Consulting on Ramalingam Foods International Expansion Plan by Infinity Business Consultancy (IBS)

Assignment Taken

Develop a marketing strategy to tap into a fast expanding market.

Case Understanding

Ramalingam Foods established by Mr. Ramalingam Venkatesh in South Bombay in 1965, is a successful fast food restaurant. It was famous for their authentic south Indian Freshly cooked food and filter coffee. During 1975, when India went under political turmoil and there was pressure in the market to sell goods at bare minimum price. But, Ramalingam Foods came up with innovative solutions and started selling Dosa-Idli Batter & packets of authentic south Indian chutneys. The next generation took over the business and thereby he thought to expand his business and started working on some innovative ideas to deal with the problem of low shelf life of Idli-Dosa batter. He came up with a wide portfolio: Instant Dosa Mix, Instant Idli Mix, Instant Gulab Jamun Mix, Instant Laddu Mix, instant coffee powder Instant Dhokla mix. They are available in different packaging. Now they are looking for expansion globally. Mr. Vijay has no prior experience of international business and hashired Infinity Business Consultancy for consultancy on international market expansion within a budget of INR 50 Crore for International Business expansion for FY 2019-20. As Ramalingam Foods don’t have enough capital and business acumen to enter more than one foreign region at a time thus they have requested Infinity Business Consultancy to suggest one region to start with international expansion.

BCS Solution Summary

Ramalingam Foods, an Indian company, which has a ready to cook product portfolio including South Indian food mix of idli-dosa instant mix,dhokla, gulab jamun mix and filter coffee asked IBS for advice regarding international expansion. Since Malaysia, Singapore and Indonesia have a huge south Indian population, IBS has suggested that the company should expand in these regions. The company would start by expanding in the Malaysian market because of its higher ranking in ease of doing business ranking, followed by export to Singapore by road and Indonesia by waterways from there. The company would build a production unit in Malaysia to cater the demand of the Malaysian market in the initial phase. After expanding in the Malaysian market, the company will start exporting to the neighbouring countries of Indonesia and Singapore. IBS has even advised Ramalingam Foods to launch current products in these three countries this year with planned product portfolio enhancement over next two years.

Solution

Reigon	Country	Indian Population (million)	Ease of Doing Business Ranking	Starting Business	Dealing with construction permit	Registering business	Advantages	Disadvantages
Middle East	UAE Saudi Arabia Kuwait Qatar	3.42 2.59   1.03 0.746	16 62   83 77	17 38   82 108	3 28   68 13	10 19   45 1	1)  Large target population 2) High per capita income	1) Very high competition 2) Strict labour laws 3) Huge fixed and operational cost 4) Huge portion of Indians are labour 5) Indian population is distributed 6) Lack of cultural inclusiveness 7) Low ease of doing business ranking
United States of America	USA	4.46	6	55	24	39	1) High per capita income 2) Easy to do business	1) Strict labour laws 2) Huge operational cost 3) Indian population is distributed 4)Less number of South Indians
United Kingdom	England Scotland Wales Ireland	1.51 0.032 0.017 0.04	8	18	23	41	1) High per capita income 2) Easy to do business	1) Strict labour laws 2) Huge operational cost 3) Low population of South Indians
South East Asia	Indonesia Malaysia Singapore	0.18 2.99 0.65	73 12 2	140 126 4	110 2 5	106 33 21	1) Ease of doing business in Malaysia and Singapore 2) Huge South Indian population 3) Concentrated Indian population 4) Less competition 5) Flexible labour laws 6) Promotes FDI 7) High income of Indians 8) Rice based agriculture 9) Low operational cost	1) Relatively high corruption 2) Low population compared to Middle East 3) Overwhelming bureaucracy 4) High corporate tax rate

 

On the basis of the above comparison, the company should enter the southeast Asian markets of Malaysia, Singapore, and Indonesia.

