Anuradha Pathak PDF

A COMPARATIVE STUDY OF MARKETING
STRATEGIES OF FMCG MANUFACTURING IN

MALWA REGION
A
Thesis Submitted to
Dev
Devi Ahilya Vishwavidyalaya, Indore
For the Award of the Degree of
Doctor of Philosophy
In Management
2014
SUPERVISOR CO-SUPERVISOR SUBMITTED BY

Dr. Hitendra Bargal Dr. Manasranjan Dashmishra Anuradha Pathak
Professor, Associate Professor, Research Scholar
Patel College of Science and Shri Vaishnav Institute of
Technology, Indore (M.P.) Management, Indore (M.P.)
RESEARCH CENTRE
SHRI VAISHNAV INSTITUTE OF MANAGEMENT,
(DEVI AHILYA VISHWAVIDYALAYA, INDORE)
Sch. No. 71, Gumasta Nagar, Indore, (M.P.) India
DECLARATION BY THE CANDIDATE
(Para 26 b)
I declare that the thesis entitled “A Comparative Study of Marketing
Strategies of FMCG Manufacturing in Malwa Region” is my own work
conducted under the supervision of Dr. Hitendra Bargal and co-supervision
of Dr. Manasranjan Dashmishra, at Shri Vaishnav Institute of Management,
Devi Ahilya Vishwavidyalaya, Indore (M.P.), approved by Research Degree
Committee. I have put in more than 200 days of attendance with the
Supervisor/Co-Supervisor at the Centre.
I further declare that to the best of my knowledge, the thesis does not
contain any part of any work which has been submitted for the award of any
degree either in this University or in any other University/Deemed
University without proper citation.
SUPERVISOR CO-SUPERVISOR SUBMITTED BY

Dr. Hitendra Bargal Dr. Manasranjan Dashmishra Anuradha Pathak
Professor, Associate Professor, Research Scholar
Patel College of Science Shri Vaishnav Institute of
and Technology, Indore Management, Indore (M.P.)
(M.P.)
Forwarded :
Dr. R.K. Patra

Director
Research Centre Head
Shri Vaishnav Institute of Management,
Indore
i
Dr. Hitendra Bargal
Professor
Patel College of Science & Technology, Indore, Madhya Pradesh
Email: f09hitendra@iimahd.ernet.in , Mob: +91-9755043353
Certificate
(Para 26 c)
This is to certify that the Ph.D. work entitled “A Comparative Study of Marketing
Strategies of FMCG Manufacturing in Malwa Region ” is a piece of research work
Anuradha Pathak , wife of Mr.
done by Mrs. Anuradha r. Vaishakh Pathak under my guidance
and supervision for the degree of Doctor of Philosophy in Management from Devi
Ahilya University, Indore (M.P.). India. That the candidate has put-in an attendance
of more than 200 days with me.
To the best of my knowledge and belief the thesis:
i. embodies the work of the candidate herself

ii. has duly been completed
iii. fulfils the requirement of the ordinance reality to the Ph.D. Degree of
University.
iv. is up to the standard both in respect of contents and language for
being referred to the examiner.
Place: Indore Dr. Hitendra Bargal

Date: Supervisor
Dr. Manasranjan Dashmishra

Co-
Co-supervisor
Forwarded By
Dr. R. K. Patra
Director
Research Centre Head
Shri Vaishnav Institute of Management, Indore, Madhya Pradesh.
ii
UNDERTAKING
I, the undersigned a Ph.D. Scholar declare that I have not joined any other
course of study or appeared at any other examination conducted by the
University during the tenure of my registration for Ph.D. Degree course.
Postal Address: (Anuradha Pathak)

F. No. 101, Jagannath Apartment,
115-116 Snehlataganj, Devi Ahilya Marg
Indore (M.P.), India, Pin: 452009
Research Centre:
Shri Vaishnav Institute of Management,
Devi Ahilya University
Sch. No-71, Gumasta Nagar, Indore, MP, India
iii
ACKNOWLEDGEMENT
The research journey has been a long and challenging one. It is not a journey that
could have been taken alone and I must express my greatest appreciation to
certain very important personalities for contributing their knowledge in their field
of specialization.
Firstly, I would like to thank my supervisor, Dr. Hitendra Bargal, Professor,

Patel College of Science & Technology, Indore. This dissertation would not have
been possible if he had not agreed to supervise me. But I am extremely fortunate
that he had great patience to continue supporting me with academic
encouragement and empathy. He has encouraged and guided me throughout my
research work.
I express my heartfelt gratitude to my Co- Supervisor Dr. Manasranjan

Dashmishra, Associate Professor, Shri Vaishnav Institute of Management,
Indore, for his sheer support, thorough reviews, in depth inquires and advice on
the work. His constant encouragement, valuable guidance, able supervision has
made me possible to complete this work.
I express my profound gratitude to Dr. R.K Sharma, Director (UG), Prestige

Institute of Management & Research, Indore for providing moral support and
motivation for the research work. I am thankful to Dr. Sonal Chaudhary,
Associate Professor, Shri Vaishnav Institute of Management, Indore and Dr.
Manohar Kapse, Assistant Professor, Jagran Lake City University, Bhopal for
inspiring and providing valuable guidance, support and suggestions. I am also
thankful to Mr. Dheeraj Nim, Assistant Professor, Indore Institute of Science &
Technology, Indore for providing some timely suggestions and guidance.
I would like to thank Dr. R. K Patra, Director, Shri Vaishnav Institute of

Management, all other faculty members, especially, Mrs. Rashmi Tiwari, for
providing continuous support throughout the research work, and staff members of
the Shri Vaishnav Institute of Management, Indore.
iv
I haven’t achieved this much nor come this far in my personal life and my career
without efforts and support of my family. I record my profound thanks to my
family members and relatives, especially my In-laws Mrs. Vidya Pathak and Mr.
Krishnarao Pathak, my husband Mr. Vaishakh Pathak, for all the sacrifices they
have made and continuously be with me in all my efforts. I am grateful to my son
Master Divit Pathak who left me undisturbed for the work. I am indebted to my
father, Late Mr. I. C Gokhale, my mother, Mrs. Amruta Gokhale and brother, Mr.
Anand Gokhale who have always supported me through tough times and
encouraged me constantly. I express my deep sense of gratitude to all the
respondents who participated in the survey of the study and spared their valuable
time to provide the requested responses.
Anuradha Pathak
(Research Scholar)
v
PREFACE
Since 1991, initiation of liberalization, privatization, and globalization, brought

many challenges and opportunities for business firms. The pattern of competition
is continuously changing with technological advances and varying needs of
consumers. New technologies affect the way of doing business and rise in new
market possibilities. This makes all enterprises- be it a big or small, to understand
the complexities and essentials of markets so as to improve and sustain
competitiveness.
The Fast Moving Consumer Goods (FMCG) sector is a huge and important part of
almost every economy of the world. It can be described as one of the most active
sectors in the world. It constitutes a large number of products that are used by
consumers on a daily basis and hence bought regularly. The Indian FMCG sector
is the fourth largest sector of the economy with a total market size of Rs.
167,100crs. Increasing demand, changing consumer preferences, higher
disposable incomes and the retail revolution, has made possible the double-digit
growth of the sector over the past couple of years. The Indian FMCG landscape is
comprised of three well-identified sets of players those operate within a highly
developed and intensely competitive landscape of the Indian FMCG market. The
three known sets of players include: foreign players, strong Indian players and
regional or small domestic players. Thus the Indian FMCG landscape includes
firms with different sizes which may be categorized as small, medium and large
firms.
Within certain industries, strategic innovations are easier and faster to copy and
FMCG is one of them. It is one of the most active users of marketing. Changes in
the marketing environment and increasing competition in this sector have
generated a need for small and large firms to reconsider the marketing
perspectives of FMCG business.
Academic studies have shown that marketing plays a significant role in every
organization. It has been argued in the literature that marketing in large firms
vi
differs from that in small due to the special characteristics of the latter. Research
illustrates that small firms in pursuit of organizational goals do not adopt the
marketing concept to the same extent as larger firms, and that marketing practice
in small medium firms is situation specific, and variable, regarding the levels of
sophistication and effectiveness. It has been said in the marketing literature that
the FMCG sector is among the top users of marketing strategies and techniques,
but in-depth research on what marketing strategies companies adopt is lacking.
Current marketing theory is developed and tested in large organizations. As a
result, little is known about the extent to which the theory extends to other FMCG
companies. FMCG industry consists of both a supplier side and a retail side.
Retailers tend to have similar strategies. Many studies have focused either on the
consumers of FMCG or the strategies of retailers but no focus has been made to
study the supplier side. Consequently, there is a need to examine the marketing
strategies of these distinguished FMCG manufacturing enterprises. Therefore, our
study “A comparative study of marketing strategies of FMCG manufacturing in
Malwa Region” enables us to cover all the above mentioned queries in detail.
The study is divided into chapters. The first chapter of the thesis presents an
overview of Indian FMCG sector, FMCG segment overview, contribution of
FMCG sector to the economy, problems of small scale industries thus highlighting
the relevance of this study. This chapter then proceeds to focus on the research
problems, research questions, and significance of the study. In the second
chapter, we have reviewed about 180 research papers. The papers reviewed are
related to strength weakness, threats and opportunities of FMCG sector,
Marketing in FMCG, marketing strategies adopted by various FMCG companies,
marketing in small medium and large enterprises, impact of marketing strategies
on performance, strategies for cost and quality. At the end, we have tried to find
the research gap and identified the objectives of the study.
The third chapter discusses the methodology of the study and the research design.
It includes a description of the sampling technique adopted and the composition of
the sample. Furthermore, it explains the data collection techniques for the
vii
empirical study, the description, purpose and construction of the survey
instrument, and provides a theoretical account of the statistical processes involved
in the quantitative analysis of the data. Chapter four deal with the functioning of
small and large FMCG manufacturing enterprises of Malwa region. The
discussion is focused on SWOT analysis of FMCG sector in general and
Opportunity-Threat profile of FMCG manufacturing firms of Malwa Region in
particular, sources of their competitive strength is also dealt in the chapter.
In chapter five, a comparison of marketing strategies of small and large firms is

done with respect to product, price, promotion and distribution. Chapter Six
examines the effectiveness of various marketing strategies adopted by small and
large FMCG manufacturing firms of Malwa region on their respective
performances. Chapters seven discusses various strategies adopted by firms to
enhance quality and reduce cost, priorities for competency development and also
talks about the future investment priorities. In the first part of the eighth chapter,
we have tried to summarize the findings of each and every objective. The
chapter summarizes the results of the empirical investigation done against the
background of the conceptual framework and the research objectives. In the
second section, we have discussed about various issued raised in the statement
of problem. In chapter nine, we have discussed about the conclusions of all the
objectives. The marketing implications arising from the investigation are outlined
together with a presentation of the marketing strategies to address the marketing
of fast moving consumer goods. In closing, some suggestions for continuing
research in the marketing of fast moving consumer goods to address unfulfilled
needs and wants of this sector are proposed. Proper referencing has been done in
the end and a blank interview schedule is enclosed in the annexure along with
other required annexure.
Anuradha Pathak
(Research Scholar)
viii
INDEX
Sr. No Contents Page No
Declaration i
Certificate ii
Undertaking iii
Acknowledgement iv-v
Preface vi-viii
Index ix-xiv
List of Tables xv-xviii
List of Figures xix-xx
List of Abbreviations xxi
List of Annexure xxii
1. Chapter 1: Introduction 1-20
1.1 Introduction 2
1.2 Indian FMCG Sector 3
1.3 FMCG Segment Overview 5
1.4 Advantage to India 7
1.5 Significance and Contribution of FMCG Sector 8
1.6 Conceptual Framework 9
1.6.1 Definition of Micro, Small & Medium Enterprises 10
1.7 Problems of Small Scale Industries 11
1.8 Statement of the Research Problem 12
1.9 Rationale of the Study 13
1.10 Significance of the Study 15
1.11 Outline of the Thesis 15
1.12 Conclusion 17
1.13 Glossary of Selected Terms 18
2. Chapter 2: Review of Literature 21-56
2.1 Introduction 22
2.1.1 Fast Moving Consumer Goods 22
2.1.2 Marketing 23
ix
2.1.3 Marketing Strategies 24
2.2 Marketing in FMCG 27
2.2.1 Segmentation, Targeting & Positioning 27
2.2.2 Marketing Mix 30
2.2.2.1 Product Strategies 31
2.2.2.2 Packaging Strategies 35
2.2.2.3 Pricing Strategies 39
2.2.2.4 Promotional Strategies 41
2.2.2.5 Distribution Strategies 46
2.3 Competitive Advantage/Strength 48
2.4 Marketing in Different Sized Enterprises 50
2.5 Strategies for cost, quality and competency
development and priorities for future investments 54
2.6 Conclusion 55
3. Chapter 3: Research Methodology 56-75
3.1 Introduction 57
3.2 Objectives of the study 57
3.3 Major Hypothesis of the study 58
3.4 Research Design 59
3.5 Sampling Design 59
3.5.1 Universe 59
3.5.2 Sampling Unit and Sample Size 60
3.5.3 Sampling Method 60
3.5.4 Data Collection 61
3.5.4.1 Primary Data 61
3.5.4.2 Data Collection Tool/Instrument 61
3.5.4.3 Secondary Data 62
3.5.5 Factors & Variables 62
3.6 Tools & Techniques 66
3.6.1 Likert Scaling 66
3.6.2 Reliability & Validity 66
x
3.6.3 Percentage 67
3.6.4 Mean 67
3.6.5 Standard Deviation 68
3.6.6 Correlation Analysis 68
3.6.7 Regression Analysis 69
3.7 Model Specification 70
3.8 Hypothesis Testing 72
3.8.1 Chi-Square Test 73
3.8.2 T-Test 74
3.8.3 ANOVA 74
3.9 Conclusion 75
4. Chapter 4: Functioning of FMCG Manufacturing Firms in 76-101
Malwa Region
4.1 Introduction 77
4.2 Profile of Small and Large FMCG Manufacturing 77
Firms
4.2.1 Years of establishment 78
4.2.2 Area of Operation 79
4.2.3 Type of Business Ownership 81
4.2.4 Control on firms 83
4.3 Opportunity Threat Profile 84
4.3.1 Opportunity for FMCG Sector 85
4.3.2 Opportunity for Respondent Firms 86
4.3.3 Threats faced by FMCG Sector 89
4.3.4 Threats faced by Respondent Firms 90
4.4 Competitive Strength as perceived by respondent 95
firms
4.5 Conclusion 100
5. Chapter 5: Marketing Strategies of FMCG Manufacturing 102-147
Firms in Malwa Region
5.1: Introduction 103
5.2: Marketing Strategy 103
5.2.1: Product Strategies adopted by respondent firms 104
xi
5.2.1.1: Category of the Product 104
5.2.1.2: Nature of the products offered by respondent firms 105
5.2.1.3: Number of product lines firms deal in 107
5.2.1.4: Number of varieties in which products are offered by 109
respondent firms
5.2.1.5: Number of sizes in which products are offered by 111
respondent firms
5.2.1.6: Reasons for making changes in the product by 114
respondent firms
5.2.1.7: Replacement Policy of respondent firms 116
5.2.2: Pricing Strategies adopted by respondent firms 118
5.2.2.1: Bases for price fixation 119
5.2.2.2 Pricing method adopted by respondent firms 121
5.2.2.3: Price differentiation strategy 124
5.2.2.4: Prices offered by respondent firms 126
5.2.3: Promotional Strategies adopted by respondent firms 127
5.2.3.1 Average percentage expenditure on promotions 128
5.2.3.2 Promotional method employed by respondent firms 130
5.2.3.3 Advertising and promotional media adopted by 131
respondent firms
5.2.3.4 Sales Promotion employed by respondent firms 134
5.2.3.5 Trade Promotion method employed by respondent 137
firms
5.2.4 Distribution Strategy adopted by respondent firms 139
5.2.5 Competitive Strategies adopted by respondent firms 142
5.3.4: Conclusion 145
6. Chapter 6: Effectiveness of strategy on performance of 148-174
FMCG manufacturing firms in Malwa Region
6.2: Effectiveness of Product Strategy on Performance of 150
Small Firms
6.3: Effectiveness of Pricing Strategy on Performance of 152
Small Firms
6.4: Effectiveness of Promotional Strategy on 154
Performance of small firms
xii
6.5: Effectiveness of Distribution Strategy on 156
6.6: Effectiveness of Competitive Strategy on 158
6.7: Effectiveness of Marketing Mix Strategy on 159
6.8: Effectiveness of Product Strategy on Performance of 162
large firms
6.9: Effectiveness of Pricing Strategy on Performance of 164
large firms
6.10: Effectiveness of Promotional Strategy on 166
Performance of large firms
6.11: Effectiveness of Distribution Strategy on 168
6.12: Effectiveness of Competitive Strategy on 169
6.13: Effectiveness of Marketing Mix Strategy on 171
6.14: Conclusion 173
7. Chapter 7: Strategy Deployment by FMCG Manufacturing 175-193
Firms
7.2: Comparison of small and large firms 176
7.3: Strategy Development 178
7.3.1: Strategies for reducing cost and enhancing quality 178
7.4: Priorities for developing competencies by respondent 182
firms
7.5: Priorities for future investments by respondent firms 186
7.6: Resource-Asset Profile 190
7.7: Conclusion 192
8. Chapter 8: Major Findings and Discussions 194-208
8.1 Introduction 195
8.2 Major Findings 195
8.2.1 Functioning of FMCG Manufacturing Firms of 195
Malwa Region
8.2.2 Marketing Strategies adopted by FMCG 197
Manufacturing Firms of Malwa Region
xiii
8.2.2.1 Product Strategy 197
8.2.2.2 Pricing Strategy 198
8.2.2.3 Promotional Strategy 198
8.2.2.4 Distribution Strategy 200
8.2.2.5 Competitive Strategy 200
8.2.3 Effectiveness of strategies on performance of 201
FMCG Manufacturing Firms
8.2.4 Investment Priorities, strategies for reducing cost 203
and enhancing quality and priorities for developing
competencies
8.2.5 Profile of assets and resources of FMCG 204
manufacturing firms
8.3 Discussion 204
8.3.1 Functioning of FMCG Manufacturing Firms of 204
Malwa Region
8.3.2 Marketing Strategies adopted by FMCG 205
8.3.3 Effectiveness of strategies on performance of 206
8.3.4 Investment Priorities, strategies for reducing cost 207
and enhancing quality and priorities for developing
competencies
8.4 Policy Implication 207
9. Chapter 9: Summary of Conclusions and Suggestions 209-221
9.1 Introduction 210
9.2 Functioning of FMCG Manufacturing Firms of 210
Malwa Region
9.3 Marketing Strategies adopted by FMCG 211
9.4 Effectiveness of strategies on performance of 215
9.5 Strategies for reducing cost and enhancing quality, 216
priorities for developing competencies and future
investments.
9.6 Asset Resource Profile 218
9.7 Suggestions/Recommendations 218
9.8 Conclusion 221
10. References 222-236
11. Annexure 237-243
xiv
LIST OF TABLES
Table No. Name of the Table Page

No.
Table No-1.1 Classification of Micro, Small and Medium 11
Enterprises
Table No-4.1 Years of establishment of respondent firms 78
Table No-4.2 Chi Square Test for comparing small and large firms 79
with respect to years of establishment
Table No 4.3 Area of operation of respondent firms 79
with respect to area of operation
Table No-4.5 Type of Business ownership of respondent firms 81
with respect to the type of business ownership
Table No-4.7 Control on respondent firms 83
Table No-4.8 Opportunities for respondent firms 86
Table No-4.9 T Test for comparing small and large firms with 88
respect to overall opportunities
respect to various opportunities
Table No-4.11 Threats for respondent firms 92
respect to overall threats
respect to various threats
Table No-4.14 Competitive Strength as perceived by respondent 96
firms
respect to overall sources of competitive strength
Table No-4.16 T Test for comparing small and large FMCG 98
manufacturing firms with respect to various sources
of competitive strength as perceived by respondent
firms.
xv
Table No-5.1 Category of the product produced by respondent 105
firms
Table No-5.2 Nature of the product offered by respondent firms 105
Table No-5.3 Chi square Test for small and large firms with 107
respect to nature of products offered by respondent
firms
Table No-5.4 Number of product line respondent firms deals in 107
respect to the number of products lines
Table No-5.6 Number of varieties in which products are offered 110
by respondent firms
respect to the number of varieties of products
offered
Table No-5.8 Number of sizes in which product is offered 112
respect to the packing sizes offered by respondent
firms
Table No-5.10 Reasons for making changes in the product 114
Table No-5.11 Replacement policy of respondent firms 116
Table No-5.12 Bases for price fixation 119
Table No-5.13 Pricing method adopted by respondent firms 122
Table No-5.14 Basis for differentiating prices by respondent firms 124
Table No-5.15 Prices offered by respondent firms 126
Table No-5.16 Average expenditure on promotional activities 128
Table No-5.17 Promotional method employed by respondent firms 130
Table No-5.18 Advertising and promotional media adopted by 132
respondent firms
Table No-5.19 Sales promotion method adopted by respondent 135
firms
Table No-5.20 Trade promotion method adopted by respondent 137
firms
xvi
Table No-5.21 Distribution strategy adopted by respondent firms 140
Table No-5.22 Competitive strategy adopted by respondent firms 143
Table No-6.1 Impact of variables of product strategy on sales 150
growth of small firms
Table No-6.2 Impact of variables of product strategy on market of 151
small firms
Table No-6.3 Impact of variables of pricing strategy on sales 152
Table No-6.4 Impact of variables of pricing strategy on market 153
share of small firms
Table No-6.5 Impact of variables of promotional strategy on sales 154
Table No-6.6 Impact of variables of promotional strategy on 155
market share of small firms
Table No-6.7 Impact of distribution strategy on sales growth of 156
small firms
Table No-6.8 Impact of distribution strategy on market share of 157
small firms
Table No-6.9 Impact of competitive strategy on sales growth of 158
small firms
Table No-6.10 Impact of competitive strategy on market share of 159
small firms
Table No-6.11 Impact of variables of marketing strategy on sales 159
Table No-6.12 Impact of variables of marketing strategy on market 161
Table No-6.13 Impact of variables of product strategy on sales 162
growth of large firms
Table No-6.14 Impact of variables of product strategy on market of 163
large firms
Table No-6.15 Impact of variables of pricing strategy on sales 164
Table No-6.16 Impact of variables of pricing strategy on market 165
share of large firms
xvii
Table No-6.17 Impact of variables of promotional strategy on sales 166
Table No-6.18 Impact of variables of promotional strategy on 167
market share of large firms
Table No-6.19 Impact of distribution strategy on sales growth of 168
large firms
Table No-6.20 Impact of distribution strategy on market share of 169
large firms
Table No-6.21 Impact of competitive strategy on sales growth of 169
large firms
Table No-6.22 Impact of competitive strategy on market share of 170
small firms
Table No-6.23 Impact of variables of marketing strategy on sales 171
Table No-6.24 Impact of variables of marketing strategy on market 172
Table No-7.1 Strategies for reducing cost and enhancing quality 179
Table No-7.2 Priorities for developing competency by respondent 183
firms
Table No-7.3 Priorities for future investments by respondent firms 187
Table No-7.4 Resource Asset Profile of respondent firms 191
xviii
LIST OF FIGURES
Figure No. Name of the Figure Page No.

Figure No-4.1 Years of establishment of respondent firms 79
Figure No 4.2 Area of operation of respondent firms 81
Figure No-4.3 Type of Business ownership of respondent 83
firms
Figure No-4.4 Control on respondent firms 84
Figure No-4.5 Opportunities for respondent firms 87
Figure No-4.6 Porter’s Five Forces Model 91
Figure No-4.7 Threats for respondent firms 92
Figure No-4.8 Competitive Strength as perceived by 97
respondent firms
Figure No-5.1 Nature of the product offered by respondent 106
firms
Figure No-5.2 Number of product line respondent firms deals 108
in
Figure No-5.3 Number of varieties in which products are 110
offered by respondent firms
Figure No-5.4 Number of sizes in which product is offered 113
Figure No-5.5 Reasons for making changes in the product 115
Figure No-5.6 Replacement policy of respondent firms 117
Figure No-5.7 Bases for price fixation 120
Figure No-5.8 Pricing method adopted by respondent firms 123
Figure No-5.9 Price Differentiation Strategy 125
Figure No-5.10 Prices offered by respondent firms 127
Figure No-5.11 Average percentage expenditure on 129
promotional activities
Figure No-5.12 Promotional method employed by respondent 130
firms
Figure No-5.13 Advertising and promotional media adopted by 132
xix
respondent firms
Figure No-5.14 Sales Promotion method employed by 135
respondent firms
Figure N0-5.15 Trade Promotion method employed by 138
respondent firms
Figure No-5.16 Distribution Strategy adopted by respondent 140
firms
Figure No-5.17 Competitive Strategy adopted by respondent 143
firms
Figure No-7.1 Strategies for reducing cost and enhancing 180
quality
Figure No-7.2 Priorities for developing competency by 184
respondent firms
Figure No-7.3 Priorities for future investments by respondent 188
firms
xx
LIST OF ABBREVIATIONS
3PL Third Party Logistics
AKVN Adyogik Kendra Vikas Nigam
ANOVA Analysis of Variance
C&F Carrying & Forwarding
CAGR Compound Annual Growth Rate
CENVAT Central Value Added Tax
CPG Consumer Packaged Goods
CSR Corporate Social Responsibility
CST Central Sales Tax
DIC District Industries Center
DIP District Industrial Profile
FICCI Federation of Indian Chambers of Commerce & Industry
FMCG Fast Moving Consumer Goods
GDP Gross Domestic Product
GST Good & Service Tax
HUL Hindustan Unilever
IT Information Technology
MNC Multinational Corporations
MSMED Micro, Small & Medium Enterprises Development
OTC Over the Counter
P&G Proctor & Gamble
R&D Research & Development
RMS Root Mean Square
SME Small Medium Enterprises
SSI Small Scale Industries
SWOT Strength, Weakness, Opportunity, Threat
VAT Value Added Tax
xxi
LIST OF ANNEXURE
Annexure No. Name of the Annexure Page No.
Annexure No-1 Interview Schedule 237-242
Annexure No-2 Reliability Test 243
xxii
A COMPARATIVE STUDY OF MARKETING STRATEGIES OF FMCG
MANUFACTURING IN MALWA REGION
CHAPTER-1
INTRODUCTION
1.1: Introduction
1.2: Indian FMCG Sector
1.3: FMCG Segment Overview
1.4: Advantage to India
1.5: Significance and Contribution of FMCG Sector
1.6: Conceptual Framework
1.6.1: Definition of Micro, Small & Medium Enterprises
1.7 Problems of Small Scale Industries
1.8 Statement of the Research Problem
1.9 Rationale of the Study
1.10 Significance of the Study
1.11 Outline of the Thesis
1.12 Conclusion
1.13 Glossary of Selected Terms
1
CHAPTER 1: INTRODUCTION
1.1 Introduction:
Industrialization has always been an important driver of economic growth and

modernization. Manufacturing sector has been the backbone of all developed and
developing economies. India's manufacturing sector has evolved from the phase
of industrial licensing to liberalization and the now the current phase of global
competitiveness. Indian Manufacturing sector comprises of many small, medium
and large enterprises. These enterprises are essential part of any economy.
Post liberalization period in the Indian economy has brought many challenges and
opportunities for business firms. Competition at global level, technological
progress and varying needs of consumers are continuously changing the
competitive paradigms. It makes all enterprises- be it a big or a small, to
understand the complexities and requisites of markets so as to sustain in
competition. Small Medium Enterprises are considered as backbone of economic
growth in all countries because of their number and variety. They are well known
for their contribution in terms of production, exports, employment generation,
support to large sector and all round development of the country. They are
involved in all segments of the economy such as Food processing, agricultural
inputs, Chemicals & Pharmaceuticals, Engineering; Electricals; Electronics,
Textiles and Garments, Leather and leather goods, Bio-engineering, Sports goods,
Plastics products, Computer Software, etc.
The Fast Moving Consumer Goods (FMCG) sector is a huge and important part of
almost every economy of the world. It can be described as one of the most active
sectors in the world. Fast Moving Consumer Goods (FMCG) also known as
Consumer Packaged Goods (CPG) are typically non-durable products that are
consumed over a short period of time after which they would need to be replaced.
Like any other industry, the FMCG industry has various sub-segments. Main
segments of the FMCG sector are Household Care which includes fabric wash
2
(laundry soaps and synthetic detergents); household cleaners (dish/utensil
cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito
repellents, metal polish and furniture polish); Personal Care which includes oral
care, hair care, skin care, personal wash (soaps); cosmetics and toiletries;
deodorants; perfumes; feminine hygiene; paper products and Food and
Beverages which includes health beverages; soft drinks; staples/cereals; bakery
products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee;
soft drinks; processed fruits, vegetables; dairy products; bottled water; branded
flour; branded rice; branded sugar; juices etc. The goods produced by the sector
are necessities and hence the sector is more or less immune to recessionary
pressures. It is a sector with a relatively less discretionary demand and therefore
tends to be relatively stable in the long term. It constitutes a large number of
products that are used by consumers on a daily basis, they are thus bought
regularly. As such very high number of products are being manufactured and sold
by the FMCG sector. The sector has low entry barriers and is characterized by
enormous sales, which results in stiff competition and often low margins.
1.2 Indian FMCG Sector:
The consumer markets in India are constantly evolving. It initiated in 1980s with
some major changes in distribution of income, increased product availability,
growing competition, increased media penetration and improved advertising. The
Indian FMCG sector is the fourth largest sector of the economy with a total
market size of Rs. 167,100crs. The sector in India has been growing at an
appreciable CAGR of 11% over the last decade. The FMCG market was set to
treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. India’s FMCG
Sector was valued at INR 60,000cr in 2004 after a growth of 4% during 2003-04
and at INR 86,000cr in 2008. Increasing demand, changing consumer preferences,
higher disposable incomes and the retail revolution, has made possible the double-
digit growth of the sector over the past couple of years. In the last five years,
annual growth has been accelerated to 17%. And if it is maintained to be 17 per
3
cent, the overall industry size would be of Rs 620,000 crore by 2020. According
to the FICCI-Technopak Report, the FMCG sector will grow at a rate of 10-12%
within the next decade to reach INR206, 000cr by 2013 and INR355, 000cr by
2018. According to a report by Booz & Company, “FMCG Roadmap to 2020 -
The Game Changers” , it has been estimated that the FMCG sector will grow at
least 12 per cent annually to become Rs 400,000 crore in size by 2020. The
market is estimated to grow to US$ 100 billion by 2025, according to market
research firm Nielsen.
The Indian FMCG companies enjoy a diverse industrial base and offer a variety of
products to consumers, namely toiletries, personal care products, soaps,
detergents, oral care , packaged foods, beverages, cosmetics, healthcare products,
plastic products, bulbs, batteries, glassware etc. Out of these, food occupies the
major chunk, with about 52%, followed by nonfood segment 45% and Over the
Counter products (OTC) by 3%. The Indian FMCG market has been divided for a
long time between the organized sector and the unorganized sector. Unorganized
sector has been crowded by a large number of local players, competing on
margins, whereas the organized sector has been varied between a two-player-
scenario to a multi-player one. India's Rs.460 billion FMCG market remains
highly fragmented with roughly half the market comprising of unbranded and
unpackaged home made products. This presents a tremendous opportunity for
manufacturers of branded products to convert consumers to branded products.
The Indian FMCG landscape is comprised of three well-identified sets of players

those operate within a highly developed and intensely competitive landscape of
the Indian FMCG market. The three known sets of players include: Foreign
players who are present through their subsidiaries such as Unilever, P&G, Nestle
and PepsiCo; Strong Indian players with established national presence such as
Marico, Dabur and Godrej Consumer Products; and regional or small domestic
players, such as Ajanta, Anchor, and CavinKare etc., who are present in a few
regions of the country.
4
Foreign players such as HUL, P&G etc., have already been established or they are
actively looking towards entering India through natural and/ or unnatural routes.
Kraft Foods has entered India by buying Cadbury. Dabur and Marico have
established themselves in niche segments by developing differentiated products
and positions and have thus become industry leaders. These companies have
established their brand of health supplements (Chyawanprash) and coconut hair
oils (Parachute) through products intrinsically linked to the traditional Indian
psyche. Apart from these, there are regional and small-scale FMCG players such
as small tea producers and organic food producers, who mainly compete by
offering low-priced products with similar looks or packaging compared to the
bigger brands, to the ‘right consumers’ typically based in rural areas or in small
towns.
Consumers play an important role in the Indian FMCG sector. Prices are fixed
depending largely on the targeted consumer class. Some products or some variants
are for urban classes for example processed foods, bakery products, and dairy
products. And some are targeted for rural consumers for example personal care
products and fabric care. Some of the FMCG companies like Nestle India, Procter
& Gamble (P&G) and Smith Kline Beecham offer premium branded products as
targeting the elite and upper middle class consumers. These products do not enjoy
the same response in rural regions of the country. Processed food manufacturers
gain more profit in the urban areas as the urban population has a higher preference
for ready-to-eat meals. Similarly the consumption of personal care items is high in
the rural regions.
1.3 FMCG Segment Overview:
The FMCG sector in India has grown rapidly and the growth rates across different
product categories are good indicators of how the Indian consumer has evolved.
Within the category of food products, which accounts for nearly 45 per cent of the
industry size, staple products like edible oils have grown at single digits given a
high degree of penetration as well as established usage patterns. Fruit juices have
5
reported exponential growth, moving from near-zero levels in Financial Year
2000 to INR 9 billion at present. Similar trends are visible in the personal
products category with skin-care creams outpacing the growth of ordinary product
lines such as toothpaste. Increased incomes, changing social habits and growing
awareness of healthier and packaged beverages have contributed to these patterns.
The size of the fabric wash market is estimated to be $1 billion, household

cleaners to be $239 million and the production of synthetic detergents at 2.6
million tones. The detergents segment dominates the household care segment and
has been growing at an annual growth rate of 10- 11% in the past five years. Local
and unorganized players account for a major share of the total volume of the
detergent market. With rapid urbanization, emergence of small pack sizes and
sachets is picking up.
The Personal care segment includes personal washing products, hair care
products, oral care products, cosmetics, skin care etc. The size of the personal
wash products is estimated at $989 million; hair care products at $831 million and
oral care products at $537 million. While the overall personal wash market is
growing at one per cent, the premium and middle-end soaps are growing at 10 per
cent. The hair care market can be segmented into hair oils, shampoos, hair
colorants & conditioners, and hair gels. The coconut oil market accounts for 72%
share in the hair oil market. In the branded coconut hair oil market, Marico (with
Parachute) and Dabur are the leading players. The market for branded coconut oil
is valued at approximately $174. The skin care market is at a primary stage in
India. The Indian skin care and cosmetics market is valued at $274 million and
dominated by HLL, Colgate Palmolive, Gillette India and Godrej Soaps. The oral
care market, especially toothpastes, remains under penetrated in India (with
penetration level below 45 per cent). The oral care market can be segmented into
toothpaste – 60%; toothpowder – 23%; toothbrushes – 17%. The leading players
in this market are HLL, Nirma, Godrej Soaps and Reckitt & Colman. With the
change in life styles, increase in disposable incomes, greater product choice and
6
availability, people are becoming more alert about personal grooming. The sector
is very competitive both for organized and smaller regional players.
The Indian food industry is a significant part of the Indian economy and it
constitutes about 36% of the total consumer spending. The Indian food industry is
poised to grow by a huge 63.5% from Rs 788,100crs now to Rs.1, 288,900crs in
next 5 years and by 137.8% to Rs.1, 874,100crs in next 10 years, throwing up
huge opportunities for investments across the entire value chain. The overall
packaged food industry reached US$25.4 billion in 2011 and is forecast to grow to
US$38.5 billion by 2016. The highest value segments of packaged foods in 2011
were to be ‘dairy’ (at US$9.1 billion), followed by ‘bakery’ (at US$4.9 billion),
and ‘oils and fats’ (at US$4.1 billion). Health beverage industry is valued at $230
million; bread and biscuits at $1.7 billion; chocolates at $73 million and ice
creams at $188 million. The size of the semi-processed/ready-to-eat food segment
is over $1.1 billion. The Food and Beverages segment comprises of the food
processing industry, health beverage industry, bread and biscuits, chocolates &
confectionery, Mineral Water and ice creams. The three largest consumed
categories of packaged foods are packed tea, biscuits and soft drinks. The Health
foods segment is likely to see one of the highest growths in the food segment. The
size of the total packaged coffee market is 19,600 tonnes or $87 million. The total
soft drink (carbonated beverages and juices) market is estimated at 284 million
crates a year or $1 billion. The market is predominantly urban with 25 per cent
contribution from rural areas. Coca cola and Pepsi dominate the Indian soft drinks
market. Mineral water market in India is a 65 million crates ($50 million)
industry.
1.4 Advantage to India:
Availability of key raw materials, cheaper labour costs and presence across the
complete value chain gives India a competitive advantage. Because of the diverse
agro-climatic conditions in India, there is a large raw material base suitable for
food processing industries. India is the largest producer of livestock, milk,
7
sugarcane, coconut, spices and cashew and is the second largest producer of rice,
wheat and fruits & vegetables. India also produces caustic soda and soda ash,
which are required for the production of soaps and detergents. The availability of
these raw materials gives India the location advantage. Low Penetration level as
well as low per capita consumption in most product categories like jams,
toothpaste, skin care, hair wash etc in India indicate the untapped market
potential. Burgeoning Indian population, particularly the middle class and the
rural segments, presents an opportunity to manufacturers of branded products to
convert consumers to branded products.
1.5 Significance & Contribution of FMCG Sector:
The FMCG sector in India has played a vital role in the nation’s socio-economic
growth and development. It has the widest reach among all sectors in India. The
sector has tripled in size over the past decade. It has an awesome potential to grow
further and faster. The sector is making efforts to reach out to the poorer section
of consumers through distribution of smaller pack sizes, single use sachets and
developing innovative products to furnish regional or local tastes and the needs of
niche consumers. There are many direct and indirect contributions that the sector
has on the Indian economy.
FMCG sector is one of the largest employers in the country employing around 25
million people as wholesalers, distributors and others through 12 million stores.
The total salary outlay of the sector on direct employment is estimated at
approximately 6% of turnover, i.e. US$ 1.5 billion4 (Rs. 7,000 crores). There are
approximately 12 million retail stores in India, out of which 9 million are FMCG
kirana stores. Thus the sector is responsible for the livelihood of almost 13 million
people. On an average almost 30% of the revenue of the sector goes into both
direct and indirect taxes. Cascading Multiple Taxes, in the form of Import duty,
CENVAT, Service Tax, CST, State VAT, Octroi/Entry Tax and Income Tax, are
paid at multiple points. Taxes are levied at Centre, State, City and mandis by the
8
FMCG sector. These taxes accounts for much more than liquor and tobacco
categories.
It is a sector which helps create employment for people with lower educational
qualifications. Many become small entrepreneurs operating their own kirana store.
Along with this, FMCG firms have also undertaken some specific projects to
integrate with upcountry and rural areas for both inputs and for distribution as
well as to fulfill Corporate Social Responsibility (CSR). For example, ITC
echoupal enables farmer connectivity and provides an easy way for farmers to get
better profitability and control through access to timely information. Choupal
Sagar sells both agricultural inputs and daily needs products. HUL’s Shakti
Amma network pioneered a rural entrepreneurship model amongst women who
became HUL distributors. Dabur India regularly conducts rural and adult
education programs and provides training in rural areas to facilitate employability.
The FMCG sector has a strong impact on several other sectors of the economy
like agriculture; supply chain; ancillary industry; packaging; media and many
more. Agriculture provides the raw material to FMCG sector. It is estimated to
constitute roughly 9% of total turnover for the sector. That would put its total
value to agriculture at US$ 2.2 billion (Rs. 10,500 crores). The third-party
logistics market for the FMCG sector in India has been growing. India’s
infrastructure in both transportation and warehousing facilities has been lacking
which enables the growth of independent third party logistics (3PL)-players to
come up to bridge the gaps. Ancillary industries like manufacturing and
distribution are greatly boosted by the FMCG sector. Almost 9-10% of total
sector’s production is outsourced to contract manufacturing units.
1.6 Conceptual Framework:
The Indian FMCG sector comprises foreign players, strong Indian players and
regional or small domestic players. Thus it includes firms with different sizes
which may be categorized as small, medium and large firms. The concept of small
scale industries lacks clarity. It has undergone changes from time to time. Before
9
Independence, the present small scale industry was meant to denote the village
and the urban cottage industry. Prof. K.T. Sash was the first Indian economist,
who realizing the importance of Small scale industries in India, tried to give a
workable definition of these industries. He defined “A small scale or cottage
industry may be defined as an enterprise or series of operations carried on by a
workman skilled in the craft on his responsibility, the finished product of which,
he markets himself.”
The Small Scale Industrial (SSI) sector is one of the most vital sectors of the
Indian Economy in terms of employment generation, the strong entrepreneurial
base it helps to create and its share in production. The SSIs in India are broadly
classified into two types: Traditional industries and Modern industries. Both the
types of SSIs are prevalent in India. Under traditional industries basically Khadi
village industries, handlooms, Sericulture etc. are included while modern SSI
industries include small scale, export oriented ancillaries and small scale service
and business enterprise. The definition of Small Scale Industries varies from one
country to another. In most of the countries of the world, the criterion for defining
a small enterprise is related to the size of employment. The definition of SSI in
India has changed from time to time. It is currently defined, as per Industries
(Development and Regulation) Act 1951, in terms of investment Ceilings on the
original value of installed plant and machinery.
1.6.1 Definition of Micro, Small & Medium Enterprises
In most of the countries, small scale industries (SSIs) are defined in terms of
number of employees whereas in India, investment in plant and machinery is the
criteria for defining SSIs. In accordance with the provision of Micro, Small &
Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and
Medium Enterprises (MSME) are classified in two Classes: (a) Manufacturing
Enterprises- The enterprises engaged in the manufacture or production of goods
pertaining to any industry specified in the first schedule to the industries
(Development and regulation) Act, 1951) or employing plant and machinery in
10
the process of value addition to the final product having a distinct name or
character or use. The Manufacturing Enterprise are defined in terms of investment
in Plant & Machinery. (b) Service Enterprises- The enterprises engaged in
providing or rendering of services and are defined in terms of investment in
equipment.
Table N0- 1.1 Classification of Micro, Small and Medium enterprises
[Investment in Plant and Machinery/Equipment (Excluding Land and Building)]

