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Marketing business strategy P&G
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Proctor & Gamble in India
Proctor & Gamble – Marketing in the Indian ContextA Critical Appraisal
Submitted By: Shreevardhan PoddarGuide Name:Affiliation:
Date:
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Proctor & Gamble in India
Proctor & Gamble – Marketing in the Indian ContextA Critical Appraisal
EXECUTIVE SUMMARY
The importance of marketing in the organisation has been declining since this function
has suffered from lack of innovation and integration with the other functions as a fully
networked whole. Multinational organisations like Proctor & Gamble have also failed
to understand their customers and the markets in developing countries like India.
This appraisal looks at the reasons for failure of P&G to derive the kind of growth and
profitability that was possible in India’s booming economy. By addressing the needs of
the affluent and urban population, which form a very small minority of the total
population P&G have, and continue to, missed out on an opportunity to establish a
brand and an empathy with the largest segment of the market – the poor – who form
‘the bottom of the pyramid’ (Prahalad 2006).
An appraisal of P&G’s Indian operations, represented by Proctor & Gamble Hygiene
and Health, indicate that the poor performance is directly a result of concentration on
brand extensions and not paying adequate attention to the need for innovation and
addressing the needs of the poor.
Using the widely accepted management tools like SWOT-TOWS and Porter’s Five
Forces analysis this study derives a strategy that can help in improving performance.
Specific suggestions are made that will help shore up performance in India.
1.0 INTRODUCTION
The article “Marketing is everything” (McKenna 1991), appeared in the Harvard Business
Review in 1991, this article concluded that: “in the 1990s, all the critical dimensions of a
company are ultimately the functions of marketing”. This perception had undergone a drastic
change in the ensuing years, Brady and Davis (1993) argued that marketing departments had
often become a “millstone around an organisation’s neck”.
Several symptoms of this decline of the importance of marketing have been reported. The
most significant being the apparent decline in the market share and profitability of
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Proctor & Gamble in India
manufacturer brands (Doyle 1995). For example, retailer private labels have pushed the share
of manufacturer brands from over half to under one third of food spending in the last decade
(ibid). At the same time margins have been eroded by a decline in brand premiums and a rise
in below-the-line spending to obtain retail shelf space. Second, and in the context of this
report, the most important, marketing departments have been criticized for their lack of
innovation. While there has been an enormous proliferation of brand extensions, it is difficult
to find examples of really significant new products or services which have emanated from the
marketing function in recent years (Doyle 1995). Finally, marketing appears to have lost its
primacy to other disciplines. The ideas that have been shaping businesses since the 1990s –
TQM, JIT, business reengineering, strategic alliances – have their origins in other functional
areas (ibid).
Research shows that the roots of a marketing failure lie in two areas. First, as King (1985)
observed, marketers have generally made the mistake of seeing marketing as a functional
discipline rather than an integrative business process. In order to meet the need for growth in
revenues marketing have used brand extensions as an easy substitute for genuine innovation
and new product development. In addition, marketers have not adapted to the new type of
competition which today pits networks rather than single companies against each other
(Doyle 1995). Doyle further emphasises that today competition is increasingly between
networks rather than stand-alone businesses. Kotler (1994, p. 46) notes that “The winner is
the company with the best network”. In other words, management has to be concerned with
building the right conditions, not only within its own organisation, but also within the other
organisations that constitute its value adding network. Instead, marketing has concentrated on
generally superficial, segmentation and positioning rather than real innovation and the
creation of sustainable competitive advantage (Hooley and Saunders 1993).
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Proctor & Gamble in India
Multinational companies entering the developing world markets have added to the basic
reasons for the decline by not looking at the primary requirement of understanding their
customers and the markets, which are massive and complex and totally unlike market places
in the west.
The majority of multinational corporations have been marketing their products in Asia’s poor
countries for decades focussing entirely on the affluent minority; those who tend to live in
urban areas and have perceptions of their needs and shopping habits that are similar to those
in the developed countries (Kristula-Green 2007). This is not difficult to understand as it is
the easiest way to show results but as this report attempts to demonstrate this approach only
scratches the surface of the potential that exists in these markets to make quantum changes in
growth profiles.
Professor CK Prahalad (2006) urges companies to look at the bottom of the economic
pyramid in the markets of poor and developing countries. He argues that the real opportunity
does not lie in changing the package sizes and price points of the same goods that are sold in
the West to make them affordable to the poor in the East, but that the opportunity really lies
in innovation to meet the needs of the people through new or modified products that can then
be sold at affordable prices. The ultimate test remains, as ever, how far the product meets the
identified needs of the customer.
Through this focus only on the economically strong urban population the marketers are
missing out on the vast opportunity that the market consisting of the middle and poorer
classes of these countries present. This bottom of the economical pyramid is not only brand
conscious because of the associated perception of quality but also conscious of value for
money (Kristula-Green 2007).
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Proctor & Gamble in India
Procter and Gamble (P&G) is one of the top 30 companies in the world and is a global leader
in the production and distribution of Fast Moving Consumer Goods (FMCG). It has been
ranked 24 in the list of fortune 500 companies in the year 2006. Based in Cincinnati, Ohio,
USA, it manufactures a range of FMCG products and markets these virtually in every country
in the world (Company Website).
P&G has a long association with India beginning in the early 1950s. However it is only in the
1990s, with the opening up of the Indian economy, that its interest in this market grew. The
company has two subsidiaries in the country: P&G Hygiene and Health Care Ltd. (PGHH), in
which it has a 65% stake and its wholly owned subsidiary P&G Home Products Ltd (PGHP).
This study briefly discusses the history of the company in India, followed by a critical
appraisal of the operations and marketing strategies deployed by them and the success (or the
lack of it) so far, with the purpose to understand the underlying reasons behind the success or
failure and also to offer some suggestions to bolster performance.
The study compares the performance of one of the subsidiaries of the Company – PGHH with
that of the overall performance of the parent company through the market related indices i.e.
Sales and profitability and a comparison of the stock performance on the relevant bourses.
The growth of the division and its revenues are studied to understand the drivers of the
growth and whether the increase in revenues is because of increase in market share or by the
growth of the market itself. In this study it is demonstrated (a) that the growth rate of PGHH
(which is negative in the last two years in any case) considerably lags behind the growth rate
of the Indian economy and that of its immediate competitors, (b) that the increase in revenue
is primarily driven by adding products and brand extensions rather than the growth of
existing brands, (c) that there has been no drive towards innovation vital to the well being of
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Proctor & Gamble in India
the organisation as noted in the opening paragraphs and finally (d) that the financial
performance of the division is considerably behind that of the parent company as a result.
With this backdrop the study carries out a SWOT-TOWS analysis for the division. A Porter’s
five forces analysis is done to further develop assessment of the situation that confronts the
division and to develop a possible strategy guideline for the future.
It is found that P&G have so far exploited the available market in India at the pinnacle of the
economic pyramid and perhaps the next layer. However, there appears no attempt to address
the bottom of the pyramid. Whether this is a matter of principle and strategy is difficult to
comment on but this report demonstrates that the company is missing out on an opportunity
which will not remain there for long.
The first section after the description of the methodology adopted (3) following briefly
describes the history of P&G in India and this is followed by a detailed exploration of India’s
markets in the next section (4). Using some specific instances it is highlighted that the market
can not be compared to those in developed countries and that what works in the West may
not work in India whether it is product profile or organisation structure. The need to innovate
and address the needs, hopes and aspirations of the large mass of India’s poor is stressed.
