Global Marketing Management

3 Credits

27 Sessions

• Why study global marketing?• To pursue marketing careers in global markets as career

employees in multinational corporations• Sure…but what does this statement mean in real terms to a

management graduate?• To gain a deep understanding and to acquire mastery over the

three critical marketing value chain processes in global markets• The marketing value chain is commonly understood in terms of

three sets of activities or components with consumers at its centre

• What are these three activities that are crucial to (global) marketing value chain?

• Understanding global consumers (market entry and market selection strategies, gaining consumer insights through consumer behavior, marketing research and global consumer and product surveys)

• Most often consumers do not communicate well articulated needs and products often fail in global markets

• only 1 in 10 products launched in global markets succeed• Nokia 1100 series• McDonald’s• Tang (withdrawn; Glucon-D market champion)• Nestea (rejuvenated)• Kellog’s cornflakes (rejuvenated and relaunched)

• Successful companies realize they need to customize existing products or design new products that appeal to local tastes and requirements

• The Dutch manufacturer Royal Philips Electronics (“Philips”) is one example of a company that has taken this philosophy to heart

• Since electric power in emerging markets is often unreliable, Philips employed technologies originally developed to extend the life of torches for rural villagers to build lights that stay powered for several hours even if the main power fails

• They have also manufactured lights that can withstand the power fluctuations that are common in India and other emerging markets

• This understanding of consumers’ need gave rise to the CFL lamp with durable gas filled filaments

• In competing for the Indian market, the auto manufacturer, Hyundai Motor Company Ltd. of South Korea, adjusted its roof design so that women wearing traditional Indian dresses could get in and out of the car easily

• Innovation also flows in the opposite direction—from emerging to developed markets

• KavinCare, a little known Canadian FMCG company based in Chennai pioneered the sachet revolution

• Personal care product packaged as single use items not only multiplied sales but also gave great product penetration efficiencies

• Gillette Vector Plus (Rs. 5 per week) male grooming product has also made aggressive inroads into the price sensitive Indian market for cartridge based razor blades

• Pulpy (Orange), Coca-Cola’s first international fruit-based drink product to be developed and marketed for consumers in low-income emerging markets

• Pulpy is one of the most successful innovations of the brand in the 21th century and significantly contributes to the brand’s global sales

• Pulpy, is almost an unknown brand in the consumers markets of Britain, France or Germany

• Launched in China (2000) by the Minute Maid unit of Coca-Cola, the beverage been accepted by consumers across Asia and Latin America

• Likewise, Knorr the blockbuster soup powder mix brand from Unilever is generic for soups the world over

• But in India, Hindustan Unilever Limited took the brand to the next level by innovating on a new variant: Knorr Soupy Noodles

• An instant pre-meal snack positioned at school-going children and developed primarily for South Asian consumers

• Who, the company discovered, exhibit a convergence of consumer tastes for ready-made pasta treats

• Diageo, the world’s largest spirit company, overcame the constraints of category growth to its beer business in Africa by embracing marketing opportunities presented by the shadow economy in Kenya, Africa

• East African Breweries, a division of Diageo in Kenya, introduced a low-priced beer brand packed and distributed in kegs rather than bottles

• The packaging strategy on the one hand sought to increase consumption by offerings supersized beer volumes and at the same time was targeted at reducing demand created by bootlegging for illicit alcohol

• The beer kegs of the company are today ubiquitous in Kenya with the beer sold across makeshift, roadside liquor vends and restaurants

• Research and development centers have moved their foci to Asian consumers, thereby delivering a strong impetus to the future of the reverse flow of innovation

• The Jack Welch R&D center, for example, located in the city of Bangalore is the biggest in the group and has developed an inexpensive electrocardiograph in this facility priced as US$ 1000

• Siemens India has been in the forefront of product development and design for the global corporation and has been feted for products such as computerized road traffic management systems and several products such as X-ray units, heart rate monitors and power generators set that run on unconventional energy sources

• Connecting and communicating with consumers through marketing strategies: IMC, branding and CRM

• Cadbury: the legendary food brand marketing chocolate and chocolate flavored health drinks has successfully connected with consumers in global markets for over 60 years……but Hershey’s has not and remains an all American marketer

• Cadbury in India for example has become a marketing champion of down market stretch and up market stretch product mix strategies marketing 20 g bars for Rs. 5 (the lowest price point) and using a price laddering and currency price point to upgrade consumption to Rs. 10, Rs. 20, Rs. 50 and Rs. 80 price points

• LG in India, extended this learning to create small and compact washing machines that ‘speak’ to the user: equipped with a speech technology functionality that sounds out instructions in several regional languages to facilitate its correct and fail safe use

• Samsung India, on the other hand, markets a washing machine model with an inbuilt sari wash cycle and trap that prevents damage to the long garment from entanglement and tear in the wash drum

• The Chinese company, Haier, sells a washing machine model specifically for rural markets in Chine that is multipurpose and robust: its washes both clothes and freshly-harvested sweet potatoes and other kitchen garden vegetables!

• Adidas in Chinese markets has positioned its product line differently by tweaking its distribution: the company has created two kinds of retail stores—one model of delivery that offers sportswear specially designed for Asian bodies and contours

• As well as ‘global’ stores that retail identical product ranges as are available to consumers in mature markets

• Levi Strauss in India offers flexible payment options for consumers of its fashionable blue jeans, based on a “pay-as-you-wear” model of ownership

• Aimed at reinforcing its up market status as a brand, while broadening its customer base to reach more segments

• Creating aspirational brand desirability based on local market dynamics: culture, language, lifestyle and economic buying power

• Nestle demonstrates how a deep understanding of consumer preference extends an opportunity to position itself as a premium, aspirational brand relative to those already available in local markets

• Nestle in India positioned its Maggi brand of instant noodles as a wholesome between-meal, snack food rather than as a main menu pasta item, thereby filling in on a marketing void otherwise occupied by salted snacks and other ready-to-eat categories

• Nestle also caters to the Indian preference for local brands: so although Nescafe is the company’s flagship global coffee brand in many countries, Nestle created a special chicory flavoured coffee blend – Sunrise

• Especially for the Indian market and designed it to deliver the ‘taste-plus-strength’ equation to the decoction, and as preferred by the Indian instant coffee drinker

• Nestle managers have also learned that the 20 million wealthy households in its core target market have a marked preference for low price and value-for-money consumer products

• In keeping with this cultural value orientation, Nestle in India has responded by keeping price points low—more than half of Nestlé's product line costs about one US dollar or Rs. 50 per unit

• Nestlé's Prepared Dishes and Cooking Aids product line boasts of many India-alone brands

• Maggi Kitchen Secrets is based on intensive product research and an in depth understanding of Indian food habits and cooking practices

