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

Assignment Taken

Develop and propose a financial plan with allocated budget for International expansion.

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 of the 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 to the demand of the Malaysian market in the initial phase. After expanding in the Malaysian market, the company will start exporting to the neighboring 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 the next two years.

Solution

Possible Options for Expansion: Entering Malaysian, Singapore, and Indonesian Market

Region	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 the Middle East 3) Overwhelming bureaucracy 4) High corporate tax rate

 

On the basis of the above comparison, the company should enter the South-East Asian market of Malaysia, Singapore, and Indonesia.

FACTORS INFLUENCING THIS DECISION

Ease of doing business: Singapore and Malaysia are 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, Kedah in Malaysia, Dhoby Ghaut, the Serangoon, Little India areas in Singapore.

Indian Tourist: Malaysia, Indonesia and Singapore are one of the most favourite 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 centres

 

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 is 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 Tanjung 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.

Conclusion

The company should enter the South East Asian market of Malaysia, Singapore, and Indonesia as it is the untapped market. With high ease of doing business, high dominance of the South Indian population, less competition, government policies, and infrastructure, this is the most preferable location

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