The report continues (Section 5) to describe the competition that P&G faces from the large
companies as well as the unorganized sector. Section 6 discusses the track record of P&G in
meeting competition. They have introduced internationally famous brands like ‘Camay’ and
withdrawn them, ‘Tide’ has become an also-ran and P&G have been able to maintain
revenues only through brand extensions while all existing products continue to lose market
share to organised and unorganised sector competitor. The following section (7) discusses the
future prospects and how the non-high-tech nature of the existing products will threaten
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Proctor & Gamble in India
performance. There is a huge market out there that can be addressed by innovative products
that give P&G ‘first mover’ status.
Financial and stock price performance of PGHH and the mother company P&G are compared
in section 8 to highlight the above findings of slipping performance.
Sections 9 and 10 work on evolving a strategy that may be followed by P&G to improve
performance using Porter’s five forces analysis and the SWOT-TOWS matrix to derive S-O;
S-T; W-O; and W-T strategy initiatives.
The above analysis is followed by a discussion (section 11) analysing the results of the
findings and again emphasising the need to be ‘first mover’; ‘prosumer’ geared; understand
the culture and social responsibility in community development; build distribution chains and
relationships with the market and importantly use these to innovate and address the unmet
needs of the consumers. Specific suggestions on media strategy and reverse engineering are
also offered in this section.
The report concludes by a short recap of the analysis and suggestions.
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Proctor & Gamble in India
2.0 METHODOLOGY
As a first step a web based analysis was undertaken; details about the company – Proctor and
Gamble – and their history within India was gleaned from their own website and publications
on the web as well as the opinions of market analysts posted on the web. Statistics about the
financial and stock performance were taken from the reports of reputed companies such as
Reuters and Business Week. Information about competition was collected from a few other
websites, prominently Quantum Information Services and Bee Management. However, this
did not allow collection of information that was up-to-date; a large amount of information
gathered showed details up to four or five years old.
This, as well as the need to get the ground realities of the market it was considered essential
to talk with someone who has been in the Indian markets and understands the FMCG
business. Therefore, telephonic interviews were held with Mr. P Singh, ex V.P. (Marketing)
of a large company in India. Mr. Singh obliged by discussing his experiences and knowledge
of the market in great detail which has helped inform large tracts of this report as well as its
contemporariness that would otherwise have not been possible.
This was followed by a detailed review of relevant literature that has been used as the
primary basis for developing this report.
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Proctor & Gamble in India
3.0 COMPANY HISTORY IN INDIA
The following history of the company is almost entirely sourced from their website (available
at http://www.pgind.com) and no references are made within the text of this section to
facilitate reading.
Procter & Gamble Co. (P&G) is an American company based in Cincinnati, Ohio that
manufactures a wide range of consumer goods. In India P&G has two subsidiaries: P&G
Home Products Limited and P&G Hygiene and Health Care Limited, both subsidiaries are
some of India's fastest growing Fast Moving Consumer Goods (FMCG) Companies. With a
turnover of more than Rs. 500 crores (approx $125 million) the Hygiene and Healthcare
division is also one of the largest in this area. Products marketed by the company include the
brands ‘Vicks’ & ‘Whisper’. P&G Home Products Limited deals in fabric care and Hair Care
products. It has in its portfolio global brands such as ‘Ariel’ and ‘Tide’ in the Fabric Care
segment, and ‘Head & Shoulders’, ‘Pantene’, and ‘Rejoice’ in the Hair Care segment. It has
recently added Oil of Olay to this kitty of products.
Procter & Gamble's relationship with India started in 1951 when Vicks Product Inc. India, a
branch of Vicks Product Inc. USA entered Indian market. In 1964, a public limited company,
Richardson Hindustan Limited (RHL) was formed which obtained an Industrial License to
undertake manufacture of Menthol and de-mentholated peppermint oil and VICKS range of
products such as Vicks VapoRub, Vicks Cough Drops and Vicks Inhaler. In May 1967, RHL
introduced Clearsil, then America's number one pimple cream in Indian market. In 1979,
RHL launched Vicks Action 500 and in 1984 it set up an Ayurvedic Research Laboratory to
address the common ailments of the people such as cough and cold.
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Proctor & Gamble in India
In October 1985, RHL became an affiliate of The Procter & Gamble Company, USA and its
name was changed to Procter & Gamble India. In 1989, Procter & Gamble India launched
Whisper - the breakthrough technology sanitary napkin. In 1991, P&G India launched Ariel
detergent. In 1992, The Procter & Gamble Company, US increased its stake in Procter &
Gamble India to 51% and then to 65%. In 1993, Procter & Gamble India divested the
Detergents business to Procter & Gamble Home Products (PGHP) a wholly owned subsidiary
of P&G USA, and started marketing Old Spice Brand of products. In 1999 Procter & Gamble
India Limited changed the name of the Company to Procter & Gamble Hygiene and Health
Care Limited (PGHH).
In 1995, PGHP entered the Hair care Category with the launch of ‘Pantene Pro-V’ shampoo.
In 1997 PGHP launched ‘Head & Shoulders’ shampoo. In 2000, ‘Tide’ Detergent Powder
was also launched ‘Tide’ is the largest selling detergent in the world. The last product to be
introduced by PGHP was in 2003 when they introduced their ‘Pampers’ brand of diapers. In
October 2005 the manufacturing part of the detergents and shampoo was divested to P&G.
Today, Proctor & Gamble is the second largest FMCG Company in India after Hindustan
Lever Limited.
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Proctor & Gamble in India
4.0 THE MARKET AND P&G
Multinational companies entering the Indian market have tended to build upon what made
them successful in the western markets, the fact remains that consumer goods companies
cannot export their business models, products and marketing formulas wholesale from their
core developed markets and expect them to work in places such as India (Kristula-Green
2007). Emerging markets differ in their governmental policies, regulations and
macroeconomic behaviours; in the structure of their consumer markets, distribution systems
and competitive sets; in the needs and behaviours of their consumers (ibid).
If we explore the possibilities for standardization of marketing elements within a
multinational marketing strategy we find that the majority view among international
marketers is that each nation is unique, and thus each must be treated as a separate and
independent operation (Sands 1979). Sands (ibid), however, finds that there are a number of
areas where companies can affect cost and resource savings through standardisation of certain
elements of their marketing strategy and that the entire package may not need to be altered
completely as soon as national borders are crossed. This standardisation, according to Sands
(ibid) may consist of adopting uniform policies with regard to product, packaging,
advertising, and pricing. This advice is completely contrary to the theme of this paper and it
is argued that this may be a desirable practice, and indeed a very useful one, when
considering marketing strategies across countries which have similar demographic and
economic frameworks and similar customer preferences. This approach can not hold in a
market as diverse and as different as India compared with the US where the P&G mother
company is located. A bizarre example of this comes from the interview quoted (Singh 2008)
where one was told that in certain, and very large, areas of the country toilet soap cakes of
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Proctor & Gamble in India
only the ‘guest’ size (25 grams) sell and not one of them is used for having a bath! Half the
cake goes into the knot of hair on the woman’s head as a perfume and the other half is used as
a contraceptive of sorts! What kind of commonality can find with any standard in the West?
This paper challenges the concepts of Sands (ibid) and their applicability in India.
