Marketing Cases From Emerging Markets

Dilip S. Mutum Sanjit Kumar Roy Eva Kipnis Editors

Marketing Cases from Emerging Markets


Dilip S. Mutum Sanjit Kumar Roy Eva Kipnis •

Editors


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Editors Dilip S. Mutum Sanjit Kumar Roy Eva Kipnis Department of Marketing and Advertising Coventry Business School, Coventry University Coventry, West Midlands UK

ISBN 978-3-642-36860-8 DOI 10.1007/978-3-642-36861-5

ISBN 978-3-642-36861-5

(eBook)

Springer Heidelberg New York Dordrecht London Library of Congress Control Number: 2013943336 Ó Springer-Verlag Berlin Heidelberg 2014 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. Exempted from this legal reservation are brief excerpts in connection with reviews or scholarly analysis or material supplied specifically for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work. Duplication of this publication or parts thereof is permitted only under the provisions of the Copyright Law of the Publisher’s location, in its current version, and permission for use must always be obtained from Springer. Permissions for use may be obtained through RightsLink at the Copyright Clearance Center. Violations are liable to prosecution under the respective Copyright Law. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. While the advice and information in this book are believed to be true and accurate at the date of publication, neither the authors nor the editors nor the publisher can accept any legal responsibility for any errors or omissions that may be made. The publisher makes no warranty, express or implied, with respect to the material contained herein. Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com)

Preface

There is a sustained increase of interest in the emerging markets by Western businesses. Emerging markets are no longer only seen as sources of cheap labour and raw materials but increasingly becoming markets of primary importance due to growing economic prominence and consumer purchasing power. However, at the same time, emerging markets are fraught with several complex economic, political and social issues which often frustrate and confuse Western investors. Understanding these issues is crucial to students and professionals in the international business, marketing, strategy and management fields. Surprisingly, despite the fact that experts acknowledge the importance of these markets, there is a dearth of real case studies specially focussed on marketing issues in these markets and limited body of knowledge on the complex socio-cultural, political and economic dynamics and issues which are unique to these countries’ contexts. This book is composed of long and short real cases with varying complexity in different sectors including airlines, hotel, fashion, etc. These cover issues are unique to the emerging markets. Thus, this case study book is believed to be important and timely in providing a framework for marketing educators, students and researchers (both academic and industry) to understand the dynamics occurring in these countries. We expect this case study book to appeal to a broad audience internationally and the book can be used for both undergraduate and graduate level courses in marketing, advertising, strategic marketing, marketing ethics and international business programmes. This is an edited case study book with contributions from lecturers in the Department of Marketing and Advertising, Coventry Business School, Coventry University, Coventry along with their collaborators in other universities as well as industry professionals. The lecturers have varied research interests and a number of them have professional backgrounds with several years’ of industry experience. The integration of these varied academic and professional viewpoints has resulted in a very unique and exciting content. We welcome your comments and suggestions for further improving this book. Dilip S. Mutum Sanjit Kumar Roy Eva Kipnis

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Contents

Part I

Introduction

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dilip S. Mutum

Part II

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Socio-Cultural Influences

Introduction to Socio-Cultural Influences . . . . . . . . . . . . . . . . . . . . . . Julia Tyrell

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Case Study 1: Mongoose Lager Beer Eyes up India . . . . . . . . . . . . . . Julia Tyrell

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Case Study 2: KFC in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hsiao-Pei (Sophie) Yang

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Case Study 3: Lakme Pure Defense: An Antipollution Cream . . . . . . . Atanu Adhikari and Sanjit Kumar Roy

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Case Study 4: Ikea Malaysia and the Halal Food Crisis . . . . . . . . . . . Dilip S. Mutum and Ezlika M. Ghazali

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Part III

Market Orientation and Brand Strategies

Introduction to Market Orientation and Brand Strategies . . . . . . . . . Dilip S. Mutum

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Case Study 5: Brands: The New Co-stars in Bollywood . . . . . . . . . . . Anvita Kumar

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Case Study 6: Junglee.com: Amazon’s Entry in India. . . . . . . . . . . . . Sanjit Kumar Roy and Rajdeep Chakraborti

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Case Study 7: Indonesian Fisheries . . . . . . . . . . . . . . . . . . . . . . . . . . John Heap, Simon O’Rourke, Rory Dillon and Lara Chaplin

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Case Study 8: Kolkata Knight Riders: Developing a Brand Identity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sanjit Kumar Roy and Rajdeep Chakraborti

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Case Study 9: The National Basketball Association (NBA) in China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adrian Pritchard

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Part IV

Product Development and Market Entry

Introduction to Product Development and Market Entry . . . . . . . . . . Geoff Alcock and Ali Baig Case Study 10: A Sweet Deal: Cadbury Leads Kraft into Emerging Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lara Spiteri-Cornish Case Study 11: Marketing of Services: The McDonald’s Way . . . . . . . Rik Paul and Sanjit Kumar Roy Case Study 12: Shangri-La Hotels Expanding to Non-Asian Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hsiao-Pei (Sophie) Yang Case Study 13: Marketing the $35 Akash Tablet . . . . . . . . . . . . . . . . Ramendra Singh and Sanjit Kumar Roy

Part V

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Marketing Communications and Social Media Marketing

Introduction to Marketing Communications and Social Media Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Anvita Kumar and Carmela Bosangit

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Case Study 14: Air Asia: Using Social Media to Reach Out to New Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dilip S. Mutum and Ezlika M. Ghazali

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Case Study 15: It’s More Fun in Philippines: Riding on the Waves of Social Media. . . . . . . . . . . . . . . . . . . . . . . . . Carmela Bosangit

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Case Study 16: Cathay Pacific Airways Using LinkedIn for Brand Building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hsiao-Pei (Sophie) Yang

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Part VI

Conclusion

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dilip S. Mutum

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Part I

Introduction

Introduction Dilip S. Mutum

The term emerging markets was used for the first time in 1981 by economists at the international Finance Corporation (IFC) [1]. However, there is still no clear definition of the term. As the Economist points out, there can be more than one definition of the term ‘‘emerging markets’’ depending on who defined it. For example, the United States Department of Agriculture, Foreign Agricultural Service, defines emerging markets as ‘‘any country that the Secretary of Agriculture determines: (a) Is taking steps toward developing a market-oriented economy through the food, agriculture, or rural business sectors of the economy of the country; and (b) Has the potential to provide a viable and significant market for U.S. agricultural commodities or products of U.S. agricultural commodities’’ [2]. Other terms which are used interchangeably include ‘‘less developed countries,’’ ‘‘newly industrialising countries,’’ ‘‘transition economy,’’ ‘‘developing nations,’’ ‘‘Third world countries’’ and ‘‘poor nations’’ [3]. Hoskisson et al. [4] made a distinction between the developing countries from Asia, Latin America, Africa and the Middle East and the transition economies made up of the former Soviet republics and China. These countries are considered emerging as they are not as developed as compared to the world’s richest industrial countries. The Economist suggests using the term ‘‘re-emerging economies’’ instead, due to the fact that countries like India and China are regaining their ‘‘former eminence’’ [5]. Initially the countries that were expected to deliver the strongest revenue and profit growth were Brazil, Russia, India and China—the BRIC countries. The acronym was coined by British economist and retiring chairman of Goldman Sachs Asset Management, Jim O’Neill in 2001 [6]. South Africa later on joined the group in 2010 to make up the group collectively known as ‘‘BRICS’’ which claims to

D. S. Mutum (&) Department of Marketing and Advertising, Coventry Business School, Coventry University, Priory Street, Coventry, West Midlands CV1 5FB, UK e-mail: [email protected]

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represent the interest of the emerging markets. According to a World Bank report, Global Development Horizons 2011—Multipolarity: The New Global Economy, more than half of all global growth will be driven by six major emerging economies, namely, Brazil, China, India, Indonesia, South Korea, and Russia [7]. Of all these countries, India and China are the most populous and have much higher economic growth rates [7] than the rest and as such, most of the cases in this book are related to these two countries. Traditionally emerging markets were seen as source of cheap labour and raw materials but this has gradually changed [8]. These countries have seen fast urbanisation and changing demographics. They have high domestic growth rates which have led to the growth of huge middle classes with increasing disposable income. They are no longer seen as a source of cheap labour and raw material but increasingly as markets (both B2C and B2B) with an insatiable appetite. The saturation of Western markets has motivated companies to explore new opportunities offered by emerging countries [9, 10]. As per market reports, emerging markets accounted for about 45 % of global GDP (evaluated at purchasing power parity exchange rates) in 2008. This share is forecasted to rise above 50 % in 2013, and by 2050, emerging markets may well account for around 80 % of global economic activity [11, 12]. It is now common for multinational corporations to highlight emerging market investments when communicating with shareholders [12]. For example, China has also overtaken the UK as Jaguar Land Rover’s biggest market and the country now accounts for 17.2 % of total sales compared with 16.5 % for the UK. Sales have also increased in Russia [13]. Similarly, while the European Union remained number one trading partner for Brazil (20.8 %), China (16.1 %) has overtaken the USA (12.8 %) in 2011 as Brazils second major trade partner. In fact, most of the top 10 trading partners of Brazil are emerging economies: Argentina (8.3 %), Japan (3.6 %), South Korea (3.2 %), Chile (2.1 %), Nigeria (2.1 %), India (2.0 %) and Mexico (1.9 %) [14]. However, many Western multinational companies are unsure of how to penetrate these markets. The fundamental inconsistency in the market strategies of multinational firms was pointed out by Dawar and Chattopadhyay (2002) who mentioned that their ‘‘marketing programs are scarcely adapted for these markets’’[15]. According to them, three key factors characterise emerging markets, namely, low incomes, variability in consumers and infrastructure, and the relative cheapness of labour. As multinational companies from the developed countries are increasing finding out, the local companies are fighting back. For example, local and regional banks are increasingly beating global banks in the emerging markets [16]. The companies who do succeed are those which understand the local complexities and able to develop relationships with their customers. Even those companies which are doing well are facing unforeseen issues round every corner (See the case study, Ikea Malaysia and the Halal food crisis). Another interesting phenomenon is the rise of multinationals from the emerging markets. Companies from these emerging economies have not only holding their own against the multinational companies from the more developed countries, they

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are actually moving into their own backyards and competing with them. A good example is the takeover of the British luxury auto marques Jaguar and Land Rover from Ford by Tata Motors, a subsidiary of the Indian Tata group. Justin Yifu Lin, the World Bank’s chief economist and senior vice president for development economics, notes that ‘‘Emerging market multinationals are becoming a force in reshaping global industry, with rapidly expanding South–South investment and FDI inflows. International financial institutions need to adapt fast to keep up’’. Unfortunately, academic literature on marketing issues in emerging markets is quite limited and a number of experts have emphasised the need to conduct more research in emerging markets. This is simply due to the fact that theories developed in the developed countries may not necessarily apply to these countries [8, 17]. For example, it was assumed that as they became richer, consumers in China would become more or less like consumers in developed countries. However, the way Chinese consumers think and their motivations to buy, is fundamentally different from consumers in the West and is ‘‘something deeply rooted in their culture’’ [18]. According to Professor Qing Wang, of the Warwick Business School, it is not about the stage of development [18]. Companies from developed countries definitely need to rethink their strategies and frameworks before applying them to emerging markets [8].

References 1. Khanna, T., & Palepu, K. G. (2010). Winning in emerging markets: a road map for strategy and execution. Boston: Harvard Business School Press. 2. USDA. http://www.fas.usda.gov/mos/em-markets/World%20Bank.pdf. 3. The Economist. (2006). A question of definition. http://www.economist.com/node/7878108. 4. Hoskisson, R. E., Eden, L., Lau, C. M., & Wright, M. (2000). Strategy in emerging economies. Academy of Management Journal, 43(3), 249–267. 5. The Economist. (2006). The new titans. http://www.economist.com/node/7877959. 6. The Economist. (2013). Why is South Africa included in the BRICS? http:// www.economist.com/blogs/economist-explains/2013/03/economist-explains-why-southafrica-brics?zid=295&ah=0bca374e65f2354d553956ea65f756e0. 7. World Bank. (2011). Emerging market growth poles are redefining global economic structure, says World Bank report. http://go.worldbank.org/CMHAKTKV40. 8. Arnold, D.J., & Quelch, J.A. (1998). New strategies in emerging markets, MITSloan management review. http://sloanreview.mit.edu/article/new-strategies-in-emerging-markets/. 9. Harvey, M., & Myers, M. B. (2000). Marketing in emerging and transition economies. Journal of World Business, 35(2), 111–113. 10. Keller, K. L., & Moorthi, Y. L. R. (2003). Branding in developing markets. Business Horizons, 46(3), 49–59. 11. Steenkamp, J.-B., & Burgess, S. M. (2002). Optimum stimulation level and exploratory consumer behavior in an emerging consumer market. International Journal of Research in Marketing, 19(2), 131–150. 12. Kaynak, E., & Zhou, L. (2010). Special issue on brand equity, branding, and marketing communications in emerging markets. Journal of Global Marketing, 23(3), 171–176. 13. BBC News (2012). Jaguar Land Rover sales boost Tata Motors profits. http://www.bbc.co.uk/ news/business-17029257.

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14. EU Website (2006). http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113359.pdf. 15. Dawar, N., & Chattopadhyay, A. (2002). Rethinking marketing programs for emerging markets. Long Range Planning, 35(5), 457–474. 16. The Economist. (2013). Lands of eternal promise. http://www.economist.com/news/specialreport/21577183-emerging-markets-local-and-regional-banks-are-increasingly-beatingglobal-ones-lands?zid=295&ah=0bca374e65f2354d553956ea65f756e0. 17. Burgessa, S. M., & Steenkampb, J. E. M. (2006). Marketing renaissance: how research in emerging markets advances marketing science and practice. International Journal of Research in Marketing, 23(4), 337–356. 18. Potter, A. (2013). Understanding Chinese. Core: Contemporary business with a twist, vol 1. Warwick Business School, pp 14–15.

Part II

Socio-Cultural Influences

Introduction to Socio-Cultural Influences Julia Tyrell

Any international marketer faces many challenges and one of the biggest challenges is dealing with socio-cultural factors and their influence on buying behaviour in the international environment. Hence any decisions relating to product design and usage, marketing communications, and making products available are all, to some extent affected by these factors. Social factors and cultural factors are often linked together, but in many ways the two areas interact and the distinction between the two is not clear cut [1]. Reference groups, family, roles and status in society are all part of social factors [2], however culture tends to influence all these areas. We are all products of our own cultures, whose behaviours we learn as children at school and within our own families. Culture is difficult to define but mainly focuses on learned behaviour shared by members of a society—for instance, ‘the collective programming of the mind which distinguishes the members of one category of people from another,’ [3], or put simply ‘the way we do things round here’ [1]. Thus culture is concerned with understanding the values, beliefs, traditions and customs shared by members of a society, and it has been observed that ‘‘many of us only realise what is special about our own culture when we come into contact with other cultures’’ [1]. Thus, when working in overseas markets, international marketers must try to avoid automatically ‘judging’ other cultures according to their own culture (known as self-referencing). This is a typical human reaction and requires a special effort to remain neutral. It is better to judge another culture as being different rather than viewing an overseas culture as inferior. Understanding culture is crucial for any international marketer because culture contributes to the complexities of doing business across borders. Misinterpreting

J. Tyrell (&) Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected]


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culture has led some British retailers to fail in the US retail market, despite the seeming cultural similarities between the two countries. The following examples illustrate the typical challenges that international marketers face when applying a ‘formula’ that seems to work well in one overseas market but does not work as well in another seemingly similar overseas market. Tesco has failed in the US market with its chain of West Coast stores called Fresh & Easy, which it opened 6 years ago. Analysts believe that Tesco failed to understand the cultural differences when it comes to shopping. For instance, American food shoppers tend to buy in bulk, once a week, rather than going to the shops two or three times a week and buying more fresh food, which is more usual for European shoppers. In addition, self-service checkouts were the norm for Fresh & Easy stores, whilst American shoppers expect to see checkout staff on the tills, plus extra sales assistants to pack your bags [4]. So Tesco joins a long list of UK retailers (Sainsburys, Marks & Spencer, Laura Ashley, The Sock Shop, etc.) who all thought they could ‘crack’ the US retail market relatively easily, perhaps feeling that the British and American cultures were similar, but have eventually failed there. Many international marketers, having worked for US and European multinational companies, understandably tend to view other cultures according to their own western view of the world. To some extent this western view amongst American and British marketers is further complicated by other cultural differences such as the values which Hofstede (2010) uncovered when investigating work-related values in various countries across the world. According to his dimensions of culture, the USA and UK tend to be strong individualistic societies, where everyone looks after their own self-interest (the ‘me’ culture) and where independence and personal responsibility are valued. This contrasts with the Asian value system which stresses group harmony (collectivism or the ‘we’ culture), shared responsibility and co-operation. Countries such as Malaysia and Taiwan have low individualism scores, whilst Japan and India exhibit mid-range scores on this dimension. The implications of all this for marketing, means that in business negotiations, selling for instance, American and British managers have the authority to make decisions independently, whilst their counterparts in Taiwan or Malaysia would tend to refer any big business decisions to a group of managers before making a final decision. As the focus of world trade has now shifted to the growing markets of Asia, Western companies now realise the importance of building trade in Asian markets, and with it, the challenge of learning about different cultural values and belief systems. Hence international marketers must change from a western focus to an Asian focus and that means understanding the socio-cultural factors of the Asian markets to be successful there.

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References 1. Doole, I., & Lowe, R. (2012). International marketing strategy: analysis, development and implementation (6th ed.). Andover: Cengage Learning EMEA. 2. Kotler, P., Keller, K.L., Brady, M, Goodman, M., Hasen, T. (2009). Marketing management. Harlow: Pearson. 3. Hofstede, G. (1984). National cultures and corporate cultures. In L. A. Samovar & R. E. Porter (Eds.), Communication between cultures. Belmont: Wadsworth. 4. Morris, R. (2013). Fresh and easy failure: can UK firms make it in the US? http:// www.bbc.co.uk/news/business-22168463.

Case Study 1: Mongoose Lager Beer Eyes up India Julia Tyrell

Introduction Faced with a declining home beer market many UK brewers are casting their eyes to growing overseas markets in order to increase sales and satisfy shareholder demands. The attraction of the Indian market is obvious from a population point of view—in 2012 the population was 1.2 billion people according to Euromonitor (2012), however the Indian market is not an obvious one when it comes to alcoholic beverages [1]. In the UK, drinking alcoholic drinks down the pub and in bars is a deeply embedded into the British culture. But will the consumer demand for beer in India be the same as UK, given the official intolerance of alcoholic drinks on religious grounds? Will a relatively small niche brand such as Mongoose, positioned deliberately as an ‘Indian’ brand and consumed in Indian restaurants in UK, work in the ‘real’ Indian market? Can Mongoose overcome the cultural issues? Can the brand position of Mongoose be maintained in the Indian market?

The Indian Economy and Trade with the UK India is the world’s second largest country (after China), and one of the fastest growing economies. India’s Gross Domestic Product reached Rs 91.7 trillion, up significantly from Rs 62.6 trillion in 2006. Generally, many Indian consumers, particularly the middle class consumers, have benefited from the country’s robust economic growth over the past few years, with real incomes growing. Indeed, per capita disposable income increased from Rs 48,267 in 2006 to Rs 61,591 in 2011. Perhaps not surprisingly, as per capita disposable incomes have increased, so has per capita spending. In 2011, per capita consumer spending reached Rs 44,462, up J. Tyrell (&) Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected]


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from Rs 34,713 in 2006. Officials at the Indo-British Partnership Network acknowledge that even though trade with India has more than doubled in the last 10 years, it is only scratching the surface. Exports have continued to grow, with figures suggesting that UK exports to India in the year to Dec 2011 grew by 35 %. India is very important to the UK, a fact that was reinforced when David Cameron visited the country in July 2010 on one of his first official trade visits since taking office.

Brewing in India British brewer Wells & Young’s launched Mongoose Premium Beer in June 2010, aimed at the buoyant Indian restaurant market in the UK. This new launch is part of a joint venture between Wells & Young’s and Gandhi’s Wine Supplies Ltd., the largest Indian restaurant supplier in the UK [2]. It was Gandhi’s desire to launch a premium lager, following the success of another premium lager Cobra. Cobra used to be brewed under contract by Wells & Young’s, until the brand was bought by Molson Coors in 2010. Mongoose has been available on draught in Indian restaurants for a little while now, but this year sees the first shipments from the Wells & Young’s brewery in Bedford, UK, of 330 and 670 ml bottles. What is interesting about this beer, is that it is based on an original Indian recipe developed over 15 years ago and was aimed at challenging Kingfisher and Cobra, the leading beer brands in India [3]. Following the success of the Mongoose launch in the UK, Chris Lewis the Marketing Director for Wells & Young is keen to investigate the Indian market, and has gained a lot of useful knowledge from Gandhi Wine Supplies, and from the Indo-British Partnership Network, which was set up by the UK government to promote trade between the two countries.

Drinking Alcohol and Indian Culture With a population dominated by Hindus and Muslims, India probably would not strike the casual observer as the best place to set up a brewery. But despite the official intolerance of Hindus and Muslims towards alcohol consumption, it is becoming increasingly acceptable for Indians to be seen with a drink in their hand. Indian society is changing rapidly. A few years ago, many men would not have drunk alcohol in public. Now it is fairly common because for many it is no longer an issue. The sales of alcoholic drinks in India registered double digit growth in 2010–2011 [1], higher than the growth rates seen across the rest of the Asia– Pacific countries. Consumption has also been fuelled by the wide availability of drinks in bars at sporting events in India such as the 2011 Cricket World cup,

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the IPL, and the recent arrival of Formula 1 Racing to India. In fact, beer sales in 2013 have grown to double-digits due to an increase in demand for strong beers from brands such as Kingfisher Strong and Tuborg Strong. This segment accounts for 85 % of the Indian beer market [4]. However, beer consumption is still remarkably low in India, which is why Chris Lewis believes that the market has the scope to expand over the next 10 years. The average Indian drinks 1 L of beer a year, just over 1 % of the 99 L consumed by the average Britain. The disparity with the Czech Republic, home of the world’s biggest beer drinkers, is even higher, with the average beer drinker there putting away 160 L a year.

Conclusion As the UK market for lager beer continues to decline in volume terms, with British consumers continuing to drink less beer overall, developing markets like India continue to look very attractive. The obstacles for foreign companies trying to do business in India are slowly being dismantled by more pro-Western Indian governments. However, Indian bureaucracy and ‘red tape’ is still legendary, as well as a complicated distribution network for food and drinks. Once Western companies learn how to deal with these issues, the rewards look very attractive.

Questions 1. Discuss and evaluate the key socio-cultural and economic factors that will face Mongoose beer as it establishes a more permanent presence in the Indian market. 2. Mongoose Beer is in preliminary talks with a local joint venture partner, Mukherjee Brewery, Bangalore. Advise Mongoose beer on the likely risks and benefits of operating a joint venture company in a challenging market like Southern India. 3. Strategic issues such as brand position can largely be standardised for global brands. Discuss whether you think this is possible for Mongoose premium beer in India.

References 1. Euromonitor (2012). Beer in the United Kingdom. http://www.euromonitor.com/beer-in-theunited-kingdom/report. 2. Nelson, L. (2010). Exclusive: Mongoose bites Cobra. http://www.brewersguardian.com/ brewing-features/marketing/868.html.

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3. Briggs, F. (2011). Wells & Young’s launches Mongoose Indian Beer. Retail Times. http:// retailtimes.co.uk/wells-young%E2%80%99s-launches-mongoose-indian-beer/. 4. Dalal, M. (2013). Beer sales rise as liquor demand stays weak, Live Mint. http:// www.livemint.com/Companies/DuhDwGVwhh5zxRr2V0BEQJ/Beer-sales-rise-as-liquordemand-stays-weak.html.

Case Study 2: KFC in China Hsiao-Pei (Sophie) Yang

Introduction In China, Yum! Brands, the parent company of Kentucky Fried Chicken (KFC), are opening a KFC store every day. Utilising a different strategy compared to other Western fast service counterparts, KFC has become the largest restaurant company in mainland China. KFC outpaced its nearest competitor, McDonald’s, by more than 1,000 restaurants in China and is outpacing its development by a roughly three to one [1]. The US chicken giant adapts its Western business model in Chinese market through acknowledging the social and cultural differences. KFC realised that the US fast food model needs to be adapted because China’s culture is not individualistic which is the characteristic of the US culture [2]. Therefore, it is necessary to combine the US fast food business model and adapted them to serve the needs of Chinese consumers.

China and Chinese Customers In late 1978, China began implementing economic reforms to develop and modernise its economy. The economic reform opened China market to the outside world and improved the living of average Chinese people. A socialist market economy was adapted by the Chinese government to lessen the government’s control of the economy, allowing some aspects of a market economy and encouraging foreign investment. Since then, income levels in China have been rising steadily as the country’s citizens reap the benefits of its economic growth. A big challenge, however, for

H.-P. (Sophie) Yang (&) Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected]


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companies like KFC is that Chinese diets are changing quickly as incomes improve. Currently, there are more than 300 million middle class in China, creating significant long-term demand for restaurant brands and encouraging rapidly new unit development in the restaurant sector [1]. The rapidly rising income level increases Chinese consumers’ spending power, and in turn drives market growth for companies operating in the country. Consequently, China is now KFC’s fastest-growing and highest-margin market [3]. China has become the highest-growth market of KFC through its unique CHAMPS strategies that stands for ‘‘Cleanliness, Hospitality, Accuracy, Maintenance, Product Quality, and Speed’’ and by demonstrating its understandings of Chinese culture. Research of the behaviour of KFC consumers in China and USA found that the Chinese customers showed more positive brand impressions towards KFC than their American counterparts [4]. Interestingly, Chinese customers ranked the KFC higher than their American counterparts in areas like furniture, décor, cleanliness of restroom, healthiness and freshness of food. Furthermore, Chinese customers suggested that efficient, courteous, and nicely dressed service personnel and attractive and well-done advertising contributed to its positive brand impression of KFC [4]. Due to the positive brand identity, Chinese customers are more apt to eat within KFC restaurants and spend more time doing so than the American counterparts.

The Foreign Fast Food Market in China A recent Mintel report (2012) suggested the total amount of foreign fast food outlets in China were 50,000 in 2012—up from 48,477 in 2011 and 36,037 in 2006 [5]. Moreover, 44 % of Chinese consumers said that they plan to spend more on fast food in the coming year. Therefore, the potential for the foreign fast food sector in China is clear. Actually, the market for foreign fast food in China has seen steady growth over the past 5 years, as Chinese consumers have incorporated it ever more into their lives and culture. China’s foreign fast food sector grew at a compound annual growth rate (CAGR) of 19 % from 2006 to 2011 to reach a market value of RMB 75.1 billion. And there is further good news for the market for foreign fast food in China, as Mintel forecasts the sector to increase to RMB 171 billion by 2017. China’s fast food sector has recorded double-digit annual growth since 2003. The market was estimated at US$303 billion in 2009 and forecasted to reach around US$450 billion by 2014. Furthermore, the number of outlets, chained and independent, is expected to increase to 71,964 outlets by 2017, up 39 % on the expected number for 2012 [5]. In terms of competition, KFC and Pizza Hut, both owned by Yum! Brands, are still ahead of McDonald’s in China. KFC has the highest number of outlets in China, while Pizza Hut remains China’s number one casual dining chain [6]. However, McDonald’s, with more than 1,000 restaurants in China, is investing

Case Study 2: KFC in China

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heavily to catch up with Yum! Brands. Specifically, McDonald’s plans to ‘‘re-image’’ about 80 % of its stores by 2013, which will involve European and Australian designs, comfortable seating, warmer colours and amenities such as WiFi.

KFC Adapts Its Strategy in China KFC opened its first restaurant in Beijing in 1987. Owing to its successful localisation strategies in the China market, it has over 3,700 stores [7] in 700 cities in China and is becoming a good example of cross-cultural marketing of multinational enterprise. KFC’s adaptation in China is discussed next to show how the US business model was altered in China.

Menu Adaptation KFC China aims to be part of the local community and not be seen as a foreign company and it reflects on changing the original Western menu to suit Chinese tastes and preferences. Chicken is a familiar choice of food in China which is much cheaper and more widely available than other forms of meat, such as beef. However, in order to change the menu according to the Chinese preferences, KFC largely increased its menu items in China. Actually, KFC China’s menus typically include 50 items, compared with about 29 in the US. The extended wide range of product offerings in China include items such as spicy chicken, fired dough sticks, porridge, sesame seed cakes, egg tarts, soya milk, and other items that tailor to the tastes of specific regions within the country, such as wraps with local sources or fish and Shrimp burgers on fresh buns. For example, KFC introduced rice dishes in Shanghai before selling them in other branches [8]. The company also introduces about 50 new products a year, compared with 1 or 2 in the US [9]. To counter concerns on fast food and obesity as it is now in the West, KFC China offers a healthier menu and has completely eliminated supersized items. From 2005, the company developed ‘‘new fast food’’ concept, focusing on nutritious, balanced and healthy living diet. The product items added to its menus include roast chicken, sandwiches, fish, shrimp, and more fruit and vegetable dishes. Furthermore, KFC’s children meals are served with vegetable and juice, while fries and soda can be substituted on request [9]. Due to the extensive menus offered, it requires more staff in the kitchen area. Therefore, KFC China cannot position itself as the cheapest dining option. Also, China’s inflation rate has hovered above 5 % in 2011, driven by the country’s speculative real estate market and soaring demand for commodities [10]. Due to

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the pressure from food and labour inflation, the company raised prices in China in 2011 and 2012 to help offset higher costs for food and labour and to bring margins up to around 20 % [11]. KFC China increased prices on a number of its popular menu items, including prices on chicken dishes, drinks, and burgers in order to battle soaring business costs. In average, customers spend the equivalent of $2.50– $3.50 per visit to a KFC in China [9].

Distribution Adaptation In China, multinationals normally focused on first tier cities, where their global brands attracted mid- and high-income consumers with an interest in western lifestyles. However, growing competition in first tier cities resulted in a growing focus on lower tier cities, particularly from KFC China. In 2007, KFC notably introduced lower franchising fees for second and third tier cities, with the chain subsequently expanding more rapidly in these cities [12]. Following that, KFC embraced smaller cities and build a national business with outlets all over the country. As Chinese government restricts direct foreign investment in early days, KFC China utilised a franchise model. However, when the country becomes more receptive to wholly owned foreign enterprise, the company switched to a strategy of company-owned outlets, which allows greater control compared to the franchising model [9]. KFC China sources food from within the country whenever possible. This is not an easy task in the early stage, when the supply chain system for chicken isn’t well-developed and multiple vendors provided only a handful of birds each. Despite of the highest population in the world, compared to the West, the supply chain in China is still unsophisticated, aboriginal, and relying on small food processors which are inefficient and lack of technology for mass production [13]. As food safety is a big concern for Chinese consumers, KFC China made a big decision to build the supply chain from the ground to help ensure quality. Despite of the huge investment involved, such decision is necessary if the company was to expand rapidly, carry a lengthy and complex menu, and introduce new products quickly [9]. Furthermore, in order to broaden the reach of its brand, KFC China offers delivery services in more than half of its restaurants. In average, KFC is opening about 450 new restaurants in China per year, and half of them among those offer delivery services [14]. According to Yum! Brand Chief Financial Officer, Rick Carucci, KFC aims to have more than 2,000 new KFC restaurants in China that will offer delivery over the next decade. KFC also adapts the delivery format in China. Unlike the drive-through format operated in the West, KFC delivery drivers ride red motorbikes on streets in China, equipping with similar heated boxes, who charges a flat fee for delivery. Thanks to the technology, online orders now account for about 40 % of the delivery orders for KFC China. As a result, KFC China plan to stop building call centres in the


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future as the numbers of customers buying online are increasing. Furthermore, Chinese customers tend to order more food online because they don’t feel as rushed as they order by phone [14].

Training Adaptation The extended menu means that food preparation is more complex and requires more staff in KFC China than in US. KFC China typically employs 60 people in a restaurant, which is nearly twice as many as in the US [8]. To maintain its current restaurant-opening rate, KFC needs at least 1,000 new managers and 30,000 new crew members a year. In terms of personnel recruitment, the strategy of KFC China is to hire local management. They hire Chinese managers who read and speak the language, who understood the restaurant business and Chinese consumers but also have had Western business experience [2]. Still, teaching employees how to interact with customers is a challenge, as one-child policy and the wide usage of home PCs mean that the younger generation in China interact less with others than their parents’ generation [2]. KFC adapts to the working needs of those young employees, as many are college students working their first job. For example, young employees are encouraged to socialise over company provided video games on their breaks. This practice serves several purposes: it eases the minds of parents anxious about sending their children out into the world, provides crucial social skills for young adults who grew up in single-child households, creates lifelong Yum! Brands customers, and develops a culture of customer service in a country where there was none [2].

The Road Ahead Despite its huge success in China, KFC China is facing a typical corporate dilemma. They are more capable to improve and make changes within current setting than to take entrepreneurial approach to start new type of business. For example, Yum! Brands, the KFC parent company, started a Chinese food brand named ‘‘East Dawning’’ from 2006, but it was not as successful as expected. Compared to its rivals, KFC China is taking a radical approach, which is also a more interesting road. When the competition is timid, it will continue to enjoy success. However, with an extended and complex food menu in China, the long term evolvement of KFC China is obviously challenging. It risks brand identity, operation simplicity and long term development in exchange for hypothetical larger consumer base and more revenues in order to meet its fast expansion [15] (Table 1).

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Table 1 Summary of the key strategies utilised by KFC in China Adaptation Key strategies Menu adaptation

Distribution adaptation

Training adaptation

Extended menu items Product items tailor to suit Chinese tastes, varying by geographical regions Introduced healthier menu to counter concerns on fast food and obesity KFC China focused on opening stores in second and third tier cities to build a national business rapidly KFC China switched from the franchising model to a strategy of companyowned outlet to allow greater control KFC built the food supply chain from the ground in China in order to expand rapidly and carry its complex menu KFC focuses on the delivery services in China to broaden the reach of its brand and the delivery format was also adapted KFC China hires Chinese managers who had experience in the Western way of doing business and who understood the restaurant business and the Chinese consumers KFC China adapts to the working needs of young employees and facilitates the building of their social skills since they grew up in single-child households

Questions 1. Discuss Chinese customers’ consumer behaviour in selecting fast-food services and evaluate the potential of the China market for the foreign fast food chains. 2. Evaluate the suitability of KFC’s approach to amend its menus largely in China. 3. Examine the distribution strategies of KFC China. What are the pros and cons of its approach in opening stores in second and third tier cities in China? 4. Discuss the training adaptation of KFC China. What challenges does KFC face in China?

References 1. Quick Service Restaurant (QSR) web (2010). Yum! Brands promotes two Yum! China division execs, Su now CEO. http://www.qsrweb.com/article/95404/Yum-Brands-promotestwo-Yum-China-Division-execs-Su-now-CEO. Accessed 27 Aug 2012. 2. Starvish, M. (2011). HBS cases: KFC’s explosive growth in China. Harvard Business School. http://hbswk.hbs.edu/item/6704.html. Accessed 31 Aug 2012. 3. BBC News (2011). KFC and Pizza Hut owner Yum Brands sees profits rise. http:// www.bbc.co.uk/news/business-13153516. Accessed 27 Aug 2012. 4. Witkowski, T. H., Ma, Y., & Zheng, D. (2003). Cross-cultural influences on brand identity impressions: KFC in China and the United States. Asia Pacific Journal of Marketing and Logistics, 15(1), 74–88.


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5. Mintel (2012). Breakfast key to growth of foreign fast food market in China. http:// www.mintel.com/press-centre/press-releases/910/breakfast-key-to-growth-of-foreign-fastfood-market-in-china-reports-mintel. Accessed 28 March 2013. 6. D’Altorio, T. (2011). Fast-food culture grows in China. http://www.investmentu.com/2011/ February/fast-food-culture-grows-in-china.html. Accessed 28 March 2013. 7. Mellor, W. (2011). McDonald’s no match for KFC in China as Colonel Rules Fast. http:// www.bloomberg.com/news/2011-01-26/mcdonald-s-no-match-for-kfc-in-china-wherecolonel-sanders-rules-fast-food.html. 8. People’s Daily Online News (2010). Rice on the menu at Shanghai KFC. http://english. peopledaily.com.cn/90001/90778/90860/6912182.html. Accessed 31 Aug 2012. 9. Bell, D. E., & Shelman, M. L. (2011). KFC’s radical approach to China. Harvard Business Review, 89(11), 137–142. 10. Strategic Sourceror (2011). KFC raises prices in China. http://www.strategicsourceror.com/ 2011/11/kfc-raises-prices-in-china.html. Accessed 31 Aug 2012. 11. Reuters (2012). KFC parent Yum sees more China price hikes in 2012. http://www.reuters. com/article/2012/02/07/yum-idUSL2E8D77CY20120207. Accessed 31 Aug 2012. 12. Euromonitor International (2011). Fast food in China. http://www.euromonitor.com/fastfood-in-china/report. Accessed 31 Aug 2012. 13. Wang, P. (2011). How KFC make a stride in China’s QSR market. http://blog.caijing.com.cn/ expert_article-151538-15237.shtml. Accessed 31 Aug 2012. 14. Jargon, J. (2011). Asia delivers for McDonald’s. http://online.wsj.com/article/SB1000142 4052970204397704577074982151549316.html. Accessed 31 Aug 2012. 15. Wang, P. (2011). Two men’s race: McDonalds and KFC in China. http://blog.caijing.com.cn/ expert_article-151538-15237.shtml. Accessed 31 Aug 2012.

Case Study 3: Lakme Pure Defense: An Antipollution Cream Atanu Adhikari and Sanjit Kumar Roy

Introduction Unilever is known all over the world with a huge product range targeting various segments of customers. In April 2008, Hindustan Unilever Ltd was embarking on the launch of its product range of antipollution cream called Pure Defense. This new range was developed in India with the help of Unilever skincare technology. Launching a new product type needs long-term research and effort and every department of the company is involved in evaluating every detail, the pros, and cons and then based on their evaluations, the managers decide whether to go ahead with the launch.

