Assignment 1:

Exporting ACI
Nutrilife Rice
Bran Oil to India
 International Business
BUS-510

Submitted to:

Mr. Najmul A Sheikh

Course Instructor, BRACU

Submitted by:

Name Student ID

Saud Sarwar 17364049

Md. Rakibul Hasan 17264067

Imama Afrin 17364036

Md. Ishtiak Sarwar 17264099

Moumita Liza 18164027

Kamrul Hasan 17364071

Date of Submission: 16th February, 2019

1
 Table of Content

Executive Summary
3

Company Background
4

Why ACI Nutrilife has become successful?

4

Porter’s Diamond 6

Mode 10

Transportation 12

Why India? 12

Trade Policy 13

Environmental Challenges 14

Conclusion 18

References 18
2
Executive Summary
Advanced Chemical Industries (ACI) Limited is one of the leading and largest local
conglomerates in Bangladesh. In the report firstly we have mentioned about the company
background and its operations. By using Porter’s Diamond we have stated the analysis and
explanation of ACI Edible Oils Limited. We have talked about several alternative strategies like
Import-Export, Licensing, joint venture and foreign direct Investment.

We have chosen a country to introduce ACI Nutrilife Rice Bran Oil and how ACI will conduct
its business and operations. Explanations of Economic, Political and Cultural environmental
challenges have been mentioned methodically in order to find out the most effective solution.
Finally a conclusion has been given to this report.

ACI, with their products, they grab the world’s different countries and supply their products
there. The proper marketing strategy will help them to rule in the market and lead the marketing
for Bangladesh in abroad as well. There are a good number of brands coming with the same
proposition of good quality, so ACI is heading towards an immense competition in near future.
By proper forecasting and effective strategies we have planned to export our product to India and
become a unique brand in rice bran oil market there.

3
Company Background
Advanced Chemical Industries (ACI) Limited is one of the leading and largest local
conglomerates in Bangladesh. ACI consists of different business groups namely:
Pharmaceuticals, Consumer brands, Agro-Business. Today ACI is one of the fastest growing
companies in Bangladesh. ACI’s mission is to enrich the quality of life of people through
responsible application of knowledge, skills and technology. ACI is committed to the pursuit of
excellence through world-class products, innovative processes and empowered employees to
provide the highest level of satisfaction to its customers. ACI has so many product categories
like antiseptic, personal care, home care, kitchen care, fabric care, commodity food, ACI
consumer electronics etc. In this report we have worked on one of the commodity food “ACI
Nutrilife Rice Bran Oil”.

Why ACI Nutrilife has become successful?

In the year 2012, ACI Edible Oils Limited has started its journey in the marketing of consumer
pack edible oils under the well-known household brands like ACI Nutrilife. ACI entered this
segment of cooking oil market through toll manufacturing with the mission of promoting a
healthy lifestyle for all when only EOIL and Rashid Oil Mills had started extracting oil by using
locally available rice bran. But at beginning the rice bran oil had to get past plenty of
misconception.

Rice bran oil is extracted from cereal germ and inner husk of rice. It contains vitamins,
antioxidants, nutrients and is free of Trans fat. According to a 2005 study published in the
American Journal of Clinical Nutrition, rice bran oil lowers cholesterol in healthy adults.
Besides, it contains almost all essential fatty acids, and is free from monosodium glutamate, one
of the main culprits behind obesity. The smoking point of rice bran oil is quite high. This is the
reason it is used in high-temperature cooking methods such as deep frying and stir frying. The oil
has a similar composition to peanut oil and is known to be healthier than many oils. The oil is
known to have the ideal balance of fatty acids and is also rich in Vitamin E and antioxidants.

4
However, the number of health conscious buyers is rising by the day. After an intense awareness
campaign demand for the antioxidant-rich rice bran oil is rising exponentially on the back of
increased health consciousness among urban people. Consumers started switching to rice bran oil
from soybean oil as the rice bran oil’s price has been reduced. The price of each liter of rice bran
oil was Tk 40 higher than soybean oil during the initial days. But the gap has now come down to
Tk 20 each litre.

Recently, ACI Nutrilife Rice Bran Oil has been positioned as premium brand and maintained the
leading position in promoting this heart-healthy oil. Demand for rice bran oil increased from 15-
20 tonnes a day in 2012 to 2.5 lakh tonnes now, according to a statistic. ACI Nutrilife is
currently the market leader in the Rice Bran Oil industry with more than 25% of market share.

