BUSINESS ENVIRONMENT SEMESTER III/BBA LLB

“IMPACT OF STRATEGIC ALLIANCES ON CONSUMER

PURCHASE BEHAVIOUR IN THE FMCG SECTOR”

Submitted to:

Dr. Karishma Desai, NMIMS school of law.

Submitted by:

Bhumika Makhija

SY BBA LLB

Div.- D Roll No. 001

SAP ID- 81022100001

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 TABLE OF CONTENTS

SR NO. TOPIC PAGE NO.

1 ABSTRACT 3

4-5
2 INTRODUCTION

5
3 RESEARCH OBJECTIVES

6
4 HYPOTHESIS BASED REVIEW OF LITERATURE

5
5 RESEARCH METHODOLOGY

7-11
6 DISCUSSIONS
CONCLUSION 11-12
7

12
8 LIMITATIONS OF THE STUDY

13-14
9 REFERENCES

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ABSTRACT

Purpose- The purpose of this paper is to learn about the impact of strategic alliances on
consumer purchase behavior in the FMCG sector. Various other research studies conducted on
this topic, are restricted to the concept and scope of strategic alliances, or its relation with
consumer loyalty, growth and profitability.

Research Methodology- The author's research methodology for composing this research paper
is secondary and non-empirical. Several relevant national and international research papers,
which include Scopus indexed research papers and UGC peer reviewed research papers, were
consulted to write this research paper about the factors influencing impulse buying tendencies in
women consumers, and a few websites were also consulted in order to collect some data that is
very relevant to the topic.

Findings- consumer purchase behavior has 5 stages- recognition, information, evaluation,

purchase and post purchase behavior. Marketers try to have an impact on each of these stages,
strategic alliances of brands in the FMCG sector influence not only the product market but also
the consumer purchase patterns. This research study aims at analyzing the impact of such
alliances on purchase behavior of consumers, discuss the benefits and challenges such alliances
may pose and provide an outlook into notable such strategic alliances in the FMCG sector.

Research Implications – The study provides a preliminary understanding of the impact of

strategic alliances on consumer purchase behavior in the FMCG sector, this is essential to
marketers and brands that are looking at launching strategic alliances and understanding how this
would affect their behavior and in turn sales, for consumers who may unconsciously get carried
away by such alliances to be more mindful while making a purchase.

Originality/ Value- The paper provides a unique contribution on the impact of strategic
alliances on consumer purchase behavior in the FMCG sector. This research paper to a very high
extent is original and unique as it aims to answer the research gap and has only taken references
from published papers.

Key Words- purchase behavior, strategic alliances, FMCG.

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INTRODUCTION

The FMCG (fast moving consumer goods) industry in India is one of the key contributors to the
Indian economy, it accounts for the fourth largest sector in the economy with an increasing 16%
in value during 2021, this growth has been the fastest in nine years primarily propelled by price
hikes and a low base to compare with. The fast-moving consumer goods industry consist of
products that are sold quickly and are consumed at a regular basis, relatively low in cost, this
industry is the classic case of low margin and high-volume business. The industry displayed
strong resilience and grew bigger after suffering the second coronavirus wave. A notable
dependence of India on the local kirana stores was brought to a standstill with the onset of the
pandemic, Mahajan, Y. (2020) attention was drawn to the latest chemistry between global
technology and Indian telecom giants having serious repercussions on the Indian FMCG
industry. What seemed near to impossible pre-pandemic is an evolved new normal today.

Prashar, A. (2022) The FMCG market heavily relies on consumer behavior, further influenced
by several factors. Consumers perceive FMCG products differently and each have a different
attitude towards them, Vibhuti, A. K. T., & Pandey, V. (2014) in the present era of globalization,
needs and wants of consumers change with time, it is necessary to identify these changes in
buying patterns as to successfully be able to determine the relevance of marketing strategies,
review products and services and ultimately serve the goal of customer satisfaction.

