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MNCs in India & Nestle International marketing

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  • 1. InternationalMarketingResearchTop MNCs In India &IMR with NestleSurabhi Agarwal ( FW/PF/ 10-12)Section -A
  • 2. International MarketingInternational marketing has become more important to companies as the worldshifts from distinct national markets to global markets. Globalization bringshomogenization of consumer needs, liberalization of trade, and competitiveadvantages of operating in international markets. Companies are now forced to thinkand act globally in order to survive in such a dynamic environment. In today‟s globalmarket many companies are finding that there are great opportunities abroad.Companies are challenged to design new marketing programs/strategies that willwork across many countries with different economic, political, social, and culturalcharacteristics.RACE OF MNCs in INDIAMNC means MultiNational Companies which deals with private companies. Byprivate company we mean controlled and operated by private individuals i.e. not bygovernment employees. Multinational corporations have played an important role inglobalization.MNC offers jobs to the candidates who are fresher as well asexperienced holders. They provide with all allowances with a good salary package intheir hometown as well as in any part of the world. MNCs today have broken all therecords and employees have been satisfied with their placementsThough the American companies - the majority of the MNC in India, account forabout 37% of the turnover of the top 20 firms operating in IndiaTop ten MNCs in IndiaMicrosoft, HP, IBM and Oracle battling it out with the Indian IT companies for topslots in the rankings. The swelling domestic IT market is attracting many more globaltech firms to India and they are giving tough competition to the home companies ontheir turf.
  • 3. 1 . Hewlett-Packard (HP)The first MNC in the list is HP India. Part of worlds No. 1 PC maker, the companytoday has one of the widest portfolio of products and services. Eyeing servicesmarket, the global company recently made a $13.2 billion acquisition of technologyservices provider Electronic Data Systems CorpWith the announcement of 3G policy, HP is planning to talk to Indian mobileoperators for a tie-up to offer 3G laptops. HP already has tie-ups with various serviceproviders in different countries. For instance, in the US it‟s AT&T, Sprint & Verizon,in Australia HP has tied up with Vodafone, in UK its Orange, Vodafone and T-Mobile.2 . IBMThe company under went restructuring into four divisions Enterprise Systems,Business Systems, Industry Systems and Volume Systems. Renewing its focus on theSMB segment, the company is restructuring its focus from a product-centric one to a
  • 4. client-centric business modeIn the year 2007 the revenues of the Indian arm of Big Blue grew maximum amongmajor markets including China (in dollar terms). The overall headcount saw a jumpof 20,000. The major clients included, Vodafone, Indian Railways and Ministry ofSocial Welfare. The transformation will provide IBM customers with a single face ofIBM to deal with. The company also boosted its direct presence from 14 locations to27. As part of the second phase of its Project Big Green (PBG 2.0) in India, IBMintroduced new products and services to help enterprises build „greener‟ technologyinfrastructure.3 . Ingram MicroThe worlds largest technology distributor and a leading technology sales, marketingand logistics company. Like HP India, the company gets a major part of its revenuesfrom the sale of computer systems and peripherals. The company which merged withTech pacific globally saw a strong growth in PC and enterprise business last year.Through Ingram Micro Logistics, the company provides customisable services fororder management and fulfilment, contract manufacturing, contract warehousing,product procurement, product pack out and cartonisation, reverse logistics,transportation management, customer care, credit and collection managementservices and other value chain services. The company also launched its own brand V7focusing largely on accessories segment. The company also added Autodesk andAdobe to its software portfolio and Asus to hardware. It also became directdistributor of Toshiba laptops. It also added several vendors like Hitachi, NetApp,Tandberg and Netgear.4 . Cisco
