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The concept of globalization has initiated drastic changes in the current market conditions across the globe. With globalization, many companies are going global and breaking all barriers of doing business in all parts of the world. Any organization in order to increase its profits needs to expand its business internationally. The heavy competition amongst the companies has given rise to new markets and marketing strategies.
This report tries to briefly narrate the various factors that affect the business of a company that has its plans of expansion internationally. To explain these factors a company called Camelot group has been considered that does lottery business across United Kingdom with the support of the Government. The Camelot group administers the National Lottery infrastructure, proposes new games, builds the marketing strategy for lottery products, and offers services for lottery players and winners. It also manages the chain that sells tickets to players in partnership with 26,000 retailers in the United Kingdom. This report deals with the various lottery systems in different countries and the pros and cons of various national lotteries. Many countries have lotteries so as to generate revenues for different departments of the government. The lottery system is governed by the local governments and the management is vested in the hands of private companies that take a part of the profits and the rest is handed over to the government. Some countries still consider lottery to be illegal and there are some countries that doesn't have a proper lottery system and are prone to frauds and illegal activities in the name of lottery. This report focuses on the introduction of Camelot group in India and China and the various aspects that need to be considered while entering these markets. The challenges and difficulties that the company may face because of this expansion and recommendations to deal with it are discussed in detail. The various opportunities and threats offered by the new markets are discussed with the help of SWOT analysis and PEST analysis done on the market regarding the Camelot group. The political, social, environmental and technological issues are dealt in the report and recommendations are made to over come those issues.
About the Company:
Camelot group plc is the operator of the United Kingdom National Lottery. It is a £526.6 million company founded in 1995. Camelot group plc has its operations solely in United Kingdom and Isle of Man. The head office of Camelot group is located at Watford and it has its tele sales office in Aintree, a store house in Northampton and a satellite office in London. Camelot group is owned by five share holders. Camelot group is a public limited company owned by Cadbury Holdings Limited, De La Rue Holdings plc, Fujitsu Services Ltd, Royal Mail Enterprises Ltd and Thales Electronics plc. The board of directors of Camelot group consists of independent chairman, independent executive officers and non executive officers and non executive directors from all of its share holder companies.
The main aim of the company is to increase the sales of the National lottery so as to improve the revenue of the United Kingdom government to aid the Good Causes program that is committed to fund heritage, arts, health, education, charities, environment, sports and other non profit sectors. Camelot is empowered by its partners for its successful functioning. The government appoints and directs the employees of Camelot group plc. The national lottery commission awards the license to operate the National Lottery and regulates the operations. Camelot group plc manages and operates the infrastructure, designs the marketing strategy to promote the lottery products, design new lottery games, gives services to the lottery winners and the players, operates the chain of retailers and suppliers who sell tickets to the players. Camelot group plc has its main aim of generating revenue for Good Causes through the sale of lottery tickets. It funds the Good Causes and the sectors which get benefited through this program include arts, sports, health and education, environment, charities and voluntary sectors. The beneficiaries also include London 2012 Olympic Games and Paralympic Games. 28% of the total revenue generated by Camelot group plc goes to the Good Causes. 50% is paid to the winners, 12% of the revenues is paid to the government as lottery duty. 5% of the revenue is given as sales commission to the retailers and 6% as commission on scratch cards. The operating costs are valued at 4% and the profits make a 1% of the total revenue. Camelot group plc has been performing so well that the government has been extending license year after year.
Driving forces for business expansion:
Camelot group plc aims at increasing the revenues for Good Causes by managing the National Lottery in a socially responsible way. The strategy of Camelot group plc aims at diversifying the National Lottery and improve the accessibility of the lottery games by introducing new channels of retailers and distributors. This has resulted in increased sales throughout United Kingdom. Camelot group plc operates one of the most cost effective lotteries in the world. Camelot group plc has the highest returns than any other lottery across the world given to the government in order to fund various sectors of the society.
These factors are main driving forces for the company to expand its business internationally. The core competency of the company is to operate in a cost effective manner such that it increases the revenue to the government which in turn funds the Good Causes. It is committed to the concept of maintaining high quality standards that are competitive with the global market and to maintain high standards in player protection and to contribute to the social causes of the government. Let us take the help of SWOT analysis to analyze the move of Camelot group to enter the international market.