Moreover, since staple food of Bangladesh people is rice, therefore in our country we usually
produce rice for three times in a year which results huge amount of bran. Researcher has also
found that Bangladesh has the potentiality to produce 750,000 tonnes of rice bran oil if we could
utilize all the resources efficiently as the rice bran quality of Bangladesh is suitable to produce
oil. This amount is enough to satisfy the 50% of the requirement of the national demand. The
existing facility is good for producing 250,000 tonnes. ACI is now concentrating to produce
higher.

Health consciousness, similar price to soybean oil, huge amount and good quality of rice bran are
vital reasons behind flourishing the rice bran oil production in Bangladesh. ACI is one of the
leading company in this section who has grabbed the market potential at the right time with a
view to ensuring healthy life for consumers.

5
Porter’s Diamond
Porter’s Diamond is an economic model developed by Michael Porter. This model is often used
to analyze the external competitive environment or marketplace, which helps companies to
determine the relative strength and explain why certain industries have become competitive or
possess regional advantages.

In this model, the regional advantages can be assessed by four factors, which includes:

1. Firm Strategy and Rivalry

2. Demand Conditions
3. Related and Supporting Industries
4. Factor Input Conditions.

Beside this, two other factors mentioned by Porter’s are

5. Government
6. Chance

6
 Firm Strategy and Rivalry: This is the competition in the home market that drives
innovation and quality. When there’s lots of competition and lots of rivalry, this keeps
companies on their toes, and so they try to out-compete each other by continually
developing more innovative and quality products and or services. As a section of the
business community of the country came across to establish a number of rice bran oil
extraction mills ACI Limited has strong competitors in this field. For Instance, KBC
Agro Products Private Limited, Ali Natural Oil Mills & Agro Industries Limited, The
Green & Poultry Feed Industries, Emerald Oil Industries Limited, Rashid Oil Mills
Limited, Majumder groups of Industries initiated their production on due time. There are
some more industries like Agrotech International Limited, having the capacity of
producing 25,000 tonnes of oil. But from the day of its establishment ACI Edible Oils
Limited is trying to serve finest quality of edible oil to serve the consumers of
Bangladesh. With the finest quality and effective marketing strategy taken by ACI
Limited, ACI rice bran oil is one of the most preferred edible oil by consumers.

 Demand condition: A country with sophisticated homebuyers that have awareness and
demand for advanced, quality, and innovative products, which can create international
competitiveness. A larger market means more challenges, but also creates opportunities
to grow and become better as a company. The presence of sophisticated demand
conditions from local customers also pushes companies to grow, innovate and
improve quality. The domestic demand for this rice bran oil is growing thanks to the
expanding middle and upper-middle income groups. Today this sector, which began its
journey in 2009, has 14 firms with an annual production capacity of more than 2.50 lakh
tonnes of rice brain oil. Export potential is bright if we can ensure quality.

 Related and Supporting Industries: These are the inputs for a country, which drives its
success. The presence of related and supporting industries provides the foundation on
which the focal industry can excel. Rice is the leading crop of the country and grown on
about 10.5 million hectares throughout the year. The country has a total paddy (unhusked
rice) production about 50 million metric tonnes. Out of this total production, 30% is

7
 processed at the household level and keep away from the marketing channel. The rest
70% is processed in rice mills with varying capacities. It is estimated that bran oil
production potential is 2,53,000 tons (FMPHT Division, BRRI 2015). As per an earlier
survey by FMPHTD (Farm Machinery Post Harvest Technology Division) and, BRRI,
we have 17000 of different types of medium to large rice mills in operation all over the
country. These milling machines could be an instant source of huge amount of rice bran
ready to be used for oil production. At least 22% oil content in the bran is worthy to be
extracted economically. Availability of rice bran is not an issue; the main problem is
supply chain of rice bran is not well-established in our country. A smooth supply chain of
rice bran need to develop, and logistics, ports and other infrastructures are needed to
improve.

 Factor Input Conditions: These are the factors of production that includes things like
skilled labor, education, capital, climate, and infrastructure. As we have no raw material
problem, if we improve the efficient extraction of quality oil, the interim period between
the productions of rice bran and the oil producing industry is a major factor. ACI
Nutrilife Rice Bran Oil is truly "The World's Healthiest" edible oil, containing vitamins,
antioxidants, nutrients and Trans fat free. This oil is currently the market leader in the
Rice Bran Oil industry with more than 25% of market share. The factory maintains
international standards of quality assurance. Finest crude is selected and refined in
hygienic facilities to remove impurities. The factory team consists of very experienced
people running the operations smoothly.