Background of Hindustan Unilever Ltd and Its Beauty Products The first Indian subsidiary was set up by Unilever in 1931, followed by three more subsidiaries: Hindustan Vanaspati Manufacturing Company, Lever Brothers India Limited, and United Traders Limited. They merged and formed Hindustan Unilever Ltd (HUL) in 1956. Later Tata Oil Mills Company merged with HUL in 1993 and then Lakme Limited, another subsidiary of Tata, formed a 50:50 joint venture called Lakme Unilever Limited, with HUL in 1996 and was completely taken over by HUL in 1998. Kimberly-Clark Lever Ltd and HUL also formed a 50:50 joint venture A. Adhikari Indian Institute of Management Kozhikode, Kerala, India S. K. Roy (&) Department of Marketing and Advertising, Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected]


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in 1994. The famous tea brand, Brooke Bond later merged with HUL as well. In 2000, HUL was awarded with 74 % equity in Modern Foods by the Government of India. In 2003, HUL acquired the Cooked Shrimp and Pasteurised Crabmeat business of the Amalgam Group of Companies, a leader in value added Marine Products exports. All these mergers and acquisitions led to an expansion of HUL’s product range. Their direct-to-home business was launched in 2003. Hindustan Unilever campus was established in Mumbai and includes their Customer Insight & Innovation Centre (CiiC). HUL now owns numerous brands including several food, home care, personal care, water, nutrition, health, hygiene, and beauty brands.

Indian Beauty Products and the Market India has witnessed enormous economic growth since 1991 due to liberalisation of the economy. Several taxes were reduced or removed and international companies were allowed to enter the Indian market. This has lead to the growing disposable income of the population and a huge middle class. The purchasing power for beauty products is increasing. Indian beauty products include baby care, bath and shower, colour cosmetics, deodorants, depilatories, fragrances, hair care, men’s grooming, oral care, sets/kits, skin care, and sun care products. According to a report published in 2009 by market research firm Kline & Co, the beauty market in India was growing four times faster than mature beauty markets and twice as fast as the global market. This data shows that beauty market is one of the fastest markets in India. Although the growth rate of beauty market was in the double-digit figures, the market penetration of cosmetics and toiletries products in India was very low in 2009. In comparison, the market size is rising 20 % a year [1] Purchasing power of consumers is increasing because female population began to earn own money and media has positive effect on female population.

Different Competitors and Their Products Many companies are involved in the beauty market in India and competition is quite tough. For instance, multinational players such as J.L. Morrison, Palmolive, Ponds, Unilever, and Colgate and international players such as Maybelline, Avon, P&G and L’Oréal are all big players in the beauty market. P&G with its strong infrastructure and earnings is one of the biggest rivals along with Olay for HUL. Olay has a similar product range which is even bigger than Lakme [2].

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Behavior of Beauty Product Consumers in India Initially Indian consumers preferred functional products. In other words, they paid attention to product functions such as colour, quantity and permanence. However, the booming middle class, rising disposable income levels, westernisation, and pervasive media, all have had a huge impact on the beauty market in India. Slowly consumers started to choose more attractive products rather than functional products. Nowadays, they want to be cool and fashionable and also feel good. Furthermore, there is an increasing awareness of health issues. Consumers are increasingly concerned about the safety and quality of the beauty products.

The Product: Lakme Pure Defense The Lakme Pure Defense product range was launched with the aim of protection from the sun and pollution. The most crucial aim of their products is to protect from pollution and UV rays and to ‘‘feed the skin’’. Detoxifying facial wash deep cleansers, detoxifying serum, protective day lotion, and restorative night cream are the most popular products. Consumers’ reviews about Lakme Pure Defense products are generally very good.

Segmentation, Targeting and Positioning Lakme Pure Defense targets lower and middle income class and consumers who want to protect their skin against pollution and UV rays. In other words, their target market consists of consumers who pay attention to their skin health and want to clean their skin. Moreover, the range is targeted at working women who spend most of the time outside looking for protection against the sun and pollution.

Pricing Lakme Pure Defense products’ prices are lower than Olay’s products. HUL tries to appeal to lower and middle income class. However, middle income class is increasing day by day in Hindustan. For this reason, HUL should increase a little their price and so their margin will rise up.

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Distribution HUL prefers retail outlets to distribute Lakme Pure Defense because lower and middle income class usually goes to the retail outlets. In addition, salespeople communicate with customers more efficiently in retail outlets than other distribution ways.

Advertising and Promotion In advertising and promoting the new launch of Lakme Pure Defense, HUL has deviated from the traditional mode of advertising and opted for a different strategy. The company has deployed beauty advisors at 1,200 Lakme retail outlets across the country to promote its new launch ignoring the conventional mass media ad campaigns. On the other hand, HUL’s nearest competitor Procter & Gamble India (P&G) has started an aggressive consumer activation programme to popularize its skin care brand ‘Olay’ in Mumbai. Clearly, the accent seems to be on ‘direct consumer contact’ in the Rs 2,200 Crore (£ 26 Million) Indian skin care market. On Lakme’s new initiative, Anil Chopra, vice-president, HPC Hindustan Unilever Ltd said ‘‘Our strategy is not to use mass media advertising to promote Lakme Pure Defense—the first of its kind across the globe. Instead, we have opted for the ‘education’ route to create awareness for our new product’’ [3]. Industry analysts opined that Indian skin care majors are increasingly opting for direct marketing concept to create awareness for their products. One business analyst in Mumbai said that: ‘‘Recognising the growing significance of targeted marketing, HUL and P&G are now using this method to attract consumers at different retail outlets including malls, medium retail outlets and departmental stores’’.

Prospective Marketing Dilemma and Challenges The top management of HUL wants to initially concentrate on distributing trial versions and promotions. Their reasoning was that, consumers would be willing to try out smaller packs and then if they liked it, they would go and buy big packs and recommend it to their friends and family members as well. HUL knew that customers’ experiences were crucial for other customers and they are thinking of going for contacting consumers directly using well-educated and motivated salespeople. However, Procter & Gamble which is their main competitor has a strong market presence all over the world and has a stronger customer base as compared to Unilever. P&G pays more attention to detergent and shampoo sector more than face hygiene products and is leading in cleaning products with brands.

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They are also in the process of rolling out an aggressive marketing campaign titled ‘‘Total Proof. Total Challenge’’ led by cine actor Tisca Chopra [4]. According to the spokesperson from P&G India, they hoped that this initiative would lead women to swap their moisturisers with for ‘Olay Total Effects’.

Questions 1. Develop a marketing strategy for Lakme to launch pure defence. 2. What HUL should do to minimise cannibalisation of its existing product? 3. What are the pros and cons of the direct marketing strategy of HUL for such innovative product like Pure Defence? 4. What pricing strategy should HUL follow for its new launch? 5. Which segment of market is most attractive for Pure Defence, and how should HUL target them?

References 1. Bhattacharya, P. (2009). India Quarterly: Indian beauty market roundup. http://www. gcimagazine.com/marketstrends/regions/bric/38826982.html. Accessed 10 December 2012. 2. Euromonitor (2012). Country report: beauty and personal care in India. http://www. euromonitor.com/beauty-and-personal-care-in-india/report. Accessed November 2012. 3. Rise of the Indian beauty market. http://cosmetics.indianetzone.com/1/rise_indian_beauty_ market.htm. Accessed 10 March 2012. 4. Srinivasan, L. (2008). Lakme steers clear of old marketing strategy, The Financial Express. http:// www.financialexpress.com/news/lakme-steers-clear-of-old-marketing-strategy/269671/2. Accessed 10 March 2012.

Case Study 4: Ikea Malaysia and the Halal Food Crisis Dilip S. Mutum and Ezlika M. Ghazali

Introduction In 2005, IKEA Malaysia faced one of their most serious challenges since they started operations in the country, when their restaurants were raided by government officials on suspicion that food served there did not comply with the strict religious dietary regulations in the country.

About the Company IKEA was founded by Ingvar Kamprad in 1943 in Sweden. Since then the IKEA Group has grown into a global retail brand with franchise stores in more than 53 countries/territories. All together, there are 301 IKEA stores in 37 countries/territories. The IKEA Group itself owns 267 stores in 25 countries while the other 34 stores are owned and run by franchisees outside the IKEA Group in 16 countries/ territories including Malaysia [1]. IKEA entered Malaysia in 1996 as part of the One Utama mall in Bandar Utama, Selangor. It later re-located to a new IKEA store in Mutiara Damansara, Selangor, in 2003. The new IKEA store was the largest in Asia at that time and it currently covers 35,000 square feet. It is operated by Ikano Pte. Ltd. which is a franchisee of Inter Ikea Systems B.V. Besides the Malaysian store, they also own and operate two IKEA stores in Singapore and one in Bangkok, Thailand [2]. Malaysian customers have developed a taste for both Swedish style flat pack D. S. Mutum (&) Department of Marketing and Advertising, Coventry Business School, Coventry University, Priory Street, Coventry, West Midlands CV1 5FB, UK e-mail: [email protected] E. M. Ghazali University of Malaya, Kuala Lumpur, Malaysia


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furniture and their food as well including the popular Swedish meatballs. In 2011, the Malaysian store was the fourth most visited Ikea store in the world with 5.7 million visitors [3].

About Malaysia Malaysia is a South-eastern Asian country which comprises of Peninsular Malaysia and the two states of Sabah and Sarak on the island of Borneo. It shares boundaries with Thailand to the north and Singapore to the south. In the east, Sarawak shares boundaries with Indonesia and Brunei while Sabah is bounded by Indonesia. With a population of 28.3 million [4], the Bumiputra, which include ethnic Malays, make up 62 % of the population. The Chinese constitute about 24 % while Indians (mostly Tamil) and others make up the rest of the population. Though Malaysia has a multi-ethnic, multi-religious society, it has a majority Muslim population with Islam as the official religion. All food outlets selling to Muslims are required by law to serve only Halal food and have verified halal certificates. Halal is an Arabic term which means permissible or lawful in Islam. Halal food thus refers to the Islamic dietary standard as prescribed under Islamic law. This includes the kind of animals that can be eaten and the way they are killed [5].

Crisis in the Restaurant The IKEA restaurant is on the first floor of the store and seats 1686 customers. It is highly popular with consumers. On 15th of March, 2005, their restaurant on the first floor of the IKEA store, was raided by the Malaysian Domestic Trade and Consumer Affairs and Health Ministry, the Selangor Religious Affairs Department (JAIS) officials, Malaysian Muslim Consumer Association and police. Sixty boxes of sausages were seized from the restaurant by the team as they were suspected to be non-Halal6. This followed raids at the factories of their suppliers, namely, Muller Sausage Haus Sdn. Bhd. and Pacific Refrigerating Sdn. Bhd. at Kompleks Selayang Industrial Zone, for suspected non-compliance with the country’s strict halal manufacturing regulations. It was revealed that the halal certificates of the factories had expired in January 2004 [6]. The store was also investigated to verify that they had the valid halal certification from the religious authorities failing which they were liable to be charged under the under the Trade Descriptions Act 1972 which provides for a fine of up to RM 250,000 (approximately £51,280 then).

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Ikea Malaysia’s Response The response from the top management was swift. The first response was to immediately close down their restaurant and cafe despite the fact that the authorities had only asked them to stop selling the sausages. They immediately sent out press releases detailing the incident and informing the public that the management were working with the authorities to verify the halal compliance of the other food suppliers. A ritual cleansing or samak, was voluntarily carried out by 80 of the store’s Muslim staff and supervised by officials from the Selangor Religious Affairs Department [7]. This ritual cleaning involved not only all the utensils and cutlery but also the racks, ovens, the storage and exit areas. The general manager Joseph Lau said that the restaurant and cafe would only open after all of their 11 frozen food suppliers had signed a statute of declaration confirming that their current halal certificates were valid. They also terminated the supply agreement with the food company which supplied the suspected sausages. Sausages were removed from the menu as well. The café reopened for business on 26 March 2005 and went on to become more popular than before.

Questions 1. Do you think it is right for Ikea Malaysia to apologise publicly when the whole crisis was due to a supplier who had not renewed their halal certification? 2. Were any mistakes made by Ikea which led to this crisis? 3. Do you think that the company’s response was culturally-sensitive and timely?

References 1. Ikea Facts and Figures. (2013). http://www.ikea.com/ms/en_US/about_ikea/facts_and_figures/ ikea_group_stores/index.html. 2. Ikano Retail site. (2013). http://www.ikanogroup.com/retail-ikano-pte-ltd.html. 3. Leong, S. H. (2012). The low-price, flatpack phenomenon, The Star online, http://thestar. com.my/lifestyle/story.asp?file=/2012/8/27/lifeliving/11910125&sec=lifeliving. 4. Malaysian Tourism. (2013). http://www.tourism.gov.my/en/Master/Web-Page/About-Malaysia/ Fast-Facts/. 5. HMC website. (2013). http://www.halalhmc.org/DefintionOfHalal.htm. 6. Malay Mail (16 March 2005). IKEA food court faces probe. 7. New Straits Times. (15 March 2005). Jakim raids food outlet over sausages.

Part III

Market Orientation and Brand Strategies

Introduction to Market Orientation and Brand Strategies Dilip S. Mutum

Marketing Orientation Despite the fact that there are so many empirical studies on marketing orientation, the evidence from literature indicates several perspectives of this concept. However, all the different perspectives of this concept do have three common areas of agreement, which includes: [1, 2] 1. An emphasis on customers; 2. Marketing activities as an inter-functional and important culture of the company; 3. Being responsive to the market needs and wants, leading to customer satisfaction. It can be defined simply as the degree of adoption of the marketing concept by companies and has been shown to be an important determinant of firm performance. Majority of studies on marketing orientation have been based on developed countries, particularly the United States and European countries and empirical research from emerging markets is negligible [3]. Market orientation studies in the developing countries are still ignored and it is simply assumed that the empirical findings generated in the developed countries are generalisable. In fact, research results indicate that relationships between market orientation and performance in emerging countries are different from that in industrialized/developed countries. For example, it was found that market orientation does not have a direct impact on sales growth or return on investment in emerging economies [4]. Several emerging markets are still behind the developed countries when it comes to branding or



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marketing. According to Professor Qing Wang of the Warwick Business School, marketing carries a negative connotation to a lot of Chinese businesses, associating it with ‘‘lying and cheating’’ [5].

Branding Strategies Though a number of studies have focused on brands and effects of brands in influencing consumer behaviour and attitudes, surprisingly, a review of literature reveals that there is no consistent or even a universally accepted meaning of the term branding [6]. A rather simplistic definition of branding was given by Kotler et al. [7], as the process of endowing products and services with the power of a brand. Another definition was given by Keller et al. who pointed out that an important goal of branding is to differentiate your product and set it apart from its competition [8]. Later, de Chematonyl [9] highlighted the shift in branding literature from image to identity, which is more concerned with the roles of staff as brand builders and how they ‘‘make brands unique’’. According to Aaker and Joachimsthaler [10], the brand identity needs to ‘‘resonate with customers, differentiate the brand from competitors, and represent what the organisation can and will do over time’’. It is the brand identity which makes a brand unique and different from others [11]. Brand image is another important concept in branding and refers to ‘‘the cluster of attributes and associations that consumers connect to the brand name’’ [12]. As the emerging markets get mature and sophisticated, it was assumed that the demand for brand and products offered by Western companies would increase. However, it has been revealed that even though there has been an increase in demand, the customers in these countries are also increasing becoming more demanding. There have been other issues as well. A brand’s aim is to communicate a set of emotions, and associate those feelings with the brand itself. However a global brand may find difficulty making its emotion association relevant to each person, or even to each market. Local brands are learning from their Western counterparts and with the advantage of their local knowledge, sometimes are beating the MNCs from the developed nations in their own game. Arnold, D. J. & Quelch, J. A. [13] suggests that developing local brands, through acquisition, along with their global brands may be one of the strategies to penetrate the foreign markets. Relating back to the previous chapter on socio-cultural influences on marketing, van Gelder [14] has identified some key imperatives for branding in terms of strategy, creativity and leadership. Culture differences can have a huge impact on the way these imperatives manifest themselves [14]. For example, the concept of ‘‘humour’’ and the way it can be used in branding campaigns varies hugely across cultures. An effective global brand needs to appreciate and assimilate such cultural differences. Those brands which have been able to identify the common strands between cultures have been the most successful globally— examples include Starbucks, Ikea, etc. These brands are the ones who have provide

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high quality products, are associated with positive emotions and have been able to carefully manage their perceptions in each country and adjusted the product offerings where required. It is time to recognise the ‘‘post-global brand’’ [15], proposed by Professor Jean-Noel Kapferer, one that moves away from the rigid model of total globalisation and allowing a degree of regional flexibility. Yet, at the same time trying to connect with similar universal emotions associated with the brand.

References 1. Lafferty, B. A., & Hult, G. T. M. (2001). A synthesis of contemporary market orientation perspectives. European Journal of Marketing, 35(1/2), 92. 2. Avlonitis, G. J., & Gounaris, S. P. (1999). Marketing orientation and its determinants: an empirical analysis. European Journal of Marketing, 33(11/12), 1003–1037. 3. Mohd Mokhtar, S. S., Yusoff, R. Z., & Arshad, R. (2009). Market orientation critical success factors of malaysian manufacturers and its impact on financial performance, International Journal of Marketing Studies, 1(1), 77–84. 4. Appiah-Adu, K. (1998). Market orientation and performance: empirical tests in a transition economy. Journal of Strategic Marketing, 6(1), 25–45. 5. Wang, Q. (2013). Marketing not high enough on the agenda for chinese firms. http://www. wbs.ac.uk/news/marketing-not-high-enough-on-the-agenda-for-chinese-firms/?dm_i=ZLB, 1FV99,8RU79K,4VZJ2,1. 6. Molander, J. (2012). Branding is not enough to make social sell, http://www.targetmarketingmag.com/channel/making-social-sell. [Accessed July 27 2012]. 7. Kotler, P., Keller, K. L., Brady, M., Goodman, M., & Hansen, T. (2012). Marketing Mangement, 2nd edn. Pearson: Harlow, p. 925. 8. Keller, K. L., Apéria, T., & Georgson, M. (2008). Strategic brand management: A european perspective. Harlow: Pearson. 9. de Chernatony, L. (1999). Brand management through narrowing the gap between brand identity and brand reputation. Journal of Marketing Management, 15(1–3), 157–179. 10. Aaker, David A., & Joachimsthaler, E. (2000). Brand Leadership, London: Free Press. 11. Kapferer, J. N. (2004). The New Strategic Brand Management: Creating and Sustaining Brand Equity Long Term. London: Kogan Page. 12. Biel, A. L. (1993). Converting image into equity. In D. A. Aaker, A. L. Biel (Eds.), Brand equity and advertising (pp. 67–82). Hilldale, NJ: Lawrence Erlbaum Associates. 13. Arnold, D. J., & Quelch, J. A. (1998). New strategies in emerging markets. http://sloanreview. mit.edu/article/new-strategies-in-emerging-markets. 14. van Gelder, S. (2005). The new imperatives for global branding: strategy, creativity and leadership. Journal of Brand Management, 12(5), 395–404. 15. Kapferer, J.-N. (2005). The post-global brand. Journal of Brand Management, 12(5), 319–325.

Case Study 5: Brands: The New Co-stars in Bollywood Anvita Kumar

Don’t forget to catch the Audi Q7 starring alongside Salman Khan in Bodyguard. —tweet by Audi India [1].

Bodyguard, a 2011 Bollywood1 blockbuster earned a record Rs 22 crore net (US$3.7million) as first day collections [2]. The movie boasts of popular Indian stars, Salman Khan and Kareena Kapoor. However, they are not the only co-stars. The film also offers screen time to a number of brands such as the Audi Q7 car, Tupperware, Blackberry and Sony Vaio notebook [1].

Introduction to Brand Placements Recently, there has been a surge of popular brands appearing alongside the stars in movies and television programmes. Brand placements, more popularly known as product placements, is the practice of placing branded products in the content of mass media programming [3]. It has gained popularity as a tool to reach the increasingly fragmented audiences. ‘‘The commercial that is not a commercial’’ helps in avoiding the zipping and the zapping of ads and reduce audience volatility [4]. According to the industry reports, global branded entertainment spending will continue to grow at accelerating rates in the forecast period as well, posting a 9.1 % CAGR from 2009 to 2014, with paid product placement as the fastest growing segment [5]. The earliest noted instance of product placement was in 1945, when Joan Crawford sipped on Jack Daniel’s Bourbon Whisky in Mildred Pierce (Karrh 1995) [6]. However, the stupendous increase in candy consumption (65 %) after the public’s exposure to Reese Candy in the film ET-Extra Terrestrial, established it as the ‘‘hidden advertising plug’’ (Weaver and Oliver 2000) [7]. Brand 1

Bollywood is the nickname for the Indian film industry, which is located in Mumbai, Maharashtra.

A. Kumar (&) Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected]


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placements, riding the wave of globalisation, are becoming prominent marketing strategies in the emerging markets as well. For instance, the Bollywood movies have become an important channel for brand placement strategies to capture the huge Indian market base [8].

Bollywood-the Indian Film Industry Bollywood is the nickname for India’s leading movie industry based in Mumbai and its potential is growing. According to PricewaterhouseCoopers, the Indian film and television industry generated revenues of around 7.7 billion dollars in 2008 and the figure is forecasted to top 13 billion dollars by 2015. It has also been reported that around three billion movie tickets were sold in India, compared with 1.5 billion in the United States, according to a Crisil media and entertainment report last September [9]. With Bollywood offering an enormous production output (approximately 1,000 films/year) as compared to Hollywood (473 in 2003, Motion Picture Association of America, Inc.) and a large audience [9], it is little wonder that companies have started placing their products within Bollywood films. Market homogenisation [10] is another driving force which is facilitating this branding strategy as Indian consumers are becoming increasingly media-savvy and familiar with the international brands. According to Nelson and Devananthan (2006) [11], globalisation of media has created transnational audiences who are presented with a multitude of international and domestic brands within commercial media.

Increasing the Reach of the Medium Bollywood movies have now gained widespread acceptance in the U.S and U.K. theatres. It has been observed that these movies have become community foci for the South Asian communities across the globe. ‘‘Though separated by a vast distance from home, South Asians have found Bollywood films to be a great way of staying in touch with their culture and their fellow South Asians’’ [12]. While Bollywood (in Mumbai) leads India in film production, its specialty lies in Hindi language movies. There are other regional film centres in India which are slowly entering the spotlight, such as Chennai which produces films in Tamil and Kolkata, the Bengali movie capital. Bollywood’s film production centres in ‘‘Film City’’ a government-owned studio facility. The film industry traces its inception to 1911 when the first silent Indian feature film was released by D. P. Phalke. The industry has not looked back since then and currently, there are over 250 theatres in Mumbai alone [12].

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Brand Placements and Bollywood A 2005 study by PQ Media, revealed that there are three main types of brand placements: Paid, in which brands placed in a movie are by arrangement and financial compensation is mandatory; Barter, in which products are again placed within a movie but the products serves as a compensation and lastly, Gratis whereby products are placed simply to add realism to the programme context. A recent study posits that subject to the degree of integration of their products within the movie plotline, companies are negotiating for paid product placements from over Rs 30 m (US$660,000 approximately) to up to Rs 2bn (US$44.4 m approximately) to allow their brands to share the spotlight with the Bollywood stars [13]. According to the marketing director at Tupperware, Movies are a passion for Indians. Thus association with a Bollywood movie is an excellent way to position our product in Indian culture and take our brand to every home. ‘We are Family’ is a family movie set in a home. So there was a perfect match between the movie and the personality of our brand [13]. The chief executive of an Indian company that specialises in in-film product placements also observed that this marketing tool is definitely effective, particularly with the big names in Bollywood effectively endorsing the products. The strategy has been observed to be mutually beneficial for both the movie producers and brand companies. For instance, Coca cola garnered a substantial market share from Pepsi, through its product placement strategies in Bollywood [14], such as Taal (1991) and Aap Mujhe Ache Lagne Lage (2002).2 On the other hand, the director of Taal, Subash Ghai earned 20 % of the production budget out of the Coke placement in that movie.3 Similarly, Ray-Ban’s integrated placement in Dabaang (2010) as the signature style of Chulbul Pandey played by Bollywood superstar Salman Khan, has reportedly increased its sales post-Dabaang [15]. In India, the metro cities of Delhi and Mumbai, are the biggest markets for this high-end brand, with target consumers in age range of 25–35 years. However, local brands, such as Pass Pass4 and Times of India,5 are also joining the bandwagon and it would be interesting to observe how the product placements for these brands fare as opposed to the international brands placed in a regional/ national movie content with respect to the county-of—origin bias, if at all. Furthermore the ethical and aesthetic components of the practice has to be considered to deem this marketing practice a success yet.

2

Product Placements-Global Scan, [online] http://www.mediae2e.com/downloads/Product%20 Placements-%20Global%20Scan.pdf Accessed April, 2013. 3 [online] \http://www.iimcal.ac.in/[ cited in Product Placements-Global Scan (see above). 4 A local mouth freshner brand available in North India. 5 A English language daily newspaper in India.

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Questions 1. What are the international marketing issues faced by practitioners while trying to adopt product placements in overseas national/regional film industries? 2. Identify the posible reasons for success of product placements of international brands in the Indian market. 3. What are the ethical dilemmas a practitioner may face when opting for brand placements both in host and home markets?

References 1. Sauer, A. (2011, September 6). Bollywood’s bodyguard features hollywood-style product placement. Retrieved October 30, 2012, from http://www.brandchannel.com/home/post/ 2011/09/06/Bollywood-Bodyguard-Product-Placement.aspx 2. World Snap (2012, January 2). Bodyguard box office collection/earning: Breaks opening day record. Retrieved March, 2013, from http://news.worldsnap.com/entertainment/bollywood/ bodyguard-box-office-earningreport-record-opening-day-collection-109421.html 3. Russell, C. A. (2002). Investigating effectiveness of product placements in television shows. Journal of Consumer Research, 29(3), 306–318. 4. Ephron, E. (2003). The Paradox of Product Placements. MediaWeek, (June 2), 20. 5. PQ Media (2010). Social Media Sponsorship Forecast 2010-2014, IZEA Inc. 6. Karrh, J. A. (1995). Effects of brand placement in motion pictures. Proceedings of the 1994 American Academy of Advertising Conference (pp. 90–96). Athens, GA: American Academy of Advertising. 7. Weaver, D. T. & Oliver, M. B. (2000). Television programs and advertising: Measuring the effectiveness of product placement within seinfeld. Paper Presented to the Mass Communication Division at the 50th Annual Conference of the International Communication Association (ICA) Mexico. 8. Product Placement in Movies (2012, June 21). Brands in bollywood movies. http:// productplacementandmovies.wordpress.com/2012/06/21/brands-in-bollywood-movies/ 9. The Express Tribune (2010, November 11). Hollywood, bollywood sign landmark cooperation pact. http://tribune.com.pk/story/75679/hollywood-bollywood-sign-landmarkcooperation-pact/ 10. Concept posited by Levitt (1984). 11. Nelson, M. R., & Devanathan, N. (2006). Brand placements bollywood style. Journal of Consumer Behaviour, 5(3), 167–279. 12. Rosenberg, M. (2013). Bollywood: India’s movie industry known as bollywood. http:// geography.about.com/od/culturalgeography/a/bollywood.htm 13. Ravel, A. (2010, September 29). Bollywood: Revolutionising product placement. http://blogs. ft.com/beyond-brics/2010/09/29/bollywood-in-film-branding/#axzz2APOXEL9p 14. Business week (2013, February) In Singh, P. (2013). An analytical study on covert advertising: Product placement In Indian cinema. International Journal of Research and Development -A Management Review, 2(1). 15. Twishy (2012, November 6). Ray-Ban: Teaching lessons in smart in-movie placement. Retrieved April, 2013, from http://www.exchange4media.com/48663_ray-ban-teachinglessons-in-smart-in-movie-placement.html

Case Study 6: Junglee.com: Amazon’s Entry in India Sanjit Kumar Roy and Rajdeep Chakraborti

If you look at our corporate culture, we’ve always had a customer obsession, and we’ve always been pioneering. —Jeff Bezos, Amazon.com.

Introduction On February 02, 2012, Amazon.com announced the launch of its much awaited Indian website called Junglee.com (Junglee means ‘‘wild’’ in Hindi) [1]. Speaking on this occasion, Mr. Amit Agarwal (Amit), VP, Amazon.com commented that, ‘‘We are excited to give customers in India a single online starting point where they can shop a wide selection of products sold by local and global retailers, and make informed purchasing decisions [1].’’ True to the promise, Junglee.com was comprised of a selection of a wide variety of Indian and global brands. Another unique feature of Junglee.com was that the customers had access to both online and offline buying options, including Amazon.com, in 1 place. At the time of launch Junglee.com included 10.2 million products with the option of buying from hundreds of online and offline retailers, which included well known Indian retailers like Homeshop18, UniverCell, FabIndia. The current selection on Junglee consists of around 9 million books, and products worth more than US$ 3 million from approximately 14,000 Indian and global brands. The site has more than 25 product categories, including consumer durables, books, music and jewellery [1]. Junglee.com is unique in the sense that it includes products from both the online and offline retailers simultaneously and this selection was available to prospective customers through Amazon’s search technology [1]. Junglee.com was equipped with the same recommendation engine technology which is used by Amazon.com to provide the customers some unique features such as the ‘‘Most Frequently Viewed Products’’ or ‘‘Customers Who Viewed This Product Also Viewed’’ options [1]. Similar to Amazon.com, Junglee.com provides information related to S. K. Roy (&) Department of Marketing and Advertising, Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected] R. Chakraborti IBS Hyderabad, Hyderabad, India

D. S. Mutum et al. (eds.), Marketing Cases from Emerging Markets, DOI: 10.1007/978-3-642-36861-5_9, Springer-Verlag Berlin Heidelberg 2014

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customer reviews, price, and number of days required for the product to reach the customers, so that the customers could make an informed decision. Customers could also read millions of real-time customer reviews from Amazon.com, choose and share products through Facebook, Twitter as well as email [2]. In the past Amazon has never entered a country with a completely different brand name. The reason behind this was Amazon’s belief in its brand name and logo. Amazon believed that the name and the logo conveyed the ‘‘amazon-ness’’ of the venture to the customers and exposed them to an unexplored world of online retailing [3].

The History Amazon.com is a Fortune 500 e-commerce company with its headquarters in Seattle, US. It was one of the pioneers in the online retail sector. The company was founded by Jeff Bezos (Bezos) in 1994, and was launched in 1995. Initially it was named as Cadabra.com, but founder Bezos renamed the company Amazon after the world’s largest river, the Amazon. He saw the potential for a huge volume of sales in an online bookstore (as opposed to a bricks and mortar), which was a completely new concept at that point of time [4]. Initially Amazon started out as an online bookstore and then quickly diversified into different sectors such as electronics and electrical goods, CDs and DVDs, software, video games, clothing, furniture, toys, etc. [4]. The motto of Amazon.com is: ‘‘to offer the earth’s biggest selection and to be the earth’s most customer-centric company, where customers can find and discover anything they may want to buy online.’’

The Initial Days Throughout the 1990s, the IT boom helped the creation of World Wide Web (www) and the craze of internet was rising rapidly. As use of the internet became more and more popular, different online retailers decided to use the Web as a new channel for commerce. They soon found out that selling products over the Internet offered a variety of choices and opportunities and it was less costly also as it saved the cost related to the payment to the dealers and retailers. Online sales also helped a company to reach a much wider audience across the globe compared to a brick and mortar store. As already mentioned, one of the pioneers of this e-commerce revolution was Bezos, who founded Amazon.com. In 1994, Bezos resigned as the vice-president of the Wall Street firm D.E. Shaw, moved to Seattle, and started to work on a business plan to come up with an online retail store which eventually came to be known as Amazon.com. He was successful in coming up with a business plan which projected annual web growth at 2,300 %. Encouraged by the initial success of the website, Bezos shortlisted 20

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products that could be sold over internet. From the initial list of 20 items, he narrowed down the list to the five most promising products according to him: cd-s, computer and software, videos and books. Due to the large worldwide market for literature, and the existing low price that was being offered for books in addition to the huge selection of titles that were available in print, Bezos eventually decided that his brainchild, the online retail website would sell books over the Web.1 He strategically chose Seattle as the company headquarters because of the easy availability of high-tech work force and its proximity to Oregon which was the hub of a large book distribution centre. Bezos then simultaneously started to raise funds for the company and started to work with software developers to build the web site. The web site debuted in July 1995 with the name of Cadabra.com and quickly became the number one book-related site on the Web [5]. In just four months since its inception, Amazon.com became the sixth best site on Point Communications’ ‘‘top 10’’ list, a place on Yahoo’s ‘‘what’s cool list’’ and Netscape’s ‘‘what’s new list.’’ The sheer volume of the website reveals its range of the titles. The site opened with an accessible database of over 1 million titles and customers were given enough scope to make an informed purchase using search information and comments about the title and its genre. The customers were also given the option to order the books using their credit cards and have the books shipped in a just a few days [5]. What made Amazon unique was that unlike its large competitors, such as Barnes & Noble and Borders, it carried only a small inventory of approximately 2,000 titles in stock. As most of the orders through Amazon.com were received via wholesalers and publishers, no warehouse was needed. It was basically playing the role of intermediary. Initially the company was being run from Bezos’ garage, but its success forced it to move into its Seattle office, which was used as the base to the customer support, shipping, and receiving area. Within a month of launching the web site, Amazon.com was handling orders from all the 50 states of USA as well as from 45 other countries.2 As a pioneer in the world of Internet commerce Bezos decided to make Amazon.com as customer friendly as possible. He also gave importance to ensure that all kinds of customers could relate themselves with the website. For the regular readers, who knew what they were looking for, Amazon.com offered a powerful search engines which was capable of accessing its expanded 1.5 milliontitle database very fast. Apart from that, Amazon offered 10–30 % discounts on most of the titles ensuring affordable prices to the customers [6]. For the general readers, Amazon offered a content list in categorical manner, which made it easier for the readers to search for the specific genre they were looking for. For the undecided reader, Amazon.com came up a concept called the ‘‘recommendation centre’’. Here a customer could find books based on his or her mood, reading habits, or choices. The ‘‘recommendation centre’’ also could suggest different

1 2

Schneider, L. (2013). Perez, E. (September 19, 1995).

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books to a particular reader based on their purchase history [7]. It also included some unique features such as optional gift wrapping and the ‘‘eye’’ service, which informed the customers about the arrival of a new book of their favourite subject or by their favourite author. The site also offered the customers an open discussion forum about the books that were available via the website creating a more informed customer base as well as generating interest amongst the non-readers [7].

Going Public Within two years of operation, Amazon became as a public company in May 1997 and launched its first initial public offering (IPO) of 3 million shares. The money generated from the IPO was invested by Bezos on improving the already productive web site and to help broaden the company’s distribution capabilities, and to release the pressure on the existing distribution centre that came from such a high volume of orders.3 With the growing size of the business, Amazon.com, in September 1997 declared that an East Coast distribution centre in New Castle, Delaware would be opened for the better service delivery. On top of that, Bezos announced that there would also be a 70 % expansion of the company’s Seattle centre to cater to the customers in a much better and efficient manner. The opening of its new office at Delaware helped Amazon to establish itself very close to the East Coast publishers, which decreased Amazon.com’s service delivery time. In lieu of this development, Bezos set a goal for the company that 95 % of the instock orders will be shipped on the same day, reaching the customers at a much faster pace than before.4 Amazon.com was successful in its ‘Associate’ program as well. Established in July 1996, this program ensured that the individuals who owned web sites could choose books of interest and place ads of those items on their own sites, allowing visitors to purchase those books. Amazon.com only took care of all their orders. Those people, who posted the ads on their websites, were offered 3–8 % commission from books sold on their sites. Though initially started with a low scale, the Associates program really began to show some signs of improvement in mid1997, when Amazon.com joined hands with Yahoo, Inc. and America Online, Inc. two of the most popular websites. As Amazon continued its growth over time, it was able to get into collaboration with websites including Netscape, GeoCities, Excite, and AltaVista.5 With the continued growth of Amazon, Bezos announced in October, 1999 that Amazon.com was on the verge of becoming the first online retailer to reach 1 million customers. This included customers across the entire US and 160 countries

3 4 5

Hazleton, L. (1998). Ibid. Ibid.


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worldwide. The small business plan from Bezos was now a company with US$147.8 million in yearly sales [8].

Further Expansion By February, 1998 the Associates program had 30,000 members, whose commissions reached up to 15 % for recommending and selling books from their web sites. This number went up to 60,000 members within a span of 4 months [8]. Financially also, Amazon was facing a huge growth in customer database. The customer base increased by 50 % in three months and reached 2.26 million in March, 1998 which was 564 % more than the previous year. This established Amazon.com as the third largest bookseller in the US [9]. In late 1997, the company was buoyed by a US$75 million credit which helped it to continue to expand its catalogue to over 2.5 million titles, and to redesign the service delivery system to reach the customer at a much faster time. In addition, the company added Amazon.com Advantage, a program to help and encourage the sales of books written by independent authors and publishers, and Amazon.com Kids, which had over 100,000 titles for younger children and teenagers.6 In early 1998, Amazon.com also expanded its business by acquiring 3 independent business units. To create a stronghold of Amazon.com in Europe, it decided to acquire Bookpages, one of the largest online booksellers in the UK. This gave Amazon access to the U.K. market. Apart from this, Amazon also acquired the largest online bookseller in Germany, called Telebook. This helped Amazon to add the German titles into its already huge list of titles. Not only these two newly acquired companies gave Amazon.com the desired access in the European market, but it also gave existing Amazon.com customers access to a wider array of titles to choose from.7 On the other front, Amazon acquired the Internet Movie Database (IMDB), to support plans for its move into online video sales. The vast database of IMDB served as a valuable and important asset in the construction of a customer-friendly and informative web site for video sales.8 In 1998, Amazon decided to venture into the online music business. Bezos wanted to make the site as useful as possible for his customers and asked its bookstore customers and the music professionals to come up with the designs of the new web site [10]. The music store was opened in June 1998, with a collection of over 125,000 music titles. This online music site was equipped with most of the familiar features of the original Amazon website. People could search the database

6 7 8

Business Week (4 Feb. 2002). Ibid. Ibid

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by artist, song title, etc. in addition to that, customers had access to more than 225,000 sound clips from which to make their selection [10].9 Riding on the back of the success of its new websites, Amazon.com had a strong second quarter of 1998. Total number of customers touched 3 million and sales figures for Amazon.com continued to rise indicating a bright future ahead. Bezos told Fortune magazine in December 1996: ‘‘By the year 2000, there could be two or three big online bookstores. We need to be one of them [7].’’

