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Global Marketing, Strategic Perspectives 2013
TCI Packaging Division Page 1
Global Marketing, Strategic Perspectives
Case Study Analysis
TCI Packaging Division
10/22/2013
Submitted to:Dr. M.R. Suresh
Submitted by:Group: B7
Siv Sagar Saha (12048)
Saumya Ranjan Khatoi (12104)
Gaurav D. Jhunjhunuwala (12138)
Ritesh Jaiswal (12153)
Samuel R Chintalapudi (12161)
Sarthak Rohatgi(12182)
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Table of Contents
1. OVERVIEW OF THE CASE ................................................................................................ 3
2. CASE FACTS ........................................................................................................................ 3
2.1 TCI and its Growth ........................................................................................................... 3
2.2 TCIs Packaging and Printing Division........................................................................... 3
2.3 Product Development Team ............................................................................................. 3
2.4 Production of Cashew Kernels ......................................................................................... 4
2.5 Cashew Exports from India .............................................................................................. 4
2.6 Export Marketing Channel for Cashew Kernels .............................................................. 5
2.7 Packaging of Cashew Kernels .......................................................................................... 5
2.8 Production of Tin Containers for Bulk Cashew Export Packaging ................................. 5
3. CORE ISSUES....................................................................................................................... 5
4. ANALYSIS ............................................................................................................................ 6
4.1 Strategic Responses in Host Country Regulatory Environment ...................................... 6
4.2 Questions & Answers ....................................................................................................... 8
5. APPLICATION OF MODELS ............................................................................................ 13
5.1 A-B- C- D Framework ................................................................................................... 13
5.2 Cage Framework ............................................................................................................ 13
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1. OVERVIEW OF THE CASE
TCI Packaging Division case basically describes a situation faced by individual manager or
by an organization at the strategic, functional or operational level in a global environment to
cope up with the changing needs of the market. Products may be marketed worldwide
without significant changes, but most companies will find that global success depends on
willingness to adapt to local market requirements. To be successful in global markets,
companies often need to be flexible in product offerings. Companies that overcome these
international markets requirements can have global success which increases their profits and
lead to more secure market positions both domestically and globally.
2. CASE FACTS
2.1 TCI and its Growth
TCI was established in 1910 as a cigarette manufacturing and marketing organization. TCI is
now more than eight decades later, a 1.5 billion dollar enterprise and a multi-product, multi-
technology, and multi-market group. TCI is one of the most diversified and professionally
managed business houses in India and has investments in seven main businesses. These are
tobacco, cigarettes, packaging and printing, hotels, seeds and edible oils, paper and board,
financial services, and international trading. It has a distribution network that encompassesthe entire sub-continent. The annual report for the year ending 1992-93 showed that the
company had earned a profit after tax of Rs 155 crore from a gross income of Rs 3810 crore.
2.2 TCIs Packaging and Printing Division
TCI's Packaging and Printing Division [PPD] is presently India's largest manufacturer of
value added folded cartons. It meets not only the packaging needs of the cigarette division
wide range of brand leaders in domestic and export markets covering industries like liquor,
foods, detergents, personal products and matches. PPD's facilities have been upgraded withnew computer-controlled machinery to meet international standards. PPD had technical
collaboration arrangement with Box-Liquid Corporation, USA, to manufacture and market
Wunder-Pac" Bag-in-Box [BIB]packaging system.
2.3 Product Development Team
Mr D K Sharma is the Marketing Manager of PPD and head of the new product development
team. He joined TCI 14 years ago and has done Post Graduation in Management. The other
members of the team are:
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Mr Shiva - Post-Graduate Diploma in Packaging from National Institute forPackaging, Bombay and involved in technical matters of development of packaging
solution.
Mr Jeyan Engineering, involved in the development and designing of liquid fillersfor major clients of PPD in soft drinks and agro-processing industries.
