Entry Strategies of Multi-nationals

Indian Context
By
S. Ramesh Kumar
M J . Xavier

August 1996

Please address all correspondence to:

Ramesh Kumar/M.J. Xavier
Assistant Professor/Professor
Indian Institute of Management
Barmerghatta Road
Bangalore 560 076
India
Fax: (080) 6644050

ENTRY STRATEGIES OF MULTI-NATIONALS INDIAN CONTEXT

by
Prof. S Ramesh Kumar
Prof MJXavier
Abstract
India with a population of over 920 million people with 300 million of them in the middle
income category, is a country that cannot be ignored by any foreign multinational company. The
hitherto protected Indian market was opened to foreign companies in the year 1992 through the
liberalization policies initiated by the Government of India.In this article some of the unique
characteristics of the Indian market and the entry strategies followed by foreign companies in
different industries are discussed.

ENTRY STRATEGIES OF MULTI-NATIONALS INDIAN CONTEXT

India is a country full of contradictions. There are islands of prosperity where one canfindthe
best of the global products from ice-creams to automobiles; throughout the length and breadth of
the country there are people reeling under poverty and illiteracy. Snake charmers can be found
near the sky scrappers while computers coexist with the common man. While the illiteracy ratio is
as high as 35%, India can also boast of a vary large pool of software professionals and scientific
manpower. Though India is seen as a less developed country, in another sense it can also be
viewed as a giant in the awakening.
Economic Prestroika:
After attaining independence in 1947, India followed a socialistic democratic path with central
planning mechanism. Though the protectionist policy helped India develop its indigenous
industrial base, it also created certain amount of complacency and retarded the growth of the
country. Hence in the year 1992, the Government of India took several steps to integrate India
with the rest of the global economy. The highlights of these steps are (Vasantha, 1992):
1. The Indian Rupee was devalued in two stages against major currencies.
2. A substantial volume of import licensing was eliminated and export incentives were
strengthened.
3. Foreign equity investment was permitted upto 51% in 34 categories of industries. Equity
participation up to 100 per cent was allowed in certain cases.
4. Key changes were introduced infinancialmarkets which enabled the entry of foreign banks in
order to enable the efficiency of the banking sector.
5. Controls on Indian companies raising equity funds in the domestic market were abolished.
6. Gold imports were legalized and a proposal was mooted to float gold bonds.
As a result of the aforesaid measures a number of large global corporation, such as Sony,
AT&T, Coca Cola, Compaq and many others have set up shops in the Indian subcontinent.
The Lucre of Indian market.
According to a report prepared by NCAER (National Council of Applied Economic
Research) there are 65.1 million middle-class households earning more than Rs. 18,000/- per
annum. Out of this 3.7 million earn over Rs. 78,000/- per annum . One million households earn
more than Rs. 1 lakh per year. Per capita income has increased at 5.5% per year through the 80s.
In 1991, the average Indian had a purchasing power equivalent to $1,150 (Rs 35,650) per year
according to the 1993 World Development Report published by the World Bank. This is several
times higher than the India's per capita income $350 (Rs. 10,850/-). In the nineties, through
income growth per capita has fallen to 3.5% annually, the top 1% has had an annual increase of
i

10%. Even if one million households form a small part of the Indian population, it is comparable
to the size of may foreign markets. (For example, Norway has a population 4 million, Austria has
8 million). According to NCAER high middle-class households (Rs. 78,000/- plus) in the rural
areas has grown from .6 million to 1.6 million between 1989-90 and 1992-93 (166%) (A&M,
June 30, 1994). Table - 1 gives an idea about the size of the Indian market and growth
opportunities in selected product categories.

TRENDS IN THE INDIAN MARKETS - 2000 A. P.

Television
Light-commercial vehicles
Cars
Refrigerators
Personal Computers
Air-conditioners
Soft-drinks
Luggage

4 million units ( Current Demand 1.35 millions)

1.6 lakhs per year (Current demand 90,000)
8 lakhs (Current demand 2.4 lakhs)
4 million units (Current demand 1.5 million)
1.4 million units (current demand 2.5 lakhs)
7.5 to 9.0 lakh units (Current demand 2 to 3 lakhs)
Increase in per capita consumption from the present 3 to 6 bottles
Expected to grow to Rs. 1500 crores (Current market Rs. 750
crores)
(Adapted from A&M, April 1995)

Liberalization policies of the government, changing lifestyles, enhanced purchasing power of

consumers are some of the significant aspects which influence the Indian markets. From a handful
of brands across product categories, there is a proliferation of brands in
almost each
product category. Saturation of markets in the west, availability of 300 million middle class
consumers and the emergence of'neo-rich1 segments (Ramesh Kumar, 1994) are probably certain
factors which have ushered in the entry of a host of multi-nationals into the Indian marketing
playground.
In this context, it would be interesting to analyse the strategic advantages multi-nationals have in
Indian markets. The emerging scenario will require an examination of several inter-related
marketing aspects for a firm to decide its strategies. These aspects could range from the
advantage a firm has in strategic alliances to positioning strategies which deal with the psyche of
consumers. The article attempts to probe into the existing state of the market and trends in
specific product categories with a view to provide inputs on the strategic entry of multi- nationals.