Category Manufacturing Enterprises Service Enterprises
Micro Up to Rs. 25 lakh Up to Rs. 10 lakh
Small More than Rs 25 lakh and up to More than Rs. 10 lakh and up to
Rs. 5 crore Rs. 2 crore
Medium More than Rs Rs 5 crore and up More than Rs 2 crore and
to Rs.10 crore Up to Rs. 5 crore
Source: Ministry of MSME, Government of India, New Delhi.
1.7 Problems of Small Scale Industries
The Small-scale industries find themselves at a loose end in competition with

large scale industries with their large organization and resources. Of the present
difficulties, availability of raw material at competitive prices appears to be the
greatest. Small units suffer from inadequate work space, power, lighting and
ventilation, absence of sanitary and safety measures etc. Marketing has been
identified as one of the major stumbling blocks for small scale industries. Small
scale industries in our country have suffered from the lack of entrepreneurial
ability to develop initiative and undertake risks in the unexplored industrial fields.
The inefficiency in management comes first among managerial problems. Lack of
standardization, poor designing, lack of quality control, lack of precision, poor
bargaining power, scale of production and the like affect them. The shortage of
finance affects the ability of the small units severely. Every kind of problem,
whether of raw material, power, transport or marketing faced by an entrepreneur
in its ultimate analysis turns out to be a problem of finance. The small industry
11
gets elbowed out by the large and medium scale industries in the procurement of
bank finance and institutional credit.
1.8 Statement of the Research Problem:
The current market scenario is characterized by strong competition, speed and

change. New technologies affect the way of doing business and rise in new market
possibilities. These factors force today’s companies to quickly respond to new
changes and demand situations within short product life cycles. Fast changing
technology and new market situations have forced businesses to be more
innovative and apply strategy of change with continuous innovations of their
products.
FMCG is one of the sectors where strategic innovations are easier and faster to
copy. The FMCG market has changed with the advent of innovative products. It
has emerged as a fast, customized and large market. The FMCG sector is one of
the most active users of marketing. Changes in the marketing environment have
generated a need to reconsider the marketing perspectives of FMCG business. The
competition in the industry is increasing progressively and it is getting more and
more difficult to reach and influence consumers. Because of this intense
competition, both small and large companies need to ensure that they are ahead of
the competition. Brassington and Pettitt (2000:17)1 preserve that, in an
environment where consumers are spoilt for choice, the marketers of these
products need to be creative and innovative with regard to the planning and
implementation of their marketing strategies. Thus effective marketing is
considered as an important ingredient of success.
Academic studies have shown that marketing plays a significant role in every
organization. It is one of the biggest problems owner-managers face in their
business operations but it is also recognized as one of the most important business
1 Brassington, F. & Pettitt, S. (2000). Principles of Marketing. Second Edition. United Kingdom:
Prentice Hall.
12
activities and essential to the survival and growth of the enterprises (Stokes
2000b)2. In the previous studies, it is found that small and medium enterprises are
least focused on their marketing aspects. No thumb rule is yet defined for
enterprises according to their degrees of venture. Therefore the current study
entitled “A comparative study of marketing strategies of FMCG manufacturing
in Malwa Region” tries to cover all the above mentioned research issues in detail
in the Malwa region of Madhya Pradesh.
1.9 Rationale of the study
In the new era of open economies, global competition, technological changes and
demanding customers create more composite, dynamic and uncertain business
environment. Large Scale enterprises are essential for scale of economy,
employment generation and cost reduction. Small enterprises also play a major
role in global economic growth in terms of their contribution to industrial
employment, output and exports. As environments for business become
increasingly volatile and uncertain, the need for sound strategies for either
reacting to or attempting to manage those environments becomes more apparent.
In the literature it has been argued that marketing in large firms differs from that
in small due to the special characteristics of the latter. Research illustrates that
small firms in pursuit of organizational goals do not adopt the marketing concept
to the same extent as larger firms, and that marketing practice in small medium
firms is situation specific, and variable, regarding the levels of sophistication and
effectiveness. Small firms face marketing problems which are a function of the
general characteristics of small firms including: a limited customer base; limited
marketing activity, expertise and impact; an over dependence on the marketing
ability of the owner/manager; reactive rather than planned marketing and
difficulties in exploiting marketing opportunities. Consequently, there is a need to
2
Stokes, D. (2000). Entrepreneurial Marketing: A Conceptualization from Qualitative Research.
Qualitative Market Research: An International Journal, Vol. 3, No. 1, 47-54.
13
examine the marketing strategies of small and large enterprises in order to develop
a marketing theory appropriate to fit in context of enterprises.
FMCG sector is the one where innovations are very easily and rapidly imitated.
The Indian market has largely been considered as a homogenous market despite of
the existence of many languages, culture and customs. FMCG firms are offering
one product for the entire country (eg. Maggi Noodles or Diet Coke). Also the
promotional advertisements are same. But now the FMCG firms have realized that
consumer vary significantly in their tastes and preferences across the regions and
the states. The Indian FMCG industry has a very competitive landscape, with
three sets of players: the global players or foreign MNCs, the large Indian players,
and regional or small domestic players. Over the past decade, the relative
performance of the large domestic companies, the mid-sized and small domestic
companies and the multinational firms has changed. Hence the priorities are likely
to differ for the three groups of industry players.
The FMCG industry consists of a manufacturer side and a retailer side. There are
a lot of products being manufactured by both large and small companies. Many
studies have focused either on the consumers of FMCG or the strategies of
retailers as they constitute a large part of the sector. Retailers are likely to have
similar strategies, but the manufacturer side plays as significant a role. No attempt
has been made to focus FMCG manufacturing enterprises. During many years the
manufacturers in the FMCG sector, as compared to retailers, were more powerful
and had control of all the marketing variables including price, promotions and
presence on the shelves. In recent years the picture has changed dramatically and
there has been an increase in the control of retailers having control over large
parts of the marketing mix, which used to be controlled by the manufacturers. It
has been said in the marketing literature that the FMCG sector is among the top
users of marketing strategies and techniques, but in-depth research on what
marketing strategies these companies adopt is lacking. Current marketing theory
is developed and tested in large organizations. As a result, little is known about
the extent to which the theory extends to other FMCG companies. Consequently,
14
there is a need to examine the marketing strategies of these distinguished FMCG
manufacturing enterprises. Studies so far have been carried out at a national level
of aggregation. Given the importance of sub-national/state level planning for
regional development, there is a need to carry out regional studies.
1.10 Significance of the Study
This attempt will bring marketing strategies of various FMCG manufacturing

enterprises in one single study. This study will be of significant importance to the
marketing literature as it will present an in-depth understanding of what marketing
strategies are being adopted by different FMCG manufacturing enterprises
established particularly in Malwa region. It will help to understand and analyze
their marketing strategies and its impact on their respective performances. The
contribution of this study shall consist of more profound understanding of the role
and practices of marketing in various FMCG manufacturing enterprises and, thus,
of the development of marketing theory with reference to this context. This will
help FMCG manufacturing enterprises of various categories in framing
differentiated marketing strategies, sustain product access, drive market creation
and strengthen sales and marketing capabilities. As such, the completion of this
dissertation will provide understanding of the concepts presented so as to generate
data and information that every organization could use in order to come up with
plans and designs that will strategically position them in the highly competitive,
diverse, and complex business environment that is experienced at present.
1.11 Outline of the Thesis
This study is divided into nine chapters, which are as follows:
Chapter One- Introduction presents an overview of Indian FMCG sector,

FMCG segment overview, contribution of FMCG sector to the economy,
problems of small scale industries thus highlighting the relevance of this study.
This chapter then proceeds to focus on the research problems, research questions,
and significance of the study. Finally, the overall structure of the study is
15
discussed with particular reference to the major areas covered by the different
chapters.
Chapter Two- Review of Literature presents review of about 180 research

papers. The papers reviewed are related to strength weakness, threats and
opportunities of FMCG sector , Marketing in FMCG, marketing strategies
adopted by various FMCG companies, marketing in small medium and large
enterprises, impact of marketing strategies on performance, strategies for cost and
quality, priorities for competency development and future investments. At the
end, we have tried to find the research gap and identified the objectives of the
study, factors and variable of the study.
Chapter Three- Research Methodology discusses the methodology of the study

and the research design. It includes a description of the sampling technique
adopted and the composition of the sample. Furthermore, it explains the data
collection techniques for the empirical study, the description, purpose and
construction of the survey instrument, and provides a theoretical account of the
statistical processes involved in the quantitative analysis of the data.
Chapter Four- Functioning of FMCG Manufacturing Firms deals with the

functioning of small and large FMCG manufacturing enterprises of Malwa region.
It describes the general characteristics of FMCG manufacturing firms of Malwa
region. The discussion is focused on SWOT analysis of FMCG sector in general
and Opportunity-Threat profile of FMCG manufacturing firms of Malwa Region
in particular. Sources of competitive strength of aforesaid FMCG manufacturing
firms are also dealt with.
Chapter Five - Marketing strategies of FMCG manufacturing firms compares

the marketing strategies adopted by small and large FMCG manufacturing
enterprises of Malwa region with respect to product, price, promotion and
distribution. The chapter also discusses and compares the competitive strategy
adopted by these firms.
16
Chapter Six – Effectiveness of strategies on performance of FMCG
manufacturing firms deals with the effectiveness of various strategies adopted
by them on their respective performances. Performance is measured in terms of
market share and sales growth.
Chapter Seven - Strategy deployment by FMCG manufacturing firms tries to

determine the strategies adopted by firms to enhance quality and reduce cost,
competency development and also talks about the future investment priorities. It
also describes about various resources possessed by these firms.
Chapter Eight - Major findings and discussion: In the first part of this chapter,
we have tried to summarize the findings of each and every objective. The chapter
summarizes the results of the empirical investigation done in chapter no. four, five
and six against the background of the conceptual framework and the research
objectives using appropriate statistical techniques. In the second section, we have
discussed about various issued raised in the statement of problem.
Chapter Nine - Summary of Conclusions and Suggestions: In this chapter,

we have discussed about the conclusions of all the objectives. The marketing
implications arising from the investigation are outlined together with a
presentation of the marketing strategies adopted by small and large firms to
address the marketing of fast moving consumer goods in Malwa region. In
closing, some suggestions for continuing research in the marketing of fast moving
consumer goods according to the degrees of venture are given.
1.12 Conclusion:
The present study is based on a survey of small and large firms. This study
investigates the marketing strategies pursued by large and small firms, whether
they differ and, if so, whether these differences have any impact on their
respective performances. The study increases understanding of small firms by
permitting comparisons with large firms in one single study to find out whether
17
the marketing strategies followed by small firms are distinguishable from large
firms’ strategies.
1.13 Glossary of Selected Terms
Advertising: Advertising is a paid form of non personal communication of ideas,

goods and service by an identify sponsor.
Asset: Anything that is of value to an individual. It may be tangible, concrete or

physical resources, such as money, land, equipments, building; or intangible,
abstract resources such as knowhow, skills, knowledge.
Capabilities: A capability is the firm's ability to strategically deploy its tangible

and/or intangible assets that improves its performance, and sustaining its
competitive advantage.
Competency: A competency is the knowledge, skills, ability, and characteristics

associated with high performance on a job.
Competitive advantage: Attaining superior strength relative to competitors, by

taking strategic actions, acquiring and deploying capabilities and resources.
Cost Leadership: In cost leadership, a firm sets out to become the low cost
producer in its industry. This strategy involves the firm winning market share by
appealing to cost-conscious or price-sensitive customers.
Differentiation Strategy is an approach under which a firm aims to develop and

market unique products for different customer segments. This strategy is usually
employed where a firm has clear competitive advantages, and can sustain an
expensive advertising campaign.
Intangible assets: Intangible assets are nonphysical resources that contribute to

the value of the firm, giving the firm an advantage, e.g. know how, skills,
knowledge, goodwill, copyrights, trademarks, patents, computer programs.
18
Marketing Strategy: A strategy is a long-term plan to achieve certain objectives.
A marketing strategy is therefore the overall plan for choosing a target and
succeeding within it through product, pricing, distribution and promotional
choices.
Niche Strategy: In adopting a narrow focus, the company ideally focuses on a
few target markets (also called a segmentation strategy). These should be distinct
groups with specialized needs. The choice of offering low prices or differentiated
products/services depends on the needs of the selected segment and the resources
and capabilities of the firm.
Opportunity: Opportunities are those potential possibilities at which the

company arrives at through an external analysis.
Performance: Performance refers to the functioning of the organization as a

result of the implementation of any strategy. Typically, the results are measured
by economic terms, such as sales growth, market share and profit.
Quality: Quality is the standard of something as measured against other things of

a similar kind. It is the degree of excellence of something. It is a distinctive
attribute or characteristic possessed by someone or something.
Relationship marketing: All marketing activities are directed towards

establishing, developing, and maintaining successful relational exchanges with
channel partners, suppliers and customers.
Resources: Firm resources include all assets, capabilities, organizational

processes, firm attributes, information, knowledge, etc. those are controlled by a
firm, and enable the firm to conceive of and implement strategies that improve its
efficiency and effectiveness.
Sales Promotion: Sales promotions are the set of marketing activities undertaken
to boost sales of the product or service.
19
Tangible Assets: Tangible assets are assets that are quantifiable, have a physical
existence, or give its owner a clear and definite set of financial rights.
Threats: Threats can be external or internal, that can adversely affect its
performance or in achieving its goals.
Trade Promotion: The schemes, discounts, freebies, commissions and incentives

given to the trade (retailers, wholesalers, distributors, C&Fs) to stock more, push
more and hence sell more of a product come under trade promotion.
*****
20
CHAPTER-2
REVIEW OF LITERATURE
2.1 Introduction
2.1.1 Fast Moving Consumer Goods
2.1.2 Marketing
2.1.3 Marketing Strategies
2.2 Marketing in FMCG
2.2.1 Segmentation, Targeting & Positioning
2.2.2 Marketing Mix
2.2.2.1 Product Strategies
2.2.2.2 Packaging Strategies
2.2.2.3 Pricing Strategies
2.2.2.4 Promotional Strategies
2.2.2.5 Distribution Strategies
2.3 Competitive Advantage/Strength
2.4 Marketing in Different Sized Enterprises
2.5 Strategies for cost, quality and competency development and
priorities for future investments
2.6 Conclusion
21
CHAPTER 2: REVIEW OF LITERATURE
2.1 Introduction
The empirical analysis has to be built on a comprehensive review of relevant in the

area of the study. A review of the available literature on small and large firms is
undertaken with a view to identify possible areas of enquiry. It also provides the
necessary background for the present study.
2.1.1 Fast Moving Consumer Goods (FMCG)
Kotler (2008)1 defines Fast Moving Consumer Goods (FMCG) as products of low
unit value that are consumed within a short period of time and are purchased on a
frequent basis. Paul (2008)2 identifies FMCG as a highly segmented industry with
sub-segments such as oral care, soaps and detergents, health and hygiene products,
cosmetics, hair care products, food and dairy-based products, cigarettes, and tea and
beverages. Poultry, cheese, cigarettes, alcoholic beverages, butter, milk for babies,
and coconut oil, along with other packaged goods can be included in the FMCG
sector
Coulthart (2007)3 defines FMCG as a name for a category of products which have a
quick turnover and a relatively low cost. Loettner (2006)4 defines FMCG as
consumer products that have a fast turnover and a relatively low price, and include
food and beverages as well as frequently purchased consumer products such as
toiletries, cosmetics, cleaning products and pharmaceuticals. According to (Paul
1
Kotler, P. (2008). Marketing Management – Analysis, Planning, Implementation and Control. 12th
Edition. USA: Prentice-Hall.
2
Paul, J. (2008). International business, PHI Learning.
3
Coulthart, J. (2007). Fast Moving Consumer Goods. Online Available:
http://www.aboutus.org/VertexResourcing.com
4
Loettner, J. (2006). The concept Fast-Moving-Consumer-Goods. Online Available:
www.dematic.com/bausteine.net/file/showfile.aspx?downdaid=6505&sp=E&domid=1029&fd=3
22
2006)5, Fast Moving Consumer Goods (FMCG) (also known as repeat-purchase
packaged goods) refers to consumer non-durable goods required for daily or frequent
use.
According to Brassington and Pettitt (2000)6 and Dewhirst and Davis (2005)7, FMCG
products are usually frequently purchased and are low priced, thus, requiring mass
distribution and marketing communication focusing on their functional and
psychological benefits. Typical products that fall into the classification of fast
moving consumer goods include soap, toothpaste, tea, milk, sugar, bread, jam and
lunch wrap, among others. Steele & Ingall (2004)8 defines FMCG as those retail
goods which have a short shelf life, either as a result of high consumer demand or
because the product deteriorates rapidly. According to Baron, Davies, and Swindley
(1991)9, FMCG refers to low-priced items which are used rapidly with a single or
limited number of consumptions (as opposed to consumer durable or consumer
service).
2.1.2 Marketing
American Marketing Association10 defines marketing as the “performance of

business activities that directs the flow of goods and services from producer to
consumer or user”. The business activities that enable the producer to get in touch
with the users cover a host of things. The products have to be developed transported,
stored and distributed to the traders or retailers before the user/consumer is contacted.
5
Paul, J. (2006). Business environment. McGraw-Hill.
6
Brassington, F. & Pettitt, S. (2000). Principles of Marketing. Second Edition. United Kingdom:
Prentice Hall.
7
Dewhirst, T. & Davis, B. (2005).Brand Strategy and Integrated Marketing Communication (IMC):
A Case Study of the Players Cigarette Brand Marketing. Journal of Advertising, 34(4), P. 81-92.
8
Steele et al. (2004). Consumer Goods vs. Retail: New Lessons From the Store Wars. Marakon
Commentary, Winter 2004
9
Baron, S., Davies, B. and Swindley, D. (1991). Macmillan Dictionary of Retailing. Oxford:
Macmillan.
10
American Marketing Association Board of Directors, (1985), Marketing News, 1 March, p.5.
23
Human needs and wants give rise to the concept of goods and services as products.
Hence, marketing activities will have to include the collection of information about
the consumers’ wants, desires, incomes and sources of influences over him.
Marketing according to Bradley (2003)11 is a philosophy that leads to the process by
which organizations, groups, and individuals obtain what they need and want by
identifying value, providing it, communicating it and delivering it to others.
Marketing according to Proctor (2000)12 is about satisfying wants and needs and in
the course of doing so facilitating the achievement of an organization’s objectives.
By paying attention to customer wants and needs, organizations are more likely to
achieve their objectives in the marketplace. Marketing in a nutshell, is defined as the
art of selling products. However, marketing does not only aim to sell products. It
involves a deep understanding of the customer and identification of products or
services that will satisfy their needs and wants. Kotler (1997)13 describes marketing
as a social and managerial process by which individuals and groups obtain what they
need and want through creating, offering, and exchanging products of value with
others. The firm’s marketing inputs or activities consist of a logical sequence of
events that are designed to achieve the desired objective.
2.1.3 Marketing Strategies
Marketing strategy is a game plan designed by the marketer for increasing its sales
and market share for higher profitability and to retain customers continuously. A
marketing strategy combines product development, pricing, promotion, channel, and
relationship management. It encompasses the strategy involved in the management of
11
Bradley, F. ( 2003). Strategic marketing: in the customer driven organization. Wiley. Chichester.
England.
12
Proctor, T. (2000). Strategic marketing: an introduction. Routledge.
13
Kotler, P. (1997). Marketing Management – Analysis, Planning, Implementation and Control.
Ninth Edition. USA: Prentice-Hall
24
a given product. The activities start from marketing research, need identification,
market segmentation, product design, product modification, branding, packaging,
product launching, pricing, changes in prices, advertising, personal selling, publicity,
sales promotion, distribution, feedback etc. These activities are divided into various
groups and are called marketing mix, coined in 1953 by Neil Borden in his American
Marketing Association presidential address.
As pointed out by McDonald (2007)14, all the marketing strategies are concerned
with the four major elements of the marketing mix, which are product, price, place
and promotion”. Thus, in cases where changes are concerned with “product”, the
emphasis should be laid on technology, materials, manufacturing, product design and
qualities, cost, price, packaging, distribution and competition. In cases where changes
touch upon “branding”, a special attention should be given to generating awareness,
establishing unique and appealing image, encouraging product trial via promotion
and advertising. In case of “new market”, considerable effort is required to build the
infrastructure, educate consumers about new category and stimulate development of
the core need, related to the new product. The marketing strategy of a company
includes the different approaches that the company will take in order to achieve the
goals and objectives of the company. It integrates the activities in marketing as well
as sales and advertising (Pinson 2008)15.
Kotler and Armstrong (2004)16 contend that the importance of making customers the
focus of the business is known as the marketing concept. It is the key in achieving
organizational goals by means of determining the needs and wants and satisfying
such through activities that could deliver the desired satisfaction more effectively and
14
McDonald, M. (2007). Marketing plans: how to prepare them, how to use them, Butterworth
Heinemann.
15
Pinson, L. (2008). Anatomy of a business plan: the step-by-step guide to building your business
and securing your company's future, AKA Associates.
16
Kotler, P. & Armstrong, G. (2004). Principles of Marketing. 10th ed., Pearson.
25
efficiently than rivals. According to McCarthy and Perreault (2000)17, a marketing
strategy specifies a target market and a related marketing mix. It represents a picture
of what a firm will do in a certain market. Generally, marketing strategy deals with
the adapting of marketing mix elements to environmental forces. It evolves from the
interplay of the marketing mix elements and the environmental factors (Li et al.,
2000)18. Therefore, the function of marketing strategy is to determine the nature,
strength, direction, and interaction between the marketing mix- elements and the
environmental factors in a particular situation (Jain and Punj 1997)19.
Marketing seems easy to describe, but extremely difficult to practice (Kotler and
Connor, 1997)20. Any firm’s strategy is aimed at achieving competitive advantage
that contributes to wealth creation and growth over time (Ireland et al. 2003)21. A
firm’s strategy selection, in turn, is based on the careful evaluation of its resource and
capability portfolios and reflects the market influence (Barney 1991)22. Marketing
strategies and tactics are concerned with taking decisions on a number of variables to
influence mutually-satisfying exchange transactions and relationships. Typically,
marketers have a number of tools they can use, these include mega marketing (Kotler
1996)23 and the so-called 4Ps of marketing (McCarthy, 1995)24, among others.
According to (McDonald, 1992)25, the aim of the development of an organization’s
17
McCarthy, E.J. & Perreault, W.D. Jr. (2000). Essentials of marketing: A global-managerial
approach. (8th ed.). Boston: Irwin McGraw-Hill.
18
Li S, Kinman R, Duan Y, & Edwards JS. (2000). Computer-based support for marketing strategy
development, Eur. J. Mark. 34(5/6).
19
Jain, S.C. & Punj, G. (1997). Developing marketing Practices: A framework Approach, Marketing
Intelligence and Planning, 7(3), 34-42.
20
Kotler P, & Connor RA. (1997). Marketing of professional services. J. Mark. 5(4):12-18.
21
Ireland, R. D., Reutzel, C. R. and Webb, J. W. (2005). Entrepreneurship Research in AMJ: What
Has Been Published, and What Might the Future Hold? Academy of Management Journal, 48(4), pp.
556-564.
22
Barney J.B. (1991). Firm Resource and Sustained Competitive Advantage. Journal of
Management, Vol. 17 (1), pp. 99-120
23
Kotler . (1996). Principles of Marketing. Prentice Hall PTR, 1996
24
McCarthy, E.J. (1995). Basic Marketing, New York: D. Irwin.
25
McDonald M. (1992). Strategic marketing planning: A state of the art review. Marketing
Intelligence and Planning, 10(4): 4-22.
26
marketing strategy development is to establish, build, defend and maintain its
competitive advantage.
2.2 Marketing in FMCG
2.2.1 Segmentation, Targeting, and Positioning
Market segmentation pertains to the division of a market of consumers into persons

with similar needs and wants. Market segmentation allows for a better allocation of a
firm's finite resources. A firm only possesses a certain amount of resources.
Accordingly, it must make choices (and incur the related costs) in servicing specific
groups of consumers. Singh & Chandhok (2010)26 gives an outline of various market
segmentation and targeting strategies followed by the leading FMCG companies i.e.
HUL and ITC in India in the personal care products. Both HUL and ITC used the
purchasing power of the consumer, as the most important bases, to divide the whole
market into various segments and try to offer different product for each segment.
According to Schiffman and Kanuk (2004)27, Social class is also a popular tool that is
used for market segmentation and consumers can be placed into separate categories
based on their level of income, education and occupation. Marketers often structure
their product portfolio to cater for the needs of consumers in different social classes.
According to Bradley (2003), markets are segmented into groups of customers with
common needs and buying motives, and then developing solutions that appealed
particularly strongly to those segments. Targeting is the process of identifying the
company’s consumers to whom the marketing strategies will be directed. The process
of positioning is all about creating a favorable position for the company and its
26
Singh, A. & Chandok, A. (2010). Study of the key market segmentation and targeting strategies
followed by the leading FMCG companies in India. Asian Journal of Management Research, Online
Open Access publishing platform for Management Research.
27
Shiffman, L.G. & Kanuk, L.L. (2004). Consumer Behaviour. 8th Edition. U.S.A: Prentice Hall.
27
products or services in the market, particularly in the minds of the consumers. A
company’s position is composed of different factors that spring up from perceptions,
impressions and feelings
The cover story by Nagarajan et. al (2010)28 attempts to chronicle the rise of new
brave breed of Indian FMCGs from the viewpoint of three companies who have
followed entirely different strategies to counter the bigger players. Players like
Marico have successfully utilized the blue ocean strategy to establish a first mover
advantage in fields like skin care via the Kaya skin clinics while Godrej has
successfully leveraged its brand name and distribution strength to play itself into a
position of strength in the rural market for soaps. The Indian companies are putting
great emphasis on understanding the needs of the Indian consumers and tailoring
their products to those needs.
Communications is central to marketing function as these are product- or service-

related messages that a company convey to the public using communication mediums
and coupled with distribution channels. Marketing technique within FMCG business
is the adoption and integration of technology. Information technology (IT), as Chung
et al (2007)29 put it, acts as an enabler to improve order and delivery processes as
well as the overall cost effectiveness and efficiency. Digital marketing strategies are
thus becoming more important in FMCG environment, which is basically
characterized by powerful retailers, tier-1 suppliers, of industrial end products and
further-upstream ingredient/raw material producers. Pistelak (2006)30 explains that
FMCG businesses are generally results driven through their marketing activity as
28
A cover story by Nagarajan et al. (2010) The Rise of the Indian FMCG Company, IIM Shillong.
29
Chung, W WC, Ko, C CY, Cheung, E WM & Wong, T CW (2007). IT-enhanced order and
delivery process of a fast moving consumer goods (FMCG) company: A case study. Benchmarking:
An International Journal. vol. 14, no. 1, pp. 123-139.
30
Pistelak, P. (2006). Selling banks is the same as selling soap: Applying fast moving consumer
goods best marketing practices to the banking industry in Central and Eastern Europe. Journal of
financial services marketing. 11(1), pp. 72 – 84.
28
they generally do not have direct contact with the final purchaser and consumer.
Sales in this sector are more involved in distribution and in-store presence whereas
marketing is more responsible for the increase in market share.
According to Erdem and Valenzuela (2006)31, the marketers of fast moving consumer
goods collectively spend billions of rands on the marketing and development of new
and existing products each year and since the objective of most marketers of fast
moving consumer goods is to maximize the wealth of their shareholders by
increasing turnover through innovative marketing campaigns. The FMCG industry is
one of the industries that heavily use marketing (Jaray 2005)32. Since marketing
flourishes in the FMCG industry it is expected that many FMCG companies
subscribe to the marketing concept. Kunc (2005)33 mentions that within certain
industries, strategic innovations are easier and faster to replicate because their
products are mostly commodities. One such industry is that of FMCG companies. In
an FMCG industry, companies face the very difficult task of developing a
competitive advantage based on differentiation or low cost strategies. Therefore, it
becomes apparent that FMCG companies as opposed to other companies need to
constantly ensure that their strategic innovations are distinctive, to remain ahead of
competitors.
A study by Roy & Banerjee (2005)34 focused to answer whether factor identification
is readymade or it should be tailor-made depending upon the nature of FMCG
business in a developing country. Findings indicate that for the FMCG industries
there are no structural differences among risk groups in respect of their assigning
31
Erdem, T., Swait, J. & Valenzuela, A. (2006). Brands as Signals: A Cross Country Validation
Study. Journal of Marketing. Vol. 70. No. 1, P. 34-49.
32
Jaray, S. (2005). Marketing: Australia. Career FAQs.
33
Kunc, Martin. (2005). Illustrating the competitive dynamics of industry: the fast-moving consumer
goods industry case study, Proceeding of 23rd International Conference of the System Dynamic
Society, Boston USA.
34
Roy & Banerjee (2005). Assignment of Priorities to External and Internal Environmental Factor: A
Study on FMCG Industries. SCMS Journal of Indian Management.
29
highest priority to both external and internal environmental factors. The most
important external factor is the market and competitive factor and the most important
internal factor is the marketing and distribution factor. The marketing of fast moving
consumer goods is an area that stimulates intense competition among global
companies such as Unilever, Coca-Cola, Nestle, Gillette, Johnson and Johnson, and
Procter and Gamble (Ratnatunga and Ewing 2005)35. Brassington and Pettitt (2000)
maintain that, in an environment where consumers are spoilt for choice, the
marketers of these products need to be creative and innovative with regard to the
planning and implementation of their marketing strategies.
Francis (2011)36 focuses on Strategic Marketing in the FMCG sector with PZ

Cussons as a case study. The research focused on marketing strategy, marketing
communication, marketing mix and target audience of PZ Cussons. Research
revealed that FMCG companies use marketing to attract, influence and convince
consumers to purchase products. PZ Cussons has a product focus wherein product
development is important. Marketing mix plays an important role in attracting and
convincing consumers to purchase PZ Cussons’ products. The study revealed that
price is the most influential factor that affects consumers’ intention to purchase.
2.2.2 Marketing Mix
An important component of marketing strategies relate to the marketing mix. A

business needs to develop a market offering and present it to the market for
consumption in order to be able to satisfy the needs and wants of the market.
According to a research report by FICCI released in 200937, deep consumer
35
Ratnatunga, J. & Ewing, M.T. (2005).The Brand Capability Value of Integrated Marketing
Communication (IMC). Journal of Advertising, Vol. 34, No.4, P. 25-40.
36
Francis (2011). A Study of Strategic Marketing in FMCG Sector in the United Kingdom: A Case
Study on PZ Cussons. online available at
http://ivythesis.typepad.com/term_paper_topics/2011/02/dissertation-paper-on-a-study-of-strategic-
marketing-in-fmcg-sector-in-the-united-kingdom-a-case-stu.html#ixzz1SdmWHHC6
37
A report released by FICCI 2009 – FMCG Sector: The Road Ahead
30
understanding will always be at the heart of FMCG. The report found that in some
metros, there is a rising demand for higher end home consumption food products, as
consumers eat out less and compensate by eating better at home. This presents an
opportunity for the FMCG firm with its finger on the consumer’s pulse.
The marketing mix comprises a set of marketing decisions that management make to
implement the positioning strategy of the business and to achieve its objectives
(Doyle 2002)38. Marketing literature identifies the four P’s (4P’s) (product, price,
place and promotion) as the components of the marketing mix (George 200439;
McCarthy 199640). The marketing mix framework was particularly useful in the early
days of the marketing concept when physical products represented a larger portion of
the economy. Currently, with marketing more integrated into organizations and with
a wider variety of products and markets, some authors have attempted to extend its
usefulness by proposing an additional three P’s, namely: people, processes, and
physical evidence (Morrison 199641; Payne 199342; Zeithaml and Bitner 199643;
Barton 2007; George 2004).
2.2.2.1 Product Strategies
Product concept is one of the five alternative concepts under which organizations
conduct marketing strategies. The ideology is that consumers will favor those
products that offer the most quality, performance and features. Companies embracing
the product concept deal greatly with making continuous improvements in order that
they could provide value for money.
38
Doyle, P. (2002). Marketing Management and Strategy. Third Edition. United Kingdom: Prentice
Hall.
39
George, R. (2004). Marketing South African tourism. 2ndEdition. Cape Town: ABC Press.
40
McCarthy, E.J. (1996). Basic Marketing: A managerial approach. 12th Edition. Homewood, IL:
Irwin.
41
Morrison, A.M. (1996).Hospitality and travel marketing. 2nd Edition. New York: Delmar
Publishers.
42
Payne (1993). The Essence of Services Marketing. Prentice Hall PTR.
43
Zeithaml, V., Bitner, M. (1996), Services Marketing, New York, NY., pp.McGraw-Hill.
31
Nagarajan and Sheriff (2013)44, in their article highlighted a clear understanding of
the consumer mindset towards FMCG products. It focuses on some of the
fundamental issues pertaining to the emerging challenges and prospects of marketing
FMCG products (new product launch) in India, different types of problems faced, the
possible solutions and how GDP affects the growth of the FMCG sector this industry.
It is worthwhile to note that it is possible for FMCG Industries to bring about
changes in their strategies in creating consumer preferences by suitably modifying
interest pattern and preferences from their primitive mind set to modern ways of
living.
Mohankumar and Shivaraj (2010)45 in their research paper exposes the attitudinal
effects on the decision - making process of consumers in purchasing FMCG products
in a mass market confined to HUL and P&G Companies soaps and detergents. In the
study it is found that there are still some untapped market segments in both upper and
lower end of the market. This is evidenced by the brand switching in soaps and
detergent market. The analysis in the study shows that brand awareness is the key for
success in consumer market.
Going back to marketing mix, FMCG sector has products that is often standardized,
less technical and often requires less servicing. Prices are more important, rarely
negotiated and with few tenders and bids. Value for money is particularly important
and dominant in customer choice. Availability of credit and payment could be
important facets of pricing. Places are less direct but logistics are very important.
Distribution for FMCG will often need to be intensive and will normally takes place
through intermediaries. Promotion of FMCG has emphasis on non-personal like
advertising than personal selling. Advertising also generally aimed at mass market
44
Nagarajan, G. & Sherrif, J.K. (2013). Emerging Challenges and prospects of FMCG product
development in India. International Journal of Marketing. Financial Services & Management
Research. Vol.2, No. 1, ISSN 2277- 3622. Online available at www.indianresearchjournals.com
45
Mohankumar and Shivaraj .(2010). Product Mix Strategies: FMCG in Indian Market. SCMS
Journal of Indian Management. April-June, 2010.
32
and will stress brand image and persuasive messaging (Lancaster and Whitney
2006)46. Gerlich (2004)47 in his study found that large manufacturers dominate when
there is introduction of new grocery products and they are willing to pay large
slotting fees in order to have their product stocked at a store. This presents problems
for the financially- and resource- strapped small manufacturer. Some strategic
recommendations are provided for the small firm to help it compete against the larger
manufacturers.
According to Boone and Kurtz (2004)48, fast moving consumer goods or convenience
products can be divided into three basic groups, namely, impulse items, staples, and
emergency items. Impulse goods are purchased without much effort being put into
the decision-making process. Staples are those types of convenience goods that
consumers always keep a ready supply at any point in time. Emergency goods and
services are products that are usually purchased as a result of an unexpected or urgent
need. The common thread among all three of these convenience products is that they
all depend greatly on visibility and availability to ensure their success. It is quite
expensive for the smaller manufacturers to compete on an equal footing with the
larger manufacturers and, as a result, the former’s products are given minimal brand
exposure on supermarket shelves (Leixton and Movondo 2005)49.
Kotler (2000) argues that customers will favor those products that offer the most
quality, performance, and features. Management in these product-oriented
organizations focuses their energy on making good products and improving them
over time. The emphasis is on the bundle of benefits the consumer receives when
46
Lancaster, G & Whitney, F. (2006). Marketing Fundamentals: 2006-2007.Butterworth-
Heinemann.
47
Gerlich. (2004). New Product Introduction Strategies for Small Food Manufacturers, West Texas
State University.
48
Boone, J.L. & Kurtz, M.S. (2004). Marketing. USA: McGraw-Hill Book Company.
49
Reid, M., Luxton, S. & Movondo, F. (2005). The Relationship between Integrated Marketing
Communication, Market Orientation, and Brand Orientation. Journal of Advertising, Vol. 34, No. 4,
P. 11 – 23.
33
making the purchase, or in other words, on the value of the product. According to
Battezzati and Magnani (2000)50, FMCG and other durable goods conform to points
of considerable development, a practice which is increasingly implemented across
the sector to better meet the need to manage the complexity of the growing variety of
products in hand. The FMCG sector also channels the efficient consumer response
practices and so there is a necessity for category management, a practice where
groups of products were broken down into various related categories. Such practices
are adapted by either suppliers or by the partner retailer.
Fast Moving Consumer Goods Company adopts product orientation. According to

