Chapter 1 1.

1 About XYZ Company

XYZ Company is a household name for skin care products in Sri Lanka & in the Asian Region. The company which is listed in the Sri Lankan stock exchange started operations in 1978. In addition to serving the local market the company also serves the international market. It currently has a global presence in the following countries Pakistan, Bangladesh, Nepal, Malaysia, Singapore etc. The company offers a wide variety of skincare products to cater to both the male & female market segments. To the female segment of the market it offers face wash, cleansers, toners, moisturizers, sun care creams & body wash. To the male segment it provides shaving creams/gels, aftershave creams & mens face wash.

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1.2 Choosing a New Market

The market entry process requires a firm to select attractive & profitable national markets and to identify the suitable entry mode (Johnson et al, 2008). The national markets should be analyzed at the macro level & in terms of competitive & market conditions. There are several frameworks that can be used to analyze the countries/markets. The following are the most commonly used frameworks i. ii. iii. Nine Cell/GE Matrix Porters Five Force Theory BCG matrix.

Out of the three frameworks the Nine Cell matrix is the most popular framework which is used by many organizations to ascertain the level of attractiveness in a market/region against the business unit strengths.

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1.3 Definitions
Concentric Diversification David (2003) defines concentric diversification as adding new but related products or services to the existing product range. Horizontal Diversification David (2003) defines horizontal diversification as adding new but unrelated products or services for present customers. Conglomerate Diversification David (2003) defines conglomerate diversification as adding new & unrelated products or services. Vertical Integration Johnson et al (2008) defines vertical integration as forward or backward integration into adjacent activities in the value chain. Horizontal Integration Johnson et al (2008) defines horizontal integration as development into activities which are complimentary to present activities. Combination Strategy According to David (2003) combination strategy is where an organization pursues a combination of two or more strategies simultaneously.

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1.4 Nine-Cell Matrix

The Nine Cell/GE matrix is a strategic & marketing management tool developed by GE & McKinsey used for portfolio analysis (Thompson Jr et al). It is an extension of the BCG matrix, the GE matrix compares different businesses on business strength & market attractiveness variables & the size of the bubble represents the size of the market. The bubble is then depicted as a pie chart showing the share of the market or business sales vs. market size. This framework allows decision makers to compare the business strength, market attractiveness, market size & market share for different strategic business units or different product offerings

(www.mrdashboard.com).
Figure 1 Nine-Cell Matrix

Source- http://www.12manage.com

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There are two key elements that have to be analyzed according to the GE/McKinsey Matrix before choosing to enter new markets. They are 1. The Attractiveness of the Market Market attractiveness measures measure how attractive the market is to make a profitable return on the investment. The following are typically considered indicators of market attractiveness. However they are not pre ordained the factors should be those most relevant to the organization & its market (Johnson et al). y Market size & projected growth rate Big industries are more attractive than small industries & companies find fast growing industries more attractive compared to slow growing industries. y Intensity of the competition In comparison with industries which have a high degree of competition firms prefer industries where the competition is low. y Emerging opportunities & threats Industries which present more opportunities & fewer threats in the future are favored in comparison with industries which pose a higher degree of threats & lesser extent of opportunities. y Resource requirements Industries which have similar resource requirements are more attractive than industries which strain the financial resources of a firm. y Seasonal & cyclical influences Firms find industries where the demand is steady throughout the year than industries which have cyclical & seasonal effect on demand. y Social, political, regulatory & environmental factors Industries which do not have stringent rules & regulations on consumer health, safety or environment pollution is more attractive to firms compared with industries where there are problems in this regard. y Industry profitability