Kinds of entry strategies

There are six kinds of entry strategies for new markets (Shama, 1995). They are a) Export/Import. Thisis a commonstrategy An existing product is merely shipped to a foreign
country. The advantage of this strategy is that it has low degree of financial risk and it extends

the domestic market into international marketing. (Rice, raw cotton exports are typical ofthis type
of entry. Rock phosphate, potash, chemicals used for dental applications are imported by India )
b) Licensing: This involves granting the rights and methods for production to a host country firm
in return for a royalty fee. Advantages are low capital requirements and circumvention of import
restrictions It is a low-risk strategy but also generally offers low returns.
c) Joint Venture: This involves two companies that form a partnership under a new corporate
name. This is very suitable for large and successful multi-nationals which want to expand from
their own markets which have reached maturity or which want
access to new sources of raw materials. Advantagesare the
synergies between the host countryfirm'slocalized knowledge and
skills and the foreign company's capital and technology It
allows a foreign company to enter a market which is otherwise
inaccessible due to trade barriers. (DCM-Daewoo and Pal-Peugot are typical example of joint
ventures in India).
d) Franchising: This is a form of licensing and it combines the franchisee's local knowledge,
capital and entrepreneurial talent with the franchisor's standard bundle of
products, expertise and support systems. Advantage of this strategy is the speed with which a
foreign company can enter a domestic market. (Me Donald in India), e) Consortia: In this
strategy, a group of companies join to take advantage of the participant's location or technological
risk. Consortia merge resources and reduce the risk of individual companies. (Co-operative
exports in categories like incense sticks - agar-bathis, fireworks in India).
f) Manufacturing/wholly-owned subsidiary: This is the highest- risk strategy with the highest
potential return and it involves setting up manufacturing operations in a foreign company.
Advantages are capitalizing on low/labour costs, avoiding import taxes and transportation costs
and access to raw materials. In this strategy, the company is much more subjected to the vagaries
of political instability and government policies. (COCA-COLA, KFC are examples in the Indian
Context)
FACTORS AFFECTING CHOICE OF ENTRY
Ownership advantages:
Companies will have to be strong in their asset base to directly compete with host country. Costs
of marketing will have to be balanced with economies of scale (Hood and Young, 1979). The size
of a company reflects its potential for talking on these costs (Buckley and Casson 1976) .
Finns need asset power to engage in international expansion and to successfully compete with
most country firms. Resources are required for high costs of marketing and for achieving
economies of scale. The sifce of firm represents its capability for the absorption of these costs ;
Kumar 1984)

International advantages
A study on the mode of market entry with five major factors - product differentiation, size and
multinational experience, market potential, investment risk and contractual risk (cost of making
and enforcing contracts) has yielded the following results (Agarwal and Ramaswamy 1991)
a) Multinational firms appear to have a higher propensity for entry through a joint venture mode
in high potential markets
b) Firms that have higher ability to develop differentiated products do not have a specific
preference with regard to entry in markets associated with investment risk
The incorporation of global strategic variables
In the attempt to expand the existing entry mode analysis, Chan Kim and Peter Hawang (1991)
suggest that the following aspects could be considered by a firm
1) Global Concentration
2) Global Synergies and
3) Global Strategic Motivations
In a number of markets around the globe, limited number of multinationals compete with each
other Under these situations the action of a firm in a market may influence other markets This is
global concentration (Watson 1982 and Kim and Maubornjne 1988) A multinational could use its
inputs across several markets around the world (Honda's core comptence in engines to expand in
automobiles, lawn movers and snow blowers), (Willing, 1978) Strategic motivations of
multinationals may be linked with future expansion plans, errecting barriers for future global
competitors or any strategy to enhance the corporate efficiency of the firm

ENTRY-MOPE MODELS
Stopford and Wells (1972) observed that entry is contingent upon firm's experience in global
markets and its ability to diversify product lines Kogut and Singh (1988) found that industry,
firm, and country-specific factors influence the selection between joint venture, acquisition and
new venture
We shall now look at the entry strategies followed by various multinationals into India in various
product categories
CONSUMER ELECTRONICS/APPLIANCES
Matsushita Electric Industrial Co , the $84 billion multinational entered India with its wholly
owned National Panasonic India (NPI) and it has set for itself a sales target of Rs 3100 crores in
the year 2000 Matsushita had earlier entered India duringthe early seventies with joint ventures
to manufacture dry cells It was not allowed to take a controlling stake in the two companies
(Indo National Ltd and Lakhanpal National Ltd) In 1993 it launched the rice cooker (under
4

