International Management Report: Moonpig in India Essay

Management Report Moonpig : India Table of Contents_____________________________________ 1. 0 IntroductionPage 3 1. 1 Greeting Card IndustryPage 3 2. 0 BackgroundPage 4 2. 1 Business EnvironmentPage 4 2. 2 Demand AnalysisPage 6 2. 3 Market PotentialPage 7 3. 0 Market Entry StrategyPage 8 3. 1 Potential PartnershipsPage 8 3. 2 Location and Target MarketPage 9 3. 3 Market Size and GrowthPage 9 3. 4 Legalities and SubsidiesPage 10 3. 5 DistributionPage 11 3. 6 Pricing StrategyPage 12 3. 7 Promotion and Communications StrategyPage 13 4. 0 RecommendationsPage 15 . 0 ReferencesPage 16 1. 0 Introduction______________________________________ With the original launch of online personalized greeting card retailer, Moonpig, in 2000 being cited as a failure to the dot. com collapse, when considering the entrance into a potential foreign market such as India, it must be closely examined, with a strong market entry strategy and marketing mix. A key understanding of the business environment is crucial to success and will aid in establishing India as a stronghold successor for the Moonpig brand in South Asia.

Initial insight into the greeting card industry and Moonpig as a brand, will also aid in the analysis of the potential market, as well as building the marketing plan. 1. 1 Greeting Card Industry Greeting cards have always been a way for people to reach out and send messages to those they care about, typically for holidays such as Christmas and significant events such as birthdays, anniversaries and weddings. Today, the UK holds the strongest and highest grossing greeting card industry in the world, with over ? 1. 7 billion turned over in 2009 (GCA Market Report, 2009).

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Traditionally a paper product purchased through high-street retailers and hand-delivered, the greeting card has taken on various forms through the e-card, and Moonpig’s innovative, personalised, digitally printed greeting card. The Guernsey based firm offers consumers a chance to connect with their loved ones through personalised cards. With their online store turning over ? 20. 9 billion in 2009 (Sheahan, 2009), Moonpig’s successes have been linked to their connection with their customers, and understanding of their needs.

Consumers want quality, personal cards, and Moonpig offers them just this, with little effort and little risk. Additionally, company founder, Nick Jenkins suggests that the advent of the digital camera and broadband Internet, saw Moonpig hit its first real success in 2005, and today, rises as the UK’s number one online greeting card company holding 90% of the UK online market. 2. 0 Background______________________________________ 2. 1 Business Environment With the Indian economy on a steady growth path, the market is attractive for potential investors.

India currently sits as the 12th largest economy in the world. The introduction of Moonpig into the India market levy’s a large amount of potential for growth within the company. Centered in South Asia, India is in prime location for Asian expansion. With over 1. 1billion people, the Indian economy is amongst the fastest growing in the world, and has seen an average annual GDP growth rate of 5. 5% over the last two decades. With the economy strongly dependant on its internal market and external trade, the country has seen a vast increase in the growth rate of their trade, currently accounting for 1. % of World trade as of 2007 (WTO, 2007). India has a predominantly rural population, however 2010 estimates suggest that the country will see an increase in the number of Indian’s living in towns and cities (Kellior, 2007). Whilst this rural population is strong in spending power, and is a large target for FMCG and durables, this new urban middle class widely varies in consumption behavior. With a 300 million strong middle class (the size of the US population), this segment is estimated to grow at 5% annually, and will be reflected through the retail trade amongst this group.

Hofstede’s Cultural Dimensions strongly reflects this through its Power Distance (PDI) scoring. At 77, (compare to world average of 56. 5), India ranks highly, indicating a high level of inequality of wealth and power. India’s large English speaking population is attractive to investors but is also the stronghold for potential foreign products and services such as Moonpig. Keillor (2007) suggests that “consumerism is taking off in India and more and more Indian’s are motivated by material success… prosperity is a sign of materialism. This group is a prime target for Moonpig and their growing wealth and consumerism places them at the center of an investors target market. When assessing a foreign business environment such as India both the potential risks and potential demand need to be addressed. Hollensen (2004) suggests political risk can adversely affect the success of the organization entering a foreign market such as India. The stability and consistency of India’s government and legislature will determine the potential for political change.

