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strategy adopted by mnc to cope wid indian brand

  3. 3. CHAPTER -1 Rationale for the Study 6
  4. 4. India is one of the world‘s most promising and fastest-growing economies. Many MNCsentered to cash in on the exciting opportunities there. But overall, they have had a mixedperformance. Many, who were remarkably successful elsewhere, have failed or are yet tosucceed. Indian market poses special challenges due to its heterogeneity, in terms ofeconomic development, income, religion, cultural mix and tastes. On top is the heatingcompetition among local players as well as the leading MNCs. Not all companies havebeen struggling to understand Indian consumer behaviour. Doing business in India is at aturning point; market entry strategies, for example, that clicked once do not promisesuccess every time. Success in India will not happen overnight; companies need to havean open mind. This requires commitment, management drive and focus on long-termobjectives, and proper business models too. They have to invest substantial financial andmanagerial resources to understand customer‘s needs and come up with suitable products.OPPI Global Sourcing Committee chairperson Alok Sonig said ―In the Indian context,working successfully with global sourcing players involves deeper understanding of Indiaaround three broad areas - capability, capacity and culture"UN Secretory Kofi Annan said ―We must ensure that the global market is embedded inbroadly shared values and practices that reflect global social needs, and that all theworld‘s people share the benefits of globalization‖As more Indian companies push ahead with their aggressive global growth strategies,many middle and senior management personnel in these organizations are faced withsignificant challenges. They have to ―go global and take charge‖ in a very short time, andlearn how to manage complex businesses on a global scale. They need to acquire themanagerial skills needed to deal with varied customer needs and diverse competitiveforces; learn to work with team members from different cultural backgrounds; and alsolearn how to manage the companies that have been acquired through the M&A (i.e.mergers and acquisitions) route.For the company to compete with established globalbrands, it requires a deep understanding of local customers‘ needs in different markets,and significant investments in brand building over long periods of time. 7
  5. 5. CHAPTER -2 Objective of the Study 8
  6. 6. 2.1 Project Title:STRATEGIES ADOPTED BY MNC’S TO COPE WITH INDIAN BRANDS2.2 Objective of project:Primary objective MNC need to meet the challenges of global efficiency MNC need to meet the challenges of multinational flexibility MNC need to meet the challenges of world-wide learning Macro-economic factors such as wars interest wage rates exchange rates Secondary objectives Can be enhanced both by increasing revenues by lowering costs Scope Economies. The ability of a company to manage the risks exploit the opportunities that arise from the diversity volatility of the global environment Responses of competitors in the host market Resources including natural financial HR 2.3 Scopes: Very presence of MNCs in diverse national environments creates opportunities for worldwide learning Global integration of activities allows firms to realize Economies of Scale (EoS) scope hence leads to lower cost Multinational flexibility Policy actions of national governments such as expropriation changes in exchange 9
  8. 8. INTRODUCTION to STRATEGIC MANAGEMENTWhat is Strategy?The term ‗strategy‘ proliferates in discussions of business. Scholars and consultants haveprovided myriad models and frameworks for analysing strategic choice (Hambrick andFredrickson, 2001). For us, the key issue that should unite all discussion of strategy is aclear sense of an organization‘s objectives and a sense of how it will achieve theseobjectives. It is also important that the organization has a clear sense of itsdistinctiveness. For the leading strategy guru, Michael Porter (1996), strategy is aboutachieving competitive advantage through being different – delivering a unique valueadded to the customer, having a clear and enact able view of how to position yourselfuniquely in your industry, for example, in the ways in which Southwest Airlines positionsitself in the airline industry and IKEA in furniture retailing, in the way that Marks &Spencer used to. To enact a successful strategy requires that there is fit among acompany‘s activities, that they complement each other and that they deliver value to thefirm and its customers. The three companies we have just mentioned illustrate thatindustries are fluid and that success is not guaranteed. Two of the firms came toprominence by taking on industry incumbents and developing new value propositions.The third was extremely successful and lost this position. While there is much debate onsubstance, there is agreement that strategy is concerned with the match betweencompanies Capability and its external environment. Analysts disagree on how this maybe done. John Kay (2000) argues that strategy is no longer about planning or ‗visioning‘– because we are deluded if we think we can predict or, worse, control the future – it isabout using careful analysis to understand and influence a company‘s position in themarket place. Another leading strategy guru, Gary Hamel (2000), argues that the beststrategy is geared towards radical change and creating a new vision of the future in whichyou are a leader rather than a follower of trends set by others. According to Hamel,winning strategy = foresight + vision. 11
  9. 9. Two Approaches to StrategyThe idea of strategy has received increasing attention in the management literature. Theliterature on strategy is now voluminous and strategic management texts grow ever largerto include all the relevant material. In this book our aim is not to cover the whole area ofstrategy – that would require yet another mammoth tome – but to present a clear, logicaland succinct approach to the subject that will be of use to the practising manager. We donot attempt a summary of the field; rather we present what we see as a useful frameworkfor analysing strategic problems based on our own experience of teaching the subject on avariety of courses and to a variety of audiences over the years. Our premise is that a firmneeds a well defined sense of its mission, its unique place in its environment and scopeand direction of growth. Such a sense of mission defines the firm‘s strategy. A firm alsoneeds an approach to management itself that will harness the internal energies of theorganization to the realization of its mission. Historically, views of strategy fall into twocamps. There are those who equate strategy with planning. According to this perspective,information is gathered, sifted and analysed, forecasts are made, and senior managersreflect upon the work of the planning department and decide what the best course for theorganization is. This is a top-down approach to strategy. Others have a less structuredview of strategy as being more about the process of management. According to thissecond perspective, the key strategic issue is to put in place a system of management thatwill facilitate the capability of the organization to respond to an environment that isessentially unknowable, unpredictable and, therefore, not amenable to a planningapproach. We will consider both these views in this textElements of StrategyDefinitions of strategy have their roots in military strategy, which defines itself in termsof drafting the plan of war, shaping individual campaigns and, within these, deciding onindividual engagements (battles/skirmishes) with the enemy. Strategy in this militarysense is the art of war, or, more precisely, the art of the general – the key decision maker. 12
  10. 10. The analogy with business is that business too is on a war footing as competitionbecomes more and more fierce and survival more problematic. Companies and armieshave much in common. They both, for example, pursue strategies of deterrence, offence,defence and alliance. One can think of a well developed business strategy in terms ofprobing opponents‘ weaknesses; withdrawing to consider how to act, given theknowledge of the opposition generated by such probing; forcing opponents to stretchtheir resources; concentrating one‘s own resources to attack an opponent‘s exposedposition; overwhelming selected markets or market segments; establishing a leadershipposition of dominance in certain markets; then regrouping one‘s resources, decidingwhere to make the next thrust; then expanding from the base thus created to dominate abroader area. Strategic thinking has been much influenced by military thinking about ‗thestrategy hierarchy‘ of goals, policies and programmes. Strategy itself sets the agenda forfuture action, strategic goals state what is to be achieved and when (but not how), policiesset the guidelines and limits for permissible action in pursuit of the strategic goals, andprogrammes specify the step-by-step sequence of actions necessary to achieve majorobjectives and the timetable against which progress can be measured. A well definedstrategy integrates an organization‘s major plans, objectives, policies and programmesand commitments into a cohesive whole. It marshals and allocates limited resources inthe best way, which is defined by an analysis of a firm‘s unique strengths and weaknessesand of opportunities and threats in the environment. It considers how to deal with thepotential actions of intelligent opponents. Management is defined both in terms of itsfunction as those activities that serve to ensure that the basic objectives of the enterprise,as set by the strategy, are achieved, and as a group of senior employees responsible forperforming this function. Our working definition of strategic management is as follows:all that is necessary to position the firm a way that will assure its long-term survival in acompetitive environment. A strategy is an organization‘s way of saying how it createsunique value and thus attracts the custom that is its lifeblood. 13
