Q1) What should Should it diversifyMarket Penetration Product Development Kamdhenu Diary do regarding its business? or not? Why? Market Development Diversification Product diversification is the riskiest strategy in the Ansoff matrix and it requires a wary investigation. . So far as Kamdhenu venturing into tea business is concerned, they used the concept of “reverse supply chain” utilizing their existing procurement chain of milk and their cold storages as distribution points. The entry in this market was a right decision as it has the following advantages: High Margin Product Negligible cost for Promotion Established Distribution Network Ever Increasing Demand The strength of the dairy is its decision of converting its strong procurement network into a distribution channel without incurring any additional costs. Also to mitigate the risks involved in product diversification, the operations need to be scaled up. The key changes required to pull Kamdhenu out of stagnation in the tea market are: Procurement of tea from other parts of the country where prices are lower Blending and tasting to be carried out locally by the professional tea tasters Focus on the color, taste and aroma of tea Rajhans Modi Tea Modi Tea Babulal’s 7 Morning Tea Babulal’s 7 Morning Tea Analysis of Competitors: Porters 5 Forces model Threat of New Entrants (Moderate) Tea business is complex Catering to localised need becomes a challenge Power of Suppliers (Low) Tea procurement through open market acutions so no dependency on individual tea suppliers Switching cost is negligible Challenge of establishing distribution network.Chowdhry(Deer). the top 3 players have a market share of close to 63 % and rest of the players including national players occupy 37 % of the market. Considering the rural market. The following table gives an idea of market leaders in different regions: Taluka Rajnagar Vadgam Radhanpur Kankerej Wav Deodar Market Leaders Chowdhry(DeerShakuntala).Realization that ease of availability and lower price are more important factors than traditional loyalty Stock smaller sized packets Q2) Do a Competitor analysis and the present strategy adopted by Kamdhenu Diary? Analysis of market composition The Tea market in India is highly consolidated.Chowdhry(Deer). each of the different smaller regions have different market leader. Competitive Rivalry (High) Less product differentiation Many small or equally sized competitors Power of Buyers (High) Switching to competitive product is simple Customers are price sensitive Low brand preference Availability of Substitutes Customers are not averse to switching brands Costs of switching to substitutes is low and depends on offers provided 2 .Rajhans Chowdhry(DeerShakuntala). Though there are many national and local players Tea players in the market. Strengths and Weakness of National Players Strengths Being a national player. financial muscle as compared to national players Leveraging the existing supply chain network of Dairy Cooperative societies as a distribution network for selling Tea Tea is procured through auction and blending is done through local agent. The consequence of this is clearly reflected in its poor sales as compared to other players The company hasn’t done much promotional marketing and is mostly relying on the potential customers through their local DCS stores. Strong brand recognition in local markets Well established distribution network in form of local retail stores and distributors in villages Present Strategy adopted by Kamdhenu Diary Weakness Lacks global/national brand which makes it difficult to expand into newer markets As most of the local players are family run business. we have broadly categorised all the competitors into 2 categories namely Local players and national players. not so strong and bitter in taste. The low brand awareness is also hurting the sales of the company 3 . without even considering the tastes and preferences of the end users.For the purpose of analyzing the strengths and weakness of the competitors. they lack in professional manpower. the economies of scale results in lower cost of production Professional manpower and financial muscle Ability to expand in different markets leveraging their existing distribution networks of other products Weakness Lack of understanding of local tastes and preferences Difficulty in breaking the brand loyalty of customers towards existing local brands Inability to sell loose tea in order to preserve their brand name Strengths and Weakness of Local Players Strengths Better understanding of local taste and preferences In-house blending facilities to cater to the local taste and demands in a satisfying way Better understanding of local mindset. (Product Concept orientation ) The company came with a tea which was black in colour. and in Western Rajnagar. The western part. etc. Adobe:Acrobat. The eastern Rajnagar segment offers more variety in terms of customers. the talukas located are Rajnagar. Microsoft: DOS. the talukas located are Radhanpur. has popular brands having only one price point. 2. It has customers with preference in various price ranges including a higher priced segment. Thus. As the company isn’t able to compete with big players like Chowdhry. This strategy is due to the fact that this region is mostly backward and has a majority as rural population. 4 . on the contrary. In the Eastern Rajnagar market. It is making immense efforts to match the product specification of Chowdhry 333 by making the blend similar to the blend of the most popular brand of Chowdhry 333 Q3) Which product strategy should be adopted by Kamadhenu Diary? Product strategy begins with a strategic vision that states where company wants to go. Examples of Leverage expansion can be Texas Instruments : the little professor. Apple: PowerBook. how it will get there. Deodar etc. though with a range of pack sizes.Kamdhenu Diary should re-evaluate its decision to blend the tea at Kolkata and consider processing of the tea at Rajnagar. Kankerej. Q4) What can be segmentation. Technical skills. The two geographical market segments are Eastern and Western Rajnagar. Existing market knowledge and. the market can be segmented geographically and based on the tastes of the consumers. Wav. The taste of Kamdhenu tea is different from that