Prahalad (2006) in his book ‘The fortune at the bottom of the pyramid’ opens his argument
with a simple yet revolutionary proposition: if we stop thinking of the poor as victims or as a
burden and start recognizing them as resilient and creative entrepreneurs and value conscious
consumers, a whole new world of opportunity will open up. Prahalad (ibid) suggests that the
four billion people who survive on two dollars a day can be the engine that drives the next
round of global trade and prosperity and can be the drivers of innovation.
To join the bandwagon of companies who will be looking to exploit this opportunity P&G
will need to work collaboratively with civil society, organizations, and local governments but
the largest hurdle will be in understanding the motivations, needs and aspirations of this sea
of potential customers. This can not be achieved sitting in Cincinnati or in Bombay – the
information and the ideas will be generated only in the dust and heat of the large hinterlands
of the country. While marketing is an important aspect of business growth, it is the
development of new products and business ideas that shall have to take the front seat. Selling,
promotion and customer education will follow once the company educates itself. Herein lays
the crux of the issue informing the suggestion that P&G decentralize operations and devolve
responsibility for product, packaging and pricing decisions to the people on the ground in the
Indian market.
There is no element of doubt that central control over company policy on finance, ethics,
sustainability and corporate philosophy can be compromised under any circumstance.
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Proctor & Gamble in India
However, gigantic opportunities need gigantic and out-of-the-box thinking. The traditional
bureaucracy of ‘Headquarters’ and ‘Regional Offices’ with ‘Country Managers’ manning
them has to be given up and replaced with responsive managements that are tasked with
creating value for the organization.
There are only so many lozenges that one can sell in a country that is hot and dry for most of
the year and colds are not of a major concern to the populace. Neither does the future lie in
attempting to sell more and improved sanitary napkins to women who never even heard of a
bra! Selling Pantene, a high end shampoo, in single serve pouches is not the greatest stroke of
genius either, the need is to develop a product that has the quality association with the P&G
name, is affordable to the masses and addresses an identified need (refer Prahalad 2006) –
shampoo is definitely not a priority – not for the moment in any case, even if selling the mini
sachets at Re 1 each is profitable, growth is stymied and the results evident.
This is further highlighted by the simple observation that within the country there is a huge
differentiation of consumer preferences, for example a toilet soap with jasmine (or
sandalwood) as the predominant note in its perfume is the preferred choice in the south but
will not sell in the north who prefer eau-de-cologne as the top note (Singh 2008). Similarly, a
white bar will sell in the west and predominantly pink or green in the east. One can see this in
the numerous colours in which LUX (of HLL) is available with each colour targeted at a
region within the country and with its distinct fragrance. P&G attempted to sell a white
CAMAY throughout the country, the results of this foray are in the market to see – the brand
was handed over to another company to market, a company who has no interest in the brand
in any case – there is no CAMAY in the market anymore (Singh 2008).
So where does this lead us? This report stresses upon the need for large multinational
companies to innovate on the basis of market information generated in the markets where
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Proctor & Gamble in India
these ‘poor’ people buy. The need is to carry out a comprehensive ethnographic research in
the Indian market and develop products that are relevant, appropriate and meet local needs. A
prime example of such innovation is the recent launch of the ‘Nano’ a car that meets with the
aspirations of the large number of the middle class in India to own a car at the same time
addresses the affordability – the car is priced at $ 2500 – new! The number of jobs this will
create in the ancillary and after-sales service market and help raise living standards have not
even begun to be estimated. Where this takes the TATA image, already a household name in
the country is easy to estimate. Another example, closer to the P&G business is NIRMA, a
detergent that makes no pretensions to image and competition with the large brands, it comes
in a plain plastic bag with a modicum of printing, stapled close, and one standard pack of
500grams and an unassuming pale yellow colour. Each of these attributes of the product are
individual masterstrokes – the yellow colour is the colour of the bar laundry soap that the
poor have been using, the stapling on the top and manual mixing of the components of the
detergent helped the company declare that the product was ‘manufactured without the use of
power’ and avoid paying excise duty which is 15% for others, the packing and price at which
it was introduced allowed the company to sell it at Rs. 10 – no small change required (Singh
2008). The result - while HLL was unloading trucks of Surf, NIRMA was unloading railway
rakes (ibid) in the small towns. Today there are two generic names for detergents in India you
are either looking for SURF or NIRMA every other brand falls within these categories. P&G
could learn from this example – NIRMA today is one of the biggest companies in India – it
started in a small shed 20 years back.
Proctor and Gamble have a huge challenge ahead and they need to come up with such
innovative products that use local skills, expertise and local materials, are eco-friendly and
sustainable, are hybrids of old technology and new, and educate the customer in its
desirability and value.
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Proctor & Gamble in India
Stress is repeated on the need to establish an image of responsibility and caring that drives
brand equity and customer loyalty. The runaway success of a product like ‘Pan Parag’ – a
product that has no equivalent anywhere in the world and is probably the most unethical but it
meets a need of the people (Singh 2008) – should help explain the point.
On the one hand P&G tells us that it is the most innovative companies in the whole world
(company website), on the other they’ve never quite managed to grasp the challenge of the
Indian market. Instead of aiming to ‘delight the customer’ (Mr. Khosla, MD, PGHH in The
Times of India), the company must look to base its business plans on understanding the
customers they wish to delight. Cutting prices and packing in small sachets, increasing ad-
spend and traditional marketing practices based on western models are leading them nowhere
– as the financial analysis clearly shows.
The Indian market demographics are changing continuously, the market has seen three
important changes in the past decade a. the market is becoming less homogenous or in other
words clear customer segments are beginning to emerge all of meaningful size and potential
to grow, b. there is a retail revolution that has begun at the top end of the market and is bound
to mushroom and c. the lower end of the market is beginning to have a phenomenal increase
in aspirations with increasing exposure to the media, demonstrated, for example, by the huge
and growing demand for mobile phones (Singh 2008).
Medicines sold without the requirement of a prescription are referred to as the Over-The-
Counter (OTC) medicines. India is currently ranked 11th in the global OTC market in size
with sales exceeding $ 2.6 billion and the present growth rate, ranging between 8 and 9%
annually, will take it to 9th position within five years (Source: Bhangale 2006). In comparison
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Proctor & Gamble in India
the ‘Vicks’ brand has grown at 5% in 2007 in volume and recorded negative growth in terms
of value (Company Annual Report 2007).
The growth in OTC medicines is driven by urban India thanks to the advent of technology,
improving literacy levels, increasing health awareness and high work stress levels (Bhangale
2006). Considering the changing mindset and likely changes in regulatory framework, such
as, OTC guidelines and open distribution, it is reasonable to estimate that within the next ten
years, India will emerge as one of the biggest markets for OTC medicines. Currently, aches/
pains, cough, colds, hyperacidity, minor topical infections, and indigestion are the major
OTC categories. Emerging categories include cuts, wounds and burns, muscle pains and
sprains, diarrhoea and constipation. In addition there are many prescription medicines whose
market can be revitalised by switching to the OTC mode these include vitamins, cough &
cold, antacids, and antipyretics (Bhangale 2006).