  11. 11. Our Model of StrategyOur working model of the strategic management process is set out in figure 1.1. This is amodel that works for us in terms of organizing our thinking about strategy and ourattempts to understand the strategic issues facing particular firms. We do not suggest thatit is the only model that is useful or that this is the best. (We just think it is!) Hopefully,in the course of your reading of this book, and other work on the subject, you will becritically analysing the various models suggested and the concepts upon which they rest.You may come to this text with your own model, developed out of your own experience.We suggest that you try working with our model and examine the extent to which itcomplements or contradicts your own and others. The result of such a critical appraisalwill be a model with which you are comfortable and find useful in practice. If you feelthat the model you develop is far superior to our own, please tell us about it! Remember,there is no one a best answer in strategic management. If a firm chooses a particularstrategic direction and it works in the way that very successful firms like IBM or, on asmaller scale, Body Shop have, the fact that it is successful does not mean that the choiceof strategy was optimal, that it was the best. Another strategic decision might have led toeven greater success. Conversely, if a firm makes a choice that leads to disaster, this doesnot necessarily mean that it could have made a better choice (though, with better decisionmaking, it hopefully could have done). The environmental conditions in its industrymight have been such that this was the best choice, but that no choice, given its size orhistory, or the power of its competitors, could have changed its fate. We will now explainour model, which provides the basis of subsequent chapters. Current strategy (italicsindicate terms in the model) has its roots in the strategic history of a firm and itsmanagement and employees. We mention both management and employees here because,though in many cases senior management is the source of strategic decisions, it is theemployees at the point of production or delivery of a product or service who areresponsible for the actual implementation of a strategy. They can take this decision in twoways. In a proactive sense they can scan their environment and the potential for change 14
  12. 12. within their own organization and decide that to carry on doing what they are doing andwhat they are good at is the best way to face the future. In a less active, and far lesssatisfactory, way they can proceed on the basis of tradition – ‗This is the way we havealways done it. It has worked so far. That‘s good enough for us‘ – or inertia. Ormanagement may decide that change is necessary. Again this can come about in a varietyof ways. They may scan their environment and decide that there are major changesoccurring in their business world to which they have to adapt. Or they might decide,through internal analysis, that they have the ability to develop a new way of doingbusiness that will redefine the nature of the business they are in. Another stimulus tochange can be the new manager appointed to a senior position that wants to leave his orher mark on the company and changes strategy primarily for this self-centred reason. Figure 1.1 The strategic management process 15
  13. 13. If change is the order of the day, then two issues need to be addressed: environmental(external) analysis and organizational (internal) analysis. (Remember, this is the idealway of proceeding. In practice, managers may adopt only a partial solution and analyseonly external or internal factors.) For a change of strategy to work there must bealignment between internal capability and external opportunity. This is described as‗strategic fit‘. The ideal situation is where there is a fit between the environments, abusiness need arising out of that environment that is strongly felt by a firm that has thesense of purpose (mission) and a management system that enables it to respond to thisneed with a coherent and practicable strategy. The potential to act in this way dependsupon managerial judgement, managerial skill to exploit windows of opportunity andmanagement ability to motivate other employees to support and commit themselves to thefirm‘s new strategic objectives. The analysis of the environment can be segmented intofour interactive elements. There is the issue of the firm‘s general environment, the broadenvironment comprising a mix of general factors such as social and political issues. Thenthere is the firm‘s operating environment, its more specific industry/businessenvironment. What kind of industry is the firm competing in? What ‗forces‘ make up its‗industry structure‘? Having examined its business environment, the issue then arises:how is the firm to compete in its industry? What is to be the unique source of itscompetitive positioning that will give it an edge over its competitors? Will it go for abroad market position, competing on a variety of fronts, or will it look for niches? Will itcompete on the basis of cost or on the basis of added value, differentiating its productsand charging a premium? What the range is of options that managers have to choosefrom? How are they to prioritize between these options? Does the company have strategicvision, a strong sense of mission, and a ‗reason for being‘ that distinguishes it fromothers? If change is necessary, what is to be the firm‘s direction for development? Havingidentified the major forces affecting its environment how is the firm to approach thefuture? Organizational analysis can also be thought of as fourfold. How is the firmorganized? What is the structure of the organization, who reports to whom, how are thetasks defined, divided and integrated? How do the management systems work, the 16
  14. 14. processes that determine how the organization gets things done from day to day – forexample, information systems, capital budgeting systems, performance measurementsystems, quality systems? What do organizational members believe in, what are theytrying to achieve, what motivates them, what do they value? What is the culture of theorganization? What are the basic beliefs of organizational members? Do they have ashared set of beliefs about how to proceed, about where they are going, about how theyshould behave? We know, thanks to Peters and Waterman‘s In Search of Excellence thatthe basic values, assumptions and ideologies (systems of belief) which guide and fashionbehaviour in organizations have a crucial role to play in business success (or failure).What resources does the organization have at its disposal – for example, capital,technology, and people? Management‘s role is to try to ‗fit‘ the analysis of externalitiesand internalities, to balance the organization‘s strengths and weaknesses in the light ofenvironmental opportunities and threats. A concept that bridges internal and externalanalyses is that of stakeholders, the key groups whose legitimate interests have to beborne in mind when taking strategic decisions.The Growth VectorStrategic management involves decisions concerning what a company might do, giventhe opportunities in its environment; what it can do, given the resources at its disposal;what it wants to do, given the personal values and aspirations of key decision makers; andwhat it should do, given the ethical and legal context in which it is operating. A firmneeds a well defined sense of where it is going in the future and a firm concept of thebusiness it is in. We can think of these in terms of the firm‘s ‗product–market scope‘ and‗growth vector‘. This specifies the particular products or services of the firm and themarket(s) it is seeking to serve. A firm‘s ‗growth vector‘ defines the direction in whichthe firm is moving with respect to its current product–market scope. The key componentsof the ‗growth vector‘ are set out in figure 1.2. One qualification is necessary here. Theuse of the growth 17
  15. 15. Figure 1.2 Product, mission and market choices.Source: adapted from Ansoff (1965) vector assumes that the firm is indeed growing. Thisis obviously not always the case, and strategic decision making may therefore involve‗downsizing‘ and withdrawal from some areas of business The growth vector illustratesthe key decisions concerning the directions in which a firm may choose to develop.Market penetration comes about when the firm chooses as its strategy to increase itsmarket share for its present product markets. If the firm pursues product development itsets out to develop new products to complement or replace its current offerings whilestaying in the same markets. It retains its current mission in the sense of continuing toattempt to satisfy the same or related consumer needs In market development the firmsearches for new markets with its existing products. If a strategy of diversification ischosen, the firm has decided that its product range and market scope are no longeradequate, and it actively seeks to develop new kinds of products for new kinds ofmarkets. Let us illustrate the growth vector with an example concerning product–market 18
  16. 16. strategy options in retailing. A retailing firm might decide to consolidate its position in itscurrent markets by going for increased market share, perhaps through increasedadvertising. It might choose to develop new markets, perhaps expanding geographicallyinto other areas, or even overseas, but retaining its current product range. It might chooseto develop new retail products but stay in the same line of business – for example,increase its product range in clothing. It might choose to redefine the nature of theseproducts. For example, the running shoe market was radically altered and expanded byredefining running shoes as leisure items, not merely as sports equipment. Finally, thefirm might choose to move into totally different areas of business, for example, intofinancial services, as Marks & Spencer has done. Figure 1.3 Retailing product–market strategy options. By Knee andWalters (1985)The range of product–market strategy options in retailing is illustrated in figure1.3.Governing the choice between strategic options should be the notion of competitive 19
  17. 17. advantage. The firm has to identify unique opportunities for itself in its chosen area(s). Ithas to identify particular characteristics within its approach to individual product–marketswhich will give it a strong competitive position. It might go for a large market share thatwould enable it to dominate particular markets and define the conditions of competitionin them, for instance, as regards pricing policy. It might pursue technological dominance,looking for breakthrough products or a new manufacturing technology that would give ita technological edge over the competition, as Pilkington did, for example, with itsdevelopment of the process for manufacturing float glass, which formed the foundationof the company‘s subsequent success. It might go for a better quality of product andservice. In the automobile industry, Japanese manufacturers have rewritten the rules ofthe game regarding the quality of products and thus revolutionized consumerexpectations. In the process they have made major inroads into Western marketshistorically dominated by Western firms. Or the firm might choose to combine some ofthese, as Sainsbury‘s has done with its ‗good food‘ that ‗costs less‘, an approachcombining a low-cost advantage with a quality position in the world of supermarkets.Mission StatementsThe concept of mission has become increasingly fashionable in discussions of strategy.Indeed, some analysts go as far as asserting that a good ‗mission statement‘ can providean actual worthwhile alternative to the whole task of corporate planning. The definitionof a firm‘s strategic mission encapsulated in the mission statement can be thought of asthe first stage of the strategy process A firm‘s mission should be clear and concise anddistinguish it from any other firm. The mission statement has to be backed up withspecific objectives and strategies, but these objectives and strategies are far more likely tobe acted upon when there is a clear sense of mission informing action. A good missionstatement will contain the following:• The purpose of the organization – a statement of the principal activities of a business ororganization; 20
