International Expansion with Legal requirements

Assignment Taken

Leader: Develop an International Market expansion plan.

Case Understanding

Ramalingam foods is a fast-food restaurant, its USP is in authentic south Indian cuisine. To stay afloat during the 1975 political turmoil, Mr. Ramalingam introduced dosa-idli batter and packets of authentic south Indian chutneys. Further in 1990, Mr. Vijay Ramalingam grew the business in pan india by selling a variety of instant mix products. The business grew to become a Pan India Business selling varied products having below products in their portfolio: Instant Dosa Mix, Instant Idli Mix, Instant Gulab Jamun Mix, Instant Laddu Mix, instant coffee powder Instant Dhokla mix. Currently most products are available in 200 Gms, 500 Gms & 1 Kg Packaging. Currently Ramalingam food's operating revenues INR 152 crore for the financial year ending on 31 March 2019. It's EBITDA has increased by 3.16 % over the previous year. At the same time, it's book networth has increased by 20 %. They observed that their products are being shipped to foreign markets by Indian origin visitors settled in those countries. This gave them an idea to leverage the opportunity of international expansion of their brand. During Initial discussion, it was clear that Ramalingam Foods doesn't have necessary permissions & Licenses for International business. As per current plan they don't have enough capital and business acumen to enter more than one foreign region at a time thus they have decided to start with one region in international expansion. The following parts include a detailed international expansion plan along with all rationale, context and other necessary information.

BCS Solution Summary

A successful international expansion plan for expansion can be targeting the emerging markets of UAE where the concentration of Indian people is higher. So, by doing analysis of the packaged food industry in countries in UAE, it was found out that Dubai, Sharjah and Abu Dhabi are the potential countries where the company can expand in the first phase. • For the initial phase of expansion, since we have 50 crores allotted for international expansion, the plan is to initially expand through partnerships and strategic alliances • Currently Ramalingam Foods have a limited variety of mixes and SKUs – North Indian Mixes, South Indian mixes, Chutney Powder, dessert mixes and instant coffee mixes. The proposed plan is to expand in selected UAE markets with the existing SKUs and introduce a few products on the basis • Printing the instructions in the packets in native languages as well helps to reach a wider consumer base and attracts local consumers as well

Solution

Mission for International expansion:

In the context of International expansion, Ramalingam Food’s mission would be:

 

To be the most favourite instant mix and fast-food company overseas while solving problems associated with cooking traditional cuisines and fast foods in a quick and hassle-free way.

 

Vision for International expansion:

To be the global leader and innovator in ready to eat food markets while giving utmost preference to customer preference, purity and quality.

 

Tagline: Chef’s Kiss with Tasty Instant Mix- The essence of Indian Flavours

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

• To establish the brand name across the countries selected for expansion driven by quality, marketing and our employees

• To capture INR 300 CR market in first 3 years of operation or 5% of the market in first year

• To break even in first two years of operation and attain revenue and attain revenue growth of minimum 20% y-o-y

• To add 15% Cr from international business to the company’s bottom-line in 3 years.

• To add at least 6 products (mix of Indian cuisine and international cuisine) on yearly basis driven by R&D

• To enable seamless transition from a domestic company to a global company without hampering fundamental values, principles and maintaining good environment to work

• To target expansion in other countries as well.

Other Driving Factors for UAE:

Supportive Government Policies

• Pro-business, Liberal investment policies

• Responsive government

• Liberal exchange control regime

• Intellectual property protection

An Educated Workforce

• Talented, young, educated and productive workforce

• Multilingual workforce speaking two or three languages, including English

• Comprehensive system of vocational and industrial training

• Harmonious industrial relations with minimal trade disputes

Developed Infrastructure

• Network of well-maintained highways and railways

• Well-equipped seaports and airports

• High quality telecommunications network and services

• Fully developed industrial parks, including free industrial zones, technology parks and Multimedia Super Corridor (MSC)

Way of Export

Export from India Terms:

India’s Foreign Trade i.e. Exports and Imports are regulated by Foreign Trade Policy notified by the Central government in exercise of powers conferred by section 5 of foreign trade (Development and Regulation) Act 1992. Presently Foreign Trade Policy 2015-20 is effective from 1st April, 2015.  As per FTD & R act, export is defined as an act of taking out of India any goods by land, sea or air and with proper transaction of money. The FTP 2015-20 has been extended till 30th September, 2021.

STARTING EXPORTS

Export in itself is a very wide concept and a lot of preparation is required by an exporter before starting an export business.  To start export business, the following steps may be followed:      

1) Establishing an Organisation

To start the export business, first a sole Proprietary concern/ Partnership firm/Company has to be set up as per procedure with an attractive name and logo.

