List any 4 types of Strategic Control and explain any 2 - ANSWER

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BUSINESS PLANNING & POLICYCASE STUDY : 1
MISSION STATEMENT
A Mission Statement defines the basic reason for the existence of the Organization, it provides
enlightenment to the insiders and outsiders about what the organization status for. In order to be
effective, a mission statement should possess the following seven characteristics.
1) It should be feasible : A mission should always aim high but it should not be an impossible
statement. It should be realistic and achievable-its followers must find it to be credible. But
feasibility depends on the resources available to work towards a mission. In the 1960s, the U.S.
National Aeronautics and Space Administration (NASA) had a mission to land on the moon. It
was a feasible mission that was ultimately realized.
2) It should be Precise : A mission statement should not be so narrow as to restrict the
organization’s activities, nor should it be too broad to make itself meaningless. 'Manufacturing
bicycles' is a narrow mission since it severely limits the organization’s activities while 'mobility
business' is too broad a term as it does not define the reasonable contour within which an
organization could operate.
3) It should be Clear : A mission should be clear enough to lead to action. It should not just be
a high-sounding set of platitudes meant for publicity purposes. Many organizations do adopt
such statements but probably they do so for emphasizing their identity and character.
4) It should be Motivating : A mission statement should be motivating for members of the
organization and of the society and they should feel it worthwhile working for such an
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organization or being its customers. A bank which lays great emphasis on customer service is
likely to motivate its employees to serve its customers well and to attract clients.
5) It should be Distinctive : A mission statement which is indiscriminate is likely to have little
impact. If all scooter manufacturers defined their mission in a similar fashion, there would not be
much of a difference among them. But if one defines it as providing scooters that would provide
value for money, for years, it creates an important distinction in the public mind. Bajaj Auto
adopted its popular mission of providing 'value for money, for years' and now believes in
'inspiring confidence'.
6) It should Indicate the Major Components of Strategy : A mission statement, along with
the organizational purpose should indicate the major components of the strategy to be adopted.
The mission of HCL Infosystems is: 'To provide world-class information technology solutions
and services to enable our customers to serve their customers better'. It provides a clear
indication of the emphasis in the strategies of the company on providing cutting edge technology
and customer-orientation.
7) It should Indicate how Objectives are to be Accomplished : Besides indicating the broad
strategies to be adopted, a mission statement should also provide clues regarding the manner in
which the objectives are to be accomplished. LG Electronics has its mission of 'becoming 2 by
10', that is, double the sales volume and profit by 2010 through setting its medium and long
term goal.
Q1) Define Mission Statement and explain the 5 important Mission Statement? (20 Marks)
CASE STUDY : 2
ENVIRONMENTAL SCANNING
Environmental scanning can be defined as the process by which organizations monitor their
relevant environment to identify opportunities and threats affecting their business for the
purpose of taking strategic decisions.
Factors to be Considered for Environmental Scanning
The external environment in which an organization exists consists of a bewildering variety of
factors. These factors are explained below:
• Events are important and specific occurrences taking place in different environmental sectors.
• Trends are the general tendencies or the courses of action along which events take place.
• Issues are the current concerns that arise in response to events and trends.
• Expectations are the demands made by interested groups in the light of their concern for
issues.
Approaches to Environmental Scanning
Kubr has suggested three approaches which could be adopted for sorting out information for
environmental scanning.13 We could call these approaches as systematic, ad hoc and
processed-form approaches.
1) Systematic Approach : Under this approach, information for environmental scanning is
collected systematically. Information related to markets and customers, changes in legislation
and regulations that have a direct impact on an organization's activities, government policy
statements pertaining to the organization's business and industry, etc. could be collected
continuously to monitor changes and take the relevant factors into account. Continuously
updating such information is necessary not only for strategic management but also for
operational activities.
2) Ad hoc Approach Using this approach, an organization may conduct. special surveys and
studies to deal with specific environmental issues from time to time. Such studies may be
conducted, for instance, when an organization has to undertake special projects, evaluate
existing strategies or devise new strategies. Changes and unforeseen developments may also
be investigated with regard to their impact on the organization.
3) Processed·form Approach For adopting this approach, the organization uses information in
a processed form, available from different sources both inside and outside the organization.
When an organization uses information supplied by government agencies or private institutions,
it uses secondary sources of data and the information is available in a processed form.
