Marketing Strategies Adopted by MNC’s in India


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Marketing Strategies Adopted by MNC’s in India

  1. 1. International Institute Of Professional StudiesMarketing Strategies and Progremmes Adopted by MNC’s in India According to Indian CultureGuided by: Submitted by:Dr. Pooja Jain Ankur Pandey MBA (MS) 5yrs. IM-2K8-007
  2. 2. IntroductionIndia is one of the world‘s most promising and fastest-growing economies. ManyMNCs entered to cash in on the exciting opportunities there. But overall, they havehad a mixed performance. Many, who were remarkably successful elsewhere, havefailed or are yet to succeed. Indian market poses special challenges due to itsheterogeneity, in terms of economic development, income, religion, cultural mixand tastes. On top is the heating competition among local players as well as theleading MNCs. Not all companies have been struggling to understand Indianconsumer behaviour. Doing business in India is at a turning point; market entrystrategies, for example, that clicked once do not promise success every time.Success in India will not happen overnight; companies need to have an open mind.This requires commitment, management drive and focus on long-term objectives,and proper business models too. They have to invest substantial financial andmanagerial resources to understand customer‘s needs and come up with suitableproducts.OPPI Global Sourcing Committee chairperson Alok Sonig said ―In the Indiancontext, working successfully with global sourcing players involves deeperunderstanding of India around three broad areas - capability, capacity and culture"UN Secretory Kofi Annan said ―We must ensure that the global market isembedded in broadly shared values and practices that reflect global social needs,and that all the world‘s people share the benefits of globalization‖As more Indian companies push ahead with their aggressive global growthstrategies, many middle and senior management personnel in these organizationsare faced with significant challenges. They have to ―go global and take charge‖ ina very short time, and learn how to manage complex businesses on a global scale.They need to acquire the managerial skills needed to deal with varied customerneeds and diverse competitive forces; learn to work with team members fromdifferent cultural backgrounds; and also learn how to manage the companies thathave been acquired through the M&A (i.e. mergers and acquisitions) route.For the company to compete with established global brands, it requires a deepunderstanding of local customers‘ needs in different markets, and significantinvestments in brandbuilding over long periods of time.
  3. 3. 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 byburning the book and thinking on their feet. ―Most MNC companies are run by aglobal manual, but those succeeded in India have shredded this manual and takenthe ‗when in India, go local‘ approach and developed on local consumer insight tochart their strategy,‖ reasons marketing consultant Harish Bijoor, CEO, HarishBijoor Consults. Consider Lee. When it entered India in 1995, there was a verynascent market for branded apparel, much less premium jeans wear. Premiumbrands like Levi‘s chose to play it safe by using the multi-brand outlet route, butLee chose to go it alone and set up exclusive showrooms. According to marketwatchers, Levi‘s suffered from a brand perception problem because it was clubbedwith non-premium brands.Further, Arvind Brands, which owns the licence for Lee in India, decided to retainownership of operations for Lee. According to Chakor Jain, head (businessdevelopment, Lee), Arvind Brands, ―Exclusive showrooms and owning theoperations added to our costs. However, it also added to the overall customerexperience, which we considered most important.‖When Reebok came to India in 1995, it forged alliances with health clubs andfitness centres to create brand awareness. When the retail market matured, Reebokchanged focus. Says Subhinder Sing Prem, MD, Reebok India, ―On the retail front,we went about opening up new markets beginning with metros and large cities, weswiftly moved into tier II and III towns.‖ To further establish its brand, Reeboksigned up Indian cricketers, while Nike continued showing its internationaladvertisements in Indian media. Today, Reebok has a exclusive retail presencethrough 400 plus outlets, second only to Bata, while Nike lags behind.LG‘s is the proverbial ‗third time lucky‘ story. After two failed joint ventures, itmade a re-entry into the Indian market in 1998 all by itself. The other chaebolswere on their way here, too, while Phillips and Sony were already well-established.LG began with a rapid national roll-out, mass customisation and products adapted
  4. 4. specifically for Indian markets. It also kept its dealers happy with a wide portfolioand allowed them to cut sweet deals. ―Our success in India can be attributed to ourability to focus on empowering people, profit-driven market presence and being anopen organisation, with just about all employees having access to the company‘sfinances,‖ says LG India‘s MD, KR Kim. Today, with over Rs 7,500 crore in sales,LG leads in almost all the categories in consumer durables.When Hyundai, with a name prone to mispronounciation and virtually no globalheritage, entered India in 1998, it signed up Shah Rukh Khan to educate theconsumers about the brand. Behind the scenes, the company resorted to extensivemarket studies and technical camps before coming up with its first offering, Santro,a hatchback with tall boy design. And it had chosen its market well, starting withthe small car. To date, Hyundai has stayed true to its strategy and played by theconventional Indian market rules tailored to suit its specific targets.