P&G's ‘Whisper’ dominates the Rs 1.8 bn sanitary napkins market with a 50% market share
(in value terms) and about 30% in volume. Whisper operates in the premium range, meaning
high margins and low volumes. This segment is growing annually at 25-30% and PGHH at
17% (again in volume of sales only). The segment has low awareness and penetration levels
(10-12% in urban areas). P&G competes with Johnson & Johnson (Stayfree, Carefree) and
Kimberley Clarke-HLL (Kotex, Secure) (Source: QISPL 2006) and TZMO of Poland (Bella)
(Singh 2008). It is important to note that a. the information clearly states ‘in value terms’ and
‘high margins and low volumes’ and b. ‘this segment is growing annually at 25-30%’. The
inferences drawn by this writer that P&G is only addressing the top of the economical
pyramid and that its growth rate is nowhere close to that of the market appear vindicated
here.
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Proctor & Gamble in India
P&G also manufactures Clearasil an anti-acne cream, which has been growing at 5-6%,
compared to the industry average of 15%. Lakme, Ponds, Charmis and Fair & Lovely are the
other major brands in this segment (QISPL ibid).
17
Proctor & Gamble in India
5.0 THE COMPETITION
In India competition faced by Proctor and Gamble comes from the Indian arm of Unilever
(Hindustan Lever Ltd. - HLL), ITC Ltd. (erstwhile Imperial Tobacco) and some major
companies with multinational or indigenous roots. In addition the competition comes from
innumerable companies, large and small, in the same line of business as P&G in one or more
of its product lines. The competition in the home products division comes from the large
companies like HLL, ITC, Godrej, Nirma, Colgate etc as well as smaller companies that
literally thrive on shoestring margins and large volumes that abound every nook and corner of
the country. For example, it is not uncommon to find several soap factories in a single city
that make vegetable oil based soap or add a little AOS (Alkyl Olefin Sulphonate), colour and
perfume to Soda Ash and market it as detergent powder – and they have their takers (Singh
2008).
Similarly the hygiene and healthcare division also faces a stiff challenge from virtually street
corner manufacturers of sanitary napkins and the ‘Vicks’ range is challenged by such other
products like Amrutanjan, Halls, Strepsils, Sualin, D-Cold and many others who base their
remedies on the Ayurvedic (Ancient Indian) or Unani (Ancient Greek) schools of medicine,
the list is literally endless. However, a brief description of some of the main competitors is
provided below.
The following description of competitors and present market structures is based on
information gleaned from the websites:
http://www.beemanagement.com/magazine/ciox.asp ; and http://www.domain-b.com/companies/companies_p/procter_gamble_india/19990921procter_gamble_india_res.html
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Proctor & Gamble in India
The information available from these sources is not up to date and this has been
supplemented through a personal telephonic interview with Mr. P Singh, (ex) VP-Marketing
of Oswal Agro Mills Limited – a company that has a large presence in Indian markets in
FMCG (soap and detergents), chemicals and fertiliser businesses.
5.1 Hindustan Lever Limited (HLL)
The scale of operations, the breadth and depth of its product range, its distribution reach, its
clout in the media and most importantly its ability to attract and retain top talent are variables
that reinforce each other and have resulted in the actuation of an increasing returns business
model. It has got its distribution network spread right across the length and breadth of the
country. Increasing amounts of capital have been employed at an ever-increasing rate of
return. Return on shareholders funds have increased every single year over the past ten years
on an expanded capital base, from 23.55% in CY 1989 to nearly 50% in CY 1998 yielding
annual returns in excess of 44% for its shareholders in the last decade.
HLL is a leader in soaps, detergents and household care businesses, personal products,
beverages and has taken innovative initiatives in branded staples, culinary products and ice
creams. It is number one in six of its nine categories, and number one in all the large
categories that account for 65% of the markets in which they operate.
5.2 Colgate Palmolive India Limited (CPIL)
Colgate-Palmolive Company, the parent, with 51% equity stake in Colgate-Palmolive India
Ltd., has strong global brands in its core businesses - Oral Care and Personal Care. The
Indian oral care segment has witnessed a fierce battle for market shares between HLL and
CPIL. The earlier market leader Cibaca, a brand of Ciba has all but disappeared from the
market. The other players in the market include Balasara’s ‘PROMISE’ and Dabur’s
‘MESWAK’, ‘FORHANS’ and a few other local players. The most visible ramification of
19
Proctor & Gamble in India
this scenario of fierce competition is fall in CPIL market share in the oral care segment from
65% in 1995 to the less than 55% presently, and bruised profit margins on the back of
increased advertisement expenditure as a percentage of sales.
5.3 Reckitt & Coleman India Limited
Reckitt & Colman India (now Rekitt Benckiser) has a brand portfolio covering a large and
diversified product range. It is the market leader in the mosquito coils, shoe care, fabric care,
lavatory care and antiseptic liquid segments. Furthermore it is the second largest player in the
premium soaps (Dettol) and the surface care segments. Roughly 85% of its sales are from
businesses where it has either a number one or number 2 ranking. It has formed a joint
venture with Nicholas Piramal India Limited for its OTC products which should be beneficial
to the Company in the long run.
The company also makes over-the-counter pharmaceuticals analgesics, antiseptics, cold and
flu remedies, and gastrointestinal products; though these are not yet a threat to P&G business
these are expected to have a huge impact in the market with the strong brand presence and its
association with health - DETTOL.
As mentioned above these are only some of the larger companies. Vicks is facing tremendous
competition from Amrutanjan and D-Cold, products of substantial sized Indian companies
and a number of companies producing similar products.
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Proctor & Gamble in India
6.0 P&G HISTORY OF MEETING COMPETITION
Proctor and Gamble have a history of being literally forced to take the bottom end of the
market in the detergents business. This can not be attributed to P&G marketing alone
HENKEL have faced the same fate in a market where SURF is the generic name for all
detergents – a retailer will ask you “which brand of SURF do you want?” It has also been
forced to hand over its ‘CAMAY’ and ‘MEDIKER’ brands to the fast emerging Indian
company in the FMCG market in India – Marico Industries (Singh 2008).
Vicks has lost market share to spurious look-alike brands and a host of new products in the
market. To strengthen its brand image, the company has given Vicks the status of a mega
brand and all Vicks sub-brands--Vaporub, Action 500, Cough Drops, and Inhalers--have been
given a common synergy via packaging to make them look identical.
P&G has been losing market share in sanitary products since mid-1996. This was accelerated
by the launch of Johnson & Johnson’s ‘Stayfree’ and ‘Secure’ and Kimberley Clarke Lever’s
‘Kotex’ in end-1997. From a market share of approximately 43 per cent before the launch of
Secure and Kotex, Whisper’s share dropped to an all-time low of 28.5 per cent in June 1999.
The way that has been found by P&G to keep its share of the market revenue alive is by
introducing new variants of ‘Whisper’ at a fast rate while on individual products it keeps
losing ground. The total market share in terms of volume remains stagnant at around 30%.
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7.0 FUTURE PROSPECTS
The largest threat that looms ahead of P&G is the entry of Godrej into the sanitary napkins
and baby diapers business in the very near future – end 2008. The company has entered into a
joint-venture agreement with SCA of Sweden, a European leader in the business, to produce
and market personal care and hygiene products (Godrejcp, 2007). Godrej is a highly
respected name in the Indian market with products ranging from soap to white goods to
business machines to steel furniture to forklift trucks and a host of others and a strong
association with high quality and impeccable business ethics. Marketing strength is also
considerable as they have held the business in soap (HAMAM & SHIKAKAI) detergents
(EZEE) hair dyes etc. and market shares intact despite the fierce competition.