 Government: The government has played a major role in creating the regional advantage
as it supported and funded scientific research. Bangladesh has the potentiality to produce
750,000 tonnes of rice bran oil if we could utilize all the resources efficiently. The
manufacturers of rice bran oil have a limited access to the loan during the production
period. Even they are not given any subsidies like soybean and palm oil for the
production of rice bran oil. The rate of return is also low and the rate of interest is high.
All these discrepancies have the direct influence on the cost of production. Governments

8
 should encourage and push companies to raise their aspirations and move to even
higher levels of competitiveness. This can be done by stimulating early demand for
advanced products (demand factors); focusing on specialized factor creations such as
infrastructure, the education system and the health sector (factor conditions); promoting
domestic rivalry by enforcing anti-trust laws; and encouraging change. With the mission
of promoting a healthy lifestyle for all, ACI Edible Oils Limited is trying to serve finest
quality of edible oil.

 Chance: The final element in the Porter Diamond model is chance. Chance refers to
random events that are beyond the control of the company. For the international
competitiveness, they may be very important: the discontinuities created by chance may
lead to advantages for some and disadvantages for other companies. Some firms may
gain competitive positions, while others may lose. ACI Limited is very concerned about
their product quality, with the continuous R&D and better equipment they always ensure
finest edible oil.

9
Mode

There are several alternative strategies or mode/s that can be adopted by an organization when
the organization decides to increase its international business activities. Some of these strategies
are:

1. Importing and Exporting - When citizen, business or government of a country buys

goods or services from foreign country that is importing. On the other hand, exporting refers to
the sales of domestically produced goods in foreign country. An organization can do its
international business activity through importing and exporting.

2. Licensing - Licensing refers to a business agreement that involves with two companies.
Under licensing agreement one company gives permission to another company to use their
patents or copyright. In licensing, a company grants another foreign company to manufacture or
market their products. For example: Singer.

3. Strategic Alliances - In strategic alliance two or more companies jointly cooperate for
common benefits. A joint venture is a type of strategic alliances where two or more companies

10
form a new company for specific project or business activity and share the ownership of that new
company.

4. Foreign Direct Investment - Through foreign direct investment an organization can

conduct its international business activity. FDI refers to an investment that is made by a company
or individual in one country into another foreign country where the company or individual has
interests to do business. For example: Honda is doing FDI in Bangladesh.

The mode/s that we are going to choose:

ACI Foods Limited is exporting their brand “ACI Pure” in different countries like USA, UK,
Australia, Canada, Malaysia etc. For increasing our business activities we have decided to bring
our business ACI Edible Oils Limited in India which is a SAARC country. As we are going to
introduce our brand “ACI Nutrilife” for the first time in India that is why we believe “Export”
mode will be suitable for our business.

Participating in “Export Fair” is one of the best ways to introduce a new product in international
market. In this fair many dealers come to visit different stalls to find out what is new in the
market and then decide with whom they will do their business. To introduce our products in
India’s market at first we will participate Export Fair in India. In the fair we will meet many
dealers. We will provide them some free sample oil jars of our brand “Nutrilife Rice Bran Oil”
and get feedback from them. When we will find suitable dealers for our product, we will export a
minimum quantity of our brand at the initial stage. Then we will observe our product’s position
in India’s market. We will try to get feedback from the customers who will use our oil. After few
months of observing our products’ condition in the market and conducting a market research if
we find that our product is preferred by the customers and if the demand of our product in the
market is positive in India then we will increase our export quantity. We will also appoint some
sales agents in India who can sell our product in their market and provide us the authentic
information about our customers’ perception about our product and also provide information
about the market condition. In this way we will enter into Indian local market with our product
and expand our products in the markets through exporting.

We will also conduct market analysis to make future plan for our oil business in India. In future,
if we find that our brand has successfully made a good position among all foreign and local

11
brands of Rice Bran Oil in India’s market then we will go for joint venture or foreign direct
investment based on the situation.

Transportation
The mode of transportation we are going to use is the rail / train service over road and sea
transportation for exporting ACI Rice Bran Oil to India. The road transport has delays in ports
and takes up to several days to reach India whereas sea vessels are not sufficient enough and cost
effective to use for exporting our product. After research we found that the train has the potential
to substantially reduce transport costs from about $800 by truck to about $730 by train per TEU
(twenty –foot equivalent unit); transport time will also take days instead of about two weeks or
longer. Shippers and business groups are enthused by the train service because transport via train
is cheaper and quicker and it gives shippers a non-truck transport option. Bangladesh already
started exporting her primary exports to India of its woven garments, knitwear, home textiles,
agri-products, frozen food, leather and leather products, footwear, raw jute, jute goods, and
bicycles through the India-Bangladesh freight train service from the middle of the year 2018.
Therefore, considering the high / low value-to-weight-ratio train would be the best option to
choose as our preferred mode of transportation for exporting our brand to India.