  5. 5. Cultural Differences and IntegrationGlobal business brings people from different cultures together. The managers needto overcome cultural differences and collaborate with each other, in order tosucceed. Another aspect is to understand Cultural sensitivity that means tounderstand the behaviour and attitudes of personnel from different parts of theworld, and develop an operating culture for the team which builds ―bridges‖ acrossthe cultural differences that will inevitably surface. While it is unrealistic to expectthat every manager entering the global arena will exhibit all of the above elementsof a global mindset, it is important for the manager to recognize that theserequirements do exist, and make efforts to develop and strengthen areas where heis relatively weak. The failure of the Daimler-Chrysler ―merger of equals‖ tells us that culturalintegration is a key pre-requisite for global managers to be effective andsuccessful. While there could be several exceptions to the rule, most Indianmanagers, especially those employed in the brick and mortar industries exhibitsome common cultural traits. Here are some examples:• He is very comfortable with clear, well-defined organization structures, wherereporting relationships are explicit, and there is no ambiguity as to who themanager‘s ―boss‖ is. The organization is the classic pyramid.• Compared to simpler organization structures in Indian firms, large globalcorporations routinely resort to complex matrix organizations to drive their globalbusiness strategies. The Indian manager is relatively less effective in (and lesscomfortable with) matrix organizations, where vertical and horizontal―relationship‖ lines cut across functions, businesses, and geographies. Theresultant ambiguity is something that he finds difficult to manage.• In spite of the introduction of holistic performance evaluation systems andprocesses, the average Indian manager is still more comfortable with the traditionalconcept of ―seniority.‖ Grey hair still matters, in spite of many organizationspushing ahead with meritbased decisions when filling senior positions. Thiscontrasts with the US practice, for example, where age is not allowed to be usedeven 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
  6. 6. the most objective terms – is best given behind closed doors, and not in a groupmeeting. The West is less cognizant of such sensitivities.• Deadlines and commitments are still reasonably ―elastic‖ – missing a target datefor a response by a day or two is not seen as a major issue. In Germany, this wouldbe seen as unprofessional.As stated earlier, these are generalisations about India, and many of these aregetting modified under the relentless pressure of globalisation; but given that thesetraits are widely prevalent, the Indian manager now ―going global‖ needs torecognize that managerial beliefs and behaviour in other cultures – e.g., in Japan,Germany or the US – are likely to be very different from what he or she hasexperienced in India.Once these differences are understood, the Indian manager can work out ways andmeans of integrating himself into a hybrid ―global‖ culture, where the group goalstake precedence over individual differences. Many Indian organizations have nowstarted giving their managers specific training in this vital area of culturalintegration, before exposing them to the dynamics of the global businessenvironment. This minimizes the cultural shocks, and pre-disposes the Indianmanager to expect and manage cultural differences.
  7. 7. Understanding and Managing Cultural Differences: Models and ToolsWhen asked to deal with a fuzzy, hard-to-define concept called ―culture,‖ it isnatural that the practising manager from India would say, ―All this is fine. I amprepared to be culturally sensitive, and adapt my ways in the interests of team-work. But how do I start getting a handle on this vague subject? How do I measurethe cultural differences?‖Fortunately, considerable research has already been conducted in this area,resulting in the formulation of models and tools to assist the manager. In thisarticle, we will highlight three approaches which share a large degree ofcommonality in the way they look at cultural differences, organizations, andteamwork.Approach #1: Geert-Hofstede Cultural DimensionsProf. Geert Hofstede (2001) of Maastricht University, based on his research acrossdifferent countries and organisations (starting with IBM, and extendedsubsequently to include other organisations), has postulated four culturaldimensions, with a fifth dimension – longterm orientation – getting added to themodel 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, unequaldistribution of power, e.g., ―That‘s the way it is.‖• Individualism vs. collectivism: Is the individual a lone person, who is expected tolook after his interests by his own efforts? Or is he a member of a collective groupwhich looks after its members, in return for loyalty shown to the group ?• Masculinity vs. feminity: This refers to the distribution of roles between thegenders. In ―masculine‖ cultures, there is a significant difference in the valuesexhibited by men and women, with men being seen as assertive and dominant andthe women, modest and caring; in ―feminine‖ cultures, this difference is less stark,with men also showing caring traits.
