STRATEGIC INTERNATIONAL MARKETING PLAN

FOR THE INDIAN MARKET WITH ACTIVIA

December 2010

Alena Lutzke Aaron Buder Silke Piepenpott Corinna Kaul

(109099) (126510) (109745) (108989)

Introduction
With the ambition of starting a company every entrepreneur wants to become a player in the international world of business and trade. How difficult it is to expand to new markets especially to new countries we want to show in our report. To be specific we focus on the dairy products of the companies DANONE and UNILIEVER. For knowing how the two competitors are doing, we give an insight on the international strategy of our two companies at the beginning of our report. After comparing and analysing we will select the firm, which we think has it easier to enter a new international market of the dairy industry. As a following step after choosing the company and India as our new market we will develop an international business plan with respect to all marketing, financial, human resource, legal, and CSR factors. Finally the conclusion will highlight all our aspects we took in consideration and how we want to enter the dairy sector in India.

Table of content

1. 1.1 1.1.1 1.1.2 1.1.3 1.1.4 1.2 1.3 1.4 1.5 1.6 1.6.1 1.6.2 1.6.3 1.6.4

Marketing Plan External Analysis Demographic Economic Political Social Target market Entry Strategy Marketing goals Marketing strategy Marketing Mix Product Place Promotion Price

3 3 3 4 4 4 5 6 6 6 7 7 8 9 9 10 10 12 12 14

2. Financial Plan 2.1 Financial Statements 2.1.1 Consolidated Balance Sheet 2.1.2 Income Statement 2.2 Financial Forecast Financing Decision 2.3 3. 3.1 3.2 3.3 3.4 3.5 4. 5. 6. 7. DANONE HRM Aspects General Aspects at Danone Europe Recruitment aspects at DANONE Europe Selection method at DANONE Europe Indias HR history HRM practices for India with the DANONE Company Corporate Social Responsibility Policy of Danone in India Legal Aspects for India Conclusion Literature

15 16 16 17 18 21 20 25 28

1. Marketing Plan
1.1 External Analysis In the following we are examining the most important issues of the external Analysis (PEST) of India demographic, economic, social and political in order to find out whether or not India is an attractive choice to launch our product Activia.

1.1.1 Demographic India, as belonging to one of the BRIC countries, is the second most populous country in the world with a population of more than 1.18 billion people (as of 2010), which is more than a sixth of the worlds population. Already containing 17.31% of the world's population, India is projected to be the world's most populous country by 2025. India has an astonishing demographic dividend where more than 50% of its population is below the age of 25 and more than 65% hovers below the age of 35. It is expected that, in 2020, the average age of an Indian will be 29 years. In total, there are 1,652 languages and dialects spoken in India, with Hindu being the principal official language and English being the secondary official language. For us, this is definitely an advantage and therefore of course a positive aspect to consider India for our expansion. Indias population growth rate represents 1.548% and an unemployment rate of 7.8%. Both rates show again, that India is again a favourable country, with a relatively low unemployment rate and as well as a higher growth rate compared to Singapore e.g. Indias age structure is as following: 014 1564 years: years: 30.8%, 64.3%, male: male: 188,208,196, 386,432,921, female: female: 171,356,024 364,215,759

65+ years: 4.9%, male: 27,258,259, female: 30,031,289 (2007 est.)1

1.1.2 Economic The economy of India is the eleventh largest economy in the world by nominal GDP and the fourth largest by purchasing power parity (PPP). India is an emerging economic power with a very large pool of human and natural resources, and a growing large pool of skilled
1

Wikipedia website, Demographic of India, Nov. 25 2010 from:http://en.wikipedia.org/wiki/Demographics_of_India

professionals. By 2008, India had established itself as the world's second-fastest growing major economy with an per capita income is 40,745 (US$ 924.91) just ahead Japan and behind U.S. and China. According to the estimates by the Ministry of Statistics and

Programme Implementation2, the Indian economy has registered a growth of 7.4 per cent in 2009-10, driven by robust performance of the manufacturing sector on the back of government and consumer spending.

1.1.3 Political India is the second populous country in the world and has the worlds largest economy. The country consists of 28 states. The Prime Minister is the head of the India nation. Laicism the separation of state and religion is one of the most important aspects in Indians political system.

1.1.4 Social India is still an emerging country. More than 40% of the population have not enough money and live from 1$ a day. Due to the poverty large parts of the population have nutrient deficiency. Particular outside of the big cities like Mumbai and New Dehli, on the countryside the people are poor. Due to the bad living situation on the countryside more and more people move to the cities with the hope of a better life. For this reason the population on the countryside is decreasing and also the number of worker. Consequently child work is common in India. 3

1.2 Target market After having analyised and evaluated different target markets, Danone Groupe has decided to enter the Indian market to target its probiotic product Activia. Since Danone has already built up a joint venture with the Japanese company Yakult in India, both companies believe that India has great potential as a successful probiotic market with a fast growing population of one billion, an economy that grew by 7% in 2004 and a long tradition in probiotic products.
4