• The Maggi Kitchen Secrets range of product items allows the aspirational housewife to prepare a large variety of dishes without the hassle of chopping and frying the ingredients

• Delivering value solutions to consumers (supply chain management; sales and channel management and retail management)

• Distribution strategy• rule of winning in global markets is for marketers to tweak the

go-to-market model of value delivery to the consumer, and lower the cost of ownership—thereby managing affordability

• The value chain for a consumer product is uniform across markets as is the logic surrounding it: designing it, making it, distributing it and selling it to the personal consumer

• Tuning the go-to-market model—the distribution strategy—must account for cost advantage gains, high price elasticity of demand and economies of scale and scope

• For example in developed markets with large format retail stores, it is common for 18-wheel semitrailer trucks to transport goods from the manufacturer to the distributor, and right up to the point of delivery

• In India, as in other big emerging markets such as China and Brazil, a routine logistics chain is true only of larger cities where modern infrastructure and large retail outlets enable externalities of scale

• To reach and access smaller retailers in smaller cities and towns and far distant consumption centers in rural areas, where larger agglomerations of consumers are located, this required redesigned trucks with lower loads

• Tata Motors pioneered new and creative thought to overcome this disconnect that hampered the last mile of connectivity in India’s enormous logistical market

• Tata Ace, an innovation of the Tata brand, a new-to-the-world product, soon grew to become the champion of penetration strategy at the bottom of the pyramid

• When Ace, the country's first four-wheel mini truck was launched in 2005, it created a new segment of a sub-one ton, small commercial vehicle

• powered with a swift engine and a longer cargo bay that improved operational efficiency and reduced the cost per trip for the transporter

• The vehicle was also ideal for navigating narrow, congested and tight traffic conditions that are characteristic of cities and towns in India

• A fuller understanding of local product distribution can pay rich dividends and the lack of it, painful learnings for a marketer

• Unilever in India bypassed the product reach of Nirma in the retail end of the value chain altogether and took the battle elsewhere

• Hindustan Unilever distributed its low-cost laundry detergents: Wheel and Sunlight, using direct selling and trained 25,000 Indian village women to distribute the detergent door-to-door who sold the brands in over 80,000 villages

• The project (Project Shakti) effectively stalled the local detergent brand, Nirma, in its tracks by flanking it progress into low-income segments and earning for the company US$250 million in annual revenue

• Similarly, Coca-Cola learned that its cola product is in high demand even in rural India, despite the widely-penetrated reach of Thums Up

• But the typical Coke customer in Indian villages buys a single unit of the product at a time and tends to prefer single servings of the drink resulting in yet another innovation—the miniature Coke, packaged and sold in a returnable glass bottle

• This helped Coke understand how to do business in rural India less expensively

• By breaking product lots down into ever-smaller sizes through the distribution channel—even to the point where only a couple of units of Coke are delivered daily to each retailer by bicycle: Coca-Cola was able to get its volumes and its costs low enough to make a profit

• On the contrary, Danone, the famed French yogurt firm faltered in its physical distribution strategy in Brazil

• While the firm focused on the distribution of yogurt stocks to major branded retail supermarkets, it discovered to its disappointment that over 80 percent of yogurt distribution is channeled by local dairy producers through thousands of small mom-and-pop shops and neighborhood stores

• These retailers enjoy phenomenal stock runs by serving the daily top-up needs of millions of consumers

• Local brands and their distributors offered attractive markdowns on yogurt sales and succeeded in sharply increasing the cost of distribution for Danone and significantly dented the company’s market position

• What is global marketing?• In global or world marketing a marketer views the whole world

as a single market of consumers and standardizes the marketing mix of the companies to the extent feasible

• In global marketing a global company does not differentiate between a home country and foreign country

• The conceptual understanding of the evolution of global marketing helps a student understand the different orientations in global marketing that drive the strategy and operations of global corporations

Domestic Marketing : Evolution of Global Marketing (Stage 1)Marketing Focus: DomesticOrientation: EthnocentricMarketing Mix Decisions: Domestic consumers• Marketer focuses only on the domestic market consumer

segment/s: Nirma – the mass marketing domestic marketing champion created marketing history by offering detergent powder at bottom down prices to Indian market consumers

• MTR, Dabur• Marketer’s orientation to marketing is ethnocentric: belief of

the marketer that marketing strategies successful in domestic markets will meet with equal success in international markets

• Marketers ignore marketing mix differences

Export Marketing : Evolution of Global Marketing (Stage II) Marketing Focus: Overseas (targeting and entering

foreign markets) Orientation: Ethnocentric Marketing Mix Decisions: Domestic consumers; some

overseas marketing • Marketer focuses only on the domestic market consumer segment/s: but

also services export orders for products from international importer firms and corporations

• Marketer’s orientation to marketing remains ethnocentric with marketing mix strategies similar to the domestic market

• Small and medium enterprises

International Marketing : Evolution of Global Marketing (Stage III) Marketing Focus: Differentiation in country markets

by acquiring host country marketing brands

Orientation: Polycentric Marketing Mix Decisions: Developing local products designed for home country consumer needs and marketing decisions are formulated by subsidiaries •The exporting firm over time expands into multiple domestic markets and focuses on establishing market share and emerges as a foreign competitor•Marketer’s orientation is polycentric. i.e. firm recognizes and responds to adaptation of marketing strategies for multidomestic target markets (standardization vs customization)• Marketing mix decisions such as product development, branding, distribution, pricing and promotion by marketing department of local subsidiary of the firm (GE, Pepsi, Cisco, Nokia and Fujitsu)

Multinational Marketing : Evolution of Global Marketing (Stage IV) Marketing Focus: Consolidation of operations on a regional basis (multinational marketing)

Gains from economies of scale Orientation: Regiocentric Marketing Mix Decisions: Product standardization within regions

but not across regionsOn regional basis

Once a company establishes its manufacturing and marketing operations in multiple markets, it begins to consolidate its operations on a regional basis taking advantage of economies of scale in manufacturing •Marketer’s orientation is regiocentric. i.e., product development is standardized within a region (similar country markets) such as South Asia but not across regions•Marketing mix decisions are standardized within the region but not across regions (advertising, promotion and distribution); regional subsidiaries control marketing mix: Nestle, GM (Opel), Reckitt Benkiser

Global Marketing : Evolution of Global Marketing (Stage V) Marketing Focus: Consolidation a firm’s operations on a global basis (global marketing)Orientation: GeocentricMarketing Mix Decisions: Globalization of marketing mix decisions with local variations (single

marketing method)• The marketers focus is single market: that is the standardization of the marketing program across a single global market with respect to product offering, pricing and channel structures• The marketer’s orientation is geocentric: strategic approach to have a global perspective to reap economies of scale and not complete standardization of the marketing mix decisions• Coca Cola, Toyota, Colgate-Palmolive, Unilever and P&G

