describes a sihtntion faced, a decision or action Ioken l1y an individual manager

Management Case or by an organization at thi! strategic, fu nctional or operational levels.

Blair Water Purifiers India

James E Nelson "A pity I couldn't have stayed for Diwali," thought
Rahul Chatterjee. "But anyway it was great to be back
home in Calcutta." The Diwali h oliday and its fes-
tivities would begin in early November 1996, some
two weeks after Chatterjee had returned to the United
States. Chatterjee worked as an international market
liaison for Blair Company, Inc. This was his eighth
year with Blair Company and easily his favourite.
"Your challenge will be in moving us from just
dabbling in less developed countries (LDCs) to our
The case featured in this issue deals thriving in them," his boss had said when Chatterjee
with international marketing strategy was promoted to the job last January. Chatterjee had
and current business conditions in India agreed and was thrilled when asked to visit Mumbai
particularly in the field of home water and New Delhi in April His purpose on that trip was
to gather background data on the possibility of Blair
purification devices. Rahul Chatterjee is
Company entering the Indian market for home water
entrusted with the task of gathering purification devices. Initial results were encouraging
background data on the possibility of and prompted the second trip.
Blair Company entering the competitive Chatterjee had used his second trip primarily to
Indian market for home water purifica- study Indian consumers in Calcutta and Bangalore and
tion devices. The data would be used by to gather information on possible competitors. The two
the executives to make a recommendation cities represented quite different metropolitan areas
on market entry and on elements of an in terms of location, size, language, and infrastructure
-yet both suffered from similar problems in terms
entry strategy. of water supplied to their residents. These problems
could be found in many LDCs and were favourable
Readers are invited to send their res- to home water purification.
ponses on the case to Vikalpa Office.
Information gathered on both visits would be
James E Nelson is Associate Professor of used to make a recommendation on market entry and
Marketing at the University of Colorado, on elements of an entry strategy. Executives at Blair
Company would compare Chatterjee's recommenda-
Boulder, USA. tion to those from two other Blair Company liaisons
The author is grateful to the students of class of 1996 at DM, who were focusing their efforts on Argentina, Brazil, ·
Calcutta, and Professor Roger Korin, Southern Methodist and Indonesia.
University, for their help.
Indian Market for Home Water Filtration
and Purification
Like most aspects of India, the market for home water
filtration and purification took a great deal of effort
to understand. Yet, despite expending this effort,
Chatterjee realized that much remained either un-
known or in conflict. For example, the market seemed
clearly a mature one, with four or five established
Indian competitors fighting for market share. Or, was
it? Another view portrayed the market as a fragmented

Vol. 22, No. 3, july- September 1997 79

011e, with no large competitor having a national pre- One thing that seemed certain was that many
sence and perhaps 100 small, regional manufacturers, Indians felt the need for improved water quality.
each competing in just one or two of India's 25 states. Folklore, newspapers, consumer activists, and govern-
Indeed, the market could be in its early growth stages, ment officials regularly reinforced this need by de-
as reflected by the large number of product designs, scribing the poor quality of Indian water. Quality
materials, and performances. Perhaps, with a next suffered particularly during the monsoons because of
generation product and world class marketing effort, highly polluted water entering treatment plants and
Blair Company could consolidate the market and because of numerous leaks and unauthorized with-
stimulate tremendous growth - much like the situ- drawals from water systems. Such leaks and with-
ation in the Indian market for automobiles. drawals often polluted clean water after it had left
Such uncertainty made it difficult to estimate the plants. Politicians running for national, state, and
market potential. However, Chatterjee had collected local government offices also reinforced the need for
unit sales estimates for a 10-year period for three similar improved water quality through election campaign
product categories - vacuum cleaners, sewing ma- promises. Governments at these levels set standards
chines, and colour televisions. In addition, a Delhi- for water quality, took measurements at thousands of
based research firm had provided him with estimates locations throughout the nation, and advised consum-
of unit sales for Aquaguard, the largest selling water ers when water became unsafe.
purifier in several fndian states. Chatterjee had used the During periods of poor water quality, many
data in two forecasting models available at Blair Indian consumers had little choice but to consume the
Company along with three subjective scenarios - water as they found it. However, better educated,
realistic, optimistic, and pessimistic - to arrive at the wealthier, and more health conscious consumers took
estimates and forecasts for water purifiers shown in steps to safeguard their family's health and often
Table 1. "lf anything," Chatterjee had explained to his continued these steps year around. A good estimate
boss, "my forecasts are conservative because they of the number of such households, Chatterjee thought,
describe only first time sales, not any replacement sales would be around 40 million. These consumers were
over the 10-year forecast horizon." He also pointed out similar in many respects to consumers in middle and
that his forecasts applied only to industry sales in larger upper m iddle class households in the United States
urban areas, which was the present industry focus. and the European Union. They valued comfort and
Table 1: Ind ustry Sales Estimates and Forecasts for product choice. They saw consumption of material
Water Purifiers in India: 1990-2005 ('000 goods as a means to a higher quality of life. They
units) liked foreign brands and would pay a higher price
for such brands, as long as purchased products
Unit Sales ForeCJlSt Under outperformed competing Indian products. Chatterjee
Unit Sales Realistic Opttmistic Pessimistic had identified as his target market these 40 million
Ytar Estunates Sc:enano Scenario Scntario households plus those in another four million house-
holds who had similar values and lifestyles, but as
1990 60 yet took little effort to improve water quality in their
1991 90 homes.
1992 150
1993 200
Traditional Method for Home Water
1994 220 Purification
1995 240 The traditional method of water purification in the
1996 250 250 250 target market relied not on any commercially supplied
1997 320 370 300 product but instead on boiling. Each day or several
1998 430 540 400 times a day, a cook, maid or family member would
1999 570 800 550 boil two to five litres of water for 10 minutes, allow
2000 800 1,200 750 it to cool, and then transfer it to containers for storage
2001 1,000 1,500 850 (often in a refrigerator). Chatterjee estimated that
2002 1,300 1,900 900 about SO per cent of the targel market used this
2003 1,500 2,100 750 procedure. Boiling was seen by consumers as inex-
pensive, effective in terms of eliminating dangerous
2004 1,600 2,100 580
bacteria, and entrenched in a traditional sense. Many
2005 1,500 1,900 420
consumers who used this method considered it more