Q1) Difference between Ad-hoc and Processed-form Approach? (10 Marks)
Q2) Explain the factors of Environmental Scanning. (10 Marks)
CASE STUDY : 3
STRATEGIC CONTROL
The process of strategic management makes it clear that a strategy is formulated on the basis
of several assumptions. These relate to the environmental and organizational factors that are
dynamic and eventful. There is a considerable gap between the time a strategy is formulated
and when it is implemented. The process of implementation is itself time-consuming.
The four basic types of strategic controls are9:
1. Premise control
2. Implementation control
3. Strategic surveillance
4. Special alert control
The following sub-sections address each of these four strategic controls.
Premise Control
As mentioned above, every strategy is based on certain assumptions about environmental and
organizational factors. Some of these factors are highly significant and any change in them can
affect the strategy to a large extent. Premise control is necessary to identify the key
assumptions and keep track of any change in them so as to assess their impact on strategy and
its implementation.
Implementation Control
Implementation control may be put into practice through identification and monitoring of strategic
thrusts, such as an assessment of the marketing success of a new product after pre-testing or
checking the feasibility of a diversification programme after initial attempts at seeking
technological collaboration. In the first case, the company may evaluate whether the new
product launch will really be advantageous or it should be abandoned in favour of another
programme. In the second case, implementation control can help to determine whether a
diversification move will actually succeed or not.
Another method of implementation control is milestone reviews, through which critical points in
strategy implementation are identified in terms of events, substantial resources allocation or
significant end-time.
Strategic Surveillance
The premise and implementation types of strategic controls are specific in nature. Strategic
surveillance, on'1: the other hand, is aimed at a more generalised and overarching control
'designed to monitor a broad range of events inside and outside the company that are likely to
threaten the course of a firm's strategy'. Strategic surveillance can be done through a broadbased,
general monitoring, on the basis of selected information sources to uncover events that
are likely to affect the .course of the strategy of an organization.
Special Alert Control
The last of the strategic control systems is the special alert control, which is based on a trigger
mechanism for rapid response and immediate reassessment of strategy in the light of sudden
and unexpected events. Special alert control can be exercised through the formulation of
contingency strategies (see Section 9.4) and assigning the responsibility of handling unforeseen
events to crisis management teams. Examples of such events can be the sudden fall of a
government at the central or state level, instant change in a competitor's posture, an unfortunate
industrial disaster, a breach in information security or a natural catastrophe.
Q1) List any 4 types of Strategic Control and explain any 2. (10 Marks)
Q2) Explain Strategic Control and its two advantages. (10 Marks)
CASE STUDY : 4
MARKET LOCATION TACTICS
Market location could be classified according to the role that organizations play in the target
market and the type of business tactics they adopt to play such a role. We expect that you have
studied these strategies in you marketing management courses and so would only review them
here. It could be helpful if you review your marketing text as you read further.
On the basis of the role that organizations play in the target market, market location tactics
could be of four types : leader, challenger, follower and nichers. As you will note, the essence
of these tactics has been derived from military science.
1) Market Leaders are organizations that have the largest market share in the relevant product
market and usually lead the industry in factors such as technological developments, product and
service attributes, price benchmarks and distribution channel design.
Expanding the total market through new users, new uses and more usage.
Defending the market share through position defence, flank defence, counteroffensive defence,
mobile defence and contraction defence.
Expanding the market share through enhancement of operational effectiveness by means such
as new product development, raising manufacturing efficiency, improving product quality,
providing superior support services or increasing marketing expenditure.
2. Market Challengers are organizations that have the second or lower ranking in the industry.
These organizations can either challenge the market leader or choose to follow them. When
they seek to challenge the market leader, they do so in the hope that they would be able to gain
market share. The tactics adopted by the market challenger have several components. The
opponents, choose a genera! attack strategy and then, choose a specific attack strategy. The
most common objective of the challenger is increasing the market share. It could, however, also
be a somewhat devious aim, say to drive the opponent out of the industry. A general attack
approach could be of five types:
Frontal attack involving matching the opponent in terms of the product, price, promotion and
distribution.
Flank attack involving challenging the opponent's weak or uncovered geographical or segmental
areas.
Encirclement attack involving a grand move to capture the opponent's market share through
means such as launching an advertising blitzkrieg, making an unbeatable product–related
offering or presenting a unique service guarantee.