2) Opening a Bank Account

A current account with a Bank authorized to deal in Foreign Exchange should be opened.

3) Obtaining Permanent Account Number (PAN)

It is necessary for every exporter and importer to obtain a PAN from the Income Tax Department.

4) Obtaining Importer-Exporter Code (IEC) Number

• As per the Foreign Trade Policy, it is mandatory to obtain IEC for export/import from India. Para 2.05 of the FTP, 2015-20 lays down the procedure to be followed for obtaining an IEC, which is PAN based.

• 
  An application for IEC is filed online as per ANF 2A, online payment of application fee of Rs. 500/- through net Banking or credit/debit card is made along with requisite documents as mentioned in the application form. 

5) Registration cum membership certificate (RCMC)

For availing authorization to import/ export or any other benefit or concession under FTP 2015-20, as also to avail the services/ guidance, exporters are required to obtain RCMC granted by the concerned Export Promotion Councils/ FIEO/Commodity Boards/ Authorities.

6) Selection of product

All items are freely exportable except a few items appearing in the prohibited/ restricted list.

After studying the trends of export of different products from India proper selection of the product(s) to be exported may be made.

7) Selection of Markets

An overseas market should be selected after research covering market size, competition, quality requirements, payment terms etc. Exporters can also evaluate the markets based on the export benefits available for a few countries under the FTP. Export promotion agencies, Indian Missions abroad, colleagues, friends, and relatives might be helpful in gathering information.

8) Finding Buyers

Participation in trade fairs, buyer seller meets, exhibitions, B2B portals, web browsing are an effective tool to find buyers. EPC’s, Indian Missions abroad, overseas chambers of commerce can also be helpful. Creating a multilingual Website with product catalogue, price, payment terms and other related information would also help.  

9) Sampling

Providing customized samples as per the demands of Foreign buyers help in getting export orders. As per FTP 2015-2020, exports of bonafide trade and technical samples of freely exportable items shall be allowed without any limit.

10) Pricing/Costing

Product pricing is crucial in getting buyers’ attention and promoting sales in view of international competition. The price should be worked out taking into consideration all expenses from sampling to realization of export proceeds on the basis of terms of sale i.e. Free on Board (FOB), Cost, Insurance & Freight (CIF), Cost & Freight(C&F), etc. Goal of establishing export costing should be to sell maximum quantities at competitive prices with maximum profit margin.  Preparing an export costing sheet for every export product is advisable. 

11) Negotiation with Buyers

After determining the buyer’s interest in the product, future prospects and continuity in business, demand for giving reasonable allowance/discount in price may be considered. 

12) Covering Risks through ECGC

International trade involves payment risks due to buyer/ Country insolvency. These risks can be covered by an appropriate Policy from Export Credit Guarantee Corporation Ltd (ECGC). Where the buyer is placing order without making advance payment or opening letter of Credit, it is advisable to procure credit limit on the foreign buyer from ECGC to protect against risk of non-payment.

Processing an Export Order

i. Confirmation of order

On receiving an export order, it should be examined carefully in respect of items, specification, payment conditions, packaging, delivery schedule, etc. and then the order should be confirmed. Accordingly, the exporter may enter into a formal contract with the overseas buyer.

ii. Procurement of Goods

After confirmation of the export order, immediate steps may be taken for procurement/manufacture of the goods meant for export. It should be remembered that the order has been obtained with much efforts and competition so the procurement should also be strictly as per buyer’s requirement.

iii. Quality Control

In today’s competitive era, it is important to be strict quality conscious about the export goods.  Some products like food and agriculture, fishery, certain chemicals, etc. are subject to compulsory pre-shipment inspection. Foreign buyers may also lay down their own standards/specifications and insist upon inspection   by their own nominated agencies. Maintaining high quality is necessary to sustain in export business.

iv. Finance

Exporters are eligible to obtain pre-shipment and post-shipment finance from Commercial Banks at concessional interest rates to complete the export transaction. Packing Credit advance in the pre-shipment stage is granted to new exporters against lodgment of L/C or confirmed order for 180 days to meet working capital requirements for purchase of raw material/finished goods, labour expenses, packing, transporting, etc.   Normally Banks give 75% to 90% advances of the value of the order keeping the balance as margin.  Banks adjust the packing credit advance from the proceeds of export bills negotiated, purchased or discounted.