Whilst the country suffered minor political instability in the 1990’s from the failure of any political party to win an absolute majority in Parliament, the country’s economic liberilasation attracts many marketers and investors, and today, India generally obtains no political risk, encouraging the attractiveness of entering the Indian market. Since India’s period of instability, the country has embarked on a process of economic reform that aims to put it on a path of rapid and sustained growth (European Commission, 2009).

Efforts have seen per capita rates rise, year by year, in particular, from 2008 ($1,016) to 2009 ($1,032), a 6. 7% growth rate, noting that income is growing rapidly amongst urban consumers. However, under the current global economic conditions, many are suggesting that India’s slum in export and industrial output, leave the country in much needed economic stimulation from foreign investment (Amsterdam, 2009). With strong backing from Indian governments for the development of foreign brands in the market, Moonpig will obtain support for the introduction of their product into the Indian market.

The SAFTA (South Asian Free Trade Area) leaves Moonpig with future opportunities for expansion amongst the Association and the collective countries within it, covering over 1. 4 millions people. With Association aims of accelerating economic growth, improving quality of life, the introduction of foreign brands is encouraged and supported to spur economic growth. 2. 2 Demand Analysis When assessing a potential market such as India, understanding of the sociocultural environment is key.

Whilst culture has always been illusive to define, Hollensen (2004) remarks that Hofstede’s (1980) definition is widely used, of which he suggests that, “Culture is the collective programming of the mind which distinguishes the members of one human group from another… Culture, in this sense, includes systems of values; and values are among the building blocks of culture. (p. 21)” Culture is a fundamental determinant of a consumers behaviors and in a country such as India, a consumer’s culture, subculture and social class strongly influence buyer behavior.

Today, India’s buyer behavior is based on their increasing awareness on consumer goods. Increased exposure to the West, satellite TV, foreign magazines and newspapers has made Indian consumers more aware selective of the quality and brand of the products they are buying. India is beginning to see a Westernised lifestyle trend, with a growth in packaged food and beverages, sportswear, clothing and footwear and gifts including greeting cards. Demand for family orientated products reflecting Indian’s high value orientation are typically well accepted (Vishwakarma, 2009. Hollensen (2004) also suggests that in some countries people are highly motivated by monetary rewards, while in other countries and cultures social position and recognition are more important” (p. 194). The understanding consumer spending in connection with culture is important. With regards to India as a potential market for Moonpig, the current stability in their economy has seen an increase in the number of middle class urban consumers. These consumers are living by a ‘work hard and get rich’ ethos, and consumerism is becoming a way of life (Keillor, 2007).

Rather than dispensing their traditional values, Indians are wrapping moderninity around their traditional core values and beliefs. A traditional way to approach the analysis of cultural influences is to examine cultures by means of a high context or low context analysis. Edward T. Hall (1976) introduced the concept of high and low contexts as a way of understanding different cultural orientation. India is classed a high context culture, in which many things are left unsaid. Words and word choice become very important in higher context communication, as fewer words are used to communicate a complex message.

Such justifications can be used when assessing means of promotion, where in places like India, little needs to be said to generate a message. 2. 3. Market Potential The greeting card industry is apparent in India, with some of the key players offering more than just cards. Archie’s is Moonpig’s prime competitor. Based in New Delhi, Archie’s operates online with a range of retail stores throughout the city and 32 of India’s states. Archie’s currently holds around 50% market share of India’s greeting card industry. Primarily selling greeting cards and e-cards, Archie’s also specializes in other gifts and collectibles.

Archie’s currently sells its greeting cards for around $3. 50(US) (www. archiesonline. com). The Indian consumer market is growing, and there is a need for personal, family orientated products to reflect their high value culture. Peronalised greeting cards add a personal touch to something consumers use to let someone know they care about them. There is a gap for Moonpig in the Indian market, and based on the success of companies like Archie’s, operating all over the country with a strong online and retail presence, there is a need for convenient and personal goods.