Growth Continues: 1999 and Beyond In 1999, Amazon.com launched an online auction service entitled Amazon Auctions. It divided its product offerings into individual stores on its site to make it easier for customers. The results were evident as the sales climbed to US$1.6 billion proving that Bezos’ efforts to create an online powerhouse had indeed paid off. In 1999 Time Magazine named Bezos as the Person of the Year for 1999. This was largely in recognition of the company’s success in popularizing online shopping.10 However, there were some negative aspects too. Bezos’ focus on market share over profits forced the analysts speculating whether the company would ever be profitable or not. Though, sales continued to grow as the company added new products to its site (kitchen wares, furniture, etc.) it continued to post net losses. In addition, the bursting of ‘‘dot-com boom’’ in the early years of the new millennium made the situation of Amazon even worse [11]. During 2001, the company had no other option but to lay off 1,300 employees and closed a distribution facility [12]. To overcome these problems, Amazon.com joined hands with well-known retailers as Target Corporation and America Online, Inc. Products from other well known retailers such as Toysrus.com Inc., Circuit City Stores Inc. and a host of other retailers were also selling via Amazon.com [13]. This was the turning point for Amazon.com. In 2001, sales grew by 13 % to reach US$3.12 billion. During the fourth quarter of 2001, Amazon.com secured a net profit of $5 million. In 2002, the company diversified again and launched its first apparel store in collaboration with retailers like The Gap and Lands’ End. Amazon.com reported a net loss of US$149 million for the year 2002, which was a significant improvement from the US$567 million loss reported in 2001. However, the trend changed in the fourth quarter of 2002 when Amazon managed to turn around a quarterly net profit of US$3 million—the second net profit in its history [13]. While this was a major turning point for Amazon.com, a July 2002 Business Week article warned, ‘‘after seven years and more than US$1000 million in losses, Amazon is still a work in process [14].’’ Nevertheless, Bezos and his Amazon team

9 10

Ibid. Schneider, L. (2013).


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believed that the firm was on the right track. With US$3900 million in annual sales, Amazon.com was on its way to fulfil Bezos’ dream [14]. One of the reasons behind the success of Amazon.com was the values and the existing work culture of the company. The work culture in Amazon.com was divided into certain segments such as: customer obsession, innovation, bias for action, ownership, high hiring bar and frugality.11 These segments together indicated that though the focus of the organisation would be on the customer, it would not mean that the customers have the last word. The suggestions from the customers would be taken into consideration and the best possible option for both the company as well as the customers will be chosen as the solution. Apart from that, on the recruitment front also, there was a very high ceiling for recruitment. As Amazon.com is known for continuous innovations, their engineers tackle some of the most complex challenges in large-scale computing. Experts from all possible fields such as software development and testing, program managing and userinterface work in small teams across the company to contribute to the e-commerce platform that’s used by the huge customer base of Amazon, the huge network of the sellers and the group of external developers. This is the reason why Bezos ensured a high recruitment bar.12 The IT department at Amazon.com has a massive responsibility. Their job included taking care and monitoring of an enormous system that continues to be extremely reliable. Amazon.com described their IT group as ‘‘system, database, and networking experts (that) build and operate highly reliable, scalable distributed systems with terabyte-sized databases and infrastructure that can handle a massive number of transactions.’’13 In 2000, VoiceStream Wireless,14 the then fastest growing wireless telephone network in USA joined hands with Amazon.com to sell their products and services through the Amazon.com’s online wireless phone store [15]. Speaking on this occasion, VoiceStream President and COO, Bob Stapleton (Bob) opined that, ‘‘The agreement between VoiceStream and Amazon.com is a big win for consumers. VoiceStream makes wireless service affordable, Amazon.com makes purchasing it convenient and hassle free. VoiceStream and Amazon.com are a powerful team that brings customers the best value in wireless service online and delivers it right to their door.’’15 Addressing this Occasion, Christopher Payne (Chris), VP of Amazon Electronics, commented that, ‘‘Amazon.com has built a reputation for helping consumers find the best value online. VoiceStream’s clear GET MORE offering is an attractive service to online shoppers who have come to

11

Schneider, L. (2013). Ibid. 13 www.amazon.com 14 One of the major nationwide providers of communication services in the USA and operates and uses the globally dominantGSMtechnology platform. VoiceStream is a member of The GSM Alliance, L.L.C., a consortium of U.S. and Canadian digital wirelessPCScarriers. 15 Business Wire (28 Nov 2000). 12

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expect value and variety when shopping at Amazon.com.’’ 16 The magnitude of the website became so huge that, O’ Reilley and Associates17 decided to come up with a book called ‘‘Amazon Hacks’’, written by Paul Bausch, which will contain details of how to make the most of using Amazon.com [16]. In the words of Rael Dornfest, editor of O’ Reilley and Associates, ‘Amazon Hacks’ will be a collection of tips and tools for getting the most out of Amazon.com. The book will appeal to a variety of readers, including shoppers using the site to discover new products, Amazon Associates honing their sites for better linking, sellers listing products for sale on Amazon.com, and programmers building their own application using Amazon.com Web Services [16]. Speaking on this occasion, Colin Bryar, Director of Amazon.com Associates and Web Services, commented that, ‘‘We are thrilled that O’Reilly is publishing this book to help third parties create even more interesting applications using our powerful platform. This book represents continued recognition of Amazon.com technology and will be a tremendous resource for Amazon.com Web Services developers, web site owners, sellers and customers who want to take our platform to another level [16].’’

International Expansion The global growth of Amazon has played a significant role in the success it has achieved so far. Although Amazon had the infrastructure to deliver products across any country of the globe, it has established country-specific websites and fulfilment networks which were strategically located. It all started with its expansion in the UK and Germany in 1998. These two major expansions were followed by the opening of Amazon.com websites which were specifically suited for the customers located in France (2000), Japan (2000), Canada (2002), and China (2004). These expansions ensured that Amazon had its presence in all the growing e-commerce markets across the world and the financial results of these expansions clearly indicated that the growth in these countries were far ahead than the growth of its original website catering to the American customers. The reason behind might be stiffer competition Amazon was facing in the North Americas as well as their approach to integrate the entire bundle of successful services available to the international market. Thus, it could be said that the expansion of Amazon’s international businesses were benefitted from the experience it gained through US markets, though the proper application of these experiences in the international markets played a significant role in accumulating the success of Amazon.com. Another strategy that made Amazon unique was that it allowed its competitors to advertise on its website. These competitors were allowed to advertise their

16

Ibid. A leading publishing house who publishes books related to the leading edge computer technologies. 17


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offerings on the Amazon.com website and were even allowed to compete with Amazon using the same webpage. These merchants were to pay a certain percentage of the price of the varied offerings being sold using its website. Although the gross profit on these transactions was much less compared to if Amazon sold them directly. The underlying strategy behind this was that Amazon.com website became a one stop destination for the online shoppers with a consistent experience for the customer. It also ensured that Amazon’s website carried a much wider variety of items, which made it the most sought after online shopping website. It was estimated that almost 30 % of the items sold on Amazon were actually the offerings from the third parties [17].

Junglee.com According to the experts, Junglee.com is just a testing phase for the Amazon.com as it tries to gauge the reaction of the Indian people towards the e-commerce sector. Experts predict that India is going to experience an e-commerce boom. With a population of more than 1,000 million people and the technology savvy young generation who are ready to experiment with the e-commerce and online shopping, India is an unchartered and lucrative market. Asheesh Raina, a principal research analyst at global consultancy Gartner commented that, ‘‘This market could be a game-changer for Amazon-these e-commerce retailers survive on volume. India with its large number of people could be a huge opportunity [18].’’ Junglee.com, was a modified version of the Amazon.com website. Junglee.com allowed customers to search for different products and compare prices as it was there in the Amazon website, but in case of Junglee, the buyers have no other option but to make their purchases through a network of third-party suppliers, be it through online booking or by personal visits to the stores in case of offline retailers [18]. This was an intentional strategy as this setup allows Junglee to avoid Indian government rules which prohibit the foreign multi-brand retailers from operating in India as Junglee.com works as a gateway to the different online retail sites rather than selling the products directly. Commenting on this strategy by Amazon, Saloni Nangia, president of Indian research consultancy Technopak opined that, ‘‘It’s a clever way of getting into the Indian market that works with the rules [18].’’ Experts believe that Amazon is waiting for the government to ease the regulations to allow online multi-brand retailers such as Amazon to do business in India. However, since it’s not certain when the regulations will be eased, the experts believe that Amazon did the best thing that it could do to enter the Indian market [18]. Amazon.com vice president Amit Agarwal commented that Junglee.com was trying to give ‘‘a single online starting point’’ access to its Indian customers. He also added that, ‘‘They can shop a wide selection of products sold by local and global retailers and make informed purchasing decisions.’’[18] On the other hand, Gartner’s Raina opined that the move was nothing but a ‘‘low-cost way for Amazon to find out what the Indian market is about—build brand loyalty and

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hopefully when the retail regulations loosen in India take their customers with them’’[18]. Long before Junglee.com was launched, Amazon set up its first of the warehouses, known as ‘‘fulfilment centres’’, in India, which would allow Amazon to store products and ship them swiftly across the subcontinent [18].

The Competition Amazon faces a stiff competition in India from the popular e-commerce portal Flipkart.com, which is the brainchild of two ex-Amazon employees and was established in 2007. Experts opine that, with its headquarter in the southern city of Bangalore, Flipkart.com does in India exactly what Amazon did in the USA, namely, selling a range of goods from books to television sets. An added advantage for Flipkart faced is that as an Indian company, it is exempted from the government rules and regulations that prevent Amazon to launch a full-service site [18]. Though Junglee.com was expected to face stiff competition in India, it was still expected to reach at least US$100 million in sales for the 2012–2013 financial year and US$1 billion by the end of 2015–2016 financial year, up from only US$11 million in financial year 2011–2012. This rise was mainly due to the exponential growth rate of India’s e-commerce market [18]. According to a report of Internet and Mobile Association of India, India has only around 52 million active Internet users—those who go online at least once a month, which indicated a very low internet penetration volume [18]. However, the experts believe that this figure is expected to grow rapidly, helping e-commerce to take off. Commenting on this, Nangia opined that, ‘‘This is just the beginning of the market with the number of smart phones, debit and credit cards rising so quickly. Many Indian young people have no history of only going to retail stores of only consuming in a certain way making prospects for e-commerce even bigger.’’ [18]. Technopak forecasted that the e-commerce market, consisting of travel and financial services among others, will grow to US$200 billion by 2020 from US$10 billion in 2011 which indicated a bright future for Amazon.com. Now, the question that arises is that why Amazon decide to enter India with the brand name ‘‘Junglee’’? Looking at the History of Amazon.com, the company is very possessive about its brand name and logo and has never used a different name or logo when they entered different markets across the globe. Amazon bought out a small database technology company in Sunnyvale way back in 1998 called Junglee. Later when Amazon decided to enter India, this name, Junglee was used for the online shopping website to cater to the Indian market.


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Junglee.com The name ‘‘Junglee’’ was chosen with a conscious effort. There is an Indian-ness to the name Junglee. It gives a very similar feel to that of Amazon with the added advantage that Junglee is an Indian word which Indians could easily identify with it as the ‘‘desi’’ version of Amazon [18]. As it is a well known fact that Indians are very much price conscious, the question was that how the consumers would perceive the product sold through Junglee.com. Amazon believed that in the Indian scenario, the lesser the price the higher the hits. So, it will be interesting to see how the brand equity of Amazon helped Junglee to compete with the already existing web stores in India, such as, Ebay.com, Quickr.com, Letsbuy.com, Yebhi.com, Flipkart.com, Infibeam.com, rediffshopping.com, myntra.com, indiatimesshopping.com to name a few [18]. Amazon was more concerned about how to maintain the efficient distribution network or the delivery model in India as well, which was much different from the other markets they were doing business in. To start with, Amazon decided to go for free shipping to the Indian addresses if the purchase amount was more than US$100, to find out whether the same effectiveness could be maintained in the Indian market or not. After being satisfied with the market and functional efficiency of the Indian market, Amazon decided to launch Junglee.com in India. The experts are still debating whether Junglee will be the sole representative of Amazon in India or whether the company will also launch their flagship website with the url: Amazon.co.in. Whatever happens, the Indian online consumer are going to be the winners as they will have much more options to choose from and with the cutthroat competition expected between the top online web stores, they could expect the best in the customer service. Initially, Junglee.com was launched as a reference website, where one could get information about the products on sale on the web stores who registered with Junglee. At the initial level Junglee.com did not have any direct responsibility for delivering the products purchased by a customer. Junglee had a statement on their website: ‘‘We help you discover over 1.2 crore (10.2 million) products. You choose where to buy!’’ PTI18 reported that Amazon.com, the world’s largest online retailer would come up a facility in Hyderabad which will generate employment for over 3,000 people. The announcement was made after a meeting between the Andhra Pradesh government and an Amazon delegation led by John Schoettler, VP (Global Real Estate and Facilities) in November, 2011 [19]. It was expected that Amazon’s arrival will create a fierce competition among the existing popular online stores such as FlipKart.com. Incidentally, Flipkart.com was launched by two former Amazon employees, and follows more or less the same procedure for speedy, cashon-delivery service for a range of products including books, electronic goods, music and video and home appliances. However, there were adverse reactions as 18

Press Trust of India.

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well. According to one Junglee.com customer, ‘‘Amazon’s entry into India with Junglee.com has created a big buzz in the media but the fact is that it does not list prices by the Top Players like FlipKart, Yebhi, LetsBuy, InfiBeam or Rediff which also offer the lowest prices. If you see similar Indian Websites like http://www.SearchDeals.com who do actually list the lowest prices, they are much better than Junglee’’ [20]. Another user called Tanisha commented that ‘‘Amazon is not listing products from many of other Indian e retailers like tradus, myntra, indiatimes, letsbuy and so many others, where as an Indian shopping search engine cheapestinindia.com has host of sites and huge number of products available. They claim to be a search engine and an independent Indian entity.’’19

The Road Ahead In the initial days of Amazon, experts used to compare Amazon to other e-commerce competitors like Buy.com, Overstock.com, Walmart.com, etc. However over the years, the dominance of Amazon ensured that such comparison were not at all comparable. Amazon considered its largest competitor as not a particular company, but all the online retail stores and the brick and mortar retail stores in the US and across the world. While the penetration of online sales depends on the category (in USA: 1 % penetration in food, and 22 % in computer peripherals).20 However, online sales still represent only a fraction of the Indian retail market (less than 1 % to be precise) [21]. The continuing shift towards online purchasing amongst the youth in India is a major trend which should provide Amazon with sustained long-term growth potential in the Indian market. Amazon’s continued focus on increasing selection and availability, lowering prices, and providing a great product and service towards the Indian customers are the most important aspects of its long-term growth strategy in the Indian market. As Amazon continues to venture into different categories and different markets to experiment with building different types of businesses, substantial investments have been made in Junglee.com to gain substantial revenue opportunities in the untapped Indian market. Even if a few of these schemes succeed, this could translate into a huge success for Amazon in the lucrative Indian market.

19 20

PTI (2 Feb. 2012). http://www.wikinvest.com/stock/Amazon.com_(AMZN)


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References 1. Business Standard. (2012, February 02). Amazon debuts Junglee.com in India. www. businessstandard.com 2. Business Standard. (2012, February 2). Amazon debuts Junglee.com in India. http://www. business-standard.com/article/companies/amazon-debuts-junglee-com-in-india-112020200135_ 1.html 3. Amazon Forests and Junglee.com. www.brandyou.com 4. Schneider, L. (2013). Amazon.com company research. http://jobsearchtech.about.com/od/ companyprofiles/a/Amazon.htm 5. Perez, E. (1995, September 19). Store on Internet is open book: Amazon.com boasts more than 1 million titles on the Web. Seattle Times, E1. http://community.seattletimes.nwsource. com/archive/?date=19950919&slug=2142506 6. Hazleton, L. (1998). Jeff Bezos: How he built a billion dollar net worth before his company even turned a profit. Success, 58–60. 7. Martin, M. (1996, December 9). The next big thing: A bookstore. Fortune, 134(11), 168–70. 8. Zito, K. (1999, December 23). Amazon CEO Tells of Life at the Top, San Francisco. Chronicle, 81. http://www.sfgate.com/business/article/Amazon-CEO-Tells-Of-Life-at-theTop-2889026.php 9. Business Week. (2002, February 4). How Amazon cleared the profitability hurdle. http:// www.businessweek.com/stories/2002-02-03/how-amazon-cleared-the-profitability-hurdle 10. Jeffrey, D. (1998). Amazon.com eyes retailing music online. Billboard, 8–9. 11. Haines, T. (January 23, 1998). Amazon.com Sales Grow While Loss Widens. Seattle Times, C1. 12. Soto, M. (2001, 5 February). Amazon Layoffs: What’s It All Mean? Seattle Times. 13. (2002, February 4) How Amazon cleared the profitability hurdle. Business Week. 14. Colker, D. (2003, January 24). Amazon Delivers Profit for the Second Time. Los Angeles Times. 15. Business Wire (2000, November 28 ). Voicestream wireless teams up with Amazon.com ‘Get More’ goes online for holiday shopping season. http://www.thefreelibrary.com/Voicestream+ Wireless+Teams+Up+With+Amazon.com+%60Get+More’+Goes+Online…-a067385305 16. Business Wire (2003, April 22). Unleashing Amazon.com—O’Reilly & Associates to Publish and Release ‘‘Amazon Hacks’’ (this Summer) 17. Miller, R. (2009, July 19). Outage for Amazon Web services. Data Center Knowledge. http:// www.datacenterknowledge.com/archives/2009/07/19/outage-for-amazon-web-services/ 18. Agence France-Presse (2012, February 8). Amazon enters India with Junglee.com. 19. Jayadevan, P. K. (2012, February 12). American online retail giant Amazon enters India with Junglee.com, an online shopping site. www.theeconomintimes.com. 20. PTI (2012, February 2). Amazon.com launches India specific online shopping service Junglee.com. http://ibnlive.in.com/news/amazoncom-launches-india-specific-online-shoppingservice-jungleecom/226557-11.html. 21. India B2C E-Commerce Report 2013. www.ystats.com

Case Study 7: Indonesian Fisheries John Heap, Simon O’Rourke, Rory Dillon and Lara Chaplin

Introduction Though Indonesia has been successful in growing the value of its fisheries sector, there are issues and constraints which make further growth more difficult to achieve. Some of these factors are external factors which affect both Indonesia and its main competitors; others are specific issues relating to the industry within Indonesia. There are, for example, barriers to increasing trade with particular countries (which might represent high export growth potential) due to technical barriers to trade (TBT) and SPS (Sanitary and Phytosanitary) standards/regulations. This case study examines the challenges of moving from a predominantly product/quality centred focus to adopting a marketing orientation. These issues are linked to—but do not fully represent—the ability of firms within the Indonesian fisheries sector to meet the quality requirements of those major export markets where a premium price may be achieved by meeting particular quality thresholds. This requires a systematic approach to adding value and meeting quality standards including addressing the technological infrastructure, cultural factors and skills gaps.

Background Information The strategic geographic location of Indonesia between two continents and two oceans make the seas around Indonesia an extremely rich and fertile source of a number of marine products. The trade balance of fisheries products increased by J. Heap S. O’Rourke R. Dillon Grimsby Institute of Further and Higher Education, Grimsby, UK L. Chaplin (&) Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected]


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approximately 5 % per annum between 2001 and 2006, moving from US$1.53 billion to US$1.94 billion, whilst the export volume over the same period increased by just over 15 % per annum, from 487,113 tonnes in 2001 to 926,478 tonnes in 2006 [1]. The major products within this trade are tuna, shrimp, pearl and seaweed with the remaining items simply being categorised as ‘other fish commodities’ or ‘other fish’. In the 2001–2006 period, shrimp represented the highest export value at US$1.12 billion in 2006, tuna represented US$250.56 million in 2006, other fish commodities represented US$673.57 million, seaweed was US$49.59 million and pearl was US$25.26 million [2]. Tuna and most other species are caught at sea; shrimps are raised on ‘farms’ by a process known as ‘aquaculture’. Thus, ‘raw materials’ are sourced by a combination of ‘capture’ and ‘aquaculture’. Tuna sells in a variety of ways. If tuna landed at port is of high quality—and can be shipped (by air freight) to Japan so that it lands on a table of a sushi house within 30 h of being caught—it is known as sushimi grade and commands a premium price. If it cannot make this time constraint or is of slightly lower quality, it is packaged as tuna loin/steaks and sold as ‘fresh’—for a reasonably high price. Tuna which fails to meet quality standards is sold for a significantly lower price to processors for canning or other forms of ‘modification’. The major export markets for Indonesian fishery products over the last 10 years have been USA, Japan, EU, China and Singapore (in decreasing order). However, for the last 2 years (2009) Indonesian fisheries products have been banned from the EU on hygiene grounds (The inspection authorities in Indonesia think they have done enough—and proved so—to get this ban lifted but the EU moves slowly and cautiously on such issues). The import of fisheries products is also important to Indonesian trade and in the period 2001–2006, the import value increased by 14 % per annum from US$103.62 million to US$165.72 million [2]. The importance of the fisheries sector to Indonesia is evidenced by the fact that the Ministry of Fisheries and Maritime Affairs was established in 2001 (as a ‘breakaway’ from the Ministry of Industry) to oversee the strategic development of the sector. The Indonesian government clearly wants to maximise the benefits of these resources since the (GDP) Gross Domestic Product of the Fisheries Sector (both captured fish and aquaculture) makes a strategic contribution to national GDP and the fisheries sector is responsible for maintaining the livelihoods of just under 5 million workers and their dependents (approximately 2.6 million in the capture sector, 2.3 million in aquaculture and 0.75 million in secondary industries) [2].

Known Issues Products from the Indonesian fisheries sector need to meet international quality standards but also need to be price competitive. In 2009 there were certain factors within the industry, partly relating to the geography of the country and partly relating to the industry infrastructure, that mitigate against this. For example,

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products are shipped from particular capture zones to internal consolidation ports (where a transfer from one container size to another might take place) and then perhaps to an external consolidation port (such as Singapore, where another container transfer might take place). A key issue in relation to quality is cooling and refrigeration. If tuna, for example, is frozen quickly to -60 it can be maintained ‘as fresh’. Most boats are quite small and do not have refrigeration on board. These generally carry blocks of ice which are used to keep the catch cool. Though the use of ice is certainly better than using no freezing, it is not a particularly effective means of maintaining quality. For extended voyages, such boats have to ‘re-ice’ by buying new blocks off supplying boats in the fishing zones. The price of fuel (which represents about 60 % of the total cost of putting a vessel to sea) is currently causing great concern (as it is throughout all countries). It also has a major impact on the aquaculture process since it directly affects the price of feed, one of the major sources of cost for shrimp farmers. However, fuel price increases have differential effects according to the nature of current fuel efficiencies and this has implications for the fisheries sector. Finally, a strategic long-term approach to fisheries development clearly involves the management and conservation of stocks. This requires an understanding of the nature, life cycle, behaviour and inter-dependence of fish species as well as of the wider coastal and marine ecosystem resulting in appropriate policy and practical intervention. For example, tuna is a migratory species and any conservation strategy must be the result of trans-national co-operation (Freedom to fish the high seas comes with responsibility). There are areas of the seas around Indonesia that the country does not currently fully exploit (in the Indian Ocean), though these areas are not necessarily unexploited by other bordering countries. Illegal, unreported and unregulated (IUU) fishing results in significant losses. Any move into these areas by the Indonesian fishing industry would require significant investment in capture/landing/logistics facilities.

Stakeholder Analysis The government is clearly a primary stakeholder. Though the Ministry of Fisheries and Maritime Affairs is the main government department with responsibility for the sector, a number of other government departments have a stake in, and influence over, parts of the sector. Thus, principal government stakeholders are, namely, Ministry of Fisheries and Maritime Affairs, Ministry of Trade, Ministry of Industry and the National Planning Board. In terms of industry, there is a number of ‘collective associations’ that act as representatives of specific sub-sectors and activities. Consulting with these associations allows representative and consensus views to be obtained. The key associations reflecting both the essential supply/value chain components and the major sector products are The Indonesian Tuna Association, The Tuna Long Line Association, The Shrimp Association, The Frozen Seafood

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Association of Indonesia and The Cold Chain Association of Indonesia. These various associations come together, with others representing other parts of the sector, as a Confederation under the co-ordinating responsibility of the Indonesian Fisheries Society.

Discussions with Stakeholders Throughout the preparatory phase of the research a number of discussions took place with these stakeholders, both individually, so that stakeholders could make frank comments in private, and in a series of workshops, to allow interaction and constructive debate. In the case of government departments, discussions also took place with officers at different levels so that strategic, tactical and operational issues could be explored. Industry representatives recognise that compliance with international, and especially EU, standards is an essential step towards increasing export potential. They are frustrated by what they see as a lack of capacity within the inspection service and delays in inspection resulting from this. Most of the discussions, however, were with government representatives, with the competent authority and with members of the inspection service itself. It was clear that there is a lack of a strong, coherent management system to ensure that the inspection regime is used to drive quality back up the supply chain. Similarly, in terms of making effective use of resources, the roles of national and provincial agencies need to be clarified such that the provincial agencies are responsible for inspection within their province and the national agency is used to audit and validate those inspection services. Discussions with all stakeholders suggest that there is a broad, shared understanding that specific changes to the quality grading of particular products in particular markets will result in the ability to charge premium prices. However, it would be wise to confirm the nature of this relationship with structured market research so that any quality/price parameters used in the EIAM are based on evidence rather than simple assumptions. For example there is a need to understand price/supply elasticity to confirm that any price premium would be maintained in a situation of increased supply. The discussion with stakeholders raised the following ‘big’ issues: • • • • •

inconsistency of quality from smaller-scale producers the need for a ‘no compromise’ approach to quality control the lack of inspection capacity lack of a specific image/identity for Indonesian fish/seafood ‘cultural’ factors amongst the fishing community that impede quality development (linked to reward structure to incentivise improved quality) • rising fuel costs and the impact on capture (see below)


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• rising fuel costs are causing a reduction of raw material available to processors, both in the capture and aquaculture sectors • lack of refrigeration/ice-making/cold chain capacity in some geographic areas • over-regulation of the industry by government • need for knowledge transfer in support of new product development • lack of business planning by producing organisations in support of export expansion • the cost of technology investment in support of improved quality and/or efficiency • significant stocks of fish off Eastern Indonesia lie unexploited due to a lack of suitable vessels and a lack of appropriate port facilities • lack of adequate road transport infrastructure in some parts of the country • lack of a port of sufficient size and with sufficient facilities to avoid consolidation of shipments in Singapore • the need to be aware of longer term sustainability of fish stocks—and of organisations that lobby on sustainability/environmental issues (such as Greenpeace) whose influence on the market can be significant • a lack of direct flights to key market destinations prohibits the sale of fish as ‘fresh’. In addition, government stakeholders in particular referred to the need to upgrade elements of the overall logistics infrastructure. The issue of ‘branding’ has been raised several times. It is seen as a major issue in terms of raising the profile of Indonesian fisheries products in general. However, it is recognised that any strategy for branding must be linked to initiatives to improve quality, to meet internationally-recognised standards and perhaps to achieve specific quality (or related) certification. The Indonesian Fisheries Society talked at some length about branding, pointing out that ‘branding’ is a relatively broad term incorporating promotion at different levels, such as the country the sector, the species of fish and the organisation. In addition it is possible to co-brand and to use third-party certification brands (such as those promoting environmentally-friendly and sustainable sourcing and processing or those associated with particular process technologies). The other item that raised most comment was the price of fuel. The ability of fishing vessels to make extended capture journeys and return greater quantities— increasing the fuel efficiency and lowering the cost of fuel per unit of catch—is affected by the size of the vessel and its ability to maintain the quality of caught product over the extended period (for example by effective freezing. Vessels may now put to sea for 6, even 12, months (whereas once a ‘typical’ trip would be 2 months) and this involves re-fuelling from ‘local’ tankers, re-stocking with bait etc. Regulation determines that Indonesian fishing vessels must land their catch at an Indonesian port; however, sometimes vessels are forced to land their catch ‘illegally’ elsewhere. Of course, extended voyages mean that vessels are unable to land the highest quality, sushimi grade, tuna (for the Japanese market) since this must be landed within a much smaller timeframe. (Landing fish ‘as fresh’ after

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extended time at sea requires on-board refrigeration at -60 and only 17 vessels in the entire Indonesian fleet—of hundreds of vessels—have such technology—most being able to freeze to only -30) [3]. Vessels do receive a fuel subsidy from the government—though only for a fixed quantity of fuel per month. This results in a number of behaviours, not all strictly within the rules. Some fleet owners, for example, use the allocation for several vessels to resource extended trips by a smaller number of vessels; a few even (illegally) sell their allocation to others. Another ‘choice’ is to change the fishing gear and catch other species—though this may result in a lower value catch, it involves lower cost and is thus a rational economic decision (though it impacts negatively on the government’s aim to increase export value). The Indonesian Fisheries Society (the confederation of the major associations and societies representing specific sectors and functions within the fisheries sector) is promoting the concept of ‘Indonesian Fisheries Inc’ as a tri-partite, co-operative venture between the government, the confederation and academicians (recognising that this requires further ‘trust-building’). This seemed to have broad approval from all key stakeholder groups.

Conclusion Much of the Indonesian fisheries output is simple ‘raw material’—product that is minimally processed before being exported. Where this involves high quality product carrying premium pricing, this is an obvious and sensible strategy. However, where—for some of the logistical reasons we have already identified— product cannot be sold as ‘high quality’ and cannot therefore attract premium pricing, there is a need to consider alternative strategies. Clearly there are two basic approaches: to find a way of converting a significantly higher proportion of product to ‘high quality’ and continue to sell it as raw material; or to use additional processing steps to convert product into different forms that can be sold at a price where the additional revenue is greater than the additional processing costs. This is the area of value-added processing as a sub-set of new product development. It would be prudent to confirm with ‘the market’ that particular quality thresholds continue to attract premium prices (and would do so in the light of additional supply). Additionally, there seems little point in trying to replicate products already in the market—especially as a ‘low price’ strategy might be the only way to enter such an established market. What is needed is to develop viable products and/or new forms of packaging that are uniquely or primarily ‘Indonesian’, perhaps by using the variety of tastes/textures already existing in regional cooking throughout Indonesia or simply by using a common theme to all packaging of specific product ranges. Any market study needs to understand the nature of demand in a range of markets for value-added products and a parallel study of the ability of Indonesian producers to move up the value chain to meet any identified demand.


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Questions 1. Identify the business orientation followed by the Indonesian Fisheries sector? 2. What stages must the Indonesian Fisheries sector take to adopt a marketing orientation? 3. What potential issues would the Indonesian Fisheries Sector encounter if trying to adopt a marketing orientation? 4. Critically evaluate if the Indonesian Fisheries sector should attempt to adopt a ‘societal’ orientation.

References 1. Indonesian Ministry Marine Affairs and Fisheries (2009). Fishery is one of the food security pillars in D-8. Retrieved July 2009 http://www.kkp.go.id/en/ 2. United Nations Commodity Trade Statistics Database. (2009). Annual totals table (ATT) for imports and exports. Retrieved 2009 http://unstats.un.org/unsd/trade/imts/annual%20 totals.htm 3. Indonesian Ministry Marine Affairs and Fisheries. (2009). Shrimp tax to Japan zero percent. Retrieved January 2013 http://www.kkp.go.id/en/

Case Study 8: Kolkata Knight Riders: Developing a Brand Identity Sanjit Kumar Roy and Rajdeep Chakraborti

‘‘Winning games is not enough to build a successful sports brand. Teams need to engage the local community, attract star players, who inspire a wide audience, and develop a strong marketing communications programme,’’ —Richard Yoxon, Director, Intangible Business International

Introduction In the fourth edition of the Indian Premier League (IPL), held in 2011, the Kolkata Knight Riders (KKR) decided to revamp the team by changing the entire set of players. Even, Sourav Ganguly, the team’s icon player for the first three editions of the IPL was dropped from the team. Instead, Gautam Gambhir (worth $2.4 million) was purchased by KKR to handle the responsibility of captaining the side in the absence of Ganguly. However, KKR had a disappointing start of season, losing to Chennai Super Kings by 2 runs in their first outing in Chennai. It was a bitter experience; it seemed that nothing has changed. Like the previous three editions of IPL, KKR had a strong team but they could not perform to their potentials. After the first match of the 2011 edition of IPL, the same sinking feeling started to creep in. However, unlike the previous editions, KKR fought back, winning their next three matches against Deccan Chargers and Rajasthan Royals at Kolkata and Jaipur respectively. KKR went on to win the matches against Delhi Daredevils, Kings XI Punjab, Deccan Chargers, Chennai super kings in Kolkata and the other against Pune Warriors India in Navi Mumbai ensuring a place in the play-offs for the semi-finals [1]. However, in the eliminator they lost to Mumbai Indians, losing their chance to enter the semifinals for the first time in the IPL and the franchisee history [1]. On the supporters front, as Ganguly was not picked KKR the supporters initially turned their backs to the home matches at Eden Gardens, the home ground of KKR S. K. Roy (&) Department of Marketing and Advertising, Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected] R. Chakraborti IBS Hyderabad, Hyderabad, India


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at Kolkata. This was followed by a silent protest rally, signature campaigns and stadium protests [2]. But the fans’ reactions gradually improved as the team started to perform well and the Eden Gardens started to attract supporters and was back to its sold out capacity. KKR may have performed poorly in the last three seasons of IPL. However, KKR was a profitable business venture for the owners. KKR brand was valued at USD 57.56 million and was ranked the third most valuable franchise in IPL 5 (2012).1

Indian Premiere League (IPL) The Indian Premier League (IPL) is a professional league for cricket championship in India initiated by the Board of Control for Cricket in India (BCCI). BCCI Vice President Rajeev Shukla is the chairman of IPL who also serves as the IPL Commissioner. It is currently contested by nine teams representing different parts of India and each of these teams consists of players from around the cricket playing countries of the world except from Pakistan. In 2010, IPL became the first sporting event ever to be broadcast live on YouTube [3] and its brand value was estimated to be approximately US$2.99 billion in fifth season [4]. However, the league came under scrutiny due to the corruption scandals where allegations of cricket betting, money laundering and spot fixing were made repeatedly [5]. The Premier League is considered to be the world’s showcase for cricket where top Indian and international players showcase their talent, contributing to what is the world’s richest cricket tournament.

Historical Background KKR was one of the initial 8 franchise teams which took part in IPL’s inaugural season. It was co-owned by Bollywood actor Shahrukh Khan’s Red Chillies Entertainment, in partnership with Juhi Chawla Mehta and her husband Jay Mehta. In 2008, KKR franchise was bought at a cost of USD 75.09 million in 2008. Right from the days of inception, KKR was never away from the controversies. During the first season of IPL in 2008, there were reports of a rift between Shahrukh Khan and Ganguly over various issues such as team composition, and other off the field matters. Though, the team denied about any problem in the KKR dressing room, the performance on the field became bad to worse. There were also speculations that KKR wanted to shift its base to Ahmedabad because of the money demanded by the CAB.2 But Jagmohan Dalmiya, the President of CAB ensured that the franchise stays in Kolkata. 1 2

Online: www.ipl.com. Cricket Association of Bengal.

Case Study 8: Kolkata Knight Riders

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But, even though these controversies were chasing KKR management, financially, they were the most successful franchise in the IPL’s first edition by achieving a profit of Rs. 130 million.3 Sports analysts commented that this was solely due to the efforts of SRK. According to the experts, Shahrukh Khan was able to successfully use his charisma to bring international sponsors like Tag Heuer,4 Sprite,5 Nokia6 for KKR. Noticeably, all these brands had SRK as their brand ambassador. The controversies did not leave KKR as Ganguly was stripped off his captaincy in the second season of IPL in 2009. He was replaced by Brendon McCullum at the last moment. Apart from that, an anonymous blogger, who called himself ‘‘fake IPL player’’, claimed to be a member of KKR team and started to reveal all the team secrets, minutes of team meetings, arguments between staff and team members, post-match parties and pre-match strategy [6]. Though it created a controversy in the team as well as in the media, the blog was found to be a fake [7]. KKR set up a Talent Resource Development Wing (TRDW) in 2009 to spot local talent across India and Makarand Wainganker (Wainganker), who had first initiated the TRDW concept for the KSCA7 was appointed as the chief of the project [8]. However, the controversies followed KKR even there as Wainganker resigned after having to fight continuously with the then coach John Buchanan over team selection and Buchanan’s ‘‘multiple captains’’ theory [9]. On the brighter side, KKR was ahead of any other franchises to implement innovative ideas. KKR became the first team in IPL to choose their cheer leaders by a talent hunt show called Knights and Angels, which had Ganguly and Bollywood8 actor Purab Kohli as the judges. Unfortunately the winners of the show could not perform at IPL 2 as the local authorities only allowed South African cheerleaders to perform during the games. In 2010, KKR had a roller-coaster ride in the tournament. After 11 games, they were required to win all their three remaining games to qualify for the semi-finals. Unfortunately, they failed to beat Chennai Super Kings in Chennai leading to their ouster from the semi final spot. But, KKR made a decent finish to their 2010 season by winning their last two matches against the Rajasthan Royals and Mumbai Indians. The ouster of Ganguly from the team led to a decline in support for KKR. The crowds did not support the team in the initial stages of IPL 2011 and the newly appointed skipper, Gautam Gambhir (Gambhir), did not receive a good welcome 3

US$ 1=INR 44.8661 as of 13 June, 2011. TAG Heuer is a Swiss luxury watchmaker known for its sports watches and chronographs. 5 Sprite is a transparent, lemon-lime flavored, caffeine free soft drink from the house of CocaCola. 6 Nokia is the world’s leading mobile phone supplier and a leading supplier of mobile and fixed telecom networks including related customer services. It has its headquarters at Finland. 7 Karnataka State Cricket Association. 8 Bollywood is the informal term popularly used for the Hindi-language film industry based in Mumbai (formerly known as Bombay), Maharashtra, India. 4

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from the crowds. But, Eden Gardens stadium began to witness screaming KKR fans once again as the team qualified for the playoffs for the first time.