The other threat is the presence of a large number of small businesses that produce spurious
and low quality substitutes for the major product lines.
The acts of hiving off the marketing of detergents (Ariel) and shampoos (Head & Shoulders,
Pantene) to P&G Home Products while continuing to produce these (also discontinued in
October 2005) helps to keep PGHH profits intact by passing on the low margin and products
facing high competition to PGHP. However, this is interpreted as a retreat in the face of
competition by the market and acknowledgement of defeat (Singh 2008).
Some of the crucial statistics that can impact future markets are:
- Per Capita consumption of toothpaste in India is below 110grams per year as
compared with a world average of 320 grams
- Sale of sanitary napkins covers only 30 percent of the urban female market and
less than 10% of the total potential market
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Proctor & Gamble in India
- Sale of anti-cold lozenges and formulations are growing at 17-18% per annum as
compared with 5% growth in this market for PGHH.
(Source QISP - Quantum Information Service P Ltd. Website: http://www.equitymaster.com/p-detail.asp?date=1/5/1999&story=1)
Healthcare (Anti-cold) segment consists of menthol-based products in numerous forms like
rub and cream, tablets and cough drops, lozenges and inhalers. P&G's brand Vicks operates
in all the aforesaid forms and is the No. 1 brand with 35% market share in the Rs 4 bn anti-
cold healthcare segment. Overall, this segment is growing at 17-18% per annum. Vicks main
competitors in this segment are Amrutanjan, Zandu and Warner-Lambert (Halls).
The parent company is focussed on P&G Home Products to launch all future products in
fabric-wash, hair-care, cosmetics and oral-care segment through this 100% owned
subsidiary. Though it will shield P&G from high costs of product launches and brand
building, at the same time it will deprive it of leveraging the P&G global brands and high
growth areas.
PGHH is in market with products that do not rely on a unique or high level of technology and
are therefore easily copied. Its success rate with earlier product launches has been dismal to
say the least. In this scenario the company needs to re-examine its strategy of addressing the
‘easy’ markets and look towards a strategy that a. helps expand absolute market size for
existing products and b. look to identify and introduce innovative products in which it can be
the ‘first mover’ in the market.
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Proctor & Gamble in India
8.0 FINANCIAL ANALYSIS
The financial performance of the parent company and the Indian operations represented by
PGHH below show trends of profitability.
Figure 1: Performance of the parent company
Performance of P&G
0
5000
10000
15000
20000
2004 2005 2006 2007
Year
US
D M
illio
n
Operating Income Net Income
(Source – company financial statements)
Figure 2: Performance of PGHH
PGHH - Performance Past Four Years
020406080
100120140160
2004 2005 2006 2007
Year
Ru
pe
es
/cro
re
Profit after TaxEPS
(Source – company financial statements)
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Proctor & Gamble in India
Stock performance is indicated by the graphs 1 and 2.
Graph – 1: Stock Price Movement of P&G (compared with S&P)
Source: http://stocks.us.reuters.com/stocks/charts.asp?symbol=PG
Graph – 1: Stock Price Movement of PGHH
Source: http://investing.businessweek.com/research/stocks/charts/charts.asp?symbol=PROC.BO The performance of PGHH in the market can also be understood from the data presented in
below:
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Proctor & Gamble in India
Figure 3: Sales and Profitability growth of PGHH, India
Proctor & Gamble Hygiene and Health Care - IndiaGrowth (as percent over previous year)
2005 2006 2007Sales 20% -19% -7%Profit before Tax 40% 8% -25%Profit after Tax 36% 12% -36% (Source: Company Balance Sheets)
The sudden decline in sales in 2006 is obviously a result of the discontinuance of contract
manufacturing of detergents and shampoo that PGHH were doing for PGHP. However, the
decline in 2007 is purely based on market factors. While the volume of sales has been
reported to have grown at 17% for the Sanitary napkins business and 5% for Vicks it is
obvious that these growths have been achieved through lowered costs, increased market
spend, higher input costs etc.
The interpretation of the results presented above lead us to the following inferences:
- Despite being in a market where the economy is growing at over 8% per annum
PGHH has recorded negative growth in value terms.
- The performance of the Indian arm of the business is not indicative of the overall
performance of the company’s operations in India since the impact of the worse
performing operations have been cleverly shielded by hiving these off as a wholly
owned subsidiary of the American parent and results are conveniently not
reported.
However, the important facts are that
- The market is so large that any company can enter and show good results but it is
vital to see that neither the growth of PGHH is in keeping with what is possible as
also that the growth figures show a declining trend. Both these factors are
indicative of the fact that the market is not as easy as it may appear at first glance.
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Proctor & Gamble in India
- The top end of the market and the large margins that can be commanded in the
initial stages are bound to be challenged through competition and cheaper
substitutes.
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Proctor & Gamble in India
9.0 PORTER’S FIVE FORCES ANALYSIS
Porter’s (Porter 1998) analysis deals with external factors that influence the nature of
competition within a industry as well as the forces inside the industry that influence the way
in which firms compete to understand the industry’s likely profitability. Every firm is
interested in studying the forces that impact their performance and how these can be
harnessed to provide competitive advantage and as a result gives a return on investment better
than the average for the industry (Thurlby 1998).
The Porter ‘five force’ model helps a company understand the dynamics of the industry and
the markets they operate in which in turn helps in effectively competing in the marketplace.
Porter defines the forces that impact the performance of a company as:
1. Rivalry among existing firms;
2. Threat posed by new entrants in the market;
3. Supplier Power;
4. Power of buyers; and
5. The threat of substitute products and services.
Porter suggests that the intensity of competition is determined by the relative strengths of
these forces. The model emphasizes extended competition for value rather than just
competition among existing rivals. The simplicity of the model weighed against the deep
insights it can provide has led a number of companies to adopt its use (Wheelen and Hunger
1998).
PGHH is engaged in the marketing of OTC medicine products under the ‘Vicks’ brand
umbrella and personal care for women under the ‘Whisper’ brand. Both products have no
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inter-relation in terms of the target customer, positioning, promotion opportunities or market
segmentation. The only commonality that they share is that they can both rely on the same
distribution and retail network in the context of the Indian market since both of them find
retail outlets in the medicine shops as well as the ‘kirana’ (grocery) stores, and both address
the middle class customer.
The industry that the company operates in is broadly defined as Fast Moving Consumer
Goods (FMCG) and is generally regarded as being one of the most profitable areas (Singh
2008). However, as we have seen it is also an area of enterprise that has the maximum
competition both within the organised as well as from players belonging to the unorganised
sector. The margins and profitability in this industry can only come from large volume, low
margin products. Every attempt to identify a niche and target marketing efforts to that niche
is quickly nullified by other competitors also entering the market. Within the FMCG market
we have identified that the products that PGHH markets are low on technology input and
therefore easily copied or matched without requirement of large capital outlays as barriers to
entry. Therefore the profitability of the industry can be termed as – low.
Rivalry among existing sellers
The Whisper line of products faces competition at two levels; one from ‘branded’ products
from reputable companies and the second from cheap products from small scale producers.
Rivalry amongst existing sellers is intense in the limited market – various sources report that
market penetration is not more than 10%.
In the market for Vicks the rivalry is even more intense as the number of players in OTC
medicine market is much larger.
