Business Administration

04 Jul

CASE – 1    BHEL’S Strategic Intent

Bharat Heavy Electricals Ltd (BHEL) is major Indian public sector enterprise in power, engineering, and manufacturing divisions and centres spread all over the country. It exports to more than 45 countries.

The Vision 2001 statement of BHEL is as below.

MISSION:  To be the leading engineering enterprise providing quality products, systems, and services in the fields of energy, transportation, industry, infrastructure, and other potential areas.


  • meeting commitments made to external and internal customers
  • foster bearing, creativity, and speed of response
  • respect for dignity and potential of individuals
  • loyalty and pride in the company
  • team playing
  • zeal to excel
  • integration and fairness in all matters

BUSINESS MISSION:  To maintain a leading position as suppliers of quality equipment, systems, and services in the field of conversion, transmission, utilisation, and conservation of energy for application in the areas of electric power, transportation, and gas exploration and industries. To utilise company’s capabilities and resources to expand business into allied areas and other priority sectors of the economy like defence, communication, and electronics.



To ensure a steady growth by enhancing the competitive edge of BHEL in existing business, new areas, and international operations.


To provide a reasonable and adequate return on capital employed primarily through improvement in operational efficiency, capacity utilisation, and productivity and generate resources to finance the company’s growth.


To build a high degree of customer confidence by providing increased value for his money through international standards of product quality, performance, and superior customer service


To achieve technological excellence in operations by development of indigenous technologies and efficient absorption and adaptation of imported technologies to suit business needs and priorities and provide a competitive advantage to the company.


To fulfill the expectation which stakeholders like government as owner, employees, customers, and the country at large have from BHEL.


Analyse the vision statement of BHEL and comment on its positive and negative features.


CASE – 2    The Troubled Soap Opera

Doordarshan (DD) is India’s public service broadcaster (PSB) with 1,000 transmitter covering 90 per cent of the country’s population across an estimated 70 million homes. It has 21,000 employees managing its metro and regional channels.

Recent years have seen growing competition from private channels, now numbering more than 60, and the cable and satellite (C & S) operators. The C&S network reaches nearly 30 million homes and is growing fast.

DD’s business model is based on selling half-hour slots of commercial time to the programme producers and charging them in minimum guarantee. For instance, the present tariff (i.e., in 2001), for the first 26 episodes of a programme, is Rs 42 lakh plus the cost of production of the programme. In exchange, the producer gets 720 seconds of commercial time that he can sell to advertisers and generate revenue. Break-even point for producers, at the present rates, thus is Rs 70,000 for a 10-second spot in order to break-even. It is at this point that advertisers face a problem: the competitive rate for a 10-second spot is Rs 50,000. Producers are cagey about buying commercial time on DD. As a result, DD’s projected revenue growth is just 6 to 15 per cent as against 40 to 50 per cent for the private sector channels. Software suppliers, advertisers, and audiences are deserting DD owing to its unrealistic pricing structure.

Clearly, DD has three options if it is to survive. The first is to privatise and the other is to become a pure PBS. In between is the third option of a middle path.

The SWOT factors of DD, analysed by Business World in its issue of March 19, 201, are as below.

Strengths Opportunities Weakness Threats
  • Its 1,000 transmitters cover90 per cent of the country’s population across an estimated 70 million homes against C & S’s tally of 30 million homes.
  • Cable distribution along with MTNO and DoT
  • Leasing infrastructure, time blocks to other broadcasters like Channel 9
  • Digital terrestrial transmission
  • Syndicating programming
  • Too much political interference
  • Muddled programming and commercial strategy
  • Low credibility
  • Gross over-staffing
  • Little stability
  • Producers and advertisers are deserting DD in droves
  • C & s Continues to attract a larger portion of advertising, and now pay revenues

Privatisation could fetch the government a tidy sum and solve many of the managerial and operational problems of DD. Yet, no government can be expected to let go the reins of mass media owing to its political ramifications. If DD is to be a pure PSB, then it needs to have just a news-focussed channel letting its metro and regional channels become autonomous entities. The middle path would mean that DD tighten up its management by reducing its bloated workforce, diversifying into other media, creating marketing function, and overhauling its programming function.

The challenge seems to be to leverage DD’s immense potential and emerge as a formidable player in the mass media in India.


Analyse the SWOT factors and the options before DD. What, in your opinion, is the best strategic alternative before DD? Why do you think the proposed alternative to be the best?


