Impact of Marketing Macro-Environment in Indian Context by Wahid311

Impact of Marketing Macro-environment in Indian Context Abdul Wahid Khan NITK Surathkal This report is a small study of the impact of Marketing macro-environment on companies in India. How they face these situations and how they won or lost over it? This study basically consists of examples of marketing strategies followed by companies in Indian context for each macro-environment.

2012

Abdul Wahid Khan NITK Surathkal, India

1/25/2012

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Table of Contents

DEMOGRAPHIC ENVIRONMENT ....................................................................................................... 3

1. Ethnic and Other Groups ............................................................................................................................... 4

a. KBC (Kaun Banega Crorepati) ........................................................................................................................... 4

2. Educational Groups ....................................................................................................................................... 4

a. Adobe India Pricing Strategy ............................................................................................................................ 4

3. Household Patterns ....................................................................................................................................... 5

a. Burberry ............................................................................................................................................................ 5

ECONOMIC ENVIRONMENT ................................................................................................................ 6

1. Based on Types of Economies ........................................................................................................................ 7

a. HKB in India, a Subsistence Economy ............................................................................................................... 7

2. Based on Income Distribution ....................................................................................................................... 8

A. For High Income Group .................................................................................................................................... 8

a. Sahara Holiday Plans .................................................................................................................................... 8

b. Burberry ....................................................................................................................................................... 8

B. For Low Income ................................................................................................................................................ 9

a. Sunsilk by HUL .............................................................................................................................................. 9

b. Center Fresh by Perfetti Van Melle .............................................................................................................. 9

SOCIAL-CULTURAL ENVIRONMENT .............................................................................................. 10

1. LG ................................................................................................................................................................ 11

2. KFC in India .................................................................................................................................................. 11

NATURAL ENVIRONMENT ................................................................................................................ 12

1. ITC Limited .................................................................................................................................................. 13

2. IndusInd Bank.............................................................................................................................................. 13

TECHNOLOGICAL ENVIRONMENT .................................................................................................. 14

1. Godrej ......................................................................................................................................................... 15

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2. Invention Labs ............................................................................................................................................. 15

POLITICAL-LEGAL ENVIRONMENT ................................................................................................ 16

1. Redbull ........................................................................................................................................................ 17

REFERENCES .......................................................................................................................................... 18

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Demographic

Environment

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1. Ethnic and Other Groups

a. KBC (Kaun Banega Crorepati)

The latest season of the quiz show Kaun Banega Crorepati (KBC), screened on television in 2011, has

achieved unparalleled success.

An amazing number of 25 million people watched the final episodes of KBCSeason 5 screened in

November 2011, which is an all-time record. KBC reinvented itself this year; with the theme Koi Insaan

Chhota Nahin Hota (No one is unimportant or small). In doing so, it reached out magnificently to the

heartland of India, with a power which became unstoppable. Contestants were specifically chosen from

the hinterland of India, from sections of society not normally associated with the intellectual pastime of

quizzing.

The winner of the grand prize of Rs. 5 crore, Sushil Kumar, is a lower middle-class computer

operator from Motihari, a small town in the Champaran district of Bihar. Other notable winners included

Aparna Malikar, a 27-year-old widow from Vara Kawatha in Maharashtra's Yavatmal district. Watching

these ordinary Indians (aam aadmi) become really special (khaas aadmi) in the able and graceful

presence of quizmaster Amitabh Bachchan transformed a quiz show into an intensely emotional and

empowering voyage for millions of viewers across the country. The phenomenal success of KBC this year

holds two essential lessons for Indian marketers. First, if you want to build a really big and iconic brand

in India, you have to necessarily reach out to millions of consumers who live in the heartland and

interiors of our country, because that is where the massive population and purchasing power resides.

