International Marketing Research

Top MNCs In India & IMR with Nestle

Surabhi Agarwal ( FW/PF/ 10-12) Section -A

International Marketing

International marketing has become more important to companies as the world shifts from distinct national markets to global markets. Globalization brings homogenization of consumer needs, liberalization of trade, and competitive advantages of operating in international markets. Companies are now forced to think and act globally in order to survive in such a dynamic environment. In today’s global market many companies are finding that there are great opportunities abroad. Companies are challenged to design new marketing programs/strategies that will work across many countries with different economic, political, social, and cultural characteristics.

RACE OF MNC's in INDIA

MNC means MultiNational Companies which deals with private companies. By private company we mean controlled and operated by private individuals i.e. not by government employees. Multinational corporations have played an important role in globalization.MNC offers jobs to the candidates who are fresher as well as experienced holders. They provide with all allowances with a good salary package in their hometown as well as in any part of the world. MNCs today have broken all the records and employees have been satisfied with their placementsThough the American companies - the majority of the MNC in India, account for about 37% of the turnover of the top 20 firms operating in India

Top ten MNC's in India 

Microsoft, HP, IBM and Oracle battling it out with the Indian IT companies for top slots in the rankings. The swelling domestic IT market is attracting many more global tech firms to India and they are giving tough competition to the home companies on their turf.

1 . Hewlett-Packard (HP)

The first MNC in the list is HP India. Part of world's No. 1 PC maker, the company today has one of the widest portfolio of products and services. Eyeing services market, the global company recently made a $13.2 billion acquisition of technology services provider Electronic Data Systems CorpWith the announcement of 3G policy, HP is planning to talk to Indian mobile operators for a tie-up to offer 3G laptops. HP already has tie-ups with various service providers in different countries. For instance, in the US it’s AT&T, Sprint & Verizon, in Australia HP has tied up with Vodafone, in UK its Orange, Vodafone and T-Mobile.

2 . IBM 

The company under went restructuring into four divisions Enterprise Systems, Business Systems, Industry Systems and Volume Systems. Renewing its focus on the SMB segment, the company is restructuring its focus from a product-centric one to a client-centric business modeIn the year 2007 the revenues of the Indian arm of Big Blue grew maximum among major markets including China (in dollar terms). The overall headcount saw a jump of 20,000. The major clients included, Vodafone, Indian Railways and Ministry of Social Welfare. The transformation will provide IBM customers with a single face of IBM to deal with. The company also boosted its direct presence from 14 locations to 27. As part of the second phase of its Project Big Green (PBG 2.0) in India, IBM introduced new products and services to help enterprises build ‘greener’ technology infrastructure. 

3 . Ingram Micro

The world's largest technology distributor and a leading technology sales, marketing and logistics company. Like HP India, the company gets a major part of its revenues from the sale of computer systems and peripherals. The company which merged with Tech pacific globally saw a strong growth in PC and enterprise business last year.Through Ingram Micro Logistics, the company provides customisable services for order management and fulfilment, contract manufacturing, contract warehousing, product procurement, product pack out and cartonisation, reverse logistics, transportation management, customer care, credit and collection management services and other value chain services. The company also launched its own brand V7 focusing largely on accessories segment. The company also added Autodesk and Adobe to its software portfolio and Asus to hardware. It also became direct distributor of Toshiba laptops. It also added several vendors like Hitachi, NetApp, Tandberg and Netgear. 

4 . Cisco

The networking giant too is making rapid strides in the Indian market. It claims that the company came to India not just because of cost arbitrage, but more for innovation, growth and talent. The company which witnessed the exit of a series of top managers in 2006-07, saw some stability at the top last year. The company's total India sales stood at Rs 5370 crore, with 35 per cent coming from Switches.The R&D operation of Cisco India currently has around 5,000 people including its India technology partners like Wipro. It also formed joint go-to-market alliances with Wipro and Satyam Computers with the potential generating substantial revenues in the areas of networking and healthcareThe restructuring is also expected to create more jobs and create further leadership positions. The company plans to take its headcount to 10,000 in the next five years. Cisco's new globalisation centre east campus has largest campus data centre outside US.

