Introduction
The aim of the paper is to develop a basic
understanding of various factors that determine the outlining of a marketing
plan to launch a product in a foreign territory. For this study, case of an international
soft drink brand has been considered, wanting to launch a particular product
line in a foreign market.
The product line in question is a diet
aerated soft drink with three different taste variants. The foreign market in
context of which this paper is written, is India. With its ever growing middle
class and a relatively under developed retail sector, India makes an exciting
subject with reference to entry of a foreign player in its agro-food retail
market.
In the sections to follow, the soft drink
brand’s marketing plan will be discussed in context of current scenario in the
foreign market, barriers to entry, marketing agencies and information; from the
point of view of the international marketing manager of the company.
Situation analysis of the Indian market
India being one of the largest and the
second most populous nation in the world is eyed as a lucrative business
opportunity by companies around the globe. Its sheer size, cultural diversity
and the recent evolutionary phase moving towards a developed tomorrow, present
an unusual yet interesting case for marketers to study in order to be able to
thrive in such a unique market.
Briefly described below are some of the
points which make India a unique opportunity for launching the soft drink brand.
1.
Demographics
With a 1.2 billion population and rising,
India is a huge opportunity for any mass retail brand. Moreover the growth of
the service sector and industries in the last decade has contributed to the
rise of an affluent middle class in the country. Such an economically
independent population is also exposed to the current global trends due to a
developed media.
This situation is already eyed by retail
biggies such as Walmart, which are struggling to enter the market. However,
others (which are also our close competitors in the beverage industry) such as
Coca Cola and Pepsi are already monetising the opportunity.
It only makes economic sense to take
advantage of the situation by entering the market with a relatively novel idea
such as a diet aerated drink (novel because, Pepsi and Coke have not made
efforts to popularise similar products in their own stable).
2.
Soft Drink Consumption
The
soft drink consumption in India is still quite low when compared to global
consumption trends. At present the per capita consumption of soft drink in
India stands at around 5-6 bottles, which is same as Nepal’s (which is a much
smaller country when compared to India). Pakistan’s consumption is 17 bottles,
Sri Lanka’s 21 bottles, Thailand 73 bottles, The Philippines 173 and Mexico
605. However, the soft drink industry is growing at a rate of 6%-7% annually in
the recent years and is also cited as the second largest in the packaged food
industry in India. Hence the behemoth opportunity present is quite obvious.
3.
Lack of options in the market
With the growing epidemic of diseases such
as obesity, type 2 diabetes, stroke, cancer, heart attacks among others, the
Indian consumer is becoming aware of health risks posed by unhealthy lifestyle
and eating habits. In recent times there has been a surge in the demand of
preventive medicine, health supplements and healthy food options.
However, in context of aerated drink
markets, growth has only slowed since, majors like Pepsi and Coca Cola have
failed to concentrate on their diet drink alternatives such as Diet Coke or
Diet Pepsi. Therefore, there is a huge opportunity to win over the consumer
(who already likes the fizz drinks) by presenting a healthier option.
4.
Price Sensitive Market
India is typically the market of the middle
class. With consumer incomes mostly derived from the service industry and relatively
less personal consumption expenditure due to Indian value system like the
preference to family needs, India is a price sensitive market when it comes to
disposable incomes in context of personal expenditure.
Hence, we see global brands adapting to
sachet culture in India in order to make sales. Only a while ago Pepsi and Coca
Cola had engaged in price wars to penetrate the market and build loyalty.
However, food products oriented towards a
healthier lifestyle still weigh heavy on the average Indian pocket. Options
like packaged juices, energy drinks and diet beverages are still not mass
consumed due to being expensively priced.
Playing at a reachable price level in the
Indian context can popularise the diet soft drink proposed to be launched in
this paper.
5.
Favourable Government
The UPA government constituting of congress
party majorly is the ruling government in India in this term. This party is
known for its liberal attitude towards foreign investors and globalisation. Currently
the party is heeding to the demands of lobbyists and trying to bring certain
proposed legislations in force which would make it easier for foreign retailers
to enter the Indian market.
