20 Adapting Marketing to New Liberalised Economy

Kulbhushan Chandel

1. Learning outcome

After completing this module the students will be able to:

Understand the concepts of adapting marketing practices to new liberalized economy
Understand the need of the liberalized economy
Describe the importance of marketing practices to new liberalized economy
Define the need of changing marketing practices as per the liberalized economy

2. Introduction

The Indian economy had been under a controlled regime for a long time when the marketing distribution, industrial production and prices were governed by the government. During the last few years, drastic changes have taken place in the policies of the government which resulted in the removal of controls and opening up of the Indian economy. Liberalisation and globalisation have brought s dynamic change in the economic environment of the country. Today companies need to think on how to operate and compete in the new economy. For example Do Como is quickly gaining experience by providing superior services customer to customer. Now businesses have to quickly anticipate as well as respond according to emerging customer needs and expectations. The internet and other technologies used to satisfy that needs. Due to changes in the technologies, set of beliefs, Shows the major business to adopt changes in believes in the old economy and turned these believe into new economy. All companies need to retain skills and competencies gained in the past but also they need to add new knowledge and competencies to grow and prosper.

3. Difference between Old Economy and New Economy

Today’s marketplace has following types of customers:

Traditional consumers are those who don’t buy online and
Cyber consumers are those who mostly buy online
Hybrid consumers are the one who does both.

Examples:

Mostly consumers are hybrid as they shop in grocery stores but occasionally order online from peapod.
They buy books and noble in bookstores but order books from bn.com.

Companies are required to adjust their marketing practices to meet these new conditions examined the marketing practices in which companies and marketers are involved. For example: E-business Websites and customer relationship management.

The basic differences in the marketing practices in the old economy and in the new economy are as follows:

S. No.	Old Economy Effects	New Economy Effects
1	Influenced by product units	Influenced by customer segments
2	Focus on profitable transactions	Focus on Lifetime customers
3	Secure financial scorecard	Secure marketing scorecard
4	Looking towards shareholders	Looking towards stakeholders
5	Marketing does marketing	Everyone does marketing
6	Create brand through advertising	Creates brand through performance
7	Acquire customers	Consumer retention
8	No customer satisfaction measurement	Measure customer satisfaction

4. Drivers of New Liberalised Economy

There are many forces which play a significant role in reshaping the world economy. Among them, technology, globalization and marketing deregulation plays a major role. The main drivers which have a great influence on the marketing strategies in this new liberalised economy are given below:

Digitalisation and Connectivity: Much of the world’s business is now carried through networks that help in connecting people and companies. For example: people within a company can be connected through intranet; extranet connects a company with its suppliers and distributors and at last internet that connect user to the worldwide information repository. Company interacts with supplier and consumer to buy and sell through internet. Global connectivity is further developed through wireless communication. Consumers and business in Europe and Japan mainly involved in mobile commerce using such as Do Como.
Disintermediation and Reintermediation: As a result of the achievement of early online websites like AOL, Amazon, EBay, Snapdeal, etc. have struck terrors in the hearts of many established manufacturers and retailers. For Example: Compaq sold its computers through retailers, whereas Dell Computer sold directly to customers was able to grow faster by using internet to sell online. Many intermediaries like bookstores, music stores, travel agents and stock brokers- felt massive pressure on online competitors emerged. Compaq, Barnes and Noble finally created their own Internet sales channels and combination of off line and online operations to retain the loyalty of retailers, brokers and agents. But some off line competitors such as online channels have become stronger than the pure dot-coms because they had a large pool of resources and have well established brand names.
Customization and Customerization: Customization means that the company’s ability to provide differentiated products, services, prices and delivery channels for each customer by online companies that make consumer to become self-producing consumers who can eventually design their own goods. Customerization may be complicated to execute for products like automobiles that can increase costs what consumers are not willing to pay. It is hard to repair customized product, on the other hand Customerization is well known for some products such as Laptops, Computers and Skin Care products.
Industry Convergences: Pharmaceutical companies are now in a position to add biogenetic research capacities in order to formulate new drugs, new cosmetics and new foods. Film Company such as Kodak Chemical Company is now moving into electronics to digitalize their image-making capabilities. All these companies are recognizing many new opportunities present in the environment.