• The champion of global marketing is the iconic soft drink beverage brand: Coca Cola

• Its worldwide success is a textbook application of the geocentric orientation of global marketing

• Its market success was not based on the total standardization of the marketing mix elements but rather on it leveraging tremendous brand traction and cross economies in a single global market: CSD; fruit juice based drinks, powdered soft drinks, coffee and tea, bottled water and bottled soda

• Coke embraces a geocentric orientation that while it is a world’s strongest brand globally the company produces over 200 beverages to suit local beverage preferences

• A number of other global corporations have successfully pursued global marketing by creating sting global brands

• Global marketing strategies are not just based on branding but also on product or system design, product positioning, packaging, distribution, customer service and sourcing considerations

• McDonald’s : standardization of communication and distribution while product is customized

• Customer service: Caterpillar with is network of dealers that supports a promise of 24 hour parts and service anywhere in the world

Chapter 6Global Marketing Information Systems and Research

• TWO CENTRAL LEARNINGS OF CHAPTER 6: How does global marketing research generate information on consumers across global markets? How does it help a marketer understand consumers in terms of both articulated and poorly articulated needs

• Global marketing research is defined as research that crosses national borders and involves respondents and researchers from different countries and cultures• Market research is the function that links an organization to its markets through information collection and analysis• Market research is defined as the systematic gathering, recording and analyzing data about problems related to the marketing of goods and services• Can conduct their own marketing research • Or hire other companies to do it for them

• In conducting research, firms must decide whether to collect their own data • Or use data that already exists • Also decide which TYPE of research to use: quantitative research methods or qualitative research methods to collect and interpret data• Observational, focus group, behavioral data• Sample survey• Consumers’ thoughts, actions, and purchase intensions are collected to form the basis of marketing decisions

• Qualitative research methods include focus group discussions, perception studies, mall intercepts, telephone data collection

• Methods used to closely describe the actions of consumers • Instruments used to capture consumer insights are questionnaires • Respondent• Investigator • Questionnaire: open-ended and close-ended questions; preferences

• LG in India, extended this learning to create small and compact washing machines that ‘speak’ to the user: equipped with a speech technology functionality that sounds out instructions in several regional languages to facilitate its correct and fail safe use

• Samsung India, on the other hand, markets a washing machine model with an inbuilt sari wash cycle and trap that prevents damage to the long garment from entanglement and tear in the wash drum

• Consumers are complex in their buying habits and purchase

decision-making

• Consumers, do not always have the capacity to voice, or understand

how they decide to purchase a particular product or service

• As a result, good marketing research should delve into the

consumers’ “purchase decision trees” to understand hidden

motivations and influences

• Carefully crafted qualitative research may undercover hidden purchase agendas, hidden uses for the product, or hidden opportunities for new, yet undeveloped products: qualitative research can often be a useful step in exploring consumers’ brand and product perceptions

• Quantitative research relies extensively on primary data collection and its mathematical analysis using statistical techniques and modeling to arrive at predictability and accuracy of the marketing decision• field surveys • sample surveys• secondary data analysis

• Industry examples of marketing research

• The market research industry normally undertakes three broad types of research studies—customized, syndicated and omnibus• A customized study is tailor-made for a particular client and for a particular marketing situation or problem• For instance, a company could have a new TV commercial which is to be pre-tested before being aired, or it could have declining sales and may want to know the reasons for the same• Researchers give their interpretation and recommendations for marketing action• Relatively expensive especially when the sample sizes required are large

• A syndicated study gives the marketer the benefit of a large sample size purchased from a research company which sells findings to a buyer • The information to be collected in such studies is decided by the research agency • The cost is low simply because it is shared by many buyers • The syndicated study is only useful for providing baseline market information and trends

•Omnibus studies•An omnibus study is initiated by the research agency and then offered to clients •The research company would simply announce that it is interviewing say 3,000 respondents of income group Rs 30,000-plus in the top seven cities of the country •It then invites clients to ‘board the bus’ by specifying what questions they want asked

• Brain mapping studies

• The ‘jewel’ in the crown of qualitative researchers • Marketers rely on brain mapping studies to study customer behaviour• Explores the hidden motives behind why consumer buy product and services• Market researchers use psychological studies of the consumer to understand motivational behaviour and consumer insights• ‘Hidden persuaders;” brain mapping, buyology, and neuromarketing

• On smoking: smoking is done to satisfy the primary impulse

and need of oral comfort

• Smoking in general serves to relieve tension, impatience, anger

and frustration: just as sucking does to the infant

• This explains the widespread use of chewing gums, cigars and

pan masala

• On selling soaps and detergents: many housewives feel they

are engaged in unrewarded and unappreciated drudgery

while housekeeping

• The advertiser fosters the wife’s feeling of ‘worth and esteem’

by exalting the role of housekeeping and making it known

what an important and proud thing it is be to be a home

manager: housewife (Lalithaji ad of yesteryear)

• Symbolism of soup: soup is unconsciously associated with a man’s deepest need

for nourishment and reassurance

• It takes consumers back to their earliest sensations of warmth, protection, and

feeding

• Its deepest roots may lie in prenatal sensations of being surrounded by the

amniotic fluid in the mother’s womb

• Why cone ice-creams and burgers are popular: consumers like to sink their

mouth right into the ice-cream and get the full taste of it

• This is symptomatic of a primeval instinct of prey and predator

• Brain mapping studies provide indicators of how advertisers can design and

communicate advertising for maximum pull traction

• Neuromarketing

• The use of magnetic resonance imaging (MRI) scanners to record brain activity in minute detail • Measuring how the products they are selling affects the brain’s pleasure centres • Simply put, MRI scanners measures the flow of oxygen to different parts of the brain, indicating activity or thought in those regions• Mind-reading capability of the machine that makes it so alluring to an increasing number of market researchers

•Printing health warnings on tobacco product packages does not have much of an impact on smoking behaviour •Researchers have concluded that the warnings triggered a stronger craving •The very warnings intended to reduce smoking might well be an effective marketing tool for tobacco giants

• Consumers prefer Pepsi to Coke when they take a blind taste test • But prefer Coke to Pepsi when they are actually drinking the brands• In MRI studies drinking Coke more significantly increases blood flow in the medial prefrontal cortex because its ad campaigns over the years • So effectively associated Coke with sensations of warmth, security and childhood innocence

