Fairchild Water Technologies, Inc. Essay

I. INTRODUCTIONFairchild water Technologies was founded in 1980 by Eugene Fairchild. The follows first crop was a desalinator subprogramd by mobile habitation parks in Florida to shift salt from wholesome water supplied to residents. As the desalinator became a huge success, the comp either expanded into the coastal regions nigh to the comp any(prenominal)s headqu artworkers in Tampa, Florida, and then to desert atomic number 18as in the southwestern United States. By 2002, they had expanded their yield lines to accommodate desalinators, particle filters, ozonators, ion exchange resins, and purifiers. Their results were generally priced higher than their competitors, just regarded to be sea captain in terms of performance and quality.In the year 2000, Fairchild Water Technologies was expected to take in revenues of $400 zillion, and an estimated net of $50 million. For the past atomic number 23 years, they posted a 12 percent produce in their yearbook sales. In 1 985, the company managed to start its exports to Mexico, Belize, and later to water bottlers in Ger more. By 1990, due to the rapid growth in export sales, the company established its International Division. Sales in the International Division grew to $one hundred forty million in 2000. About 50 percent of International sales came from Latin and South America, $30 million from Europe, and $40 million from South Asia and Australia.In 1995, the companys Frankfurt, Ger legion(predicate) office stressed the get hold of to develop and merchandise produces that target consumer households. The first idea was to develop a national water filter. By late 1995, the company was able to develop dickens models that were designed in the U.S. and introduced in Germany, Poland, Hungary, Romania, the Czech Republic, and Slovakia. The products were greatly successful. But, the quality of water in ontogenesis countries required a purifier instead of filters. Thus, in late 1999, company executives initiated the development of a water purifier which was given the sign name Delight.The Delight purifier was able to remove reasonable levels of sediments, organic and inorganic chemicals, microbials, cysts, and unpleasant tastes and odors. Reasonable levels are those described by several orbit Health Organization (WHO) reports as appropriate for potable waters. Also, engineers had repeatedly assured Mr. Chatterjee, the companys external liaison, that laboratory testing showed no product failure after 5,000 hours of continuous use. Chatterjee used his expertise in the Indian trade to direct engineers into pursuing a point of use design instead of a point of entry design.Moreover, Chatterjee provided engineers with some recommendations such as the susceptibility to add a small outpouring that will act a power source in case of power failure. Additional recommendations include the might to add fluoride, vitamins, and flavors, flow rates, dimensions, and storage capacity. Through consumer surveys, Chatterjee was able to determine a grocery choice for the countertop design over the wall- mount design.II MARKETING ISSUESFairchild Water Technologies is tasteing to bring in the Indian commercialize in the water purifier product category. They acquire had a successful track record in invention and grocery storeing home purifiers in European and South American Markets. In this case, they are trying to enter the market in a developing market that is in the process relaxation behavior. Accordingly, they are facing triune marketing issues that are critical for the success or failure of their product. The list of marketing issues includes the following1. make out to forgo any entry into the Indian market2. Enter the market under a licensing intellect3. Enter the market by utilizing a colligation venture and a skimming pricing order4. Enter the market by utilizing a knock venture and a penetration pricing regularityIn accompaniment to these primary ma rketing issues, Fairchild Water Technologies had to decide whether they want to target urban areas or unsophisticated areas where the quality of water is poorer and where 80% of the cosmos lives. It wasdetermined earlier that the company would forgo the untaught opport social unity for now, due to the lack of a much carryed infrastructure. Also, the company established an greet to force in India, where labor is much chinchyer when compared to the United States. However, the company would import few components that are critical for operations. Finally, it was recommended that Fairchild should seek an Indian partner that is big enough to give up a dissemination and manufacturing infrastructure, but not too heroic where it commands the direction of the product line.III. SITUATION ANALYSIS TASKSA. Buyer BehaviorMany Indians emphasize the indispensability for and meliorated water quality. Newspapers, consumer advocates, government officials, and the general public are aware of the poor quality of Indian water. The majority of Indians have no choice but to consumer the water that is accessible to them. But, better educated, wealthier, and health-conscious Indians took some measures to improve the quality of water that is consumed by their families. It is estimated the number of such households is rough 40 million.Health-conscious households are similar to middle- and upper-middle classify households in the U.S. and Europe. They cherish convenience and product variety, and consider consumption of material goods as a elbow room to higher quality of life. Moreover, Chatterjees research suggests that product performance was important consumers. Some product characteristics that were cited include the ability to remove sediments, bacteria and viruses, capacity, safety, and foot print space.Purchase price was important for market segments that turn water, boiled and filters, or only filtered their water. The tercet most important factor was the ease of i nstallation and service, on with style and appearance. The least important factor was warranty and the availability of financing. Finally, there was an engagement among all segments that the purifier should have a warranty amid 18 and 24 months, and to perform between 5 and 10 years without any issues.B Customer SegmentationThe Indian market could be segmented by consumers ability