Not surprisingly belongs India to one of the BRIC countries, whereby India will

become one of the four most dominant economies by 2050. Since our mission is to bring
Ministry of Statistics and Programme Implementation Wikipedia website, Facts about India, Dec. 1, 2010, from: http://de.wikipedia.org/wiki/Indien 4 (2005) nutraingredients Danone, Yakult choose India to expand rapidly, Nov. 27, 2010 from: http://www.nutraingredients.com/Industry/Danone-Yakult-choose-India-to-expand-jointly
3 2

health through food to as many people as possible5, India is not surprising a very appealing market being the fourth largest economy in the world. Furthermore, Asian countries are also experiencing Westernization of their diets.6 Through heavy research of the Asian market, we found out that Asian consumption, especially in developing Asia, has been expanding dramatically with income growth, changing demographics (population growth, urbanization), and the dietary changes in many Asian countries. Besides, the Indian market is not saturated as a probiotic market. In the dairy sector, other players such as Nestle and Britannia are focused heavily on the plain milk business, while our focus is on value-added products. Besides, we will not launch products that are not perceived as healthy.7 Since the Asian market is very large, with a population of more than 1 billion, the launch of Activia will be addressed mainly to people within the age of 15-64 ages at the middle-income state, since this group represents the most powerful group. However we have to be very sensitive, since dairy products are still not a common consumption pattern in Asia. Therefore, our main focus will be aimed to people that are conscious about their health. More precisely, we do not only want to sell dairy products, but rather create benefits for our customers that will stay in their mind. Possible consumers of Activia can be families with children as well the elderly and young generation.

1.3 Entry Strategy Through the enormous success of our joint venture with the Japanese group Yakult that we contracted with in 2004, we are already operating in the Indian market. Therefore, we will stay with the close tie and use our current alliance with Yakult to launch our probiotic product Activia. Through the joint venture, we opened together with Yakult our new Yakult Danone India Private Limited8, which is located at Rai, Sonepat (Haryana). Hence, it is just of advantage to produce domestically at our current facility to save costs on the one hand, but also to make use of the know-how. Since our new enterprise has experienced great success with the launch of the probiotic drink of Yakult, we will also use the know-how of Yakults R&D for the launch of Activia. Yakult has just granted our company a license for its YIF-Scan,
Danone company website, Nov. 27, 2010, from: http://www.danone.com/en/our-brands/know-it-all-aboutdanone.html 6 Dairy Markets in Asia: An Overview of Recent Findings and Implications Sept. 2005, from: http://ageconsearch.umn.edu/bitstream/18303/1/bp050047.pdf 7 (2010) Business-standard: Danone India sees wealth in health, Nov. 27, 2010, from: http://www.businessstandard.com/india/news/danone-india-sees-wealth-in-health/392640/ 8 Yakult company website, Nov. 27, 2010 from: http://www.yakult.co.in/index.php?option=com_frontpage&Itemid=1
5

a high-precision system that quantifies bacteria, targeting gene sequences (RNA and DNA) specific to particular intestinal bacteria.9 Since the intestinal microbial flora of Europeans differs from the Indians influenced by diet and lifestyle, we can benefit from using their technology in order to adjust our probiotic product to the Indian lifestyle. Another very important aspect for choosing the intermediate mode over direct export or FDI is the fact that the Government of India has permitted duty-free import of up to 30,000 tones of milk powder and 15,000 tones of butter oil. The imports are, however, subject to tariff rate quota (TRQ) arrangements allowing only certain designated agencies to bring in these goods at nil duty10.

1.4 Marketing goals Since India is a relatively new market within the probiotic segment as well as a growing market, our main goal is create awareness of our product in order through high emphasis on advertising. We will focus on communicating the benefits of Activia in order create awareness and loyalty. As Indian consumers are still not aware of the healthy benefits of probiotics, educating the consumers will be the key role in developing the probiotic market. We see high potential in the Indian market with the launch of Activia, since the market is at its growing stage. Of course our long-term goal is to boost sales and market share. It helps preserve a sound financial structure by spreading fixed costs across larger volumes. It also ensures continuing demand for suppliers of raw materials who need to sell their output, particularly when it is perishable. And, most obviously, it preserves industrial jobs. On that point we have a responsibility not only to our employees, but also to society at large, since cutting jobs contributes to the downward spiral in consumer demand.11 Precisely, we aim to gain 2% market share in the first year and double it by the end of the second year. To measure our performance we will make a market research at the end of the first.

1.5 Marketing Strategy Since we experienced great success with the adaptation of our overall marketing strategy last year, we will stick to our strategy as well for the Indian market. The success of our
(2007)Asiafoodjournal: Groupe Danone, Yakult Honsha cemet relationship, Dec. 01, 2010, from: http://www.asiafoodjournal.com/article-4301-groupedanoneyakulthonshacementrelationship-Asia.html 10 (2010) Business line: milk powder, butter oil imports liberalised, Dec. 02, 2010 from: http://www.thehindubusinessline.com/2010/03/17/stories/2010031750841700.htm 11 Danone company website: Annual report 2009, Dec. 03, 2010, from: http://danone09.danone.com/en/fb/data/catalogue.pdf
9

strategy is particularly evidence for our growth in sales of 3.2%. Therefore we will continue with our marketing strategy for entering the Indian market. To review, we will:

1. Reweighing product portfolios and adjusting prices to ensure that prices in each country are just right: attuned to market realities, consumer purchasing power, and brand value; 2. Put increased emphasis on promotion and point-of-sale events. 3. Put emphasis in consumer advertising to highlight product quality in terms of taste, pleasure and well being in addition to functional benefits. By combining this reset strategy with major productivity initiatives, Danone has already consolidated its market shares.

