Business Environment Case Study

-Aditya Jain O8D1608 1 BBA B

Summary
Procter and Gamble (P & G), a global consumer products giant, entered the Japanese market in 1973 with American products, American managers, American sales methods and strategies. But, they lost a lot of money until 1987 when they had to learn how to adapt their products and strategies to Japanese culture. P & G entered the Indian market in 1985; it entered the detergent market in early nineties with Ariel brand .Besides soaps and detergent, they also introduced products like Pantene, viks range, Clearasil, mediker and also some personal products for both men and women. The Indian detergent and soap market had been dominated by Hindustan lever Ltd (HLL) for centuries, but after they took over of TATAS Tomco HLLs market dominance increased even more. Over one and half decades, P & G invested several thousands crores. They were dissatisfied by the performance in India so they decided to restructure their operations basically by shrinking of some activities like cutting the manpower and terminating thousands of stockiest. According to Gray Cofer, the country manager, it takes time to build a business category or brand in India. It is possibly an even more demanding geography than others. On the other hand China emerged as a highly promising market for P & G. In the Chinese market P & G was the first MNCS to enter. Per capita of China was higher than India and also china was growing faster than India. P&Gs best product Ariel failed to generate enough sales as consumers were worried about per kilo price. The company estimated that it would cost Rs.60 in comparison to Surf Rs.27 and Nirma Rs.8. It is pointed out that, in hindsight, even P&G managers privately admit that the bringing a new technology was big blunder. In eighties, P&G had taken huge beating in one of the most profitable markets, Japan, at the hands of the local company, Kao. Knowing that Japanese consumers fondness for small things, Kao weaved magic with its new found compact technology. It was therefore decided that compacts would now be the lead brand for the entire Asia-pacific region. When P&G launched Ariel in India, it hoped that Indian consumers would devise the appropriate benchmarks to evaluate Ariel. Even though Ariel was targeted at consumers with high disposable income, who represented half the urban population, consumers simply baulked at the outlay.

Ariel strategy of introducing variants was a smart move to flank lever at every price point by cleverly brands halo effect. By 1996, it had become clear that Ariels equity as a high performance detergent had begun to take a beating. Its equity as top-of-the-line detergent was getting eroded. Nowhere in P&Gs history had a concept like Super soaker been used to gain volumes. It was then decided that Super soaker wont be supported any longer and nor would Ariel bar be supported in media.

SWOT analysis
Strength: y y y y A well renowned brand. Have a large product portfolio. A very strong financial base. Very high acceptance in china and Japan.

Weakness: y y y y Not easily adaptable to all the cultures. Universal method of weakness. High priced goods. Use of compact latest technology.

Opportunities y Presence of consumers of high disposable income. y Ability to cover large markets with the help of the different strategies.

Threats:

y To much competition due to price cutting y Presence of successful products like surf to nirma y Increase in market dominance of Hindustan lever Ltd. Acquisition on tomco

QUESTIONS
1. Discuss the reason for the initial failure of P&G in Japan.
Ans. P & G entered Japanese market in year 1973.P & G entered

Japanese market with American products, American strategy, American managers and American sales method. This was the major reason of their failure in Japanese market. The main reason that they werent successful in the initial stage was that the company didnt learn how to adapt products and marketing style to Japanese culture. If P & G would enter Japanese market with the product according to the taste of Japanese people then they would not have such kind of disaster. One reason was also that the American managers work according to the work conditions of America so they are not able to put their 100% in work in Japanese market.

2. Where did P&G go wrong in the evaluation of the Indian market and its strategy? Ans. P&G entered the Indian detergent market in the early nineties with the Ariel brand through P&G India. P&G also introduced products like shampoo, medical products and personal products of men and women. The Indian detergent market was dominated by Hindustan lever Ltd from Past many centuries. So this was one of the reasons that P&G was not able

to take over the market. P&G more over introduced detergent with the brand of Ariel which was sold at the price of Rs.60/kilogram, where as the alternate product by the Hindustan lever ltd. Nirma was sold for Rs.8/kilogram. This was the major mistake made by P&G that they introduced the alternative product at higher rate in the market which was already dominated by Hindustan lever ltd. Even though this product was targeted at the consumers with high disposable income, who represented half the urban population, consumers simply baulked at the outlay.