TSFationaT brand). In order to understand the local markets it has chosen 'Salora International1
(which owns a plant for manufacturing colour TVs) as its partner for consumer electronics (for
manufacturing) and in 1994 it formed NPI. It's rice cookers are being made by 'Indo Matsushita
Appliances Co.' a joint venture with the Madras based Obul Reddy Group. NPI's strategies in
India are
a) to enter a vast number of product categories and offer the widest variety in each of these, b) to
have a competitive pricing structure and then move to the upmarket segments.
c) to use the manufacturing capacity of 'Salora International1 to put together knocked-down kits
(two lakhs colour TVs and four lakhs audio units per year)
d) to launch an advertising campaign only after its products are available nationally, e) NPI aims
for a market share of 15 per cent in all markets it enters. It has the futuristic plan of introducing
refrigerators, washing machines, air-conditioners, micro-wave ovens and vacuum cleaners by
1997. It has also finalised a deal with 'Sab Electronics1 for the manufacture of key telephone
systems. By 2000 NPI plans to have 6000 dealers (A & M, 15 July, 1995).
t

GOLDSTARl a leading Korean Company is the only company which might challenge
'National1 in the Indian market with regard to all its product categories (A & M 15 July, 1995). It
is a high- quality low/cost player and it has 30,000 employees with an international network of
about 50 branches. It sells in 170 countries around the world (A & M, Jan, 1995) 'GOLDSTAR1
began its Indian operations in 1984 with a liaison office at Delhi and began exporting colour
picture tubes to the former USSR through this office (LG Electronics). In 1994, it launched its
TV's and VCR ranges in the Indian market. 'GOLDSTAR'S strategies in India are
a) to introduce top/end audio systems each with double/deck and CD player
b) to introduce a range of home appliances by '96
c) to utilise its low production costs to price its products competitively. (A & M Jan, 1995).
The Korean (LG Group) group produces over 25,000 products from petrochemicals,
Pharmaceuticals to electronics and its turnover was $3.5 billion in 1994 (A & M 15 June, 1995).
'SAMSUNG' has entered India through 'SAMSUNG ELECTRONICS INDIA LTD' which has an
alliance (51% stake) with 'REASONABLE COMPUTER LTD.', AHMEDABAD. It has
allocated $100 crores for its first phase of operations. It plans to spend Rs.100 crores for its
phase of operations. It has launched the world's flatest TV in India (29"). It's strategies in India
are
i) to use models launched in the top end of the market for building its equity
ii) to develop its dealer network (it plans to build 3000 in the next few years)
iii) to launch 'new to the market' products (like its "COUPLE" model which has a TV/VCR
combination by which consumers canview one programme and record another, camcoders etc.)
(Financial Express, 5 Jan, 1996),

SONY:
'SONY INDIA PVT. LTD.', a wholly owned subsidiary of 'Sony Corp' ($45 billion
turnover in 1994) has launched its 'Trinitron' color TV in India. It is made with 99 per cent
imported content at Sony's plant at Dharuhera (Haryana) which has a capacity to produce three
lakh sets. It has invested Rs. 15 crore ($5 billion) A & M, 31 July, 1995). The company's strategy
5

is to manufacture colour television exclusively for the Indian market It has opened up sixty
service centres and fSONYf has plans to enter TV film production It also proposes to launch its
'Sony Handycam' camcoder in Indian market 'Sony' is planning for a market share of 3-5 per cent
in the 21-inch colour television segment has tied up with Digital Equipment India Ltd
'Godrej and Boyce1 (G and B) has formed an alliance (with 60% stake) with 'General Electric
Appliances Ltd '(GE) to in the area of appliances The company has put up a washing machine
plant (5 lakh capacity) near Pune and a refrigerator plant at Chandigarh (collective cost is $63
million) (A & M 15 May, 1995)
The company's strategies are
a) to employ cost control systems ('GE target 10' system) b) to increase the sale of higher
capacity refrigerators (over 165 litres)
c) to introduce products suited to Indian needs, for example- a vacuum cleaner that wet-cleans
floors and low priced microwave ovens
d) use the synergy existing between the companies (distribution strength of Godrej & Boyce and
the expertise of GE Appliances) (A & M, 15 May, 1995)
WHIRLPOOL COMPANY, (net earnings $8 1 billion in 1994) entered the Indian market striking
an alliance with Madras based TVS (in 1987) The company is currently manufacturing automatic
and twin-tub washing machines at its plant at Pondicherry In 1994, 'Whirlpool1 raised its stake
in the alliance apart from buying a controlling stake in Kelvinator of India for ($120 million)
This gives 'Whirlpool* access to 3000 dealers of Kelvinator in addition to the manufacturing unit
at Delhi 'Whirlpool' has also shifted its 1 2 million no-frost refrigerator unit from China to India
and it is planning to invest $200 million in the plant (A & M, 31 July, 1995)
Whirlpool's strategies in India are
i) to launch a consumer credit company in alliance with a domestic finance company
ii) to introduce CFC free, super efficient refrigerators (this is a global strategy)
iii) to add features to products which would save time for the consumers (also a global strategy)
(A&M, 31 July, 1995)
LUBRICANTS
The lubricant market is worth about (5000 crores or $1 14 billion)(The Economic Times, 29
December '95) The total investment required in petroleum industry is about Rs 3,00,000 crores
(by 2010) (The Economic Times, 29 December '95) A number of multi-nationals have entered
the Indian market
'INDO-MOBIL' (a 50 50 joint venture between Indian Oil Corporation and 'Mobil Oil
Corporation') has planned the following strategies for the Indian market
i) to expand into oil and gas industry apart from lubricants
ii)to concentrate on lubricants and oils for the power generation and marine segments
iii)to have Indian Oil Corporation distribute "MOBIL" branded products (The Economic Times',
29 Dec 1995)
iv) to differentiate the brand and target car owners through positioning strategies (A & M, 15 July
1995)
6

