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A Report On Growth Opportunities for CG in International market

Submitted by: Submitted to:

Dina Khadka Yogesh Satyal Pavima Jajodia Satyendra Nath Subedi Ushma Pandey

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Introduction

Nepal was primarily dominated by the white noodles, Maggie in the 80s. Detecting a need for brown instant noodles in the Nepali market, Chaudhary Group tapped on the demand in 1984 with the introduction of the brown instant noodles, Wai Wai. With technical collaboration from Thai Preserved Food Factory (TPFF), Thailand, the popularity of this brand has been escalating since its introduction. There are two plants that manufacture Wai Wai, which are located in Kathmandu and Nawalparasi. Plants and machinery have been imported from Japan, Taiwan, Singapore and China.

Chaudhary Group is one of the largest private business houses in the Kingdom of Nepal having diversified interests across various sectors. Team of highly qualified and experienced professionals manages the company professionally. They have world class manufacturing facilities of Noodles, Snacks & Beverages, & Cigarettes. Today their brands like WAI-WAI noodles are the market leader in its segment and a household name not only in Nepal, India & Bhutan but also in the fast growing markets across the world. By virtue of its world-class quality & unique taste, their noodles & snacks have also been successfully accepted in the markets of European Union Countries like UK, Austria& Germany. Chaudhary Group (CG) is one of the largest corporate houses in Nepal. Over the last 137 years, growing in size and strength, the CG today is a conglomerate of over 40 businesses. The group has spent considerable time and energy looking at its core values and beliefs while focusing on its vision of becoming a global growth company.

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The CG touches every aspects of public life with presence in industries like food and beverages, apparel, health care, education, tobacco, real state (housing development), financial services, steel, automobiles, hydro and electric power, and hospitality tourism. The CG, as the first Nepalese company, also has growing presence in South Asias competitive FMCG markets. Being the first Nepali organization to have a distribution network spanning the subcontinent, it has made a prominent presence in South Asias fiercely competitive Food and Beverages market. With ISO 9002 certification, its Food and Beverage products have crossed borders to become a favorite in South Asian cities.

CG operation in Nepal An integrated food production complex of Chaudhary Group on the southern fringe of Lalitpur district, Nepal, it offers a wide range of products of true international quality using the latest food technology.

FUDCO is divided into 3 subunits manufacturing noodles, extruded snacks, fried pallets and fruit juices. It is Nepal's first and only ultramodern, private industrial park, which is situated in Nawalparasi, about 180 km from Kathmandu. It houses various units equipped with latest technology, R& D and laboratories for manufacturing snacks, food, beverages and cigarette. There are also ancillary units producing specialty food items to suit different lifestyles. Cg Foods (Nepal) Pvt. Ltd. (CGFN) houses a total of 3 production units, the main being noodles production facility which has 3 plants operating under the same roof with a combined capacity of producing 615 packets of

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noodles per minute, the largest in the South East Asia. Others plants are Potato Chips, Wafer and Bhujiya.

Products of CG CG has increased its product portfolio to Extruded Snacks, Potato Chips, Fried Snacks, Fruit Drinks, Chocolate Enrobed Wafer and Broken Noodles popularly known as Bhujiya. CGFN has two manufacturing locations in Nepal which have been named as FUDCO at Kathmandu and Chaudhary Udyog Gram (CUG) at Nawalparasi, 160 Kms south west of Kathmandu.

Instant Noodles

Brown Noodles
o

Wai Wai 123 is a popular brown noodle (3 Seasonings) available in 2 different flavours - Vegetable and Chicken. It is available in 75 gm packet. Wai Wai Quick is a brown noodle (Curry Base - 3 Seasonings) available in Vegetable and Chicken flavours. It is available in 75 gm packet.

White Noodles
o

Wai Wai X Press is a white noodle (2 Seasonings) available in Vegetable and Chicken flavours. It is available in 90 gm packet.

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Wai Wai X Press Masala Delight is a white vegetable noodle with 2 seasonings. It is available in 90 gm packet and 50 gm packet. Soaltee is a white noodle available in Chicken flavour. It is available in 50 gm packet.

