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11th November 2009 Paras Mukesh Shah (PGP-IBM) Ahmedabad Management Association
Topics Acknowledgement Declaration Management Summary Project Report on Global Consumer Behavior in Online Shopping Introduction Literature Review Research Objectives Research Methodology Online Shopping in India Changing Attitude Towards Online Shopping Proposed Model Limitations of Study Barriers to Growth of Online Market Findings & Analysis Conclusion Recommendations References Project Report on Global Consumer Behavior of Export Company Objective of the Study Scope of the Study Introduction of KEMROCK INDUSTRIES & EXPORTS LTD. Journey from 1981-82 to 2008 Strategic Alliances / Collaborations About Products Sector wise Demand of Products Competitors in the Market Differentiation in Products & Services Product Life Cycle Marketing Strategy Implications in Product Life Cycle Distribution Strategy SWOT Analysis Global Consumer Behavior in KEMROCK INDUSTRIES Insights Recommendation References Page No. 2 3 4 5 6 7 9 10 11 13 15 18 20 21 27 27 28 29 30 30 31 32 33 34 36 37 38 39 41 42 43 44 48 49 50
The satisfaction and euphoria that accompany the successful completion of my project would be incomplete without the mention of the people who made it possible and whose constant guidance & encouragement crowned our efforts with success. I express my sincere gratitude and thanks to Mr. Alan D’souza for his support, guidance and valuable suggestions without which I would not have been able to complete this project. I am also thankful to all the respondents for their contribution who helped us in this study specially contributors outside India.
Paras Mukesh Shah (AMA-PGPIBM 2008-10)
I, the undersigned, hereby declare that the project report entitled Study of Global
Consumer Behavior in Online Shopping
and Study of Global Consumer Behavior of a Kemrock
Industries & Exports Ltd. has been written and submitted under the guidance of Mr. Alan D’Souza. I further declare that it is original work done as a part of our academic course and has not been submitted elsewhere. The conclusions and recommendations written in this project are based on the data collected by me while preparing this report.
Paras Mukesh Shah
The growing use of Internet in India provides a developing prospect for online shopping. If Emarketers know the factors affecting online Indian behavior, and the relationships between these factors and the type of online buyers, then they can further develop their marketing strategies to convert potential customers into active ones, while retaining existing online customers. This project is a part of study, and focuses on factors which online Indian buyers keep in mind while shopping online. This research found that information, perceived usefulness, ease of use; perceived enjoyment and security/privacy are the five dominant factors which influence consumer perceptions of online purchasing. Consumer behavior is said to be an applied discipline as some decisions are significantly affected by their behavior or expected actions. The two perspectives that seek application of its knowledge are micro and societal perspectives. The micro perspectives involve understanding consumer for the purpose of helping a firm or organization to achieve its objectives. The people involved in this field try to understand consumers in order to be more effective at their tasks. Whereas the societal or macro perspective applies knowledge of consumers to aggregate- level faced by mass or society as a whole. The behavior of consumer has significant influence on the quality and level of the standard of living. Throughout the project we will see that how Kemrock Industries and Online Shopping Study consumer behavior How they approach in the new market, What are the problems face by them while accepting local culture and customs, How they compete with the local competitors How they respond to the customers‘ behavior towards their products and services.
I have developed a model indicating online shopping behavior and acceptance among customers in India. The model was tested with a survey sample (n=50). Factor analysis technique was used to classify these factors which buyers keep in mind while shopping online.
ONLINE SHOPPING TREND IN INDIA
“Awareness, Future Demand Focus for Emerging Markets & Current Issues”
Paras Mukesh Shah Ahmedabad Management Association 11th November, 2009
Internet is changing the way consumers shop and buy goods and services, and has rapidly evolved into a global phenomenon. Many companies have started using the Internet with the aim of cutting marketing costs, thereby reducing the price of their products and services in order to stay ahead in highly competitive markets. Companies also use the Internet to convey, communicate and disseminate information, to sell the product, to take feedback and also to conduct satisfaction surveys with customers. Customers use the Internet not only to buy the product online, but also to compare prices, product features and after sale service facilities they will receive if they purchase the product from a particular store. Many experts are optimistic about the prospect of online business. In addition to the tremendous potential of the E-commerce market, the Internet provides a unique opportunity for companies to more efficiently reach existing and potential customers. Although most of the revenue of online transactions comes from business-to-business commerce, the practitioners of business-to-consumer commerce should not lose confidence. It has been more than a decade since business-to-consumer E-commerce first evolved. Scholars and practitioners of electronic commerce constantly strive to gain an improved insight into consumer behavior in cyberspace. Along with the development of E-retailing, researchers continue to explain E-consumers‘ behavior from different perspectives. Many of their studies have posited new emergent factors or assumptions which are based on the traditional models of consumer behavior, and then examine their validity in the Internet context.