5. Main Marketing Practices in New Liberalised Economy.

5.1 E-business

The demand of business in today’s world is e-business or computerisation of business houses. The internet helps companies to conduct business faster, more accurately over a wider range of time and space at less cost and customize the customer offerings. Organizations are appreciative to set up websites and to distribute information and promote goods and services. The companies use intranet and extranet for communicating the information. When the information is to be communicated internally among the employees, intranet is used and when the information is to be provided for exchange of data, orders and payments among suppliers and distributors. There is no need of paper flows as now with computerisation everyone can be linked through computers.

5.2 E-Commerce has Four Major Internet Domains

E-commerce is wider than e-business that means that in addition to providing information about the company’s history, policies and job opportunities; e-commerce includes e-purchasing and e-marketing also. Company uses the Internet to purchase goods and services efficiently from suppliers through e-purchasing. E-marketing helps company to inform, communicate, promote and sell its products and services through the internet. The main domains of internet are as follows:

Business to Consumer: The internet is most important for the consumer products. And the consumers generally buys books, music, stock trading etc., online. As information regarding the features and prices of the products is also available online. Online business is not used for those products which need to be touched and examined in advance. However, products like computers, flowers and even wine without seeing or trying are bought online.
Business to Business: Business to business websites makes market more efficient for business houses. Buyers which get goods by using business to business marketing are business houses. They can visit suction sites, spot exchange and online product catalogues and other online resources for purchasing their business. Companies are also forming online buying alliances to get huge discounts from suppliers.
Consumer to Consumer: With consumer to consumer, consumers create and join internet interest groups and chat rooms just to share information so that ‘word of web’ joined with ‘word of mouth’ has a buying influence. Like Olx.com and many more such websites are also there.
Consumer to Business: Consumers feel trouble free for communicating with the companies online. The companies invite from their customers e-mail queries, suggestions and even complaints. Even some companies have provided a call-me button on their websites, it a consumer click on that button then automatically the call is transferred to the company’s representatives who are available for answering phone calls. Moreover, consumers can also use sites like complaints’ and planet feedback.com for satisfying themselves.

5.3 Selection of Distribution Channels

It is very important decision to be taken regarding the choice of the right distribution channel. For this a marketing agency is set up by the company which select importers and even the company can have its own branches in other states and foreign countries. The company can also operate through its subsidiary companies. As the producer and the consumer are separated by a vast distance so the efficiency of distribution channel becomes essential in the marketing context. Efficient distribution alone can eliminate the effect of geographical separation. So, selection of distribution channel becomes an important decision area in international marketing as well as Indian marketing.

5.4 Pricing Policy

The principles and techniques of determining pricing are the same as in both domestic and international marketing. Firms having a short-term interest in the markets may adopt cost plus pricing strategy. But firms with long-term interests can adopt market-oriented pricing policy. The firms must consider the prevalent conditions in each country and in each distinct market segment and formulate suitable pricing policies. Even in some countries government agencies function as sole buying and distribution agents.

5.5 Communication

In domestic marketing, a marketer symbol attracts and appeals to people who are better known to him, using a known language, symbols and familiar media. But in international marketing, he has to face unfamiliar people, strange languages and imagery, unfamiliar media and unfamiliar purchase motivations. So, those symbols and images should be used which can be understood by them and appeal to them.

5.6 Mastering In the Procedural Complexities

The businessman is needed to have mastery in variety of procedural complexities covering a variety of areas like export-import license, customs, and foreign exchange regulations relating to insurance of quality and packages.