80 Vikalpa
effective than any product on the market. However, of purified water per minute. Simple service activities
boiling affected the palatability of water, leaving the could be performed on water purifiers by consumers
purified product somewhat "flat" to the taste. Boiling as needed. However, more complicated service re-
was also cumbersome, time consuming, and ineffec- quired unlts to be taken to a nearby dealer or an in-
tive in removing physical impurities and unpleasant home visit from a skilled technician.
odours. Consequently, about 10 per cent of the target
market took a second step by filtering their boiled The remaining 10 per cent of the target market
water through "candle filters" before storage. Many owned neither a filter nor a purifier and seldom boiled
consumers who took thjs action did so despite know- their water. Many consumers in this group were
ing that water could become recontaminated during unaware of water problems and thought their water
handling and storage. quality acceptable. However, a few consumers in this
group refused to pay for products that they believed
Mechanical Methods for Home Water were mostly ineffective. Overall, Chatterjee believed
Filtration and Purification that only a few consumers in this group could be
induced to change their habits and become customers.
About 40 per cent of the target market used a mechani- The most attractive segments consisted of the 90 per
cal device to improve their water quality. Half of this cent oi households in the target market who either
group used candle filters, primarily because of their boiled, boiled and filtered, only filtered, or purified
low price and ease of use. The typical candle filter their water.
comprised two containers, one resting on top of the
other. The upper container held one or more porous All segments in the target market showed a good
ceramic cylinders (candles) which strained the water deal of similarity in terms of what they thought
as gravity drew it into the lower container. Containers important in the purchase of a water purifier. Accord-
were made of either plastic, porcelain, or stainless steel ing to Chattetjee's research, the most important factor
and typically stored between 15 and 25litres of filtered was product performance in terms of sediment re-
water. Purchase costs depended on materials and moval, bacteria and virus removal, capacity (e1ther in
capacities, ranging from Rs 350 for a small plastic the form of storage or flow rate), safety, and "foot-
model to Rs 1,100 for a large stainless steel model print'' space. Purchase price was an important concern
(35 Indian Rupees were equivalent to US$1.00 in among consumers who boiled, boiled and filtered, or
1996). Candle filte rs were slow, producing 15 litres only filtered their water. The next most important
(one candle) to 45 litrcs (3 candles) of filtered water factor was ease of installation and service, with style
each 24 hours. To maintain this productivity, candles and appearance rated almost as important. The least
regularly needed to be removed, cleaned, and boiled important factor was warranty and availability of
for 20 minutes. Most manufacturers recommended finance for purchase. Finally, all segments expected
that consumers replace candles (Rs 40 each) either a water purifier to be warranted against defective
once a year or more frequently, depending on sediment operation for 18 to 24 months and to perform trouble
levels. Cree for five to ten years.
The other half of this group used "water puri- Foreign Investment in India
fiers,'' devices that were considerably more- sophis-
ticated than candle filters. Water purifiers typically India appeared attractive to many foreign investors
employed three water processing stages. The first because of government actions begun in the 1980s
removed sediments, the second objectionable odours during the administration of Prime Minister Rajiv
and colours, and the third harmful bacteria and Gandhi. The broad label applied to these actions was
viruses. Engineers at Blair Company were skeptical "liberalization." Uberalization had opened the Indian
that most purifiers claiming the latter benefit actually economy to foreign investors, stemming from recogni-
could deliver on their promise. However, all purifiers tion that protectionist policies had not worked very
did a better job here than candle filters. Candle filters well and that western economies and technologies -
were totally ineffective in eliminating bacteria and seen against the collapse of the Soviet Union - did.
viruses (and might even increase this type of contami- Liberalization had meant major changes in approval
nation); despite advertising claims to the contrary. requirements for new commercial projects, investment
Water purifiers generaUy used stainless steel contain- policies, taxation procedures, and most importantly,
ers and sold at prices ranging from Rs 2,000 to attitudes of government officials. These changes had
Rs 7,000, depending on manufacturers, features, and stayed in place through the two national governments
capacities. Common flow rates were one to two litres that followed Gandhi's assassination in 1991.