Threat posed by new entrants
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Proctor & Gamble in India
The market for ‘Whisper’ faces a new threat with the entry of the Godrej JV (reported
above). The market is already facing readjustment after the launch of ‘Bella’ (TZMO of
Poland). The barriers to entry into these markets are actually inverted. The incentives and tax
holidays offered for the setting up of new projects; the low investment required; and the large
mass of qualified unemployed persons looking to start their own business make new entrants
a major threat.
No new entrant is identified in the market for products like the Vicks line. However, a
number of the existing players are introducing new lines with the ‘Herbal’ tag which are
automatically presumed to be better than the synthetic ones.
Supplier Power
Suppliers do not appear to have much power over the operations of companies like P&G who
have their own manufacturing units where value is added to the most basic of raw materials
which may be sourced from a number of suppliers. Vicks depends on menthol, a farm
produce that can be affected by vagaries of weather or a shift in plantation patterns and
indirectly impact supplier power.
Power of buyers
As discussed earlier the Indian customer is usually a follower and wishes to conform. The
power of buyers thus lies with a small number of opinion leaders and innovators. The
identification and influencing of such leaders can only be done at the ground level by market
savvy people. Film actors and TV personalities are generally accepted as trend setters.
Buyer power is low in terms of the large number of small retailers and high in terms of the
buyer’s options to switch from one product to another.
Threat of substitute products
Substitute products are not identified for sanitary napkins or for Vicks as of the moment.
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Porter’s model is useful in identifying where new products, services or businesses have the
potential to be profitable. It finds limited use in existing businesses since it assumes a static
market structures. In the present world industry structure is constantly changing and a
Porter’s analysis only yields a snapshot of a moving picture (Haberberg & Rieple 2001) and
must be supported by other frameworks like SWOT analysis.
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10.0 SWOT-TOWS ANALYSIS
Systematic analysis of the strengths and weaknesses and comparing these with the
opportunities and threats in a SWOT-TOWS matrix enables formulation of strategy options
to improve performance in the market. While this is understood to be an excellent tool for
informing strategic decision making some writers claim that the system does not yield
enough understanding to be able to actually take decisions. Mintzberg (1990) states that “the
assessment of Strengths and weaknesses may be unreliable, being bound up with aspirations,
biases and hopes.” It therefore becomes imperative that the assessment of strengths and
weaknesses be put in an informed assessment of the market environment as exists at the time
of defining the strengths and weaknesses. Gathering information through creative problem
solving tools such as brainstorming can be of considerable value to the analysis
(http://coursework4you.co.uk/swot.htm). The commonly highlighted difficulties with SWOT
analysis (Mintzberg 1990) are:
• Strengths may not lead to an advantage
• SWOT focus on the external environment is too narrow
• SWOT gives a one-shot view of a moving target
• SWOT overemphasizes a single dimension of strategy
Specific to PGHH we have identified the following strengths, weaknesses, opportunities and
threats in our discussion of the company’s background, the market, competition and financial
analysis:
Strengths:
- Large cash surplus from existing operations
- Established presence in the Indian market
- Existing distribution network
- Availability of a strong R&D facility with the parent organisation
Weaknesses:
- Knowledge of the market limited to elite markets only
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Proctor & Gamble in India
- No competitive edge, me-too products
- Limited product portfolio that targets urban upscale markets
- Lack of management freedom to tailor strategy according to market need
Opportunities:
- Massive virgin market size and possibility for growing market instead of share in
existing markets
- Growing economy and increasing capacity to pay among the rural poor
- Growth possibility in existing lines through market expansion
- Not much relationship built by competitors in these markets
- Internet penetration in major towns – e-retailing
Threats:
- Stiff competition in present markets and products
- Unethical products and cheap substitutes
- Entry of market majors in existing lines of business
- Chances of other multinationals also entering the country
A furtherance of this model is to carry out a SWOT-TOWS analysis where we can combine
the different strengths, weaknesses, opportunities and threats to derive a set of strategies by
compensating one against the other.
10.1 Strength-Opportunities Strategies:
- Using the strengths of cash and R&D availability address the opportunity
presented by the large and untapped markets by developing products in which the
company is the ‘first-mover’
- Use distribution network to gain knowledge of the market and to build
relationships with the market movers/ innovators.
- Employ distribution network and use presence in the market to educate potential
customers and increase market size for existing products.
10.2 Strength-Threats Strategies
- Educate customers on quality and the threat of cheap and unethical substitutes.
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- Find new products and markets through research and development strength and
reduce dependence on products facing competition and threat of new entrants.
- Use cash flows to increase awareness through innovative product promotions
10.3 Weaknesses-Opportunities Strategies:
- Get knowledge of the market and build relationship marketing with a thrust on
‘cause marketing’
- Use internet to offer products especially of intimate nature – and build a
relationship with the female customer – she normally also decides what other
brands will be purchased for the household
10.4 Weakness-Threat Strategies:
- The dependence on me-too products should be reduced
- Empower and free management of the local company to meet competition on the
ground using strategies appropriate to the realities of this market instead of
strategies that worked in other markets.
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11.0 DISCUSSION
A firm must generate and retain value to justify its existence in a competitive scenario and
when it fails to do so, it implies that the firm is not making optimal uses of its resources, and
therefore destroying value (Drucker, 1995). Simmonds (1986) states that marketing can be
viewed as organised rational innovation, a function concerned with identifying the
opportunity for change, inducing the action required and monitoring the change once
introduced. This paradigm of innovation directly focuses on what the marketer actually does,
wherein innovation is taken to be, something done for the first time by that firm. In these
terms P&G may, through an overall assessment of their marketing strategy, be described as
being a ‘follower’ rather than an ‘innovator-leader’ (Kotler & Keller, 2005).
A ‘first mover’ is defined as a firm that is the first to produce a new product, use a new
process or enters a new market (Lieberman and Montgomery, 1990). The first mover enjoys a
host of advantages associated with its being a first mover. Research suggests that though the
first mover may not enjoy spectacular gains, it enjoys several competitive advantages
(Robinson 1998; Rogers 1983; Tellis & Golder 1996). One advantage is that its promotional
messages are not lost in the clutter of those of the competition. The product may even
become the industry or category standard against which consumers compare the offers of late
entrants while making a purchase decision (Howard 1989).
Surf, promoted by Hindustan Lever in 1959, was the first detergent powder in the Indian
market. Proctor and Gamble entered the Indian detergent market as late as 1990. Despite
heavy promotion, and cutting prices to almost half the company’s Ariel brand detergent has
failed to even come close to the market share that Surf has (A&M). Surf, is today the generic
name for detergents and Ariel just one more brand among hundreds.
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In his prophetic book: The Third Wave, Alvin Toffler (1980) predicted the emergence of the
‘prosumer’. This concept has been interpreted in different ways which are provided at the
website: www.logophilia.com/WordSpy. Two of those, relevant to the present context, are:
1. Persons who help design or customize the product they purchase (Producer +
Consumer).
2. Persons who take steps to correct difficulties with markets and to anticipate future
problems (Proactive + consumer)
In deploying strategy to generate market presence and share the use of this concept is
essential. In addition, one may ask the following questions (adapted from Ghosh, 1998):
1. Can I offer additional services to my existing customer base?
2. Can I address the needs of new customer segments by repackaging my current assets
or by creating new business propositions?