5 . Oracle

The IT MNC has been in India for over 15 years. In fact, it was among the first few multinational software companies to set up operations in India.

Beginning with a distributorship through Tata Consultancy Services in 1987, the company established direct operations with a liaison office in 1991, and in 1993 formed Oracle India Private Ltd, a wholly-owned subsidiary of Oracle Corp, focused on the sales and marketing of Oracle software in India.

Last year saw Oracle India look beyond its conventional ERP, and focus more on niche apps like CRM, logistics management and HCM. The company continues to lead the database market with 63 per cent market share.

6 . SAP

The company overtook SAP in CRM and stood at no. 3, behind Avaya and ASPECT software. The company has seven development centres including an Asian R&D centre, a partner solution centre, an egov centre, a retail CCoE and three GDCs at Bangalore, Hyderbad and Noida.

Last year, company saw attrition at top level, with several senior managers joining completion like IBM, Microsoft and SAP.

7 . Intel and Accenture

The chip giant Intel earned over 60 per cent of its last year's revenues from the APAC market, including Japan. The company seems to have benefited from the expanding laptop market. It earned $160 per laptop versus $85 it made per desktop. The "Centrino Atom" processor technology aimed specially at mobile Internet devices. This was formerly code-named Menlow. Intel has also launched its low-cost, low-power Atom processors and quad-core processors. Intel sees a huge market for UMPCs and other small form factor Internet devices; calling its own version of such a device as 'Netbook', a low-cost PC that would cost in the region of $250.

Eyeing the SMB segment, it introduced an online storefront and business

solution Web portal designed for small and medium-sized businesses (SMBs). The Intel Business Exchange (Intel BX) brings together offerings such as bundled software and hardware, standalone business applications and services.

Accenture is one tech MNC which has more employees in India than US. The management consulting and IT services provider recently announced that it is planning to add another 28,000 employees in the current financial year.

Globally, the company plans to make 60,000 gross additions to its workforce by August and will be consistently investing in training manpower. The Bermuda-based company was formerly a part of Andersen Consulting, till the company split off from defunct accounting firm Arthur Andersen in 1989.

Formerly Andersen Consulting, the company split off from defunct accounting firm Arthur Andersen in 1989. Accenture delivery centers for technology and business process outsourcing in India were awarded the BSI BS 25999-2:2007 certification for business continuity from British Standards Institute (BSI) recently.

The company operates 45 delivery centres across five continents with more than 75,000 people. Its India delivery centres are located in Bangalore, Chennai, Hyderabad, Mumbai, Pune and Gurgaon in National Capital Region of Delhi.

It is currently servicing 350 clients, including many of the Fortune 100 companies from India. The company's BPO unit recently said that it is

witnessing pricing pressure for certain deals, especially the low-end transactional work.

8 . Microsoft 

The Indian subsidiary of software major Microsoft Corp recently announced the appointment of ex-Dell chief Rajan Anandan as its MD. The company grew 26 per cent claimed that launched largest Microsoft Office Sharepoint at TCS.

The company also announced changes in software licencing, which included option of staggered payment for software purchases. The company partnered 14 states and now boasts of over 300 e-gov apps running on Windows. The drop in piracy rates also boosted company's revenue.

The company recently announced the Release to Manufacture (RTM) of SQL Server 2008, the latest version of its database management offering. Microsoft India has also been in news for all the wrong reasons recently, the company which got a new MD last week saw a series of senior-level resignations including its MD, Neelam Dhawan, who quit Microsoft to join HP.

The company was also issued a show-cause notice for non-payment of service tax worth Rs 127 crore. The notice has been issued for non-

payment of service tax on `marketing and user support services' carried out by Microsoft India for Microsoft Singapore.

9 . SAP 

SAP India was recently termed as 'Jewel in the Crown' of SAP worldwide. SAP India posted 67 per cent growth in the software licence revenue in the first quarter of 2008. The company's small and mid-size revenue rose by 43 per cent, while consulting grew by 34 per cent and education marked 100 per cent growth.