Snack Noodles
o

Mimi, a snack noodle (2 Seasonings) available in Chicken flavour. It is available in 50gm packet.

Bhujia and Snacks

Mama Bhujia is available in Chicken flavour in three different weights 40gm, 10gm and 20 gm. Kwiks Potato Chips, very popular among the youngsters is available in 16 and 35 grams. It is available in the spicy Tangy Masala and Tomato Chilli.

Kwiks Cheese Balls is made in the most modern and hygienic plant with the best quality, they are blended with right amount of Corn, Cheese and Salt. The Cheese Balls is available in 12 gm.

Confectionaries The Zoom wafers are available in four Different flavors namely, Chocolate Enrobed Wafer, Vanilla Flavor Wafer, Orange Flavor Wager and Orange Flavor Wafer. It contains Sugar, Vegetable Fat, Wheat Flour, Milk Powder and Sodium Bicarbonate.

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Fruit Drink Gold Beverage Nepal (GBN), a unit of CG Foods (Nepal) Pvt. Ltd. was established in the year 1998 for the production of Fruit juice. It produces more than 30 Million packets per year. It produces popular flavors like Alfanso Mango, Mixed fruit, and Pineapple under its brand name Rio.

Natural Spring Water CG has tied up with Raybot Springs Mineral Water Pvt. Ltd. to bottle water from natural springs with the objective of exporting to various international markets and for domestic sales. The plant manufactures bottled natural spring water of the Himalayas in various packaging sizes. The bottling plant is located in Kathmandu. The unit has its own source that rivals to any spring water from any part of the world. CG Beverages CG Raybot unit is taking the Himalayan spring water to the world.

Cigarette CG has a cigarette manufacturing unit, Perfect Blends (Nepal) Pvt. Ltd. that produces popular brands like Bagh, Gaurav, James, Josh, Matrix, Pine, Pride and Sahasi. It was established in 1998 with the capacity of 1,500 sticks per minute. It has increased its capacity to 4,500 sticks per minute.

Brewery Sungold Brewery (Nepal) Pvt. Ltd. (SBN) was established in 1997 as the Brewery arm of Chaudhary Group and has a capacity of producing 130,000
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cartons of beer per month. It has its own popular brands like Nepal Ice, Real Gold and Mustang that is also exported to Hongkong, Japan, UK and the USA besides domestic sales. It has also tied up with international brewers like SAB Miller and InBev International, Netherlands. SBN is an ISO 9001:2008 certified company.

CG contribution to Nepal The Group's progress over the last sixty-seven years has been a trial-blazer on the Nepalese horizon. In a land-locked, developing third world nation, this spells nothing short of very hard-earned success. Apart from also being a responsible citizen, Chaudhary Group forms an intrinsic part of every realm of life from Biotech, Cement, Education, and Electronics & White goods, Energy and Infrastructure, Financial Services, FMCG, Hotels & Resorts, Realty to Retail.

Since its inception, Chaudhary Group has contributed to the upliftment of the nation's economy, equalizing the infrastructure and entrepreneurial capability of Nepal with other developing nations. As Nepal's investment potential progressively draws the attention of leading multinationals, Chaudhary Group continues to lead, harnessing global partnerships in core sectors and offering cost-effective procurement affiliation to corporate worldwide. The company offers its products and services through dealers, distributors, retailers, and suppliers. Chaudhary Group is based in Kathmandu, Nepal. The Chaudhary Group in Nepal is the biggest group in Nepal. It has involved itself possibly in all the sectors and has been the pioneer in the business and economy sector of Nepal. From fast moving consumable goods to real estates,
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higher end products to services, automobiles and everything, Chaudhary Group has its market share. This Group is always focused on development and they are always on the course of innovation through investment. The investment thus results in a nation to prosper. It has yet to be confirmed officially but Chaudhary Group has already been into academic sector as well. They have already invested on school and colleges. This seems to be a good move by Chaudhary Group but some may claim, schools and colleges should not be commercialized but, Chaudhary Group are not commercializing academic sectors. With the capital they have and the will to develop the educational infrastructure, this move should be well appreciated. Market Share Wai Wai has an annual turnover of Rs 3 billion, while in Nepal it is approximately Rs 1.40 billion. Wai Wai is the most affordable food product. Earlier when the noodle was introduced, it had a small market as consumers awareness had to be created and the noodles market back then was dominated by Maggie. Soon, many competitors joined the market. The market size increased with the introduction of instant noodles brands like Mayos and Rum Pum in 2000. The last decade has seen a cut-throat competition as awareness and penetration of noodles brands has reached every corner of Nepal. Instant noodles are the most advertised and promoted brands in Nepal. Wai Wai has stood the pressure of competitions and prevailed as the best instant noodle.