Mr Thomas - Involved in direct relation with customers and provided the feedbackfrom the market
Mr Doss - planning and production manager2.4 Production of Cashew Kernels
Production of Cashew Kernels goes through many processes. Firstly, Cashew nuts are
conditioned by sprinkling water and are kept for 24 - 72 hours after which they are sun dried
or roasted. The roasting could be done either by the drum roasting method or the oil roastingmethod. The roasted cashew nuts are then shelled manually with wooden hammers. In this
process, kernels get separated from the nuts. The kernels are then dried immediately and a
process called 'borming' is done. This process helps to prevent insect attack on cashew
kernels. Finally, the outer skin of the cashew kernel is peeled off manually.
The production of cashew nuts in India has been highly unorganized. The cashew kernels
exported from India can either be from cashew nuts produced indigenously or from cashew
nuts imported from countries like Guinea, Nigeria, Ivory Coast, Indonesia, Tanzania, and
Vietnam
2.5 Cashew Exports from India
Cashew kernels occupy a prime place among India's agricultural commodity exports. The
total value of cashew kernels exported from India rose from Rs 258 crore in 1988 to Rs 601
crore in 1991. There are two major international markets for cashew kernelsthe New York
market and the London market.
The graph below shows the trend of Indias export of cashew kernels in quantities and for
1992 it is only for 9 Months (Till the end of the month of September).
16.9
64.5
24
46.8
35.2
0
10
20
30
40
50
60
70
1947 1972 1978 1991 1992
Quantity(InThousands
Tonnes)
Year
Export of Cashew Nuts
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2.6 Export Marketing Channel for Cashew Kernels
The buyers for the cashew kernels are mostly chain stores, especially in the US. The kernels
which are sent in tin boxes of 25 Ibs capacity are repacked at the retail stores and packed in
their own lot sizes with their own brand names imprinted in most of the cases. The tradingpart on behalf of the processors is done mostly by the agents who do forthright purchases
from the processors. Thus a majority of the Indian processors do not have direct contacts with
most of the channel agents on the other side of the shore.
2.7 Packaging of Cashew Kernels
The system used to pack cashew kernels for bulk exports is called the 'vitapack' system. The
cashew kernels are packed with a net weight of 11.34 kgs. (25 Ibs.) Of kernels in tins
weighing 1 kg. Each. In the vitapack system, the tins are kept in the fillers and cashew
kernels are filled by jerk movements. These tins are weighed and tightly packed. Finally, tins
are then sealed with tin lid and lead soldering.
2.8 Production of Tin Containers for Bulk Cashew Export Packaging
The tins required for packaging of cashew kernels are made either by the exporter himself in
his workshop or by the sub-contractors. At present, these are procured from Virudhunagar in
Tamilnadu and Quilon in Kerala. Tin plates are procured from Calcutta and are certified as
leak-proof by the Export Inspection Agency [EIA]officials, either in the godown of the tin
manufacturer or in the godown of the exporter.
Indian exporters are now facing pressure from the importing countries to adopt alternative
packaging methods because of different reasons like lead solders contamination,
Disposability etc. which leads to issue related to investment in new technology, tin
manufacturer, high cost of new packs, shorter time period to adopt the new packing system
etc. To overcome the problems in the tin containers and to evolve new methods of bulk
packaging for cashews, the Association of Exporters and the Council for Cashew Exports
and Promotion (CCEP) formed a committee and was expecting the recommendations of this
committee.
3. CORE ISSUES
The following are the core issues to be dealt in the case:
Problems faced in cashew packaging Stake of different stakeholders in cashew packaging Attractiveness of the cashew packaging industry
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the product in proper quality and in required time in US which is the main market
for TCI.
4.2 Questions & Answers
Q.1 What are the problems faced by the cashew industry regarding packaging of
cashews for exports?
The problems faced by the cashew industry regarding packaging of cashews for exports are
as follows:
Lead Solder Contamination:The process of production of tins involves usage oflead solders which makes the tins leak-proof. The lead solder used for this purpose
has 50 per cent lead and 50 per cent tin mixture. This concentration of lead isconsidered to be health hazardous. Also, fears were expressed about the lead
solder getting in touch with the cashew kernels near the mouth as they were
tightly packed. The increased health consciousness and awareness of lead
poisoning world over had made the importers of cashews to pressurize the
exporters to adopt alternative bulk packaging methods.
