International Institute Of Professional Studies

Marketing Strategies and Progremmes Adopted by MNC’s in India According to Indian Culture

Guided by: Submitted by:

Dr. Pooja Jain Ankur Pandey

MBA (MS) 5yrs.

IM-2K8-007

IntroductionIndia is one of the world’s most promising and fastest-growing economies. Many MNCs entered to cash in on the exciting opportunities there. But overall, they have had a mixed performance. Many, who were remarkably successful elsewhere, have failed or are yet to succeed. Indian market poses special challenges due to its heterogeneity, in terms of economic development, income, religion, cultural mix and tastes. On top is the heating competition among local players as well as the leading MNCs. Not all companies have been struggling to understand Indian consumer behaviour. Doing business in India is at a turning point; market entry strategies, for example, that clicked once do not promise success every time. Success in India will not happen overnight; companies need to have an open mind. This requires commitment, management drive and focus on long-term objectives, and proper business models too. They have to invest substantial financial and managerial resources to understand customer’s needs and come up with suitable products.

OPPI Global Sourcing Committee chairperson Alok Sonig said “In the Indian context, working successfully with global sourcing players involves deeper understanding of India around three broad areas - capability, capacity and culture"

UN Secretory Kofi Annan said “We must ensure that the global market is embedded in broadly shared values and practices that reflect global social needs, and that all the world’s people share the benefits of globalization”

As more Indian companies push ahead with their aggressive global growth strategies, many middle and senior management personnel in these organizations are faced with significant challenges. They have to “go global and take charge” in a very short time, and learn how to manage complex businesses on a global scale. They need to acquire the managerial skills needed to deal with varied customer needs and diverse competitive forces; learn to work with team members from different cultural backgrounds; and also learn how to manage the companies that have been acquired through the M&A (i.e. mergers and acquisitions) route.

For the company to compete with established global brands, it requires a deep understanding of local customers’ needs in different markets, and significant investments in brandbuilding over long periods of time.

What leading MNCs do tap into the Indian consumer market ?

Look at how the second best global brands have executed their India strategy.

While global market leaders have proven to be flat-footed and bookish, brands like Reebok, LG, Hyundai and Lee have stolen a march over their arch-rivals by burning the book and thinking on their feet. “Most MNC companies are run by a global manual, but those succeeded in India have shredded this manual and taken the ‘when in India, go local’ approach and developed on local consumer insight to chart their strategy,” reasons marketing consultant Harish Bijoor, CEO, Harish Bijoor Consults. Consider Lee. When it entered India in 1995, there was a very nascent market for branded apparel, much less premium jeans wear. Premium brands like Levi’s chose to play it safe by using the multi-brand outlet route, but Lee chose to go it alone and set up exclusive showrooms. According to market watchers, Levi’s suffered from a brand perception problem because it was clubbed with non-premium brands.

Further, Arvind Brands, which owns the licence for Lee in India, decided to retain ownership of operations for Lee. According to Chakor Jain, head (business development, Lee), Arvind Brands, “Exclusive showrooms and owning the operations added to our costs. However, it also added to the overall customer experience, which we considered most important.”

When Reebok came to India in 1995, it forged alliances with health clubs and fitness centres to create brand awareness. When the retail market matured, Reebok changed focus. Says Subhinder Sing Prem, MD, Reebok India, “On the retail front, we went about opening up new markets beginning with metros and large cities, we swiftly moved into tier II and III towns.” To further establish its brand, Reebok signed up Indian cricketers, while Nike continued showing its international advertisements in Indian media. Today, Reebok has a exclusive retail presence through 400 plus outlets, second only to Bata, while Nike lags behind.

LG’s is the proverbial ‘third time lucky’ story. After two failed joint ventures, it made a re-entry into the Indian market in 1998 all by itself. The other chaebols were on their way here, too, while Phillips and Sony were already well-established. LG began with a rapid national roll-out, mass customisation and products adapted

specifically for Indian markets. It also kept its dealers happy with a wide portfolio and allowed them to cut sweet deals. “Our success in India can be attributed to our ability to focus on empowering people, profit-driven market presence and being an open organisation, with just about all employees having access to the company’s finances,” says LG India’s MD, KR Kim. Today, with over Rs 7,500 crore in sales, LG leads in almost all the categories in consumer durables.

When Hyundai, with a name prone to mispronounciation and virtually no global heritage, entered India in 1998, it signed up Shah Rukh Khan to educate the consumers about the brand. Behind the scenes, the company resorted to extensive market studies and technical camps before coming up with its first offering, Santro, a hatchback with tall boy design. And it had chosen its market well, starting with the small car. To date, Hyundai has stayed true to its strategy and played by the conventional Indian market rules tailored to suit its specific targets.