Bypass attack involving ignoring the opponent and attacking the easier markets by means such
as diyersifying into unrelated products, moving into new geographical areas or leapfrogging into
new technologies.
Guerrilla attack involving small, intermittent attacks to harass and demoralise the opponent
organization and eventually secure an organizational foothold in the industry. This could be
done by means such as price cuts, price discounts, intensive comparative advertising or
initiating legal action.
3. Market Followers are organizations that imitate the market leaders but do not upset the
balance of competitive power in the industry. They prefer to avoid direct attack, keep out of the
way of other organizations and reap the benefits of the innovations made by the market leaders
through imitation. The market follower may adopt four broad approaches as under:
Counterfeiter strategy involving duplicating the market leader's product and packaging and
selling it in the black market.
Cloner strategy involving emulating the market leader's products, name and packaging.
Imitator strategy involving copying some things from the market leader while retaining some
other features such as pricing, packaging or advertising.
Adapter strategy involving adapting one's own products to those of the market leader and selling
them in different markets.
4. Market Nichers are organizations that carve out a distinct niche that is left uncovered by the
other organizations in the industry or a niche that is of little or no interest to others. The niche
strategies are akin to focus business strategies as they target a market position that is small and
unique and require special competencies in order to be served. Excelling in providing a special
product or service attribute, serving a distinct geographical area or offering a customized
product or service to a select group of customers are some such means. Market niche
strategies carry the risks that we identified for focus business strategies. For instance. a market
leader may choose to expand its own market coverage to serve a niche, thereby negating the
advantages enjoyed by the market nicher. Market nichers can adopt three approaches, which
are as under:
• Creating niches involving looking for ways and means by which niches can be identified or
created in an industry.
Q1) List the types of market location tactics and explain any 2. (20 Marks)


 BUSINESS PLANNING & POLICY MANAGEMENT
Instructions:
1. Maximum marks : 80 Marks
2. Attempt any 8 questions
3. Illustrate with examples wherever applicable
Q1) XYZ Ltd. Wishes to adopt the cost-leadership business strategy for one of its SBUs. How
should it ensure operational effectiveness in terms of productivity, processes, people and pace?
If, after 1 year, the company wishes to change over to a differentiation business strategy,
identify the changes it should bring in its approach to attain operational effectiveness.
(10 marks)
Q2) Take an example of any service institution of your choice (example: hospital) and suggest how
operational control will work in such an institution. (10 marks)
Q3) Discuss the importance of strategic changes for the following organizational systems (a)
Information, (b) Control, (c) Appraisal, (d) Motivation, (e) Development and (f) Planning
(10 marks)
Q4) Take an example of an Indian company. What steps should it undertake for resource allocation
for implementing its strategies? What difficulties could be expected while doing so and how can
they be dealt with? (10 marks)
Q5) In what way is the concept of life cycle and SWOT analysis helpful in making strategic choice
at the business level? (10 marks)
Q6) Explain why business policy is a capstone, integrative course. How can an understanding of
business policy help in a career choice? (10 marks)
Q7) Explain the meaning of strategic management in your own words. Identify the roles that CEOs
play in strategic management. (10 marks)
Q8) Describe the essential characteristics of a mission statement. In what different ways can a
mission statement be formulated? (10 marks)
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Q9) Explain the technique of ‘balanced scorecard’.
OR
Q9) Explain the term ‘corporate restructuring’. (10 marks)
Q10) Explain the following terms: (10 marks)
1) Cost leadership
2) Differentiation
3) Focus

SUB : BUSINESS MANAGEMENT
N. B. : 1) Attempt any Four cases
2) All cases carry equal marks.
No : 1
REMAINS OF A DREAM
This is a tragic story, narrated in first person, of an entrepreneur who
became bankrupt for no fault of him, without producing anything, mostly
because of the irresponsible political and government environment. This case
study, documented by Bibek Debroy and P.D. Kaushik and published in Business
Today is reproduced here with permission.
In the 1980s, I worked as a chemical analyst for a transnational in
Germany, but kept thinking about shifting to India.
Opportunity knocked when I saw an advertisement by the Uttar Pradesh
government inviting NRI professionals to start a chemical unit in the newly
identified Basti Chemical Industrial Complex. I hail from Lucknow. Hence, this
was attractive. I inquired from the Indian High Commission and was told that
there is single window clearance for NRI investors. The brochure said several
things about the benefits – excise and sales tax holiday for five years,
uninterrupted power supply, low rate of interest on loans, and clearance of
application within 30 days.