Strengths of Camelot Group:
The main strength of Camelot lies in its basic strategy to contribute to the Good Causes by increasing the revenues to the government. The cost effective operation of Camelot is also one of its main strength that can attract international market. Camelot group has a good reputation with the government through its successful management of the National Lottery. It has been increasing its sales year on year and this made the government to allot the license to Camelot group by extending its contract period. Camelot group has achieved a good brand name in United Kingdom since its introduction and this could turn out to be the main strength of the company to launch its ventures internationally.
Weaknesses of Camelot group:
The main weakness of Camelot group is its poor publicity. The management of Camelot group has less power of decision making as it is majorly operated and regulated by the government. There are too many partners in the company and this dampens the strategy formulation and the governing power of the company. The company cannot restrict children under the age of 16 from playing though strict actions are amended. This has a negative impact on the company.
Opportunities of Camelot group:
The opportunity for Camelot group lies in the increasing interest of people to participate in lotteries. This interest is increasing among the people all over the world. Many countries are legalizing the lottery business and this tends to provide opportunity for Camelot group to venture its business internationally. Since in majority of the countries, the lottery system is managed by the local government, it becomes easy for the company to enter the international market based on the credibility of the company in the United Kingdom. The contribution of the company towards Good Causes attracts the attention of other governments and this could be a crucial factor to enter the international market.
Threats of Camelot Group:
The threat for any company that wants to enter international market is from the existing players in the country. It becomes difficult for the company to gain a competitive advantage over the companies which already have a market share. The terms and regulations of the country can also be a threat to the company if they are not in favor of entertaining foreign player in the local market. The social and economical factors of the country also have its effect on the international venture of the company.
The political situations in many countries are changing regarding the regulations of lottery system. Many countries are supporting the lottery system as it generates revenue to support the government in supporting various sectors like education, environment, health, arts, sports, charities and voluntary sectors. So these political attributes provide opportunities for the company to setup its business internationally. The market of lottery system has increased drastically throughout the world since lot of people are showing interest in this type of gambling that supports the revenues of the government. Since government manages the lottery system, people tend to show interest in buying lottery tickets. The economical positions of people all over the world have been increasing and the spending capacities of the people have increased which increases the lottery market with good promotional activities. The lottery is very different from other kinds of gambling and hence it is less addictive. The National Lottery increases the size of the market and hence provides employment to the people. The government gets benefited by getting revenues through tax levied on lottery business. Hence these all factors support the rationale of the company for international expansion.
Setting foot in the international market:
Before getting into the topic let us see how a lottery business operates. In any country the local government governs and manages the lottery business to avoid any fraud or illegal lottery business. It invites various companies for a bid to manage the National Lottery on behalf of the government. The company which wins the bid gets a contract from the government to operate the National Lottery. The company needs to give a share of the revenue generated and the share depends on the government's legislation. If the company performs well, then the government will extend the contract. Since the lottery market is governed and controlled by the local government in any country, Camelot's main focus needs to be on the competitors who bid for the license. Because after getting the license, the main aim of the company would be to increase the sales in the market which would help it to extend its contract. After getting the license, the National Lottery would be operating in a monopoly market.
In order to venture into a new market, Camelot group plc needs to get a thorough knowledge of the market in which it is going to setup its venture. The investment for Camelot group plc would be majorly in setting up distribution channel to sell the lottery tickets. Camelot group has a very good track record in United Kingdom and it should make a good use of the company brand name in introducing itself in the new market. Before entering the new market, Camelot group plc needs to do a market research on the current lottery system in the country and the current players in the market and their sales pattern. The main aim of entering foreign market is to expand the current business of Camelot group plc. The lottery business is expanding its market worldwide and this proves to be a good opportunity for Camelot group plc to expand its business. Many countries are encouraging lottery business as they provide good revenues to the government to fund various sectors of the government like education, environment, health, arts, sports, charities and voluntary sectors. This has encouraged the lottery business in many countries and people are getting attracted to lottery since the local governments are supporting and governing the National Lottery. Technological advances have helped a lot in the expansion and increase in the revenues and sales. Lottery is being seen as a method of economic development, precisely in low developed areas of a country. In remote areas the introduction of lottery system has made a drastic change in the facilities provided. The introduction of lottery system has brought capital investment, increased tax earnings, improved public amenities, and improved employment opportunities and health care benefits for many areas which were without these facilities. This is a big opportunity for Camelot group to venture into foreign markets to generate revenues for social causes. In lottery system, every part of lottery system is governed and operated by government decisions.