Vol. 22, No. 3, july - September 1997 81

 11 Blair Company entered the Indian market, it tion covering Foreign Arbitral Awards.
would do so in one of the three ways: (1) JOint working
Foreign companies were taxed on income arising
arrangement, {2) joint venture company, or (3) acqui-
from Indian operations. They also paid taxes on any
sition. In a jomt working arrangement, Blair Company
inte_rest, dividends, and royalties received, and on any
would supply key purifier components to an Indian
cap1tal gams received from a sale of assets The
company which would manufacture and market the
government offered a wide range of tax concesstons
assembled product. License fees would be remitted
to foreign investors, including liberal depreciation
to Blair Company on a per unH basis over the term
allowances and generous deductions. The government
of the agreement (typically five years, with an option
~ffered even more favourable tax treatment if foreign
to renew for three more). A joint venture agreement
uwestors would locate in one of India's six Free Trade
would have Blatr Company partnering with an ex-
Zones. Overall, Chatterjee thought that corporate tax
Isting Indian company expressly for lhe purpose of
rates in India were probably ~omewhat higher than
manufacturing and marketing water purifiers. Profits
in the United States. However, so were profits - the
from lhe jomt venture operation would be split
~verage return on assets for all Indian corporations
between lhe two parties after a minimum time period.
m recent years was almost 18 per cent, compared to
An acquisition entry would have Blair Company
about 11 per cent for United States corporations.
purchasing an existing Indian company whose opera-
tions would then be expanded to include lhe water Approval by the Reserve Bank of India was
purifier. Profits from the acqu1sition would belong to needed for repatriation of ordinary profits. However,
Blair Company. approval should be obtained easily if Blair Company
Beyond understanding these basic entry possibili- could show that repatriated profits were being paid
out of export earnings of hard currencies. Chatterjee
~es, Chatterjee acknowledged that he was no expert
thought that export earnings would not be difficult
m legal aspects attending lhe project. However, two
days spent with a Calcutta consulting firm had pro- to realize, given India's extremely low wage rates and
its central location to wealthier South Asian countries.
duced the following information. Blair Company .must
"Profit repatriation was really not much of an issue,
apply for market entry to the Foreign Investment
Promotion Board, Secretariat for Industrial Approvals, anyway," he thought. Three years might pass before
profits of any magnitude could be realized; at least
Ministry of Industries. The proposal would go before
five years would pass before substantial profits would
the Board for an assessment of the relevant technology
be available for repatriation. Approval of repatriation
and India's need for the technology. I£ approved by
by the Reserve Bank might not be required at this
the Board, lhe proposal would then go to the Reserve
time, given liberalization trends. Pinally, if repatriation
Bank of India, Ministry of Finance, for approvals of
remained difficult, Blair Company could undertake
any royaltie and fees, remittances of dividends and
cross-trading or other actions to unblock profits.
interest (if any), repatriations of profits and uwested
capital, and repayment of foreign loans. While the Overall, investment and trade regulations in India
process sounded cumbei'some and time consuming, in 1996 meant that business could be conducted much
the consultant assured Chatterjee that the government easier than ever before. Hundreds of companies from
usualJy would complete its deliberations in less than the European Union, Japan, Korea, and the United
six months and that his consulting firm could "vir- States were entering India in all sectors of the country's
tualJy guarantee" final approval. economy. In the home appliance market, Chattetjee
ilademarks and patents were protected by law could identify 11 such .£inns - Carrier, Electrolux,
in India. Trademarks were protected for seven years General Electric, Golds tar, Matsush1ta, Singer, Samsung,
and could be renewed on payment of a prescribed Sanyo, Sharp, Toshiba, and Whirlpool. Many of these
fee. Patents lasted for 14 years. On balance, Chatterjee firms had yet to realize substantial profits but a1J saw
had told hts boss that Blair Company would have "no the promise of a huge market developmg over the
more problem protecting its intellectual property next few years.
rights in India than in the United States - as long Blair Company, Inc.
as we stay out of court." Chatterjee went on to explain
that litigation in India was expensive and protracted. Blair Company was founded in 1975 by Eugene Blair,
Litigation problems were compounded by an appeal after he left his position in research and development
process that could extend a case for easily a generation. ~t Culligan International Company. Blair Company's
Consequently, many foreign companies preferred ar- fll'st product was a desalinator, used by mobile home
bitration, as India was a party to the Geneva Conven- parks in Florida to remove salts from brackish well