This makes an opportune time for entering
the Indian market since, the legislation (if it comes into force) will reduce a
lot of problems and barriers associated with entering India. One of the major
hurdles being that foreign players cannot make 100% investment in the Indian
market (restricted to 51% for single brand operators). Foreign firms either
need to enter into strategic partnerships with Indian firms or, establish
wholly owned Indian subsidiaries to function in the market, currently.
6.
Rural marketing
It has been often commented that India
lives in its villages. The villages contribute the majority of the Indian
population; and it is a wonder how they still remain untapped by any major
global brand – especially the ones focussing on masses. Even a brand like Coca
Cola has been relatively unsuccessful in registering its presence in Indian
villages.
Solutions to problem like pricing and point
of sales hurdle like lack of electricity to chill the drinks can give a jump
start to the drink proposed to be launched in this market.
Barrier to Entry and Preferred Entry Option
1.
Legal Barriers
Currently foreign direct investment in
India can be made with a cap of maximum 51% in a particular venture. Therefore,
global players attempting to foray in this market either need to partner with
Indian firms to contribute the remaining 49% to set up a business or, need to
establish a wholly owned domestic subsidiary.
This regulation is a tough hurdle posing
the soft drink brand’s entry in the country since finding a reliable partner is
a function of time and setting up a domestic subsidiary is both financially
risky as well as requires huge capital investment.
2.
Competition
The organised soft drink market in India is
largely a duopoly. With over 95% share of the market held by Pepsi and Coke,
there is little scope for any other player to enter (except one with a very
good strategy and a huge marketing budget). Moreover, the competition in the
unorganised sector is from local juice and soda vendors and tea/coffee stalls,
the presence of which cannot be negated to develop a good strategy.
3.
Marketing and Distribution
expenditure
India is a country so big and diverse that
it enjoys the status of a sub continent. To service such diversity over a large
landscape not only requires a unique marketing approach and a robust
distribution system but also huge budgets (often running into millions). This
has been one of the major reasons for failure of brands like RC cola, in the
past.
Taking the above mentioned points in
consideration, it only makes sense to partner with an Indian company in order
to foray in this market. It is advisable to tread on the footsteps of market
leaders like coca cola, and secure partnerships with Indian bottlers. This will
not only reduce the initial expenditure on packaging, allowing for greater
funds to be diverted towards marketing but also, provide a ready distribution
system to the brand; which is of great importance in the Indian context.
In the future, as the business picks up,
efforts can be made to establish wholly owned subsidiaries in order to reduce
dependence on outside agencies (however, the role of bottlers will forever
remain critical in the success of operations).
Preferred Marketing Organisation and Controlling Marketing
activities
Many international advertising and
marketing agencies are working in India. However, important in this context are
those which can introduce programs which are specific to the Indian cultural
context. Indians though love foreign products, have only taken liking to ones
which have been able to connect to specific Indian tastes. For example, even
McDonald’s in India has introduced burgers which incorporate tastes of popular
Indian dishes like Chicken tikka and aloo tikki. As the marketing manager I’d
suggest Ogilvy as the agency of choice. Ogilvy’s recent efforts to popularise
Vodafone’s value added services in India have positioned the Phone services
giant uniquely.
Below mentioned are some of the criterion
that will shape the marketing strategy:
1.
Types of marketing efforts
In the Indian case, two types of marketing
efforts need to be focussed upon. First, is top line which would cover the
wider media strategy covering television ads, hoarding, product placement in
movies, etcetera. The second one being the bottom line, which covers point of
sales marketing and advertising in the form of posters, standees, cut outs and
promotional give away among others.
2.
Indianisation
Marketing efforts should be such so as to
appeal to the Indian psyche. Special Indian values, tastes and interests should
be always kept in mind, while formulating a marketing program.