Pest attacks in godowns:Sometimes smell of cashews attracts the rats, which incase destroys the cashews. Cashew should be packed in such a way that they
should be smell proof from pest. Disposability & Shelf Space: The tins which reach the destinations of the
importing countries, after being emptied, are to be stored and then scrapped. Since
these tins are not collapsible, they occupy a huge floor space in storage. In some
countries, the importers were asked to pay for scrapping and disposing of these
tins.
Recyclability: In most of the western countries, consumers are forcing themarkets into becoming 'green' and more environment friendly. In fact, they have
formulated guidelines for packaging and are demanding recyclable packs.
Safety aspects with respect to sharp edges of Tin: Tin packaging wasconsidered to be unsafe as the tins, when cut, have sharp edges and may injure the
person handling them. Even though this problem had prevailed in the past, the
importers were now keen to get rid of this problem by having a safe pack.
Association of Exporters and Council for Cashew Exports and Promotion (CCEP) has
formed a committee and certain recommendations were suggested:
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Enough strength to withstand the pressure of handling and transport as cashew aretransported from factories to godowns and from godowns to port dockyard.
Containers should be leak proof as cashews tend to become rancid if they areexposed to air, light, and moisture.
Shelf life of the cashews to be in the range of 6 months to 1 year considering thetransportation time to be nearly 2 months by ship and those cashews are
sometimes traded in forward market.
Resistance to pest attacks in godowns. The normal rejection level should be less than 5 per cent and Resistance to pest
attacks in godowns.
The cost of new packs is not more than current packs as importer are not willingto pay more than that.
Q.2 Is the cashew packaging market attractive enough?
The following are the key factors that help determine the attractiveness of the market:
Market size Market growth Pricing trends Intensity of the competition Overall risk in the industry
Opportunity to differentiate products and services
Based on the existing scenario its not attractive due to the restrictions imposed by the
importers. The present situation may lead to the importers preferring other countries if the
packaging method is not altered. This shows that for existing players this has become a very
important issue to handle immediately. But there is Scope for the new players to come up
with new packaging. That may help in getting the upper hand on existing market players.
Any new breakthrough innovation could open up a new market in this arena. They have to
consider the cost factor. And ensure the packaging system doesnt exceed the cost ofinvestment. With increasing Cashew kernel exports Cashew Packaging market is growing
too.
The cost benefit analysis has to be rationalized of course. Brazil has been a tough competitor
in the market with rise in the Cashew kernel exports world over. There is all the more reason
for new players to crop up in this market of bulk exporting for cashew packs.
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Q.3 What are the stakes of different stakeholders in cashew packaging?
In cashew packaging interest of different stakeholders are on the line. The stake of priority
stakeholders has been explained below:
Exporter: Importer has made a demand for different type of packaging within ashort period of time (next financial year). Developing different type of packaging
system within a short time and at the same cost as importer are not willing to pay
much created problems for the exporter. Importer are having options of importing
from different countries it creates additional pressure on exporter. If, the exporter
are not able to cope with demand of importer they may lose their business which
has been already declining because of different restrictions from foreign countries.
Tin Manufacture:Tin manufactures are one of the stakeholders which will beseverely affected by the importer demand. As most of the manufacturer are smallscale the new method may require considerable amount of investment which they
are not able to finance. New packaging can destroy their almost completely.
Government: Cashew kernels occupy a prime place among Indias agriculturalcommodity exports. Although, figures show that India's exports of cashew kernels
were increasing, the share of Indian exports in the total world exports showed a
declining trend. It will have an impact on the revenues earned and foreign
exchange reserves.
Importers: They have the maximum say in the entire value chain. They imposerestrictions and norms/standards to be followed world-wide to achieve best quality
cashew products. New packaging system is beneficial from them as they are
getting better quality at the same rate.