Why India:
i) India is the world's largest democracy and, according to UN estimates, its population
is expected to overtake China's in 2028 to become the world's most populous nation.
ii) Population 1.3 billion.
iii) India has the seventh-largest country by geographical area (Area 3.1 million sq km
(1.2 million sq miles), excluding Kashmir).
iv) Currency Rupee.
v) Neighbor country.
vi) Relationship among two countries (political, social).
vii) Other local companies started to export in India eg. - Pran RFL.
viii) New market opportunity.
ix) India's rapidly expanding middle class represents substantial market.

12
Trade Policy:
The rice bran oil industry began its journey in Bangladesh in 2009. Initially there was only few
firms to produce rice bran oil. Currently the Industry has fourteen active firm with an annual
capacity of 2.5 Lakh Metric Tons. The industry lacks required amount of raw rice bran to meet
its full production capacity. The industry requires 13 lakh Metric Tons of rice bran annually to
make the most use of the capacity.

Trade policy of Rice Bran Oil in Bangladesh encourages international trade of it. In the Fiscal
year 2015-2016 Bangladesh has exported 17,515 Metric Tons of rice bran oil, in Fiscal year
2016-2017 the export volume was 25,371 metric tons and in the fiscal year 2017-2018 the export
volume was 20,464 metric tons. Most of this exports have been done to India, the US, the UK,
Australia, Japan, Korea, and China.

Trade policy with India:

Why India: India has a total population of 134 crore people and the percentage of urban
population is 33.6% (Census 2017), which is more than 45 crore people of total population. In
Bangladesh the total population of 16.42 crore people and the percentage of urban population is
35.86% (World Bank 2017), which is only 5.89 crore people of total population.

India has 7.6 times more urban population than Bangladesh. This is huge potential market for
exporting rice bran oil.

Since India is encouraging its people to consume rice bran oil instead of soybean oil and olive oil
because of its health benefits, there are no rigid restrictions in exporting our Nutrilife rice bran
oil in India.

In importing rice bran oil the current customs duty is 30%, and IGST is 5% in India and there is
no anti-dumping duties on rice bran oil which will lead us a certain profitability in short period
of time.

13
Environmental Challenges
Since liberalization in 1991, India have witnessed a handful of foreign companies entering the
country. Among these companies, lot of them have shut down in short periods, since they could
not survive India. Be it banks like Barclays and Royal Bank of Scotland shutting down their
banking services or General Motors announcing its exit in mid-2017, there were a number of
explanations for their failure. Companies who have just started on a multinational path, have a
long way to go to understand how the cultural, political and legal system works in India. Mostly,
the challenges they confronted weren’t accounted for in initial planning.

When a company wants export its product to another country it usually faces three environmental
challenges. They are i) Economic environment ii) political/legal environment iii) cultural
environment. For surviving in India these challenges are more than vital to analyze.

Some common challenges foreign companies face while setting up business in India:

1. Economic environmental challenges:

Infrastructure

Issues with the country's roads, ports, airports, railroads, power grids, education and
telecommunications infrastructure are critical obstructions as the nation strives to accomplish its
full economic potential. India’s proceeding with urbanization, together with growing incomes,
has brought about an increased requirement for enhanced infrastructure, both to deliver public
services and to withstand economic growth. India has dedicated substantial portions of its recent
annual budgets towards infrastructure development and plans to execute this infrastructure
enhancement largely through its home-grown Public-Private Partnerships.

Price sensitivity

In India, another problem that companies face is the psychology of the target market in buying
goods and services. India is more of a price centric nation, which does not witness as much brand
loyalty, as it does consider the price. Henceforth, not only do the companies need to offer quality

14
products, they too require to charge a competitive price for that. People would compare features
deprived of going into the premium depth, and later choose a cheaper version. The fall of the
telecom sector is a picture-perfect example for the price oriented psychology of the Indian
people.

Electricity

The Indian government’s rural electrification program saw the nation climb to the 26th spot in the
World Bank's electricity accessibility ranking in 2017, from 99th spot in 2014. A chance to attain
an electricity connection in Delhi has fell from 138 days four years ago to 45 days, involving five
procedures. But demand is presently exceeding supply, as the economy booms, and there is a
possible for power outages. The cost of attaining electricity is relatively cheap in comparison to
the rest of South Asia, but the number of procedures involved can be rather discouraging. What’s
more, each procedure is in itself quite time consuming, taking around eight days to receive an
external site inspection and three weeks to get externally connected, have a meter installed and
conduct a test installation.