1.6 Marketing Mix 1.6.1 Product As our results from 2009 proved, Activia belongs to one of our most successful brands on our portfolio. This is of course due to our adaptation strategy to different markets as well as in depth R&D in different markets where we are already operating. Due to that, we already launched Activia very successful in different markets with different sizes and flavors. In the U.S e.g., flavors differ from plain and flavored semi-solid yogurt in regular and "light" (fat free), whereas in South Africa flavors include pear, mango, dried apricot, kiwi, fibre and prune. There is also a fiber-enhanced yogurt with added cereal and a bottled yogurt variety. Packaging options include a 24 oz. pack that is not available in European markets. Therefore, we will also react to the needs of the Indian market carefully. Research showed, that the average family size accounts for 5-6 members. Therefore we are going to offer our probiotic product Activia in sizes of four and eight packs. Another reason for offering those two different types of packs is the fact, that we are already experienced with the production of 4 and 8 packs in Europe, Central America etc. Although we have a broad experience with different flavors and products within the Activia portfolio, we will only introduce three different types of Activia products and 2 different flavors in the beginning. First, the people in Singapore are not used to many different tastes of milk. Second, Activia should be considered as a unique healthy beneficial product rather than just a tasty low fat yogurt. As such, we will introduce Activia Low fat yogurt, Activia Fiber, a combination of low fat yogurt, fiber and cereals and finally Activia Light with fewer calories and zero fat. 7

Since Mango is the national fruit of India, Mango will of course be one of the flavors. Further research on taste preferences showed us, that Indians prefer most Guava and Papaya next to Mango. Activas overall appearance with its green color has been a great success worldwide. Hence, we are going to introduce Activia in green as well in India, as the color also stands for hope and life. According to Census of India in 2001, more than 1 million native speakers speak 29 languages. Since the principal official language is Hindi and English is the secondary official language, the communicative language on the Actvia products will be Hindi and English.

1.6.2 Place Since the Asian market has a different purchasing behavior compared to Europe, we have to take those differences into account. We decided to introduce Activia in the most well known supermarket chains in India and just in a limited number of cities with a population of more than 1.000.000 inhabitants like Delhi, NCR, Jaipur, Chandigarh, Mumbai, Pune and Bangalore in the beginning. Since many people shop their groceries after work and choose those grocery chains that are conveniently located, we will only negotiate with those stores that are open until 22.00 pm and convenient. Concerning a research food and grocery is the largest segment and it occupies around 74 per cent (US $ 200 billion) of total retail market in India12. Such formats of grocery chains in India include Hypermarket, Supermarket,

Convenient stores, and Cash and Carry wholesale. Therefore we have to be very careful with the selection of grocery stores. Since many Indians still rely on small domestic grocery stores, we are going to cooperate with domestic as well as with international grocery chains. Such chains will include: Big Apple, Food Bazaar, Reliance, Shoprite and Tesco. After having introduced Activia successfully into the market, we will continue to negotiate with further grocery chains. Since Activia is considered as a healthy product, we also make them available in hospitals. Another system that will be used to distribute Activia is bringing our
12

Retail Mantra: Grocery chains- Largest segment of reatil Dec. 03, 2010, from: http://india.retailmantra.com/2009/02/grocery-chains-largest-segment-of.html

products directly to our customers at their doorstep. The system was already introduced in 1963, where Yakult has successfully used it to deliver its products worldwide through a network of over 80,000 ladies. As this system was very successful with the distribution of Yakult, we are going to introduce a similar system, through which we can bring Actvia directly to our customers every day and help them to fully understand the benefits.

1.6.3 Promotion In order to reach a broad target group in India we will set up a marketing campaign the addresses a variety of different people with different ages, lifestyle etc. Since the Internet and TV are media that are broadly spread in India, we will of course make use of those two media to promote our product. In detail, we are going to operate different TV commercials with a celebrity of India to promote Activia, since we experienced great success with TV commercials in Europe and the U.S using celebrities to promote Activia. Furthermore we will create an homepage in two different languages, English and Hindi, where people can find our different products and flavors, nutrition information as well as information about our company. Other media that will be used are billboards and magazines to address the people in between. Since Activia is a new product on the India market it is important that it is not only communicated via different media such as magazines, TV and the Internet, but also through direct marketing. Therefore we will also employ trained sales personnel in the grocery chains that give free samples to and explain the benefits.

1.6.4 Price Research conducted that the average spending of Indian consumer is Rs. 8000, which equals approx. 131 Euro. Therefore we have to be very careful with the price setting for Activia. Since India is a complete new market for us, we will use competitive pricing, setting the price for Activia at a similar stage to that of our direct competitors such as Nestle and Yakult, since Activia has to be considered as a healthy product. We believe that this pricing strategy is best for India, since we are operating in a complete new market where yogurt products are not common yet. Therefore it is important to reach a broad target group in the beginning.

Cost price Profit margin Cash sales price Cash discount Target sales price Discount List sales price 10% 2% 25%

0,65 0,16 0,82 0,01 0,83 0,08 0,91

2. Financial Plan
2.1 Financial Statements 2.1.1 Consolidated Balance Sheet As of December 31, 2009 (In millions) Assets 2008
Brand names Other tangible assets net Goodwill net Intangible assets net Property, plant and equipment, net Investments in associates Investments in non- consolidated companies Long- term loans Other long-term financial assets Deferred taxes Non- Current assets Inventories Trade accounts and notes receivable 3,846 380 12,320 16,546 3,083 1,267 237 73 137 639 21,982 795 1,534

2009
3,903 365 12,927 17,185 3,180 805 521 27 127 621 22,446 765 1,682

10

Other accounts receivable and prepaid expenses Short-term loans Marketable Securities Cash and Cash equivalents Assets held for sale Current assets Total assets