FACTORS INFLUENCING THIS DECISION

Ease of doing business: Singapore and Malaysia is ranked 2 and 12 respectively in ease of doing business ranking. Still, not a lot of companies have tapped this market. Ramalingam foods can take advantage of this.

High dominance of South Indian population: The concentration of the South Indian population is very much in Malaysia, Singapore, and Indonesia. Moreover, this population is concentrated in Selangor, Johor, Negeri Sembilan, Perak, Penang, Kuala Lumpur, Kedad in Malaysia, Dhoby Ghaut, the Serangoon, Little India areas in Singapore.

Indian Tourist: Malaysia, Indonesia, and Singapore are one of the most favorite tourist destinations for Indians.

Less Competition

Tax incentives:

• A company that invests in its subsidiary company engaged in food production activities can be considered for tax deduction equivalent to the amount of investment made in that subsidiary for that year of assessment; and
• The subsidiary company undertaking food production activities are considered for a full tax exemption on its statutory income for ten years of assessment for a new project or five years of assessment for the expansion project. 

 

Government policies and Infrastructure

• Pro-business, Liberal investment policies
• Liberal exchange control regime
• Fully developed industrial parks, including free industrial zones, technology parks, and Multimedia Super Corridor (MSC)
• Advanced MSC Malaysia Cyber cities and Cyber centers

 

MODE OF ENTRY IN MALAYSIAN MARKET

Initially, the company will start by exporting to Malaysia from India via sea route. From there the product will be transported to Singapore via road and to Indonesia via sea route. This will carry on until the factory is set up in Johar Bahru. After the factory is set up, Exports from India will be stopped. The company will set up a subsidiary firm in Malaysia. A regional office will be set up in Singapore and Indonesia.

 

MODE OF EXPORT

Malaysia to Singapore: Freight charges of $95.54 per ton via train are cheaper compared to $216.96 per ton via road. Therefore, the company will use the railway

Malaysia to Indonesia: there are two routes for the same

1. Tanjung Pelepas port in Johor, Malaysia to Tanjunk Priok port in Jakarta Indonesia
2. Tanjung Pelepas port in Johor, Malaysia to Belawan port in Medan Indonesia

From Tanjunk Priok port, goods will be transported to Jakarta and Surabaya via railways and roadways.

From Belawan port, goods will be transported to Medan and Banda Aceh via railways and roadways.

Legal Requirements to enter Malaysia:

 

• Trade Standards are widely used in sectors of Malaysia. A consensus process is used to develop new standards

• Malaysia follows WTO(World Trade Organization)’s Standard Code

• Standards and Industrial Research Institute of Malaysia (SIRIM) provides the institutional and technical infrastructure for the government

 

Testing, inspection, and certification

• Malaysia’s national accreditation body and national standards body is the Department of Standards Malaysia. It provides accreditation and credible standardization services

• Foreign exporters are required to follow these same standards as the domestic producers do 

Technical regulations

Malaysia follows WTO and under WTO Agreement on Technical Barriers to Trade (TBT Agreement), all proposed technical regulations are required to be reported that may affect trade with WTO member countries in the future.

PESTEL Analysis

Political:

Malaysia consists of:

·       Thirteen states

·       Three federal territories

·       A monarchy

Due to this, the prime minister is the decision-maker of most of the country’s regulations, therefore the permissions required for Ramalingam Foods to start operations would have to be done in a centralized way. Malaysia is also a member of various international organizations such as the UN, the Commonwealth of Nations, OIC, ASEAN, and this makes it a hub for country tie-ups.

The main principles are peace and neutrality in developing and implementing foreign politics. The corruption rate is low.

As per the World Bank data, the Political stability index of Malaysia, the latest value from 2020 is 0.12 points which indicate that Malaysia’s political stability is medium.