  • 5. The networking giant too is making rapid strides in the Indian market. It claims thatthe company came to India not just because of cost arbitrage, but more forinnovation, growth and talent. The company which witnessed the exit of a series oftop managers in 2006-07, saw some stability at the top last year. The companys totalIndia sales stood at Rs 5370 crore, with 35 per cent coming from Switches.The R&D operation of Cisco India currently has around 5,000 people including itsIndia technology partners like Wipro. It also formed joint go-to-market allianceswith Wipro and Satyam Computers with the potential generating substantialrevenues in the areas of networking and healthcareThe restructuring is also expected to create more jobs and create further leadershippositions. The company plans to take its headcount to 10,000 in the next five years.Ciscos new globalisation centre east campus has largest campus data centre outsideUS.5 . OracleThe IT MNC has been in India for over 15 years. In fact, it was among the first fewmultinational software companies to set up operations in India.Beginning with a distributorship through Tata Consultancy Services in 1987, thecompany established direct operations with a liaison office in 1991, and in 1993
  • 6. formed Oracle India Private Ltd, a wholly-owned subsidiary of Oracle Corp, focusedon the sales and marketing of Oracle software in India.Last year saw Oracle India look beyond its conventional ERP, and focus more onniche apps like CRM, logistics management and HCM. The company continues tolead the database market with 63 per cent market share.6 . SAPThe company overtook SAP in CRM and stood at no. 3, behind Avaya and ASPECTsoftware. The company has seven development centres including an Asian R&Dcentre, a partner solution centre, an egov centre, a retail CCoE and three GDCs atBangalore, Hyderbad and Noida.Last year, company saw attrition at top level, with several senior managersjoining completion like IBM, Microsoft and SAP.7 . Intel and AccentureThe chip giant Intel earned over 60 per cent of its last years revenues from the APACmarket, including Japan. The company seems to have benefited from the expandinglaptop market. It earned $160 per laptop versus $85 it made per desktop. The"Centrino Atom" processor technology aimed specially at mobile Internet devices.
  • 7. This was formerly code-named Menlow. Intel has also launched its low-cost, low-power Atom processors and quad-core processors. Intel sees a huge market forUMPCs and other small form factor Internet devices; calling its own version of such adevice as Netbook, a low-cost PC that would cost in the region of $250.Eyeing the SMB segment, it introduced an online storefront and business solutionWeb portal designed for small and medium-sized businesses (SMBs). The IntelBusiness Exchange (Intel BX) brings together offerings such as bundled softwareand hardware, standalone business applications and services.Accenture is one tech MNC which has more employees in India than US. Themanagement consulting and IT services provider recently announced that it isplanning to add another 28,000 employees in the current financial year.Globally, the company plans to make 60,000 gross additions to its workforce byAugust and will be consistently investing in training manpower. The Bermuda-basedcompany was formerly a part of Andersen Consulting, till the company split off fromdefunct accounting firm Arthur Andersen in 1989.
  • 8. Formerly Andersen Consulting, the company split off from defunct accounting firmArthur Andersen in 1989. Accenture delivery centers for technology and businessprocess outsourcing in India were awarded the BSI BS 25999-2:2007 certification forbusiness continuity from British Standards Institute (BSI) recently.The company operates 45 delivery centres across five continents with more than75,000 people. Its India delivery centres are located in Bangalore, Chennai,Hyderabad, Mumbai, Pune and Gurgaon in National Capital Region of Delhi.It is currently servicing 350 clients, including many of the Fortune 100 companiesfrom India. The companys BPO unit recently said that it is witnessing pricingpressure for certain deals, especially the low-end transactional work.8 . MicrosoftThe Indian subsidiary of software major Microsoft Corp recently announced theappointment of ex-Dell chief Rajan Anandan as its MD. The company grew 26 percent claimed that launched largest Microsoft Office Sharepoint at TCS.The company also announced changes in software licencing, which included optionof staggered payment for software purchases. The company partnered 14 states andnow boasts of over 300 e-gov apps running on Windows. The drop in piracy ratesalso boosted companys revenue.The company recently announced the Release to Manufacture (RTM) of SQL Server2008, the latest version of its database management offering. Microsoft India hasalso been in news for all the wrong reasons recently, the company which got a newMD last week saw a series of senior-level resignations including its MD, NeelamDhawan, who quit Microsoft to join HP.