950 26 441 591 546 4,883 26,865

645 41 454 644 176 4,407 26,873

Liabilities and Shareholders equity

Share capital Additional paid in capital Retained earnings Cumulative translation adjustments Treasury stock Net income realized directly in equity Shareholders equity attributable to the Group Minority interests Shareholders equity Non- current financial liabilities Retirement commitments Deferred taxes Other non- current liabilities Non- current liabilities Trade accounts and notes payable Accrued expenses and other current liabilities Current financial liabilities Liabilities held for sale Current liabilities Total Liabilities and Shareholders Equity 128 297 10,399 (1,121) (1,225) 166 8,644 56 8,700 11,435 208 1,109 515 13,267 2,189 2,024 652 33 4,898 26,865 162 3,596 11,137 (869) (1,027) 256 13,255 54 13,309 5,958 219 937 594 7,708 1,981 2,173 1,702 5,856 26,873

Figure 1, Consolidated Balance Sheet 2008/ 2009 13

13

http://finance.danone.com/phoenix.zhtml?c=95168&p=irol-regulatedAMF

11

2.1.2 Income Statement: 2008

Net Sales Trading operating income Trading operating margin Current net income (attributable to the Group) Net Income (attributable to the Group) Underlying diluted EPS (attributable to the Group) 2.66 1,313 15,220 2,270 14.91% 1,313

In millions 2009
14,982 2,294 15.31% 1,412

1,361

2.57

Figure 2: Income Statement 2008/ 200914

From 2008 to 2009 the Group had no necessary to mention changes in the assets total. As the Group was able to reduce its debts, non-current financial liabilities from 11,435 to 5958 from 2008 to 2009 the Group needed other financial sources to finance new investments. However the Group could strengthen its financial structure through an increase in share capital and the repurchase of company bonds. By selling additional stock to currently holding shareholders in two steps in April and June 2009 the Group had increased its share capital by 4.609 millions. The increase in share capital and the repurchase of company bonds enables the Group to decrease its debt levels from 11.0055 millions to 6.562 millions.15

2.2 Financial Forecasts In comparison to the recent years, we want to improve our financial position or at least achieve similar results compared to 2008 and 2009. We have still expected the environment to remain difficult due to financial, economic and social factors. The business couldnt expect a rapid recovery of the economic crisis in 2010. Additionally because of the economic crisis changes in consumer trends of the western

14 15

(2009) Danone_Documentde_ Reference 2009, p 17 from: http://www.danone.de/danone.html#daten-fakten (2009) Danone_Document_de_Reference_2009, from: http://www.danone.de/danone.html#daten-fakten

12

countries are expected. Secondary weak currencies in emerging countries and an expected raw material crisis could weaken our financial results16. However despite the difficult environment the forecasts of the business for the year 2010 still include growth potential. The priority goal of the business is continuing increasing cash flows of 2009. During the year 2009 we were able to increase its free cash flow by 20.6%. In 2010 we follow the objective of increasing the cash flow by still at least 10%. The minimum target of an operating cash flow in 2012 is 2 billion. In addition the company tries to hold the operating margin at the constant level of 2009. The third forecast of 2010 is an increase in growth revenue of 5% compared to 2009. The strategy followed in order to achieve these targets is increasing sales volume worldwide. After cutting prices in 2009, responding to the economic situation of its customers, we have to gain our revenues through the sale of high product volumes. By responding to consumer trends, this should enable us to increase our market share in key countries. Secondary the growth in cash flows should be achieved by optimizing general, operating and administrative costs and the reduction of financial expenses through restructuring the companys debts. As the company can expect a 5.2% growth in sales volume in 2009 for all divisions the financial forecasts of Danone for the next years wont change for worse.17 Particularly in the dairy products sector we are the worlds leading manufacturer measured in sales.18 Through entering the Indian food market we expand our international operations and hope to increase the Groups profit. As the price of our Activia product is in Euro 0, 91 for four yoghurts and the cost prices are Euro 0, 65, we would have a profit margin of 25%. Additionally the Group has to take into consideration additional costs for investments in new plants or machines. On the basis pf calculations the Groups assumes to achieve a rate of return of the investment of about 16%. In 2009 the Group had a turnover of 14.982 billion, which means an increase of 3, 2%, despite the economic crisis Danone was able to increase its turnover due to the new developed strategy in 2008. 19

16 17

(2009) Danone_document_de_Referncing2009, p.107 from:http://www.danone.de/danone.html#daten-fakten (2009) Danone_document_de_Referncing2009, p.107, from: http://www.danone.de/danone.html#daten-fakten 18 (2010) Annual_ Report_09, from: http://www.danone.de/danone.html#daten-fakten 19 (2010) Danone company website: http://www.danone.com/en/company/introduction.html

13

2.3 Financing Decisions:

Financial Position In millions 2008

Net debt Stockholders equity (including minority interests) Debt/ equity ratio 127.1% 49.3% 11,055 8,700 6,562 13,309

2009

Table 3 Financial Position

It is obvious that our Group could reduce its debts from 2008 to 2009 by more than 40%. This gives the company the ability to invest into new businesses. During 2008 the debt to finance the operations of the business exceeded the stockholders equity used to finance. For that reason the debt/ equity lied at 127.1% in 2008. During the year Group was able to improve the equity/ debt ratio to less than 50%. Until the end of 2009 the amount of debts could be reduced while the stockholders equity increased to 13,309 million .

We have already formed a Joint Venture with the Japanese company Yakult to enter the market for probiotic dairy products. At the beginning only products of the Japanese producer Yakult were offered on the Indian market, however it was planned that Danone should follow selling the products on the Indian market. For that reason the decision to enter the Indian market with our probiotic yogurt Activia could be a relatively cost effective decision, as Danone could use the production facilities, as well as the distribution channels of the already existing Joint Venture with Yakult in India. Additionally to that Danone could use the income of the year or again increase the outstanding debts of 6,562million in order to finance its new operations in India. In case that the Group wants to held its cash made through operations in the recent years, but doesnt want to make debts again at any bank, the Group could issue additional shares to receive more capital to invest for entering the Indian market.

