(a) Was entering the Indian market with a standardised product a mistake?

Justify.

A Major cereal manufacturer produces and markets standardized breakfast cereals to

countries around the world. Minor modifications in attributes such as sweetness of the
product are made to cater to local needs. However, the core products and brands are
standardized. The company entered the Chinese market a few years back and was
extremely satisfied with the results. The companys sales continue to grow at a rate around
50% a year in China and other Asian countries, and based on the market reforms taking
place, the company started operations in India by manufacturing and marketing its
products. Initial response to the product was extremely encouraging, and within one year
the company was thinking in terms of rapidly expanding its production capacity. However,
after a year, sales tapered off and started to fall.

Traditionally, Gillette relied on extensive research and development to create a single

product for global distribution. The product was supported by a marketing premise that it
would be equally valuable to customers globally. But Gillette set aside its global strategy in
India and grew its market share dramatically. This case study looks at how Gillette
innovated by tailoring advertising and inventing a new product development process to
reflect local shaving habits.

Although Gillette entered the Indian market in 1984 and launched its newest triple-blade
system, Mach3 in 2004, sales were flat for a long time. The product did not go through any
changes and kept its key features - such as long lasting diamond-like coating blades, 'Power
Glide' smoothness, ergonomic handles, pivoting precision heads - and premium price,
which was 10 times more than its two-blade competitors.

Even though the target customers were professional men with higher disposable incomes
than the average Indian, the traditional, double-edged razor, could not be dislodged. Indian
men do not consider shaving a significant enough activity to justify such a premium.
Gillette's Mach3 value proposition was based on extensive consumer research, which
highlighted key concerns men had about shaving: it was time-consuming, caused skin
irritation and was generally unpleasant. Mach3 promised "the closest shave ever in fewer
strokes - with less irritation". Research and development served as the key value network
component supporting this value proposition, as it was crucial to deliver the promised
performance. Manufacturing, distribution, marketing and advertising were geared for the
global introduction through increased production capacity and aligned promotional
material.
With such indifference towards shaving, Gillette had to focus on changing the consumer's
attitude, leading to some creative marketing campaigns. For example, the launch of the
newest Gillette Mach3 in 2009 was supported by the 'Shave India Movement 2009'
campaign which included several initiatives. Gillette created the platform 'India Votes... to
shave or not' to support this campaign, which asked three controversial questions: Are
clean-shaven men more successful? Did the nation prefer clean-shaven celebrities? And the
big one: do women prefer clean-shaven men? For two months, various media channels
picked up on the campaign and ran interviews, discussions, editorials and news stories,
which triggered popular interest. The main purpose was to create a debate around shaving.

The company created the Women Against Lazy Stubble (WALS) association, where women
were encouraged to ask their men to shave, capitalizing on their role as influencers of men
in this aspect. Gillette recruited Hollywood celebrities such as Argon Ram pal and Nihau
Dhulia to support the campaign. This innovative way of marketing proved to be effective
and as awareness grew, sales and market share increased by 38 per cent and 35 per cent
respectively.

Until 2010, Gillette India had been following a strategy of marketing cheaper-end US-
developed razors. However, low-income Indian customers who could not afford Gillette's
premium price relied on the outdated, but traditional, double-edged razor shaving systems.
An estimated 400 million customers not happy with existing market offerings provided a
promising growth opportunity for Gillette. Thus, it focused on understanding its customers
and the challenges they faced, which required spending hours visiting and interviewing
consumers in order to understand the role of grooming in their lives and their needs.

Kelloggs decided to open its subsidiary in India by the name of Kelloggs India and
launching its topmost brand, Corn Flakes. The company decided to invest around 65
million USD on this project. This investment is received in a great positive sense among the
Indian economists considering the vast market size of India and motivation among the
households to improve their life-styles. However, when the Corn-Flakes were launched, it
did not receive the expected response in the market. Kelloggs also was extremely confident
about the success of their product in Indian market. However, the when launched, product
was a complete disappointment and the strategy of Kelloggs to position itself as healthy
and nutritional brand totally failed. Indian market did not accept the whole idea.
Eventually, they had to take the product back and after several months of analysis and
market research, they entered the market again and re-launched the product.