Second, to achieve phenomenal success in India, brands need to develop strong emotive appeal. (For

more info, see Reference [1])

2. Educational Groups

a. Adobe India Pricing Strategy

Adobe Systems India has said that it will have a "special pricing" for educational institutions that

purchase its range of products. The company is also working on a "licensing programme" to make its

products more affordable for educational institutions. The company will soon announce its policy for the

education market in India, according to Mr. Sandeep Mehrotra, Country Sales Manager, Adobe Systems

India. Addressing a news conference held here on Wednesday to unveil Adobe's go-to-market strategy

for its Creative Suite 3 (CS3) product line, Mr. Mehrotra said in partnering with educational institutions,

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the company would prepare the curriculum and even train the trainers. (For more info, see Reference

[2])

3. Household Patterns

a. Burberry

Burberry is a premium British clothing brand which sells worldwide. "In India, there is a very strong

male market, as in China, so we have had to relook at our men's offering. We are listening to our

customers here, and have started our accessories business," Ahrendts said. Asia contributes a third to

the revenues to the company, which sells trench coats, scarves and umbrellas with a unique tartan

pattern, besides fragrance and fashion accessories.

In the last two years, the company has added new product categories to its catalogue — like menswear,

men's accessories and fragrances. The products have been added to the global portfolio as a lot of

Burberry's buyers travel around the globe and make purchases there. The company is concentrating on

male population of India as it identifies India as a strong male market. (For more info, see Reference [3])

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Economic

Environment

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1. Based on Types of Economies

a. HKB in India, a Subsistence Economy

Agriculture in India has a long history which dates back to ten thousand years. Today, India ranks

second worldwide in farm output. Agriculture and allied sectors like forestry and logging accounted for

16.6% of the GDP in 2007, employed 52% of the total workforce and despite a steady decline of its share

in the GDP, is still the largest economic sector and plays a significant role in the overall socio-economic

development of India. But still most of the agricultural is not organized. Many big organizations like ITC

(E-chaupal), DCSL Shriram (Hariyali Kisan Bazaar), Tata (Tata Kisaan Kendra/Sansar), Hindustan Uniliver

Limited (Shakti), Godrej (Aadhar) and Reliance (Rural Business Hubs) are trying to capture these

agricultural markets because of the huge potential available in these markets. The business model of

most these companies are almost same. They promise to bring all of farmer needs under one roof and

procure the farmer produce at assured rates without any middle man so that farmer gets assured

returns. The ostensible promises made by these companies are to improve the agricultural productivity

and to improve the life standards of farmers by making the agricultural trading more organized and

reducing the transaction costs. But their real objective is to sell their produce. If we keenly observe, all

these companies are manufacturers of fertilizers or FMCG products which they want to sell through

these rural bazaars. The reality is many of these initiatives have failed; the reasons for which are quite

interesting.

We will take the case of the Hariyali Kisan Bazaar (HKB) by DCSL Shriram for understanding this

better. We will compare HKB (located in Kanpur) and a mandi in Kanpur (a second tier city with dense

population comprising mostly agriculture labors). The first important factor that has to be observed in

this case is the location. The mandi is located in a place which is very near to all the people who use it. It

can be debated whether the mandi is located near them or they are located near the mandi because

nobody knows when the mandi was established. But HKB, it is located in a place which is far away from

most of the villages surrounding it. When we observed the HKB outlet and the mandi, we have not seen

even a single customer in the HKB but almost all the shops in the mandi had customers. There are many

reasons other than location for such poor show by HKB. In HKB, there will be only one vendor for a

product, but in case of mandis, there will be many shopkeepers selling same product at various qualities

and various prices which give customers many options to choose from. The products sold in HKB are of

good quality but of high prices. (For more info, see Reference [4])

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2. Based on Income Distribution

A. For High Income Group

a. Sahara Holiday Plans

With increasing number of upwardly-mobile Indians entering the high income bracket, Sahara India

Pariwar today forayed in the Rs. 65,000 crore luxury holiday business targeting a revenue of Rs. 100

crore within three years.

The company today announced launch of 'Paradiso' for providing high-level customized luxury

holidays in the price band of Rs. 14,400 to a whooping Rs. 18,40,000 per night.

He said the company has tied up with 165 luxury properties across the UK, Italy, France, Scotland

and Ireland.

Out of eight million rich Indians in the income segment of Rs. 30-40 lakh per year, only one million

spent on luxury travel in 2006 which would triple within a span of three years. "We need a focused

approach to address the needs of brand conscious Indians" he added.