3. Can I use my ability to attract customers to generate new sources of revenue such as
advertising or sales of complementary products?
4. Will my current business be significantly harmed by other companies providing some
of the value I currently offer?
These in combination with the concept of addressing the Prahalad’s bottom of the pyramid
can help in finding new products and new markets to strengthen the company and improve
the bottom line.
Culture is considered as the most important determinant of a person’s wants and behaviour
(Kotler, 1999). Culture is normally defined as set of values and beliefs that a society as a
whole upholds and therefore expects its members to subscribe to. Culture in India is better
defined as collective rather than individualistic as in the western countries. An individual is
expected to follow or conform to what the others are doing, and therefore it is essential to
understand who the opinion leaders are for they decide. Because of this insistence on group
conformity once the innovators in society begin using a new product others will follow to
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avoid discomfort of being left out. The other factor that typifies the Indian society is the
relatively large size of the family; average of 5.5 members as compared with 2.64 in the US
(Kotler 2001). The large family size and low per capita income the average consumer suffers
from the non-availability of significant amount of disposable income. New products therefore
need to address the existing needs rather than creating an expansion of needs. This situation
also makes the customer extremely conscious of value, while the need to conform may drive
a preference for a brand it is, ultimately, the quality and value for money that will engender
continued use and loyalty. The P&G strategy, and indeed that of most other companies in the
market, to reduce packing sizes to sachets (e.g. single serve Pantene shampoo) and blister-
packs (e.g. Vicks single lozenge) addresses the need of such consumers by allowing them to
buy what they need without a large outgo of cash (Prahalad & Liberthal 1998).
Social responsibility and community development activities have been considered as
philanthropic not for profit activities and separate from the main for profit business by
companies for long. This perception is undergoing a change with ‘cause marketing’ emerging
as a new field for business to exploit for the improvement of their bottom lines.
It is now established that community development and support can be successfully positioned
at the intersection of business objectives – revenues and profits – and societal needs.
Supporting a specific cause and being public about this support gives companies identifiable
personalities, demonstrates what they stand for, and helps them connect with customers,
suppliers, investors, employees, and the community (Sundar, 2006).
The 2004 Cone Corporate Citizenship Study (Cone 2004) report reveals that 8 in 10
Americans say that corporate support of socially relevant causes wins their trust in that
company, a 21% increase since 1997. Another revealing finding of the report is the response
to the statement, “I am likely to switch from one brand to another that is about the same in
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price and quality, if the other brand is associated with a cause”. As many as 86% respondents
confirmed that they would do so, a rise from 81% in October 2001. Therefore, we can
conclude that ‘cause’ marketing programs allow the consumers to overtly and publicly
express their belief in and support for, the companies that are working on causes that are most
important to them.
‘Cause’, has therefore become an important differentiator, a means to promote products and
enhance bottom lines for marketers today. Cause marketing allows a company to put its
brand, marketing might and people behind a non-profit cause that can provide mutual benefits
to the company and the non-profit entity. In the most common type of relationship, for each
purchase made by its customers during a specified period of time, a portion of it is donated to
the non-profit entity. The company may also take up a cause to fight/ campaign for or assist
local communities in on a long term support strategy. It is a win-win situation for both
partners – Companies increase their sales, non-profits get more funds and the consumer
benefits because he feels a part of his purchase is going for a good cause.
This leads us to the role of the company in the milieu that it operates in. Large corporations
are perceived as centres of major financial (and sometimes political) power and can not stay
distant from issues that that concern the society they operate in. This perception is based on
the simple reason that they contribute to the economy through payment of taxes, rents and
levies; through providing employment to the local people; but simultaneously and most
importantly looking for gain through utilization of local resources. They corporation is
therefore expected to contribute to the well being of the society they operate in. P&G have
spent Rs. 500,000 on ‘Shiksha’ (Company Annual Report, 2007) a initiative to take education
to the doorstep of some deprived children. This represents less than 0.1% of their profit after
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Proctor & Gamble in India
tax! It is obvious that this level of activity will neither find appreciation nor any positive
response from the society.
The key to success in FMCG marketing in India also depends very greatly on the distribution
and retail chain. It is necessary to understand that many of the retailers are extremely small
sized operations which are run by poor people and generate very small sale volumes. They
can not afford to carry large inventories. It becomes vital to establish a distribution network
that is capable of replenishing stock almost on a daily basis. For example ITC and Coca Cola
have distributors who are capable of reaching even the remotest location to replenish stock
every day. This is why they have such dominant market shares bordering on monopolies in
their respective lines, cigarettes and soft drinks. An unmatched distribution network is the
TSR (Territory Sales Representative) also known jocularly as the ‘Thela’ (handcart) Sales
Representative that HLL employs. The TSR, every day, places even as less as 4-5 cartons of
soap on a hand cart and goes from shop to shop selling, collecting money, cleaning and
arranging display shelves and putting up point-of-purchase promotional material (including
removing those of the competition). He does this every day of every journey cycle (each JC is
4weeks) 13 JCs a year – on days that he is on leave his Sales Officer substitutes for him!,
(Singh 2008). It comes as no surprise that HLL controls 55 % market share in toilet soaps.
Another issue that impacts marketing wherever it operates but that has a huge impact in the
Indian markets is the concept of ‘relationship marketing’. Relationship marketing involves a
paradigm shift from the more traditional measurement of success in terms of ‘‘market share
increase’’ to a long term gauge of success in terms of gain in the share of a customer’s
business. Ambler (1994) highlights ‘‘Guanxi’’ as marketing’s ‘third paradigm’. Ambler
considers three paradigms that identify marketing: neo-classic, conflict and relational. The
neo-classical school is based on microeconomic analysis, i.e. the famous ‘‘4 P’s’’. It is based
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on the simple equation “input = Output” and accordingly explains that sales or profits are
generated by the right economic marketing mix. In the conflict paradigm, the primary
emphasis is on competition. Marketing plans start with strategies to achieve advantage and
may or may not cover the classical marketing mix. The third paradigm recognises that
marketing owes its success more to cooperation than competition – cooperation between the
various elements in the supply chain and up to the ultimate consumer. In this, Chinese believe
that one should build ‘‘relationships’’ and if successful, transaction will follow. Westerners,
however, build transactions and if successful, a relationship will follow. The Indian market
works more on the Chinese principles rather than following the western concepts.
It is not that relationship marketing is typical of large transactions only, Peppers and Rogers
(1995) insist relationship marketing is an innovative alternative even while undertaking mass
marketing. Addressing customers individually and entering into dialogue with them can be
done even while offering mass customised goods and services.
The influence of strategic relationships, market orientation and learning, superior customer
value, distinctive competencies and organisational change on “marketing strategy” is vital to
understand as the market-driven era unfolds (David 1998). The shifts will include a
significant de-emphasis on the functional perspectives and instead an organisation-wide
perspective will have to be developed, wherein the perspective will be toward the customer
and strategies for providing superior customer value (ibid).
In the context of globalisation, Singh (2003) states that the word ‘globalisation’ tends to
create a homogenous image of the world; a world in which everything and everybody is
getting integrated with the rest, which is not actually the case. The world consists of diverse
people and societies and can never become one homogenous mass that can be understood
using one percept. What globalisation actually means is that opportunities to establish global
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Proctor & Gamble in India
connections exist and it is up to corporations to use these opportunities. In this development
of ‘‘global markets’’ and ‘‘world without borders’’, for those who are looking at addressing
Indian markets must understand that this is a huge country – a world within itself - and the
diversities of societies, languages, cultures, religions and economic habits are immense and
extremely complex (Merchant 1999). One can see this as a difficult challenge to face or as a
huge untapped marketing potential.