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Industries with high & stable profit margins are more attractiveness to firms rather than industries with low & unstable profit margins. y Industry uncertainty & business risk Industries with less uncertainty on the horizon & lower overall business risk are more attractive than industries whose prospects for one reason or another are quite uncertain, especially when the industry has formidable resource requirements. 2. The Business Unit Strength The next step in evaluation is to appraise how strongly the firm is positioned in each business unit in their respective industries (Johnson et al). Appraising the strength & the competitive position of each business units provides the firm a basis for ranking units from competitively strongest to competitively weakest & also it reveals the chance of industry success. According to (Thompson Jr et al) the following factors are used to calculate the competitive strength scores for each business unit. y Relative market share A business units relative market share is defined as the ratio of its market share to the market share held by the largest rival firm in the industry, with market share measured in unit volume not dollars (Thompson Jr et al). y Cost relative to competitors costs Business units which have low production costs compared to competitors will be strongly positioned in their industries while business units which have high production costs compared to competitors will be competitively vulnerable. In case a business has high costs the products offered should be differentiated form the offerings from its competitors & customers should be prepared to pay a premium price for the differentiated features. y Ability to match or beat rivals on key product attributes The competitiveness of a firm depends on the capability of the firm to satisfy customer requirements in terms of features, product performance, reliability, service & other important attributes. y Ability to benefit from strategic fits with sister businesses

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If firm can obtain benefits from a sister company the competitiveness of the firm would be high. y Ability to exercise bargaining leverage with key suppliers or customers A firm which has a high bargaining power will be more competitive compared with other competitors. y Brand Image A strong brand image is considered valuable asset in most industries. y Competitive capabilities Firms which have strengths in technology, innovation, marketing, managerial skills etc will always be strong competitors in a market. y Profitability compared to competitors High profit margins than competitors will aid businesses to be in a stronger competitive position.

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1.5 Nine-Cell Matrix Position & Strategy

The GE matrix is divided into nine cells with each cell providing a different alternative for positioning the SBU or the product offering. Each SBU will have a different position in the matrix depending on the strength of the business & the attractiveness of the market. The current sale & the market size will differentiate the each SBU. Decision makers use the above mentioned factors to come up with effective strategies for the firm. Three Major Segments of the Nine Cell Matrix Segment 1
Figure 2 Nine-Cell Matrix Segment 1

This is the best segment of all the available segments. According to this the business is strong & the market is attractive. At this point the company should concentrate growing the business & increase market share by allocating resources to the business.

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Segment 2
Figure 3 Nine-Cell Matrix Segment 2

This segment presents two scenarios to the company one is that the business is strong but the market is not attractive & the other being the market is attractive but the business is not strong enough to follow potential opportunities. The decision makers should be careful when making decisions if the SBU lies in this segment as some may consume too much resource & not much in returns while others may need additional resources & better strategy for growth.

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Segment 3
Figure 4 Nine-Cell Matrix Segment 3

This is the worst case scenario for a company. SBUs in this segment are weak & the market is not attractive. The management should look into either repositioning these SBUs or invest the resources into other more promising SBUs. (www.mrdashboard.com)

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1.6 Overview of the FMCG Sector in India

The FMCG sector is the 4th largest sector in the Indian economy & it generates 5% of the total factory employment in the country (www.naukrihub.com). The following is a summarized SWOT analysis of the FMCG sector in India Strengths y y y Low operational costs Presence established distribution networks Presence of established brands

Weaknesses y y Scope for investment in technology is low Export levels are low

Opportunities y y y y Threats y y Removals of import restrictions Tax & regulatory structure Untapped rural market Increase in income levels & disposable income Size of the domestic market High spending on consumer goods

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Chapter 2 2.1 Analysis of Market Attractiveness & Assigning Weights

1. Market Size & Projected Growth Rate FMCG products are goods which do not have a large profit margin therefore to achieve substantial amount of profits it is important that large quantities of products are sold. To be able to do that the market should be large in size. India is the 2nd most populous country after China having a population of 1.21 billion people according to a survey done in 2011(www.bbc.co.uk). The skin care product market in India is still at its primary stage (www.naukrihub.com). Even though the penetration levels are still at low levels, over the past five years the use of skin care products have increased significantly in India. The industry is predicted to have a CAGR growth of 17% between 2010 and 2013 according to a research done by RNCOS

(www.cosmeticsdesign-europe.com), where as the growth rate was about 8% in 2006 (www.articles.economictimes.indiatimes.com).

