How to design a distribution flow to the Indian market - Based on market potential, import regulations, and trade barriers

Abstract: BACKGROUND AND PURPOSE A global company aiming at a high market position in the future, which Axis Communications AB is, is forced to address the emerging markets. Axis has previously focused on Brazil, Russia, and China and now it is time to address the fourth BRIC country; India, since it is considered to have one of the world's greatest market potential. Axis works according to their partner model, which defines how Axis goes to market. Axis always sells products to distributors, the distributors sell the products to the system integrators/resellers, and the system integrators/resellers sell the products to the end users. Today, Axis sells products to the Indian market through applying ExWorks Singapore, which means that Axis Communications AB ships the products to Singapore where the distributor buys the products. The distributors sell the products to the system integrators/resellers, and the system integrators/resellers finally sell the products to the end users on the Indian market. Axis wants to know how this distribution flow can be designed to better fit the corporate strategy based on market potential, import regulations, and trade barriers. The research questions in the thesis are: 1. Does the Indian market opportunity for video surveillance for the coming three years, 2014-2016, indicate positive or negative sales potential for Axis's products? 2. Based on local requests or requirements for network video on the Indian market, what adjustments, if any, in the offer of products or services would be preferable for Axis's sales in India? 3. Which, if any, trade agreements or other governmental incentives in India could Axis benefit from? 4. Based on costs and partner program aspects, what are the advantages and disadvantages for Axis to start importing to India compared to letting the distributors continue handle the import? The purpose with this project is to clearly explain the advantages and disadvantages with Axis importing products to India. Since the market opportunity for Axis in India, requirements from the market and applicable trade agreements will impact the distribution flow design, this will be examined and presented as well. METHODOLOGY For this Master's Thesis project, the Constructive research approach has been selected as method with slight adjustments to answer the research questions and fulfil the purpose. The Constructive research approach is focusing on solving an existing problem or finding a solution to a given situation. The data collection was made through desk research and interviews. This process was structured according to the research areas: corporate strategy, macro environment, sales and market potential, trade regulation, and distribution flow. The empirical data was analysed to create a problem solving construction that first was tested practically through a workshop at the company and then refined. FRAME OF REFERENCE From the framework for network design decision by Chopra and Meindl (2004) and the framework for import/export decision by Nelson (2000), the researchers developed a research framework. The framework has five research areas: Corporate Strategy, Macro environment, Sales and Market Potential, Trade Regulation, and Distribution Flow. CONCLUSION The refined solution for research question one is that the sales potential is positive for Axis's products on the Indian market for video surveillance for the years, 2014-2016. Although, Axis will need to invest a lot of effort and resources to follow the market's estimated growth. The refined solution for research question two suggests that it would be beneficial for Axis sales in India to implement the following changes to today's offer: ' Requirement: Take over the activity of labeling the products with MRP-labels. ' Requests: Extend the warranty to match the competitors; shorten the lead time from order until the product reaches the end user; continue to have a broad range of products; introduce a customized product portfolio. The refined solution for research question three is that there are no trade agreements applicable for Axis activity in India and that the governmental incentives of interest are the reduction of duty for some end users. The refined solution for research question four is that the major advantages and disadvantages for Axis to start importing are: ' Advantages: Possible to establish a price list; conditions for implementing the partner program will be in place; Back-end rebates will be applicable. ' Disadvantages: India is a very corrupt market. Hence, regulations on the paper might not be equal to practice; price pressure and negotiation are fundamental parts of the culture. The recommendation is that Axis should start import to India, to have Axis's strategy operational and to be able to build further on the basis of the corporate strategy.