Classical and Human Relations Theories Essay

Critically evaluate the classical and human relations approaches of management theory. Your essay must clearly define the term ’’ management theory’’ and include industry examples to illustrate your answers. The purpose of this essay is to provide a critical assessment of the strengths and weaknesses of the classical and human relations theories of management giving some industry examples which supports their applicability and importance or otherwise. â€Å"‘Critical evaluation is the skill of assessing the strengths and weaknesses of a piece of work, and of understanding the importance of its contribution to the subject’. Hulme, J.A. (2004). For the benefits of in-depth analysis we will look at the classical scientific of F. W. Taylor (and not the classical administrative approach of say Weber), identifying expert supported strengths and weaknesses of his approach. Equally, we will look at Herzberg’s human relations theory of motivation. Classical management was rooted on the belief that employees have only economical and physical needs, and that social needs and need for job-satisfaction either don’t exist or are unimportant. Accordingly, this school advocates high specialization of labor, centralized decision making, and profit maximization. The humanistic (or human relations) school recognized people as a special sort of resource. They not only work for the organization – they are the organization. Mary Parker Follett succinctly defined management as ‘†¦the art of getting things done through people.’ Management theory can be defined as a body of general principles on how best to manage a business or organization to achieve its goals and how to motivate employees to achieve highest possible performance. F. W. Taylor (the father of scientific management) was the intellectual leader of the efficiency or classical movement. According to him the main object of management ‘should be to secure the maximum prosperity for the employer, coupled with the maximum prosperity of each employee’. For employers ‘maximum prosperity’ not only means large profits but overall development in the enterprise to a state of permanent prosperity. Taylor was, therefore, driven to ask why is there so much antagonism and inefficiency? He suggested three causes: (1) the fallacious belief by workers that massive increase in output will ultimately lead to their unemployment; (2) the defective systems of management which make it possible for workers to restrict output so as to protect their interests; (3) effort- wasting methods of work. The aim of scientific management to him was to overcome these obstacles by a systematic study of work to discover the most efficient methods of performing the job, and then a systematic study of management leading to the most efficient methods of controlling the workers. As Taylor puts it: ‘What the workmen want from their employers beyond anything else is high wages and what employers want from their workmen most of all is low labour cost of manufacture†¦.the existence or absence of these two elements forms the best index to either good or bad management.’ (Pugh & Hickson, 1996) Taylor, therefore, propounded four principles of management: Development of a true science of work to replace the old rule-of thumb; those fulfilling optimum goals would earn higher wages; failure would result in loss of earnings. The Scientific selection and progressive development of the worker: Every worker can be trained to be ‘first- class’ at some task. The mental revolution in management: He argued that the major resistance to scientific management came from management as workers are all too keen to learn to do a good job for a high rate of pay. The constant and close cooperation of management and workers: Every job is divided into various tasks each of which is done by a specialist- this system he calls ‘functional management’. He also formulates the ‘exception principle’ where management reports only details deviation from the expected norm. In support of his approach, it has been argued that Taylor laid the foundation for the development of other management systems for decades to come. His thinking has been developed into what is now called Work Study or Industrial Engineering. Taylor’s focus is understandably narrow as he was writing from scratch. Few managements have been willing to put into practice one of his basic tenets that there should be no limit to earnings or bonus- most incentive schemes are restricted. This may inhibit the ‘mental revolution’ Taylor sought. The focus on division of labour leads to increased efficiency and productivity. This can be seen in many operations ranging from fast food to large industrial facilities e.g. MacDonald’s or the car industry. Ford is said to have adopted his approach in 1913. Taiichi Ono of Toyota, father of JIT acknowledges his debt to scientific management. The autocratic style of leadership also ensures a unity of command, clear lines of direction and control for a better focus on the job at hand. During his time, the work force was not highly educated or trained. For many, the opportunity to obtain a secure job and a level of wages to provide for their families was all they expected. Taylor, like the other classicists, have been criticised in that he heavily relied on experiences with large manufacturing companies enjoying stable environments. It may be unwise to generalize from those situations to others’ especially to young, high-technology firms of today that are confronted daily with changes in their competitors’ products. Taylor assumed that workers are only motivated by money and that productivity is the best measure of how well a firm is performing. These assumptions fail to recognize that employees may have needs unrelated to the workplace or may view their jobs only as a necessary evil. His approach tends to ignore informal relations as characterized by social interchange among workers, the emergence of group leaders apart from those specified by the formal organization, and so forth. When such things are not considered, it is likely that many important factors affecting satisfaction and performance, such as letting employees participate in decision making and task planning, will never be explored or tried. Taylor’s approach aim at achieving high productivity, at making behaviors predictable, and at achieving fairness among workers and between managers and workers; fails to recognize that several unintended consequences can occur in practice. A heavy emphasis on rules and regulations may cause people to obey rules blindly without remembering their original intent, defeating their objectives. The theory was dehumanising work processes – stripped jobs of skill and judgement, treating workers as machine parts. Organizations are influenced by external conditions that often fluctuate over time, yet his approach presents an image of an organization that is not affected by external influences. The Human Relations theories of Management The primary functions of any organization, whether religious, political or industrial, should be to implement the needs of man to enjoy a meaningful existence. Frederick Herzberg (Pugh & Hickson, 1996) Frederick Herzberg (1923-2000), an American psychologist, conducted research on 200 engineers and accountants that led him to develop the two-factor theory of job satisfaction and dissatisfaction. Herzberg’s two-factor theory separated the elements of a job into those serving economic needs (‘hygiene’ and maintenance factors/Adam) and those meeting deeper aspirations (motivational factors/Abraham). He also relates job satisfaction and dissatisfaction to mental health. The motivators include responsibility, a sense of achievement, recognition, promotion and job attraction. These things are likely to motivate workers and are related directly to the job. The ‘hygiene’ factors include company policy and procedures, supervision, pay, work relationships and working conditions. These factors can only reduce job dissatisfaction and they are not directly linked to the job. Making sure these factors are acceptable to the labour force prevents dissatisfaction ra ther than causing positive motivation. The ‘Adam’ factor seeks the avoidance of dissatisfaction and the ‘Abraham’ factor is linked to job satisfaction. Their absence will not cause dissatisfaction but will reduce job satisfaction. Man has the above two sets of needs explained Herzberg in a later book (work and the nature of man); his needs as an animal to avoid pain and his needs as a human to grow psychologically. A lack in one cannot be compensated by fulfillment in the other. Herzberg therefore advocates for an industrial engineering approach which would design the ‘Abraham’ factor into jobs. This he called job enrichment to produce an effective utilization of people and to increase job satisfaction. When a worker does more hours at work to save money for a holiday it is a movement, not motivation. From this, Herzberg suggested that reward based systems including bonuses, could only provide movement rather than long term motivation. The main criticism of Herzberg’s research was the fact that the sample he used consisted of only two hundred accountants and engineers. It was also overly simplistic and blurs the distinction between satisfaction and motivation. Being pleased with doing a more challenging set of tasks does not necessarily mean it will increase motivation. It was also suggested that his research understated the role of groups and teams within the workplace. This is because groups and teams can generate a great deal of motivational influence. Even though Herzberg’s work has its criticisms, his ideas have been shown to be valid in practice. This is evident in businesses because a pay rise or change in working conditions is rarely enough to produce a labour force that is highly motivated. It has also been shown that if workers perceive a wage increase to be inadequate or working conditions are less than ideal it can have major consequences on the business and its operations. (The annual series of strikes by LU workers springs to mind). Conclusion As Oliver Wendel Holmes quoted, â€Å"When we want to know what is going on today or want to make sure what will happen tomorrow, I will look back at the past.† One theory will not fit all businesses at all times, naturally. But management theories are useful in that they formulate principles of best practise. Their relevance will depend on the socio-economic, cultural and political environments in which they are applied. ‘The gurus have all the answers, but all the answers are different. No one knows the problem’ . (Owen, Jo, Management stripped bare, 2012, 3rd ed.) References Hulme, J.A. (2004). Critical Evaluation: A Student Guide. Psychology Review, 10, 6-8. Pugh & Hickson, (1996) Writers on Organizations, (5thed) George, Claude S.1968. The History of management thought (1sted). Englewood Cliffs: N.J. Prentice-hall Herzberg, F. (1959) Mausner, B; Snyderman, B. the motivation to work, NY Herzberg, F. (1966) Work and the nature of man, world publ. Herzberg, F. (1976) Managerial choice: To be efficient and to be human, Dow Jones, Irwin Owen, Jo, (2012) Management stripped bare, 3rd ed.

Pathophysiology Case Study Essay

Patient Case Question 1: For which condition is this patient likely taking nifedipine? Nifedipine is a calcium channel blocker used to treat high blood pressure and chest pain. Patient’s past medical history indicates that he has had hypertension â€Å"for years,† the patient is most likely taking Nifedipine to manage this condition. May also be taking nifedipine so as to prevent chest pain from his past condition of Coronary Artery Disease (CAD). Patient Case Question 2: For which condition is this patient likely taking lisinopril? Lisinopril is an ACE inhibitor that treats high blood pressure and heart failure. Patient could be taking lisinopril in tandem with nifedipine to manage his hypertension and Coronary Artery Disease. Patient Case Question 3: For which Condition is this patient likely taking paroxetine? Paroxetine is used to treat various mood disorders. It is most likely that the patient is taking paroxetine to treat his generalized anxiety disorder, which he has been experiencing for the past 18 months (according to his past medical history). Patient Case Question 4: What is meant by â€Å"tenting of the skin† and what does this clinical sign suggest? â€Å"Tenting of the skin† involves a skin turgor test. By pulling a fold of skin from the back of the hand, lower arm, or abdomen with two fingers one can assess the ability of the patient’s skin to change shape and return to normal (elasticity). â€Å"Tenting of the skin,† indicates that the skin is not returning to normal quickly, which means the person has severe dehydration, a fluid loss of 10% body weight. The result of his skin turgor test indicates late signs of dehydration (patient had skin with poor turgor), and the presence of tenting in the skin indicates the severity of his dehydration. Patient Case Question 5: Are the negative Grey Turner and Cullen signs evidence of a good or poor prognosis? A positive test for Cullen sign occurs when a patient has superficial bruising in the subcutaneous fat around the umbilicus. A positive Grey  Turner test occurs when a patient has bruising of flanks (last rib to top of hip), which indicates a retroperitoneal hemorrhage. Both Cullen and Grey Turner signs are used to indicate/predict acute pancreatitis, when these signs are present one has a high rate of mortality (37%). The patient tested negative for both Grey Turner and Cullen signs, so his prognosis is good. Patient Case Question 6: Identify THREE major risk factors for acute pancreatitis in this patient. Patient has sinus tachycardia, paired with the patient’s severe dehydration the patient is showing signs of having acute pancreatitis. Patient also has a history of alcohol abuse and is regularly taking ACE inhibitors, which puts him at a high risk of developing acute pancreatitis. Patient also has diminished bowel sounds that indicate possible acute pancreatitis. Patient Case Question 7: Identify TWO abnormal laboratory tests that suggest that acute renal failure has developed in this patient. Patient’s Blood Urea Nitrogren (BUN) level is 34 mg/dL; which indicates decreased kidney function. Patient has a potassium level of 3.5 meq/L which is below normal range (3.7- 5.2 meq/L), this indicates possible renal artery stenosis. Both of these lab results suggest that the patient has developed acute renal failure. Patient Case Question 8: Why are hemoglobin and hematocrit abnormal? Patient’s hemoglobin level is 18.3 g/dL, normal hemoglobin levels for men are between 14 and 18 g/dL. Patient’s hematocrit level is 53%, normal hematocrit levels are 40-50%. This abnormally high lab results indicate early stages of kidney disease and anemia. Patient has developed acute renal failure, so these test results are as expected for a patient under such conditions. Patient Case Question 9: How many Ranson criteria does this patient have and what is the probability that the patient will die from this attack of acute pancreatitis? Patient has seven points of Ranson criteria. Patient’s WBC count was over 16K, patient is over age 55, patient’s blood glucose level was higher than  200 mg/dL, patient’s LDH level was over 350, patient had high BUN level, and Patient had high fluid needs due to his dehydration. Patient’s predicted mortalitiy is 100% based upon the Ranson criteria, so it is very likely that the patient will die from this attack of acute pancreatitis. Patient Case Question 10: Does the patient have a significant electrolyte imbalance? Patient has a sodium level that is 1 meq/L below normal range, and a potassium level 0.2 meq/L below normal range. This indicates that the patient is having renal complications that are interfering with electrolyte balance. Patient Case Question 11: Why was no blood drawn for an ABG determination? No blood was drawn for an ABG determination because patient’s lungs were clear to no auscultation, so no test was needed to test patient’s blood PH. Also patient had urine with a PH within normal range, so an ABG test was not really needed.