"SHELL" has entered India through the joint venture Bharat Sheil Ltd.1 (Shell has 51 per cent
stake) (A & M, 15 May, 1995). It's strategies are
i) to set up demonstration pumps to explain its concept of retailing (Economic Times 29 Dec,
1995) CRetail Visual Identity Programme1),
ii) to make soft drinks facility available and Bank of Baroda1
credit card facility available at petrol bunks (A & M, 15 May, 1995).
iii) to make use of 4000 outlets of 'Bharat Petroluem1.
'CALTEX1 has entered India through its alliance with Tndo- Burma Petroleum1 and EXXON1
(earlier USSO1) has entered India through its alliance with "Hindustan Petroleum Corporation.
Both these companies (like other companies which have alliances with public sector units) have
distribution strengths and they would be using it for marketing lubricants (as 70% of sale of
lubricants in India occurs at petrol stations) (A & M, 15 May, 1995).
TIDE WATER OIL' (w VEEDOL" brand) is another player. It plans to raise the advertising
expenditure in 1996. "ELF' is another company which has developed about 6000 dealers and has
signed a tie-up with 'Lucas1 for another 30,000 outlets (The Economic Times1 29 Dec, 1995).
YETROSEL1 ('GULF brand) which has entered India has introduced a range of car care products
through its group company 'Gulf Carex India Ltd1. It also plans to develop its brand image
'GULF ( A & M, 15 May, 1995). 'PENNZOIU another multinational to enter India has put up
exclusive outlets at Bangalore and Pune (PENNZOIL SHOPPES1). It has tied up with *Rallis
India1 and has access to 40,000 outlets of the company. It also plans to enhance advertising
expenditure in 1996 (A & M, 15 May, 1995).
COMPUTERS:
A number of multi-nationals have entered India especially to cut software costs. India will
need more computers than the domestic industry can produce. India has emerged as a global
resourcing market. India can produce software at a fraction of the cost in the U.S., Europe or
Japan (Nancy Hass, 1992). A survey shows that in 1994-95, the PC market exploded, growing
by 67 per cent from 1.5 lakh unite to 2.5 lakh units. The table-2 below (A & M, 30 June, 1995)
gives an idea about the joint operations which multi-nationals have in India.

Table - 2
Multinational
Acer
Apple
AST
Compaq

Revenue 1994
in SBillion
32
91
23
100

DEC
Olivetti
HP
IBM

134
60
25 0
64 0

Indian Partner
Wipro
Wipro, Odin
Digitron, Usha, AMD
CMC, ICIM, Unicorp,
Microland, Tangerine
Digital Equip - India
Modi Olivetti
HCL-HP
Tata Infor Systems

Major multi-nationals are adopting one of two strategies in India They have a financial stake in
the Indian venture (Hewlett-packard, Olivetti, Digital, IBM and ACER) or they operate through
multiple partners (Apple, AST, COMPAQ) The only exception is DELL which markets its
products through PCL Several multi-nationals are opting for multiple distributorships
ACT
has nine partners (like CALS, USHA, CMS, PCS, DATA, GENERAL and DDE ORG)
COMPAQ has five (ICIM is showing distribution with MICROLAND LTD AND TANGERINE
ELECTRONICS SYSTEMS P LTD ) International brands have gone up from 11,000 units in
I993J94 to 60,000 units in 1995
HEWLETT-PACKARD
The company entered India m 1976 with one alliance of HCL
(1994-f95 turnover of HCL-HP is Rs605 crores) It has the highest selling PC brand (35,000
units in 1994-'95) (A & M, 30 June 1995) HCL-HP introduced its international range
t
VECTRA<in the India market apart from "OMNIBOOK" a range of portable PCs with multimedia
features It is positioning the product as an "intellectually fashionable" products and as a part of
the strategy it is planning to plant sample units in suites of five-star hotels (A & M, 31 July,
1995) Itis also promoting the product through HCL Frontline Ltd, a chain of PC dealers
established by HCL Hewlett-Packard India Limited is another company in which it manufactures
oscilloscopes
ACER The company has a tie-up with "WIPRO INFOTECH" ACER has the strategy of
"Global player with the local touch" It has 19 manufacturing plants worldwide and selects local
partners based on their strength to serve local market needs It has selected "WIPRO" because of
its software strengths and competence in server technologies (Business India, 4 Sept, 1995)
COMPAQ
COMPAQ has a tie-up with five companies (including TANGERINE and
UNICORP INDUSTRIES LTD) for the distribution of its products It has launched the
PRESARIO' international range in the Indian market targeting the home market which is about 5
to 8 per cent of the overall market MICROLAND which is a value added distributor for

'COMPAQ1 is planning to penetrate the SOHO (small Office Home Office) and home segments
with
bundling benefits of low-cost CD titles with personal computers. R has developed
software specially for Indian needs.
It also offers afinancingscheme (A & M, 30 June, 1995).