of the local competitors because of the location of the processing( Existing market knowledge). Leverage expansion states that success of expansions to new product marketdepends highly on ability to leverage1. As per data in the case. the Indian market has been broken up as below: For Kamdhenu Tea. it is following the MARKET FOLLOWER STRATEGY to follow the market leader. and why it will be successful. Vadgam. Kamdhenu should go for leverage expansion as their product strategy. targeting and positioning strategy adopted by Kamadhenu Diary? Segmentation and Targeting: The tea market in India can be divided into many segments based on geography. economic conditions etc.Window etc. Thus it is suggested that a new. This is primarily due to the fact that the taste of Kamdhenu tea doesn’t match the preferences of customers. with a range of pack sizes. popular brands have only one price point.Additionally. If Kamdhenu Tea wants to make an impact with its product. Thus.The DCS secretary has been found to very lax about promotion of Kamdhenu tea. The population of the eastern Rajnagar have been found to be of higher economic group than that of the western area. Even so. But then these points need to be considered: 1) Blending should be done locally in accordance to the taste of the rural population. it needs to develop the right blend keeping the local taste in mind. but the taste too is too varied for liking. 3) Packs of different sizes will have to be launched.Complaints have been received about the irregular grain size of Kamdhenu tea. superior variant of Kamdhenu tea be supplied in this region. if processing is done at Rajnagar. These complaints reflect on the quality consciousness of the consumers. In western Rajnagar. in order to penetrate the market in this region Kamdhenu should lower its price for the time being. only 35 % wanted to make a repeat purchase. the final price at which the tea is sold may bear a small increase. Q5) IMPROVEMENT OF MARKETING MIX A) Product: Of those who tried Kamdhenu tea. but a minimal difference in price should not be a deterrant for consumers of Kamdhenu tea. The targeting strategy will accordingly be designed Given the fact that Kamdhenu tea is currently sold at an average fixed price of 126 rs with no range available. aroma and taste of the tea because of the difference in the taste of water in both the regions. Not only is it perceived as black as compared to the preferred red. The taste of Kamdhenu tea is different from that of the local competitors because of the location of the processing. resulting in the reduction of cost to a large extent.Market research indicates that localised taste plays a very important role when it comes to a customer selecting a tea. Tea sold in western Rajnagar is currently priced at 115-120 per kg. There is a marked difference in the colour. it would result in product postponement. due to backwardness. so in the short-run a dip in margin vis-à-vis a possible increase in sales volume is a good proposition. 2) The price should be brought down slightly in order to match competitor’s price of 120 rs. it will have to first select the region which it wants to target and based on that. B)Pricing: The main objective of Kamdhenu is to penetrate the market. Kamdhenu earns a profit of 22% at present. Thus. Kamdhenu Diary should re-evaluate its decision to blend the tea at Kolkata and consider processing of the tea at Rajnagar. it is more suitable to launch it only in eastern region. To induce the secretary to support Kamdhenu’s product an 5 . thus a new limited period promotional scheme involving distribution of free 10gm samples packs of tea on purchase of certain amount of milk. Combining the benefits of DCS with the product will help Kamdhenu tea to develop a position of its own in the consumer’s minds. Currently the milk supply chain is the only means of distribution.6%) are also not aware of the benefits that DCS offers. We believe that if this network were utilised to the fullest. The factors that affect sales positively are convenient timings. could potentially convert first time consumers (targets of the above-mentioned promotion) to return buyers. Simultaneously as mentioned earlier a change in the taste of the tea to match the preferences of the general public. would promote the tea to a great extent. As research shows that packaging. Kamdhenu need not look at the alternatives discussed in the case. There is no need for brand positioning as Kamdhenu is already known in the market but the product needs to be positioned well in customer’s minds.incremental differential slab for commission can be set up. This system reaches out to the smallest of households in the Rajnagar district. Majority (80. This differential slab will act as an incentive for the secretary to look into the sales of the Kamdhenu tea. Simply loading the macro. The perception about the low stocks needs to be removed from the customer’s mind. Kamdhenu tea distribution network is facing a major challenge due to inability to maintain supply. Few possible alternatives have been supplied in the case. The first step in that direction should be to develop the product by getting the right blend and hence the right taste. which is Kamdhenu’s primary cash-cow has an excellent supply chain network. 6 . Kamdhenu needs to establish its tea strongly in the market. Positioning:Kamdhenu Tea needs to position itself in a much stronger way. How this is done has not been clearly mentioned in case. Milk and tea are complementary products. manufacturer’s image and sales promotion played a major role in influencing the purchase of the Kamdhenu tea. The milk business. in itself would result in creation of increased awareness of the Kamdhenu brand of tea. friendly behaviour of the staff and credit offered on purchase. shifting the processing of tea to Rajnagar. That can be done through aggressive promotion insid e the stores. But we believe that this problem should not have arisen in the first place. Promotion And Distribution: As discussed earlier in our report. Research also indicated that the customers perceive the stocks availability to be low and hence a lot of customers don’t buy the tea.and micro-distribution networks of milk with tea would adequately solve Kamdhenu’s distribution worries.