82 Viknlpa
water supplied to residents. The product was a huge of a water purifier that could be added to the product
success and markets quickly expanded to include line. Engineers had given the final design in the project
nearby municipalities, smaller businesses, hospitals, brand name, "Delight." For the time being, Chatterjee
and bottlers of water for sale to consumers. Gecr and the other market analysts had accepted the name,
graphic markets also expanded, first to other coastal not knowing if it might infringe on any existing brand
regions near the company's headquarters in Tampa, in India or in the other countries under study.
Florida, and then to desert areas in the southwestern
Delight Purifier
United States.
New products were added rapidly as well and The Delight purifier used a combination of technolcr
by 1996, the product line included desalinators, particle gies to remove four types of contaminants found in
filters, ozonators, ion exchange resins, and purifiers. potable water - sediments, organic and inorganic
Industry experts generally regarded the product line chemicals, microbials or cysts, and objection able tastes
as superior in terms of performance and quality, with and odours. The technologies were effective as long
prices higher than those of many competitors. as contaminants in the water were present at "rea-
sonable" levels. Engineers at Blair Company had
Blair Company sales revenues for 1996 would be interpreted "reasonable" as levels described in several
almost $ 400 million, with an expected profit close to World Health Organization (WHO) reports on potable
$50 million. Annual growth in sales revenues aver- water and had combined the technologies to purify
aged 12 per cent for the past five years. Blair Company water to a level beyond WHO standards. Engineers
employed over 4,000 people with 380 having technical had repeatedly assured Chatterjee lhflt Delight's de-
backgrounds and respsonsibillties. sign in terms of technologies should not be a concern.
Export sales of desalinators and related products Ten units operating in the company's testing labora-
began at Blair Company in 1980. Units were sold first tory showed no signs of failure or perfom1ance
to resorts in Mexico and Belize and later to water deterioration after someS,OOO hours of continuous use.
bottlers in Germany. Export sales grew rapidly and "Still,'' Chatterjee thought, "we will undertake a good
Blair Company found it necessary to organize its bit of field testing in India before entering. The risks
International Division in 1985. Sales in the Interna- of failure are too large to ignore. And, besides, results
tional Division also grew rapidly and would reach of our testing would be useful in convincing consum-
almost$ 140 million in 1996. About$ 70 million would ers and retailers to buy."
come from countries in Latin and South America, $
Chatterjee and the other market analysts still
30 million from Europe (including shipments to
faced major design issues in configuring technologies
Africa), and $ 40 million from South Asia and Aus-
into physical products. For example, a " point of entry"
tralia. The International Division had sales offices,
design would place the product immediately after
small assembly areas, and distribution facilities in
water entry to the home, treating all water before it
Frankfurt, Germany; Tokyo, Japan; and Singapore.
flowed to all water outlets. In contrast, a "point of
The Frankfurt office had been the impetus in 1990 use" design would place the product on a counterlop,
for development and marketing of Blair Company's wall, or at the end of a faucet and treat only water
first product targeted exclusively to consumer house- arriving at that location. Based on cost estimates,
holds - a home water filter. Sales engineers at the designs of competing products, and his unde rstanding
Frankfurt office began receiving consumer and dis- of Indian consumers, Chatterjee would direct engi-
tributor requests for a home water filter soon after neers to proceed only with "point of use" designs for
the fall of the Berlin wall in 1989. By late 1991, two the market.
models had been designed in the Unjted States and Other technical details were yet to be worked out.
introduced in Germany (particularly to the eastern For example, Chatterjee had to provide engineers with
regions), Poland, Hungary, Romania, the Czech Re- suggestions for filter flow rates, storage capacities (if
public, and Slovakia any), unit layout and overall dimensions, plus a
Blair Company executives watched the success of number of special features. One such feature was the
the two water filters with great interest. The market possibility of a small battery to operate the filter for
for clean water in LDCs was huge, profitable, and several hours in case of a power failure (a common
attractive in a socially responsible sense. However, the occurrence in India and many other LDCs). Another
quality of water in many LDCs was such that a water might be one or two "bells or whistles" to tell cooks,
filter usually would not be satisfactory. Consequently, maids, and family members that the unit indeed was
in late 1994, executives had directed the development working properly. Yet another might be an " additive"

Vol. 22, No. 3, July - September 1997 83

feature, permitting users to add flurotde, vitamins, or Competitors
even flavourings to thelf water.
Upwards of 100 companies competed in the Indian
Chatterjee knew that the lnd1an market would market for home water filters and purifiers. While
eventually require a number of models. However, at information on most of these companies was difficult
the out.:;et of market entry, he probably could get by to obtain, Chatterjee and the Indian research agencies
with just two - one with a larger capacity for houses were able to develop de!'Cr:iptions of three major
and bungalows and the other a smaller capacity model competitors and brief profiles of several others.
for flats. H e thought that model styling and specific
appearance!> should reflect a western, high technology Eureka Forbes
school of design in order to distinguish the Delight The most established competitor in the water purifier
purifier from competitors' products. To that end, he market was Eureka Forbes, a joint venture company
had instructed a graphics artist to develop two ideas established in 1982 between Elcctrolux (Sweden) and
that he had used to gauge consumer reactions on his Forbes Campbell (India). The company marketed a
last visit (see Exhibit 1). Consumers liked both models broad line of "modem, lifestyle products" including
but preferred the countertop design O\'er the wallmotmt water purifiers, vacuum cleaners, and mixers/ grind-
design. ers. The brand name used for its water purifiers was
"Aquaguard," a name so well established that many
Exhibit 1: Wallmount and Countertop Designs consumers mistakenly used it to refer to other water
purifiers or to the entire product category. Aquaguard,
with its 10-year market history, was clearly the market
leader and came close to being India's only national
brand. However, Eureka Forbes had recently intro-
duced a second brand of water punfier called
"PureSip." The PureSip model was similar .to Aqua-
guard except for its third stage process which used
a polyiodide resin instead of ultraviolet rays to kill
bacteria and viruses. This meant that water from a
PureSip purifier could be stored safely for later usage.
Also, in co(ltrast to Aquaguard, the PureSip model
needed no electricity for its operation.
However, the biggest difference between the two
products was how they were sold. Aquaguard wa ~
sold exclusively by a 2,500 person c;aJcsforce that called
directly on households. In contrast, PureSip was sold
by independent dealers of smaller home appliances
Unit prices to consumers for Aquaguard and PureSip
in 1996 were approximately Rs 5,500 and Rs 2,(100
respectively. Chatterjee believed that unit sales v
PureSip was much smaller than unit sales for Aqua-
guard but growing at a much faster rate.
An Aquaguard unit typically was mounted on a
kitchen wall, with plumbing required to bnng watt•r
to the purifier's inlet. A two metre long power cord
was connected to a 230 volts AC electrical outlet -
the Indian standard. If the power supply were to drop
to 190 volts or lower, the un1t would stop functioning.
Other limits of the product included a smallish amoum
of activated carbon which could eliminate only weak
organic odours. It could not remove strong odours
or inorganic solutes like nitrates and iron compounds.
The unit had no storage capacity and its flow rate
of one litre per minute seemed slow to some consumers.

