Sample: Implementation of International Business Strategy, Results from Manufacturing: AB Co.
4.1 Results from Manufacturing: AB Co.
The company is an MNC with strong worldwide presence focusing on non alcoholic beverages and confectionery since the year 1969. The company is operating in India since last 55 years and entered the market with the focus on low-income market ventures. For several users the company has been able to maintain its popularity in Indian markets because of its expertise in understanding the taste of consumers in the market.
However there was a period when company launched some of its new products in the country and all of them were failed drastically one after another. This was in line for 4-5 products of the company that affected the profitability of the company in the Indian markets significantly. The interview for various executives were conducted to get an idea of what were the major reasons of failure of an already established company in India and what key steps and strategies were adopted by the company to revive its position among Indian consumers. The results of the semi-structured interviews conducted for executives of finance, strategic decisions, human resource, logistics, and marketing department of the organization have been discussed as follows.
The managers from the strategic department of the company revealed that the despite of having a strong presence in Indian markets the company faced a long period of failures where five of its products in a line were totally rejected by Indian consumers. The reason for such a long period of failure has been reported to be the company's failure in judging the market environment. During the initial stages the company believed that it can rely on old technology and existing metrics of performance to remain successful in the Indian market. Further minor adaptations were believed to be sufficient in the distribution channels and techniques of communicating with potential customers, i.e. the marketing and promotional techniques. However it was later realized that the venture failed to reach the target customers in an effective manner because the company made several assumptions about the Indian market and did not made an effort to research on the market to get the actual information on likes, dislikes, preferences, etc. of the customers in the Indian markets. There was a need to customize the products of the company for Indian consumers.
It was further revealed that the company led with their products and thus levered their expertise. However as the technology used in the new markets was same which was introduced ten years ago in Western markets the venture failed to identify the differences that lie between the low-income markets and the Western upscale markets and assumed Indian markets to be about a decade behind from the Western world's stage of development. The major reason of the failure was the taste of the products that was disliked by Indian consumers. As the products were already popular in UK and Western markets it was assumed by the company that a successful product can attract success in any area and under any set of conditions.
The respondents from finance department of the company reported that there was no explicit consideration and the company plugged the venture into the metrics that already existed. This was especially in case of the pricing formula used by the company. This resulted in overpricing of the products of the company that were too expensive for Indian consumers and also not functionally attractive enough for the customers of high income group. Further the respondents from logistics department revealed that there were no effective incentives to encourage the current distributors of the company who were responsible for promoting the product. These new products were potentially cannibalizing the existing and more lucrative products of distributors and thus there was a need of creating much more attractive incentives. The company relied heavily on the existing partners to market the new products that has different target and aim and was required to be marketed and promoted differently from the existing successful products of the brand resulting in the failure of making the products reach to secondary cities and rural areas of the country.
It was further revealed that the company relied on existing links with the local manufacturers of the firm for getting market-specific knowledge. This resulted in a failure of making the introduction or entry strategy of the new product line in an inclusive manner leading to a failure in incorporation of the important environment conditions and preferences of eating as per the climate conditions in India. The venture struggled to meet its sales goals because of the decisions of relying on existing partners and a strategy based on traditional model of entering the market and introducing new product lines into an emerging economy. Such a failure also had an adverse impact on the existing strong image and goodwill of the company in Indian market.
When asked about the strategies adopted to revive the original image of the company in Indian market after the failure of several products in a line the respondents reported that the products had already failed on the level of taste which resulted in discontinuation of all such products in Indian markets. For reviving its position the company relied on changing its focus along with changing the vision statement of the company. There was as shift in focus of the company from new brand launching to the rejuvenation and strengthening of its existing popular brands in the country. It also extended its reach to semi urban and rural areas by incorporating new partners into its distribution and promotional channels. At this stage it was required to make the product establish in daily life of people and thus innovative modes of selling were required. The company decided to see its products through non-traditional outlets such as music stores, bookstores and apparel outlets.
Some executives from the strategic department of the company reported that AB Co. has been successful in Indian markets because of its realization that there is a need of high penetration in the market for getting compensated for reduced margins. The company set targets within the context of Indian market challenges that resulted in high investments in distribution networks of the country and product localization areas. In addition the management of the company has been able to create the right product-price proposition. They further reported that there are some unique challenges of operating in Indian markets. These related to the difficulty of operating in the Indian environment where procedural bottlenecks, government policies and legacy of cumbersome laws are the most important factors. Furthermore the socio-economic challenges of Indian society makes it important considers the poverty, illiteracy and health concerns prevalent in the society.
The lessons form the failures and success of the company made its executives believe that to operate in India there is a need to have localized product-market business models in operation and the commitment needs to be generated on a global level. In order to obtain Indian cost and capability benefit there requires localization of parts of the value chain. Further the India-specific business models should be designed as the models successful in Western countries will not prove to be helpful in Indian context where the emphasis on product, value and price is required to be provided on a simultaneous basis. The executives also argued in favor of creating processes to accelerate the integration and localization of the company in India. The rules regarding global metrics, and standards to meet market challenges should be changed while operating in India. For instance it was reported that the operatins of AB CO. in India were hamstrung by Government regulations that limited both their cocoa improsta and their production capacities. India requires being the focus area of operations of the company and the plans related with the country should be long term and measurable adding a visionary lens to the decisions related with future products, marketing efforts and investments to be made. The basic vision of the company may not prove to be suitable for Indian markets and thus requires to be molded as per the nature of consumers and the markets as a whole.
This need of alignment of organization with the potential of the market is evident from the initiatives taken by the human resource department of the organization. The executives of the department reported that the company emphasize on linking its targets in India with the management processes of targeting and monitoring and using them for forming a baseline to discuss with regional and global teams. Company focused on leveraging the Indian advantages that includes managerial talent of the country along with capturing the huge market potential of India.
Finally the product division of the company reported that India required creation of strong brands. This was made possible through offering high quality products in a consistent manner. This consistency was the major reason why the failed products were immediately discontinued from Indian markets and no efforts were made to revive those products but the company concentrated on rejuvenation of its existing products.
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