The current literature on consumer online purchasing decisions has mainly concentrated on identifying the factors, which affect the willingness of consumers to engage in Internet shopping. In the domain of consumer behavior research, there are general models of buying behavior that depict the process which consumers use in making a purchase decision. These models are very important to marketers as they have the ability to explain and predict consumers‘ purchase behavior. The classic consumer purchasing decision-making theory can be characterized as a range extending from routine problem-solving behaviors, through to limited problem solving behaviors and then towards extensive problem-solving behaviors. The traditional framework for analysis of the buyer decision process is a five-step model. Given the model, the consumer progresses firstly from a state of felt deprivation (problem recognition), to the search for information on problem solutions. The information gathered provides the basis for the evaluation of alternatives. Finally, post-purchase behavior is critical in the marketing perspective, as it eventually affects consumers‘ perception of satisfaction/dissatisfaction with the product/service. This classic five-stage model comprises the essence of consumer behavior under most contexts. Nevertheless, the management of marketing issues at each stage in the virtual environment has to be resolved by individual E-marketers. It is an early stage in Internet development in terms of building an appropriate dedicated model of consumer buying behavior. Decision sequences will be influenced by the starting point of the consumer, the relevant market structures and the characteristics of the product in question. Consumers' attitude towards online shopping is a prominent factor affecting actual buying behavior. (Source: Jarvenpaa Journal of Electronic Commerce Research, VOL. 6, NO.2, 2005) There are several indicators, belonging to four major categories; the value of the product, the shopping experience, the quality of service offered by the website and the risk perceptions of Internet retail shopping. There are some nine factors associated with users' perception of online shopping. Among those factors the risk perception of users was demonstrated to be the main discriminator between people buying online and people not buying online. Other discriminating factors were; control over, and convenience of, the shopping process, affordability of products, customer service and ease of use of the shopping site. Experts tested a model of consumer attitude towards specific web base stores, in which perceptions of the store's reputation and size were assumed to affect consumer trust of the retailer. The level of trust was positively related to the attitude toward the store, and inversely related to the perception of the risks involved in buying from that store. Researchers concluded that the attitude and the risk perception affected the consumer's intention to buy from the store. Consumer risk perceptions and concerns regarding online shopping are mainly related to aspects involving the privacy and security of personal information, the security of online transaction systems and the uncertainty of product quality. It is found that trust is interwoven with risk. One of the consequences of trust is that it reduces the consumer‘s perception of risk associated with opportunistic behaviour by the seller. Lack of trust is frequently reported as the reason for consumers not purchasing from Internet shops, as trust is regarded as an important factor under conditions of uncertainty and risk in traditional theories. Researchers developed a model which combines traditional marketing philosophy on consumer motivation to buy and the trust model. In this model, trust propensity; which is a
personality trait possessed by buyers; is an important sign of trust. In Internet shopping, there is not much information available to the buyer regarding the seller, prior to purchase. A buyer with a high propensity to trust will more likely be a potential customer than a buyer with a lower propensity. The ability, generosity and honesty constitute the main elements of trustworthiness. Ability refers to skills, competencies and characteristics that a seller has in a specific domain. In this context, sellers need to convince buyers of the competence of their companies in the Internet shopping business. Generosity is the extent to which the seller is perceived by the buyer as wanting to ‗do good‘. Sellers have to convince buyers that they genuinely want to do good things for buyers, rather than just maximize profit.
The objective of this study is to see the Awareness of consumers, Future Demand Focus for Emerging Markets & Current Issues involved in online shopping and behaviour based on an analytical literature review. In doing so, this study attempts to provide a complete picture of the status of this subfield. The purpose of this research study is to investigate online consumer behaviour, which in turn provides E-marketers with a constructional framework for fine-tuning their E-businesses strategies.
1. To identify key factors influencing online shopping purchase behaviour. 2. To identify the factors that can explain the differences in online buying behaviour of Indian Consumer and Foreign Consumer.
Data for this study was collected by means of a Survey conducted randomly within a period of Thirty days. The sample size was 50. Questionnaires were filled by sending them on email id of the samples .The Questionnaire (shown in Annexure) was used mainly to test the model proposed for Attitude towards online shopping. The type of research was both exploratory as well as Descriptive. Likert five point scale ranging from Strongly Agree to Strongly Disagree was used as a basis of Questions.
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ONLINE SHOPPING IN INDIA
It is a fact that a great online shopping revolution is expected in India in the coming years. There is a huge purchasing power of a youth population aged 18-40 in the urban area.
If we observe the growth of Internet Subscribers from the above graph, it is getting doubled year by year. The usage of internet in India is only 4% of the total population. This is also getting increased day by day as the costs of computers are decreasing and net penetration is increasing. The cost of internet usage is also getting lower, with good competition among the providers. Wi-Fi & Wimax system has also started in India. This will increase the usage as it goes more on wireless internet. Indians are proving everytime that they can beat the world when it comes to figures of online shopping. More and more Indians are going to online shopping and the frequency of India‘s online buying is crossing the overall global averages. Factors That Boost Online Shopping in India Rapid growth of cybercafés across India Access to Information The increase in number of computer users Reach to net services through broadband Middle-class population with spending power is growing. There are about 200 million of middleclass population good spending powers. These people have very little time to spend for shopping. Many of them have started to depend on internet to satisfy their shopping desires.
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Few Facts about Online Shopping The figures from IAMAI show that the internet users in India will grow to 200 million by 2010. Around 25% of regular shoppers in India are in the 18-25 age groups, and 46% are in the 26-35 year range. Indian online matrimonial sector is worth around $230 million. Worldwide E-commerce is only growing at the rate of 28%, since India being a younger market, the growth of e-commerce is expected at 51% in the coming years. In line with global trends finally India has also started shopping online these days. As per the study by IAMAI online shopping in India has rose from $11million in 1999-2000 to $522 million in 2007 and it is expected to rise above $700 million by end March 2010. Indians are also Shopaholics like other Asians. There is a strong booming young adult population in India with good levels of disposable income. INDIA - Over $50 Billion and growing rapidly - Most popular online shopping products include:
There are over 120 million people online in India and this is expected to grow to 200 Million by the end of 2010.