The growth can be attributed to the following factors i. ii. iii. iv. Changing life styles Increase in disposable income Greater product choice & availability More people taking care in personal grooming

The entire FMCG industry in India is expected grow by about 15% in 2010 in comparison with a growth rate of 12% which was recorded in 2009 (www.expressindia.com). Comparing the FMCG industry growth rate as a whole with the growth rate of the skin care market which is expected to be around 17% it can be concluded that the skin care sector will outgrow the industry. According to the 2010 annual report of Emami Ltd the penetration level of the skin care industry in India is 22% with the penetration level in the urban market being 31.5% & rural market being 17.8% (www.bseindia.com).

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As mentioned above the size of the market is important in the FMCG industry for firms to achieve substantial profits, also for a new entrant to the market the growth rate is important as it allows new firms to grow. Therefore an importance weight of 0.2 is assigned to the market size & projected growth rate factors. Also the rating given to the factor is 9 as the market size is very attractive to the company but the projected growth rate is somewhat lower compared to other FMCG industries in India.

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2. Intensity of Competition The skin care market in India has five big name players in the market & several small players who consist of mainly producers of herbal skin care items. The market leader in skin care industry is The Hindustan Lever group (Fair & Lovely, Lakme, Ponds) with a market share of 53%, followed by CavinKare- Fairever with a market share of over 12 % and Godrej-Fair Glow with a market share of 3.4 %. The other players that have a presence in the market are Emami (Gold Turmeric and Naturally Fair), Revlon (Fair & Glow) (www.naukrihub.com). The rest of the market is made up of international brands such as Oriflame, Avon & Aviance which have a small market share (www.slideshare.net). The competition between existing firms in the industry is very intense and price wars very common. The market leader in the industry HUL has seen its market share gradually decline from 60% in 2007 to 53% in 2010 (www.watblog.com) owing to the intense competition in the industry. The MNCs & branded skin care products have to overcome cheap imitates in the market especially in the urban markets. Highly scattered market and poor transport infrastructure limits the ability of MNCs and national players to reach out to remote rural areas and small towns & low brand awareness enables local players to market their fake look-alike brands (www.slideshare.net). Owing to the above mentioned factors an importance weight of 0.3 is assigned to the intensity of the competition. Since the industry already has 6 established players in the market it can be argued that the market is relatively less attractive but since XYZ Company is targeting the consumers who want organic products the importance rating assigned is 7.

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3. Emerging Opportunities & Threats The Indian FMCG market is the 4th largest in the economy and has a market size of US $ 13.1 billion (www.chillibreeze.com) thus being a very attractive option. Another critical factor in choosing India is the rural population of India which accounts for nearly 70% of the population (www.unionbankofindia.co.in) and is estimated to touch US $ 100 billion driven by the rising income levels in rural India by 2025 (www.economictimes.indiatimes.com) according to a study done by Nielsen Company. According to the Nielsen Company India Vice President Prashanth Singh premium skin care brands typically associated with urban population are growing nearly twice as fast as in rural areas (www.articles.economictimes.indiatimes.com). Mr. Singh also adds that "These findings have wide-ranging, practical implications for creating successful portfolio strategies and packaging formats that recognize these traits and appeal to the rural consumers' senses". Rising levels of disposable income which in turn increases the purchasing power is another factor which provides an opportunity for firms to capitalize upon.

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Accelerating Household Income in India Average household disposable Income (thousands, Indian rupees, 2000)
Figure 5 Growth Rate of Disposable Income in India

*Circled figures represent compound annual growth rates. Source: McKinsey Global Institute Another key opportunity for firms is that owing to the size of the market benefits of economies of scale can be attained, thus lower cost of production & higher profit margins can be achieved. The one of the threat faced by a new entrant into the industry is the power of the established players in the market who can resort to price wars to undermine the new entrants & eventually wipe them out of the market. Also entry into the market is relatively easy due less stringent policies of the Indian Government in recent years in terms of policies aimed at attaining international competitiveness through lifting of the quantitative restrictions, reducing excise duties, automatic foreign in-vestment, food laws resulting in an environment that fosters growth & 100 per cent ex-port oriented units can be set up by government approval and use of foreign brand names is now freely permitted (www.ghallabhansali.com). Even though this can be viewed as an opportunity it is important that new firms entering the market try to safeguard their market share by offering differentiated products & satisfying customer demands so that any other new firms cannot take away their market share.