AT & T: AT & T (1994 Revenue - $75.1 billion) (A& M, 11 July, 1995) entered India as 'AT &
T Global Information Solutions Asia Pacific Limited' and launched its range of notebooks,
desktops ami servers (under the brand 'AT & T Gfobalyst') in 30 June, '95. AT & T's strategy is
to market its PC's by synergising them with its strengths in the telecom sector. Futuristic needs
will combine together personal computing with communication (A & M, 31 July, '95). It positions
its products as computing and communicating products and its company as one which could be a
source for such synergised needs. It is also selling its products at competitive prices. It is
offering product features and communication - specific add-ones which cannot be offered by its
competitors. It bundles its "VISTIUM" share software with its machines and this enables
applications to be shared by personal computers with modems. It also has a personal video
facility which works for video conferencing. It has two distributors (CMS Computers Limited
and Unicorp Industries Limited).

TELECOM:
The "National Telecom Policy' of 1994 promises to provide 10 million phone connections (A
& M, 30 Nov, 1995) during the Eighth Five Year Plan. There are a number of markets in the
telecom industry - pagers, VS AT's. Cellular phones and basic services are the segments which are
currently experiencing the entry of multi-nationals. In the basic services sector, the Department
of Telecommunication has divided the country into 20 circles and a number of companies have
offered to pay a total license fee of Rs.100,000 crore in the next 15 years (A & M, 30 Nov,
1995). Currently the formalities are being worked out by the Government
Reliance-Nynex and AT & T - Birla are among the two alliances which figure in this
sector of basic services ("The Hindu" 2 Jan, 1996) Companies are yet to formulate strategies in
this sector. In 1995-^5, there was only 1.08 phone per 100 persons in India (A & M, 30 Nov,
1995).
The cellular (mobile phones) market has been a new segment in the telecom market. But
already about 30,000 bookings have been made in the metros Companies are expected to invest
about Rs.2500 crores in equipment over the next five years (A & M, 31 May, 1995).
Hutchison Max Telecom Ltd. operating in Bombay collaborates with Hutchison Whampao and
BPL the other operator in Bombay has Trance Telecom as the foreign partner. Bharti Cellular'
operating in Delhi has 'C-General Des Eaux Enter and the other Delhi operator *Essar Cellphone'
has 'Cellular Communications International' as its partner In Calcutta TJsha Martin' has Telecom
Malaysia' as its foreign partner while 'Indian Telecom' (also at Calcutta) has 'Telstra Australia' as
its partner. The Madras operator 'Skycell Communications' has 'Bell South' as its foreign partner.

"Skycell" highlights the features of "NOKIA" handset in its positioning ("The Hindu" 7 Jan,
1996)
Regarding the strategies of these companies, they import the handsets from Ericsson
(Sweden), Motorola (US), Nokia (Finland) and Siemens (Germany). As a part of the after-sales
service BPL provides that consumer with a spare one if its set gets damaged, fBharti' spent 1.7
crores in six months on advertising when it launched its service (A & M, 31 May, 1995) 'Essar1
also ran a major advertising campaign. Hoardings is another strategy followed by all the
marketers in the various metros (A & M, 31 May, 1995)
The market for handsets has been
stimulated by the cellular segment The market for handsets is 900 crores in the first year of
launch of cellular phones (A & M, 31 May, 1995) 'Motorola1 is expected to start a handset
manufacturing unit to avoid import duties In the next few years marketers will concentrate on
business executive segment A recent entrant to the market is "RPG ERICSSON" which has
positioned itself on product features (The Hindu, 7 Jan, 1996)
In the pager segment "MOTOROLA1 and 'PHILIPS' are the two multi-nationals operating in
the Indian market In just a few years the product category is likely to have a market for 1000
crores (A & M, 15 Dec, 1994). 'MOTOROLA' after comprehensive research adopts the
segmentation route It will be targeting superior technology models to the executive segment and
rugged models for the trade segment (sales persons, shop-floor users) and elegant models for the
household segment It will also offer models for consumers who need long messages (A & M, 15
Dec 1994). MOTOROLA has a model with voice mail service ('The Hindu1 2 Jan, 1996).
"PHILIPS" relies on superior technology, its brand image, after - sales service and its 3000 strong
dealer network (A & M, 15 Dec 1994) 'SAMSUNG1 and 'MATSUSITA' are likely to enter the
market for pagers (A & M, 15 Dec, 1995)
The market for VSAT (Very Small Aperture Terminals) which connect remote computers for
data communications is also taking off in the Indian market 'Huges Escorts Communications
Ltd' (CHECL) (a joint venture of'Escorts') has decided to manufacture VSAT's in India to avoid
import duties, currently as a part of its strategy it is offering these systems (Rs. 7-10 lakhs) free
for potential customers to try out 'The Australian Telecom Company' is in the process of
spending Rs 25 crores in promoting its range of cellular and VSATs As VSATs is linked to
computer markets, (anticipated at 650 by 1998) (A & M, 30 Nov, 1995). HECL has alliances
with computer companies like TISL, MICROLAND, MODI-OLIVETTI, UNICORN and
WIPRO-BT British Telecom is offering value added VSAT services in India 'COSMAT
MAX1 a joint venture between 'Cosmat International Ventures' and 'Max India Ltd'
CONSUMER CONSUMABLES: SOFT DRINKS PEPSI
Pepsi Company Incorporated entered India in 1990 by buying the Voltas stake (initially
Voltas had a tie-up with Pepsi for its introduction in India) along with the factory in Aurangabad.
It also bought out the Bombay based 'Duke and Sons' The acquisition gave Pepsi, a much
10