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CHANGING ATTITUDE TOWARDS ONLINE SHOPPING
“Awareness, Future Demand Focus for Emerging Markets & Current Issues” Malls malls springing up everywhere and yet people are E-shopping! And not in small numbers either. Consumers are more rational nowadays and have ability to get the choices from the market. Awareness among the consumers is spread through internet. The number of internet users is increasing day by day which attracts people who have an option to buy online. It was never thought that Indians would go in for e-shopping in such a big way. Ticketing, travel bookings and even books and movies seem fine to buy online. Knowing that in India sizes vary from brand to brand and quality is inconsistent, even of some electronic items, how is it that there are people buying these items online? The targeted consumers in my research study were from India and also from foreign countries like USA, UK and Australia. Descriptive analysis showed that the consumers outside India are more friendly doing shopping on internet. They have better political system to protect their rights incase of any frauds. Every consumer of foreign country have chosen Debit Card and Credit Card as their mode of payment. They are more used to with their system which allows them free flow of number of transactions they make on internet. While in case of Indians there are some segments of people who have not yet tried purchasing over internet. The reason found was insecurity of transactions and they also found that the price was similar to the market price. There was no forcing factor for them to purchase over internet. Also they analyzed in the way that they had to make payment in advance and have to wait for the delivery which again restricted them to purchase over internet. Comparative analysis of Indian Buyers and Foreign Buyers revel that Indians less comfortable purchasing on internet. In the same way Foreign buyers are mostly purchasing from internet. The comparative analysis below will make it more clear.
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Point of Distribution Demographic Segmentation Demographic Segmentation
The per capita income of people is much higher. The age factor is less important. Every person is knowledgeable about the use of Online Shopping.
The per capita income of people is very less. Only youngsters below the age of 30 are more aware of Internet Shopping. Other age group people are least aware of Online shopping Only Urban population is the customer of E-Marketers. People in India are very conscious and they have a tendency to compare, analyze, touch and feel and then buy the product. Govt. is less aware of the online shopping trend so the legal system does not fully support the consumers. More number of frauds recorded. So less usage People are less aware.
Both Urban & Rural population are the customers of E-Marketers. People in foreign countries have very speedy life style that allows them to buy online and save their time.
Well-established govt. system to protect rights of people making online purchase. Less number of frauds recorded. more usage So
Use-related Segmentation Payment Mode
People are well aware of internet usage.
All people normally use debit cards or credit cards to make purchase over internet.
All consumers don’t have their personal debit cards or credit cards that restricts them.
Increasing penetration of Internet connectivity and PCs has led to an increase in the Internet users across India. The demographic segments that have witnessed maximum growth comprise college going students and young persons. These segments are the users of advanced applications and technologies online and are most likely to be heavy E-commerce users.
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I identified a total of 11 interrelated factors for which the practical evidences show significant relationships.
Ordinarily Independent Variables
Ordinarily Dependent Variable
Consumer satisfaction is considered to be a separate factor in this study. It can occur at all possible stages depending on consumer‘s involvement during the online shopping process. The relationships between satisfaction, attitude, intention, decision making and online purchasing are proposed to be twoway relationships due to the reciprocal influences of each on the other. In addition, three of the antecedents, perceived usefulness, perceived ease of use, perceived enjoyment, have been found to have direct impact on consumer satisfaction.
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ORDINARILY DEPENDENT VARIABLES Perceived Usefulness Perceived usefulness is defined as the degree to which a person believes that using a particular system would increase his or her job performance. It is an important factor affecting acceptance of an information system, because the ultimate aim of any person is the superior job performance. Perceived Ease of Use This is an important factor that affects the acceptance of a particular information system. It is defined as the degree to which a person believes that using a particular information system would be free of effort. Hence an application perceived to be easier to use would more likely be accepted by the user. Perceived Enjoyment Enjoyment refers to the extent to which the activity of using a computer is perceived to be enjoyable in its own rights. This is seen as an intrinsic source of motivation to use a particular application. Amount of Information Amount of information is defined as the information which is available for the product which a person wants to buy through online shopping. This factor eases the decision of the user to actually buy the product or not, or which product to buy. This factor becomes even more important in case of High Involvement product. Security and Privacy Security and privacy are the main factors which hinder the growth of Online shopping. The user is concerned about his ID and Password which can be stolen by persons with wrong intentions and then misuse it. At the same time they are concerned that their personal information may be sold to the third party which poses a serious threat to their privacy. Quality of Internet Connection Not only is the presence of internet connection necessary, but also its Quality is important to shop online. This is an important factor which determines whether the user would shop online or not because presence of internet is a basic necessity for this mode of shopping. ORDINARILY INDEPENDENT VARIABLES Attitude towards Online Shopping Consumer‘s attitudes toward online shopping have gained a great deal of attention in the empirical literature. It is believed that consumer attitudes will affect intention to shop online and eventually whether a transaction is made. It refers to:
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1) The consumer‘s acceptance of the Internet as a shopping channel 2) Consumer attitudes toward a specific Internet store (i.e., to what extent consumers think that shopping at this store is appealing). Intention to Shop Online Consumer‘s intention to shop online refers to their willingness to make purchases in an Internet store. Commonly, this factor is measured by consumer‘s willingness to buy and to return for additional purchases. The latter also contributes to customer loyalty. Consumer‘s intention to shop online is positively associated with attitude towards Internet buying, and influences their decision-making and purchasing behavior. In addition, there is evidence of reciprocal influence between intention to shop online and customer satisfaction. Online Shopping Decision Making Online shopping decision-making includes information seeking, comparison of alternatives, and choice making. The results bearing on this factor directly influence consumer‘s purchasing behavior. In addition, there appears to be an impact on user‘s satisfaction. Though it is important, there are only five studies that include it. Potential consumers appear to use a two-stage process in reaching purchase decisions. Initially, consumers typically screen a large set of products in order to identify a subset of promising alternatives that appears to meet their needs. They then evaluate the subset in greater depth, performing relative comparisons across products based on some desirable attributes and make a purchase decision. Online Purchasing This is the most substantial step in online shopping activities, with most empirical research using measures of frequency (or number) of purchases and value of online purchases as measures of online purchasing; other less commonly used measures are unplanned purchases Online purchasing is reported to be strongly associated with the factors of personal characteristics, vendor/service/product characteristics, website quality, attitudes toward online shopping, intention to shop online, and decision making. Consumer Satisfaction It can be defined as the extent to which consumer‘s perceptions of the online shopping experience confirm their expectations. Most consumers form expectations of the product, vendor, service, and quality of the website that they patronize before engaging in online shopping activities. These expectations influence their attitudes and intentions to shop at a certain Internet store, and consequently their decision-making processes and purchasing behavior. If expectations are met, customers achieve a high degree of satisfaction, which influences their online shopping attitudes, intentions, decisions, and purchasing activity positively.