Moonpig is offering an already existing product, with a personal touch, reflecting the Indian values of family and personality. 3. 0 Market Entry Strategy_________________________________________ Hollensen (2004) suggests various modes of entry, specifically, intermediate modes, also known as, contractual modes where company has shared control and risk but split ownership. He describes intermediate modes specifically, noting “they are distinguished from the hierarchical entry modes in the way that there is no full ownership (by the parent firm) involved, but ownership and control can be shared between the parent firm and a local partner.

This is the case with the (equity) joint venture” (p. 308). A required number of steps will be taken to ensure Moonpig encounters the Indian market with a strong market entry strategy, for the company to succeed in the foreign market. Understanding the potential market and the entry barriers, there are many considerations to take when attempting to push a foreign product into the Indian market. 3. 1 Potential Partnerships The company needs to consider whether to manage wholly on its own or as a joint venture with a local partner. As Moonpig are not specifically entering new market, the company would have higher rates of success running a joint venture with competitor Archie’s. Archie’s also sell greeting cards online as well e-cards and gift products. Whilst Moonpig are offering a new product with the personalised card, the idea of the greeting card in India is not new. Having a local partner will benefit Moonpig in many ways, primarily, as the partner will have a clear and solid understanding of the industry already. As a joint partnership, Archie’s can remain selling its pre-printed cards and gifts, and Moonpig can run alongside the success of the company, offering its alternative product.

A joint venture between Moonpig and Archie’s also involves lower risk, and lower investment. Joint ventures do not require investment in the two partnering companies. Whilst Moonpig would provide technology, products and finances, Archie’s would provide the knowledge required for having a successful product in the country. Moonpig also benefits from avoiding local tariffs and non-tariff barriers by producing goods locally. 3. 2 Location and Target Market Choosing a location to offer the product is key. Archie’s currently operates in New Delhi, centered around the middle-class market discussed earlier.

By basing the company in the city, the company can directly target the consumers they are after, and are within postal and delivery range. The central location also means the poorer areas of the country where infrastructure such as roads is weak, aren’t targeted and wasted. Urban cities and towns are the best location for Moonpig in terms of infrastructure and target market as well as being close to their local partner. The products will be sold strictly to the urban Indian marked. To avoid various tax disadvantages, the company will produce the product locally. Whilst equipment and products (card, ink etc. will be imported from the domestic country (United Kingdom), the final product will be produced locally in a city-based office/warehouse. Local production allows better interaction with local customer needs concerning product design, delivery and service. Moonpig will benefit being close to foreign customers and this method reflects the nature of the company- personalised cards that are printed locally, and delivered on the same working day, or following day. Should the product be produced domestically, Moonpig could not follow through with the time commitments. 3. 3 Indian Market Size and Growth

Hollsensen (2004) notes that, “country size and rate of market growth are key parameters in determining the mode of entry. The larger the country and the size of its market, and the higher the growth rate, the more likely management will be to commit resources to its development and to participate in a majority owned joint venture. Retaining control over operations provides management with direct contact and allows it to plan and direct market development more effectively. (p. 282)” The rapid growth of the Indian economy and the urban subcultures creates vast opportunity for Moonpig.

Developing a vital understanding of the Indian culture and the consumer market is necessary, so that any issues that may arise can be dealt with appropriately. A joint local venture with Archie’s will enable Moonpig to grasp the culture and the market quickly. 3. 4 Legalities and Subsidies Understanding legal compliance requirements, which must be met once entry is made, such as corporate laws, labor laws, direct and indirect tax issues as well as barriers to entry such as tariffs and quotas is important.

The joint venture will favor Moonpig, and will be supported as a local supplier gaining trade regulations and quotas that favor companies who opt to produce locally, or under a joint venture. Under Government regulations that over the years many foreign and domestic companies have bypassed, the company will also employ locally to aid in employment growth within the city and will honor equal pay rights. The joint venture agreement between Archie’s and Moonpig will be conditional upon obtaining all necessary approvals and permissions from Government Agencies of India like RBI (Reserve Bank India) within the specified period.