needed boost in the Western India (Duke had 34% in Maharashtra) - access to Duke's bottling
plant in Bombay a large number of retailers and over 100 delivery trucks. Pepsi also bought out
Sunrise Products' in Calcutta (after the launch of VCOKE# there) and threefiranchisedbottling
plants in Madras, Madurai am} Bangalore. One of the strategies of Tepsi1 is to ease out franchisee
business to make it company owned for better control (The Economic Times* 22 June, 1994).
Pepsi has notched up 1,75,000 additional outlets and installed 4000 visi-coolers (refrigerators
with see-through glass doors) andSOOO fountains. With the introduction of fCOKE\ TEPSr
replaced all its 250 ml bottles with 300 ml apart from pushing economy in all sizes (500 ml for
Rs 7) (The Economic Times1 22 June, 1994). Initially soon after entering the market, Pepsi's
strategy was to increase the pa* capita consumption of soft drinks and expand the aerated
soft-drink market. It positioned 'Lehar-Pepsi1 for all ages, *Lehar-Seven Up1 for teen agers and
TLehar-Nliranda' for children. India was the only market for which "Pepsi' made an advertising
campaign whichfeaturedlocal stars (A & M, Oct 90).
COCA-COLA: 'COCA-COLA1 re-entered India after a gap of 17 years with its tie-up with
*Parle Export1. 'Coke' spent 30 erores on advertising in 1994. If s marketing researchrivaledthat
adults over 35 years and young adults in the 15-24 age group are the largest consumers of soft
drink. "COKE" introduced a national integration theme advertising campaign and replaced it by a
trendier international image campaign This was in compete contrast to the "Pepsi" campaign
which Indianised its message (The Economic Times' 22 Jun, 1994). By tying up with *Parie\
'Coke* has access to 62 bottling plants. The strategy of 'COKE* is to innovate in India while
confirming to the stringent standards o f Coke' system worldwide COKE's strategies in India are
a) to increase the per capita consumption of soft-drinks
b)to compete with beverages like tea and coffee (to ensure consumer would prefer 'COKF
whenever he wants refreshment)
c)to create new channels of distribution (like tricycles and push carts)
d) to develop "one-way* bottles to get over the problem of turn- around1 time in re-cycling of
bottles
e) to increase volumes rather than margins across markets (as research worldwide has shown that
soft drink demand is price- sensitive) (A & M, 30 Nov, 1994).
CADBURY SCHWEPPES
Cadbury Schweppes Beverages India Ltd. launched its soft-drink "CANADA DRY" at Delhi,
Bombay, Madras and Hyderabad. The global player has positioned the drink as drink for adults
(300 ml priced at Rs.5.50). The launch was made after the company's research on "taste and
concept" aspects. The company has an alliance with "Pure Drinks*1 (its bottler at Delhi) It is
trying to create a new "adult" segment (aged between 20-30 years, ''independent and having
distinctive taste." It has hoardings in Delhi and it has launched the the variant of the Tida-Dido'
commercial which was associated with "7-Up" ("7-Up* is its global brand but marketed by
"Pepsi" in India). The company plans to launch a range of new products in the Indian market (A
& H 30 June, 1995)

li

CHEWING GUM
The chewing gum market (estimated at Rs 28 crore) accounts for only 4 per cent of the
Rs 650 crore market for confectioner products "PERFETTI" ($1 billion or Rs 3100 crore)
Italian confectioner has entered India has a target to expand the market to 25 per cent of
confectionery market in the nextthreeyears It's brand 'BROOKLYN1 has been launched in Oct
1994 with an advertising spend of Rs 65 lakh for the first two months It's other brands include
'Centerfresh' and 'Big Babol' "Perfetti"s strategy is to get its products across first and then shift
to communicating brand benefits It operates in the premium brand It has launched a
pan-variant targeting the "younger chewers" who might be used to betal nut "BROOKLYN" is
targeted at the adolescent consumer, Centrefresh at adults and 'Big Babol' at the pre-adolescent
Another company to enter the Indian market is 'Carbur India Ltd ' a joint venture between 'Dabur*
and the Spanish company "Agrolimen" (1994 turnover $1 billion) This company also operates in
the premium band "WRIGLEY INDIA" ('Wrigley' is a global leader) is likely to enter India It
has a tie-up with 'Parry's' for distribution (A & M, 15 Feb, 1995)