Brand KKR The name Knight Riders was chosen to reflect the idea that ‘‘by courage, youth, talent, ambition, focus & dedication and armed with the recognition that with great honor comes greater responsibility.’’9 The logo of KKR consisted of a blazing golden viking helmet against a black background with the name of the team Kolkata Knight Riders written in gold. The team merchandise was supplied by Reebok. The tag line of the team was chosen as ‘‘All the King’s Men.’’10 The official color combination as well as the design of the team kits was designed by Manish Malhotra (Manish).11 Manish chose black and gold because Black represented the courage of Maa Kali12 and gold represented the spirit of glory. In 2010, after continuous poor performances, KKR decided to change the color of their kit from clack and gold to purple and gold. The team mascot was called Hoog Lee, which was a lazy Royal Bengal Tiger who was passionate about burgers. The name Knight Riders was chosen keeping in mind the excitement and adventurism that that name reflects, and was a reference to the famous television show from the early 1980s called ‘Knight Rider’.13 Nokia was one of the companies who agreed to join Star Plus,14 Reebok,15 Tag Heuer, HDIL,16 Belmonte17 and The Telegraph18 as the sponsors of KKR. According to the experts, as SRK was the brand ambassador of all these companies apart from The Telegraph (The Telegraph has their base at Kolkata), it became easier for KKR to have such big brands as their sponsors. Nokia decided to go for an aggressive campaign to promote KKR. Devinder Kishore, director (marketing),

9

www.kkr.in SRK is fondly known as ‘‘King’’ Khan in India. 11 A noted fashion designer from India. 12 A Hindu Goddess. 13 Knight Rider was an American television series that originally ran from September 26, 1982, to August 8, 1986. The series was broadcast on NBC and starred David Hasselhoff as Michael Knight, a high-tech modern-day knight fighting crime with the help of an advanced, artificially intelligent and nearly-indestructible car. 14 STAR Plus is a Hindi language general entertainment television channel based in India. The channel is part of the STAR TV network’s bouquet of channels. 15 Reebok International Limited, a subsidiary of the German sportswear company Adidas, is a producer of Athletic shoes, apparel, and accessories. 16 HDIL is a leading real estate builder/developer in Mumbai, India. 17 Belmonte is SKumar’s new brand in the Rs 80000 crore apparel industry. 18 The Telegraph is an English daily newspaper in India founded in 1982 and published by the ABP Limited (an enterprise of Ananda Publishers). 10


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Nokia India said that, ‘‘To create a compelling engagement for the contest, we have undertaken a 360 degree approach to communication with a judicious mix of electronic, print and digital media, this includes a 15 s TVC (TV commercial), an eight-city print campaign, road shows in Kolkata over weekends during the IPL series. We will also be present online prominently through internet advertising as well as a viral campaign.’’19 apart from this, Nokia also organised several promotional events such as ‘Blog with Shahrukh!’ to capture the imagination of the people of Kolkata of all age groups. Even though KKR finished last in the 2009 season of the IPL, it still remained as the tournament’s most popular team [10]. In 2009 SRK entered in a sponsorship deal with Coca Cola’s ‘Sprite’ as a sponsor for KKR from 2009 season onwards, and for that SRK sacrificed his own contract with Pepsi India [10]. In 2010, SRK roped in XXX energy drink and LUX Hosiery apparel brand as KKR’s sponsors [10]. The question that arose was that what was there in the brand KKR, that despite the poor performance on the pitch for the first three seasons of IPL, it was able to attract sponsors such as Nokia, Sprite, XXX,20 etc., without any problem. Normally, the attitude of the corporate is to get attached to a winning team so that its audience could view the corporate as a winning outfit as well. But the same was not the case with KKR. The pundits opined that Nokia, Belmonte, Tag Heuer were associated with SRK even before KKR existed. Star Plus was associated with SRK from the Kaun Bange Crorepati (KBC) 3 times. Reebok got its products placed in SRK’s movie My Name is Khan, a Hindi film released by Fox worldwide, as it was the official kit supplier to KKR. Sprite, XXX and Lux Hosiery21 featured SRK in its advertisements only because they were sponsors of KKR. SRK had to make an appearance on the advertisements of the official sponsors of KKR to promote his own investment in the team of KKR. This was an opportunity which the small companies like Lux Hosiery and XXX could not afford to lose. As for KKR, the credit for their marketing success over the other franchises in IPL was largely due to the good brand image it was able to create during the first edition of the IPL. Kolkata being a city where the people are extremely fond of sports and arts, helped KKR immensely. As a result when SRK launched KKR with Ganguly as the captain of the team, the emotional impact it had on the Kolkatans, created a brand that became a household name. The KKR management used knew that their target market was west Bengal and they focused solely on promoting the team within that region. Even, for a national level competition, they came up with a Bengali slogan for KKR, which was the only slogan in the regional language among the other IPL franchises. The slogan: ‘‘KORBO, LORBO, JITBO RE’’ was extremely catchy and it became a household line of every cricket lover in Bengal. Further, KKR decided to launch different road-shows and competitions held in different cities of Bengal offering the winner the chance to meet SRK and Ganguly.

19 20 21

ibid. XXX Energy Drinks, is a subsidiary of the JMJ group. An apparel company owned by Ashok Todi and based in Kolkata.

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Before IPL, Cricket was considered just as a sport, but SRK and his promotional campaigns and the brand positioning of KKR made every Bengali a KKR supporter. The humanitarian efforts undertaken by KKR also made the franchise a very popular amongst the social circle [11]. In addition to that, KKR decided to recruit 70 boys (ten boys for each of the 7 home matches at the Eden Gardens) from the Future Hope22 organization. In 2009, Coca-Cola became the associate sponsor and official pouring partner of KKR. In return, Coke got the rights for putting Sprite on players’ apparel (leading arm) as well as on the Helmet. According to Venkatesh Kini, VP-Marketing, CocaCola India, ‘‘Twenty20 Cricket is clearly a growing passion with today’s youth. The success of IPL, 2008 has taken the game to a new high. It provides Coca-Cola India with a very exciting platform to connect with all its consumers. We are happy to bat with Kolkata Knight Riders as an associate sponsor and pouring partner. Our entire association with KKR has been conceptualized in an exciting and engaging manner, in keeping with both KKR and brand Sprite’s positioning, ‘Seedhi Baat, No Bakwaas… Clear Hai!’’23They also decided to work together to launch an extensive 360-degree campaign. The 360-degree communication effort included mass media, Out-Of-Home (OOH) media as well featuring Ishant Sharma, Brendon McCullum along with Ganguly. Apart from these, Sprite in association with Nokia also launched a ‘‘Para’’ (neighborhood) Cricket competition in Kolkata and sent 11cricketers of the winning Para to South Africa to cheer for KKR. Apart from Sprite, there were many more sponsors carried out other promotional campaigns as well. NOKIA was roped in by SRK as ‘‘presenting sponsor’’ of KKR. On this occasion, SRK said, ‘‘I thought of Nokia because Nokia could connect my 22 players who were diverse but came together in one thought- they hated the thought of losing’’ [12]. Nokia also came up with exclusive ‘‘Nokia 2 Hot 2 cool’’ album which featured five exclusive songs composed for the team by the prominent music directors such as Bappi Lahiri, Pritam Chakraborty and Vishal-Shekar. Nokia and SRK have additionally come up with a consumer contest titled ‘Millan of the Villains’, where people would get an opportunity to chat online with SRK on the issues related to KKR, IPL and his association with Nokia. As for KKR, they were able to hit the right tune as their marketing strategy was responsible for the brand image it was able to build during the 1st edition of the IPL. Commenting on this, Jay Mehta, co-owner of KKR opined that, ‘‘From the time of inception last year, Kolkata Knight Riders has far exceeded the expectation of competitors and compatriots in terms of our fan following and the success of our brand and business. With Sprite now on board as associate sponsor and official pouring partner, I am confident we will together provide more enhanced experiences to our fans and consumers, making the second season of IPL 2009, all the more action-packed and exciting’’ [13].

22 It is an organization set up to provide a home, education, medical care and opportunity to street children of Kolkata in 1988. 23 CocaCola India. Sprite to Bat with IPL Team, Kolkata Knight Riders as Associate Sponsor & Pouring Partner. [Online] www.coca-colaindia.com.


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The TV Campaigns According to the experts, in 2008 KKR came up with some exceptional promotional campaigns. The music video of its theme song, ‘‘Korbo Lorbo Jeetbo Re..’’ was picturized indicating how SRK was selecting the best people for KKR from across the different parts of society, indicating KKR was a team for everyone and not for a certain class of people. The first set of TV advertisements for KKR was able to generate enough hype about the team. In one of the advertisements, the team was shown to walk across a difficult terrain and desert to reach their aim, indicating that the team was ready to cross any difficulties to achieve their goals. In another advertisement, it was shown that a KKR bowler has appealed unsuccessfully to the umpire. Then he appeals again with such vigor that the umpire evaporates and the leg umpire gives the batsman out to save his life. This ad indicated that the furious and desperate nature of the team. In another advertisement, a KKR batsman was shown to get hit by a bowler 2–3 times in the helmet. The bowler asked the batsman whether he was hurt and whether he wanted to continue or not. The KKR batsman took out his helmet and took a bite off the ball and asks the bowler to go back and bowl again. This advertisement indicated the strength, power and the fearlessness from the point of KKR players. According to the experts, these advertisements hit the right cord to the people of Kolkata and across India making KKR an instant hit amongst the cricket lovers. In 2009, when the IPL shifted to South Africa due to the Lok Sabha elections, SRK launched a new promotional campaign for KKR. SRK danced to the tunes of ‘‘Korbo Lorbo Jeetbo’’ even though he had a broken hand in a sling. Though the tune was same, the theme was changed from the soft Bengaliness to a rougher and tougher African theme. The music video included African tribal dancers and SRK dancing in the rough and barren African terrain indicating the difficulties KKR was facing. In 2010, KKR came up with an advertisement indicating IPL’s return to India. The advertisement featured Ganguly, who was shown to be saying that he missed the Indian people’s love for him and the name ‘‘Dada’’ given to him fondly by the Indian people and was looking forward to hear it again in the Indian fields. The ad ends by showing Ganguly as saying ‘‘Dada ne bhi aapko miss kiya’’ (Dada missed you too).24 In the same year, KKR launched a campaign called Main Bhi Coach. The theme of the campaign was sarcastic in nature as it aimed at getting ‘expert’ advice from all over India to make KKR perform better for the third edition of IPL. The idea again caught the imagination of KKR fans as it gave them the opportunity to get their grievances and thoughts about the KKR’s game across to the team management (in theory, at least). It ensured that the brands KKR & Nokia got some more exposure; and in financial terms, both KKR and Nokia got the rewards. The campaign was launched across TV, radio, newspaper and outdoor media. The theme of the campaign was that anyone could be the coach of KKR. The TV 24

www.kingsrk.wordpress.com

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commercial portrayed a newspaper boy as the coach of KKR, taking a training session on hitting the stumps. The ad consisted of players like Ishant Sharma saying in frustration, ‘‘isse coach kisne banaya! (who assigned this person as the coach?)’’, followed by SRK saying very proudly, ‘‘maine (I did)’’. On the other hand, the radio commercial featured a housewife saying, ‘‘ball fainkna pati par belan fainkne jaisa hai (bowling is pretty similar to throwing belan at your husband)’’, while the print and the outdoor ads focused on the message that anyone could be the coach of the team [14]. One of the advertisements in the series of ‘‘Main Bhi Coach’’ was even directed by Farah Khan [15].25 In 2011, Nokia in association with KKR launched a new set of campaigns which included ads like ‘‘Maalish’’, ‘‘Lassi’’ and ‘‘Tension Mat le Yaar’’. These ads featured Players like Gautam Gambhir, Yousuf Pathan, Jacques Kallis, etc. and focused mainly on how to keep cool during the tensed times. The theme of these advertisements was that KKR reaches to people of different levels of society like the way Nokia reaches to them. These ads were directed by noted ad film maker Shoojit Sircar26 and according to the experts, were able to generate positive vibes about the team. However, in 2012 KKR changed their tagline from ‘‘All the King’s Men’’ to ‘‘New Dawn, New Knights’’. The process of changing KKR’s identity started in February 2012 when the global designing agency Lambie-Nairn was given the responsibility of creating the new logo for KKR [16]. Speaking on this issue Team owner Shahrukh Khan commented that, ‘‘The new identity of the brand is modern, vibrant and unique. We look forward to the upcoming season and our new campaign, ‘New Dawn. New Knights’’’ [16]. Sophie Lutman, creative director for LambieNairn opined that, ‘‘The KKR identity had a lot of quality but it was not designed for use across the wide range of platforms that are used today. We wanted to retain the existing heraldic imagery and purple and gold colours, as these features differentiate the team from competitors and ensure instant recognition. However, we needed to refine the logo and ensure that it would work across every touch point, from the screen to merchandising,’’ [16]. Commenting on the new image of KKR, the CEO of KKR, Mr. Venky Mysore opined that, ‘‘We have been fortunate that the KKR brand has become the leading brand in the IPL. We are working very hard to add value to our sponsors, grow our fan base and build a profitable business. I am confident that our new logo and our new campaign will help us achieve our objectives’’ [16].

The Online Promotional Activities KKR came up with a website www.kolkatanightriders.com which has all the match schedules, videos archives of matches, player interviews and blogs. It was able to succeed in becoming a regular destination of KKR fans to get the daily

25 26

Famous choreographer and director from Bollywood. A famous ad film maker from Barrackpore, Kolkata, based in Mumai.


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information of IPL including the videos, interviews and blogs. In addition, the website provided an opportunity for KKR fans to interact with KKR management as well as the players. The KKR website also included a contest section which was created by www.Contest2win.com where, the fans were faced with games such as quizzes, Hangman’s, Twisters prepared solely to test the fans knowledge about KKR [17]. These games were designed to allow the fans to interact with KKR players or fictional elements such as ‘Hoog Lee’ and ‘The 12th Man’. The adaptability of the contest engines supplied by C2 W helped KKR to create contents across genres as well as customize them whenever necessary. As for example, since McCullum was a hit after the first match of IPL 1, KKR launched a quiz game in the KKR website completely dedicated to McCullum. KKR used the flexibility of these contest engines supplied by C2 W that they have used these engines for their loyalty program of KKR as well. KKR created a set of contests in their website and asked the users to participate in those contests. The users could play at their own time within a certain time period and could score points. The highest scorers in those contests were then given the opportunity to become the registered members of KKR [17]. In 2011, KKR launched their official page on Facebook and Twitter [18]. KKR decided to use Facebook and Twitter to continuously engage and engage and interact with its fan base before, during and after the IPL season. For that purpose KKR joined hands with Bengaluru-based digital agency 22 feet, and gave the responsibility to 22 feet to handle KKR’s social media marketing activities [19]. Speaking on this occasion, Vineet Gupta (Gupta), managing partner, 22 feet, opined that, ‘‘From March 1 onwards, we will manage the social media presence of KKR for 12 months. Our mandate is to keep the brand alive before, during and after the IPL’’ [19]. As of 23 February, 2011 as a group in Facebook, KKR had a following of 11,000 members and on Twitter (www.Twitter.com/KKRiders), it was being followed by more than 31,000 Twitter members [19]. Gupta explained that 22 feet had plans to create original and unique content for KKR in the Facebook and Twitter and promised to build applications for the KKR team. He also emphasized on the role of social media to push the sales of KKR branded merchandise across the country [19]. Though KKR had a presence in Facebook, it was there only just as a group. KKR decided to go for a webpage in FaceBook so that they could include several customized KKR applications that will be developed and will be made available to the KKR fans. It was interesting to see that SRK, who was not an ardent fan of social networking sites, used both FaceBook and Twitter to promote KKR and to communicate with KKR fans across the country and across the globe [18]. Apart from this, KKR took the help of Indigo Consulting, a Mumbai based digital creative agency to come up with an iphone, ipod and ipad application known as ‘‘KnightWatch’’ to extend its reach to its fan base. KKR was reported to have 46,584 followers in Facebook. In addition to that, it had 659 Twitter followers (1.43 % growth) in the last 14 days as of 10 July, 2011 [20].

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The Problems for KKR For KKR, IPL 2008 started with a bang as McCullum single handedly dealt a defeat to the Bangalore Royal Challengers. Overnight KKR became the team everyone was talking about. In addition to their performance in the first match of IPL, SRK’s presence and glamour helped KKR to be an indistinguishable part of IPL. However, that performance deserted KKR since then and it continued till IPL 2010 [21]. The problem for KKR started during IPL 2009 season as the then team coach John Buchanan (John) decided to get involved into the unique experimentation involving the rotating captaincy policy. John Buchanan’s decision of removing Ganguly as captain and giving charge to McCullum disturbed the unity of the team. The team finished at the bottom of the table. SRK again got himself surrounded by controversies related to IPL as he openly came out in support of inclusion of the Pakistani players in the IPL which agitated some political parties. As if it was not enough, the endorsement deal with Lux Cozy brand for KKR came into much criticism from both the public as well as from the legal front. SRK roped in the inner wear brand Lux Cozy as one of the kit suppliers and he was appointed as the brand ambassador of Lux Cozy. The owners of the company, Ashok Todi and Pradip Todi were accused of supporting of murder in one of the most controversial cases in Bengal. Finally, KKR decided to part ways with the sponsorship deal with Lux Cozy [22]. During IPL 3 season, KKR was performing better than the first two seasons of IPL. They won their first three matches of the season. But then they lost their way again and could not qualify for the semi-final for a third straight season [21]. Even though the team consisted of several big names both in international and national level (such as Chris Gayle, Ishant Sharma, etc.) the highest scorer for KKR was Ganguly who retired from international cricket. It indicated the level of effort given by the KKR players. Though he played well at a personal level during the IPL 3 season, he lost the aggressiveness that made him a standout captain. Kolkata might have become the most successful franchise of IPL commercially, but as SRK spoke publicly about his emotional attachment with KKR, he was concerned about the performance of the team as well. At the end of another failed attempt to reach the semi final of IPL 3rd season running, SRK signed out from his KKR blog page knowing that the team again disappointed its supporters and the people associated with it [21]. In 2011, KKR came out with a completely new looking team (the team consisted of only four players from the previous editions: Iqbal Abdullah, Manoj Tiwary, Jaidev Unadkat and LaxmiRatan Shukla) and a new captain (Gautam Gambhir) at its helm, KKR was desperately looking for success that it could not achieve in the previous three editions. But, as always controversies rocked KKR once again, the decision to drop Ganguly from the team was not taken in good mood by the KKR fans. And it was reflecting in the attendance in the stadium as well. Though KKR won their first match at the Eden Gardens, the stadium was


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almost half empty. KKR fans openly came out and criticised SRK for not taking Ganguly in the team, the fans even threatened to boycott the matches at the Eden Gardens. Understanding the depth of the problem, SRK tried to convince the people of Kolkata by declaring that Ganguly was the source of inspiration for KKR and offered Ganguly the role of mentor for the KKR players. Ganguly refused politely and in the later part of IPL 4 season, joined the Pune Warriors as a replacement to Ashish Nehra [23]. This decision of Ganguly went against the image of KKR as Ganguly’s fans comprehended that it was a ploy by the KKR management to save their face and retain the strong base that they were able to build over a period of last 3 years.

The Road Ahead KKR finally showed their ability on the field and was able to reach the top four for the first time in the IPL history.27 By reaching the top four of the IPL table, they also got the opportunity to fight for a place for the Airtel Champions’ League28 to be held in India during September–October of 2011. As KKR started to perform on the ground, the fans returned to the Eden Gardens and it was a great sign for KKR. Finally, the performance of KKR on the field was at par with its performance off the field. But as always some skeptics would always make themselves heard. JWT India29 CEO Colvyn Harris opined that, ‘‘They have created a lot of hype around it but it remains to be seen how IPL lives up to it. The slots that they have taken are tough as far as grabbing the attention of the prime-time audience is concerned’’ [24]. But, in this case, their opinions seemed to be right as the latest Brand Finance30 study indicated an 11 %, or US$460 million drop in the brand valuation of IPL [25]. Starting from 2008, a couple of years solid growth ensured that value of IPL was more than doubled by 2010, with a valuation of $4.13 billion in 2010. In 2011 the valuation was found to be at a price of $3.67 billion. Speaking on this issue, M Unni Krishnan, MD of the India office of Brand Finance opined that, ‘‘The honeymoon is over; the IPL juggernaut has sure hit a speed breaker, now its sustainability will largely depend on infusing governance policies to align all the stakeholders towards win–win relationships, thereby preserving the value in the long run.’’ [25] Talking on the aspects of franchise branding, Swapan Seth, CEO of 27

www.ipl.com The Airtel Champions League Twenty20 is an international Twenty20 cricket competition between club teams from India, Australia, England, South Africa, Sri Lanka, New Zealand and West Indies. 29 JWT (J. Walter Thompson) is the world’s best-known marketing communications brand. Headquartered in New York, JWT is a true global network with more than 200 offices in over 90 countries. 30 A UK-headquartered firm that specialises in brand valuation. 28

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Equus Red Cell31 opined that: ‘‘They have not really been able to whip up the euphoria. The team branding has also not been done properly.’’ [24] Fortunately this was proved wrong by the franchises led by KKR. As the figures indicate, though the brand value of IPL had decreased, the aggregate brand value of all franchises increased from $333 million in 2010 to $355 million in 2011 [25]. The brand values of the franchises were evaluated on the basis of financial, marketing, cricket acumen and corporate governance. It was found that apart from Rajasthan Royals, King XI Punjab and KKR, the other six franchises were able to improve their brand values [25]. This again put the brand KKR in dilemma. When KKR was performing poorly on the field, they were having a better brand value, while in the 2011 edition of IPL, even when KKR’s performance was the best compared to its previous performances, their brand value did not improve. The question is whether KKR has started losing the race off the field as well?

Questions 1. What was most influential in creating the brand identity of KKR? Was it the team or the presence of star players in the team or was it the brand identity of its owner? 2. Could the identity creation strategy of KKR be applicable across all the industries? Explain. 3. What possible roles might the sponsors have played in the creation of KKR’s brand identity?

Exhibit 1: KKR at a Glance Owners—Shahrukh Khan (Red Chillies Entertainment) in partnership with Juhi Chawla, Jai Mehta (Mehta Group). Franchisee Fee—USD $75.09 million (for a term of 10 years) Main Sponsors—Nokia, Belmonte, Royal Stag, Tag Heuer, Sprite, Reebok, Videocon d2h, XXX energy drink Valuation—approximately USD $ 100 million as of 2012 (after winning the IPL season 5) Brand ambassador—Shahrukh Khan. Chief Operating Officer & Managing Director—Venky Mysore Director—Joy Bhattacharya

31

An advertising firm based in Mumbai.


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Coach—John Buchanan (2008–2009), Dav Whatmore (2010–2011), Trevor Bayliss (2012–present). Assistant Coach—Vijay Dahiya Bowling coach and mentor—Wasim Akram Physiotherapist—Andrew Leipus Physical Trainer—Adrian Le Roux Mental Skills Coach—Rudi Webster Team Analyst—A. R. Srikkanth Most Expensive Player—Gautam Gambhir (USD $ 2.4 million) Captain—Gautam Gambhir

References 1. Gambhir, G. (26 May 2011). Gambhir praises fighting spirit of Kolkata Knight Riders. The Times of India [Online]. Retrieved April 17, 2012, from http://articles.timesofindia. indiatimes.com/2011-05-26/news/29585476_1_kkr-skipper-gautam-gambhir-kolkata-knightriders-manoj-tiwary 2. The Times of India. (14 January 2011). Facebook’s Ganguly fans plan protest March. Retrieved April 20, 2012. 3. Cricinfo. (20 January 2010). IPL matches to be broadcast live on Youtube. Retrieved January 21, 2010. 4. Bhat, V. (8 April 2011). Brand IPL comes under a cloud. Business-standard Retrieved December 12, 2011. 5. Biswas, S. (13 April 2012). Why is the Indian Premier League floundering? [Online]. Retrieved May 15, 2012, from http://www.bbc.co.uk/news/world-asia-india-17699415 6. Blogger Bounces Knight Riders. Retrieved April 21, 2009, from www.cricketvoice.com 7. Aney, S. (28 August 2010). And the ‘Fake IPL Player’ is… [Online]. http://www. hindustantimes.com/News-Feed/TopStories/CricketNews/Article1-593020.aspx 8. Zee News. (2009). Waingankar Joins Kolkata Knight Riders as Trdw Chief [Online]. http:// zeenews.india.com/sports/sports/waingankar-joins-knight-riders-as-trdw-chief_16432.html 9. Waingankar, M. (30 May 2009). In a Hell Called Kolkata Knight Riders [Online]. http:// 178.63.30.31/article/sports/in-a-hell-called-kolkata-knight-riders 10. Rao, K. S. (31 January 2010). Brand SRK Bags Big Bang Deals for KKR [Online]. http:// articles.economictimes.indiatimes.com/2010-01-31/news/28407662_1_kkr-brandambassador-apparel-brand 11. Future Hope. (2010). Future Hope Children to be IPL Ballboys [Online]. www.futurehope.net 12. One India. (18 April 2008). Shahrukh Launches Nokia 2 Hot 2Cool [Online]. http:// entertainment.oneindia.in/bollywood/features/2008/shahrukh-2-hot-2-cool-180408.html 13. Goswami, S. R. (18 Feb 2009). Coke and Knights seal deal [Online]. http://www.telegraphindia. com/1090219/jsp/frontpage/story_10558849.jsp 14. theamarketer.com (2010). KKR’s Latest Marketing Gimmick: Main Bhi Coach. www.theamarketer.com 15. Planetsrk.com. Farah Khan Directs Kolkata Knight Riders Ad for Shah Rukh. www.planetsrk.com 16. Afaqs.com (15 February2012). KKR set for ‘New Dawn, New Knights [Online]. http:// www.afaqs.com/news/story/33086_KKR-set-for-New-Dawn.-New-Knights 17. Livemint.com (13 May 2008). Kolkata Knight Riders Tie-Up with C2W for Customized Contests [Online]. http://www.livemint.com/Consumer/b2JSl6LtdAmyMr0qbGfxrL/KolkataKnight-Riders-tieup-with-C2W-for-customized-contest.html

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18. Ashar, U. (2011). SRK IPL 4 [Online]. http://timesofindia.indiatimes.com/SRK-IPL-4/ speednewsbytopic/keyid-579654.cms 19. Ohri, K. (23 February 2011). Kolkata knight riders appoints 22feet for social media marketing [Online]. http://www.afaqs.com/news/story/29769_Kolkata-Knight-Ridersappoints-22feet-for-social-media-marketing 20. Kolkata Knight Riders Social Media History. www.sportsfangraph.com 21. Ameya. (2010) Should SRK Reconsider Kolkata Franchise? Retrieved April 15, 2010, from www.cricketsimple.com 22. Bhattacharjee, S. (23 February 2010). Amidst Controversy Shahrukh Drops Todi. www.entertainment.oneindia.in 23. IPL Kolkata Knight Riders KKR Team Details and Controversies. www.liveiplscore.com 24. IPL’s Big Branding Game. Retrieved April 22, 2008, from www.sifysports.com 25. IPL-4: IPL’s Brand Value Falls By 11% to $ 3.67 Billion. Retrieved April 7, 2011, from www.ipl4odds.com

Case Study 9: The National Basketball Association (NBA) in China Adrian Pritchard

History of Basketball and the NBA Baseball was invented by James Naismith in Springfield, Massachusetts, USA, in 1891.The sports popularity grew with the first professional competition in 1896 at a Young Men’s Christian Association (YMCA) event in Trenton, New Jersey. A number of leagues were formed in the late part of the nineteenth and early twentieth century operating with varying degrees of success. The NBA was formed as the Basketball Association of America (BAA) in 1946. It emerged as the strongest league in 1949 with 17 teams, following its merger with the National Basketball League (NBL). Since then it has consolidated its position in North America. Currently the league has 30 teams; 29 in the USA and one in Canada; they play at least 82 games a season (the regular season). This usually runs from late October until April. However, a dispute between players and management meant the 2011/12 season start was delayed until December. The eight best performing teams then proceed to the play offs which run until the Final in mid June [1]. In the USA the sport is governed by USA Basketball, a non profit organization, responsible for the rules of play and the national team. The NBA as the main league is a far wealthier organization. It is headed by a Commissioner and power lies in the hands of a Board of Governors (the 30 team owners), there are no outside investors in the league. In addition to the NBA two other leagues are run: WNBA (Women’s National Basketball Association) a twelve team league; and the NBA Development League (the D-League) a 16 team league founded in 2001.1 This is the official minor league and part of its purpose is to act as a feeder league for NBA. Unlike European sports leagues there is no movement of teams between leagues. New teams, usually referred to as franchises, are only allowed entrance by 1

For a brief history of the three leagues see www.nba.com/careers/prolevel_leagues.html.

A. Pritchard (&) Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected]


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agreement of existing franchise holders. As in most American team sports there is a clear profit motive in the operation of the franchises. Those that make losses are likely to cease operating, be sold to new owners and/or relocate to other parts of North America.2 The main streams of income in the sport are from: spectators at matches, sponsorship, broadcasting and merchandising. There are a number of broadcasting partners the main one being NBA.TV an American sports channel dedicated to the sport, which is backed financially by the NBA. The channel also broadcasts every game on line through their portal at www.nba.tv/nbatv/. This subscription service is available globally, though a number of countries are excluded including the USA and Mainland China. International sales of products and services are estimated to account for about 15 % of the leagues revenue [2].

Basketball in China Introduced into the country in the 1890s by YMCA missionaries the sport caught on quickly throughout the country, being declared a national pastime in 1935. The Chinese government estimates that 300 million people currently play the sport. The national team is regarded as one of the best in Asia and has regularly competed at the Olympics, though the standard of play is not as high as the USA. The top league in the country is the China Basketball League (CBA) which has 17 teams and began in 1995. Their season runs from November to February with teams usually playing three games a week. Each team is allowed two foreign players on the court at any time, some of these have played in the NBA [3]. Sport within China is administered by the China General Sports Administration. Details of their strategy are contained within the National Policy Framework, which is updated every 5 years. Basketball is viewed not only as recreation but also as a significant industry impacting both on society and commerce. Though much of the control of the teams still lies in the hands of the state at both a national and regional level, both local and foreign corporations have become increasingly involved in the sport. There are plans to transfer all the teams to private ownership [3].

NBA Involvement in China NBA has worked with the Chinese basketball authorities for a number of years. The first game played in China between the then Washington Bullets and the Chinese national team took place in 1979. In turn the USA first hosted the Chinese

2

For a detailed history of franchising in North American sport see Frank Jozsa Big sports, big business. Prager: USA, 2006.

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national team in 1985. The league’s television deal with China Central Television (CCTV) dates back to 1987 when footage of NBA games was provided in exchange for a share of advertising revenue. Viewing figures grew through the 1990s, receiving a great boost when CCTV5 began to broadcast live matches and Yao Ming joined the Houston Rockets in 2002 and became one of the star players in the NBA. Games have been played in China as pre-season warm up for the NBA since 2007. In addition to staging matches and selling broadcasting rights the NBA engage in a number of other activities. Touring basketball events have been staged, merchandise is sold through a range of retail outlets and a Hong Kong office opened in 1992. The NBA became the first American sports league to stage games in China in 2004 with the NBA China Games in Beijing and Shanghai. Online http://china.nba.com/ has become one of the most popular sporting sites in China. The NBA also advised the Beijing Organizing Committee for the Olympic Games (BOCOG) on the design of the Basketball arena that was to be used during and after the 2008 Olympics. The arena management venture is run by a partnership involving BOCOG, NBA China and AEG, a wholly owned subsidiary of Anschutz who operate facilities in the USA. Arenas have since been opened in Guangzhou and Shanghai. In addition to basketball games they stage concerts, shows and a wide range of events that have even included a travelling circus [4]. Eric Drummond sees a number of attractions in the Chinese market. Size is the obvious one. The 1.3 billion population includes a growing middle class, 400 million people have moved out of poverty in the last 20 years. The sport is also one of the most popular in the country, particularly in the 15–24 age group with 83 % identifying themselves as fans of NBA. The popularity is evidenced by viewing figures In 2007, when an estimated 200 million Chinese watched a regular season game between Houston Rockets, with Yao Ming in the line up and Milwaukee Bucks, with Yi Jianlian [4].

NBA China In 2008 NBA China was formally established as a separate legal entity to conduct all of the league’s business in Greater China (China, Hong Kong, Macau and Taiwan). The aims are to get more people interested in the sport with a strategy that involves sponsorships, promotions and staging events [5]. Five strategic partners invested $253 million to acquire 11 % of the share capital: ESPN (5 %), Bank of China (2 %), Legend Holdings (2 %) and Li Ka Shing Foundation (1 %) acquired 10 % which was the initial plan. China Merchants Bank were allowed to purchase a further 1 % because of their strategic importance. The venture was valued at $2.3 billion by Goldman Sachs at the launch. By 2010 there were three offices based in Beijing, Shanghai and Hong Kong. Though specific financial information is not disclosed industry estimates put revenue at between $150 and

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170 million in 2010. The leagues overall revenue for the same period was $4.3 billion. [6] David Stern, NBA Commissioner, announced at the formation that: The strategic investment from these companies will allow us to continue working with the General Administration of Sports and the CBA to grow our sport and emphasise in both rural and urban Chinese communities its contribution to fitness, health lifestyle and an appreciation of teamwork [5].

Sponsorship and licensing are arranged locally, a number of partnership deals have been signed, see Table 1. Local grassroots activity is an important part of the marketing strategy as the league tries to promote the sport to young fans. Popularity is also evident among Chinese social media sites such as Weibo and QQ where it is estimated there are over 45 million fans of the NBA and 4.7 billion page views on the league’s website. NBA has high level of awareness among the Chinese, 95 % are aware of it and 89 % claim some interest in it [7]. The first ever NBA Chinese New Year Celebrations were held in January/ February 2012. These involved a 21 game broadcasting schedule, customized content and a variety of themed events in both the USA and China, viewing figures in China were estimated at 96 million people [8]. NBA China Jam Live a 6 day entertainment event was held involving exhibition games and celebrity coaching in May 2012. NBA Nation a 6 month travelling basketball and entertainment roadshow was planned for later in the year [9].

Table 1 NBA China marketing partners Partners

Category

Adidas Amway Cisco Coca-Cola EA Gatorade Lenovo Mengniu Nike Oppo Peak Spalding Toyota Tsingtao Visa

Sportswear Non-liquid vitamin and dietary supplements Technology solutions Soft drinks Video games Sports and energy drinks Personal computers Dairy products Footwear Mobile handsets Athletic footwear Basketball Automotive Beer Payments products and services

Source Lombardo (2010) [6]

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Distribution of NBA products and services in Greater China NBA Sponsorship

NBA Matches in USA

NBA League Pass live stream (only in HK , Macau and Taiwan)

NBA Matches in China

Broadcasting via CCTV

Merchandise and licensing

NBA-China

Coaching and events (some with CBA)

Arena management

Social media

Retailers

NBA retail stores

Greater Chinese consumers (China, Hong Kong, Macau and Taiwan)

Fig. 1 Distribution of NBA products and services in Greater China

Current Situation The NBA is far more active in China than other team sport marketing a wide range of products and services using a number of distribution channels, see Fig. 1. Other team sports have also been attracted to the Chinese market. The NFL (National Football League) has plans to play games in China, but this has yet to happen. European football teams have played in China, but most of the games have been exhibition matches and there has been criticism over fielding weakened teams and ticket prices. Critics of the NBA in China argue that there are not enough games staged in China. There is also concern that since the retirement of Yao Ming in 2011, there is no Chinese player in the NBA to maintain interest. The NBA has also been unable to date to create a Chinese affiliated version of the league. How such a league, if created, might function is not clear. It could take the form of a co-branded league; a league with Chinese franchises; as a tournament between North American and Chinese teams; or a variant on these themes [10]. The CBA league is also becoming stronger as the countries wealth increases and entrepreneurs take more interest in the sport [11].

Questions 1. Explain the advantages and disadvantages of setting up a separate company to operate in China. 2. Are there likely to be any areas of conflict in the future between NBA’s online offering and their broadcasting partner CCTV? Explain how these might be overcome.

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3. Explain the advantagers and disadvantages of NBA China’s distribution system for merchandise in China. 4. Eric Drummond, Head of HRM at NBA claims that their best export is not a team but their knowledge of how to run a professional league. Evaluate this statement. 5. Explain the advantages of the joint venture in arena management with BOCOG and AEG. 6. Evaluate the setting up of a NBA China league with franchised teams.

References 1. ESPN (2011). NBA cancels first 2 weeks of season. http://espn.go.com/nba 2. Drummond, E. (2009). Entrepreneurship a good play for NBA in China, Institute for International Business—Global Forum Report, Winter, 4–15. Drummond was at the time of publication Head of International Human Resources for the NBA. 3. Bou, F., Chen, D., Guo, S., Han, F. & Liao, M. (2011). Beyond Yao: The future of Chinese basketball, Knowledge@Wharton. 4. Drummond, E. (2009). Entrepreneurship a good play for NBA in China. Report: Institute for International Business—Global Forum. p.14. 5. NBA (2008). NBA announces formation of NBA China http://www.nba.com/news/ nba_china_080114.html 6. Lombardo, J. (2010). After two years, NBA China on steady course, Sports Business Daily.com. 7. Smith, D. (2012). Toronto raptors guard DeMar DeRozan takes NBA message to China. The Star. 8. Martin, B. (2012). Big things are happening in China. www.nba.com/global/news 9. Chine Daily (2012). NBA China program draws 96 m viewers. www.chinadaily.com 10. Bou, F., Chen, D., Guo, S., Han, F. & Liao, M. (2011). Beyond Yao: The future of Chinese basketball, Knowledge@Wharton. 11. Yardley, J. (2012). The New York Times: The NBA is missing its shots in China. 1 Feb.