  18. 18. • Its principal business aims – its mission as regards the position it aims to achieve in itschosen business;• The key beliefs and values of the company;• Definitions of who are the major stakeholders in the business;• The guiding principles that define the code of conduct that tells employees how tobehave.Drucker illustrates the importance of a sense of mission with his story of three peopleworking on a building site. All three were doing the same job but when asked what theirjob was gave very different answers. One answered, ‗Breaking rocks,‘ another answered,‗Earning a living,‘ the third answered. ‗Helping to build a cathedral.‘ There is a similarstory told about three climbers. When asked what they were doing, one answered,‗Pitching camp,‘ the second answered, ‗Collecting material for a film,‘ the thirdanswered, ‗Climbing Everest.‘ There are no prizes for deciding who was most committedto his/her task and who would be most motivated to perform to the best of his/her ability.There are four approaches to setting a mission (Collins and Porras, 1991):• Targeting. Setting a clear, definable target for the organization to aim at, such as themoon (the NASA moon mission statement!), financial/growth targets or standards ofexcellence in product markets.• Focusing on a common enemy. Defeat of the common enemy guides strategic choice,e.g. Pepsi‘s ‗Beat Coke‘, Honda‘s ‗Crush, squash, slaughter‘ Yamaha, Nike‘s attack onAdidas. Honda was so successful in its mission that Yamaha actually made a publicapology for its claim that it would defeat Honda.• Internal transformation. Used by older organizations faced with the need for radicalchange. This kind of mission has as its starting point the admission that its currentmission is out of tune with the new realities it is facing. 21
  19. 19. CHAPTER -4company‘s profile 22
  20. 20. Samsung History -Unlike other electronic companies Samsung origins were not involving electronics butother products.In 1938 the Samsungs founder Byung- Chull Lee set up a trade exportcompany in Korea, selling fish, vegetables, and fruit to China. Within a decade Samsunghad flour mills and confectionary machines and became a co-operation in 1951.From 1958 onwards Samsung began to expand into other industries such as financial,media, chemicals and ship building throughout the 1970s. In 1969, Samsung Electronicswas established producing what Samsung is most famous for, Televisions, MobilePhones (throughout 90s), Radios, Computer components and other electronics devices.1987 founder and chairman, Byung-Chull Lee passed away and Kun-Hee Lee took overas chairman. In the 1990s Samsung began to expand globally building factories in theUS, Britain, Germany, Thailand, Mexico, Spain and China until 1997.In 1997 nearly all Korean businesses shrunk in size and Samsung was no exception. Theysold businesses to relieve debt and cut employees down lowering personnel by 50,000.But thanks to the electronic industry they managed to curb this and continue to grow.Thehistory of Samsung and mobile phones stretches back to over 10 years. In 1993 Samsungdeveloped the lightest mobile phone of its era. The SCH-800 and it was available onCDMA networks. 23
  21. 21. Then they developed smart phones and a phone combined mp3 player towards the end ofthe 20th century. To this date Samsung are dedicated to the 3G industry. Making video,camera phones at a speed to keep up with consumer demand. Samsung has made steadygrowth in the mobile industry and are currently second but competitor Nokia is aheadwith more than 100% increase in shares. Introduction of Samsung –Samsung is known globally for its electronic products and it is one of the successfulbrands in the electronic industry. It is an established company almost all around theworld. Samsung Electronics is a South Korean multinational electronics and informationtechnology company headquartered in Samsung Town, Seoul. It is the flagship subsidiaryof the Samsung Group. With assembly plants and sales networks in 61 countries acrossthe world, Samsung has approximately 160,000 employees. 24
  22. 22. In 2009, the company took the position of the world‘s biggest IT maker by surpassing theprevious leader Hewlett-Packard. Its sales revenue in the areas of LCD and LED displaysand memory chips is number one in the world.In the TV segment, Samsung‘s marketposition is dominant. For the five years since 2006, the company has been in the top spotin terms of the number of TVs sold, which is expected to continue in 2010 and beyond. Inthe global LCD panel market, the company has kept the leading position for eight yearsin a row.With the Galaxy S model mobile phone, Samsung‘s Smartphone line-up has retained thesecond-best slot in the world market for some time. In competition to Apples ipad tablet,Samsung released the Android powered Samsung Galaxy Tablet.The Samsung Philosophy -At Samsung, we follow a simple business philosophy: to devote our talent andtechnology to creating superior products and services that contribute to a better globalsociety.Every day, our people bring this philosophy to life. Our leaders search for the brightesttalent from around the world, and give them the resources they need to be the best at whatthey do. The result is that all of our products—from memory chips that help businessesstore vital knowledge to mobile phones that connect people across continents— have thepower to enrich lives. And that‘s what making a better global society all is about. 25
  23. 23. Company’s Values -We believe that living by strong values is the key to good business. At Samsung, arigorous code of conduct and these core values are at the heart of every decision wemake. PeopleQuite simply, a company is its people. At Samsung, we‘re dedicated to giving our peoplea wealth of opportunities to reach their full potential. ExcellenceEverything we do at Samsung is driven by an unyielding passion for excellence—and anunfaltering commitment to develop the best products and services on the market. ChangeIn today‘s fast-paced global economy, change is constant and innovation is critical to acompany‘s survival. As we have done for 70 years, we set our sights on the future,anticipating market needs and demands so we can steer our company toward long-termsuccess. 26
  24. 24. IntegrityOperating in an ethical way is the foundation of our business. Everything we do is guidedby a moral compass that ensures fairness, respect for all stakeholders and completetransparency. Co-prosperityA business cannot be successful unless it creates prosperity and opportunity for others.Samsung is dedicated to being a socially and environmentally responsible corporatecitizen in every community where we operate around the globe. Figure 1.4 Samsung Company’s Values 27
  25. 25. Vision 2020 -As stated in its new motto, Samsung Electronics vision for the new decade is, "Inspirethe World, Create the Future."This new vision reflects Samsung Electronics‘commitment to inspiring its communities by leveraging Samsungs three key strengths:―New Technology,‖ ―Innovative Products,‖ and ―Creative Solutions.‖ -- And topromoting new value for Samsungs core networks -- Industry, Partners, and Employees.Through these efforts, Samsung hopes to contribute to a better world and a richerexperience for all.As part of this vision, Samsung has mapped out a specific plan of reaching $400 billionin revenue and becoming one of the world‘s top five brands by 2020. To this end,Samsung has also established three strategic approaches in its management: ―Creativity,‖―Partnership,‖ and ―Talent.‖ Figure 1.5 vision of the company 28
  26. 26. Samsung is excited about the future. As we build on our previous accomplishments, welook forward to exploring new territories, including health, medicine, and biotechnology.Samsung is committed to being a creative leader in new markets and becoming a trulyNo. 1 business going forward.Samsung Profile 2011 -At Samsung our gaze is cast forward, beyond the next quarter or the next year, ahead intoareas unknown. By charting a course toward new businesses and new challenges, we aresowing seeds for future success. Figure 1.6 Samsung Profile 29
  27. 27. 2011 Financial Highlights - [Amounts in billions]* AMOUNTS IN BILLIONS WON DOLLARS EUROS Net Sales* 254,561.5 220.1 165.9 Total Assets 391,391.9 343.7 258.7 Total Liabilities 230,688.5 202.6 152.5 Total Stockholders Equity 160,693.5 141.1 106.2 Net Income* 24,497.9 21.2 16.0 Table 1.1 Financial HighlightsSWOT Analysis of Samsung  Strengths:• New bogus appurtenances abstraction to rollout in 5 months.• Communicable the beating of the buyer, present acceptable designs & acceptingemotions.• Heavy asset in technology, artefact architecture and staff.  Weaknesses:• Lack in artefact separation.• Different models at assorted amount points.• Centermost on accumulation bazaar instead of alcove markets.• Not actual user affable design.  Opportunities:• Differentiate its account from competitors.• Offer artefact variation• crave for corpuscle phones apprenticed by the account provider or carriers.• Affordability by 43%.  Threats: 30
