Good Morning Ishan

Tuesday, February 1, 2011

Impetus for Rising Aspirations

The heterogeneity that characterizes the modern Indian consumer has created a tangle that marketers would like to unravel in order to target their products and services precisely. In this fortnightly series, Indicus Analytics presents the various facets of urban consumers, across geographies and socio-economic group

SEC c households, whose chief wage earners are skilled workers with no college degree or diploma, comprise earners are skilled workers with no EC C households, whose chief wage a little less than a quarter of all urban households. Among all the urban SEC C households, the second largest sub-segment is formed by households whose chief wage earners are in their middle years, married with young children. Most of these chief wage earners have completed higher secondary schooling, and some of them did attend college as well. These skilled workers prefer to work in regular salaried jobs that give them security of in- come, and just about a third of them run businesses of their own. There are a few urban areas where business dominates jobs, such as Varanasi, Jalpaiguri, Moradabad, Kannur and Jalgaon; in most cases the main business is trade with manufacturing taking the second spot.

Interestingly, even though education levels are not very high, a quarter of the chief wage earners have found jobs either in the government or large private or public limited companies. The sector that offers maximum earning opportunity is of course trade, wholesale or retail, while manufacturing, public administration and transport, storage and communication also have a large number of workers from this segment.

Spouses in this segment have low educational qualifications. Most of them prefer to stay home to look after young children, though some have taken

Case Study

Kellogg's Indian Experience: A Failed Launch

In April 1995, Kellogg India Ltd. (Kellogg) received unsettling reports of a gradual drop in sales from its distributors in Mumbai. There was a 25% decline in countrywide sales since March1995, the month Kellogg products had been made available nationally.

Kellogg was the wholly-owned Indian subsidiary of the Kellogg Company based in Battle Creek, Michigan. Kellogg Company was the world's leading producer of cereals and convenience foods, including cookies, crackers, cereal bars, frozen waffles, meat alternatives, piecrusts, and ice cream cones. Founded in 1906, Kellogg Company had manufacturing facilities in 19 countries and marketed its products in more than 160 countries. The company's turnover in 1999-00 was $ 7 billion. Kellogg Company had set up its 30th manufacturing facility in

India

, with a total investment of $ 30 million. The Indian market held great significance for the Kellogg Company because its

sales were stagnating and only regular price increases had helped boost the revenues in the 1990s.Launched in September 1994, Kellogg's initial offerings in

India

included cornflakes, wheat flakes and Basmati rice flakes. Despite offering good quality products and being supported by the technical, managerial and financial resources of its parent, Kellogg's products failed in the Indian market. Even a high-profile launch backed by hectic media activity failed to make an impact in the marketplace. Meanwhile, negative media coverage regarding the products increased, as more and more consumers were reportedly rejecting the taste. There were complaints that the products were not available in many cities. According to analysts, out of every 100 packets sold, only two were being bought by regular customers; with the rest 98 being first-time buyers. Converting these experimenters into regular buyers had become a major problem for the company.

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India considering import duty cuts

Thought of the Day

“Talent only matures when harnessed within a personality that is capable of self-improvement. And talent, ironically, has a nasty knack of protecting the talented from the urge to self-improve.”

-Ed Smith

Insurance Glossary

Change in Net Premiums Written (IRIS)

The annual percentage change in Net Premiums Written. A company should demonstrate its ability to support controlled business growth with quality surplus growth from strong internal capital generation.

Change in Policyholder Surplus (IRIS)

The percentage change in policyholder surplus from the prior year-end derived from operating earnings, investment gains, net contributed capital and other miscellaneous sources. This ratio measures a company's ability to increase policyholders' security.

Personality Introduction

ADI GODREJ

Chairman of Godrej Group

Adi Godrej is one of the icons of Indian Industry. He is the chairman of Godrej Group. .Adi Godrej was born in a business family. His father's name was Burjorji Godrej and his mother's name was Jai Godrej. More than a century age, the Godrej's were into manufacturing locks and vegetable-based soaps. The Godrej products were among the first indigenously manufactured products to displace entrenched foreign brands.