3. Discuss the reason for the difference in the performance of P&G in India and china. Ans. The difference was because, chinas business worth several times than in India in less than 12 years, has emerged as highly promising market for P&G. When the Chinese market opened P&G was the first MNCS to enter china. The performance was better in china because per capita income is much higher in china than that of India, and also the growth rate in china is also much faster than the rate in India. All these signify that there is high disposable income with the people of china. Another reason for P&Gs better growth in china is that understanding the Chinese culture was much easier since the expat Chinese in the US was not very different from those back home where as most Indian expats tended to adapt far more to the cultural nuances of the immigrant country.

Conclusion After going through this case study it is clearly understood that if company wants to enter the market of the country then it should adopt the strategy any methods according to the market to that particular country and not by sticking to the methods and policy the country of the parent company. Moreover the company should analysis the competitors of the particular country related to that particular product. Company should also decide the price of the particular product according to the per capita of the particular country.

HUMAN RIGHTS PROTECTION

SUMMARY: Reebok the well known athletic shoe multinational gets its product contract manufactures by independent firms in the developing countries. The MNC which gives importance to low cost and high quality is also concerned with human rights protection and requires its suppliers to follow the following human rights standards. y Nondiscrimination: the partners with Reebok should not discriminate while appointing an employee. The employee should not be appointed on the basis of his cast, creed and color. y Working hours: the business partner with Reebok should ask the employees to work for not more than 48 hours a week, except for appropriately compensated overtime in compliance with local laws. y Forced or compulsory labour: Reebok will not work with the company who uses forced labour. Reebok will not purchase any materials that were produced by the forced labour or other compulsory labour. y Fair wages: the partner of Reebok should have the commitment to the betterment of the wage and benefit levels that address the basic needs of the labour and their familyis fulfilled. y Child labour: Reebok would not appoint any labour force below the age of 14. y Freedom of the association: Reebok will seek business partners that share its commitment to the right of employees to establish and join organizations of their choosing. Reebok

will seek to assure that no employee is penalized because of his or her non-violent exercise of this right. y Safe and healthy work environment: Reebok will assure employees a safe and healthy workplace and that do not expose the workers to the hazardous conditions.

SWOT analysis
Strength: Reebok follows all the human rights standards such as nondiscrimination, working hours, forced labour, fair wages, child labour, freedom of association, safe and healthy work environment. Weakness: y All the multinational companies are dependent on each other for their manufacturing. y The company who produces may have monopoly which might affect the cost of the product. Opportunities: The company can manufacture on its own inspite of depending on the other countries which can reduce the cost of the product. Threats: y Many times the manufacturing doesnt follow all the human rights. y Any company can enter and can give the present company competition.

QUESTIONS
1. Discuss the human rights protection Endeavour of Reebok.

Ans.
y Nondiscrimination: the partners with Reebok should not discriminate while appointing an employee. The employee should not be appointed on the basis of his cast, creed and color. y Working hours: the business partner with Reebok should ask the employees to work for not more than 48 hours a week, except for appropriately compensated overtime in compliance with local laws. y Forced or compulsory labour: Reebok will not work with the company who uses forced labour. Reebok will not purchase any materials that were produced by the forced labour or other compulsory labour. y Fair wages: the partner of Reebok should have the commitment to the betterment of the wage and benefit levels that address the basic needs of the labour and their familyis fulfilled. y Child labour: Reebok would not appoint any labour force below the age of 14. y Freedom of the association: Reebok will seek business partners that share its commitment to the right of employees to establish and join organizations of their choosing. Reebok will seek to assure that no employee is penalized because of his or her non-violent exercise of this right. y Safe and healthy work environment: Reebok will assure employees a safe and healthy workplace and that do not expose the workers to the hazardous conditions.

2. What are its implications for the developing country suppliers? Will these standards pose a problem for the suppliers? In what ways will these standards benefit the supplies in particulars and developing country industrial sector in general? Ans. Nondiscrimination, working hours, child labour, fair wages, freedom of association, safe and healthy environment, forced labour are human rights which are implications for developing countries suppliers. Yes these standards will pose problem for the developing suppliers because many times following these expenses is very expensive and non practical. As the result the suppliers will loose its contracts with the MNC if there is break of the standards. This standard will benefit the suppliers in many ways. Such as the suppliers will gain the reputation in the eyes of the society and in the eyes of MNC. As a result they get more orders from different MNC.

Conclusion
Its really good that all the multinational companies keep the human standards as criteria for the suppliers to take the contracts.
If all the multinational companies follow these standards, then all the problems related to the industry and labour will vanish. There will be a feeling of oneness among the employees towards the company.