Radilux, the $3$rd largest watchmaker in the world with annual sales of over $ $3\mathrm{.}5$ Bn$,$ decided to enter the Indian watch market in $2008.$ It had decided to make its initial foray with its medium range of watches under the Radix label, which was to be followed later by the premium segment Dicora label of watches. Mr$.$ Gert Verstappen, the CEO, was given two market entry strategies for Radilux$$s foray into India by the VP of Marketing, Mr$.$ Leon Jennings. According to Leon$$s initial market studies, the watch market in A$-$ and B$-$grade cities was estimated to be around $30$ crores and $20$ crores, respectively; of this, the share of Swiss watches was around $60\%.$ The survey carried out by Leon suggested that Radilux, with its strong Swiss heritage, brand image and recall, would be able to garner a $20\%$ share of the market share of Swiss watches.

Strategy A: Radilux had the option of going with a franchisee model, which meant that the franchisee owner shared the risk of the venture along with Radilux. This approach involved a much smaller capital outlay, but on the other hand, it also meant that the profits would be shared! Leon believed that Radilux should restrict its franchisee operations to $5$ A$-$grade cities and $10$ B$-$grade cities $($the classification was based on market size$).$ The franchisee fee was set as six lacs for an A$-$grade city and four lacs for a B$-$grade city. The fixed costs in establishing the outlet were expected to be around $100$ lacs irrespective of the classification of the city $($on account of the look and feel that the store was expected to have as per Radilux$$s standard benchmarks$)$ and the variable cost involved in running the business was expected to be around $50$ lacs & $30$ lacs per year for A and B grade cities respectively. The

franchisees had to transfer $20\%$ of the profits earned to Radilux as royalty. The profit margin on selling the Radix label is $30\%$ of the expected revenues.

Strategy B: Radilux had the option of opening its own stores, and the fixed costs and variable costs are the same as those in Strategy A$.$ However, Radilux would incur a very heavy capital expenditure, and the manpower requirements to run the business would increase manifold. However, on the flip side, Radilux would enjoy $100\%$ of the profits as it need not share this with any franchisee.

The CEO of the Indian operation, Vivek Ghosh, who earlier headed the Marketing function of the European operations of Radilux, was not convinced of the quality of the Radix label and feared that this would not be accepted in India. He had conveyed his fears to Leon and wanted him to speak to the top management and convince them to launch the Dicora range of premium segment watches instead of the Radix range.

Participants Task: As a consultant, you must advise Mr Vivek to either

$1.$Convince Gert Verstappen to launch the Dicora range

$2.$Go with Leon's research, which suggested that Radix would garner a significant market share.

Provide suitable assumptions for choosing either of the strategies

Provide a basic layout for selecting that strategy and articulate any further improvements, if required.