 

Economic:

Malaysia is one of the most open economies in the world with a trade to GDP ratio averaging over 130% since 2010. Openness to trade and investment has been instrumental in employment creation and income growth, with about 40% of jobs in Malaysia linked to export activities. 

Malaysia's economy advanced by 16.1% YoY in Q2 of 2021, rebounding sharply from a 0.5% contraction in Q1 and higher than market expectations of a 14.3% gain. This was the fastest growth in the economy since the series began in 2000, due to the reopening of more economic activities and a low base effect last year. Both household consumption (11.6% vs -1.5% in Q1) and fixed investment 16.5% vs -3.3%) recovered sharply. In addition, net external demand contributed positively to the GDP as both exports and imports surged 37.4% and 37.6%, respectively. Also, government spending grew faster (9.0% vs 5.9%). On the production side, output recovered for mining (13.9% vs -5%), services (13.4% vs -2.3%), construction (40.3% vs -10.4%), while manufacturing sectors expanded more (26.6% vs 6.6%). By contrast, production of agriculture fell (-1.5% vs 0.2%). On a seasonally adjusted quarterly basis, the economy shrank by 2.0%, reversing from a 2.7% rise in Q1.

Social:

As an upper-middle-income country, Malaysia is both a contributor to the development of low- and middle-income countries and a beneficiary of global experience in its own journey towards high-income and developed nation status.

The World Bank Group Inclusive Growth and Sustainable Finance Hub in Malaysia (the Hub) serves as a partner to the country and its people in developing and implementing global development solutions.

Technological:

Malaysia’s Prime Minister unveiled the Twelfth Malaysia Plan on 27 September 2021. According to the executive summary states, the Twelfth Plan is anchored on three key themes, namely resetting the economy, strengthening security, wellbeing, and inclusivity as well as advancing sustainability.

Four catalytic policy enablers, namely developing future talent, accelerating technology adoption and innovation, enhancing connectivity and transport infrastructure as well as strengthening the public service will support the achievement of these themes.

These policy enablers will form the foundation and building blocks of Malaysia’s development over the next five years and beyond.

The Twelfth Plan will accelerate Malaysia’s adoption and application of digital and advanced technology to create and unlock new opportunities. This will maximize the potential of the digital economy as well as achieve inclusive, responsible, and sustainable socio-economic growth.

The talent and skills required to drive both the digital economy and 4IR will be enhanced, while R&D&C&I will be intensified. Malaysia will also aggressively attract investment in the digital economy to become the regional leader. The focus will be on mainstreaming digitalization for inclusive development, accelerating R&D&C&I as well as capitalizing on the potential of advanced technology.

Legal:

The Malaysia Digital Economy Blueprint (MyDigital) initiative launched in February 2021, is expected to be the impetus to position Malaysia as a high-value-added economy and a net exporter of homegrown technologies and digital solutions, at the end of this decade.  

Despite lingering uncertainties brought about by the COVID-19 pandemic, growth prospects look relatively optimistic. World Bank’s Doing Business 2020 report ranks Malaysia 12th amongst 190 global economies and 2nd in South East Asia. The Malaysian economy is also observed to be on the path to recovery in 2021, with GDP growth projected at 4.4% according to The Economist Intelligence Unit forecast as of 14 June 2021.

 

 

 

 

Environmental:

Malaysia has a wide range of flora and fauna with 50-70% of the country is made up of tropical rainforests. Due to high exports of palm oil and mining, there have been mass deforestation, forest conversion, river pollution, and land reformation leading to a change in ecological landscape. So, this nation is not so good from an environmental angle. But there are new government laws to control damages to nature regarding waste disposal, emission from factories, etc. and the situation might improve

 Product Strategy

The mission for International expansion:

To be the go-to instant mix and fast-food company in Malaysia while making it easier for the consumers to cook delicious traditional cuisines without much hassle.

Vision for International expansion:

Ramalingam foods aim to be the global market leader in the ready-to-eat foods category and build brand equity based on their values, that is purity and quality.