• Findings of some key Global MR studies

• Sony's LCD TV is best-seller in 2010: India• Sony's LCD television Bravia has emerged the leader in flat panel display sales in 2010 •Capturing a market share of 32 per cent (by value) and 29.5 per cent (by units) •GFK Nielsen•Sony Bravia is the most sold LCD brand in the 22-inch, 32-inch and 40-42-inch segment • Over 100,000 units sold

•DVR, second only to cell phone for homes •A survey conducted by the digital television solutions provider NDS in 2010•DVR ranks second amongst most essential household technology items•Coming only after the mobile phone, and ahead of gadgets such as a home PC, a digital camera and the iPod •DTH players, Tata Sky, Airtel Digital, and DEN and Hathway commissioned a survey amongst 250 DVR owners aged between 18-83 years • Omnibus research study• Eighty eight per cent of respondents felt the DVR had improved their television viewing experience

• Band-Aid: the market leader in the wound-care category• Band-Aid is an Adhesive Bandage used to cover minor cuts and • bruises• In India, Band-Aid was launched in the year 1978 by Johnson & Johnson• Band-Aid was successful because it identified the need in the • households for wound care• But to reach the dominant position in India was not easy• Band-Aid had to fight the tradition rather than the competitors to succeed

•Traditionally consumers in India prefer not to cover the cuts and bruises because there is a feeling that wounds should be kept open in order to heal faster •Further, Indian consumers typically used traditional methods to heal wounds •In earlier days most of the households had the bottle of tincture iodine which was considered as the best solution for cuts and bruises

• Band-Aid comes with red colored medicine inside which resembled Iodine • This had enabled early adoption of this brand and Band-Aid was called " Lal Dhawa Wali Patti" which became the USP • Had the medicine strip color not been red Band-Aid would have had a tough time convincing consumers of wound-care

•Band-Aid was a brand that changed with time and it keenly watched the consumers and tried to identify their needs•The company had valuable consumer insights that created the first water proof band-aid in India •The main weakness for cotton-based Band-Aid adhesive strips was that it used to come off easily when wet

• This prevented the category usage to certain extent • The waterproof Band-Aid strip made the brand usable in any condition • Band Aid focused on the area of application and was clever enough to • come out with various size and shapes • This comes from the insight that different wounds in different parts of the • body need different shapes • For example, a small cut in the forehead needs round strips• These insights made the brand a market leader in the category with a market share of over 60% (India)

• Only 20% of urban mobile users will take to 3G• 8-10 years before majority of users migrate to 3G broadband VALS usage• Even as 3G services are being rolled out by telecom companies, a new survey says that only one in five of India's urban mobile users will adopt it initially

•A study by The Nielsen Company released in November 2010 stated that despite a high awareness of 3G and its capabilities to deliver broadband content it may be as long as eight to 10 years before the majority of mobile users migrate to a 3G plan •Urban mobile subscriber base is around 450 million •If even a fifth adopt it initially: 90 million•Telecom companies have projected 100 million subscribers by 2013•The most eager group to adopt 3G, according to Nielsen, is the power users — largely made up of working professionals and Internet-savvy youth•The high speed would be useful for them to access the Internet and download large attachments

•According to Nielsen, driving migration to 3G devices will be a challenge and the effective course of action for telecom carriers would be to bundle 3G services with new handsets•Around 35 per cent of subscribers said they would leave their current carrier if they failed to provide 3G services•The study also said that reducing pricing to drive 3G adoption may not necessarily grow their businesses: user experience and relevance of services will be key to achieving business success

Developing a Global Vision through Marketing Research

• Given the complexity of the global marketplace solid marketing research is critical for a host of global marketing decisions• Skipping the research phase in the international marketing decision process can often prove to be a costly mistake• The following anecdotes illustrate the even marketing behemoths such as Wal-Mart and Procter and Gamble and Unilever and Kraft

• When Wal-Mart entered the Argentine market in 1999 its

meat counters featured T-bone steaks –an American

household staple – and not the rib strips and tail rumps that

Argentines prefer

• Wal-Mart’s jewellery counters were filled with emeralds,

sapphires, and diamonds while Argentine women prefer

wearing gold and silver

• In 1995 P&G’s Cheer brand of laundry detergent failed to make an

advertising splash in Japanese markets since ads featuring the all-

temperature washing detergent brand mistakenly assumed that

Japanese housewives wash clothes in different temperatures

• P&G has ineffectively researched this cultural trait that Japanese women

wash laundry in tap water or left over bath water!!

• HUL in an attempt to break the dominance of Nestle in the iced tea segment introduced Lipton ice tea in India in 2001 after seeing the success of the brand in various other countries•although the concept was successful in other Asian markets it failed primarily due to poor market research• the introduction of the product was also based on the fact that 60 per cent of customers in other countries liked iced tea• the company envisaged that India being a tropical country with a long summer season would imply the consumers can prefer ice tea to hot tea

•HUL faltered in the fact that in India consumers of tea drank hot tea and hot tea with spices and milk was a local staple in many regions – even in the peak of summer!!• the concept failed• Lipton Ice Tea (green tea) was repositioned and targeted at the 16-29 year urban affluent healthy hedonists: young-minded consumers who enjoy life but also understand the importance of healthier choices (price points of Rs. 70, Rs. 75, Rs. 85 and Rs. 95)

• Kraft, a 100 per cent subsidiary of introduced an orange flavoured energy drink concentrate – Tang – targeted at school going children , sports clubs, and adolescents in the Indian market (2003)•the product was commercialised in the Indian market based on extensive market research which indicated that there was identified need for an energy drink like Tang as there were few players in the market• Kraft India, a 100 per cent subsidiary of Philip Morris U.S. went ahead and accordingly launched Tang in India• Kraft tied up with Dabur Foods Ltd for the distribution of the product

•the product failed in the Indian market and the prime reason for the failure of Tang was its comparatively higher price point that the entrenched market brand – Glucon-D – the flagship energy drink brand from the P&G stable•what do these examples highlight?• most of such cultural blunders stem from inadequate marketing research

• Global marketing research• marketing research assists the global manager in two ways: (1) by making better decisions that recognize cross-country similarities and differences (2) by gaining support from the local subsidiaries for proposed marketing decisions

• global marketing research is defined as research that crosses national borders and involves respondents and researchers from different country markets and cultures

• global marketing research may be conducted simultaneously in multiple countries or sequentially over a period of time

• Four major objectives of global marketing research are: • to carry out country screening and selection• to evaluate a country’s market potential• to identify problems that would not require a country market ‘s listing for further consideration• to evaluate the components of the marketing mix for possible adoption

•the typical sequence of global market research follows the familiar pattern used in domestic marketing research