Part IV

Product Development and Market Entry

Introduction to Product Development and Market Entry Geoff Alcock and Ali Baig

How can managers increase the profitability and profit growth of their organisations? This is a central marketing challenge and drives the strategic marketing thinking of many firms. In recent years, economic uncertainty, rising costs and saturated domestic markets are coercing managers to look to untapped and undeveloped overseas markets, which, if approached appropriately, could offer potential solutions for organisations seeking greater financial returns. Fundamental marketing theory has for decades been built around the core strategic solution of entering new markets, and as a result, seminal models such as the Ansoff growth matrix [1] sit alongside other models of competition and product/market portfolio analysis at the foundation of the discipline. Ansoff encouraged the marketer to think beyond the current market of operation and product range. He demonstrated that business growth could result from further market penetration of current products into existing markets but it is the evaluation of the potential risks and rewards of product and market development that can present the greatest opportunities for sustainable and continued success. Until recently, the greatest financial benefits were reaped by entering markets and producing new goods for wealthier developed nations. Lack of economic development and smaller potential target segments made more developing countries unattractive or unviable for product or market development. This paradigm, however, no longer holds true. The balance of global wealth has long been tipping from west to east and the arrival of the 21st century has now cemented this shift [2]. Unprecedented growth in China and other emerging markets of Eastern Europe and Asia now means they have become the fastest expanding source of potential profitability and profit growth for organisations. The global changes in social-demographics, means that there is growing demand in these markets for G. Alcock (&) A. Baig Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected] A. Baig e-mail: [email protected]


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sophisticated goods and services. Huge swathes of the populations of India and China now have the requisite financial resources, material aspirations and appetite for consumption that savvy marketers are attempting to satisfy. On-going development of other nations such as Brazil and Russia is driving the focus towards emerging markets, and is amplified by the effect of the global financial crisis as well as saturation and stagnation in the established economies. However, as the case studies in this section will illustrate, marketers must not apply traditional strategic models as if in an old-fashioned context. They must be cogniscent of the more complex environmental patterns that now shape international markets. The classical dyadic relationship between the developed, highly productive economies sourcing low-cost materials and labour from foreign markets, and selling back appropriate goods and services, has metamorphosed into a more multi-dimensional picture. Patterns of business ownership, global trading and communications networks, and a more fragmented map of sub-economies have all contributed to this. Many of the principles of product development and market entry can still be used. However it is best now to think not of a home market and a foreign market, but of a single fragmented market full of diversity, opportunity and risk. One of the implications of this dynamic international marketing environment is that faster new product development capability is essential for firms striving for a higher degree of export involvement [3]. It is also important for marketers to consider product development and market entry options together, in the context of substantive international market analysis. The questions of whether and how to enter new markets will inevitably feed into those of how to adapt or standardise products and product portfolios. The pressure for local responsiveness conflicts with the need for cost reductions but it is clear that adaptation is crucial to avoid potential rejection of products or services by consumers. International brands such as McDonalds (illustrated by its growing success in India) and Cadbury’s (now as part of Kraft Foods) have come to understand the importance of adapting their offerings to different local tastes and cultures, while maintaining and exploiting the global powers of their economies of scale and their specific brand appeals. These principles can equally apply to brands that have grown from within the emerging economies themselves. Shangri-La (hotels) group provides a case study that encapsulates the brand appeal of ‘Asian hospitality’ that needs to be adapted to the more individualistic cultural values of non-Asian markets to facilitate successful international market entries. In other instances the core product itself is adapted in less fundamental ways in response to the cultural demands of the country or region. In the case of the Aakash tablet the company, the British registered and Canadian founded company Datawind, have worked in close collaboration with the Indian Ministry of Human Resource Development. Here the adaptation is primarily focussed on the requirements of unit prices, and the technological and educational infrastructure of the target market. While the adaptation can be construed as cultural in the broad sense of the term, the challenges have been primarily economic and technical. In the case of the United States NBA (National Basketball Association) in China, the

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core product offering is not in dispute; the Chinese love their basketball. The challenge is one of engagement of the population, and making the sport and its derivative products and services accessible to them. While reading the case studies the reader is encouraged to consider the fundamental theories and disciplines of product development and market entry. Companies are liable to analyse their product portfolio in the international market context. It is possible, in terms of the Boston Consulting Group’s growth-share matrix, for a ‘Dog’ in a mature market to become a ‘Star’ in an emerging market, and for products at saturation or in decline in the Product Life Cycle [4] to find new growth in alternative settings with minimal or minor adaptations. Where new product development is a requirement, it would seem reasonable for a company to test both the concepts and the specific emerging markets before proceeding to full commercialisation. The product development and market development approaches may well run in parallel, as ever greater commitments are made to markets through the establishment of distribution networks, licensing agreements or the establishment of full production and marketing subsidiaries. An alternative approach is through the establishment of strategic alliances to facilitate international market penetration. The alliance may be with a company indigenous to the target nation or region, or, as in the case of the Kraft purchase of Cadbury, the acquisition of a brand with an established presence in target world markets on which other brands and products can ‘piggyback’. Companies can therefore gain many strategic and financial advantages through product and market development internationally. However, many have also come to realise that a strategic overview and control of global marketing operations is essential also for the long term health of brands. A balance is needed between the local requirements of marketing mixes to achieve success in diverse markets, and the consistent need to retain core brand attributes that are universal and therefore sustain the differential positioning of the company’s name and its international brands. This challenge is common to all the cases in this section. It may be a case of adapt or die, but if a brand is over-adapted it can lose its core identity and with that, its potential sustainability. It is in achieving this balance that the longer term global success of brands, and the ability to continue developing new products and successfully entering new markets under those brand umbrellas, may ultimately depend.

References 1. Ansoff, I. (1957). Strategies for Diversification. Harvard Business Review, 35(5), 113–124. 2. Agtmael, A. (2007). The Emerging Markets Century, Simon and Schuster. 3. Lim, J., Sharkey, T. W., & Heinrichs, J. H. (2006). Strategic Impact of New Product Development on Export Involvement. European Journal of Marketing, 40, 44–60. 4. Polli, R., & Cook, V. (1969). Validity of the Product Life Cycle. Journal of Business, 42(4), 385–400.

Case Study 10: A Sweet Deal: Cadbury Leads Kraft into Emerging Markets Lara Spiteri-Cornish

Introduction February 2010 saw the acquisition of Cadbury, one of the two major confectionary players in the world, by USA-based Kraft Foods Inc [1]. Analysts believe that the acquisition of Cadbury was the final step in a strategy designed to enable Kraft to be restructured and split into two companies by the end of 2012: a grocery business worth around $16bn; and a global snacks business worth approximately $32bn global [2]. Cadbury was pivotal in providing the scale that Kraft needed to strengthen its snacks business, providing it with the sought-after foothold in emerging markets, defined here as Latin America, Middle East, Africa, Eastern Europe and Asia Pacific. But how was Cadbury able to do this?

Cadbury: Background Cadbury was founded in 1824 when a Quaker named John Cadbury opened a shop in Birmingham, England to sell drinking chocolate as a virtuous alternative to alcohol. From 1969 it traded as Cadbury Schweppes plc until, in 2008, it split its global confectionery business from its beverages business which it renamed Dr Pepper Snapple Group Inc [3]. The company grew through mergers and demergers and by 2009 Cadbury was the second largest confectionery company in the world after Mars-Wrigley [4]. It marketed mainly three types of confectionery products, namely chocolate, gum and candy. In 2009, Cadbury held 10 % share of the global market and the top two positions in over 20 of the top 50 world confectionery markets with strong brands in the markets for chocolate (Cadbury, Fry, Bournville, Green & Black’s and Jaffa), gum (Trebor, Trident and Hollywood Chewing Gum) and candy (Bassett’s and Maynards) [3, 5]. L. Spiteri-Cornish (&) Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected]


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Kraft: Background Kraft, Inc. was established by James L. Kraft, the son of a Canadian farmer [6] In 1903 Kraft started a wholesale cheese distribution business in Chicago with the aim of relieving grocers of the need to travel daily to the cheese market by delivering cheese to their doors [6]. At first, business was slow but eventually it began to improve. James was joined by his four brothers, Fred, Charles, Norman, and John and in 1909 the business was incorporated as J. L. Kraft & Bros. Company. New product development, innovative advertising and strategic mergers and demergers fuelled the company’s growth[6–8]. In 2010, Kraft Foods Inc. was the largest food company in the United States and held the number two position worldwide, behind Nestlé S.A. It had two main operating units, namely Kraft Foods North America and Kraft Foods International. Its brands were divided into five main sectors: snacks (30.6 % of global revenues); beverages (19 % of global revenues); cheese (18 % of global revenues); grocery (16.6 % of global revenues) and convenient meals (15.8 % of global revenues). Top players for Kraft Foods Inc. included Kraft cheeses, Nabisco cookies and crackers, Maxwell House coffee, Philadelphia cream cheeses and Oreo cookies. By the time of the offer for Cadbury, Kraft’s top seven brands generated annual revenues of more than $1bn [4] each. In 2009, Kraft’s product portfolio led by the billion dollar Milka brand enjoyed a 7.8 % market share in the global chocolate market.

Kraft’s Foothold in Emerging Markets In 2010, the recession saw Kraft’s lucrative American market begin to stall. Conversely, emerging markets began to see double-digit expansion. While emerging markets have always underpinned both Cadbury’s and Kraft’s growth strategies (for example, in 2010 sales in emerging markets accounted for 38 % of Cadbury’s sales and 20 % of Kraft’s sales) [9, 10], Kraft realised that the acquisition of Cadbury would allow an increased market share in emerging markets where the multinational already had a strong presence (e.g. Brazil : Kraft’s 2008 revenue : $1.2 billion and China: Kraft’s revenue: $400 million) [9] and more importantly, a foothold in emerging economies where Kraft’s presence was minimal. Cadbury’s presence in emerging markets has historically been strong and in 2008, 60 % of its business growth came from emerging markets. Indeed, Cadbury enjoyed a dominant position in these regions when compared to other market leaders such as Mars and Nestle [11] (Fig. 1). It also generated 38 % of its sales from new ‘emerging’ markets [3]. Preacquisition results showed sales up by 5 %, with emerging markets showing growth of 9 % and developed markets 2 % [3]. India is one of the emerging 1

Cadbury Annual Report and Accounts 2008: Explaining Cadbury’s Markets.

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Fig. 1 Positions in emerging markets1

markets where Cadbury had a strong presence whereas Kraft had a minimal foothold. Since it was set up in India 60 years earlier, the corporation became the largest confectioner in the country with approximately 70 % of India’s US$425 million chocolate market,2 with Nestle coming a distant second. Analysts believe that Kraft’s acquisition of Cadbury was party motivated by its intention to penetrate the Indian market.

Krafts Acquisition of Cadbury The incorporation into its portfolio of Cadbury’s popular brands like Dairy Milk, Creme Egg, Flake, and Green & Black’s has made Kraft the biggest player in the global chocolate industry. The corporation increased its share in the high growth/ high margin packaged food market and also significantly strengthened its presence in highly lucrative emerging markets3. Cadbury’s infrastructure and distribution networks have been instrumental in Kraft’s increased market share in the Middle East, Africa, Latin America and India. In 2011, the acquisition of Cadbury began to pay off with revenue from emerging markets increasing from 23 to 30 %.4 In the Middle East and Africa, the company rose from 18th to third largest packaged food competitor [12]. Value sales in Latin America, Kraft’s largest emerging market before the integration with Cadbury, also rose to 14 %. Post-acquisition, Kraft’s portfolio increased to over 40 confectionery brands, each with annual sales of more than $100 million [11]. Total revenue for the quarter increased 11 %, to 2

Euromonitor (2011). How can Packaged Food Companies Grow their Presence in Emerging Markets? 3 See Footnotes 2 4 See Footnotes 2

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$12.6 billion, as sales rose 40 % in India, and 20 % each in China and Indonesia [13, 14]. Kraft also announced the opening of an $80 million manufacturing plant and an investment of over $200 million in Brazil, maintaining that this country is one of its 10 priority developing markets. However, the biggest success took place in India. India has historically been one of Cadbury’s most resilient markets. By 2008 sales growth of Cadbury in India averaged 20 % with profits growing at 30 % per annum [15]. Cadbury’s legacy increased Kraft’s share in the confectionary market exponentially and also enabled it to introduce its bestselling Oreo biscuits to the Indian market. In March 2011, Kraft sold Oreos under the purple banner of Cadbury rather than the red and white of Nabisco [16] to capitalise on its pre-existing equity in India. Further, the company also used Cadbury’s network of small mom-and-pop stores to push their Oreos and Lacta chocolate, a strategy which was also implemented in Mexico [17]. Prior to acquiring Cadbury, Kraft had no meaningful presence in India [18]. In 2012, Kraft’s combined retail value sales pushed US$1 billion, a nominal increase of more than 60 % since 2010.5 Cadbury’s historic local strength enabled Kraft to penetrate India’s virginal packaged food market, opening the door to product innovations, such as chocolate products that survive the extreme heat, which will seal its popularity.6 Kraft’s increased presence in emerging markets is strategically significant since growth of the confectionary market, of which chocolate represents the biggest segment with a 55 % share in value, has been considerably higher in emerging markets (10 % p.a.) than in developed markets (3 % p.a.).7 Indeed, the doubledigit annual growth in chocolate sales in emerging markets is forecasted to be the driving force behind increased market share in the future [11]. Analysts attribute this trend to higher population growth rates and rising affluence which has increased demand for affordable luxuries and treats. The importance of operating in emerging markets is evident when considering that by 2015 about 88 % of the global population is estimated to live in emerging markets. Further, by 2015 emerging markets are expected to post higher compound annual growth rates in total GDP then developed regions.8

Future Outlook In October 2012, Kraft changed its name to Mondele¯z International and spun off some brands into a new company called Kraft Foods Group. This company focuses on the North American food business, while Mondele¯z International focuses on the

5

Euromonitor International (2012). Chocolate and Cheese: The Way Forward for Mondelez International. 6 KPMG (2012). The Chocolate of Tomorrow: What today’s Market can tell us about the Future. 7 See Footnotes 1. 8 See Footnotes 2.

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global snacks business, including Cadbury. The start of 2013 saw Mondelez International (Cadbury in India) restructuring its emerging markets operations to create individual business units for India and China and dissolve the development markets division [19]. Under the new structure, Mondelez International will have a presence in five worldwide regions, namely Europe, North America, Latin America, Asia Pacific and Eastern Europe, Middle East and Africa. The company intends to focus its efforts across Asia Pacific, Latin America and the Middle East and Africa, all regions where Cadbury enjoys an established consumer base and supply chain networks. India and China are seen as ‘‘growth engines’’ [19] and are key components of the growth strategy of Mondelez International. Emerging markets are expected to make up to 44 % of Mondele¯z International’s revenue by 2016 [20] and it is believed that the profitability of its emerging markets business give it an advantage over other packaged food companies [11].

Questions 1. Has the acquisition of Cadbury by Kraft impacted the Cadbury brand? How? 2. Recently creations such as ‘‘Cadbury with Oreos’’ and ‘‘Philadelphia with Cadbury’’ have hit supermarket shelves in the UK. How do you think consumers respond to these products and why? 3. How can Mondelez International ensure its continuing growth in emerging markets? 4. What are some of the challenges that Mondelez International will have to face in the next few years? 5. China is a difficult market for confectioners. What strategies can Mondelez International implement to getter a stronger foothold in this market?

References 1. IBS Centre for Management Research (2011). Kraft’s Takeover of Cadbury. 2. Financial Times (2012). Kraft’s Takeover of Cadbury. 3. Burns, P. (2011). Entrepreneurship and Small Business (3rd ed.). Palgrave Macmillan Financial Times (2012). 4. Financial Times (2012). Kraft’s Takeover of Cadbury. www.ft.com/cms/s/0/1cb06d30-332f11e1-a51e-00144feabdc0.html 5. Shelley, A. (2009). Case study: Cadbury. Sweet like chocolate. Inside, 12(6). 6. ChoiceLevel (2009). Kraft Foods Inc. Business Background Report, Filiquarian Publishing. 7. Deogun, N., Fairclough G., & Branch S. (2000). Philip Morris agrees to acquire Nabisco, Wall Street Journal, A3. 8. Sanger, E. (1985). Still the big cheese, Barron’s, 51.

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9. India Knowledge@Wharton (2010). Sweet Surrender: Can kraft’s cadbury acquisition help it tap the Indian market? http://knowledge.wharton.upenn.edu/india/article.cfm?articleid=4451 10. Euromonitor International (2012). Unlocking the door: How cadbury acquisition increased kraft’s global footprint. http://blog.euromonitor.com/2012/10/unlocking-the-door-howcadbury-acquisition-increased-krafts-global-footprint.html 11. Nasdaq (2012). Emerging markets drive kraft’s chocolate & candy market share. 12. Euromonitor (2011). Kraft Foods Inc in Packaged Food (World). 13. Kraft Foods’ Q1 2011 Results—Earnings Call Transcript, May 5, 2011. 14. Bhushan, R. (2011, May 18 ). India fastest-growing market for kraft food. http:// articles.economictimes.indiatimes.com/2011-05-18/news/29555982_1_cadbury-portfoliooreo-biscuits. 15. Bhushan, R., & Vijayraghavan, K. (2010, January 20). Cadbury buyout gives kraft foods access to India. http://articles.economictimes.indiatimes.com/2010-01-20/news/28466189_ 1_kraft-foods-cadbury-s-dairy-milk-confectionery. 16. Euromonitor International (2012). Chocolate and cheese: The way forward for Mondelez international. http://blog.euromonitor.com/2012/10/chocolate-and-cheese-the-way-forwardfor-mondelez-international-.html. 17. Boyle, M. (2010, August 11). Kraft chief pitches Brazilian tang in blitz on emerging markets. http://www.bloomberg.com/news/2010-08-11/kraft-chief-rosenfeld-pitches-brazilian-tangin-blitz-on-emerging-markets.html. 18. Pinto, V. S. (2010, January 21). Kraft set to get a taste of India. http://www.businessstandard.com/article/management/kraft-set-to-get-a-taste-of-india-110012100018_1.html. 19. Vijayraghavan, K. (2013, February 27). Global snacks major Mondelez International ups focus on India with new setup. http://articles.economictimes.indiatimes.com/2013-02-27/ news/37331072_1_grocery-portfolio-cadbury-india-mondelez-ceo 20. Euromonitor (2011). Kraft Foods Inc in packaged food (World). http:// www.euromonitor.com/kraft-foods-inc-in-packaged-food/report

Case Study 11: Marketing of Services: The McDonald’s Way Rik Paul and Sanjit Kumar Roy

If you work just for money, you’ll never make it, but if you love what you’re doing and you always put the customer first, success will be yours. —Ray Kroc, Founder, McDonald’s Corporation.

Introduction For a lot of people, the name of McDonald’s instantly brings a smile. It is known for its crispy burgers and its wide network of outlets. The company started its business operations in India in 1996 as a 50:50 joint venture partnership between the two businessmen Amit Jatia (Jatia)1 and Vikram Bakshi2 (Bakshi). India was a challenging market, given local dietary preferences for vegetarian dishes. Tim Fenton3 pointed out that India’s eat out market was about $128 billion a year compared with $132 billion in China, but was growing faster than that of China. Adding that McDonald’s India is planning to open 40 stores in the country soon, Bakshi said, ‘‘Our comparable sales in metros have been nearly 20 % in 2010 and as the fast food market continues to expand across the country and across various consumer segments, there is tremendous scope for expansion [1]. With reference to the age old saying ‘‘when in Rome, do as the Romans do’’ Bakshi also 1

Amit Jatia, the MD of Hardcastle Restaurants, joined the McDonald’s family as the youngest JV Partner in 1995. He took hands on training for a year at McDonald’s in Jakarta (Indonesia) as well as a degree in Hamburgerology from the Hamburger University, Oak Brook (Illinois, USA). He was also nominated for ‘‘The Economic Times Awards for Corporate Excellence’’ as ‘‘Entrepreneur of the Year’’ in 2004 and 2005. 2 Vikram Bakshi became the MD, McDonald’s India (North and East) on September 28, 2006. He was also nominated as the President of the National restaurant Association of India. 3 Tim Fenton was the president of Asia, Pacific, Middle East and Africa and was accountable for the 38 countries and more than 8,200 McDonald’s restaurants in this region. He served as president, East Division, for McDonald’s USA. He was responsible for more than 5,200 restaurants in the eastern United States, covering eight geographical regions in 21 states. R. Paul (&) IBS Hyderabad, Hyderabad, India e-mail: [email protected] S. K. Roy Department of Marketing and Advertising, Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK


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commented on the USP of McDonald’s in India and the introduction of menu dishes like McAloo Tikki Burger,4 Pizza McPuff,5 McVeggie6 keeping in view the strong liking of north Indians towards spicy stuff [2]. From its India debut in 1996 with just one outlet at Basant Lok in Delhi, McDonald’s had 211 restaurants in India by 2011, of which 105 were in North and East India and 106 in West and South. Apart from the metros, McDonald’s also reached rural areas as well, with 14 outlets in Haryana, 11 in Punjab and 28 in Uttar Pradesh [2].

The Fast Food Market in India India, being a country of rich culture and heritage, its tradition is like a pearl necklace where every beautifully white pearl expresses customs like respecting elders, joint family tradition, and strong religious perspective that even extends to their food habits and forms an extremely strong and integral part of their life. Therefore Indian food completely differed from the food habits of the other people of other origins. Indian people are mostly fond of their own regional Indian food such as samosa,7 kababs,8 chola bhatura,9 pakoda,10 aloo-paratha,11 poori-bhaji,12

4

It is a vegetable burger, which includes a patty made out of potatoes, peas, and spices. It also includes tomato slices, onions, and vegetarian mayonnaise. 5 It starts with a rectangular shaped crust, but instead of a creamy sauce, it is flavoured with a tomato-based sauce and then is topped with carrots, beans, bell peppers, onions, peas and mozzarella cheese. 6 It looks similar to McAloo Tikki Burger, but starts with the sesame seed bun. In between the bread, there is a vegetarian patty made from peas, carrots, green beans, red bell pepper, potatoes, onions, rice, and seasoning. It is garnished with lettuce, and has mayonnaise spread thickly on the bread. 7 A samosa is a stuffed pastry and a popular snack in South and Southeast Asia. It generally consists of a fried or baked triangular, semi-lunar or tetrahedral pastry shell with a savory filling, which may include spiced potatoes, onions, peas, coriander, and lentils, or ground beef or chicken. 8 Kababs are a wide variety of meat dishes originating in Persia and later on adopted by the Middle East andTurkey, and now found worldwide. 9 Chole bhatura is a combination of spicy chick peas and fried bread called bhatura made of flour. 10 Pakoda is a fried snack (fritter) found across South Asia. It is created by taking one or two ingredients such as onion, eggplant, potato, spinach, plantain, cauliflower, tomato, chilli, or occasionally bread or chicken and dipping them in a batter of gram flour and then deep-frying them. 11 A paratha is an Indian flat-bread that originated in the Indian subcontinent. Parathas are usually stuffed with vegetables such as boiled potatoes, leaf vegetables, radishes or cauliflower and/or paneer (South Asian cheese). Aloo-paratha is the variety that is stuffed with boiled potato and spices. 12 The bhaaji is a vegetarian dish made from a vegetable. A typical north Indian lunch or dinner usually starts with Poori (flat bread), accompanied by one or more bhaaji(s).

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dosa,13 and sambar vada14 and these are available in both specialty and multicuisine restaurants throughout India. Home cooked foods are not only a preference but are also a matter of self esteem for most Indians. The Indian catering services sector of which fast food is a part is estimated to be worth Rs.15 570 billion, of which only Rs. 39.40 billion or 6.9 % is accounted for by the organized retail market.16 While such restaurants were expensive, there was a large unorganized sector consisting of roadside food vendors and dhabas17 which provided a wide option for food within affordable price ranges. The local food business had their own customers with distinct set of preferences [3]. There are 22,000 registered restaurants in India. In addition, there are thousands of dhabas that sell a variety of regional and regular foods in cities and on highways. Thus naturally it is a lot tougher for the foreign food markets to survive in a country which is already biased towards their own rich food habits and varieties. However, contrary to expectations, the foreign food companies were welcomed into the periphery of the Indian food circle and the problems that were considered fatal were erased and foreign food products were rapidly accepted into the household of the Indians. There was a sudden mushrooming of KFC, McDonald’s, Subway, Dominoes and Pizza Hut outlets [4]. (Refer to Exhibit I for a brief profile of the major players in the Indian fast food industry, Exhibit II for the percent share of the fast food market in India and Exhibit III for percent share of fast food chains in India). Organised food retailing in India had established north Indian and south Indian style classic restaurants mostly in the metropolitan cities. The big Indian food business companies were soon raging as they attempted to defend their strongholds in the country.

13 Dosa is a fermented crepe or pancake made from rice batter and black lentils. It is indigenous and is a staple dish in the southern Indian states of Andhra Pradesh, Karnataka, Kerala, and Tamil Nadu. 14 Vada can vary in shape and size, but are usually either doughnut or disc shaped and are about between 5 and 8 cm across. They are made from dal, lentil, gram flour or potato. Vadas are preferably eaten freshly fried, while still hot and crunchy and is served with a variety of dip called sambar. 15 Rs = Indian Rupee (s), Re. 1 = 100 paisa, In February 2011, US$1 = Rs. 45 (approximately). 16 V S Rama Rao, ‘‘Fast Food Retailing in India,’’ www.citeman.com, September 17, 2010. 17 In India, highways are dotted with local restaurants popularly known as dhabas (singular: dhaba). They generally serve local cuisine. They are most commonly found next to petrol stations, and are generally open 24 h a day.

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Exhibit I Some Major Players in Indian Fast Food Industry Company Profile Domino’s Pizza

KFC

Pizza Hut

Taco Bell

Nirula’s

Domino’s Pizza opened its first store in India in January 1996, at New Delhi. India Retail Report 2009 indicated Domino’s as the largest Pizza chain in India and the fastest growing multinational fast food chain between 2006–2007 and 2008–2009 in terms of number of stores. Over the period since 1996, Domino’s Pizza India had focused on delivering great tasting pizzas and sides, superior quality, exceptional customer service and value for money offerings. Domino’s Pizza India had grown into a countrywide network of more than 300 stores with a team of over 9,000 people by 2011. They also had established a reputation for being a home delivery specialist capable of delivering pizzas within 30 min or else FREE to a community of loyal consumers from all our stores around the country. KFC is the largest brand of Yum Restaurants, a company that owns other leading brands like Pizza Hut, Taco Bell, A&W and Long John Silver. Renowned worldwide for it’s finger licking good food, KFC offers its signature products together with introduction of many specialized offerings for its growing customer base in India. Its signature dishes include the ‘‘crispy outside, juicy inside’’ Hot and Crispy Chicken, flavourful and juicy Original Recipe chicken, the spicy, juicy & crunchy Zinger Burger, Toasted Twister, Chicken Bucket and a host of beverages and desserts. For the vegetarians in India, KFC also has great tasting vegetarian offerings that include the Veg Zinger and Veggie Snacker. In India, KFC had grown rapidly and by 2011 it had presence in 21 cities with close to 107 restaurants. Pizza Hut is one of the flagship brands of Yum! Brands, Inc. Pizza Hut is said to be the world’s largest pizza chain with over 12,500 restaurants across 91 countries. By 2011, in India, Pizza Hut had 140 restaurants across 34 cities, including Delhi, Mumbai, Bangalore, Chennai, Kolkata, Hyderabad, Pune, and Chandigarh amongst others. Yum! Also declared to be in the process of opening Pizza Hut restaurants at many more locations to service a larger customer base across the country. The first Taco Bell in India was launched at Mantri Square Mall, Bangalore, in March 2010. True to its brand promise of providing craveable tastes and unbeatable value, Taco Bell offered a wide range of products to mesmerize the Indian consumer. The menu in India included a variety of vegetarian and non vegetarian Tacos, Burritos, Signature Quesadillas, Grilled Stuft Burritos, Nachos, and other specialty items. Several combos to satisfy the craving for Taco Bell food at lunch, snack and dinner were also offered. It also offered unlimited refills on the entire Pepsi beverage range. Taco Bell focussed on a unique dining experience with the vibrant restaurant ambience, dynamic, set of activites, zest and contagious energy. Nirula’s was India’s oldest fast food restaurant chain, based in north India and most popular in Delhi. It started Delhi’s first fast food restaurant in Connaught Place in 1977. In 2011 it had over 75 outlets in NCR Delhi, Punjab, Haryana, Rajasthan, Madhya Pradesh and Uttar Pradesh states, which included familystyle restaurants. Nirula’s specialized in ‘‘Desi version’’ of western fast food as well as offered Indian cuisine, casual dining, pastry shops and ice cream parlours, and two hotels in Noida and Panipat. The company announced its plans to venture into a large number of quick service restaurants in every major city in India by the end of 2011. With an aggressive expansion strategy, the organisation planned to have a national presence by opening 150 new units in the next 2 years in high footfall locations. (continued)


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Exhibit I (continued) Company Profile Subway

Haldiram’s

Bikanervala

Sagar Ratna

Subway Systems India Pvt Ltd opened its very first restaurant in 2001 in New Delhi and had swiftly grown its operations to 183 operating restaurants in 26 cities across India. Although it is a global brand with a menu that is relatively the same around the world, Subway restaurants took great pride in honouring and respecting local traditions and food preferences and had earned a reputation for offering a healthier alternative to traditionally fatty and greasy fast food. Subway restaurant’s in India served no beef or pork products and had an expanded selection of vegetarian choices. Popular sandwiches, both local and international favourites, included Veggie Patty, Paneer Tikka, Aloo Patty, Chicken Meatball Marinara, Roasted Chicken, Chicken Teriyaki, Turkey, and Tuna. Established in 1937 it took more than six decades for Haldiram’s to become the leading manufacturer of Indian savoury snacks. Known for its unbeatable taste in Mithais and Namkeen segment, Haldiram was an household name to urban Indian consumers. Being a Rs. 1,200 crore company by 2011, Haldiram’s had diversified to fast food industry with 28 restaurants in the domestic market with an average size of 5,000 sq ft. the restaurants served assorted traditional vegetarian recipes together with the availability of a wide selection of chats and namkeens. Bikanervala was one of India’s most prominent families in the business of traditional hospitality products like Sweets and Namkeens. As of 2011 Bikanervala Foods Pvt. Ltd. was an ISO 9001:2000, HACCP and SQF 2000 cm certified company with four modern manufacturing units in the National Capital Region and a chain of 88 outlets in India and abroad, serving vegetarian north Indian, south Indian, continental, Chinese cuisine and fast food along with a vast variety of traditional Indian sweets and snacks. ‘Sagar Ratna’ is a well known brand of restaurant chain in northern India serving vegetarian cuisine with a speciality in south Indian delicacies. As of 2011 the company had more than 24 outlets and 29 franchisees and was still looking to grow more in the near future.

Source Compiled from respective company websites

Exhibit II Percentage share of food market in India (2010), Source Technopak Advisors

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Exhibit III Percentage share of fast food chains in India (2010), Source www.budding markets.com

McDonald’s India Entry Multinational company (MNC) restaurant chain owners had struggled consistently to adapt to the needs of India’s many markets from their earliest investments in India. Some even pulled out of the country after ventures that did not work out and had failed miserably. However, consolidation of the hugely fragmented Indian retail sector had also slowly begun, and there was a raw hesitation that Indians would prefer the foreign foods like burgers and fries to local food offerings. When McDonald’s India first launched in 1996, Indians in Mumbai and Delhi ate out three to five times a month. However, in the intervening decade, McDonald’s continued to open brand new outlets in the country, and evolved their marketing strategies through their impressive endeavours even though there were minor protests from existing political parties [5]. After the first Indian McDonald’s outlet in Mumbai in 1996, outlets had begun trading in metropolitan and Tier II towns across the country. By September 2008, it had premises in Mumbai, Bangalore, Baroda, Pune, Indore, Nasik, Chennai, Hyderabad, Surat and Ahmedabad. ‘‘The past decade has witnessed a marked change in Indian consumption patterns, especially in terms of food. Households in middle, upper, and high-income categories now have higher disposable income per member and a propensity to spend more,’’ said Amit Jatia in 2000. He further added that ‘‘Our growth plan for the next 3 years is more a function of getting our logistics and cold chain right rather than going too far off places [6]. By September 2008, McDonald’s had completed 12 years of its operations in India and had its presence in Mumbai, Delhi, Bangalore, Chennai, Hyderabad, Ahmedabad, Baroda, Nasik, Pune, Indore, Surat and other tier I and tier II cities [7]. Meanwhile, there had been a significant increase in the Indian eating out habit. Analysts expected the Indian quick service restaurant market to be US$6.3 billion by 2011.


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Marketing Strategies Promotional Campaigns In 2000, McDonald’s India came out with their first television ad campaign. It featured a child who suffers stage fright and is not able to recite a poem. On entering McDonald’s, he properly recites it in the store’s familiar and easy environment without any reluctance. A similar campaign featured a child and his family moving into a new unknown place. The child misses his previous surroundings until they see McDonald’s which provides something familiar and.18 Singhal said that the first TV commercial, Stage Fright, attempted to establish an emotional connection between the (Indian) family and the brand together with the aim of establishing McDonald’s as a familiar place. These storylines of the campaigns were all supported by other creative initiatives. The company promoted 1 min service guarantee which attempted to reinforce its reputation for quick, friendly and accurate service and it also ran in-store events for mothers and little children. K.V. Sridhar (Sridhar), National Creative Director, Leo Burnett,19 McDonald’s agency in India, said ‘‘In the launch phase, the communication focused solely on building brand and product relevance. The brand’s scores on relevance to families and kids were very high.’’ Furthermore the introduction of the toys and other little gimmicks that came along to with the meals appealed to the children and they all craved for more [6]. In 2004, McDonald’s realized the strong potential in the youth audience, but they considered McDonald’s to be expensive and pocket burning and were mainly for children. Thus the Happy Price Menu with a value message for a younger audience was launched and for the first time McDonald’s India saw an upsurge of young people entering the restaurants [8]. In 2008, the latest impressive campaign from the McDonalds-Leo Burnett stable used father-son duos from Bollywood20 to rejuvenate the theme of ‘‘Yesteryear’s Prices’’. It featured Bollywood stars from past decades along with their sons with the message that prices of the fast food had not risen in line with the onslaught of time [9].

18

‘‘The Burger Story’’ www.tonicpanel.com. Leo Burnett Worldwide is an American advertising company, created in 1935 by Leo Burnett. The company was opened in Chicago in 1935. In 1950 the company started its two first major advertising projects, for Kellogg’s and P&G. 20 Bollywood is the informal term popularly used for the Hindi-language film industry based in Mumbai, Maharashtra, India. The term is often incorrectly used to refer to the whole of Indian cinema; it is only a part of the total Indian film industry, which includes several regional film industries sorted by language. 19

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McDonald’s has also explored strategic tie-ups with Indian sport events in the country such as the IPL21 cricket tournament, where it was one of the events food managers. Jatia remarked, ‘‘The eating out market in India is very large and has huge potential fuelled by rising disposable incomes. There are many Indian and international players who have entered in the market since the last decade and unbranded food chains have also grown significantly. The Indian consumer has seen value in what we have to offer at our restaurants which is a testament to our model’’ [10].

Products, Pricing and Distribution In the initial days, McDonald’s India made efforts to completely change Indian consumers’ perceptions, which related it with being ‘foreign’ or often ‘American’. Consumers typically had the feeling of ‘not knowing what to expect’ which made India a more challenging market due to the local dietary preferences for nonmeat dishes. India was the world’s vegetarian paradise with nearly one billion people who eat meat only occasionally or never at all [11]. McDonald’s India thus invested time and effort to develop a customised menu for India, a menu that reflected both the taste and beliefs of the natives. In the words of Bakshi, ‘‘It really doesn’t make sense to sell beef in a country where 85 % of the population doesn’t eat it or will even shun a restaurant where beef is served’’. The second largest community, the Muslims, did not eat pork. To establish a market in India, McDonald’s managed to design a menu that included only chicken, fish and mutton products he added. McDonald’s in India also devised a comprehensive range of vegetarian products with the addition of Indian spices as a large population in north India preferred Vedic style of eating, which propagated vegetarian food [12]. McDonald’s used the most creative forms of innovations to make their efforts palatable and catchy so that even the kids would love their endeavours. The names of the Mac Burgers namely the Maharaja Mac had an Indian connotation, therefore was more acceptable to the customers of the country. Jatia revealed that the products like McAloo Tikki burger, Veg Pizza McPuff and Chicken McGrill burger were formulated and introduced using spices favoured by Indians. He added that the menu development team was responsible for special sauces which used local spices that did not contain beef and pork. Other products too did not contain eggs and were 100 % vegetarian. ‘‘The Indianised products have been so well received that we even export McAloo Tikki burger and Veg. Pizza McPuff to the

21 The Indian Premier League (IPL) is a professional league for Twenty20 cricket competition in India. It was initiated by the Board of Control for Cricket in India (BCCI) headquartered in Mumbai, India.


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Middle East’’ exclaimed Jatia though certain flagship items like Mac Nuggets were served both in US as well as in India [3]. Sridhar, remarked that, ‘‘When McDonald’s launched we took a conscious call of not introducing any beef or pork in our products. Thus, when controversies around McDonald’s products started during the early and growth stages of the Indian business, we reacted quickly. We educated our customers about the build of our products and did extensive kitchen tours for our customers. We showed them how we use separate vegetarian and non-vegetarian platforms for cooking—a first in any market for McDonald’s [13]. McDonald’s kept the prices of its products low which was made possible by as a result of its strategies like bulk buying, manufacturing efficiencies and long-term vendor contracts. In 2004, McDonald’s India launched the ‘‘Happy Price Menu’’ under which products were priced as low as Rs. 20 [13]. For their individual products they adopted value pricing strategies and went for bundling strategies for the combo meals which typically consisted of a burger, french fries and coke. Apart from typical first food restaurant set ups all across India, McDonald’ also launched home delivery services. ‘‘The key idea is convenience. We are a quick service restaurant available at high-traffic locations. But there is a large number of people who find it difficult to travel. By offering home delivery we can reach out to them and increase our penetration,’’ said Jatia. There were no restrictions on the minimum order for home delivery, but a flat fee of Rs. 10 was charged per order as delivery charges, irrespective of the size of the order, Jatia added [14]. McDonald’s India also started a single nationwide McDelivery no: 66-000-666, in an effort to upgrade its home delivery service [15]. McDonald’s wanted to be recognised as ‘Indian’ and a promoter of ‘family values and culture’, and as being ‘comfortable and easy’. Operationally, it was committed to maintaining a good quality service, cleanliness and offering complete value for money.

Intensifying Competition Assocham22 reports that the consumer spending on processed food in India increased at an average rate of 7.6 % annually from 2008 to 2010 and this was expected to rise at an average of around 8.6 % until 2012. The report also indicated the major shift in food habits in metropolitan cities was about 86 % of respondent households preferring to have instant food due to steep rise in dualincome levels, standard of living, convenience and influence of Western countries. Mona Sharma, a 24 years old BPO employee, remarked that due to odd working 22

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) is the umbrella body of chambers of commerce in India. The organisation represents the interests of trade and commerce in India, and interacting with the Government of India on policy issues, and liaisoning with their international counterparts to promote trade between India and other nations.