Camelot group plc's main investment has to be done in setting up a marketing chain, distributors and retailers, staff in the country in which it is going to launch its operations. Market research needs to be done on the probable suppliers for the lottery tickets. They include retail shops which has their reach in even remote areas of the country. This project has the main aim of expanding its business internationally and hence Camelot group plc has to understand the government's regulations for lottery business. To successfully enter a foreign market Camelot group plc has to focus on the following factors.
Supply chain management.
Camelot group plc needs to get the information of the foreign market from a lot of sources. And the major investment lies in getting the suitable information from the credible sources. They include the past trends in the lottery sales in the market, the retail locations, customer preferences etc. The company has to get all the relevant information from the various sources in order to innovate, target, promote and price its products. The past trend in lottery sales and the retail locations give the information regarding the lottery business, customer's expectations and the buying trend of the lottery products. This helps the company not only to know the market situation, but also gives an idea about consumer behavior. This provides the statistics of the sales in the market and the customers' perception of the lottery business. This market research data provides the information regarding customers' expectations in the lottery products. This will help Camelot group plc to define its customers and the target customers. This also gives the company an idea of the promotional activities it needs to formulate to reach its products to the customers. The information gained through data sources help the company to improve its efficiency and effectiveness of its marketing strategies. And by further knowing the customers' choice and perceptions the company can know how to formulate its promotional campaigns. The company can also rely on the secondary research data collected by marketing firms like Publicis to get a clear picture of the customer behavior.
Supply chain management:
Camelot group needs to invest in establishing supply chain and have well formulated supply chain management to sell its products in the market. Camelot group needs to estimate the number of retailers to be included in the supply chain in order to get maximum reach of the market and to target the potential market. The retailers can sell other products besides the lottery products and hence the company needs to focus on the strategies which increase the sales of the lottery tickets. This helps the company to know what kind of retailers would help it to penetrate in to the market.
The marketing strategies of Camelot group plc focuses on creating vast awareness of its products, its activities and its aim in the market. Camelot group plc has to formulate the marketing strategies for the foreign market and they should aim to create awareness about the company's products i.e. lottery tickets, promotions, and customer relationships. The company needs to dedicate 40% of the marketing plans to create awareness about the products and the jackpot and other 60% to create awareness about the promotions and creating a brand values in the market. So having a good rapport with the media is necessary for a successful marketing strategy.
Camelot group plc has to invest in knowing the current trends of the lottery business in the foreign country. The company must be up to date with the current trends in the business and the advancements in the business. This includes getting the information regarding the customer attitude, sales of the lottery tickets, profitability of the lottery business, the retailers who sell the tickets, competitors, marketing strategies and the lottery industry as well. This requires the company to invest in regularly collecting, analyzing, monitoring and interpreting the information and use it in a useful manner to enter the business in the international market.
Camelot group plc has to focus on the various factors that help it to expand its business in the international market. They include expanding the supply chain and thus increasing the revenues, sales and the profits. The company needs to get access to the customers through various kinds of retailers which include stationary stores, super markets, shopping malls, automobile shops, coffee bars, local retail shops and other possible outlets to reach the target customers. The company should invest to encourage partnerships with these outlets to expand the business in the international market. This helps the company to formulate strategy to customize its products as per the tastes of the customers.
Camelot group plc has to invest on developing new products or customizing the existing products to suit the market into which it wants to enter. This may require the company to do research on adding new products, deleting existing products or customizing the existing products. This helps the business to come up with products that suit the market. The company will be able to design its products such that they increase the odds of winning the lottery. By innovating new products the company will be able to attract and retain the customers.
The success of lottery business lies in maintaining a good retail partners. So the company's investment should be done in selecting good retail partners and thus increase the business and thus achieve long term growth in the industry. The company should be coming up with sales training and develop the products so that the retailers act as a source of developing the business. The company can increase its reach in the market by having a good supply chain and this is possible by the co operation of the retail partners.
The goal of Camelot group plc is to create a positive perception of national lottery in the minds of the stake holders for the company. The objective of the company is to create awareness among the public regarding the social causes program and how it benefits the government. To achieve these goals and objectives the company has come up with a strategy to undertake promotional campaign to attract the attention of government and the general public. Camelot group plc has to communicate its international plan with the potential customers, existing customers, non customers, winners, retailers, lottery staff, educators, legislators, media etc.
These all factors need to be addressed before launching the company in the international market and hence the company needs to come up with a budget plan to invest in the above mentioned areas.