The reasons for securing the top position are due to its unique taste, innovation and constant upgrading that includes adopting better and safer
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packaging. Wai Wai was the first brand to introduce food fortification in Nepal in 2006. New flavors have been introduced. Quick, a variant of Wai Wai comes in various flavors like Schezwan chicken, Manchurian veg, Chicken curry, Veg curry, Chicken pizza and Kimchi. Mayos used to be the biggest competitor but currently Wai wai is at the top.

The annual growth rate for instant noodles has been 20 to 25 per cent in the last few years. Chaudhary Group as a company holds a market share of 42 per cent and Wai Wai as a brand holds a market share of 25 per cent in Nepal. The brand plans to continue its innovation and introduce new flavors and products.

Chaudhary Group as an International Enterprise

The Chaudhary Group is regarded as the third-generation Nepali Marwari family business that has become Nepal's first multinational with over $500 million in assets and revenues that Forbes Asia recently called 'among Nepal's richest non-royals'.

Chaudhary's Cinnovation group with its hotel division has invested in tourism, manufacturing and trade, owning hotels in New York, Malaysia, Maldives and Sri Lanka. The group is still in full expansion mode with partners to set up luxury hotels in Singapore, Thailand and Bali islands of Indonesia.

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The Chaudhary group still sees Nepal as his base. The owners of Chaudhary group believe that they have to have a certain mindset to be a global player. With constant persistence and commitment, the group has been able to spread its wings around the globe. Today Chaudhary Group has over 40 Companies under its umbrella and an investment outlay of over $1Billion. Being the first Nepalese organization to have a distribution network spanning the subcontinent, it has made substantial presence in South Asia's fiercely competitive Food and Beverages market. Its Food & Beverages products have been a common household name in Nepal for decades. With ISO 9002 certification, providing the lead, their F&B products have crossed the borders to become a favorite in South Asian cities.

Global Presence Hospitality Industry The Chaudhary Group (CG) of Nepal has joined hands with Thailand based InVision Hospitality with a plan to open 30 hotels across Asia by 2013. For this purpose, a company called Zinc InVision Hospitality (ZIH) has been formed as a joint venture of InVision Hospitality and the Singapore based investment company Cinnovation CG, which is part of Chaudhary Group family.

InVision Hospitality currently manages five properties in Thailand. Cinnovation CG holds 51 per cent of the initial fund of ZIH which is $170-180 million, states the release. The remaining 49 per cent is held by InVision. The fund will
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be invested on 30 hotels across Asia, including Nepal, Thailand, UAE, the Philippines, Sri Lanka, India, China and Malaysia.

Zinc InVision Hospitality has seven hotel and hospitality brands already developed: Zinc City, Glow Studios, Zinc Edge, Zinc Living, Zinc Journey, SOMA, and Touch by Zinc. Each one caters to a unique market segment -luxury resorts, hip business hotels, value-oriented urban travelers, long-stay and residential living, heritage travel, and spa and wellness retreats.

Out of 30 hotels, Glow Studios, Edge deluxe hotels, The Farm, a Touch by Zinc spa and wellness retreat will also be established in Nepal by 2013 while the latter by 2011. The creation of Zinc InVision Hospitality marks the arrival of a formidable hotel management company and fresh brand offerings in the Asian hotel and hospitality arena. Cinnovation CG has the financial depth and hospitality background to support the growth while InVision has the depth of experience and hospitality know-how to execute all elements of technical, sales and marketing and operating activities.