  28. 28. • Motorolas baby minding in the U.S market, Nokias acceptance in the Pakistani market,artful added than bisected of the apple market.• Agitated competitor, including Sony Ericsson and Siemens bistro into its share.• Not befitting clue of the new trend in the market.• Not an appearance accent and appearance statement Strategies of Samsung -Product Innovation -Samsungs product range in India included CTVs, audio and video products, informationtechnology products, mobile phones and home appliances. Its product range covered allthe categories in the consumer electronics and home appliances. Analysts felt that thewide product range of Samsung was one of main reasons for its success in the Indianmarket. Samsung positioned itself on the technology platform.Pricing -Pricing also seemed to have played a significant role in Samsungs success.Distribution -Along with the launch of new products, Samsung also consolidated its distributionsystem. Samsung had 18 state-level distribution offices and a direct dealer interface. Thedirect dealer interface helped the company get quick feedback from dealers, and enabledit to launch products according to consumer needs.Advertising and Sales Promotion -In 1995, when Samsung entered India, it realized that Indian consumers were not familiarwith the company. So, in order to establish itself in the Indian consumers ‗mind,Samsung launched corporate advertisements highlighting its technologically superiorgoods.The Making of a Global Brand -In 1993, as a first step in its globalization drive, Samsung acquired a new corporateidentity. It changed its logo and that of the group. In the new logo, the words SamsungElectronics were written in white color on blue color background to represent stability, 31
  29. 29. reliability and warmth. The words Samsung Electronics were written in English so thatthey would be easy to read and remember worldwide. The logo was shaped ellipticalrepresenting a moving world - symbolizing advancement and change.Advertising and Promotional Strategies -In 1997, Samsung launched its first corporate advertising campaign - Nobel Prize Series.This ad was aired in nine languages across Europe, the Middle East, South America andCIS countries. The advertisement showed a man (representing a Nobel Prize Laureate)passing from one scene to another. As the man passes through different scenes, Samsungproducts transform into more advanced models. According to company sources, the idea wasto convey the message that Samsung uses Nobel Prize Laureates ideas for making its products.Samsung Electronics: Innovation and Design Strategy -In January 2008, Samsung Electronics won 32 innovation and design engineering awardsat the Consumer Electronics Show. This is a management strategy case that exploresproduct design, innovation strategies and strategic planning in a changing competitivelandscape. While investment in R&D and product design has rewarded SamsungElectronics with its dominant market position and premium brand perception, suchdominance may not be sustainable in the long run, especially now that competitors areachieving higher profitability with lower investments in R&D per product. The case alsodiscusses such issues as product design philosophies, innovation strategies, localizationof products, product design outsourcing for consumer electronics products.Design strategy –Design strategy is a discipline which helps firms determine what to make and do, why doit and how to innovate contextually, both immediately and over the long term. Thisprocess involves the interplay between design and business strategy, forming a systematicapproach integrating holistic-thinking, research methods used to inform business strategyand strategic planning which provides a context for design. While not always required,design strategy often uses social research methods to help ground the results and mitigate 32
  30. 30. the risk of any course of action. The approach has proved useful for companies in avariety of strategic scenarios.Samsungs Plan to Strengthen Its Weaknesses -The global cell phone business has been in a funk lately, with handset sales off 11% thisyear—a serious downshift from the double-digit expansion of recent times. SamsungElectronics, though, has bucked the trend, boosting sales 7% in 2009 without denting its10% profit margins. That has helped the Korean giant increase its worldwide marketshare to 19% and cement its position as the No. 2 player globally, behind Nokia, with38%. Samsungs reaction to the good news? "We have a long way to go," says J.K. Shin,the companys new handset business chief. Sure, theres a big dose of traditional Korean modesty in Shins fretting. But whileSamsung is the top brand in the U.S., Shin is worried that the company remains a laggard in two key segments: high-end smart phones and ultra cheap models for developingcountries. In smart phones, Samsung has just 3.5% of a world market thats likely to grow31% this year, according to researcher Strategy Analytics. At the low end, Samsung stilltrails Nokia badly. In India, its share is less than 10%, vs. Nokias 58%. And of the 150 or so new models Samsung will introduce this year, only a half-dozen cost less than $100. Samsungs Marketing Strategy in India -Samsung entered India in December 1995 as a 51:49 joint venture with ReasonableComputer Solutions Pvt Ltd (RCSPL), owned by Venugopal Dhoot of the Videocongroup. In 1998, RCSPL diluted its stake in Samsung to 26% and in November 2002, theFIPB cleared Samsungs proposal to buy RCSPLs remaining (23%) stake.In 2002, Samsung established manufacturing facilities for colour televisions, microwaveovens, washing machines and air conditioners at Noida, Uttar Pradesh. It also had a 33
  31. 31. presence in consumer electronics, information technology products, mobile phones andhome appliances. Samsungs flagship businesses were consumer electronics and homeappliances, which contributed more than 60% of its revenues.In 2002, Samsung reported sales of Rs.170 million with 26% growth over the previousyear. Its consumer electronics business grew by 29% and contributed 60% to the totalsales, and its home appliances division grew by 21%, contributing 40 % of the total sales.Energy Management Strategy -Samsung Electronics has adopted various measures such as high-efficiency facilities,energy management systems and training programs for employees to reduce energyconsumption across all operations. We also plan to introduce an energy certificationprogram for new facilities and buildings from 2010.The company established a working group for energy management which meets everytwo months to share best practices for energy saving and management throughout allbusiness divisions. These activities encourage facilities to set up highly energy efficientequipment and technologies; low-power vacuum pump technology, energy efficient waterhumidification systems, and energy efficient process optimization, etc. We are alsocommitted to enhancing employees awareness through diverse training, promotions andincentive programs to facilitate energy saving activities at workplaces. 34
  32. 32. Compliance Management Strategy -Samsung Electronics has established a new compliance system to prevent and minimizebusiness risks associated with issues such as collusion and violation of intellectualproperty rights. We have instituted a compliance program that includes preemptive andyear-round training, control and supervision in order to ensure adherence to pertinentlaws by the company and all employees and mitigate risks related to violation of laws andregulations. Our compliance activities are broadly classified into prevention, monitoringand follow-up processes. Prevention activities include employee education, distributionof manuals on compliance, system-based self-inspections, and operation of a help desk torespond to questions on compliance matters. We also keep up to date with theintroduction and revision of various laws and regulations. There is a separate teamdedicated to monitoring activities. After dealing with a compliance issue, we analyze therelated process and outcome to find the fundamental cause and pursue improvementmeasures. Real life examples are used in training programs as a way of preventingrecurrence of any compliance problems that arise.Climate Strategy -Samsung Electronics has been establishing corporate-level strategies to address its directand indirect impact on climate change. Through this, Samsung strives to reduce directand indirect emissions of greenhouse gases and prevent potential risks by carrying outinitiatives in voluntary GHG reduction and the development of an inventory.Samsungs strategy pressures competitors –Samsung Electronics Co. Ltd is piling on the pressure in the second quarter with a floodof investments— approximately Rs.28,226.70 crore (7.3 trillion Korean won or $7billion)—migrating into advanced geometries to further reduce costs and proposing ahefty 100 per cent jump in DRAM bit shipment and 130 per cent for NAND memorycomponents.Despite this, Samsung executives speak little about boosting depressed 35
  33. 33. DRAM average selling price. That goal, which they admit will benefit the entire memorycomponent market and is critical to profitability in the embattled sector, will come later."We plan to make massive investments and try to expand our market share throughimplementation of aggressive investment plans and migration into advanced geometry,"said Yeongho Kang, vice president of the semiconductor business at Samsung, in apresentation to the investment community following the release of the companys firstquarter results."We will accelerate our efforts to strengthen our competitive edge and continue to widenthe gap with our competitors to achieve further growth and profitability," added Kang.Blue Ocean Strategy (BOS) – Samsung Electronics 2006-2010 -Value Innovation, first component of Blue Ocean Strategy is Samsung‘s primary tool forproduct development. Value Innovation Program centre was started in 1998 and by 2004the centre was playing a very key role in rapid growth of Samsung to become the world‘stop consumer electronics company. Many cross-functional Blue Ocean project teamswere at work, and had ingrained the approach in the corporate culture with an annualconference presided over by their entire top management. One of the key successes ofVIP centre was, within five years of entering the mobile phone market, in 2003 Samsunghas become the No2 player in the mobile phones market.Samsung BOS strategy has also helped it to maintain top position in TV market (since2006-2010), Global; LCD panel market since 2002. BOS is still at the core of theSamsung product strategy and company has been able to make the necessary adaptationsaccording to the business environment and changing consumer preferences. In 2006Samsung launched Market Driven Change (MDC) where its focus was on the consumerinsights and how to develop better and new products using consumer insights. One of thesuccessful results of the MDC was Flat panel LCD TV Bordeaux. This TV has played acrucial role in Samsung overtaking Sony in the LCD market. In 2007 Samsung keeping 36
