MARKET STRATEGY – Th e Great Ink-Scape

                                                                       Great Ink-Scape

Let’s begin with your case. Our client is a well-established and known electronic company which is coming up with a new modern and innovative ink cartridge used for printing. They would like to know if it would be profitable for them to launch this in the Indian market or not.

Alright, what are the new innovations in the ink cartridge?

The ink cartridge is 10 times better at printing on paper than a regular ink cartridge which is present in the market right now. The ink is darker and does not easily fade away.

What is the motive of this market entry?

What is the time that the company is targeting to launch the product?

The company plans to launch the cartridges as soon as possible.

Is there any component of fixed costs that the client is specifically targeting to cover up in any particular number of units or any particular time frame?

No, the fixed costs are not an issue.

Can I get to know the market size of ink cartridges in India?

Yes sure, the market size of ink cartridges in India is about 10 million dollars.

Is there any data on the cost structure of the regular ink cartridges in the market and what percentage of profit is our specific company targeting?

Yes, so the cost structure of the ink cartridge can be explained using the following equation.

Manufacturing Cost (70%) + Distribution Cost (15%) +Marketing Cost (15%) + Retail Markup (5%) = Market Price of the ink cartridge (105%).

A regular ink cartridge used for printing is available in the market for around ₹1500-2000. However, because our ink cartridge is much superior to the regular ink, it costs 3 times higher than the regular ones.

I think it would be safe to assume our cost to be around 4500 without the retail markup. Therefore, the potential profit on each unit sold is around 225 rupees. Do we have data on the estimated market share that the company will achieve?

Yes, our company is aiming for one-third of the share of the current market. So, around 3.34 million dollars right?

Yes that is correct.

That seems appropriate, are there any suggestions for the company to improve profitability in the long run.

Now, we can calculate the expected profits that can be achieved by using the following formula. Expected profits = (Market Size/Cost of each Unit) x Market Share (in % age) x (Profit/Unit)

Now, the cost of the product is ₹4500 which equals around $55. And the profit on each unit is 5% of $55 = $2.75 a unit. Now, Expected profits = (10,000,000/55) X (1/3) X 2.75

= $166,500

This profit would be recurring because there would be a continued demand for ink cartridges.

That seems appropriate, are there any suggestions for the company to improve profitability in the long run. Some suggestions for the company could be:

1) The company should look towards optimising the cost structure, it should be aiming to source the chemicals required to produce these ink cartridges indigenously and also look towards better distributors.

2) The company should also look towards diversifying its ink business. That would include getting into the market of ink printers and developing ink printers which could enhance the effect of these ink cartridges to a further extent.

3) The company should also look towards building a stronger brand image because ink printing in India is majorly occupied by top brands like Epson, HP, Canon and Brother. Therefore, it should focus on stronger marketing campaigns and alliances

Excellent, those are some great suggestions. Thank you for your analysis. That concludes our case interview.