Cultural Differences and IntegrationGlobal business brings people from different cultures together. The managers need to overcome cultural differences and collaborate with each other, in order to succeed. Another aspect is to understand Cultural sensitivity that means to understand the behaviour and attitudes of personnel from different parts of the world, and develop an operating culture for the team which builds “bridges” across the cultural differences that will inevitably surface. While it is unrealistic to expect that every manager entering the global arena will exhibit all of the above elements of a global mindset, it is important for the manager to recognize that these requirements do exist, and make efforts to develop and strengthen areas where he is relatively weak.

The failure of the Daimler-Chrysler “merger of equals” tells us that cultural integration is a key pre-requisite for global managers to be effective and successful. While there could be several exceptions to the rule, most Indian managers, especially those employed in the brick and mortar industries exhibit some common cultural traits. Here are some examples:

• He is very comfortable with clear, well-defined organization structures, where reporting relationships are explicit, and there is no ambiguity as to who the manager’s “boss” is. The organization is the classic pyramid.

• Compared to simpler organization structures in Indian firms, large global corporations routinely resort to complex matrix organizations to drive their global business strategies. The Indian manager is relatively less effective in (and less comfortable with) matrix organizations, where vertical and horizontal “relationship” lines cut across functions, businesses, and geographies. The resultant ambiguity is something that he finds difficult to manage.

• In spite of the introduction of holistic performance evaluation systems and processes, the average Indian manager is still more comfortable with the traditional concept of “seniority.” Grey hair still matters, in spite of many organizations pushing ahead with meritbased decisions when filling senior positions. This contrasts with the US practice, for example, where age is not allowed to be used even as a criterion in such situations.

• In India, public “face” (i.e., the person’s standing and image among colleagues) is crucial at individual level. Feedback of the negative kind – even when couched in

the most objective terms – is best given behind closed doors, and not in a group meeting. The West is less cognizant of such sensitivities.

• Deadlines and commitments are still reasonably “elastic” – missing a target date for a response by a day or two is not seen as a major issue. In Germany, this would be seen as unprofessional.

As stated earlier, these are generalisations about India, and many of these are getting modified under the relentless pressure of globalisation; but given that these traits are widely prevalent, the Indian manager now “going global” needs to recognize that managerial beliefs and behaviour in other cultures – e.g., in Japan, Germany or the US – are likely to be very different from what he or she has experienced in India.

Once these differences are understood, the Indian manager can work out ways and means of integrating himself into a hybrid “global” culture, where the group goals take precedence over individual differences. Many Indian organizations have now started giving their managers specific training in this vital area of cultural integration, before exposing them to the dynamics of the global business environment. This minimizes the cultural shocks, and pre-disposes the Indian manager to expect and manage cultural differences.

Understanding and Managing Cultural Differences: Models and Tools

When asked to deal with a fuzzy, hard-to-define concept called “culture,” it is natural that the practising manager from India would say, “All this is fine. I am prepared to be culturally sensitive, and adapt my ways in the interests of team-work. But how do I start getting a handle on this vague subject? How do I measure the cultural differences?”Fortunately, considerable research has already been conducted in this area, resulting in the formulation of models and tools to assist the manager. In this article, we will highlight three approaches which share a large degree of commonality in the way they look at cultural differences, organizations, and teamwork.

Approach #1: Geert-Hofstede Cultural Dimensions

Prof. Geert Hofstede (2001) of Maastricht University, based on his research across different countries and organisations (starting with IBM, and extended subsequently to include other organisations), has postulated four cultural dimensions, with a fifth dimension – longterm orientation – getting added to the model at a later stage:

• Power Distance Index (PDI): This dimension deals with the degree to which less powerful members of a society or a group accept, and indeed expect, unequal distribution of power, e.g., “That’s the way it is.”

• Individualism vs. collectivism: Is the individual a lone person, who is expected to look after his interests by his own efforts? Or is he a member of a collective group which looks after its members, in return for loyalty shown to the group ?

• Masculinity vs. feminity: This refers to the distribution of roles between the genders. In “masculine” cultures, there is a significant difference in the values exhibited by men and women, with men being seen as assertive and dominant and the women, modest and caring; in “feminine” cultures, this difference is less stark, with men also showing caring traits.

• Uncertainty Avoidance Index (UAI): This pertains to tolerance for uncertainty and ambiguity; the degree to which a “culture programs its members to feel either uncomfortable or comfortable in unstructured situations.”

• Long-term orientation vs. short-term orientation:This dimension deals with values that people exhibit. Values associated with long-term orientation are thrift and perseverance, whereas those associated with short-term orientation are respect for tradition, fulfilling social obligations, and protecting one’s ‘face.’