Products After successfully serving the Nepali customers for decades, the CG has started serving the international markets also. The CG has gone beyond exporting its foods and beverages to international market by establishing their plants and manufacturing units in India. CG's WaiWai instant noodle is a recognized and established brand not just in Nepal but in 20 different countries.
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CG

Foods

is

expanding

its

facility

by

setting

up

State-of-the-art

manufacturing unit in Rudrapur, India in addition to its already two functional manufacturing plants in Assam & Sikkim with a combined capacity of 270 million packs. The new facility opening is aimed at boosting further growth in one of the worlds largest and fastest growing food and beverage markets. Current plans foresee a further acceleration in 2011 and beyond, spreading into the Western part of the country and capacity expansion in Assam.

Spread over an area of 3 acres, the new plant will have a production capacity of 120 million packs, thus accelerating the production of its star product WAI WAI to new high. With an initial investment of Rs. 20 crores, the Rudrapur facility will add a new dimension to the growth strategy of CG foods in North India. The new investment is expected to directly generate approximately 500 new jobs in and around the manufacturing plants operation. Sikkim and Assams unit employ about 1500 people in India.

Consumers in North India will now be able to consume array of locallyproduced CG foods products- WAIWAI, MIMI and WAIWAI Xpress. CG Foods has a turn-over of INR 150 crores in India and a global turn-over of INR 350 crores. The company plans to grow to Rs 1000 crores in next three years. The CG group claims that it has 70% market share in North East, Sikkim and west Bengal combined. In the whole country, their market share is around 14-15% in the 1200 crores noodles market. The company is targeting a market share of 25% by 2014.

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Including these two important sectors, Chaudhary Group has over the last 65 years nurtured and maintained global alliances and this growth has taken place through a deep understanding of local markets, people and customs. The followings are the industries with which CG maintains a strategic relationship: Toshiba Corporation LG Electronics Inc. Thai Preserved Food Factory Co. Zinc Hospitality Crimson Logic Pte. Ltd. AES Corporation Sab Miller Western Union Financial Services Mani pal K-12 Education Pvt. Ltd. Videocon Industries Ltd. Onida Kelvinator Cinnovation Group Japan South Korea Thailand Thailand Singapore USA South Africa USA India India India India Singapore

Setting up a business in any new country or place calls for a lot of risk and research. Understanding the political, economic and social conditioning of the place is extremely important. CG has been running their businesses in different countries with great success inspite of certain difficulties. While entering into international and after it entered, it faces many opportunities as well as challenges.

Some of the opportunities are: Growth opportunities A conglomerate of over 40 businesses, The Chaudhary Group in Nepal is an organization touching every aspect of public life and has its presence in more

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than 18 countries. The Group has been operating in Nepal for around 70 years now and continues to grow with each passing day.

Introduction of products It has world class manufacturing facilities of Noodles, Snacks & Beverages, & Cigarettes. Chaudharys Cinnovation group with its hotel division has invested in tourism, manufacturing and trade, owning hotels in New York, Malaysia, Maldives and SriLanka. The group is still in full expansion mode with partners to set up luxury hotels in Singapore, Thailand and Bali. Brand image A successful business player in Nepal literally Touching Life Everyday, as the companys motto has it. CGs WaiWai instant noodle is a recognized and established brand not just in Nepal but in 20 different countries. WAI-WAI noodles are the market leader in its segment and a household name not only in Nepal, India & Bhutan but also in the fast growing markets across the world.

Higher acceptance In order to enter in international market they operated their business ethically and care for the customer expectations in quality and cost. By virtue of its world-class quality & unique taste, our noodles & snacks have also been successfully accepted in the markets of European Union Countries like UK, Austria& Germany.

Quality focused

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Its F&B products have crossed the borders to become a favourite in South Asian cities with ISO 9002 certification, so it will continuously focus to maintain its quality.

Economies of scale in production CG operates with 100 per cent local talent and utilize the local resources as far as possible. This help to reduce cost and gain economies of scale.