Marketing Channel Agents: These are the stakeholders who bridge the gapbetween the producer and the consumer. The trading part on behalf of the
processors is done mostly by the agents who do forthright purchases from the
processors, either based on future contracts (20 to 30 per cent of the cases) or go
in for one time spot transactions or both (in most of the cases). The commission is
what incentivizes their action. Greater value addition by processing and packaging
of cashew kernels calls for better commission.
Producers: There has been a rise in imports for cashews as compared toindigenous production for India. This is so because the market is largely
unorganised. The switching cost is not much as incentives are too low in this
industry.
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Packaging Industry: Packaging Industry has tried different mechanisms toovercome the issues posed by the importing nations of Cashew kernels. The
following types of method has been evaluated by the industry:
Kovak Packaging:Their packaging method involves packing cashew kernelsin an aluminium foil pack (non-recyclable) which is closed on three sides and
has an opening on one side. Widely used by Brazil cashew exporters, it is
found to withstand the wear and tear of small distances, viz. between Brazil
and USA.
CAM Companys Packaging:This Company has tried to produce a new typeof bulk pack through its packaging production unit. Cashew exporters have
been using composite cans for small consumer packs up to 1 kg. These carts
are made of hard cardboards which are glued after rolling them into requiredshape. The top and the bottom of the can is made of tin sheets. The cost of
such cans when extended to bulk packaging of cashews is considered to be
very high. However, only minor modifications are required in the existing
packaging system.
TCI's Bag-in-Box Flexi Packs: In this packaging, a flexi pack made ofaluminium foils and HDPE (High Density Poly Ethylene) of four layers is
used as a container. The sprout could be made to protrude outside the box. The
outer carton could be made with a handle also. Results have been encouraging
with 25 lbs. flexi packs in the testing stage. The team is also trying to develop
a bulk pack which could hold 50 lbs., in a single pack. New packs were tested
by sending one full container load of cashews to Japan through TCIs Agri-
Business division. Few problems still persist around percentage of broken and
split components and susceptibility to rat infestation. On the plus side, new
packs could be offered at a lower cost than the tin containers. The expected
changes to be made in the vitapack system to accommodate this new pack
were also minimal.
Q.4 What should be the marketing strategy for their new pack?
TCI can implement 4Ps to know the feasibility of the BIB (Bag- in- Box). The
implementation of 4Ps as a marketing strategy by TCI are as follows:
Product: The BIB(Bag-in-Box) is a made from Aluminium and HDPE(High-densitypoly ethylene)and the salient features of BIB are Convenient to use, Hygienic,
Tamper proof. The expected changes to be made in the vita pack system to
accommodate this new pack were also minimal.
http://en.wikipedia.org/wiki/High-density_polyethylenehttp://en.wikipedia.org/wiki/High-density_polyethylenehttp://en.wikipedia.org/wiki/High-density_polyethylenehttp://en.wikipedia.org/wiki/High-density_polyethylene -
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The advantages of HDPE are:
Virtually maintenance free Impervious to insects Will not crack or split Does not contaminate ground or soil High abrasion resistance Splinter free Does not contain harmful chemicals Attractive appearance
Price:The BIB (Bag-in-Box) packaging is Lower cost than tin containers and its veryCost effective one more advantage of HDPE is Durable and Recycled Plastic, it needs
Minimal changes to be made from Vita pack system.
Promotion:TCI have to get EIA (Export inspection Agency) certification. TCI willshow the Association of Cashew Exporters and CCPE (Council for Cashew Exports
and Promotion) the Cost advantages of this new pack. By explaining how it is
addressing the Importers standards itcan create awareness of its usage.
Place:The location is selected where the exports of cashews are take place like US,Netherland, UK etc. and potential markets should also be taken into considerations.