CASE – 3    Managing Cultural Changes at Procter & Gamble

In September 1998, the Procter & Gamble Company, Cincinnati, USA, announced a major global structural change programme, “Organisation 2005”. The mission of the programme was to take P & G’s global turnover from $ 38 billion to $ 70 billion by 2005. The objective was to raise profitability by changing the work culture at P & G. The change drivers identified were the attributes of Stretch, Innovation, and Speed (SIS). The structural changes to be initiated included setting up of four global business units based on product lines, eight market development organisations based on regions, and one global business service centre. A 14-member cross-functional team named as the Culture Team was set up to oversee the management of change.

The achievements of the Organisation 2005 programme were to be seen in terms of:

  1. Changing P & G from being a misaligned organisation to one aligned on common goals, with trust as the foundation
  2. Evolve from an intense inspection-led organisation where everything is kept under control to one that is a team-collaborating unit
  3. Shift from a risk-avoiding culture to a stretch-taking one
  4. Move from running down on complexities to taking on challenges
  5. Heave from a slow-moving organisation to one which hurtles through stretch, innovation and speed to breakthrough goals

As the news of Organisation 2005 programme reached the P & G Hygiene and Health Care headquarter at Mumbai, India, there was a lot of apprehension among the employees. Uncertainty and suspicion arose with regard to their own future and related to the continued existence of the business division they worked in. It took about a year for the apprehensions to fade away and be replaced by clarity and confidence.

P & G, India adopted the global motto of SIS of its parent. A cultural team was set up to communicate the goals of SIS to the employees and to seek their involvement in creating a new P & G. The team set out to identify projects to help achieve the goal of SIS and to get employee feedback periodically. Outdoor meetings of all P & G India employees were conducted to drive home the SIS message. Weekly indoor meetings were held both department-wise and across hierarchies and categories. Team members were made responsible for communicating formal and informal feedback to and from their department. Monthly updates and communication through newsletters were extensively used. Reassurance of employees thus became an on-going continual process.

Says a P & G employee: “Initially, when the global changes were announced, we were a little skeptical as to what will be its impact on the Indian operations. Now after so much communication and interaction at all levels, we are confident and look forward to this change.”


1. Comment on whether the cultural changes at P & G are supportive of the strategy being implemented.

2. What, in your opinion, are the chances of the cultural change being successful? What needs to be done additionally to ensure success?


CASE – 4    What do You Know about Knowledge Management

Shailesh Gupta was quite impressed on meeting T Rajashekhar who was a knowledge management consultant. The chance meeting took place after the annual Laghu Udyog Sangh (Small-industries association) function, which Shailesh was attending. Shailesh requested Rajashekhar to find time to visit his factory to which the latter readily agreed.

Shailesh belonged to an old and established business family of Mahanagar where his grandfather had set up a cooking oil business. The business grew and prospered well. Shailesh’s father was prudent enough to provide him with good education. After graduating in commerce, Shailesh was sponsored by the family business to do a year’s management education programme at Manila. On his return, Shailesh was eager to implement new ideas to his family business and to the real estate and construction business that his father had started.

When Rajashekhar arrived at the appointed time, the first question that Shailesh asked him was about his specialization—knowledge management (or KM, as Rajashekhar referred to it). “KM”, said Rajashekhar, “is a fairly new concept in large corporations that are looking to maximise returns by turning all the data available internally into useful and productive information, which can help predict market trends and competitor moves.” Shailesh immediately related this to his own problem of managing the real estate business that was facing intense competition from newer companies that had come up in the last few years. He was eager to know how KM was implemented.

Rajashekhar cautioned by saying “A formal KM system requires a lot of planning and a sound framework in order to be successful. The process involves planning and gathering of data to an organisation available in any form such as text, graphics as well as audio-visual. Once this has been done, the next step is to collate the data in a format that can be catalogued, indexed, filtered, or linked in a manner that makes sense. Then the information has to be refined and projected in a manner that can be easily disseminated throughout the organisation. The purpose is to help managers take better decisions on the basis of the information provided.”

At this point, Shailesh was excited enough to ask why should decision-makers apply KM within their companies. What Rajashekhar told created some apprehension in Shailesh’s mind. He said, “KM is important for organisations—big or small—that strive to achieve competitive advantage. KM enables corporate and market intelligence to be used in strategic planning.” Shailesh was quick to interject with a query about KM’s applicability to a small business like his own. Rajashekhar agreed by saying “KM is easier for large organisations as they already have a network that helps them share information through e-mail, intranet, and the Web. But any committed organisation, even if small, could apply KM if determined to do so.” He continued, “Once a company has a KM process in place, it will be able to empower its employees with information on various aspects of decision-making related to the strategic as well as operational activities.”