•therefore the steps are similar:• Step 1 Define the research problem • Step 2 Define the research hypothesis and a research design• Step 3 Collect the data (secondary and primary)• Step 4 Analyse the data and interpret the results•Step 5 Report and present the findings of the study

•Let us now examine a sample market research project at Eli Lilly that estimates the market potential for a prescription weight loss productStep 1:• Research Problem: estimate the dollar potential for a prescription weight loss product in the UK, Spain, Italy, and Germany• Step 2:•Research Hypothesis: Patients would be willing to pay a premium price for the product even without reimbursement by the government

• Step 3: Collect data•Secondary Data Research: Market share of a similar product (Isomeride) Incidence of overweight and obesity in Europe• Primary data research: sample size: 350 physicians from the UK, Italy, Spain, and Germany Sampling procedure: random selection from a high prescribers doctor list based on company data

• Secondary Global Marketing Research: assessing information needs is the next step after the research problem definition•Published information or information available in the form of computerised electronic databases • primary: data is collected specifically for the purpose of the research study

• more recent and highly reliable forms of secondary data sources are syndicated databases sold by market research companies such as AC Nielson Company and Taylor Nelson Sofres• these firms acquire a wide range of data for sale sourced from purchase transactions from retail outlets whose cash registers are equipped with optical scanning equipment

•primary global marketing research: primary data is collected in three specific ways: focus groups (qualitative), survey research (quantitative), and test markets (qualitative)• survey research begins with sampling where the global researcher draws a sample from the target population

• a sampling plan centres around three issues: who should be surveyed? •What is the target population (sampling unit); how many respondents should be surveyed (sample size); how should prospective respondents be chosen from the target population (sampling procedure)

• computing the desired sample size in cross-country market research varies with the culture: typically large heterogeneous cultures such as India demand bigger samples than homogeneous cultures (South Korea and Thailand)• Most global research firms prefer some form of probabilistic sampling (random, stratified, multilayer) that allows for statistical inferences about the collected data

• the end result of all global market research processes is…?• the end result is analyzing research data to assess market size• when deciding whether to enter a particular country one of the key drivers is market potential • in many global markets a fairly accurate estimate of the market size for any particular product is easily obtainable

In global marketing research, researchers uses five major research methods to analyze research data 1. Demand pattern analysis.

2. Income elasticity measurements.3. Market estimation by analogy.4. Comparative analysis.5. Cluster analysis.

• Method commonly used by global researchers to assess the size of the market for any given product• The technique is the analogy method the method is based on the research premise that the relationship between the demand for a product and a particular indicator, for instance, the demand for a related product, is similar in both countries

•let us now illustrate the method with a brief example• suppose that a consumer electronics company wants to estimate the market size for DVD players in India• for the base country we select a neighbouring Asian country say China for which we possess information on the sales of DVD players

• We also need to choose a proxy variable that correlates highly with the demand for DVD players• One such proxy variable is the number of colour TV sets in use so in this example we assume that the ratio of DVD-player sales to colour TV ownership in India and China is roughly equivalent this is expressed as…

• DVD Player Demand India DVD Player Demand China ______________________ = ________________________________ Colour TVs in Use India Colour TVs in Use China (Eq.1)• since we are interested in the demand for DVD players we can derive an estimate based on the following relationship• DVD Player Demand India = Colour TVs in Use in India * (DVD Player Demand China/Colour TVs in Use China) (Eq. 2)• for this specific example the data values are fitted to the ratios to get:• Annual Retail Sales (2001) : China (CTVs in 000s) = 14,722.64; DVD Players (in 000s) = 69.17• Annual Retail Sales (2001): India (CTVs in 000s) = 15,626.15; DVD Players (in 000s) = ???

•Plugging in the values we get (Eq.3) :•Estimated DVD Player Demand India (Annual Retail Sales) = 15626.15 * (69.17/14,722.64) = 73.4 (or 73,400 units)• in conclusion the analogy method’s usefulness lies in finding a comparable country and a good surrogate measure (in this case the number of colour television sets in use)

•Nestle demonstrates how understanding carefully planned market research can lead to success• Nestle in India successfully positioned its Maggi brand of instant noodles as a between-meal snack food rather than as a main menu pasta item• Nestle also caters to the Indian preference for local brands • So although Nescafe is the company’s flagship global coffee brand in many countries Nestle created a special chicory flavoured coffee blend – Sunrise – especially for the Indian market

• Nestle managers have also learned that the 20 million wealthy households in its core target market have a marked preference for low price and value for money consumer products• In keeping with this cultural value orientation Nestle has responded by keeping price low – more than half of Nestlé's product line costs about one US dollar or Rs. 50/- per unit

• Food majors are active global market researchers and product development, manufacturing, and marketing are executed by each subsidiary for its own local home market• Nestlé India has a wide portfolio for Milk Products and Nutrition locally suited for Indian tastes: Nestle Everyday Pure Ghee, Nestle Fresh n’ Natural Dahi, Nestle Fresh n’ Natural Jeera Raita

• Nestle Prepared Dishes and Cooking Aids product line boasts of many India-alone brands• Based on intensive product research and in depth understanding of Indian food habits and cooking practices, MAGGI Kitchen Secret’s Bhuna Masala allows the housewife to prepare everyday, a large variety of dishes without the hassle of chopping & frying• Bhuna Masala for Gravy Dishes- a ready- mix of Onion, Tomato, Ginger and Garlic fried in refined oil for meat dishes and Bhuna Masala for Vegetables and Dal- a ready- mix of Onion and Tomato, fried in refined oil

Chapter 7Segmentation, Targeting and Positioning

What is the central learning of Chapter 7?

Central learning: Variations in consumer needs is the primary motive for

market segmentation.In other words, when consumer preferences vary marketers

design the product or service tailored to the needs of specific segments in the firm’s market

• There exist only three consumer segments in global marketing• Universal or global segments • Regional segments• Unique or diverse segments• In other words marketers develop and design products and services in response to three types of variations in consumer needs

1. Universal or global consumer segments.• Universal or global consumer segments in global marketing transcend national boundaries• These segments are universal in the sense that customers belonging to such segments have common needs• Examples of universal segments in global marketing are consumers who watch entertainment TV; use high technology consumer durables and travel related products (credit cards and airlines)

• The Nokia 9000 Communicator is a wonderful example of a product that is targeted toward a universal segment: the international business traveller• The product combines phone, fax, e-mail, and Internet functions• To roll out the innovation to universal market segments Nokia used a global campaign with the slogan “Everything, Everywhere”

• The Nokia 9000 Communicator is a wonderful example of a product that is targeted toward a universal segment: the international business traveller• The product combines phone, fax, e-mail, and Internet functions• To roll out the innovation to universal market segments Nokia used a global campaign with the slogan “Everything, Everywhere”• Undifferentiated marketing strategy that offers a more or less uniform product world wide: similarity in consumer needs and preferences exists globally