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hours and work pressure it was very difficult to get out and eat. ‘‘We normally place group orders from our office to outlets which serve ‘ready to eat’ food like burger and pizzas. It saves our working time,’’ she added [1]. Sales at fast-food chains were growing at a rate of 28 % in India. As a result, American fast-food companies voraciously tried to expand their markets. Ajay Kaul, CEO of Jubilant Food Works, the master franchise for Domino’s Pizza in India expressed his desire to open more than 60 new outlets every year. At a growth rate of nearly 42 % for the last 5 years, the India operations of Domino’s Pizza was its fastest in the world. At the opening of its 300th outlet in Delhi, Patrick Doyle, the global CEO of Domino’s Pizza Inc, remarked, ‘‘Our teams in India and Louisiana, USA, are two of the largest and best franchisees [16]. The Food Franchising Report23 2009 depicted that the eating out market is on an upswing in India due to the rising number of working women and nuclear households, and an increase in general affluence which in turn have led to higher discretionary spending on food. The report also points out that, 30 % of working singles ate out at least once a month, with a majority of them spending at least Rs. 101–150 per outing. On similar note Technopak Advisors24 reported the spending on eating out at 11 % to be the second only to groceries for Indian households and urban Indians had repast outdoor eating six times a month compared to 2.7 times in 2003. Thus, whether it was multinational chains like McDonald’s, Pizza Hut, KFC or indigenous ones like Sagar Ratna,25 Yo! China,26 Haldiram’s,27 Bikanervala28 or Nirula’s,29 they were all participants in the expansion game. Yum! Brand, owner of the KFC and Pizza Hut, planned to add 15 and 20 outlets respectively in the year 2010 [16]. Nirula’s which already had 80 outlets (company owned and franchised) in 7 cities across Delhi, Uttar Pradesh, Uttaranchal, Haryana, Rajasthan and Punjab planned to open 70 more till 2012 [2]. Sagar Ratna planned 35 new outlets by December, 2011. Bikanervala and Haldiram’s too announced their expansion plans of four to five new outlets every year. ‘‘An Indian is only 23 India’s first Food Franchising Report by Franchise India and CIFTI-FICCI. The primary objective of the report is to provide a snapshot of current trends in Food Franchising vis-a-vis expert analysis of various elements having implications on it. 24 Established in 1991 by Arvind Singhal, Technopak Advisors is a Management Consulting firm in India, offering strategic advice, start up assistance, performance enhancement impetus, consumer insights and capital advisory to Indian and International companies. 25 Sagar Ratna is a well known brand of restaurant chain in northern India serving vegetarian cuisine with a speciality in south Indian delicacies. 26 Yo! China is India’s first and largest chain offering Indian Chinese cuisine in almost all corners of the country. It offers a trendy casual dining atmosphere and has 43 points of presence in trendy locations across India. 27 Haldiram’s is one of India’s largest sweets and snacks manufacturers, based in Delhi, India. 28 Bikanervala is a chain of traditional restaurant in India which specializes in ethnic Indian food specially sweets and snacks. 29 Nirula’s is India’s oldest fast food restaurant chain, based in North India and most popular in NCR Delhi. It specialized in ‘‘Desi (local) version’’ of western fast food as well as offered Indian cuisine and casual dining.


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ultimately satisfied by desi food, no matter how many pizzas or burgers he eats.’’ commented Shyam Sunder Aggarwal, MD, Bikanervala [16]. Even traditional entities like the Bangalore based MTR Restaurant30 and the Chennai based Murugan Idli Shop31 (MIS) were looking at Delhi and Mumbai, ‘‘for the first time in 80 years’’, according to Hemamalini Maiya, managing partner, MTR Restaurants. The scramble by global food companies into India’s fast food sector intensified as several U.S. chains announced their plans to enter the country, in the hope of tapping the surging spending power in Asia’s third largest economy. William Edwards (Edwards), chief executive of EGS, which handled Denny’s Corp’s32 international expansion announced the plans to make an Indian foray in 2012, and their constant effort to set up a supply chain network that would help them customise the offering to suit local palates with menus stripped free of beef and pork but focused on fish and vegetarian dishes instead. ‘‘In India we are planning to have regional licensees with 10, 25 or 50 units,’’ Edwards said, adding that every 10 units required an investment of about $5 million. Pollo Tropical of Carrols Restaurant,33 known for Caribbean flavored chicken, Applebee’s and Johnny Rockets,34 known for its hamburgers, were also looking to cash into the Indian quick service restaurant market worth $13 billion. Others wanting a foothold included Wendy’s,35 Arby’s International,36 CKE Restaurants with Carl’s Jr37 and

30 Mavalli Tiffin Room (commonly known as MTR) is the brand name of a food related enterprise located in India. It is famous for the MTR restaurant located on the Lal Bagh Road in Bangalore and also for the pre-packed food articles which are sold in packets having the MTR brand. MTR also claims to be the inventor of the popular South-Indian breakfast item, Rava idli. 31 Murugan idli shop is considered among the best to taste South Indian dishes. Idly, Dosai and Meals are enjoying the prominent positions among the menu of a south Indian. 32 Denny’s Corp is a full-service coffee shop/family restaurant chain. It operates over 1,500 restaurants in the United States. Denny’s is known for always being open, serving breakfast, lunch, dinner, and dessert around the clock. . 33 Pollo Tropical is a fast food restaurant chain specializing in the Floribbean cuisine of South Florida (a fusion of Florida cuisine and Caribbean food). Pollo Tropical is owned and operated by Carrols Corporation. The chain has its headquarters in Kendall, unincorporated Miami-Dade County, Florida. 34 Johnny Rockets is an American restaurant franchise whose concept is to create a classic American restaurant atmosphere. The theme is the diner-style restaurant that had become a common sight by the 1950s. 35 Wendy’s Old Fashioned Hamburgers is an international fast food chain restaurant founded by Dave Thomas. As of March 2010, Wendy’s was the world’s third largest hamburger fast food chain with approximately 6,650 locations. 36 Arby’s is a fast food restaurant chain in the United States and Canada that is a wholly owned subsidiary of Wendy’s/Arby’s Group. It is primarily known for selling roast beef sandwiches and curly fries. The company’s target market attempts to be more adult-oriented than other fast food restaurants. 37 CKE Restaurants, Inc. is the parent company of the Carl’s Jr., Hardee’s, Green Burrito, and Red Burrito restaurant chains.

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Focus Brands with Schlotzsky’s Deli,38 all known for sandwiches and burgers. BannaStrow’s Crepes and Coffee,39 Moe’s Southwest Grill40 and Carvel Ice Cream41 were also in line [19]. President of Franchise India, Gaurav Marya, comments that ‘‘India is the biggest consumption market in the world. Even chains like Dunkin’ Donuts,42 Popeyes Chicken,43 Pizza & Co,44 Swensen’s45 and Burger King46 are in talks with local partners to enter India’’ [16]. Growth and expansion plans from the competitors were not the only hurdles, B. Narayanaswamy, president, Ipsos Indica Research47 commented that, ‘‘One of the biggest questions is whether restaurants can localize as every region of India has a different taste.’’ Thus even the selling ethnic food on a national scale hadn’t been easy in a country which was historically used to a variety of dishes. Indian consumers are price conscious as well. Therefore compared to a basic burger, say a thali was available for Rs. 50. To counter such an issue, Domino’s re-launched its ‘Pizza Mania’ offer, serving pizzas at Rs. 35 [17] Not only did Domino’s get into price reduction, so were McDonalds and other players. The changing lifestyles of young Indians also posed difficult problems as well as opportunities for growth. Trying to reach to customers even when they are travelling, fast food chains had opened their outlets on a variety of locations including highways, malls, airports and metro stations. ‘‘With limited time, customers need to be tapped wherever they go,’’ says Niren Choudhary, MD, Yum! Restaurants India adding that the company had set up express delivery counters at airports. Even Sagar Ratna CFO K.S. Suresh expressed his desire of exploring an

38 Schlotzsky’s is a privately held franchise chain of restaurants, specializing in sandwiches, headquartered in Downtown Austin, Texas. As of November 20, 2006, Schlotzsky’s has nearly 380 franchised and company-owned locations in 36 states in the United States and in six other countries around the world, generating $210 million in systemwide revenue. 39 BannaStrow’s is a franchise concept that focuses on a menu of Crepes and Waffles, cooked to order in front of its customers for a wonderful show. 40 Moe’s Southwest Grill is an American chain of fast casual style Tex-Mex restaurants headquartered in Atlanta, Georgia. 41 Carvel is an ice cream franchise owned by Focus Brands. Carvel is best known for its ice cream cakes, which feature a layer of distinctive ‘crunchies’. It also sells a variety of novelty ice cream bars, ice cream sandwiches and soft serve ice cream. 42 Dunkin’ Donuts is an international doughnut and coffee retailer founded in 1950 in Quincy, Massachusetts by William Rosenberg. 43 Popeyes Chicken & Biscuits (sometimes named Popeyes Louisiana Kitchen or Popeyes Chicken & Seafood; often referred to as just Popeyes) is a chain of fried chicken fast food restaurants, owned since 1993 by the Sandy Springs, Georgia-based AFC Enterprises. 44 The Pizza Company is a restaurant chain and international franchise based in Bangkok, Thailand. 45 Swensen’s is a global chain of ice cream restaurants that started in San Francisco, California. 46 Burger King, often abbreviated as BK, is a global chain of hamburger fast food restaurants headquartered in unincorporated Miami-Dade County, Florida, United States. 47 Ipsos Indica Research is an independent company which ranks fifth among global research companies.


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express model by next year 201. ‘‘Currently two people spend an average 30 min in the restaurant. This will reduce the time to 12 min approximately,’’ Suresh said, highlighting that home delivery is another big area, growing at 15 to 20 % [16]. The problems were aggravated with the high cost of real estate. Added to the rising input costs; companies claimed that their margins were getting squeezed. Expert reports indicated that, while the global standards were 10 to 15 % of sales as rentals, in India it went as high as 20 to 25 % [16].

Road Ahead By 2011, most fast food brands had moved into the phase II of their expansion in India, which is penetration. Phase III was marked by the saturation point, where companies were required to overhaul menus, at least partially, and innovate. Much of the second phase growth came from tier II and III cities where eating out was still an occasion, experts said.48 But, Bakshi, said otherwise, ‘‘We don’t plan to tweak our menu too much. Now we will grow to new areas and increase our concentration in areas where we are less spread.’’ The response from tier II and III cities was overwhelming he added. In 2010 McDonald’s India opened an outlet in Amritsar. Consultants said it was a city which loved Punjabi food, so the company opted for a smaller, 100 cover set up. Six months later, Bakshi felt a second restaurant was needed [18].

Questions 1. Traditional fast food retailers dominated the market when McDonalds entered India. What made it so challenging for them to change the consumer perception? 2. Why do you think that McDonald’s makes a constant effort to train their employees and also to educate customers? 3. Wherever McDonald’s went, they tried to localise their products and services. Do you think that it is a good strategy in India given the competitive scenario and the varied tastes and preferences of the customers? 4. What is more important to customers? The service products or the service experience at McDonald’s? Discuss.

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indiafranchiseblog.blogspot.com.

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References 1. Rediff.com (2011, January 25). Fast food industry booms in India. http://www.rediff.com/ money/report/fast-food-industry-booms-in-india/20110125.htm 2. Sharma, A. (2011, January 25). Fast food industry on fast track. news.in.msn.com 3. Kulkarni, S., Lassar, W., Sridhar, C. & Venkitachalam, A. (2009). McDonald’s ongoing marketing challenge: Social perception in India. OJICA-Online Journal of International Case Analysis, 1(2). 4. Ganguly, D. (2002, February 25). Blowing hot and cold: Challenges facing fast food chains in India. http://www.just-food.com/analysis/challenges-facing-fastfood-chains-inindia_id93659.aspx 5. Lahoti, N. (2010). McDonald. http://www.scribd.com/doc/26816297/McDonald-201-0 6. Kaimal, S. (2009). A study of the Marketing Strategies of McDonald’s with special reference to Indore, MBA Dissertation, Govindram Seksaria Institute of Management and Research, Indore 7. India Franchise Blog (2010, May 17). Growth of the India fast food industry and the opportunities it offers. http://www.indiafranchiseblog.com/2010/05/growth-of-india-fastfood-industry-and.html 8. Adgully Bureau (2011, February 17). McDonald’s happy price menu spreads happiness. http://www.adgully.com/mcdonald-s-happy-price-menu-spreads-happiness-45823.html 9. Exchange4media.com (2008, March 29). McDonald’s carries forward the baap-beta saga 10. Business Standard (2009, April 23). McDonald’s launches special offer to cash IPL frenzy. http://www.business-standard.com/article/companies/mcdonald-s-launches-special-offer-tocash-ipl-frenzy-109042300148_1.html 11. Petrun, E. (2007, April 2). Where’s the beef? CBS News. http://www.cbsnews.com/2100500522_162-2640540.html 12. Mathur, S. (2011, February 6). McDonald’s spices up products for Indian vegetarians. McDonald’s Spices up Products for Indian Vegetarians 13. Chaturvedi, P. (2008). How McDonald’s evolved its marketing in India. http://ipm.ge/article/ How%20McDonald’s%20evolved%20its%20marketing%20in%20India_ENG.pdf 14. Ganapati, P. (2004). Home delivery from McDonald’s now! Rediff. http://uswww.rediff.com/ cms/print.jsp?docpath=//money/2004/apr/08spec1.htm 15. Indiaretailing.com (2008, April 10). McDonald’s tie up with vCustomer corporation. http:// www.indiaretailing.com/News.aspx?Topic=1&Id=1813 16. Vaish, N. (2010, May 7). Taste of growth. www.indiatoday.intoday.in 17. Jain, V. (2009, April 14). Affordable meals drive sales at fast-food chains. http:// www.livemint.com/Companies/B5vbOgO2ZOhMANyrayIEaK/Affordable-meals-drivesales-at-fastfood-chains.html 18. Punjab Newsline (2009, December 24). McDonald’s India to open more restaurants cum drive thru in Punjab. http://punjabnewsline.com/news/node/16353 19. Nandita B. (2011, April 11). U.S. fast-food chains bet on India to drive growth. www.reuters.com

Case Study 12: Shangri-La Hotels Expanding to Non-Asian Markets Hsiao-Pei (Sophie) Yang

Introduction In the past two decades, brands from emerging markets have made significant inroads into developed markets, including those in the tourism industry [1]. Brands from emerging countries increasingly market their brands with the ambition of positioning them as global brands [2]. This case study illustrates the expansion of the Shangri-La hotel group as a good example of emerging markets’ brands expanding to the Western markets. The Shangri-La group was a Hong-Kong based hotel group, focusing on luxury hotels. This case study pointed out the market entry challenges the Shangri-La group faced when it entered its first non-Asian market in Australia. As the case study illustrated, one of the biggest challenges faced by the Shangri-La group was preserving its Asian brand identify while adapting to the cultural differences in a new market. This case study also showed some possible challenges an emerging market brand might face before reaching cultural integration in a new market.

Company Background The Shangri-La group established its first deluxe hotel in Singapore in 1971. Today, this Hong Kong-based hotel group is one of the Asia Pacific’s leading luxury hotel groups that own 75 hotels and resorts throughout Asia Pacific, North American, the Middle East and Europe, with a room inventory of over 30,000 [3]. New hotels under development of the Shangri-La group are in mainland China, India, Malaysia, Mongolia, Philippines, Qatar, Sri Lanka, Turkey and United Kingdom. The Shangri-La group has four hotel brands including the Shangri-La hotels, Shangri-La H.-P. (Sophie) Yang (&) Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected]


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resorts, Traders Hotels and Kerry Hotels. In 2003, the Shangri-La group entered its first non-Asian market in Sydney, Australia. Following that, other non-Asian markets the group had expanded into included Dubai, New Delhi, Vancouver and Paris. The Shangri-La group believes in the unique characteristics encapsulated by Asian hospitality, which shapes its philosophy ‘‘Shangri-La Hospitality from a caring family’’, which differentiates this Chinese hotel group from other Western competitors.

Market Entry Challenges The biggest challenge faced by the Shangri-La group in its expansion into nonAsian markets was preserving its Asian brand identify while adapting to the cultural differences in new non-Asian markets. This case study uses the example of the Shangri-La group expanding into its first non-Asian market in Sydney, Australia, to point out some possible challenges a Chinese company might face before reaching cultural integration in entering a new market. The three key challenges identified by the management of the Shangri-La group in entering the Australian market included [4]:

Restrictive Workplace Legislation The management of the Shangri-La group found the Australian workplace legislation being quite restrictive compared to Asia, as it focuses more on centralised and formalised-based legal adversary relationship. Therefore, it is a challenge to get Australian staff to be flexible at work, such as getting a maid to change a light bulb or do something like that, which is different from Asia.

Different Workforce Composition The composition of the workforce in the Australia hotel industry is different to Asia, as nearly two-thirds of staff are either part-time or casual, whereas the staff in Asian locations are mainly full-time. Such staffing composition has implications on training outcomes and motivation.

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Different Cultural Values Asian countries like China, Taiwan and Singapore are more collectivistic in cultural values, whereas non-Asian cultures such as Australia are more individualistic. Moreover, Western cultures, such as Australia, United Kingdom and United States, have smaller power distance than in Asian countries [5]. The management of the Shangri-La group noted that their Asian employees think their guests have higher social status than them and will treat guests very respectfully while Australian staff would think that they are doing a job to serve the guests but they are equal in status. Although the Shangri-La group had training contents that were widely used in Asia, the management of the Shangri-La group was willing to adapt the training contents as well as after-work social activities to suit the needs of their Australian employees. The management of the Shangri-La group also found the strengths of Australian employees differ from their Asian counterparts in areas like empowerment and anticipation of customer needs. Moreover, it was noted that Australian employees learn quicker in the training session and require less repetition of concepts when compared to Asian staff [6]. The above observations led to the redesign of training contents and adaptation of company communications, including accepting exceptions to organisational routines, such as reducing the training sessions as well the repetition in the training in Australia. Those adoptions all contributed to the preservation of the Shangri-La group’s Asian brand identity and the success of this Chinese parent company when expanding into a non-Asian market like Australia.

Conclusion The Shangri-La group repositioned its brand label from ‘‘Asian hospitality’’ to ‘‘Shangri-La hospitality’’ after entering the Australian market. Chinese companies, like the multinationals that have come to China over the past two decades, are reaching for opportunities in new markets abroad. Similarly, they will have to acclimate to new surroundings, just as the foreign companies that entered China did. In terms of adaptation, two key adaptations Chinese companies often need are adapting organisational culture and balancing cultural norms [7]. Firstly, many Chinese companies need to redesign organisational culture in their expansion beyond China, as many of them are still organising from the top-down, and the headquarters is the nominal centre where decisions are made. Secondly, Chinese companies often need to find a balance of cultures as they globalise, because similar to the case study of the Shangri-La group discussed above, they will face the challenge of combining Chinese and Western forms of communication and cultural norms. For many, this will be one of the greatest obstacles to global integration and to performance in global settings.

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Questions 1. Discuss the market entry challenges faced by the Shangri-La group in its expansion into the Australian market. 2. Explain the common adaptations Chinese companies might need in entering the Western markets. 3. Discuss the possible challenges facing by emerging markets’ brands when expanding into a Western market.

References 1. Guzmán, F., & Paswan, A. K. (2009). Cultural brands from emerging markets: Brand image across host and home countries. Journal of International Marketing, 17(3), 71–86. 2. Melnyk, V., Klein, K., & Volckner, F. (2012). The double-edged sword of foreign brand names for companies from emerging countries. Journal of Marketing, 76(6), 21–37. 3. Shangri-La Hotels and Resorts (2012).Retrieved November 1, 2012, from http://www.shangrila.com/corporate/about-us/milestones/ 4. Hoffernan, T., & Droulers, M. (2008). East and west: The successful integration of cultures at Shangri-La, Sydney. The Marketing Review, 8(3), 297–309. 5. Hofstede, G. (1980). Culture’s consequences: International differences in work-related values. London: Sage Publications. 6. Hoffernan, T., & Droulers, M. (2008). East and west: The successful integration of cultures at Shangri-La, Sydney. The Marketing Review, 8(3), 297–309. 7. Dietz, M. C., Orr, G., & Xing, J. (2008). How Chinese companies can succeed abroad. McKinsey Quarterly, 3, 22–31.

Case Study 13: Marketing the $35 Akash Tablet Ramendra Singh and Sanjit Kumar Roy

It should not require technologists to use computers, that it should be a common man’s thing. —Steve Jobs

Introduction In April 2006, a U.S non-profit organisation approached the Indian government with a proposal to purchase their device with an offered price of US$100 (approximately £65) device. The device was similar to a laptop but with less functionally and specially designed to target underprivileged school children. In a developing country like India, where 75 % of the people live on less than $2 a day, the offered price was a big question in a sense of affordability. The Indian Ministry of Human Resource Development (MHRD) thought that the ideal price of device should be less than $50, with a goal of reaching up to US$10 as per Indian requirements which is of very large numbers. Therefore, the organisation refused the order saying that producing a device with such an ultra low cost was impossible. This sets the genesis of the mission with an objective of producing a functional computing device at a cost of around $35/device, which could revolutionise delivery of education in India [1]. The week when the world was mourning the death of Steve Jobs—Father of social media, the man who changed our relationship with computers forever, India was launching its first ever Low Cost Access cum Computing Device. It was initially named as the Sakshat tablet, later changed to Aakash and officially launched by former MHRD Kapil Sibal on 5 October 2011 in New Delhi, India. The name is derived from the Sanskrit word Akasha or Aakash in Devnagri with several other related meanings like ether, empty space, and outer space. The word

R. Singh Indian Institute of Management, Kolkata, India S. K. Roy (&) Department of Marketing and Advertising, Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected]


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in Hindi means sky.1,2 The first version of Aakash was developed jointly by Indian Institute of Technology Rajasthan and a London-based company DataWind [2]. It is manufactured by the India-based company Quad, at a new production centre in Hyderabad [3]. The development of the second version of Aakash is taking place at IIT Bombay.3

First Prototype During November, 2006 [4], MHRD started making efforts to design the ultra low cost device. The ministry requested big players in VLSI (Very Large Scale Integration) design to work upon this mission. Before heading in this direction, the idea of creating such a device was discussed with a group of experts and Professors at various IITs like Kanpur, Kharagpur, Madras and Bombay along with IISc Bangalore and VIT. The ministry nucleated a small team of persons with experience of commercial issues and negotiation and hardware and software designers. The core team decided to create specifications meant especially for educational purposes and came up with different prototypes [5]. In July 2008, Minister of State for Human Resource Development—D.Purandeswari announced that the device cum laptop would cost around $10. PC World mentioned that the gadget would initially cost $20 and later $10 as production ramps up. In February 2009, the first prototype was unveiled during the inauguration of the national Mission on Education Programme organized by the union HRD Minister Arjun Singh at Sri Venkateswara University campus, Tirupati, India. The device was called SAKSHAT, a $10 device cum laptop nearly equal to the cost a student would have to spend on textbooks per year. However, this controversial price and lacking photos or videos of the device had doubted the people about its existence or specifications. The photo presented described that it was a white brick like device with 10.5 inches in length and width and an onboard memory of 2 GB. Wires were loosely held inside and were coming out of it with no keyboard and usable display. There had been a lot of rumours about missing features from Sakshat. According to Times of India, Sakshat was not a laptop at all but was only USB storage with 2 GB capacity which could be accessed by user by connected to a laptop [6]. The core team suffered from a fair amount of criticism and scepticism, both from within the system and from experts outside. Some vested interests were publicising reports saying that such a device was not possible. However, the teams preserved in their task with the single-minded determination and the thought this

1

PIB Press Release PIB. Accessed 26 July 2010. http://www.aakashstore.in/2011/11/worlds-cheapest-tablet-aakash-can-turn.html. 3 http://www.fastcompany.com/1839297/how-failed-aakash-tablet-object-lesson-indias-longroad-ahead-tech-innovation. Accessed 17 December 2011. 2

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initiative would not only create an ultra low cost device for the students, but also a new market niche. It was claimed that this prototype would help build a $60 laptop at some point in the future.

Second Prototype In September 2009 [7], MHRD decided to head the task of developing and testing of this device to Indian Institute of Technology Rajasthan. Dr. Prem Kalra, director of IIT Rajasthan, accepted the challenge. He had dedicated his school to overcoming a challenge of connecting the last person of the nation. The focus of Kalra’s attention was the question ‘Can the financially worst-off person in India be empowered if given the basic tools to acquire enough skills to overcome dire poverty’. Here the challenge was designing and making a stripped-down iPad-like tablet usable for distance learning, teaching subjects and with internet or wireless connection at the cost of around $35 which the poorest Indian family, saving about $2.50 a month for a year, could afford given that the government subsidised the rest [8]. The Aakash team at IIT Rajasthan was managed by Kalra along with two electrical engineering professors, one of whom was from a village that still has no electricity: Prof. Anupam Gupta and Prof. Sandeep Yadav [8]. They advised a group of about 170 students in total involved in various parts of the development and testing. They came up with a prototype which was unveiled on 22 July 2010 by Indian former MHRD minister Kapil Sibal. The price of the exhibited device was projected at $35, eventually to drop to $20 and finally to $10 [9]. The specifications shown were 256 MB RAM, 2 GB of internal flash-memory storage running the Android operating system with features of video playback, internal Wi-Fi and cellular data via an external 3G modem. IIT Rajasthan students who were a part of developing team of device had gone through initial user-testing process. They revealed to authorities that the prototype would become slow once it heated up after 30 min [10]. But this problem was not taken in account by the professors of IIT Rajasthan who were leading the project. Prof. Vivek Vijayvargiya, an assistant professor in IIT Rajasthan, who was part of the Aakash team, conceded these problems but pointed out that one could not compare this device with a high tech laptops or iPads. After being criticised for second time for its missing features and slow processor, the U.S based non-profit organisation One Laptop Per Child (OLPC) founder and Chairman— Nicholas Negroponte, had offered his help in developing $35 laptop by allowing full access to all of his software and hardware technology of OLPC with free cost. He had offered this help even after the Indian government declined the OLPC proposal in 2006. Negroponte warned the Indian government against making a cheap device only for media consumption rather than an inexpensive one as an education tool focusing on primary level school children [11].

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Tender Process The government announced the launch of its $35 laptop on January 15, 2011. The tender for the ambiguous $35 laptop termed ‘Sakshat’ had been cancelled. HCL Infosystems—who was the so called vendor of Sakshat failed to furnish a bank guarantee of INR60 Crore bank guarantees which was mandatory as per the Indian government’s General Financial Rules, 2005 to idem the government in case a vendor fails to deliver the project. However HCL said that no information of a decision been taken was shared with the company and in the tender they only bid for the latest Expression of Interest. According to a government source and tech analyst the laptop components alone were costing more than $35 to the vendor without including any kind of taxes into it. They doubted if the financial disagreement was the reason for tender cancellation [12]. MHRD was left with no option other than seeking for a new vendor. It started shouting out for bidding again. Datawind came out as lowest price bidder and won to become the new vendor for the tablet over several other bidders. It quoted an ex-factory price of US$37.98 which was close enough to the cost mentioned by the government [13].

About Datawind DataWind is a company founded in 2001 by two brothers Suneet and Raja Tuli who live in Canada. The research and development team is in Montreal, Canada, while the products are mainly sold in the Britain where it is registered as a limited liability company (LLC). According to Alia Khan, the vice president of British operations, it sold about 100,000 units of web-searching devices including the PocketSurfer, a check book sized gadget in 2011. The major products of the company are manufactured in China but this deal with the Indian ministry has changed a little in the strategy of the company. Unlike other products, the company decided to manufacture the $35 tablet in India itself. Suneet Tuli decided over a telephonic interview with an executive at Quad Electronics in Secunderabad, Andhra Pradesh, that his company would be manufacturing the tablets in India for Datawind with the condition that the company would not be identified. For the past 14 years, Quad has been manufacturing electronics like modems and wireless routers. They have a total of 900 employees, and manufacture around 700 tablets a day [14]. Finally the development of the device took place in India with some criticism that it was nothing more than a made-in-China gadget. However, hundreds of components were sourced from around all over the world. The major countries for component supply (by value) are as follows: South Korea: 39 %, China: 24 %, United States: 16 %, India: 16 %, and Taiwan: 5 % [5].


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Launching Aakash On 5 October, 2011, the device was finally launched by MHRD Kapil Sibal and named as Aakash. At the launching ceremony he announced that it was the world’s cheapest tablet. Pricing and Distribution In 2010, as a lowest bidder, Datawind quoted an ex-factory price of US$37.98 and the government accepted it thinking that the price was merely close to the desired price. This cost covered all the costs of manufacturing including components and materials as well. The final price which came in reality was $49.98/unit (approximately = INR 2,276 at the time of the order). This price includes taxes, levies, and charges like freight and insurance, servicing and documentation along with one-year free replacement warranty from the manufacturer apart from other costs. However, it did not include any subsidy from the Government. On the date of launch on 5 October 2011, Suneet Singh Tuli, CEO of Datawind said that Aakash, is the computer for the masses. He also mentioned that the price quoted, i.e., $49.98 is for Indian government while it is $39.98 if one buys ex-factory. Mr. Tuli further commented that the price of manufacturing was less than the target price ($35) but taking care of his company’s profitability, it arrived at a relative higher price. The government had ordered 100,000 units initially and the real volume break was at two to three million units. There were a lot of questions about its ultra low price and specification. Answering these questions, Tuli explained that there were three big reasons behind it. First—the technology was developed with the help of 18 US patents, dozens of other international patents which shifted the burden of processing and thus reduced the processor cost. Second—more vertical integration than the average manufacturer by buying 800 components which was very large in number compared to 50 of others. This process eliminated the middle ware cost. Third—monetising the operating system, means one need to buy an application from the company’ app store to install it. Buying the application would make some money to the firm same way as Apple makes with iTunes. Combining all these factors had a huge impact on the price.4 By the time it was launched, the government had planned for two series of the tablet for the retail market. One would be the subsidised student version, called Aakash and other would be the commercial version, called Ubislate7. The government decided to make the tablet available to students at a subsidised price of Rs. 1,730($35) against Rs. 2, 999 ($49.98).5 Ubislate7, the commercial version was to be made available at retail stores from November 2011 onwards. The Indian government had earlier bought 100,000 tablets at a price of Rs. 2,250 for giving to secondary students across the country under the National Mission for Education. These were distributed to all the states with each receiving 3,000 units in order to test in various climatic and usage conditions. At the time of 4 5

http://www.sakshat.ac.in/pdf/Final_FAQ_Aakash.pdf. Accessed 5th oct 2011 Ibid.

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launch, the tablets were also distributed among 500 students for field trials and feedback. These students were from different colleges including the IITs, RECs, BITS Pilani, Teri University among others. Feedback from all the testing would be used to designing the next version of the device [15]. The government had promised that the Aakash tablet, i.e., government subsidised student version, would be made available through the institutions in they belong by directly contacting the student cell or Dean, Student’s Welfare [13].

Media Reviews and Feedback Aakash’s functionality and affordability is a hot deal in India although it has received mixed reviews upon launch. One of the students who tested the device at the time of launch said that it was a great device as he has never used laptops before. It’s a whole new experience for those kinds of students. Some other student told that the best part is its portability since it is unlike personal computers or laptops. However, there were some issues as well. When one of the students from IIT tried to watch a video on full screen, it was not possible to rewind or stop the video once it had started. The tablet hanged and he could not shut it down even after pressing the button. He further added that the battery was too poor to work with when the device started functioning again. The IIT students were not happy with the device and they complained that it was of no use to them as they could not even listen to the video lectures or open PDF files. A student from TERI University said that using this laptop was a kind of time wastage as the processor was very slow [16]. One primary sourced student from BITS Pilani told ‘‘the device was looking very pleasing like an ipad but it lacked in specifications. The biggest problem was with its sensitivity and slow processor. The display resolution was dull and the tablet didn’t have any in-built camera or Bluetooth.’’ (Technical specifications of Aakash Tablet revealed on 5th Oct 2011, in Exhibit 1). A student of IIIT-Allahabad wrote in an article of Hungry and Foolish that the device was aesthetically clean, durable and solid. The two USB ports in the device was a new feature which is not present in other ipad. The device has resistive touch screen with a low memory RAM of 256 MB only. He further said that this tablet could have a wide reach to see more rural penetration than any other device due to its ultra low cost [17]. A reporter at the VentureBeat said that the device is a kind of Jugaad6 with a very high technology but the components were cheap and easily sourced which led to cost saving. ‘‘The Indian government thinks the $35 Aakash Android tablet has the power to change the world. After testing one out, we’d tend to agree’’ he added in the report.

6

An Indian word which mean ‘‘to make-do’’.


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Exhibit 1 Technical specifications of Aakash Tablet revealed on 5th October’ 2011 S No. Measures Specifications 1 2 3 4

5 6

7

8 9

10 11 12

13

• Dimensions: 115 (H) * 185 (W) * 8 (D) mm • Weight: 0.34 Kgs Display • 700 (15.5 cm.) LCD Resistive touch screen • 800 * 480 pixel Processor • 366 MHz with graphics accelerator and HD video processor Memory • 256 MB (RAM) • 2 GB Flash (Internal storage) • Micro SD card (2 GB provided) supports up to 32 GB (External storage) Networking and Wireless • Wi-Fi (IEEE 802.11 a/b/g) Input/Output • 2* Standard type A USB 2.0 ports • 1* 3.5 mm audio-out jack • 1* 3.5 mm audio-in jack Power and Battery • Built-in 2100 mAh battery • Up to 180 min (mixed use) • AC adapter 200–240 V Operating System • Android 2.2 (Froyo) Productivity Application • Supported document formats: DOC, DOCX, PPT, PPTX, XLS, XLSX, ODT, ODP • PDF viewer • Text editor Images and Video • Image formats: PNG, JPG, BMP and GIF • Video codes: MPEG2, MPEG4, AVI, FLV Audio • Audio formats: MP3, AAC, AC3, WAV, WMA Browser and Internet • Xhtml 1.1 COMPLIANT, JAVASCRIPT 1.8 COMPLIANT BROWSER • Separate application for on-line YouTube video viewing Safety and manufacturing Standards • CE and RoHS certification

Size and Weight

Source Aakash Tablet, http://www.sakshat.ac.in/pdf/Specs_Aakash_LCAD.pdf, Retrieved October 5th, 2011

Summarizing the whole idea, the most common problems faced by students or others while using the device were—overheating (within 10–30 min), extra slow processing, frequent hangs, poor sound quality, lack of user-friendly touch screen, absence of support for all formats, and inability to install free software available online. Aakash was much below the expectations of users. Addressing to all these misunderstandings and problems, Mr. Tuli said that the company had only supplied 1,000 devices to state coordinators including students for testing purpose. After hearing the results of testing they would submit their reports after 45–60 days so as to correct the lacking or not working part to improve the device functionality [18]. However, he had also assured that in near future the company might come up with an economical capacitive touch screens.

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Improved Commercial Version It could be said here that Aakash Tablet did not disappoint the users but neither did it satisfy their wishes. The commercial version of Aakash, i.e., Ubislate 7 was scheduled to arrive by November 2011 in retail market. But it did not come by the scheduled time. A spokesperson of Datawind told that the feedback received from the testing of earlier student’ version (Aakash) formed an input into the new designs and the company decided to improve the specifications, which resulted in this delay. However they were expecting an improved version of Aakash, i.e., Ubislate7+ to be available in retail market by January 2012 [19]. During mid of December, 2011, Datawind announced that the student version named as Aakash Tablet was available for order online at at Rs. 2,500. The company also opened their official website for pre-order booking of upgraded version of Ubislate at Rs. 2,999 at (www.ubislate.com/prebook). According to a press released, Mr. Tuli told that about 30,000 tablets were put up online on sale and about 400,000 pre-sale orders for the tablets were received by the company within three days of sale opening [20]. On December 19th, 2011, Datawind announced in their website that the first phase of Aakash tablet had been sold-out completely [41] While online pre booking for Ubislate7+. Looking at this overwhelming response, on 20th December, 2011, Business Today on Online Bureau commented that the government’s programmed to expand education through information technology had received great appreciations [21]. The commercial version was put up for just Rs. 499 more than the original version with some improvement like adding GPRS along with Wi-Fi and fast processor [22]. Datawind had confirmed 1.08 lakh units’ bookings in India and 4 lakh from dealers around the world. (Difference in specifications of Aakash Tablets mentioned in Exhibit 2 and Exhibit 3).