This post analyses the reasons behind the initial failure of Kelloggs India and the
marketing and product-positioning strategies of Kelloggs India, where did they went
wrong. The write up gives an insight about the marketing-mix adopted by the company and
its marketing strategy for the re-launch and how such policies worked for them in Indian
market.
 (b) Was it a problem of the product, or the way it was positioned?

Detailed consumer seemed to suggest that while the upper-middle social class, especially
families where both spouses were working to whom this product was targeted adopted the
cereals as an alternative meals (i.e. breakfast) for a shot time, they eventually returned to
the traditional Indian breakfast. The CEOs of other firms in the food industry in India are
quoted as saying that non Indian snacks products and restaurant business are the areas
MNCs can hope for success. Trying to replace a full meal with a non-Indian product has
less of a chance of succeeding.

Over the past 20 years, multinational companies have made considerable inroads into the
Indian market. But many have failed to realize their potential: some have succeeded only in
niches and not achieved large-scale market leadership, while others havent maximized
economies of scale or tapped into the countrys breadth of talent. The experience of a
leading multinational consumer goods company illustrates the challenge: its revenue in
India has grown by 7 percent compounded annually in the past seven yearsalmost twice
the rate of the parent company in the same period. Nevertheless, the companys growth
rate in India is only about half that of the sector.

For multinationals, the key to reaching the next level will be learning to do business the Indian
way, rather than simply imposing global business models and practices on the local market. Its
a lesson many companies have already learned in China, which more multinationals are treating
as a second home market.1In India, this trend has been slower to pick up steam, although best-
practice examples are emerging:

A leading beverage company entered India with a typical global business modelsole
ownership of distribution, an approach that raised costs and dampened market penetration.
The companys managers quickly identified two other big challenges: Indias fragmented
market demanded multiple-channel handoffs, and labor laws made organized distribution
operations very expensive. In response, the company contracted out distribution to
entrepreneurs, cutting costs and raising market penetration.

A big global automobile company has become the one of the largest manufacturers in India,
growing at a rate of more than 40 percent a year over the last decade, by building a local
plant, setting up an R&D facility to help itself better understand what appeals to Indian
customers, and hiring a well-known Indian figure as its brand ambassador.
To realize Indias potential, multinationals must show a strong and visible commitment to the
country, empower their local operations, and invest in local talent. They must pay closer
attention to the needs of Indian consumers by offering the customization the local market
requires. And multinational executives must think hard about the best way to enter the market.
More and more, that will mean moving beyond the joint-venture approach that so many have
adopted and learning to go it alone. (For a localization-assessment tool, see exhibit, Winning in
India: An illustrative scorecard.)

