Keywords: india fmcg, fmcg india, india culture impacts
The way of life and culture of India is changing dramatically. The populace of India is increasing annually and this will have a primary impact on the FMCG industry and its organizations. Although society of India is increasing annually the population progress rate is lowering over a period. In 2008 the population progress rate is 1. 6%, in '09 2009 it is 1. 5%. In 2010 2010 the progress rate is 1. 3%. Although numbers didn't change greatly, the source and demand of the FMCG products will be affected due to change in population composition. You will see reduction in demand and strong competition as the delivery rates and number of customers decrease. Most importantly it is the change is life style of Indian customers and communal behavior will affect the FMCG industry in India. It will demand a fresh products and services over the time and will lead to upsurge in investment in R&D of FMCG companies. Now the entire world is facing with food lack leading to increasing spend money on food production. In case the organizations neglect to offer products and services matching to changing lifestyle and tendencies then it will be difficult for any corporation to survive on the market.
Current slowdown in global financial scenario affected nearly every industry around the world. There's been increase in unemployment and low consumer spending power. This contributes to consumers not opting to buy expensive products or services. This further pressurizes the RMCG companies to reduce the prices for the products and services.
Organizations must review this economical ride and have to respond accordingly,
A successful organization will respond relating changing financial conditions, consumer and stakeholder tendencies. An efficient corporation should be aware of the changing monetary condition across the country and global and should employ a ideal strategy to remain in the market.
Political factors will have a larger influence on the organization and industry and it is the duty of the organizations to comply with it. It's important for the organizations to adhere to the legislations executed non conformance which may lead to serious implications on the organization. The federal government has carried out certain limitation in the import policies. However tax exemptions in sales and excise responsibility are given for the small scale industries. This allows the SMEs to get more and can increase the number of new entrants. Vehicles and infrastructure facilities are increasing not only in urban but also in the rural area which can only help in syndication network.
Advancement in technology boost the production with development in quality of products and services rendered to the customers. Organizations began to look at e-business to improve brand communication and market. Technological improvement makes the resource chain and ventures along the chain simple. Organizations reduced costs with effective IT systems and increased the rate of information orders. Technology is playing an integral and huge part in the FMCG sector by expanding the new presentation, increasing production and longer shelf life of foods.
Better, stronger, far better and faster are the key elements that all manufacturers in this sector force for, as it drives sales. The growth boosts the sales by allowing the manufactures to produce better products with attractive product packaging and better communication. With improvement in communication technology and growing social media networking it enables the organizations to talk better to the clients by much better marketing campaigns.
The economic crisis and slowdown experienced greatly afflicted the sales FMCG goods across the world. However rising economies like India, China and Brazil are not greatly influenced and manage to do well to recuperate quickly. A style that was implemented across the world during economic slowdown was trading down. Because, customers became more careful looking for less expensive brands, special deals and discount rates. This added great strain on the market prices credited to severe competition and down trading. However growing economies like India, China and Brazil observed development in hypermarkets aiding the expansion of FMCG market segments in these countries.
Macro environmental opportunities:
India has Huge Rural Market with majority of population where in fact the market is still untapped market. India has cheap labour to provide cost advantages over other countries. Many multinational companies are experiencing cost advantage by outsourcing its product requirements from its Indian company.
The FMCG market of India split into two industries the planned sector and the unorganized sector. The arranged sector has only few Indian companies and MNCS whereas the unorganized sector is congested by the many local players.
Indian FMCG market accounts for about Rs. 460 billion where in fact the market has been highly occupied by local and unbranded products. It has been an effort for many planned players to efficiently launch a product and to occupy the market talk about. Distribution and offer chain in addition has been an effort as India's infrastructure and travel systems nearly helpful with an incredible number of shops in the united states. Although infrastructure and transportation system is producing recently it continues to be considered as an effort by many players.
The FMCG sector has a wide range of products including confectioneries, drinks, detergents, toothpaste, toilet soaps, shampoos, ointments, powders, foods, cigarettes.
Typical characteristics of FMCG products are:
The products cater to need, comfort and luxury.
Price and income elasticity of demand varies across products and consumers.
Individual items are of small value (small SKU's) although all FMCG products put together account for a substantial part of the consumer's budget.
The consumer spends short amount of time on the purchase decision. He hardly ever ever looks at the technical features. Brand loyalties or recommendations of reliable dealer/ supplier drive purchase decisions.
Limited inventory of these products (a lot of that happen to be perishable) are retained by consumer and prefers to get them frequently, as so when required.
Brand turning is often induced by heavy advertisements, recommendation of the dealer or person to person.
Distinguishing features of Indian FMCG Business
FMCG companies sell their products directly to consumers. Major features that distinguish this sector from others include the following:
Design and Manufacturing
Low Capital Intensity as most of products in FMCG requires relatively little investment in plan, machinery and other set assets.
Basic technology required for manufacturing is easily available.
Third party manufacturing is common and the benefits include creation and inventory planning flexibility, flexibility in managing labor costs and logistics.
Marketing and Distribution
High Initial Introduction Cost with huge investment in product development, market research, test marketing and launch. Creating recognition for a fresh brand requires extensive initial costs.
Huge Circulation Network as India has millions of retail outlets across the country making the logistics functions problematic for many players.
Market is congested numerous unorganized players. Presence of several unorganized players and highly ready MNCs provides fierce competition on the market to release many new brands. Thus giving wide range of selection of brands for the customers.