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Analyzing the threats & opportunities within the industry it can be concluded that there are more opportunities for a new entrant but the entrant should be careful to make optimal use of the opportunities & create a few entry barriers to protect themselves or else the few threats posed can bring the business down. As a result the opportunity & threat factor is given an importance weight of 0.2 & industry rating is given 7 points.

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4. Resource Requirements The skin care industry mostly needs basic level of resource requirements in terms of capital intensity & technology. The production process requires relatively minor investment in plan, machinery & other fixed assets. Also the business is mostly done on cash basis therefore the working capital requirement is minimized. Also the technology used in this industry is fairly stable & very little modifications & improvements are done (Singh, 2009). On the down side bureaucracy levels in the state institutes are high so is widespread corruption therefore there might be the need of having to bribe employees from the state sector get work done or to expedite the progress of paperwork to get permits. The FMCG industry in India has seen aggressive marketing in recent years. FMCG giants Hindustan Lever Group Ltd has spent more than its net profit on advertising & promotional activities in the last fiscal year (www.expressindia.com). In this sort of cut throat competitive industry it is important that XYZ Company has the financial might to carve a niche for itself in the market. Since resource requirements for the industry are very much basic and YYZ Company being already being in the same industry albeit in a different geographical industry the company will not face many problems in terms of resource requirements. Hence an importance weight of 0.1 is assigned & an attractiveness rating of 7 is given.

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5. Societal, Political, Regulatory & Environmental Factors Societal Factors To understand the importance of societal factors the factors that influence societal factors should be understood. Consumer behavior theories can be used to understand societal factors & its influence on consumers. Consumer behavior is defined as the behavior that consumers display in searching for, purchasing, using, evaluating and disposing of products and services that they expect will satisfy their needs (Schiffman & Kanuk, 2004). According to this theory reference groups & trends plays a vital part in persuading consumers to purchase products & services. For instance mens grooming is a modern trend which is catching up with lots of youngsters mainly, over the years mens grooming was more popular in the western countries but that trend seems to be catching up in Asia also & is very popular in India. The availability of more & more mens beauty products in the Indian market bears evidence to the changing environment. Along with that usually it was only the urban young female population which was more beauty conscious but now it is not the case as even the rural population & women in the late 30s & 40s are also becoming more beauty conscious. The growth rate of the industry in the rural sector is evidence to this fact. Political Factors Political factors play an important role in the attractiveness of a market. A country with a stable political climate with less stringent policies will be more attractive to investors while a country with an unstable political environment will be viewed upon as unattractive. From an investors point of view the Indian in from a political perspective is quite attractive. The governments have been stable which in turn has allowed economic growth to be stable. According to recent publications the GDP has had an average annual growth of 8.1% in the last three years (www.economist.com). Also India has become more receptive towards foreign investors as it can be seen in the amount of MNCs there are in India.

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Regulatory Factors India has slackened quite a lot of regulations it had on foreign investors thus making India an attractive option for foreign investors. To foster growth India has endorsed policies such as reduced excise duties, automatic foreign investments & food laws. Further the Indian Government removed quantitative restrictions in 2001 & in the Union budget of 2004-05 it further reduced 85 items from the reserved list (www.slideshare.net). Different state governments have encouraged manufacturing facilities to set up business through package of fiscal policies. Jammu and Kashmir offers incentives such as allotment of land at concessional rates, 100 per cent subsidy on project reports and 30 per cent capital investment subsidy on fixed capital investment up to US$ 63,000. The Himachal Pradesh government offers sales tax and power concessions, capital subsidies and other incentives for setting up a plant in its tax free zones (www.slideshare.net). Environmental Factors According to Dr. Nanda a company licensed to manufacture cosmetic products in India should comply with the following conditions as specified in schedule M-II of the Drugs & Cosmetics act 1940 & Rules 1945 (www.consumereducation.in). Most of the environmental regulations imposed are on firms which manufacture cosmetic products within India environmental regulations on firms which import the products are virtually non-existent. Therefore environmental factors can be disregarded when assigning weight & scores. Considering the societal, political, regulatory & environmental factors discussed above and XYZ Company is currently looking selling products manufactured in Sri Lanka in the India market rather than producing the products in India an importance weight of 0.05 is assigned & an industry rating of 7 points is given mainly considering the societal & political factors.