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I started the application formalities for a chemical unit. Once the
application was accepted, I requested for long leave from my employers. I also
inquired from my relatives in Lucknow and was told that the Uttar Pradesh
government’s intentions are clear, and developmental work is progressing at fast
speed.
Every now and then, I received a letter from the ministry of industry in
Uttar Pradesh to furnish some paper or the other, as part of procedural
formalities. After three months, I received my provisional sanction letter for
allotment of land, and term loan. The letter also stated that within six months, I
must take possession of the land, and initiate construction. Otherwise, the
deposited amount (Rs 1 lakh as part of my contribution) will be forfeited. I
resigned from the company, and shifted permanently to India, since my employer
turned down my request for long leave.
On reaching the complex, I was surprised to see that the Uttar Pradesh State
Industrial Development Corporation (UPSIDC) had actually developed the land
in terms of markers, and signboards, compared to what I had seen on my last
visit.
Though roads were not fully laid, it was evident that work was in progress.
I took possession of my land and started construction.
Meanwhile, I approached the UPFC for granting me the term loan for
ordering the plant and machinery. The first obstacle came from the Uttar Pradesh
State Electricity Board (now Uttar Pradesh Power Corporation). The electricity
supply to the complex was not yet available. On inquiring, I was told that the
plan had been sanctioned, but required clearance from the power ministry, before
undertaking further work. The approximate time to get grid supply ranged
between four and six months.
The next obstacle came from the Uttar Pradesh Financial Corporation
(UPFC). It could release the first instalment after I completed construction till the
plinth level. I continued work with the help of a diesel generating set. It took
another month to reach the plinth level.
But before I could request UPFC to release my first instalment, I received a
letter from UPFC that I had to deposit interest against the amount paid to the
UPSIDC for land possession. This was a shock, because interest had to be paid
even before anything was produced.
But I had no alternative, because the first insatlment was due. The UPFC
promptly released the first instalment after inspecting the construction. It helped
me continue construction work, and also book for plant and machinery.
Six months went by. Construction was almost complete. I had received
three instalments from the Uttar Pradesh Financial Corporation (UPFC). Each
time the payment of interest was due, the required sum was adjusted from the
instalment released. If there was any shortfall in money required for construction,
I paid from my own pocket.
But after nine months, my coffers went empty. Machinery suppliers were
after me, for payment. UPFC insisted on interest payments, because this was the
last instalment of my term loan and interest due couldn’t be deducted from future
instalments. I borrowed from family and friends and paid up. Then I received the
final instalment from UPFC for plant and machinery, with another notice that the
yearly instalment for the principal was due.
Within two months, machinery was commissioned at the site. But
electricity was yet to reach the complex. In the previous year, I had visited the
Uttar Pradesh State Electricity Board (UPSEB) office innumerable times. I also
approached the industry association to assist me. But all my efforts were in vain.
This did not help me, or others like me, to get the grid supply.
There were 14 other who were in the same boat. The biggest company of
them all – obviously with contacts at higher levels – arranged for grid supply
from the rural feeder. But that plan also did not take off, because the rural feeder
supplied poor quality power for a mere six hours. A process industry requires 24
hours of uninterrupted electricity supply without load fluctuations. It is precisely
because of this that all 15 of us, who were waiting for electricity, had insisted on
industrial power from UPSEB.
All plans failed. Captive generation was not a viable alternative now. And
we continued to wait for the grid supply. We met the former minister for industry
and pleaded our case. He assured us that he would take up the case with the
power ministry.
Meanwhile, I defaulted on interest payment. So did the others. The final
blow came in the Assembly elections, when both the sitting : Member of
Legislative Assembly, from Basti, and the state industrial minister lost their
seats. Suddenly, everything – from road construction work, to the laying of sewer
and phone lines – came to a standstill.
Only the police post and the UPSKB rural feeder office remained. The new
incumbent in the industrial ministry hailed from Saharanpur, so the thrust of the
ministry changed. Basti was not on their priority list anymore. After waiting for
tow years, UPSEB was not able to connect the complex with grid supply.
In the end, UPFC initiated recovery action and sealed my unit. Besides,
they claimed that I could not get NRI treatment, with preferential interest rates,
because I had permanently moved to India. Thus, there were also plans to file a
case against me on account of misinforming the corporation. Experts suggested I
should file for insolvency if I wanted to avoid going to prison. This I did in 1994.