In the past brands have built reputation in
this market by associating with cricket (which is very popular in India), or
roping in popular celebrities such as Sachin Tendulkar, Shahrukh Khan and Aamir
Khan to promote brands such as Pepsi and Coke. Also brands have paid attention
to Indian values of sharing and joint family while promoting a campaign (for
example Coca Cola on-going campaign Han
main crazy hu focussing on sharing happiness)
3.
Environmental
India
being a rapidly industrialising country with a large carbon footprint is fast
realising the ill effects of it. The recent out lashes on soft drink majors
alleging the use of pesticides in drinks and the depletion of ground water
table, has put the global giants in a negative light in India.
One should be cautious while operating in
such an environment and marketing efforts should focus on popularising
corporate social responsibility efforts undertaken.
For instance we should learn from Coke’s
introduction of eKOCOOL refrigerators in the rural Indian market. These
function on solar power and can even help light up a store and recharge mobile
batteries. Such programs will minimise the effect of any negative publicity.
Accumulating additional marketing information
The launch in a foreign market such as
India will require more objective information as well as the knowledge and
understanding of certain culture and nation specific trends (in addition to
critical insider information). It is proposed to collect such information from
the following sources:
1.
Trade and Industry Specific
associations- Journal and research papers published by industry specific
associations as well as trade and business groups such as Indian Chambers of
Commerce, will be helpful in gathering knowledge and data about the market.
Moreover, such
associations also provide tailored research information to help organisations
that could promote mutual interests
2.
Research agencies- Employing
research agencies such as McKinsey or AC Nielsen to gather ground level data
can be extremely helpful in gathering Intel of direct importance to the final
plan to be implemented at the core level of operation that is the actual market
where consumer makes a purchase.
3.
Lobbyists and Politicos- It
would be extremely helpful to win over the confidence of politicos and
lobbyists lobbying for a mutual cause, in order to gain insider information
about legislations and political climate in the country. Also, it will be helpful
in spreading a positive word around.
Conclusion
In the sections mentioned in this paper, an
endeavour has been made to briefly introduce the various points to be kept in
mind while making a marketing decision to launch a product in a foreign
territory.
In context of the soft drink brand
proposing to launch in the Indian market, it is of key importance to take due
note of the opportunity presented by the sheer size of the market. However, any
successful attempt to launch in this market will require a careful study of
competition, political climate and the Indian culture. To back up this study
and its implementation the allocation of a huge marketing budget is also of
utmost importance.
To sum up, this paper is an attempt to
briefly describe the process of situation analysis, study of barriers to entry
and formulating a marketing program, while undertaking a marketing decision to
launch in a foreign territory.
References
2.
Mofpi.nic.in/ContentPage.aspx?Categoryid=548
3.
FDI IN
INDIAN RETAIL SECTOR:ANALYSIS OF COMPETITION IN AGRI-FOOD SECTOR RUPALI GUPTA
CHRIST UNIVERSITY, PAYAL MALIK (Adviser, Economics Division, Competition
Commission of India)
4.
“COCA COLA
IN INDIA: A STUDY ON PRODUCT PORTFOLIO AND DISTRIBUTION ADAPTATION” Prof.
Ray Titus, Nagabhushana
5.
Indian retail market, changing with
the changing times. Deloitte Touche Tohmatsu India
Assignment Brief:
Assume that you are the international markeign manager for a company marketing a successful
brand of a soft drink. (you may make your own assumptions about the type of drink and its
positioning). Your company is planning to market its product overseas.
Select an overseas market )country_. Obtain information from secondary sources that will be
relevant to marketing planning and decision making, eg., culture, demographics, economics,
political legal and international trade agreements, marketing systems and so on.
Write a report covering the following :
1. Situation analysis of the selected market, with supporting statistics, and justification for
selecting this market.
2. The barrier to entry and preferred entry option.
3. The preferred marketing organization to cater for the new foreign activity, including your
plans for control of your marketing activities.
4./ additional marketing information that you will require for marketing decision making and
how you propose to obtain it.
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