Saturday, December 31, 2016

Real life Case Study – Distributor’s Business in Tanzania

Mr. John from ABC Ltd, Tanzania is an exclusive distributor of JJ India Ltd since last 20 years in Tanzania.

JJ India Ltd. is a well-known and established brand in the field of industrial consumables. Mr. John have been doing a decent business with JJ India Ltd, Importing industrial consumables from JJ India Ltd to Tanzania and selling it to his customers. His business with JJ India Ltd have been grown in decent pace, He has introduced various new products from JJ India Ltd to Tanzania market and grown the business successfully.

Mr. John is operating with a decent gross margin of 25% in his market since last few years (Till the year 2015), which is very lucrative to stay into the business.
Tanzanian Currency (TZS) have been devalued against US Dollar (USD) from year 2015 to 2016 by 30 %. (From 1700 TZS per USD in 2015 to 2200 TZS per USD in 2016) . Therefore Mr John’s import prices have gone up.

With higher manufacturing cost JJ India Ltd. was not able to pass on the extra discount to ABC Ltd to make Mr. John stable into the business.

To counter this situation Mr. John Has increased its selling price by 15-20% as a result they have started loosing their market share, which made them to sell their products at old rate. As a result their gross margin has reduces to 12%.

A competitor of JJ India has started approaching to Tanzanian market with same product but 25 % cheaper than JJ India Ltd and quality approximately the same.

Tanzanian government also have made trading process tougher for the traders like Mr. John.
Because of all above circumstances ABC Ltd. has lost its market share by 30%.

Please suggest the way forward to ABC Ltd and JJ India Ltd to sustain and grow their business in Tanzania Market.

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Note: It is a real life example but the name of the person and firm has been purposely changed, If any reader has any concern please contact me.  


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