Q1) What should Should it diversify

Market Penetration Product Development

Kamdhenu Diary do regarding its business? or not? Why?

Market Development

Diversification

Product diversification is the riskiest strategy in the Ansoff matrix and it requires a wary investigation. . So far as Kamdhenu venturing into tea business is concerned, they used the concept of reverse supply chain utilizing their existing procurement chain of milk and their cold storages as distribution points. The entry in this market was a right decision as it has the following advantages:

High Margin Product

Negligible cost for Promotion

Established Distribution Network

Ever Increasing Demand

The strength of the dairy is its decision of converting its strong procurement network into a distribution channel without incurring any additional costs. Also to mitigate the risks involved in product diversification, the operations need to be scaled up. The key changes required to pull Kamdhenu out of stagnation in the tea market are: Procurement of tea from other parts of the country where prices are lower Blending and tasting to be carried out locally by the professional tea tasters Focus on the color, taste and aroma of tea

Realization that ease of availability and lower price are more important factors than traditional loyalty Stock smaller sized packets Q2) Do a Competitor analysis and the present strategy adopted by Kamdhenu Diary? Analysis of market composition The Tea market in India is highly consolidated. Though there are many national and local players Tea players in the market, the top 3 players have a market share of close to 63 % and rest of the players including national players occupy 37 % of the market. Considering the rural market, each of the different smaller regions have different market leader. The following table gives an idea of market leaders in different regions: Taluka Rajnagar Vadgam Radhanpur Kankerej Wav Deodar Market Leaders Chowdhry(DeerShakuntala),Chowdhry(Deer),Rajhans Chowdhry(DeerShakuntala),Chowdhry(Deer),Rajhans Modi Tea Modi Tea Babulals 7 Morning Tea Babulals 7 Morning Tea

Analysis of Competitors: Porters 5 Forces model Threat of New Entrants (Moderate) Tea business is complex Catering to localised need becomes a challenge Power of Suppliers (Low) Tea procurement through open market acutions so no dependency on individual tea suppliers Switching cost is negligible

Challenge of establishing distribution network. Competitive Rivalry (High)

Less product differentiation

Many small or equally sized competitors Power of Buyers (High) Switching to competitive product is simple Customers are price sensitive Low brand preference Availability of Substitutes

Customers are not averse to switching brands Costs of switching to substitutes is low and depends on offers provided

For the purpose of analyzing the strengths and weakness of the competitors, we have broadly categorised all the competitors into 2 categories namely Local players and national players. Strengths and Weakness of National Players Strengths Being a national player, the economies of scale results in lower cost of production Professional manpower and financial muscle Ability to expand in different markets leveraging their existing distribution networks of other products Weakness Lack of understanding of local tastes and preferences Difficulty in breaking the brand loyalty of customers towards existing local brands Inability to sell loose tea in order to preserve their brand name

Strengths and Weakness of Local Players Strengths Better understanding of local taste and preferences In-house blending facilities to cater to the local taste and demands in a satisfying way Better understanding of local mindset. Strong brand recognition in local markets Well established distribution network in form of local retail stores and distributors in villages Present Strategy adopted by Kamdhenu Diary Weakness Lacks global/national brand which makes it difficult to expand into newer markets As most of the local players are family run business, they lack in professional manpower, financial muscle as compared to national players

Leveraging the existing supply chain network of Dairy Cooperative societies as a distribution network for selling Tea Tea is procured through auction and blending is done through local agent. (Product Concept orientation ) The company came with a tea which was black in colour, not so strong and bitter in taste, without even considering the tastes and preferences of the end users. The consequence of this is clearly reflected in its poor sales as compared to other players The company hasnt done much promotional marketing and is mostly relying on the potential customers through their local DCS stores. The low brand awareness is also hurting the sales of the company

As the company isnt able to compete with big players like Chowdhry, it is following the MARKET FOLLOWER STRATEGY to follow the market leader. It is making immense efforts to match the product specification of Chowdhry 333 by making the blend similar to the blend of the most popular brand of Chowdhry 333

Q3) Which product strategy should be adopted by Kamadhenu Diary? Product strategy begins with a strategic vision that states where company wants to go, how it will get there, and why it will be successful. Kamdhenu should go for leverage expansion as their product strategy. Leverage expansion states that success of expansions to new product marketdepends highly on ability to leverage1. Existing market knowledge and, 2. Technical skills. The taste of Kamdhenu tea is different from that of the local competitors because of the location of the processing( Existing market knowledge). Thus,Kamdhenu Diary should re-evaluate its decision to blend the tea at Kolkata and consider processing of the tea at Rajnagar. Examples of Leverage expansion can be Texas Instruments : the little professor, Apple: PowerBook, Adobe:Acrobat, Microsoft: DOS- Window etc. Q4) What can be segmentation, targeting and positioning strategy adopted by Kamadhenu Diary? Segmentation and Targeting: The tea market in India can be divided into many segments based on geography, economic conditions etc. As per data in the case, the Indian market has been broken up as below:

For Kamdhenu Tea, the market can be segmented geographically and based on the tastes of the consumers. The two geographical market segments are Eastern and Western Rajnagar. In the Eastern Rajnagar market, the talukas located are Rajnagar, Vadgam, etc. and in Western Rajnagar, the talukas located are Radhanpur, Kankerej, Wav, Deodar etc. The eastern Rajnagar segment offers more variety in terms of customers. It has customers with preference in various price ranges including a higher priced segment. The western part, on the contrary, has popular brands having only one price point, though with a range of pack sizes. This strategy is due to the fact that this region is mostly backward and has a majority as rural population.