  • 9. The company was also issued a show-cause notice for non-payment of service taxworth Rs 127 crore. The notice has been issued for non-payment of service tax on`marketing and user support services carried out by Microsoft India for MicrosoftSingapore.9 . SAPSAP India was recently termed as Jewel in the Crown of SAP worldwide. SAP Indiaposted 67 per cent growth in the software licence revenue in the first quarter of2008. The companys small and mid-size revenue rose by 43 per cent, whileconsulting grew by 34 per cent and education marked 100 per cent growth.The rise was marked by software licence revenue and customer acquisitions thatmade SAP India the fastest growing region within SAP. The growth came acrossvarious verticals including utilities, Banking Financial Services and Insurance(BFSI), automotive, and retail.While SAP added Delphi TVS, Easun Reyrolle, and IFB Industries as its newcustomers, companies such as Moser Baer, Sasken Communications, and GreavesCotton moved to SAP from legacy platform.SAP success story also touched SAP Labs. SAP Lab started operations in the year2000 with 100 people and has been growing by almost 50 per cent every year until2007, when it grew about 30 per cent. Labs present headcount stands atapproximately 3500 people.On the down side, the lack of database applications continues to give its arch rival,Oracle, lead in vertical specific offerings. Also, Oracle last year inched past SAP in the
  • 10. CRM market.10 . DellWorlds second largest computer maker made its India entry some eight years ago.The company which is bullish on India market claims to be seeing rising demandfrom consumer, small and medium business, government, financial services andeducation sectors.The Texas-based company, which has a plant in Tamil Nadu achieved a revenue of Rs3,000 crore building on strong volume growth in 2007. The companysSriperumbudur plant has brought down the shipping time from three weeks to oneweek.The company is at third position in the market with a 7.6 per cent market share andclaims to be number one in large corporate segments. It recently launched low-costpersonal computers customised for the Indian market.
  • 11. Dell has also announced plans to adopt channel sales model to enhance its presencein the Indian market. The vendor plans to leverage the growing opportunities in theSMB segment.On the down side, the company still has to gain visibility on the consumer salesfront.;l‟lRole of Marketing research in Global expansion of MNCsNestleNestle was found by Henri Nestle in 1867 had become the world‟s largest foodprocessing company that had revenues of more than $10 billion in 1977 and withsales greater than Coco-Cola and Pepsi combined. One of these products thatgenerated so many sales for Nestle was its infant formula. These infant formulaswere in high demands by mothers; it gave them an alternative feeding method formothers who cannot, or choose not to breastfeed. But the idea behind the babyformula is to acts as a supplement for babies experiencing a “nutrition gap”.Nestle started marketing its infant formula in the 1970‟s to many underdevelopedcountries. They had imagined that profits would be greatly in countries such asAfrica, the Philippines, Mexico and other underdeveloped countries; due to theinfants who are missing that “nutritional gap” and for mother who chose not to orcannot breastfeed. But its dreams of making such profit failed terribly when theirmethods of marketing the products were criticized.Nestle‟ s marketing techniques were later accused of bribing doctors, nurses, andmany other medical officials to help promote the infant formulas. “Milk nurses” whowere professional salespeople often dressed in white went from door to door sellingand “educating” the new mothers about the infant formula. In these underdevelopedcountries, professionals in uniforms are highly respected. For these “milk nurses” toimitate as professionals, proves that Nestles‟ misleads and uses unethical marketingtechniques to promote its infant formula.The real problem in these Third World countries was being nutritional. It became adebate whether not to give infants breast milk or formula; how to supplement themothers‟ milk with adequate nutritional foods when needed. Although this is theprimary problem, the way Nestle approached a country and promoted its infantformula to uneducated mothers, was what made this a horrid issue. As a result, themisuse of the formula was said to be a contributing factor to the deaths of manyThird World infants whose mothers were incompetent of using them properly.However, Nestle denied the accusations of their unethical and immoral behaviorafter the company came under fire. One recommendation should have research thetarget market in which its products will be introduced. They should not have justtransfer their marketing strategy in the United States to Third World countries butadapted and focus their strategy to fit the targeted environment better. Since Nestlewas introducing a new product, they could be more considerate of the cultural factors