14

The advantages of issuing new shares or increasing share capital is that the company doesnt have to finance new investments with making new debts on which interest cost have be paid.

3. DANONE HRM Aspects

At this point we want to describe human resource practices and strategies of DANONE and compare them with HRM policies in India. When companies begin to enter new markets that strongly differ from their home market, HRM practices often need to be adjusted. How well the company integrates itself into the new market can strongly depend on adaptation of HR practices.

3.1 General HRM aspects at DANONE Europe We are strongly involved into several campaigns like social operations Grameen DANONE Funds or DANONE Nations Cup. Those social operations around the world and the companys award for Great Place to work show our strong commitment to improve quality of life, which is also reflected by our HRM policies. According to DANONEs culture it is the quality of each employee, the enthusiasm, and the dedication of every single one, which makes the difference when it comes to satisfy the demand of our customers. The values integrated in the corporate culture are lived in practice. This means that low hierarchies within the organization, create the path for an open and direct contact among all hierarchies, no ties required and trainees can address their superior by the first name. Prime principle is a transparent communication, humanity, being reachable, to support and motivate each other all these are values, which reflect the corporate culture. Our global business strategy is Bringing health through food to the maximum number of people this statement shows that social responsibility is indivisibly related with our business operation.

15

3.2 Recruitment method DANONE Europe: We use a centralized recruitment system rather than decentralized. Whenever there is an open position for a particular job, a job description is prepared with the consultation of the HR department. The department head provides all the requirements of the job and this information is used to prepare the essential qualifications to be included in the advertisement. Besides running the recruitment through HR departments, we are also using outside agencies to acquire new employees. Because DANONE is a huge organization with a lot of employees, HR departments follow internal and external recruitment methods to ensure the efficient and effective performance of goals and objectives.

Internal The internal recruitment method is used when the work related activity for the open position is at a higher level and requires a high level of familiarity with the current operations and functions. Then, an external recruitment method would be a second option. We have very good experience with this recruitment form. It is time saving and employees who are familiar with our culture tend to fulfill the challenges better. External: The external recruitment method consists of two elements; The referral approach and the external search approach which includes, press advertisements, and e-recruitment. The main reason for referral approach is to find competent and self-devoting employees. The referrals are given priority but they also have to go through the whole procedure, like submitting CV, initial interview and final interview. DANONE does not use application forms on their web site because it would restrict the applicants to give out any additional information or skills, which could highlight or underline their application. The additional information is seen as a support in the selection process therefore, CVs are preferred over application forms

3.3 Selection method of DANONE Europe: After the candidates CVs have been read and the information fit the positions criteria, the following steps in the selection method take place: 16

-> Phone call to applicant, before taking interview in front of committee. -> Committee consists of department head, HR Director or an HR manager

In some cases a direct hiring takes place and department head are not involved During the interview various points regarding personality, work-passion, consistency, communication, general knowledge and educational skills are checked. For some positions there are no further selection steps needed and if the interviewer seems to be confident the applicant gets hired. Sometimes applicants have to go through a second selection phase after they have reached 70% of the required skill in the previous interview. Depending on the position, a conversation regarding salary and future projects round of the selection process at DANONE. Additional we use the Selection Tool Kit listed below to support the selection process: Preliminary selection Employment test Verification of references Medical evaluation Supervisory interviews Realistic job previews Assessment centers

3.4 Indias HR History When companies begin to enter new markets that strongly differ from their home market, HRM practices often need to be adjusted. How well the company integrates itself into the new market can strongly depend on adaptation of HR practices. 17

From a Human Resource perspective it important to know how HRM developed in the country the company is about to enter and what the major key factors were that set the countries vision of HRM There are a couple of key factors that shaped Indias image of HRM. One of the first management books, titled Arlhshastra, written three millenniums before Christ, contains many aspects of human resource practices in old India and were used in practice in organizational thinking for centuries. A further powerful effect on the managerial history of India was given by the British system of management. But also values and cultural practices have strongly characterized HRM in India. To this also belongs the caste system. The cast system consists of five levels.

Brahamin Kashatriya Vaishya Sudra Untouchables

For certain cast levels the government is sensitive about reserving seats in colleges and job opportunities. In urban India, people of all castes meet socially or for business. Discriminating against anyone because of his or her caste is against the law. In management positions like recruitment, promotion and work allocation managers have to deal with these cultural traditions and the government regulations.

3.5 Best HRM practices for India with the DANONE Company Considering the cultural aspects and HRM trends to socio cultural roots we need to ask ourselves what human resource practices are the best to reach our goals and objectives for the location in India. An Indian Professor named Ashok Som has made several surveys on HRM practices in traditional Indian and European companies. What Mr. Som wanted to know was whether firms that implemented innovative HRM practices did better than those that did not. He also wanted to know which particular HRM practices were considered the most effective and if 18

there were any synergies between individual HRM practices. From the public and private sectors 69 companies participated in survey.