Bsiness Strategy of Pepsico

PROJECT REPORT FOR BUSINESS STRATEGY-1 EVOLUTION OF BUSINESS STRATEGIES AT PEPSICO Submitted to:Submitted By: Prof. Sanjany SharanPrashant Sharma Parul Kapoor Mohit Madan Prerna Gupta Murali Krishna (Section-A) (Group – 10) ACKNOWLEDGEMENT We take this opportunity to express our gratitude towards Mr. Sanjay Sharan, Department of Marketing, IBS, Hyderabad. We are indebted to him for the expertise and invaluable guidance we have received while working on this project. Contents Introduction †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. PESTEL Analysis †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 6 SWOT Analysis†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦10 PORTER Analysis†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 14 4P @ Pepsi †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 18 Competitive Strategy†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 20 Recommendations†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ †¦25 New Product Launch†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 27 Advertisement Strategy†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦34 Market Diversification Strategy†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 36 HR Strategy†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦39 Bottling Strategy†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢ € ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦45 INTRODUCTION OF PEPSICO Pepsi is one of the most well-known brands in the world today available in over  160 countries. The company has an extremely positive outlook for India. This reflects that India holds a central position in Pepsi's corporate strategy. India is a key market for Pepsi co, and at the same time the company has added value to Indian agriculture and industry. PepsiCo entered India in 1989 and is concentrating in three focus areas – Soft drink concentrate, snack foods and vegetable and food processing. Faced with the existing policy framework at the time, the company entered the Indian market through a joint venture with Volta’s and Punjab Agro Industries. With the introduction of the liberalization policies since 1991, Pepsi took complete control of its operations. The government has approved more than US$ 400 million worth of investments of which over US$ 330 million have already flown in. One of PepsiCo's key strategies was to develop a completely local management team. Pepsi has 19 company owned factories while their Indian bottling partners own 21. The company has set up 8 Greenfield sites in backward regions of different states. PepsiCo intends to expand its operations and is planning an investment of approximately US$ 150 million in the next two-three years. PESTEL ANALYSIS PESTLE analysis stands for â€Å"Political, Economic, Social, Technological, Legal and Environmental/Ecological analysis† and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. It is a part of the external analysis when conducting a strategic analysis or doing market research, and gives an overview of the different macro environmental factors that the company has to take into consideration. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. PESTEL ANALYSIS FOR SOFT DRINK INDUSTRY Political – * Non-alcoholic beverages fall within the food category under the FDA. The government plays a role within the operation of manufacturing these products n terms of regulations. * There are potential fines set by the government on companies if  they do not meet a standard of laws. * The following are some of the factors that could cause Pepsi’s actual results to differ materially from the expected results described in their underlying company's forward statement:- * Changes in laws and regulations, including changes in accounting standards, taxation requirements, (including t ax rate changes, new tax laws and revised tax law interpretations) and environmental laws in domestic or foreign jurisdictions. Changes in the non-alcoholic business environment. These include, without limitation, competitive product and pricing  pressures and their ability to gain or maintain share of sales in the global market as a result of action by competitors. * Political conditions, especially in international markets, including civil unrest, government changes and restrictions on the ability to transfer capital across borders. Their ability to penetrate developing and emerging markets, which also depends on economic and political conditions, and how well they are able to acquire or form strategic business alliances with local bottlers and make necessary infrastructure enhancements to production facilities, distribution networks, sales equipment and technology Economic- * The companies are subject to the harvest of the raw material that they use in their snack foods, soft d rink and juice, like corn, oranges, grapefruit, vegetables, potatoes, etc. Because of they rely on trucks to move and distribute many of their products, fuel is also an important subject, so they are subject to the fuel price fluctuation, and to possible fuel crisis. * Operating in International Markets involves exposure to volatile movements in foreign exchange rates. The economic impact of foreign exchange rates movements on them is complex because such changes are often linked to variability in real growth, inflation, interest rates, governmental actions and other factors. * PepsiCo is also subject to other economic factors like money supply, energy availability and cost, business cycles, etc. Sociocultural influences: – * PepsiCo and moreover Pepsi is subject to the lifestyle changes, because of it bases her advertising campaigns in a concrete kind of people with an special lifestyle, it is for that PepsiCo has to pay a special attention on the lifestyle changes. * Particularly in the United States Pepsi drinkers are very defined, there is a kind of people who drinks Pepsi another kind who drinks Coca-Cola, it is for that they have to pay attention to the social mobility for not losing a possible market. Taking into account that PepsiCo is trying to introduce itself in underdeveloped markets, they have to be careful with the possible problems with the governments of this countries, and with the problems could rise from PepsiCo act with the people of this countries. Technological – * PepsiCo is subject to new techniques of manufacturing, for their three business sectors, snack food, juices and soft drinks. * It has to pay attention to the new distribution tec hniques. – And they have to fix their attention in the competence developed, to know about the new products. Even though, we have to take into account that specialized factors involve a heavy and sustained investment, we have to know that if we are able to achieve them, we could generate a competitive advantage. * Some of the factor conditions PepsiCo has to take into account, in each country where they want to introduce are – Unemployment. – Interest rate. (Short term, long term). – Labour legislation. Environment Aspect: * There are many aspects when it comes to the environmental concerns. * For Example the presence of Pesticides in the Pepsi content causes health hazards. Also the wastes generated in the manufacturing of Pepsi are left out without treatment which causes hazardous effects to the surrounding and the water table. * The plastic used for bottling is harmful for the environment. Moreover, the waste generated by the industries producing soft drinks also affects the environment. Legal Aspect: * The production distribution and use of many of PepsiCo product are subject to various federal laws, such as the Food, Drug and Cosmetic Act, the Occupational Safety and Health Act ad the Americans with Disabilities. * The businesses are also subject to state, local and foreign laws. The international businesses are subject to the Government stability in the countries where PepsiCo is trying get into (underdeveloped markets). * The federal, state, local and foreign environmental laws and regulations. * The businesses are also subject to de taxation policy in each country they are operating. * They also have to comply with federal, state, local and foreign environmental laws and regulations SWOT ANALYSIS It is the study of factors that affects the organization or the industry in both positive and negative ways. Strength: Strength is defined as any internal asset, technology, motivation, finance, business links, etc. hat can help to exploit opportunities and to fight off threats. Weakness: It is an internal condition which hampers the competitive position or exploitation of opportunities. Opportunity: It is any external circumstance or characteristic which favours the demand of the system or where the system is enjoying a competitive advantage. Threat: It is a challenge of an unfavourable trend or of any external circumstance which will unfavourably influence the position of the system. SWOT ANALYSIS PEPSICO Strengths Branding – One of PepsiCo’s top brands is of course Pepsi, one of the most recognized brands of the world, ranked according to Interbrand. As of 2008 it ranked 26th amongst top 100 global brands. Pepsi generates more than $15,000 million of annual sales. Pepsi is joined in broad recognition by such PepsiCo brands as Diet Pepsi, Gatorade Mountain Dew, Thirst Quencher, Lay’s Potato Chips, Lipton Teas (PepsiCo/Unilever Partnership), Tropicana Beverages, Fritos Corn, Tostitos Tortilla Chips, Doritos Tortilla Chips, Aquafina Bottled Water, Cheetos Cheese Flavoured Snacks, Quaker Foods and Snacks, Ruffles Potato Chips, Mirinda, Tostitos Tortilla Chips, and Sierra Mist. The strength of these brands is evident in PepsiCo’s presence in over 200 countries. The company has the largest market share in the US beverage at 39%, and snack food market at 25%. Such brand dominance insures loyalty and repetitive sales which contributes to over $15 million in annual sales for the company Diversification – PepsiCo’s diversification is obvious in that the fact that each of its top 18 brands generates annual sales of over $1,000 million. PepsiCo’s arsenal also includes ready-to-drink teas, juice drinks, bottled water, as well as breakfast cereals, cakes and cake mixes. This broad product base plus a multi-channel distribution system serve to help insulate PepsiCo from shifting business climates. Distribution – The company delivers its products directly from manufacturing plants and warehouses to customer warehouses and retail stores. This is part of a three pronged approach which also includes employees making direct store deliveries of snacks and beverages and the use of third party distribution services. Weaknesses Overdependence on Wal-Mart – Sales to Wal-Mart represent approximately 12% of PepsiCo’s total net revenue. Wal-Mart is PepsiCo’s largest customer. As a result PepsiCo’s fortunes are influenced by the business strategy of Wal-Mart specifically its emphasis on private-label sales which produce a higher profit margin than national brands. Wal-Mart’s low price themes put pressure on PepsiCo to hold down prices. Overdependence on US Markets – Despite its international presence, 52% of its revenues originate in the US. This concentration does leave PepsiCo somewhat vulnerable to the impact of changing economic conditions, and labour strikes. Large US customers could exploit PepsiCo’s lack of bargaining power and negatively impact its revenues. Low Productivity – In 2008 PepsiCo had approximately 198,000 employees. Its revenue per employee was $219,439, which was lower than its competitors. This may indicate comparatively low productivity on the part of PepsiCo employees. Image Damage Due to Product Recall – Recently (2008) salmonella contamination forced PepsiCo to pull Aunt Jemima pancake and waffle mix from retail shelves. This followed incidents of exploding Diet Pepsi cans in 2007. Such occurrences damage company image and reduce consumer confidence in PepsiCo products. Opportunities Broadening of Product Base – PepsiCo is seeking to address one of its potential weaknesses; dependency on US markets by acquiring Russia’s leading Juice Company, Lebedyansky, and V Wwater in the United Kingdom. It continues to broaden its product base by introducing TrueNorth Nut Snacks and increasing its Lipton Tea venture with Unilever. These recent initiatives will enable PepsiCo to adjust to the changing lifestyles of its consumers. International Expansion – PepsiCo is in the midst of making a $1, 000 million investment in China, and a $500 million investment in India. Both initiatives are part of its expansion into international markets and a lessening of its dependence on US sales. In addition the company plans on major capital initiatives in Brazil and Mexico. Growing Savory Snack and Bottled Water market in US – PepsiCo is positioned well to capitalize on the growing bottle water market which is projected to be worth over $24 million by 2012. Products such as Aquafina, and Propel are well established products and in a position to ride the upward crest. PepsiCo products such as, Doritos tortilla chips, Cheetos cheese flavored snacks, Tostitos tortilla chips, Fritos corn chips, Ruffles potato chips, Sun Chips multigrain snacks, Rold Gold pretzels, Santitas are also benefiting from a growing savory snack market which is projected to grow as much as 27% by 2013, representing an increase of $28 million. Threats Decline in Carbonated Drink Sales – Soft drink sales are projected to decline by as much as 2. 7% by 2012, down $ 63,459 million in value. PepsiCo is in the process of diversification, but is likely to feel the impact of the projected decline. Potential Negative Impact of Government Regulations – It is anticipated that government initiatives related to environmental, health and safety may have the potential to negatively impact PepsiCo. For example, manufacturing, marketing, and distribution of food products may be altered as a result of state, federal or local dictates. Preliminary studies on acrylamide seem to suggest that it may cause cancer in laboratory animals when consumed in significant amounts. If the company has to comply with a related regulation and add warning labels or place warnings in certain locations where its products are sold, a negative impact may result for PepsiCo. Intense Competition – The Coca-Cola Company is PepsiCo’s primary competitors. But others include Nestle, Groupe Danone and Kraft Foods. Intense competition may influence pricing, advertising, sales promotion initiatives undertaken by PepsiCo. Resently Coca-Cola passed PepsiCo in Juice sales. Potential Disruption Due to Labor Unrest – Based upon recent history, PepsiCo may be vulnerable to strikes and other labor disputes. In 2008 a strike in India shut down production for nearly an entire month. This disrupted both manufacturing and distribution. MICHAEL PORTER’S 5 FORCES MODEL: MICHAEL PORTER’S 5 FORCES ANALYSIS: Porter's five forces  is a framework for the industry analysis and business strategy development developed by  Michael. E. Porter  of  Harvard Business School  in  1979. It draws upon  Industrial Organization (IO) economics  to derive five forces that determine the competitive intensity and therefore attractiveness of a  market. Barriers to Entry: * Bottling Network: Both Coke and PepsiCo have franchisee agreements with their existing bottlers who have rights in a certain geographic area in perpetuity. These agreements prohibit bottler’s from taking on new competing brands for similar products. Also with the recent consolidation among the bottler’s and the backward integration with both Coke and Pepsi buying significant per cent of bottling companies, it is very difficult for a firm entering to find bottler’s willing to distribute their product. * Advertising Spend: The advertising and marketing spend in the industry is  in 2009  was around $ 2. billion (0. 40 per case * 6. 6 billion cases) mainly by Coke, Pepsi and their bottler’s. The average advertisement spending per point of market share in 2000 was 8. 3 million . This makes it extremely difficult for an entrant to compete with the incumbents and gain any visibility. * Brand Image / Loyalty: Coke and Pepsi have a long history of heavy advertising and this has earned them huge amount of brand equity and loyal customer’s all over the world. This makes it virtually impossible for a new entrant to match this scale in this market place. * Retailer Shelf Space (Retail Distribution): Retailers enjoy significant margins of 15-20% on these soft drinks for the shelf space they offer. These margins are quite significant for their bottom-line. This makes it tough for the new entrants to convince retailers to carry/substitute their new products for Coke and Pepsi. * Fear of Retaliation: To enter into a market with entrenched rival behemoths like Pepsi and Coke is not easy as it could lead to price wars which affect the new comer. So, it is explicit from these factors that entry to this industry for new player is tough as the existing brands are pretty strong. Bargaining Power of Buyers: The major channels for the Soft Drink industry are food stores, Fast food fountain, vending, convenience stores and others in the order of market share. The profitability in each of these segments clearly illustrate the buyer power and how different buyers pay different prices based on their power to negotiate. * Food Stores: These buyers in this segment are somewhat consolidated with several chain stores and few local supermarkets, since they offer premium shelf space they command lower prices, the net operating profit before tax (NOPBT) for concentrate producer’s in this segment is $0. 