The meeting ended but Shailesh kept on thinking about what Rajashekhar had told him about KM. A thought that lingered for long was whether his employees, long used to working in the traditional environment, would readily share information that they had. And whether they would be willing to adapt to the sophisticated technology involving, what Rajashekhar informed, datamining, intranet, video-conferencing, and webcasting that the KM process was based on.


How do you respond to Shailesh’s predicament expressed at the end of the case?


CASE – 5   Supply Chain Management at Hindustan Levers

The final year class of MBA students was quite excited on hearing that the head of information systems and the infotech manager (sales and distribution) of Hindustan Lever Limited (HLL) were coming to address them on the application of supply chain management (SCM) at HLL.

The mini auditorium was full when the lecture started. The first thing the managers did was to introduce the company to the audience of students and faculty members of the business school. They also suggested that any one could ask question during the presentation they were going to make.

The head of information systems started by saying “as you must be aware, HLL, subsidiary of Unilever, is India’s largest fast-moving consumer goods (FMCG) company. We are the leaders in home and personal care products, foods and beverages, and specialty chemicals. Armed with a portfolio of 110 brands, HLL’s has a vision to meet everyday needs of people everywhere by anticipating the aspirations of customers and responding creatively and competitively with branded products and services that raise the quality of life.” He went to relate the experience of HLL at restructuring its businesses by informing that HLL initiated Project Millennium focussing on the four areas of growth, knowledge, talent, and cost. On being asked whether that was the first time that HLL was restructuring its businesses, the head of information systems replied that business restructuring is a continual process and HLL invested close to Rs 10 crore over a period of a year on the process itself. The process resulted in HLL moving out of its non-core areas, integration of existing core areas, and exploring new potential areas.

At this point, the infotech manager took over and explained the marketing set up of the company. He said, “Owing to the nature of our business activities, we need to launch several new products every year. Streamlining procurement, operations management, and marketing are mammoth operations. It is here that an operational effectiveness technique like SCM came to our aid. With SCM solutions, we are able to monitor all our production lines and manage existing distribution network to make way for new products.” On being asked to relate how HLL was using information technology (IT), the infotech manager said, “SCM mainly relies on the use of IT. For support, there is a satellite based communication system that offers voice and communication facilities linking over 200 locations all over the country. Other initiatives on the IT front have been taken to support the streamlining of the whole process. E-commerce and B2C portal are used to reduce the inventory levels and the working capital cycle. Continuous innovation in process and product management are the other supporting initiatives.”

Some of the students were interested in knowing the software used by HLL for SCM. To this, the infotech manager said that Mfg Pro, a software similar to Enterprise Resource Planning, was introduced in 1998. With this HLL has been able to reduce the duration of production runs. “Constant monitoring of inventory levels and servicing demand is done so that no bottlenecks hold up the supply lines so crucial to an FMCG company such as ours,” he added.

The students were quite impressed to know that the SCM system links the HLL’s headquarter at Mumbai with its 50 factories, an equal number of depots, and 200 sites. More than 750 of the larger stockists have also been linked through a TCS EX software package. From the enthusiasm of the infotech manager, the audience could surmise the continual search for a software solution to enable seamless operations of its value chain seemed to be a fetish with HLL.

A young faculty member interjected at this stage to ask about the difficulties faced in SCM implementation is not always smooth. “The process involves changing established ways of working and it could turn out to be quite painful. The success of the SCM system depends on the quality of data provided to it. Training in error-free data logging is essential.” The head of the information systems added, “Then, there is a bigger challenge of decentralisation of decision-making to the shop floor level.

The fear of making mistakes and getting one’s inefficiencies exposed are the behavioural snags that any company implementing SCM has to contend with.” The presentation ended with the head of information systems encouraging the students to learn more about SCM as it offered a viable approach to managing the value chain in an integrated way.


Suppose you were a student at the business school and a member of the audience at the presentation on SCM at HLL. In the business policy the next day, the professor asks anyone to say how SCM is related to business strategy. What would be your reply?


Business Administration

29 Jun

NO: 1


This is a tragic story, narrated in first person, of an entrepreneur who became bankrupt for no fault of him, without producing anything, mostly because of the irresponsible political and government environment. This case study, documented by Bibek Debroy and P.D. Kaushik and published in Business Today is reproduced here with permission.