Its essential that multinationals raise their game in India: the countrys economy is expected to
grow by upward of 6 percent annually in the next few years, among the highest rates of any big
emerging economy. In several product and market categoriesmobile handsets, for example
India could account for more than 20 percent of global revenue growth in the next decade. In
other words, the future of many multinationals depends on their ability to succeed in India.
(3) Given the advantages to be gained through leveraging of brand equity and
product knowledge on a global basis, and the disadvantages of different local
tastes, what would be your strategy for entering new markets?
What is Brand Leveraging?
A brand leveraging strategy uses the power of an existing brand name to support a companys entry
into a new, but related, product category. For example, the manufacturer of Mr. Coffee coffee
makers used its brand name strength to launch Mr. Coffee brand coffee. While coffee machines
and coffee beans are in different product categories, there is a strong enough correlation between
the two items that the brand name has a powerful impact on consumers of both categories.
Brand leveraging communicates valuable product information to consumers about new products.
Consumers enter retail outlets equipped with pre-existing knowledge of a brands level of quality
and consistently relate this knowledge to new products carrying the familiar brand. Generally,
consumers maintain a consistent brand perception until disappointed creating a risky advantage
for established brands.
Brand equity refers to the intangible value that accrues to a company as a result of its successful
efforts to establish a strong brand. A brand is a name, symbol, or other feature that distinguishes
the company's goods or services in the marketplace. Consumers often rely upon brands to guide
their purchase decisions. The positive feelings consumers accumulate about a particular brand are
what makes the brand a valuable asset for the company that owns it. Alan Mitchell of Marketing
Week described brand equity as "the storehouse of future profits which result from past marketing
activities."
Advantages and disadvantages of brand extension strategy
Advantages of brand extension strategy
According to David Taylor (2004, p1), this strategy of brand extension is popular because it is less
risky and cheaper compared to the creation of a new brand. Leslie de Chaternatony and Malcolm
McDonald (1998, p315) point the same economical advantage by indicating that the economics of
establishing new brands are pushing companies more towards stretching their existing name into
new markets. Daunted by the heavy R&D costs, and more aware of the statistics about failure rates
for new brands, marketers are increasingly taking their established names into new product fields
Leslie de Chaternatony and Malcolm McDonald, (1998, p315).
Consumer knowledge:
the remaining strong brand used to promote a new product makes it less critical to create
awareness and imagery. The association with the main brand is already done and the main task
is communicating the specific benefits of the new innovation Taylor (2004, p1).
Consumer trust:
the existing well-known-strong brands represent a promise of quality, useful features etc. - for the
consumer. Thus, the extension will benefit from this fame and this good opinion about the brand to
create a compelling value proposition in a new segment or markets Taylor (2004, p1). In addition,
according to a Brand gym survey in 2003, 58% of UK consumers will be more likely to try a new
product from a brand they knew, versus only 3% for a new brand, Taylor (2004, p1).
Lower cost:
compared to launching a new brand, brand extension strategy is cheaper especially because the
new product use the name of an already well-known brand. Taylor (2004, p2) said that Studies
show that cost per unit of trial is 36 % lower and that repurchase is also higher with an extension
Indeed, Smith & Park (1992, p296) confirm this idea when suggesting that regarding the
advertising effectiveness, it seems for same market share, the advertisement budget for brand
extension are smaller than for new brands.
Enhancement of brand visibility:
when a brand appears in another field it can be a more effective and efficient brand-building
approach than spending money on advertising In addition, he suggests that the relationship with
loyal customers will be strengthen because they will use the brand in another context and it is
expected as well that they will rather this brand to the competitors one.
Provide a source of energy for a brand:
the brand image-especially when the brand is a bit tired- is expected to be reinforced by the
extension. Indeed, this latter gives energy to the brand because it increases the frequency with
which the brand is associated with good quality, innovations and large range of products. In
addition, the customer sees the brand name more often and it can strengthen his idea that it is a
good one.
Defensive strategy:
an extension can prevent competitors from gaining or exploiting a foothold in the market and can
be worthwhile even though it might struggle according to Asker (2004).
Disadvantages of brand extension strategy:
However, this strategy cannot only have advantages. Thus, there are different disadvantages listed
by these authors.
Dilution of the existing brand image:
C. Vito (2007) underlines that the extensions are using the most important asset of the company
that i.e. its brand name. It can be a major advantage for the extension but it represents as well a
huge risk for the existing brand because the brand image can be diluted. Park, McCarthy & Milberg,
(1993, p60) said that those positive and negative consequences are reciprocity effects and defined
as a change in the initial customers behavior regarding the brand, after an extension
Asker (2004, p211) adds that when a brand benefits are ensure by the fact that it is not for or
available to everyone, doing too much extensions could reduce this image of brand selectivity. He
takes the example of the overuse of the name Gucci at one moment there were 14,000 products
Gucci- was a part of the factors leading to the fall of that brand.
Cannibalization:
Asker (2004, p214) states that the extensions can cannibalize the existing products of the brand
when there are positioned in a close market. It means the extensions sales are increasing while
those of the existing brands products are following the opposite curved. Asker (2004) underlines
that these good sales figures for the extensions can 10 not compensate the damage produced to the
original brands equity. He argues that this situation is however better than seeing this happening
with a competitors brand.
A disaster can occur:
Asker (2004, p212) explains that a disaster which cannot be controlled by the firm e.g. that
Firestone tires used for the Ford Explorers were potentially unsafe- can happen to any brand. The
more extensions the brand made, more important the damages will be. This occurred to Audi when
the Audi 5000 cars were suspected to have sudden-acceleration problem.