LIGHTING
This industry is estimated around Rs 1200 crores and it is growing at (3 - 5 per cent a year)
'GE Apar Lighting' (a joint venture between 'GE' of US 'Apar Lighting' India) has entered India by
introducing a range of GLS (General Lighting System on the incandescent bulbs) with three
shades and a bug- lite' which is designed to keep bugs and insects away It has introduced new
product-variants in tube lights (like natural and bluish light) It has about 1000 distributors and is
planning to expand it The company's strategy is to change the buying pattern of lighting in the
country and create brand preferences (packaging innovation will be one strategy) (The Hindu Business Line, 17 Aug, 1995)
DESIGNER BRANDS - TEXTILES
LEVI STRAUSS and CD (1994 turnover $6 billion or Rs 18,600 crore) company which has
sold more than 2 4 billion jeans since 1853 operates in more than 24 countries It's entry into
india CLevi Strauss India Ltd ') is a part of its global expansion plans It proposes to invest about
$3 million (Rs 9 3 crores) in India It's strategy is to aim at the age group of 15 - 25 years
Product positioning will be its priority with regard to its strategies (A & M, 15 Feb, 1995)
France based 'PIERRE CARDIN' (1994 turnover $2 billion or Rs 6200 crores) entered India
in 1989 in a licensing arrangement with 'Majestic Apparels', Delhi On liberalization it has set up
its own unit with 26 per cent stake ('SM Finance' has 34 per cent, 'Sai Group' 20 per cent and
Ruhil' another 20 per cent) The company opened nine franchised show-rooms in a few metros
and spent 20 crores in the launch campaign The retail show- rooms address the needs of the
entire family (in the premium segment) The show-rooms also sell leather accessories, bags,
jewelry, ties and pens
12

FOODS
Cereal giant "KELLOGG" entered India in 1986 with a liason office at Delhi It invested $40
million to build a plant and establish a distribution network. fKellogfs' wholly-owned subsidiary in
India launched its products in April 1994 with a high-visibility campaign. 'Kellog1 is trying to
change the breakfast habits of Indians to create a market for fready-to-eat- cereals* The company
has developed 'Basmati' flavored cereals for the Indian taste. It plans to launch a line of food
products for children (A & M, 30 Jan, 1995 and The Hindu - Business Line, 30 Nov, *95).
'Pepsico' Restaurants International of India1 has entered India with its outlets 'KFC ('Kentuky
Fried Chicken1 and 'Pizza Hut1). It plans to invest $80 million over the next seven years to set up
30 'KFC' and 30 'Pizza Hut1 outlets across the country. 'KFC1 which has 2,200 outlets in Asia, had
to close down its Delhi unit because of the order of the Government based on sanitation violations
of the outlet. The company has postponed its strategies due to the anti-multinational stance of the
Delhi government which oppresses the entry of multi-nationals in areas other than that which
involves high-technology (The Hindu- Businessline 30 Nov, 1995).

AIR-CONDITIONERS:
A sharp fall in the duties to 40 per cent in the last two years, have brought the national players
into the active "playing field" after years of domination of the market by the unorganized sector.
The current market size is 2-3 lakh units and it is likely to treble by 2000. There is low level of
penetration in the consumer segment and market expansion may depend on the entry of foreign
players like 'National1, 'General Electric' apart from the existing players. The split model may be in
high-demand in the commercial sector because of the space crunch in cities and the sub-1 tonne
model (initially introduced by Usha Shriram) will catch up in the home segment. It is interesting
to note that 'CARRIER AIRCON' made a loss of 7 crores during 1992-'93 and bounced back this
year (1994-'95) with a profit of 12 crores. This remarkable growth was because of 62 per cent
sales increase in window-type, 94 per cent in split and 41 per cent in compressors
Worldwide
'CARRIER1 leads in all countries it operates in (except Japan) carrier's strategy in India is (A &
M, 15 0ct, 1995)
i) to target the fragmented split AC segment
ii) to position "Carrier" into the 'consideration set' of consumers as the brand is hardly known
iii) to open up exclusive show-rooms - a first in the industry
iv) to build up a good distribution network (at present it is 193).
'Carrier Aircon' established itself in the high-margin, low- volume segment (which is its forte
worldwide). It can choose from 300 products of its parent company and launch them in India
according to local needs. It's strategy is to introduce atleast three new products every year. The
company also makes compressors for captive consumption which will also give it a competitive
edge in the market