5.7 Entrepreneurial Freedom

The entrepreneurial freedom which was result of liberalization released the blocked-up growth impulse of Indian industry and business. De-licensing of industries resulted in facilitation of the entry of a number of new players into several industries. Many industries entered with the removal of hurdle of licensing. The major developments which took place as result of the new entrepreneurial freedom are mergers/ acquisitions and takeovers of the business houses and also diversification of business houses. Entrepreneurs now can easily raise capital from domestic as well as foreign capital markets. Freedom of entry and concessions motivate foreign investment.

Examples:

Merger of Doom Dooma, Tea Estates, KGF and Kissan into Brooke Bond.
Merger of QIL with Pond’s.
Merger of Tomco with HLL merger of Brooke Bond and Lipton into BBLIL and merger of BBLIL into HLL.

5.8 Foreign Direct Investment Influences Investment

The various measures have led to jump in the inflow of FDI into India. The inflow has influenced the investment pattern in several industries. The passenger car industry, the soft drinks industry, and the cosmetic and personal care product industry have all been influenced strongly by the FDI. Many experts believe that India has enough potential to attract foreign investments. Global companies usually consider market size, political stability and regulatory environment, as the three factors for direct investments.

5.9 Multinationals Companies in the Indian Markets

The removal of FERA restrictions and the liberalization of FDI enabled MNCs, who were to operate in India and to raise their equity in their Indian enterprises. MNCs already in operation in India have been consolidating their position and many of them in alliances with an Indian partner and some fully-owned subsidiaries. For example: Whirlpool Corporation USA entered the Indian market by acquiring Kelvinator India Ltd (KIL); major Cosmetics merge as L’Oreal, Avon, Amway, and Oriflame, also Set Shops; Raise food chains like McDonald’s , Kentucky Fried Chicken (KFC), Wimpy, Domino’s, Kellogg, etc.

5.10 Banking Sector

The banking sector also faced following changes due to liberalisation in the economy:

By losing the controls on interest rates on deposits permits banks to make differentiated offers.
Decrease multiplicity of rates.
Enhance customer orientation.
Automation of banking sector.
Play in the competitive game while continuing with the constraints of public sector existence.
To adjust to new norms of capital adequacy.
To restructure organization, operations and system banking.
To computerize and interconnect the branches without this.
To improve productivity and profitability.

5.11 Competition in Insurance Sector

IRDA has issued licenses to many companies for carrying on insurance business in India. Some of them are:-

HDFC Standard Life Insurance Company Ltd
Royal Sundaram Alliance Company Ltd
ICICI Prudential Life Insurance Company Ltd
Max New York Life Insurance Company Ltd
IFFCO Tokyo General Insurance Company Ltd
SBI Life Insurance Company
Birla Sun Life Insurance Company

5.12 Capital Market

The main components of the financial sector i.e. capital markets and the banking sector have undergone drastic changes. Due to opening of the capital markets to foreign institutional investors and foreign portfolio investment in Indian companies, the capital market has undergone far-reaching changes. For example: Unit Trust of India, IDBI, ICICI, IFCI, Credit capital Finance Corporation, etc.

5.13 Growth of Private Mutual Fund

Due to liberalisation the rapid growth of private mutual fund has been an important development. Earlier mutual funds were in the hands of public sector and they were operating in the country under public sector. Private sector enters the mutual fund and portfolio management schemes shows the quick launch of excess of private mutual fund. A number of firms in the private sector such as Kothari group, Apple industries, Tata Birla, Kodak Mahindra, CAT financial services, reliance capital etc. started their mutual funds.

6. Marketing Challenges of Liberalised Economy

6.1 Changes due to Liberalisation

Indian marketing segment has been facing many drastic changes of late as a consequence of the liberalisation policy. The freedom offered by liberalisation has given an impulsion to start many new businesses and industries. There has been a mass of mergers and acquisitions, takeovers and amalgamations. For example: Unilever merged many of its units in India like Brooke Bond, Lipton, Kissan, Pond’s etc. into Hindustan Levers Limited.
Policy changes have helped to bring a steady flow of foreign direct investment into Indian market. Many global investors are waiting further reforms in Indian economy to enter the market in a big way in the near future.
Many multinational companies have entered the Indian market after liberalisation. Major MNC’s which are active in India are General Motors, Ford, Hyundai, Honda, Whirlpool, Samsung, LG, IBM, Domino’s, Kellogg, Baskin-Robbins, etc.
Indian companies are now facing the marketing challenges of a liberalised economy where survival of the fittest is the order of the day. Marketers have to gear up to face the challenges of a highly competitive market scenario. Only those companies survive which have the necessary marketing strengths and capabilities. The consumers are becoming more knowledgeable and are more demanding, making companies consider them with more respect to gain and retain their loyalty.