23/case Convenience Stores: This segment of buyer’s is extremely fragmented and hence has to pay higher prices; NOPBT here is  $0. 69 /case. * Fountain: This segment of buyer’s are the least profitable because of their large amount of purchases hey make, it allows them to have freedom to negotiate. Coke and Pepsi primarily consider this segment â€Å"Paid Sampling† with low margins. NOPBT in this segment is  Ã‚  $0. 09 /case. * Vending: This channel serves the customer’s directly with absolutely no power with the buyer, hence NOPBT of $0. 97/case. The level of bargaining power differs among groups of buyers. Therefore, buying power of buyers is moderate. Threat of Substitutes: * There are a large number of substitutes available for the carbonated beverages like juices, water, alcoholic drinks, tea, coffee etc. However, each company has a significant presence in the substitute market so that they can leverage upon the sales of these drinks. Because the substitute products are mostly included in each manufacturer’s product portfolio, the threat of substitutes is low. Internal Rivalry: * The Concentrate Producer industry can be classified as a Duopoly with Pepsi and Coke as the firms competing. The market share of the rest of the competition is too small to cause any upheaval of pricing or industry structure. Pepsi and Coke mainly over the years competed on differentiation and advertising rather than on pricing except for a period in the 1990’s. This prevented a huge dent in profits. Pricing wars are however a feature in their international expansion strategies. * In a maturing market such as the domestic carbonated sodas, the only way to gain market share is to steal from one’s rivals. Thus, Pepsi and Coke fight heatedly over prices, suppliers, spokespeople, retail space and most importantly, the taste buds of  consumers. So, the internal rivalry is quite cut-throat. Bargaining Power of Suppliers: * Most of the raw materials needed to produce concentrate are basic commodities like  Colour, flavour, caffeine or additives, sugar, packaging. Essentially these are basic commodities. The producers of these products have no power over the pricing hence the suppliers in this industry are weak. 4P STRATEGY OF PEPSICO PRODUCT: The main product of PepsiCo in the beverages market is the flagship soft drink ‘Pepsi’. The aerated drink is a widely accepted and popular thirst quencher around the world. The Pepsi-Cola drink contains basic ingredients found in most other similar drinks including carbonated water, high fructose corn syrup, sugar, colourings, phosphoric acid, caffeine, citric acid and natural flavours. Some other popular products by Pepsi are: 1. Diet Pepsi 2. Aquafina 3. Gatorade 4. Mirinda 5. Mountain Dew 6. Slice 7. Tropicana Juices Both the companies Coke and Pepsi have a number of products. Many of these products are innovations but there are also many products which are brought out just as a competitive product for the other companies. These products are merely launched as a result of the ’cola wars’. Ex: 1. Diet Coke V Diet Pepsi 2. Maaza V Slice 3. Sprite V 7Up 4. Fanta V Mirinda 5. Minute Maid V Tropicana [Strategy being used: Envelopment Strategy  (also called encirclement strategy) – This is a much broader but subtle offensive strategy. It involves encircling the target competitor. This can be done in two ways. You could introduce a range of products that are similar to the target product. Each product will liberate some market share from the target competitor’s product, leaving it weakened, demoralized, and in a state of siege. If it is done stealthily, a full scale confrontation can be avoided. ] PRICE: Pepsi has always had to price its product according to the trend in the industry. Since aerated drinks are often homogenous, Pepsi and Coke alike have had to indulge in a strategy of ‘competitive pricing’. However, the two companies have also tried to make changes in these patterns as Coke introduced Rs. 5 bottle for rural markets. Pepsi has also never been shy of reducing its price to match the competition and has been flexible in lowering its price to match competition. STRATEGY: COMPETITIVE PRICING: Setting the price of a product or service  based on  what the competition is charging. . This type of pricing strategy is generally  used once a price for a product or service has reached a level of equilibrium, which often occurs when a product has been on the market for a long time and there are many substitutes for the product. ] PLACE: Pepsi has spread its reach worldwide and into all p ossible channels. Pepsi products are commonly available at supermarkets, vending machines, mom-&-pop stores, department stores, general stores and convenience stores. Pepsi is also available at many restaurants and cafes through exclusive contracts and deals with these restaurant owners. Coke’s channel also is based on similar lines, to penetrate the market to the maximum extent and increase the availability and points of purchase for consumers. PROMOTION: The promotional strategies of Pepsi are very aggressive especially in the advertising domain. Pepsi has taken Coke head on, in all areas such as Personal Selling, Sales Promotion and Public relations. Scores of legendary slogans, high-profile celebrity endorsements have marked a very public promotional tussle between cola giants Pepsi & Coke. One popular example is the â€Å"There's nothing official about it† campaign in 1996-97 (During the Wills World Cup (cricket) held in India/Pakistan/Sri Lanka) when Coke had won the official sponsorship of the world cup. PEPSI’s COMPETITIVE STRATEGY WITH RESPECT TO COKE: Pepsi & Coke have been involved a legendary struggle for capturing market share worldwide. They have been competing with the strengths of one another and targeting the weaknesses. They have been involved in many marketing warfare strategies to gain an edge over each other & as a follower; Pepsi has given a great challenge to Coke in all aspects of the business. Let alone leaving the corporate strategies, Pepsi and Coke have even competed in Outer Space by trying to launch aboard the  Space Shuttle Challenger  on  STS-51-F. The companies had designed special cans (officially the Carbonated Beverage Dispenser Evaluation payload or CBDE) to test packaging and dispensing techniques for use in  zero G  conditions. The experiment was classified a  failure by the shuttle crew, primarily due to the lack of both  refrigeration  and  gravity. Some of Pepsi’s strategies include: BYPASS ATTACK: Here marketing takes a Machiavellian turns where you pretend to neglect the direct competitor and instead work on expanding your resource base. Key considerations are consolidating your base and building up to a frontal or flank attack. * Summer of 98? – Pepsi buys Tropicana for $3. 3billion. buying the market leader in the OJ space helps it compete directly against Coke’s Minute Maid. * 2000 – Pepsi buys Quaker Oats, the owner of Gatorade another dominant player in the sports drink market (80% market share as opposed to Coke’s Powerade) for $14 billion. Earlier in the program, Pepsi develops its bottled water brand Aquafina which now commands a 14% market share as opposed to Coke at 11% and Poland springs at 10%. * Moral of this story: You may lose the brand war with your flagship product but could win the overall EBIT war with your family of brands. FLANK ATTACK: 1. Avoid areas of likely confrontation. A flanking move always occurs in an uncontested area . 2. Make your move quickly and stealthily. The element of surprise is worth more than a thousand tanks. 3. Make moves that the target will not find threatening enough to respond decisively to. In 1915, Coke announced a 6. ounce bottle in an innovative style. Pepsi introduced a bigger bottle for the same price and did not leave Coke with many options to retaliate because Coke could not change its bottle since that was the innovation & the vending machines for these bottles could also not fit a nickel coin, which was the competitive price at which Pepsi was selling its bigger bottle. This strategy was a successful flank attack by Pepsi as it is designed to pressure the flank of the enemy line so the flank turns inward. You make gains while the enemy line is in chaos. In doing so, you avoid a head-on confrontation with the main force. The disadvantage with a flanking attack is that it can draw resources away from your centre defence, making you vulnerable to a head-on attack. GUERRILLA MARKETING: Aggressive marketing techniques are used more covertly by large organisations to improve advertising impact and reduce the likelihood of competitors’ retaliation. Pepsi’s   Ã¢â‚¬Å"There's nothing official about it† campaign in 1996-97 (During the Wills World Cup (cricket) held in India/Pakistan/Sri Lanka) when Coke had won the official sponsorship of the world cup was a great example of Guerrilla Marketing where they leveraged upon Coke’s sponsorship with a great slogan and a lower cost. FRONTAL ATTACK: in India, Coca-cola continually launches against its customary rival Pepsi. Of course, Coke in India attacks Pepsi because not only can it match up with Pepsi, which still is the market leader in India, but also gives it a severe psychological trouble with its dominant flanking brand, Thums Up. According to statistics, Thums Up is the number 2 brand in the Indian soft drink industry, third being Coke itself. Coke’s inexorable attack on Pepsi on the too sweet taste of the latter (Offensive Principle 2: Find a weakness in the leader’s strength and attack at that point), also creates a huge psychosomatic incongruity. Coke being worldwide superior to Pepsi is trying to create a battlefield positioning where the ultimate supremacy of the cola war in India goes to Coca-Cola. This is a direct head-on assault. It usually involves marshalling all your resources including a substantial financial commitment. All parts of your company must be geared up for the assault from marketing to production. It usually involves intensive advertising assaults and often entails developing a new product that is able to attack the target competitors’ line where it is strong. It often involves an attempt to â€Å"liberate† a sizable portion of the target’s customer base. In actuality, frontal attacks are rare. There are two reasons for this: * Firstly, they are expensive. Many valuable resources will be used and lost in the assault. * Secondly, frontal attacks are often unsuccessful. If defenders are able to re-deploy their resources in time, the attacker’s strategic advantage is lost. The strategy is suitable when * the market is relatively homogeneous * brand equity  is low * customer loyalty is low * products are poorly  differentiated the target competitor has relatively limited resources * the attacker has relatively strong resources Elsewhere in the world, Pepsi is the one who takes Coke head-on in terms of advertisements, sponsorships, exclusive deals, product line etc. ENCIRCLEMENT STRATEGY: Pepsi has taken Coke up not only on the Cola beverage front but also tackles its many variants and product lines. This is a much broa der but subtle offensive strategy. It involves encircling the target competitor. This can be done in two ways. You could introduce a range of products that are similar to the target product. Each product will liberate some market share from the target competitor’s product, leaving it weakened, demoralized, and in a state of siege. If it is done stealthily, a full scale confrontation can be avoided. Alternatively, the encirclement can be based on market niches rather than products. The attacker expands the market niches that surround and encroach on the target competitor’s market. This encroachment liberates market share from the target. Pepsi has launched many competitive products to match Coke and has not shied away from investing in innovative products and fighting for market share. Some of these competitive products are: 6. Diet Coke V Diet Pepsi 7. Maaza V Slice 8. Sprite V 7Up 9. Fanta V Mirinda 10. Minute Maid V Tropicana PRICING WARS: As far as pricing is concerned, Pepsi has always been the follower since Coke was the first brand to enter the market. Coke had recently trumped Pepsi with the introduction of its Rs. 5 bottle to penetrate rural markets. This strategy had been fairly successful and Pepsi had to lower its price to compete with the innovative pricing. Since both products are homogeneous in nature, the nature of pricing has to become cooperative and similar. DISTRIBUTION STRATEGY: Pepsi ; Coke are not only infiltrating markets by putting their bottles in general stores, supermarkets, mom ; pop stores, convenience stores, fountain sodas ; vending machines but they are also snagging exclusive deals with global and local food chains. Pizza Hut which is run by Pepsico’s Yum! Brands Inc. only serves Pepsi on its menu. Coke, meanwhile, just scored a big coup by winning the soft-drink business at Subway, a fast-food chain now bigger than McDonald’s, which had previously served only Pepsi. In Conclusion, we see that Pepsi ; Coke have been involved in a long and bitter battle as they exist in hyper markets and battle out an oligopolistic market situation. This condition has forced advertising costs to sky-rocket and employment of various tactics and strategies to gain market share across the globe. RECOMMENDATIONS ANSOFF’S MATRIX The Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy. Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether it markets new or existing  products in  new or existing markets. The output from the Ansoff product/market matrix is a series of suggested growth strategies that set the direction for the business strategy. These are described below: Market penetration Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. Market penetration seeks to achieve four main objectives: †¢ Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling †¢ Secure dominance of growth markets Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors †¢ Increase usage by existing customers – for example by introducing loyalty schemes A market penetration marketing s trategy is very much about â€Å"business as usual†. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research. Market development Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets. There are many possible ways of approaching this strategy, including: †¢ New geographical markets; for example exporting the product to a new country Product development Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets. Diversification Diversification is the name given to the growth strategy where a business markets new products in new markets. Having analysed the various aspects of soft drinks industry in India and with reference to Ansoff’s model, Pepsi could launch a new product in the existing Indian market. This new product will be vitamin and nutrients enriched water. The new product will be called as PEPSI FRESH. STP ANALYSIS Segmentation: Target: Our main target is the affluent society in India where there has been no product ever launched by Pepsi in this category. We also target the Old Aged People for coming into the age bracket from 35 + and the health conscious people. Positioning: It is a highly differentiated product as no product has been introduced by pepsi or its competitors in this category. This would target the health conscious and the affluent. Marketing Mix: 4P Strategy Marketing mix is the process of designing and integrating various elements of marketing in such a way as to ensure the achievement of enterprise objectives. Marketing mix is a combination of marketing tools that are used to satisfy customers and company objectives. Creating a successful marketing mix that will increase results often takes experimenting and market research. The constituents of marketing mix are given below: PRODUCT Product refers to a physical product or a service or an idea which a consumer needs and for which he is ready to pay. Physical products include tangible goods like grocery items, garments etc. Services are intangible products which are offered and purchased by consumers. Services may involve also an innovative idea on any aspect of operation. A product is the key element of any marketing mix. The decisions concerning product may relate to – Product attributes * Branding * Packaging and labelling * Product support service * Product mix. Pepsi can launch this new product, called PEPSI FRESH, a vitamin and nutrient enriched water as India is a huge market for beverage industry with its population size of 1. 