• Marketing to universal consumer segments: Lego Private Limited• Founded in 1949 a privately-owned and secretive company and is enormously profitable • The Lego group has more than 50 companies world wide generating profits of over $100 million on sales of about $ 1 billion• Lego’s main attraction are Lego toy bricks: colourful plastic bricks in small sizes that are assembled to create a variety of structures: ships, cars, homes, castles, playhouses, bridges etc.• The target market for Lego bricks are boys: aged between 2 and 13 years of age and provide them with a wholesome alternative to video games to develop speedier motor and spatial skills

• Global Market Consumer Segments

• Coca-Cola

• Caterpillar

• Marketing to universal consumer segments

Global Market Consumer Segments Coca-Cola

• The Coca-Cola company is the world’s largest beverage company• Operates in more than 200 countries and markets to universal or global segments of consumer over 3,500 beverage products marketed through over 500 brands• Coca-Cola has segmented global markets into only two universal consumer segments for the company• Sparkling drinks’ consumer segment: All colas• Still beverages’ consumer segment: waters, juices and juice drinks, teas, coffees, sports drinks and energy drinks • Consumers enjoy Coca-Cola beverages at the rate of 1.7 billion servings a day

Global Market Consumer Segments Caterpillar

• US$ 42.58 billion corporation

• Four clearly defined universal consumer segments

• Segment A: construction and mining equipment

• Segment B: diesel and natural gas engines

• Segment C: Industrial gas turbines

• Segment D: Diesel-electric locomotives

2. Regional segments. • Apart from universalized global segments corporations also focus on building and serving regionalized segments • Consumer needs and preferences are localized with similarities among the region• Nestle is a food corporation that markets its products to regional segments only• Nestle understands that food is and will always be a local product• It markets some 8000 brands that include instant coffee

• India is the largest market for Nestlé's instant noodles: Maggi and the company has adapted the Tastemaker Masala to suit the preferences of local tastes – an adaptation not carried out in any other country market• Nestle factories at Choladi process green tea for the company’s requirements for Nestea: a product that is sold the world over but not in India• Strategic orientation: businesses organized along regional consumer geographies• Regional segments: a differentiated strategy allows the company to understand consumers in regional local markets and develop flexible marketing mixes

3. Unique (diverse) segments.

• This type of segmentation strategy is used by corporations when there exist diverse cross border segments of consumers and each with a specific local need or preference• The corporation focus on marketing to attractive target markets in each individual country market• Canon • Canon launched its range of 35 mm, single-lens, reflex cameras (AE-1) by developing three separated marketing mixes: Japan, United States and Europe

• In the Japanese market Canon targeted the product to young replacement buyers• In the US the company targeted upscale, first time buyers of 35 mm high end single lens cameras • In Germany Canon focused its branding on older replacement buyers who were also photo enthusiasts

Segmentation variables in international market segmentation• Predominantly demographic and psychographic based segmentation• Grouping of country markets as global segments• Demographic variables are the most popular segmentation criteria used by corporations to segment global market consumers as most information on population variables is reasonably accurate and readily available• Various consumer surveys by market research and media agencies conducted on mature consumers (45-55 years of age) in Asian cities classify then into the following six types of demographics:1. Entrepreneurs.2. Good Students.3. Thrifty Shoppers.4. Family oriented.5. Self centred.6. Falling behind.

1. Entrepreneurs.- 45-55 year age group, largely male, affluent life styles, risk

takers, like to try out new products; 5 % of Asian consumers in urban areas

2. Good Students.- College educated, high on social affiliation needs, lead affluent

lifestyles; 18 percent of consumers (male) 3. Thrifty Shoppers.- Average in income and education, mainly female, price conscious

and discount centred and spend considerable time in evaluating the price points of products and services (8 percent)

4. Family oriented.- High school education, family is the unit of decision making and

consumer product acquisition, not active information seekers about products and services; 29%

5. Self centred.- Average in income and education, impulse buyers, marked

preference for consumer durables and information technology; mainly female; 18%

6. Falling behind.- High school education, low on aspirational needs, poor

acquisition of products and services; 20%- 4+5+6 = 67 % of global consumer segments

• Psychographic segmentation

• Lifestyle based segmentation: grouping consumers on the basis of attitudes, opinions, and core values• Researchers have grouped consumers in global markets into six global values segments1. Strivers.2. Devouts.3. Altruists.4. Intimates.5. Fun Seekers.6. Creatives.

1. Strivers.• predominantly male, aspire to own wealth, status; ambitious; common

segments in Asia and Russia; prefer to own high tech products; Japan, Philippines, Russia and 23 %

2. Devouts.• Concentrated as segments in the emerging markets of Asia, Africa and

the Middle East; uphold traditional values; marked preference for local or regional brands; global brands hold very little appeal; 22 %

3. Altruists.• concerned about social issues and welfare of society; predominantly

female; median age is 44 years; Russia and Latin America; 18 percent

• 1+2+3 = two thirds of global consumer lifestyle segments

4. Intimates.• social affiliation need level is high; value bonds with family, friends

and colleagues; found mainly in Europe and USA; heavy users of both broadcast media and internet media that allow for bonding (TV, movies, social media); 15 percent

5. Fun Seekers.

• uphold values such as adventure, pleasure, excitement and looking good; the youngest segment (MTV generation); teenagers and young adults; high on entertainment needs: dining, heavily involved with electronic media; strongly represented in Asia; 12 percent

6.Creatives. • a strong interest in education, knowledge and technology; members

of this segment are global trendsetters in owning technology; primarily located in Western Europe and Latin America; heavy media consumers (newspapers, books and magazines); 10 percent

In conclusion: global consumer lifestyle segments range from strivers to creatives

• Global positioning strategies• Once a global corporation has segmented consumers in foreign

markets the firm decides on the target markets to pursue and the positioning strategies to use to appeal to the chosen target group

• Four Global Positioning Strategies available to a global marketer1. Universal positioning.2. Global consumer culture positioning.3. Local consumer culture positioning.4. Foreign consumer culture positioning.