Adi Godrej left

India

at the age of 17 to enroll at the Massachusetts Institute of Technology. Though he planned to study mechanical engineering but he later on switched to management. After his return to

India

, Adi Godrej joined the family business. He modernized and systematized management structures and implemented process improvements. Adi Godrej took the Godrej Group to great height during controlled economy era.

DPO

Direct Public Offering (DPO)

A company pursues a direct public offering (DPO) to raise capital by marketing its shares directly to its own customers, employees, suppliers, distributors and friends in the community. DPOs are an alternative to underwritten public offerings by securities broker-dealer firms where a company's shares are sold to the broker's customers and prospects.

Direct public offerings are considerably less expensive than traditional underwritten offerings. Additionally, they don't have the restrictions that are usually associated with bank and venture capital financing. On the other hand, a DPO will typically raise much less than a traditional offering.

Trading pattern of DPO

The corporation may sell securities once completing a DPO by direct methods; telemarketing or mail outs but may also develop a brokering system to assist in the day to day management of such securities

Case Study

The Coke Pepsi Rivalry: Pepsi Vs. COKE

The cola wars had become a part of global folklore - something all of us took for granted. However, for the companies involved, it was a matter of 'fight or succumb.' Both print and electronic media served as battlefields, with the most bitter of the cola wars often seen in form of the comparative advertisements.

In the early 1970s, the US soft-drinks market was on the verge of maturity, and as the major players, Coke and Pepsi offered products that 'looked the same and tasted the same,' substantial market share growth seemed unlikely. However, Coke and Pepsi kept rejuvenating the market through product modifications and pricing/promotion/distribution tactics. As the competition was intense, the companies had to frequently implement strategic changes in order to gain competitive advantage. The only way to do this, apart from introducing cosmetic product innovations, was to fight it out in the marketplace. This modus operandi was followed in the Indian markets as well with Coke and Pepsi resorting to more innovative tactics to generate consumer interest.

In essence, the companies were trying to increase the whole market pie, as the market-shares war seemed to get nowhere. This was because both the companies came out with contradictory market share figures as per surveys conducted by their respective agencies - ORG (Coke) and IMRB (Pepsi). For instance, in August 2000, Pepsi claimed to have increased its market share for the first five months of calendar year 2000 to 49% from 47.3%, while Coke claimed to have increased its share in the market to 57%, in the same period, from 55%.

Media reports claimed that the rivalry between Coke and Pepsi had ceased to generate sustained public interest, as it used to in the initial years of the cola brawls worldwide. They added that it was all just a lot of noise to hard sell a product that had no inherent merit.

Coke had entered the Indian soft drinks market way back in the 1970s. The company was the market leader till 1977, when it had to exit the country following policy changes regarding MNCs operating in India. Over the next few years, a host of local brands emerged such as Campa Cola, Thumps Up, Gold Spot and Limca etc. However, with the entry of Pepsi and Coke in the 1990s, almost the entire market went under their control.

Making billions from selling carbonated/colored/sweetened water for over 100 years, Coke and Pepsi had emerged as truly global brands. Coke was born 11 years before Pepsi in 1887 and, a century later it still maintained its lead in the global cola market. Pepsi, having always been number two, kept trying harder and harder to beat Coke at its own game. In this never-ending duel, there was always a new battlefront opening up somewhere. In India the battle was more intense, as India was one of the very few areas where Pepsi was the leader in the cola segment. Coke re-entered India in 1993 and soon entered into a deal with Parle, which had a 60% market share in the soft drinks segment with its brands Limca, Thums Up and Gold Spot.

Questions:-

1. 1. Analyze the main reasons behind the rivalry of Pepsi and Coke and why there is a need of such strategic change.

2. 2. Do the SWOT analysis of the case study.