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6. Industry Profitability According to indiainfoline.com website which analysis the Indian stock market performance has predicted that the Indian FMCG sector is set to benefit from the upbeat rural economy, normal monsoons & receding inflation by having significant volume growths in the 2nd half of 2011 (www.indiainfoline.com). Further skin care industry leaders Hindustan Lever Groups are

expected to post revenue worth 46.75 billion Indian rupees. The following graphs give a yearly breakdown of net profits of some of the players in the skin care market. The figures are based on the Indian stock exchange data & the annual reports of the respective companies.
Figure 6 Hindustan Unilever Ltd Profit Graph

Hindustan Unilever Ltd

30000 25000 20000 15000 Net Profit in (Millions) 10000 5000 0 2005/06 2006/07 2007/08 2009/10 2010/11

Source- www.bseindia.com

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Figure 7 Godrej Consumer Product Ltd Profit Graph

Godrej Consumer Product Ltd

5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 2006/07 2007/08 2008/09 2009/10 2010/2011 Net Profit (in Million)

Source- www.bseindia.com

Although the graphs shows an increase in net profit levels of two of the biggest players in the skin care industry it cannot be concluded that the skin care industry itself is profitable because these two FMCG giants not only produce skin care products but also other FMCG goods. Still owing to the unavailability of accurate data on the profitability of the skin care industry these figures can be taken as a relative measure of the industry. Therefore the profitability of the industry is given a weight of 0.1 & an importance rating of 7 points.

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7. Industry Uncertainty & Business Risk The industry uncertainty levels in the skin care industry of India can be considered as low. This is because the industry is set to grow at a slow but steady rate as more & more people being health & beauty conscious & the level disposable income is set to soar. Also the growth predicted for the Indian economy as whole reduces the uncertainty & business risks posed to firms unless something drastic happens to the economy. The weight assigned to this factor is 0.05 as the influence this factor has on the success on the venture is very minimal & since uncertainty levels & business risks are at lower levels the industry rating assigned is 9 as the market is attractive to investors.

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Calculations for Weighted Industry Attractiveness Scores

Industry Attractiveness Measure Market Size & Projected Growth Rate Intensity of Competition Emerging Opportunities & Threats Resource Requirements Societal, Political, Regulatory & Environmental Factors Industry Profitability Industry Uncertainty & Business Risk
Sum of assigned weights Overall industry attractiveness score

Importance Weight

Rating

Score

0.2

1.8

0.3

7 7

2.1 1.4

0.2

0.1

7 7

0.7 0.35

0.05

0.1 0.05

7 9

0.7 0.45

1 7.5

Table 1 Calculations for Weighted Industry Attractiveness Scores

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2.2 Analysis of SBU Strengths & Assigning Weight