Jain et al (1999)51, the focus in product orientation is on evolving improved/new
products using technology. This orientation is adopted when the company believes
that buyers admire and buy superior and well-made products. Zairi (1995)52 argued
that organisations still wrestle with new product development, quality, speed and
timeliness as well as consumer impact in FMCG sector. This is especially true due to
the fact that FMCG requires continuity in basic product development, explaining the
product focus of FMCG companies. On the other hand, FMCG companies could also
resort in brand extensions rather than new product development.
Large manufacturers may sometimes agree to label their own products under the
brand name of a middleman (Kotler 2008). The reason for adopting this approach is
to ensure that they benefit from the additional volume and turnover as opposed to
their competitors. Fast moving consumer goods are a typical area where private
50
Battezzani, L. & Magnani, R. (2000). Supply chains for FMCG and industrial products in Italy:
Practices and the advantages of postponement. International Journal of Physical Distribution &
Logistics Management, vol. 30, no. 5, pp. 413-424.
51
Jain, A.K. et al. (eds.). (1999). Marketing information products and services: a primer for
librarians and information professionals. International Development Research Center. Ottawa.
52
Zairi, Mohamed. (1995), “Total Quality Education for Superior Performance”, Training for
Quality, 3, pp. 29–35
34
branding is adopted. Virtually anything, from rice to shaving blades, can be privately
labeled.
2.2.2.2 Packaging Strategies
Packaging is an important strategic marketing tool in the hands of the marketers of

fast moving consumer goods (Kotler 2008).In addition to this (Kotler 2008) believes
that the size of the package can also assist the marketer with new product launches.
Special trial size products can offer consumers the opportunity to sample a new
product at minimal cost and risk. These special pack sizes can also be offered free of
charge to consumers as part of an in-store promotional campaign.
According to Rita Kuvykaite (2009)53 , package attracts consumer’s attention to

particular brand, enhances its image, and influences consumer’s perceptions about
product. The research result shows the impact of package elements on consumers
purchase decisions can be stronger. The study concluded that package could be
treated as one of most valuable tool in today’s marketing communications,
necessitating more detail analysis of its elements and an impact of those elements on
consumers buying behavior. Also package imparts unique value to products
(Underwood, Klein & Burke, 200154; Silayoi & Speece, 200455), works as a tool for
differentiation, i.e. helps consumers to choose the product from wide range of similar
products, stimulates customers buying behavior (Wells, Farley & Armstrong,
200756). Packages are found to attract attention (Underwood et al., 2001; Garber et
53
Kuvykaite, R. Dovaliene, A. and Navickiene, L. (2009). Impact of package elements on
consumer’s purchase decision. Economics & Management, 14: 441-447.
54
Underwood, R. L., Klein, N. M., & Burke, R. R. (2001). Packaging communication: attentional
effects of product imagery. Journal of Product & Brand Management, 10 (7), 403-422.
55
Silayoi, P. and Speece, M. (2004). Packaging and Purchasing Decisions: An exploratory study of
the impact of involvement level and time pressure. British Food Journal, 106 (8): 607-628.
56
L.E. Wells, H. Farley and G.A. Armstrong. (2007). Packaging exploitation in fast moving
consumer goods: consumer processing of sponsorship messages, International Journal of Retail &
Distribution Management Vol. 35 No. 9, 2007 pp. 677-690. Online available at
www.emeraldinsight.com/0959-0552.htm
35
al., 200057; Goldberg et al., 199958; Schoormans & Robben, 199759). In fact,
Goldberg et al. (1999) found that by dismissing such non-verbal signs as colors, the
attention to verbal signs can be increased. Pictures on packages are emphasized to
attract attention, particularly when consumers are not very familiar with the brands
(Underwood et al., 2001). Furthermore, packages are claimed to attract attention
when their appearances are not typical within a product class (Garber et al., 2000;
Schoormans & Robben 1997).
Underwood et al. (2001) found that pictures on packages attract attention particularly
in cases when consumers are less familiar with a brand. Studies that have focused on
other single signs than pictures on packages have found that such single package
signs as colors (Gordon et al., 199460), brand names (Rigaux-Bricmont, 198161), and
materials (McDaniel & Baker, 197762) convey brand meaning. Vyas(2005)63 in her
study on measuring Consumer Preferences for Sales Promotion Schemes in FMCG
Sector found that deal proneness prevailed across different demographic segments.
Price cut nature of promotions was found to be preferred. Out of the nine concepts
presented to the respondents; they preferred a price cut nature of promotion on a
national brand with an immediate incentive and awareness created at point of
purchase.
57
Garber, L. L. Jr, Burke R.R., and Jones, J.M. (2000). The Role of Package Color in Consumer
Purchase Consideration and Choice. Marketing Science Institute. Working Paper, Report No 00-104.
58
Goldberg, M. E., Liefield, J., Madill J., and H. Vredenburg 1999. The Effect of Plain Packaging
on Response to Health Warnings. American Journal of Public Health, 89 (9), 1434-1435.
59
Schoormans, J.P.L., and Robben, H.S.J. (1997).The effect of new package design on product
attention, categorization and evaluation. Journal of Economic Psychology, 18 (2-3): 271-287.
60
Gordon, A., Finlay, K., and T. Watts 1994. The Psychological Effects of Colour in Consumer
Product Packaging. Canadian Journal of Marketing Research, 13, 3-11.
61
Rigaux-Bricmont, B. (1981). Influences of Brand Name and Packaging on Perceived Quality. In:
Mitchell, A. (eds.). Advances in Consumer Research, St. Louis: Association for Consumer
Research, 9, 472-477.
62
McDaniel, C., and Baker, R.C. (1977). Convenience food packaging and the perception of
product quality. Journal of Marketing, October, pp.57-58
63
Preeta H. Vyas. (2005). Measuring Consumer Preferences for sales promotion schemes through
conjoint design in FMCG sector. Research and Publication, W.P. No. 2005 – 09 -08, IIMA.
36
Wells, Farley and Armstrong (2007) in their study seeks to investigate the
importance of packaging design for a UK premium own-label food brand, by
developing an understanding of how consumers evaluate own-label packaging,
providing an insight into their shopping behaviour regarding premium own-label
desserts and identifying the factors that influence their purchase decisions. Findings
indicate that there is a strong association regarding the influence of packaging on the
purchase decision, with over 73 per cent of interviewed consumers stating that they
rely on packaging to aid their decision-making process at the point of purchase.
Stammerjohan et al (2005)64 observed that there are some manufacturers of fast

moving consumer goods that also design their packaging with a view to it being
reused at some point in the future. In addition to promoting the sales of their product,
this type of strategy also enables marketers to benefit from additional branding that
can be gained from the packaging being used together with its existing branding for
some other purpose. The packaging of a product can be a powerful tool in the
marketing of fast moving consumer goods. Packaging is an integral component of a
product and constitutes a critical component of a company’s marketing strategy.
Packaging, therefore, serves as both a functional and a communication tool for the
company concerned in its efforts to market its product offering to consumers (Kotler
2008).
Multiple packaging includes a number of units in a single packaged unit that is aimed
at providing better value for money or greater variety for the consumer (Thompson
and Arsel 2006)65. Examples of products that can be packaged in this fashion include
golf balls, sweets and chocolates and soups. It has the benefit of increasing the
64
Stammerjohan, C., Wood, C.M., & Chang, Y. & Thorson, E. (2005). An Empirical Investigation
of the Interaction between Publicity, Advertising, and Previous Brand Attitudes and Knowledge.
Journal of Advertising. Vol. 34, No. 4, P 55-67.
65
Thompson, C.J., Rindfleisch, A. & Arsel, Z. (2006). Emotional Branding and the Strategic Value
of the Doppelganger Brand Image. Journal of Marketing. Vol. 70, No. 1, P. 50-63.
37
volumes of the product sold and creates the perception of good value for money
when it appears on the shelf of the middleman (Etzel, Walker and Stanton 2001)66
The product’s packaging is generally the consumer’s first point of direct contact with
the product. Apart from just the physical appearance of the product, marketers should
also take into consideration other factors such as the size of the pack to attract either
light or heavy users. The size of the packaging chosen will help the marketer to
segment the target market according to product usage. Marketers must also take
cognizance of environmental regulations and ensure that the materials used in the
manufacture of the product’s package are not harmful to the environment (Kotler
2008).
In the competitive fast moving consumer goods sector, consumers are always on the
lookout for a good deal. In this respect, a really good package should be able to
communicate a pricing advantage over that of the competitors. Printing special offers
on the packaging can prove to be more effective than offering coupons to consumers.
There should be a strong and direct relationship between the graphics on the
packaging and the contents of the package. If there is no relationship between the
package and its contents, confusion will reign in the minds of consumers (Peter and
Olsen 1999)67. Companies will need to decide if it is to develop family packaging or
individual packages even though it is all produced by the same manufacturer (Agres
and Dubitsky 1996)68. Family packaging is a viable option for products that have
similar uses and levels of quality specifications. Waterschoot and Van der Bulte
(1992)69 support the findings of Richardson, Dick and Jain (1994)70 with regards to
66
Etzel, M.J., Walker, B.J. & Stanton, W.J. (2001). Marketing. Eleventh edition. USA: McGraw -
Hill.
67
Peter, J.P. & Olson, J.C. (1999). Consumer Behaviour and Marketing Strategy. Fifth Edition.
Singapore: Irwin-McGraw-Hill.
68
Agres, S.J. & Dubitsky, T.M. (1996). Changing Needs for Brands. Journal of Advertising
Research. Vol. 36, No. 1, P. 21-30.
69
Van Waterschoot W. and Van den Bulte C. (1992). ―The 4P classification of the marketing mix
revisitedǁ, Journal of Marketing, Vol. 56, October,pp. 83-93
38
packaging as a dynamic feature of the product that can be used to increase a
company’s chances of success in a highly competitive marketplace for fast moving
consumer goods.
2.2.2.3 Pricing Strategies
The pricing strategy adopted has significant implications for the marketing of not just
fast moving consumer goods but also a wide variety of other products (Doyle 2002).
The price selected for a product influences the quantity of the product sold, the
profits earned, and the strategic position of the product in its market. It has become
common practice to focus on the costs of manufacture, marketing and distribution
and then add a mark-up when establishing the final selling price of a product (Kotler
2008). The pricing of a product is a key component of a company’s marketing
strategy and planning process (Thompson and Arsel 2006).
A company may choose to launch a line of products into the marketplace with a
specific identity chosen for each particular line of product (Doyle 2002). This type of
product strategy will enable a company to follow a pricing strategy in line with the
profile of the target market for each product. By adopting this type of a pricing
strategy, a company will be able to capitalize on different price elasticity among
consumers and distributors. In addition, there is also the potential to motivate
consumers to trade up to higher margin-brands. The difference in pricing can also be
used to differentiate the company’s different products in terms of differences in
quality (Erdem and Valenzuela 2006).
The marketers of fast moving consumer goods have to contend with a highly
competitive marketplace. A powerful tool in this type of an environment is the price
charged for the product. Consumers can sometimes switch brands if there is only a
70
Richardson, P.S., Dick, A.S. & Jain, A.K. (1994). Extrinsic and Intrinsic Cue Effects on
Perception of Store Brand Quality. Journal of Marketing. Vol. 58, No. 4, P. 28 - 36.
39
minor difference in the price of competing products. It is therefore of great
importance to marketers to carefully consider all relevant factors before setting the
price of the product (Dewhirst and Davis 2005). From a strategic planning
perspective the price of a fast moving consumer product needs to complement the
other components of the marketing mix (Stammerjohan et al 2005).
Bundled pricing is designed to offer consumers a range of features and benefits at a

very good price. This type of pricing is a popular technique among Japanese
companies that seek to provide consumers with a superior value proposition
(Stammerjohan et al.2005). On the other hand, there are companies that may choose
to reduce the perceived price in the mind of the consumer by advertising the product
at a greatly reduced price but offer the consumer a wide variety of optional extras at
the moment of purchase. The profit margins earned on these optional extras provide
the marketer with an opportunity to recoup a percentage of the costs incurred in
producing and marketing the product (Doyle 2002).
Fairly often, the price of a product is determined by the amount of money that the
target audience is prepared to pay for the product. The cost of producing the product
will then be carefully calculated to ensure that it is still possible to earn a healthy
profit margin by charging a suitable price (Kotler 2008). Some markets will allow for
premium pricing while in other markets it might not be possible to charge such high
prices. Therefore, the costs of production must always be in relation to the price
dictated by the market. The price of the product is also affected by its stage in the
product life cycle. In the decline stage marketers will need to drop prices and profit
margins to ensure that the product remains competitive. Moreover, the price of the
product could be determined by means of product line pricing, which distinguishes
between a varieties of different grades of products (Doyle 2002).
40
2.2.2.4 Promotional Strategies:
To counter the brand-switching of consumers, it is important to devise consumer

promotions that are innovative and effectively involve the end-user so that brand
insistence is encouraged. The promotional mix consists of a variety of personal and
non-personal communication techniques. These two basic forms of promotion are
usually integrated into a coherent plan to achieve a company’s marketing objectives
(Kotler 2008). Marketers have traditionally used promotions as an opportunity to
provide information relating to the product or service on offer to the target market
(Dewhirst and Davis 2005). This type of communication will usually be directed at
the functional attributes of the product and provide information on the features and
benefits of the product. Popular tools for communicating this type of information
include video cassettes and compact discs (Boone and Kurtz 2004).
When choosing how to go about promoting their products, marketers can choose to
either use “push” or “pull” techniques (Kotler 2008). Push involves making extensive
use of personal selling and the granting of discounts to wholesalers and retailers. Pull
entails switching the attention from the trade in favour of the consumer through
extensive consumer advertising and promotions. This approach seeks to get products
on the shelves of wholesalers and retailers and also to move products off the shelves
through consumer pressure (Leixton and Movondo 2005). The market for fast
moving consumer goods is highly competitive and, as a result, consumers pay special
attention to the messages that they receive in the form of above-the-line and below-
the-line marketing communications. According to Shiffman and Kanuk (2004)71,
consumers make reference to the price of the product together with its features, its
packaging and its related quality attributes. This reference then results in the
consumer developing an overall image of the brand.
71
Shiffman, L.G. & Kanuk, L.L. (2004). Consumer Behaviour. 8th Edition. U.S.A: Prentice Hall.
41
Techniques falling under the banner of sales promotion are both diverse and
complex, and offer management the opportunity to address a range of different
marketing situations. Its purpose may be: to stimulate quick response in the market
place, as a retaliatory device, or to reward and retain existing customers (Totten et al.
1994)72. Sales promotions relate to techniques employed by manufacturers to
stimulate interest in their products. The target audience is usually wholesalers,
retailers and consumers. The major objective of sales promotions is to encourage the
trade to stock the product and also to ensure that consumers feel motivated to
purchase the product (Kotler 2008). Sales promotions also provide the sales force
with a major bargaining tool in the negotiation process. Sales promotions consists of
a wide variety of activities including displays, trade shows, coupons, contests,
samples, premiums, product demonstrations and other ad hoc activities that marketers
might consider suitable for stimulating desire and interest in their products (Erdem
and Valenzuela 2006). Procter and Gamble, an international fast moving consumer
goods manufacturer, believes that it is the impact that is created at the point of
purchase that is most likely to get consumers to choose one’s brand as opposed to the
competitor brand (Platt 2006)73.
When techniques are considered individually, several of them could be, and indeed
are, used as retaliators. Price-related promotions (such as ―cents-off the regular
price, and refund offers for coupon redemption) form a large share of consumer
promotional activity. They also represent the greatest concern in terms of potential
damage to brand equity because price plays an important role in the evaluation of a
72 Totten, J.C. and Block, M.P. (1994). Analyzing Sales Promotion Text and Cases: How to Profit
from the New Power of Promotion Marketing, 2nd ed., The Dartnell Corporation, USA.
73 Platt, S. (2006). Untitled document. Retrieved from
http://www.jump.co.za/Forum/topic.asp?TOPIC_ID=20.
42
brand. It is, therefore, relevant in terms of potential equity outcomes to consider the
impact of using price-based promotions (Keller 199374; Mela et al. 199775).
Vaishnani (2011)76 in their study opined that advertising and strategic media
planning is of great significance for promotion of the business in present competitive
situation. It has studied the relation of advertising and media planning and its impact
on effectiveness of promotion activities. The importance of consumer sales
promotion in the marketing mix of the fast moving consumer goods (FMCG)
category throughout the world has increased. Companies spend considerable time in
planning such activities. However, in order to enhance the effectiveness of these
activities, manufacturers should understand consumer and retailer interpretations of
their promotional activities.
Kagure (2010)77 dissertation was an exploratory survey on the evaluation of the

effectiveness of sales promotion in the FMCG industry in Kenya whose key
objectives were; to establish how firms allocated marketing budgets, what objectives
they sought to achieve through sales promotions as well as whether and how these
firms in Kenya evaluated the effectiveness of sales promotion as a marketing strategy
and the challenges faced in the process. The most important conclusion was that,
while all companies claimed to be evaluating the effectiveness of their sales
promotion, the evaluation seemed superficial or less than objective owing to the fact
that majority did not have well established tools or systems to carry out adequate
detailed analysis. Another finding from the study was that a big proportion (89%) of
74
Keller, K. L. (1993). Conceptualizing, Measuring, and Managing Customer Based Brand Equity.
Journal of Marketing. 57 (1), 1-22.
75
Mela, C. F. Gupta, S. and Lehmann, D. R. (1997).The long-term impact of promotions and
advertising on consumer brand choice. Journal of Marketing Research. Vol. 34, No. 2, pp. 248-261.
76
Vaishnani, H. (2011)..Effects of Sales Promotions on Consumer Preferences and Brand Equity
Perception: With specific reference to FMCG Products, Saurashtra University,
http://etheses.saurashtrauniversity.edu/id/eprint/63.
77
Kagure (2010). An analysis of evaluating sales promotions effectiveness in the fast moving
consumer goods (FMCG) industry. kenya Kamau.
43
all FMCG companies engaged in sales promotions. A conclusion deduced from this
finding was that the firms acknowledged the importance of, and actually carried out
sales promotions regularly as part of their marketing strategy. Above the line and
below the line promotion strategies are important for FMCG marketing, although the
greater emphasis is placed on the former than the latter. Above the line promotion
makes use of the traditional media while below the line are non-traditional
promotional activities such as short-term incentives.
Kureshi & Vyas(2010)78 in their attempt to study the perception of consumers and
retailers for Sales Promotion Activities in Toilet Soap Category find that with respect
to the nature of the schemes, premiums (free gifts) were found to be the most
frequently used in both premium and popular toilet soap category, followed by price
offs. Retailers and Consumers both perceived price offs to have relatively greater
impact compared to any other forms of sales promotion. Retailers stated that role of
word of mouth and television advertising was very important in providing
information inputs to the consumers regarding sales promotion activities. This
perception of retailers was supported by the consumer unaided recall of sales
promotion schemes which were widely advertised.
Direct marketing consists of techniques that are designed to communicate directly

with the target audience (Kotler 2008). The objectives of this type of communication
are to minimize any distortion in the communication process and also to
communicate with the consumer in the most direct method possible. Typical
examples of direct marketing include direct mail, direct response advertising,
telemarketing, and infomercials on broadcast media, direct response print advertising
and electronic media (Boone and Kurtz 2004).He believe that while personal selling
is really about face-to-face contact with the customer, non-personal promotion is
78
Kureshi, S. & Vyas, P. (2010). An Exploratory Study of Sales Promotion Activities in Toilet Soap
Category: An Insight into Consumer and Retailer Perceptions. Vol. 1, Issue No. 8, ISSN 0976-2183.
44
composed of advertising, sales promotion, direct marketing, public relations, guerilla
marketing and sponsorships. Advertising consists of the placement of promotional
messages in a variety of media vehicles, namely, television, radio channels,
newspapers, magazines and billboards. In recent years, the internet has grown in
popularity as an effective medium for the communication of promotional messages.
Advertising is particularly effective in communicating to audiences that are
geographically dispersed. In addition to targeting the consumers through special
offers over a limited period of time, companies also target wholesalers and retailers
through special schemes including free stock, buyback allowances and competitions
between different intermediaries in which they will be able to win prizes (Boone and
Kurtz 2004).
According to Shimp (2003)79, advertising constitutes the major promotional expense

for most manufacturers of fast moving consumer goods. Procter and Gamble a
leading international manufacturer of fast moving consumer goods, was ranked
number 3 of all advertisers in the USA. Their advertising spend in 2001 amounted to
2,3 billion dollars. Procter and Gamble view advertising as an on-going activity and
an opportunity to build and maintain brand equity. Advertising must seek to address
five basic functions, namely, informing, persuading, reminding, adding value and
assisting other company efforts. Ashley (1998)80 conducted research to establish
exactly how manufacturer brands can compete effectively with house brands.
Advertising that can effectively communicate the quality advantages of the
manufacturer branded product over the house brand was identified as a major tool to
be used in maintaining and increasing market share. Anschuetz (1997)81 maintains
that advertising is the key to build and maintain the popularity of a brand in the
79
Shimp, T.A. (2003). Advertising, Promotion and Supplemental Aspects of Integrated Marketing
Communications. Sixth Edition. USA: Thomson South-Western.
80
Ashley, S.R. (1998). How to Effectively Compete Against Private Label Brands. Journal of
Advertising Research. Vol. 38, No. 1, P. 75-82.
81
Anschuetz, N. (1997). Point of View: Building Brand Popularity: The Myth of Segmenting to
Brand Success. Journal of Advertising Research. Vol. 37, No. 1, P. 63-66.
45
competitive fast moving consumer goods sector. Author proposes that for a brand to
increase the number of frequent or heavy purchasers, the brand must become more
popular in general. The most effective way to build the popularity of the brand is to
advertise as effectively as possible.
According to research conducted by Flynn, Goldsmith and Eastman (1996)82,

marketers should not underestimate the power of opinion leaders who have the power
to sway consumer perceptions and purchase intention. Advertising is a powerful
marketing tool; however, consumers are sometimes more believing of information
that comes from a trusted and reliable source (Kotler 2008). Peattie and Peattie
(1995)83 recognize the change in FMCG marketing whereby below the line
techniques is increasingly becoming extensive, credible and sophisticated. These
promotional techniques have now reached a point where they deserve a consideration
of each below the lines technique’s individuality in relation to other areas of FMCG
marketing. In a study conducted by Peterson, Wilson and Brown (1992)84, it was
established that advertised claims about consumer satisfaction did little to encourage
consumer acceptance of a product or brand. Personal experience and word-of-mouth
communication are probably the most effective methods of promoting a product.
2.2.2.5 Distribution Strategies
Fast moving consumer goods must be widely distributed in order to maintain brand
loyalty and repeat purchasing. By its very nature, many fast moving consumer goods
are easily substituted by consumers when their preferred brand is not available.
82
Flynn, L.R. Goldsmith, R.E. & Eastman, J. K. (1996). Opinion Leaders and Opinion Seekers: Two
New Measurement Scales. Journal of the Academy of Marketing Science. Vol. 24, No. 2, P. 137-
147.
83
Peattie, K. & Peattie, S. (1995). Sales promotion – A missed opportunity for services marketers?’
International Journal of Service Industry Management, 6(1), pp. 22-39.
84
Peterson, R.A., Wilson, W.R. & Brown, S.P. (1992). Effects of Advertised Customer Satisfaction
Claims on Consumer Attitudes and Purchase Intention. Journal of Advertising Research. Vol. 32,
No. 2, P. 34-40.
46
Distribution is therefore, required to place the product within easy reach of
consumers (Doyle 2002).
Many fast moving consumer goods are distributed through a traditional distribution
channel, that is, from the manufacturer to the wholesaler, to the retailer, and finally to
the consumer (Kotler 2008). There are many parties in this distribution channel and
the costs of the distribution will need to be built into the price of the product and
ultimately all of these distribution costs need to be recovered from the consumer. The
price will need to be competitive and also ensure that all costs and profit margins are
fully recovered (Doyle 2002).
Bhoyar and Nagendra (2011)85 studied that FMCG distribution has the maximum
channel partners in the Indian rural market. The extending of credit by retailers to
customers depends upon their location and product. Earlier rural consumers
purchased most of their requirements from nearby towns, but in recent times, a shift
has been seen towards purchasing locally. Rural retailers could capitalize on
consumer satisfaction and provide outstanding value and service to keep local
customers in local markets.
Mishra, Debi P (2008)86 provides an in-depth look at the strategic role of distribution
channels in the FMCG industry. Specifically, it surveys the state of current
distribution channels in India and identifies four archetypes that FMCG firms can use
as a starting point to develop their distribution strategy. The main objective of this
study was to appraise the distribution channel challenges faced by the FMCG
industry in India. This analysis sheds light on the challenges and opportunities for
85
Bhoyar, P.K. & Nagendra, A. (2011). Measuring the Effectiveness of FMCG Distribution
Channels with Respect to the Satisfaction of Consumers in Rural Market, Eighth AIMS International
Conference on Management January 1-4, 2011
86
Mishra, D. P. (2008). FMCG Distribution Channels in India: Challenges and Opportunities for
Manufacturers and Retailers. Journal of Global Business Issues; Summer 2008; 2, 2; ABI/INFORM
Global.
47
FMCG firms and retailers alike. While the FMCG industry is well developed in the
west, in India the industry is in its incipient stages, market access and success is
affected by several factors such as infrastructure, diversity in channel forms, and
regulatory changes. The major implications for the FMCG industry are: lack of
infrastructure and the means to access far-flung rural markets and the yawning gap in
purchasing power between the rich and poor.
2.3 Competitive Advantage/Strength
Rao and Wagwe (2007)87 in their book points out that marketing function in the
FMCG business are all about seizing competitive advantage. The FMCG market,
which was earlier a sellers’ market, has transformed into a buyers’ market that exerts
pressure on companies to balance costs, quality, price, time, and so on. To generate
growth and excellence, companies need to develop and then implement their
marketing mix models in a way that will grab and then sustain their competitive edge
in the market.
Prahalad and Hamel (1990)88 focus on the resources, capabilities and competences of
the organization as the source of competitive advantage rather than the environment,
as in the traditional approach. Edith Penrose89, in her work ‘The Theory of the
Growth of the Firm (1959) is often credited with the idea of the resource-based view.
Also the work of Philip Selznick (1957)90 stressed the role of distinctive competences
and Alfred Chandler (1962)91 demonstrated the importance of organizational
87
Rao,P. & Wagwe, R. (2007). Managing 4Ps Of FMCG Marketing : An Introduction (Management
Series ICFAI University Press, ISBN 8131411804.
88
Prahalad, CK, and Hamel, G. (1990)., The Core Competence of the Corporation”, Harvard
Business Review. 90 (3), 79-91.
89
Penrose, E.T (1959). The theory of the Growth of the Firm, Wiley, New York
90
P. Selznick, Leadership in Administration: A Sociological Interpretation (New York: Harper &
Row, 1957).
91
Chandler, A.D. (1962). Strategy and structure, Cambridge, Ma: MIT Press
48
structure in the utilization of a firm’s resources. Argyris (1994)92 stress the
acquisition of competences through internal mechanisms of individual and collective
learning, while Hamel and Prahlad (1990) emphasize strategic tools like alliances,
licensing, mergers and acquisitions. The ability of a firm to pursue a particular
strategy is dependent on what resources that firm has.
Unlike SBV which stresses the importance of choosing a product market position, the
RBV raises the importance of firm resources and capabilities in competition and the
theoretical background was strengthened by the work done by many researchers
(Wernerfelt, 198493; Barney, 1991; Grant, 199194; Peteraf 199395; Collis, 199496). In
all these studies, the competitive advantage of a firm was viewed through the
resource aspect where resources were defined as anything which could be thought of
as a strength or weakness of a given firm. Barney (1991) pointed out that a firm
could achieve a competitive advantage only if the resources have attributes: they
must be valuable, rare, and imperfectly imitable and there cannot be strategically
equivalent substitutes. Studies have found that firms deploy different strategies
depending on the resources that they possess (e.g. Zajac et al., 200097; Kraatz and
92
Argyris, C. (1994), Good Communication that Blocks Learning, Harvard Business Review, 72
(July/August)
93
Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5 (2),
171–180.
94
Grant, RM. (1991). Contemporary Strategy Analysis: Concepts, Techniques and Applications.
Blackwell Ltd., Ambridge, MA
95
Peteraf, M.A. (1993). The cornerstones of competitive advantage: a Resource- Based View.
Strategic Management Journal. Vol. 14, pp. 179-191.
96
Collis, DJ. (1994). How valuable are organizational capabilities?” Strategic Management Journal.
Vol. 15, pp. 143-152.
97
Zajac, E., Kraatz, M. S., Bresser, R.K. (2000): Modelling the dynamics of strategic fit: A
normative approach to strategic change, Strategic Management Journal, 21, 429-453
49
Zajac, 200198), while others have found that firms with similar resources can also
choose different strategies (e.g. Furrer et al., 2000)99.
2. 4 Marketing in different sized enterprises
Marketing is regarded as relevant to both large and small organizations (Hogarth-

Scott et al. 1996)100 and basic marketing principles are seen to apply to both of them
(Reynolds 2002101, Siu & Kirby 1998102). At the same time it is recognized that small
firm marketing has unique characteristics that differentiate it from that of large
organizations (Fillis 2002103, Gilmore et al. 2001104). Traditionally, marketing theory
has been developed mainly based on studies on large organizations (Stokes 2000b105)
and, thus, it is argued that it cannot be applied directly to SMEs, where the practices
and activities may differ considerably from those of their larger counterparts (cf. Hill
2001)106. The study of marketing in SMEs has been recognized as a problematic area
for researchers for over 20 years (Chaston and Mangles, 2002107; Siu and Kirby,
1998). However, small and medium entities cannot do conventional marketing as
98
Kraatz, M.S. and E.J. Zajac .(2001). How Organizational Resources Affect Strategic Change and
Performance in Turbulent Environments: Theory and Evidence. Organization Science, Vol. 12, pp.
632-657.
99
Furrer, O., D. Sudharshan, M.T. Alexandre and H. Thomas .(2000). Generic Resources Groups,
Strategy, and Performance: Empirical Support from a New Industry. Working Paper, University of
Illinois at Urbana-Champaign.
100
Hogarth-Scott, S. Watson, K. & Wilson, N. (1996). Do small businesses have to practice
marketing to survive and grow? Marketing Intelligence & Planning, 14(1), 6-18.
101
Reynolds, P.L. (2002). The Need for a New Paradigm for Small Business Marketing? – What is
wrong with the old one? Journal of Research in Marketing & Entrepreneurship. 4(3), 191-205.
102
Siu, W. S. & Kirby, D. A. (1998). Approaches to Small Firm Marketing: A critique. European
Journal of Marketing 32 (1/2), 40-60.
103
Fillis, I. (2002). Small Firm Marketing Theory and Practice: Insights from the outside. Journal of
Research in Marketing & Entrepreneurship. 4(2), 134-157
104
Gilmore, A., Carson, D. & Grant, K. (2001). SME Marketing in Practice. Marketing Intelligence
& Planning, 19(1): 6-11.
105
Stokes, D. (2000b). Putting Entrepreneurship into Marketing: The Processes of Entrepreneurial
Marketing. Journal of Research in Marketing & Entrepreneurship, 2(1), 1-16.
106
Hill, J. (2001). A Multidimensional Study of the Key Determinants of Effective SME Marketing
Activity: Part 2. International Journal of Entrepreneurial Behaviour & Research. 7(6), 211-235.
107
Chaston, I. & Mangles, T. (2002). Small Business Marketing Management. Palgrave Publishers,
Basingstoke, UK. ISBN0-333-98075-1.
50
large ones do (Verhees and Meulenberg, 2004108; Gilmore et al., 2001; Carson,
1990109). Due to the characteristics and limitations of their owner-manager,
resources, market impact and organizational structure, marketing in small and
medium businesses is likely to be haphazard, informal, loose, unstructured,
spontaneous and more reactive than proactive (Gilmore et al., 2001). Their marketing
activities tend to be pragmatic, practical and adopted to suit their unique situation
(Carson and Gilmore, 2000110) and informal and unplanned, relying on the intuition
and energy of an individual, i.e. owner-manager (Stokes and Blackburn, 1999111).
Small firms with limited resources will be expected to perceive its business
environment as being different from that of large firms with perhaps more resources
and it is also likely to face different environment pressures with regard to market
competitiveness (Gyampah et al, 2001112). The approaches that large firms use to
benchmark their competitors and negotiate with suppliers are expected to be different
from the approaches used by small firms (Vickery et al, 1999113). SME marketing in
practice is thought to be largely done though networking (Gilmore et al, 2001) or a
combination of transaction, relationship, interaction and network marketing (Brodie
et al, 1997)114.
108
Verhees, F. J. H. M. & Meulenberg, M. T. G. (2004). Market Orientation, Innovativeness Product
Innovation, and Performance in Small Firms. Journal of Small Business Management. 42(2), 134-
154
109
Carson, D. (1990). Some Exploratory Models for Assessing Small Firms Marketing Performance
(a Qualitative Approach). European Journal of Marketing. 24(11).
110
Carson, D & Gilmore. (2000). Marketing at the Interface: Not »What« but »How««. Journal of
Marketing Theory and Practice. 8, 2, 1-8.
111
Stokes, D. & Blackburn, R. (1999). Entrepreneurship: Building for the future. Working Paper
Series. Small Business Research Centre, Kingston University, UK.
112
Gyampah, KA. & Boye, SS. (2001). Operations Strategy in an Emerging Economy: The case of
the Ghanaian manufacturing industry. Journal of Operations Management, 19, pp.59-79.
113
Vickery S.K., Droge, C. and Germain, R.(1999). The Relationship between Product
Customization and Organisational Structure, Journal of Operations Management, 17 (4), pp 377-391.
114
Brodie, R.J., Coviello, N.E., Brookes, R.W. and Little, V. (1997).Towards a Paradigm Shift in
Marketing? An Examination of Current Marketing Practices. Journal of Marketing Management,
Vol. 13, pp. 383-406.
51
More recently the use of Internet marketing (Chaffey et al, 2000)115 or e-commerce
(Rayport and Jaworski, 2001)116 has become popular in all types of businesses
including SMEs. According to extensive literature reviews (Raaij and Stoelhorst,
2007117; Hill, 2001; Siu and Kirby, 1998; Romano and Ratnatunga’s (1995)118,
marketing in small businesses can be categorized as: marketing as a culture;
marketing as a strategy; and marketing as tactics.
Siu and Kirby (1998) had identified four approaches to marketing in small firms: the
Stages/Growth model; the Management Style approach; the Management Function
model and the Contingency approach. The stages/growth model suggests that any
model of small firm marketing must take into account the stage of development of
the business but does not explain how the changes occur or account for the effects in
variability of marketing skills between different owner/managers. The management
style approach acknowledges the limitations and constraints of the small firm
(resources and capabilities) and provides a useful explanation for the poor
development of marketing in small firms but does not explain the marketing practices
actually used by small firms. The management function approach acknowledges that
marketing is both an important business function and an essential concept in small
firm growth and survival but many owner-managers simplify and misunderstand
marketing as the 4Ps or interpret marketing as advertising. The contingency approach
acknowledges that various factors affect the small firm’s marketing performance and
that there is no universal set of strategic choices that is optimal for all businesses
regardless of their resources or business environment in which they operate.
115
Chaffey, D., Mayer, R., Johnston, K. and Ellis-Chadwick, F. (2000). Internet Marketing. Prentice
Hall, Harlow, England. ISBN 0-273-64309-6.
116
Rayport, J. F. and Jaworski, B. J. (2001). E-Commerce, McGraw-Hill, Boston, USA. ISBN 0-07-
112052-1.
117
Raaij, van E. M., Stoelhorst, J. W. (2007).The implementation of a market orientation - A review
and integration of the contributions to date. European Journal of Marketing. Vol. 42 No.11/12,
pp.1265-1293.
118
Romano, C. and Ratnatunga, J. (1995). The Role of Marketing: Its Impact on Small Enterprise
Research. European Journal of Marketing. Vol. 29, No. 7, 9-30.
52
Neelam Kinra, (1995)119 finds that while a broad customer orientation does indeed
prevail among large, medium and small companies, they are only vaguely conscious
of their mission or business purpose. The study found that large-sized companies see
more prospects in terms of intensive growth strategies through market penetration in
the domestic market, with future prospects being identified in terms of new product
development in the domestic market, rather than in exploring new market
development possibilities in overseas markets. Small/medium-sized companies are
more concerned with market development through identifying new untapped
segments in the domestic market. Lalkaka (2003)120 study of SME incubators in
developing countries such as China, Brazil and other developing countries found that
a key to successful SME development is networking strategy. This was found to
affect performance, leading to higher success rate in the creation and survival of new
SMEs, and strategic activities include partnerships for mentoring and marketing;
knowledge base of learning and research; professional networking at the national and
global levels; and community involvement to promote entrepreneurism and cultural
change.
2.5 Strategies for cost, quality, priority for developing competencies and
priorities for future investments
A study by Singh et al. (2006)121 attempted a holistic approach for analyzing

competitiveness bases on issues related with competitiveness of SMEs such as assets,
pressure constraints, strategy development, processes and different dimensions of
performance. Studies in Indian context have also observed that SMEs give highest
119
Kinra, N. (1995). Strategic dimensions in marketing planning: large versus small/medium
companies in the Indian television market. Marketing Intelligence & Planning. Vol. 13 Issue: 4,
pp.34 – 44.
120
Lalkaka, Rustam (2003). Business incubators in developing countries: Characteristics and
performance. International Journal of Entrepreneurship and Innovation Management, Vol. 3(1/2), pp.
31-55.
121
Singh, R.K., Garg, S.K. and Deshmukh, S.G. (2006). .Strategy development by Indian SMEs in
plastic sector: an empirical study. Singapore Management Review. Vol. 28 No. 2, pp. 65-83.
53
priority for quality (Singh et al., 2004122, Dangayach and Deshmukh, 2005123). These
findings imply that quality and cost have now become qualifying criteria to stay in
the market. Tang et al (2005)124 in their study investigated the effects of marketing-
related variables on business performance of small firms in China. The results show
that long-term differentiation marketing strategy, R&D as a percentage of sales, and
years in business are positively associated with a small firm’s business performance
in China.
A study by Singh, Garg and Deshmukh (2006) focuses on analyzing different