Post Shipment finance is given to exporters normally upto 90% of the Invoice value for normal transit period and in cases of usance export bills upto notional due date. The maximum period for post-shipment advances is 180 days from the date of shipment.  Advances granted by Banks are adjusted by realization of the sale proceeds of the export bills. In case the export bill becomes overdue Banks will charge commercial lending rate of interest.

v. Labeling, Packaging, Packing and Marking

The export goods should be labeled, packaged and packed strictly as per the buyer’s specific instructions.  Good packaging delivers and presents the goods in top condition and in an attractive way. Similarly, good packing helps easy handling, maximum loading, reducing shipping costs and ensuring safety and standard of the cargo.  Marking such as address, package number, port and place of destination, weight, handling instructions, etc. provides identification and information of cargo packed.

vi. Insurance

Marine insurance policy covers risks of loss or damage to the goods during the while the goods are in transit. Generally in CIF contract the exporters arrange the insurance whereas for C&F and FOB contracts the buyers obtain insurance policy.

vii. Delivery

It is important feature of export and the exporter must adhere the delivery schedule. Planning should be there to let nothing stand in the way of fast and efficient delivery.

viii. Customs Procedures

It is necessary to obtain PAN based Business Identification Number (BIN) from the Customs prior to filing of shipping bill for clearance of export good and open a current account in the designated bank for crediting of any drawback amount and the same has to be registered on the system.

In case of Non-EDI, the shipping bills or bills of export are required to be filled in the format as prescribed in the Shipping Bill and Bill of Export (Form) regulations, 1991. An exporter need to apply different forms of shipping bill/ bill of export for export of duty free goods, export of dutiable goods and export under drawback etc.

Under EDI System, declarations in prescribed format are to be filed through the Service Centers of Customs. A checklist is generated for verification of data by the exporter/CHA. After verification, the data is submitted to the System by the Service Center operator and the System generates a Shipping Bill Number, which is endorsed on the printed checklist and returned to the exporter/CHA. In most of the cases, a Shipping Bill is processed by the system on the basis of declarations made by the exporters without any human intervention. Where the Appraiser Dock (export) orders for samples to be drawn and tested, the Customs Officer may proceed to draw two samples from the consignment and enter the particulars thereof along with details of the testing agency in the ICES/E system.

Any correction/amendments in the check list generated after filing of declaration can be made at the service center, if the documents have not yet been submitted in the system and the shipping bill number has not been generated. In situations, where corrections are required to be made after the generation of the shipping bill number or after the goods have been brought into the Export Dock, amendments is carried out in the following manners.

1.    The goods have not yet been allowed "let export" amendments may be permitted by the Assistant Commissioner (Exports).

2.  Where the "Let Export" order has already been given, amendments may be permitted only by the Additional/Joint Commissioner, Custom House, in charge of export section.

In both the cases, after the permission for amendments has been granted, the Assistant Commissioner / Deputy Commissioner (Export) may approve the amendments on the system on behalf of the Additional /Joint Commissioner. Where the print out of the Shipping Bill has already been generated, the exporter may first surrender all copies of the shipping bill to the Dock Appraiser for cancellation before amendment is approved on the system.

ix. Customs House Agents

Exporters may avail services of Customs House Agents licensed by the Commissioner of Customs.  They are professionals and facilitate work connected with clearance of cargo from Customs.

x. Documentation

FTP 2015-2020 describe the following mandatory documents for import and export.

·         Bill of Lading/ Airway bill

·         Commercial invoice cum packing list

·         shipping bill/ bill of export/ bill of entry (for imports)

(Other documents like certificate of origin, inspection certificate etc may be required as per the case.)

xi. Submission of documents to Bank

After shipment, it is obligatory to present the documents to the Bank within 21 days for onward dispatch to the foreign Bank for arranging payment.  Documents should be drawn under Collection/Purchase/Negotiation under L/C as the case may be, along with the following documents

-      Bill of Exchange

-      Letter of Credit (if shipment is under L/C)

-      Invoice

-      Packing List

-      Airway Bill/Bill of Lading

-      Declaration under Foreign Exchange

-      Certificate of Origin/GSP

-      Inspection Certificate, wherever necessary

-      Any other document as required in the L/C or by the buyer or statutorily.

xii. Realization of Export Proceeds

As per FTP 2015-2020, all export contracts and invoices shall be denominated either in freely convertible currency of Indian rupees, but export proceeds should be realized in freely convertible currency except for export to Iran.

Export proceeds should be realized in 9 months.

Conclusion

A successful international expansion plan for expansion can be targeting the emerging markets of UAE where the concentration of Indian people is higher. So, by doing analysis of the packaged food industry in countries in UAE, it was found out that Dubai, Sharjah and Abu Dhabi are the potential countries where the company can expand in the first phase.

Attached File Details

View Attachment file (Ramalingam (1).png)

Video

https://www.youtube.com/watch?v=TKRPioxOhbQ