• Universal positioning appeals: positioning themes of a global marketer that appeal to consumers anywhere in the world regardless of cultural background

• Products that offer benefits or features that are universally important are marketed on universal positioning appeal

• Red Bull : marketing energy drink via universal positioning appeal (Red Bull, Austria)

• An energy drink brand that is positioned at two global target market groups only: (i) Extreme sports enthusiasts (mountain bike racers, rock climbers, rally drivers, wind surfers); (ii) Night club goers: teens and bar-goers and party animals

• Since its launch in 1987 in Austria the product has used the same appeal and communication strategy across global TGs: “The energy drink that gives you wings”

2. Global consumer culture positioning.• Strategy projects the marketers brand as a symbol of a given

consumer culture• Buying the brand reinforces the consumer’s feeling of being part

of a global segment• Sony (“My First Sony”) or Nike (“Just Do It”) or Coca-Cola (“Coke

Is It”; “Open Happiness”) or Benetton (“ The United Colors of Benetton” ) or McDonald’s (“I Am Loving It”) successfully use this strategy

3. Local consumer culture positioning.• Portraying a global brand as an intrinsic part of the local culture:

depiction of the product as being consumed by local consumers that is manufactured locally with local talent and sourcing

• When HUL launched Knorr, the market leader soup mix brand in India in 2005 its ad campaigns featured Kajol as the brand ambassador and used images of Indian children eagerly awaiting servings from the table

• TG: children craving for a pre-dinner snack (5-8 pm snacking)

4. Foreign consumer culture positioning.• The marketer builds a brand image around a specific foreign

culture in local consumer markets: Switzerland for watches, Germany for household appliances, Japan for cars and South Korea for consumer durables, alcoholic beverages (US and Holland), sports footwear (US)

• Nike, Budweiser, Levis, BMW, Kentucky Fried Chicken (Colonel Sanders) position brands very strongly in their foreign markets around a specific foreign culture: the brand image of a “piece” of Germany or America in the lives of consumers

Chapter 8

International Entry and Expansion Strategies

Chapter 8Part II: International Entry and Expansion Strategies

Covers the topic on Trade-related modes of entry and expansion

Chapter 9Part II: International Entry and Expansion Strategies

Covers the topics: Contractual modes of international market entry

and Investment modes of international market entry

• Global corporations use the two tools of country evaluation and selection as a frame of reference for international market entry• Global managers and corporations use three entry and expansion strategies to enter global markets for marketing and sourcing operations:

1. Trade related modes of international market entry.2. Contractual modes of international market entry. 3. Investment modes of international market entry.

• A mode of international market entry is a strategy by which a firm enters new markets and expands its operations overseas

•Trade-related modes: expansion modes that employ some form of

trade to expand business in foreign countries are termed as trade-

related modes

• Four major forms of trade-related modes: exports, piggybacking or

complementary exports, countertrade, and e-channels

• Exports as a mode of trade-related international market entry are defined as manufacturing of goods in the home country or a third country and shipping them for sales to a country other than the country of production• The key form of exports in global marketing is: indirect exports• Indirect exports is defined as a form of trade-related expansion when a firm sells its products through an export intermediary based in its home country and does not take care of export activity

• Indirect exports enable firms to test international markets before plunging into a more proactive entry-expansion mode• Indirect exports take place either through a home-based agent or piggybacking arrangements• Buying Offices• Piggybacking

• Buying Offices: importer firms locates in the exporter’s country through a permanent buying office to source supplies from markets• In view of India’s strength as a low-cost manufacturing hub, global retail chains are sourcing a wide variety of products from India• Liberty Shoes, an Indian company, supplies the inners and soles to Addidas and Rebook brand as well non-leather beachwear and sports footwear for the American retail giant Wal-Mart• Global retail chains: JC Penny and Target have set up buying offices in India• Marks and Spencer: the UK based retailer with over 540 stores in 30 countries has set up a sourcing center for ready made garments in Bangalore

• Wal-Mart sources a total of US $ 1 billion value of diamonds, pens, shrimps, towels, and shoes from Indian manufacturers through its procurement offices in Bangalore and Hong Kong

• Piggybacking or complementary exports• A manufacturing firm expands its business in a foreign country by using the distribution network of another company: termed piggybacking or complementary exporting• A company that is not willing to commit its own resources for creating its own distribution channel often prefers to piggyback• Under piggybacking arrangements, the exporting firm is termed ‘rider’ whereas the firm with established distribution channels in the target country of export is termed ‘carrier’• Thus, the exporting firm rides on the back of the carrier through the latter’s well-established distribution channel in the target country

• Piggybacking is generally used for related but non-competitive products of unrelated companies which are complementary to the distributors’ existing product lines • Prominent examples of piggybacking arrangements• Fiat-Tata• Wrigley-Parry

• Fiat decided to use the extensive nationwide network of Tata Motors to market and service its passenger cars •Strategic alliance failed when after Fiat did not achieve a sales breakthrough in the Indian market

• Wrigley, the US-based chewing gum company entered India by piggybacking on the well-established distribution network of the Indian confectionary firm: Parry’s Confectionary• The piggybacking arrangement provided Wrigley’s an instant access to over 250,000 retail outlets across India selling the range of Parry’s product mix of hard-boiled sugar confectionary• Hence, Wrigley’s chewing gum had a complementary effect on Parry’s product portfolios and marketing channels

Chapter 9Cooperative Strategies and Global Strategic Alliances

Cooperative Strategies and Global Strategic Alliances:

• Contractual modes of international entry and expansion

• Investment modes of international entry and expansion

• Contractual modes make use of strategic strengths and resources of a foreign-based partner company for international market expansion• In contractual expansion modes the partner firms complement each other with one or more of their strategic strengths such as: superior technology, strong brand equity, manufacturing facilities, well-established distribution network

• Seven major modes of contractual expansion: international strategic

alliances, international contract manufacturing, international management

contracts, turnkey projects, international leasing, international licensing,

and international franchising

1. International or Global Strategic Alliances.• Long-term formal relationships for mutual benefit: a firm agrees to cooperate with one or more than one firm overseas to carry out a business activity wherein each one contributes its different capabilities and strengths to the alliance• A firm has to be globally cooperative to be globally competitive• Phillips• Star Alliance

• The Dutch giant: Phillips heavily relies on multiple strategic alliances with external firms• Such global strategic alliances are aimed at blunting the market advantage of American-Japanese, South Korean, and Taiwanese competition in high-quality electronics and reducing its dependence on Europe where 50 per cent of sales and 70 per cent of its workforce and assets are located• Philips makes use of its global strategic alliance to have a balance of its business operations in major markets across the world

Industry Strategic PartnerAdvanced telephone systems AT&T (US)Compact Discs Sony (Japan)Electronic credit cards Bull (France)Lighting and electronic components Matshushita (Japan)Minicomputer software Bull, ICL, Siemens, OlivettiMobile communications CIT Alcatel, Thomson,

SiemensPersonal memory systems Control Data, SiemensSemiconductors and microchips Intel (US), Siemens

(Germany)Video recorders Grundig (Germany)

• The major advantages of international strategic alliances include:1. The investment cost is shared.2. Leverage specific individual strengths.