  • 12. in countries where the practical or dysfunctional changes occurred as a result of thenew product introduction. Therefore, it was their responsibility to make moreethical, thought-out decisions regarding the introduction and promotion.In order to understand where Nestlé‟s strengths lie and how this can help them whenentering a new market, they should have used the Self Referencing Criteria (SRC)process. This process can determine a decision whether or not to introduce a productin a foreign market. It helps to establish a company‟s own cultural values,experiences, and knowledge.1. Define the business problem in the home country which includes cultural traits,habits, and norms.2. Define the business problem in foreign cultural traits, habits, and norms.3. Isolate the SRC influence in the problem and examine it carefully to see how itcomplicates the problem.4. Redefine the problem without the SRC influence and solve for the optimumbusiness goal situation.If Nestle had followed this process they would have understood that the UnitedStates and the Third World countries need to use two different strategic plans. Theywould have understood that Americans already established a habit of nursing withformula and becoming a cultural norm. On the other hand, there were many red flagsthat should indicate to Nestle that Third World cultures have no knowledgebackground to read or write. It could then have been reasonably assumed that with alow literacy rate in these countries that they would not use the product correctly.Even if this process was followed, a company still has to make a conscious decision ofhow and if to introduce their product. This creates an ethical dilemma for thecompany. In Nestlé‟s case, there was a lack of government regulations, and thecompany neglected to conduct thorough research about the environment. Withresearch of the environment and regulations, they could foresee some of theconsequences. In the end they took advantage of the situation and the innocentpeople involved and decided to make a poor choice. Ultimately, it did not matter howmuch money they made because their reputation was ruined as a result. With moreresearch, strategic thinking, SRC analysis, and organizational analysis, many of theadverse effects could have been prevented.To some extent the marketing problems was combining a highly-educated,mechanized, free-enterprise western culture with cultures that are poor, less literate,and less adjusted to the “Sakes Fifth Avenue” style of advertising techniques. Wheninfant formula companies were first informed of the risks created by their products,they denied they were responsible and refused to change their practices. As the partywith greater awareness of the problem they had a responsibility to avoid creatingharm for those who were less able to fend for themselves. After numerousunsuccessful efforts to persuade Nestlé and other companies to change their policies,several religious groups boycott Nestlé products, in hopes that the loss of revenueswould persuade the company that it should change its promotional policies.
  • 13. Marketing StrategyIn 1982, Nestle under immense pressure by the World Health Organization (WHO)stated a new policy for their worldwide promotions of their infant baby formula.Nestle guidelines, which was created specifically for developing countries statespublicly their support for breastfeeding as best start of life, cautions mothers ofconsequences of incorrect use of their baby formula, and ensures infant formulamarketing practices would be ethically followed stated by the International Code. Butwhat Nestle doesn‟t admit publicly is that their change of their marketing strategyhad to do with heavy criticism of their mass media advertising, which unethicallypersuaded new mothers to use bottle-feeding milk as best for new babies, whichconsequently provoked the rejection of breast-feed and the dependence on babyformula.Nestles support of the WHO led to the initiation of the following practices: Nestlewas not to advertise to general public, no sampling to mothers, no incentives to itsstaff for sales, no use of pictures on infant formula packs, no financial endorsementsto health professionals to promote product, no donations of infant formula tophysicians except in specific situations, and no educational material relating to theuse of infant formula to be displayed in hospitals and clinics. All these were frequentmarketing strategies used by Nestle and its competitors.Even though overall profit margins were low for Nestle they stayed committed in theproduction of their baby formula. Reason for this was that mothers inunderdeveloped countries (target market) stubbornly continued to breast-feed theirbabies. That‟s why the turnover for Nestle was less than 10%, while other productsales for the company were growing exponentially.Nestle new international marketing strategy is of a decentralized system whichconsists of specifically molded facilities which are made to fit in to that country‟sculture, habits, and conditions. They now support all WHO code (mentionpreviously) in all the countries of Africa, Middle East, Asia, Latin America, theCaribbean nations, and the Pacific nations except Japan, Republic of Korea,Singapore, and Taiwan. The company also promotes an understanding of the properway on how to use the product, and educates consumers on considerations that needto be made before using the product.EnvironmentNestle was discovered by Henri Nestle in 1867, it has become the world‟s largest foodprocessing company that had revenues of more than $10 billion in 1977 