I spent Rs. 15 lakh from my own pocket.
Now, all that remains of an entrepreneurial dream is a sealed chemical unit
in Basti and a complex legal tangle.
I was better off working for the transnational in Germany. Power does not
come out of the barrel of a gun. A gun’s barrel comes of power, especially when
the latter does not exist.
QUESTIONS
1. Identify and analyse the environmental factors in this case.
2. Who were all responsible for this tragic end?
3. It is right on the part of the government and promotional agencies to
woo entrepreneurs by promising facilities and incentives which they are not
sure of being able to provide?
4. Should there be legislation to compensate entrepreneurs for the loss
suffered due to the irresponsibility of public agencies? What problems
are likely to be olved and created by such legislation?
5. What are the lessons of this case for an entrepreneur and government
and promotional agencies?
No : 2
THE COSTS OF DELAY
The public sector Indian Oil Corporation (IOC), the major oil refining and
marketing company which was also the canalizing agency for oil imports and the
only Indian company I the Fortune 500, in terms of sales, planned to make a
foray in to the foreign market by acquiring a substantial stake in the Balal Oil
field in Iran of the Premier Oil. The project was estimated to have recoverable oil
reserves of about 11 million tonnes and IOC was supposed to get nearly four
million tonnes.
When IOC started talking to the Iranian company for the acquisition in
October 1998, oil prices were at rock bottom ($ 11 per barrel) and most refining
companies were closing shop due to falling margins. Indeed, a number of good
oil properties in the Middle East were up for sale. Using this opportunity, several
developing countries ``made a killing by acquiring oil equities abroad.’’
IOC needed Government’s permission to invest abroad. Application by
Indian company for investing abroad is to be scrutinized by a special committee
represented by the Reserve Bank of India and the finance and commerce
ministries. By the time the government gave the clearance for the acquisition in
December 1999 (i.e., more than a year after the application was made), the prices
had bounced back to $24 per barrel. And the Elf of France had virtually took
away the deal from under IOC’s nose by acquiring the Premier Oil.
The RBI, which gave IOC the approval for $15 million investment, took
more than a year for clearing the deal because the structure for such investments
were not in place, it was reported.
QUESTIONS
1. Discuss internal, domestic and global environments of business
revealed by this case.
2. Discuss whether it is the domestic or global environment that hinders
the globalization of Indian business.
3. Even if Elf had not acquired Premier Oil, what would have been the
impact of the delay in the clearance on IOC?
4. What would have been the significance of the foreign acquisition to
IOC?
5. What are the lessons of this case?
No : 3
NATURAL THRUST
Balsara Hygiene Products Ltd., which had some fairly successful household
hygiene products introduced in 1978 a toothpaste, Promise, with clove oil (which
has been traditionally regarded in India as an effective deterrent to tooth decay
and tooth ache) as a unique selling proposition. By 1986 Promise captured a
market share of 16 per cent and became the second largest selling toothpaste
brand in India. There was, however, an erosion of its market share later because
of the fighting back of the multinationals. Hindustan Lever’s Close-up gel
appealed to the consumers, particularly to the teens and young, very well and
toppled Promise form the second position.
Supported by the Export Import Bank of India’s Export Marketing Finance
(EMF) programme and development assistance, Balsara entered the Malaysian
market with Promise and another brand of tooth paste, Miswak.
The emphasis on the clove oil ingredient of the Promise evoked good
response in Malaysia too. There was good response to Miswak also in the
Muslim dominated Malaysia. Its promotion highlighted the fact that miswak
(Latin Name : Salvadora Persica) was a plant that had been used for centuries by
as a tooth cleaning twig. It had reference in Koran. Quoting from Faizal-EMiswak,
it was pointed out that prophet Mohammed used ``miswak before
sleeping at night and after awakening.’’ The religious appeal in the promotion
was reinforced by the findings of scientists all over the world, including Arabic
ones, of the antibacterial property of clove and its ability to prevent tooth decay
and gums.
Market intelligence revealed that there was a growing preference in the
advanced counties for nature based products. Balsara tied up with Auromere
Imports Inc. (AAII), Los Angeles. An agency established by American followers
of Aurobindo, an Indian philosopher saint. Eight months of intensive R & D
enabled Balsara to develop a tooth paste containing 24 herbal ingredients that
would satisfy the required parameter. Auromere was voted as the No. 1
toothpaste in North Eastern USA in a US Health magazine survey in 1991.