2 billion. This product is a product related to the health of the people and also the basic need i. e. , wat er. U. S. Consumption of carbonated soft drinks has steadily declined in the past decade. Part of that comes down to the array of alternative beverages the market now offers. Part of it comes down to health concerns in a nation with an obesity problem. In that spirit, Pepsi is focusing more on water, juices, teas and sports drinks. Pepsi’s top brands in those areas include Aquafina and Gatorade. And while it trails in soft drink sales, it leads the world in ready-to-drink teas through Lipton, while its Tropicana wins out in juices/nectars. The company is betting big on creating healthy foods through its Quaker Oats, Gatorade and Tropicana divisions. And it just began the Global Nutrition Group to deliver breakthrough products. As Caroline Levy, a CLSA analyst, noted, â€Å"PepsiCo is currently focused on better-for-you† products. So, our product will perfectly fit in their strategy. Attributes: * Flavours: Pepsi could provide 5-6 good flavours in this product. * Benefits: Vitamin water does feature multiple vitamins that are good for the body. One bottle of â€Å"FRESH† has 40 per cent of your daily value of vitamin C, and 20 per cent of your daily value of vitamins B3, B5, B6 and B12. * Branding: Pepsi has the advantage of number 1 player in the Indian beverages market. It is having huge capital reserves to fund its new product. The logo used for this could be PRICING Price is the amount charged for a product or service. It is the consideration paid by consumers for the benefit of using any product or service. Price fixation is an important aspect of marketing. There may be two types of Price fixation: * Cost based approach: This is the simplest method of pricing. Generally companies add a certain percentage of Profit, to the total cost of the product. The total cost of the product is calculated after taking all types of costs into consideration. While following this approach, no other factors e. g. prices of substitute goods, nature of demand, etc. are considered. * Competition-based approach : The prices are determined on the basis of conditions in the market. Companies may follow any one of the following three approaches. a) Price-in-line b) Market-plus c) Market-minus Price-in-line means prices fixed nearly equal to the prices of close alternatives. Generally this happens under free market conditions i. e. when the number of buyers and sellers is so large that they cannot affect the prices. When companies charge (fix up) a price which is more than the price of existing substitutes, it is called market plus pricing. This approach is adopted when the quality of a product is better, or it has a popular brand name, or its packaging is attractive and useful. Consumers will pay more only when they find distinctive differences in the product and its substitutes. Sometimes business enterprises get ready to supply products at a price lower than the market price. It may be adopted to grab a larger market share or to make a newly introduced product more popular. This approach is called market-minus approach. Companies having shorter channels of distributions or direct selling facilities can afford to fix a price lower than the prevailing market price. We will price the product in a higher segment above the normal mineral water. We will do some cost-revenue analysis to come up with the price. Basis and Assumptions: Total Fixed Cost Total (Rs. in lakhs) * Land & Building 50. 00 * Plant & Machinery 40. 00 * Other fixed assets10. 00 Total 100. 00 Cost of Production (Per annum) Total (Rs. in lakhs) * Working capital 350. 00 * Depreciation on building1. 50 @ 5% per annum. * Depreciation on plant & 3. 50 Machinery @ 10% per annum * Interest @ 15%18. 00 Total 373. 00 Sales Forecast = 45 lakh bottles Now, Total cost = Total fixed cost + Cost of Production = 100 + 373 = Rs. 473. 00 lakhs. Cost per bottle = 473/45 = Rs. 10. 5 Now, Price per bottle = 10. 5 + 138% mark-up = Rs. 25 per bottle. PLACE Place is another important aspect of 4P strategy. This refers to how an organization will distribute the product or service they are offering to the end user. The organization must distribute the product to the user at the right place at the right time. Efficient and effective distribution is important if the organization is to meet its overall marketing objectives. If an organization underestimates demand and customers cannot purchase products because of it, profitability will be affected. Pepsi can distribute this product through following channels: * Supermarkets. * Hypermarkets. * Convenience stores. * Institutional Tie-ups. * Public places like airports, multiplexes etc. PROMOTION Promotion refers to using methods of communication with two objectives: (i) informing the existing and potential consumers about a product, and (2) to persuade consumers to buy the product. It is an important element of marketing mix. In the absence of communication, consumers may not be aware of the product and its potential to satisfy their needs and desires. Techniques used in the promotion of project: * Advertising: * Advertising budget will be huge. * Advertising will be continued the entire year round. * Media Classes to be used: TV, Magazines and Radio. * Channel Genres: Entertainment, English Movies, Hindi movies, Music and Sports. * Day-Parts: All the day with heavy advertising in Prime time. * Sales Promotion: * Discounts will be given for the first month to entice the customers to use the product. * Extra incentives will be given to heavy selling retailers. * Free gifts can be given to the lucky customers. * Events: The Product will be launched with inauguration of Champions League T 20 Cricket tournament. Pepsi Fresh will be the main sponsor of the event. The promotional banners will look like this: ADVERTISING STRATEGY: After the liberalization policy in 1991 when Coke re-entered India, it found Pepsi had already established itself in the soft drinks market. The global advertisement wars between the cola giants quickly spread to India as well. Internationally, Pepsi had always been seen as the more aggressive and offensive of the two, and its advertisements the world over were believed to be more popular than Coke's. It was rumoured that at any given point of time, both the companies had their spies in the other camp. The advertising agencies of both the companies (Leo Burnett for Coke and HTA for Pepsi) were also reported to have insiders in each other's offices who reported to their respective heads on a daily basis. Pepsi has focused on ‘Youth’ centric values by using young celebrities such as Ranbir Kapoor and cricketers for its advertisements, also incorporating taglines such as ‘Yeh hai youngistaan meri jaan’. Internationally too, Pepsi has always had a young target audience. Many of their ads were historically targeted at teens and even pre-teens and are injected with fun, sports and most often, music. Pepsi has leveraged all manner of musical celebrities over the years, from Ray Charles to Britney Spears. Coca-Cola ads depict human experience in two primary ways. First, long before global branding was the trend it is today, Coca-Cola was embracing diversity. This can be clearly seen in its long-running â€Å"I’d like to buy the world a Coke† series of ads, depicting people from all over the globe joining together in Coke and song. Further, Coca-Cola has long been vailable in one form or another in countries all across the world and it’s even rumoured to be the most recognizable brand, logo and even word on the planet (the latter with the possible exception of â€Å"ok†). When Coca-Cola ads aren’t targeting worldwide diversity, they still possess a strong sense of community and overcoming differences and hardship throug h universal similarities such as a love for Coke. P P Pepsi has also paid close attention to its Packaging and always comes up with innovative cans, bottling and frequently changes it logo. However, Coke is not similar in this respect and only makes minor changes in its logos and cans. Coke has so far indulged in emotional marketing and tried to tap into the sentiment of Indian values by focusing on family packs, diwali advertisements and rural markets. Some legendary campaigns include: * The Pepsi Challenge ads showing people doing blind taste tests kicked off the fun in 1975. * In 1985 both were launched into space aboard the Space Shuttle Challenger with specially designed cans, although the crew considered both failures. * Over the years the formula was tweaked so that Pepsi ads featured celebrities stressing the drink was the â€Å"The Choice of a New Generation†. By the 1990s the Pepsi strategy revolved around consumers being invited to â€Å"Drink Pepsi, Get Stuff† by collecting Pepsi Points on packages and cups which they could redeem for lifestyle merchandise. Millions took part and the Pepsi Stuff campaign was considered a huge success. MARKET SEGMENTATION AND DIVERSIFICATION STRATEGY OF PEPSICO CURRENT SITUATION: * PepsiCo has ample opportunities to increase their market share and to grow if they concentrate on market diversification. * Pepsi and coke both have almost the same market share, but the markets where their strengths lie are different. The general market is dominated by Pepsi whereas restaurants, colleges, cinema halls are dominated by coke. * In Pakistan where PepsiCo has nearly 60% market share and its nearest competitor is coke. Coke is already devising strategies to become the market leader from follower in Pakistan. * Loyalty toward the brand â€Å"Pepsi† is relatively low in the Indian market. * Their marke t share in the Indian rural segment is low compared to coke. * Low productivity. WHAT PEPSICO CAN DO? * Pepsi’s primary consumers are teenagers, young and adults. So Pepsi can diversify their target market a bit and target these teenagers at clubs, restaurants, cinema halls etc, where coke has substantial share. * Concentrate more on the rural markets which has a lot of potential. Widen their distribution network; know what the consumers in that market want. Already coke presence in rural market through it’s â€Å"thanda matlab coca-cola† ad campaign. Through proper promotion and distribution channels Pepsi can catch up with coke in the fast-growing rural market. * Pepsi has a loyal customer base in Pakistan. It should not lose out this segment to coke. People who are already brand conscious use Pepsi. Hence they should concentrate on reinforcing their brand image and maintain the loyalty towards their brand. By doing so they can easily penetrate the other near-by markets, which will be a huge advantage. * Pepsi depends a lot on the US market. Hence it should diversify its market on a large scale and allocate necessary budgets for achieving desired results. Even though it’s long-term, strategies regarding which markets to enter and necessary budget allocations must be made now and must be implemented at the right time. Different growth strategies are appropriate for companies operating in different types of markets and Pepsi should decide on different strategic options according to the stage they are in their organizations life cycle. * Despite efforts made by PepsiCo to retain its customers through extensive marketing strategies and consumer loyalty programs, consumers are not loyal. Hence they should turn their strategies t owards building loyalty among consumers by affecting their purchasing decisions and at the same time diversify to other markets. Relying solely on one consumer market may prove harmful in the long-run and also it will be in line with other strategic decisions as discussed above. * PepsiCo’s diversification is obvious in that the fact that each of its top 18 brands generates annual sales of over $1,000 million. But having said that PepsiCo has approximately 198,000 employees and its revenue per employee is $219,439, which is lower than that of its competitors. This may indicate comparatively low productivity on the part of PepsiCo employees. To achieve strategic goals like market diversification, budget allocation plays a very important role and is crucial for success. Hence cutting down on costs and improving productivity must also be taken care of. * PepsiCo has been using all four marketing strategies from Ansoff’s matrix. Each strategy contributed to the company’s overall success but the diversification strategy seems to be the most favorable strategy for Pepsi, given the present market conditions. * By capturing various markets one at a time using different but appropriate strategies, Pepsi can become the market leader in the long run. HUMAN RESOURCES STRATEGIES OF PEPSICO LEADERSHIP AT PEPSICO INSIDERS AT PEPSICO INC (PEP) Name (Connections)| | Title| Type of Board Member| Age| Indra Nooyi | | | Chairman and Chief Executive Officer| –| 55| Eric Foss | | | Chairman of Pepsi Bottling Group, Chief Executive Officer of Pepsi Bottling Group and Chief Executive Officer of Pepsi Beverages Company| –| 52| Robert Pohlad | | | Chairman of PepsiAmericas and Chief Executive Officer of PepsiAmericas| –| 56| Irene Rosenfeld | | | Chairman of Frito-Lay North America Division and Chief Executive Officer of Frito-Lay North America Division| –| 57| Other Board Members on Board* Name (Connections)| | | Primary Company| Age| Ray Hunt | | | | Hunt Consolidated, Inc. | 67| Arthur Martinez | | | | Sears Investment Management Company| 72| Dina Dublon | | | | Microsoft Corporation| 57| James Schiro | | | | Zurich International (Bermuda) Ltd. | 65| Sharon Rockefeller | | | | Pepsico, Inc. | 66| Daniel Vasella M. D. | | | | Novartis AG| 57| Victor Dzau M. D. | | | | Kearny Venture Partners| 65| Alberto Ibarguen | | | | John S. & James L. Knight Foundation| 67| Ian Cook | | | | Colgate-Palmolive Co. | 58| Lloyd Trotter Ph. D. | | | GenNx360 Capital Partners| 65| Shona Brown | | | | Google In| | Human Resource Planning In Pepsi For Human resource planning the strategic goals and objectives are the key activities. Same is the case in the Pepsi. With the start of the season the goals and objectives are set. The goals of the organization are * To provide quality product by meeting customer demands. * To remain market leader and provide continuous improvement in its brand quality. * To provide good services to customers, employees, communities, and the environment. Human Resource Planning Process in Pepsi In Pepsi managerial estimates are used to determine the total future need of Human Resources in the organization. Than human resource department take actions to fulfill these needs. The employees hired both on permanent basis and temporary basis. After the season the temporary employees are layoffs. Normally the temporary employees are hired in production department. Tools and Techniques of Human Resource Planning Many tools are available to assist in human resource planning. In Pepsi the most commonly used tools are 1) Succession Planning. (Managerial employees) 2) HRIS (non managerial employees) Recruitment in Pepsi In Pepsi the issue of employees hiring is more critical as compare to other organizations because there is cyclical demand for employees. Pepsi uses both methods internal and external for recruitment depending upon the number of the employees required. Internal Recruitment Methods External recruitment is necessary for the organizations like Pepsi that are rapidly growing because there are large demand of people and internal sources are not sufficient to fulfill this demand. Pepsi use following methods of internal recruitment to attract their existing employees to apply for jobs available in Pepsi 1) Job Posting and Biddings ) Memos to Supervisors External Recruitment Methods Pepsi also use external recruitment methods to recruit a pool a qualified employees so that the most suitable persons can be hired for the job vacancies available in organization. Pepsi use the following external methods of recruitment 1) Job advertisement 2) Employees referrals and walk-ins 3) Campus recruiting Who Is Responsible For Recruitment In Pepsi assistant Human Resource Manager Miss Parsa Habib is responsible for both external and internal recruitment. Selection in Pepsi There are two different process of selection in this company for non-managerial and managerial employees Selection process for non-managerial employee Selection process for Managerial employees First the candidate applies or sends their resumes than an entry test is conducted by the organization. If the candidate is successful in this test than he move towards the next step of initial interview and then final selection is conducted by the manager of concern department and he makes the final decision about selection. Orientation in Pepsi Orientation is the process of introducing of new employees to the organization, their work units, and jobs. In Pepsi there are two types of orientation exist. In Pepsi there are two types of orientation exist 1) Official orientation provided by the organization. 