Approach #2: Trompenaars and Hampden-Turner’s Cultural Dimensions

Fons Trompenaars and Charles Hampden-Turner (1997) identified several dimensions along which cultures vary. These dimensions can be summarized as follows:

• Universalism vs. particularism: This dimension deals with how people look at actions of others. Universalism depends on specific rules and regulations; particularism, on the other hand, relies more on relationships.

• Individualism vs. communitarianism: This deals with the balance between an individual’s interests and the group’s interests.

• Achievement vs. ascription: Is status something that we get through achievements? Or is it something that is “given” – through attributes such as seniority and hierarchy ? This is the key question in this dimension.

• Neutral vs. affective: Neutral cultures avoid open display of emotions, and try to stay focused on the subject at hand whereas affective cultures use gestures and animated conversations.

• Specific vs. diffuse: People from specific cultures tend to keep business and personal lives separate and distinct. There is very little mixing between the two. Diffuse cultures permit intermingling of the two spheres.

• Internal vs. external: Internally focused cultures are likely to have a strong belief in their own actions, and are resistant to changes induced by the environment; in

contrast, external focus promotes the belief that the environment is the dominant force, thereby encouraging a more ready acceptance of changes and events.

• Time as sequential vs. time as synchronized: Does one see time as something linear (that is, sequential), where discrete elements follow one after the other? Or is it something where many things happen simultaneously? This will determine whether the culture encourages “one thing at a time,” or will permit parallel- processing.

Approach #3: The Cultural Orientations Model from Walker, Walker and Schmitz

Walker, Walker and Schmitz, in their book (2004), Doing Business Internationally, have postulated a “Cultural Orientations Model” (COM), which is a framework for understanding cultural differences between people from different countries and cultures. This model consists of ten cultural dimensions along which the beliefs and actions of different people or cultures can be mapped. Here is a brief description of each of these ten dimensions:

• Environment: This dimension deals with how the person relates to the environment in which he operates. Does the person believe that he has reasonablecontrol over the future, or is it all ‘written’ – decided by a higher force? Is harmony important? Is the environment seen to be full of constraints? And so on.

• Time: Is time seen as something fixed, to be measured and tracked? Is “being on time” of paramount importance? Or is time something fluid, something secondary to higher priorities like taking care of your relationships?

• Action: Is the emphasis more on action that leads to measurable results? Or is it on building relationships and caring for one another?

• Communication: Does the meaning of words depend on the context? Does “yes” mean “yes”? Does silence mean something? Are conflicts dealt with through open communication? Or in an indirect fashion?

• Space: Is space (physical and psychological) seen as public or private? Is the office designed on an “open plan,” or is it full of cabins and cubicles? Do people stand close to each other while talking? Or at a distance?

• Power: Is power driven by hierarchy, or is it more decentralized and equal? How are decisions made? By consensus, or by the boss?

• Individualism: Is a person’s identity determined by individual achievements? Or does the group’s identity over-ride that of the individual? Is loyalty to the group important?

• Competitiveness: Is the individual encouraged to take aggressive action on his own? Or is it a co-operative working style that is valued? Is the reward structure designed to emphasise individual achievements?

• Structure: What is the degree of comfort with change, risk, ambiguity, and uncertainty? Does the culture value predictability and order? Or does it permit some degree of flexibility and chaos?

• Thinking: What is perceived to be more important. The abstract, and the ‘principle’? Or large volumes of hard data? Is the approach holistic, or is it tuned to breaking the issue down to small manageable chunks?

Building BridgesAs mentioned earlier, these three approaches exhibit a fair degree of commonality in the way they look at cultural differences. These models show that people from different cultures think and act differently while operating on the same dimension–e.g., on communication, or time, or status. Once these cultural differences arerecognised and understood, the global manager has a greater chance of succeeding in getting a set of people from different cultures to work together reasonably harmoniously. Lack of sensitivity to deep-rooted cultural differences is likely to result in misunderstandings and diversion of energy into negative directions. The key to success in global business lies in building bridges across the cultural gaps, and not seeking to achieve “one size fits all” homogeneity in the team. The global manager has to collaborate with the team in establishing “cultural ground rules” for day-to-day work that focus on the common tasks and goals, rather than try to eliminate the individual cultural differences. It is a two-stage process: understanding the differences in culture among team members, and then building bridges across the differences. These bridges can be built on a simple, but powerful principle– which is to place the customer’s needs above individual cultural preferences.