strategies adopted by Indian industries for competing in domestic and global market.
From this study, it is observed that level and priority of different factors of pressures,
constraints, strategies and performance measures differ among small, medium and
large scale industries. It is being observed that cost, quality and delivery lead-time is
the main pressures for Indian small, medium and large-scale industries. Deshmukh
(2006)125 examined the issues of pressures and constraints, strategies for investments,
competencies development, cost reduction and quality improvement for SMEs in
Indian plastic sector and it is observed that SMEs are not making clear distinction in
developing strategies for reducing cost and improving quality.
2.6 Conclusion:
From the above discussion and thorough study of literature, it is observed that there
is no uniformity in adopting strategies by the enterprises, which is creating
122
Singh, Garg and Deshmukh. (2004). Competitiveness of Small and Medium Enterprises: Case of
an Indian Auto Component Manufacturing Organization. IIMB Management Review. Vol. 16, No. 4,
pp. 94-102.
123
Dangayach G. S. and Deshmukh S. G. (2005). Advanced Manufacturing Technology
Implementation: Evidence from Indian Small and Medium Enterprises (SMEs), Journal of
Manufacturing Technology Management, Vol. 16, No. 5, pp. 483-496.
124
Yiming Tang, Paul Wang, Yuli Zhang. (2005). Marketing Strategy and Business Performance:
The Case of Small Firms in China, ANZMAC 2005 Conference: Marketing Issues in Asia.
125
Deshmukh S.G. (2006). Strategy development by Indian SMEs in plastic sector: An empirical
study. Singapore Management Review .
54
significant difference among them. Academic studies have shown that marketing
plays a significant role in every organization. In the previous studies, it is found that
small and medium enterprises are least focused on their marketing aspects. Existing
literature raises questions that whether the basic principles of marketing are equally
valuable to both large and small enterprises? Hence various issues are raised with
different perspective. It is accepted that SMEs have different characteristics than
larger enterprises, but are these differences credited to their relative scale? Some of
the queries are like, what are different marketing strategies adopted by different sized
enterprises? Are the strategies adopted by them similar or different? Are the sources
of competitive strength similar for all types of enterprises? Does market presents
similar or different types of opportunities and challenges for these enterprises? Are
profile of assets, resources and capabilities qualitatively different to those accessed
by larger enterprises? How effective are the strategies in relation to their respective
performance outcomes? FMCG sector is the one where innovations are very easily
and rapidly imitated. Products are getting closer and hence firms need to think
creatively in order to differentiate them from other firms by adopting various
strategies. It has been said in the marketing literature that the FMCG sector is among
the top users of marketing strategies and techniques, but in-depth research on what
marketing strategies different companies adopt is lacking. Current marketing theory
is developed and tested in large organizations. As a result, little is known about the
extent to which the theory extends to other FMCG companies. Previous studies have
focused on the consumers of FMCG or the retailers but no attempt has been made to
focus FMCG manufacturing enterprises. Therefore there is a need to study the
marketing strategies of FMCG manufacturing with an attempt to compare small and
large firms.
*****
55
CHAPTER-3
RESEARCH METHODOLOGY
3.1 Introduction
3.2 Objectives of the study
3.3 Research Design
3.4 Sampling Design
3.4.1 Universe
3.4.2 Sampling Unit and Sample Size
3.4.3 Sampling Method
3.4.4 Data Collection
3.4.5 Factors & Variables
3.5 Tools & Techniques
3.5.1 Likert Scaling
3.5.2 Reliability & Validity
3.5.3 Percentage
3.5.4 Mean
3.5.5 Standard Deviation
3.5.6 Correlation Analysis
3.5.7 Regression Analysis
3.6 Model Specification
3.7 Hypothesis Testing
3.7.1 Chi-Square Test
3.7.2 T-Test
3.7.3 ANOVA
3.8 Conclusion
56
CHAPTER 3: RESEARCH METHODOLOGY
3.1 Introduction:
Many studies have been done so far focusing on marketing strategies. But a few
studies have been undertaken in context of comparative marketing strategies
adopted by small and large FMCG manufacturing firms. And when Indore is
concerned, no such study has ever been made. The research is focused on major
areas like marketing strategies and effectiveness of the strategies on performance,
future investment priorities, strategies to reduce cost and enhance quality, and
competency development. The purpose of this study titled “A Comparative study
of marketing strategies of FMCG manufacturing in Malwa region” is to examine
the marketing strategies of FMCG manufacturing firms of Malwa region and to
compare the strategies used by small firms with the strategies used by large firms.
Specifically, we wanted to determine whether the combination of important
elements in a marketing strategy is same for all the firms. This study is based on
both primary and secondary data.
3.2 Objectives of the study:
The main aim of this dissertation is to understand how different sized FMCG
manufacturing firms market their products. In lieu with this, specific objectives are
outlined as follows.
1. To find out major marketing strategies adopted by FMCG manufacturing

enterprises in Malwa region.
2. To study the effectiveness of strategies on performance of FMCG
manufacturing enterprises in Malwa region.
3. To identify different sources of competitive strength of FMCG manufacturing
enterprises in Malwa region.
4. To explore opportunities and threats faced by FMCG manufacturing enterprises
in Malwa region.
57
5. To investigate various issues such as priority for investment, strategies for cost,
quality and competencies development for FMCG manufacturing Enterprises in
Malwa region
6. To determine the profile of assets resources and capabilities for FMCG
manufacturing Enterprises in Malwa region
For analyzing the different issues as per the objectives of the research, following
methodology has been adopted:
3.3 Major Hypothesis of the study
Since the study is exploratory in nature, no specific hypotheses have been framed.
However to give a proper direction to the study in light of objectives, following
hypotheses have been framed:
Hypothesis H01: There is no significant difference between small and large FMCG
manufacturing firms with respect to marketing strategy.
Hypothesis H02: There is no significant difference between small and large firms
with respect to various opportunities.
with respect to various threats.
with respect to various sources of competitive strength.
with respect to various strategies for cost & quality.
with respect to priorities for making future investments.
with respect to priorities for developing competencies.
with respect to profile of assets and resources:
58
Hypothesis H09: There is no significant impact of marketing strategy on
performance of small and large firms.
3.4 Research Design:
The current study considers many issues related to marketing strategies of FMCG
manufacturing firms which require exploration of ideas and flexibility of research
design and it also requires accurate description of association of some variables.
Hence the study is exploratory cum descriptive in nature.
3.5 Sampling Design:
3.5.1 Universe:
Madhya Pradesh geographically represents the heart of India and Malwa region is
in all senses, the heart of Madhya Pradesh. The universe for the study is all FMCG
manufacturing enterprises of Malwa region. It includes large, small and medium
sized enterprises from Indore, Dewas, Dhar and Ujjain of Malwa region. Indore is
located in the western region of Madhya Pradesh, on the southern edge of the
Malwa plateau. Indore is often referred as the commercial capital of Madhya
Pradesh with a bulk of its trade coming from Small, Mid and Large scale
manufacturing & service industries. Dewas district is situated in western central
Madhya Pradesh. Dewas is known as the Soya capital of India and is a major part
of the soya bean processing industry in the country. Ujjain is a historical city of
Central India and is located in the Malwa region of Madhya Pradesh. The district
of Dhar is situated in the Malwa region of west Madhya Pradesh in central India.
Pithampur is a large industrial area under the Dhar District. The participants are
selected from the District Industrial Profiles (DIP) from District Industries
Center(DIC) of Indore, Dewas, Dhar and Ujjain respectively and Madhya Pradesh
Adyogik Kendra Vikas Nigam (AKVN), Association of Industries and MSME,
Indore.
59
3.5.2 Sampling Unit and Sample Size:
A sample is a finite part of a statistical population whose properties are studied to

gain information about the whole. When dealing with people, it can be defined as a
set of respondents selected from a larger population for the purpose of a survey.
Inferential statistics are used to draw conclusions about populations from samples.
It enables us to determine a population`s characteristics by directly observing only
a portion (or sample) of the population. In this study, there is two tier system
employed to collect data, firstly, the selection of geographical area of Malwa
region, that is, Indore, Ujjain, Dewas and Dhar, then selection of different sized
FMCG manufacturing firms from these regions. A sample size of 150 small and
medium large FMCG manufacturing firms is considered for the study out of
around 45000 (including all) small and around 200 (including all) medium large
registered industrial units. (Source: DIP). The unit of analysis is the chief
executive officer/managing director/ marketing/sales manager or entrepreneur of
FMCG manufacturing firms enterprises situated in the selected geographical area
of Malwa region of Madhya Pradesh.
3.5.3 Sampling Method:
Judgmental & convenience sampling method is used to select the respondents.

Judgment sampling is a common non-probability method. The researcher selects
the sample based on judgment. This is usually an extension of convenience
sampling. When using this method, the researcher must be confident that the
chosen sample is truly representative of the entire population. Convenience
sampling is used in exploratory research where the researcher is interested in
getting an inexpensive approximation of the truth. As the name implies, the sample
is selected because they are convenient. This non-probability method is often used
during preliminary research efforts to get a gross estimate of the results, without
incurring the cost or time required to select a random sample. Purposive sampling
is used by the researcher with a purpose in mind. That we have predefined
respondents in our mind and attempt is made to seek members of this group to be
included in the sample.
60
3.5.4 Data Collection:
3.5.4.1 Primary data:
The empirical data have been collected by conducting a survey by using an

interview schedule. Primary data from the units were collected by using a pre-
tested and pre-coded schedule by personal interview with the
entrepreneurs/Marketing heads by the researcher. We conducted a trial interview
with 17 senior representatives, owners, and marketing managers of small and large
FMCG manufacturing firms. Their suggestions were incorporated and the final
draft is prepared. In order to collect the information, 180 people at the level of
chief executive officer/managing director/marketing/sales manager or
entrepreneurs of different FMCG manufacturing enterprises were targeted. Total
153 people responded out of which only 145 responses were used, considering 111
small and 34 large medium enterprises. The researcher herself carried out the field
work for the study. The work was conducted during the period from February 2012
to August 2013 by means of an initial phone call followed by a personal interview.
3.5.4.2 Data Collection Tool/Instrument:
The schedule was divided into three sections. First section contains seven general
questions related to firms’ area of operation, years of establishment, type of
business ownership and other questions related to general characteristics. The
second section contains six questions related to opportunities, five questions
related to threats for FMCG manufacturing firms of Malwa region and seven
questions related to sources of competitive strength for these firms. It also contains
seven questions related to product strategy, four questions related to pricing
strategy, five questions related to promotion strategy, one for distribution strategy,
one for competitive strategy and two questions related to performance of the firms.
The third section contains five questions related to future investment priorities,
five questions related to strategies for reducing cost and enhancing quality and six
questions related to priorities for developing competencies. (Annexure No-1)
61
3.5.4.3 Secondary data:
Secondary data were collected from published and unpublished sources,

government publications for business and trade. They were collected from books
on marketing and management, articles from research journals, industry reports
and publications from various agencies and associations, websites and published
documents of District Industries Centre.
3.5.5. Factors and Variables:

Factor1: Product Strategy
For the product strategy, overall six variables are considered and measured through
the questionnaire. They are as follows:
1. Number of product lines

2. Number of sizes in which product is offered
3. Number of varieties in which product is offered
4. Nature of the product
5. Reasons for making changes in the product
5.1 Because of competitors
5.2 Because of market demand/customer need
5.3 For improvement in quality
6. Replacement Policy
6.1 Piece-to-piece
6.2 Percentage of total bill
Factor 2: Pricing Strategy
For the pricing strategy, overall four variables are considered and measured
through the questionnaire. They are as follows:
1. Bases for setting prices
1.1 Cost Plus Pricing
1.2 What the market is prepared to pay
1.3 Uniqueness of the product
1.4 Competition based pricing
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2. Pricing Method
2.1 Market Skimming
2.2 Market Penetration
2.3 Bundle Pricing
3. Prices offered to various customer segments
3.1 Single Price
3.2 Two or more than two prices
4. Price Differentiation
4.1 Rural/Urban Area in the district
4.2 Within/Outside the district
4.3 Within/Outside the state
Factor 3: Promotion Strategy
For the promotion strategy, overall five variables are considered and measured
through the questionnaire. They are as follows:
1. Average percentage expenditure of price of the product on promotional
activities.
2. Promotional Methods
2.1 Advertising
2.2 Sales Force
2.3 Retailer/Distributor
3. Media Adopted
3.1 Newspaper/Magazine
3.2 Pamphlets/Posters
3.3 Wall Paintings
3.4 Banners/Hoardings/Billboards/Danglers
3.5 Radio
3.6 Television
3.7 Websites
3.8 Audio/Video on wheels
3.9 Word of Mouth
4. Sales Promotion Methods
63
4.1 Buy One Get One
4.2 Premiums/Complementary/ Free Gifts/Coupons
4.3 Price Off/ Discounts
4.4 Free trials
4.5 Quantity Off/Extra
5. Trade Promotion Methods
5.1 Buying/ Advertising Allowance
5.2 Bonus Packs
5.3 Trade Discounts
5.4 Credit Sales
5.5 Buy Back Guarantee
5.6 Sales Contests
5.7 Sponsorships is preferred
Factor 4 Distribution Strategy
1. Producer-Retailer-Consumer
2. Producer –Distributor-Retailer-Consumer
3. Producer-Distributor-Wholesaler-Retailer-Consumer
Factor 5: Competitive Strategy
1. Focus Strategy
2. Differentiation Strategy
3. Low Cost Strategy
Factor 6: Opportunities
1. Low Category Penetration at present
2. Modern Retail
3. Untapped Rural Market
4. Rising Income levels
5. Large Domestic Market
6. Export Potential
Factor 7: Threats
Threats for small and large FMCG manufacturing firms are measures using five
parameters. The parameters are:
64
1. New entrants
2. Substitute product/technology
3. Number of rivals
4. Strong bargaining powers of suppliers
5. Strong bargaining powers of buyers.
Factor 8: Sources of competitive strength
Sources of competitive strength as perceived by firms are measured using
following parameters:
1. Physical Resources
2. Human Resources
3. Financial Resources
4. Knowledge Resources
5. Organizational Resources
6. Social Networks
7. Legal resources
Factor 9: Strategies for cost & quality: In this study, strategies to reduce cost
and enhance quality is measured through five constructs, these constructs are as
follows:
1. Intro. of quality improvement methods; TQM and quality circle
2. Improvement in process capability
3. Maintenance and product design
4. Reduction of rejection/rework
5. Automation of Operation
Factor 10: Priorities for developing competencies
1. New product development

2. Training and Development of employees
3. Management of quality
4. Use of information to optimize decisions
5. Use of customer to define quality standards
6. Introduction of new technology
65
Factor 11: Priorities for future investments
1. Marketing Activities
2. Research & Development
3. Human Resource Development
4. Automation of process
5. Information Technology Applications
3.6 Tools & Techniques:
3.6.1 Likert Scaling:
A Likert scale is a psychometric scale commonly used in questionnaires. It is the

most widely used scale in survey research. With the help of likert scale,
respondents specify their level of agreement to a particular statement. It is used to
measure respondents' attitudes by asking the extent to which they agree or disagree
to a particular question or statement. We have used five point Likert scale as
Strongly Agree, Agree, Neutral, Disagree, Strongly Disagree.
3.6.2 Reliability and Validity:

Sekaran (2003)1 believes that the reliability of a questionnaire depends on how
well it is able to consistently measure that which it is supposed to measure. In this
respect, consistency relates to the extent to which different items are able to
measure a particular concept and form a coherent set. Cronbach's coefficient alpha
is a popular reliability test used for the purposes of establishing the internal
consistency of a questionnaire consisting of a multi-item measurement scale.
Cronbach's coefficient alpha reflects how well the items in a set are positively
correlated to one another. The closer Cronbach's alpha is to 1, the higher the
internal consistency reliability". Furthermore, Siegal (1986)2 proposes that a
coefficient of 0.8 or greater is normally indicative of a reliable measuring
instrument.
1
Sekaran, U. (2003). Research Methods for Business: Fourth edition. USA: John Wiley.
2
Siegal, L.D. (1986). In, Flynn, L.R.; Goldsmith, R.E. & Eastman, J. K. (1996). „Opinion
Leaders and Opinion Seekers: Two New Measurement Scales‟. Journal of the Academy of
Marketing Science, Vol. 24, No. 2, P. 137-147.
66
Hair et al. (1998)3 suggests that that acceptable level of reliability index should be
maintained at a minimum of 0.5 in order to satisfy for the early stages of research;
and over 0.7 is considered to be a good level. Validity is concerned with the
soundness of the inferences based on the scores – that is, whether the scores
measure what they are supposed to measure, but also not measure what they are
not supposed to measure (Kline, 2005)4.
With the help of ALPHA model in SPSS, Reliability is estimated to be 0.683 for
83 items of scale.
3.6.3 Percentage:
Percentage is a number or ration expressed as a fraction of 100. It is denoted using

percent sign “%”.
3.6.4 Mean:
Arithmetic mean (or simply the mean) of a list of numbers is the sum of the entire
list divided by the number of items in the list. If the list is a statistical population,
then the mean of that population is called a population mean (µ). If the list is a
statistical sample, we call the resulting statistic a sample mean ( ). In practice, the
difference between µ and is that µ is typically unobservable because one
observes only a sample rather than the whole population, and if the sample is
drawn randomly, then one may treat , but not µ, as a random variable, attributing
a probability distribution to it (the sampling distribution of the mean). Both are
computed in the same way:
3
Hair, E. J., Anderson, E. R., Tatham, L. R., & Black, C. W. (1998). Multivariate data analysis
(Fifth ed.). New Jersey: Prentice Hall International.
4
Kline, R.B. (2005). Principles and Practice of Structural Equation Modeling (2nd edition).
The Guilford Press.
67
3.6.5 Standard Deviation:
Standard deviation is a measure of the variability or dispersion of a population, a

data set, or a probability distribution. A low standard deviation indicates that the
data points tend to be very close to the same value (the mean), while high standard
deviation indicates that the data are “spread out” over a large range of values. The
standard deviation of a discrete random variable is the root-mean-square (RMS)
deviation of its values from the mean.
If the random variable X takes on N values (which are real numbers)

with equal probability, then its standard deviation σ can be calculated as follows:
1. Find the mean, , of the values.

2. For each value xi calculate its deviation ( ) from the mean.
3. Calculate the squares of these deviations.
4. Find the mean of the squared deviations. This quantity is the variance σ2.
3.6.6 Correlation Analysis:
The correlation coefficient r, known as Karl Pearson's correlation coefficient, is a

statistical technique used to measure the "linear association between two intervals
or ratio scaled variables”. The magnitude of r gives an indication of the strength
and direction of the relationship that exists between two variables. Pearson r value
can only assume values between -1 and +1. A value of +1 indicates a perfect
positive linear relationship, reflecting the fact that the higher the score on X, the
higher the score on Y and vice versa. Conversely, a negative value of Pearson r
indicates that low scores on X go with high scores on Y. However, if the value of r
is zero, then no linear relationship will exist between X and Y.
68
3.6.7 Regression Analysis:
In statistics, regression analysis refers to techniques for the modeling and analysis
of numerical data consisting of values of a dependent variable (also called a
response variable) and of one or more independent variables (also known as
explanatory variables or predictors). The dependent variable in the regression
equation is modelled as a function of the independent variables, corresponding
parameters (constants), and an error term. The error term is treated as a random
variable and represents unexplained variation in the dependent variable.
Parameters are estimated to give a “best fit” of the data. Regression can be used
for prediction (including forecasting of time-series data), inference, and hypothesis
testing, and modeling of causal relationships. For example, in simple linear
regression for modeling N data points there is one independent variable: xi, and
two parameters, β0 and β1:
Straight line: Yi = β0 + β1 Xi + Ui, i=1,......N
In multiple linear regressions, there are several independent variables or functions

of independent variables. For example, adding a term in Xi2 to the preceding
regression gives: Parabola: Yi = β0 + β1 Xi + β2 Xi2 Ui, i=1,......N
This is still linear regression; although the expression on the right hand side is
quadratic in the independent variable xi, it is linear in the parameters β0, β1 and β2.
In both cases, Ui is an error term and the subscript i indexes a particular
observation.
In the case of simple regression, the formulas for the least squares estimates are
Where the mean (average) of the x is values and is the mean of the y values.
The standard errors of the parameter estimates are given by
69
Under the further assumption that the population error term is normally distributed,
the researcher can use these estimated standard errors to create confidence
intervals and conduct hypothesis tests about the population parameters.
The estimation of regression model has been done through SPSS version 20. In our
study, for finding the impact of product, price, promotion, distribution and
competitive strategy on sales growth and market share of small and large FMCG
manufacturing firms, we have first standardized the variable using Z score and
then regression has been performed.
3.7 Model Specification:
The model specified is used for both small and large firms separately. Analysis has
been done separately.
1. To study the impact of variables of Product Strategy which are affecting

sales growth and market share in the selected FMCG manufacturing firms,
we have used two multiple regression model. The model is as follows:
Model 1: Y1 = β0 + β1X1+ β2X2+ .....................+ β6X6+Ut
Y1 = Sales growth of FMCG manufacturing firms
Y2 = Market share of FMCG manufacturing firms
X1 = No. of product lines
X2 = No. of sizes in which product is offered
X3 = No. of varieties in which product is offered
X4 = Reasons for making changes in the product
X5 = Product replacement policy
X6 = Nature of the product
70
2. To study the impact of variables of Pricing Strategy which are affecting
sales growth and market share in the selected FMCG manufacturing firms
of Malwa region, we have used two multiple regression equation. The
model is as follows:
Y2 = Market Share of FMCG manufacturing firms
X1 = Bases for setting prices
X2 = Pricing method
X3 = Price offered to different customer segments
X4 = Price Differentiation on geographical basis
3. To study the impact of variables of Promotion strategy which are affecting

sales growth and market share in the selected FMCG manufacturing firms
of Malwa region, we have used two multiple regression equation. The
model is as follows:
X1 = Average percentage expenditure of price of the product on
promotional activities
X2 = Promotional methods
X3 = Media Adopted
X4 = Sales Promotion Methods
X5 = Trade Promotion Methods
4. To study the impact of distribution strategy on sales growth and market
share in the selected FMCG manufacturing firms of Malwa region, we have
used two simple regression equations. The model is as follows:
Model 7: Y1 = β0 + β1X1+ Ut
71
Y1 = Sales Growth of FMCG Manufacturing Firms
Y2 = Market Share of FMCG manufacturing Firms
X1= Distribution Strategy
5. To study the impact of competitive strategy on sales growth and market

share in the selected FMCG manufacturing firms of Malwa region, we have
used two simple regression equation. The model is as follows:
Model 10: Y2 = β0 + β1X1+ Ut
Y1 = Sales Growth of FMCG manufacturing firms
X1= Competitive Strategy
In the above ten regression models β0 s are intercept (constants) of the regression
equations and β1 to β6 are coefficients of independent variables. The positive value
of coefficient shows positive impact and negative coefficient shows negative
impact on dependent variables. If the calculated t’ value is greater than table t’
value, then the null hypothesis is rejected otherwise accepted.
3.8 Hypothesis Testing:
Inferential statistical techniques are used by researchers to explain the relationship

that exists between different variables or between two or more groups. Researchers
also like to draw conclusions for a larger population from the results obtained by
studying the sample group. Statistical tests form an important component of
inferential statistics and these are different for different types of data. Parametric
tests are appropriate when dealing with data that is interval or ratio-scaled. In
addition, the sample size needs to be large and the population from which the
sample is drawn should have a normal or bell-shaped distribution. Parametric tests
have the advantages of being able to provide more accurate results, and are also
able to clearly describe the relationships between different variables in the
72
population. These tests are not applicable to nominal or rank-order data, and are
also more complex to work with than non-parametric tests. For the purposes of
this study, a combination of both parametric and non-parametric statistical tests
was utilized. For testing the hypothesis, the following tools were used:
3.8.1 Chi-square Test:
Chi-square is a statistical test commonly used to compare observed data with data
we would expect to obtain according to a specific hypothesis. It is used to
determine whether there is a significant difference between the expected
frequencies and the observed frequencies in one or more categories. Pearson's chi-
square is used to assess two types of comparison: tests of goodness of fit and tests
of independence. A test of goodness of fit establishes whether or not an observed
frequency distribution differs from a theoretical distribution. A test of
independence assesses whether paired observations on two variables, expressed in
a contingency table, are independent of each other. A second important part of
determining the test statistic is to define the degrees of freedom of the test: this is
essentially the number of observed frequencies adjusted for the effect of using
some of those observations to define the "theoretical frequencies".
The value of the test-statistic is
N
(Oi - Ei)2
χ2 = ∑
Ei
i=1
Where
Χ2 = Pearson's cumulative test statistic, which asymptotically approaches a
χ2 distribution.
Oi = an observed frequency;
Ei = an expected (theoretical) frequency, asserted by the null hypothesis;
n = the number of cells in the table.
The chi-square statistic can then be used to calculate a p-value by comparing the
value of the statistic to a chi-squared distribution. The number of degrees of
73
freedom is equal to the number of cells n, minus the reduction in degrees of
freedom, p.
3.8.2 T-test:
The t-test is a parametric hypothesis test that is used when evaluating a hypothesis
with a small sample size and an unknown population standard deviation. It can be
used to determine if two sets of data are significantly different from each other,
and is most commonly applied when the test statistic would follow a normal
distribution and the samples come from populations with equal variances. The
absolute value that is obtained for the t-test is an indication of the magnitude and
difference of the respective means. Furthermore, if a value of zero is obtained for
the t-test, this is an indication that the means are identical. In this study, the t-test is
used to establish whether a significant difference exists in small and large FMCG
manufacturing firms.
3.8.3 ANOVA:
Analysis of variance (ANOVA) is a collection of statistical models used to analyze

the differences between group means and their associated procedures such as
variation among and between groups. ANOVA provides a statistical test of
whether or not the means of several groups are equal, and therefore generalizes
the t-test to more than two groups. ANOVA is a bivariate statistical test which is
commonly referred to as 'one way’, since there is only one independent variable.
Using the ANOVA technique allows researchers to determine if different groups
within a sample vary with regard to the independent variable being investigated.
However, if this variance within the groups is compared with the variance of the
groups' means around the grand mean, it is then possible to establish if the means
are significantly different.
For the purposes of our discussions the terms "firm,", "business,”,

“organization” and "enterprise" are used interchangeably.
74
3.9 Conclusion:
Research Methodology is the back bone of research work. We have ascertained

various tools, techniques, models and conceptual framework in this chapter. With
all these efforts we have comprehended this research work. We have collected
primary and secondary data. With the help of SPSS we have analyzed these data.
The results were critically evaluated and described logically in this thesis. All the
objectives and hypothesis are studied, analyzed and tested in the following
chapters.
*****
75
CHAPTER 4
FUNCTIONING OF FMCG
MANUFACTURING FIRMS IN
MALWA REGION
4.1 Introduction
4.2 Profile of Small and Large FMCG Manufacturing Firms
4.2.1 Years of establishment
4.2.2 Area of Operation
4.2.3 Type of Business Ownership
4.2.4 Control on firms
4.3 Opportunity Threat Profile
4.3.1 Opportunity for FMCG Sector
4.3.2 Opportunity for Respondent Firms
4.3.3 Threats for FMCG Sector
4.3.4 Threats for Respondent Firms
4.4 Competitive Strength as perceived by respondent firms
4.5 Conclusion
76
CHAPTER 4: FUNCTIONING OF FMCG MANUFACTURING
FIRMS IN MALWA REGION
4.1 Introduction:
In this chapter, an attempt has been made to discuss the functioning of FMCG
manufacturing firms of Malwa region of Madhya Pradesh. Previous researches
has illustrated that inadequate credit flow from banks and financial institutions,
inadequate infrastructure facilities, low quality standards of products, use of
technology, plant and machinery and equipments and inefficient management
techniques are inhibiting the small scale sector. Availability of raw material at
competitive prices appears to be the greatest difficulty for small sector. They also
suffer from inadequate work space, power, lighting and ventilation, absence of
sanitary and safety measures etc. Marketing too is identified as one of the major
stumbling blocks for small scale industries because of lack of standardization,
poor designing, lack of quality control, lack of precision, poor bargaining power.
But on the other hand it is also found that small firms are more flexible and less
bureaucratic and are able to react quickly and efficiently to both market and
technological changes.
The study is an attempt to find out how small and large firms rank the relative
importance of each factor and do these differ significantly among them?
4.2 Profile of the FMCG Manufacturing Firms:
For the study, data have been collected from 145 FMCG manufacturing firms of
Malwa region. These selected firms comprised of 111 small firms and 34 medium
and large firms. The selected respondents were Proprietors, Marketing Managers
and equivalent levels. Data were collected with the help of an interview schedule
and accordingly analyzed as below:
77
4.2.1 Years of establishment of respondent firms:
firms
The firms are divided in to four categories on the basis of years of establishment.
The categories are less than 10 years, 11-20
11 years, 21-30
30 years and more than 30
years.
Table No- 4.1 Years of establishment of respondent firms

Years of Establishment Small Firms (%) Large Firms (%)
Less Than 10 Years 20.7 11.8
11-20 Years 36.0 32.4
21-30 Years 21.6 14.7
More Than 30 Years 21.6 41.2
Source: Ass per data collected by Researcher
Figure No- 4.1 Years of establishment of respondent firms
45
40 41.2
36
35
32.4
30
25
20.7
21.6
20 21.6
15 11.8 14.7
10
Less Than 10
Years 11-20 Years
21-30 Years
More Than 30
Years
Small Firms (%) Large Firms (%)
78
It is clear from the above Table No. 4.1 that 36 per cent of small FMCG
manufacturing firms have been established for around 11-20 years, around 22 per
cent of small firms are established for more than 30 years and equal per cent (22)
are established for about 21-30 years. Around 21 per cent firms are established for
about less than 10 years. When large FMCG manufacturing firms are considered,
about 41 per cent of large firms are established for more than 30 years, about 32
per cent are established for 11-20 years and around 12 per cent of large firms are
established for less than 10 years. Maximum number of small and large firms is
established for more than 10 years.
H01: There is no significant difference between small and large FMCG

manufacturing firms with respect to years of establishment
Table No- 4.2 Chi Square Test for comparing small and large firms with
respect to years of establishment
Value df Asymp. Sig. (2-
sided)
Pearson Chi-Square 5.642a 3 0.130

a. 0 cells have expected count less than 5. The minimum expected count is 6.33.
As evidenced from Table no. 4.2, the p value is found to be greater than 0.05,
hence the hypothesis is accepted at 5% level of significance, which implies that
there is no significant difference between small and large FMCG
manufacturing firms with respect to its years of establishment.
4.2.2 Area of Operation /Activity Area of respondent firms

The firms are divided in to four categories on the basis of their business operation.
The categories are regional, state level, national level, and international level.
Table No- 4.3 Area of operation of respondent firms
Area of Operation Small Firms (%) Large Firms (%)
Regional 18.0 0
State 33.3 11.8
National 27.0 32.4
International 21.6 55.9
Source: As per data collected by Researcher
79
Figure No- 4.2 Area of operation of respondent firms
Area of Operation
60
50
40
Small Firms (%)

30
Large Firms (%)
20
10
0
Regional State National International
Table no. 4.3 shows that maximum percentage (33.3%) of small firms are
operating at state level followed by 27 per cent at national level. 18 per cent of
small firms are operating at regional level and around 22 per cent of small firms
are operational at international level. National distribution has found to be very
high for small firms. The table indicates that maximum 55.9 per cent of large
firms are operating at international level followed by 32.4 per cent at national
nat
level. Study reported that no single large firm has limited itself to regional level.
Very few (11.8 %) large firms are operating at state level.

manufacturing firms with respect to area of operation.
80
respect to area of operation

sided)
a. 1 cells (12.5%) have expected count less than 5. The minimum expected count
is 4.69.
From the Table no. 4.4, the study found that the p value is less than 0.01, it
indicates that there is a significant difference between small and large FMCG
manufacturing firms with respect to its area of operation (p<0.01). The
hypothesis is rejected. Large firms are operational at broader geographical region
as compared to small firms.
4.2.3 Type of Business Ownership of respondent firms
Firms are divided into five categories with respect to its ownership type. They are
privately held firms, Public Limited Companies, family owned companies,
partnership firms and sole proprietorship firms.
Table No-4.5 Type of Business Ownership of respondent firms
Type of Business Small Firms (%) Large Firms (%)
Private 33.3 32.4
Public 6.3 55.9
Family Owned 11.7 11.8
Partnership 0.9 0
Sole Proprietor 47.7 0

Source As per data collected by Researcher
81
Figure No-4.3 Business Types of respondent firms
60
50
40
30 Small Firms (%)

Large Firms (%)
20
10
0
Private Public Family Partnership Sole
Owned Proprietor
As it is evidenced from table no. 4.5,

4. around 48 per cent of small FMCG
manufacturing firms are sole proprietary firms followed by around 33 per cent
privately owned firms. 11.7 per cent are family owned firms and only about 1
per cent of small firms are partnership firms. It is reported that majority of
large FMCG manufacturing firms, around 56 percent are publicly owned,
followed by 32.4 per cent privately owned and only 11.8 per cent to be family
owned. No single large firm is found to be a partnership firm or a sole
proprietary firm.
82
manufacturing firms with respect to type of business ownership.
respect to type of business ownership.

sided)
a
Pearson Chi-Square 54.292 4 0.000
a. 2 cells (20.0%) have expected count less than 5. The minimum expected count
is 1.88.
From the above table no. 4.6, it is clear p value is less than 0.01, hence the
hypothesis is rejected. It implies that there is a significant difference between
small and large FMCG manufacturing firms with respect to the type of business
ownership. Maximum number of small FMCG manufacturing firms,
approximately 48 per cent, is sole proprietary firms while maximum large FMCG
manufacturing firms, around 60 per cent, are public limited firms.
4.2.4 Control on the firm
In the literature it was found that small firms usually work as component
manufacturers for large firms. Respondents were asked about whether their firm is
subsidiary of any other firm and the responses were recorded as Yes/No.
Table 4.7 Control on respondent firms
Subsidiary Small Firms (%) Large Firms (%)

Yes 33.3 44.1
No 66.7 55.9
It is observed from table no. 4.7 that around 33 per cent of small firms reported
that they are a subsidiary firm and 67 per cent reported that they are not a
subsidiary firm. Out of large firms, around 44 per cent reported that they are a
subsidiary firm and about 60 per cent reported that they are not a subsidiary firm.
83
Figure 4.4 Control on respondent firms
70
60
50
40
Yes
30
No
20
10
Small Firms (%)

Large Firms (%)
4.3 Opportunity-Threat
Threat Profile of Respondent Firms
One of the major objectives of the study is to explore opportunities and threats
faced by FMCG manufacturing firms of Malwa region and to identify different
sources of competitive strength as perceived by them. The study also attempts to
explore the resource capability profile of respondent firms. In general terms, the
environment consists of all those factors which have a bearing on the business. It
consists of internal
nal factors and external factors. Internal factors are within the
control of organization whereas external forces are beyond the control of the
organization. Although business environment consist of many dimensions but
present study focus on opportunity and
an threat elements of external environment.
84
4.3.1 Opportunities for FMCG sector:
Low Category Penetration at Present: FMCG sector is ruled by MNCs, large

domestic companies and a large number of small and regional FMCG players. But
despite such rapid growth, the penetration of FMCG products is still very low.
The per capita consumption is less than a kilo in case of snacks. In case of
cosmetics, while India is the 13th largest market in the world, the per capita spend
is low at less than $4 in India. Penetration of many product categories is still low
thus offering scope for high growth in the future.
Rising Income Levels: There is rise in number of double income families as

number of working women has increased. The improved purchasing power
because of rising income levels has accelerated the motivation for buying
premium products. Analysts have observed uptrend in packaged food products,
cosmetics and beauty products.
Large Domestic Market: The huge Indian population offers a large domestic
market for FMCG products as these are the necessities. Around 60 percent
population is in the age group of 15-44 years. This young population is easily
attracted towards ‘high-end’ products.
Modern Retail: Modern retail provides a great opportunity for different product
categories of FMCG, including greater penetration, wider product range, the
ability to display the range, direct interaction with the consumer and with the
product, the ability to run specific promotions for specific regions etc. As per
Technopak estimates the penetration of FMCG in Organized retail will
consistently grow from current 15 % to 25% by 2018. The value of total sales
would increase in both traditional and modern sales, due to growing affluence of
consumers and an increasing shift towards packaged and branded goods.
Goods & Service Tax (GST) Implementation: A GST would provide simplified
uniform tax rates across all geographic boundaries of India and thus would
eliminate the opportunity for arbitration as well as provide goods at a uniform rate
85
everywhere in India. Also single-point taxation would create greater efficiency
and speed of operation within the system.
4.3.2 Opportunities for respondent firms
As far as opportunities for various FMCG manufacturing firms of Malwa Region

is concerned, following table shows the level of agreement of small and large
FMCG manufacturing firms to various identified opportunities of FMCG sector.
For this study, six areas of opportunities were identified. These are the
opportunities identified for FMCG sector in general and taken from the previous
SWOT analysis of FMCG sector. Respondents were asked to indicate the degree
to which they find these elements as opportunity for their organization on Likert
scale of 1-5 (1 –strongly disagree, 5 – strongly agree). The results are presented in
Table No. 4.8
Table No-4.8 Opportunities for respondent firms
Opportunities Small Firms Large Firms
Mean S.D. Mean S.D.
Low Category Penetration at present is an 2.49 0.830 3.50 0.749
opportunity
Modern Retail is an opportunity 3.05 1.166 3.85 0.784
Untapped rural Market is an opportunity 3.68 0.674 2.35 1.125
Rising Income levels is an opportunity 2.01 0.939 1.82 0.869
Large Domestic Market is an opportunity 3.71 0.888 3.85 0.958
Export Potential is an opportunity 3.63 1.061 3.91 1.240
Overall Mean 3.09 - 3.21 -
Source: As Computed By Researcher
86
Figure No-4.5 Opportunities for small and large respondent firms
The Table No. 4.8 indicates that “large domestic market” has been identified as an
area of high opportunity for small FMCG manufacturing firms with a mean score
of 3.71 followed by “untapped rural market” with the mean score of 3.68 and
“export potential” with a mean score of 3.63. The least mean score of 2.01 is
recorded for “rising income levels” which means that rising income levels does
not present a high opportunity for small FMCG manufacturing firms of Malwa
region. Similarly for large FMCG manufacturing firms of Malwa region, “export
potential” is identified as the major opportunity with the mean score of 3.91
followed by “large domestic market” and “modern retail” with the mean score of
3.85. Rising income levels does not present high opportunity to even large firms
with a mean score of 1.82. From figure no. 4.5, it can be seen that “large domestic
market” has been identified as area of high opportunity by both small and large
FMCG manufacturing firms of Malwa region. In remaining cases, we can say that
the environment presents different opportunities for small and large firms.
87
H04: There is no significant difference between small and large firms with
respect to overall opportunities presented to them.
Table No. 4.9 T Test for comparing small and large FMCG manufacturing
firms with respect to overall opportunities
t df Sig. (2-tailed)
overall opportunity -1.603 143 0.111
From the above table no. 4.9, it is evidenced that p value is greater than 0.05,
therefore we accept the null hypothesis. There is no significant difference
between small and large FMCG manufacturing firms with respect to overall
opportunities presented to them. It can be said that environment present equal
opportunities to both small and large FMCG manufacturing firms of Malwa
region.
Table No. 4.10 T Test for comparing small and large FMCG manufacturing
firms with respect to various opportunities
Opportunities t df Sig. (2-

tailed)
Low Category Penetration at present is an opportunity. -6.370 143 0.000
Modern Retail is an opportunity. -3.739 143 0.000
Untapped rural market is an opportunity. 8.483 143 0.000
Rising income levels is an opportunity. 1.025 143 0.307
Large domestic market is an opportunity. -0.796 143 0.427
Export potential is an opportunity. -1.298 143 0.196
The above table no. 4.10 shows that the p values for low category penetration at
present, modern retail and untapped rural market is less than 0.01, hence it
indicates that there is a significant difference between small and large FMCG
manufacturing firms with respect to the low category penetration at present,
modern retail and untapped rural market as an opportunity as p<0.01. Modern
retail presents high opportunity to large FMCG manufacturing firms as they can
88
afford the slotting fee, high retail margin to put their products on the shelf because
of their strong financial resources but small firms have financial limitations and
hence these firms cannot afford slotting fee and high retail margin. In the presence
of established and successful brands, it is difficult for small firms to seize space
from competing products. Since small firms operate primarily in regional or
limited geographic scope, they are more close to untapped rural market and hence
it presents opportunity for small firms as well.
As shown in the above table, the result shows that there is no significant
difference between small and large FMCG manufacturing firms with respect to
the “rising income levels”, “large domestic market” and “export potential” as
an opportunity. Since p>0.05, we accept the null hypothesis. Products
manufactured by FMCG sector are usually frequently purchased and are low
priced hence rising income levels may not be a big opportunity for small and large
firms. The goods produced by FMCG sector are basically necessities. These are
typically non-durable products that are consumed over a short period of time after
which they would need to be replaced. And hence large domestic market
definitely provides high opportunity to small as well as large firms particularly in
this sector. Large firms are equipped with all type of resources; hence export
potential is definitely an area of high opportunity for these firms. And with
globalization, small firms too are ready and are aiming for global markets.
4.3.3 Threats faced by FMCG Sector:
Complicated Tax Structure prevalent in India, lack of uniformity in taxes,

changing tax policies, infrastructural bottlenecks in terms of power and
transportation and counterfeit products, pressure on margins, private labels are
some of the issues being faced by FMCG sector. A Technopak analysis
undertaken across product categories revealed that private labels could constitute
as much as one fourth of all sales in the FMCG category and private label FMCG
goods will constitute a formidable threat to add to the already fierce competition
in the FMCG category. Regulatory structures, bureaucratic delays, cumbersome
and lengthy export procedures, fluctuations in commodity prices, petroleum price,
89
make it difficult to finalize the price of the final product. The petroleum price
fluctuation also impacts the cost of supply of materials. As a result, the entire
supply chain dynamics need to be constantly planned afresh with the changing
prices. Removal of import restrictions resulting in replacing of domestic brands
and slow down in rural demand are some of the threats being faced by Indian
FMCG sector.
4.3.4 Threats for respondent firms