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LIMITATIONS OF THIS STUDY
Limitation of the study is the selection of the existing studies. Owing to time limitation, I only searched a few number of journals. This may leave some other prominent empirical studies out. In addition, owing to the multidisciplinary nature of online shopping, it would be very interesting to compare IS literature to other disciplines that study online shopping attitudes and behavior.
Indian E-Comm. Report Finds Heavy Spenders Driving Sales By Devin Comiskey August 16, 2007 A Survey by Indian research organization Juxtconsult found that more and more Indian Internet users are opening their wallets online. While such hurdles as limited broadband access and security concerns remain, the report finds there are currently more than 10 million shoppers online in India. While current trends point to increased e-commerce growth in India, the online marketplace in the country of more than 1 billion people is still relatively small. Juxtconsult's survey found that 40 percent of all urban Internet users buy online, while 42 percent of the sales originate through just five percent of consumers. The survey was conducted in April 2007 and sampled more than 30,000 users. "This section of buyers spends 5,000 rupees or more per month on the net," states the report. "It is interesting to note that two out of every three heavy spenders are also 'netholics,' those who are on the net for more than three hours per day...Of all those who buy online, only 25 percent are spending more than 1,000 rupees per month while the (remaining) 75 percent bill less than 1,000 rupees per month." (1,000 Indian rupees is currently equal to approximately $23 US.) The report also found that buying and search patterns among Indians differ between genders. "While 43 percent of male users buy online, only 31 percent of urban female users are consumers as well. Women tend to search more. Defying their more common attitude towards shopping, women are more guarded when it comes to the online market," says Juxtconsult. "Depending on the product type, nine percent to 25 percent are buying online, whereas 33 to 47 percent are searching the net for product information," it says. Security Fears Persist Juxtconsult says the motivation for Indian users to make purchases online varies, but users fear compromised personal information is still a great risk when it comes to e-commerce. "The single biggest motivation for buying online for net users is saving time. Thirty-two percent of them look to shop online with this purpose. Convenience of shopping '24x7' and home delivery are other major incentives," says the report. "However, the concern of possible misuse of credit car or personal
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information is extremely significant among online buyers, with almost 55 percent of them voicing their concern. Clearly, tackling and countering the issue of online safety figures as an imminent challenge for net marketers." Books, CDs Top the List The products that are purchased most online in India, according to Juxtconsult, are books and CDs making up 25 percent of all online purchases. "Ironically, computer hardware and software, despite having the home advantage are among one of the least bought products online, with only 13 percent buying them," says the report. "In sum, the online market in India is blossoming but is yet to take off in a considerable way. The Internet is still being used more for searching than buying products and services. Though a noticeable proportion of net users are also net consumers, essentially, at present only a small tribe among them is driving online shopping momentum," says Juxtconsult. LATEST A new trend in this space is that of Meta search engines. Ixigo and Ezeego are two players in this space. A Meta search engine searches all the online travel sites (including the airlines sites as well) and displays the best deals for the user. Travel websites, such as Make My Trip India Pvt. Ltd and Yatra Online Pvt. Ltd, are battling to win over India‘s Rs16,000 crore ($400 million) religious travel market Opportunity in Online Travel Industry: $2billion Online travel company MakeMyTrip (MMT) has recorded sales of Rs. 1000 crore for the financial year ending March 2008, as per a release.
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BARRIERS TO GROWTH OF ONLINE MARKET
Consumer Bias Consumers often display a bias for brands that they know well and have had a good experience in the past. Thus products of brands with a favorable bias will score over the products of less popular brands. A few would risk buying expensive jewelry from an unknown jeweler online. Lack of ‘Touch –Feel-Try’ Experience The customer is not sure of the quality of the product unless it is delivered to him and post delivery of the product, it is sometimes a lengthy process to get a faulty or the unsuitable product changed. Thus, unless the deliverables are as per the customers‘ expectations, it is hard to infuse more credibility in the e-Tailing market. Mounting Competitive Pressures To attract customers, the competing online players are adopting all means to provide products and services at the lowest prices. This has resulted in making the consumers choice-spoilt, who in turn surf various websites to spot the lowest price for the product. Thus, although the number of transactions is increasing, the value of the products sold is continuously falling owning to high competition and leaner margins. Seasonality E-Commerce Market is faced by seasonal fluctuations. As told by an Industry player, ―August to February is the peak seasons for sale, while March to July is the dry seasons for sale‖. During the peak season, occasions that drive the sales are Diwali, Rakhi, Valentines Day, New Year, Christmas, Mother‘s Day, Friendship Day etc are. On these occasions younger generations prefers buying and sending gifts online. Credibility in Payment System Online frauds and breach are the biggest barriers to online sales. As a result, prospective buyers prefer staying away from revealing their credit card and bank details. Untimely Delivery of Products It might take a few minutes to search, book and pay for products and services online, but the delivery of the product may take unreasonable time.
