Difficulties of a foreign company to expand its products market

Here we are starting with the case of SK, the chief of P & G for India and P&G the organization itself. Dressed casually, he gels more with a young executive dressed in jeans and a shirt, sitting across the table in the conference room with cool demeanor. He talks at a relaxed pace, with words flowing effortlessly. There is no emotion as he reveals his ambitious for the Indian market, very unlike the tearing hurry local entrepreneur’s display is growing their business. He answers every question instantaneously almost off the cuff of the young executives meeting him in the conference room.

A person at the position and caliber of SK normally cannot afford to act cool. He heads the local arm of Procter and Gamble, the world’s most admired marketing machine. His business, after many false starts, has started growing by leaps and bounds in the last three years. Increasingly, the men at P&G’s global headquarters in Cincinnati are beginning to devote a disproportionate amount of resources to the Indian business. SK stresses their only aim is to delight the customer.

Four decades in the country, P&G is a few notches down in the pecking order of fast moving consumer goods (FMCG) companies in India. It is dwarfed by the market leader Hindustan Unilever and there are even two local companies that run bigger businesses. The Chinese operation which was established much later is now more than three times the size of the Indian business. And with Unilever growing rapidly in China, P&Gs board s watching every single move that SK is making. For, in the global scheme of things, a solid growth in India in the coming years will determine the fortunes of this $80-billion giant. SK chose India other Asian regional roles in the corporation, because he believes the action is in the region.

Anyone following the hype around the Indian economy making a choice to operate in the region is no surprise. With rising incomes and snazzier lifestyles, there will be more P&G products Indians will aspire to buy. If Old spice is passé for the upwardly mobile, P&G has Boss, Hugo and Escada in fragrances. For every globally successful big product that has already been launched in India, P&G has several which haven’t been launched here.

Even seven years ago, P&G’s Indian operations seemed a big mistake. The company made its formal debut in the mid-80s after a global acquisition gave its control of Richardson Hindustan in India. The only product it sold then was the cold and cough brand Vicks, till sanitary brand Whisper was launched in 1989.

After thousands of crores in investment for nearly 15 years, the Indian operations did not have much to show. Sales from two entities, one listed and the other wholly owned by the parent together amounted to Rs 700 crore. The listed company posted a profit of Rs 50 crore and according to industry sources, the wholly owned subsidiary was in red. In the entire decade during the 90s, P&G had managed to launch only one large brand Ariel, a wash care product.

That was not all. There were also serious missteps that the company committed in its forte, marketing. Strategists at the global headquarters thought that consumers will pay the extra price for their premium product, but the Indian market proved a tough nut to crack. Initially, the company spent huge sums positioning the product Ariel as a premium product. After the initial success, they spent a lot creating sub brands at cheaper price points. This was done ostensibly to grow volumes by leveraging the brand. Eventually after a decade of tinkering and investing in Ariel, P&G was back where they had started without a winner in the detergent market.