Various factors affect consumer purchase behavior in India, these may be categorized as-

a. Personal factors- an individual’s interests and decisions can be impacted by

demographics (age, religion, culture, gender, etc.)
b. Psychology factors- a person’s response to marketing messages and strategies are largely
affected by their perceptions, attitudes and school of thought.
c. Social factors- family, friends, social status, education, media influence, extent of impact
of social media, income etc. are often determining factors for a particular behavior.

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He, Quile, Meadows, M., Angwin, D., Gomes, E., & Child, J. (2020) The emerging digital
transformation in the twenty-first century is rapidly and significantly changing the business
landscape. The fast-changing activities, expectations and new modes of collaboration suggest
marketers new tactics. Strategic alliances as seen as a growing marketing tool in this sector in the
recent years is a joint venture that bolsters a core business strategy, creates a competitive
business, and abates competitors from moving in on a marketplace. It has visibly allowed
companies to achieve more together than individually. Yoojin OH, (2019) Alliances seemingly
also improves consumer awareness of the brand and leads to positive feedback from customers.
This enhances customer purchasing attitude and gives them new marketing opportunities.

RESEARCH OBJECTIVES

1. To analyze the impact of strategic alliances on consumer purchase behavior in the FMCG
sector.
2. To discuss the benefits of such alliances and challenges posed to it.
3. To study notable such strategic alliances in the FMCG sector.

RESEARCH METHODOLOGY

The author's research methodology for composing this research paper is secondary and non-
empirical. Several relevant national and international research papers, which include Scopus
indexed research papers and UGC peer reviewed research papers, were consulted to write this
research paper about the factors influencing impulse buying tendencies in women consumers,
and a few websites were also consulted in order to collect some data that is very relevant to the
topic.

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REVIEW OF LITERATURE

Geleilate, J. M. G., Parente, R. C., & Talay, M. B. (2021) Strategic alliances play an
important role in a firm’s financial performance and management, it also finds a visible
impact on relations with and impact on partners and consumers. Liu, W., Kwong, C. C.,
Kim, Y. A., & Liu, H. (2021) These strategic alliances with notable other companies
seem to be reassuring and play a vital role in consumer purchase behavior. Several
researchers view such alliances as an effective strategic bundle for improving SE’s social
performance and sheds light on the new and developing concepts of SE.Latheera, R., &
Rajangam, P. (2022) Fast moving consumer goods sector is a corner stone of the Indian
economy which touches every aspect of life. FMCG products are frequently consumed by
every section of the society. The aim of consumer behavior is to analyze and understand
the perception of strategies and advertisements and their subsequent impact on the buying
decisions. Singh, K., Sandhu, S., & Ranga, A. (2022) Some notable consumer goods in
India like Unilever, Nestle, TATA, etc. have had some of the most successful strategic
alliances. Alliances in the FMCG sector are near to impossible to fail, the trust on FMCG
brands, new or old are worth a mention and can be used to benefit for marketers trying to
experiment in the sector. This is an identifiable result of Indians dependence on the
sector. Yelamanchili, R. K., Rajagopal, K., Jain, A., & Wukadada, B. (2021) Addition of
a layer of strategic management to existing market strategy will be essential in case of
FMCGs to strengthen brands, build loyalty and impact consumer purchase decisions to
the very core of it.

HYPOTHESIS

1. H0- strategic alliances have no impact on consumer purchase behavior in the FMCG
sector.

2. H1- strategic alliances have an impact on consumer purchase behavior in the FMCG
sector.

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DISCUSSIONS

a. To analyze the impact of strategic alliances on consumer purchase behavior and

firms in the FMCG sector.

Foroohar, (2018) Currently, the strategic environment of business is changing faster than ever,
due to rapid technological evolution, saturation of existing marketplaces and the emergence of
new markets and business models, the growing salience of innovation, globalization of business
on one hand and deglobalization of the market on another. The balance of the global, economic
and political structure is also changing, challenging the strategic vision of many businesses with
regard to their corporative strategies. Over the past three decades, strategic alliances have
attracted substantial amounts of attention from the industry. Xu et al, (2018) The formation of
strategic alliances has been advanced after the globalization and seen as a quick response to
liberalization. This will seemingly lead to ambiguity and competition in the business
environment.