In the 1980s, I worked as a chemical analyst for a transnational in Germany, but kept thinking about shifting to India.

Opportunity knocked when I saw an advertisement by the Uttar Pradesh government inviting NRI professionals to start a chemical unit in the newly identified Basti Chemical Industrial Complex. I hail from Lucknow. Hence, this was attractive. I inquired from the Indian High Commission and was told that there is single window clearance for NRI investors. The brochure said several things about the benefits – excise and sales tax holiday for five years, uninterrupted power supply, low rate of interest on loans, and clearance of application within 30 days.

I started the application formalities for a chemical unit. Once the application was accepted, I requested for long leave from my employers. I also inquired from my relatives in Lucknow and was told that the Uttar Pradesh government’s intentions are clear, and developmental work is progressing at fast speed.

Every now and then, I received a letter from the ministry of industry in Uttar Pradesh to furnish some paper or the other, as part of procedural formalities. After three months, I received my provisional sanction letter for allotment of land, and term loan. The letter also stated that within six months, I must take possession of the land, and initiate construction. Otherwise, the deposited amount (Rs 1 lakh as part of my contribution) will be forfeited. I resigned from the company, and shifted permanently to India, since my employer turned down my request for long leave.

On reaching the complex, I was surprised to see that the Uttar Pradesh State Industrial Development Corporation (UPSIDC) had actually developed the land in terms of markers, and signboards, compared to what I had seen on my last visit.

Though roads were not fully laid, it was evident that work was in progress. I took possession of my land and started construction.

Meanwhile, I approached the UPFC for granting me the term loan for ordering the plant and machinery. The first obstacle came from the Uttar Pradesh State Electricity Board (now Uttar Pradesh Power Corporation). The electricity supply to the complex was not yet available. On inquiring, I was told that the plan had been sanctioned, but required clearance from the power ministry, before undertaking further work. The approximate time to get grid supply ranged between four and six months.

The next obstacle came from the Uttar Pradesh Financial Corporation (UPFC). It could release the first instalment after I completed construction till the plinth level. I continued work with the help of a diesel generating set. It took another month to reach the plinth level.

But before I could request UPFC to release my first instalment, I received a letter from UPFC that I had to deposit interest against the amount paid to the UPSIDC for land possession. This was a shock, because interest had to be paid even before anything was produced.

But I had no alternative, because the first insatlment was due. The UPFC promptly released the first instalment after inspecting the construction. It helped me continue construction work, and also book for plant and machinery.

Six months went by. Construction was almost complete. I had received three instalments from the Uttar Pradesh Financial Corporation (UPFC). Each time the payment of interest was due, the required sum was adjusted from the instalment released. If there was any shortfall in money required for construction, I paid from my own pocket.

But after nine months, my coffers went empty. Machinery suppliers were after me, for payment. UPFC insisted on interest payments, because this was the last instalment of my term loan and interest due couldn’t be deducted from future instalments. I borrowed from family and friends and paid up. Then I received the final instalment from UPFC for plant and machinery, with another notice that the yearly instalment for the principal was due.

Within two months, machinery was commissioned at the site. But electricity was yet to reach the complex. In the previous year, I had visited the Uttar Pradesh State Electricity Board (UPSEB) office innumerable times. I also approached the industry association to assist me. But all my efforts were in vain. This did not help me, or others like me, to get the grid supply.

There were 14 other who were in the same boat. The biggest company of them all – obviously with contacts at higher levels – arranged for grid supply from the rural feeder. But that plan also did not take off, because the rural feeder supplied poor quality power for a mere six hours. A process industry requires 24 hours of uninterrupted electricity supply without load fluctuations. It is precisely because of this that all 15 of us, who were waiting for electricity, had insisted on industrial power from UPSEB.

All plans failed. Captive generation was not a viable alternative now. And we continued to wait for the grid supply. We met the former minister for industry and pleaded our case. He assured us that he would take up the case with the power ministry.

Meanwhile, I defaulted on interest payment. So did the others. The final blow came in the Assembly elections, when both the sitting : Member of Legislative Assembly, from Basti, and the state industrial minister lost their seats. Suddenly, everything – from road construction work, to the laying of sewer and phone lines – came to a standstill.

Only the police post and the UPSKB rural feeder office remained. The new incumbent in the industrial ministry hailed from Saharanpur, so the thrust of the ministry changed. Basti was not on their priority list anymore. After waiting for tow years, UPSEB was not able to connect the complex with grid supply.