Based on the above discussion the potential markets for Camelot group plc to expand its business internationally are India and China. Since these two countries are large and does not have a proper lottery system in their countries, Camelot group plc can target these markets to expand its business. The lottery business in India and China is not well established and the governments of these countries are trying to regulate and manage the lottery business in their respective countries. Since lottery business earns good revenues for the government to fund different sectors like, education, arts, sports, health, social and charities, the Indian and China governments are showing interest in introducing lottery system in their countries. Though lottery business is prevalent in both countries, it is not up to the mark. In India, out of the 35 states, only 18 states participate in the lottery business and in other states lottery business is operated by private bodies. In china, lottery business is in existence since a long time, but the government doesn't have the control over it which has given rise to fraud and illegal activities in the lottery business. In both the cases, Camelot group plc has the potential to tap the markets and help the governments in regulating and governing the lottery business in their countries. Since Camelot is successfully operating in United Kingdom, it does not need much effort to enter into the international market. Camelot group is already working with the United Kingdom government in successfully running the lottery business and it has generated huge revenues for the government to fund its social causes. In this way it becomes easy for the company to convince the Indian and China governments to operate the lottery business in their countries. Now let us analyze the situations in the Indian and China markets and how they can affect the Camelot group plc's business in their respective markets.
Lottery system in India and China:
There are many lottery operators in India which are run by the Indian government which are governed by the rules and regulations of the Central Government. The lottery business in India has a turnover of Rs.50,000 crore. The Sikkim Government participates largely in the lottery business and earns good revenues for the government. Lottery business stays banned in many of the Indian states but the government is coming up with new regulations to legalize the lottery business and raise funds for the social activities like, funding different sectors of the community. They include arts, health, sports, education and providing basic amenities to various sectors of the society. In India the government issues license to run lottery business. The government calls for tenders and the private firms need to bid for the license. This issuing of license is separate for different states. Many states in India have banned lottery business in their states but the Central Government is coming up with initiative to legalize the business and fund the social activities.
In China though lottery system is prevalent since many decades, the government has failed to reduce the fraud and illegal activities in the lottery business. Most of the revenues generated are misused and do not reach the government. The lack of laws and legislations has proved fatal for the lottery business in China. China government is expected to issue its first lottery regulation to reduce the fraud in lottery business. The lottery business in China has revenue of 81.93 billion Yuan. Lottery business is legal throughout China and the revenue generated is used for funding the various sectors like the development of public sports facilities, education and health care for the handicapped. The government manages and governs the lottery business similar to India and the lottery business is managed by private firms.
Let us now consider the PEST analysis to know the Indian market and China market and thus know the potential for the Camelot group.
The political scenario in India regarding the lottery business is mixed. Some states run the business and some states ban the lottery business in their states. Many states are planning to legalize the business as the potential of lottery business is very large in India since people are showing interest towards this business. The Central Government is planning to come up with an idea to regularize the lottery business throughout the country. This step by the government to legalize the lottery business has attracted many companies to operate the lottery business in India. So the political scenario in India is favorable for Camelot group plc to venture in the Indian market.
In china the political scenario is favorable to lottery business as it is legalized throughout the country. Though the regulations are not stringent in China, the government is planning to introduce new regulations to reduce the fraud in the lottery business and thus the political scenario in China also favorable for Camelot group.
The economic scenario of lottery business is quiet healthy with lottery business generating a business of Rs. 50,000 crore per year. 50% of the revenue is distributed among the winners, 25% is given to the local government, 8% is the distributor commission, 9% is spent as the operating costs and 8% is the profit. The potential of the lottery business seem to be increasing as large number of people are participating in buying the lottery tickets. This revenue generation is the amount contributed by 14 states which allow lottery business in their states. This revenue could be a huge sum if all the states participate in the lottery business. Thus the market is huge and this proves to be a supporting factor for Camelot group.
In China the revenue generated by lottery business stands at 81.93 billion Yuan and is expected to grow by 31% by 2011. This proves to be a good market for Camelot group with a lot of scope for expansion. The distribution of revenue is similar to the Indian market and thus economical factors are favorable in China market.
The social conditions for lottery business in India and China are very much encouraging. The spending capacities and the perception of people in India and China towards the lottery business have changed in favor of lottery business. People are now more willing to participate in buying lottery tickets as the income levels have increased and also the spending capacities. Hence the social factors in India and China can help Camelot in expanding its business internationally.