Exhibit 2 Difference in specifications of Aakash Tablets Specifications Aakash (Student version) Ubislate7+ (Commercial version) Price OS Microprocessor Network Battery Made in Rebate Replacement

Rs. 2, 500 Android 2.2 Arm11-366 MHz Wi-Fi 2100 mAh India 50 % off for Indian students 1 year replacement warranty

Rs. 2,999 Android 2.3 Cortex A8-700 MHz Wi-Fi and GPRS (SIM & Phone functionality) 3200 mAh China No rebate 1 year warranty and 30 days replacement warranty

Source World’s cheapest tablet Aakash goes on sale for Rs. 2,500 Online with One week Delivery—www.aakashtablet.com, [Online] \http://www.mytechskool.com/2011/12/worldscheapest-tablet-aakash-goes-on-sale-for-rs-2500-online-with-one-week-delivery-wwwaakashtablet-com/[. Accessed 17 December, 2011

Android 2.3 (Gingerbread) 700 resistive 800 * 480 pixels Wi-Fi and GPRS (SIM and 3G) Cortex A8-700 MHz ? HD video co-processor ? graphics accelerator 256 MB 2 GB ? 2 BG Micro-SD (Expandable up to 32 GB) 2–full sized External USB and front facing camera 3200 mAh Rs. 2,999

Operating system Screen Screen Resolution Network Processor

Android 2.3 (Gingerbread) 700 resistive 800 * 480 pixels Wi-Fi and GPRS (SIM and 3G) Cortex A8-700 MHz ? HD video co-processor ? graphics accelerator 256 MB 2 GB ? 2BG micro-SD (Expandable up to 32 GB) 2- full sized External USB and front facing camera 3200 mAh Rs. 2, 999

Operating system Screen Screen Resolution Network Processor

USB ports Camera Battery Estimated price

RAM Flash

Aakash LCAD Tablet (Ubislate7 +)

Specifications

USB ports Camera Battery Estimated price

RAM Flash

Aakash LCAD Tablet (Ubislate7+)

Specifications

3 USB 2.0 ports Yes 3000 mAh Rs. 15, 750

512 MB 2 GB

No USB port Yes 4000 mAh Rs. 23, 500

512 MB 16 GB


256 MB 16 GB

iOS 1000 capacitive 1024 * 768 Wi-Fi 1 Ghz

1 mini USB port Yes 600 MHz Rs. 14, 990

512 MB 512 MB

Android 2.2 700 Capacitive 800 * 400 pixels 3G and Wi-Fi 600 MHz

OlivePad V-T100

1 GB 16 GB Micro-SD, expandable up to 32 GB 1 microUSB (MHL) v2.0 Yes Li-Ion 1730 mAh Rs. 33, 900

Android 2.3.4 (Gingerbread) S-LCD capacitive 540 9 960 pixels Wi-Fi, GPS 1.5 GHz

HTC Amaze 4G


512 MB 4 GB

Android 2.3 700 Capacitive 800 * 400 pixels 3G and Wi-Fi 800 MHz

Reliance 3G Tab

Samsung Galaxy Tab Apple’s iPAD

Micro USB port Yes 2200 mAh Rs. 9, 990

256 MB 8 GB

Android 2.2 700 resistive 800 * 400 pixels 3G and Wi-Fi 1 Ghz

Beetel Magiq

Fedora Linux Android 2.2 7.500 TFT (Not touch) 700 capacitive 1200(H) * 900(V) 200 (DPI) 1024 * 600 pixels Wi-Fi 3G & Wi-Fi 433 MHz 1 Ghz

OLPC

512 MB 4 GB Micro-SD, expandable up to 32 GB 1 USB 2.0 Yes 4000 mAh Rs. 5, 000

Android 4.0 (Ice cream sandwich) 700 capacitive 1024 9 600 pixels Wi-Fi, 3G 1 GHz

MIPS NOVA7

Exhibit 3 Competitions in specifications of existing tablets with Ubislate7+

Case Study 13: Marketing the $35 Akash Tablet 125

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From IIT Rajasthan to IIT Bombay After launching the Aakash tablet, Datawind was now working on making a tablet with capacitive screen unlike Ubislate7+ which have resistive screen. However, Ubislate7+ was not launched yet. During January 2012, the development story took a twist, with a scrap breaking out between the manufacturer, Canada’s DataWind Ltd, and its erstwhile assembly partner, Hyderabad’s Quad Electronics Solutions Pvt. Ltd. Datawind claimed on Quad Electronics that it has signed an agreement with IIT Rajasthan to manufacture Aakash competitor, which they were unsuccessful in making. DataWind executives were tipped off after they saw a senior Quad Electronic executive on the daily flight to Jodphur, and the Quad Electronic executive tried to hide his face with a newspaper. In April 2012 Quad Electronic confirmed that it had signed a memorandum of understanding (MoU) with IIT Rajasthan. The agreement was not for producing a competing tablet but for technical expertise for products, services and IP [intellectual property] creation. Mr. Tuli further added that the Quad executive said his company assembled 20,000 tablets, but stopped delivery after 10,000 tablets. Over this Quad executive said that they had sent a legal notice to Datawind for not paid yet for tablets delivered [23]. In late February, a committee headed by R. Chandrashekhar, a senior bureaucrat in the government’s Information and technology department, met to discuss about this issue. Finally the government decided to transfer the project from IIT Rajasthan to IIT Bombay. Mr. Kalra, the director of IIT Rajasthan was asked to resign as leader of the project. In March, 2012, Aakash project was transferred to IIT Bombat. It is now being led by Deepak B. Phatak, a professor at IIT Bombay, who set up the Affordable Solutions Lab in 2003, which aims to develop low-cost technological solutions. He is very optimistic about the future of Aakash and wants to start from scratch. On April 13, IIT Bombay sent a single-party tender to DataWind for 100,000 tablets. Datawind has no relation with Quad now and has appointed new partners to assemble the tablet [24].

The Controversial Tablet From December 2011 to March 2012, when online bookings for the Aakash was opened up, thousands of people had booked the tablet and they ended up disappointed with the company’s failure to deliver Ubislate7+ on time even after they had paid an advance. These customers claimed that they were not even able to find their status of booking as the toll-free number was not working and there were no replies to their emails. They wondered whether this would turn out to be a failed government project. Tuli explained that the delay in launching Ubislate7+ was due to their search for a new partner. He assured that the deliveries would be made for pre-paid customers shortly and if customers wished not to wait any more then the company would offer full refunds. In his mail to the Mint, Tuli said that a large


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majority of customers were still making pre-bookings. However, he also said that anyone who had paid in advance heard back from the company within 48 h and was given an email address and phone number to call ‘‘instead of the toll-free number’’. But the customers were still complaining in the online consumer forums [23].

Aakash-2 on the Way Finally after a long wait of almost one and half year from the time of launch of the Aakash tablet, the commercial version of Aakash 1- Ubislate7+ was launched on 26 April, 2012. The company decided that the pre-booked orders would be given priority and that the paid ones would get their devices shipped by the end of the month. The basic unit was priced at Rs. 2,999. The Ubislate7C was also launched, which is now known as commercial version of Aakash-2 (a project which had been transferred to IIT Bombay). It has an advantage of having a capacitive screen as compared to the resistive screen of Ubislate7 ? and the price has been kept at Rs. 3,999 [25]. On 25 June 2012, Aakash-2 was launched in IIT Bombay. Upon launch, the government said that the institute would be handling over 100,000 of the improved tablets to students and teachers at engineering colleges across the nation and it was expected to begin in July 2012. It is an improved version with upgraded specifications and faster processor while maintaining the cost. It has a much better capacitive screen and battery power of approximately 3 h unlike Aakash-1 and the price was negotiated from Rs. 2,263, down from Rs. 2,276, said by Prof Deepak Phatak, who is the team leader of Aakash. He also told about the Aakash lab which has been set up in the department of Computer Science at IIT Bombay. The motive behind this was to drive the project so as to make Aakash a ubiquitous tool in the hands of students, at all levels of their education. The team consists of around 150 people, including faculty, Ph. D. scholars, M Tech students and project engineers. The institute has partnered with Centre for development for advanced Computing (CDAC) for testing the development of educational applications and deployment of tablets in engineering colleges for field testing of devices through actual users. The new aim of the institute is to develop useful open source applications and contents especially in Indian languages. Aakash-2 has been loaded with few more specifications like accessing video lectures, permitting to run computer programs like C, C++, Python and open source package ‘Scilab’. This effort emphasises that it is not just an access device but also a regular computer for learning programming. IIT Bombay has a long term vision to work on Aakash’ research and developments and it hope to contribute significantly to this great initiative by the government [26]. At the end of June, 2012, the government had announced that Aakash tablet was in manufacturing process by Datawind and supposed to be released in August, 2012 [27]. During the first convocation of Birla Institute of Technology and Science (BITS) Hyderabad campus, on 12th August, 2012, Kapil Sibal while addressing, announced that the Aakash-2 is going to be made available very soon [28].

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At the end of August 2012, when a group of students at IIT Bombay were told that government is giving 50 % discount on Aakash table, i.e., they would be charged below Rs. 2,000, their reactions were unbelievable. Each and everyone from the group decided to buy the tablet, though they knew that the processor would be relatively slow. When one of the students was asked the reason behind, she told in a very casual way that the tablet was very cheap irrespective of the features and even if it did not work properly, she could at least get a chance to try it. As the group was from IIT Bombay itself, they easily enquired about the Aakash by giving a call to Aakash lab at Computer Science department of the institution. But they came to know that the student version of Aakash has not been released yet and they need to wait for few more days to get it, they got disappointed.

Market and Competition The news about the Akash tablet has attracted a lot of attention by the newspapers, news channel and the internet since 2008 when Mr. Sibal had announced the inception of idea of 700 tablet in only $10. Since then Aakash had received around 3 lakh pre-launch booking orders for Ubislate 7+, the commercial version. Even the retail bookings had exceeded the government’s estimated 250,000 tablets in a PC market dominated by Apple, Samsung and Reliance. Datawind had also launched an applications design competition in November 2011. The best applications would feature in the tablet and the winners would also win a money award of Rs. 1 lakh. Datawind in association with Nasscom Foundation had also conducted contest wherein ten NGOs had an opportunity to win 20 tablets, mainly to improve their operations and programme implementation [29]. To publicise the tablet, ‘Indiaweb.in’ sponsored an Aakash give away contest in Nov-Dec 2011, in which five winners were awarded Aakash tablets [30]. To increase its popularity amongst the students, government of India is also offering almost 50 % discounts to the students in Mumbai to buy the Aakash tablet at a price of only Rs. 1,138 instead of the actual retail price of Rs. 2,500. Every university across India has been informed by the government about the Aakash tablet and are been asked to give suggestions on technical specifications, subsidies and any other relevant matter [31]. From the date of launch of online booking system, Aakash tablet was sold out completely in three days only and then to promote the Commercial version of Aakash, Datawind started online campain to get maximum orders. Aakash Store website also ran a contest from 23 December 2011 to 31 January 2012, in which the people were asked to answer a multiple type quiz on specification and features of the Aakash tablet [32].


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Emerging Markets for Aakash In recent years, the notebook personal computer has gained significant amount of market share among laptops, largely due to its more user-friendly size and portability. According to Goldman Sachs, PC growth would be 11.4 % in 2011 and 9.5 % in 2012 worldwide without tablet cannibalisation [33]. Reliance Communications’ group head for marketing and branding Sanjay Behl said the tablet market has doubled in a year. The first quarter of 2009 to the first quarter of 2010 saw a 72 % growth in Netbook sales. E-commerce in India has hit 10 billion in 2011 as per published in Asia Tech News for the World [34]. Aakash hit global market after an official announcement that the Indian government would be distributing this cheapest tablet to students across India, many foreign countries like US, Panama, Malaysia, and Thailand etc. had shown interest in the tablet. Panama had approached India to buy one lakh units of Aakash tablets. Malaysia had approached HRD minister of India to release the know-how to produce Aakash tablets locally in Malaysia but the ministry declined this request. Thailand had directly approached the Datawind Company for the manufacture of one lakh tablets. There was even a personal invitation from the President of Sri Lanka to Datawind. This tablet has received a strong demand, not because of its features but because of its low cost price. The Indian ministry has not refused the various requests by these countries but pointed out that they wanted to produce more tablets for Indian customers first [35]. It first landed in America in the last week of October 2011 in the hands of a visiting professor at the University of California at Berkeley and Duke, Vivek Wadhwa, who is researching the Indian education system and is a columnist with the Washington Post. He received an Aakash tablet from Kapil Sibal, HRD of India to the VentureBeat office. Aakash has evinced a lot of interest among several other world leaders and international organisations like UNESCO and World Bank. During the visit to UNESCO, Kapil Sibal, in the first week of November 2011 said that the president of the general council displayed the Aakash tablet to the audience while the World Bank showed it among the board of directors. Several prime ministers and ministers wanted it for their country in thousands. India was also offered for collaboration from International Finance Corporation, which coordinates its activities with other institutes of the World Bank group, for improving the device [36]. In April 2012, Philadelphia, which is sixth largest US state in terms of gross domestic production, has showed interest in Aakash tablets. Philadelphia-based Wilco Electronics was negotiating with the Indian MHRD to procure the tablets for use by school children and disadvantaged ones. Brigitte Daniel, executive vice president of Wilco, came to New Delhi late last year to personally see and understand how the tablet works and was quite interested in the project. According to her, Aakash is in demand across the US. She believes that Aakash tablet could potentially make an impact within the US National Broadband plan, which aims to bridge the digital divide for low-income and under served communities and schools [37].

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Competitive Environment In the present scenario, where low-price tablet strategy plays vital role to attract a set of tablet users, it is thrilling the world by imagining the level of competition in Tablet industry which would result in low cost devices only to attract more and more number of customers. The international media seems to love tagging India as the cheapest market, especially after the launch of Tata Nano. A similar story followed the launch of Aakash Tablet, dubbed as World’s cheapest tablet and priced at Rs. 2,999. This news created some notable fuss in the Tech market, due to the fact that the features and specifications were quite good with respect to its price. The Aakash tablet has a promising future in India but when it comes to take it market to the different countries especially to the west, the tablet may suffer a huge competition with giant tablet makers. But as being affordable this tablet can easily be used by anyone and thus creating a huge threat to the other market player in tablet manufacturing. While comparing Aakash with similar offering from Apple or HTC Amaze 4G, one should keep in mind that they are targeted at different market segments. There are many buyers in the market looking for tablet PCs who see sense in investing in a low-cost tablet. This reason keeps vendors like Datawind, Beetel, HCL, Milagrow, Spice, Reliance and Lenovo, among others, optimistic. Indian consumers bought around 85,000 tablet PCs in 2012, and the market has already attracted over 15 players with tablet PC models as per the CMR data. Ajit Joshi, CEO and MD of Infiniti Retail (Croma) told that low cost tablets PCs are offering a choice for the customers [38]. Research indicates that Aakash may not actually be the world’s cheapest tablet. There are several other manufactories in countries such as Taiwan and China who are producing tablets at the same affordable consumer price of just $39.71 with faster processors. The cheap tablets in China primarily come with WiFi. At an idea exchange session with Delhi Technological University, Tuli mentioned that Chinese companies like Huawei and ZTE many compete with Aakash at any level. In December 2011, MIPS Technology, a China based company launched a new Tablets called Nova 7 with Google’s Android 4.0 and priced it $99. Very soon it will be launched in India and will be a huge competitor in the low cost market [39]. Bangalore’s based company, Allgo embedded system, has also launched a tablet in 2012 called Stamp Tablet. This tablet is based on the Android operating system and the cost is around Rs. 8,000. The specifications are similar or better than Aakash but this tablet is not designed for the retail market yet and it targets business customers, with a delivery time of about eight weeks [40]. Aakash is also being pitted against other low-cost tablets such as the Beetel Magiq and the Reliance 3G Tab. Reliance proposes to charge 1 GB of data for just Rs. 10 which is about one tenth charged by existing 3G technologies. Their 4G tablet is priced nearly one-fourth of what is being offered by well known phone


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makers such as HTC, Dell and Motorola. Delhi-based Bharti Group’s Beetel is also heating up the competition by launching its low-cost Android 2.2 tablet called ‘‘Magiq’’, an upgraded version of the Huawei IDEOS S7, priced at Rs. 9,999 in 2011 [41]. This competition is getting intense with the entry of new vendors and tablets. The vendors are not only targeting on hardware but also at education providers with full package offers for the student community. When it comes to educating the underprivileged village children, Aakash has a big competition with OLPC too, though there is little in common between the MHRD’s $35/$50 device and Negroponte’s $100 OLPC. MHRD is going for the urban and college crowd while OLPC is targeting the village school goers. OLPC’s dominance in the ‘‘learning learning’’ segment is not just about its hardware, which might be Aakash’s weakness. It’s about OLPC’s entire ecosystem that comes with every application imaginable and works in the villages, tried and tested by three million children over the past few years. Another competition for Aakash is end-to-end desktop virtualisation company, Ncomputing, which has positioned 420,000 Ncomputing virtual desktops in major state of Andhra Pradesh, Bihar, Punjab and Maharashtra. It claims that the low-cost Aakash tablet is not the answer to the woes of India’s education sector and that the Government should adopt the Ncomputing model to save customers’ and taxpayers’ money as its technology saves energy and reduces costs by up to 75–90 % [42]. The two biggest competitors of Aakash are the latest entrants: Micromax and HCL Infosystem. In mid 2012, Micromax unveiled a tablet PC called Funbook with a price of Rs. 6,499. While HCl Infosystems introduced the MyEdu Tab priced at Rs. 9,999. Micromax is trying to make educational content available to its tablet by partnering with Pearson and Everonn. HCL MyEdu will also have National Council Of Educational Research And Training (NCERT) K12 mapped contents containing free NCERT text books both in English and Hindi for standard I to V students with animation in 2D and 3D. WishTel’s IRA tablets also comes with eBook reader application and course contents for CBSE, ICSE, state boards along with higher engineering and medical education stuffs and cost between Rs. 4,000 and 5,000 [43]. Aakash has created a niche where many more competitors would have to join the price and specification war, resulting in many different specifications. However, an increasing number of low-cost tablets is certainly adding to the confusion for the consumers. The ultimate winner will be the Indian student and anyone who had not been able to afford such computing devices. Apart from the price, the functionality of the Aakash and availability of suitable educational content targeted for the device through the Sakshat Portal would be the USP of this device. This device could then become a leading light in that direction. For normal customers, the Indian tablet market, especially the budget-tablet segment, is currently witnessing an intense competition (Specifications of existing tablets with Ubislate7+ are shown in Exhibit 3).

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Aakash as an Educational Tool India is a developing country and along with the development of technologies, population here is also increasing at a rapid rate. It crossed 1 billion in 1997 to more than 1.2 billion in 2011 as per the data of World Bank. According to 2001 census figures, literacy levels in India are at 63 %, lagging far behind most other developing nations, including China—where the figure is 93 %. According to a recent report, the number of Internet users in India grew 15-fold between 2000 and 2010, still, only 8 % of Indians have access to it compare to nearly 40 % in China. Some 19 million people subscribe to mobile phones every month, making India the world’s fastest growing market, but it is mostly from the wealthier segment of the population. An expert on the use of communications technology for development said the budget tablet could also be used to deliver distance learning in rural areas and among students [44]. Mr. Kapil Sibal is making an effort to enacting the ‘‘Right of Children to free and Compulsory Education (RTE) Act’’, which will provide free and compulsory education to every child between 6 and 14 years. Through the ‘‘Sarva Shiksha Abhiyan (SSA)’’ program, India’s investment in basic education has achieved an enrollment rate close to 100 % over the past decade (net enrolment ratio of primary level education was 98 % in 2009–2010). Mr. Sibal also planned to increase the number of accredited institutions and open up education to the private sectors, offering dual degree programs to increase the educational options for students in collaboration with foreign universities as a part of the higher education reform. He believes that this will spur more competition among universities which may cause enhancement in the quality of education in near future. Under the National Mission on Education through Information and Communication Technology (NME-ICT), the government aims to provide high-quality, personalised, and interactive knowledge modules over the internet in any-time, any-where mode. The purpose behind could only be served by providing connectivity to all colleges and universities, providing low cost and affordable access cum computing devices to students and teachers and providing high quality e-content free of cost to all learners in the Country [5]. Nearly 80 % Universities and Colleges in the country have already been connected to BSNL. Included in the mission is spending on ebooks and e-journals for students, development of translation tools, upgrades to educational networks and more PCs for high schools and it is coordinated via the Sakshat web portal, on which students can register and can then use to monitor their progress. Nearly 500 webs based and video courses are available and uploaded on Sakshat, YouTube and NPTEL portals. MHRD has brought in a real paradigm shift in the educational computing environment seeking education delivery in any environment at any time without much dependence on regular power supply and classroom [5].


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Conclusions The Aakash tablet is a ray of hope that India can leverage technology to get more of its 220 million students enough tools to escape poverty and poor teaching. In a developing country like India which is called a home to 40 % of the world’s poor [44], the costs for the technology have to be kept low for the benefit reach to maximum number of people. Due to its affordable price, now every student in India can have access to world-class lectures and educational content in anytime, anywhere mode even in the most remote corners of this country without any bound to classroom—a lifetime dream to numerous college students in rural locations in India. The Idea is to make available this device to colleges and universities at a 50 % subsidy and then to ask the colleges and universities to issue these devices to financially weak students from the library on the pattern of the Book Bank scheme [13]. This tablet is an example of a technology where the latest innovations jump directly into areas where legacy technologies never penetrated. Unique Identification Development Authority of India has approached ministry to collaborate with Aakash tablets using Aadhar card for establishing identity of students and their attendance. Laptops in India range from anywhere between $400 to $1000 and average income of Indians are much lower. In an Idea Exchange session held at Delhi Technological University, Suneet Singh Tuli, explained how Aakash ‘‘serves the purpose of a phone, a computer and an entertainment device’’ in India. According to him, the gap between the Internet subscribers (18 million) and Internet users (120 million) out of total 1.2 billion populations is due to affordability to buy computer, laptops and Internet access. If assuming 300 million Indian families, only 10 million would have broadband while 290 million is still left out [45]. The customs excise duty is 14 % for a computer and 2 % for a mobile phone in India. So the government has been providing an incentive for mobile phones and not for computers. Cell phone today is not a communication tool alone though it is a commerce tool. Tuli once said that ‘‘If we allow the poor man the utility, the opportunity, he will create wonders that we cannot imagine’’. Five years ago, we would have been surprised if we saw a rickshaw wallah7 with a mobile phone. Today, we are surprised if we see him with a business card. Tomorrow we will be surprised if we see him with a website. ‘‘He will take advantage of the Internet as a commerce tool’’, he added [45]. There is a great hope that with Aakash, more people particularly the country’s youth will have greater access to technology.

7

Means Rickshaw driver.

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Questions 1. Develop a marketing strategy for the Aakash tablet. 2. Design an advertising strategy for the new product keeping in mind the existing competition in the market. 3. What do you think about the pricing and distribution strategies of Aakash. What changes would you suggest? 4. Carry out a marketing mix analysis for Aakash using the 4A framework.

References 1. Ministry of Human Resource Development. (2011, October 5). Retrieved October 5, 2011, from http://www.sakshat.ac.in/pdf/Final_Note_Aakash.pdf 2. Kurup, S. (2011, October 9). We want to target the billion Indians who are cut off. Times of India. 3. Timmons, H. (2011, October 6). Aiming for the other one billion. New York Times. 4. Aakashtablet.com. (2011). World’s cheapest tablet Aakash goes on sale for Rs 2500 online with one week delivery. Retrieved December 17, 2011, from www.aakashtablet.com 5. Sakshat. (2011). Retrieved October 5, 2011, from http://www.sakshat.ac.in/pdf/ Final_Note_Aakash.pdf 6. OnlyGizmos. (2009, February 5). The $10 laptop that is not a laptop. http://onlygizmos.com/ sakshat-the-10-laptop-that-is-not-a-laptop/2009/02/ 7. Rabkin, A. (2012, June 18). How the failed Aakash tablet is an object lesson in India’s long road ahead to tech innovation. Retrieved December 18, 2012, from http:// www.fastcompany.com/1839297/how-failed-aakash-tablet-object-lesson-indias-long-roadahead-tech-innovation 8. Economic Times. (2011). Retrieved November 13, 2012, from http:// economictimes.indiatimes.com/tech/hardware/an-affordable-ipad-like-tablet-in-india-maybe-the-start-of-something-big-stay-tuned/articleshow/10713648.cms 9. BBC World news-South Asia. (2012, July 23). India unveils prototype for $35 touch-screen computer. Retrieved July 25, 2012, from http://www.bbc.co.uk/news/world-south-asia10740817 10. Chauhan, C. (2011, November 03). Better, faster Aakash-2 to be launched in Feb 2012. Hindustan Times. http://www.hindustantimes.com/technology/PersonalTech-Updates/Betterfaster-Aakash-2-to-be-launched-in-Feb-2012/SP-Article1-764394.aspx 11. SiliconIndia (2010, August 9). OLPC’s Negroponte supports India’s $35 tablet concept. Retrieved August 14, 2010, from http://www.siliconindia.com/shownews/ OLPCs_Negroponte_supports_Indias_35_tablet_concept-nid-70313-cid-2.html 12. Julka, H. & Aulakh, G. (2011, January 18). Tender for $35 laptop project cancelled. The Economic Times. http://articles.economictimes.indiatimes.com/2011-01-18/news/ 28432799_1_laptop-project-bank-guarantee-sakshat 13. Sakshat (2011). Retrieved October 5, 2011, from http://www.sakshat.ac.in/pdf/ Final_FAQ_Aakash.pdf 14. Raina, R. & Timmons, H. (2011, October 5). Meet Aakash, India’s $35 ‘Laptop’. New York Times. http://india.blogs.nytimes.com/2011/10/05/meet-aakash-indias-35-laptop/ 15. Bhushan, K. (2011, October 7). Your guide to the new $35 Aakash Tablet. Retrieved January 15, 2012, from http://www.thinkdigit.com/Mobiles-PDAs/Your-guide-to-the-new-35Aakash_7700.html


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16. Jamwal, R.S. (2011, October 16). Aakash gets thumbs down from students, The Statesman. Retrieved January 21, 2012, from http://www.thestatesman.net/ index.php?option=com_content&view=article&id=386755&catid 17. Hungry N Foolish. (2011). Aakash tablet hands on review. Retrieved October 6, 2011 from http://www.hungrynfoolish.com/2011/10/06/aakash-tablet-product-review-specs-pics-priceand-insights-from-the-maker-himself/ 18. Jamwal, R. S. (2011, October 16). Aakash gets thumbs down from students. The Statesman. Retrieved February 5, 2012, from http://www.thestatesman.net/ index.php?option=com_content&view=article&id=386755&catid=35 19. Bhushan, K. (2011, December 5). Aakash tablet to arrive in the market by January 2012. Retrieved February 21, 2012, from http://www.thinkdigit.com/Tablets/Aakash-tablet-toarrive-in-the-market_8099.html 20. Mitha, S. (2011, December 16). Aakash tablet now available online. Retrieved February 22, 2012, from http://gadgets.ndtv.com/tablets/news/aakash-tablet-now-available-online-224826 21. Business Today Online. (2011, December 20). Low-cost tablet Aakash receives overwhelming response. Retrieved March 1, 2012, from http://businesstoday.intoday.in/ story/low-cost-tablet-aakash-sees-massive-booking/1/21074.html 22. Sinha, V. (2011, October 23). Rs 3,000-tablet PC sparks 500,000-order frenzy. Hindustan Times. Retrieved March 1, 2012, from http://www.hindustantimes.com/technology/MarketUpdates/Rs-3-000-tablet-PC-sparks-500-000-order-frenzy/SP-Article1-760760.aspx 23. EfyTimes News. DataWind To Launch UbiSlate 7+ on April 26. Retrieved March 2, 2012, from http://efytimes.com/e1/fullnews.asp?edid=82123 24. IIT. (2012). IIT Bombay scales up ‘train 1000 teachers at a time’ programme to 10,000 teachers and launches Aakash-2. Retrieved March 2, 2012, from http://www.iitb.ac.in/AK/ Aakash.htm 25. Bhushan, K. (2012, April 27).UbiSlate 7C: Hands-on. Retrieved March 1, 2012, from http:// www.thinkdigit.com/Tablets/UbiSlate-7C-Hands-on_9399.html 26. Khicha, P. (2012, February 20). A brand new configuration. Business Standard. Retrieved March 1, 2012, from http://www.business-standard.com/india/news/a-brand-newconfiguration/465119/ 27. News Track India. (2012, June 28). Upgraded Android 4.0 Aakash 2 tablet will release in August, priced at Rs. 2,263. Retrieved July 1, 2012, from http://www.newstrackindia.com/ newsdetails/2012/6/28/93-Upgraded-Android-40-Aakash-2-tablet-will-release-in-Augustpriced-at-Rs-2263.html 28. Sibal, K. (12 Aug. 2012). Aakash 2 to be launched very soon. The Economic Times. Retrieved September 2, 2012, from http://economictimes.indiatimes.com/tech/hardware/aakash-2-tobe-launched-very-soon-kapil-sibal/articleshow/15462440.cms 29. Aakash Store. (2011). Retrieved September 3, 2012, from http://www.aakashstore.in/2011/ 11/worlds-cheapest-tablet-aakash-can-turn.html 30. Indiweb. (2011). Retrieved September 3, 2012, from http://www.indiweb.in/general/aakashtablet-giveaway/ 31. Shetty, A. (2011, December 22). 50 percent discount on the Aakash for Mumbai college students. http://tech2.in.com/news/tablets/50-percent-discount-on-the-aakash-for-mumbaicollege-students/266002 32. Aakash Store (2011).Retrieved September 4, 2012, from http://www.aakashstore.in/2011/12/ datawinds-ubislate-7-is-available-for.html 33. The Times of India (2011, December 5). Cheapest tablet Aakash delayed: Report. Retrieved July 2, 2012, from http://articles.timesofindia.indiatimes.com/2011-12-05/hardware/ 30477070_1_32gb-expandable-memory-slot-cheapest-tablet-800x480 34. Haindl, S. (2011, October 11). Social innovation: India aiding students to reach for the sky via affordable technology. Retrieved September 3, 2012, from http://www.justmeans.com/ Social-Innovation-India-Aiding-Students-Reach-for-Sky-Via-Affordable-Technology/ 50200.html

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35. Budki, S. (2011, December 5). Cheapest tablet: Aakash will not be available this year. The Mobile Indian. Retrieved September 3, 2012, from http://www.themobileindian.com/news/ 4099_Cheapest-tablet:-Aakash-will-not-be-available-this-year 36. Gupta, D. P. (2011, November 29). Now, the world wants’ Aakash. EFYTimes News. Retrieved March 2, 2012, from http://efytimes.com/e1/fullnews.asp?edid=74232 37. Vishnoi, A. (2012, April 2). Aakash tablet may see launch in Philadelphia. The Indian Express. Retrieved May 1, 2012, from http://www.indianexpress.com/news/aakash-tabletmay-see-launch-in-philadelphia/931432/ 38. Saraswathy, M. (2011, December 12). Low-cost tablets try hard to please buyers. Business Standard. Retrieved March 2, 2012, from http://www.afaqs.com/news/ story.html?sid=32431_Lowcost+tablets+try+hard+to+please+buyers<=rss 39. MSN News. (2011, December 7). World’s first $99 ICS tablet Nova 7 launched. Retrieved January 3, 2012, from http://news.in.msn.com/technology/article.aspx?cpdocumentid=5656535 40. EFYTimes (2012, February 22). Meet stamp: The first indigenously designed tablet in India. Retrieved March 5, 2012, from http://www.efytimes.com/e1/ fullnews.asp?edid=79343&magid=11 41. Vadlamani, S. (2011, July 27). 3G Android tablet from Beetel costs Rs. 8900 and looks slick too. The Gadget Fan. Retrieved November 2, 2011, from http://thegadgetfan.com/tablets/3gandroid-tablet-from-beetel-costs-rs-8900-and-looks-slick-too.html 42. Saraswathy, M. (2011, December 13). Low-cost Aakash is not the only solution, says Ncomputing. Business Standard. Retrieved January 5, 2012, from http://www.businessstandard.com/article/technology/low-cost-aakash-is-not-the-only-solution-says-ncomputing111121300038_1.html 43. Srivastava, A. (2012, May 1). The tangled tale of Aakash—the world’s cheapest tab. Retrieved June 1, 2012, from http://arpitsrivastava.wordpress.com/2012/05/01/the-tangledtale-of-aakash-the-worlds-cheapest-tab/ 44. The Economic Times (2011, October 5). Aakash: World’s cheapest tablet launched; to be sold for $60 in retail. Retrieved November 5, 2012, from http:// articles.economictimes.indiatimes.com/2011-10-05/news/30246812_1_tablet-mobilephones-sim 45. Rajan, N (2011, October 30). If Aakash can help level the playing field for the poor, that’s the biggest motivator. The Indian Express. Retrieved December 1, 2012, from http:// www.indianexpress.com/news/if-aakash-can-help-level-the-playing-field-for-the-poor-thatsthe-biggest-motivator/867596/0

Part V

Marketing Communications and Social Media Marketing

Introduction to Marketing Communications and Social Media Marketing Anvita Kumar and Carmela Bosangit

Marketing Communications, referred to as the ‘‘voice’’ of the company and its brand, is one of the four principles of marketing, which strives to engage the consumers in a dialogue to build brand equity and relationships among consumers [1]. Over the recent years, there is a new imperative to integrate a variety of promotional tools available to the practitioners to reach their consumers with consistent message across the range of media available. These integrated promotional tools, also known as Integrated Marketing Communications (IMC) [2] was developed for consumer focused marketing system, which brings together a number of marketing variables such as distribution channels, financial health of the market, competition and supporting industries. Targeting consumers in emerging consumer markets becomes challenging as most of the practitioners/multinationals entering these markets overlook the fact that the Emerging Consumer Markets (ECM) differs politically, economically and culturally from Western markets [3]. It has been observed that industry practitioners often face failure as they ‘‘ineffectively’’ apply western principles to emerging markets [4], more often than not reflecting the self-reference criterion (SRC). Thus, developing IMC has become more complex with the established importance of emerging markets [4]. For instance, it has been observed that in the emerging markets many of the factors necessary in IMC are non-existent or in nascent stages of development. Hence, the following questions become crucial for the industry: how to optimise IMC-related strategies in the emerging new markets? Are the existing IMC tools culturally relevant? If not, how much of the strategies need to be adapted or standardised given the cultural characteristics of a host market? [5]

A. Kumar (&) C. Bosangit Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected] C. Bosangit e-mail: [email protected]


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Extant studies indicate that many of the marketing theories stem from Western settings with a notion that international generalisations are possible without explicit reference to socioeconomic, institutional, and cultural contexts [6]. One explanation for this approach is provided by Alden, Steenkamp, and Batra ([7], p. 84), who posit that a global strategy might be more effective than a local strategy in ECMs since consumers in these markets tend to admire the ‘‘economic centre’’, [7] though in many instances, the meanings of products and brands may be altered at local context [3, 8]. On the other hand, London and Hart [9] argue that recognising that Western-style patterns of economic development may not occur in these business environments is crucial in ECM [9]. The case studies presented in this chapter are examples of companies and organisations from emerging markets which also competes in order to capture the EMCs. Central to their strategies is the use of social media which closes the huge gap between the western multinationals and smaller businesses resources. Social media has made it possible for a person to communicate with hundreds or thousands of other people about goods and services and its impact on consumer-to-consumer communication has been greatly magnified in the marketplace [10]. New media channels such as Facebook, YouTube, Google and Twitter has threatened long established business models and corporate strategies but also provide ample opportunities for growth through new adaptive strategies [11]. Hennig-Thurau et al. [11] stated that characteristics of new media include: (i) digital (virtually no costs for producing extra copies of digital products and individuals can easily distribute their creation ta global audience); (ii) proactive (using new media to contribute to all parts of the value chain, e.g., reviews on good, testing new product and reporting flaws, etc.); (iii) visible (consumers activities are seen by others); (iv) real-time and memory (new media can be accessed by consumers at the time they are produced, allowing them to share experiences and comments and reviews are also available indefinitely); (v) Ubiquitous (consumers reach and can be reached by consumers and companies almost anywhere at any time) and (vi) networks (consumers used new media to participate in social networks to create and share content, communicate and build relationships with each other). Definitely there are changes to consumer behaviour, the way customer interacts with companies and even customers’ transactions and outcomes; and the companies and organisation featured in this chapter have used these changes as leverages in developing their marketing communication strategies. AirAsia, is presented here as an example of a company in emerging markets that benefitted from deploying and expanding the marketing practices that worked in the Western context but enhanced definitely by the use of social media in engaging with their customers. The western low cost business model combined with innovative marketing techniques such as the Real People, Real Stories campaign allowing customers to share their experiences on social media has been fundamental in turning this small budget airline in Asia into one of the global players. Cathay Pacific Airways, on the other hand, has used social media, in particular LinkedIn to increase brand awareness in a specific target market—the business travellers. Working on the existing environment and market, the airline

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used LinkedIn for (a) identifying members who belong to LinkedIn groups who are related to business travel; (b) targeting these members with display ads and sponsored polls, and (c) establishing Cathay Pacific Airways Page on LinkedIn and use ‘‘Status Updates’’ and ‘‘Recommendations’’ to build brand awareness and drive engagement. This marketing campaign had generated a substantial response from business travellers; and almost a hundred recommendations on the product page of the airline and most importantly it provided them with insights to advertising effectiveness and data for useful campaign. Last, the case study on the tourism campaign of the Philippine Department of Tourism is an illustration of the combination of strategies of building on local capacity and the traditional marketing practices and social media. The tourism campaign ‘‘It’s more fun in the Philippines’’ has capitalised on the Filipinos being members in many social media networks and allowing them to create their own memes (supported by an application and with certain guidelines) has contributed to it going viral in a short period of time. This has resulted to the country hitting the first time high of four million tourists within a year of launching the campaign. This campaign has effectively reached some of the emerging markets. The marketing communications landscape has changed drastically over the years because of the new media development which has definitely empowered consumers and changed the way the companies/organisations should communicate with them. However, this has given companies in emerging markets somewhat another strategy to enhance their marketing strategies by modifying Western culture practices in combination with the potential of social media and even traditional marketing practices or even simply to focus on targeted markets. The emerging markets consumers and companies and social media are contemporary trends that should be constantly monitored by marketers and researchers because they are areas of opportunities for companies may it be multinationals or national/ local businesses.

References 1. Keller, K. L. (2009). Building strong brands in a modern marketing communications. Journal of Marketing Communications, 15(2–3), 139–155. 2. Hartley, B., & Pickton, D. (1999). Integrated marketing communications requires a new way of thinking. Journal of Marketing Communications, 5(2), 97–106. 3. Guillaume, D. J., Elliot, R. M., & Grier, S. A. (2010). Conceptualizing multicultural advertising effects in the ‘‘new’’ South Africa. Journal of Global Marketing, 23(3), 189–207. 4. Al-Hemaidi, S., Y. Belachew, P. Bhattacharya, N. Houki, A. Fanqiu Hu, A. Kar, J. Liu, S. Narayanaswamy, M.Cullivan, N. Vijay & Omokwale, O. O. (2013). Understanding IMC in emerging markets: A study of the resources and marketing landscape of ten emerging markets, [Online] \http://jimc.medill.northwestern.edu/Archives/2012/EMERGINGMARKETS_FINAL.pdf[. Accessed 6 May 2013. 5. Schultz, D. E., & Patti, C. H. (2009). The evolution of IMC: IMC in a customer-driven marketplace. Journal of Marketing Communications, 15(2–3), 75–84.

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6. Steenkamp, J.-B. (2005). Moving out of the U.S. silo: A call to arms for conducting international marketing research. Journal of Marketing, 69, 6–8. 7. Alden, D. L., Steenkamp, J. B., & Batra, R. (1999). Brand positioning through advertising in Asia, North America and Europe: The role of global consumer culture. Journal of Marketing, 63(1), 75–87. 8. Ger, G. (1999). Localizing in the global village: Local firms competing in global markets. California Management Review, 41(4), 64–83. 9. London, T., & Hart, S. (2004). Reinventing strategies for emerging markets: Beyond the transnational model. Journal of International Business Studies, 35, 350–370. 10. Mangold, G., & Faulds, D. (2009). Social media: The new hybrid element of the promotion mix. Business Horizons, 52(4), 357–365. 11. Hennig-Thurau, T., Malthouse, C., Gensler, S., Lobschat, L., Rangaswamy, A., & Skiera, B. (2010). The impact of new media on customer relationships. Journal of Service Research, 13(3), 311–330.