1. Relative Market Share The relative market share of XYZ Company is calculated in comparison with the market leader Hindustan Lever Group Ltd. As figures indicate the market share of the HUL is 53%. According to a report by brokerage firm Morgan Stanley the HUL Group has had a market share fall from 2009 to 2010 (www.business-standard.com) in the overall FMCG sector. The report further states that the loss of market share in the skin care industry is 78 basis points to competitors. Therefore it can be assumed that there is brand switching in the industry so the market share that could be attained by XYZ in the 1st year is 5%. As a result the relative market share of the Company would be 0.1; such a low figure means the company is weak on this rating. The importance weight assigned to this factor is 0.2 & the rating score given is 3 points. 2. Costs Relative to Competitors Costs The competitors faced by XYZ Company in India are mostly MNCs who have International presence. Due to this the market size they serve is very large & India serves as the manufacturing center to produce their products which are consumed in other countries therefore the firms are in a good position to attain economies of scale thus lower their unit production cost. The XYZ Company plans to produce all its production in Sri Lanka to achieve economies of scale & export the production to India. By doing this the company plans on reducing the production cost as much as possible but on the other hand it will have to bear extra costs in tariffs & taxes imposed by the Indian government. Another factor that has to be taken into consideration is the price sensitivity of the consumers in the skin care industry. According to reports the skin care industry is moderately price sensitive (www.cosmeticsbusiness.com). Taking into consideration the above mentioned factors it is difficult for XYZ Company to produce at a lower cost than its competitors therefore it should look at differentiating its product offering from that of the competitors & charging a higher price so that the profitability will not be affected.
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Since being able to produce at a lower cost is an important factor in a business the importance weight given is 0.3 & the rating score assigned is 6 as XYZ Company is not very strong in this aspect. 3. Ability to Match or Beat Competitors on Key Product Attributes Irrelevant of the type of business a firm is in it should focus on satisfying customer requirements better than competitors to sustain the existing customers & to entice new customers to purchase the firms products. XYZ Company should identify the niche it wants to hold in the market & align its product attribute according to it. Since XYZ Company is competing with large MNCs matching their products on price can be a risky strategy as the MNCs can create price wars & eliminate XYZ from the industry. To overcome this XYZ Company should concentrate on matching/beating the competitors in terms of product quality, service quality, distribution channels etc. Quality is not an issue for XYZ Company as its products are products at high quality. According to Pitt & Lee (2003) smaller firms & new entrants are at an advantage in comparison with established firms as established firms are often slower in responding to environmental change as it can elaborated using Pizza Huts lateness in responding to demand for home deliver y which allowed Dominos to create a market for itself. Since XYZ is a new entrant into the market & is relatively small in size compared to the competitors any changes that need to be done owing to changes in the external environment can be implemented quickly. Since XYZ Company has a relatively good ability to match key product attributes of the competitors if not beat them the rating score given is 7 & the weight assigned to this factor is 0.1.

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4. Bargaining Leverage with Suppliers/Buyers; Caliber of Alliances XYZ Company imports most of its raw materials from China & it has been importing the raw materials from the same supplier for the last 15 years. Even though XYZ Company is reliant on the suppliers the long term relationship it has with the suppliers will reduce the risk levels. The importance weight assigned to this factor is 0.1 & the rating score given is 8 points.

5. Brand Image & Reputation The image & the reputation of a company important in the skin care industry since the consumers should be able to trust that the products will not have any harmful effects. Therefore the consumers should be able to trust the products they choose & the company that manufactures the products. If anyone develops harmful side effects using a companys product reputation & the image of the company will take a hit as well as its sales. XYZ Company need not worry about this factor because the products of XYZ have a very high quality & its products are produced at international standards. Also XYZ Company itself has a very good name in the South Asian region as its products are sold in this region. The importance rating assigned to brand image & reputation is 0.1 & the rating given is 9.

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6. Profitability Relative to Competitors Business units that consistently earn above average returns on investment & have bigger profit margins than their rivals usually have stronger competitive positions (Thompson Jr et al). XYZ Company has been earning high returns in comparison with other competitors in most of the market it operates in therefore it can be confidently assumed that the same trend be set in India. The weight assigned to this factor is 0.2 & the rating given is 8.