Falling under one of the Governments high priority areas for foreign investment, should the proposal involve up to 74% foreign equity, the joint venture will receive automatic approval within two weeks. India’s economic policies are designed to attract capital inflows into India on a sustained basis (India Finance and Investment Guide, 2009). Policy initiatives adopted in recent years include: * Automatic approval for majority foreign equity participation up to 74% in certain key areas, and up to 51% or 50% in several others. * Up to 100% foreign equity permitted in many industries. Free repatriation of profits and capital investment. * It is not necessary for foreign investors to have a local partner. As a foreign product, Moonpig will encourage much needed Government support for the introduction of their product in the Indian market as it will aid in economic growth, employment and consumer spending. 3. 5 Distribution After a strategy is set to ensure entry into a foreign market, the distribution of the product needs to be considered. The distribution of the products can account for 15-40% of the retail price of the product according to Bucklin et al. 2006) cited by Hollensen, (2004). Due to the Internet ordering of the products by consumers, the distribution of the product is fairly limited. As in the UK market, orders will be delivered via the national postal service Indiapost. This is a reliable postal service in India, used for domestic and international purposes. Offering account services, Moonpig can set up a monthly cost plan with Indiapost, to ensure they are receiving the best deal. With the account services, Moonpig will also be able to control and manage their orders, by tracking them online, and monitoring their status.

Moonpig can use Indiapost as a cost effective method for distribution. The nature of the product ensures limited costs in delivery, as weight and size are small. Indiapost currently operates around the majority of the country, and reaches all of Moonpig’s desired coverage. Orders sent from the central location of Moonpig, in New Delhi are within market coverage of towns and cities. Unlike conventional or vertical integration (Hollensen, 2004), Moonpig will operate under a producerconsumer strategy.

The products are personalised and are therefore not generic to fall under the manufacturer wholesalers retailer consumers integration system. They are produced in the company office, based in New Delhi, and will be collected from that location once daily. Similar to the UK, Moonpig will offer same day delivery if ordered before 2pm, but otherwise, consumers can expect to receive their order the next working day. 3. 6 Pricing Strategy Pricing is an important aspect of the marketing mix, especially when entering a product into a foreign market.

Hollensen (2004) states that “in international markets pricing decisions are much more complex, because they are affected by a number of additional external factors, such as fluctuations in exchange rates, accelerating inflation in certain countries and the use of alternative payment methods such as leasing, barter and counter-trade” (p. 495). In the case of foreign products produced locally, and sourced domestically, an initial price needs to be set, and established after time. Initial price settings will need to reflect the cost of entrance, including the import of machinery and products, to cover these costs.

The Indian consumer is price sensitive, and spends their money on quality products that they are confident in. A joint venture with Archie’s will give Moonpig a base price to start its product at. Rather than taking a skimming or penetration approach, Moonpig will start at market pricing, where the final price is based on competitive pricing (Hollensen, 2004). He remarks, “this approach requires the exporter to have a thorough knowledge of product costs, as well as confidence that the product life cycle is long enough to warrant entry into the market” (p. 00). Moonpig will follow its domestic pricing strategy in place for its UK market. As the product has not been adapted or modified in any way the pricing structure will reflect this. Research around the industry in India has seen an average price around $1. 80(US) per greeting card with prices as high as $4. 00(US) for musical cards. Moonpig will start its prices just above the industry average, reflecting the higher quality in relation to competitors, with prices increasing for the higher quality cards (standard Moonpig UK prices start at ? 2. 99).

Expected prices will start from $2. 00. The price reflects the quality and the personalization of the card, and is of little risk to a consumer to initially try. The free delivery prices (as similar to the UK strategy) will encourage customers to shop online as opposed to retail outlets. However, the pressure of competitors will also influence pricing. Moonpig will need to remain competitive, but affordable, to consider the consumers ability to pay. Indian’s tend to be price conscious when it comes to their purchases and are looking to invest their money in something quality.

