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Internationalization Experience of PRAN Foods

PRAN started its operation in 1981 as a processor of fruit and vegetable in Bangladesh. Now PRAN is the leading agro food processor and agro food exporter of Bangladesh. PRAN is the pioneer in Bangladesh since 1980 to be involved in contract farming and procures raw material directly from the farmers and processes through state of the art machinery at several factories into hygienically packed food and drinks products. Over the years, the company has not only grown in stature but also contributed significantly to the overall socio-economic development of the country. The company is currently one of the most admired food & beverages brand among the millions of people of Bangladesh and other 82 countries of the world where PRAN products are regularly being exported. PRAN is currently producing more than 200 food products under 10 different categories i.e. Juices, Drinks, Mineral Water, Bakery, Carbonated beverages, Snacks, Culinary, Confectionery, Biscuits & Dairy and serving approximately 300 million customers. The company has adopted ISO 9001 as a guiding principle of its management system. The company is complaint to HACCP & certified with HALAL which ensures only the best quality products are reaches to the consumers table across the Globe. Internationalization Process The process leading to identifying and entering international markets is called internationalization process. A vast literature in international business emphasizes that uncertainty about the characteristics of the specific national market-its business climate, cultural patterns, structure of the market system, and, most importantly characteristics of the individual customer can lead firms to follow a gradual internationalization process, serving a foreign market via exports before deciding whether to invest there. Jan Johanson and Jan-Erik Vahlne have depicted the internationalization process as follows:

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Internationalization Experience of PRAN foods Though PRAN started its journey in 1981, it went for export in 1996 and for setting up foreign plant in 2008. So, it took almost 27 years for PRAN to go for direct investment in foreign countries. The internationalization process of PRAN foods is described as follows: i. No export activities PRAN was established in 1981 as a food processor company. But the company had no export activities till 1996. In 1996, the company started its export journey by exporting its products to France. Initially the company cultivated papaya, banana, pineapple and other fruits and vegetables. But the company soon realized that a good harvest often did not mean a fair price due to gluts in the market. So an agro-processing plant was set up in 1993 with canning and bottling facilities. It began with sliced pineapples in canned form, and gradually came out with mango drinks, jams and jellies, with a plan to cater to both domestic and foreign consumers. The company gathered knowledge and increase its experience of the business of preservation and processing by sending high officials to Thailand, Taiwan, India, Pakistan and the US. So this period, 1981 to 1996, was actually the primary stage for PRAN of internationalization in which they not only enriched their experience and enhanced their learning curve of the business, but also strengthened their market position in the local market. ii. Export via independent sales representative After passing the primary stage of internationalization, PRAN stepped into the second stage of internationalization i.e. export via independent representatives. PRAN started its exporting journey in 1996 by exporting its products in France. Before investing in large amount in foreign countries by setting up sales subsidiary or manufacturing plants, PRAN started exporting their products through interested buyers of the foreign countries. Many studies have shown that before investment in foreign countries, companies limit their activities only to exports. The reason behind this act of the companies is that at first the companies strive to understand the rules, regulations, market situation, demand of the foreign market etc before making investment in the foreign countries. PRAN was of no exception from this kind of strategy before making investment in the foreign countries. They improved their value chain activities to ensure the highest quality level of their product and also to ensure the prevailing rules and regulations of their targeted foreign markets. iii. Establishment of sales subsidiary Gathering sufficient experience about the targeted foreign market, PRAN stepped into the third step of the internationalization process. They established sales subsidiaries in different countries especially UAE, India, Oman, Malaysia and Singapore. PRAN even established its own distribution channel network equipped with full fledged office, warehouse, distribution vehicles, sales force, and other sophisticated supports in those countries for smooth selling activities. Establishment of sales subsidiary in foreign countries helped to reduce some costs like paying commission to independent Page 2 of 4