The core question asked to these organizations was: Compared with the performance of best performing organizations in your sector/industry or in your line of activity in India, how does your organization rate on each of the following, five years ago and now? The five-year period was 1997 to 2002 Innovative role of the HRM department Innovative recruitment practices Innovative retraining and redeployment practices Innovative performance appraisal Innovative compensation and reward policies

These practices were judged in the context if the use of innovative HRM practices improved organizational efficiency and output? The results of Mr. Soms survey showed that those organizations that had introduced innovative HRM practices had indeed improved their performance. However, the research could not find any evidence of synergies between individual HRM practices, which to western eyes may seem surprising! Although India differs strongly from Europe with its history in Human Resource Management the firms are becoming much more sophisticated in their approach to HRM. Mr. Som himself says: Indian firms are using flexible hours, competency-based payment systems and clear remuneration policies to attract and retain talent. As we from DANONE are considering doing business in India, we need to realize that innovative HRM practices are becoming much more professional in particular in relation to recruitment and reward strategies and that HRM in Indian organizations is undergoing a change. DANONES European HRM methods could therefore also be used in India and would not collide with Indias HR history.

19

4. Corporate Social Responsibility Policy of Danone in India

We are already very engaged in protecting the environment and focus on different labour standards which need to be fulfilled of all business units, business partners and suppliers20. These social principles are based on conventions of the International Labour Organization. The most important standards are: Prohibition of child labor Prohibition of forced labor Prohibition of all forms of discrimination Freedom of association and the right to collective bargaining Protection of the physical integrity of employees in the workplace Application of national law on working hours Application of national law on minimum wages.

As an example of the green marketing, Danones most important environmental activity is focused on the protection of water resources and reducing their own water consumption21. One of our strategic issues is to manage water in terms of quantity and quality so that they currently exploit around one hundred springs worldwide. Due to the fact that in India still 24% live under the poverty level in slums or bondages Danone could be reached a lot in direction to a better water availability in the mountain regions of the Himalaya and in the north east of the dry regions in Rajasthan and Deccan.

(2010), Respect of fundamental social principles, 15 Nov. 2010, from: http://www.danone.com/en/index.php?option=com_content&task=view&id=44&Itemid=83&lang=en 21 th (2010), Spring water: a national heritage that must be preserved, 15 Nov. 2010, from: http://www.danone.com/en/sustainable-development/water.html

20

th

20

Because of the bad conditions for living and farming on the country side more and more people flee to the big cities with the hope of getting a job. But obviously there are not enough employments and some of them are additionally paid with dumping salaries. We need to use their high knowledge and technology about making water available. Due to this, living conditions would became better and easier for many people living in India. Additionally women are still in an inferior position towards men although they are politically seen as equal. Especially in the working environment women are on a lower level so that men mostly get the precedence. To support the position of the women we especially try to employ women for each kind of jobs we are offering. So, we focus and act on positive discrimination. Another important fact is the education. Supporting the education of children as well as the further education of their own personnel brings a huge advantage for both Danone and the people in the country. The employees need to have the chance to move on in their career, because everybody wants a certain degree of development and change in their life to stay motivated, especially in the work placement. As we said in our strategic marketing plan our location of retailing would be concentrate on the markets in the big cities. So due to the International Labour Organization, to which Danone sticks, also the working conditions and terms of payment in the groceries have to fulfill these standards. For Danone being consequent with their working conditions is very important, especially in India where also corruption is well known particularly in doing business. Getting into touch with publicity of corruption would have a negative impact on their reliability in general and the relation to our alliance partner Yakult.

5. Legal Aspects for India

In respect to the legal aspect, for Danone it would be easier to invent Activia due to the alliance with Yakult. But also for production in Asia they need to import certain products like milk powder or butter oil. Concerning importing and producing those comestible goods, there are many facts, which need to be taken into account.

21

Registration International Agreements Preferential Treatment Customs Procedures Customs Value Requirements for Import Formalities Currency and Payments Packaging and Labelling Requirements Abbreviations Political risks

Staring business in India everything started with the official registration. All importers have to apply for a code at the Directorate General of Foreign Trade (DGFT), which is relevant for any kind of import.

Furthermore, economic operators must obtain a Permanent Account Number (PAN) from the Income Tax Department for tax purposes. This PAN is necessary to all documents which are related to financial transactions.22 But of course the different needed documents vary from the product and also to the country that wants to import. To participate in the international trade India singed several agreements and contracts like for example the Asia-Pacific Trade Agreement (APTA), the South Asian Association for Regional Cooperation (SAARC), the South Asian Free Trade Area (SAFTA), the South Asian Preferential Trade Arrangement (SAPTA), the World Customs Organization (WCO), or the World Trade Organization (WTO). Goods, which are originating products in the sense of a member state from the agreements stated above, may benefit from preferential treatment in India. Obviously France and Japan are not included in those preferential treatments. But since 2004 India became on of the strategic partners of the EU. Although India and the EU already launched negotiations for a Free Trade Agreement (FTA) in 2006, the online magazine Business Standards published an article on the 13th Dec

(2010), Overview of the import procedures, 17th Nov. 2010, from: http://madb.europa.eu/mkaccdb2/viewPageIFPubli.htm?datasetid=MAIF-IN1003v001&filename=overview.html&hscode=0402&path=/data/website/madb/egif/prod/MAIF-IN1003v001/&imagepath=/egif/prod/MAIF-IN10-03v001/&country=India&page=overview&countryid=IN#kap06

22

22

2010 that the EU and India expect the FTA by spring 201123. This Free Trade agreement between India and the EU would make doing business and trade much easier for both sides, so that the huge trade potential of India could be used more efficient. At the moment the Government of India has permitted duty-free import of up to 30,000 tonnes of milk powder and 15,000 tonnes of butter oil. The imports are, however, subject to tariff rate quota (TRQ) arrangements allowing only certain designated agencies to bring in these goods at nil duty24. But for agencies which do not refer to countries of the Free Trade Agreements there are import tariffs of 30%. Till now those tariffs apply also for the EU. But in case of the FTA with the EU in spring 2011 this import barrier will drop.