The product line was extended by introducing several variants of
Auromere. A saccharine free toothpaste was introduced. It was found that mint
and menthol were taboo for users of homoeopathic medicines. So a product free
of such mints was developed. Auromere Fresh Mint for the young and Auromere
Cina Mint containing a combination of cinnamon and peppermint were also
introduced. When the company relaised that Auromere was not doing well in
Germany because of the forming agent used in the product, it introduced a
chemical free variant of the products.
QUESTIONS
1. Explain the environmental factors which Balsara used to its advantage.
2. What is the strength of AAII to market ayurvedic toothpaste in USA?
No : 4
THE SWAP
The Economic Times, 20 October 2000, reported that Reliance Industries
entered into a swap deal for the export and import of 36 cargoes of naphtha over
the next six months. Accordingly, three cargoes of 50,000 tonnes each were to be
exported every month from Reliance Petroleum’s Jamnagar refinery and three
cargoes of the same amount were to be imported to the Reliance Industries’
Hazira facility. The deal was done through Japanese traders Mitsubishi,
Marubeni, ltochu, IdCmitsu and Shell. The export was done at around Arabian
Gulf prices plus $22.
Reliance, needs petrochemical grade naphtha for its Hazira facility which is
not being produced at Jamnagar. Therefore, its cracker at Hazira gets
petrochemical grade naphtha from the international markets in return for
Reliance Petroleum selling another grade of naphtha from its Jamnagar refinery
to the international oil trade.
If RIL imports naphtha for Hazira petrochemical plant, the company does
not have to pay the 24 per cent sales tax, which it will have to pay on a local
purchase, even if it is from Reliance Petro. Besides Reliance Petro will also get a
10 per cent duty drawback on its crude imports if it exports naphtha from the
refinery at Jamnagar.
The export of naphtha with Japanese traders is being looked as a coup of
Reliance as it gives the company an entry into the large Japanese market.
Indian refineries have a freight advantage over the Singapore market and
can quote better prices.
QUESTIONS
1. Examine the internal and external factors behind Reliance’s decision
for the swap deal.
2. What environmental changes could make swap deal unattractive in
future?
3. Could there be any strategic reason behind the decision to import and
export naphtha?
4. Should Reliance import and export naphtha even if it does not provide
any profit advantage?
No : 5
A QUESTION OF ETHICS
TELCO opened bookings for different models of its proud small car Indica
in late 1998. The consumer response was overwhelming. Most of the bookings
were for the AC models, DLE and DLX. The DLE model accounted for more
than 70 per cent of the bookings.
Telco has planned to commence delivery of the vehicles by early 1999.
However, delivery schedules for the AC models were upset because of some
problems on the roll out front. According to a report in The Economic Times
dated 13 March 1999, Telco officials attributed the delay to non-availability of
air conditioning kits.
Subros Ltd. supplies AC kits for the DLE version and Voltes is the vendor
for the DLX version. Incidentally, Subros is also the AC supplier to Maruti
Udyog Ltd.
Telco officials alleged that Subros was being pressured by the competitor to
delay the supply of kits. ``If this continues, we will be forced to ask Voltas to
supply kits for the DLE version too,’’ a company official said.
QUESTIONS
1. Why did Telco land itself in the problem (supply problem in respect of
AC kits)?
2. If the allegation about the supplier is right, discuss its implications for
the supplier.
3. Evaluate the ethical issues involved in the case. (Also consider the fact
Maruti was 50 per cent Government owned.)
No : 6
DIFFERENT FOR GAMBLE
Product and Gamble (P & G), a global consumer products giant, ``stormed
the Japanese market with American products, American managers, American
sales methods and strategies. The result was disastrous until the company learnt
how to adapt products and marketing style to Japanese culture. P & G which
entered the Japanese market in 1973 lost money until 1987, but by 1991 it
became its second largest foreign market.’’