2) Unofficial orientation provided by the co-workers. Official orientation is for the managerial employees and unofficial orientations are for the non-managerial employees. Length and Time of Orientation In Pepsi, the length and timing period of the orientation program is very short usually from 1 to 2 hours. Orientation Kit There is no concept of orientation kit in Pepsi. They are not providing their employees orientation Kit. Training in Pepsi Training for new employees is very necessary because without the proper training of employees no organization can achieve maximum output from their employees. Every organization offers their employees training so that they can sharp their skills and perform their jobs well. Pepsi is also offer to their employees training. They are doing both off the job and on the job training. 75% on the job training and remaining is classroom training. Following are the commonly used methods of training in Pepsi * Understudy assignment. * Coaching. * Classrooms training. * University and professional associations. Off the job training methods are used by the non-managerial employees or technical staff. Classrooms training and university and professional association are generally used for managerial employees. Who Train the Employees? In case of non-managerial employees training the immediate manager train the employees. This is for 3 days to 1 Month. For managerial employees Pepsi hire professional trainer. This training is held Hotels. This training is for 3 days to 15 days. Training Evaluation In Pepsi, there are no proper training evaluation system exists. Career Planning In Pepsi Pepsi provide career development opportunity only for managerial employee. . In Pepsi there is no concept of career development for the non-managerial employees because of this there is a very high employee turnover rate in Pepsi. Performance management system in Pepsi Performance management system is the important components of human resource management. Through this the organization identifies the strong and weak points of their employees and tries to rectify them. In Pepsi they have no proper way of evaluating the performance of their employees. Compensation and Benefits in Pepsi Compensation and Benefits motivates the employees and these must be offer by the organization. In Pepsi there is no concept of compensation and benefits for the non-managerial employees but Pepsi offer benefits and incentives to the managerial employees. These includes * Medical allowances * House rent * Education allowances * Convince allowances Recommendation Increase compensation and benefits to retain their existing employees also should have a better career development strategy to make it happen for their employees to go up the organizational hierarchy. * A better orientation strategy should be adopted to socialize their employees with the organizational rules and regulation also they should provide orientation kit to its employees * Career developmen t is necessary in every organization. Because it something that makes employees satisfied and increase their performances level ultimately this increase organization productivity. This is also helpful in achieving organization objectives. * Training Evaluation is very necessary because there are a lot of benefits of training Evaluation. We come to know our strengths and weaknesses through training evaluation, thus PepsiCo should have a mechanism to evaluate it. BOTTLING STRATEGY The Pepsi Bottling Group, Inc. was the world's largest bottler of Pepsi-Cola beverages. PBG sales of Pepsi-Cola beverages accounted for more than one-half of the Pepsi-Cola beverages sold in the United States and Canada and about 40 per cent worldwide. PBG had the exclusive right to manufacture, sell and distribute Pepsi-Cola beverages in all or a portion of 43 states, the District of Columbia, nine Canadian provinces, Spain, Greece, Russia, Turkey and Mexico. Approximately 70 per cent of PBG's volume was sold in the United States and Canada. Pepsi Bottling Group was based in Somers, New York. On August 4, 2009 The Pepsi Bottling Group and another major Pepsi bottler, PepsiAmericas, were purchased by PepsiCo, headquartered in Purchase, New York. The purchases were completed on February 26, 2010, forming a wholly owned PepsiCo subsidiary, the Pepsi Beverages Company (PBC). PBG's largest operations are in its North American and Western European markets, which have recently been hit by declining consumption of carbonated soft drinks. Consumer preferences have been shifting away from carbonated soft drinks, which accounted for around two-thirds of PBG's 2006 units, to healthier alternatives. The prices of production inputs, especially aluminium and corn, have been rising as well, putting additional pressure on PBG's profits. Despite these difficulties, PBG has performed relatively well. The Pepsi brands are very well known and enjoy significant brand loyalty. PBG's international markets have seen steady growth, helping to offset the sluggish domestic market. Also, PBG's performance is inherently tied to that of PEP, providing PBG with a certain degree of security in the highly competitive non-alcoholic beverage market. STATISTICS We see that the profit for the year 2006 was 5,830 million. When pepsi overtook 2 bottling plants it resulted in saving of 15 cense per bottle manufactured. It increased the gross profits to 6,210 million by the end of 2008. Pepsi already owns 33. 1 per cent of PBG stock and 43 per cent of PAS and since both bottlers have reported good FQ results and have increased their earnings forecast for the year, analysts believe that it is highly likely that even PAS will reject Pepsi's offer. While making the offer, Pepsi had said that the consolidation of its bottlers would bring in a saving at least $600 million a year, but PBG believes that the synergies would bring in savings in multiples of $600 million, based on its own internal analysis. This brings the profit statistics to

Surf Exel

? HINDUSTAN LEVER LIMITEDA Project Report On SURF EXCEL ? 2. TABLE OF CONTENTS†¢ ACKNOWLEDGEMENTS†¢ INTRODUCTION†¢ EXECUTIVE SUMMARY†¢ INDUSTRY ANALYSIS†¢ COMPANY OVERVIEW†¢ FINANCIAL STATEMENT ANALYSIS†¢ MARKETING MIX OF ORISSA†¢ COMPETITORS ANALYSIS†¢ PROJECT1: o OBJECTIVES o SCOPE AND LIMITATIONS OF THE STUDY o RESEARCH METHODOLOGY o DATA ANALYSIS  § CONSUMER ANALYSIS o CONCLUSIONS†¢ APPENDIX o CONSUMER’S QUESTIONNAIRE o DETAILED FSA ? 3. EXECUTIVE SUMMARYThe project assigned to us was to study the business and marketing practice, competitorsin business and customers of Surf Excel, for Orissa market.For this a questionnaire wasprepared for the consumers. A sample of 53 consumers was surveyed. The respondentswere interviewed in market places across Bhubaneswar. After the analysis we came to the conclusion that the Surf Excel enjoys a space in the top2 positions in brand recall of the consumer. This is a positive sign for HL L. The researchalso shows that the market share of Surf Excel in Orissa’s detergent market isapproximately 66%. Also, from the survey it is evident that brand name, price andcleansing action are three of the most important attributes a consumer looks for in anydetergent brand.Surf Excel enjoys a good reputation with the consumers with respect toall these attributes. Another thing that we noted in this survey was that Television is the most usedinformation source for the consumer. The exact communication recall however, is verypoor among the consumer. This could be attributed to the ever increasing advertisementclutter, across all media. Thus, HLL should consider looking for other media likeoutdoors. It was also noted that over 50% of the consumers who used Surf Excel, would purchasepacks whose size was 1/2 – 1 kg and did not prefer purchasing the 200gm pack.We triedto find out the reason as to why this practice occurred, but to no avail. HLL shouldconsider promoting th is pack size in some way, or phase it out totally. Thus, we can conclude that Surf Excel enjoys excellent customer reviews. It gets specialrecognition for its superior cleansing action, the convenient packs it comes in, the ease it ? 4. is available with, and the fact that its price is at par with similar products available in themarket today. OBJECTIVES OF THE STUDY 1.The primary objective of the study was to understand the customers of Surf Excel ( type/ quality/ their decision making style/ source of information that they use for collecting information regarding Surf Excel) 2. The study was also aimed to understand the business and marketing practice of Surf Excel and the marketing mix used by HLL for Surf Excel. 3. Another important objective of the study was to understand the competitors of Surf Excel. 4. Efforts were also made to evaluate the financial strength and market capabilities of the parent firm, Hindustan Lever Limited. ? 5.INDIAN FMCG INDUSTRYBackgroundThe FMCG secto r has been the cornerstone of the Indian economy. Though, the sector has been in existence for quite a long time, it began totake shape only during the last fifty-odd years. The sector touches everyaspect of human life, from looks to hygiene to palate. Perhaps, defining anindustry whose scope is so vast is not easy. Generally, FMCG refers to consumer non-durable goods required for dailyor frequent use. The sector touches every aspect of human life, from looksto hygiene to palate. Perhaps, defining an industry whose scope is so vastis not easy.The FMCG sector consists mainly of sub segments viz. personal care, oral care andhousehold products. This can be further sub-divided into oral care, soaps and detergents,Health and Hygiene products, beauty cosmetics, hair care products, food and dairy-basedproducts, cigarettes, and tea and beverages. Major Indian consumer product companies (like Britannia, P&G, HLL, etc. ) have a verystrong presence through their strong brands. Diversified port folios, wide distributionnetworks and scale economies of these companies deter new players from entering.Brand equity, therefore, is an extremely important factor in FMCG industry. One of theother most critical factors is the ability to build, develop, and maintain a robustdistribution networkPost-reforms, the industrys growth has been hinging around a burgeoning ruralpopulation which has witnessed significant rise in disposable incomes. Consequently, therural markets have been witnessing intense competition in almost all the consumerproduct classes. Another reason which has led to rise in this trend is the saturation inurban markets in most of the consumer non-durable goods categories.This has led to theindustry players scrambling for greater rural penetration as a future growth vehicle, thearea which accounts for 70% of the total Indian householdsSo far, it has been a chequered graph for the MNCs operating in the Indian FMCGindustry. Domestic companies are only beginning to make t heir presence felt in theindustry. It has taken tremendous consumer insight and market savviness for the FMCGplayers to reach where they are today. But, the journey seems to have just now begun forthe players as the majority of the rural populace are yet to get access to the items of dailyusage like toothpastes, soaps and shampoos. 6. Value for moneyEver since the global recession of 1991-94, which hit consumer spending hard, value-for-money has become the buzzword for FMCG companies globally. These FMCGcompanies embarked upon major restructuring and cost rationalization exercises asbusiness continued to become fiercely competitive. Several packaging innovations werealso resorted to. India was no different. There was a paradigm shift towards value-for-money products and, to some extent, towards the rural market. What Nirma did all these years suddenly became the buzzword for many FMCG players.Price cuts became inevitable to keep the market share from shrinking. Sometimes, thecuts to uched ridiculous levels. Economic recession hit the urban pockets badly and forcedcompanies to train their guns on rural India, which was witnessing a major change in itsaspiration and lifestyles and even had an income that translated into increasing volumes. India’s agrarian economy is fundamentally strong. Rural India accounts for as much as 70per cent of the nation’s population. That means rural India can bring in the much neededvolumes and help FMCG companies to log in volume-driven growth.Companies such asHLL, Colgate and Britannia who already had a strong rural focus, stepped up the gasfurther. HLL unleashed its â€Å"Operation Bharat†. Britannia pushed its Tiger biscuits toevery nook and corner of the country, while Colgate went about wooing the rural massesby offering low-priced products in convenient packaging. Those who could not do it ontheir own went piggyback on somebody else. P&G, whose distribution is largely urban,chose to leverage Maricos retail reach. P&G and Smith Kline Beecham, nonetheless, are interesting cases.With small productportfolios like theirs, they have been able to achieve what others could not and provedthat what you need is a good product, marketed effectively and sold at the right priceOf late, an interesting trend in the Indian FMCG sector has been brand acquisitions. Thisrepresents a growing awareness among the FMCG players are talking today more andmore of product â€Å"fits† while discussing brand acquisitions. It is not just acquiringanything and everything as it was in the pastRural marketing has become the latest marketing mantra of most FMCG majors.True,rural India is vast with unlimited opportunities. All waiting to be tapped by FMCGs. Notsurprising that the Indian FMCG sector is busy putting in place a parallel rural marketingstrategy. Among the FMCG majors, Hindustan Lever, Marico Industries, Colgate-Palmolive and Britannia Industries are only a few of the FMCG majors who have beengung-ho about rural marketing. With reason. Certainly, rural marketing holds the key to success of FMCG companies, which aredesperate to find ways out to gain deeper penetration. Not just the rural population isnumerically large, it is growing richer by the day.Of late, there has been a phenomenalimprovement in rural incomes and rural spending power. ? 7. FMCG sector performance in last decadeThe fmcg sector in India showed a constant decline in the last decade. What started as 20-25% growth rate in year 1994-96, had reached a negative growth rate of -2. 8% in Q1’04. The FMCG sector is now mockingly called SMCG or slow moving consumer goods. ? 8. Source India Today – R K Swamy BBDO Guide to Urban Markets*Soap, Shampoo, Nail Polish, Washing Powder, Footwear, Tea, Coffee, Cigarettes, Electric Bulbs.Rank Towns States Average Monthly Spending on FMCG Products* in Rs. 1 Chandigarh Chandigarh 3,418 2 Greater Maharashtra 2,955 Mumbai 3 Chennai Tamil Nadu 2,886 4 Ahmedabad Gujarat 2, 869 5 Vadodara Gujarat 2,816 6 Pune Maharashtra 2,804 7 Coimbatore Tamil Nadu 2,684 8 Ludhiana Punjab 2,674 9 Faridabad Haryana 2,596 10 Hyderabad Andhra 2,533 Pradesh ? 9. The Fabric Care Market In IndiaDetergentsThe Indian fabric wash market consists of synthetic detergents (comprising bars, powderand liquids) and oil-based laundry soaps. The detergent powder market is furthersegmented based on price and form.It is characterised by brands from a plethora ofregional and local players competing with the national marketers primarily in the low-priced and mid-priced segmentsThe synthetic detergent market can be classified into premium (Surf, Ariel), mid-price(Rin, Wheel) and popular segments (Nirma), which account for 15%, 40% and 45% ofthe total market, respectively. The product category is fairly mature and is dominated bytwo players, HLL and Nirma. Nirma created a revolution in the market by pioneering theconcept of low-cost detergents.Currently, the market is highly segmented with thedifferential between the premium and popular segments at almost 7X. GrowthAlthough the per capita consumption of detergents in India (2. 7 kg pa) is comparable tosome countries like Indonesia, China and Thailand (around 2 kg pa), it is lower than inothers such as Malaysia, Philippines (3. 7 kg) and the USA (10 kg). High consumerawareness and penetration levels will enable the market to grow at an average 8-10% perannum with slightly higher growth in the rural areas. Higher penetration stems frompopularity of low-cost detergents.Hence, besides increase in per capita consumption,there is tremendous scope for movement up the value chain. Leading Fabricare Brands Available In IndiaSurf ExcelSurf comes from the stables of Hindustan Lever, the largest player in this market with anoffering at each price point. Surf was the first detergent powder brand to be launched in thecountry. It created the detergent powder category and introduced the concept of bucketwash to housewives hitherto u sed to washing clothes with laundry soap bars. Surf has, since,become generic to detergent market.Consumers refer to all their powders as Surf, evencompetitive powders are called Surf e. g. Nirma Surf ? 