Furthermore, another import barrier is described as the customs procedures. The customs law of India allows for a number of customs treatments of imported goods. Imports into India may be entered under any of the following categories: Home consumption Transit Temporary importation Warehousing Use in a special economic zone. 25

Our product Activia would fall into the category of home consumption. So, this fact requires the presentation of a bill of entry, which may be presented in paper format or as an electronic document. But of course the bill of entry is not the only document that is needed. For the required import documents there is a difference between general requirements and specific requirements. Next to the mentioned bill of entry there are nine more general documents required:

(2010), Anand Sharma & Karel De Gucht: Partners in trade, partners for growth, 13th Dec. 2010, from: http://www.business-standard.com/india/news/anand-sharmakarel-de-guchtpartners-in-trade-partners-forgrowth/417950/ 24 http://www.thehindubusinessline.com/2010/03/17/stories/2010031750841700.htm 25 (2010), Overview of the import procedures, 17th Nov. 2010, from: http://madb.europa.eu/mkaccdb2/viewPageIFPubli.htm?datasetid=MAIF-IN1003v001&filename=overview.html&hscode=0402&path=/data/website/madb/egif/prod/MAIF-IN1003v001/&imagepath=/egif/prod/MAIF-IN10-03v001/&country=India&page=overview&countryid=IN#kap06

23

23

Commercial Invoice Pro forma Invoice Packing List Air Waybill Bill of Loading Certificate of Origin Exporter/Importer Code Import General Manifest Letter of Credit

Especially for the milk powder and the butter oil the Indian government wants two specific documents before the goods can be imported. Due to the fact that products are produced with animal products we need an Import Permit for Livestock Products and an Veterinary Health Certificate for Animal Products. Concerning the aspects of payments and abbreviations, these two parts are dependant upon the incoterms and other agreements about law and court that are written in the contract between exporter and importer. In case we are producing Activia locally with its strategic alliance with Yakult we face some restrictions on packaging which they need to keep in mind for being able to sell Activia in India. In general, the labelling of imports should be done in English using clear and legible letters.26 The following details are to be included on each of the small yoghurt packages:
26

Name and address of the manufacturer Name and kind of the product Brand name or trade mark International details and signs which should be observed in the course of transportation and handling Kind and name of ingredients and percentage of each Net content of volume in terms of weight

(2010), Overview of the import procedures, 17th Nov. 2010, from: http://madb.europa.eu/mkaccdb2/viewPageIFPubli.htm?datasetid=MAIF-IN1003v001&filename=overview.html&hscode=0402&path=/data/website/madb/egif/prod/MAIF-IN1003v001/&imagepath=/egif/prod/MAIF-IN10-03v001/&country=India&page=overview&countryid=IN#kap06

24

Country of origin Production date Expiry date Batch number

As a last legal point especially the political risk plays a huge role for the question where to import. Some countries face a certain degree of corruption so that it is may be hard or even impossible to do business. According to Geert Hofstede, who ranked certain countries on his five different cultural dimensions, India has its Power Distance Index as the highest dimension for their culture. With a ranking of 77 compared to a world average of 56.5, India shows a high level of inequality of power and wealth within the society.27 This high Power Index also leads to a conclusion that corruption is involved in day-to-day business. But looking to the giant trade countries like the USA, Russia or some European countries there are also enough corrupt people operating in the business environment. Important for the international relations is, that the Indian government sticks to its rules and legislations concerning import and export. Due to the facts that we already operate on the Indian market and the Free Trade Agreement between India and the EU will be signed in spring 2011 the legal entry into the market becomes easier so that corruption will become less attractive.

6. Conclusion
We decided to enter the Indian market with one of our probiotic dairy products Activia. We analysed our future target market and took external factors as political, social or legal aspects into consideration. Additionally we analysed the labour market in India and the financial situation of the Danone Group. India seems to be a suitable market to enter for different reasons. First of all our company Danone has already formed a Joint Venture with the Japanese company Yakult. Until now we havent sold any Danone products in the Indian market. However we decided to use the Joint Venture for entering the Indian market with Activia because of financing reasons and experiences with India India is an attractive market, as it is one of the four fastest growing nations until 2050.
27

(2010), Geert Hofstede Cultural Dimension India, 15th Nov. 2010, from: http://www.geerthofstede.com/hofstede_india.shtml

25

After analysing the Indian market we decided to sell a probiotic product, however we have to make some adjustments to the product mix. As we want to enter the market via our Joint Venture with Yakult, the investments needed to enter are not that high compared to other investments. In order to finance the entry in India we have to alternatives, we can increase our long-term debts again or increase our share capital. After informing about the labour market in India and its HRM policies in the companies, we came to the decision that we dont have to make a lot of changes to our HRM policies in our European units. For sure we have to adapt or HRM policy in some way to the Indian because of Indias HRM history, but the impact wont be that high, since India seems to get more and more similar to the European HRM. We are already active in corporate social responsibility issues, however if we enter the Indian market, we wish to take actions in India as well, since India is still an emerging country in which more than 24% of the population live under the property level. We decided to support employment of women and exploiting of water. When entering the Indian market we have to take as well some legal aspects into consideration. Since we enter the market as Danone Yakult, we can use the facilities of our Joint Venture in India, but we still have to import milk and powder for the production of Activia. For the import of these products we have to consider tariffs or quotas and the documents that are needed for the import.