For this study, five threats were identified. These are taken from Porter’s Five
Forces Model.
Threat of new entrants: The nature of the products and the technology for the
production process gives rise to economies of scale in any sector. Economies of
scale provide a substantial barrier for new entrants, as not all companies will be
able to obtain economies of scale in a given market to a degree where they are
effectively competing. Also in FMCG sector, there are few or no patents and little
proprietary knowledge to consider when entering the market. So for new firms
entering in FMCG sector, the obstacles are less. Rivalry among existing
competitors: Due to the inherent nature of FMCG products, the competition in
the industry as a whole is very high in mature markets and will gradually develop
in unmatured markets also. Bargaining power of suppliers: Since so many and
completely different goods and materials goes into producing most FMCG
products, it is generally hard for suppliers to obtain any significant bargaining
power over most companies in the industry. Bargaining power of buyers: Given
the nature of the goods produced by FMCG firms, the customer base represents
most households and persons giving relatively low bargaining power to the final
consumer. But as customers have easy access to any given FMCG, gives the
customers some degree of power. Threat of substitute products: To a large
extent, the goods produced by FMCG sector are interchangeable, not from outside
goods but from the industry itself, thus there is a threat of substitution.
90
Figure No-4.6 Porter’s Five Forces Model
Source: Dinodia Capital, 2012.
Respondents were asked to indicate the degree to which the above elements are of
concern for their organization on Likert scale of 1-5 (1 – strongly disagree, 5 –
strongly agree). The results of this analysis for threats being faced by small and
large FMCG manufacturing firms are presented in Table no. 4.11.
91
Table No. 4.11 Threats for respondent firms
Threats Small Firms Large Firms
Mean S.D. Mean S.D.
There is a significant threat that new firms will 4.14 0.707 3.26 1.214
enter the market.
There is a significant threat that substitute 2.11 1.123 2.53 1.419
product/technology will enter market.
There is a significant threat that number of rivals 3.79 1.237 3.12 1.200
will increase in the market.
The bargaining power of suppliers to the 1.80 0.672 2.15 1.048
industry is strong.
The bargaining power of buyers of the industry 2.81 1.164 2.62 1.015
is strong.
Figure 4.7 Threats for respondent firms
As evidenced from table no. 4.11, major threat being faced by small FMCG
manufacturing firms is the “threat of new entrants in the market” with a mean
score of 4.14 followed by “increase in the number of rivals” with mean score of
92
3.79. The least mean score of 1.80 was observed for “bargaining power of
suppliers is strong in the industry”.
Similarly, if we look at the major threat being faced by large FMCG

manufacturing firms of Malwa region, again “the threat of new entrants in the
market” is a major threat for large firms also with the mean score of 3.26 followed
by “increase in the number of rivals in the market” with mean score of 3.12. The
least mean score was observed for “bargaining power of suppliers is strong in the
industry” which is 2.15. Thus we can say that the FMCG manufacturing firms of
Malwa region, both small and large, face similar threats with varying intensities.
respect to various threats presented to them.
Table No. 4.12 T Test for comparing small and large firms with respect to
overall threats
t df Sig. (2-tailed)
overall threats 2.496 143 0.014
From the above table no. 4.12, since p value is less than 0.05, we reject the
hypothesis. “There is a significant difference between small and large FMCG
manufacturing firms of Malwa region with respect to overall threats presented
to them.” It can be said that environment presents different threats to small and
large FMCG manufacturing firms of Malwa region. To study precisely, the exact
difference, we will be comparing on the basis of various threats considered in the
study.
Table No. 4.13 T Test for comparing small and large firms with respect to
various threats
Critical Threats o Future Business Sig.

t df (2-tailed)
93
There is a significant threat that new firms will enter the
5.217 143 0.000
market
There is a significant threat that substitute products or

-1.794 143 0.075
technologies will enter the market
There is a significant threat that number of rivals will
2.804 143 0.006
increase in the market
The bargaining power of suppliers to the industry is

-2.273 143 0.025
strong
The bargaining power of buyers of the industry is strong 0.871 143 0.385
Source: As per data collected by researcher
It is evidenced from the above table no. 4.13 that the p value for “new firms will
enter the market”, and “number of rivals will increase in the market” is less than
0.01, it shows that there is a significant difference between small and large
FMCG manufacturing firms with respect to the threat that “new firms will
enter the market”, “number of rivals will increase in the market”. It is also
found that the p value for “the threat that bargaining power of suppliers to the
industry is strong” is less than 0.05; it shows that there is a significant difference
between small and large firms with respect to the strong bargaining power of
suppliers to the industry
FMCG sector is characterized by enormous sales with relatively low entry barriers
which results in stiff competition and often low margins. Hence if there are new
entrants or number of rivals increases, it will definitely affect all firms whether
small or large. But because of inherent nature of small firms, the threat is more for
small firms as compared to large ones. Small firms have commonly been
categorized to be component manufacturers/supplier for larger companies. Hence
the threat of strong bargaining power of suppliers to the industry is more for large
firms as compared to small firms.
94
It is also reported from the table that there is no significant difference between
small and large FMCG manufacturing firms with respect to the threat that
“substitute products or technologies will enter the market” and “the bargaining
power of buyers of the industry is strong”. FMCG sector produces a large number
of products that are used by consumers on a daily basis. It results in a very high
number of products being produced and sold by FMCG sector at all times. The
important task is of grabbing the market share in this competition.
4.4 Competitive Strength As Perceived by Respondent Firms
The performance of all firms- may it be small or large, is affected by the business
environment in which they operate. The present business environment is very
dynamic, turbulent and complex. Technological advancements and demanding
customers are contributing for the increased level of competition. To survive and
sustain in such competition, firms need to create and leverage new forms of
competitive advantage. Economic reforms in the post liberalization era have led to
severe changes in the approach of Indian SMEs and large organizations for
developing various competencies to get competitive advantage. (Dangayach and
Deshmukh, 2001) had identified that new competition is in terms of reduced cost,
improved quality, high performing products, wider range of products with better
service, and timely delivery. And hence those firms who are able to build new
strategic assets faster and cheaper than others can benefit from long-term
competitive advantages.
For this study, we have identified seven resources as a source of competitive

strength (Sujarittanonta 2008)1 for small and large firms. Respondents were asked
to indicate the level of agreement on the Likert Scale of five (1- strongly disagree,
5-strongly agree). The results are shown in table no. 4.13.
Table No-4.14 Competitive Strength as perceived by respondent firms
1
Sujarittanonta. (2008). Empirically Derived Strategy Types for SMEs in Developing
Countries—A Study of Knowledge in Action. Doctoral Thesis, submitted to School of Marketing
The Australian School of Business University of New South Wales
95
Source of Competitive Strength Small Firms Large Firms
Mean S.D. Mean S.D.
Physical resources (raw materials, machinery, 2.61 0.974 4.00 0.778
production, storage, distribution) are a source of
competitive strength for our firm.
Human resources (skills, knowledge, commitment 2.45 0.932 3.44 0.860
and vision) is a source of competitive strength.
Financial resources (cash reserves, access to 2.83 1.061 4.03 0.717
finance) is a source of competitive strength for our
firm.
Legal resources (contracts with supplier/customer, 3.17 0.952 4.21 0.641
license, patent/trademarks) is a source of
Organizational resources (internal mgmt. planning 2.60 0.877 3.82 0.869
& control, accounting procedures, leadership) is a
source of competitive strength for our firm.
Knowledge resources (knowledge of market, 3.37 1.070 4.41 0.557
customer needs, awareness of competitors,
knowledge of relevant technology, traditional
designs, processes and products) is a source of
Social Networks is a source of competitive strength 3.81 0.720 4.35 0.597
for our firm.
Overall Mean for competitive strength. 2.97 - 4.03 -
96
Figure No-4.8 Competitive Strength as perceived by respondent firms
The table no. 4.14 indicates various resources being possessed and perceived as
competitive strength by small and large FMCG manufacturing firmsof Malwa
region. From the table no. 4.12, it is clear that for small firms “Social networks”
has the highest mean score of 3.81 followed by knowledge resources (3.37) and
legal resources (3.17). These resources are perceived as competitive strength to
small firms. Talking about large FMCG manufacturing firms, again knowledge
resources (4.41), social networks (4.35) and legal resources (4.21) are the
competitive strength perceived by large FMCG manufacturing firms. But if we
look at the table or the figure, it is clearly indicated that in terms of all types of
97
resources, large firms are definitely at more advantage than small firms with
higher level of agreement as compared to those of small firms with moderate or
below moderate level of agreement.
manufacturing firms with respect to physical resources as a competitive
strength.
Table No-4.15 T Test for comparing small and large FMCG Manufacturing
Firms with respect to various sources of competitive strength
T df Sig. (2-tailed)
overall strength -14.721 143 0.000
From the above table no. 4.15, since p value is less than 0.01, we reject the
hypothesis. It is found that there is a significant difference between small and
large FMCG manufacturing firms with respect to sources of competitive
strength. It can be said that small and large firms have different resources as their
competitive strength.
Table No-4.16 T Test for comparing small and large FMCG manufacturing
firms with respect to various sources of competitive strength
Sig.
Sources of Competitive Strength t df (2-tailed)
Physical resources (raw materials, machinery,

production, storage, distribution facilities) are a -7.591 143 0.000
Access to human resources (skills, knowledge,

commitment and vision of staff) is a competitive -5.521 143 0.000
strength for our firm.
Financial resources (cash reserves, access to financial

-6.174 143 0.000
support) are a competitive strength for our firm.
98
Legal resources (firm contracts with suppliers,
customers, licenses, patents, trademarks) are a -5.930 143 0.000
Organizational resources (internal mgmt. planning

and control, accounting procedures, leadership) are a -7.112 143 0.000
Knowledge resources (knowledge of market,

customer needs, awareness of competitors,
knowledge of relevant technology, traditional -5.451 143 0.000
designs, processes and products) are a competitive
strength for our firm.
Social Networks are a competitive strength for our
-3.988 143 0.000
firm.
Source: As per data collected by researcher
From the above table no. 4.16, it is clear that the p value for physical resources,
financial resources, legal resources, human resources, organizational resources,
knowledge resources and social networks is found to be less than 0.01. Therefore,
we reject the null hypothesis at 1 per cent level of significance. It implies that
there is a significant difference between small and large FMCG manufacturing
firms with respect to various resources (physical resource, financial resource,
Human resource, knowledge resource, organizational resource, legal resource
and social networks) being possessed by them as their competitive strength.
Large firms are at more advantage as compared to small firms. This is consistent
with the previous findings that availability of raw material at competitive prices to
be the greatest difficulty for small firms. It had also been found in earlier studies
that small units suffer from physical resources in terms of inadequate work space,
power, lighting and ventilation, absence of sanitary and safety measures etc. The
result obtained are consistent with the study of (Armstrong and Coyle, 1999)2
2
Armstrong, P.J. and Coyle, P.J. (1999). The relevance of enterprise resource planning to
manufacturing SMEs. Proceedings of the15th international Conference on Production
99
Korea Federation of Small Businesses, 2003, wherein access to human resources,
inadequate in-house human expertise and shortage of qualified human resources
has been considered as a critical bottleneck and main barriers to be competitive
for small businesses.
Small firms lack financial resources which are time and again identified as one of
the main barriers for small firms. Small firms do face problems in initiating
innovation and getting, implementing and protecting intellectual property rights.
The findings are also consistent with the findings of Stokes, 2002. Small firms
usually serve local or regional markets with narrow specializations. Improper
organizational structures pose constraints to small firms. Small firms have
suffered from the lack of entrepreneurial ability in internal management, planning
and control. Small firms are good at traditional product knowledge. Traditionally
small firms acted as ancillary to large firms and these firms are not much aware of
customer needs, competitors and knowledge of market. With sufficient financial
resources, large firms can make use of IT applications, ERP for decision making
and hence large firms are comparatively at better advantage then their small
counterparts. Small firms and large firms both practice customer relationship
management. Small firms are good at networking and relationship marketing.
Hence social networks are identified as source of competitive strength for both
and small firms but it is higher for large firms as compared to small firms as large
firms have a professional approach towards relationship building, feedback and
networking and these firms too act regionally when comes to networking.
4.4 Conclusion
It is found in the study that most of the large FMCG manufacturing firms of
Malwa region are operational at international level, whereas most of the small
FMCG manufacturing firms are operational at state level. The study reports that
majority of the small firms have been established for more than 10 years.
Approximately 41 per cent of large firms are established for more than 30 years.
Research, Limerick, Ireland, pp. 721-6.
100
Maximum small firms are sole proprietary firms and maximum large firms are
public limited firms. Most of the small and large firms reported that they are not a
subsidiary of any other firm. It is found in the study that “large domestic market”
is an area of high opportunity for small firms. But “rising income levels” does not
present a high opportunity for small firms. Similarly for large firms, “export
potential” is identified as the major opportunity and “rising income levels” is not
identified as a high opportunity even by large firms. Major threat being faced by
small and large FMCG manufacturing firms is the “threat of new entrants in the
market” and “increase in the number of rivals”. “Social networks” followed by
“knowledge resources” and “legal resources” are perceived as competitive
strength by small firms. Talking about large firms, again knowledge resources
followed by “social networks” and “legal resources” are the competitive strength
as perceived by large firms. In terms of all types of resources, large firms are
definitely at more advantage than small firms.
The study also found that there is a significant difference between small and large
FMCG manufacturing firms of Malwa region with respect to its area of operation
and type of business ownership. And no significant difference is found with
respect to its years of establishment. Also there is no significant difference
between small and large FMCG manufacturing firms with respect to various
opportunities being considered in the study. But study reports that there is a
significant difference between small and large FMCG manufacturing firms with
respect to various threats being considered in the study. Since there are very low
entry barriers which results in stiff competition and often low margins, the new
entrants threat and increase in rivalry firms will definitely affect all firms whether
small or large. But because of inherent nature of small firms, the threat is more for
small firms as compared to large ones. Also there is a significant difference
between small and large FMCG manufacturing firms with respect to various
sources of competitive strength. Small firms seem to be strong in intangible
resources while large firms are strong in both tangible and intangible resources.
*****
101
CHAPTER-5
MARKETING STRATEGIES OF
FMCG MANUFACTURING
FIRMS OF MALWA REGION
5.1: Introduction
5.2: Marketing Strategy
5.2.1 Product Strategies adopted by respondent firms
5.2.2: Pricing Strategies adopted by respondent firms
5.2.3: Promotional Strategies adopted by respondent firms
5.2.4 Distribution Strategy adopted by respondent firms
5.2.5 Competitive Strategies adopted by respondent firms
5.3.4: Conclusion
102
CHAPTER 5: MARKETING STRATEGIES OF FMCG
MANUFACTURING FIRMS
5.1 Introduction
Strategies are formulated to survive and sustain competition, to increase market

share, to increase profitability and revenues and to make product acceptable to the
target customers. Strategies are concerned with various aspects of the businesses
where the company should compete in. A marketing strategy is a method by which a
firm attempts to reach its target markets. Marketing strategy starts with market
research, wherein the needs and attitudes and competitors' products are assessed and
continues through into advertising, promotion, distribution, customer servicing,
packaging, sales and distribution. Marketing strategy must focus on delivering
greater value to customers and the firm at a lower cost.
The FMCG market has changed with the advent of innovative products. It has
emerged as a fast, customized and large market. Growth of the FMCG sector is
largely volume driven and oriented towards large scale market. The sector has been
dominated by multinational companies with strong distribution network and intense
rivalry among firms. The FMCG sector is one of the most active users of marketing.
Changes in the marketing environment have generated a need to reconsider the
marketing perspectives of FMCG business. To generate growth and excellence,
companies need to develop and then implement their marketing mix models in a way
that will grab and then sustain their competitive edge in the market. Thus effective
marketing is considered as an important ingredient of success.
5.2 Marketing Strategy
Marketing mix is the set of the marketing tools that the firm uses to pursue its
marketing objectives in the target market. Theories of marketing management and
strategy need to evolve and change to keep pace with changes in the marketplace and
103
in marketing practice. The marketing mix in general includes 4Ps they are Product,
Price, Place and Promotion and marketing strategy is based on these 4Ps.
5.2.1 Product Strategies adopted by Respondent Firms
A product is something offered by marketers to customers for exchange (Churchill &

Peter, 1998)1. The product provides primary value to customer. The products
manufactured by different sized units vary in terms of features and overall
performance. Product as a marketing mix variable consists of the following variables
- physical variety, quality, design, features, brand name, packaging, sizes, services
warranties and returns (Kotler, 1997: 92). Kotler & Armstrong (2006) has defined
consumer product as the product bought by the final consumer for personal
consumption. Marketers differentiate their products from those of their competitors
in such a way that consumer start believing the product.
5.2.1.1 Category of the Product:

Main segments of the FMCG sector are Household Care which includes fabric wash
(laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners,
floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents,
metal polish and furniture polish); Personal Care which includes oral care, hair care,
skin care, personal wash (soaps); cosmetics and toiletries; deodorants; perfumes;
feminine hygiene; paper products and Food and Beverages which includes health
beverages; soft drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack
food; chocolates; ice cream; tea; coffee; soft drinks; processed fruits, vegetables;
dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc.
1
Chruchill, G.A. & Peter, J.P. (1998). Marketing:Creating a value for customers. Second Edition.
NewYork:Irwin.
104
Table No. 5.1 Category of the product produced by respondent firms
Category of the Product Small Firms (%) Large Firms (%)
Foods & Beverages 82.9 94.1

Personal Care 4.5 5.9
Household Care 12.6 0
As evidenced from the table no. 5.1, maximum of 82.9 per cent of small firms are
into food and beverages followed by 12.6 percent to household care and 4.5 per cent
to personal care segment. Out of large firms, 94.1 percent belong to food and
beverages segment and 5.9 per cent of large firms belong to personal care segment.
5.2.1.2 Nature of the products offered by respondent firms:
Products manufactured by FMCG sector are offered directly to end users; to other
manufacturers such as in confectionaries or bakery products or it may be for both end
user and other manufacturer.
Table No. 5.2 Nature of the product offered by respondent firms
Nature of the product Small Firms (%) Large Firms (%)

Product for end user 54.1 38.2
Product for other manufacturer 22.5 14.7

Product for end user and other manufacturer 23.4 47.1
105
Figure No. 5.1 Nature of the product produced by respondent firms
It is clear from the table no. 5.2 that around 54 percent of small FMCG
manufacturing firms manufacture products for the end user, 23.4 percent
manufactures for both end user and other manufacturer while 22.5 per cent
manufactures only for other manufacturer. Out of large FMCG manufacturing firms,
it is reported that about 47 per cent manufactures for both end user and other
manufacturer, around 38 per cent manufactures for the end user, and only 14.7 per
cent manufactures for other manufacturers only.
106
manufacturing firms with respect to the nature of products offered.
Table No. 5.3 Chi Square Test for comparing small and large firms with respect
to the nature of products offered by respondent firms
Value df Sig. (2-sided)

Source: As computed by Researcher
From table no. 5.3, it is found that p value is less than 0.05. Hence the hypothesis is
rejected. It implies that there is a significant difference between small and large
FMCG manufacturing firms with respect to the nature of product being offered. We
can say that there is an association between the size of the firm and the nature of
product being offered.
5.2.1.3 Number of product lines firm deals in
FMCG, as we know, are non-durable products that are consumed over a short period
of time after which they would need to be replaced. It constitutes a large number of
products that are used by consumers on a daily basis. These products are bought
regularly and hence very high number of products are produced and sold by the
FMCG sector at all times. It is possible that firms may deal in single product line or
many.
Table No. 5.4 Number of product respondent firms deals in
No. of product Small Firms (%) Large Firms (%)

One 24.3 17.6
Two 18.9 32.4
More than two 56.8 50.0
107
Source: As Computed by Researcher
Figure No. 5.2 Number of product respondent firms deals in
Table no. 5.4 indicates that majority of small FMCG manufacturing firms, that is,
56.8 per cent deals in more than two products, 24.3 per cent deals in single product
and around 19 per cent deals in two products. From the large FMCG manufacturing
firms, again majority of large firms deals in more than two products, followed by
32.4 percent dealing in two products and 17.6 per cent dealing in single product.
108
manufacturing firms with respect to the number of product lines.
Table No-5.5 Chi Square Test for comparing small and large FMCG
manufacturing firms with respect to the number of product lines

It is evident from table no. 5.5 that p value is greater than 0.05, which implies that
there is no significant difference between small and large FMCG manufacturing
firms with respect to the number of product lines firm deal in. It can be said that
there is no association between size of the firm and number of products firms offer.
5.2.1.4 Number of varieties in which products are offered by respondent

firms:
FMCG sector includes products like laundry soaps and detergents, dish/utensil
cleaners, floor cleaners, air fresheners, toothpastes, shampoos, hair oil, cosmetics and
beauty products, personal wash (soaps), deodorants, perfumes, health drinks, soft
drinks, bakery products like biscuits, bread, & cakes, snack food, chocolates, ice
cream, tea, coffee, processed fruits, vegetables, dairy products, bottled water.
Consumers play a crucial role in the Indian FMCG sector as the price band of each
FMCG product is fixed depending largely on the targeted consumer class. Some
products or some variants are for urban classes for example processed foods, bakery
products, and dairy products. And some are targeted for rural consumers. These
products are highly customized and hence it becomes necessary for firms to offer
complete product range as far as possible.
109
Table No. 5.6 No. of varieties in which products are offered by firms
Variety of Products Small Firms (%) Large Firms (%)

One 9.0 2.9
Two 7.2 14.7
Three 24.3 14.7
Four 11.7 20.6
More Than Four 46.8 47.1

As per requirements 0.9 0
Source As Computed by Researcher
Figure No. 5.3 No. of variety of products respondent firms offer
110
Table no. 5.6 shows that majority of small FMCG manufacturing firms, that is, 46.8
percent offers more than four varieties of their product, 24.3 per cent offers their
products in three varieties, 11.7 per cent offer their products in four varieties. Only
0.9 per cent of small firms offer their product as per requirement. Out of large firms,
again majority of large firms, that is, around 47 per cent offer their products in more
than four varieties, 20.6 per cent offer four varieties of their products and no single
large firm is reported to offer their product as per requirement. The reason to offer
more than four varieties of products both by large and small firms is that they are
majorly dealing in more than two products.

manufacturing firms with respect to the number of varieties offered
Table No-5.7 Chi Square Test for comparing small and large firms with respect
to the number of varieties in which the product is offered

From the above table no. 5.7, it is clear that p value is greater than 0.05, which
implies that there is no significant difference between small and large FMCG
manufacturing firms with respect to the number of product varieties firm offer. We
can say that there is no association between size of the firm and the number of
varieties of products offered.
5.2.1.5 Number of sizes in which products are offered by respondent firms
Apart from just the physical appearance of the product, size of the pack is also
important. With rapid urbanization, emergence of small pack sizes and sachets is
picking up. Firms do offer their products in the most convenient and affordable ways.
111
The size of the packaging chosen will help the marketer to segment the target market
according to product usage. Kotler (2008) believes that the size of the package can
also assist the marketer with new product launches. Special trial size products can
offer consumers the opportunity to sample a new product at minimal cost and risk.
These special pack sizes can also be offered free of charge to consumers as part of an
in-store promotional campaign.
Table No. 5.8 No. of Sizes in which the product is offered by respondent firms
Wt wise Small Firms (%) Large Firms (%)

One 1.8 0
Two 10.8 5.9

Three 23.4 17.6
Four 20.7 26.5
More Than Four 42.3 50.0
As per requirements 0.9 0

Table No. 5.8 shows that around 42 per cent of small FMCG manufacturing firms are
offering their products in more than four sizes, 23.4 percent of small firms are
offering their product in three sizes. Only around 2 per cent of firms are offering their
product in only one size. It is evident from the table that around 50 percent of large
firms are offering their product in more than four sizes. 26.5 per cent of firms are
offering in four sizes. No single large FMCG manufacturing firm is offering their
product only in one size. It is also observed from the table that firms are not offering
packing sizes as per customer requirements.
112
Figure No. 5.4 No. of size of the product weight wise offered by respondent firms

manufacturing firms with respect to the number of packing sizes offered
Table No. 5.9 Chi Square Test for comparing small and large FMCG
manufacturing firms with respect to the number of packing sizes offered by
respondent firms
The above table no. 5.9 reports that there is no significant difference between small
and large FMCG manufacturing firms with respect to the number of packing sizes
firms offer. Small and large, both firms are offering their products in more than four
113
packing. It can be said that there number of packing sizes offered by firms is
immaterial of their size.
5.2.1.6 Reasons for making changes in the product by respondent firms

Product differentiation is the modification of a product to make it more attractive to
the target market. This involves differentiating it from competitors' products as well
as the firm’s own product mix (Bennett, 2002)2. An existing product can be modified
by improving its features, without altering the benefits to be gained, in order to attract
new users or to increase its usage. The changes may be minor; it may be in packaging
or advertising. Upgrading quality continuously is the best strategy to follow.
Moreover, with the different constraints the companies have it may be difficult to set
such strategy. Respondents were asked to rate the following factors on the scale of 1
to 5 where 1 stands for strongly disagree and 5 for strongly agree.
Table No. 5.10 Reasons for making changes in the product
Small Firms Large Firms Sig. (2-

t df
Mean S.D Mean S.D tailed)
We have made changes in the

product because of Market 4.05 0.882 3.68 1.093 0.277 143 0.782
Demand/Customer Need
2.47 0.989 2.41 1.209 2.011 143 0.046
product because of competitors
product because of improvement 2.25 1.040 3.50 0.896 -6.312 143 0.000
in quality
2
Bennett A (2002). Marketing. (In: NIEMAN, G. AND BENNETT, A 2002.Business management -
a value chain approach. Pretoria: Van Schaik Publishers. pp. 178).
114
Figure No. 5.5 Reasons for making changes in the product
The results from table no. 5.10 shows that small FMCG manufacturing firms have
made changes in their product “because of market demand or customer need”
evidenced with a mean score of 4.05 followed by “because of competitors” with a
mean score of 2.47. As per the large firms, maximum mean score of 3.68 is given to
“because of market demand/customer need” followed by “because of improvement in
quality” with a mean score of 3.5. Large firms have not made changes in the product
because of competitors as evidenced by a mean score of 2.41.

manufacturing firms with respect to various reasons for making product changes
115
As it is clear from the table no. 5.10, there is no significant difference between small
and large firms with respect to competitors as being the reason for making changes
in the product as p value is greater than 0.05. But it is found that there is a
significant difference between small and large firms with respect to market
demand/customer need (p<0.05) and quality improvement (p<0.01) as being the
reason for making changes in the product. Small firms are catering more to customer
need as they are in more proximity with customers as compared to large firms. Large
firms are focusing more on improving the quality of the product as they can go for
research and development, improvement in process, implement quality control
process and quality circle, TQM etc. Also by improving quality, large firms can
command higher prices.
5.2.1.7 Replacement policy of respondent firms:
Companies do offer replacement policy to their customers or channel partners. This

replacement policy serves as a medium of trade promotion and also helps in to build
a strong relationship with customers and channel partners. Firms replaces product if
they are pilfered or defective or not sold. Firms can replace either on piece to piece
basis or they usually offer value for the replaceable product in terms of percentage of
total bill.
Table No. 5.11 Replacement Policy of Respondent Firms
Replacement Policy Small Firms Large Firms

t df Sig. (2-
Mean S.D Mean S.D tailed)
Piece to piece basis 2.69 1.518 2.21 1.274 1.698 143 0.092
Percentage of total bill 3.42 1.352 3.74 1.421 -1.163 143 0.247
116
Figure No. 5.6 Replacement policy of respondent firms
From the table no 5.11, it is observed that both small FMCG manufacturing firms and
large firms adopt “percentage of total bill” as a replacement policy as represented by
a mean score of 3.42 for small firms and 3.74 for large firms. “Piece-to-piece” basis
for replacement is found to be less preferable which is evident from the mean score
of 2.69 for small firms and 2.21 for large firms.

manufacturing firms with respect to the replacement policy.
As evidenced from the table, the p value is significant at 10 per cent level of
significance. It implies that there is a significant difference between small and large
firms with respect to the piece-to-piece basis of replacement. It is observed that both
117
small and large firms do not prefer piece to piece basis of replacement but the
percentage of total bill method. But again replacement depends upon the nature and
type of the product..
5.2.2 Pricing Strategies adopted by respondent firms
A price is the amount of money, goods or services that must be sacrificed to acquire
ownership or use of a product (Churchill & Peter, 1998). Price as a marketing mix
variable consists of the following variables - list price, discounts, allowances and
payment period and credit terms (Kotler, 1997: 92). Pricing is one of the 4 P’s
outlined in the marketing mix strategy of a company. The price of products and
services often influences whether consumers will purchase them at all and, if so,
which competitive offering is selected. Value for money is particularly important and
dominant in customer choice. Availability of credit and payment could be important
facets of pricing.
The success in marketing depends on the pricing strategies adopted by the companies
because customer builds strong association between price and quality. Pricing
policies are aimed at increasing market share. If the product is overpriced buyer will
stay away but if prices are competitive it has better chance of being sold quickly.
Pricing constitutes one of the major problems of marketing management. Pricing
being integral part of the marketing generates revenue, while other three Ps are
related to cost (Shanker and Vijendranath, 1997)3.
Hence marketers need to be very careful about pricing decisions, and the products
should be offered at highly competitive prices after doing comparative market
analysis.
3
Shanker, U .P. & Vijendranath, G.(1997).Pricing Strategy as a Mean for Sustenance and Growth.
The Management Accountant. 32 (5), pp. 385-390.
118
5.2.2.1 Bases for price fixation
Prices of the product are set keeping in mind many factors such as cost of production,
profit margin, competitors’ prices, and on the basis of demand of the product or what
the market is prepared to pay. If the product is unique or differentiated, firms may set
prices on the basis of that differentiation or uniqueness. The most common are
market-based pricing, marginal pricing and the full-cost pricing, i.e. cost-plus
pricing. In market-based pricing, the price is based on the price level set by
competitors and the market. Marginal pricing is the price of a product or service
derived after covering all its procurement and manufacturing costs. Full-cost pricing
or cost-plus pricing, is a typical cost-based pricing method. This is the minimum
price for the product; a lower price should not be applied, even in the short term.
Table No. 5.12 Bases for price fixation
Small Firms Large Firms Sig.

t df (2-
Mean S.D. Mean S.D. tailed)
We set prices on the basis

of costs of producing plus a 4.25 0.899 4.21 0.729 0.274 143 0.784
fixed margin for profit
We set prices based on

what the market is prepared 1.86 1.151 2.03 1.000 -0.792 143 0.430
to pay

of uniqueness of our 2.65 1.270 3.44 0.960 -3.355 143 0.001
products.

2.95 1.135 3.06 1.278 -0.492 143 0.623
of competitors’ price
119
Figure No- 5.7 Bases for price fixation
As it is clear from the table 5.12, small FMCG manufacturing firms set prices on the
basis of “costs of producing plus a fixed margin for profit” with highest mean score
of 4.25, followed by “on the basis of competitors’ price with a mean score of 2.95.
The least mean score of 1.86 is given to “what the market is prepared to pay” by
small firms. Large firms also set prices on the basis of “costs of producing plus a
fixed margin for profit” with highest mean score of 4.21, followed by “on the basis of
uniqueness of the products” with a mean score of 3.44. The least score of 2.03 is
given to “what market is prepared to pay”. Research indicates that small firms find
conducting market research and measuring promotion efficiency difficult, while in
120
pricing, they solely rely on what are perceived to be industry norms for guidance,
irrespective of their own firms’ individual circumstances (Jovanov M. T., 2011)4

manufacturing firms with respect to various bases for setting prices
It is clear from the table no. 5.12 that there is no significant difference between
small and large firms with respect to setting prices on the basis of “costs of
producing plus a fixed profit margin”, on the basis of “what market is prepared to
pay” and on the basis of “competitors’ price”. But it can be seen from the table that
the p value is less than 0.01 for setting prices on the basis of uniqueness of the
product. It indicates that there is a significant difference between small and large
firms with respect to setting prices on the basis of uniqueness of the product. Large
firms can offer more unique products and hence the prices are set accordingly. Small
firms are not offering unique product and hence cannot charge price on its basis.
Both small and large FMCG manufacturing firms sets prices on the basis of cost plus
and not on the basis of competition.
5.2.2.2 Pricing method adopted by respondent firms
Premium pricing or skimming strategy establishes a price higher than the

competitors. It is a strategy that can be effectively used when there is something
unique about the product or when the product is first to market and the business has a
distinct competitive advantage. A penetration pricing strategy is designed to capture
market share by entering the market with a low price relative to the competition to
attract buyers. A bundle pricing is used when the firms collectively charge for their
products in a bundle. Generally, by offering a bundle of products, they can offer
4
Jovanov Marjanova T.(2011).Doctoral Dissertation (working paper): Market Orientation,
Marketing Strategy and Plan – Basic Business Steps for Successful Competitive Positioning of the
SMEs on the Market – With a Special Focus on the Confectionary Industry and Market in Republic
of Macedonia. Faculty of Economics, University “Sts. Cyril and Methodius” – Skopje, RM
121
lower price to customers, thus penetrating the market with lower price. It is generally
offered for a specific time period.
Table No. 5.13 Pricing method adopted by respondent firms

t df (2-
Mean S.D. Mean S.D. tailed)
Market Skimming method is

1.98 1.314 3.62 1.181 -6.496 143 0.000
employed for fixing the price
Market Penetration method is

4.09 1.005 4.06 0.851 0.164 143 0.870
Bundle Pricing method is

2.27 0.914 1.74 0.751 3.105 143 0.002
It is evidenced from table no. 5.13 that small firms mostly prefer market penetration
method for fixing the price as depicted by the highest mean score of 4.09, followed
by bundle pricing with a mean score of 2.27. The least preferred method is market
skimming. If we look at the table, it is clearly indicated that large firms too prefer
market penetration method for fixing the price as denoted by a mean score of 4.06,
followed by market skimming with a mean score of 3.62. The least preferred method
for fixing the prices by large firms is bundle pricing. It means that both small and
large firms are charging low price relative to competitors to attract buyers.
122
Figure No-5.8 Pricing Method adopted by respondent firms
H014: There is no significant difference between small and large firms with respect
to various methods for fixing the prices.
This is evidenced from table no. 5.13 that as p value is less than 0.01 it indicates that
there is a significant difference between small and large firms with respect to
market skimming method for fixing the price. Small firms do not prefer this method
and it is difficult for them to employ this method for fixing the price. This method is
preferred by large firms due to strong product feature, uniqueness, good quality and
123
strong financial support. They are charging higher price relative to their competitors.
It is also found that there is no significant difference between small and large firms
with respect to market penetration method for fixing the price (p>0.05). Both firms
equally prefer this method for fixing the price. The study also found that the p value
is less than 0.01 which indicates that there is a significant difference between small
and large FMCG manufacturing firms with respect to bundle pricing method for
fixing the price at 1 percent level of significance. Small firms prefer this method for
fixing the price as they can promote their other products also and this is again the
sales promotion method employed by small firms. This method is not preferred by
large firms.
5.2.2.3 Price Differentiation Strategy
Some firms follow a common pricing policy or similar prices across their area of
operation and some firms differentiate prices in between two geographical region.
We have tried to find out what pricing strategy is followed by small and large FMCG
manufacturing firms of Malwa region.

manufacturing firms with respect to the price differentiation strategy
Table No. 5.14 Basis for differentiating prices by respondent firms
Sig.
Small Firms Large Firms t df (2-
tailed)
Mean S.D. Mean S.D.
We differentiate prices in rural/urban
2.07 1.270 1.68 0.912 1.686 143 0.094
area in the district
We differentiate prices
1.63 0.587 1.71 0.871 -0.579 143 0.564
within/outside the district
We differentiate prices
2.06 1.098 2.12 1.320 -0.242 143 0.809
within/outside the state
124
Figure No-5.9 Price differentiation strategy
It is clear from the above table no. 5.14 that neither small firms and nor the large
firms are differentiating their prices geographically, rural/urban area wise or
within/outside district or within/outside state/ which is also evidenced from table no.
4.3.3.1 wherein on the basis of t test, it is found that there is no significant difference
between small and large firms with respect to the geographical basis for
differentiation as all p values are >0.05. The overall response of both small and large
firms is below moderate for such geographical differentiation of prices.
125
5.2.2.4 Prices offered by respondent firms
"One size fits all" prices can be a risky matter for customers at both ends of the
demographic scale. Some prices may be high for small customers and for some it
may be too low. Fixed prices may not be appropriate for every customer. Firms may
offer same price to their entire customer segment or they can offer different prices to
different customer segment. The study tries to find out whether small and large
FMCG manufacturing firms of Malwa region offers same price to entire customer
segment or do they differentiate it?
Table No. 5.15 Prices offered by respondent firms
Sig.
Small Firms Large Firms t df
(2-tailed)
Mean S.D. Mean S.D.
We offer single price to all
3.96 0.785 3.65 1.433 1.660 143 0.099
our customers
We offer two or more

1.71 0.878 2.03 1.141 -1.715 143 0.089
prices to our customers

manufacturing firms with respect to the prices offered.
It is clear from table no. 5.15 that both small and large FMCG manufacturing firms
are offering single price to their entire customer which is evidenced from a mean
score of 3.96 given by small firms and 3.65 given by large firms. It is observed from
the table that p value is significant at 10 per cent level of significance; as such there
is a significant difference between small and large firms in this regard.
126
Figure No-5.10 Prices offered by respondent firms
5.2.3 Promotional Strategies adopted by respondent firms

A successful product or service means nothing unless the benefit of such a service
can be communicated clearly to the target market. Promotion is one of the elements
of marketing mix. Normally, the company makes its first contact with customer
through its promotional efforts. Promotion is one of the variables through which
information regarding products or services is being communicated to customers to
change their attitude and behaviour. Promotion is the personal and impersonal means
used to inform, persuade, and remind customers about products and services
(Churchill and Peter, 1998: 612). Methods of promotion include advertising, personal
selling, publicity, sales promotion and packaging. The company communicates with
127
its middlemen, consumers and various publics. So, the promotional mix consists of
major tools such as advertising, any non personal paid form of communication using
any form of mass media; sales promotion, commonly used to obtain an increase in
sales short term.
5.2.3.1 Average percentage expenditure on promotions:

Fast moving consumer goods in India is in turmoil due to proliferation of brands in
various categories. Using consumer sales promotion to differentiate one's offer has
become an order of the day in matured urban markets. More and more budget is
allocated to these activities in order to lure the consumers. Previous researches have
illustrated that due to limited resources or financial constraints, small firms are not
able to allocate separately for marketing or say promotional activities. We have tried
to find out the behaviour of small and large firms in this regard.
Table No. 5.16 Average percentage expenditure of price on promotional

activities by respondent firms
Average percentage expenditure on

promotional activities Small Firms (%) Large Firms (%)
Less than 5% 90.1 26.5
5-10 % 9.9 55.9
10-15% 0 17.6
More than 15% 0 0
As shown in the table no. 5.16, small FMCG manufacturing firms are spending less
than 5% of price on promotional activities as reported by 90.1 percent of respondents
whereas large firms are spending 5-10% of price on promotional activities as
reported by 55.9 per cent of respondents. Only 9.9 per cent of small firms are
spending in the range of 5-10% and no single small firms is spending more than that
on promotional activities. 26.5 percent of respondents belonging to large firm
128
category are spending less than 5% on promotional activities and around 17.6 per
cent reported to spend in the range on 10-15%. No single large firm is spending more
than 15 % of price on their promotional activities.
Figure No- 5.11 Average percentage expenditure on promotional activities
129
5.2.3.2 Promotional method employed by respondent firms
It would be of interest to a marketer to learn about consumer preferences with respect

to sales promotion offers; what schemes do consumers prefer for what kind of
brands, which media they prefer to learn about the schemes and many more. It is also
interesting to know what type of promotional method firms adopt, especially FMCG
manufacturing firms.
Table No. 5.17 Promotional method employed by respondent firms

Sig. (2-
tailed)
Mean S.D. Mean S.D.
We use advertising to
2.80 1.285 3.59 1.158 -3.192 143 0.002
help sell our products
The main source of
promotion we use is our 3.74 0.988 3.74 0.864 0.018 143 0.985
sales force
We promote our
product through 2.66 1.283 2.41 1.282 0.978 143 0.330
retailer/distributor
Figure No-5.12 Promotional method employed by respondent firms
130
As per table no. 5.17, the main source of promotion used by small FMCG
manufacturing firms is their sales force as shown by the highest mean score of 3.74,
followed by promotion through advertising with a mean score of 2.80. The least
score of 2.66 is for promotion through retailer/distributor. Majority of small firms
avoid middlemen and hence they cannot be a medium for promotion. For large firms,
the highest mean score of 3.74 is again given to promotion through sales force,
followed by promotion through advertising with a mean score of 3.59 and the
surprising fact for large firms is that they are also least promoting their products
through retailer or distributor.

manufacturing firms with various promotional method employed by the firms
It is clear from table no. 5.17 that there is a significant difference between small and
large firms with respect to advertising as a promotional media. Since p<0.05, we
reject the null hypothesis. Large firms are using more of advertising as compared to
small firms as they can afford the advertising cost. It is also evidenced from the table
that there is no significant difference between small and large firms with respect to
sales force as a promotional medium and retailer/distributor as a promotional
medium. Since p>0.05, we accept the null hypothesis. Both small and large firms are
promoting their products by employing sales force and not through retailers or
distributors. This is again surprising as large firms too are not using this kind of
promotion. FMCG firms employs both above the line and below the line promotion
strategies. Above the line promotion makes use of the traditional media while below
the line are non-traditional promotional activities such as short-term incentives.
5.2.3.3 Advertising and promotional media adopted by respondent firms
Advertising is a paid form of non personal communication of ideas, goods and

service by an identify sponsor. Advertising medium can be categorized as traditional
131
media and modern media. It is also categorized as electronic media and print media.
The study tries to find which advertising media is preferred by small and large
FMCG manufacturing firms of Malwa region.
Table No. 5.18 Advertising and promotional media adopted by respondent firms
Small Firms Large Firms t df Sig. (2-
tailed)
Mean S.D. Mean S.D.
Newspaper/Magazine 3.32 1.105 2.71 1.404 2.672 143 0.008
Pamphlets/Posters 3.93 0.747 2.65 1.125 7.693 143 0.000
Wall Paintings 3.26 1.110 3.15 1.209 0.514 143 0.608
Banners/Hoardings/Billboards 3.83 0.749 3.76 0.955 0.408 143 0.684
Radio 2.38 1.062 3.21 1.274 -3.787 143 0.000
Television 2.07 1.150 3.68 1.147 -7.122 143 0.000
Websites 2.64 1.387 3.41 1.076 -2.980 143 0.003
Audio/Video on wheels 3.05 1.159 2.94 1.278 0.485 143 0.628
Word of Mouth 3.96 0.883 3.68 1.007 1.606 143 0.111
Figure No. 5.13 Advertising and promotional media adopted by respondent
firms
132
From Table no. 5.18, it is clear that the highest mean score of 3.96 is given to “word
of mouth” by small FMCG manufacturing firms followed by pamphlets/posters with
a mean score of 3.93. banners/Hoardings/billboards score 3.83, newspaper/magazine
3.32, wall paintings 3.26 and audio and video on wheels 3.05. The least preferred
methods as reported by small firms is television with a mean score of 2.07, radio 2.38
and websites 2.64. As far as large firms are concerned, the most preferred media is
banners/hoardings/billboards with the highest mean score of 3.76, followed by word
of mouth and television with the equal score of 3.68, websites 3.41 and radio 3.21.
The least preferred media is pamphlets/posters with a mean score of 2.65,
newspapers/magazines 2.71 and audio/video on wheels with a mean score of 2.94.
It is concluded that there is an above moderate or high response of small firms

towards word of mouth publicity, pamphlets and posters,
banners/hoardings/billboards, newspapers/magazines. A moderate response is
observed for wall paintings and audio/video on wheels. A below moderate response
is observed for television, radio and websites. Large firms reported an above
moderate or high response towards banners/hoardings/billboards, word of mouth,
television and websites. A moderate response by large firms is towards radio and
audio/video on wheels. A below moderate response is observed towards pamphlets,
posters, newspaper and magazines. It can also be concluded that small FMCG
manufacturing firms of Malwa region are adopting traditional and cost effective
methods for promotion as compared to their large counterparts. Some interesting
findings from the literature suggest that apart from traditional advertising methods,
advertising through mobiles are an innovative and customer centric approach. It
includes advertising in the form of short message service (SMS), mobile alerts,
multimedia, messaging service etc. The use of mobile phone advertising can be cost
133
effective, flexible to inform target group and helps in immediate feedback which
ultimately helps in brand recall and brand interactivity (Labh, 2008)5.

manufacturing firms with respect to various advertising medium adopted.
From the table no. 5.18 , it is clear that there is no significant difference between
small and large FMCG manufacturing firms with respect to various advertising
medium such as wall paintings (p>0.05), banners/hoardings/billboards (p>0.05),
audio/video on wheels (p>0.05) and word of mouth (p>0.05). These mediums are
adopted by both small and large firms. It is also found that there is a significant
difference between small and large with respect to various advertising mediums such
as newspaper/magazine, pamphlets/posters, radio, television and websites. Small
firms are using newspapers, magazines, pamphlets, and posters more as compared to
large firms and large firms are using radio, television and websites more as compared
to their smaller counterparts.
5.2.3.4 Sales Promotion method employed by respondent firms
Sales Promotion is the activity that aims directly to influence buyers to buy products
and increase sales. Sales promotion refers to many kinds of incentives and techniques
that are directed towards consumers, traders and sales force with the intention to
increase sales in short term. Sales promotion methods are many and these are
selected as per the target groups. In present situation not only in one industry but also
all sectors are facing tough competition. It has become very difficult to grow,
stabilize and excel in business performance. It is required to influence the attitude
and behaviour of buyers. Consumer Sales Promotion include Sampling;
Couponing; Contests and Sweepstakes; Money refunds; Premiums and bonus packs;
5
Labh, Shyama .(2008).Mobile Advertising: Another Dimension in Promotion. ICFAI Advertising
Express, March, pp. 57-61.
134
Loyalty schemes; Exhibitions; Packaging. Trade Promotion includes the schemes,
discounts, freebies, commissions and incentives given to the trade (retailers,
wholesalers, distributors, C&Fs) to stock more, push more and hence sell more of a
product come under trade promotion.
Table No. 5.19 Sales promotion method adopted by respondent firms
Sig.
Small Firms Large Firms t (2-
df
tailed)
Mean S.D. Mean S.D.
Buy One Get One is employed 2.20 1.285 3.71 0.871 -6.398 143 0.000
Premiums/Complementary/ Free
1.92 0.886 2.82 1.218 -4.746 143 0.000
Gifts/Coupons is employed
Price Off/ Discounts is employed 3.41 1.164 2.32 1.119 4.633 143 0.000
Free trials is employed 3.01 1.297 3.50 1.285 -1.936 143 0.055
Quantity Off/Extra 3.07 1.367 2.91 1.458 0.568 143 0.571
Figure No-5.14 Sales promotion method adopted by sample firms
135
As evidenced from the table no. 5.19 small firms have given the highest mean score
of 3.41 to price off/discounts for sales promotion followed by quantity off/extra with
a mean score of 3.07 and free trials with a mean score of 3.01. The least preferred
sales promotion method adopted by small firms is premiums/complementary/free
gifts with a mean score of 1.92, followed by buy one get one free with a mean score
of 2.20. Small firms have shown above moderate response towards price
off/discounts, moderate response towards free trials and quantity off/extra and a
below moderate response towards premiums/free gifts/ complementary and buy one
get one free.
As reported by large firms, the most preferred sales promotion method adopted by
them is buy one get one free with a mean score of 3.71, followed by free trials with a
mean score of 3.50, quantity off/extra with a mean score of 2.91,
premiums/complementary/free gifts with a mean score of 2.82. The least preferred
sales promotion method is price off/discounts with a mean score of 2.32. It is also
observed that large firms have above moderate response towards buy one get one free
and free trials, a moderate response towards quantity off/extra and a below moderate
response premiums/complementary or free gifts and price off/discounts.
to various sales promotion methods
It is clearly evidenced from table no. 5.19 that the p value is greater than 0.05, it
indicates that there is no significant difference between small and large firms with
respect to sales promotion method such as quantity off/extra (p>0.05). It is also
observed that there is a significant difference between small and large firms with
respect to various sales promotion methods such as buy one get one free (p<0.05),
premiums/complementary/free gifts (p<0.05), price off/discounts (p<0.05) and
free trials (p<0.05). Price off/discounts is offered more by small firms whereas
premiums/complementary/free gifts and buy one get one and free trails are offered
136
more by large firms. It may be concluded that for all the sales promotion methods
considered in the study, for most of the sales promotion methods, there exist a
difference between small and large firms.
5.2.3.5 Trade promotion method employed by respondent firms
Table No. 5.20 Trade promotion method adopted by respondent firms
Small Firms Large Firms t df Sig

(2-
tailed)
Mean S.D. Mean S.D.
Buying/ Advertising Allowance 2.08 1.071 2.00 1.206 0.375 143 0.708
Bonus Packs 3.53 0.772 3.76 0.699 -1.573 143 0.118
Trade Discounts 3.73 0.673 3.62 1.045 0.738 143 0.462
Credit Sales 3.20 0.923 3.24 0.987 -0.202 143 0.840
Buy Back Guarantee 2.18 1.089 2.06 0.919 0.588 143 0.557
Sales Contests 2.54 1.102 3.53 1.419 -4.265 143 0.000
Sponsorships 2.40 1.064 3.15 1.329 3.387 143 0.001
As far as trade promotion methods are concerned, the results in the Table no. 5.20
shows that small firms have given highest mean score of 3.73 to trade discounts
followed by bonus packs with a mean score of 3.53, credit sales 3.20. The least mean
score of 2.08 is given to buying/advertising allowances, followed by buy Back
Guarantee with a mean score of 2.18, sponsorships 2.40 and sales contests 2.54.
Small firms cannot afford to offer buying or advertising allowances and sponsorships
137
due to their limited finances. Small firms have shown above moderate response
towards bonus packs and trade discounts, a moderate response is shown towards
credit sales and a below moderate response is shown towards buying and advertising
allowances, buy back guarantee, sales contests and sponsorships. It is clear from the
table itself that large firms have given highest mean score of 3.76 to bonus packs
followed by trade discounts 3.62, sales contests 3.53. The least mean score of 2.0 is
given to buying and advertising allowances followed by buy back guarantee 2.06.
Large firms have depicted an above moderate or high response towards bonus packs,
trade discounts, sales contests, a moderate response is shown towards credit sales and
sponsorships and a below moderate response is shown towards buying and
advertising allowance and buy back guarantee. The overall response of small firms is
observed to be below moderate while it is observed to be moderate for large firms.
Figure No-5.15 Trade promotion method employed by respondent firms
138
to various trade promotion methods
It is observed from table no. 5.20 that the p values observed for buying and
advertising allowances, bonus packs, trade discounts, credit sales and buy back
guarantee are greater than 0.05. This indicates that there is no significant difference
between small and large firms with respect to trade promotion methods such as
buying and advertising allowances (p>0.05), bonus packs (p>0.05), trade discounts
(p>0.05), credit sales (p>0.05), buy back guarantee (p>0.05).
From the above table, it is also observed that p values observed for sales contests and
sponsorships are less than 0.01. This indicates that there is a significant difference
between small and large firms with respect to trade promotion methods such as
Sales contests (p<0.01) and sponsorships (p<0.01). Sales contests and sponsorships
are majorly employed by large firms and not by small firms due to their financial
constraints.
5.2.4 Distribution Strategy adopted by respondent firms
Place is the channel of distribution used to get products and services to the market
(Churchill & Peter, 1998: 610). Place as a marketing mix variable consists of the
following variables - channels, coverage, assortment and locations, inventory and
transport (Kotler, 1997: 92). Distribution is an important dimension of FMCG
marketing. FMCG distribution has the maximum channel partners, distributors,
dealers, wholesalers, retailers, stockiest are the major participants. These are the
intermediaries between manufacturer and consumer. The distribution mix stands for
the matching arrangement for the smooth flow of goods and services from producer
to customer. The products should be made available at the right time in the right
quantity and at the right place. There are huge numbers of such intermediaries
involved in the distribution of a variety of consumer goods all over the country.
139
FMCG sector, in particular, rely mostly on its marketing channels to generate
customer satisfaction and to achieve differentiation over competition. Companies put
efforts to make their products available in every corner of the country. It incurs huge
costs to make product available. Thus companies try to find those channels which are
cost effective and efficient depending upon the firm size and the product type.
Table No. 5.21 Distribution strategy adopted by respondent firms
Small Firms Large Firms t df Sig. (2-

tailed)
Mean S.D. Mean S.D.
Producer –retailer- consumers 3.75 0.909 1.56 0.561 13.267 143 0.000
is the most preferred channel
Producer- Distributor- Retailer- 3.36 0.840 4.06 0.547 -4.556 143 0.000
Consumer is the most preferred
channel
Producer- Distributor- 2.64 0.840 4.41 0.609 -4.556 143 0.000
Wholesaler-Retailer-Consumer
is the most preferred channel
Figure No-5.16 Distribution strategy adopted by respondent firms
140
It is clear from table no. 5.21 “producer-retailer-consumer” is identified as the most
preferred channel by small firms with a mean score of 3.75 followed by “producer-
distributor-retailer-consumer” with a mean score of 3.36. “producer-distributor-
wholesaler-retailer-consumer” is the least preferred channel as reported by small
firms with a mean score of 2.64. It is exactly opposite when comes to large firms.
Large firms mostly prefer “producer- distributor-wholesaler-retailer-consumer”
channel with a mean score of 4.41, followed by “producer-distributor-retailer-
consumer” with a mean score of 4.06, the least preferred channel as reported by large
firms is “producer-consumer” with a mean score of 1.56.
to the most preferred distribution channel.
From the table no. 5.21, it is clear that there is a significant difference between
small and large firms with reference to “producer-retailer-consumer” as most
preferred distribution channel. We reject the null hypothesis as p<0.05. Small firms
prefer the channel because there is no middlemen, whereby avoiding the unnecessary
cost. Such channels suits small firms with limited financial resources and limited
geographic area. On the contrary, since large firms are equipped with resources and
have a broader market to serve, this channel is not suitable for them. The table
indicates that there is a significant difference between small and large firms with
reference to “producer-distributor-retailer-consumer” as most preferred
distribution channel. We reject the null hypothesis as p<0.05. Small firms avoid
such channels because of the middlemen cost. Hence small firms have a moderate
response towards this channel. Large have a broader market to serve, hence large
firms have reported above moderate response for this channel. The result from the
table shows that there is a significant difference between small and large firms with
reference to “producer-distributor-wholesaler-retailer-consumer” as most
preferred distribution channel. We reject the null hypothesis as p<0.05. Small firms
141
cannot afford such a long channel but again the selection of distribution channel
depends on the type of the product and the market also. Hence small firms have
below moderate response towards this channel. Large firms have a broader market to
serve, hence large firms have a favorable response towards this channel.
5.2.5 Competitive strategies adopted by respondent firms.
Competition is at the core of the success or failure of firms. Competition determines

the appropriateness of a firm's activities that can contribute to its performance, such
as innovations, a cohesive culture and good implementation. Competitive strategy
helps to search for a favorable competitive position in an industry.
Michael E. Porter in 1980 defined three competitive strategy techniques, later known
as the three generic strategies are: Cost Leadership; Differentiation Strategy; and
Focus Strategy. Overall cost leadership focuses on offering low cost relative to
competitors by neglecting quality, service, and other areas. The second strategy,
differentiation, focuses on offering a product or a service which is recognized as
unique in the industry. And because of its uniqueness, companies can command
higher prices. According to Porter (Porter M. E., 1980)6, “a differentiation strategy
focuses on gaining a competitive advantage by increasing the perceived value of
products relative to the perceived value of other firm´s products”. Products offered
by two diverse companies may be exactly the same, but if customers believe the first
is more valuable than the second, then the first product has a differentiation
advantage (Porter M. E., 1980). The third generic strategy is a focus strategy, in
which the firm focuses on a particular group of customers, geographic markets, or
product line segments (Dess & Robinson 1984)7.
6
Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and
competitors. New York: Free Press.
7
Dess, G. G., and Robinson, R. (1984). Measuring Organizational Performance in the Absence of
Objective Measures: The Case of the Privately-Held Firm and Conglomerate Business Unit.
Strategic Management Journal, 5: pp. 265–273.
142
Table No. 5.22 Competitive strategy adopted by firms.
Strategies to attract customers Small Large t df Sig.

Firms Firms
Mean S.D. Mean S.D.
We seek to serve selected individual 3.70 1.311 2.62 1.303 4.227 143 0.000
customers within the total market
We seek to differentiate our products 2.77 1.160 3.32 1.007 -2.527 143 0.013
and services from competitors in the
market
We aim to be the lowest cost 3.45 1.007 2.12 1.038 6.706 143 0.000
producer in our industry
Figure No- 5.17 Competitive strategies adopted by firms.
143
It is clear from the table no. 5.22 that small firms seek to serve selected individual
customers within the total market as indicated by the mean score of 3.70, followed by
the aim to be the lowest cost producer in the industry with a mean score of 3.45.
Small firms are least focused to differentiate their products from competitors in the
market as indicated by a mean score of 2.77. On the other hand, large firms are
focusing more on differentiating their products from competitors in the market as
indicated by a mean score of 3.32, followed by the focus to serve selected individual
customers within the total market with a mean score of 2.62. Large firms are least
focused to be the lowest cost producer in the industry with a mean score of 2.12.
respect to the focus strategy
From the table it is clear that there is a significant difference between small and
large firms with respect to focus strategy. Since the p <0.05, we reject the null
hypothesis. From the mean value it is clear that small firms are practicing focus
strategy more as compared to large firms due the special characteristics of small
firms. Large firms because of their large scale of operation cannot practice focus
strategy.
to the differentiation strategy
From the table it is clear that p value is less than 0.05, it implies there is a significant
difference between small and large firms with respect to differentiation strategy.
Since the p <0.05, we reject the null hypothesis. From the mean value it is clear that
small firms are not practicing differentiation strategy. This may be because small
firms lack initiation and implementation of innovation to create unique product, these
firms also lack in research and development aspect. Differentiation strategy is more
practiced by large firms with strong support of R & D, knowledge resources etc.
144
to the low cost strategy
It is clear from the table that there is a significant difference between small and
large firms with respect to low cost strategy. We reject the null hypothesis as p<0.05.
From the mean value we can conclude that small firms are aiming to be the lowest
cost producer as compared to large firms. Overall cost leadership focuses on offering
low cost relative to competitors by neglecting quality, service, and other areas.
5.3 Conclusion:
marketing objectives in the target market. The marketing mix in general includes 4Ps
they are Product, Price, Place and Promotion and marketing strategy is based on
these 4Ps. It is found that majority of the respondent firms belong to food and
beverages segment. Association is found between the size of the firm and the nature
of product being offered but no association is found between size of the firm and
number of products firm offers, number of varieties of product offered and number of
packing sized offered. One of the reasons for making changes in the product both by
small and large firms is to improve the quality and also to meet the market demand or
customer need. Firms have not made changes because of the competitors. It is
observed that both small and large firms do not prefer piece to piece basis of
replacement but the percentage of total bill method.
The success in marketing depends on the pricing strategies adopted by the companies
because customer builds strong association between price and quality Both small and
large FMCG manufacturing firms sets prices on the basis of cost plus and not on the
basis of competition. Small firms do not prefer market penetration method and is
mostly preferred by large firms. Both small and large firms equally prefer market
penetration method. Small firms also prefer bundle pricing method for fixing the
145
price as they can promote their other products also and this is again the sales
promotion method employed by small firms. It is found that there is no significant
difference between small and large firms with respect to the geographical basis for
differentiation. Both small and large firms are offering single price to their entire
customer.
Promotion is one of the variables through which information regarding products or

services is being communicated to customers to change their attitude and behaviour.
Majority of the small firms are spending less than 5% of price on promotional
activities whereas large firms are spending 5-10% of price on promotional activities.
The main source of promotion used by both small and large FMCG manufacturing
firms is their sales force. It is found that there is a significant difference between
small and large firms with respect to advertising as a promotional media. It can also
be concluded that small firms are adopting traditional and cost effective methods for
promotion as compared to their large counterparts. And there is a significant
difference between small and large with respect to various advertising mediums
considered in the study. Sales promotion refers to many kinds of incentives and
techniques that are directed towards consumers, traders and sales force with the
intention to increase sales in short term. It is found that there is no significant
difference between small and large firms with respect to sales promotion method
such as quantity off/extra. It is observed that there is a significant difference between
small and large firms with respect to buy one get one free,
premiums/complementary/free gifts, price off/discounts and free trials. Price
off/discounts is offered more by small firms whereas premiums/complementary/free
gifts and buy one get one and free trails are offered more by large firms. It is found
that there is no significant difference between small and large firms with respect to
trade promotion methods such as buying and advertising allowances, bonus packs ,
trade discounts , credit sales , buy back guarantee . And the significant difference is
found for Sales contests and sponsorships. Distribution is an important dimension of
146
FMCG marketing. FMCG distribution has the maximum channel partners,
distributors, dealers, wholesalers, retailers, stockiest are the major participants. These
are the intermediaries between manufacturer and consumer. It is found that there is a
significant difference between small and large firms with reference to the distribution
strategy adopted by them.
Competitive strategy helps to search for a favorable competitive position in an

industry. Michael E. Porter in 1980 defined three competitive strategy techniques,
later known as the three generic strategies are: Cost Leadership; Differentiation
Strategy; and Focus Strategy. It is found that small firms seek to serve selected
individual customers within the total market and are least focused to differentiate
their products from competitors in the market. On the other hand, large firms are
focusing more on differentiating their products from competitors in the market and
are least focused to be the lowest cost producer in the industry. From the table it is
clear that there is a significant difference between small and large firms with respect
to focus strategy, differentiation strategy and low cost strategy. Thus small and large
follow different competitive strategies.
*****
147
CHAPTER-6
EFFECTIVENESS OF
STRATEGIES ON
PERFORMANCE OF FMCG
MANUFACTURING FIRMS OF
MALWA REGION
6.1: Introduction
6.2: Effectiveness of Product Strategy on performance of small firms
6.3: Effectiveness of Pricing Strategy on performance of small firms
6.4: Effectiveness of Promotional Strategy on performance of small firms
6.5: Effectiveness of Distribution Strategy on performance of small firms
6.6: Effectiveness of Competitive Strategy on performance of small firms
6.7: Effectiveness of Marketing Strategy on performance of small firms
6.8: Effectiveness of Product Strategy on performance of large firms
6.9: Effectiveness of Pricing Strategy on performance of large firms
6.10: Effectiveness of Promotional Strategy on performance of large firms
6.11: Effectiveness of Distribution Strategy on performance of large firms
6.12: Effectiveness of Competitive Strategy on performance of large firms
6.13: Effectiveness of Marketing Strategy on performance of large firms
6.14: Conclusion
148
CHAPTER 6: EFFECTIVENESS OF STRATEGIES ON
PERFORMANCE OF FMCG MANUFACTURING FIRMS OF MALWA
REGION
6.1 Introduction:
Performance of an organization is often measured as a ratio of output to input. The
output constitutes the products of the organization and the input is the resources used
by the organization (Choudhary, 2001)1. Garg et al. (2003)2 suggest that as most of
the small firms are privately held, their CEOs will not be willing to provide detailed
accounting data on the firms’ performance. Therefore, they suggest the use of
“subjective, self-reporting measures of performance.”The study has employed two
subjective self reporting measures namely firm’s total sales growth and market share.
This chapter tries to find out how strategy will influence firm performance. It has
been argued in the literature that firms with a clear strategy will outperform other
firms which do not have such a strategy. This is the main argument for Porter to
define his generic strategies. The firm size and the environment might influence the
‘right’ strategy.
In this study we have tried to find out the effectiveness of product strategy, pricing
strategy, promotion strategy, distribution strategy and competitive strategy on
performance of small and large firms with respect to sales growth and market share.
We have also tried to find the variables of product, price, promotion and distribution
strategy which affect the sales growth and market share of these firms. Analysis has
been done separately for small and large FMCG manufacturing firms of Malwa
region.
1
Choudhary, B.V. (2001).Flexibility and related issues in evaluation and selection of technological
systems. Global Journal of Flexible Systems Management, Vol. 2 No. 2, pp. 11-20.
2
Garg, V.K., Walters, B.A. and Priem, R.L. (2003).Chief executive scanning emphases,
environmental dynamism and manufacturing firm performance.Strategic Management Journal, Vol.
24 No. 8, pp. 725-44.
149
6.2 Effectiveness of product strategy on performance of small firms
Table No- 6.1 Impact of variables of product strategy on sales growth of small
FMCG manufacturing firms
R2 = 0.409
Adjusted R2 = 0.375
Std. Error of the Estimate = 0.79337
ANOVA (F) = 11.923 Significance = 0.000
Unstandardized Standardized
Coefficients Coefficients
Model B Std. Error Beta t Sig.
1 (Constant) -0.009 0.076 -0.121 0.904
Zscore: No. of product lines -0.039 0.084 -0.038 -0.461 0.646
Zscore: Variety of Products -0.043 0.089 -0.043 -0.487 0.627
Zscore: Wt wise/no. wise -0.202 0.088 -0.201 -2.281 0.025
Zscore: Nature of the
0.013 0.085 0.013 0.158 0.875
product
Reason for making changes 0.238 0.084 0.238 2.828 0.006
Replacement Policy 0.650 0.084 0.645 7.714 0.000
a. Dependent Variable: Zscore: Sales Growth
From the Table No-6.1, it is found that the R square is 0.409. This indicates that the
determination power of the regression equation is about 40.9 per cent. The rest of
59.1 per cent of sales growth is unexplained in the model. The Standard error of the
estimates is 0.79337. The F ratio (ANOVA) is 11.923 is statistically significant at 5
per cent level of significance. Therefore, the model is acceptable. The regression
model is estimated by enter method. The method has not excluded any variable.
From the above table, it is found that the coefficients of variables such as reasons for
changes in the product and replacement policy are positive and statistically
significant at 5 per cent level of significance. The coefficient of products offered
weight wise or number wise is negative and statistically significant at 5 per cent level
of significance. The coefficients of other variables such as number of product lines,
150
number of variety of products and nature of the products are statistically
insignificant. Thus it may be concluded that the variables of product strategy like
changes in the product and replacement policy have positive influences on the sales
growth of small FMCG manufacturing firms of Malwa region. Only products offered
weight wise or number wise is showing a negative influence on the sales growth of
small FMCG manufacturing firms of Malwa region.
Table No-6.2 Impact of variables of product strategy on market share of small

R2 = 0.154
Adjusted R2 = 0.105
1 (Constant) -0.006 0.090 -0.071 0.943
Zscore: No. of product lines -0.188 0.100 -0.186 -1.873 0.064
Zscore: Variety of Products -0.016 0.106 -0.016 -0.147 0.883
Zscore: Nature of the product 0.126 0.102 0.125 1.235 0.220
Reason for making product
0.127 0.101 0.126 1.257 0.212
changes
Replacement Policy 0.374 0.101 0.372 3.716 0.000
a. Dependent Variable: Zscore: Market share
determination power of the regression equation is about 15.4 per cent which is very
poor. The rest of 84.6 per cent of market share is unexplained in the model. The
Standard error of the estimates is 0.94728. The F ratio (ANOVA) is 3.135 is
statistically significant at 1 per cent level of significance. Therefore, the model is
acceptable. The regression model is estimated by enter method. The method has not
151
excluded any variable. From the above table, it is found that the coefficient of
variable replacement policy is positive and statistically significant at 1 per cent level
of significance. Coefficient of the other variable that is no. of product lines is
negative and statistically significant at 10 per cent level of significance. The
coefficients of other variables such as number of variety of products, nature of the
products and reasons for making changes in the product are statistically insignificant.
Thus it may be concluded that the variables of product strategy like replacement
policy have positive influences on the market share of small FMCG manufacturing
firms of Malwa region.
6.3 Effectiveness of pricing strategy on performance of small firms

Table No-6.3 Impact of variables of pricing strategy on sales growth of small
R2 = 0.150
Adjusted R2 = 0.119
1 (Constant) 3.348E-16 0.089 0.000 1.000
Bases for setting
0.331 0.108 0.331 3.075 0.003
price
Pricing Method -0.362 0.109 -0.362 -3.309 0.001
Price Offered 0.101 0.093 0.101 1.080 0.282
Price Differentiation 0.064 0.095 0.064 0.673 0.502
From the Table No-6.3, it is found that the intercept is very small. This implies that
there is no scope of autonomous sales growth of small FMCG manufacturing firms of
Malwa region. The value of R square is 0.150, which is not so impressive. This
indicates that the determination power of the regression equation is about 15.0 per
152
cent. The rest of 85.0 per cent of sales growth is unexplained in the model. The
Standard error of the estimates is 0.93874, which is less than one. The F ratio
(ANOVA) is 4.705 is statistically significant at 1 per cent level of significance.
Therefore, the model is acceptable. The regression model is estimated by enter
method. The method has not excluded any variable. From the above table, it is found
that the coefficient of variable such as bases for setting prices is positive and
statistically significant at 1 per cent level of significance. The coefficient of pricing
methods is negative and statistically significant at 1 per cent level of significance.
The coefficients of other variables such as number of prices offered and
differentiation in prices are statistically insignificant. Thus it may be concluded that
the variables of pricing strategy like bases for setting prices have positive influences
on the sales growth of small FMCG manufacturing firms of Malwa region. Only
pricing method is showing a negative influence on the sales growth of small FMCG
Table No-6.4 Impact of variables of pricing strategy on market share of small

R2 = 0.128
Adjusted R2 = 0.096
1 (Constant) -4.097E-16 0.090 0.000 1.000
Bases for setting
0.131 0.109 0.131 1.200 0.233
price
Pricing Method -0.218 0.111 -0.218 -1.971 0.050
Price Offered 0.283 0.095 0.283 2.986 0.004
Pice Differentiation -0.082 0.097 -0.082 -0.844 0.401
a. Dependent Variable: Zscore: Market
share
153
determination power of the regression equation is only about 12.8 per cent. The rest
of 87.2 per cent of market share is unexplained in the model. The Standard error of
the estimates is 0.95084. The F ratio (ANOVA) is 3.916 is statistically significant at
1 per cent level of significance. Therefore, the model is acceptable. The regression
From the above table, it is found that the coefficient of variable such as number of
prices offered is positive and statistically significant at 1 per cent level of
significance. It is found that the coefficient of pricing method is negative and
statistically significant at 5 per cent level of significance. The coefficients of other
variables such as bases for setting the prices and differentiation in prices are
statistically insignificant. Thus it may be concluded that the variable of pricing
strategy like number of prices offered has positive influence on the market share of
6.4 Effectiveness of promotional strategy on performance of small firms
Table No-6.5 Impact of variables of promotional strategy on sales growth of

small FMCG manufacturing firms
R2 = 0.199
Adjusted R2 = 0.160
1 (Constant) 3.927E-16 0.087 0.000 1.000
Promotional Method 0.224 0.090 0.224 2.476 0.015
Advertising Medium 0.053 0.101 0.053 0.529 0.598
Sales Promotion 0.111 0.097 0.111 1.146 0.254
Trade Promotion 0.351 0.094 0.351 3.748 0.000
154
Zscore: avg. expenditure
of price on promotional 0.112 0.089 0.112 1.263 0.210
activities
estimates is 0.91604. The F ratio is 5.217 is statistically significant at 1 per cent level
of significance. Therefore, the model is acceptable. The regression model is
estimated by enter method. The method has not excluded any variable. From the
above table, it is found that the coefficients of variables such promotional method
and trade promotion methods are positive and statistically significant at 5 per cent
level of significance. The coefficients of other variables such as advertising medium,
sales promotion methods and average percentage expenditure on promotional
activities are statistically insignificant. Thus it may be concluded that the variables of
promotion strategy like promotional method and trade promotion methods have
positive influences on the sales growth of small FMCG manufacturing firms of
Malwa region.
Table No-6.6 Impact of variables of promotional strategy on market share of

R2 = 0.366
Adjusted R2 = 0.336
1 (Constant) -3.571E-16 0.077 0.000 1.000
Promotional Method 0.568 0.080 0.568 7.071 0.000
Advertising Medium -0.220 0.089 -0.220 -2.459 0.016
155
Sales Promotion -0.182 0.086 -0.182 -2.115 0.037
Trade Promotion 0.341 0.083 0.341 4.092 0.000
of price on promotional 0.008 0.079 0.008 0.107 0.915
activities
63.4 per cent of market share is unexplained in the model. The Standard error of the
From the above table, it is found that the coefficients of variables such as
promotional methods and trade promotion methods are positive and statistically
significant at 5 per cent level of significance. The coefficients of variables such as
advertising medium and sales promotion methods are negative and statistically
significant at 5 per cent level of significance. The coefficient of other variable such
average percentage expenditure on promotional activities is statistically insignificant.
Thus it may be concluded that the variables of promotional strategy like promotional
method and trade promotion methods have positive influences on the market share of
small FMCG manufacturing firms of Malwa region. Only advertising medium and
sales promotion methods are showing a negative influence on the market share of
6.5 Effectiveness of distribution strategy on performance of small firms

Table N0-6.7 Impact of distribution strategy on sales growth of small FMCG
manufacturing firms
R2 = 0.041
Adjusted R2 = 0.032
156
1 (Constant) -4.665E-15 0.093 0.000 1.000
Distribution Strategy 0.203 0.094 0.203 2.165 0.033
determination power of the regression equation is only about 4.10 percent. The rest
of 95.9 per cent of sales growth is unexplained in the model. The Standard error of
From the above table, it is found that distribution strategy has a positive impact on
the sales growth of small FMCG manufacturing firms of Malwa region.
Table N0-6.8 Impact of variables of distribution strategy on Market share of

R2 = 0.024
Adjusted R2 = 0.015
1 (Constant) -2.695E-16 0.094 0.000 1.000
Distribution Strategy 0.155 0.095 0.155 1.642 0.100
determination power of the regression equation is only about 2.40 percent. The rest
157
From the above table, it is found that distribution strategy has a positive impact on
the market share of small FMCG manufacturing firms of Malwa region.
6.6 Effectiveness of competitive strategy on performance of small firms
Table No-6.9 Impact of competitive strategy on sales growth of small FMCG

manufacturing firms
R2 = 0.188
Adjusted R2 = 0.181
1 (Constant) 3.375E-16 0.086 0.000 1.000
Competitive Strategy 0.434 0.086 0.434 5.036 0.000
From the above table, it is found that the coefficient of competitive strategy adopted
by small firms is positive and statistically significant at 1 per cent level of
significance. Thus it may be concluded that the competitive strategy followed by
158
small FMCG manufacturing firms of Malwa region has positive influence on their
sales growth.
Table No-6.10 Impact of variables of competitive strategy on market share of
R2 = 0.119
Adjusted R2 = 0.111
1 (Constant) -4.015E-16 0.089 0.000 1.000
Competitive Strategy 0.345 0.090 0.345 3.837 0.000
of 88.1 per cent of market share sales growth is unexplained in the model. The
Standard error of the estimates is 0.904291. The F ratio (ANOVA) is 14.7233 is
statistically significant at 1 per cent level of significance. Therefore, the model is
acceptable. The regression model is estimated by enter method. The method has not
excluded any variable. From the above table, it is found that the coefficient of
competitive strategy adopted by small firms is positive and statistically significant at
1 per cent level of significance. Thus it may be concluded that the competitive
strategy followed by small FMCG manufacturing firms of Malwa region has positive
influence on their increasing their market share.
6.7 Effectiveness of marketing mix strategy on performance of small firms
Table No-6.11 Impact of marketing strategy on sales growth of small FMCG
manufacturing firms
R2 = 0.327
Adjusted R2 = 0.295
159
1 (Constant) -0.011 0.080 -0.135 0.893
PRODUCT 0.355 0.082 0.354 4.307 0.000
PRICE 0.113 0.092 0.110 1.235 0.220
PROMOTION 0.050 0.085 0.050 0.585 0.560
COMPETITIVE
0.471 0.093 0.468 5.062 0.000
STRATEGY
DISTRIBUTION 0.066 0.082 0.066 0.802 0.425
From the above table, it is found that the coefficients of variables such as product
strategy and competitive strategy are positive and statistically significant at 1per cent
level of significance. The coefficients of other variables such as pricing strategy,
promotion strategy and distribution strategy are statistically insignificant but are
showing a positive tendency. Thus it may be concluded that the variables of
marketing strategy like product strategy and competitive strategy have positive
influences on the sales growth of small FMCG manufacturing firms of Malwa region.
Rest variables are showing a positive tendency though they are statistically
insignificant.
160
Table N0- 6.12 Impact of marketing strategy on market share of small FMCG
manufacturing firms
R2 = 0.168
Adjusted R2 = 0.128
Std.
Model B Error Beta t Sig.
1 (Constant) -0.014 0.089 -0.152 0.880
PRODUCT 0.092 0.091 0.092 1.006 0.317
PRICE 0.095 0.102 0.092 0.933 0.353
PROMOTION 0.178 0.094 0.178 1.882 0.063
COMPETITIVE STRATEGY 0.363 0.103 0.362 3.521 0.001
DISTRIBUTION -0.082 0.091 -0.083 -0.906 0.367
From the above table, it is found that the coefficient of variable such as competitive
strategy is positive and statistically significant at 1 per cent level of significance. The
coefficient of the variable promotion is positive and significant at 10 per cent level of
significance. The coefficients of variables such as price, product and distribution are
statistically insignificant. Thus it may be concluded that the variables of marketing
strategy like competitive strategy adopted by small firms and promotional strategy
adopted by them have positive influences on the market share of small FMCG
161
6.8 Effectiveness of product strategy on performance of large firms
Table No-6.13 Impact of variable of product strategy on sales growth of large
R2 = 0.186
Adjusted R2 = 0.005
Std.
1 (Constant) 1.752E-15 0.171 0.000 1.000
Zscore: No. of product lines 0.172 0.186 0.172 0.928 0.362
Zscore: Variety of Products 0.276 0.176 0.276 1.573 0.127
Zscore: Wt wise 0.020 0.194 0.020 0.102 0.920
Replacement Policy -0.055 0.191 -0.055 -0.289 0.775
Reasons for making changes 0.288 0.187 0.288 1.541 0.135
a. Dependent Variable: Zscore: Sales growth
estimates is 0.997327. The F ratio (ANOVA) is 1.030 is statistically insignificant.
Therefore, the model is unacceptable. The regression model is estimated by enter
that the coefficients of variables such as no. of product lines, variety of products, and
no. of sizes offered, nature of product and reasons for making changes, thought
insignificant, shows a positive tendency towards sales growth. The coefficient of the
variable replacement policy is negative and insignificant. Thus it may be concluded
that the variables of product strategy shows a positive tendency towards sales growth
162
of small FMCG manufacturing firms of Malwa region but it is statistically
insignificant.
Table No-6.14 Impact of variable of product strategy on market share of large
R2 = 0.236
Adjusted R2 = 0.066
Std.
1 (Constant) -9.628E-16 0.166 0.000 1.000
Zscore: No. of product lines 0.064 0.180 0.064 0.358 0.723
Zscore: Variety of Products 0.357 0.170 0.357 2.101 0.045
Replacement Policy -0.098 0.185 -0.098 0-.531 0.600
Reasons for making product
0.339 0.181 0.339 1.870 0.072
changes
a. Dependent Variable: Zscore: Market share has
increased
the estimates is 0.966277. The F ratio (ANOVA) is 1.391 is statistically insignificant.
that the coefficient of variable such as variety of products is positive and statistically
significant at 5 per cent level of significance. Coefficient of the other variable, that is,
reasons for making changes in the product, is also positive and is statistically
significant at 10 per cent level of significance. The coefficients of other variables
163
such as number of product lines, nature of the products, number of sizes in which
product is offered and replacement policy is statistically insignificant. Thus it may be
concluded that the variables of product strategy like reasons for making changes in
the product and no. of variety in which product is offered have positive influences on
the market share of large FMCG manufacturing firms of Malwa region.
6.9 Effectiveness of pricing strategy on performance of large firms

