Consulting on Ramalingam Foods Expansion Internationally by Infinity Business Consultancy

Assignment Taken

Develop an International Market Expansion Plan

Case Understanding

Ramalingam Foods established by Mr. Ramalingam Venkatesh in South Bombay in 1965, is a successful fast food restaurant. It was famous for their authentic south Indian Freshly cooked food and filter coffee. During 1975, India went into political turmoil and there was pressure in the market to sell goods at bare minimum price. But, Ramalingam Foods came up with innovative solutions and started selling Dosa-Idli Batter & packets of authentic south Indian chutneys. The next generation took over the business and thereby he thought to expand his business and started working on some innovative ideas to deal with the problem of the low shelf life of Idli-Dosa batter. He came up with a wide portfolio: Instant Dosa Mix, Instant Idli Mix, Instant Gulab Jamun Mix, Instant Laddu Mix, instant coffee powder Instant Dhokla mix. They are available in different packaging. Now they are looking for expansion globally. Mr. Vijay has no prior experience in international business and has hired Infinity Business Consultancy for consultancy on international market expansion within a budget of INR 50 Crore for International Business expansion for FY 2019-20. It was clear that Ramalingam Foods doesn't have the necessary permissions and Licenses required for international business. As Ramalingam Foods doesn’t have enough capital and business acumen to enter more than one foreign region at a time thus they have requested Infinity Business Consultancy to suggest one region to start with international expansion.

BCS Solution Summary

Ramalingam Foods, an Indian company, which has a ready-to-cook product portfolio including South Indian food mix of an Idli-dosa instant mix, Dhokla, gulab jamun mix, and filter coffee asked Infinity Business Consultancy for advice regarding international expansion. Since Malaysia, Singapore and Indonesia have a huge south Indian population, Infinity Business Consultancy has suggested that the company should expand in this region. The company would start by expanding in the Malaysian market because of its higher ranking in ease of doing business ranking, followed by export to Singapore by road and Indonesia by waterways from there. The company would build a production unit in Malaysia to cater to the demand of the Malaysian market in the initial phase. After expanding in the Malaysian market, the company will start exporting to the neighboring countries of Indonesia and Singapore. Infinity Business Consultancy has even advised Ramalingam Foods to launch current products in these three countries this year with planned product portfolio enhancement over the next two years. Possible Options for Expansion: Entering Malaysian, Singapore, and Indonesian Market

Solution

Mission for International expansion:

To be the go-to instant mix and fast-food company in Malaysia while making it easier for the consumers to cook delicious traditional cuisines without much hassle.

Vision for International expansion:

Ramalingam foods aim to be the global market leader in the ready-to-eat foods category and build brand equity based on their values, that is purity and quality.

Tagline: Serving packets of happiness since 1965 

Objective:

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

• To have a known name in global markets

• To have product diversification 

• To expand in other countries as well

Possible Options for expansion:

Region	Country	Indian Population (million)	Ease of Doing Business Ranking	Starting Business	Dealing with construction permit	Registering business	Advantages	Disadvantages
Middle East	UAE Saudi Arabia Kuwait Qatar	3.42 2.59   1.03 0.746	16 62   83 77	17 38   82 108	3 28   68 13	10 19   45 1	1)  Large target population 2) High per capita income	1) Very high competition 2) Strict labour laws 3) Huge fixed and operational cost 4) Huge portion of Indians are labour 5) Indian population is distributed 6) Lack of cultural inclusiveness 7) Low ease of doing business ranking
United States of America	USA	4.46	6	55	24	39	1) High per capita income 2) Easy to do business	1) Strict labour laws 2) Huge operational cost 3) Indian population is distributed 4)Less number of South Indians
United Kingdom	England Scotland Wales Ireland	1.51 0.032 0.017 0.04	8	18	23	41	1) High per capita income 2) Easy to do business	1) Strict labour laws 2) Huge operational cost 3) Low population of South Indians
South East Asia	Indonesia Malaysia Singapore	0.18 2.99 0.65	73 12 2	140 126 4	110 2 5	106 33 21	1) Ease of doing business in Malaysia and Singapore 2) Huge South Indian population 3) Concentrated Indian population 4) Less competition 5) Flexible labour laws 6) Promotes FDI 7) High income of Indians 8) Rice based agriculture 9) Low operational cost	1) Relatively high corruption 2) Low population compared to Middle East 3) Overwhelming bureaucracy 4) High corporate tax rate

 

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

FACTORS INFLUENCING THIS DECISION

Ease of doing business: Singapore and Malaysia are ranked 2 and 12 respectively in ease of doing business ranking. Still, not a lot of companies have tapped this market. Ramalingam foods can take advantage of this.