Strategies for Going Global: Some Current Indian Examples

While in-depth research output on specific strategies adopted by Indian MNCs is still not available, there are sufficient examples, at company level, to show that Indian companies are fully capable of drawing up and executing strategies that are sensitive to customer needs, culture, brand equity, and teamwork. The Tata Group’s approach to its acquisitions—in terms of cultural integration, branding, and customer focus has been based on very pragmatic considerations. The top management teams at Corus, Jaguar, and Land Rover have been pretty much left intact, with the Tata headquarters getting involved primarily in long-term direction- setting and large investment decisions. The global brands that have been acquired are getting careful nourishment for the long run. There have been no abrupt attempts at implementing drastic changes. Overall, as seen from the outside, the philosophy seems to be one of encouraging continuity and growth, while ensuring adherence to the Tata group’s core values. In the case of Sundram Fasteners, a trend-setter in the auto component industry in India, the approach has been similar. The UK and German companies that have been acquired in recent years have been allowed to retain and strengthen their brands and identities. Fresh investments in equipment have been made where merited, thereby overturning conventional wisdom that such acquisitions are always followed by loss of jobs and “hollowing out” of manufacturing assets. There is continuity in senior management staff. Global customers — whose needs can be met from Sundram Fasteners’ multiple manufacturing units in India, Germany, UK, and China — are being managed as single “accounts” globally, through coordinated marketing and sales efforts. Best practices in operational excellence are being transferred from one unit to the other through horizontal deployment, without implications of superiority or inferiority between countries, companies, and cultures. Bharat Forge, with its headquarters in Pune, is another aggressive player in the engineering industry, with the goal of becoming one of the top players in the global automotive forging industry. The company has made a series of acquisitions in Germany, USA, Sweden, and Scotland, and has also formed a JV in China. The company follows a strategy of “dual-shoring” where its global customers’ needs can be met from at least two of its plants worldwide. This allows the company to satisfy its customers’ requirements with fast, possibly “local” responses, while at the same time meeting the constant demand for more competitive prices.

Impact of Culture at Operational LevelWhile the above instances are examples of clear thinking, planning, and execution at the strategic level, it is important to recognise that individual managers need to be sensitive to each other’s cultural expectations, when working at the operating level on a daily basis. While this might seem like stating the obvious, real-life experience shows that this is not something that comes naturally to operating managers. Since globalisation has been a relatively recent phenomenon in India, most managers have not had the opportunity to get in-depth exposure to different cultures. Correspondingly, the manager from the other culture (say, from Europe or the US or elsewhere) also has had no opportunity to observe and understand how the Indian mind works. This results in a gap, which needs conscious effort from both sides to bridge. The following caselet will make this point clear.

A Real-life Caselet: The Meaning of “Time”

In this example, a manager from a German company had given a project for the development of a new product to his counterpart in the Indian company (in the same group of companies) at a significantly lower cost. The German was getting increasingly frustrated with repeated delays in the delivery date. He took this to mean that the Indian manager was not serious about his commitments, and that he was insensitive to the negative impact that was created with the end customer. In reality, the product was inherently complex, and represented something of a challenge to the Indian team. If the Indian manager were culturally more aware, he would have said, “Look, this job is more complex than what we have done in the past; but I am reasonably confident we can pull it off. Tell your customer this is being attempted in good faith, and that it will take a few iterations before we get it right. We will keep you updated on the progress, and let’s target six months for the whole process to get completed.” Instead, the Indian manager had said “yes” to the project, and had taken on an unrealistic deadline, because he was operating in a culture where people were encouraged to take on difficult challenges. The hard work being put in was considered important; and the slippage of dates – while seen as not good – was not a matter of life and death. Where are the cultural differences? The Indian was comfortable with ambiguity (of the outcome); the German was not. The Indian saw “time” as something fluid and continuous; the German saw a finite date, and a discrete period. The Indian was used to dealing with other customers (Indian), who were, by and large, forgiving of slippages. The German saw his (German) customer walking away. The Indian valued the input,

i.e., the efforts being put in to develop the product; the German was focussed only on the output, i.e., the date of completion. To the Indian, saying “no” or “may be” meant an admission of lack of capability and a perceived loss of “face”; to the German, receiving a “no” for an answer would have been equally acceptable, and more professional. He would have found another source for the product, and got on with his life. Ultimately, the two sides evolved a working method for future instances, by which they agreed to discuss the risks and assumptions explicitly before the start of any new project so that the ambiguity was sharply reduced, and everyone “was on the same page.” The commitment to be made to the end customer was agreed to be held sacrosanct.

Learning from such examples, Indian MNCs can proactively implement cultural sensitization programmes at both ends of the ocean, so that such gaps and problems are minimised, if not avoided altogether. Many specialist organisations, which offer expert training in this relatively new and fuzzy area, have come into existence in recent times. Given that the financial logic for many M&A decisions is based heavily on achieving significant synergies in a short period of time, such training should become a mandatory part of the corporate M &A playbook