S4 V1knlpa
Removing water for storage or connecting the unit
to a reservoir tank could affect water quality, like a
candle filter. DON'T JUST
GUARD YOUR
Aquaguard's promotion strategy emphasized per·
sonal selling. Each salesman was assigned to a specific FAMILY THIS
neighbourhood and was monitored by a group leader MONSOON.
who, in tum, was monitored by a supervisor. Each
salesman was expected to canvass his neighbourhood, AQUAGUARD IT.
,.._....,. ........... ....
...... """'·---·.. ..., .........
select prospective households (e.g., those with annual

_ _
..,;

income exceeding Rs 70,000), demonstrate the pro- ,

duct, and make an intensive effort to sell the product.
...... .._... .... ....._..,_.,._. ..........................
..,._.~,..._..........,._

_...,....__....,.,.,... ...,,...... .....__........"... _._ ...... ...,.

.......,;,
Repeated sales calls helped to educate consumers
about their water quality and to reassure them that _..........,....... ~_.......,_,,..... ....... .,. ........... .......
Aquaguard service was readily available. Television ........., .. ..w..._ - · ........... ~,-~ .....
commercials and advertisements in magazines and ........ ................,_.,_... ..... •'--" " - ' · " " ' ·......- J ............ ___ •

newspapers (see Exhibit 2) supported the personal

selling efforts. Chatterjee estimated that Eureka Forbes
~ ... , .....
_.... __ --
s. ............................... -. ~
.................. .,_ ........
-
would spend about Rs 120 million on all sales activities
in 1996 or roughly 11 per cent of its sales revenues. C.,.... . ...·--
He estimated that about Rs 100 million of the Rs 120
million would be spent in the form of sales comm.is-
sions. Chatterjee thought that the company's total nology as part of a three stage purification process.
advertising expend~tures for the year would be only The frrst stage removed suspended impurities via filter
about Rs 1 million. pads, the second eliminated bad odours and taste with
activated carbon, and the third killed bacteria using
Eureka Forbes was a formidable competitor. The trace quantities of polyiodide (iodine). The latter
salesforce was huge, highly motivated, and well feature was attractive because it helped prevent iodine
managed. Moreover, Aquaguard was the first product deficiency diseases and permitted purified water to
to enter the water purifier market and the name had be stored up to eight hours without fear of recontami-
tremendous brand equity. The product itself was nation.
probably the weakest strategic component - but it
The basic purifier product for the home carried
would take much to convince consumers of this. And,
the name, "Puristore." A Puristore unit typically sat
while the salesforce offered a huge competitive ad-
on a kitchen counter near the tap, with no electricity
vantage, it represented an enormous fixed cost and
or plumbing hookup needed for its operation. The unit
essentially limited sales efforts to large urban areas.
stored 20 litres of purified watez: It sold to consumers
More than 80 per cent of India's population lived in
for Rs 2,000. Each year, the user must replace the
rural areas, where water quallty was even lower.
halogenated resin :1t a cost of Rs 200.
Ion Exchange
Chatterjee estimated that ZERO-B captured about
Ion Exchange was the premier water treatment com- 7 per cent of the Indian water purifier market.
pany in India, specializing in treatments of water, Probably the biggest reason for the small share was
processed liquids, and waste water in industrial a lack of consumer awareness. ZERO-B purifiers had
markets. The company began operations in 1964 as been on the market for less than three years. They
a wholly-owned subsidiary of British Permutit. Permutit were not advertised heavily nor did they enjoy the
divested its holdings in 1985 and Ion Exchange became sales effort intensity of Aquaguard. Distribution, too,
a wholly-owned Indian company. The company pres- was limited. During Chatterjee's visit, he could find
ently served customers in a diverse group of indus- only five dealers in Calcutta carrying ZERO-B pro-
tries, including nuclear and thermal power stations, ducts and none in Bangalore. Dealers that he contacted
fertilizers, petrochemical refineries, textiles, automo- were of the opinion that ZERO-B's marketing efforts
biles, and home water purifiers. Its home water would soon intensify - two had heard rumours that
purifiers carried the family brand name, ZERO-B a door-to-door saJesforce was planned and that con-
(Zero-"Bacteria). sumer advertising was about to begin.
ZERQ..B purifiers used a halogenated resin tech· Chatterjee had confirmed the latter point with a

