Unique combinations and usages of resources results in innovation. Interactions provide platforms for exchange of ideas on available permutations and combinations of resources. In a conference attended recently, I came across an interesting discussion in terms of a specific query from the head honcho of a global IT &Telecom company. They were looking at starting their engagement with India Market but were not in a position to pledge investments right up front. They had products that they wanted to introduce in Indian market. And they were considering one of the traditional models to operate through a ‘Sole Importer cum Country Distributor’ while simultaneously opening a Liaison office. However, they knew that the model had its own -VEs and +VEs.
As emerging markets, especially BRIC nations, assumes larger importance, many such companies would be thinking to enter a market like India and most of them generally go through such a dilemma of business models. Many companies go wrong in their entry strategies into a country like India. The list of issue that add to this dilemma are:
- Through a Sole Importer cum Country Distributor Model, there is no control on the prices of the products.
- No consistency on the purchases as Sole Distributors has limited band width in terms of expansion, investments and interest.
- Country Distributor’s model is good from the perspective of risk but it lacks visibility and touch with the potential market.
- Such models also have limitations in terms of creating an after sales service network.
- A country distributor may not be an exclusive distributor and may not give required heed to the new products.
Every business model would have its own sets of advantages and challenges, so what is the model available for such companies to adopt while entering a market like India? The answer would vary from company to company and would depend upon their long term strategies; however, a quick start can be through a Free Trade Warehousing Zone (FTWZ), a concept recently introduced in India by the Govt. and where companies like Genex Logistics have acquired Special expertise from its lineage of running and managing Bonded warehouse operations for years!
A Readily Available Solution of FTWZ via Genex Logistics: Free Trade Warehousing Zone (FTWZs) are an area within a country in which goods may be landed, handled, manufactured or reconfigured, and re-exported without the intervention of the customs authorities. Only when the goods are moved to consumers within the country in which the zone is located (India, in this case) do they become subject to the prevailing customs duties. These are a special category of Special Economic Zone, with services such as speedy delivery of cargo, one-stop for Customs clearance capability; integrated solutions, such as packing management, sorting, inspection, re-invoicing, strapping and kitting, assembly of complete and semi-knocked down kits, and taxation benefits. Basically the Free Trade & Warehousing Zones (FTWZ) is a special category of Special Economic Zones with a focus on trading and warehousing. And Genex Logistics is a key player in offering FTWZ services in India.
As I was keenly listening to the list of challenges through a distributor model, as narrated by the Gentleman, I was amused to correlate that Genex Logistics has been facilitating such trades and transactions through their Bonded warehouses and FTWZ services for years!
When I shared with the head Honcho that in order to test market India, their company can start using the FTWZ without having to register as an operating entity in India. And that they can bring the material into FTWZ and store it there without paying the custom duty for period of up to 3 years. And that the Custom duty would be paid only against the clearance of a part shipment order by the client. It is like having a warehouse close to the customer and also have the advantage of custom duty deferment and other value additions.
Advantages – No need to build inventory by the distributors; reduced time to market; payment of lesser custom duty by 4%; payment in foreign current directly to the company in o’seas; hassle free third country exports from FTWZ and lastly NO capital investments.
This discussion resulted in the company started using our FTWZ at NCR of Delhi few weeks later, by shifting material from Free Trade Zone in Hong Kong, thereby reducing the time-to-market from weeks to days !
Genex Logistics offers customized solutions that fit the need of clients without increasing their costs. Come tap into our network of FTWZ footprints, Bonded warehouses and Logistics Centers spread around the country. Genex Logistics also offers International freight Management and Warehousing & Distribution services across industries to Time critical After Sales, Production Logistics, Finished Goods, Promotional material and reverse Logistics for various industry segments.
Mansingh Jaswal is Director & Chief Executive Officer with Genex LogiSolutions Pvt. Ltd., having a professional experience of over 15 years in Supply Chain, Logistics, Transportation and International Freight and a Strategy Research Scholar at Management Development Institute (MDI).