and withsales greater than Coco-Cola and Pepsi combined. One of the products that generatedso many sales for Nestle was its infant formula. In the 1970‟s, Nestle decided to gointernational to market its new infant formula, the baby formula was to acts as asupplement for babies experiencing a “nutrition gap”. Its purpose was to savemillions of malnourished babies in underdeveloped countries and provide mothersan alternative feeding method for those who cannot, or choose not to breastfeed.Nestle‟ targeted its infant formulas in underdeveloped countries such as Mexico,Philippines, Central America and Africa where the majority of its population areilliterate, living conditions are terrible and the average salary is less than a dollar aday. Nestle‟ intentions of going abroad was to gain a competitive advantage over its
  • 14. competitors and to educate the illiterate mothers on how to use its new infantformula products.Cultural and social values of these Third World countries affected Nestle‟ ability tomarket the infant formula successfully. Nestle‟ marketing techniques may haveworked to getting its product recognized, but it did not communicate efficiently,users of the infant formula failed to understand that suitable water supply andsanitary conditions must be used to prepare the formula properly. Demographics,income and language barriers have caused major issues for Nestle‟ in the ThirdWorld countries.Nestle‟ sent sales people, often working on commissions to the homes of mothers ofnewborns to advertise the most modernized product for babies. These sales peoplewore white hospital uniforms and were commonly referred to as “milk nurses.” Freesamples of Nestle‟ infant formula was distributed in hospitals and doctors wereencouraged to give to new mothers using the argument that the formula hasnutritional benefits. Pamphlets were also distributed in hospitals and clinics itdescribed and discussed the proper way to bottle feed a baby. Other forms ofmarketing techniques were also used to promote the infant formula. Advertising wasplaced on television, radios, in magazines, on posters in hospitals, clinics andbillboards.Nestle used these form of communication to advertise its infant formula, but didn‟trealize that its communication was not effective. Eventually the bad connection costNestle heavily in the Third World countries.IndustryAmong Nestle, there are two other companies who are large producers of infantformulas who may become a threat to Nestle. Included in the production of infantformula, Ross, a division of Abbott Laboratories produces a wide variety of SimilacIsomil formulas, PediaSure, and Pedialyte for infants with feeding problems such asfussiness, gas, and spit-up. Abbott Laboratories has been working to advance healthcare for people around the world. Founded by a Chicago physician, Dr. WallaceCalvin Abbott, in 1888, Abbott Laboratories has evolved into a diversified health carecompany that “discovers, develops, manufactures and markets innovative productsand services that span the continuum of care.” Headquartered in north suburbanChicago, Abbott helps people around the world in the more than 130 countries. Theybelieve that their products will:1. Promote overall growth in weight, length, and head circumference.2. Nutritionally balanced carbohydrate, protein, and fat.3. Well tolerated.4. Specifically formulated to mix easily with human milk.Abbott Laboratories has been developing products to meet the needs of children formore than 40 years. Their research focuses on nutrients for growth anddevelopment, and diagnostics that help detect dangerous childhood diseases.The other major infant formula company that produces Enfamil formulas is MeadJohnson it‟s a nutritional division of a two billion-dollar Bristol-Myers Squibb. Inrecent years it has also been classified as a world leader in nutrition thatmanufactures more than 60 brand name products and markets them in more than
  • 15. 100 countries. In the United States and Taiwan, they are the infant formula marketleaders. Mead Johnson‟s “commitment to world leadership” in nutrition is confirmednot merely by a geographic presence, “but by a set of ethics, standards and practices”that they are proud to uphold. Their sale in 1997 was over $17 billion dollars, and has54,000 employees worldwide. Its intent is to become a common household name byfamilies around the world.Even though, Nestle is one of the world‟s leading manufactures of the infant formula,its reputation has been smeared due to the infant formula incident in the ThirdWorld countries. Nestle competitors used Nestle as a role model not to make thesame “unethical” marketing mistakes. Nestles‟ situation gave other companies suchas Abbott- Ross and Mead Johnson the opportunities to produce and market itsinfant formula products in ways different from Nestle.A threat to the company is the increased competition as other companies find waysto catch up to Nestle. Because of its wide range of businesses Nestle is involved in,these competitors include many of the world‟s top companies such as Proctor andGamble, Pepsi, Kellogg and Kraft Foods. Other large threats came from negativepublic opinion regarding Nestlé‟s marketing techniques of their breast milksubstitutes in the past, which led to the inappropriate use of the product in ThirdWorld countries.