Monday, 22 September 2014

Marketing Planning and Decision Making

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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