• Star Airlines: launched in May 1997 is a strategic alliance in the airlines industry and is the largest airline in the world• Runs 18,000 daily flights to 975 airports in 162 countries with a total fleet of 3,360 aircraft carrying about 510 million passengers annually• Alliance includes: Air Canada, United Airlines, Lufthansa, Thai Airways, Singapore Airline, and ten other airlines

• The advantages for partner airlines are:1. Integration of frequent flyer programs allowing accumulation

and redemption across partners.2. Flight schedules coordinated to permit seamless travel for

passengers within the alliance on a single ticket.

2. International contract manufacturing: international contract manufacturing is a form of international sub-contracting arrangement between the internationalizing firm and the contract manufacturer

• The contract manufacturer limits itself to the production activities whereas marketing is done by the internationalizing firm globally

• Sub-contracting arrangements involve supply of inputs, semi-finished goods, components

• Contract manufacturing is a strategic tool in cost reduction and reduction in the cycle time of production runs for manufacturing on a large and very large scale

• For example, Chinese contract manufacturers alone produce 30 per cent of air conditioners, 24 per cent of washing machines, and 16 per cent of refrigerators sold in the US and Europe

3. International management contracts.• A firm that possess technical skills and management know how can expand overseas by providing its managerial and technical expertise on a contractual basis• Management contracts are common in the hotel industry to take advantage of economies of scale, brand equity, and global reservation systems• The international expansion strategy of the Global Hyatt Corporation for example is primarily based on managing 216 hotels across 44 countries through management contracts • India’s Taj Hotels has also used the management contract route for international business expansion•Indian Hotels Company Limited (IHCL) entered into a 10 year management contract in April 2005 with the Dubai-based property developer ETA Star to develop and manage the Taj Exotica Resort and Spa: a luxury resort at the Palm Island Jumeriah Cresent in Dubai

4. International licensing.• In licensing a firms makes its intangible assets such as patents, trademarks, and copyrights, technical know how and skills (technical, feasibility, product studies, engineering, designs) available to a foreign company for a fee termed as royalty• The home-based firm transferring the intellectual property is known as the licensor whereas the foreign based firm is known as the licensee• The licensee makes use of these intangible assets in the production process• International licensing is common in pharmaceuticals, toys, machine tools, and publishing

• Arrow, ‘America’ shirt maker since 1851’ follows the licensing strategy to expand worldwide• Licensees in more than 90 countries with a wholesale value of stock worth US $ 300 million• Entered India in 1993 through licensing (product licensing where the licensee gets the right to manufacture, produce, and market the product in the defined market area) to Arvind Clothing a subsidiary of Arvind Mills • Arrow is the market leader in India of branded premium men’s shirt categories

Investment mode of international expansion• Foreign direct investment in manufacturing operations in foreign assets • Major forms of investment modes include joint ventures and wholly owned subsidiaries • International joint ventures offer equity investment opportunities in foreign countries with sharing resources and risks with partner firms • A firm shares equity and other resources with other partner firms to form a new company in the target country• Effective strategy to expand in countries with investment restrictions• 50 per cent ownership• 50-50 equity with equal capital ownership• Minority with less than 50 per cent ownership

• Joint venture mode in India most preferred by foreign companies as a mode of investment only in the early 1990s when investment restrictions were high

• Foreign firms are now only taking the wholly owned subsidiary route• A firm expands internationally to have complete control over its

overseas operations by way of 100 percent ownership in the new entity: known as a wholly owned subsidiary

•Entry Strategies for Foreign Investors: Starting operations in India

• A foreign company planning to set up business operations in India has one of two options of entry: as an Indian Company or a Foreign Company

• AS AN INDIAN COMPANY • A foreign company can commence operations in India by incorporating a company under the Companies Act,1956 either as a joint venture or wholly owned subsidiary • Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy. Details of the FDI policy, sectoral equity caps & procedures can be obtained from Department of Industrial Policy & Promotion, Government of India (http://www.dipp.nic.in ).

1. Joint Venture With An Indian Partner• Foreign Companies can set up their operations in India by forging strategic alliances

with Indian partners• Joint Venture may entail the following advantages for a foreign investor: established

distribution/ marketing set up of the Indian partner2. Wholly Owned Subsidiary Company• Foreign companies can also to set up wholly-owned subsidiary in sectors where

100% foreign direct investment is permitted under the FDI policy.

• AS A FOREIGN COMPANY• Foreign Companies can set up their operations in India through • Liaison Office• Project Office• Branch Office

Liaison OfficeLiaison office acts as a channel of communication between the principal place of

business or head office and entities in India. Liaison office can not undertake any commercial activity directly or indirectly and can not, therefore, earn any income in India. Its role is limited to collecting information about possible market opportunities and providing information about the company and its products to prospective Indian customers. It can promote export/import from/to India and also facilitate technical/financial collaboration between parent company and companies in India.

• Approval for establishing a liaison office in India is granted by Reserve Bank of India (RBI).

• Project Office• Foreign Companies planning to execute specific projects in India can set up

temporary project/site offices in India. RBI has now granted general permission to foreign entities to establish Project Offices subject to specified conditions. Such offices can not undertake or carry on any activity other than the activity relating and incidental to execution of the project. Project Offices may remit outside India the surplus of the project on its completion, general permission for which has been granted by the RBI.

• Branch Office• Foreign companies engaged in manufacturing and trading activities abroad are allowed to

set up Branch Offices in India for the following purposes: (i) Export/Import of goods(ii) Rendering professional or consultancy services(iii) Carrying out research work, in which the parent company is engaged.(iv) Promoting technical or financial collaborations between Indian companies and parent

or overseas group company.(v) Representing the parent company in India and acting as buying/selling agents in India.(vi) Rendering services in Information Technology and development of software in India.(vii) Rendering technical support to the products supplied by the parent/ group companies.(viii) Foreign airline/shipping company. • A branch office is not allowed to carry out manufacturing activities on its own but is permitted to

subcontract these to an Indian manufacturer. Branch Offices established with the approval of RBI, may remit outside India profit of the branch, net of applicable Indian taxes and subject to RBI guidelines Permission for setting up branch offices is granted by the Reserve Bank of India (RBI).

Foreign investors predominantly select the :1. Joint Venture With An Indian Partner• Foreign Companies can set up their operations in India by forging

strategic alliances with Indian partners• Joint Venture may entail the following advantages for a foreign investor:

established distribution/ marketing set up of the Indian partner2. Wholly Owned Subsidiary Company• Foreign companies can also to set up wholly-owned subsidiary in

sectors where 100% foreign direct investment is permitted under the FDI policy.

• Locate out of Special Economic Zones: http://www.sezindia.nic.in/about-introduction.asp