The consumer platform of this industry is larger than other industry and they have little or no influence on the price of the product. The buyer always possesses great choice of brands within the merchandise category plus they can shift from one to another without much effect. Hence, buyer electric power is nearly strong in this industry. However they have vitality when they provide threat to alter in one brand to another brand. In FMCG sellers should also used into the take into account analysis. Retailers can always decide which brand to stock and consumers don't show much interest to wait if one make of choice is unavailable. So vendors can always make choice between brands and they have significantly more buyer vitality than consumers.
SUPPLIER Electric power:
Supplier electric power is little or limited in the FMCG industry. The industry always has great number of suppliers with great size. There will not be any uniqueness in the product or service of suppliers and the manufacturer can always alter from one distributor to other company. However manufacturer faces some amount of distributor power because of the cost they have to incur when transitioning suppliers. Suppliers who do large business with manufacturers are always appreciated with their customers.
THREAT OF NEW ENTRANTS:
Threat of new entrants is limited in this industry. The brand new entrants generally cater to local or small marketplaces contributing to the large unorganized sector. Raw materials for most of the sections in FMCG industry can be easily procured. The investment will never be high for equipment and other possessions required for almost all of the products in the industry. Also the essential technology is easily available. These factors can make the local or small companies to go into easily on the market. But this industry requires high original introduction cost and syndication network is usually an issue. These factors act as a barrier for just about any new entrants in the industry and nearly provide low risk of new entrants.
THREAT OF SUBSTITUTES:
The FMCG industry bears a higher risk of substitutes. The industry owns many organized players with large number of local produces. The products in the industry can continually be imitated and promoted. The industry owns high level risk of substitutes in rural market than in the metropolitan.
DEGREE OF RIVALRY:
The amount of rivalry is high in the industry. There are various global players along with local manufacturers. The industry enjoys low customer loyalty. The customers will have wide choice of brands and the switching cost is always lowest or negligible. There will be only little difference in the grade of brands. Therefore the competition is fierce on the market to entice customers and retain them.
Strategic groups in the industry:
Among the FMCG companies in India Hindustan Unilever Limited is most catered company to nearly every segment in the industry. Its competitors are only catered to certain sections but HUL faces stiff competition from all competitors in every segments. The major companies of tactical groups in FMCG industry are Hindustan Unilever Limited, ITC Small, Nestle India, Emami Small, Colgate-Palmolive (India) Limited, Dabur India Small, Procter & Gamble, Godrej Consumer Products Limited and Cadbury India.
India can be an rising market and has become a hotspot for most multinational FMCG companies like HUL, Proctor & Gamble and Nestle. However home companies like Marico, Dabur and Emami are supplying rough competition to them. These businesses step into natural product category by offering natural and organic products and managed to occupy the market. For example, Marico's flagship brand Parachute Coconut Olive oil has no foreign competition. The existence of international competition is fixed to regions of where they can action and categories like natural products didn't interest the global players.
The structured players on the market are facing problems high magnitude of imitative products. The fake products have emerged highly in rural markets and the Indian FMCG sector is shedding large amount of money due to occurrence of counterfeits products. The industry is facing increasing input costs due to increase in price of the recycleables credited to global monetary slowdown and potential impact of increasing crude petrol prices
The FMCG sector is the fourth-largest sector in the Indian market and has been growing significantly over the past few years credited to changing lifestyle, consumer choices and high throw-away income. The rural market is being highly untapped and provides advantageous condition for growth of the companies in this sector.
VRIO Platform of Hindustan Unilever Limited:
The value of HUL is based on their ability to offer different products and focus on the different sections in the industry. The business has international expertise and wealth of knowledge to focus on different segments satisfying the client needs. The organization is exhibiting high benchmarks of corporate patterns towards its stakeholders. The company realizes that its employees are the primary source of success and well committed to their employees. The business encourages the available communication with customers to get opinions and improve its product offerings.
The company relishes the competitive benefit in its solid supply string and distribution network. Though the company resources aren't rare it enjoys the competitive edge in its resources used in supply chain and syndication network.
The organization owns valuable and exceptional resources in its resource chain and distribution network that the competitors did not have cost benefit in imitating the tool. The social associations entailed in resources are intricate that the opponents cannot easily imitate and control well.
The organization structure of HUL using its empowered managers across the company's nationwide functions imparts acceleration and overall flexibility in decision-making and implementation. The organization leverages its resources for efficient management. The company realizes that its employees will be the primary way to obtain success and well focused on their employees.
Analysis of Commercial Strategies:
Hindustan Unilever Limited has robust supply chain and circulation network covering over 3400 marketers and 16 million stores. HUL's sales organization structure integrates family members, Personal Good care and foods syndication networks along. By this the business aligns all the items of its organization towards the normal goal.
Analysis of Business Strategies:
HUL introduces wide selection of products in several segments at different price tips. HUL analyses its technique to improve its foothold in the processed food items category which is basically unoccupied.
The company has variety of products in each category giving wide array of choice to customers.
Robust Syndication Network covering over 3400 marketers and 16 million stores.
The Company likes many respected brands and created a well respected brand image in the clients mind through advertising campaign.
Well developed quality management.
The company has highly able and well toned R&D resources.
HUL not able to contend effectively with local competitor in the rural market:
The Company's product mainly target middle class and lower middle income population. Therefore the upper middle class population terms the business's product as an inexpensive product with low quality
HUL is over dependent on Indian market and depends on it for most revenue generation. This makes the company at the mercy of changes in weather, politics and economic conditions and also helps it be vulnerable to potential risks arising in India.