  34. 34. focus of teenager customers has launched a store in the Second Life Site. The virtualspace will be used to showcase range of mobile handsets to teenagers the future consumergroup, in a competition-less way.2008 has been a tough year for Samsung as the Chairman of the group was indicted andforced to resign on tax evasion charges. Samsung also failed to acquire SanDisk, the flashmemory giant. Fall in sales of microchips and TVs has hit the company badly due torecession. Early 2009 Samsung merged its LCD (liquid crystal display) andsemiconductor business into one business unit called Device Solution Business. It is alsomerged its digital media and its telecommunications business into one business unit,called Digital Media & Communications Business. Samsung launched green managementinitiative that is intended to make Samsung a leading eco-friendly company by 2013. TheEco-Management 2013 plan seeks to reduce greenhouse gas emissions frommanufacturing facilities by 50 percent, and to reduce indirect greenhouse gas emissionsfrom all products by 84 million tons over five years.2009 also saw Samsung enter into Mobile OS market with launch of its own open mobileoperating system, called "bada," which can be used to develop applications for Samsungphones. Samsung launched mobile phones Wave based on Bada platform along with itsfirst smart phone on Google‘s Android platform – Samsung Galaxy. The company plansto bring down smart phone prices significantly. Samsung launched 3D LED TVs and at apremium pricing and changing the home entertainment experience from 2-D to 3D.2010 saw Samsung launching a a new tablet PC named Galaxy Tab as the latest devicemeant to rival Apple Inc.s popular iPad. Samsung is still innovating in a big way and itstill relies on a basic assessment: product‘s competitiveness is everything, and it must bekept away from price wars. 37
  35. 35. CHAPTER -5Marketing Strategies and Progremmes adopted by mnc’s in india according to Indian Culture 38
  36. 36. Introduction of MNCAbout Multinational CompaniesAs the name suggests, any company is referred to as a multinational company orcorporation (M. N. C.) when that company manages its operation or production or servicedelivery from more than a single country.Such a company is even known as internationalcompany or corporation. As defined by I. L. O. or the International Labor Organization, aM. N. C. is one, which has its operational headquarters based in one country with severalother operating branches in different other countries. The country where the head quarteris located is called the home country whereas; the other countries with operationalbranches are called the host countries. Apart from playing an important role inglobalization and international relations, these multinational companies even havenotable influence in a countrys economy as well as the world economy. The budget ofsome of the M. N. C.s are so high that at times they even exceed the G. D. P. (GrossDomestic Product) of a nation.These are not the sole prior causes of the Nokia, Vodafone, Fiat, Ford Motors and as thelist moves on- to flourish in India. As the basic economic data suggest that after theliberalization in 1991, it has brought in hosts of foreign companies in India and the shareof U.S shows the highest. They account about 37% of the turnover from top 20companies that function in India.Why are Multinational Companies in India?There are a number of reasons why the multinational companies are coming down toIndia. India has got a huge market. It has also got one of the fastest growing economies inthe world. Besides, the policy of the government towards FDI has also played a majorrole in attracting the multinational companies in India.For quite a long time, India had arestrictive policy in terms of foreign direct investment. As a result, there was lesser 39
  37. 37. number of companies that showed interest in investing in Indian market. However, thescenario changed during the financial liberalization of the country, especially after 1991.Government, nowadays, makes continuous efforts to attract foreign investments byrelaxing many of its policies. As a result, a number of multinational companies haveshown interest in Indian market.Profit of MNCs in IndiaIt is too specify that the companies come and settle in India to earn profit. A companyenlarges its jurisdiction of work beyond its native place when they get a wide scope toearn a profit and such is the case of the MNCs that have flourished here. More over Indiahas wide market for different and new goods and services due to the ever increasingpopulation and the varying consumer taste. The government FDI policies have somehowbenefited them and drawn their attention too. The restrictive policies that stopped thecompanys inflow are however withdrawn and the country has shown much interest tobring in foreign investment here. Besides the foreign directive policies the labourcompetitive market, market competition and the macro-economic stability are some ofthe key factors that magnetize the foreign MNCs here.Following are the reasons why multinational companies consider India as a preferreddestination for business: * Huge market potential of the country * FDI attractiveness * Labor competitiveness * Macro-economic stability 40
  38. 38. Advantages of the growing MNCs to IndiaThere are certain advantages that the underdeveloped countries like and the developingcountries like India derive from the foreign MNCs that establishes. They are as under: * Initiating a higher level of investment. * Reducing the technological gap * The natural resources are utilized in true sense. * The foreign exchange gap is reduced * Boosts up the basic economic structure.Disadvantages of MNCsA rose does not come without thrones. Disadvantages of having MNCs in a developingcountry like India are as under-# Competition to SMSI# Pollution and Environmental hazards# Some MNCs come only for tax benefits only# Exploitation of natural resources# Lack of employment opportunities# Diffusion of profits and Forex Imbalance# Working environment and conditions# Slows down decision making# Economical distress 41
  39. 39. Top MNCs in IndiaThe country has got many M. N. C.s operating here. Following are names of some of themost famous multinational companies, who have their headquarters of operationalbranches based in the nation:IBM: IBM India Private Limited, a part of IBM has been operating from this countrysince the year 1992. This global company is known for invention and integration ofsoftware, hardware as well as services, which assist forward thinking institutions,enterprises and people, who build a smart planet. The net income of this company postcompletion of the financial year end of 2010 was $14.8 billion with a net profit margin of14.9 %. With innovative technology and solutions, this company is making a constantprogress in India. Present in more than 200 cities, this company is making constantprogress in global markets to maintain its leading position.Microsoft: A subsidiary, named as Microsoft Corporation India Private Limited, of the U.S. (United States) based Microsoft Corporation, one of the software giant‘s has got theirheadquarter in New Delhi. Starting its operation in the country from 1990, this companyhas got the following business units: * Microsoft Corporation India (Pvt.) Limited (Marketing Division) * Microsoft Global Services India * Microsoft Global Technical Support Centre * Microsoft India Development Center * Microsoft IT * Microsoft Research IndiaThe net income of Microsoft Corporation grew from $ 14, 569 million in 2009 to $ 18,760 million in 2010. Working in close association with all the stakeholders including the 42
  40. 40. Government of India, the company is committed towards the development of the Indiansoftware as well as I. T. (Information Technology) industry.Nokia Corporation: Nokia Corporation was started in the year 1865. Being one of theleading mobile companies in India, their stylish product range includes the following: * Normal mobile handsets * Smartphone * Touch screen phones * Dual sim phones * Business phoneThe net sales of the company increased by 4 % in the last financial year with sales ofEUR 42.4 billion as compared to 2009s EUR 41 billion. Over the past few years, thiscompany in India has been acquiring companies, which have got new and interestingcompetencies and technologies so as to enhance their ability of creating the mobile world.Besides new developments to fight against mineral conflicts, they are even to set upBridge Centers in the country for supporting re-employment. Their first onsite for theinstallation of renewable power generation are already in place.PepsiCo: PepsiCo. Inc. entered the Indian market with the name of PepsiCo India fromthe year 1989. Within a short time span of 20 years, this company has emerged as one ofthe fast growing as well as largest beverage and food manufacturer. As per the annualreport of the company in the last business year, the net revenue of PepsiCo grew by 33 %.By the year 2020, this food manufacturing company intends to triple their portfolio ofenjoyable and wholesome offerings. The expansion of their Good-For-You portfolio isbelieved to be assisting the company in attaining the competitive advantage of thegrowing packaged nutrition market in the world, which is presently valued at $ 500billion. 43
  41. 41. Ranbaxy Laboratories Limited: Ranbaxy Laboratories Limited, one of the biggestpharmaceutical companies in India, started their business in the country from the year1961. The company made its public appearance in 1973 though. Headquartered in thisnation, this international, research based, integrated pharmaceutical company is theproducer of a huge range of affordable cum quality medicines that are trusted by bothpatients and healthcare professionals all over the world. In the business year 2010, theregistered global sales of the company was US $ 1, 868 Mn. Successful development ofbusiness forms the key component of their trading strategy. Apart from overseasacquisitions, this company is making a continuous endeavor to enter the new globalmarkets, which have got high potential. For this, they are offering value adding productsas well.Reebok International Limited: This global brand is a famous name in the field of sportsas well as lifestyle products. Reebok International Limited, a subsidiary of Adidas AG, isbased in U. S. A. (United States of America) started its operation in 1890s. During thelast financial year, Adidass currency neutralized group sales increased by 9 %. Apartfrom their alliance with CrossFit that is among the largest contemporary fitnessmovements, in the current year, Reeboks announcement of its partnership with artist,designer and producer Swizz Beatz reflects its long term future growth.Sony: Sony India is a part of the renowned brand name Sony Corporation, which startedtheir business operation in the year 1946 in Japan. Established in India in November1994, this company has captured one of the leading positions in the field of consumerelectronics goods. By the end of the business year 2010 on 31st March, 2011, thecompany showed a remarkable increase in the share related to numerous categories. SonyIndia is planning to invest around INR. 150 crore for the marketing of the activitiesrelated to ATL and BTL. As far as Bravia TVs are concerned, they are looking forward tohold their market share of 30 %. In between the last and the current financial year, thenumber of their outlets in the country increased by 1, 000. 44