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FINDINGS & ANALYSIS
Most of the consumers were found frequent users of Online Shopping. The study evaluates that most of the frequent buyers were outside India. Indian Consumers were less buying on internet.
Indian Consumers made occasional purchases over internet. The highest share of frequent purchase was done by overseas buyers. There were 8 consumers from India who had not done online shopping before.
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Most of the people who had a good hand over internet found online shopping more convenient and also substantial amount of people found it similar to offline shopping or less convenient. Convenience depends upon how you perceive your requirement with the help of good sites.
More number of samples recorded online shopping and offline shopping quite similar. The reason could be access to proper sites. There are numerous sites which provide online shopping and all have different pricing strategy. It is necessary that you access to a genuine site which are reputed.
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The respondents outside India were highest at buying more than 10 times till now. India has a emerging market and people have tried approx 2-5 times purchasing on internet.
Credit card and Debit card mode of payment is found most suitable and convenient to the overall respondents. People in India are curious about the security of transaction so they have preferred Cash on Delivery as the suitable mode of payment.
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People who while accessing over internet come across to many advertisements, search engines, special offers where they get attracted towards making a purchase. Personal recommendations within friends are also helping in deciding the site for online shopping.
In this research study it was seen that Indians are lacking in getting information or proper knowledge about the online products & services. Many people gave a neutral response and some of them have denied of having any information. Global consumers are ahead of having full information & knowhow.
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Online shopping has proved to be useful after getting 60% positive replies. People are able to evaluate compare and take decision. Online shopping saves time and money both.
No doubt the procedure in making an online purchase is hassle free. Again 62% of the respondents feel that online shopping is very easy to do and also very convenient.
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Very important measure is security of transaction. Very less people have rated online transaction secure. There were some bad feedback given by the respondents who paid for the product but didn‘t received or got a low quality product. Only overseas buyers recorded proper security as they have a very strong legal system to protect their interests.
There are certain factors which you have to face while you are making a purchase over internet. People according to their experience have to wait for delivery, significant discounts are there, buyers want to touch and feel the product but they can‘t, they are also not able to negotiate or bargain, also buyers are neutral about quality of the product.
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Increased Internet penetration, a hassle free shopping environment and high levels of Net savviness see more and more Indians shopping online. But at the same time the companies need to reduce the risks related to consumer incompetence by tactics such as making purchase websites easier to navigate, and introducing Internet kiosk, computers and other aids in stores. The goal is not to convert all shoppers to online purchasing, but to show them it‘s an option. In addition to above, efforts need to be taken to educate the online buyers on the steps that need to be undertaken while making an online purchase. Moreover, the feedback of an online buyer should be captured to identify flaws in service delivery. This can be done through online communities and blogs that serve as advertising and marketing tools and a source of feedback for enterprises. I found that it is a challenge for E-marketers to convert low frequency online buyers into regular buyers through successful website design and by addressing concerns about reliable performance. Thus, the online retailing raises more issues than the benefits it currently offers. The quality of products offered online and procedures for service delivery are yet to be standardized. Till the same is done, the buyer is at a higher risk of frauds.
Efforts need to be taken to educate the online buyers on the steps that need to be undertaken while making an online purchase. Proper security should be assured to the people making online purchases. Government should play a bigger role in encouraging online shopping.
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Journal of Electronic Commerce Research, VOL. 6, NO.2, 2005 Research report By: IAMAI DoT Indian E-Comm. Report Finds Heavy Spenders Driving Sales by Devin Comiskey www.ebay.com www.homeshop18.com
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Global Consumer Behaviour in KEMROCK INDUSTRIES & EXPORTS LTD.
Understanding and analyzing the importance of consumer behavior behind the success factor of the company
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Paras Mukesh Shah Ahmedabad Management Association 11/1/2009
OBJECTIVE OF STUDY
To know what companies in India do to understand global consumer behavior when they export their products.
SCOPE OF STUDY
KEMROCK INDUSTRIES is a 100% EOU since last many years. My study will help me to know the way global consumer behavior affects the sales of the company. This will also help me in understanding: 1) Different global behavior in different product categories. 2) Marketing Strategies in different countries. 3) Cross Cultural Behaviors 4) Post Purchase Behavior
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INTRODUCTION TO KEMROCK INDUSTRIES & EXPORTS LTD.
Kemrock entered in the field of composites in early 1980‘s with a modest manufacturing facilities in Vadodara. Under the leadership of its creator, Shri Kalpesh Patel, Kemrock has created possibly the World‘s most comprehensive and integrated FRP composite manufacturing facilities. With composite being well accepted as the new age material, the growth of the composites industry globally has been exponential. Kemrock with its global scale facilities is well established in the global markets. Today, with over 100192 sq meters of plan area, on the land area of 796283 sq meters and road area of 57199 sq meters. Kemrock has spreadsheet India‘s FRP revolution. At Asoj, in its sprawling grounds, it has a state of art manufacturing facility, 20kms from Vadodara. Facilities also include sophisticated Quality control and testing facilities and an extrusive product development centre. Kemrock Industries and Exports prides itself on its infrastructural facilities such as the state-of-the-art Application Development Center and the Design and Engineering Unit, both of which play a pivotal role in the innovation and research undertaken in Kemrock Industries and Exports.
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JOURNEY FROM 1981-82 TO 2008
1981-82 1995-96 1996 2003 2003 Production started at Vadodara Entry into Wind Energy market with Suzlon Energy The first global tie up with creative pultrusion Strategic alliance with Stoncore group Production of gratings and Pultruded structural shapes for Fibergrate Composite Structures, USA Commenced production of Phenolic resins under licensed to Georgia-Pacific Resins, USA Joint venture with Top Glass for manufacture of high end Pultruded products and lighting poles. Licensed technology to produce carbon fiber from National Aerospace Laboratories (NAILS).