Datta said the marketing strategy would include wealth management by the banks, one-to-one

relationship building with its target customers in addition to high-end advertisements. He declined to

disclose the company's media plans.

The company would currently operate its travel business from Delhi and Mumbai offices and expand

its base to Bangalore and Chennai within six months. (For more info, see Reference [5])

b. Burberry

British luxury brand Burberry is making a concerted effort to reach out to high net worth individuals

(HNIs) in India and China, even as investors have hammered the company's stock 30% since July due to

its expansion plans in Asia. This show how different companies target different income segments in

India. Here, Burberry is planning to target the higher income class of Indians for its new products. (For

more info, see Reference [3])

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B. For Low Income

a. Sunsilk by HUL

HUL has a lot of products among which Sunsilk is a very popular shampoo and hair-care product.

It is very successful in India due to its wide availability in low price for Indian consumers. The second

aspect marketing managers should look at when developing their product strategy for the Indian

consumer market is: packaging. The most common example used in ‘Marketing’ text books is the 1 Rs.

(0,02 €) shampoo pack. Sunsilk, Unilever’s leading hair care brand, can be found at every corner shop in

small packages (enough for using it once or twice or maybe just to try it out). The reach of smaller packs

is much wider, and considering India’s huge population a lot of small packs can result in quite high

overall sales. This worked in India because generally, lower class people can not afford to spend too

much at once and hence it is more convenient for them to buy small packets of any product like

shampoo for use anytime. (For more info, see Reference [6])

b. Center Fresh by Perfetti Van Melle

Italian company Perfetti Van Melle, which started by selling single packed chewing gums branded

“Centre Fresh” at 50 Paisa (0,01 €). Perfetti’s product strategy for the Indian market worked out: now

they have 18 different brands and are market leader in the Indian confectionary market. (For more info,

see Reference [6])

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Social-Cultural

Environment

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1. LG

India is the last frontier, says Moon B. Shin, the Korean boss of LG Electronics’ Indian subsidiary. By

which he means: India has the largest number of people who have not yet bought many electronic

goods. LG’s annual sales in India are about $3 billion. But what really excites Mr. Shin is that they rose by

30% just in the first seven months of this year.

LG started manufacturing in India in the late 1990s. It is now the country’s most popular maker of all

manner of gizmos. To succeed, it has kept its prices ultra-low and adapted its products to Indian tastes.

Since many Indians are vegetarian, it offers a fridge with less freezer space and more drawers for

vegetables. Since Indians like their televisions loud, LG affixes powerful speakers. The firm also sells

voice-activated washing machines for middle-class families with illiterate maids. Its products are

designed to cope with fluctuating power, and its packaging is extra-tough to cope with India’s terrible

roads. (For more info, see Reference [7])

2. KFC in India

KFC offers a wide range of vegetarian products such as the tangy, lip-smacking paneer tikka wrap 'n'

roll, the veg de-lite burger, and the veg crispy burger. There are munchies such as the crisp golden veg

fingers and crunchy golden fries served with tangy sauces.

If you are veg and looking for a meal, you can combine the veg fingers with steaming, peppery rice

and a spice curry. The mayonnaise and sauces don't have egg in them.

Sharanita Keswani, Director, KFC Marketing, says the vegetarian menu in India came about when

KFC found the country had about 35 per cent vegetarians, and in metros such as Delhi and Mumbai,

almost 50 per cent.

The non-vegetarian is the obvious target customer because, as Ms. Sharanita points out, Bangalore

and the rest of south India have over 70 per cent non-vegetarians. But she also observes that chicken is

KFC's strength.

KFC's vegetarian menu is almost exclusive to India and is the most extensive. Most countries either

do not have a vegetarian menu, and some which do, have a burger at the most. (For more info, see

Reference [8])

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Natural

Environment

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1. ITC Limited

Different companies face various problems in conserving the natural environment along with their

operation and making profits. ITC strengthened their commitment to green technologies by introducing

‘ozone-treated elemental chlorine free’ bleaching technology for the first time in India. The result is an

entire new range of top green products and solutions: the environmentally friendly multi-purpose paper

that is less polluting than its traditional counterpart. Hence, we see that ITC is very nature friendly and

market its products in eco-friendly way. (For more info, see Reference [9])

2. IndusInd Bank

Green banking has been catching up as among the top Indian green initiatives ever since IndusInd

opened the country’s first solar-powered ATM and pioneered an eco-savvy change in the Indian banking

sector. The bank is planning for more such initiatives in addressing the challenges of climate change.