This report, through the details and discussions, attempts to demonstrate that there is a huge
untapped market that is available at the bottom of the economic pyramid in India and so also
in other emerging markets that are not cluttered with the fierce competition that one observes
in the market segments that presently form the focus of P&G’s marketing efforts.
In addition to the strategy suggestions emerging from the Porter’s five forces and the SWOT-
TOWS analysis this reports offers the following suggestions to PGHH to help improve
performance.
11.1 Media Planning
Companies worldwide are realising that the traditional print and television, are not the most
effective means of promoting a product. An example of this is the latest launch of the no-
calorie, no-caffeine soft drink ‘Tava’ where the entire gamut of traditional advertising has
been given a go-by. The launch campaign is entirely based on the use of the internet in
combination with promotional free sampling at popular shops and delivery of free samples to
the staff of Google and MTV. This promotion is not targeted at a young customer but rather
identifies men and women between the ages of 35 and 49, whom the company calls the
‘reborn digital’ segment (NYT News Service 2008). This example demonstrates the need for
a complete rethink in media planning for product promotion.
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Proctor & Gamble in India
In India the print media consists of newspapers and magazines that are largely regional and
cater to the needs for local news, gossip and a modicum of news of national relevance,
international news is almost completely absent. Added to this is the massive level of
illiteracy, especially in the rural and tier III cities that prevent accessibility to a majority of
the target customer. Television has achieved a deep penetration of the households across the
entire country and a number of soaps and some news channels enjoy a large popularity and
viewer ship. This media, therefore, presents a viable media for promotion of products like the
ones that P&G market, and indeed is being used with a lot of ad-spend being allocated to
promotion on prime-time television. So do the main competitors like HLL, Colgate, and ITC.
The use of the internet, is not as widely prevalent as one is led to imagine looking at the
emerging e-enabled service sector. Good Internet connectivity and use is, as yet, limited to
the metros and the tier II cities. The smaller towns (Tier III), where required, still use the dial-
up services provided by the telephone companies. The mobile phone has made a remarkably
quick and deep penetration and using it as a very useful media for promotion of products,
especially FMCG, is not so prevalent. This is an area that P&G could look at.
However, the entire discussion above is not aimed at developing an understanding of the
media and its relevance in India but to form the background for the following suggestions:
1. The most powerful media in the country is films. Hiding in the melodrama of heroes,
beauties and villains is a massive opportunity for marketing success. Some companies
have already realised that Bollywood is a highly effective backdrop for brand
building. Placing a brand in the landscape of a film is not uncommon. Several recent
examples may be cited, consider Coca-Cola’s in “Raang de Basanti” or Motorola
phones being used by the godfather in “Don” or indeed the Reebok brand promotion
in the film “Goal” – some of the most successful films (blockbusters?) of recent
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Proctor & Gamble in India
times. P&G need to consider using this media. Endorsement by popular movie stars in
an obviously paid for advertisement is just not the same thing!
2. The second media that draws most attention at present is the reality shows on
television, where the host is often one of the ‘superstars’ of Indian filmdom. This is
one vehicle, which P&G has not used so far, but has been effectively utilised by
competitors but only as sponsors to the shows. The impact, of say, Shahrukh Khan
(the top actor of Bollywood) taking out a Vicks lozenge and popping it into his mouth
and saying ‘I always rely on this to keep my voice smooth’ or something like that, is
beyond all that tons of advertisements can achieve – probably cost the same!
11.2 Reverse Engineering – Marketing
One way of approaching the task of increasing sales and profitability is to ask the question
"how to create economic opportunities that are sustainable and create new value for the
bottom of the pyramid?" However, there is not enough new wealth being generated to
purchase new products for global enterprises to get excited about. The other way to approach
this opportunity is to develop a global marketplace that allows people and corporations to
purchase from people that live in developing countries. For example, consumers in the
developed countries can be made aware of all the exciting products and services that create
jobs, new levels of income and opportunity for growth for the poor in the developing
countries. There are a number of opportunities like this that exist in markets like India which
are not limited to handicrafts and spices, a number of small enterprises produce ethical,
sustainable and good quality products at a fraction of what it would cost to produce them in
the developed countries – they all face the same difficulty – marketing. By creating a demand
for such products and by providing cost effective channels for collection, transportation and
distribution companies like P&G can help create wealth for the people at the bottom of the
pyramid. This in turn would lead to increasing purchasing power and therefore a demand for
their products in India.
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Proctor & Gamble in India
12.0 CONCLUSION
The Indian economy is slowing down – for the first 10 months of 2007-08 core industries
grew by 5.5% as against 8.9% for the same period last year and the overall industrial growth
was 8.7% compared with 11.2% last year (TOI, 2008). The rising rupee against the dollar has
also hit exports and inflation has risen to 5.9% for the week ended March 8, 2008. The
optimism generated for the economy in the last four years can disappear very fast – impacting
both investment and growth.
The main thrust of the recent annual budget was to increase disposable incomes for the
middle class mostly through lowering of taxes and interest rates. Income of the middle class
has risen very fast and they have been the most to benefit from the growing economy.
However, in a country of 1.1 billion people this middle class accounts for only 250 million
people or about 23 percent. The other 77 percent are outside the ambit of the benefits of
economic growth (Sengupta, 2007).
For the economy to be strong and be able to tide over temporary fluctuations in currency and
economic shocks it is vital that more goods are produced that are consumed by the masses.
This will lead to more people being involved in the production and in the consumption of
such goods which in turn will generate more demand for other mass produced goods.
How do companies like P&G take part in this essential restructuring of the economy and as a
result deriving benefits for themselves and their stakeholders? The concept of inclusion has to
be added to their strategy and conscious drive to address the need of the excluded three
fourths of the population who for the bottom of the economic pyramid.
In sum P&G has to move away from the traditional description of the role of marketing from
understanding the business as meeting the customer need for a service or product to be
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Proctor & Gamble in India
provided on time, appropriately and at a fair price; the traditional 4P’s and on to generating
the need in the first place and developing a product or service to meet that need.
The company in the last six decades of presence in India, established itself as a front runner
in the FMCG sweepstakes. It has targeted the urban and rich society and has grown to
become one of the largest FMCG companies in the country. Some of its marketing and
promotion strategies have helped it gain market share in its product lines. However, its
growth rate appears stymied and growth is only in its revenues and that is driven by frequent
brand extensions. In an attempt to target the middle class it has successfully introduced
smaller, and therefore more affordable packing while simultaneously reducing prices to align
with the market forces that prevail.
This study has attempted to emphasise the need for Proctor and Gamble, as indeed other such
companies, to identify which part of the customer base in India holds maximum promise for
growth and address the needs of these customers. This report takes the position that these
customers are the poor and excluded sections of Indian society and equitable and sustainable
growth is possible through them only.
So, rather than, or as a complement to, trying to make money off of the poor as new market
opportunities, when companies help create value by allowing families to create wealth
through their creations or products, lends itself to more robust investments. Otherwise,
companies will continue to scratch their heads on how to capitalize on the bottom of the
pyramid opportunity.
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Proctor & Gamble in India
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