Past iadvisory Questions and Answers: Market Set-Up

Questions regarding market set-up have always been popular among members of the iadvisory portal. In this issue, we showcase answers provided by our iadvisors.

Qn: I own a software company and I intend to market my products to listed companies in Malaysia and Hong Kong. Please advise me on the best way to penetrate these markets.
The brief overview of the enquirer’s company was removed to maintain anonymity.

Ans: Based on an initial overview of your business model, it appears that the most feasible market entry model would be via joint ventures or distribution partnerships with suitable partners who already have established relationships with listed companies in Malaysia and Hong Kong.

Potential partners may include IT consultants or even CPA firms who are familiar with listed companies’ requirements, and have an existing relationship with them. Also, your potential partners would need to have subject matter knowledge in terms of accounting and consolidation issues.

While JVs and distributorship may be the fastest and least costly method, you may also consider establishing a direct presence in those two countries. Having your own people on the ground would present many benefits and you can directly control the marketing efforts. However, this would entail relatively higher costs.

Qn: I own a food manufacturing company and would like to venture into India, which market-entry method should I use? What are the import duties for food?

Ans: Market entry into India could be via importer-distributors, licensing/franchising, JV or M&A - depending on your globalisation strategy, as per your business size, stage of growth, etc. We have a network of Indian FMCG manufacturers/importer distributors who are looking for Singapore imports and/or joint manufacturing partners. From these sources, we find that vegetarian/tofu based products are of interest to distributors in India.

Before CECA (precursor of India-Singapore FTA), import duties of raw/bulk food ingredients was 5-15% versus finished/packaged goods at 5-35%, depending on food category.

Do take note that India's too large and complex (with national & state level structures) a market to have straightforward answers regarding tariffs, documentation or even centralised importer lists. Also, an importer will usually only buy enough foreign currency to procure from its direct customers only. So you would first need to find an importer-distributor for your direct segment. An established distributor will not usually take on a new brand unless there is a competitive advantage or a certain level of advertising and promotion investment for pre-commitment. Also, pay attention to your packaging & shelf life because India has neither regional nor national cold chain as yet.

Have market set-up questions too? Ask an iadvisor now!