This can be considered as both a compliance with the natural environment as well as technological

innovation for marketing strategy. (For more info, see Reference [9])

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Technological

Environment

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1. Godrej

Godrej is known for introducing refrigeration to India's rural masses. What Tata Motor's Nano car is

to automobiles, the Godrej ChotuKool is to the refrigerating industry. The fridge, which costs roughly

$70, does not have a compressor and runs on batteries. Hence, Godrej is fulfilling a technological need

of the society by introducing such innovative products and marketing efficiently. (For more info, see

Reference [10])

2. Invention Labs

For giving a "voice" to speech-impaired children. The company's AVAZ device interprets the gross

motor movements of a child and uses predictive software to help users form sentences, which it then

reads aloud. It also includes a portable touch-screen voice synthesizer, which can be easily mounted on

a wheelchair. Such Products are very innovative and fulfill the needs of the society. It is a very good

example of technological marketing. (For more info, see Reference [10])

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Political-Legal

Environment

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1. Redbull

Redbull markets its all energy drink in all countries in same packaging. Changing the package size

and looks is not always necessary. Keeping the same look and size has a “global recognition advantage”.

Red Bull’s energy drink cans for example have the same size and design and are going off the shelf very

well in India. Still, some formal changes, like adding the MRP (Maximum Retail Price), indicating if the

product is vegetarian / non-vegetarian and the address of the importer and distributor, are mandatory

(this applies to every consumer goods sold in India). Hence it has to follow various extra conditions for

packaging as a part of legal barriers for marketing in India. (For more info, see Reference [6])

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References

[1] Harish Bhat. "The really hot marketing gurus of 2011". thehindubusinessline.com.

http://www.thehindubusinessline.com/features/brandline/article2752574.ece

[2] Prasad Kulkarni. “Adobe India Pricing”. May 31, 2011. http://www.examplesofmarketing.blogspot.com

[3] ET Bureau. "Burberry fashions strategy to target Indian high net worth individuals".

Economictimes.Indiatimes.com. Oct 11, 2011. http://articles.economictimes.indiatimes.com/2011-10-

11/news/30266680_1_india-and-china-angela-ahrendts-burberry

[4] Arun Kathik B. "Marketing to Bharat". IITK.ac.in. Mar 1, 2011.

http://www.iitk.ac.in/ime/MBA_IITK/avantgarde/?p=259&cpage=1#comment-5253

[5] ET Bureau. “Sahara forays into luxury holiday biz”. Economictimes.Indiatimes.com. Sep 12, 2007.

http://articles.economictimes.indiatimes.com/2007-09-12/news/27679425_1_luxury-travel-travel-business-indians

[6] Andreas De Rosi. "Marketing in India (Part I): Which product strategy is the right one for the Indian market?".

EuroBrandsIndia.com. May 15, 2010. http://www.eurobrandsindia.com/blog/2010/05/15/marketing-in-india-part-i-

which-product-strategy-is-the-right-one-for-the-indian-market/

[7] "A bumpier but freer road". Economist.com. Sep 30, 2010. http://www.economist.com/node/17145035

[8] Question. "KFC marketing strategy in India?". Answers.Yahoo.com.

http://in.answers.yahoo.com/question/index?qid=20081114203505AAHTQc4

[9] Vandana Thambi. "Top 10 Companies that Paint India Green". ChilliBreeze.com.

http://www.chillibreeze.com/articles_various/top-10-indian-green-companies-green-business-practices.asp

[10] Fast Company Staff. "The 10 Most Innovative Companies in India". FastCompany.com. Mar 14, 2011.

http://www.fastcompany.com/1738533/the-10-most-innovative-companies-in-india