Vol. 22, No.3, July- Stptember 1997 85

visit to a Calcutta advertising agency. A modest During Chatterjee's time in Calcutta, he had
number of 10-second TV commercials would soon be visited a Singer Company showroom on Park Street.
aired on Zee TV and DD metro channels. The adver- Initially, he had hoped that Singer might be a s uitable
tisements would focus on educating consumers with partner to manufacture and distribute the Delight
the position, "It 1S not a filter' Apart from this purifier. However, much to his surprise, he was told
advertising effort, the only other form of promotion that Singer now had its own brand on the market,
used was a point of sale brochure that dealers could "Aquarius." The product was not yet available in
gtve to prospective customers (see Exhibit 3). Calcutta but was being sold in Mwnbai and Delh1
On balance, Chatterjee thought that Ion Exchange A marketing research agency in Delhi was able
could be a major player in the market. The company to gather some mformation on the Singer purifier. The
had over 30 years' experience in the field of water product contained nine stages (!) and sold to consum-
purification and devoted upwards of Rs 10 million ers for Rs 4,000. It removed sediments, heavy metals,
each year to corporate research and development. "In bad tastes, odours, and colours. It also killed bacteria
fact," he thought, " all Ion Exchange really needs to and viruses, fungi, and nematodes. The purifier
do is to recognize the market's potential and to make required water pressure (8 PSI minimum) to operate
it a priority within the company." Howeve~ this might but needed no electricity. It came in a single counter-
be difficult to do, given the company's prominent top model that could be moved from one room to
emphasis on industrial markets. Chatterjee estimated another. Life of the device at a flow rate of 3.8 litre!>
that ZERO-S products would account for less than per minute was listed as 40,000 litres - about four to
two per cent of Ion Exchange's 1996 total sales, six years of use in the typical Indian household. The
estimated at Rs 1,000 million. He thought that the total produc~s life could be extended to 70,000 liti:es at a
marketing expenditures for ZERO-S would be around somewhat slower flow rate. However, at 70,000 litres,
Rs 3 million. the product must be discarded. The agency reported
Singer a heavy advertising blitz accompanying the introduc-
The newest competitor to enter the Indian water tion in Delhi - emphastzmg TV and n ewspaper
purifier market was Singer India Ltd. Originally, Sin- advertising, plus outdoor and transit advertising as
ger India was a subsidiary of The Singer Company, support. All 10 Singer showrooms in Delhi offered
located in the United States, but a minority share (49%) vivid demonstrations of the product's operation.
was sold to Indian investors in 1982. The change in Chatterjee had to admit that photos of the Aquarius
ownership had led to construction of manufacturing purifier shown in the Calcutta showroom looked
facilities in India for sewing machines in 1983. The appealing. And, a trade article he found had d escribed
facilities were expanded in 1991 to produce a broad the product as "state of the art" in comparison to the
line of home appliances. Sales revenues for 1996 for "primitive" products now on the market. Chatterjee
the entire product line - sewing machines, food and Blair Company engineers tended to agree - the
processors, iron s, mixers, toaster, water heaters, ceiling disinfecting resin used m Aquarius had been devel-
fans, cooking ranges, and colour televisions - would oped by the United States government's Nation al
be about Rs 900 million. Aeronautics and Space Administtation (NASA) and
Exhjbit: 3 ZERQ.B Sales Brochure was proven to be 100 per cent effective against bacteria
and viruses. "If only I could have brought a unit back
with me," he thought. "We could have som e test
results and see just how good it is." The trade article
also mentioned that Singer hoped to sell40,000 units
over the next two years.
Chatterjee knew that Singer was a well known
and respected brand name in India. Further, Singer's
distribution channels were superior to those of any
competitor in the market, including those of Eureka
Forbes. Most prominent of Singer's three distribution
channels were the 210 company-owned showrooms
located in major urban areas around the country. Each
sold and serviced the entire line of Singer products.
Each was very well kept and staffed by knowledgeable