High dominance of South Indian population: The concentration of South Indian population is very much in Malaysia, Singapore, and Indonesia. Moreover, this population is concentrated in Selangor, Johor, Negeri Sembilan, Perak, Penang, Kuala Lumpur, Kedah in Malaysia, Dhoby Ghaut, the Serangoon, Little India areas in Singapore.

Indian Tourist: Malaysia, Indonesia and Singapore are one of the most favourite tourist destinations for Indians.

Less Competition

Tax incentives:

• A company that invests in its subsidiary company engaged in food production activities can be considered for tax deduction equivalent to the amount of investment made in that subsidiary for that year of assessment; and
• The subsidiary company undertaking food production activities are considered for a full tax exemption on its statutory income for ten years of assessment for new project or five years of assessment for expansion project. 

Government policies and Infrastructure

• Pro-business, Liberal investment policies
• Liberal exchange control regime
• Fully developed industrial parks, including free industrial zones, technology parks and Multimedia Super Corridor (MSC)
• Advanced MSC Malaysia Cyber cities and Cyber centres

MODE OF ENTRY IN MALAYSIAN MARKET

Initially, the company will start by exporting to Malaysia from India via sea route. From there the product will be transported to Singapore via road and to Indonesia via sea route. This will carry on until the factory is set up in Johar Bahru. After the factory is set up, Exports from India will be stopped. The company will set up a subsidiary firm in Malaysia. A regional office will be set up in Singapore and Indonesia.

MODE OF EXPORT

Malaysia to Singapore: Freight charges of $95.54 per ton via train is cheaper compared to $216.96 per ton via road

 

PESTEL Analysis

Political:

Malaysia consists of:

·       Thirteen states

·       Three federal territories

·       A monarchy

Due to this, the prime minister is the decision-maker of most of the country’s regulations, therefore the permissions required for Ramalingam Foods to start operations would have to be done in a centralized way. Malaysia is also a member of various international organizations such as the UN, the Commonwealth of Nations, OIC, ASEAN and this makes it a hub for country tie-ups.

The main principles are peace and neutrality in developing and implementing foreign politics. The corruption rate is low.

As per the World Bank data, the Political stability index of Malaysia, the latest value from 2020 is 0.12 points which indicate that Malaysia’s political stability is medium.

Economic:

Malaysia is one of the most open economies in the world with a trade to GDP ratio averaging over 130% since 2010. Openness to trade and investment has been instrumental in employment creation and income growth, with about 40% of jobs in Malaysia linked to export activities. 

Malaysia's economy advanced by 16.1% YoY in Q2 of 2021, rebounding sharply from a 0.5% contraction in Q1 and higher than market expectations of a 14.3% gain. This was the fastest growth in the economy since the series began in 2000, due to the reopening of more economic activities and a low base effect last year. Both household consumption (11.6% vs -1.5% in Q1) and fixed investment 16.5% vs -3.3%) recovered sharply. In addition, net external demand contributed positively to the GDP as both exports and imports surged 37.4% and 37.6%, respectively. Also, government spending grew faster (9.0% vs 5.9%). On the production side, output recovered for mining (13.9% vs -5%), services (13.4% vs -2.3%), construction (40.3% vs -10.4%), while manufacturing sectors expanded more (26.6% vs 6.6%). By contrast, production of agriculture fell (-1.5% vs 0.2%). On a seasonally adjusted quarterly basis, the economy shrank by 2.0%, reversing from a 2.7% rise in Q1.

Social:

As an upper-middle-income country, Malaysia is both a contributor to the development of low- and middle-income countries and a beneficiary of global experience in its own journey towards high-income and developed nation status.

The World Bank Group Inclusive Growth and Sustainable Finance Hub in Malaysia (the Hub) serves as a partner to the country and its people in developing and implementing global development solutions.