10. Selling over 60,000 tonnes per year, Surf is the market leader in the concentrate andpremium powder price segments Surf has always been the first to recognize and respond totrends. Whether it was through Surf with Easy Wash- a low lather variant, in 1994 or Surfwith Wash Boosters (1995) that provided best clean even in hard water. The brand SurfExcel now has three variants – Surf Excel Quickwash, Surf Excel Blue and Surf ExcelAutomatic – which address different laundry needs but each offers stain removal as the keybenefit.In 2003, recognising changing consumer purchase patterns, it once again redefined value forthe consumers by introducing the concept of monthly packs. Sensitive to the increasing concerns on environmental pollution and water scarcity problemsacross the country, it brought to the consumer Surf Excel Quickwash. This low lathervariant is the first eco-friendly detergent in the country, as it uses almost half the water otherdetergents require. Surf has innovated beyond the basic product into other aspects of laundry.Understandingthe need for easy-to-store packaging, tubs and jars were introduced. In order to helpconsumers dose correctly for the best possible clean, measuring scoops were built into thepacks. For convenience seekers, washing has been simplified with the ready to dose packs ofSurf Excel Automatic. Consistent innovation addressing ever-evolving consumer needs has earned the brand aplace in the hearts of consumers. Surf was rated in the top Ten Most Trusted brands in TheEconomic Times survey in 2003WheelWheel is Indias number one detergent brand.Launched in 1987, it cleans effectivelywith lesser effort, making a laborious chore like washing light and easy. Moreover,Wheel does not burn hands or harm clothes like some ot her detergents, which containa high percentage of soda. Ever since its relaunch in 2001, with the new positioning of best clean with less effort,Wheel has been growing strongly. Research showed that consumers seek a solution to heavyduty laundry, like bed sheets and curtains. Developing on this insight, wheel sought to ? 11. liminate the trouble of tough dirt or heavy-duty laundry. Mass market consumers havewelcomed the solution, making it the number one. Nirma – a home-grown product that revolutionized the detergent market in India, andsuccessfully challenged large multinational leaders in the process. The Nirma success story isa result of its founder, Dr. Karsanbhai Patels relentless focus on quality, cost and value. Thedistribution model, sustained line extensions and umbrella branding strategies have enhancedthe brands cost leadership.Today, the companys two brands, Nirma and Nima, aredistributed through more thantwo million retail outlets across the country, generating g rosssales in excess of Rs. 26,000 million. In the fabric care category, Nirma has three productsfor the lower-end market. The Nirma Yellow Washing Powder is available in pack sizes of30 gms, 200 gms, 500 gms and 1 kg, and is ranked as the largest selling single detergentbrand in the world. Nirma is one of the large st selling single detergent brands in the world.Nirma products aresold through two million retailers and reach 400 million. This brand had been ranked as the â€Å"Most widely distributed detergent powder brand in India† as per AllIndia Census of Retail Outlets carried out in 435 urban towns by the AIMS (Asian InformationMarketing & Social) Research agency [Brand Equity – The Economic Times, March 11, 1997]. As perthe ORG-MARG Rural Consumer Panel [December 1998] survey, Nirma brand has been ranked ashighest in terms of penetration in washing powder category [BT Rural Market Watch, Business Today, June22, 1999]. ? 12.World-over Ariel epitomizes ‘stain removal’ and removes even the toughest stains in the firstwash. Introduced in India in 1991, Ariel has continuously led other detergents in productinnovation. For example, it pioneered the use of enzyme technology for superior and safestain-removing power, longer-lasting perfume, and the P&G proprietary cleaningtechnology, which cleans everyday soil and dirt from garments. Over the years, the brand hasenjoyed endorsement from celebrities such as the former actress and now MP Shabana Azmiand lakhs of other homemakers in India.Tide is the World’s Oldest and Most Trusted Billion Dollar Detergent and is the marketleader in 23 Countries around the world. Tide provides outstanding whiteness on whiteclothes and provides excellent everyday cleaning for colored clothes too. Launched in Indiain mid-2000, the brand has gained popularity among Indian housewives, thanks to itssuperior whitening, creative advertising starring Shekhar Suman, and its Value-for-Moneyproposition. Both T ide and Ariel are billion dollar brands in sales for P&G globally. Now Large Packs of Tide and Ariel – World’s Best Detergents at Rs. 3/- and Rs. 50/- only Mumbai, India — March 02, 2004 — Procter & Gamble today announced that it has reduced the prices of Ariel and Tide bags (large packs) by 20-50%, while maintaining the superior quality. The superior quality ? kg pack of Tide now cleans a family’s one-month laundry in just Rs. 23/-, while a ? kg pack of Ariel cleans a family’s one-month laundry in just Rs. 50/-. This significant price reduction will now allow many more Indian consumers to experience the world-class experience of outstanding whiteness from Tide and superior stain-removal from Ariel in every wash.The new prices of Ariel and Tide are as follows: ? 13. Old Price New Price Old Price New Price Pack Size P&Gs move to slash Ariel Ariel Tide Tide detergent prices is 200gm Rs. 30 Rs. 22 Rs. 20 Rs. 10 ostensibly to get more consumers to 500gm Rs. 70 Rs. 50 Rs. 43 Rs. 23 experience its brands 1kg Rs. 135 Rs. 99 Rs. 85 Rs. 46 but the industry sees it primarily as a 1. 5kg Rs. 180 Rs. 145 N. A* N. A move to wrest the advantage from HLL 2kg N. A N. A Rs. 160 Rs. 88 in a sluggish market. The prices of sachets (20gm) of Ariel and Tide remain unchanged. N. A = Not Available in that size. Six months ago, P&G reduced the prices of Ariel and Tide sachets by 50% in order toencourage a larger number of consumers to experience their superior quality. The bettervalue offer on sachets received such an overwhelming, positive response from consumersacross India that P&G was encouraged to offer the irresistible value to Ariel and Tide bagusers as well, thereby make the world’s best detergents accessible to a larger number ofIndian consumers.P&G talked to over 3,000 consumers across the length and breadth of India and observedover 25,000 washing sessions in consumers’ homes. Consumers believed in the superiorquality of Ariel and Tide but indicated ‘pricing’ as a constraint in using Ariel and Tide on aregular basis. The drop in prices by the P&G has forced HLL to also react in a similar way thus shrinkingthe overall profit margins for the group. While the immediate impact of any price slash isbound to result in more volumes and thereby shares for the companies concerned,improving margins in the business remains doubtful. 14. Company OverviewHindustan Lever Limited (HLL) is Indias largest fast moving consumer goodscompany, with leadership in Home & Personal Care Products and Foods & Beverages. HLLs brands, spread across 20 distinct consumer categories, touch the lives of two out of 1888 Sunlight soapthree Indians. They endow the company with a scale of combined volumes of about 4 introduced inmillion tonnes and sales of Rs. 10,000 crores. India. The leading business magazine, Forbes Global, has rated Hindustan Lever as the bestconsumer household products company.Far Eastern Economic Review has rated HLL asIndia’s most respected company. Asiamoney has rated HLL as one of India’s best managedcompanies. Leading national publications, like The Economic Times, Business World, and 1895Business Today have also rated HLL as one of India’s most respected companies and the Lifebuoy soapnumber one in Market Value Added and EVA. launchedHLL is Indias largest marketer of Soaps, Detergents and Home Care products. It has thecountry’s largest Personal Products business, leading in Shampoos, Skin Care Products,Colour Cosmetics and Deodorants.HLL is also the market leader in Tea, ProcessedCoffee, branded Wheat Flour, Tomato Products, and Ice cream, Soups, Jams and 1902Squashes. Pears soap introduced inHLL is also one of the countrys biggest exporters and has been recognized as a Golden IndiaSuper Star Trading House by the Government of India; it is a net foreign exchange earner. HLL is Indias largest exporter of branded fast moving consumer goods. The companysExports portfolio includes HLLs brands of Soaps and Detergents, Personal Products,Home Care Products, Tea and Coffee.HLL is also driving exports in chosen areas whereIndia has a competitive advantage – Marine Products, Basmati Rice, Castor Oil and its 1903 Brooke BondDerivatives. It is Indias largest exporter of Marine products, and one of the largest global Red Label teaplayers in castor. launched. Market leading brandsHLL’s brands have become household names. The company’s strategy is to concentrate itsresources on 35 national power brands, and 10 other brands which are strong in certain 1905regions. The top five brands together account for sales of over Rs. 3000 crores.Each of Lux flakesthese mega brands has a potential scale of Rs. 1000 crores in the foreseeable future. introducedSome of the big brands in Soaps and Detergents are Lifebuoy, Lux, Liril, Hamam,,Pears,Rexona & Dove, (all soaps), Surf Excel, Surf, Rin, & Wheel (all detergents). HLLalso m arkets the Vim and Domex range of Home Care Products. 1913In the Personal Products business, HLLs Hair Care franchises are Clinic, Sunsilk and Lux Vim scouringshampoos. In Oral Care, the portfolio comprises Close-up and Pepsodent toothpastes and powdertoothbrushes.In Skin Care, HLL markets Fair & Lovely Skin Cream and Lotion, the introduced. largest selling Skin Care Product in India; a brand developed in India, it is now exported toover 30 countries. It has been extended as an Ayurvedic cream, an under-eye cream, soap ? 15. and talc, in line with the strategy to take brands across relevant categories. The other majorSkin Carefranchises are Pond’s, Vaseline, Lakme and Pears. In Colour Cosmetics, HLLmarkets the Lakme and Elle-18 ranges.In Deodorants, the key brands are Rexona, Axe, 1930Denim and Ponds, while the Talc brands are Ponds, Liril, Fair & Lovely, Vaseline and Unilever isLifebuoy. Axe and Denim are HLL’s franchises for Men’s toiletries. formed on January 1HLL has recently launched Lever Ayush Ayurvedic Health & Personal Care Products. Health Care is among the new businesses HLL has chosen to enter. The product rangecomprises Cough Naashak Syrup, Headache Naashak Roll-on, Dandruff NaashakShampoo, Hair Rakshak Oil and Body Rakshak Soap.The purity of the Ayurvedic 1931ingredients in Lever Ayush is endorsed by the renowned Arya Vaidya Pharmacy (AVP) of HindustanCoimbatore. It is for the first time that rigorous testing procedures of the pharmaceutical Vanaspatiindustry have been applied to Ayurvedic products. That is why the brand seal is ‘Truth of ManufacturingAyurveda; Proof of Science’. Company registered on November 27HLL has started franchised Lakme Beauty Salons, offering standardised services, in linewith the strategy to add a service dimension to relevant brands.The company has set up the Hindustan Lever Network, a direct selling channel, offering 1932the Lever Home range of Laundry and Home Care products and the A viance Personal Vanaspati manufactureCare range. starts at SewriThe company has also begun an e-tailing service, called Sangam, which can home-deliveron order by phone or through the Net, a diverse range of about 5000 branded andunbranded products. The service is now available in select areas of Mumbai and NaviMumbai, besides Thane. 1939HLL is one of the world’s largest packet Tea marketers.Its Tea brands – Taj Mahal, Red Garden ReachLabel, Taaza, – are among the top brands in the country; it also markets Lipton Ice Tea. Factory purchasedHLL and Pepsi have formed an alliance to distribute a full range of tea and coffee and soft outrightbeverages through vending machines; HLL already has a base of around 15000 suchmachines. The coffee business comprises Bru Instant Coffee and Deluxe Green LabelRoast & Ground Coffee. The Kissan and Knorr Foods range comprises Spreads & Jams, Biscuit Sticks, Soups, 1943 Personal ProductsSquashes, Tomato Ketchup, Sauces, Puree, and Cooking Aids.Popular Foods, like Wheat manufactureFlour and Iodized Edible Salt, under the Knorr Annapurna brand name, have met with begins in India atremarkable success. The range has been expanded with ready-to-eat 10-second chapatis. Garden ReachThe innovative offerings are changing consumer habits into using processed, hygienic, Factoryhealthy and convenient products. The Kwality-Walls Ice Cream range comprises exotic Sundaes, Viennetta Desserts,popular ‘Impulse’ segment products like Max, Cornetto and Feast, and Cornetto Ripple 1947Softies.Ponds Cold Cream launched. Max was extended in 2001 as sugar confectioneries, because children are a key consumersegment in confectioneries too. This is among the new businesses HLL has chosen toenter. ? 16. HLL has acquired Modern Food Industries (India) Limited, entering the bread market. Modern Foods was the first Public Sector Undertaking to be disinvested. Besides 1959 Surf launched. upgrading the existing Modern products, H LL has launched new products, among thembiscuits. HLL is liberating its brands from their existing category mindset.Historically, brandsoriginated and stayed within a category format. HLL sees its Power Brands as being able tooccupy a unique position in the consumers mind and therefore being able to stretch intoother product formats and categories. All such initiatives have had a promising start, and 1964there are more to come. Etah dairy set up, Anik ghee launched; Animal feeds plant atThe Distribution network Ghaziabad; Sunsilk shampooHLL’s distribution network is recognised as one of its key strengths — that which helps launched. each out its products across the length and breadth of this vast country. The need for astrong distribution network is imperative, since HLL’s corporate purpose is â€Å"to meet theeveryday needs of people everywhere. †HLLs products, manufactured across the country, the operations involve over 2,000 1969 Rin bar launchedsuppli ers and associates. HLLs distribution network, comprising about 7,000redistribution stockiest about one million retail outlets, directly covers the entire urbanpopulation, and about 250 million rural consumers.In addition to the ongoing commitment to the traditional grocery trade, HLL is building aspecial relationship with the small but fast emerging modern trade. HLLs scale enables itto provide superior customer service including daily servicing, improving their rangeavailability whilst reducing inventories. HLL is using the opportunity of interfacing more 1975 Close-updirectly with consumers in this retail environment through specially designed toothpastecommunication and promotions. This is building traffic into the stores while yielding high launched.. growth for the business.An IT-powered system has been implemented to supply stocks to redistribution stockistson a continuous replenishment basis. The objective is to catalyse HLL’s growth by 1978ensuring that the right pro duct is available at the right place in right quantities, in the most Fair & Lovely skin creamcost-effective manner. For this, stockists have been connected with the company through launched.. an Internet-based network, called RSNet, for online interaction on orders, dispatches,information sharing and monitoring. RS Net covers about 80% of the companys turnover. 930 Unilever is formed onHLLs foray into Network Marketing January 1 1988 Launch ofAs per the market surveys conducted it is expected that the consumer market in India is Lipton Taazaworth 13000 crores per year and in few years the network market will capture 500 crores as tea. per market surveys, considering the potential Hindustan Lever has launched HindustanLever Network (HLN), a unique Network Marketing opportunity . ? 17. 1991The Network marketing concept Surf Ultra detergent launched. In the normal marketing system, the manufacturer supplies the products through themiddle men such as brokers, wholesalers and retailers. These middle-men add theirestablishment costs and their own margin of profit or commission on the price. Thisincreases the price by approximately 45 per cent. The consumer therefore gets the productat atleast a 45 per cent markup from the manufacturers price. 