13

CARS
DCM-DALWOO
'DCIV! after its unsuccessful alliance with TOYOTA' in the light commercial segment (due to
appreciation of yen), it has forged a joint alliance with the Korean Company "DAEWOO" The
Korean company has a 51 per cent stake ($37 8 million or Rs 117 2 crore) It plans to invest $1
billion (Rs 3,100 crore) in India in the next few years In July f95 MDCM-DAEWOOM launched
"CIELO" a family
in the price range of '4 lakhs and above1 segment which in 1994-'95
accounted for 24,000 units Contrary to the popular notion the company has based its strategy
on the premise that "CIELO" will be a "mass market" car and not a pretty and symbolic car aimed
at a niche It's objective is to sell 1.5 lakh cars by the turn of the century. The company's another
strategy is to export components to other "DAEWOO" factories worldwide The company plans
to rise the indigenous content from the present 30 per cent to 80 per cent to keep a control on
the pricing aspects. As the model is positioned on product attributes, it has several product
features (like the multi-point fuel injection system) which reduce running costs and enhance
safety "PAL-PEUGOT LED" plans to launch its "Peugot 309" in the same segment in which
TEILO" is positioned (A & M, 31 March, 1995)
GM-HINDUSTAN MOTORS
'General Motors' (1994 turnover $155 billion or Rs 480,500 crores) (A & M, 31 May, 1995)
entered India with an alliance with "Hindustan Motors" It has launched "ASTRA-OPEL" in the
Indian market This is in the same segment which is currently under competitive threats from
other multi-nationals The model has positioned itself on a number of product features
TYRES
With the entry of several multinationals in the automobile sector their tyre suppliers are likely
to enter the Indian market as these foreign car manufacturers have strong relationships with
transnational tyre manufacturers (A & M, 31 May, 1995)
"Goodyear" entered India through its Indian subsidiary and also has a strategic alliance with
"CEAT" to jointly make radials The joint venture company is "South Asia Tyres Ltd" will
synergise on the technological strengths of "Goodyear" and the distribution strengths of "CEAT",
"APPOLO" "JK" and "MODI RUBBER INDUSTRIES LTD " have got together with the
German group "CONTINENTAL" to set up "INDO GERMAN
TECHNICAL
COLL \BORATION COMPANY"
This new entity will provide support to all these firms to
manufacture radials Multi-nationals may be keen to enter India because car manufacturers
abroad are unlikely to source tyres from Indian companies that have no relationship with their
own international tyre suppliers (A & M, 31 May, 1995)P

14

EYE-CARE:
"CIBA" a global group in areas of chemical and biological products based in Switzerland
entered India as Tiba Vision" in the eighties. It operates in two segments namely opthalmic
pharma and optics. Opthalmics segment is related to eye-related problems and optics is related to
vision correction It plans to introduce a range of products in the opthalmics segment (eye
cleaners for women who use make up is one of them). It's another major product is contact lens
which it intends to promote through eye specialists across the country. In opthalmics (where eye
care products are involved) the company will operate in small towns and cities. It has launched
the replaceable contact lenses in Delhi. It has a scheme for sustaining regular customers of this
product The company has also launched lense care solutions from its international stable. Direct
mailers are used to expand the customer base.
There are four million requiring cataract
operations every year and this offers opthalmic products a huge potential (The Hindu Businessline 28 Dec, 1995).
"BAUSH and LOMB" is another company which has entered India in the eye care segment. It
is the world's leading marketer of optical and eye care products with sales of $ 1 9 billion
(RS.5,890 crores - 1994) from 70 countries. It entered India in 1990 in a joint venture with
"Montari India" to market contact lenses and sun glasses. It has introduced its brand lfRay-banM
(sunglasses)
which holds 40 per cent of the global market for premium sunglasses. The
company is planning to introduce its; range of disposable contact lens in global markets.
(A & M, 30 September, 1995)
Through the brand1 equity of several global players entering India may be strong, it would be
worthwhile for these players to study tho unique buying behaviour and psycographics of Indian
consumers before they target their offeriings. Marketing concepts could be used to study the
interaction of several marketing variables before strategies are evolved.

CONCLUSION:
In this article an attempt has been made to compile entry strategies followed by multinationals into
India in various prodcut categories. A cursory took at the strategies adopted points to the
following aspects.
1 India is emerging as a major market that cannot be ignored by Global giants
2 Backw udness of Indian technology in most product categories appears to be another
motivating factor for multinational rush into India,
3. The interst in India is not merely having a presence alone which is evident from the fact that a
number of companies are setting up wholly owned subsidaries.
4 The joint ventures with Indian companies is used as an entry mode by mu(tina*tioaals that
require quick access to the complex distribution system prevailing in India.
5 Awareness about global brands in India much before the opening up of the Indian markets,
provided the impetus for the entry of multinationals. (Brands like Sony, National, Sharp and Akai
were well known brands in India.)
15

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