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STRATEGIC ALLIANCES / COLLOBORATIONS
Year 1995, witnessed Kemrock entering into licence agreement with M/s Creative Pultrusion, Inc, USA for acquiring state of art pultrusion technology. Today with over seven pultrusion lines of different capacities, Kemrock is the largest pultruder in the region Year 2003, saw M/s Fibergrate composite structure, Inc, USA identifying Kemrock as their manufacturing partner, to manufacture and offer world- class Pultruded & moulded grating products. Fibergrate is a part of M/s Stoncore Group Inc, USA, functioning under the umbrella of the huge multi – billion dollar, multi locational RPM Group. USA Year 2004, witnessed Kemrock going in for backward integration with a specialized division to manufacture Hi-tech Phenolic Resin for the composite industries. This time it acquire the a proven world class technology from M/s Georgia Pacific Resins Inc, USA for the manufacture of this polymer. M/s Georgia Pacific Resins Inc, being a global leader for a variety of building products, paper products, industrial and specialty chemicals. Top Glass SPA, Italy, is recognized the world over as one of the major and most highly qualified producers of Pultruded composite profiles. Our unique design and production capacities enable us to furnish, on a daily basis, a large number of profiles in all section, dimensions, and composites for varied application worldwide. Youngman, UK, over the years, the Youngman brand has become synonymous with access products. Products ranges are towers, catwalks, modular access systems etc. Baja India, Bajaj India group ranks among the top ten business houses in India with a combined turnover of $3 billion.
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Kemrock manufactures different kind of product for their suppliers and customers as per their requirement. They are as follows:
COMPOSITE RAILWAY RESIGN FABRIC
GRP/ FRP GRATINGS HANDRAILS AND LADDER SYSTEMS GRP/ FRP PIPING SYSTEM MOULDINGS GRP/ FRP POLES
Recently company is also diversifying into the following areas.
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Diversification in New Areas
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SECTOR WISE DEMAND OF PRODUCTS
Markets Oil, Gas and Energy Sector Products Applicable FRP Moulded and Pultruded Gratings, FRP Pipes and fittings, Cable trays, FRP Security fencing etc. Gratings and Hand Rails, FRP Cable Tray, Gratings etc.
Chemicals, Fertilizers & Sugar Sector
Minerals Mines Industries.
Construction Gratings and Structural Components
Railways and Power Sector
Railway interiors parts, Fibre Glass Tubes etc
Projects Consultants, Water Management FRP Electrical Poles, GRP Pipes, FRP Pipes and Consultants & other Engineering Fittings Industries
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COMPETITORS IN THE MARKET
We are aware of that there are many manufacturer of FRP/ GRP products in India beside other small manufacturer . But the major Four manufacturer of FRP/GRP Products in India are
Company Name Kemrock Industries Sumip Industries Ercon Industries Sintex Industries
Location Halol, Baroda (Gujarat) Ahmedabad (Gujarat) Jodhpur (Rajasthan) Kalol – (North Gujarat)
Above four companies are manufacturing the same product but they have a different Pricing policy which make them different from each other. As per my knowledge Sumip Industries has a higher price for it FRP/ GRP products as compare to other companies producing the same goods.
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DIFFERENTIATION IN PRODUCTS & SERVICES
FRP Composites are superior to conventional material like metals and woods. Premium grade Isopthalic polyester or vinyl ester resin systems and a synthetic veil, maintain structural integrity. They perform in the toughest and most hazardous environments. Moreover, due to ease of fabrication and installation, virtually no maintenance and longer lifecycles, the composites are cost effective and economical in the long run. Corrosion Resistance FRP composites provide chemical and corrosion resistance with long term durability over conventional materials. Light weight yet durable. Less than one half of the weight of steel, allowing easy access and installation, with no heavy equipments and less manpower. Fire Retardant Fire resistant properties makes than ideally suitable for fire safety applications. Maintenance Free Provides low maintenance and high durability due to inherent corrosion resistant properties. UV Protection UV inhibitors include in the resin system for optium protection from the effects of weathering. Easy to Fabricate Minimal need for lifting equipment or expensive tools, can be readily carried manually and installed at site. Electrically and thermally non- conductive Increase application areas and benefits along with additional safety. Aesthetically Pleasing Being self coloured, they are easy to clean and maintain their appearance over very long periods.
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PRODUCT LIFE CYCLE
Like human being, product also passes through the different stages of life cycle. These stages are known as product life cycle. Stages through which a successful product progresses are Introduction Growth Maturity Decline
STAGES OF PRODUCT LIFE CYCLE Introduction Stage Firm attempts to build demand for its new offering Promotional campaigns concentrate on features, uses, and benefits Financial losses are common due to low initial sales and heavy promotional costs Growth Stage Sales climb quickly Firm usually begins to realize profits due to higher sales volume. Marketing efforts continue to focus on establishing the product in the market and building brand awareness Later in the growth stage, the strategy shifts to building loyalty Additional spending on product adaptation, promotion and distribution, along with lower prices may be necessary Maturity Stage Industry sales continue to grow, but eventually reach a plateau Companies emphasize market segmentation-often resulting in an oversupply of the product Competition intensifies, and profits begin to decline Some firms reduce prices and/or spend heavily on promotion
Decline Stage Innovations or shifts in consumer preferences cause an absolute decline in industry sales Industry as a whole does not generate profits, though some firms can prosper Prices tend to hold steady if a loyal market segment continues to buy the product If the firm is selling to consumers who are loyal, they can skip most of the usual advertising.