  42. 42. Tata Consultancy Services: Commonly known as T. C. S., this multinational companyis a famous name in the field of I. T. (Information Technology) services, BusinessProcess Outsourcing (B. P. O.) as well as business solutions. This company is asubsidiary of the Tata Group. The first center for software researching was established inthe country in 1981 in the city of Pune. Tata Consultancy earned a growth of 8.9 %during the latest quarter of this financial year, which ended on 30th September, 2011.This renowned company is presently looking forward to the 10 big deals that they havereceived besides the Credit Union Australias contract as well as Government ofKarnatakas INR. 94crore deal for a total period of 6 years. In this current business year,they are about to employ 60, 000 people to meet their business requirement.Vodafone: Vodafone Group Plc is an international telecommunication company, whichhas got its headquarter based in London in the United Kingdom (U. K.). Earlier knownas Vodafone Essar and Hutchison Essar, Vodafone India is among the largest operators ofmobile networking in the country. The parent company Hutchison started its business inthe year 1992 along with the Max Group, which was its business partner in India. Muchlater in 2011, Vodafone Group Plc decided to buy out mobile operating business of EssarGroup, its partner. The turnover of the Vodafone Group Plc after the completion of thelast financial year grew to £ 44, 472 m from £ 41, 017 m that was the turnover of thebusiness year 2009.Tata Motors Limited: The biggest automobile company in India, Tata Motors Limited,is among the leading commercial vehicles manufacturer in the country. They are one ofthe top 3 passenger vehicle manufacturers. Established in the year 1945, this company, apart of the famous Tata Group, has got its manufacturing units located in different partsof the nation. Some of their well known products of the company are categorized in thefollowing heads: * Commercial Vehicles * Defence Security Vehicles 45
  43. 43. * Homeland Security Vehicles * Passenger VehiclesIndia is one of the world‘s most promising and fastest-growing economies. Many MNCsentered to cash in on the exciting opportunities there. But overall, they have had a mixedperformance. Many, who were remarkably successful elsewhere, have failed or are yet tosucceed. Indian market poses special challenges due to its heterogeneity, in terms ofeconomic development, income, religion, cultural mix and tastes. On top is the heatingcompetition among local players as well as the leading MNCs. Not all companies havebeen struggling to understand Indian consumer behaviour. Doing business in India is at aturning point; market entry strategies, for example, that clicked once do not promisesuccess every time. Success in India will not happen overnight; companies need to havean open mind. This requires commitment, management drive and focus on long-termobjectives, and proper business models too. They have to invest substantial financial andmanagerial resources to understand customer‘s needs and come up with suitable products.As more Indian companies push ahead with their aggressive global growth strategies,many middle and senior management personnel in these organizations are faced withsignificant challenges. They have to ―go global and take charge‖ in a very short time, andlearn how to manage complex businesses on a global scale. They need to acquire themanagerial skills needed to deal with varied customer needs and diverse competitiveforces; learn to work with team members from different cultural backgrounds; and alsolearn how to manage the companies that have been acquired through the M&A (i.e.mergers and acquisitions) route. 46
  44. 44. STRATEGY AND STRUCTURE OF MNCDifferences between Domestic Multi-National Firms Multiculturalism geographic dispersion 2 factors that were considered to be of primary importance in differentiating between domestic multinational firms Multiculturalism (MC) defined as the presence of people from two or more cultural backgrounds within an organization. Geographic dispersion (GD) defined as the location of various subunits of the parent firm in different countries. International business studies have focused on the consequences of GD tended to give little attention to the consequences of MC whereas most comparative management studies reversed the emphasis but both perspectives are equally important Here in our discussion MC will occupy only a modest roleFour Strategic Approaches Multi-domestic Strategy International Strategy Global Strategy Transnational Strategy Multi-domestic takes care of regional specifics. McDonalds for example do not sell beef hamburgers in India because they take care of the regional culture and customers. Global applies one approach to everyone - like iPod - using ipod in Tanzania is the same as using ipod in Sweden 47
  45. 45. Multi-domestic StrategyCompanies that follow a MULTI-DOMESTIC STRATEGY will give prime importanceto one of the MEANS national differences to achieve the different strategic objectives(ENDS).Global efficiency is realized mainly by increasing revenues (1a) which thesecompanies achieve through differentiating their products services to respond todifferences in consumers tastes preferences govt. regulations (1c) Through thisresponsiveness to national differences (2a) they also realize the opportunities associatedwith multinational flexibility. Although Companies following this strategy do learn (3)from local differences most of this learning remains within country borders subsidiariesidentify local needs but also use their own local resources to meet these needs (local-for-local innovation)International StrategyCompanies that follow an INTERNATIONAL STRATEGY focus primarily on one ofthe ENDS worldwide learning use the different MEANS available to achieve this end.However most Companies following this approach limited it primarily to exploitationtransfer of technologies developed at home to less-advanced overseas markets. Drawbackalthough it is very efficient at transferring knowledge across borders it does not do a verygood job in achieving either global efficiency or flexibility as its ENDS. Differentactivities in the value chain typically have different optimal locations RD and assemblymay be better conducted to 2 locations. Eg. NIKE which design their shoes in US andmanufacture in China and Thailand. The international strategy fails to take advantage ofthis benefits as it has tendency to concentrate most of its activities in one locationcompany is too closely identified with a single country (currency conversion risk)Thisstrategy is based on diffusion and adaptation of the parent company‘s knowledge andexpertise to foreign markets. Country units are allowed to make some minoradaptations to products and ideas coming from the head office but they have far lessindependence and autonomy compared to multi-domestic companies. For most of its 48
  46. 46. history Ericsson a Swedish telecommunications firm has followed this strategy becauseits home market (Sweden) was too small to support the RD effort necessary in theindustry Ericsson built its strategy on its ability to transfer and adapt its innovativeproducts and process technologies to international markets and this helped it to competesuccessfully against NEC which followed a global strategy and ITT which followed amulti-domestic strategy. Kellogg is also another example of firms following suchstrategy.Global StrategyFor Companies that follow a GLOBAL STRATEGY meeting the objective of globalefficiency takes pride of place all means are used to achieve this objective. With regard tothe means of national differences however global Companies focus on exploitingdifferences in factor costs by locating production in low cost countries. This contrastswith multi-domestic Companies who focus on differences in national preferences. SiebelSystems We have one brand one image one set of corporate colors and one set ofmessages across every place on the planet. An organization needs central quality controlto avoid surprises. The concentration centralization of production RD activitiesassociated with a global strategy limits flexibility leaves companies following thisstrategy vulnerable to political currency risks limits their ability to learn from foreignmarkets.Transnational StrategyCompanies that follow a TRANSNATIONAL STRATEGY acknowledge that all of thesedifferent combinations of means ends have their own merits might be very suitable inspecific industries. The firm following this strategy strives to optimize the trade offassociated with efficiency local adaptation and learning. However they realize that intoday‘s competitive environment in many industries it might be necessary to achieve all 3strategic objectives at the same time. And in contrast to companies following a multi- 49
  47. 47. domestic strategy Companies following this strategy use all means available to achievethis end. NESTLE We believe that there is not a so-called global consumer at least notwhen it comes to food and beverages as people have local tastes based on their uniquecultures and traditions a good candy bar in Brazil is not the same as a good candy bar inChina. Therefore decision making needs to be pushed down as low as possible in theorganization out close to the markets. That said decentralization has its limits. If you aretoo decentralized you can become too complicated and therefore you need to balance it.What leading MNCs do tap into the Indian consumer market?Look at how the second best global brands have executed their India strategy.While global market leaders have proven to be flat-footed and bookish, brands likeReebok, LG, Hyundai and Lee have stolen a march over their arch-rivals by burning thebook and thinking on their feet. ―Most MNC companies are run by a global manual, butthose succeeded in India have shredded this manual and taken the ‗when in India, golocal‘ approach and developed on local consumer insight to chart their strategy,‖ reasonsmarketing consultant Harish Bijoor, CEO, Harish Bijoor Consults. Consider Lee. When itentered India in 1995, there was a very nascent market for branded apparel, much lesspremium jeans wear. Premium brands like Levi‘s chose to play it safe by using the multi-brand outlet route, but Lee chose to go it alone and set up exclusive showrooms.According to market watchers, Levi‘s suffered from a brand perception problem becauseit was clubbed with non-premium brands.When Reebok came to India in 1995, it forged alliances with health clubs and fitnesscentres to create brand awareness. When the retail market matured, Reebok changedfocus. Says Subhinder Sing Prem, MD, Reebok India, ―On the retail front, we went aboutopening up new markets beginning with metros and large cities, we swiftly moved intotier II and III towns.‖ To further establish its brand, Reebok signed up Indian cricketers,while Nike continued showing its international advertisements in Indian media. Today,Reebok has an exclusive retail presence through 400 plus outlets, second only to Bata,while Nike lags behind. 50