sales representatives. But PRAN had to take some risks like exchange rate risk, country risk in setting up sales subsidiaries in foreign countries. iv. Establishment of foreign manufacturing subsidiaries The final stage of the internationalization process is establishment of foreign manufacturing subsidiaries. When companies have identified their potential market, measured the market size and demand of the products of the company in the targeted market, possible country risk, exchange rate risk, companies decide whether to establish foreign manufacturing subsidiaries or not. Jan Johanson and Jan-Erik Vahlne define this process as Organizations enter those markets that they know best and only move into more distant/unfamiliar markets after feeling that they have gained sufficient knowledge. In January 2008, PRAN declared to build its first foreign factory in the north-eastern Indian state of Tripura, taking advantage of the countrys decision to lift its ban on Bangladeshi investment. PRAN decided to supply the markets of northeast India Assam, Nagaland, Tripura, Meghalaya, Manipur, Mizoram and Arunachal Pradesh known as Seven Sisters. The reason behind choosing Tripura was due to its closeness to Bangladesh. PRAN will be able to transport raw materials for their products from Bangladesh to Tripura very easily due to the easy communications. PRAN also gave importance of the similarity in lifestyle, culture and economy between the people of Bangladesh and these areas of India. The main objective of establishing foreign manufacturing subsidiaries is to avoid the trade barriers between India and Bangladesh and to charge premium price to the consumers. Quality Improvement for internationalization Compliance with the quality standard was a major issue in the internationalization process of PRAN. From the very beginning of the operations, PRAN has emphasized on the quality of their products. In fact PRAN was the first food processing company in Bangladesh to earn the prestigious distinction ISO 9001 certificate. This supreme certification ensures that PRAN products reach the consumer maintaining the high level of quality. PRAN focused on continuous improvement of the quality of their products and as a result in January 2013, PRAN for the first time received IMS certificate as the first food processing company in Bangladesh. IMS is known as combination of Environmental Management System ISO14001:2004 and British Standard Occupational Health Safety Assessment Series (BS OSHAS) 18001:2007. Besides, PRAN achieved ISO 22000:2005 Halal, HACCP (Hazard analysis and critical control point) certificates.

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Strategies followed by PRAN Serving Suppliers PRAN introduced a unique strategy of contract farming to procure raw materials from the producers directly to minimize to cost of raw materials, which helped them to follow a low-cost strategy in the market. It also helped PRAN to have a competitive advantage. Even PRAN provided good seeds, fertilizers, insecticides, financial supports, and proper information about what to produce more and what to produce less etc. all these activities have helped PRAN to maintain their competitive advantage. They always try to reduce production and distribution costs so that they can offer products at affordable prices. Improvement of the value chain activities PRAN has always attempted to focus on the improvement of their value chain activities. By continuous improvement of the value chain activities, PRAN has been able to reduce the unnecessary activities of the value chain and thereby improve the quality of the products. Besides, PRAN has always put extreme focus on innovation and up gradation of its management to cope up with the changing circumstances and grow. Maintaining an effective distribution channel Since PRANs Food products are widely available and affordable, they have large production base and effective distribution channels. Company has appointed Sales force all over the Country. Each department has their own decision making power at the most lower level. So their organization structure is highly decentralized. The Company identifies needs and wants of the target market and delivers the desired products better than its competitors. Serving Customers PRAN has introduced a broad range of products to satisfy the need of people of different walks of life. PRAN also attempts to increase the number of loyal customers. To meet this goal, PRAN tries to build a strong reputation for lavishing their consumers with special services, discounts, gifts, or other benefits besides offering quality products. Conclusion PRAN has reached the final stage of internationalization process. From this point to become the global brand, as the management of PRAN expects, PRAN has to keep a close look at the social and cultural changes of other countries since the Companys customers are situated across the globe. Economic environment is the most important of all that the organization has to deal with. As it is an export oriented organization PRAN Foods has to monitor the economic situations of Bangladesh and the other countries where it exports its products. It should be cautious about the elements like inflation rate, interest rate, gross domestic product, unemployment rate, exchange rate of the local currency with the foreign currency etc. Besides the company has to identify the needs of the customers before its competitors and forecast the possible change of the life standard of the people where it distributes its products. As internationalization not only brings new opportunities for a company but also brings new challenges, PRAN has to be really focused about its value chain activities and quality improvement of the products. Page 4 of 4