Following is the Example of Product Life Cycle taken directly from the Internet to understand it in a better way. It shows that Kemrock Industries and Exports limited is at the Growth Stage of the Product Life Cycle.
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MARKETING STRATEGY IMPLICATIONS IN THE PRODUCT LIFE CYCLE
OBJECTIVE COMPETITI0N PRODUCT PRICE PLACE PROMOTION
Introduction Build Consumer awareness. Encourage trial purchases. Growth Build brand loyalty and market share. Practice market segmentation
Few Direct competitors
Highly standardized product Few variations in Features
Higher price or lower price
Set up a distribution network
Heavy expenditure on informative promotion and advertising.
Competition intensifies as high profits. Attract new entries
Differentiated product for different market segments
Different prices for different segments
Expand distribution coverage
Focus on building demand and strengthening brand preference
Maturity Seek new product users – and users encourage increasing purchase frequency Intense competition as marketers practice market segmentation Emphasis on quality and cost reductions Pricing to maintain market share & meet competition Emphasize relationship marketing to build dealer loyalty Promotion to wholesalers and retailers consumer promotions focus on persuasive and reminder advertising
Decline Consider leaving the industry if declining sales results in loses Competition begin to leave the industry Few changes in product features
Stable prices resistance to price cutting Begin to phase out marginal dealers Minimal promotion
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Distribution Channel— Path through which products - and legal ownership of them - flows from producer to consumers or business users. Physical Distribution— Actual movement of products from producer to consumer or business users. Different types of Distribution Channels Distribution channels adopted by the Kemrock Industries for the supply of goods are
Agent / Brokers
Agent / Brokers
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STRENGTH Competent Manpower Financial Backing Brand Image Customers Loyalty Good coordination among inter-departments Quality certification:• • • ISO 9001:2000 & ISO 14001:2004 Certified Currently we hold 18 certifications with 5+ approvals in progress We have various facilities to test resins as well as composites products in our technology center. WEAKNESS Price of the product Promotional aspects High cost of production Technology Technical persons
Ideal setup Plant located near the sea-shore
OPPORTUNITIES Domestic Market Pre- sales Service Growing demand of Fiber Product Few Competitors in the same product Uniqueness in product
THREATS Price Technology Volatile fiber Market Increasing Power Cost Government Rules and Regulations
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GLOBAL CONSUMER BEHAVIOR IN KEMROCK INDUSTRIES & EXPORTS LTD.
The first step was very necessary to understand the global behavior of the company in different kind of product categories. In such a case Kemrock mainly deals with contractors. They don‘t supply to the final users. These contractors deal in a big way. They have different subcontracts. Subcontractors have their own subcontractors. They supply to main contractors. Not necessarily that he will be in a particular country but his projects will be in any country. Kemrock have middle man called as contractors and they are not the final users. The criterion for selection of your contractor depends upon the market experience you have. Mr. P.L. Narshimah (DGM - Marketing) said, “When you are in market since last many years you come to know by your experience about giant contractors in your field. Your marketing team must be efficient enough to get the contracts from such people.” Consumer behavior affects the imports of the country. Kemrock has also come across a diverse behavior which affects the imports of the country. When a particular customer demands to buy the product made from the raw material of a particular company, and if there are 4 customers like this, then Kemrock don‘t buy separately from a different company for the fifth one. It has been observed that domestic market fails to deliver quality raw material to the company. Mr. Jayesh Patel (Sr. Manager – Purchase) said, “If domestic market provides with the same kind of quality and price then it could be bought from the domestic market”. For e.g. Rowing is the core raw material behind the finished goods like Fiber Reinforced Plastic. They purchase in bulk according to their major customer‘s requirement. Indian market is not potential in the supply of better quality raw materials. In global business you must meet the quality standard. Kemrock don‘t target market wise or area wise or region wise. They supply it to the contracts of cooling towers. There are very less number of contractors (hardly 5 to 6), who are giving them substantial
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business. These contractors might have projects in different countries. Kemrock themselves approach to contractors. Mr. P.L. Narshimah (DGM - Marketing) said, “Contacts develop by your experience in the market and business. As per the market knowledge and market survey we come to know about the potential buyers.” They select top buyers and all information is available from the market itself. When you roam in the market you come to know about these potential buyers. Kemrock has a very strong marketing team who can give the feedback and reach the target people. Bandra-Worli Sea Link – Search for a new market. Kemrock was a substantial contributor in the Bandra-Worli Sea Link Project carried out in Mumbai. Kemrock had supplied FRP Poles (Lights) to the whole project. The buyer for Kemrock was Bajaj Electricals who was not the final user. Bajaj Electricals was a sub contractor (a middle man) in this whole dealing. Bajaj knew about Kemrock that it manufactures quality products. Based on the information they approached Kemrock. There need a lot of marketing to be done before you get noticed by your customer. As far as domestic market is concerned there is a huge potential in the market just you need to have real marketing personnel at the right place. Kemrock‘s products are found bit costlier than the substitute goods available in the market. Local government bodies are not financially sound to use these products in their infrastructure projects. There are also political barriers restricting the deal to take place. There needs lot of marketing to convert the non buyers into buyers. Mr. Ashok Dube (GM - Marketing) said, “You need to tell them the advantages of your product. Initially the reluctance will be there but you need to explain them why your product and why not others.” Like eg. Cement they get cracked, metal they get rusted but fiber glass will last there for 10 times longer period because it is such a hard product where there will be no rusting, erosion or any sort of damage to the product. Nowadays quality products are highly demanded. Emerging cities like Mumbai, Delhi, Ahmedabad, etc are demanding good quality products. Collection of revenue and wealth power of the govt. bodies depends a lot for any high quality purchase. When the consumer behavior of any exporting company is studied there arises issues of cross cultural behavior of different nations when the products are exported to different countries of the world. Kemrock exports to many countries like USA, UK, UAE, Australia and Canada.
