The Parent decided to set up one such green field venture in a neighbourhood country which shares the border in India. The Parent by then had done all the work required to set up the Subsidiary. Number crunching, feasibility, financial projections, 3-year plan, product benchmarking etc. Everyone felt that the huge experience of the Parent would sure shoot steer the Subsidiary to deliver as per the feasibility report
This is where the hypothesis & planning went totally wrong
- The Local (Company (A)), in that country was by far controlling more that 50% market share and was extremely dominant almost tending towards monopoly
- The factory was commissioned. Delayed due to some external circumstances beyond one’s control
- A mega launch was conducted inviting all prospective customers, team and dignitaries from the Parent company as well as local dignitaries. Everything looked and sounded very positive
- This is where the problems started
- The Parent decided that it would do business only on advance cash basis. Obviously the country one is referring to has always been prone to credit risk. Entire local team unanimously felt that without credit, there would be no takers. Still one tried out to do business on advance cash basis. It became a futile exercise which resulted in not a single taker and the results of the gala launch faded.
- The Parent felt that the products made by competition was very similar to the product made in India. Despite having conducted product benchmarking exercise during the testing stages, one particular product which was a lead product was way off in comparison to the product attribute of Company (A). The Parent was proved wrong. One had to go back to the drawing board and reformulate the particular product to be in line with Company (A) if not better. This led to postponing of this particular product introduction in the market.
- The competition company entered into legal agreements with most of their dealers to ensure that they do not buy Subsidiary company product. Those who signed the agreement were blessed with additional discounts. It was an unwritten understanding that those who did not sign the agreement would not get supplies of Company (A) products
- Consequently, the green field project got into a severe crisis wherein nothing was in line with the feasibility report
- There was tremendous pressure on performance of the Subsidiary-plant ready, team ready, products ready but main product getting delayed due to improper product benchmarking
- There was a big challenge with regard to motivation of the team