The rise was marked by software licence revenue and customer acquisitions that made SAP India the fastest growing region within SAP. The growth came across various verticals including utilities, Banking Financial Services and Insurance (BFSI), automotive, and retail.

While SAP added Delphi TVS, Easun Reyrolle, and IFB Industries as its new customers, companies such as Moser Baer, Sasken Communications, and Greaves Cotton moved to SAP from legacy platform.

SAP success story also touched SAP Labs. SAP Lab started operations in the year 2000 with 100 people and has been growing by almost 50 per cent every year until 2007, when it grew about 30 per cent. Lab's present headcount stands at approximately 3500 people.

On the down side, the lack of database applications continues to give its arch rival, Oracle, lead in vertical specific offerings. Also, Oracle last year inched past SAP in the CRM market.

10 . Dell

World's second largest computer maker made its India entry some eight years ago. The company which is bullish on India market claims to be seeing rising demand from consumer, small and medium business, government, financial services and education sectors.

The Texas-based company, which has a plant in Tamil Nadu achieved a revenue of Rs 3,000 crore building on strong volume growth in 2007. The company's Sriperumbudur plant has brought down the shipping time from three weeks to one week.

The company is at third position in the market with a 7.6 per cent market share and claims to be number one in large corporate segments. It recently launched low-cost personal computers customised for the Indian market.

Dell has also announced plans to adopt channel sales model to enhance

its presence in the Indian market. The vendor plans to leverage the growing opportunities in the SMB segment.

On the down side, the company still has to gain visibility on the consumer sales front.;l’l

Role of Marketing research in Global expansion of MNCs

Nestle

Nestle was found by Henri Nestle in 1867 had become the world’s largest food processing company that had revenues of more than $10 billion in 1977 and with sales greater than Coco-Cola and Pepsi combined. One of these products that generated so many sales for Nestle was its infant formula. These infant formulas were in high demands by mothers; it gave them an alternative feeding method for mothers who cannot, or choose not to breastfeed. But the idea behind the baby formula is to acts as a supplement for babies experiencing a “nutrition gap”.

Nestle started marketing its infant formula in the 1970’s to many underdeveloped countries. They had imagined that profits would be greatly in countries such as Africa, the Philippines, Mexico and other underdeveloped countries; due to the infants who are missing that “nutritional gap” and for mother who chose not to or cannot breastfeed. But its dreams of making such profit failed terribly when their methods of marketing the products were criticized.

Nestle’ s marketing techniques were later accused of bribing doctors, nurses, and many other medical officials to help promote the infant formulas. “Milk nurses” who were professional salespeople often dressed in white went from door to door selling and “educating” the new mothers about the infant formula. In these underdeveloped countries, professionals in uniforms are highly respected. For these “milk nurses” to imitate as professionals, proves that Nestles’ misleads and uses unethical marketing techniques to promote its infant formula.

The real problem in these Third World countries was being nutritional. It became a debate whether not to give infants breast milk or formula; how to supplement the mothers’ milk with adequate nutritional foods when needed. Although this is the primary problem, the way Nestle approached a country and promoted its infant formula to uneducated mothers, was what made this a horrid issue. As a result, the misuse of the formula was said to be a contributing factor to the deaths of many Third World infants whose mothers were incompetent of using them properly. However, Nestle denied the accusations of their unethical and immoral behavior after the company came under fire. One recommendation

should have research the target market in which its products will be introduced. They should not have just transfer their marketing strategy in the United States to Third World countries but adapted and focus their strategy to fit the targeted environment better. Since Nestle was introducing a new product, they could be more considerate of the cultural factors in countries where the practical or dysfunctional changes occurred as a result of the new product introduction. Therefore, it was their responsibility to make more ethical, thought-out decisions regarding the introduction and promotion.

In order to understand where Nestlé’s strengths lie and how this can help them when entering a new market, they should have used the Self Referencing Criteria (SRC) process. This process can determine a decision whether or not to introduce a product in a foreign market. It helps to establish a company’s own cultural values, experiences, and knowledge.

