V. MARKETING U.S. PRODUCTS AND SERVICES DISTRIBUTION AND SALE CHANNELS Imported products can only enter Madagascar via air to the international airport in Antananarivo or via sea to the port of Tamatave. Products are then distributed by road or rail to various destinations in the country. Distribution is usually handled by the importing company. Importers of consumable goods tend to be either diversified large retailers or wholesalers. Importers of electronics and technical equipment tend to be smaller retailers. USE OF AGENTS/DISTRIBUTORS AND FINDING A PARTNER The use of agents and distributors, particularly those with prior experience in distributing imported products, is highly recommended. Local agents have contacts to develop a customer base, and can easily communicate in Malagasy and/or French. Partners can be found by obtaining lists of importers from the U.S. Embassy Commercial Section or by contacting the market research firms listed in Appendix C. The embassy recommends that U.S. firms visit Madagascar and negotiate a distribution contract face to face, in order to develop a sense for the realities of doing business in Madagascar and to develop trust between the U.S. and Malagasy company. FRANCHISING Malagasy investors are expressing interest in establishing franchises of U.S. businesses in Madagascar, but it is not clear that there is sufficient consumer buying power to support such ventures. New investors would also likely require financing assistance for even a minimal investment of 20,000 USD. Existing franchise operations that appear to be profitable include: Avon, Yves Rochard, Benetton, and Prisunic. DIRECT MARKETING Direct marketing for U.S.-made products is not recommended. The Malagasy consumer is not habituated to Western marketing styles and prefers a local flavor to advertising. In addition, French language nuances may not be as evident to an American advertiser. However, the embassy does encourage U.S. business to direct market to locate distributors and agents. JOINT VENTURES/LICENSING Joint ventures are almost a necessity for foreign investors, as foreigners are not allowed to own land in Madagascar and the bureaucratic process for establishing a new enterprise is time consuming and requires some maneuvering. The benefit to joint ventures is that the Malagasy partner will know or can quickly learn the bureaucratic process for establishing new enterprises, which involves obtaining permits from several different ministries. The drawback is that a Malagasy partner will likely be a minority shareholder in dollar figures. There are few licensing ventures in Madagascar, the most prominent being that of Coca Cola with Star Brewery (owned by Henri Fraise and Fils, Cie), a relationship of 40+ years. Malagasy investors express an interest in license agreements, but it is recommended that contracts be negotiated carefully because of the lack of consistency in the Malagasy Commercial Code. STEPS TO ESTABLISHING AN OFFICE Office space can be found through a handful of real estate agents, advertisements in local papers, or word of mouth. Landlords will rent to new companies even if they have not obtained all their operating permits. Electric and water service can be established quickly but obtaining telephone service is extremely difficult and will remain so until the telephone system is modernized (2-5 years). Office furniture can be obtained locally at reasonable prices, but imported office equipment (particularly computers) is very expensive because of high customs duties. There is an increasing number of multilingual, qualified secretaries and administrative assistants interested in working with foreign businessmen. SELLING FACTORS/TECHNIQUES The purchasing power of the average Malagasy citizen is very low. Most Malagasy can literally only buy immediate necessities. In addition, culturally the Malagasy are reserved, often shy. As a result there is not much value put on showy salesmanship. Retailers and sales clerks respond to customer's questions and process sales, but do not practice sales techniques common in the United States. ADVERTISING AND TRADE PROMOTION Marketing is a relatively new industry to Madagascar. Avenues of advertising include billboards, posters, newspapers, and television (there is little advertising on radio, except for public service announcements). Prominent ad campaigns have a European influence and often link the product with leisure activities or personal enjoyment. The quality of production of advertising campaigns vary, and depends on the budget of the advertiser. It is possible to pay a newspaper for a full page article/advertisement, or the national television station to broadcast an info/advertisement program. Daily newspapers: Tribune BP 659 Rue Ravoninahitriniarivo Ankorondrano 101 - Antananarivo Tel: 226-35-32994 Fax: 222-54 Telex: 22635 Midi Madagasikara BP 1414 Ankorondrano 101 - Antananarivo Tel: 300-38-33288 Fax: 273-51 Telex: 22543 SNIC WM Le Nouveau Journal de Madagascar Cite BATMAD Bloc I 1 Ankorondrano 101 - Antananarivo Business Journal: Mada (weekly) 15 rue Ratsimilaho 101 - Antananarivo Tel: 256 34 Television: Television Malagasy Soc. d'Etat Immeuble SOLIMA Antaninarenina 101 - Antananarivo Tel: 268-30-24852 PRICING PRODUCT Pricing of imported products depends particularly on import and transaction taxes, which range from 0 to 150 percent. Profit margins on all products tend to be small. In May and June 1994, prices of imported goods rose dramatically, a result of the devaluation. More and more businesses are listing their prices in French Francs, awaiting stabilization of the Malagasy Franc. SALES SERVICE/CUSTOMER SUPPORT The concept of sales service and customer support is also relatively new to Madagascar and is primarily found among distributors of computers and automobiles. Retailers of most consumer products rarely accept returns of defective products. In addition, companies that offer servicing do not have many spare parts and their technicians have limited training. Objects in need of repair may have to be sent to Europe or the company may have to wait up to six-months to receive a necessary spare part. SELLING TO THE GOVERNMENT As part of its liberalization strategy the government of Madagascar frequently publicizes in local journals or via radio, requests for bids, some intended for international bidders and some only for local companies. These bids are opened publicly and tend not to be contested. However, the practice of awarding government contracts without making a public request for bids continues. PROTECTING YOUR PRODUCT FROM IPR INFRINGEMENT Officially, Malagasy law protects property rights infringement. Madagascar is a member of the World Organization of Intellectual Property (Organisation Mondiale de la Propriete Intellectuelle - OMPI) and has created two offices dedicated to IPR protection: Office Malgache de la Propriete Industrielle (OMPI), Office Malgache des Droits d'Auteurs (OMDA). There is little enforcement. Pirated audio and video recordings are the most flagrant violations of property infringement in Madagascar, and imported "fake" consumer goods can also be found (such as imitation Cartier bags or Rolex watches). Local industry is not capable of producing quality imitations. NEED FOR A LOCAL ATTORNEY It is recommended that a foreign investor or businessmen obtain the assistance of a local attorney before finalizing any contract or operating agreement in Madagascar.