In order to guarantee the success of our project in India, Danone needs to measure the actual sales compared to the targets on a regularly basis. We need to evaluate the project to see what progress has been made during a specific period of time and to identify weaknesses and strengths in order to improve our weaknesses and use our strength to build up a competitive advantage in the Indian market. Additionally the external factors influencing our operations in India need to be analysed after a specific period of time, since the environment is continuously changing and we need to identify threats and opportunities in order to take advantage of these or reduce their impact on our business. Through the regular evaluation we are able to compare our performance and to make decisions about staying in the Indian market or leaving. The Group needs to know how 26

profitable the operations in India are and if the projects results justify the projects inputs and investments.

27

7. Literature
Books
Martin, M. and Jackson, T. (2005). Personnel Practice 4h edition. Chartered Institute of Personnel and Development Kerin, Hartley, Berkowitz,Rudelius. Marketing 8th edition. New York:McGraw-Hill/Irwin. Pages 42-68.

Internet
Wikipedia website, Demographic of India, Nov. 25 2010 from: http://en.wikipedia.org/wiki/Demographics_of_India Wikipedia website, Facts about India, Dec. 1, 2010, from: http://de.wikipedia.org/wiki/Indien (2005) nutraingredients Danone, Yakult choose India to expand rapidly, Nov. 27, 2010 from: http://www.nutraingredients.com/Industry/Danone-Yakult-choose-India-to-expandjointly Danone company website, Nov. 27, 2010, from: http://www.danone.com/en/ourbrands/know-it-all-about-danone.html Dairy Markets in Asia: An Overview of Recent Findings and Implications Sept. 2005, from: http://ageconsearch.umn.edu/bitstream/18303/1/bp050047.pdf (2010) Business-standard: Danone India sees wealth in health, Nov. 27, 2010, from: http://www.business-standard.com/india/news/danone-india-sees-wealth-inhealth/392640/ Yakult company website, Nov. 27, 2010 from: http://www.yakult.co.in/index.php?option=com_frontpage&Itemid=1 (2007)Asiafoodjournal: Groupe Danone, Yakult Honsha cemet relationship, Dec. 01, 2010, from: http://www.asiafoodjournal.com/article-4301groupedanoneyakulthonshacementrelationship-Asia.html (2010) Business line: milk powder, butter oil imports liberalised, Dec. 02, 2010 from: http://www.thehindubusinessline.com/2010/03/17/stories/2010031750841700.htm Danone company website: Annual report 2009, Dec. 03, 2010, from: http://danone09.danone.com/en/fb/data/catalogue.pdf Retail Mantra: Grocery chains- Largest segment of reatil Dec. 03, 2010, from: http://india.retailmantra.com/2009/02/grocery-chains-largest-segment-of.html

28

(2010), Respect of fundamental social principles, 15th Nov. 2010, from: http://www.danone.com/en/index.php?option=com_content&task=view&id=44&Itemid=83 &lang=en (2010), Spring water: a national heritage that must be preserved, 15th Nov. 2010, from: http://www.danone.com/en/sustainable-development/water.html http://madb.europa.eu/mkaccdb2/viewPageIFPubli.htm?datasetid=MAIF-IN1003v001&filename=overview.html&hscode=0402&path=/data/website/madb/egif/prod/MAIF -IN10-03v001/&imagepath=/egif/prod/MAIF-IN1003v001/&country=India&page=overview&countryid=IN#kap06 (2010), Anand Sharma & Karel De Gucht: Partners in trade, partners for growth, 13th Dec. 2010, from: http://www.business-standard.com/india/news/anand-sharmakarel-deguchtpartners-in-trade-partners-for-growth/417950/ http://www.thehindubusinessline.com/2010/03/17/stories/2010031750841700.htm (2010), Overview of the import procedures, 17th Nov. 2010, from: http://madb.europa.eu/mkaccdb2/viewPageIFPubli.htm?datasetid=MAIF-IN1003v001&filename=overview.html&hscode=0402&path=/data/website/madb/egif/prod/MAIF -IN10-03v001/&imagepath=/egif/prod/MAIF-IN1003v001/&country=India&page=overview&countryid=IN#kap061 (2010), Overview of the import procedures, 17th Nov. 2010, from: http://madb.europa.eu/mkaccdb2/viewPageIFPubli.htm?datasetid=MAIF-IN1003v001&filename=overview.html&hscode=0402&path=/data/website/madb/egif/prod/MAIF -IN10-03v001/&imagepath=/egif/prod/MAIF-IN1003v001/&country=India&page=overview&countryid=IN#kap06 (2010), Geert Hofstede Cultural Dimension India, 15th Nov. 2010, from: http://www.geerthofstede.com/hofstede_india.shtml

(2010), How new HRM policies are impacting Indias economy, from: http://humanresource.org.gh/site/index.php?option=com_content&view=article&id=205:ho w-new-hrm-policies-are-impacting-indias-economy-&catid=37:articles&Itemid=97

(2010), Human Resource Management in India: Where From and Where To?, from: http://rphrm.curtin.edu.au/2007/issue2/india.html

(2010), How new HRM policies are impacting Indias http://www.essec.edu/sites/essecinsight/2009/fall/expert-ideas/expert-ideas-02.html

(2010)Current trends in HRM, from: http://www.chillibreeze.com/articles_various/humanresources.asp ( 2010) Danone Annual Report_09, 18rd November 2010, from http://www.danone.de/danone.html#daten-fakten

29

(2010) Danone_ Document_ de_ Reference, 28th November 2010, from http://finance.danone.com/phoenix.zhtml?c=95168&p=irol-reportsannual (2010) Danone company webside, 3rd December 2010, from http://www.danone.com/en/company/introduction.html

30