1. Define the business problem in the home country which includes cultural traits, habits, and norms.2. Define the business problem in foreign cultural traits, habits, and norms.3. Isolate the SRC influence in the problem and examine it carefully to see how it complicates the problem.4. Redefine the problem without the SRC influence and solve for the optimum business goal situation.

If Nestle had followed this process they would have understood that the United States and the Third World countries need to use two different strategic plans. They would have understood that Americans already established a habit of nursing with formula and becoming a cultural norm. On the other hand, there were many red flags that should indicate to Nestle that Third World cultures have no knowledge background to read or write. It could then have been reasonably assumed that with a low literacy rate in these countries that they would not use the product correctly.

Even if this process was followed, a company still has to make a conscious decision of how and if to introduce their product. This creates an ethical dilemma for the company. In Nestlé’s case, there was a lack of government regulations, and the company neglected to conduct thorough research about the environment. With research of the environment and regulations, they could foresee some of the consequences. In the end they took advantage of the situation and the innocent people involved and decided to make a poor choice. Ultimately, it did not matter how much money they made because their reputation was ruined as a result. With more research, strategic thinking, SRC analysis, and organizational analysis, many of the adverse effects could have been prevented.

To some extent the marketing problems was combining a highly-educated, mechanized, free-enterprise western culture with cultures that are poor, less literate, and less adjusted to the “Sakes Fifth Avenue” style of advertising techniques. When infant formula companies were first informed of the risks created by their products, they denied they were responsible and refused to change their practices. As the party with greater awareness of the problem they had a responsibility to avoid creating harm for those who were less able to fend for themselves. After numerous unsuccessful efforts to persuade Nestlé and other companies to change their policies, several religious groups boycott Nestlé products, in hopes that the loss of revenues would persuade the company that it should change its promotional policies.

Marketing Strategy

In 1982, Nestle under immense pressure by the World Health Organization (WHO) stated a new policy for their worldwide promotions of their infant baby formula. Nestle guidelines, which was created specifically for developing countries states publicly their support for breastfeeding as best start of life, cautions mothers of consequences of incorrect use of their baby formula, and ensures infant formula marketing practices would be ethically followed stated by the International Code. But what Nestle doesn’t admit publicly is that their change of their marketing strategy had to do with heavy criticism of their mass media advertising, which unethically persuaded new mothers to use bottle-feeding milk as best for new babies, which consequently provoked the rejection of breast-feed and the dependence on baby formula.

Nestles support of the WHO led to the initiation of the following practices: Nestle was not to advertise to general public, no sampling to mothers, no incentives to its staff for sales, no use of pictures on infant formula packs, no financial endorsements to health professionals to promote product, no donations of infant formula to physicians except in specific situations, and no educational material relating to the use of infant formula to be displayed in hospitals and clinics. All these were frequent marketing strategies used by Nestle and its competitors.

Even though overall profit margins were low for Nestle they stayed committed in the production of their baby formula. Reason for this was that mothers in underdeveloped countries (target market) stubbornly continued to breast-feed their babies. That’s why the turnover for Nestle was less than 10%, while other product sales for the company were growing exponentially.

Nestle new international marketing strategy is of a decentralized system which consists of specifically molded facilities which are made to fit in to that country’s culture, habits, and conditions. They now support all WHO

code (mention previously) in all the countries of Africa, Middle East, Asia, Latin America, the Caribbean nations, and the Pacific nations except Japan, Republic of Korea, Singapore, and Taiwan. The company also promotes an understanding of the proper way on how to use the product, and educates consumers on considerations that need to be made before using the product.