1993 Tata Oil Mills CompanyIn network marketing, these middle men are eliminated. A person is invited to join and (TOMCO),become a member (also called Consultant) of the network marketing company. This merges with theperson in turn invites many more people to join under him to form a group.These group companymembers, in turn invite their acquaintance to join under them. This group is made tosteadily grow and it can grow into thousands or tens of thousands, in the course of time,depending upon the enthusiasm with which the Consultant pursue the sponsorship of newConsultants. 1994 HLL introducesThese Consultants make purchases of the products of the marketing company for self use Walls. and also for sale to other consumers. For t heir loyalty in regularly purchasing the products,the marketing co. gives discounts, handsome bonuses, rewards and special incentives.Each consultant in the group gets his shares of benefits depending upon the purchasesmade by him and also by the number of the consultant under him (called downlines). This 1995is called network marketing. HLL enters brandedThe growth in the beginning will be slow, from 1 to 2 to 4†¦Ã¢â‚¬ ¦. but later on it will be rapid, staples1000 to 2000 to 4000†¦.. and so on. Given below are the approx. benefits received, business with saltdepending upon your group strength and on the assumption that each consultant haspurchased goods worth Rs 1,000/- in the month. The benefits will be more for higherpurchases and bigger groups.Group Strength Benefits: 1996 HLL introduces253Nos(1+12+60+180) Rs17,938/- branded atta; Surf Excel launched1531Nos(1+18+216+1296) Rs64,558/-3061Nos(1+36+432+2592) Rs 1,28,818/- 2002 HLL enters Ayurvedic health & beauty centre. ? 18. Shakti-Hll Rural ProjectShakti is HLLs rural initiative, which targets smallvillages with population of less than 2000 people or less. It seeks to empower underprivileged rural women byproviding income-generating opportunities, health andhygiene education through the Shakti Vani programme,and creating access to relevant information through theiShakti community portal.Started in 2001, Shakti has already been extended to about50,000 villages in 12 states – Andhra Pradesh, Karnataka,Gujarat, Madhya Pradesh, Tamil Nadu, Chattisgarh, UttarPradesh, Orissa, Punjab, Rajasthan, Maharashtra and WestBengal. The respective state governments and several Project Shakti – By using self-helpNGOs are actively involved in the initiative. Shakti already groups, HLL has pushed its productshas about 13,000 women entrepreneurs in its fold. A typical down into the country. Into villagesShakti entrepreneur earns a sustainable income of about where people cannot spend more thanRs. 00 -Rs. 1,000 per month, which is double their average Rs 20-25 on FMCGs in a monthhousehold income. Project Shakti will expand the distribution cover bottom-up, the rural project will be top-down. Thiswill be a huge competitive advantage for Lever. The costs of expanding into these villages will betoo high for most companies, which do not have a portfolio spanning teas to detergents,In recent past Hindustan lever took some major decisions to remodel its business. These decisionshad major impact on the how distribution of lever products is managed in the market.Hindustan lever took the decision to simplify the company it merged all the different business unitsinto two large divisions: home and personal care (HPC) and foods and beverages (F&B). This gaveeach division â€Å"The advantage is that these divisions get us enormous scale,† The companydecided to whittle its brands down from 110 to 35, over the next three years. This is known asHLL’s Power Brand strategy. To identify these power brands, managers were asked to consider their growth potential, profitdelivery and the size of the opportunity.And to ensure that Lever would not lose sales, it wasdecided to migrate these brand users to the designated power brands. For one, the drastic slimmingdown of the brand portfolio which threw up huge problems in execution is now over. HLL is already combining its scale advantage to offer retailers a bigger basket of products and betterservice. Instead of different sales teams servicing the same retailer, the company has integrated bothHPC and Foods portfolios for modern trade chains like Margin Free. Once again, its large portfolio ? 19. ange helps Lever to use the power of customer relationships to corner greater shelf space and adisproportionately higher share of the branded segment. Modern trade, it reckons, is already growing at 15-20 per cent and will continue that way for a longtime. By bulking up the businesses, it is possible for Lever to service these mo dern trade outlets on adaily business. As a result, these retailers do not have to maintain high inventory levels. HINDUSTAN LEVER LIMITED — BOARD OF DIRECTORSMr. Harish Manwani Non Executive chairmanMr. M. K. Sharma Vice ChairmanMr. Arun Adhikari Managing Director (Home & Personal Care)Mr.S. Ravindranathan Managing Director (Foods)Mr. D. Sundaram Finance & IT DirectorMr. A. Narayan DirectorMr. V. Narayan DirectorMr. D. S. Parekh DirectorMr. C. K. Prahlad Director ? 20. The CompetitorsThe Indian FMCG markets have witnessed some of the classic struggles involving HLL. Sofar Levers have been able to stand their ground but times are changing. HLL’s response tothe latest challenges is being eagerly studied by the corporate India. In order to gain afoothold in Indian FMCG sector various domestic and MNC companies are using all kind ofschemes to woo customer from HLL.The major competitors of HLL are:Detergents: P&G, Nirma, Henkel SpicToothpaste: Colgate-PalmoliveBeverages: R asna, Coca-Cola (Sun fill)Tea: Tata teaCoffee: NestleIce-creams: AmulShampoo: P&G, Garnier Procter & GambleP&G Home Products Limited is a 100% subsidiary of The Procter & Gamble Company,USA. P&G Home Products Limited is one of Indias fastest growing Fast Moving ConsumerGoods Companies that has in its portfolio P&Gs global brands such as Ariel and Tide in theFabric Care segment, and in the Hair Care segment: Head & Shoulders – worlds largestselling anti-dandruff shampoo; Pantene – worlds No. beauty shampoo; and Rejoice – AsiasNo. 1 shampoo. Fabric CareProcter & Gamble has two of its world-leading detergents – Tide and Ariel, in India to caterto the main concerns of the Indian households. In India P&G has launched followingbrands: †¢ Ariel Front-O-Mat Ariel 2 Fragrances †¢ Tide Detergent †¢ Tide BarHair CareIn India, P&G’s beauty care business comprises of Pantene, the world’slargest selling shampoo, Head & Shoulders, the worldà ¢â‚¬â„¢s No. 1 Anti-dandruffshampoo and Rejoice – Asia’s No. 1 Shampoo. †¢ Pantene Pro V †¢ Head & Shoulders †¢ Rejoice ? 1. Baby Care †¢ PampersIn India, P&G will continue to be a midget, in turnover terms, when compared to HindustanLever. The two P&G subsidiaries in India (P&G Hygiene and P&G Home Products) todaygenerate a combined turnover of about Rs 1,100 crore, just a tenth of Hindustan Leverssales. P&Gs distribution network is largely urban and has a reach of 0. 4 m outlets. In 1994, Godrej entered into a strategic alliance with P&G for inter alia toilet soap business,under which Godrej used to manufacture soaps, which were marketed by a joint venturecompany.However post marketing alliance with P&G, the company lost significant part ofits market share and subsequently the arrangement was discontinued. Godrej’s entiredistribution network was then taken over by P&G. THE Procter & Gamble -Gillette deal could result in the former getting a significant boostboth to its scale of operations and range of products in the Indian market. That Gillettesportfolio of shaving razors, gels, grooming products and toothbrushes has no overlap withthat of P&G in India (shampoos, detergents, feminine hygiene, cold medication) is apositive.The addition of Gillettes businesses could help P&G expand its portfolio andacquire a more extensive distribution network; This may strengthen P&Gs hand in theongoing war for market share with Unilever arms in the Asian markets, particularly withHindustan Lever in India. NirmaNirma is one of the few names – which is instantly recognized as a true Indian brand, whichtook on mighty multinationals and rewrote the marketing rules to win the heart of princess,i. e. the consumer. It was way back in ‘60s and ‘70s, where the domestic detergent market had only premiumsegment, with very few players and was dominated by MNCs.It was 1969, when KarsanbhaiPatel started door-to-door selling of h is detergent powder, priced at an astonishing Rs. 3 perkg, when the available cheapest brand in the market was Rs. 13 per kg. In a short span,Nirma created an entirely new market segment in domestic marketplace, which is, eventuallythe largest consumer pocketand quickly emerged as dominating market player. Now, the year 2004 sees Nirma’s annualsales touch 800,000 tones, making it one of the largest volume sales with a single brandname in the world.Looking at the FMCG synergies, Nirma stepped into toilet soapsrelatively late in 1990 butthis did not deter it to achieve a volume of 100,000 per annum. This makes Nirma thelargest detergent and the second largest toilet soap brand in India with market share of 38%and 20% respectively. SoapsIn 1992, sensing a strong need to expand the market through PenetrativePricing, Nirma entered this market with the launch of ‘Nirma Bath Soap’&‘Nirma Beauty Soap’ . In 1998 Nirma expanded its product line in the soap ? 2 2. ategory by introducing ‘Nirma Lime Fresh’ & ‘Nirma Rose’. This brand had carved a nichein its segment by achieving leadership position just within two months of its launch. It isavailable in 100g and 150g pack sizes. Nirma entered the premium soap segment when itlaunched ‘Nirma Sandal’DetergentsNirma launched â€Å"Nirma Washing Powder† in Indian market in year 1969, This productwas priced at almost one third to that of the competitor brands, resulting into instant trial bythe consumers. Presently Nirma has different variants in Indian market.Nirma washing powderNirma superNirma popularEdible SaltNirma has also entered the Food market in the recent past with launch of Nirma Shudh. ? 23. FINANCIAL ANALYSISRatio Analysis ? 24. All figures in Rs cr Particulars Dec 2001 Dec 2002 Dec 2003 Dec 2004 Sales 12420. 71 10641. 15 11919. 04 11594. 65 Total assets 7089. 06 7761. 01 8104. 68 7820. 34 Net worth 3170. 86 3713. 91 2189. 22 2148. 67 Bor rowings 102. 55 86. 23 1715. 18 1604. 25 Capital Employed 3273. 41 3800 3904 3752 Debtors 1254. 38 1169. 49 1228. 55 793. 56 PAT 1576. 47 1757. 59 1687. 3 1208. 4 PBDIT 2211. 63 2461. 31 2462. 92 1875. 63 Depreciation 202. 63 192. 65 199. 99 195. 68 PBIT 2009 2269 2262. 9 1680Current liabilities & Provisions 3709. 17 3841. 92 4084. 71 3919. 71 Current assets 3505 3510 3610 3132 Current assets -Inventories 2201 2146 2120 1574 Long term Debt 102. 55 86. 23 1715. 18 1604. 25 Interest 12. 31 12. 86 69. 12 136. 25 Total Purchases 6077. 97 5389. 04 5438 5413. 77 Profitability Ratios Operating Profit Margin (%) 16. 17 21. 30 19 14. 5 Net Profit Margin Ratio (%) 12. 68 16. 51 14. 15 10. 42 ROTA (%) 28. 3 29. 23 27. 92 21. 5 ROCE 61. 37 59. 72 58 44. 77 Return on Equity (%) 49. 71 47. 3 77 56. 23 Liquidity Ratios Current ratio 0. 944 0. 91 0. 88 0. 79 Quick Ratio 0. 59 0. 55 0. 52 0. 40 Absolute Cash Ratio 0. 25 0. 254 0. 218 0. 20 Solvency Ratios Debt Equity Ratio . 032 0. 023 0. 78 0. 75 I nterest Coverage Ratio 163. 2 176 32. 74 12. 33 Efficiency Ratios Debtor Days 38. 85 40. 11 37. 62 25 Creditor days 135. 31 149. 2 131. 62 145. 23 Total assets turnover ratio 1. 75 1. 37 1. 47 1. 48 ? 25. Interpretation: †¢ Profitability Ratios:HLL earns 14. paisa on every Re. 1 of Sale before Interest and Taxes It ultimately makes 10. 42paisa on every Re. 1 of Sale after Interest and Taxes. It is visible that Hindustan Lever Ltd. has not been able to increase its Operating Profit marginconstantly over the years. We can see that the operating margin has decreased considerable in thelast year. This is mainly due to the fact that the interest cost of HLL has almost doubled from 69. 12crores to 136. 25 crores. Moreover the company’s operating expenses have increased by almost 75% in the year 2004.The efficiency has certainly decreased over the last few years mainly owing tohigh operating expenses , increased interest burden and high indirect taxes. The Net Profit Marginhas also decreased by 17. 8 % in 2004 as compared to 2001. This is mainly due to the decrease insales by Rs. 826 cr. HLL generates 21. 5% Return on Total Assets (ROTA) that it employs in its operations in theyear ended 2004. ROTA has decreased in the last year mainly due to the fact that its profit marginhas decreased. It could be ecause of high competition as a result of which profits have decreasedand the total assets of the company have increased. As we can see that the Return on Capital Employed (ROCE) for Hindustan lever Limited hasdecreased considerably during the last year mainly due to lower profit margins. The company isearning a return of 44. 77% on the funds employed by it. Though the ROCE has seen aconsiderable change, even now the company is getting good enough returns and can pay goodenough dividends to the shareholders as we saw the case in the year 2004 where the rate ofdividend was 250%.The Return on Equity Ratio (ROE) states how much profit a company earned in comparis onto total amount of shareholders equity on the balance sheet of the company. Here, we see that theROE of HLL has increased in comparison to the year 2001 but this cant be concluded as afavourable situation for the company as looking at the figures in detail we can notice that there hasbeen a near to 30% decrease in ROE in comparison to the year 2003 , also we do see that the PATof the company has fallen by about 23% and the shareholders equity has also decreased by 32% incomparison to the year 2004. But Even now an ROE of about 56. 3% is considered to be verygood. †¢ Liquidity Ratios:It can be seen from the above table that the Current Ratio for all the years is less than 1. Thissignifies that HLL has short term liabilities greater than the short term assets. It implies that thecompany would have problems in managing its short term liabilities and liquidity requirements. The company might have to resort to financing its short term liquidity requirements by long termsources of finance. We can observe that the current assets have decreased by 13 % and at the same time the currentliabilities have decreased by just 4 % in the last year.The reason is that since the company is ? 26. using long term sources of finance to fund its short term obligations therefore the interest burdenhas increased and as a result the cash balance has decreased . Other receivables have also decreasedby more than 66% leading to a fall in current assets. †¢ Solvency Ratios:The company was highly unleveraged in the years 2001 and 2002. It was risky as the company hadinvested a huge amount of its own funds as compared to debt. However in the last 2 years thecompany has changed its policy and is leveraging the advantage of debt along with equity.Thoughthe debt equity ratio of 0. 75 is not good enough as compared to industry norms of 2:1 but thecompany is moving towards a favourable debt equity mix. It has realized the importance of tradingon equity . The Company has increased its d ebt burden by 1470% in the last 4 yearsInterest Coverage Ratio(ICR) basically signifies the ability of a firm to service its interest burdenthrough the profits generated . In the initial years when the firm had not employed debt its interestburden was very low.As a result the Interest Coverage ratio is very high, gradually the companyhas employed more debt and as a result of which the interest burden has increased significantly. Moreover, due to high competition and operating inefficiency the earnings of the company havedeclined. As a result the ICR has reduced from 163. 2 to 12. 33 in the last 4 years. However an ICRof 12. 33 is still very impressive which reflects the company’s ability to pay interests on loanseasily. This is a good indicator to the various financial institutions providing long term sources offinance to HLL. Efficiency Ratios:Here, we see that the Debtors Days for the company is less than the Creditor Days of thecompany. From this we can interpret that the company has a favorable cash position as it is makingits payments long after receiving the dues from the debtors. Here, from the Asset Turnover Ratiowe can know how efficiently the firm is using its assets, the ratio for which is pretty low for thecompany. The Creditor Days as well as Debtor Days both show negative growth which reflectsnegatively on the company’s financials. The Asset Turnover Ratio also shows negative growthwhich is also not a good sign for the company.Thus, looking into these figures we can analyze thatthe efficiency level of the company has gone down vis-a-vis the previous years and hence thecompany needs to look urgently into these matters so as to improve the efficiency of the company. O DU-PONT RATIO ANALYSIS:The Du Pont ratio analysis is a combination of financial ratios in a series in order to assess theinvestment returns of the company. It combines the financial ratios of both the Income Statementas well as the Balance Sheet in order to assess either the Return on Equity or the Return onInvestment.One of the Plus points of this method is that it provides a clear understanding of howthe company generates its return. This analysis provides an insight into the importance of assetturnover as well as sales to overall return. This formula shows the relationship of profit margin andturnover how these two complement each other. ? 