  8. 8. • Uncertainty Avoidance Index (UAI): This pertains to tolerance for uncertaintyand ambiguity; 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 values that people exhibit. Values associated with long-term orientation are thrift and perseverance, whereas those associated with short-term orientation are respect for tradition, fulfilling social obligations, andprotecting one‘s ‗face.‘Approach #2: Trompenaars and Hampden-Turner’sCultural DimensionsFons Trompenaars and Charles Hampden-Turner (1997) identified severaldimensions along which cultures vary. These dimensions can be summarized asfollows:• Universalism vs. particularism: This dimension deals with how people look atactions of others. Universalism depends on specific rules and regulations;particularism, on the other hand, relies more on relationships.• Individualism vs. communitarianism: This deals with the balance between anindividual‘s interests and the group‘s interests.• Achievement vs. ascription: Is status something that we get throughachievements? Or is it something that is ―given‖ – through attributes such asseniority and hierarchy ? This is the key question in this dimension.• Neutral vs. affective: Neutral cultures avoid open display of emotions, and try tostay focused on the subject at hand whereas affective cultures use gestures andanimated conversations.• Specific vs. diffuse: People from specific cultures tend to keep business andpersonal lives separate and distinct. There is very little mixing between the two.Diffuse cultures permit intermingling of the two spheres.• Internal vs. external: Internally focused cultures are likely to have a strong beliefin their own actions, and are resistant to changes induced by the environment; in
  9. 9. contrast, external focus promotes the belief that the environment is the dominantforce, thereby encouraging a more ready acceptance of changes and events.• Time as sequential vs. time as synchronized: Does one see time as somethinglinear (that is, sequential), where discrete elements follow one after the other? Or isit something where many things happen simultaneously? This will determinewhether the culture encourages ―one thing at a time,‖ or will permit parallel-processing.Approach #3: The Cultural Orientations Model fromWalker, Walker and SchmitzWalker, Walker and Schmitz, in their book (2004), Doing Business Internationally,have postulated a ―Cultural Orientations Model‖ (COM), which is a framework forunderstanding cultural differences between people from different countries andcultures. This model consists of ten cultural dimensions along which the beliefsand actions of different people or cultures can be mapped. Here is a briefdescription of each of these ten dimensions:• Environment: This dimension deals with how the person relates to theenvironment in which he operates. Does the person believe that he has reasonablecontrol over the future, or is it all ‗written‘ – decided by a higher force? Is harmonyimportant? Is the environment seen to be full of constraints? And so on.• Time: Is time seen as something fixed, to be measured and tracked? Is ―being ontime‖ of paramount importance? Or is time something fluid, something secondaryto higher priorities like taking care of your relationships?• Action: Is the emphasis more on action that leads to measurable results? Or is iton building 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 theoffice designed on an ―open plan,‖ or is it full of cabins and cubicles? Do peoplestand close to each other while talking? Or at a distance?
  10. 10. • Power: Is power driven by hierarchy, or is it more decentralized and equal? Howare decisions made? By consensus, or by the boss?• Individualism: Is a person‘s identity determined by individual achievements? Ordoes the group‘s identity over-ride that of the individual? Is loyalty to the groupimportant?• Competitiveness: Is the individual encouraged to take aggressive action on hisown? Or is it a co-operative working style that is valued? Is the reward structuredesigned to emphasise individual achievements?• Structure: What is the degree of comfort with change, risk, ambiguity, anduncertainty? Does the culture value predictability and order? Or does it permitsome degree of flexibility and chaos?• Thinking: What is perceived to be more important. The abstract, and the‗principle‘? Or large volumes of hard data? Is the approach holistic, or is it tunedto breaking the issue down to small manageable chunks?Building BridgesAs mentioned earlier, these three approaches exhibit a fair degree of commonalityin the way they look at cultural differences. These models show that people fromdifferent cultures think and act differently while operating on the same dimension–e.g., on communication, or time, or status. Once these cultural differences arerecognised and understood, the global manager has a greater chance of succeedingin getting a set of people from different cultures to work together reasonablyharmoniously. Lack of sensitivity to deep-rooted cultural differences is likely toresult in misunderstandings and diversion of energy into negative directions. Thekey to success in global business lies in building bridges across the cultural gaps,and not seeking to achieve ―one size fits all‖ homogeneity in the team. The globalmanager has to collaborate with the team in establishing ―cultural ground rules‖ forday-to-day work that focus on the common tasks and goals, rather than try toeliminate the individual cultural differences. It is a two-stage process:understanding the differences in culture among team members, and then buildingbridges across the differences. These bridges can be built on a simple, but powerfulprinciple– which is to place the customer‘s needs above individual culturalpreferences.