The introduction of technology in lottery system has brought transparency in the business and people are relying on the results. Technology has helped the lottery business to increase the positive attitude of the people towards the industry. The introduction of online system has increased the revenues and the profitability of the business. The revenue generated by the selling of lottery tickets will be electronically credited in the bank account of the government and then the distributor gets the money after the deduction of the government's share. Thus the lottery system has become more transparent and thus reducing the fraud and illegal activities in the lottery business.
Based on the above analysis, it would be preferable for Camelot group plc to expand its business internationally by starting its business in India. Indian market would support the aim of Camelot group plc to expand its business globally since the competition is less and the market value is more. The revenue generated by lottery business in India is Rs. 50,000 crore with just 14 states participating. This would reach Rs. 100,000 crore when the government legalizes the lottery business in the remaining 21 states in India. This proves to be a huge potential market for Camelot group plc to expand its business internationally and thus achieve its objective. The spending capacities and the perception of people in India towards the lottery business have changed in favor of lottery business. People are now more willing to participate in buying lottery tickets as the income levels have increased and also the spending capacities. Thus the market for lottery business is expanding rapidly and this proves to be a good opportunity for the Camelot group plc. The technological factors in India are also in favor of the company and hence it can tap these opportunities to expand its business.
The goal of Camelot group plc is to create a positive perception of national lottery in the minds of the stake holders for the company. The objective of the company is to create awareness among the public regarding the social causes program and how it benefits the government. Camelot group plc has less risk in operating the lottery business since the lottery regulations are framed and governed by the local government and they are similar in any country. So Camelot group needs to operate in the same manner as they are doing now in the United Kingdom. The local government takes the ownership of the lottery business and out sources the lottery business to private firms. The political, economical, social and technological factors of Indian market are in favor of the Camelot group and thus they benefit the objective of the organization. Since the lottery regulations and rules are similar in any country, the company doesn't find difficult in operating the business. Since Indian market is growing at a very high rate and the potential market is also increasing, the profitability of the company can also increase. The lottery business is expected to increase by 34% by 2011 and hence the potential for lottery business is very high. Though these all seem to be in favor of the company in India, there are other factors that need to be focused in order to avoid difficulties in the operation. They are,
The existing players in the Indian market will be a huge challenge for Camelot group plc. The lottery business is managed by Essel group in India. Essel Group has been successfully operating in the Indian market and is earning good revenues for the government. It would be a challenging task for Camelot group plc to face Essel group's competition in the Indian market. Camelot group needs to come up with good marketing strategies to overcome this problem and get the license in India. The main focus of Camelot group needs to be on gaining competitive advantage over the competitors in the market. This could be done by promoting its business and communicating its achievements to the Indian government. The achievements of Camelot group plc in United Kingdom can be used to give good publicity to the company in the Indian market. It can attract the attention of the government by advertising its revenues and financial performance in the United Kingdom. This could help the company to carve a niche for itself in the Indian market. The existing product range may not be suitable for the Indian market and hence Camelot group plc needs to do research on developing new products that suits the Indian market and thus increase its reach in the market. The rules and legislations in India may not suit the company's policies. In order to over come this, Camelot group plc needs to come up with strategies to adjust itself in the foreign market. The strategy of Camelot group plc aims at diversifying the National Lottery and improve the accessibility of the lottery games by introducing new channels of retailers and distributors. The core competency of the company is to operate in a cost effective manner such that it increases the revenue to the government which in turn funds the Good Causes. It is committed to the concept of maintaining high quality standards that are competitive with the global market and to maintain high standards in player protection and to contribute to the social causes of the government. And thus Camelot group plc can enter the Indian market by focusing on the above issues.
Thus Camelot group plc has a good chance of expansion of its business in India as the Indian lottery business is increasing at a very high speed. Indian market has a huge potential for lottery business in the coming years and this needs to be tapped by Camelot group plc in order to expand its business internationally. Since the lottery business in India is expected to increase by 34% by 2011, it provides a chance for Camelot group to increase its sales and profits. The other issues that the company needs to focus are the selection of management for the Indian operations. This is important for the company because the management should consist of members from the parent company and also who have a good idea of the Indian lottery system. The supply chain must be carefully designed in order to market and distribute its products in all areas of the market. The competitors of the company should be carefully analyzed in order to gain a competitive advantage over the competitors and secure a good market share.
By considering all these facts, Camelot group plc can successfully venture into the Indian market and thus expand its business internationally.