Table No-6.15 Impact of variable of pricing strategy on sales growth of large
R2 = 0.180
Adjusted R2 = 0.067
1 (Constant) 1.758E-15 0.166 0.000 1.000
Bases for setting prices 0.433 0.195 0.433 2.222 0.034
Pricing Method -0.173 0.196 -0.173 -0.881 0.386
Prices offered -0.140 0.248 -0.140 -0.563 0.578
estimates is 0.966147. The F ratio (ANOVA) is 1.588 is statistically insignificant.
that the coefficient of variable bases for setting prices is positive and statistically
significant at 5 per cent level of significance. Coefficient of the other variable that is
price differentiation is showing a positive tendency towards sales growth, though it is
164
statistically insignificant. The coefficients of other variables such as number of prices
offered and pricing method are showing negative effect and are statistically
insignificant. Thus it may be concluded that the variables of pricing strategy such as
bases for setting prices have positive influences on the sales growth of large FMCG
manufacturing firms of Malwa region. Price differentiation strategy is showing a
positive tendency towards sales growth.
Table N0-6.16 Impact of variable of pricing strategy on market share of large

R2 = 0.152
Adjusted R2 = 0.035
1 (Constant) -8.873E-16 0.168 0.000 1.000
Bases for setting prices 0.302 0.198 0.302 1.523 0.138
Pricing Method 0.111 0.200 0.111 0.558 0.581
Prices Offered 0.191 0.252 0.191 0.759 0.454
84.8 per cent of market share growth is unexplained in the model. The Standard error
of the estimates is 0.982380. The F ratio (ANOVA) is 1.299 is statistically
insignificant. Therefore, the model is unacceptable. The regression model is
estimated by enter method. The method has not excluded any variable. From the
above table, it is found that the coefficient of variable such as bases for setting prices,
price differentiation, number of prices offered and pricing method are showing a
positive tendency towards market share of large FMCG manufacturing firms of
165
Malwa region, though they are statistically insignificant. Thus it may be concluded
that all the variables of pricing strategy are showing a positive tendency towards
market share of large FMCG manufacturing firms of Malwa region.
6.10 Effectiveness of promotional strategy on performance of large firms

Table No-6.17 Impact of variable of promotional strategy on sales growth of
large FMCG manufacturing firms
R2 = 0.357
Adjusted R2 = 0.242
1 (Constant) -6.295E-16 0.149 0.000 1.000
Promotional Method -0.237 0.192 -0.237 -1.236 0.227
Advertising medium 0.572 0.157 0.572 3.637 0.001
Sales Promotion 0.041 0.170 0.041 0.241 0.812
Trade Promotion 0.185 0.202 0.185 0.919 0.366
of price on promotional -0.079 0.169 -0.079 -0.465 0.645
activities
From the above table, it is found that the coefficient of variable such as advertising
medium is positive and statistically significant at 5 per cent level of significance. The
166
coefficients of other variables such as promotional method, sales promotion methods,
trade promotion methods and average percentage expenditure on promotional
activities are statistically insignificant. Thus it may be concluded that the variable of
promotional strategy like advertising medium has a positive influences on the sales
growth of large FMCG manufacturing firms of Malwa region.
Table N0-6.18 Impact of variable of promotional strategy on market share of
large FMCG manufacturing firms
R2 = 0.335
Adjusted R2 = 0.216
1 (Constant) 3.433E-16 0.152 0.000 1.000
Promotional Method -0.191 0.195 -0.191 -0.979 0.336
Advertising medium 0.044 0.160 0.044 0.276 0.784
Sales Promotion -0.015 0.172 -0.015 -0.084 0.934
Trade Promotion 0.687 0.205 0.687 3.347 0.002
of price on promotional -0.183 0.172 -0.183 -1.064 0.296
activities
Share
167
From the above table, it is found that the coefficient of variable such as trade
promotion methods is positive and statistically significant at 5 per cent level of
significance. The coefficients of other variables such as promotional method,
advertising medium, sales promotion method and average percentage expenditure on
promotional activities are statistically insignificant. Thus it may be concluded that the
variable of promotional strategy which is trade promotion methods has a positive
influence on the market share of large FMCG manufacturing firms of Malwa region.
6.11 Effectiveness of distribution strategy on performance of large firms
Table No-6.19 Impact of distribution strategy on sales growth of large FMCG

manufacturing firms
R2 = 0.111
Adjusted R2 = 0.083
1 (Constant) 1.637E-15 0.164 0.000 1.000
Distribution Strategy -0.333 0.167 -0.333 -1.996 0.055
of 88.9 per cent of sales growth is unexplained in the model. The Standard error of
From the above table, it is found that the distribution strategy adopted by large
FMCG manufacturing firms of Malwa region has a negative impact on their sales
168
Table No-6.20 Impact of distribution strategy on market share of large FMCG
manufacturing firms
R2 = 0.159
Adjusted R2 = 0.133
1 (Constant) -1.054E-15 0.160 0.000 1.000
Distribution Strategy -0.399 0.162 -0.399 -2.459 0.020
From the above table, it is found that the distribution strategy adopted by large
FMCG manufacturing firms of Malwa region has a negative impact on their market
share.
6.12 Effectiveness of competitive strategy on performance of large firms
Table No-6.21 Impact of competitive strategy on sales growth of large FMCG
manufacturing firms
R2 = 0.203
Adjusted R2 = 0.179
169
1 (Constant) -5.880E-16 0.155 0.000 1.000
Competitive Strategy -0.452 0.158 -0.452 -2.863 0.007
From the above table, it is found that the competitive strategy adopted by large
FMCG manufacturing firms of Malwa region has a significant negative impact on
their sales growth.
Table No-6.22 Impact of competitive strategy on market share of large FMCG

manufacturing firms
R2 = 0.102
Adjusted R2 = 0.074
1 (Constant) 4.295E-16 0.165 0.000 1.000
Competitive Strategy -0.320 0.167 -0.320 -1.911 0.065
a. Dependent Variable: Zscore: Market Share
170
From the above table, it is found that the competitive strategy adopted by large
FMCG manufacturing firms of Malwa region has a significant negative impact on
their market share.
6.13 Effectiveness of marketing mix strategy on performance of large

firms
Table No-6.23 Impact of marketing strategy on sales growth of large FMCG

manufacturing firms
R2 = 0.294
Adjusted R2 = 0.168
1 (Constant) -5.714E-16 0.156 0.000 1.000
PRODUCT -0.015 0.162 -0.015 -0.095 0.925
PRICE 0.282 0.171 0.282 1.689 0.061
PROMOTION 0.045 0.163 0.045 0.274 0.786
DISTRIBUTION -0.125 0.171 -0.125 -0.734 0.469
COMPETITIVE
-0.476 0.180 -0.476 -2.647 0.013
STRATEGY
171
From the table it is found that the coefficient of variable such as pricing strategy has
a positive impact on sales growth of large FMCG manufacturing firms at 10 per cent
level of significance. It is also found that the coefficient of competitive strategy has a
positive impact on sales growth of large firms at 5 percent level of significance. Rest
of the variable such as product strategy, promotion strategy and distribution strategy
are statistically insignificant. Thus it may be concluded that pricing strategy and
competitive strategy has a positive influence on sales of large firms.
Table No-6.24 Impact of marketing strategy on market share of large FMCG

manufacturing firms
R2 = 0.278
Adjusted R2 = 0.150
1 (Constant) 3.805E-16 0.158 0.000 1.000
PRODUCT -0.048 0.164 -0.048 -0.295 0.770
PRICE 0.182 0.173 0.182 2.022 0.025
PROMOTION 0.340 0.165 0.340 2.060 0.049
DISTRIBUTION 0.046 0.173 0.046 0.266 0.792
COMPETITIVE
-0.337 0.182 -0.337 -1.852 0.075
STRATEGY
Share
172
From the table it is found that the coefficient of variable such as pricing strategy and
promotion strategy have a positive impact on market share of large FMCG
manufacturing firms at 5 per cent level of significance. It is also found that the
coefficient of competitive strategy has a positive impact on sales growth of large
firms at 10 percent level of significance. Rest of the variable such as product strategy,
and distribution strategy are statistically insignificant, though distribution strategy
adopted by firms is showing a positive tendency towards market share. It may be
concluded pricing strategy and promotion strategy has a positive influence on market
share of large firms.
6.4 Conclusion
The study finds out the impact of variables of product strategy, pricing strategy,
promotion strategy, distribution strategy, competitive strategy and marketing mix
strategy on performance of small and large FMCG manufacturing firms of Malwa
region. The performance has been measured in terms of sales growth and market
share. It has been found in the study that variables of product strategy like reasons for
making changes in the product and replacement policy have positive influences on
the sales growth and replacement policy has positive influences on the market share
of small firms. For large firms, it is found that the variables of product strategy show
a positive tendency towards sales growth of large firms. Reasons for making changes
in the product and no. of variety in which product is offered have positive influences
on the market share of large FMCG manufacturing firms of Malwa region.
173
Variables of pricing strategy like bases for setting prices have positive influences on
the sales growth of both small and large firms. and number of prices offered has
positive influence on the market share of small firms. It is also found that all the
variables of pricing strategy are showing a positive tendency towards market share of
large firms
Variables of promotion strategy like promotional method and trade promotion

methods have positive influences on the sales growth and market share of small
firms. It is revealed from the study that variable of promotional strategy like
advertising medium has a positive influences on the sales growth of large firms and
trade promotion methods has a positive influence on the market share of large firms.
Distribution strategy has a positive impact on the sales growth and market share of
small FMCG manufacturing firms of Malwa region but it is found to be negative for
large firms. Competitive strategy followed by small FMCG manufacturing firms of
Malwa region has positive influence on their sales growth and market share. Again it
is found to be negative for large firms. For small firms, product strategy and
competitive strategy have positive influences on the sales growth of small firms and
competitive strategy and promotional strategy have positive influences on the market
share of small firms. For large firms, Pricing strategy and competitive strategy has a
positive influence on sales growth of large firms and pricing strategy and
promotional strategy has a positive influence on market share of large firms.
*****
174
A COMPARATIVE STUDY OF MARKETING STRATEGIES OF
FMCG MANUFACTURING IN MALWA REGION
CHAPTER-7
STRATEGY DEPLOYMENT
BY FMCG MANUFACTURING
FIRMS
7.1: Introduction
7.2: Comparison of small and large firms
7.3: Strategy Development
7.3.1: Strategies for reducing cost and enhancing quality
7.4: Priorities for developing competencies by respondent firms
7.5: Priorities for future investments by respondent firms
7.6: Resource-Asset Profile
7.7: Conclusion
175
CHAPTER -7: STRATEGY DEPLOYMENT BY FMCG
MANUFACTURING FIRMS OF MALWA REGION
7.1 Introduction
A recent trend has been observed for last few years all over the world, wherein
many large organizations have been focusing on their core business,
downsizing and outsourcing. This trend has given many opportunities for small
firms to work in partnership with the large organizations. To take hold of these
opportunities, small firms in all sectors need to develop effective strategies for
providing higher added values to customers in terms of cost and quality.
7.2 Compared to large enterprises, small firms possess many unique

characteristics as found in the literature:
• One field where small firms seem to be at a serious disadvantage is their
ability to cope with government regulations. Large firms have a pre-
regulatory advantage since they are usually able to fund various lobbying
activities. (Rothwell and Zegveld, 1982)1.
• SMEs have a tendency of limiting their marketing to “selling” within their
own industry (Carson, 1990). These lacks in marketing skills (Callahan and
Cassar, 19952; Carson and Cromie, 19903).
• The main barriers to be competitive for SMEs are inadequate technologies
as well as inadequate in-house human expertise and poor financial resources
(Armstrong and Coyle, 1999)4.
1
Rothwell, R. (1992). Successful Industrial Innovation: Critical Factors for the 1990s. R&D
Management, 22: 221-239.
2
Callahan, T. J., Cassar, M. D. (1995). Small Business Owners’ Assessment of Their
Abilities to Interpret Formal Market Studies. Journal of Small Business Management 33 (4),
1-9.
3
Carson, D., Cromie, S., 1990. Marketing Planning in Small Enterprises: A Model and Some
Empirical Evidence. The Journal of Consumer Marketing 7 (3), 5-18.
4
manufacturing SMEs. Proceedings of the15th international Conference on Production
Research, Limerick, Ireland, pp. 721-6.
176
• Owing to limited resources small firms are not able to devote sufficient
resources and time for developing strategies to sustainable growths, enter
export markets and conducting market research(Gyampah and Boye, 20015;
Moen 19996; Bamforth and Brookes, 20027; Siu and Kirby, 1998; Verhees,
1998 )
• Conventional marketing is not applicable in SMEs as it is in large
enterprises.(Verhees and Meulenberg, 2004; Blankson and Stokes, 2002;
Gilmore et al., 2001; Carson, 1990). Marketing in SMEs is likely to be
haphazard, informal, loose, unstructured, spontaneous and more reactive
than proactive (Gilmore et al., 2001). Marketing activities of SMEs tend to
be pragmatic, practical and adopted to suit their unique situation (Carson
and Gilmore, 2000) and informal and unplanned, relying on the intuition
and energy of an individual, i.e. owner-manager (Stokes and Blackburn,
1999).
• SME face problems in initiation of the innovation and protection of
intellectual property (Stokes, 2002). SMEs cannot bear excessive cost of
product-development projects (March-Chorda et al., 2002)8;
• Shortage of qualified human resources is also considered a critical
bottleneck in SMEs businesses (Korea Federation of Small Businesses,
2003); Continuous reduction in cost and product rejection rate is the main
pressures on Indian industries. Cost, quality, and delivery lead-time are the
main pressures for Indian SSI, MSI, and LSI. (Singh et al. 2004).
It can be summarized from the previous researches that inadequate credit flow
from banks and financial institutions, inadequate infrastructure facilities, low
5
Gyampah, KA. and Boye, SS. (2001). Operations Strategy in an Emerging Economy: The
Case of the Ghanaian Manufacturing Industry, Journal of Operations Management, Vol. 19,
pp.59-79.
6
Moen, O. (1999). The relationship between firm size, competitive advantages and export
performance revisited. International Small Business Journal, Vol. 18, pp. 53-72.
7
Bamforth, S., Brookes, N. J. (2002). Incorporating the Voice of Multiple Customers into
Product Design. Journal of Engineering Manufacture 216 (B), 809-813.
8
March-Chorda, I., Gunasekaran, A. and Lloria-Aramburo, B. (2002). Product development
process in Spanish SMEs: an empirical research. Technovation, Vol. 22, pp. 301-12.
177
quality standards of products, usage of technology, plant and machinery and
equipments and inefficient management techniques are inhibiting the small
scale sector. Availability of raw material at competitive prices appears to be the
greatest difficulty for small sector. They also suffer from inadequate work
space, power, lighting and ventilation, absence of sanitary and safety measures
etc. Marketing is identified as one of the major stumbling blocks for small
scale industries because of lack of standardization, poor designing, lack of
quality control, lack of precision, poor bargaining power. But on the other
hand it is also found that small firms are more flexible and less bureaucratic
and are able to react quickly and efficiently to both market and technological
changes.
7.3 Strategy Development
Small firms face many problems due to shortage of finance, skilled manpower
and advance technology. Therefore their strategy should match up with the
organization’s available resources. In such a dynamic environment,
organizations that are able to continually build new strategic assets faster and
cheaper than those of their competitors will create long-term competitive
advantage. The new competition is in terms of reduced cost, improved quality,
products with higher performance, a wider range of products and better service,
and all delivered simultaneously (Dangayach and Deshmukh, 2001). It is
generally observed that small firms are reluctant for changes due to fear of
failure and other constraints. Therefore small firms should select their
competitive priorities and processes carefully.
7.3.1 Strategies for Reducing Cost and Enhancing Quality
Improving quality and reducing costs are identified as critical success factors
for all type of organizations all over the world. Corbett and Campbell-Hunt
178
(2002)9 have also observed conformance quality and competitive price as major
pressures on SMEs in their study. Low manufacturing cost gives the company
an edge over its competitors. Small firms with their limited resources need to
devise various strategies to reduce the cost and maintain the quality.
Respondents were asked to give the level of agreement (1- strongly disagree; 5-
Strongly Agree) for various strategies being adopted by them for reducing cost
and improving quality.
Table No. 7.1 Strategies for reducing cost and enhancing quality
Sig.
Strategies for cost and (2-
quality tailed
)
Mean S.D. Mean S.D.
Intro. of quality
improvement methods;
2.74 0.988 3.12 0.946 -1.975 143 0.050
TQM & quality circle
is employed
Improvement in
process capability is 3.55 0.697 3.47 0.961 0.526 143 0.600
employed.
Maintenance of product
and product design is 3.14 0.942 2.65 0.917 2.707 143 0.008
employed.
Reduction of
rejection/rework is 3.10 1.035 2.62 0.853 2.465 143 0.015
employed.
Automation of
3.83 0.424 3.76 0.431 0.769 143 0.443
Operation is employed.
As computed by researcher
9
Corbett, L.M. and Campbell-Hunt, C. (2002).Grappling with a gusher! Manufacturing’s
response to business success in small and medium enterprises.Journal of Operations
Management, Vol. 20, pp. 495-517.
179
Figure No. 7.1 Strategies for reducing cost and enhancing quality
It is clear from the table no. 7.1 that for small firms “Automation of operation”
is the strategy to reduce cost and enhance quality with a mean score of 3.83
followed by “Improvement in process capability” with a mean score of 3.55.
“Introduction of quality improvement methods; TQM and quality circle” has
scored least mean score of 2.74; Strategies are similar for large firms also
which is evidenced from the table that “automation of operation” scored the
highest mean of 3.76 followed by “improvement in process capability” with a
mean score of 3.17. The lowest priority was given to reduction of rejection
work or rework with a mean score of 2.62 by large firms. “Introduction of
quality improvement methods has gained a moderate response from large firms
also but if quality improvement methods are employed, firms can achieve
improved productivity, customer satisfaction and increased overall
performance.
180
respect to the introduction of quality improvement methods; TQM & quality
circle as a strategy for cost and quality.
As shown in the table no. 7.1, there is a significant difference between small
and large firms with respect to the introduction of quality improvement
methods; TQM & quality circle as a strategy for cost and quality. We reject
the null hypothesis as p<0.05. Small firms are paying less attention to such
methods for improving quality and reducing cost, may be because of lack of
awareness regarding such methods or the high cost of implementing such
methods. And as observe in previous researches, TQM is a philosophy mainly
dominated by large companies.
respect to improvement in process capability as a strategy for cost and
quality.
It is shown in the table no. 7.1 that there is no significant difference between
small and large firms with respect to improvement in process capability as a
strategy for cost and quality. We accept the null hypothesis as p>0.05.
Organizations always put efforts for improving the process capability
immaterial of their size.
respect to maintenance of product and product design as a strategy for cost
and quality.
It is evidenced from the table no.7.1 that there is a significant difference

between small and large firms with respect to maintenance of product and
product design as a strategy for cost and quality. We reject the null hypothesis
as p<0.05. Small firms are focusing more on product maintenance and product
design to reduce the cost and improve quality as against that of large firms.
181
respect to reduction of rejection /rework as a strategy for cost and quality.
The table no. 7.1 shows that there is a significant difference between small
and large firms with respect to reduction of rejection/rework as a strategy for
cost and quality. We reject the null hypothesis as p<0.05. Small firms cannot
afford rejections or rework and hence these firms pay much attention to avoid
such extra costs. On the other hand, large firms have standardized processes to
avoid rejection or rework.
respect to automation of operation as a strategy for cost and quality.
From table no. 7.1, it is evidenced that there is no significant difference

between small and large firms with respect to automation of operation as a
strategy for cost and quality. We accept the null hypothesis as p>0.05. All
firms, whether small or large, focus on automation of operation for reducing
cost, improving quality and avoiding rework.
7.4 Priorities for developing competencies by respondent firms
Competitive priorities represent a set of tasks that should be performed in order

to support the business strategy. Majority of SMEs rely on outdated
technology, labour intensive and traditional management practices. This in
many cases led to inefficient, lack of information and inadequate in-house
expertise (Hashim and Wafa, 2002)10. According to Mosey (2005)11, SMEs can
compete with their larger rivals by developing new to market products using
novel and often simpler technologies. In the present study, six major priorities
for developing competencies have been identified (Singh et al., 2006).
Respondents were asked to indicate the level of agreement on these priorities
10
Hashim, M.K. and Wafa, S.A. (2002). Small and Medium Sized Enterprises in Malaysia –
Development Issues, Prentice-Hall, Englewood Cliffs, NJ.
11
Mosey, S. (2005). Understanding new to market product development in SMEs.
International Journal of Operations and Production Management, Vol. 25, No. 2, pp.114–130.
182
on the Likert Scale of five (1- strongly disagree, 5-strongly agree). The results
are shown in table no. 6.5.
Table N0- 7.2 Priorities for developing competencies by respondent firms.
Priorities for Sig.

developing Small Firms Large Firms t df (2-
competencies tailed)
Mean S.D. Mean S.D.
New product
development is the
3.68 0.809 4.09 0.601 -2.675 143 0.008
priority for developing
competency
Training and
Development of
employees is the 3.46 0.711 4.00 0.492 -4.136 143 0.000
competency
Management of quality
is the priority for
3.98 0.726 3.88 0.478 0.751 143 0.454
developing
competency
Use of information to
optimize decisions is
the priority for 2.45 0.657 3.53 0.615 -8.502 143 0.000
developing
competency
Use of customer to
define quality
standards is the priority 3.86 0.784 3.74 0.618 0.821 143 0.413
for developing
competency
Introduction of new
technology is the
3.57 0.758 4.12 0.769 -3.689 143 0.000
competency
Source: As computed by researcher
183
Figure no 7.2 Priorities for developing competencies by respondent firms.
From the table no 7.2 , it is evidenced that “ management of quality” received

highest attention in terms of developing competencies by small firms with a
mean score of 3.98, followed by “use of customer to define quality standards”
with a mean score of 3.86 and new product development with a mean score of
3.68. Similarly large firms have given highest attention to “new product
development” with a mean score of 4.09, followed by “training and
development of employees” with a mean score of 4.00 and “management of
quality” with a mean score of 3.88. It is observed from the table that on most of
the competencies, large firms have focused more as compared to small firms.
respect to new product development as a priority for developing competency.
184
As shown in the table no. 7.2, there is a significant difference between small
and large firms with respect to new product development as a priority for
developing competency. We reject the null hypothesis as p<0.05. Since FMCG
sector is highly customer-oriented market, firms focus on developing new
products has increased. Introducing new products has become the hallmark of
this sector. Most firms in this sector often introduce new products to replace
existing products that have reached declining stage, improve their product
portfolio, increase market share and sales growth targets. This focus is
observed more from large firms as compared to small firms.
respect to training and development of employees as a priority for developing
competency.
It is evidenced from the table no 7.2 that there is a significant difference

between small and large firms with respect to training and development of
employees as a priority for developing competency. We reject the null
hypothesis as p<0.05. Large firms are emphasizing more on training and
development aspect as compared to small firms. Small firms neither have
proper access to skilled human resources nor the firms can pursue training and
development as this would add to increasing cost.
respect to management of quality as a priority for developing competency.
The above table no. 7.2 suggests that there is no significant difference
between small and large firms with respect to management of quality as a
priority for developing competency. We accept the null hypothesis as p>0.05.
Every firm should strive to improve and manage the quality.
respect to use of information to optimize decisions as a priority for developing
competency.
185
As per the above table, p<0.05, we reject the null hypothesis. It implies that
there is a significant difference between small and large firms with respect to
use of information to optimize decisions as a priority for developing
competency. Large firms have more access to information and they better
utilize such information for making proper and right decisions.
respect to use of customer to define quality standards as a priority for
developing competency.
As it is clear from the above table, there is no significant difference between

small and large firms with respect to use of customer to define quality
standards as a priority for developing competency. We accept the null
hypothesis as p>0.05. Since small firms are actually in proximity to customers
and are in direct contact with them, customers can be a major and direct source
of feedbacks and suggestions. Small firms can better use customers for defining
quality standards. It is observed that small firms are practicing this aspect of
customers to define quality standards more as compared to large firms.
respect to the introduction of new technology as a priority for developing
competency.
The table no. 7.2 indicates that there is a significant difference between small
and large firms with respect to introduction of new technology as a priority
for developing competency. We reject the null hypothesis as p<0.05. Large
firms are able to introduce and implement new technology as compared to
small firms for who to acquire or implement new technology may be a costly
affair.
7.5 Priorities for future investments by respondent firms
Functional strategies such as HRM, manufacturing and marketing have been

argued to play an important role in competitive strategy formulation,
186
implementation, and performance .According to Mosey (2005), Small firms
can compete with their larger rivals by developing new-to-market products.
Investment in product research and development will also help in improving
quality and in reducing cost. In this study, research and development,
automation of processes, IT applications, human resource development and
marketing activities are considered as potential areas of investment (Singh et
al., 2006). Respondents were asked to prioritize these areas on Likert scale of 1
to 5 (1-strongly disagree, 5-strongly agree).
Table No. 7.3 Priorities for Future Investments by respondent firms

Investment Sig. )2-
Priorities tailed)
Mean S.D. Mean S.D.
Marketing
Activities is our
investment 3.38 0.864 3.76 0.431 -2.509 143 0.013
priority in coming
years
Research &
Development is
our investment 3.62 0.853 4.21 0.641 -3.683 143 0.000
priority in coming
years.
Human Resource
Development is
our investment 3.28 0.844 3.82 0.626 -3.475 143 0.001
priority in coming
years.
Automation of
processes is our
investment 3.73 0.75 4.21 0.410 -3.537 143 0.001
priority in coming
years.
Information
Technology
Applications is
our investment 2.81 0.879 3.62 0.739 -4.849 143 0.000
priority for
investment in
coming years.
187
Figure No. 7.3 Priorities for Future Investments by small and large firms
As it is clear from table no. 7.3, small firms are giving maximum focus on
“automation of processes” with the mean score of 3.73. Previous studies have
shown that high employees turnover and poor R&D had been the major
problems for small firms but the result shows that now small firms are giving
due attention to Research & Development as exhibited by mean score of 3.62
followed by “marketing activities” with a mean score 3.38 which was identified
as stumbling block for small firms in previous researches. Due focus is also
given to human resource development with the mean score of 3.28. As far as
large firms are considered, it is observed form the table that large firms are
giving maximum attention to “Research & Development” and “automation of
Operation” with the highest mean score of 4.21, followed by “Human resource
Development” with a mean score of 3.82 ; “marketing activities” (3.76 ) and
“Information Technology Applications” with a mean score of 3.62.
188
respect to marketing activity as their future priority for investment.
It is clear from the table no. 7.3 that there is a significant difference between
small and large firms with respect to marketing activity as their future
priority for investment. We reject the null hypothesis as p<0.05. Large firms
with more resources are focusing more on marketing activities, conducting
market research etc. Small firms, however less, too are focusing marketing
activities as their priority for future investment.
respect to research and development as their future priority for investment.
The table no. 7.3 shows that there is a significant difference between small
and large firms with respect to research and development as their future
priority for investment. We reject the null hypothesis as p<0.05. Though small
and large both firms are have research and development as their priority for
investment but the table indicates that large firms have higher priority as
compared to small firms again because of sufficient resources available with
large firms and the larger area of operations and market requirements. Lack of
resources of small firms affects its ability to develop unique and innovative
products. And thus small firms end up with producing similar items as made by
large firms.
respect to human resource development as their future priority for
investment.
From the table it is clear that there is a significant difference between small
and large firms with respect to human resource development as their future
priority for investment. We reject the null hypothesis as p<0.05. Small firms
usually do not focus on this aspect because of either cost constraints or lack of
awareness
189
respect to automation of operation as their future priority for investment.
The result from the table shows that there is a significant difference between
small and large firms with respect to automation of operation as their future
priority for investment. We reject the null hypothesis as p<0.05.
respect to information technology applications as their future priority for
investment.
It is evidenced from table no. 7.3 that there is a significant difference between
small and large firms with respect to information technology applications as
their future priority for investment. We reject the null hypothesis as p<0.05.
Above findings show that level of investments in Information Technology
Applications is not at moderate level which is consistent with the findings of
(Sadowski et al., 200212; Barry and Milner, 200213) which found that SMEs
generally have an ad hoc approach to IT management, and therefore seldom
have a defined IT budget or an explicit IT plan or strategy. Investments in
technology are often driven by the owner, rather than by any formal cost-
benefit or strategic analysis.
7.6 Resource- Asset Profile
Strategy is concerned with matching a firm’s resources and capabilities to the

opportunities that arise in the external environment. Now- a- days firms’
external environment is becoming more unstable and hence there is more
emphasis on the role of resources and capabilities as the basis for strategy
formulation. It is important to distinguish between the resources and the
12
Sadowski, B.M., Maitland, C. and Dongen, J.V. (2002). Strategic use of the internet by
small and medium-sized companies: an exploratory study. Information Economics and
Policy, Vol. 14 No. 1, pp. 75-93.
13
Barry, H. and Milner, B. (2002). SMEs and electronic commerce: a departure from the
traditional prioritization of training?.Journal of European Industrial Training, Vol. 26 No. 7,
pp. 316-26.
190
capabilities of the firm: resources are the productive assets owned by the firm;
and capabilities are what the firm can do. Capabilities are collections of
competencies that are linked together systematically and synergistically to
provide strategic outcomes, competitive advantage or superior profitability. A
firm’s competitive advantages evolve from the resources available to the firm.
Resources are defined as “the tangible and intangible assets a firm uses to
choose and implement its strategies.” All firms, including the smallest ones,
possess a variety of resources and capabilities. Tangible resources and
capabilities are assets that are observable and more easily quantified. They can
be broadly organized as financial resources and capabilities, Physical resources
and capabilities, Technological resources and capabilities, Organizational
resources and capabilities, Human resources and capabilities, Innovation
resources and capabilities and reputational resources and capabilities.
Analyzing a firm’s resources is an important step for a manager when
formulating and implementing strategy.
Table No. 7.4 Resource- Asset Profile of respondent firms

Resource- Asset (2-
Profile t df tailed)
Mean S.D. Mean S.D.
Physical resources 2.61 0.974 4.00 0.778 7.591 143 0.000

Human resources 2.45 0.932 3.44 0.860 5.521 143 0.000
Financial resources 2.83 1.061 4.03 0.717 6.174 143 0.000
Legal resources 3.17 0.952 4.21 0.641 5.930 143 0.000
Organizational 2.60 0.877 3.82 0.869
7.112 143 0.000
resources
Knowledge resources 3.37 1.070 4.41 0.557 5.451 143 0.000
Social Networks 3.81 0.720 4.35 0.597 3.988 143 0.000
191
H039= There is no significant difference in the profile of assets resources and
capabilities of various FMCG manufacturing enterprises.
It can be observed from table no. 7.4 that both small and large FMCG
manufacturing firms posses both tangible and intangible resources. Small firms
seem to be strong in intangible resources while large firms are strong in both
tangible and intangible resources. Also there is a significant difference
between the two firms with respect to their profile of asset and resources. We
can say that large firms are definitely at more advantage than small firms with
higher level of agreement in all types of resources. And it is reflected in their
respective strategies for developing competency.
7.7 Conclusion:
It is argued in the literature that strategy should match up with the

organization’s available resources. Improving quality and reducing costs are
identified as critical success factors for all type of organizations all over the
world. In this study, it is found that “automation of operation” is the strategy
for small firms to reduce cost and enhance quality followed by “Improvement
in process capability” and “Introduction of quality improvement methods;
TQM and quality circle”. Strategies are similar for large firms also. It is found
that there is a significant difference between small and large firms with respect
to the “introduction of quality improvement methods; TQM & quality circle”,
“maintenance of product and product design” and “reduction of
rejection/rework” as a strategy for reducing cost and improving quality. There
is no significant difference between small and large firms with respect to
“improvement in process capability” and “automation of operation” as a
strategy for cost and quality.
Competitive priorities represent a set of tasks that should be performed in order

to support the business strategy. It is found that “management of quality”
received highest attention in terms of developing competencies by small firms
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while large firms have given highest attention to “new product development”.
There is a significant difference found between small and large firms with
respect to “new product development”, “training and development of
employees”, “use of information to optimize decisions”, “introduction of new
technology” as a priority for developing competency. It is found that there is no
significant difference between small and large firms with respect to
“management of quality” and “use of customer to define quality standards” as a
priority for developing competency. It is found that small firms are giving
maximum focus on “automation of processes”. Previous studies have shown
that high employees turnover, marketing and poor R&D had been the major
problems for small firms but the result shows that now small firms are giving
due attention to Research & Development and marketing activities. Due focus
is also given to human resource development.
As far as large firms are considered, it is observed that large firms are giving
maximum attention to “Research & Development” and “automation of
Operation”. It is found that there is a significant difference between small and
large firms with respect to “marketing activity”, “research and development”,
“human resource development”, “automation of operation” and “information
technology applications” as their future priority for investment. It is revealed
that small firms are strong in intangible resources while large firms are strong
in both tangible and intangible resources. Also there is a significant difference
between the two firms with respect to their profile of asset and resources.
****
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CHAPTER-8
MAJOR FINDINGS AND
DISCUSSION
8.1 Introduction
8.2 Major Findings
8.3 Discussion
8.4 Policy Implication
194
CHAPTER 8: MAJOR FINDINGS AND DISCUSSIONS
8.1 Introduction:
The new era of open economies, global competition, technological changes and
demanding customers create more complex, dynamic and uncertain business
environment. It is possible that such environment may affect enterprises of different
size, different sectors and regions differently. Marketing is considered as one of
important factor for the success of any enterprise and FMCG sector is one of the
most active users of marketing. Changes in the marketing environment have
generated a need to reconsider the marketing perspectives of FMCG business. Small
and large firms owns different types of resources, they face different types of
challenges. The present study has tried to find out the functioning of small and large
FMCG manufacturing firms of Malwa region in terms of opportunities and threat,
sources of competitive strength, future investment priorities, strategies for cost,
quality and competency development and marketing strategies adopted. It also
increases understanding of small firms by making comparisons with large firms to
find out whether the strategies adopted by small firms are distinguishable from large
firms’ strategies. The study has also tried to find out the effectiveness of strategies on
the performance of small and large firms.
8.2 Major Findings:

Following are major findings of the study
8.2.1 Functioning of FMCG Manufacturing Firms of Malwa Region.
1. For the study, data have been collected from 111 small and 34 large FMCG
manufacturing firms of Malwa region. The study found that there is a significant
difference between small and large FMCG manufacturing firms with respect to its
area of operation. It is found that maximum percentage (33.3%) of small firms are
operating at state level followed by 27 per cent at national level. Maximum 55.9
per cent of large firms are operating at international level followed by 32.4 per
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cent at national level. Study reported that no single large firm has limited itself to
regional level. Very few, around 12 percent of large firms are operating at state
level.
2. It has been found that there is no significant difference between small and large
FMCG manufacturing firms with respect to its years of establishment. 36 per cent
of small firms have been established for around 11-20 years, around 22 per cent
of small firms are established for more than 30 years and equal per cent (22) are
established for about 21-30 years. Around 21 per cent firms are established for
about less than 10 years. When large firms are considered, about 41 per cent of
large firms are established for more than 30 years, about 32 per cent are
established for 11-20 years and around 12 per cent of large firms are established
for less than 10 years.
3. The study found that there is a significant difference between small and large
FMCG manufacturing firms with respect to the type of business. Around 48 per
cent of small firms are sole proprietary firms and around 33 per cent are
privately owned firms. Majority of large firms, around 56 percent are publicly
owned, followed by 32.4 per cent to be privately owned. No single large firm
is found to be a partnership firm or a sole proprietary firm. It is found that
around 33 per cent of small firms and around 44 per cent of large firms are a
subsidiary firm.
4. It is found that there is no significant difference between small and large FMCG
manufacturing firms with respect to various opportunities being considered in the
study. “Large domestic market” and “export potential” are identified as area of
high opportunity for both small and large firms. The study reports that there is a
significant difference between small and large FMCG manufacturing firms with
respect to various threats being considered in the study. Major threats being faced
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by small and large firms are the “threat of new entrants in the market” and
“increase in the number of rivals”.
5. It is found that there is a significant difference between small and large FMCG
manufacturing firms with respect to various sources of competitive strength.
“Social networks”, “knowledge resources” and “legal resources” are identified as
sources of competitive strength for both small and large firms.
8.2.2 Marketing Strategies adopted by FMCG Manufacturing Firms.