As for the FMCG sector, strategic alliances include the knowledge sharing and expertise
between the associates as well as the reduction of costs and risks in areas such as relationships
with vendors, perception of consumers and new technologies. Khanna, (2018) Such alliances are
rational and response timely to penetrate and make rapid changes in technology and economic
activity. Strategic alliances are contractual relations between two companies to utilize the
benefits of each other, while mutually benefiting too. Vanpoucke, E., & Vereecke, A. (2010)
Customers display a variety of behaviors, these different behavioral characteristics are associated
with alliance success.

The consumer goods sector is one where trust plays an important role from the consumer
perspective, Trust- a belief that somebody/something is good, honest and sincere and will not
harm you. Upamannyu, N., k., & Mathur, G. (2013) When it comes to the relationship between
brand trust and brand affect, it has been concluded that brand trust in FMCG has had a
significant impact on brand affect. Lack of trust of consumers on products in this sector are
directly associated to risk of purchase, making consumers hesitant, alliances on the other hand,

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have gained trust of customers, of the brands entering into an alliance, each have a separate
consumer base where trust has already developed, it is not often that a consumer good brand that
is trusted upon, is not purchased or substituted, strategic alliances therefore do seemingly well
with consumer trust, this instilled trust and age old practice of purchasing what is identified as
trustworthy, a quality product and is an active choice while purchase in turn builds brand loyalty.

Brand loyalty, unlike customer loyalty has no involvement of discounts and offers but is solely
based off affection and trust for the brand. In alliances too, the identified brand is favoured and
in turn leads to an increased sales, alliances also tend to introduce consumers to other brands,
build a trust factor and in turn a larger audience for both the companies involved.

Growth of a brand is possible by the basics of marketing and advertising, the core of any
successful brand still remains to be the consumers, to enter a new market, where awareness is
less, alliances come in handy. Any association with another trusted brand psychologically instills
a trust in another. Customers are of a perspective that if two players of a market are in an ally, it
produces a synergy and technical upgrade of skills, quality and are often ready to pay a higher
price. For non-established companies however, alliances may be treated differently, the absence
of pre-existing trust on a brand/(s) or goodwill seems to be a challenge for the companies to exist
even as an alliance in such cut-throat competition. Consumer purchase behavior in the FMCG
sector is predictable and a large associated with price for quality, certain names that run different
elements in the market and till some extent advertisement.

Studies show, strategic alliances increase a firm’s profitability and performance (Gulati et al.,
(2000). According to Smith et al., (1995), while cooperation and coordination within
organizations and firms were not new in the management and organizational studies, the
emergence of total Quality Management philosophies emphasized more need for cooperation
throughout organizations and between firms. Quality Management practices further result in
knowledge creation, enhances organizational performance resulting in increased profitability
which provide a valuable insight to address learning in strategic alliances. While successful
strategic alliances require systems thinking, a learning culture, knowledge and communication,
changing mental models, joint learning structure and development of learning relationships.
Inkepen (2005), Through a case study with managers it was found that strategic alliances

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resulted in improved problem-solving skills, project management, knowledge and competence of
workers, inter-organizational relationships and stakeholders’ satisfaction.

b. To discuss the benefits of such alliances and challenges posed to it.

He, Quile, Meadows, M., Angwin, D., Gomes, E., & Child, J. (2020) Complex interfirm
relationships have the potential to generate significant benefits from firms, but they can also
include various relational risks.

Benefits:

1. To enter into a new market, where brand awareness is less, strategic alliances ease
such entry.
2. Forming of a strategic alliance is profitable as it results in economies of scale,
provided it is executed properly.
3. An alliance can save a lot of funds which could incur due to research of new products
or manufacturing related research.
4. Sharing of resources can optimize its utility thus leaving less or none of the essential
resources idle.
5. Individual firms may lack knowledge, expertise or technology. An alliance helps aid
the companies with a knowledge base, assist with expertise and technological
advancements.

Challenges:

1. Hidden costs of alliance may not be visible at the face of it and may hamper
profitability when realized.
2. Data confidentiality is at a risk as both participating companies share sensitive
information and can be easily misused.
3. Due to an alliance, a company with a better say in a particular process may lose
control of operation to the stronger company, it may also misuse its position and
deviate from the actual purpose.
4. There is a risk of compromised quality in products and services in case of an alliance.