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Calculations for Weighted Competitive Strength Scores for Companys Business Units

Competitive Strength Measure

Importance Weight

Rating

Score

0.2

0.6

Relative Market Share

0.3

1.8

Costs

Relative

to

Competitors Costs Ability to Match or Beat Competitors on Key

0.1

0.7

Product Attributes Bargaining with Leverage

0.1

0.8

Suppliers/Buyers;

Caliber of Alliances Brand Reputation Profitability Relative to Competitors

Sum of assigned weights Overall industry attractiveness score
Table 2 Calculations for Weighted Competitive Strength Scores for Companys Business Units

Image

&

0.1

0.9

0.2

1.6

1 6.4

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2.3 XYZ Companys Nine-Cell Industry Attractiveness- Competitive Strength Matrix for India
Figure 8 Nine-Cell Matrix for XYZ Company

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Chapter 3 3.1 Recommendations Based on the Nine-Cell Matrix

According to the above diagram XYZ Company should allocate resources to enter the Indian market as the Companys bubble falls into an area where the market is highly attractive & the competitive strength of the business is average. The entry mode chosen by XYZ Company is to export its production to India. According to Hill & Jain (2009) exporting has the following advantages & disadvantages Advantages i. Exporting avoids substantial costs of establishing manufacturing processes in the host country. ii. Exporting may help firms to achieve experience curves & location economies.

Disadvantages i. The firm will face cost disadvantages if products can be produced in another location at a low cost. ii. iii. High transport costs can make exporting uneconomical. Tariff barriers can make exporting uneconomical.

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3.2 Recommendations to Further Strengthen the Company in the Future

Even though the positioning of the bubble of the company is currently fine by taking a few extra measures & addressing areas of concern XYZ can further strengthen its position. The following are the recommendations 1. Centralize Manufacturing The production should be centralized in order to achieve advantages of scale. According to Pitts & Lee (2003) activities operated on a decentralized, fragmented basis cannot achieve significant critical mass; hence, they will rarely enjoy significant economies of scale. Rather than exporting products to the Indian market & having several manufacturing centers due to which XYZ Company is at a disadvantage compared with its competitors it should explore the possibilities of opening a manufacturing centre in India through which it can serve all its markets. This can further strengthen the position of XYZ Company not only in the Indian market but also in other markets where XYZ has its presence. By doing this XYZ can take advantage of liberal FDI policies of the Indian Government & subsequently lower production costs by achieving economies of scale in the long run. On the other hand it can be argued that by shifting manufacturing processes to India the company will have to incur substantial costs in establishing manufacturing operations, thus increasing the resource requirements of the company. 2. Invest in Horizontal or/and Vertical Integration To further strengthen its position XYZ Company can look at implementing horizontal & vertical integration strategies. XYZ Company can use backward integration strategies like creating alliances with suppliers or have control over suppliers by purchasing shares in the suppliers businesses. It can also use forward integration strategies to have more control over distributors & retailers. XYZ Company can have websites to sell its products directly to the customers or open exclusive retail outlets/salons in major cities as Lakme has done (www.lakmeindia.com). Also XYZ Company should look into the possibilities of merging or acquiring the small competitors within the industry to allow increased economies of scale & enhanced transfer of
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resources & competencies. Or a combination strategy can be used to acquire advantages of both vertical & horizontal integration strategies. However XYZ Company should be careful when using combination strategy as it is risky if carried too far (David, 2003). 3. Use Diversification Strategies XYZ Company can diversify its business operations currently it is into only the skin care industry. It could enter into other related industries like hair care, oral care & household care industries using concentric diversification strategies. Also some of the other diversification strategies that could use are horizontal diversification & conglomerate diversification. Although Michael Porter says diversification is a beast that is difficult to manage (David, 2003) properly implemented strategies can have long term benefits to the Company.

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Conclusion
The analysis of the Indian skin care industry using the Nine-Cell Matrix shows that the market is attractive to enter into for XYZ Company. The large market in India & the potential growth of the Indian economy provides ample opportunities for XYZ Companies. Although in the short term the strategy to export products to India looks the more appropriate choice for the long term it is advisable that XYZ Company looks at other options like FDIs or mergers to be able be competitive in the price sensitive Indian market. The most viable option might be is to shift production to India owing to lower production cost due to low labor cost, ability achieve economies scale by producing to large customer base & reduced raw material costs. Although the initial investment will be high when shifting there are long term benefits which can be enjoyed in the future.

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