Tagline: Serving packets of happiness since 1965 

Objective:

The objectives of Ramalingam Foods in the context of international expansion are given below:

• To have a known name in global markets

• To have product diversification 

• To expand in other countries as well

•  

Target Customer:

Utilizing the existing potential of Ramalingam Foods in Research and Development, it is advisable to target Indian customers in Malaysia at the initial stages. As per research, it is found that approximately 9% of the Malaysian population comprises Indians out of which 70% are South Indians (Tamil, Malayali, and Telugu). So we choose this population. Next, going by the demographics, we extensively target children (where parents are the decision-makers), college students, and the working-class population that are 56.4% of the Indian population in Malaysia. Here we go by the fair assumption that the age group of 0-14 stay with their parents. 

Marketing strategies

Disentangle the frame of reference.

This can be used as an effective strategy. Right now the reference frame for customers for RTE products is home-cooked meals. For Ready to cook products this is a point for leverage. They can continue to focus on the factor of effort justification and the human factor. But for ready-to-eat products that do not require any further cooking the reference point should be disentangled from the home-cooked meals. This would tarnish the image of the Indian consumer. Instead of healthier ready-to-eat food products, it would be a better comparison to set the reference frame as the fast-food options which are unhealthier options. So we could use the fear appeal to create product affinity.

· Affective advertising and celebrity appeal.

Two appeals promoting the impulse buyer would be humor appeal or scarcity appeal. For RTE products like packaged snacks, using humor appeal can be beneficial. Creating product variants like limited edition packaging and exotic new flavors can help in market research to see customers' interest in the new variant, as well as help, create a buzz for the product. We have seen this work successfully for potato chip brands like Lays.

For ready-to-cook meals, creating effective advertising with celebrities as mothers would be a great option to strike a chord with Indian working mothers. 

· Diversification- brand/ category extensions.

To satisfy the variety-seeking behavior of customers in the RTE category manufacturers often play with packaging, flavors. It would also be feasible for them to enter into healthier food options like protein bars, snack bars, cold-pressed juices, etc. For ready-to-cook brands like MTR, Nestle, Haldirams, Knorr, ID Fresh foods, this has worked successfully.

· Focusing on hedonic attributes.

It is quite obvious that for conventional not-so-healthy RTE products, the focus is better to be on hedonic attributes. This would help push sales and bring customers under the sway of positive affect. It would also help to increase margins by charging premiums.

· Customer co-creation, taking frequent customer insights.

Taking frequent customer insights and taking note of changing customer preferences and tastes is important for companies in the food industry. Customer co-creation is where the company takes design inputs for the products from the customers. In the RTE segment, this could mean taking ideas for new flavors or on the packaging. Customer involvement is increased by taking customer inputs on packaging as has been successfully demonstrated by brands like Nestle Maggi and Kissan, Coca-Cola, Snickers, etc. For RTE products and even RTC products including customers’ recipes, stories in packaging have been a successful strategy to involve customers. It is quite frequently observed in ice-cream shops in the US that they let customers design custom ice-cream flavors which they test and then launch to the market.

· Elaboration likelihood model.

Changing customer attitude towards RTE products is essential to ensure the continuity of the product. Since most RTE/ RTC products focus on the hedonic attributes of the product while advertising, they take the peripheral route. However it is essential to increase customer involvement in the product and its consumption through affective appeal, celebrity and distinctive appeals; and by sponsoring and participating in cooking events, Television programs, social media challenges, and content. Thereby creating and attracting consumers with high involvement, high motivation, and cognition. This will increase the brand's mindshare and subsequently help to gain market share.

Conclusion

To enter Malaysia, Ramalingam foods need to extensively market their product through various channels and to create a top-of-mind recall and brand equity for the same. We are aware that there is a demand, we just need the consumer to choose Ramalingam Foods to fulfill their demands.

Attached File Details

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