Technological:

Malaysia’s Prime Minister unveiled the Twelfth Malaysia Plan on 27 September 2021. According to the executive summary states, the Twelfth Plan is anchored on three key themes, namely resetting the economy, strengthening security, wellbeing and inclusivity as well as advancing sustainability.

Four catalytic policy enablers, namely developing future talent, accelerating technology adoption and innovation, enhancing connectivity and transport infrastructure as well as strengthening the public service will support the achievement of these themes.

These policy enablers will form the foundation and building blocks of Malaysia’s development over the next five years and beyond.

The Twelfth Plan will accelerate Malaysia’s adoption and application of digital and advanced technology to create and unlock new opportunities. This will maximise the potential of the digital economy as well as achieve inclusive, responsible and sustainable socio-economic growth.

The talent and skills required to drive both the digital economy and 4IR will be enhanced, while R&D&C&I will be intensified. Malaysia will also aggressively attract investment in the digital economy to become the regional leader. The focus will be on mainstreaming digitalisation for inclusive development, accelerating R&D&C&I as well as capitalising on the potential of advanced technology.

Legal:

The Malaysia Digital Economy Blueprint (MyDigital) initiative launched in February 2021, is expected to be the impetus to position Malaysia as a high-value-added economy and a net exporter of homegrown technologies and digital solutions, at the end of this decade.  

Despite lingering uncertainties brought about by the COVID-19 pandemic, growth prospects look relatively optimistic. World Bank’s Doing Business 2020 report ranks Malaysia 12th amongst 190 global economies and 2nd in South East Asia. The Malaysian economy is also observed to be on the path to recovery in 2021, with GDP growth projected at 4.4% according to The Economist Intelligence Unit forecast as of 14 June 2021.

Environmental:

Malaysia has a wide range of flora and fauna with 50-70% of the country is made up of tropical rainforests. Due to high exports of palm oil and mining, there have been mass deforestation, forest conversion, river pollution and land reformation leading to a change in ecological landscape. So, this nation is not so good from an environmental angle. But there are new government laws to control damages to the nature regarding waste disposal, emission from factories etc. and the situation might improve

Target Customer:

Utilising the existing potential of Ramalingam Foods in Research and Development, it is advisable to target Indian customers in Malaysia at the initial stages. As per research, it is found that approximately 9% of the Malaysian population comprises Indians out of which 70% are South Indians (Tamil, Malayali and Telugu). So we choose this population. Next, going by the demographics, we extensively target children (where parents are the decision-makers), college students and the working-class population that are 56.4% of the Indian population in Malaysia. Here we go by the fair assumption that the age group of 0-14 stay with their parents. 

Please refer market size estimation photo attached

Legal Requirements to enter Malaysia:

• Trade Standards are widely used in sectors of Malaysia. A consensus process is used to develop new standards

• Malaysia follows WTO(World Trade Organization)’s Standard Code

• Standards and Industrial Research Institute of Malaysia (SIRIM) provides the institutional and technical infrastructure for the government

Testing, inspection and certification

• Malaysia’s national accreditation body and national standards body is the Department of Standards Malaysia. It provides accreditation and credible standardization services

• Foreign exporters are required to follow these same standards as the domestic producers do 

Technical regulations

Malaysia follows WTO and under WTO Agreement on Technical Barriers to Trade (TBT Agreement), all proposed technical regulations are required to be reported that may affect trade with WTO member countries in future.

Marketing strategies

1. Disentangle the frame of reference.

2. Affective advertising and celebrity appeal.

3.  Diversification- brand/ category extensions.

4. Focusing on hedonic attributes.

5. Customer co-creation, taking frequent customer insights.

6. Elaboration likelihood model.

Hiring Strategy

We would like to go ahead with the method of Partnering with an International Professional Employer Organization. 

International PEO is a cutting-edge service that enables businesses to hire personnel from all over the world swiftly, legally, and without the hassle of forming a foreign legal company.

 

Conclusion

Infinity Business Consultancy will help Ramalingam Foods in expanding in international business starting from Malaysia. A whole plan has been shared considering all the work to be implemented in each department.

Attached File Details

View Attachment file (Market Size Estimation.jpg)

Video

https://youtu.be/oWRSZb_o2N8