Environment

Nestle was discovered by Henri Nestle in 1867, it has become the world’s largest food processing company that had revenues of more than $10 billion in 1977 and with sales greater than Coco-Cola and Pepsi combined. One of the products that generated so many sales for Nestle was its infant formula. In the 1970’s, Nestle decided to go international to market its new infant formula, the baby formula was to acts as a supplement for babies experiencing a “nutrition gap”. Its purpose was to save millions of malnourished babies in underdeveloped countries and provide mothers an alternative feeding method for those who cannot, or choose not to breastfeed. Nestle’ targeted its infant formulas in underdeveloped countries such as Mexico, Philippines, Central America and Africa where the majority of its population are illiterate, living conditions are terrible and the average salary is less than a dollar a day. Nestle’ intentions of going abroad was to gain a competitive advantage over its competitors and to educate the illiterate mothers on how to use its new infant formula products.

Cultural and social values of these Third World countries affected Nestle’ ability to market the infant formula successfully. Nestle’ marketing techniques may have worked to getting its product recognized, but it did not communicate efficiently, users of the infant formula failed to understand that suitable water supply and sanitary conditions must be used to prepare the formula properly. Demographics, income and language barriers have caused major issues for Nestle’ in the Third World countries.

Nestle’ sent sales people, often working on commissions to the homes of mothers of newborns to advertise the most modernized product for babies. These sales people wore white hospital uniforms and were commonly referred to as “milk nurses.” Free samples of Nestle’ infant formula was distributed in hospitals and doctors were encouraged to give to new mothers using the argument that the formula has nutritional benefits. Pamphlets were also distributed in hospitals and clinics it described and discussed the proper way to bottle feed a baby. Other forms of marketing techniques were also used to promote the infant formula. Advertising was placed on television, radios, in magazines, on posters in hospitals, clinics and billboards.

Nestle used these form of communication to advertise its infant formula, but didn’t realize that its communication was not effective. Eventually the

bad connection cost Nestle heavily in the Third World countries.Industry

Among Nestle, there are two other companies who are large producers of infant formulas who may become a threat to Nestle. Included in the production of infant formula, Ross, a division of Abbott Laboratories produces a wide variety of Similac Isomil formulas, PediaSure, and Pedialyte for infants with feeding problems such as fussiness, gas, and spit-up. Abbott Laboratories has been working to advance health care for people around the world. Founded by a Chicago physician, Dr. Wallace Calvin Abbott, in 1888, Abbott Laboratories has evolved into a diversified health care company that “discovers, develops, manufactures and markets innovative products and services that span the continuum of care.” Headquartered in north suburban Chicago, Abbott helps people around the world in the more than 130 countries. They believe that their products will:

1. Promote overall growth in weight, length, and head circumference.2. Nutritionally balanced carbohydrate, protein, and fat.3. Well tolerated.4. Specifically formulated to mix easily with human milk.

Abbott Laboratories has been developing products to meet the needs of children for more than 40 years. Their research focuses on nutrients for growth and development, and diagnostics that help detect dangerous childhood diseases.The other major infant formula company that produces Enfamil formulas is Mead Johnson it’s a nutritional division of a two billion-dollar Bristol-Myers Squibb. In recent years it has also been classified as a world leader in nutrition that manufactures more than 60 brand name products and markets them in more than 100 countries. In the United States and Taiwan, they are the infant formula market leaders. Mead Johnson’s “commitment to world leadership” in nutrition is confirmed not merely by a geographic presence, “but by a set of ethics, standards and practices” that they are proud to uphold. Their sale in 1997 was over $17 billion dollars, and has 54,000 employees worldwide. Its intent is to become a common household name by families around the world.

Even though, Nestle is one of the world’s leading manufactures of the infant formula, its reputation has been smeared due to the infant formula incident in the Third World countries. Nestle competitors used Nestle as a role model not to make the same “unethical” marketing mistakes. Nestles’ situation gave other companies such as Abbott- Ross and Mead Johnson the opportunities to produce and market its infant formula products in ways different from Nestle.

A threat to the company is the increased competition as other companies find ways to catch up to Nestle. Because of its wide range of businesses Nestle is involved in, these competitors include many of the world’s top

companies such as Proctor and Gamble, Pepsi, Kellogg and Kraft Foods. Other large threats came from negative public opinion regarding Nestlé’s marketing techniques of their breast milk substitutes in the past, which led to the inappropriate use of the product in Third World countries.