27. The Du Pont ratio divides the Return on equity into three parts: Net Profit Margin, total assetturnover, and the company’s use of leverage referred to as Equity Multiplier also. DU-PONT CHART FOR HLL FOR THE YEAR 2004 RETURN ON EQUITY =PAT/NETWORTH 56. 3% Equity NET PROFIT TOTAL ASSET Multiplier MARGIN TURNOVER =TA/NW =PAT/NETSALES =SALES/TA =10. 42% =1. 48 =3. 64% RETURN ON ASSETS ROA=PAT/TA =15. 44%Growth Trends Over The Years Particulars Dec-01 Dec-02 Dec-03 Dec-04 ? 28. Sales 12420. 71 10641. 15 11919. 04 11594. 65Expenditure 10627 8690 9941 10076Change InSales (%) — -14. 33 12 -2. 7Chang e InExpenditure(%) — -18. 22 14. 39 1. 35Change inPBIT (%) — 12. 94 -0. 26 -25. 75Change inPAT (%) — 11. 48 -3. 99 -28. 38Change inBorrowings(%) — -15. 91 1889 6. 46Change InInterest (%) — 4. 46 437. 48 97. 12 ? 29. COMMON MARKETING MIX FOR ALL MARKETS 1.Product consists of brand, quality, appearance, 2. Price Structure consists of prices, dealers and consumers discounts. 3. Promotional activities consist of advertising, media. 4. Placement (distribution) system consists of dealers, distributors, retailers and overall logistics. MARKETING MIX FOR RURAL MARKET 1. Product 2. Price 3. Promotion 4. Placement system 5. Packaging-Reason for putting it separately is because symbols and packaging becomes very important when literacy levels are very low. 6. Retailer is the one who gives all information about brand choice and consumer feedback. 7.Education is very important for rural sector-eg. Project Shakti 8. Empowerment Example-Project Shakti and Self He lp Groups. PRODUCTSurf derives its name from ‘Surfactant’ the basic ingredient of a detergent. After 44 years, Surf brand has been upgraded and made more modern and contemporary. Surf has changed – the entire brand is now called â€Å"Surf Excel†. Continuousimprovements in the formulation of the product and introduction of new ingredients e. g. enzymes, along with new perfumes have ensured that the product meets the evolvingconsumer needs. The brand Surf Excel now has three variants – Surf Excel Quickwash, ? 0. Surf Excel Blue and Surf Excel Automatic – which address different laundry needs buteach offers stain removal as the key benefit. Surf Excel Blue Target segment: Economic segment. Attributes:-Removes stains without fading colours. Sizes avalaible: 25gm, 200gm, 500gm, 750gm, 1. 5kg, 3kgSurf Excel Quickwash (also called as Surf Excel Easy wash)(Hitherto known as just Surf Excel) Target segment: Superior quality for washing machine users. Sizes available:- 20gm, 20gm, 500gm, 1kg, 1. 5kg Attributes:-Stain removalSurf Excel Automatic Target segment:-Washing machine owners –Top and front loading machines .Sizes available:- 600gm, 1kg Attributes: Low lather detergent, anti corrosive, stain removal, ensures longer life of fabric. PRICELatest price war between detergent majors, Hindustan Lever (HLL), Proctor and GambleIndia (P&G), Nirma and Henkel-Spic India (HSIL) has proved that price in the marketingmix is very critical for growth of HLL products. If Surf excel prices were reduced to match the price cuts of their competitor (P&G),simultaneously they had to ramp up spending on advertising and promotions to increaseconsumption and penetration in the market and retain values of premium brand ? 1. PROMOTIONSSurf communication has been pleasant, soothing and gentle, Surf Excel has had adistinctively bold ‘tongue in cheek’ style of communication. Promotions for Surf Excelare more often than not tactical w eapons. Gift is offered to the consumer to gain short-term patronage or to engineer enhanced consumption. Choice of various promotionalgifts is usually governed by what can be bought cheap rather than any brand-relatedfactors. Surf Excel has always been sensitive enough to recognise the change in the consumerchoice dynamics.In some of their promotions, they have pampered influencersconsidering that brand choice in family products is a collective exercise. Various promotions being used for Surf are: †¢ Scholarship offer –Rs five lakh scholarship. Extremely rare and intelligent use of the marketing budget. Beauty of this promotion is in its design. An innovative and clever way of underscoringthe core promise of Surf Excel — stain removal!! Visual depiction in the ad is student-focussed — there are no mothers or daughters to be seen in the ad.Most of the people inthe ad are in their teens. The protagonist himself is barely in his teens. This can be anindicatio n towards changing consumer algorithm. This was backed by Win with Stains campaign – one of the largest campaigns taken upby Surf excel. This promotion is happening in Orissa markets which is aimed at offering consumers achance to win prizes as well as give students an opportunity to pursue further studies. Theaim of the whole campaign is to drive home the point that stains are good in life and oneis not to be scared to get themselves dirty.They are not only doing road shows,advertisements but branded horoscope columns in keeping with the theme of luck andfortune. They have roped in former South African cricketer Jonty Rhodes to participate in theWin with stains washathon to wash the largest stain in town with kids of the NGO -Magic Bus †¢ 1 bucket free with 3kg of Surf Excel has really managed to increase sales revenue of Surf excel. This is the most successful consumer promotion till date in Orissa market. †¢ Surf KidStains – a roadshow that invites consume rs to get first-hand experience of using Surf.Surf has taken communication beyond mass media advertising and involved consumersin the brand’s promise in the real world. It has touched consumer’s life through schoolcontact and in-store programmes. Road shows have helped to go to the consumers anddemonstrate superior performance vis-a-vis competition. ? 32. PLACEMENT SYSTEMIn Orissa, HLL has around 100 dealers and distributors. But HLL is into the exercise ofreducing number of channels in Orissa by increasing territory size of each dealer. HLL Distribution in Rural MarketsHLL has come up with new distribution channels to cater to rural markets.For long-term benefits, HLL has mounted an initiative, Project Streamline, to furtherincrease its rural reach with the help of rural sub-stockists. It has already appointed 6000such sub-stockists. As a result, the distribution network directly covers about 50,000villages, reaching about 250 million consumers. The pivot of Streamlin e is the RuralDistributor (RD), who has 15-20 rural sub-stockists attached to him. Each of these sub-stockists is located in a rural market. The sub-stockists then performs the role of drivingdistribution in neighboring villages using unconventional means of transport such astractor, bullock cart,etc.The Streamline system has extended direct HLL reach in these markets to about 37% ofIndias rural population from 25% in 1995 and the number of HLL brands and SKUsstocked by village retailers has gone up significantly. ? 33. PACKAGINGPackaging plays a key role in rural markets. Since customers are daily wage earners andthey don’t have monthly incomes like the urban consumers have, so Surf excel ispackaged in smaller sizes of 20gm so that they can afford given their kind of incomestreams. EDUCATIONSince vast majority of rural India lacks even basic education levels and modern outlook,HLL is training their new sellers to basic education levels.This is example of ProjectShakti which is explained in detail later. EMPOWERMENTHLL runs the program of Self-Help Groups (SHG), which operate like direct-to-homedistributors. The mo del consists of groups of (15-20) villagers below the poverty line(Rs. 750 per month) taking micro-credit from banks, and using that to buy HLL products,which they will then directly sell to consumersPrices of products 20gm 25gm 200gm 500gm 600gm 750gm 1kg 1. 5kg 3 kgSurf Quickwash 2 NA 23 53 NA NA 103 153 NASurf Automatic NA NA NA NA 90 NA 145 NA NASurf Blue NA 2 16 40 NA 53 NA 103 220 ? 34.Range of productsIf we divide detergent industry into three tiers – †¢ Premium at Rs. 80-140 per kg †¢ Mid-price at Rs. 30-50 per kg †¢ Popular at Rs. 15-25 per kgPopular segment accounts for 80% of the detergent industry. HLL leads in detergent powders withPremium – Surf ExcelMid price – SunlightPopular – Rin, WheelDealers and distributorsRetail Distributor MarginsExample of various distributor discounts on sale of these variants. Sale of 200gm Surf Excel Dealer Discount of 8%Sale of 20 gm Surf Excel Dealer Discount of 12%Wholesale Distributor MarginsThey get a standard discount of 1. % on sale of any variantStrategies in Orissa market 1. Shakti ProgramWith a twin objective of creating â€Å"income-generating capabilities† for underprivilegedrural women and â€Å"improving their rural living standard† through health and hygieneawareness, the Project Shakti is implemented in Orissa. Housewives and old ladies are targeted for this project. They are trained and given basiceducation to sell products. All products which are priced below Rs 5 are sold through thisproject. The sellers which are all ladies are paid margins of 3% on their sale of products.Now out of a total of 15,454 Shakti Entrepreneurs across India, Orissa hasover 928 (6%)Shakti Entrepreneurs spread across 22 districts. They are operating through Self Help Groups (SHGs) which is makes women direct-to-home distributo rs of HLL. Partnerships with several NCOs and support from stategovernments have been key enablers for the programme. Currently women entrepenuersare earning an average income of Rs. 7007- per month, doubling their household income. For the SHG women, it provides a stable, sustainable source of income.For villagers, thischannel has become a source of genuine and correctly priced products. ? 35. SALES TREND IN BHUBANESHWARBig Bazaar ,BhubaneshwarSales figures of Surf excel and is competitors Surf Ariel TideJuly sales 1,21,000 26,246 71,672July sold quantity 1787 pieces 341 pieces 1996 pieces ? 36. MARKET SHARE OF SURF Bhubaneswar, 20% Orissa, 35% Surf Excel Surf Blue Orissa, 65% Bhubaneswar, 80%SALE OF SURF EXCEL ON BASIS OF DIFERENT SIZES 10% 25% 20gm 200gm 500gm others(1kg,1. 5kg) 15%50%SALE OF SURF BLUE ON BASIS OF DIFERENT SIZES 7% 13% 20% 500gm 750gm5% 1kg 3kg 55% others(25gm,200gm) ? 37.PERCENTAGE SHARE OF SURF IN PREMIUM DETERGENTSMARKET 25% Surf Excel Ariel 75%SALE OF SURF EX CEL ON BASIS OF SEASONSCustomers reduce their washing frequency in rains, so the sales are drastically affected. Sale of detergents is strongly affected by seasonal changes as shown in the chart below. 12% 18% Summers Winters Rains 70% ? 38. COMPETITOR ANALYSIS. In this section we compare HLL with its competitors, viz. Proctor and Gamble (Ariel, Tide) and Nirma Ltd (Nirma washing powder). We now compare these products and the companies on the various counts. Market Share: The per capita consumption of detergents in India is 2. kg per annum. The synthetic detergent market can be classified into three main categories – Premium (Surf and Ariel) – 15% of total market Mid price (Rin and Wheel) – 40% of total market Popular (Nirma) – 45% of total market. Product Comparison: HLL (market share – 40%, including all 3 segments) manufactures Surf Excel in three avatars, Surf Excel Blue, Surf Excel Automatic and Surf Excel Quick wash. The USP of Surf Excel is that it reduces soaking time and water usage by 50%. It also contains a lesser amount of bleach than Ariel or Tide. P&G (market share – 12%, including all 3 segments) produces both Ariel and Tide.Ariel is produced in three types, Ariel Front-o-mat, Ariel Spring Clean and Ariel Fresh Clean. The USP here would be removal of tough stains while taking care of cloth quality and imparting a fresh fragrance to it. Tide detergent improves washing experience while imparting a lingering lemon fragrance to clothes. Nirma (market share – 30% of popular segment) comes in three variants, Nirma washing powder, Super Nirma washing powder and Nirma popular washing powder. Its USP would be low prices and the value for money it gives to the customer. Pricing Comparison: We now compare the prices for these brands.The price of each product and its variant is shown in the table b 20gm 200gm 500gm 600gm 750gm 1kg 1. 5kg 2kg 3 kg 4kg (30sachets)Surf Quick wash 2 23 53 NA NA 103 153 NA NA NASu rf Automatic NA NA NA 90 NA 145 NA NA NA NASurf Blue NA 16 40 NA 53 NA 102 NA 220 NAAriel 2 22 50 NA NA 99 145 NA NA NATide 1 10 23 NA NA 46 NA 88 NA 186 ? 39. Place comparison:HLL’s distribution system is one of its key strengths. The delivers its finished productsto various Carrying and Forwarding Agents, via whom the goods reach differentwholesalers. From here the goods are delivered to either rural or urban retailers, viawhom they reach the consumers.HLLs scale enables it to provide superior customer service including daily servicing,improving their range availability whilst reducing inventories. An IT-powered system hasbeen implemented to supply stocks to redistribution stockists on a continuousreplenishment basis. The objective is to catalyze HLL’s growth by ensuring that the rightproduct is available at the right place in right quantities, in the most cost-effectivemanner. For this, stockists have been connected with the company through an Internet-based network , called RSNet, for online interaction.As far as distribution to rural areas is concerned, they use a process called ProjectStreamline, wherein there exist networks of rural sub-stockists, who operate in the ruralareas itself. 20-30 sub-stockists come under a rural distributor (RD). The sub-stockists arethen responsible for distributing the products in rural areas. Nirma Limited markets its products through its fully owned subsidiary Nirma ConsumerCare Limited (NCCL), which was incepted in 1985. NCCL then resells the productsthrough ‘Nirma’ and ‘Nima’. Nirma pioneered the concept of flat distribution network.Nirma Consumer Care Limited operates with two parallel distribution networks. TheNIRMA brand is marketed through the first network, which consists of about 450exclusive distributors. It is one of the lowest cost FMCG distribution channels of thecountry. The principle channel for Nirma’s Products is the lowest cost system in Indiawith in built fle xibility and speedy distribution. All NIRMA and NIMA range of productshave a retail reach of over two million retail outlets and more than 40 million loyalconsumers spread all over the country.The Company has been successful in establishingan extremely good urban as well as rural presence through the two distribution channels. The distribution channels have played a significant role in making Nirma a householdname. The efficient network has made Nirma Washing Powder the brand with highestpenetration in its product category. The network is well equipped to meet the demands ofthe loyal consumers of the Company across the country. ? 40. Promotion comparison:HLL. Advertising. Surf excel, synonymous with the catch line, ‘Surf Excel hai naa! ’ was the first nationaldetergent brand on television.It has indulged in numerous advertisement campaignswhich have gained a lot of popularity. Surf Excel and Lalitaji ad also was in news for a long time. Slice of life situations havegene rated high levels of interest in the communication. Using consumer speak in the formof testimonials has helped in building credibility in the brand. â€Å"She was a hard-headed bargain-hunting housewife who demanded value for money andnot just cheap price. Consumers faith in Surf was restored, and not just because sheoffered a rational argument. The real reason Lalitaji was believed was because she wastrusted y the Indian housewife to get her a good bargain. We showed her bargainingwith the vegetable vendor about good tomatoes and bad tomatoes †¦ `Sasti cheez orachchi cheez me farak hota hai, bhai saab. â€Å"This advertisement reversed a declining brand share trend. The currents advertisement on television shows noted actor and human rights activistShabana Azmi (who did promote Ariel once upon a time), walking with two buckets ofwater and encouraging a crowd of people to do the same. It basically plays on SurfExcel’s strength to perform with lesser amounts of water.It thus underlines th