  48. 48. LG‘s is the proverbial ‗third time lucky‘ story. After two failed joint ventures, it made are-entry into the Indian market in 1998 all by itself. The other chaebols were on their wayhere, too, while Phillips and Sony were already well-established. LG began with a rapidnational roll-out, mass customisation and products adapted specifically for Indianmarkets. It also kept its dealers happy with a wide portfolio and allowed them to cutsweet deals. ―Our success in India can be attributed to our ability to focus on empoweringpeople, profit-driven market presence and being an open organisation, with just about allemployees having access to the company‘s finances,‖ says LG India‘s MD, KR Kim.Today, with over Rs 7,500 crore in sales, LG leads in almost all the categories inconsumer durables.Cultural Differences and IntegrationGlobal business brings people from different cultures together. The managers need toovercome cultural differences and collaborate with each other, in order to succeed.Another aspect is to understand Cultural sensitivity that means to understand thebehaviour and attitudes of personnel from different parts of the world, and develop anoperating culture for the team which builds ―bridges‖ across the cultural differences thatwill inevitably surface. While it is unrealistic to expect that every manager entering theglobal arena will exhibit all of the above elements of a global mindset, it is important forthe manager to recognize that these requirements do exist, and make efforts to developand strengthen areas where he is relatively weak.The failure of the Daimler-Chrysler ―merger of equals‖ tells us that cultural integration isa key pre-requisite for global managers to be effective and successful. While there couldbe several exceptions to the rule, most Indian managers, especially those employed in thebrick and mortar industries exhibit some common cultural traits. Here are someexamples:• He is very comfortable with clear, well-defined organization structures, where reportingrelationships are explicit, and there is no ambiguity as to who the manager‘s ―boss‖ is.The organization is the classic pyramid. 51
  49. 49. • Compared to simpler organization structures in Indian firms, large global corporationsroutinely resort to complex matrix organizations to drive their global business strategies.The Indian manager is relatively less effective in (and less comfortable with) matrixorganizations, where vertical and horizontal ―relationship‖ lines cut across functions,businesses, and geographies. The resultant ambiguity is something that he finds difficultto manage.• In spite of the introduction of holistic performance evaluation systems and processes,the average Indian manager is still more comfortable with the traditional concept of―seniority.‖ Grey hair still matters, in spite of many organizations pushing ahead withmeritbased decisions when filling senior positions. This contrasts with the US practice,for example, where age is not allowed to be used even as a criterion in such situations.• In India, public ―face‖ (i.e., the person‘s standing and image among colleagues) iscrucial at individual level. Feedback of the negative kind – even when couched in themost objective terms – is best given behind closed doors, and not in a group meeting. TheWest is less cognizant of such sensitivities.Understanding and Managing Cultural Differences: Models and ToolsWhen asked to deal with a fuzzy, hard-to-define concept called ―culture,‖ it is natural thatthe practising manager from India would say, ―All this is fine. I am prepared to beculturally sensitive, and adapt my ways in the interests of team-work. But how do I startgetting a handle on this vague subject? How do I measure the cultural differences?‖Fortunately, considerable research has already been conducted in this area, resulting inthe formulation of models and tools to assist the manager. In this article, we willhighlight three approaches which share a large degree of commonality in the way theylook at cultural differences, organizations, and teamwork.Approach #1: Geert-Hofstede Cultural DimensionsProf. GeertHofstede (2001)of Maastricht University, based on his research acrossdifferent countries and organisations (starting with IBM, and extended subsequently to 52
  50. 50. include other organisations), has postulated four cultural dimensions, with a fifthdimension – long term orientation – getting added to the model at a later stage:• Power Distance Index (PDI): This dimension deals with the degree to which lesspowerful members of a society or a group accept, and indeed expect, unequal distributionof power, e.g., ―That‘s the way it is.‖• Individualism vs. collectivism: Is the individual a lone person, who is expected to lookafter his interests by his own efforts? Or is he a member of a collective group whichlooks after its members, in return for loyalty shown to the group?• Masculinity vs. feminity: This refers to the distribution of roles between the genders.In ―masculine‖ cultures, there is a significant difference in the values exhibited by menand women, with men being seen as assertive and dominant and the women, modest andcaring; in ―feminine‖ cultures, this difference is less stark, with men also showing caringtraits.• Uncertainty Avoidance Index (UAI): This pertains to tolerance for uncertainty andambiguity; the degree to which a ―culture programs its members to feel eitheruncomfortable or comfortable in unstructured situations.‖• Long-term orientation vs. short-term orientation:This dimension deals with valuesthat people exhibit. Values associated with long-term orientation are thrift andperseverance, whereas those associated with short-term orientation are respect fortradition, fulfilling social obligations, and protecting one‘s ‗face.‘Approach #2: The Cultural Orientations Model from Walker, Walkerand SchmitzWalker, Walker and Schmitz, in their book (2004), Doing Business Internationally, havepostulated a ―Cultural Orientations Model‖ (COM), which is a framework forunderstanding cultural differences between people from different countries and cultures.This model consists of ten cultural dimensions along which the beliefs and actions of 53
  51. 51. different people or cultures can be mapped. Here is a brief description of each of theseten dimensions:• Environment: This dimension deals with how the person relates to the environment inwhich he operates. Does the person believe that he has reasonable control over the future,or is it all ‗written‘ – decided by a higher force? Is harmony important? Is theenvironment seen to be full of constraints? And so on.• Time: Is time seen as something fixed, to be measured and tracked? Is ―being on time‖of paramount importance? Or is time something fluid, something secondary to higherpriorities like taking care of your relationships?• Action: Is the emphasis more on action that leads to measurable results? Or is it onbuilding relationships and caring for one another?• Communication: Does the meaning of words depend on the context? Does ―yes‖ mean―yes‖? Does silence mean something? Are conflicts dealt with through opencommunication? Or in an indirect fashion?• Space: Is space (physical and psychological) seen as public or private? Is the officedesigned on an ―open plan,‖ or is it full of cabins and cubicles? Do people stand close toeach other while talking? Or at a distance?• Power: Is power driven by hierarchy, or is it more decentralized and equal? How aredecisions made? By consensus, or by the boss?• Individualism: Is a person‘s identity determined by individual achievements? Or doesthe group‘s identity over-ride that of the individual? Is loyalty to the group important?• Competitiveness: Is the individual encouraged to take aggressive action on his own? Oris it a co-operative working style that is valued? Is the reward structure designed toemphasise individual achievements?• Structure: What is the degree of comfort with change, risk, ambiguity, and uncertainty?Does the culture value predictability and order? Or does it permit some degree offlexibility and chaos? 54
  52. 52. • Thinking: What is perceived to be more important. The abstract, and the ‗principle‘? Orlarge volumes of hard data? Is the approach holistic, or is it tuned to breaking the issuedown to small manageable chunks?Strategies for Going Global: Some Current Indian ExamplesWhile in-depth research output on specific strategies adopted by Indian MNCs is still notavailable, there are sufficient examples, at company level, to show that Indian companiesare fully capable of drawing up and executing strategies that are sensitive to customerneeds, culture, brand equity, and teamwork. The Tata Group‘s approach to itsacquisitions—in terms of cultural integration, branding, and customer focus has beenbased on very pragmatic considerations. The top management teams at Corus, Jaguar,and Land Rover have been pretty much left intact, with the Tata headquarters gettinginvolved primarily in long-term direction- setting and large investment decisions. Theglobal brands that have been acquired are getting careful nourishment for the long run.There have been no abrupt attempts at implementing drastic changes. Overall, as seenfrom the outside, the philosophy seems to be one of encouraging continuity and growth,while ensuring adherence to the Tata group‘s core values. In the case of SundramFasteners, a trend-setter in the auto component industry in India, the approach has beensimilar. The UK and German companies that have been acquired in recent years havebeen allowed to retain and strengthen their brands and identities. Fresh investments inequipment have been made where merited, thereby overturning conventional wisdom thatsuch acquisitions are always followed by loss of jobs and ―hollowing out‖ ofmanufacturing assets. There is continuity in senior management staff. Global customers— whose needs can be met from Sundram Fasteners‘ multiple manufacturing units inIndia, Germany, UK, and China — are being managed as single ―accounts‖ globally,through coordinated marketing and sales efforts. Best practices in operational excellenceare being transferred from one unit to the other through horizontal deployment, withoutimplications of superiority or inferiority between countries, companies, and cultures.Bharat Forge, with its headquarters in Pune, is another aggressive player in the 55