86 Vikalpa
personnel. Singer products were also sold throughout No manufacturer targeted rural or smaller urban areas
India by over 3,000 independent dealers, who received and at best, Chatterjee had calculated, existing manu-
inventory from an estimated 70 Singer-appointed dis- facturers were reaching only ten to fifteen per cent
tributors. According to the marketing research agency of the entire Indian population. An explosion in sales
in Oellu, distributors earned margins of 12 per cent would come tf the right product could be sold outside
of the retail price for Aquarius while dealers earned metropolitan areas.
margins of five per cent. Finally, Singer employed over Recommendations
400 salesmen who sold sewing machines and food
processors door-to-door. Like Eureka Forbes, the direct Chatterjee decided that an Indian market entry for
salesforce sold product primarily in large urban Blair Company was subject to three "givens" as he
markets. called them. First, he thought that a strategic focus
on rural or smaller urban areas would not be wise,
Other Competitors at least at the start. The lack of adequate distribution
Chatterjee was aware of several other water purifiers and communication infrastructure in rural India meant
on the Indian market. The Delta brand from S&S that any market entry would begin with larger Indian
Industries in Madras seemed a carbon copy of Aq- cities, most likely on the west coast.
uaguard, except for a more eye pleasing. countertop Second, market entry would requtre manufactur-
design. According to promotion literature, Delta of- ing units in India. Because the cost of skilled labour
fered a line of water related products- purifiers, water in India was around Rs 20 toRs 25 per hour (compared
softeners, iron removers, desalinators, and ozonators. to$ 20 to$ 25 per hour in the United States}, importing
Another competitor was Alia Water Purifiers, Mumbai. complete units was out of the question. However,
The company offered four purifier models at prices importing a few key components would be necessary
from Rs 4,300 to Rs 6,500, depending on capacity. at the start of operation. Third, Blab' Company should
Symphony's Spectrum brand sold well around Mum- find an Indian partner. Chatterjee's visits had pro-
bai at Rs 4,000 each but removed only suspended sedi- duced a number of promtstng partners: Polar Indus-
ments, not heavy metals or bacteria. The Sam Group tries, Calcutta; Milton Plashes, Mumbai; Videocon
in Coimbatore had recently launched its "Water Doctor" Appliances, Aurangabad; BPL Sanyo Utilities and Ap-
purifier at Rs 5,200. The device used a third stage pliances, Bangalore; Onida Savak, Delhi; Hawkins
ozonator to kill bacteria and viruses and came in two India, Mumbai; and Voltas, Mumbai. All companies
attractive counter top models, six and 12 litre storage. manufactured and marketed a line of high quality
Batliboi was mentioned by the Delhi research agency household appliances, possessed one or more strong
as yet another competitor, although Chatterjee knew brand names, and had established dealer networks
nothing else about the brand. Taken all together, unit (minimum of 10,000 dealers). All were involved to
sales of aU purifiers at these companies plus ZERO- greater or lesser degrees with international partners.
B and Singer probably would account for around 60,000 All were medium sized firms - not too large that
units in 1996. The remaining 190,000 units would be a partnership with Blair Company would be one-
Aquaguards and PureSips. sided, not too small that they would lack managerial
At least 100 Indian companies made and mar- talent and other resources. Finally, all were profitable
keted candle filters. The largest of these probably was (15 to 27 per cent return on assets in 1995) and looking
Bajaj Electrical Division, whose product line also to grow. However, Chatterjee had no idea if any
included water heaters, irons, electric light bulbs, company would find the Delight purifier and Blair
toasters, mixers and grillers. Bajaj's candle filters were Company attractive or if they might be persuaded to
sold by a large number of dealers who carried the sell part or all of their operations as an acquisition.
entire product line. Candle filters produced by other
manufacturers were sold mostly through dealers who Field Testing and Product Recommendatio~
specialized in small household appliances and general
The most immediate decision Chatterjee faced was
hardware. Probably no single manufacturer attempted
whether or not he should recommend a field test. The
to satisfy a national market. Still, the candle filters
test would cost about $ 25,000, placing 20 uruts in
market deserved serious consideration - perhaps De-
Indian homes in three cities and monitoring their
light's entry strategy would attempt to "trade-up"
perfonnance for three to six months. The decision to
users of candle filters to a better, safer product.
test really was more than it seemed - Chatterjee's
Finally, Chatterjee knew that sales of almost all boss had explained that a decision to test was really
purifiers in 1996 in India came from large urban areas. a decision to enter. It made no sense to spend this