Whilst a greeting card is a low risk purchase, the Indian consumer is value focused, and wants a product they can be confident in, regardless of price. Currency issues need to be considered as well. A difficult aspect of pricing is the decision about what currency the price should be quoted in; the foreign currency of the buyer’s country (local currency); the currency of the exporter’s country (domestic currency); the currency of a third country (usually US dollars); a currency unit such as the euro. Whilst the Rupee is the national currency of India, the US Dollar is used widely throughout the country.

When quoting pricing for India, the US Dollar will be used. The US Dollar is currently stronger against the Indian Rupee ($1. 00 = 45. 8 Rupees). 3. 7 Promotion and Communication Strategies Moonpig currently operates a very affective television ad in the United Kingdom to build brand awareness and raise traffic to their website. In India, the company will run an affiliate website off of Archie’s current page (http://www. archiesonline. com). To increase brand awareness television advertising will also be used.

As the middle class urban market, are being targeted, this new age consumer are the most likely Indians to own televisions, and therefore be reached through the advertising campaign. The advertisements will be adapted to reflect the Indian culture, though the ad will be in English to target the middle class urban English-speaking segment. The themes and languages on the cards featured in the ads will be adapted to reflect that of Indian interest and culture. Similar to the UK promotion strategy, other online techniques will be used in order to raise awareness of the brand and send traffic to the website.

Through advertising on the Archie’s page and active links, Moonpig can run off the success of their partner. Similarly, Moonpig will link customers looking for gifts and traditional cards and e-cards to the Archie’s website. Web-page banners will be placed on either company’s pages to promote their partner. 4. 0 Recommendations_________________________________ Through careful background analysis of the potential in the Indian market, Moonpig can find successes in the greeting card industry in Asia. With the spurring economic growth and the prevailing of the urban middle class consumer, there is a huge market potential.

Alongside the successes of competitor Archie’s, Moonpig can find success in a joint venture, offering its personalised greeting cards through an already successful gift and card retailer. Language and culture adapted products feed the Indian consumers needs for family orientated, value focused goods, and the premium quality of the personalised greeting card is an investment the Indian consumer would make. Using similar promotional and communication methods as seen in the United Kingdom, Moonpig will adapt the language and culture again, but use similar television advertising.

Though there is an apparent out-weight of power and wealth in India, only the target consumer will be reached. The target location of urban middle class, means promotional wastage is minimum as these consumers are the most likely to own a television and are of higher consumer spending. Using Indiapost, Moonpig will have a reliable distribution method. With prices set at just over industry average, Moonpig can hope to see successes in its first year. 5. 0 References_______________________________________ Hall, E. T. (1985). Hidden Differences: Studies in International Communication.

Hamburg: Gruner & Jahr (Eds. ), Advances in global leadership. Stamford, CT: JAI Press. Hollensen, S. (2004). Global Marketing. 3rd Edition, Pearson Education UK. Keillor, B. (2007). Marketing in the 21st Century: Volume 1, New World Marketing. Westport, CT: Praeger Publishers. European Commission Trade, 2009. [Online] Available at: http://ec. europa. eu/trade/creating-opportunities/bilateral-relations/countries/india/ [Accessed February 20th 2010) Hofstede’s Cultural Dimensions, 2009. [Online] Available at: http://www. geert-hofstede. com/ (Accessed March 3rd 2010) PrintWeek, 2009.

Moonpigs sales and profits soar. (Business article). [Online] Available at: http://www. printweek. com/business/news/936340/Moonpigs-sales-profits-soar/ (Accessed February 26th 2010) The Greeting Card Association, 2006. Facts and Figures. [Online] Available at: http://www. greetingcardassociation. org. uk/info-resource/market-info/facts-and-figures (Accessed February 26th 2010) UK Trade and Investment, 2009. [Online] Available at: https://www. uktradeinvest. gov. uk/ukti/appmanager/ukti/countries? _nfls=false=true=CountryType1=/india (Accessed February 20th 2010)