Market research indicates that localised taste plays a very important role when it comes to a customer selecting a tea. There is a marked difference in the colour, aroma and taste of the tea because of the difference in the taste of water in both the regions. If Kamdhenu Tea wants to make an impact with its product, it will have to first select the region which it wants to target and based on that, it needs to develop the right blend keeping the local taste in mind. The targeting strategy will accordingly be designed Given the fact that Kamdhenu tea is currently sold at an average fixed price of 126 rs with no range available, it is more suitable to launch it only in eastern region. But then these points need to be considered: 1) Blending should be done locally in accordance to the taste of the rural population. 2) The price should be brought down slightly in order to match competitors price of 120 rs. 3) Packs of different sizes will have to be launched. Q5) IMPROVEMENT OF MARKETING MIX A) Product: Of those who tried Kamdhenu tea, only 35 % wanted to make a repeat purchase. This is primarily due to the fact that the taste of Kamdhenu tea doesnt match the preferences of customers. The taste of Kamdhenu tea is different from that of the local competitors because of the location of the processing. Not only is it perceived as black as compared to the preferred red, but the taste too is too varied for liking. Thus, Kamdhenu Diary should re-evaluate its decision to blend the tea at Kolkata and consider processing of the tea at Rajnagar.Additionally, if processing is done at Rajnagar, it would result in product postponement, resulting in the reduction of cost to a large extent. Even so, the final price at which the tea is sold may bear a small increase, but a minimal difference in price should not be a deterrant for consumers of Kamdhenu tea.Complaints have been received about the irregular grain size of Kamdhenu tea. These complaints reflect on the quality consciousness of the consumers. The population of the eastern Rajnagar have been found to be of higher economic group than that of the western area. Thus it is suggested that a new, superior variant of Kamdhenu tea be supplied in this region. B)Pricing: The main objective of Kamdhenu is to penetrate the market. In western Rajnagar, due to backwardness, popular brands have only one price point, with a range of pack sizes. Tea sold in western Rajnagar is currently priced at 115-120 per kg. Thus, in order to penetrate the market in this region Kamdhenu should lower its price for the time being. Kamdhenu earns a profit of 22% at present, so in the short-run a dip in margin vis--vis a possible increase in sales volume is a good proposition.The DCS secretary has been found to very lax about promotion of Kamdhenu tea. To induce the secretary to support Kamdhenus product an

incremental differential slab for commission can be set up. This differential slab will act as an incentive for the secretary to look into the sales of the Kamdhenu tea. Promotion And Distribution: As discussed earlier in our report, shifting the processing of tea to Rajnagar, in itself would result in creation of increased awareness of the Kamdhenu brand of tea. Milk and tea are complementary products, thus a new limited period promotional scheme involving distribution of free 10gm samples packs of tea on purchase of certain amount of milk, would promote the tea to a great extent. Simultaneously as mentioned earlier a change in the taste of the tea to match the preferences of the general public, could potentially convert first time consumers (targets of the above-mentioned promotion) to return buyers. Kamdhenu tea distribution network is facing a major challenge due to inability to maintain supply. Currently the milk supply chain is the only means of distribution. Few possible alternatives have been supplied in the case. But we believe that this problem should not have arisen in the first place. The milk business, which is Kamdhenus primary cash-cow has an excellent supply chain network. This system reaches out to the smallest of households in the Rajnagar district. How this is done has not been clearly mentioned in case. We believe that if this network were utilised to the fullest, Kamdhenu need not look at the alternatives discussed in the case. Simply loading the macro- and micro-distribution networks of milk with tea would adequately solve Kamdhenus distribution worries. Positioning:Kamdhenu Tea needs to position itself in a much stronger way. There is no need for brand positioning as Kamdhenu is already known in the market but the product needs to be positioned well in customers minds. As research shows that packaging, manufacturers image and sales promotion played a major role in influencing the purchase of the Kamdhenu tea. Research also indicated that the customers perceive the stocks availability to be low and hence a lot of customers dont buy the tea. Majority (80.6%) are also not aware of the benefits that DCS offers. The factors that affect sales positively are convenient timings, friendly behaviour of the staff and credit offered on purchase. Kamdhenu needs to establish its tea strongly in the market. The first step in that direction should be to develop the product by getting the right blend and hence the right taste. The perception about the low stocks needs to be removed from the customers mind. That can be done through aggressive promotion insid e the stores. Combining the benefits of DCS with the product will help Kamdhenu tea to develop a position of its own in the consumers minds.