and willingness to use a water purification device. Research shows that there are 40 million households that include middle- and upper middle class families, that value quality and a European / American lifestyle. In addition there is an untapped market segment in the rural areas that have a need for water purifiers, but are either isolated or do not have the instrument to buy a water purifier.C Competitive MarketMainly, Fairchild Water Technologies will be competing for market share with companies that manufacture and sell water purifiers. But, there is also a need to address warring methods that are currently being used by health-conscious Indian consumers. For instance, fifty percent of the target market utilizes a traditional method to purify water. A maid, cook, or family member would boil two to five liters of water, allow it to cool, and transfer the bottles to a refrigerator.Boiling water is seen as inexpensive, effective against dangerous bacteria, and ingrained in peoples traditions. In fact, many consumers consider it to be more(prenominal) effective than any former(a) product on the market. However, boiling affected the tastiness of water and made it flat. Also, boiling was considered to be burdensome, time-consuming, and unavailing in removing physical residues and unpleasant odors. ex percent of this target market took an extra pace and boiled water through candle filters, despite knowing that recontamination could occur.At the same time, about 40 percent of the target market used a mechanical device to improve the quality of water. fractional of this group use d candle filters because of their low price and ease of use. The candle filter is made of two containers that sit on top of each other the top container has one or more permeable ceramic cylinders known as candles. Candle filters stored between 15 and 25 liters of water and cost between Rs. 350 for small plasticmodels to Rs. 1, degree Celsius for a large stainless-steel model. However, candle filter were abate, required cleaning, and needed candle backup man at least once per year.Half of consumers that work on improving the quality of their water use water purifiers, which are considered to be more sophisticated than traditional candle filters. Water purifiers utilize tether processing stages. First, sediments are removed, followed by odors and colors, and finally bacteria and viruses. While Fairchilds engineers were skeptical about the efficacy of these products, they agreed that they are more helpful than candle filters. In fact, candle filters were proven to be ineffective in removing bacteria and viruses. Water purifiers were made from stainless steel and interchange anywhere between Rs. 2,000 and Rs. 7,000. Ten percent of the target market did not use any of these procedures and thought that their water quality was acceptable. Overall, Catterjee believed that 90 percent of the target market could be induced to change their current purification method.In addition to traditional water purification methods, it was determined that almost one hundred companies competed for share in the Indian home water filters and purifiers market. The most established water purifier was Eureka Forbes, which was established in 1982 as a joint venture between a Swedish company and an Indian company. The company marketed water purifiers, vacuum cleaners, mixers, and grinders. Aquaguard, the spot name used for purifiers, was highly established and many consumers mistakenly used it to refer to the entire product category. Aquaguard was the market leader, but its manufact uring company had introduced a new product called Puresip that used polyiodide resin instead of unseeable rays to kill bacteria and viruses, which meant that water, could be stored for later use. Also, Puresip did not require any electricity to operate, but it was sold in small home appliance stores instead of a direct sales force. Aquaguard sold for roughly Rs. 5,500, while Puresip sold for 2,000. Puresip sales were growing at a much faster rate than Aquaguard.Aquaguard was attach on a kitchen wall, and required plumbing and a twometer long power source. The unit would stop functioning if power supply dropped to 190 volts or raze. The flow rate was considered to be slow at one liter per minute, and had enough carbon to last only for one week. Aquaguard targeted households that make more than Rs. 70,000 per year, and fatigued 11% of its sales revenues (Rs. 120 million) on sales activities about Rs. 100 million were spent on sales commissions, and about Rs. 1 million was spent o n advertising. Eureka Forbes was well established, had a highly motivated and well managed sales force. However, they had limited reach in rural areas that represents 80% of the states population.Another direct competitor is Ion Exchange and its home water purifiers with the brand name ZERO-B (Zero-Bacteria). In 1985, the company became a wholly owned Indian company, and it serves customers in a diverse group of industries including thermic power stations, fertilizers, refineries, textiles, automobiles, and home water purifiers. Zero-B used a halogenated resin engine room that was able to remove impurities, eliminated odors and tastes with carbon, and killed bacteria using iodine. The unit stored 20 liters of water for eight hours without the risk of recontamination, and sold for Rs. 2,000, but required a yearly replacement of halogenated resin at Rs. 200. Chatterjee estimated the Zero-B had about 7% market share, and lacked consumer awareness, had limited distribution, and limite d advertising. thither were rumors that Zero-B intended to implement door-to-door sales strategy with an expected marketing expenditure of Rs. 3 million.The third and most recent competitor to enter the Indian market was Singer, a subsidiary of the Singer club located in the United States. The company provides a variety of products to the Indian market such as sewing machines, irons, mixers, toasters, and color televisions. The company had estimated sales of about Rs. 900 million.The Singer Company manufactured a home purifier called Aquarius. The product sold for Rs. 4,000, required no electricity, had a single countertop model, had a flow rate of 3.8 liters per minute, and a life span of 4 to 6 years. The product looked impressive, according to Chatterjee, and