With all the new technologies at its disposal, TCI needs to test its latest product in the leadmarkets like U.K./Western Europe and America to find out the imminent success or failure
before full-fledged commercial production for next season beyond just 4Ps. The strategy
should also focus into the following areas:
Cultural and regional implications of packaging and labelling should be kept in mindto avoid any problems in unexpected ways. Labelling must help consumers
understand and buy better products by conveying rudimentary instructions for their
usage.
The package colour and text have to be integrated into the companys promotionalstrategy and therefore may be subject to specific tailoring that differs from one
country to another.
TCI can get rid of the existing tin cans by exporting to low volume and low standardmarkets like Africa, South East Asia, West Asia etc.
PPD itself can become a company solely focused on packaging. Therefore it can focusmore into R&D and cater to packaging of various agro and other products and can
caters its own marketing needs.
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5. APPLICATION OF MODELS
TCI can apply the models which can help it in formulating its policies. TCI can apply the
following models for better implementation of its strategies regarding Packaging and
exporting of cashew nuts:
5.1 A-B- C- D Framework
Access: Importers of our product have got access to the product from various othercountries like Brazil and Kenya. But, still India is the largest exporter of Cashew
Kernels so it is easy for them to access it through India.
Buying behaviour: Buyers are mostly chain stores. Until the arrival of Brazil inmarket, India was the major exporter of Cashew Kernels, but after the arrival of
Brazil, buying behaviour changed on the basis of prices, proximity of exporter and
delivery of proper quality product.
Consumption characteristics: The factors that drives consumption pattern are: Price of Cashew Hygiene Safety to consumer
Disposal: The tins which reach the destinations of the importing countries, after beingemptied, are to be stored and then scrapped. Since these tins are not collapsible, they
occupy a huge floor space in storage. In some countries, the importers are asked to
pay for scrapping and disposing of these tins. Hence, disposing the imported tins
caused a huge problem. Environmental concerns necessitate the recyclability of
packing material used.
5.2 Cage Framework
The CAGE Distance Framework identifies Cultural, Administrative, Geographic and
Economic differences or distances between countries that companies should address when
crafting international strategies. TCI should adopt CAGE model to understand different
markets in which it is dealing:
USA & INDIA Cultural distance: Lesser language barrier as English is known to both the
countries
Administrative distance: No common currency but the problem is less as USDollar is an international currency
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Geographic distance: Differences in the climate do exist between both thecountries and both the countries are far from each other
Economic distance: USA is one of the developed countries of the world withGDP of 14.08 trillion USD where as India has GDP of 3.91 trillion USD.
NETHERLANDS & INDIA Cul tural distance:No language barrier as English is known by almost all of the
Dutch population
Administrative distance:No common currency Geographic distance: Differences in the climate do exist between both the
countries and both the countries are far from each other
Economic distance:GDP of Netherlands is 772.2 billion USD. JAPAN & INDIA
Cul tural distance:Language and Religion followed are different in both countries Administrative distance:Lack of common currency Geographic distance: Differences in the climate do exist between both the
countries and both the countries are far from each other
Economic distance:GDP of Japan is 5.96 trillion USD. UK & INDIA
Cul tural distance:Language barrier is very less as English is known to both thecountries. Followers of Indian religions (Hinduism, Sikhism, Muslims, and
Jainism) are in good numbers in UK
Administrative distance: Lack of common currency Geographic distance: Differences in the climate do exist between both the
countries and both the countries are far from each other
Economic distance:UK is one of the developed countries of the world with GDPof 2.4 trillion USD where as India has GDP of 3.91 trillion USD.
MALAYSIA & INDIA Cul tural distance:No Language barrier Administrative distance:Federal government, cordial political association, fixed
currency
Geographi c distance:Both the countries are not very far from each other. Boththe countries share similar climate
Economic distance: GDP of Malaysia is 303.5 billion USD. It is a developingcountry with a relatively stable economy.
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AUSTRALIA & INDIA Cul tural distance:No Language barrier Administrative distance:Shared democratic ideals Geographic distance: Differences in the climate do exist between both the
countries and both the countries are far from each other
Economic distance:GDP of Australia is 1.51 trillion USD.