8.2.2.1 Product Strategy
manufacturing firms with respect to the number of product lines firm deal in,
number of varieties and the packing sizes firms offer. Majority of small firms and
large firms are dealing in more than two product lines. Around 47 per cent of
small and 47 per cent of large firms are offering more than four variety of their
product. And around 42 per cent of small firms and around 50 per cent of large
firms are offering their products in more than four packing sizes.
manufacturing firms with respect to the nature of product being offered. While
majority, 54 percent of small firms are offering product directly for end user,
majority of large firms around 47 per cent are offering products both for end user
and for other manufacturer.
3. It has been found that there is a significant difference between small and large
FMCG manufacturing firms of Malwa region with respect to various reasons for
making product changes. The study found that both small and large FMCG
manufacturing firms have made changes in their product majorly because of
market demand or customer need. But large firms have also made changes for
improving the quality of the product.
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4. There is a significant difference between small and large FMCG manufacturing
firms with respect to the replacement policy. It is found that both small firms and
large firms prefer “percentage of total bill” as a replacement policy.
8.2.2.2 Pricing Strategy
manufacturing firms with respect to various bases for setting the prices. Both
small and large FMCG manufacturing firms of Malwa region set prices on the
basis of “costs of producing plus a fixed margin for profit”.
2. The study finds that both small and large firms mostly prefer market penetration
method for fixing the price. Both small and large FMCG manufacturing firms are
charging low price relative to their competitors to attract buyers. There is a
significant difference between small and large firms with respect to market
skimming method and bundle pricing method for fixing the price. No significant
difference is found between small and large firms with respect to market
penetration method for fixing the price.
3. It is found that neither small firms and nor the large FMCG manufacturing firms
are differentiating their prices geographically. The overall response of both small
and large firms is below moderate for such geographical differentiation of prices.
It is also found that both small and large firms are offering single price to their
entire customer.
8.2.2.3 Promotional Strategy
1. The study finds that small FMCG manufacturing firms are spending less than 5%
of price on promotional activities as reported by 90 percent of respondents
whereas large FMCG manufacturing firms are spending in the range of 5-10% of
price on promotional activities as reported by 60 per cent of respondents. Very
198
few, around 10 percent of small firms are spending in the range of 5-10% and no
single small firms is spending more than that on promotional activities. It is also
found that no single large firm is spending more than 15 % of price on their
promotional activities.
2. The main source of promotion used by both small and large FMCG
manufacturing firms is their sales force followed by promotion through
advertising. The least preferred method is promotion through retailer/distributor.
It is found that there is no significant difference between small and large firms
with respect to various sources of promotions.
3. The study finds that there is a significant difference between small and large
FMCG manufacturing firms with respect to various advertising methods adopted.
There is an above moderate or high response of small firms towards word of
mouth publicity, pamphlets and posters, banners/hoardings/billboards,
newspapers/magazines. A below moderate response is observed for television,
radio and websites. Large firms reported an above moderate or high response
towards banners/hoardings/billboards, word of mouth, television and websites. A
below moderate response is observed towards pamphlets, posters, newspaper and
magazines. It can be concluded that small firms are adopting traditional and cost
effective methods for promotion as compared to their large counterparts.
4. It is reported that there is a significant difference between small and large FMCG
manufacturing firms with respect to various sales promotion methods adopted.
Small firms are adopting price off/discounts for sales promotion followed by
quantity off/extra and free trials. The least preferred method adopted by small
firms is premiums/complementary/free gifts and buy one get one free. Most large
firms are preferring buy one get one free followed by free trials and quantity
off/extra. The least preferred method is price off/discounts. It can be said that all
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the sales promotion methods considered in the study, for most of the sales
promotion methods, there exist a difference between small and large firms.
5. It is found that for trade promotion, small firms are preferring trade discounts
followed by bonus packs and credit sales. The least adopted method is
buying/advertising allowances. Large firms are preferring bonus packs followed
by trade discounts and sales contests. The least adopted trade promotion method
adopted by large FMCG manufacturing firms of Malwa region is buying and
advertising allowances. The study founds no significant difference between small
and large firms with respect to trade promotion methods such as buying and
advertising allowances; bonus packs; trade discounts; credit sales and buy back
guarantee. There is a significant difference between small and large firms with
respect to trade promotion methods such as Sales contests and sponsorships.
8.2.2.4 Distribution Strategy

1. There is a significant difference between small and large FMCG manufacturing
firms with respected to the adopted distribution strategy. “Producer- retailer-
consumer” is identified as the most preferred channel by small FMCG
manufacturing firms. Large firms mostly prefer “producer- distributor-
wholesaler-retailer-consumer” channel. It is found that there is a significant
difference between small and large firms with reference to “producer-retailer-
consumer”,“producer-distributor-retailer-consumer” and “producer-distributor-
wholesaler-retailer-consumer” as most preferred distribution channel.
8.2.2.5 Competitive Strategy
1. It is found that most small FMCG manufacturing firms seek to serve selected
individual customers within the total market. Small firms are least focused to
differentiate their products from competitors in the market. On the other hand,
large FMCG manufacturing firms are focusing more on differentiating their
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products from competitors in the market. Large firms are least focused to be the
lowest cost producer in the industry.
8.2.3 Effectiveness of strategies on performance of FMCG manufacturing

Firms
The study finds out the impact of variables of product strategy, pricing strategy,
promotion strategy, distribution strategy, competitive strategy and marketing mix
strategy on performance of small and large FMCG manufacturing firms of Malwa
region. The performance has been measured in terms of sales growth and market
share.
1. It is found in the study that the relationship explained between product strategy
and sales growth of small firms is 40.9 percent. Variables of product strategy like
reasons for making changes in the product and replacement policy have positive
influences on the sales growth of small firms. Replacement policy has positive
influences on the market share of small firms which is explained by 15.4 percent
relationship. For large firms, the relationship is found to be 18.6 percent between
product strategy and sales growth. Variables of product strategy show a positive
tendency towards sales growth of large firms. The relationship between product
strategy and market share of large firms is 23.6 percent. Variable of product
strategy like reasons for making changes in the product and no. of variety in
which product is offered have positive influences on the market share of large
FMCG manufacturing firms of Malwa region.
2. It is found that the relationship explained between pricing strategy and sales
growth of small firms is only 15 percent. Variables of pricing strategy like bases
for setting prices have positive influences on the sales growth of small firms and
number of prices offered has positive influence on the market share of small firms
which is explained by 12.8 percent of relationship between pricing strategy and
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market share of small firms. For large firms, the relationship between pricing
strategy and sales growth is 18 percent. Variables of pricing strategy such as
bases for setting prices have positive influences on the sales growth of large
FMCG manufacturing firms of Malwa region. It is found that all the variables of
pricing strategy are showing a positive tendency towards market share of large
firms. The relationship explained between pricing strategy and market share is
15.2 percent.
3. The study finds that the relationship explained between promotional strategy and
sales growth of small firms is 19.9 percent. Variables of promotion strategy like
promotional method and trade promotion methods have positive influences on the
sales growth of small firms. It is also found that relationship explained between
promotional strategy and market share of small firms is 36.6 per cent.
Promotional method adopted and trade promotion methods have positive
influences on the market share of small firms. As far as large firms are
considered, the relationship explained between promotional strategy and sales
growth is 35.7 percent. It is found that variable of promotional strategy like
advertising medium has a positive influences on the sales growth of large firms.
The relationship explained between promotional strategy and market share is 33.5
percent. Trade promotion methods have a positive influence on the market share
of large firms.
4. It is found that the relationship explained between distribution strategy and sales
growth and distribution strategy and market share is very poor, which is 4.10
percent and 2.40 per cent respectively. Distribution strategy has a positive impact
on the sales growth and market share of small FMCG manufacturing firms of
Malwa region. For large firms, it is found that the distribution strategy adopted by
large FMCG manufacturing firms of Malwa region has a negative impact on their
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sales growth and market share which is explained by 11.1 and 15.9 percent of
relationship.
5. Competitive strategy followed by small FMCG manufacturing firms of Malwa

region has positive influence on their sales growth and market share which is
explained by the relationship of 18.8 percent and 11.9 per cent respectively. For
large firms, it is found that the relationship explained between competitive
strategy and sales growth is 20.3 percent and between competitive strategy and
market share is only 10.2 percent. Competitive strategy adopted by large FMCG
manufacturing firms of Malwa region has a significant negative impact on their
sales growth and market share
6. The study found that the relationship between marketing mix strategy and sales
growth of small firms is explained by 32.7 percent. Variables of marketing
strategy like product strategy and competitive strategy have positive influences on
the sales growth of small firms. The relationship between marketing mix strategy
and market share is explained by 16.8 percent. Variable of competitive strategy
and promotional strategy have positive influences on the market share of small
firms. For large firms, the relationship explained between marketing mix strategy
and sales growth and between marketing mix strategy and market share is 29.4
percent and 27.8 percent respectively. It is found in the study that pricing strategy
and competitive strategy has a positive influence on sales of large firms and
pricing strategy and promotion strategy has a positive influence on market share
of large firms.
8.2.3 Investment Priorities, Strategies for reducing cost and enhancing
quality and priorities for developing competencies.
1. The study finds that both small and large firms are giving highest priority to
“automation of processes” and “Research & Development” and least priority for
“information technology applications” for future investments.
203
manufacturing firms with respect to various strategies being considered in the
study for reducing cost and improving quality. For both small and large firms
“Automation of operation” and “Improvement in process capability” are found as
the strategy to reduce cost and enhance quality.
manufacturing firms with respect to various strategies for developing
competencies. “Management of quality” received highest attention in terms of
developing competencies by small firms. Large firms have given highest attention
to “new product development”.
8.2.5 Profile of assets and resources of FMCG manufacturing firms.
1. It has been found in the study that both small and large FMCG manufacturing
firms posses tangible and intangible resources. Small firms seem to be strong in
intangible resources while large firms are strong in both tangible and intangible
resources. We can say that large firms are definitely at more advantage than small
firms with higher level of agreement in all types of resources. And it is reflected
in their respective strategies for developing competency.
8.3 Discussion:
8.3.1 Functioning of FMCG manufacturing firms of Malwa region

Limited resources put constraints on options available to small firms. Large firms are
endowed with competitive resources. Small firms have to carefully evaluate their
potential marketing strategies to identify competencies. The study opines that small
firm's size and lack of resources limit its ability to compete with large firms at
national level and enter the international market. Hence more small firms are found
to be operational at state level. No association is found between size of the firm and
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its years of establishment. As found in the study, more large firms are public owned
as compared to small firms which are majorly sole proprietary firms. Large firms
prefer to control rather than being controlled.
FMCG sector is characterized with very low entry barriers resulting in stiff
competition and often low margins, therefore the entry of new firms and increase in
number of rivalry firms will definitely affect all firms whether small or large. But
because of inherent nature of small firms, the threat is more for small firms as
compared to large ones. It is also found that environment presents similar
opportunities to both small and large firms and infact the sources of competitive
strength are also similar for large firms. It can be concluded that as far as functioning
of small and large FMCG manufacturing firms of Malwa region is considered, it is
found to be similar.
8.3.2 Marketing Strategies adopted by FMCG manufacturing firms of

Malwa region
In product, it is observed that small and large FMCG manufacturing of Malwa region
have adopted similar strategies in terms of no. of product lines, no. of varieties
offered and the packing sizes. Thus both small and large firms are offering variant
products in order to cater the diverse needs of customers. Small firms are offering
product direct to end user. They can work on developing linkages with other
manufacturers also. In pricing, small firms solely rely on what are perceived to be
industry norms for guidance, irrespective of their own firms’ individual
circumstances. Both small and large FMCG manufacturing firms of Malwa region set
prices on the basis of cost and have overlooked what market is prepared to pay. But
customers associate the product and quality with the cost he is bearing and not the
firms’ cost. The findings are consistent with (Ratnatunga and Ewing 2005). Any cost-
based approach makes the assumption that the consumer is interested in the costs
incurred by the marketer whereas, in reality, the consumer is only concerned about
his/her own costs.
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Small firms do not prefer market skimming method for fixing the price. This method
is preferred by large firms due to strong product feature, uniqueness, good quality
and strong financial support. They can charge higher price relative to their
competitors. Small firms are also preferring bundle pricing method as they can
promote their other products also. By offering bundle of products, customers are
made to believe that they are getting high value for their money.
Small firms have adopted traditional methods of communication, which are now
becoming out dated. These methods are not able to fulfill all the requirements of
today’s consumer and marketer. Small firms cannot afford a long channel of
distribution but again the selection of distribution channel depends on the type of the
product and the market also. By adopting short channel, small firms avoid the
middlemen cost and offer product at a low price as compared to their competitors.
Large firms have a broader market to serve; hence large firms have a long channel of
distribution.
8.3.3 Effectiveness of strategies on performance of FMCG manufacturing

firms of Malwa region
It is observed that the product strategy adopted by small firms is more effective in
increasing the sales growth than market share of these firms. It is opposite in case of
large FMCG manufacturing firms where the product strategy adopted by them is
effective in increasing the market share. Both small and large firms need to devise
their strategy regarding the number, sizes and variety of products offered. The
pricing strategy adopted by small and large FMCG manufacturing firms is found to
be effective in sales growth and increasing market share. But firms need to work on
the methods for fixing the prices. Promotional strategy adopted by small FMCG
manufacturing firms is effective in increasing market share as against sales growth.
Employing sales force for promotion and trade promotion methods are positively
influencing both small and large firms. They need to devise the sales promotion
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methods adopted. As far as distribution strategy is concerned, both small and large
firms need to reconsider their distribution channel. Competitive strategy adopted by
small firms is niche strategy, which is to seek selected market is positively
influencing its market share and sales growth. But the strategy adopted by large firms
is negatively influencing the sales growth and market share. Small firms need to
work on pricing, promotion and distribution strategy whereas and large firms need to
consider promotion, distribution and competitive strategy for sales growth and
increasing market share.
8.3.4 Strategies for reducing cost and enhancing quality, priorities for
developing competencies and future investment priorities
It is observed that small and large FMCG manufacturing firms have Research and
Development and automation of processes as their investment priority. Small firms
are still not giving much priority to marketing activities, Human Resource
Development and Information Technology Applications. The findings are consistent
with the previous findings which found that small firms invest proportionately less on
sales training than larger firms, computer usage characteristics are different in
organisations of different sizes, and there is direct relationship between the size of
organisations and the percentage of those organisations in which ERP has been
implemented. It is also observed that strategies for reducing cost and improving
quality are similar for small and large FMCG manufacturing firms. The areas of
competency development for small and large FMCG manufacturing firms are found
to be different.
8.3 Policy Implication:

From a policy perspective, knowledge of functioning of small and large FMCG
manufacturing firms is important. Recognizing the important contribution of both
types of firms to our economy, this study investigates the strategies for growth and
207
competitiveness pursued by small and large firms to find out whether they differ.
This study is of significant importance to the marketing literature as it will present an
in-depth understanding of what marketing strategies are being adopted by different
FMCG manufacturing enterprises established particularly in Malwa region. It will
help to understand and analyze their marketing strategies and its impact on their
respective performances. The study contributes with profound understanding of the
role and practices of marketing in various FMCG manufacturing enterprises and,
thus, of the development of marketing theory with reference to this context. The
study will help FMCG manufacturing enterprises of various categories in framing
differentiated marketing strategies, sustain product access, drive market creation and
strengthen sales and marketing capabilities. The study provide understanding of the
concepts presented so as to generate information that every firm can use and come
up with plans and designs for sustaining and competing in the current business
environment. The study is of significance importance to government so as to amend
and create policies for the growth of FMCG manufacturing firms of Malwa region.
These findings will be of great value for small firms from other regions in
formulating their long-term strategies. In this ever changing market scenario, findings
of this study and its implications for developing various competencies and for
making investment decisions will help firms in developing strategies for long-term
competitiveness.
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CHAPTER-9
SUMMARY OF
CONCLUSIONS AND
SUGGESTIONS
9.1 Introduction
9.2 Functioning of FMCG Manufacturing Firms of Malwa Region
9.3 Marketing Strategies adopted by FMCG Manufacturing Firms of
Malwa Region
9.4 Effectiveness of strategies on performance of FMCG
Manufacturing Firms
9.5 Investment Priorities, strategies for reducing cost and enhancing
quality, priorities for developing competencies.
9.6 Asset Resource Profile
9.7 Suggestions/Recommendations
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CHAPTER 9: SUMMARY OF CONCLUSIONS AND
SUGGESTIONS
9.1 Introduction:
The present study is based on a survey of small and large firms. This study has
investigated the functioning of small and large FMCG manufacturing firms of Malwa
region, opportunities and threats faced by these firms, sources of their competitive
strength and marketing strategies adopted by them. A comparison has been made
among small and large to determine whether there exist any difference between small
and large firms and if so, whether these differences have any impact on their
respective performances. The study increases understanding of small firms by
permitting comparisons with large firms in one single study to find out whether the
marketing strategies followed by small firms are distinguishable from large firms’
strategies. The study has also tried to find the impact of different variables of
product, pricing, promotion, distribution and competitive strategy on performance of
small and large FMCG manufacturing firms.
9.2 Functioning of FMCG Manufacturing Firms of Malwa Region:
1. It is concluded that most of the large firms are operational at international level,
whereas most of the small firms are operational at state level. Majority of the
small firms have been established for around 20 years and large firms for more
than 30 years. Maximum small firms are sole proprietary firms and maximum
large firms are public limited firms. Most of the small and large firms reported
that they are not a subsidiary of any other firm. It is also concluded that small and
large firms differ with respect to its area of operation and type of business
ownership whereas no significant difference is found with respect to its years of
establishment.
210
2. It is concluded that “large domestic market” presents an area of high opportunity
for small firms whereas for large firms, “export potential” is identified as an area
of the high opportunity. “Rising income levels” do not present an area of high
opportunity for both small and large firms. Small and large firms do not differ
with respect to various opportunities being considered in the study.
3. It is concluded that “threat of new entrants in the market” and threat of “increase
in the number of rivals” are the major threats being faced by both small and large
FMCG manufacturing firms of Malwa region. And firms do differ significantly
with respect to various threats being considered in the study.
4. It is concluded that “Social networks” followed by “knowledge resources” and

“legal resources” are perceived as competitive strength by small firms. These are
similar for large firms also. In terms of all types of resources, large firms are
definitely at more advantage than small firms. Small and large firms have
significant difference with respect to various sources of competitive strength.
Small firms seem to be strong in intangible resources while large firms are strong
in both tangible and intangible resources.
9.3 Marketing Strategies adopted by FMCG Manufacturing Firms of

Malwa Region:
marketing objectives in the target market. The marketing mix in general includes 4Ps
they are Product, Price, Place and Promotion and marketing strategy is based on
these 4Ps.
1. Majority of the respondent firms belong to food and beverages segment. It is

concluded that there is an association between the size of the firm and the nature
211
of product being offered but no association is found between size of the firm and
number of products firm offers, number of varieties of product offered and
number of packing sized offered.
2. It is concluded that both by small and large firms have made changes in the
product to improve the quality and also to meet the market demand or customer
need. Firms have not made changes because of the competitors. It is observed that
both small and large firms do not prefer piece to piece basis of replacement but
the percentage of total bill method.
3. The success in marketing depends on the pricing strategies adopted by the firms
because customer builds strong association between price and quality. It is
concluded that both small and large FMCG manufacturing firms sets prices on the
basis of cost plus and not on the basis of competition.
4. It is concluded that small firms do not prefer market skimming method which is
found to be mostly preferred by large firms. Both small and large firms equally
prefer market penetration method. Small firms also prefer bundle pricing method
for fixing the price as they can promote their other products also and this is again
the sales promotion method employed by small firms.
5. It is concluded that both small and large firms are offering single price to their
entire customer and they do not differentiate prices geographically. In this regard,
the behaviour of small and large firms is found to be similar.
6. Promotion is one of the variables through which information regarding products

or services is being communicated to customers to change their attitude and
behaviour. It is concluded that majority of the small firms are spending very little,
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less than 5% of price, on promotional activities whereas large firms are spending
a bit more, 5-10% of price, than small firms on promotional activities.
7. It is concluded that the main source of promotion used by both small and large
FMCG manufacturing firms is their sales force and no significant difference is
found between small and large firms with respect to advertising as a promotional
media. It can also be concluded that small firms are adopting traditional and cost
effective methods for promotion as compared to their large counterparts. And
there is a significant difference between small and large with respect to various
advertising mediums considered in the study.
8. It is concluded that there is high response of small firms towards word of mouth
publicity, pamphlets and posters, banners/hoardings/billboards,
newspapers/magazines. A moderate response is observed for wall paintings and
audio/video on wheels. A below moderate response is observed for television,
radio and websites. Large firms reported a high response towards
banners/hoardings/billboards, word of mouth, television and websites. A
moderate response by large firms is towards radio and audio/video on wheels. A
below moderate response is observed towards pamphlets, posters, newspaper and
magazines.
9. It can be concluded that small firms are adopting traditional and cost effective
methods for promotion as compared to their large counterparts. Significant
difference is also found between small and large firms with respect to various
advertising mediums such as newspaper/magazine, pamphlets/posters, radio,
television and websites. Small firms are using newspapers, magazines, pamphlets,
and posters more as compared to large firms and large firms are using radio,
television and websites more as compared to their smaller counterparts.
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10. Sales promotion refers to many kinds of incentives and techniques that are
directed towards consumers, traders and sales force with the intention to increase
sales in short term. It is concluded that small and large firms do not differ
significantly with respect to sales promotion method such as quantity off/extra.
But they do differ significantly with respect to buy one get one free,
premiums/complementary/free gifts, price off/discounts and free trials. It is
concluded that Price off/discounts is offered more by small firms whereas
premiums/complementary/free gifts and buy one get one and free trails are
offered more by large firms.
11. It is concluded that small and large firms do not differ significantly with respect
to various trade promotion methods such as buying and advertising allowances,
bonus packs, trade discounts, credit sales, buy back guarantee. They differ
significantly with respect to sales contests and sponsorships.
12. Distribution is an important dimension of FMCG marketing. FMCG distribution

has the maximum channel partners, distributors, dealers, wholesalers, retailers,
stockiest as its major participants. These are the intermediaries between
manufacturer and consumer. It is concluded that small and large firms differ
significantly with respect to the distribution strategy adopted by them.
13. Competitive strategy helps to search for a favorable competitive position in an

industry. It is concluded that small firms seek to serve selected individual
customers within the total market and are least focused to differentiate their
products from competitors in the market. On the other hand, large firms are
focusing more on differentiating their products from competitors in the market
and are least focused to be the lowest cost producer in the industry. It is
concluded that small and large firms do differ significantly with respect to all the
three competitive strategies, that is, focus strategy, differentiation strategy and
214
low cost strategy. Thus it may be concluded that small and large have adopted
different competitive strategies.
9.4 Effectiveness of strategies on performance of FMCG Manufacturing

Firms of Malwa Region:
1. It is concluded that changes in the product and replacement policy have positive
influences on the sales growth and replacement policy has positive influences on
the market share of small firms. It is also concluded that, for large firms, variables
of product strategy show a positive tendency towards sales growth and reasons for
making changes in the product and no. of variety in which product offered have
positive influences on the market share of large FMCG manufacturing firms of
Malwa region.
2. It is concluded that bases for setting prices have positive influences on the sales
growth of small firms. Number of prices offered has positive influence on the
market share of small firms. For large firms, it is concluded that bases for setting
prices have positive influences on the sales growth of large FMCG manufacturing
firms of Malwa region. It is also concluded that all the variables of pricing
strategy are showing a positive tendency towards market share of large firms
3. The study concludes that variables of promotion strategy like promotional method
and trade promotion methods have positive influences on the sales growth of
small firms and promotional method and trade promotion methods have positive
influences on the market share of small firms. As far as large firms are
considered, it is concluded that advertising and promotional media has a positive
influences on the sales growth of large firms and trade promotion methods has a
positive influence on the market share of large firms.
215
4. It is concluded that distribution strategy has a positive impact on the sales growth
and market share of small FMCG manufacturing firms of Malwa region. For large
firms, it is concluded that the distribution strategy adopted by large FMCG
manufacturing firms of Malwa region has a negative impact on their sales growth
and market share.
5. Competitive strategy followed by small FMCG manufacturing firms of Malwa

region has positive influence on their sales growth and market share. For large
firms, it is concluded that the competitive strategy adopted by large FMCG
manufacturing firms of Malwa region has a significant negative impact on their
sales growth and market share.
6. The study concludes that the variables of marketing strategy like product strategy
and competitive strategy have positive influences on the sales growth of small
firms. Variable of competitive strategy and promotional strategy have positive
influences on the market share of small firms. It is also concluded that pricing
strategy and competitive strategy has a positive influence on sales of large firms
and pricing strategy and promotion strategy has a positive influence on market
share of large firms.
9.5 Strategies for reducing cost and enhancing quality, priorities for
competency development and future investments
It is found in the literature that small firms face many problems due to shortage of
finance, skilled manpower and advance technology. Therefore their strategy should
match up with the organization’s available resources. Improving quality and reducing
costs are identified as critical success factors for all type of organizations all over the
world.
216
1. The study concludes that “automation of operation” is the strategy for small firms
to reduce cost and enhance quality followed by “Improvement in process
capability” and “Introduction of quality improvement methods; TQM and quality
circle”. Strategies are found to be similar for large firms also.
2. It is concluded that small and large FMCG manufacturing firms differ

significantly with respect to the “introduction of quality improvement methods;
TQM & quality circle”, “maintenance of product and product design” and
“reduction of rejection/rework” as a strategy for reducing cost and improving
quality. It is also concluded that small and large firms do not differ significantly
with respect to “improvement in process capability” and “automation of
operation” as a strategy for cost and quality.
3. Competitive priorities represent a set of tasks that should be performed in order to

support the business strategy. It is concluded that “management of quality”
received highest attention in terms of developing competencies by small firms
followed by “use of customer to define quality standards” and “new product
development”. Similarly large firms have given highest attention to “new product
development” followed by “training and development of employees” and
“management of quality”.
4. It is concluded that small and large firms differ significantly with respect to “new
product development”, “training and development of employees”, “use of
information to optimize decisions”, “introduction of new technology” as a priority
for developing competency. It is also concluded that these firms do not differ
significantly with respect to “management of quality” and “use of customer to
define quality standards” as a priority for developing competency.
217
5. The study concludes that small firms are giving maximum focus on “automation
of processes”. It is also concluded that now small firms are giving due attention to
Research & Development, marketing activities and human resource development
efforts which were earlier was a neglected area.It is concluded that large firms are
giving maximum attention to “Research & Development” and “automation of
operation”.
6. It is concluded that small and large firms differ significantly with respect to
“marketing activity”, “research and development”, “human resource
development”, “automation of operation” and “information technology
applications” as their future priority for investment.
9.6 Asset-Resource Profile

Strategy is concerned with matching a firm’s resources and capabilities to the
opportunities that arise in the external environment. It is concluded that both
small and large FMCG manufacturing firms posses both tangible and intangible
resources. Small firms seem to be strong in intangible resources while large firms
are strong in both tangible and intangible resources. The study also concludes that
small and large firms differ significantly respect to their profile of asset and
resources. It can be concluded that large firms are definitely at more advantage
than small firms which I reflected in their respective strategies for developing
competency.
9.7 Suggestions/Recommendations:
1. Firms should develop their strategies effectively after analyzing business

environment in terms of strengths, weakness, opportunities and threats.
218
2. Small firms should work on expanding their area of operation. As export potential
is an opportunity for these firms, simplified export procedures for small firms can
be very helpful.
3. Small firms usually fail to consider the competitive reactions of the larger firms
and hence they should gather and use the information for making decision.
Conducting regular market research would be of great help to these firms.
4. Both small and large firms need to work on their branding strategy. Product
branding facilitates one firm to be chosen over another by just creating a branding
image. It is found that small firms are selling their product under the brand name
but the concept of branding is still at a nascent stage for these firms. FMCG
products are low involvement products with low product differentiation. Firms
need to create high brand awareness in order to include their brand into
consumer’s preference.
5. Promotional strategy has a significant impact on firms’ performances, so both
small and large firms should put on more efforts to make their promotions more
effective. Large firms can promote through retailer or distributor.
6. Traditional methods of advertisement are becoming out dated. Modern methods
of communication are much interactive. Online methods of communication are
able to generate more customized messages. It is known fact that there is high
growth rate in the internet population; firms should focus on this dimension also.
7. Use of innovative communication channels (e.g. Internet, mobile marketing or
people – word of mouth, i.e. WOM) or use of classical channels in an innovative
way, will help small firms in this competitive environment. Word-of Mouth
approach can be more cost-efficient than classical advertising for small
companies so that they can aim at target groups that are often not accessible via
TV or print.
8. Firms are offering single price to their entire customer. They can follow product
line pricing which enable them to capitalize on different prices for consumers and
219
distributors. Firms are not setting price on the basis of what market is prepared to
pay and they must consider this aspect. The price could be formulated according
to the consumer value where customers decide how much to pay for the product.
9. Small firms are focusing less on quality improvement aspect. By improving
quality they can command a higher price for their products. Small firms need to
focus on offering unique products. This uniqueness is not necessarily to be a
substantial in the development, it is important that the customer can feel
innovation.
10. Assisting small firms with the introduction of new technologies and technological
innovation will enable them to achieve economies of scale; establishing training
centers for human resource development, promoting strategic alliances with R&D
institutions, universities and other enterprises at national, regional and
international levels can help small firms.
11. Attaining superior performance in handling customers would benefits small firms
and it does not cost much. Building clientele is the best way of keeping customers
loyal to small firms.
12. Large firms focus more on the importance of employees than those of small firms.
Large firms perceive skilled labour to be more important than small firms and
more large firms than small firms offer their employees’ formal training.
Government training programs could, therefore, be an important source of help
these small firms.
13. Small firms should develop competencies for continuous cost reduction,
improvement of product quality, and ability to reduce delivery lead time. They
should devote their resources for IT applications, training of employees, and
research and development to improve their competitiveness at global level. Small
firms could benefit from exploring the potential for linkages with other firms. In
this area, government can help by facilitating such linkages at both the national
and international level.
220
14. Government should create growth conducive environment, necessary
infrastructural support, and should provide incentives to make small firms
globally competitive for sustainable growth.
Conclusion:
It is concluded that small firms need to work on pricing, promotion and distribution
strategy whereas large firms need to consider promotion, distribution and competitive
strategy for sales growth and increasing market share. From the study it raises
questions that is it possible or even feasible to derive a unified strategy for FMCG
manufacturing firms as FMCG itself is not homogenous group. The results from the
regression analysis shows that though there is an impact of strategy adopted on
performance of firms but the relationship explained is very low.
*****
221
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222
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*****
236
ANNEXURE
237
ANNEXURE-1
Dear Respondents,
This questionnaire is being executed in fulfillment of the Doctor of Philosophy Degree at Devi
Ahilya University, Indore. The objective of this questionnaire is to determine and compare the
marketing strategies adopted by FMCG manufacturing firms of Malwa region. This interview will be
treated with the strict confidentiality. The information gathered from this questionnaire will be used
purely for research purposes. Thank you for taking the time and effort to complete this questionnaire.
Your cooperation is greatly appreciated
Anuradha Pathak
Research Scholar
PART A GENERAL INFORMATION
Name & Address of the Firm: _________________________________________________

Size of the Firm:
Small Medium Large
Category of the Product:
Food & Beverages Household Care Personal Care
Activity Area:
Regional State National
International
Foundation Years:
Less Than 10 Years 11-20 Years 21-30 Years
More Than 31 Years
Type of Business Ownership:
Private Public Cooperative
Family Owned Partnership Sole Proprietorship
Is your firm a subsidiary of another firm? Yes No
PART B
Please indicate your agreement or disagreement for each statement on below mentioned
scale where 1- Strongly Disagree; 2-Disagree; 3- Neutral; 4- Agree; 5- Strongly Agree
Opportunities to your business. 1 2 3 4 5
Low Category Penetration at present is an opportunity
Modern Retail is an opportunity
Untapped rural Market is an opportunity
Rising Income levels is an opportunity
Large Domestic Market is an opportunity
Export Potential is an opportunity
Critical threat to the future of your business. 1 2 3 4 5

There is a significant threat that new firms will enter the market
There is a significant threat that substitute products or
238
technologies will enter the market
There is a significant threat that number of rivals will increase in
the market
The bargaining power of suppliers to the industry is strong
The bargaining power of buyers of the industry is strong
Competitive Strength of your business 1 2 3 4 5

Physical resources (raw materials, machinery, production,
storage, distribution facilities) is our strength.
Access to human resources (skills, knowledge, commitment and
vision of staff) is our strength.
Financial resources (cash reserves, access to financial support) is
our strength.
Legal resources (firm contracts with suppliers, customers,
licenses, patents, trademarks) is our strength.
Organizational resources (internal mgmt. planning and control,
accounting procedures, leadership) is our strength.
Knowledge resources (knowledge of market, customer needs,
awareness of competitors, knowledge of relevant technology,
traditional designs, processes and products) is our strength.
Social networks (links with family, friends; contacts in the
community, with local government officials) is our strength.
No. of product lines you deal in:

One Two More than two
No. of varieties of your product you produce:
One Two Three Four
More than four As per requirement
No. of sizes in which the product is supplied (weight wise):
One Two Three Four
More than four As per requirement
Nature of the Product Offered
For end user For other manufacturer
For both end user and other manufacturer
Do you sell your product under any Brand name? Yes No
If yes, name the brand________________________________________________________
Is your product registered? Yes No
On an average what is the percentage expenditure of your price on promotional
activities:
Less than 5% 5-10 % 10-15 % above 15%
239
Below mentioned are some statements related to marketing strategy, please indicate your
agreement or disagreement for each statement on below mentioned scale where 1-
Strongly Disagree; 2-Disagree; 3- Neutral; 4- Agree; 5- Strongly Agree
Reasons for making changes in the product, if any 1 2 3 4 5

Firm have made changes in the product because of competitors
Firm have made changes in the product because of Market
Demand/Customer Need
Firm have made changes in the product for improvement in quality
Replacement Policy 1 2 3 4 5
Piece to piece basis of replacement is preferred
Percentage of the total bill is preferred
Bases for setting prices 1 2 3 4 5
We set prices on the basis of costs of producing plus a fixed margin
for profit
We set prices based on what the market is prepared to pay
We set prices on the basis of uniqueness of our products.
We set prices on the basis of competitors’ price
Price fixation method adopted by the firm. 1 2 3 4 5
Market Skimming method is employed for fixing the price
Market Penetration method is employed for fixing the price
Bundle Pricing method is employed for fixing the price
Prices offered to customer segments 1 2 3 4 5
We offer single price to all our customers
We offer two or more prices to our customers
Differentiation of prices area wise 1 2 3 4 5
We differentiate prices in rural/urban area in the district
We differentiate prices within/outside the district
We differentiate prices within/outside the state
Promotional Strategy 1 2 3 4 5
We use advertising to help sell our products
The main source of promotion we use is our sales force
We promote our product through retailer/distributor
Advertising & Promotional Media adopted (% expenditure wise) 1 2 3 4 5
Newspaper/Magazine
Pamphlets/Posters
Wall Paintings
Banners/Hoardings/Billboards/Danglers
Radio
Television
Websites
Audio/Video on wheels
Word of Mouth
Sales promotion method employed for consumers 1 2 3 4 5
240
Buy One Get One is employed
Premiums/Complementary/ Free Gifts/Coupons is employed
Price Off/ Discounts is employed
Free trials is employed
Quantity Off/Extra is employed
Trade promotion method employed for retailers. 1 2 3 4 5
Buying/ Advertising Allowance is preferred
Bonus Packs is preferred
Trade Discounts is preferred
Credit Sales is preferred
Buy Back Guarantee is preferred
Sales Contests is preferred
Sponsorships is preferred
Distribution Channel adopted 1 2 3 4 5
Producer- Retailer- Consumers is the preferred channel
Producer- Distributor- Retailer-Consumer is the preferred channel
Producer- Distributor- Wholesaler-Retailer-Consumer is the
preferred channel
Competitive Strategy followed by firm 1 2 3 4 5
We seek to serve selected individual customers within the total
market
We seek to differentiate our products and services from competitors
in the market
We aim to be the lowest cost producer in our industry
Performance of the firm in past three years 1 2 3 4 5

Firm’s total sales growth has increased
Market share has increased
PART C
Below mentioned are some statements related to various strategies for reducing cost and
enhancing quality, competency development and priorities for future investment. Please
indicate your agreement or disagreement for each statement on below mentioned scale
where 1- Strongly Disagree; 2-Disagree; 3- Neutral; 4- Agree; 5- Strongly Agree
Strategies for cost and quality 1 2 3 4 5

Intro. of quality improvement methods; TQM and quality circle
Improvement in process capability
Maintenance and product design
Reduction of rejection/rework
Automation of Operation
Priorities for developing competencies 1 2 3 4 5
241
New product development
Training and Development of employees
Management of quality
Use of information to optimize decisions
Use of customer to define quality standards
Introduction of new technology
Investment Priorities 1 2 3 4 5
Marketing Activities is our priority for investment in next three
Research & Development is our priority for investment in next three
Human Resource Development is our priority for investment in next
Automation of processes is our priority for investment in next three
Information Technology Applications is our priority for investment
242
ANNEXURE-2
Reliability Test for the scale
Reliability Statistics
Cronbach's
Alpha N of Items
0.683 83
243

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A COMPARATIVE STUDY OF MARKETING

STRATEGIES OF FMCG MANUFACTURING IN

SUPERVISOR CO-SUPERVISOR SUBMITTED BY

SUPERVISOR CO-SUPERVISOR SUBMITTED BY

Dr. R.K. Patra

To the best of my knowledge and belief the thesis:

i. embodies the work of the candidate herself

Place: Indore Dr. Hitendra Bargal

Dr. Manasranjan Dashmishra

Postal Address: (Anuradha Pathak)

Firstly, I would like to thank my supervisor, Dr. Hitendra Bargal, Professor,

I express my heartfelt gratitude to my Co- Supervisor Dr. Manasranjan

I express my profound gratitude to Dr. R.K Sharma, Director (UG), Prestige

I would like to thank Dr. R. K Patra, Director, Shri Vaishnav Institute of

Since 1991, initiation of liberalization, privatization, and globalization, brought

In chapter five, a comparison of marketing strategies of small and large firms is

Table No. Name of the Table Page

Figure No. Name of the Figure Page No.

Industrialization has always been an important driver of economic growth and

1.2 Indian FMCG Sector:

The Indian FMCG landscape is comprised of three well-identified sets of players

1.3 FMCG Segment Overview:

The size of the fabric wash market is estimated to be $1 billion, household

1.4 Advantage to India:

1.5 Significance & Contribution of FMCG Sector:

1.6 Conceptual Framework:

1.6.1 Definition of Micro, Small & Medium Enterprises

Table N0- 1.1 Classification of Micro, Small and Medium enterprises

[Investment in Plant and Machinery/Equipment (Excluding Land and Building)]

1.7 Problems of Small Scale Industries

The Small-scale industries find themselves at a loose end in competition with

1.8 Statement of the Research Problem:

The current market scenario is characterized by strong competition, speed and

1.9 Rationale of the study

1.10 Significance of the Study

This attempt will bring marketing strategies of various FMCG manufacturing

1.11 Outline of the Thesis

This study is divided into nine chapters, which are as follows:

Chapter One- Introduction presents an overview of Indian FMCG sector,

Chapter Two- Review of Literature presents review of about 180 research

Chapter Three- Research Methodology discusses the methodology of the study

Chapter Four- Functioning of FMCG Manufacturing Firms deals with the

Chapter Five - Marketing strategies of FMCG manufacturing firms compares

Chapter Seven - Strategy deployment by FMCG manufacturing firms tries to

Chapter Nine - Summary of Conclusions and Suggestions: In this chapter,

1.13 Glossary of Selected Terms

Advertising: Advertising is a paid form of non personal communication of ideas,

Asset: Anything that is of value to an individual. It may be tangible, concrete or

Capabilities: A capability is the firm's ability to strategically deploy its tangible

Competency: A competency is the knowledge, skills, ability, and characteristics

Competitive advantage: Attaining superior strength relative to competitors, by

Differentiation Strategy is an approach under which a firm aims to develop and

Intangible assets: Intangible assets are nonphysical resources that contribute to

Opportunity: Opportunities are those potential possibilities at which the

Performance: Performance refers to the functioning of the organization as a

Quality: Quality is the standard of something as measured against other things of

Relationship marketing: All marketing activities are directed towards

Resources: Firm resources include all assets, capabilities, organizational

Trade Promotion: The schemes, discounts, freebies, commissions and incentives

The empirical analysis has to be built on a comprehensive review of relevant in the

2.1.1 Fast Moving Consumer Goods (FMCG)

American Marketing Association10 defines marketing as the “performance of

2.1.3 Marketing Strategies