P & G acclaimed as ``the world’s most admired marketing machine’’,
entered India, which has been considered as one of the largest emerging markets,
in 1985. It entered the Indian detergent marketing the early nineties with the
Ariel brand through P & G India (in which it had a 51 percent holding which was
raised 65 per cent in January 1993, the remaining 35 per cent being hold by the
public). P & G established P & G Home products, a 100 per cent subsidiary later
(1993) and the Ariel was transferred to it. Besides soaps and detergents, P & G
had or introduced later product portfolios like shampoos (Pantene) medical
products (Viks range, Clearasil and Mediker) and personal products (Whisper
feminine hygiene products, pampers diapers and old spice range of men’s
toiletries).
The Indian detergent and personal care products market was dominated by
Hindustan Lever Ltd. (HLL). In some segments of the personal care products
market the multinational Johnson & Johnson has had a strong presence. Tata
group’s Tomco, which had been in the red for some time, was sold to Hindustan
Lever Ltd. (HLL). HLL, a subsidiary of P & G’s global competitor, has been in
India for about a century. The take over of Tomco by HLL further increased its
market dominance. In the low priced detergents segment Nirma has established a
very strong presence.
Over the period of about one and a half decades since its entry in India, P &
G invested several thousand crores. However, dissatisfied with its performance in
India, it decided to restructure its operations, which in several respects meant a
shrinking of activities – the manpower was drastically cut, and thousands of
stockists were terminated. P & G, however holds that, it will continue to invest in
India. According to Gary Cofer, the country manager, ``it takes time to build a
business category or brand in India. It is possibly an even more demanding
geography than others.’’
China, on the other hand, with business worth several times than in India in
less than 12 years, has emerged as a highly promising market for P & G. when
the Chinese market was opened up, P & G was one of the first MNCS to enter.
Prior to the liberalisation, Chinese consumers had to content with shoddy
products manufactured by government companies. Per capita income of China is
substantially higher than India’s and the Chinese economy was growing faster
than the Indian. Further, the success of the single child concept in China means
higher disposable income.
Further it is also pointed out that for a global company like P & G,
understanding Chinese culture was far easier since the expat Chinese in the US
was not very different from those back home where as most Indian expats tended
to adapt far more to the cultural nuances of the immigrant country.
One of P & G’s big in India was the compact technology premium
detergent brand Ariel. After an initial show, Ariel, however, failed to generate
enough sales – consumers seem to have gone by the per kilo cost than the cost
per wash propagated by the promotion. To start with, P & G had to import the
expensive state-of-the-art ingredients, which attracted heavy customs duties. The
company estimated that it would cost Rs. 60 per kilo for Ariel compared to Rs.
27 for Surf and Rs. 8 for Nirma. Because of the Rupee devaluation of the early
1990s, the test market price of Rs. 35 for 500 gms was soon Rs. 41 by the time
the product was launched. HLL fought Ariel back with premium variants of Surf
like Surf Excel.
It is pointed out that, ``in hindsight, even P & G managers privately admit
that bringing in the latest compact technology was a big blunder. In the eighties,
P & G had taken a huge beating in one of its most profitable markets, Japan, at
the hands of local company Kao. Knowing the Japanese consumer’s fondness for
small things, Kao weaved magic with its new-found compact technology. For a
company that prided itself on technology, the drubbing in Japan was particularly
painful. It was, therefore, decided that compacts would now be the lead brand for
the entire Asia-Pacific region. When P & G launched Ariel in India, it hoped that
the Indian consumer would devise the appropriate benchmarks to evaluate Ariel.
As compacts promised economy of sue, P & G hoped that consumers would buy
into the low-cost-per-wash story. But selling that story through advertising was
particularly difficult, especially sine Indian consumers believed that the washing
wasn’t over unless the bar had been used for scrubbing. Even though Ariel was
targeted at consumer with high disposable income, who represented half the
urban population, consumers simply baulked at the outlay.
Thereafter, one thing led to another. Ariel’s strategy of introducing variants
was a smart move to flank Lever at every price point by cleverly using the
brand’s halo effect. And by supporting the brand in mass media and retaining the
share of voice. By 1996, it had become clear that Ariel’s equity as a highperformance
detergent had begun to take a beating. Its equity as a top-of-the-line
detergent was getting eroded….Nowhere in P & G’s history had a concept like
Super Soaker been used to gain volumes…. It was decided that Super Soaker
would no longer be supported, nor would Ariel bar be supported in media.
QUESTIONS
1. Discuss the reasons for the initial failure of P & G in Japan.
2. Where did P & G go wrong (if it did) in the evaluation of the Indian
market and its strategy?
3. Discuss the reasons for the difference in the performance of P & G in
India and China.