More opportunities The businesses with a global perspective have more opportunities to grow and succeed. It can coordinate operations across world markets and allow for the transfer of learning from operations in one part of the world to another

Global network Being the first Nepali organization to have a distribution network across the subcontinent, CG has made substantial presence in South Asias fiercely competitive Food and Beverage market. So by it can operate globally through its extended network. Every country has its own political, social and economic conditions. Setting up a business in a country other than one's own, requires a lot of research and
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understanding of the place and the business condition there. Also, there might be times when a particular country can be facing some sort of an upheaval too. Some of the major challenges faced by CG are:

Some of the challenges are: Competition New boundaries of competition and new sources of competition emerge when a company enters into new market. Moreover the basis for competition also changed. As CG enters into new market it faces many competitors. Environmental issues There may exist different environmental issues indifferent aspects like demand for recycling, more efficient use of resources, greater responsibility for protecting the environment, limiting toxic waste, as well as to educate consumers and to develop more "user friendly" products are all compounding the tasks and demands placed on the organization.

Localization Establishing a strong local presence by developing new products and adapting to local tastes and preferences is a difficult task. Similarly CG faces many problems when it enters into other Asian countries and western countries. It should spend lots for research to meet the tastes and preferences of consumers. New Technology Technology is rapidly altering the nature of competition and strategy in many industries. It is costly and difficult to cope up with changing technology. For
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instance, the objective of CG-Mani pal Schools would be to provide quality education at a reasonable cost to the children of Nepal. The schools would be designed to use the right combination of technology and pedagogy for an effective learning process. But as technology changes rapidly its difficult and costly to meet the objectives as stated. Difficulty to meet international level of quality "Quality is never an accident. It is always the result of high intention, sincere effort, intelligent direction and skillful execution. It represents the wise choice of many alternatives and as we entered the 21st century, the gleaming horizon awaits our vision towards globalization. So meeting high level of quality to satisfy foreign consumer is also challengeable.

Other general challenges


Differences in consumer response to marketing mix elements Differences in brand and product development and the competitive environment Differences in the legal environment, some of which may conflict with those of the home market Differences in the institutions available, some of which may call for the creation of entirely new ones (e.g. infrastructure) Differences in administrative procedures

Differences in product placement. Differences in the administrative procedures and product placement can occur

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Growth opportunities for Chaudhary Group in International Market

With more than a century of exposure to business Chaudhary Group do have strategic and global alliances with various international groups beyond borders. After serving the people of Nepal they are looking forward to expand their horizon in the international market place also. While maintaining good relationships with companies from Japan, Thailand, Singapore, India, USA, South Africa and more the opportunities for international growth looks very eminent for CG.

CG Foods, a unit of Singapore-based Cinnovation Group, are looking to invest Rs.100 crore in India during the next three years to expand its manufacturing capacity in the country. In an interview CG Foods managing director Nirvana Chaudhary said We plan to set up two new manufacturing plants in India this year and also expand the existing plants. By 2014, we will be investing Rs.100 core in India, They are also looking for acquisition opportunities to expand the business in southern and western part of India. Nirvan Chaudhary said the company was ready to invest upto Rs. 1,000 crore on acquisitions in a bid to consolidate its position in the country. CG Foods has an annual turnover of Rs.150 crore in India. The company targets nearly 40-50 percent annual growth for the next three years. So, not only in Nepal but also beyond it Chaudhary has already started its global expansion.
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As also highlighted in the report above CG Foods is expanding its facility by setting up a State-of-the-art manufacturing unit in Rudrapur, India in addition to its already two functional manufacturing plants in Assam & Sikkim with a combined capacity of 270 million packs. The new facility opening is aimed at boosting further growth in one of the worlds largest and fastest growing food and beverage markets.

Current plans foresee a further acceleration in 2011 and beyond, spreading into the Western part of the country and capacity expansion in Assam.