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 5. The cultural difference may be difficult to contain the newly formed entity, it may
also pose a challenge for employees to determine the actual partnership goals in an
alliance.
c. To study notable such strategic alliances in the FMCG sector.
1. Tata-Starbucks: tata global beverages ltd. and Starbucks coffee company announced a
strategic alliance. The 50:50 joint venture, named TATA Starbucks Limited owns and
operates the popular, “Starbucks coffee” a TATA alliance. The two companies plan to
combine the trust and heritage of tata coffee with the iconic brand image of Starbucks
coffee, which moved to sourcing fresh coffee beans from tata’s Indian facilities. India is
heavily influenced by the west, despite the existence of Indian coffee houses like café
coffee day and Barista, the emergence of Starbucks was high scoped and sure to be
profitable (Harold, 2011). This alliances benefited both the companies mutually, Starbucks
contributed its strong brand image, global outreach, consumer loyalty and specialization in
coffee making skills, while tata provided to Starbucks a huge advantage in the Indian
market, competitive advantage of having the largest integrated coffee plantation
worldwide, association with quality, brand trust and its step-by-step assistance towards
success. This strategic alliance, visibly has proved to be of great success with multiple
outlets, wide consumer base and huge sales.

2. Nestle-General Mills: General Mills and Nestle which came into formation in 1990 as a
50:50 joint venture, is a breakfast cereal market described as a saturated low or no growth
rate. Now transformed into a health, nutrition and wellness company with well diversed
product portfolio in the global market, this brand is seen as one of the largest packed food
company in the world, with focus on nutrition, health and taste. General Mills would lend
its immaculate production efficiency and product innovation to create new offerings, lend
its cereal market expertise and trade its broad portfolio of successful brands with Nestle
for its impact on the Indian market, brand name and channels of distribution to increase
sale, streamline the value chain across the globe, help achieve greater scale economies and
help popularize and plant a breakfast cereal market in India. This merger proved to be of
moderate success and is still finding ways to gain full control over the Indian market.

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 3. Hindustan Unilever-Big Basket: acknowledging the growth of E-commerce in India,
consumer giant, HUL partnered with growing E-Commerce channel, Big Basket. The
major intent behind the alliance lied in availability of HUL products at the click of a
button and reach consumers far and wide. According to Assocham-PwC report, the
alliance is expected to reach a dollars 100-billion mark by 2019 and grow at a rate of 35%
annually. The FMCG king, provided to big basket, an array of FMCG products, pre-built
brand loyalty and consumer base and a premium range of products. Big Basket on the
other hand channelized these premium goods now available from the comfort of one’s
home, a ready growing electronic mode and access to all required technology. This
alliance later joined with several other online payment channels to mow grow into one of
the biggest markets worldwide.

LIMITATIONS TO STUDY

1. Use of secondary data in the paper may not result in desirable outcomes from the paper.
2. Research study contains information and data from reliable sites on the internet, research
papers, journals and articles, which may lead to repetition or overuse of data.

CONCLUSION

Strategic alliances are an increasingly significant core element in many firm’s strategies to
generate and sustain their competitive advantages in dynamic market environments. Alliance is
like a nuptial where there may not be a formal contract and no buying and selling of equity. But,
there are few strictly binding provisions where both partners are stronger and more profitable
together than they are individually. Fast moving consumer goods is the fastest growing industry
today with almost every resident being its user. Consumers play a pivotal role in this industry
and their choices and behavior at the time of purchase are widely dependent upon several
factors.Despite technological advancements and changes the use of this sector doesn’t ever
reduce, infact is only on the rise.

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The aid of another growing firm, technology, social cause, new channels, better developed
products and services and deeper research and development will only help firms in the sector
strive closer to success. These will in turn only boost the confidence of consumers whether with
respect to purchase choices or investment.

Thus, Strategic alliances as tool of strategic management is truly the key for further growth and
development of this and several other industries.

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