Case Study 14: Air Asia: Using Social Media to Reach Out to New Customers Dilip S. Mutum and Ezlika M. Ghazali

Introduction With the tag line ‘‘Now everybody can fly’’ AirAsia has revolutionised air travel in the Asian region by offering incredibly low fares and innovative marketing techniques. The airline is one of the most innovative companies in the World, which has successfully deployed and expanded on the latest marketing/promotion practices. From August to December 2010, the airline ran their ‘Real People, Real Stories’ campaign where customers were encouraged to share their experiences on social media for a chance to win free tickets. The result was a flood of entries including stories as well as videos from satisfied customers around the World on various social media including their Facebook page. This case study examines how a small budget airline in Asia has become a global player by adopting the latest technologies and innovations in order to actively engage with their customers and improve efficiency and ultimately satisfy these customers

Company Background: From Music to Airlines The airline was initially established by DRB-Hicom Bhd., a Malaysian governmentowned conglomerate in 1993 and started operations on 18 November 1996. However, the airline did not do well. The success story of Air Asia started when Tony Fernandes, a former Warner Music executive, bought the loss making airline from DRB-Hicom Bhd for only one Malaysian Ringgit (approximately 25p) in 2001. D. S. Mutum (&) Department of Marketing and Advertising, Coventry Business School, Coventry University, Priory Street, Coventry, West Midlands CV1 5FB, UK e-mail: [email protected] E. M. Ghazali University of Malaya, Kuala Lumpur, Malaysia


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Tony is the CEO of TuneAir Sdn Bhd. which he started in partnership with Datuk Pahamin A. Rajab (Chairman). TuneAir officially acquired 99.25 % equity (51.68 million shares) in AirAsia from DRB-Hicom and went about converting it into a short-haul low cost carrier. AirAsia became Malaysia’s second national and Asia’s first low frills, ticketless airline as of 8 December, 2001 [1]. The deal came with a RM40 million debt but to the surprise of critics and supporters alike, AirAsia broke even after operating for just 1 year. Initially the airline started with only two aging jets and operated six flights to domestic destinations in Malaysia. It later entered the Thai market by forming a successful joint venture with Shin Corporation of Thailand through Thai AirAsia. On February 15, 2006, it was announced that Asia Aviation, a registered Thai company, had taken Shin Corp.’s 50 % stake in Thai AirAsia. At present, Asia Aviation holds 50 % stake, AirAsia has 49 % and the remaining 1 % is held by Thai AirAsia CEO Tasapon Bijleveld. AirAsia also entered the Indonesian market on 1 December 2005 through another joint venture, Indonesia AirAsia (formerly known as Awair). The airline started flights to Macau in June 2004, while flights to mainland China (Xiamen) and the Philippines (Manila) were started in April 2005. Flights to Vietnam and Cambodia followed later the same year. In 2007, AirAsia X was established as an separate associate company, which was involved in the low-cost long-haul business. AirAsia X is rebranded separately from AirAsia and has separate management and marketing teams [2]. The airline started flying to London in 2009. Today AirAsia flies to more than 78 destinations in 20 different countries in three continents, namely Asia, Europe and Australia. AirAsia Philippines is their latest subsidiary, which started operations in March 2012 [3]. The airline has been voted World’s Best Low Cost Airline for three years consecutively since 2009 [4].

Technology Innovations AirAsia is well known in the airline industry for the use of pioneering technology and innovation. It was the first airline in Asia to implement ticket less travel— which was implemented in March 2010 [5]. Passengers were able to buy tickets over the phone directly and just use a booking number to check in. The company also holds the unique distinction of being the first Asian airline to start online ticketing though their website, which was launched on 10th May 2002. This was quite revolutionary considering that Ryanair, which is one of the biggest budget airlines in Europe, had launched its own booking website only in January, 2000 [6]. In fact, Air Asia was far advanced than several of the low cost airlines operating in Europe such as Flybe, which launched their on-line check-in facility in 2006 [7]. It was also voted as the most popular website for online shopping in the 11th Malaysia Internet User Survey conducted by AC Nielsen in April 2005 [8]. Members registered with the company’s website receive information about

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promotions and offers via e-mail. In March 2005, online sales exceeded offline sales, growing from a paltry 5 % in January 2002 to almost 55 % in 2005 [9]. AirAsia has been able to achieve this by gaining a competitive advantage achieved through the in-depth understanding of the context and specific consumer needs/ expectations. In August 2003, the airline introduced bookings through the short messaging service (SMS) on mobiles—the world’s first airline to offer this service. At that time, it was estimated that at least 42.4 % of the current Malaysian population were mobile phone users and the SMS booking service would enable AirAsia to expand its reach to 10 million mobile phone users [10]. The service was developed in association with Maxis Communications Berhad and Dutch technology firm Getronics. AirAsia has also invested in the latest technology including the new reservation system called ‘New Skies’, which is used by several other airlines including Jetstar and Ryanair. The migration to the new system which took just 9 months as compared to 18–24 months for other major airlines [11] and was officially launched in July 2010 [12]. This state-of-the-art customer relationship management (CRM) system allows customers to better manage their online bookings. New features include multiple language support, the ‘Low Fare Finder’ which indicates the lowest fare available according to their destination and date of travel. Another improvement was the ability to book seats for several cities in just one transaction. Previously, customers had to make separate bookings if they were flying from different cities in different countries, for example from Bangkok to Kuala Lumpur, then on to Melbourne.

Social Media Marketing AirAsia first foray into social media was in 2008 through their corporate blog, ‘Just Plane Thoughts’ [13]. Unlike other corporate blogs, the tone of the blog is fairly informal and feature stories of their employees, customers as well as contest announcements. Since then, the company has actively embraced social media. The company has different Facebook pages for different locations around the World and it was the first airline outside the US to have over a million fans on Facebook [14]. In China they use the local network RenRen, due to restrictions imposed on Facebook. They also have a presence on Flickr, YouTube and Twitter And the airline was voted as the ‘Best Airline in Social Media in 2011’, in a poll hosted by consulting firm SimplyFlying [15]. Tony Fernandes, the CEO, is also a keen blogger and Twitterer and his personal Twitter page has over 170 thousand followers. Besides using social media to make announcements and inform customers about latest deals and promotions, AirAsia actively uses social media for various branding campaigns [16]. The ‘Real People, Real Stories’ campaign was one of their most successful campaigns. This was one of the first social media marketing campaigns by an airline company in the World. In the first phase, their ‘Real

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People, Real Stories Video Contest’ involved user generated content where customers were invited to share their personal story by creating a 30–90 s video or animation. This was followed by ‘The Real People, Real Stories: COMMENT and WIN’ competition where visitors to AirAsia’s YouTube page were invited to comment on any video listed in any of the five categories. The comments could be about how they related to the video or any other opinion. In the second phase, in their run-up to celebrate their 100 millionth guest, customers were asked ‘‘How has AirAsia changed your life for the better?’’ and invited to share their stories via Facebook, Twitter, YouTube and AirAsia’s corporate blog. The entries came flooding in with customers sharing their experiences with the airline in blog posts, pictures and several creative videos. The AirAsia Video/Animation Contest had over 100 videos submitted out of which 37 winners were selected. The winners won a pair of return tickets from the airline [17]. According to their 2010 annual report [18], the company ‘‘was rewarded by the stories, which reaffirmed our belief that we are not just in any business; we are in the business of changing lives’’. This focus on customers has paid off and AirAisa showed an increase in profits for a fourth straight quarter in February 2013 [19].

Questions 1. Do you agree that the innovative use of technology played a key role in AirAsia’s success story? 2. What is your opinion about AirAsia’s competition where participants have to create 30–90 s video or animations? Could they have made it easier for the participants? 3. Why do you think that AirAsia’s marketing campaigns have focused on social media as compared to other airlines in the region such as Singapore Airlines which are still focused on traditional media such as TV ads and ads on print media?

References 1. Kang, S.L. (2003) Fernandes pilots AirAsia to greater heights. New Strait Times, December 22, 2003 p. S6. 2. BBC (2010). How air Asia founder Tony Fernandes dream came true. Retrieved November 3, 2010 from http://www.bbc.co.uk/news/business-11647205 3. Suarez, K.D. (2012 March.28). Philippines AirAsia finally takes off. Retrieved March 28, 2012 from http://www.rappler.com/business/3083-philippines-airasia-finally-takes-off 4. Skytrax (2011). AirAsia wins worlds best low-cost airline award for 3rd consecutive year Retrieved June 10, 2011, from http://www.worldairlineawards.com/Awards_2011/ lowcost2011.htm

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5. Annual Report 2010–AirAsia (2010). Retrieved June 24, 2010, from http://www.airasia.com/ iwov-resources/my/common/pdf/AirAsia/IR/AirAsia_AR10.pdf 6. Ryanair (2012). About us. Retrieved July 4, 2012, from http://www.ryanair.com/index.php/ en/about 7. Flybe (2012). Company history. Retrieved February 6, 2013, from http://www.flybe.com/ corporate/about-flybe 8. Sulaiman, A., Ng, J., & Mohezar, S. (2008). E-ticketing as a new way of buying tickets: Malaysian perceptions. J. Soc. Sci., 17(2), 149–157. 9. Patrick, S. (2005). Online sales have eclipsed offline sales (p. 3). AirAsia: Star InTech. 10. Easen, N. (2003). CU L8R: Now book flights via SMS. Retrieved September 25, 2003, from http://articles.cnn.com/2003-09-25/world/biz.trav.sms.airlines_1_sms-services-mobilephone-booking?_s=PM:asiapcf 11. Air transport news (10 July 2010). AirAsia goes live with New Skies reservation system– New system implementation successfully completed ahead of schedule. Retrieved July 10, 2010, from http://www.atn.aero/article.pl?id=24523 12. Wan, C. (16 July 2010). AirAsia opens up New Skies for bookers.Retrieved July 16, 2010 from http://www.webintravel.com/news/airasia-opens-up-new-skies-for-bookers_274 13. Air Asia Blog. Retrieved May 23, 2013 from http://blog.airasia.com 14. Pal, S. (2011). For getting AirAsia a million fans on facebook and making it the leading social airline brand, Karen Chan is the SimpliFlying Hero for June 2011. Retrieved July 6, 2011, from http://simpliflying.com/2011/for-getting-airasia-a-million-fans-on-facebook-andmaking-it-the-leading-social-airline-brand-karen-chan-is-the-simpliflying-hero-for-june-2011 15. Nigam, S. (2011). The best airlines, airports and hotels in social media—finalists for simpliFlying awards for excellence in social media. Retrieved August 30, 2011, from http:// simpliflying.com/2011/the-best-airlines-airports-and-hotels-in-social-media-finalists-forsimpliflying-awards-for-excellence-in-social-media 16. AirAsia (2010). Annual Report 2010 Retrieved June 24, 2010, from http://www.airasia.com/ iwov-resources/my/common/pdf/AirAsia/IR/AirAsia_AR10.pdf 17. eYeka (2010 September 17) AirAsia video/animation contest winners, Retrieved September 17, 2010, from http://blogen.eyeka.com/2010/09/17/airasia-videoanimation-contest-winnersrevealed 18. AirAsia (2010). Annual report 2010. Retrieved June 24, 2011, from http://www.airasia.com/ iwov-resources/my/common/pdf/AirAsia/IR/AirAsia_AR10.pdf 19. Koon, C. P. (2013). AirAsia jumps on profit surge, dividend plan: Kuala Lumpur mover. Retrieved February 26, 2013, from http://www.bloomberg.com/news/2013-02-26/airasiaposts-fourth-straight-profit-increase-on-travel-demand.html

Case Study 15: It’s More Fun in Philippines: Riding on the Waves of Social Media Carmela Bosangit

Introduction Emerging markets are equally important to the tourism industry. In 2010, the UN World Tourism Organisation reported that international tourist arrivals grew by more than 7 % in the first 4 months driven partly by a strong rise in numbers in key emerging markets despite the challenging conditions as the world recovers the global economic crisis in 2009 [1]. The real growth opportunities can be found in the BRIC economies—Brazil, Russia, India and China—as well as the GCC nations such as the UAE and Saudi Arabia where emerging middle classes have desires to travel and hence they are the future of the travel and tourism industry [2]. It is projected that international travellers will almost double by 2020 to approximately 1.6 billion with the most significant increases expected to take place in markets like China, India and South East Asia, followed by Eastern Europe, Latin America and African markets [3]. It was already seen in the World Travel Market 2010 Industry Report that the industry has switched its focus from the developed markets of UK, Europe and the USA to these emerging economies [2]. From the destination management and marketing perspectives, this presents new opportunities and challenges as both developed and developing tourist destinations would compete for these emerging markets. Therefore, it is crucial to design an effective and creative marketing strategy that would stand out and capture the attention of these target markets. However, in the current economic climate of public austerity, most national tourism organizations (NTOs) are losing elements of their funding and the ability to market as widely as they did previously; hence many NTOs are turning to social media as a relative low-cost and global reach marketing tool [4]. The Philippines is an archipelago in the Southeast Asia and like its neighbours it has much to offer to tourists from its beaches, wildlife, culture, history and C. Bosangit (&) Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected]


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hospitable and friendly locals. However, due to its location, attracting tourists to the country remains a fundamental challenge to the national tourism organisation, the Department of Tourism (DOT). Thailand and Singapore, strategically located within the region have enjoyed most number of tourist arrivals in the region. For example, Thailand has reported welcoming 14 million tourists in 2011 while the Philippines have merely 4 million visitors in the same period [5]. Like any other countries, the Philippines have utilised several tourism slogan over the years, with the most recent ones as WOW Philippines and Pilipinas Kay Ganda which unfortunately did not work effectively as a unifying tourism campaign unlike slogans such as Amazing Thailand, Malaysia Truly Asia and Incredible India. With the recently elected President, Hon. Benigno Aquino, III who fully supports the tourism industry, the DOT was provided a budget of 3.1 Billion pesos to establish a new tourism marketing campaign to reach their new tourist arrival target of 10 million in 2016 [6]. The new tourism marketing campaign, It’s more fun in the Philippines, has successfully used social media with the help of the Filipinos in the country and abroad. Traditional media were also used in combination with social media. The DOT has reported 2.14 million tourists arrival to the country for the first two quarters of 2012, an increase of 11.68 % compared to tourist arrivals in the same period of last year and this was attributed to the new tourism slogan [7].

Background In November 2010, the DOT has launched a tourism campaign called ‘‘Pilipinas kay Ganda’’ (translates into How Beautiful, the Philippines) [8], however this has been criticised for several reasons: (a) it is a mouthful phrase and hard to remember by foreign tourists; (b) it is similar to a Polish campaign and (c) a search of this phrase on search engines brings up a pornographic websites with a similar name [9]. The reactions of Filipinos publicly criticizing the tourism slogan were immediate and went viral in few hours of its launch and this forced the DOT to pull out this campaign. The DOT launched the new campaign ‘‘It’s more fun in the Philippines’’ in January 2011. This campaign came out from one of the highest stakes pitches in recent Philippine ad history with seven top agencies competing for the prestige of advertising the country [10]. BBDO Guerrero, a local chapter of the biggest advertising agency in the world which also handled the previous tourism campaign, WOW Philippines campaign, won the bid. According to David Guerrero, who led the team, the concept was born during a dive trip, while he was staying in the Calypso Resort in Boracay, which was voted by Travel and Leisure and Tripadvisor as number one tropical island destination [10]. Being at such place, inspired the idea which made him wrote four pages of examples of what could be more fun in the Philippines.

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Aside from the phrase, the logo (Exhibit I), included a weave which represents the native ‘‘banig’’. Guerrrero explained that this reflects the fact that the country weaves various influences and cultures into one wonderfully colourful whole [10]. The colours are based on those traditionally used around the country; while the weave and pixels refers to the technological sophistication as evidenced in its advanced telecom and information and technology industry [10]. According to the DOT Secretary, Ramon Jimenez, the new tourism campaign aims to answer the question ‘‘Why Philippines?’’ He described this campaign as (a) grounded on basic, truthful communication between two persons; (b) a campaign for people who haven’t seen the Philippines yet; (c) with a new tourism line that allows the Filipinos to take the line and own it to themselves; and (d) it is not a manufactured line; it is drawn from the way Filipinos have touched the lives of tourists [11].

Marketing Strategies Social Media The team came up with three photographs and then launched it online with the campaign openly inviting the country’s bloggers, tweeters and Facebook users to come up with their own ads [5]. There are 27 million Filipinos who are on Facebook and their response was immediate and resounding as expected from a social media [5]. Indeed, the campaign was picked up by both digital community and traditional media resulting to #itsmorefuninthephilippines trending on Twitter after being picked up by international celebrities like Neil Gaiman and local celebrities in less than a week [9]. The digital community quickly created their own versions and an onslaught of memes has been incredible. For example, Roland Benzon, one of the many Filipinos who seized the campaign with delight created a Facebook album of ads and within 24 hours this was shared by over 10,000 people. According to Benzon, the democratic nature of the campaign

Exhibit I Source Department of Tourism. Campaign guidelines: it’s more fun in the Philippines

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Exhibit II Samples of the memes officially released by the Philippine Department of Tourism. Source Department of Tourism. Campaign guidelines: it’s more fun in the Philippines

inspired him, adding that this time Filipinos can make the ads instead of just passively reacting to it and voicing opinions on them [12]. The memes highlighted what is uniquely Filipinos’ sense of humour and creativity. They are considered positive reactions from the Filipinos. From the first three photographs initiated by


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the agency, there are now 12,000 versions of the material [13]. The DOT capitalised on how Filipinos can cause trends on twitter. #ItsMoreFuninThePhilippines was trending on Twitter worldwide just 30 minutes after the unveiling of the new slogan. The hash tag(#), a symbol before a word or group of words that signifies a topic or message category and makes searching for relevant keywords or topics much easier, were used by Filipinos which allowed the tagline to multiply like a virus [8]. To encourage the creation of memes, DOT has provided an application [9] and Logo guidelines [14] that allow people to easily create their own ads. An official website for the tourism campaign has also been developed: http:// itsmorefuninthephilippines.com/. In the website, various memes from the DOT and the public are shown and categorised into the following: nature and adventure, beaches, lifestyle, culture, water activities and fun. This website is targeted towards foreign tourists, encouraging visit to the Philippines. The design of the tourism campaign (Exhibit II) which allowed Filipinos to produce their own version of the slogan has awakened creativity among the Filipinos as well as letting their sense of humor shine through which makes it more attractive to its audience. With the help of the public, a vast amount of memes went viral which highlighted what is uniquely Filipino yet was able to relate it to an equivalent concept that is recognisable globally such as those slogans of angry birds (with a picture of a popular Filipino game/past time of cockfighting); Farmville (with a picture of rice farming); flipflops (with a picture of abaca made slippers), just to name a few. The tourism campaign goes beyond promoting tourist destinations but draws also on the Filipino culture, tradition and everyday lives of the Filipino which strongly delivers the message to its audience on why it is more fun in the Philippines. The public has widely contributed to the campaign by letting them express what they think is uniquely Filipino. The support of the Filipinos are seen in the way they use the tagline of ‘‘it’s more fun in the Philippines’’ in their Facebook statuses, twitters and even blogs. There are also compilations of these memes that were uploaded, downloaded and shared among Filipinos. An example would be this blog post titled ‘100 Things That Are More Fun In The Philippines’, by Rojae, a travel blogger [15].

The Traditional Media The DOT reinforced their promotion by using traditional forms of marketing such as TV commercials, posters and bill boards, road shows and trade shows. Three months after launching the campaign through the social media, the DOT rolled out a new TV commercial on international cable news channel CNN, a 30second video compilation of memes made and contributed by the public [13]. This was also launched in time with the 45th Annual Meeting of the Asian Development Bank Board of Governors which the country hosted from 2 to 5 May 2012 [13]. In addition to this the TVC was aired along with a special segment, ‘‘Eye on the Philippines’’. According to officials the airing of the commercials costed about

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P60 million and the hosting of the ADB annual meeting’s cost was about P300 million pesos [16]. In March, the DOT also participated in the Internationale Tourismus Borse (ITB_Berlin) 2012, the world’s largest travel fair. A launch party was also held at the ultra trendy disco club Felix to give more than 300 European travel-trade and media representatives an experience of how it is indeed more fun in the Philippines [17]. The DOT has also been intensively promoting the country through various events and trade shows across the globe, namely: in Japan during the Philippine Business Mission; in the US for the Memphis in May International Festival, in the Middle East during the Arabian Travel mart and in Korea at the Yeosu Expo 2012 [7]. In New York Times Square, billboards show footage of promotional materials on the Philippines [13]. Around the bustling streets of London, 25 double-decker buses and 50 black cabs have uniform design of the slogan logo and the different faces of the Philippines [18]. The cabs also come with a 30-min digital ad featuring the 30-seconder and 15-seconder TV commercials making DOT the very first national tourism organization to advertise through the digital platform of taxis owned by Verifone Media [18]. It was seen as a perfect opportunity to capture millions of visitors to the London 2012 Olympics [7]. Several partnerships were formed with the DOT as private sector supports the tourism campaign. Jollibee Foods Corporation [19], Land Rover Philippine Motors [20], Microsoft Philippines [21] and SEAir have launched their own advertising campaign using the theme ‘‘Its more fun in the Philippines’’. For example, the Land Rover came up with a series of Land Rover TV commercials and print advertisements featuring local tourist spots and off-road destinations in the country under the campaign dubbed ‘‘Land Rovering: More fun in the Philippines’’ [20]. SEAir, a Filipino carrier, has dedicated two of its brand new Airbus 320s to the tourism campaign by painting the country’s colourful logo on the aircraft’s front fuselage [22]. This kind of campaign was likened to a flying billboard as it flew in and out of various Asian countries such as Singapore, Thailand, Hong Kong and Indonesia [22]. The PDOT is continuously seeking support from private sector to sustain the tourism campaign.

The Results After more than a year of launching the campaign, the PDOT has announced that it has achieved a new milestone with a record of 4,272,811 visitor arrivals, a 9.07 % increase from the 3.917,454 arrivals during the previous year [23]. This is the first time that the country has reached the 4 million mark, reflecting increases in all major markets: South Korea, US, India, Japan, Australia, Malaysia, Russia, Taiwan, China Singapore, Canada, Hong Kong, UK and Germany [23]. Based on the tracking survey conducted by Ipsos ASI Philippines among 1,000 Filipinos ages 15 to 64 years old, by March 2012, the overall likeability of the tourism slogan has improved to 92 from 87 percent only in February [24].


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The company added that the campaign is communicating its intended messages, namely: ‘‘making Filipinos proud, making people want to travel, making people want to tell others about the beauty of the Philippines and making people believe that it is more fun in the Philippines’’. Measuring success of social media efforts are extremely difficult to gauge [4]. Social metrics media metrics may measure: (a) audience size (i.e., number of followers); (b) reach (e.g., viral impacts); (c) engagement (e.g., number of comments); (d) sentiment (e.g., consumer response) and (e) outcomes (e.g., resulting traffic, conversions) [25]. As Cruz observed, no reliable agency or entity has provided yet an estimate on how much free media the campaign has generated through the use of social media. However, she presented a few facts social to illustrate the power of social media [9]: • Official Facebook Page has 10, 151 likes (as of April 2012). • The #itsmorefuninthephilippines trended internationally on Twitter for less than an hour on the day of the launch. • A search on Google can go as deep as page 30 with relevant results. • Alexa ranks it as 8,343rd most popular site in the Philippines. Despite the lack of measurement of the actual effects of social media, the increase in tourist arrivals after the campaign is perceived by the PDOT as an indicator of the success of the campaign. It would definitely be interesting to follow this tourism campaign in the next few years if it will be able to maintain the support from Filipinos as well as achieve its target of 10 million tourists by 2016.

Conclusion ‘It’s more fun in the Philippines’ campaign has demonstrated how a national tourism organisation can use social media in enhancing traditional marketing strategies in competing for market shares of the emerging markets. It is clear that although the PDOT has invested billions in the campaign, the social media has amplified its impact and produced tangible outcome in terms of tourist arrivals growth. Filipinos being allowed to create and share their own memes in social networking sites features an element of co-creation which recognises the power of the connected, informed and active consumers which according to Pralahad and Ramaswamy is crucial in co-creation process [26]. Over the past few years, Filipinos have been in shaping up this tourism campaign initially causing the withdrawal of the previous campaign and massively supporting the current campaign and the PDOT. The design of the tourism campaign was effective and creative in providing the public with a slogan and a template to create their own versions and craft their own marketing messages. Combined with this burst of creativity, people were sharing them across many social networks which easily spread among Filipinos within the country and abroad, making an impact domestically and internationally. The impact of the tourism campaign is quite hard to measure

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quantitatively but there are definitely outcomes to the combination of traditional marketing and use of social media. The interaction between the PDOT and the public was fundamental to the campaign, and a basis for co-creation [26]. Filipinos feel they have ownership to the marketing campaign and the PDOT had taken some risks in allowing the public to create their own versions as inevitably there are people who created versions of the memes which highlighted negative aspects of the country but these were not as many as the positive versions that went viral. Nevertheless, this tourism campaign is an illustration of the power of social media, the co-creation process and traditional marketing strategies in marketing tourist destinations.

Questions 1. What are the key success factors for this tourism campaign? 2. Go online and search for memes of the tourism campaign by entering the key word it’s more fun in the Philippines. Given the memes that were generated can you identify what could be possible challenges that this campaign may encounter in the next few years? 3. Do you think the tourism campaign would be effective without the reinforcement of traditional media.

References 1. Davitt, D. (2010). Emerging markets drive global tourism recovery, says UNWTO. www.moodiereport.com. 2. The Telegraph (8 November, 2010). WTM report: Emerging markets. www.telegraph.co.uk. 3. Tourism Intelligence. From halaal meat to high street shopping: how to understand and woo the emerging travel markets. www.tourism-intelligence.com. 4. Hays, S., Page, S.J., Buhalis, D. (2012).Social media as a destination marketing tool: its use by national tourism organizations. Current issues in tourism (ahead of print), pp 1–29. 5. Boykoff, P. (May 3, 2012). Philippines’ tourism campaign hopes for boost from social media. www.cnn.com. 6. Torres, E. (August 8, 2012). P1.2B more needed for ‘It’s More Fun in PH’ campaign’. www.abs-cbnnews.com. 7. Mateo, J. (6 Aug. 2012). It’s more fun in PH: higher tourist arrivals recorded in first half of 2012. www.thepoc.net. 8. Arnaldo, M.S.F. (6 Jan 2012). It’s more fun in the Philippines’—spread the word, says DOT. www.interaksyon.com. 9. Cruz, X. (25 April 2012). It’s more fun in the Philippines crowdsourced marketing. www.creativeguerillamarketing.com. 10. Aragon, R. It’s more fun in the Philippines: the inside story from David Guerrero. www.balikbayanmagazine.com. 11. Metro Manila Directions. New DOT tourism slogan and logo: it’s more fun in the Philippines. www.metromaniladirections.com.


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12. Boykoff, P. (2 May 2012). Philippines’ tourism campaign hopes for boost from social media. www.cnn.com. 13. Garriga, N. (10 May 2012). DOT’s ‘it’s more fun in the Philippines’ campaign goes global’. www.ph.news.yahoo. 14. Department of Tourism. Logo guidelines on the ‘‘it’s more fun in the Philippines’’ tourism branding campaign. www.tourism.gov.ph. 15. Rojae (2012). 100 things that are more fun in the Philippines. http://adventuroj.com/2012/02/ 28/100-things-that-are-more-fun-in-the-philippines-25/. 16. Rosero, E.V. (4 May 2012). Interview: tourism secretary Jimenez on ‘it’s more fun in the Philippines’. www.gmanetwork.com. 17. Department of Tourism Media Center (13 March 2012). ‘‘It’s more fun in the Philippines’’ campaign rocks Berlin. www.tourism.gov.ph. 18. Philippine Embassy (4 June 2012). Tourism’s ‘it’s more fun in the Philippines’ campaign gets warm welcome in London. www.philembassy.no. 19. Torres, E. (11 Oct 2012). Jimenez calls on private sector to support, ‘‘it’s more fun in the PHL’’ tourism campaign. www.businessmirror.com.ph. 20. Top Gear Philippines (7 Sept 2012). DOT teams up with Land Rover PH for domestictourism campaign. www.topgear.com.ph. 21. Villegas, R. (6 Sept 2012). Microsoft launches I.T.: it’s more fun in the Philippines campaign. www.thepoc.net. 22. Uy, J.R. (19 Aug 2012). SEAir planes now bear tourism fun slogan. www.globalnation. inquirer.net. 23. Voyagers World (29 Jan 2012). Visitor arrivals in the Philippines records. 4.3 million in 2012. http://www.voyagersworld.in/article/visitor-arrivals-philippines-records-43-million-2012. 24. Remo, A.R. (7 June 2012). ‘‘It’s more fun in the Philippines’’ catching on-survey. www. globalnation.inquirer.net. 25. Schetzina, C. (2010). Introduction to social media analytics. New York: PhocusWrigth. 26. Pralahad, C. K., & Ramaswamy, V. (2004). Co-creating unique value with customers. Strategy & Leadership, 32(3), 4–9.

Case Study 16: Cathay Pacific Airways Using LinkedIn for Brand Building Hsiao-Pei (Sophie) Yang

Where we advertise is where the business person is going to be. And on the social media side, where is the business person? They’re on LinkedIn. —Dennis Owen, VP Marketing Americas at Cathay Pacific Airways.

Introduction Consumers are adopting increasingly active roles in co-creating marketing content with companies and their respective brands. In turn, companies are looking to online social media and campaigns in an effort to reach consumers where they ‘live’ online [1]. However, the challenge facing many companies is that although they recognise the need to be active in social media, they do not truly understand how to do it effectively. This case study highlights a best-practice organisation and its successful efforts to leverage social media in reaching an important audience of business consumers. Specifically, this case study explains Cathay Pacific Airways, a Hong-Kong based airline, used LinkedIn successfully for brand building and it points out how companies can maximise the potential of social media to better meet customers’ needs.

Cathay Pacific Company Background Cathay Pacific Airways is an international airline registered and based in Hong Kong, offering scheduled cargo and passenger services to over 140 destinations around the world. The airline’s primary product is premium non-stop service to Asia with a focus on the business class market. The company was founded in 1946 and it continues to make substantial investments to develop Hong Kong’s aviation industry and enhance Hong Kong’s position as a regional transportation hub. In addition to the fleet of aircraft, these investments include catering, aircraft maintenance and ground handling companies, as well as the corporate headquarters at Hong Kong International Airport. Cathay Pacific and its subsidiaries and H.-P. (Sophie) Yang (&) Coventry Business School, Coventry University, Priory Street, Coventry CV1 5FB, UK e-mail: [email protected]


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associates employ 21,000 staff in Hong Kong. Additionally, Cathay Pacific Airways is a founding member of the OneWorld global alliance whose combined network serves over 600 destinations worldwide [2].

Cathay Pacific Airways and LinkedIn Despite its success in Asia, the challenge faced by Cathay Pacific Airways is to reach the business class air travelers with a personal message that is compelling to them as individuals. Cathay Pacific Airways therefore turned to LinkedIn in order to increase brand awareness among travelers who fly business class between the United States and Asia. LinkedIn differentiates itself from other social media sites, such as Facebook or Twitter, by mainly attracting users who are professionals or business people. Therefore, Cathay Pacific Airways is able to precisely target potential customers via LinkedIn by industry, group, job title and/or company. In addition, because of the social networking nature of LinkedIn, Cathay Pacific Airways can engage with time-strapped business travelers in an environment where they are already comfortable, receptive, engaged and spending time. The three marketing approaches adopted by Cathay Pacific Airways via LinkedIn include [3]: 1. Identifying members who belong to LinkedIn groups who are related to business travel in Asia, such as Global Workers, China Networking Group, Hong Kong Connection. 2. Target these members with Display Ads and Sponsored Polls, i.e., using Sponsored Polls to ask business travelers what else they might want to redeem their airline points for, in addition to free airline tickets. Poll results gave Cathay Pacific Airways insight into customer preferences, as well as identifying prospects and loyal customers. 3. Establish Cathay Pacific Airways Page on LinkedIn and use Status Updates and Recommendations to build brand awareness and drive engagement. Results for Cathay Pacific Airways from using LinkedIn: • Three Sponsored Polls generated a total of 1,324 responses for Cathay Pacific Airways from business travelers. • Recommendation Ads generated 97 recommendations on the Product Page of Cathay Pacific Airways. • LinkedIn Research Network provides Cathay Pacific Airways ongoing insight to advertising effectiveness and provides useful data for the future campaigns. Interestingly, LinkedIn also helped Cathay Pacific Airways to identify many small and medium-sized companies and individuals who are much harder to be identified when compared to big organisations. As this case study shows, social media platforms provide extensive opportunities to customise user engagement. Although the social media platform does not require participants in the sphere of

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influence to learn anything new, companies should provide some element of uniqueness and authenticity in branding via social media, which will give consumers a reason for engaging electronically and be a great weapon against boredom: the one sin for which there is no forgiveness online [1].

Conclusion In the digital era, social media is being used more frequently by companies to better achieve corporate goals through meeting and exceeding customer needs better than the competition. As the marketing power of social media grows, it no longer makes sense to treat it as an experiment, and marketers of companies should tailor their use of social media for each stage of the consumer decision-making process for maximising the impact of social media on marketing [4]. This case study shows how Cathay Pacific Airways utilised LinkedIn to identify and target potential air travellers, drive engagement and create two-way dialogues. However, more than targeting potential customers, future opportunities that social media can create for companies could include obtaining customer feedback, creating new products/services, strengthening customer loyalty and engaging in online dialogue with followers. Specifically, it has been shown that social media enables targeted marketing response at individual touch points during consumer decision-making process [4]. Also, the various functions that social media can achieve for companies include brand monitoring, crisis management, customer service, facilitating referrals and recommendations, fostering communities, brand advocacy, increasing brand awareness, facilitating product/service launch, communicating targeted deals and offers, and utilising customer input for new product/ service development [4]. Therefore, apart from using LinkedIn, Cathay Pacific Airways and other companies can harness social media to shape consumer decision-making process in order to maximise the potential of social media to better meet customers’ needs.

Questions 1. Explain why LinkedIn is suitable for Cathay Pacific Airways in reaching the business class air travelers with personal message that would increase brand awareness. 2. Discuss the three marketing approaches adopted by Cathay Pacific Airways via LinkedIn. 3. Evaluate the results for Cathay Pacific Airways from using LinkedIn.

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References 1. Hanna, R., Rohm, A., & Crittenden, V. L. (2011). We are all connected: The power of the social media ecosystem. Business Horizons, 54(3), 265–273. 2. Cathay Pacific Airways (2012). Company background from Linkedin. Retrieved December 31, 2012 from http://www.linkedin.com/company/7097 3. LinkedIn (2012). Cathay Pacific Airways case study. Retrieved August 5, 2013 from http:// business.linkedin.com/content/dam/business/marketing-solutions/global/en_US/site/pdf/cs/ linkedin_cathay_pacific_case_study_us_en_130314.pdf 4. Divol, R., Edelman, D., & Sarrazin, H. (2012). Demystifying social media. McKinsey Quarterly, 2, 67–77.

Part VI

Conclusion

Conclusion Dilip S. Mutum

It was felt that the teaching materials utilised by Western educators, lacks real case studies related to marketing and business contexts in these markets. These 16 case studies cover a wide range of marketing topics, from product development to social media marketing. We have grouped the cases broadly into four chapters depending on the particular area of marketing the authors are considering. Several cases cover different areas of marketing. For example, Junglee.com: Amazon’s Entry in India is placed in the ‘Market Orientation and Brand Strategies’ chapter but could well come under ‘Product Development and Market entry’ as well. Moreover, the cases cover the whole spectrum of industries, ranging from the fast food sector (KFC and McDonalds) and beauty creams (Lakme Pure Defense) to airlines (AirAsia) and sports (NBA in China and Kolkata Knight Riders). The cases also highlight the need to understand the interplay of the strategic three Cs of Marketing [1] namely, the customers, the competition and the corporation. A sustainable competitive advantage can only emerge by integrating these three forces. The cases highlight the unique issues and challenges as well as some success stories. The importance of understanding your customers, of proper targeting and positioning of your brand, is highlighted in a number of the cases. They reveal the complex issues facing Western multinationals trying to penetrate or expand in these markets. At the same time, some of the cases look at how local companies and brands are holding their own against the foreign onslaught. It has been pointed out that ‘‘growing sophistication will not automatically result in growing demand for global brands’’. In fact customers in these markets are highly value-conscious and they are indeed demanding more from the MNCs. Local companies are learning from the strategies adopted by the Western companies and they often have support from the local governments who have different agendas [2]. Three cases specifically look at the marketing



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campaigns involving the Government departments, namely, the Indonesian fisheries sector adopting a marketing orientation; the development and marketing of the Akash Tablet in India and the new tourism marketing campaign ‘‘It’s more fun in Philippines’’ to promote the Philippine tourism industry. Western organisations may face tougher competition in emerging markets that have become markets of primary importance for organizations seeking sustained growth. The AirAsia case illustrates how Multinational companies from emerging markets are benefitting from deploying and expanding the marketing/promotion practices learnt from their Western counterparts in a context with which they are much more familiar with. AirAsia has achieved a competitive advantage by adopting and adapting several technological innovations including the use of social media marketing campaigns, in order to engage with and satisfy their customers. Not surprisingly, branding emerges as a common theme. The concept of a truly homogenous, global brand may well be dead and MNCs have realised that ideas of complete standardisation of the market offering is simply not possible. For example, McDonalds, which maintains strict controls on its branding, had to be flexible by offering minor changes to their menu, such as no beef or pork in India. This example also highlights another underlying theme which is common in a number of the cases, that is, the importance of local culture and its influence on marketing. Despite taking all precautions, well established companies can face crisis in areas of their business where and when they least expect it. A perfect example is the Halal food scandal faced by IKEA Malaysia. The Halal issue could have quickly snowballed into something much bigger but prudent action by the management along with a good PR campaign nipped the crisis in the bud. A few of the cases also highlight the growing importance of integrated marketing communications and social media marketing in particular. The success stories seem to indicate that social media is most effective when used to engage with consumers and build up long term loyalty rather than as a tool to sell. We acknowledge that most of the cases are from India and China, the two biggest emerging economies simply because of the immense interest in these two countries. However, it would be a mistake to ignore the rest of the emerging markets. A number of other countries in Asia, Latin America and Eastern Europe are also growing in terms of revenue and profit, especially in the fast-moving consumer goods sector despite lower prices. In fact, the highest growths came from the ‘‘BRICET’’ nations, which include Eastern Europe and Turkey besides the BRIC group [3]. We need to have more case studies from these countries as well.

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References 1. Ohmae, K. (1991). The mind of the strategist: The art of Japanese business. New York: McGraw-Hill. 2. Arnold, D. J., & Quelch, J. A. (1998). New strategies in emerging markets. http:// sloanreview.mit.edu/article/new-strategies-in-emerging-markets/. 3. Shankar, S., Ormiston, C., Bloch, N., Schaus, R., & Vishwanath, V. (2008). How to win in emerging markets. MITSloan Review, http://sloanreview.mit.edu/article/how-to-win-inemerging-markets/.

Marketing Cases From Emerging Markets

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