Spread over an area of 3 acres, the new plant will have a production capacity of 120 million packs, thus accelerating the production of its star product WAI WAI to new high. With an initial investment of Rs. 20 crores, the Rudrapur facility will add a new dimension to the growth strategy of CG foods in North India. The new investment is expected to directly generate approximately 500 new jobs in and around the manufacturing plants operation. Sikkim and Assams unit employ about 1500 people in India.

Consumers in North India will now be able to consume array of locallyproduced CG foods products- WAIWAI, MIMI and WAIWAI Xpress.

In the International arena Chaudhary's Cinnovation group with its hotel division has invested in tourism, manufacturing and trade, owning hotels in New York, Malaysia, Maldives and Sri Lanka. The group is still in full expansion

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mode with partners to set up luxury hotels in Singapore, Thailand and Bali islands of Indonesia. The Chaudhary Group (CG) of Nepal has joined hands with Thailand based InVision Hospitality with a plan to open 30 hotels across Asia by 2013. For this purpose, a company called Zinc InVision Hospitality (ZIH) has been formed as a joint venture of InVision Hospitality and the Singapore based investment company Cinnovation CG, which is part of Chaudhary Group family.

So Chaudhary Group not only has the potential to expand and grow in Nepal but also has tremendous opportunities in the global space which it has already started to work on and capitalize.

Conclusion

Chaudhary Group as one of the largest private business houses in the Kingdom of Nepal has diversified interests across various sectors. They have world class manufacturing facilities of Noodles, Snacks & Beverages, & Cigarettes. Today brands like WAI-WAI noodles are the market leader in its segment and a household name not only in Nepal, India & Bhutan but also in the fast growing markets across the world. By virtue of its world-class quality & unique taste, its noodles & snacks have also been successfully accepted in the markets of European Union Countries like UK, Austria& Germany.

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Wai Wai has an annual turnover of Rs 3 billion, while in Nepal it is approximately Rs 1.40 billion. Wai Wai is the most affordable food product. Earlier when the noodle was introduced, it had a small market as consumers awareness had to be created and the noodles market back then was dominated by Maggie. Soon, many competitors joined the market. The market size increased with the introduction of instant noodles brands like Mayos and Rum Pum in 2000.

The annual growth rate for instant noodles has been 20 to 25 per cent in the last few years. Chaudhary Group as a company holds a market share of 42 per cent and Wai Wai as a brand holds a market share of 25 per cent in Nepal. The brand plans to continue its innovation and introduce new flavors and products.

Avenues of its products range from noodles & snacks, confectionaries, fruit drink to naural spring water, cigarette and brewery. Since its inception, Chaudhary Group has contributed to the upliftment of the nation's economy, equalizing the infrastructure and entrepreneurial capability of Nepal with other developing nations.

As Nepal's investment potential progressively draws the attention of leading multinationals, Chaudhary Group continues to lead, harnessing global partnerships in core sectors and offering cost-effective procurement affiliation to corporate worldwide.

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After successfully the domestic consumers Chaudhary Group is now expanding and exposing itself into the international market. Chaudhary's Cinnovation group with its hotel division has invested in tourism, manufacturing and trade, owning hotels in New York, Malaysia, Maldives and Sri Lanka. The CG has gone beyond exporting its foods and beverages to international market by establishing their plants and manufacturing units in India. CG's WaiWai instant noodle is a recognized and established brand not just in Nepal but in 20 different countries. Consumers in North India will now be able to consume array of locally-produced CG foods products- WAIWAI, MIMI and WAIWAI Xpress.

International market opportunities are what CG is interested in now as they are eagerly expanding their wings across borders and oceans. While maintaining good relationships with companies from Japan, Thailand, Singapore, India, USA, South Africa and more the opportunities for international growth looks very eminent for CG.

But along with opportunities comes challenges as well. Going overseas and conducting business is not as easy as it seems. There will be various barriers, laws, policies to negotiate with. While the organization will be looking for growth it has to deal and cope with various local issues, meeting consumer demands and preferences, differences in cultural aspects, administrative procedures, etc.

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Taking these mitigating points into considerations and working in favor of those and utilizing ones strength will obviously lead CG to create a lasting image in the international arena as well as it has already done in the domestic settings.

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