6.2 Entrepreneurial freedom

Indian industry and businesses would be having a comfortable and great time but the entrepreneurial freedom did help entrepreneurs to enter industries of their choice but for some of the existing players, the new freedom implied destabilization. Their markets, market shares and profits came under great pressure. Example of entrepreneurial freedom: The Milk food Ltd., after almost strong position in the dairy industry in Northern India Milk Food Ltd, found itself in trouble, following the de-licensing of the industry. With the removal of the licensing barrier, many new firms entered the industry in quick succession. Milk food Ltd suddenly found itself in great danger due to an excess of new competitors. The very same people who were supplying milk to the company earlier now became its competitors. Milk food Ltd, not only found itself surrounded by new competition, but also had to struggle to obtain its daily supplies of raw material-milk now become producers. There was now a scarcity of the raw material, resulting in sharpening up in its prices. Milk food could not face the destabilization.

6.3 Compulsions to become Price Competitive

There was shortage in every sector like consumer goods, industrial goods and services. It was basically a case of production not being increased to meet the growing demand. There were many reasons like many companies were going on with old plants and unable to increase production, many others could not increase production due to licensing restrictions and also some manufacturers vested with interests in shortage, deliberately promoted the shortage, creating artificial scarcities. There was little stress on cost reduction, technology up gradation and improvement of quality and customer convenience.

6.4 Compulsion to grow

Indian business firms are compelled to take to exports. Today’s world is based on technology that has emerged as a crucial resource for business firms. With globalization, technology has emerged as a vital factor for Indian firms too. Consumers’ perception regarding products is uncertain. In addition to the opportunity technology encompasses a threat. Technological change makes products and business suddenly obsolete/out of fashion.

7. Summary

The above details reveal the vastness of the changes taking place in the business/marketing environment of India on account of liberalization. The massive change takes place in the environment has thrown up a series of marketing challenges for business firms operating in India. Technology has the Competitive Advantage and Core Competence. For competing successfully, firms need competitive advantages and core competencies. The technology strength can make firms enjoy sustainable competitive advantage and core competencies. MNC were scoring over the Indian firms largely because of their product and brand .Behind their product and brand was their core competence. Indian firms too have to acquire such core competence and that depends on technology strength. Indian firms want to compete they have to compete in Global Markets and has to equip themselves with core competencies and technological strength. The challenge on the technology front for Indian firms is actually two fold. First, they now have a compulsion to acquire parity with global firms. The second is that as the Indian firms recommended a new development is compounding the task. In recent times, technology has started changing very rapidly, becoming too intense and rapid to adjust with it. But, the firms have no escape; they have to cope with the change in order to survive. And, this is the reality the crux of the new challenge they face on the technology.

Suggested Readings (Books and Websites)

Ghosh PK, Sales Management- Text and Cases, Himalaya Publishing House, 2010.
Jobber David and Lancester Geoff, Selling and Sales Management, Pearson Education, Sixth Edition.
McCarthy, Jerome E. (1964). Basic Marketing. A Managerial Approach. Homewood, IL: Irwin.
Needham, Dave (1996). Business for Higher Awards. Oxford, England: Heinemann.
Kotler, Philip (2012). Marketing Management. Pearson Education. Kotler, P. and Keller, K. (2006), Marketing and Management, Pearson Prentice Hall, Upper Saddle River, NJ, USA
McCarthy, Jerome E. (1975)”Basic Marketing: A Managerial Approach,” fifth edition, Richard D. Irwin