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Mr. Urvish Buch (Sr. Manager – Logistics) said, “When you sell it to United States then you don’t need to worry at all, but when you sell it to any Italian Company, then they can create trouble even if it is not. If everything is clear then also they create problems like shortages and quality.” Kemrock had bad experience with Italy and other European Countries. Measure thought by Kemrock under such critical situation is that there should be a very strong internal system to prove yourself. If you can‘t have a strong internal system then you cannot counter their argument and you just have to provide them whatever they say. In case of shortages customers demand for urgent supply and Kemrock have to dispatch it by Air which proves 10 times costly then that by shipment, which not only loses your profit but also turns your contract into loses. Cost of Air freight is 10 times higher than that of you send it by ship. Management at Kemrock is working out behind this problem. Mr. Urvish Buch (Sr. Manager – Logistics) said, “You must appoint a surveyor in the destination country and who inspects you material, surveys, counts the product and based on that submit the report. Based on that company decides whether to supply or not, after finding substantial facts. You can’t always supply what your customer is saying, he might be saying wrong, or might be he is not having that knowledge also, that this particular material is packed this way, it might be there in the container, without removing each and every item you cant decide that particular item is there or not.” Consumer behavior also focuses on the post purchase behavior of the contractors associated with Kemrock. With detailed talk with Mr. P.L. Narshimah, there were certain measures which we need to consider before exporting to any foreign nation. Issues: 1) They want it very well packed; packing must be upto the international level. 2) They want in time. 3) They want in as per their quality standards. All these things are mentioned in the purchase order. If you don‘t send material according to their specifications there are possible chances of your material getting rejected. Then you have to get it replaced. In some cases International inspection agencies come and inspect the material on buyer‘s behalf. This is after the order is confirmed. Mr. P.L. Narshimah (DGM - Marketing) said, “When the need of the customer is not fulfilled, for e.g. if quality is not found proper customers ask for higher discounts. There are also possible chances of material getting 100% rejected. Quality is the key factor and it is very important in international trade.”
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Customers provide samples and according to their specifications Kemrock manufactures the product. The process does not complete. After manufacturing the product Kemrock sends samples to the buyer and after his approval material is loaded and sent to the destination. When the material is rejected it gets sold off to the other customers in the same destination. This is possible only in the case of standardized products. Products like Square Tubes, Poles, Gratings which are standard products of Kemrock are going to be used either way in the cooling tower. Kemrock is into the production of composite products. It has upcoming diversification in areas like Carbon Fiber, Agritech and Wind Mills. Mr. Ashok Dube (GM - Marketing) said, “Research and Development Center always helps in deciding new product development. As per the demand emerging in the market, you design and product under the available infrastructure you have. As soon as you have marketing team in the market they give you feedback what kind of products are developing in the market, what are your competitors moves. If there is any requirement in the market and you have a scope to get entry you manage doing it.” Mr. P.L. Narshimah (DGM - Marketing) shared some tips for a new export company. They are as follows: 1. 2. 3. 4. 5. Check the credibility of your buyer. Have proper payment or banking account system. (For Eg. Letter of Credit) Keep bank as a mediator to avail security of payment. Study the standard trading terms in the market. Big customers never give advance payment. You have to follow the 30 days, 60 days credit method.
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The global consumer behaviour in Export Company threw a lot of insights in my project. The overall learning was very effective and useful in my future prospects. Throughout the project I have come to know about the importance of consumer behaviour in the global business. Global business is surrounded with lots of different combinations of consumer behaviour. After the completion of the report I have come to know about various aspects which are need to be taken care of while entering into global business. Consumer behaviour is found different in different nations. The behaviour of one nation does not necessarily similar to the other nation. I have learnt various measures which drives the sales of the company resulting to great achievements. In this whole research project it is seen that there is a huge potential in the domestic market for supply of quality materials. Depending upon the product category consumer segmentations is done. Marketing strategies need to be revised on regular basis and the company needs to remain updated in the global market. New technology development should be done on regular basis so to remain in the competition as a leader. Global business is also very controversial with cross-cultural behaviour when there are more than one country buyers. You must take necessary steps or keep your internal system strong in order to prevent any sort of intimidation for the organization. Global consumers are highly quality conscious. There must not be any compromise with the quality of the material. Research and Development also play a major role for any business unit for its further new product development. According to the market demand and trend company needs to be updated to grab the opportunity to develop a new product with the available infrastructure it have. It has been observed that into any global business the consumers are highly sensitive about the different parameters of the product. The product should be available according to the mentioned specifications and descriptions. Any modification with the product may turn losses for the organization. Developing a market experience is a core part of this research. With the experience in the market you come to know about the consumer needs, buying behaviour, trends, etc. As soon as experience in the market is developed consumer‘s potential needs are easily identified and can be fulfilled. There were certain measures which we need to consider before exporting to any foreign nation. 3 W‘s of Consumers: 1) Want it very well packed; packing must be upto the international level. 2) Want in time. 3) Want in as per their quality standards. Overall learning during the project was sincerely a great experience.
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Company needs to work on the constant problems with the Italian and other European Customers. Internal System should be made strong enough to justify the arguments in case of any hazard. Kemrock can increase its customer base in the local market by increasing the promotional measures. Domestic market has a lot of potential demand which can be fulfilled by Kemrock. Company needs to have their offices and agents in every buying country. Kemrock needs to work on prices of its products which are very high compared to its competitors.
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Kemrock Industries Catalogue Websites: www.google.com www.justdial.com www.gidcgujarat.com www.kemrock.co www.exim.com
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