Risk of bribery and corruption

Companies operating or planning to invest in India face high corruption risks. India slipped from
79th to 81st position in the most recent Transparency International’s Global Corruption
Perception Index.

Even though the government has raised efforts to encounter corruption, it is still a serious issue,
particularly widespread in the police, judiciary, public services, and public procurement sectors.
The Prevention of Corruption Act is the minimum legal framework within India, with private
sector corruption protected by the Companies Act.

Lack Of Awareness And Education

India has multiple resources and potential to grow but lack of education and awareness is holding
back the country. In India, lack of awareness was one of the major challenges to fight against.
Most people had very little information about brand knowledge. Their buying decision was
simply based on price. Many sector is still struggling to cater to the needs because of the
missing access points for people to know about the products.

15
2. Legal environmental challenges:

Exports and imports

Exporters and investors face non-transparent and often volatile regulatory and tariff regimes.

In spite of government legislation to expand international trade, there are still various problems
to importing and exporting goods. Custom duty rates can be specific (rupees per unit). In general,
duty varies anywhere from 0% to 150%.

Other fees associated to Custom duties includes Countervailing Duty (CVD), Landing Charge,
Education Cess, Additional CVD, and Integrated Goods & Services Tax (IGST). Numerous
layers of bureaucracy make it challenging to move goods proficiently, and companies must file a
long list of documents before moving products across borders.

India has implemented a Goods & Service Tax with effect from 1st July, 2017 which now
involves the exporters to get a Letter of Undertaking.

To boost exports, the government of India provides firm assistances to exporters from time to
time. For example, the Service Exports from India Scheme of the Foreign Trade Policy 2015-
2020 has been launched since 1 April 2015, offers service exporters a funding of a transferable
duty credit scrip @ 2% to 5% of Net Exports that can be used for a variety of purposes, including
payment of customs duty.

Food Product Approval

Importers and exporters must seek formal product approval for any foods or food products that
have not been standardized from the Product Approval Division of the Food Safety and
Standards Authority of India (FSSAI). These products have been termed by FSSAI as ‘non-
specified food and food ingredients.” The various categories of food products covered under this
category are:

•Novel foods or foods containing novel ingredients which do not have a history of human
consumption in India;

16
•Food ingredients that have a history of human consumption in India, but are not specified under
and preexisting regulations under the Food Safety Act, 2006.

•New additives and processing aids; and

•Foods manufactured or processed using novel technology.

3. Cultural environmental challenges:

While Unity in Diversity is one of the high strengths of India, it is also one of the biggest
weakness for the companies to start their business as there is a massive problem in coping up
with the culture of the diversity of people. India is a cultural hothouse, and business is more
about building relations than presenting figures and sums. The polychronic culture can be
difficult to adapt to for outsiders, and initial analysis is important before travelling. In mono
culture teams and countries, a person can freely express his views, whereas, in a diverse cultural
nation like India, companies are more likely to offend people with their thoughts and opinions.
There are many different religious, ethnic, and annual differences on local and national holidays.
These need careful study before planning business trips and meetings.

17
Conclusion
ACI is the leading company in the Food industry in Bangladesh. With their products, they grab
the world’s different countries and supply their products there. Ensuring highest quality ACI will
be able to maximize market share with Nutrilife Rice Bran Oil in India. It maintains its
leadership through well planned action program, motivated and trained personnel and by
projecting a favorable company image among the customers.

References
1. http://bibd.info/rice-bran-oil-raises-hopes
2. https://www.thedailystar.net/rice-bran-oil-raises-hopes-for-cuts-in-imports-58889
3. https://www.thedailystar.net/backpage/news/rice-bran-oil-tests-reveal-low-quality-25pc-
brands-1661638
4. http://www.aci-bd.com/assets/files/directors-report/directors-report-aci-l-2016-2017.pdf
5. https://www.daily-sun.com/printversion/details/291052/2018/02/24/Rice-Bran-Oil:-
Prospects-and-Probabilities-in-Bangladesh
6. FSSAI web-site at http://www.fssai.gov.in/
7. https://www.ibef.org/economy/indian-economy-overview
8. https://www.tmf-group.com/en/news-insights/business-culture/top-challenges-india/
9. https://www.tmf-group.com/en/news-insights/articles/top-challenges/doing-business-in-
india/
10. http://www.articlesbase.com/business-opportunities-articles/why-to-expand-your-
business-in-india-5372313.html
11. http://www.vksconsultants.com/why-india.html

18