  11. 11. Strategies for Going Global: Some Current Indian ExamplesWhile in-depth research output on specific strategies adopted by Indian MNCs isstill not available, there are sufficient examples, at company level, to show thatIndian companies are fully capable of drawing up and executing strategies that aresensitive to customer needs, culture, brand equity, and teamwork. The TataGroup‘s approach to its acquisitions—in terms of cultural integration, branding,and customer focus has been based on very pragmatic considerations. The topmanagement teams at Corus, Jaguar, and Land Rover have been pretty much leftintact, with the Tata headquarters getting involved primarily in long-termdirection- setting and large investment decisions. The global brands that have beenacquired are getting careful nourishment for the long run. There have been noabrupt attempts at implementing drastic changes. Overall, as seen from the outside,the philosophy seems to be one of encouraging continuity and growth, whileensuring 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 hasbeen similar. The UK and German companies that have been acquired in recentyears have been allowed to retain and strengthen their brands and identities. Freshinvestments in equipment have been made where merited, thereby overturningconventional wisdom that such acquisitions are always followed by loss of jobsand ―hollowing out‖ of manufacturing assets. There is continuity in seniormanagement staff. Global customers — whose needs can be met from SundramFasteners‘ multiple manufacturing units in India, Germany, UK, and China — arebeing managed as single ―accounts‖ globally, through coordinated marketing andsales efforts. Best practices in operational excellence are being transferred fromone unit to the other through horizontal deployment, without implications ofsuperiority or inferiority between countries, companies, and cultures. Bharat Forge,with its headquarters in Pune, is another aggressive player in the engineeringindustry, with the goal of becoming one of the top players in the global automotiveforging industry. The company has made a series of acquisitions in Germany,USA, Sweden, and Scotland, and has also formed a JV in China. The companyfollows a strategy of ―dual-shoring‖ where its global customers‘ needs can be metfrom at least two of its plants worldwide. This allows the company to satisfy itscustomers‘ requirements with fast, possibly ―local‖ responses, while at the sametime meeting the constant demand for more competitive prices.
  12. 12. Impact of Culture at Operational LevelWhile the above instances are examples of clear thinking, planning, and executionat the strategic level, it is important to recognise that individual managers need tobe sensitive to each other‘s cultural expectations, when working at the operatinglevel on a daily basis. While this might seem like stating the obvious, real-lifeexperience shows that this is not something that comes naturally to operatingmanagers. Since globalisation has been a relatively recent phenomenon in India,most managers have not had the opportunity to get in-depth exposure to differentcultures. Correspondingly, the manager from the other culture (say, from Europe orthe US or elsewhere) also has had no opportunity to observe and understand howthe Indian mind works. This results in a gap, which needs conscious effort fromboth sides to bridge. The following caselet will make this point clear.A Real-life Caselet: The Meaning of “Time”In this example, a manager from a German company had given a project for thedevelopment of a new product to his counterpart in the Indian company (in thesame group of companies) at a significantly lower cost. The German was gettingincreasingly frustrated with repeated delays in the delivery date. He took this tomean that the Indian manager was not serious about his commitments, and that hewas insensitive to the negative impact that was created with the end customer. Inreality, the product was inherently complex, and represented something of achallenge to the Indian team. If the Indian manager were culturally more aware, hewould have said, ―Look, this job is more complex than what we have done in thepast; but I am reasonably confident we can pull it off. Tell your customer this isbeing attempted in good faith, and that it will take a few iterations before we get itright. We will keep you updated on the progress, and let‘s target six months for thewhole process to get completed.‖ Instead, the Indian manager had said ―yes‖ to theproject, and had taken on an unrealistic deadline, because he was operating in aculture where people were encouraged to take on difficult challenges. The hardwork being put in was considered important; and the slippage of dates – while seenas not good – was not a matter of life and death. Where are the culturaldifferences? The Indian was comfortable with ambiguity (of the outcome); theGerman was not. The Indian saw ―time‖ as something fluid and continuous; theGerman saw a finite date, and a discrete period. The Indian was used to dealingwith other customers (Indian), who were, by and large, forgiving of slippages. TheGerman saw his (German) customer walking away. The Indian valued the input,
  13. 13. i.e., the efforts being put in to develop the product; the German was focussed onlyon the output, i.e., the date of completion. To the Indian, saying ―no‖ or ―may be‖meant an admission of lack of capability and a perceived loss of ―face‖; to theGerman, receiving a ―no‖ for an answer would have been equally acceptable, andmore professional. He would have found another source for the product, and got onwith his life. Ultimately, the two sides evolved a working method for futureinstances, by which they agreed to discuss the risks and assumptions explicitlybefore the start of any new project so that the ambiguity was sharply reduced, andeveryone ―was on the same page.‖ The commitment to be made to the endcustomer was agreed to be held sacrosanct.Learning from such examples, Indian MNCs can proactively implement culturalsensitization programmes at both ends of the ocean, so that such gaps andproblems are minimised, if not avoided altogether. Many specialist organisations,which offer expert training in this relatively new and fuzzy area, have come intoexistence in recent times. Given that the financial logic for many M&A decisionsis based heavily on achieving significant synergies in a short period of time, suchtraining should become a mandatory part of the corporate M &A playbook