Vol. 22, No.3, July- September 1997 87

kind of time and money if India were not an attractive and would decrease to $ 15,000 as soon as an Indian
opportunity. The testing period would also give Blair national could be hired, trained, and left in charge.
Company representatives time to identify a suitable Duties of this individual would be to work with Blair
Indian company as either a licensee, joint venture Company personnel in the United States and with
partner, or acquisition. management at the licensee to see that units '"'ere
produced per Blair Company's specifications. Apart
FWldamental to market entry was product design. from this activity, Blair Company would have no
Engineers at Blair Company had taken the position control over the licensee's operations. Chatterjee ex-
that purification technologies planned Cor Delight pected that the licensee would pay royalties to Blair
could be "packaged in almost any fashion as Long as Company of about Rs 280 for each unit sold in the
we have electricity." Electricity was needed to operate domestic market and Rs 450 for each unit that was
the product's ozonatoi as well as to indicate to users exported. The average royalty probably would be
that the unit was functioning properly (or improperly, around Rs 300.
as the case might be). Beyond this requirement,
anything was possible. Joint Venture/Acquisition Considerations
Chatterjee thought that a modular approach would If entry were in the form of either a joint venture or
be best. The basic module would be a coWlter- top an acquisition, financial investmenl and annual fixed
Wlit much like that shown in Exhibit 1. The module costs would be much higher and depend greatly on
would outperform anything now on the market in the scope of operations. Chatte~ce had roughed out
terms of flow rate, palatability, durability, and reliabil- some estimates for a joint venture enl:r)~ based on three
ity and would store two litres of purified water. Two levels of scope (see Table 2). His estimates reflected
additional modules would remove iron, calcium, or what he thought were reasonable assumptions for all
other metallic contaminants that were peculiar to needed investments plus annual fixed expenses for
particular regions. For example, Calcutta and much sales activities, general administrative overhead, re-
of the surrotmding area suffered from iron contami- search and development, insmance, and depreciation.
nation, which no filter or purifier now on the Indian His estimates allowed for the Delight purifier to be
market could remove to a satisfactory leveL Water sold either through dealers or through a direct, door-
supplies in other areas in the country were known to-door salesforce. Chatterjee thought that estimates
to contain objectiot'\able concentrations of calcium, salt, of annual fixed expenses for market entry via acqui-
arsenic, lead, or s ulphur. Most Indian consumers sition would be identical to those for a joint venture.
would need neither of the additional modules, some However, estimates for the investment (purchase)
would need one or the other, but very few would need might be considerably higher, the same, or lower. It
both. depended on what was purchased.
Market Entry and Marketing Planning Table 2: Investments and Fixed Costs for a Joint
Venture Market Entry
Recommendations
Operational Scope
Assuming that Chatterjee recommended proceeding
with the field test, he would need to make a recom- 'TWo Fo1tr National
mendation concerning mode of market entry. In Regions Regions Mnrket
addition, his recommendation should include an outline 1998 Market Potential (untts) 55,000 110,000 430,000
of a marketing plan. Initial Investment (Rs 000) 4,000 8,000 30,000
Licensee Considerations Annual Fixed Overhead
Expenses (Rs 000)
U market entry were in the form of a joint working Using Dealer Channels 4,000 7,000 40,000
arrangement with a licensee, Blair Company's finan-
Using Direct Salesforce 7,200 14,000 88,000
cial investment would be minimal. Chatterjee tho1..1ght
that Blair Company might risk as little as $ 30,000 Chatterjee's estimates of Delight's unit contribu-
in capital for production facilities and equipment, plus tion margins reflected a number of assumptions -
another $ 5,000 for office facilities and equipment. expected economies of scale, experience curve effects,
These investments would be completely offset by the costs of Indian labour and raw materials, and com-
licensee's payment to Blair Company for technology petitor's pricing strategies. However, the most impor-
transfer and personnel training. Annual fixed costs to tant assumption was Delight's pricing strategy. lf a
Blair Company should not exceed$ 40,000 at the outset skimming strategy were used and the product sold

88 Viknlpa
through a dealer channel, the basic module would be Skimming versus penetration was more than just a
priced to dealers at Rs 51500 and to consumers at Rs pricing strategy. Product design for the skimming
5,900. "Thls would give us about Rs 650 unit con- strategy would be noticeably superio~ with higher
tribution, once we got production flowing smoothly," performance and quality, a longer warranty period,
he thought. In contrast, if a penetration strategy were more features and a more attractive appearance than the
used and the product sold through a dealer channel, design for the penetration strategy. Positioning, too,
the basic module would be priced to dealers at Rs most likely would be different. Chatterjee recognized
4,100, to consumers at Rs 4,400 and yield a unit several positioning possibilities; performance and taste,
contribution of Rs 300. For simplicity's sake, Chatterjee value for the money /low price, safety, health, conven-
assumed that the two additional modules would be ience, attractive styling, avoiding diseases and health
priced to dealers at Rs 800, to consumers at Rs 1,000, related bills, and superior American technology. The
and would yield a unit contribution of Rs 100. Finally, only position he considered "taken" in the market was
he assumed that all products sold to dealers would that occupied by Aquaguard - protect family health
go directly from Blair Company to the dealers (no and service at your doorstep. While other competitors
d istributors would be used). had claimed certain positions for their products, none
had devoted financial resources of a degree that Delight
If a direct salesforce were employed instead of
cou]d not dislodge them. Chatterjee believed that
dealers, Chatterjee thought that prices charged to
considerable advertising and promotion expenditures
consumers would not change from those listed above.
would be necessary to communicate Delight's position-
However, sales commissions would have to be paid
ing. He would need estimates of these expenditures in
in addition to the fixed costs necessary to maintain
and manage the sa]esforce. Under a skimming price his recommendation.
strategy, the sales commission would be Rs 550 per "H we go ahead with Delight, we "-.rill have to
unit and the unit contribution would be Rs 500. Under move quickly," thought Chatterjee. "The window of
a penetratjon price strategy, the sales commission opportunity is open but if Singer's product is as good
would be Rs 400 per unit and the unit contribution as they claim, we will be in for a fight. Still, Aquarius
would be Rs 200. These financial estimates, he would seems vulnerable on the water pressure requirement
explain in his report_ would apply to 1998 or 1999, and on price. We will need a product category ' killer'
the expected first year of operation. to win."

Vol. 22, No.3, j uly- September 1997 89