  53. 53. engineering industry, with the goal of becoming one of the top players in the globalautomotive forging industry. The company has made a series of acquisitions in Germany,USA, Sweden, and Scotland, and has also formed a JV in China. The company follows astrategy of ―dual-shoring‖ where its global customers‘ needs can be met from at least twoof its plants worldwide.Impact of Culture at Operational LevelWhile the above instances are examples of clear thinking, planning, and execution at thestrategic level, it is important to recognise that individual managers need to be sensitiveto each other‘s cultural expectations, when working at the operating level on a dailybasis. While this might seem like stating the obvious, real-life experience shows that thisis not something that comes naturally to operating managers. Since globalisation has beena relatively recent phenomenon in India, most managers have not had the opportunity toget in-depth exposure to different cultures. Correspondingly, the manager from the otherculture (say, from Europe or the US or elsewhere) also has had no opportunity to observeand understand how the Indian mind works. This results in a gap, which needs consciouseffort from both sides to bridge. The following caselet will make this point clear. 56
  55. 55. LITERATURE REVIEWCompetitive StrategiesCompetitive strategy specifies the distinctive approach which the firm intends to use inorder to succeed in each of the strategic business areas. Competitive strategy gives acompany an advantage over its rivals in attracting customers and defending againstcompetitive forces (Ansoff, 1985). There are many roots to competitive advantage, butthe most basic is to provide buyers with what they perceive to be of superior value a goodor service at a low price, a superior service that is worth paying more for, or a best valueoffering that represents an attractive combination of prices, features, quality, service, andother attributes that buyers find attractive (Thompson and Strickland, 2003).Competitivestrategy is thus the search for a favorable competitive position, in an industry, thefundamental arena in which competition occurs. Competitive strategy aims to establish aprofitable and sustainable position against the forces that determine industry competition(Porter, 1998). Firms pursue competitive strategies when they seek to improve ormaintain their performance through independent actions in a specific market or industry.There are two major types of competitive business strategies: cost leadership and productdifferentiation (porter, 1980).Firms pursuing cost leadership strategies attempt to gainadvantages by lowering their costs below those of competing firms. Firms pursuingproduct differentiation strategies attempt to gain advantages by increasing the perceivedvalue of the products or services they provide to customers. Competitive businessstrategies are important strategic alternatives for many firms, but they are not the onlybusiness strategic alternatives (Barney, 1997). Competitive strategy needs to focus onunique activities (Porter, 1996). Competitive strategies should lead to competitivedominance, which in other words of Tang and Bauer (1995) is about sustained leadershipand levels of undisputed excellence. They contend that competitive dominance is anattitude that begins with the realization that leadership is no guarantee for long termsuccess, especially in the global market place. Firms also develop competitive strategiesto enable them seize strategic initiatives and maintain a competitive edge in the market 58
  56. 56. (porter, 1998).The competitive aim is to do a significantly better job of providing whatbuyers are looking for, thereby enabling the company to earn a competitive advantageand out compete rivals in the market place. Competitive strategies provide a frame workfor the firm to respond to the various changes within the firms operating environment.Firms also develop competitive strategies that enable them develop strategic initiativesand maintain competitive edge in the market (Grant, 1998, Macmillan, 1998). Ansoff andMc Donnell (1990) define competitive strategy as the distinctive approach which a firmuses or intends to use to succeed in the market. In examining the concept of competitivestrategies, different authors have done it differently, however major studies in this areahave been done by Michael Porter. He defines competitive strategy as the art of relating acompany to the economic environment within which it exists. Porter (1998) states that thegoals of a competitive strategy for a business unit in an industry is to find a position theindustry where the company can best defend itself against the five forces which arerivalry, threat of substitutes, buyer power, supplier power and the threat of new entry.These five forces constitute the industry structure and it is from this industry analysis thata firm determines its competitive strategy. Porter unveiled four generic competitivestrategies that can be viable in the long term business environment. They are costleadership strategy, differentiation strategy, cost focus strategy and differentiation focusstrategy. Pierce and Robinson (1997), states knowledge of this underlying source ofcompetitive pressure provides the groundwork for strategic agenda of action. Thehighlight of the critical strengths and weaknesses of the company animate the positioningof the company in its industry, clarify the areas of strategic changes and may yieldbenefits. The differentiation and cost leadership strategies seek competitive advantage inbroad ran market or industry segments while in contrast, the differentiation focus and costfocus strategies adopted in a narrow market or industry .This is represented in the diagram below:- 59
  57. 57. Figure 1.7 Porter’s Generic strategies BY Porter M.E (1988) GenericStrategies.Cost Leadership StrategyA firm producing at the lowest cost in the industry enjoys the best profits. Producing atlower cost is a strategy that can be used by various firms so as to have a significant costadvantage over the competition in the market. This in effect leads to growth in the marketshare. This strategy is mostly associated with large businesses offering standard productsthat are clearly different from competitors who may target a broader group of customers.The low cost leader in any market gains competitive advantage from being able to manyto produce at the lowest cost. Factories are built and maintained; labor is recruited andtrained to deliver the lowest possible costs of production. Cost advantage is the focus.Costs are shaved off every element of the value chain. Products tend to be no frills.However, low cost does not always lead to low price. Producers could price atcompetitive parity, exploiting the benefits of a bigger margin than competitors. Someorganizations, such as Toyota, are very good not only at producing high quality autos at a 60
  58. 58. low price, but have the brand and marketing skills to use a premium pricing policy. A lowcost leader‘s basis for competitive advantage is lower overall costs than competitors. Theneed to manage cost is nothing new, yet surprising number of organizations struggles tosuccessfully control their operating expenses overtime (Bertone, Clark, West & Groves,2009). Successful low cost leaders are exceptionally good at finding ways to drive costsout of their business.Differentiation StrategyDifferentiated goods and services satisfy the needs of customers through a sustainablecompetitive advantage. This allows companies to desensitize prices and focus on valuethat generates a comparatively higher price and a better margin. The benefits ofdifferentiation require producers to segment markets in order to target goods and servicesat specific segments, generating a higher than average price. For example, BritishAirways differentiates its service. The differentiating organization will incur additionalcosts in creating their competitive advantage (Porter, 1996).These costs must be offset bythe increase in revenue generated by sales. Cost s must be recovered. There is also thechance that any differentiation could be copied by competitors. Therefore there is alwaysan incentive to innovated and continuously improve. Targeting smaller market segmentsto provide special customer needs is a strategy widely used in the corporate scene. Itinvolves identification of the needs of the customers in the market and designing productsthat can fit their needs. Companies can pursue differentiation from many angles. Varian(2003, p.454) notes that firms may find it profitable to enter an industry and produce asimilar but distinctive product.Cost Focus StrategyLower cost advantages to a section of the market segments with basic services offered toa higher priced market leader is a strategy acceptable in the corporate world. It results tosimilar products to much higher priced products that can also be acceptable to sufficientcustomers in the market. A focused strategy based on low cost aims at securing a 61
  59. 59. competitive advantage by serving buyers in the target market niche at a lower price thanrival competitors. This strategy has considerable attraction when a firm can lower costssignificantly by limiting its customer base to a well defined buyer segment. Focused lowcost strategies are fairly common (Porter, 1996).Differentiation Focus StrategyA business aims to differentiate within one or a number of target market segments. Thespecial customer needs of the segment means that there are opportunities to provideproducts that are clearly different from competitors who may be targeting a broadergroup of customers. This demands that the customer‘s different needs and wants berecognized. Porter (1980) reiterates that only if a company makes a strong andunwavering commitment to one of the generic competitive strategies does it stand muchchance of achieving sustainable competitive advantage that such strategies can deliver ifproperly executed. Many scholars have questioned this; in particular, Miller (1992)questions the notion of being ―caught in the middle‖. He claims that there is a viablemiddle ground between strategies. Many companies for example, have entered a marketas a niche player and gradually expanded. Hill (1988) claimed that Porter‘s model wasflawed because differentiation can be a means for firms to achieve low cost. He proposedthat a combination of differentiation and low cost might be necessary for firms to achievea sustainable competitive advantage. 62
  60. 60. CHAPTER-7Research Methodology/Findingsand Discussions 63