wasdescribed as state of the art by a trade article. The resin used by Aquarius was developed by NASA and was proven 100 percent effective against bacteria and viruses. Aquarius had hoped to sell 40,000 units over the next two years. Singers distribution channels were superior to competitors and included 210 company owned showrooms located in major urban areas around the country. The product was also sold by 3,000 independent dealers, who were supplied by 70 distributors. Distributors earned a border of 12 percent of the retail price, while dealers earned a margin of 5 percent.Along with many other products, Zero-B and singer accounted for 60,000 units in sales for the year 2000, while the remaining 190,000 units were sold by Aquarius and Puresip.E SWOT1 Strengthsa. Proven track record in exploring and entering new marketsb. Superior product qualityc. Market companionship and ability to produce innovative products2. Weaknessesa. Lack of knowledge about the Indian marketb. Large segments in the market live in remote areasc. Variable needs in the market, depending on the city or metropolitan aread. Lack of established manufacturing and distribution capabilities3. Opportunitiesa. Return on assets in In dia averages 18% compared to 11% in the U.S. b. Low wages, and central location to wealthier South Asian Countries c. Liberalization trends in India and market developmentd. There is no significant dominance by one brand4. Threatsa. Legal environment and expensive litigationb. Large number of competitorsc. Some established brands with extensive knowledge about the Indian marketIV. STRATEGYA. Strategy recommendation & decisiona. Select to forgo any entry into the Indian marketADVANTAGESAvoid the risk of entering the market in a developing country, where there is still some uncertainty about the extent of economic liberalization. Avoid competing with over 100 products that are currently available in India. Expand market presence in countries such as Mexico, Germany, Poland, etc.DISADVANTAGESForgo the opportunity to sell products for over 40 million households.Lose the opportunity to have large profit marginsLose the opportunity to manufacture in a country where labor is cheapLimited m arket presence in South Eastern Asia, where the majority of the worlds population lives. Increase market presence and brand awareness.b Enter the Indian market under a licensing agreementADVANTAGESLow capital investment is requiredHigher return on investment and discredit amount of riskHuge market potential and opportunities to expand in rural areasDISADVANTAGESLimited operate of the manufacturing and distribution processForgo the potential of large gains in exchange of a royalty honorariumLimited exposure to the interchange process in a developing marketLimited ability to manufacture additional product linesc Enter the Indian market through a joint venture and by utilizing a skimming pricing approachADVANTAGESLarger potential gains and a 50/50 split in profitsAbility to influence manufacturing and distribution strategies Ability to expand into rural areas and increase manufacturing capacity Develop a market knowledge for growing and developing economiesDISADVANTAGESRequires a l arge investmentHigher prices than competitorsUncertainty of markets in developing countriesHigh competitiond Enter the Indian market through a joint venture and by utilizing a penetration pricing approachADVANTAGESProfits are split between the two companiesAbility to control manufacturing and distributionDeveloping market with large potentialHigher margins and low manufacturing costsGain market exposure and proximity to uphill economiesDISADVANTAGESRequires a large capital investmentUncertainty of developing marketsLower pricing strategy and lower contribution margin per unit sold Ability to find the right company to partner withRecommended jut out of Action Fairchild Water Technologies should pursue a licensing agreement with an Indian company.B Goals and Objectivesa. Pursue a licensing agreement with a partner that is able to sell at least 75,000 per year b. Increase sales by 10 % on an annual basisC Target MarketThe target markets for Fairchild Water Technologies are the 40 mill ion households in India, which cherish a comfortable, convenient, and healthy lifestyle, and are similar in many aspects to middle- and upper-middle class households in the U.S. and Europe. Also, Fairfield Water Technologies should target consumers that move from lower to middle class, as the Indian market develops and continues to grow.D Marketing Mixa. Product / Price StrategyFairchild Water Technologies should manufacture a portable purifier that offers Indian consumers the convenience and effectiveness of a quality purifier. The purifier should have a backup battery, a selling price of Rs. 5,000, and a proven ability to kill bacteria/viruses, fast flow rate, and allow for the ability of storing water without the risk of contamination.b. Distribution and SalesBy entering into a licensing agreement, Fairchild Water Technologies decreases the amount of risk, but it has less control over the distribution and sales of its product. Fairchild could seek a partner that is willing and ha ve the capability to sell 75,000 units on an annual basis, with a 10% increase in the units sold for both year. This approach would still guarantee Fairchild Water Technologies some sizable profits.c. Advertising and PromotionBy selecting a licensing strategy, Fairchild Water Technologies would not commit itself into having an advertising budget. On the other hand, the licensee would be obliged to advertise the product in order to meet the minimum quota for annual sales. This allows Fairchild to have an average profit of 300 Rs without committing any resources into salaries or advertising budget.E Control PlanThe licensing agreement would adtake a language that guarantees Fairchild Water Technologies annual sales of 75,000 units, with a 10% increase in units sold thereafter. The agreement should have an opt out clause for both parties after three years, while holding the licensee to infringe on the technology and patent if they choose to opt out of the agreement. Fairchild must mon itor sales on a monthly basis, and conduct meetings in order to ensure that sales in the Indian market are carriage in the right direction.