In the end, UPFC initiated recovery action and sealed my unit. Besides, they claimed that I could not get NRI treatment, with preferential interest rates, because I had permanently moved to India. Thus, there were also plans to file a case against me on account of misinforming the corporation. Experts suggested I should file for insolvency if I wanted to avoid going to prison. This I did in 1994. I spent Rs. 15 lakh from my own pocket.

Now, all that remains of an entrepreneurial dream is a sealed chemical unit in Basti and a complex legal tangle.

I was better off working for the transnational in Germany. Power does not come out of the barrel of a gun. A gun’s barrel comes of power, especially when the latter does not exist.


1. Identify and analyse the environmental factors in this case.

2. Who were all responsible for this tragic end?

3. It is right on the part of the government and promotional agencies to woo entrepreneurs by promising facilities and incentives which they are not sure of being able to provide?

4. Should there be legislation to compensate entrepreneurs for the loss suffered due to the irresponsibility of public agencies? What problems are likely to be solved and created by such legislation?

5. What are the lessons of this case for an entrepreneur and government and promotional agencies


NO: 2


The public sector Indian Oil Corporation (IOC), the major oil refining and marketing company which was also the canalizing agency for oil imports and the only Indian company I the Fortune 500, in terms of sales, planned to make a foray in to the foreign market by acquiring a substantial stake in the Balal Oil field in Iran of the Premier Oil. The project was estimated to have recoverable oil reserves of about 11 million tonnes and IOC was supposed to get nearly four million tonnes.

When IOC started talking to the Iranian company for the acquisition in October 1998, oil prices were at rock bottom ($ 11 per barrel) and most refining companies were closing shop due to falling margins. Indeed, a number of good oil properties in the Middle East were up for sale. Using this opportunity, several developing countries “made a killing by acquiring oil equities abroad.’’

IOC needed Government’s permission to invest abroad. Application by Indian company for investing abroad is to be scrutinized by a special committee represented by the Reserve Bank of India and the finance and commerce ministries. By the time the government gave the clearance for the acquisition in December 1999 (i.e., more than a year after the application was made), the prices had bounced back to $24 per barrel. And the Elf of France had virtually took away the deal from under IOC’s nose by acquiring the Premier Oil.

The RBI, which gave IOC the approval for $15 million investment, took more than a year for clearing the deal because the structure for such investments were not in place, it was reported.


1. Discuss internal, domestic and global environments of business revealed by this case.

2. Discuss whether it is the domestic or global environment that hinders the globalization of Indian business.

3. Even if Elf had not acquired Premier Oil, what would have been the impact of the delay in the clearance on IOC?

4. What would have been the significance of the foreign acquisition to IOC?

5. What are the lessons of this case?


NO: 3


Balsara Hygiene Products Ltd., which had some fairly successful household hygiene products introduced in 1978 a toothpaste, Promise, with clove oil (which has been traditionally regarded in India as an effective deterrent to tooth decay and tooth ache) as a unique selling proposition. By 1986 Promise captured a market share of 16 per cent and became the second largest selling toothpaste brand in India. There was, however, an erosion of its market share later because of the fighting back of the multinationals. Hindustan Lever’s Close-up gel appealed to the consumers, particularly to the teens and young, very well and toppled Promise form the second position.

Supported by the Export Import Bank of India’s Export Marketing Finance (EMF) programme and development assistance, Balsara entered the Malaysian market with Promise and another brand of tooth paste, Miswak.

The emphasis on the clove oil ingredient of the Promise evoked good response in Malaysia too. There was good response to Miswak also in the Muslim dominated Malaysia. Its promotion highlighted the fact that miswak (Latin Name : Salvadora Persica) was a plant that had been used for centuries by as a tooth cleaning twig. It had reference in Koran. Quoting from Faizal-E-Miswak, it was pointed out that prophet Mohammed used “miswak before sleeping at night and after awakening.’’ The religious appeal in the promotion was reinforced by the findings of scientists all over the world, including Arabic ones, of the antibacterial property of clove and its ability to prevent tooth decay and gums.

Market intelligence revealed that there was a growing preference in the advanced counties for nature based products. Balsara tied up with Auromere Imports Inc. (AAII), Los Angeles. An agency established by American followers of Aurobindo, an Indian philosopher saint. Eight months of intensive R & D enabled Balsara to develop a tooth paste containing 24 herbal ingredients that would satisfy the required parameter. Auromere was voted as the No. 1 toothpaste in North Eastern USA in a US Health magazine survey in 1991.

The product line was extended by introducing several variants of Auromere. A saccharine free toothpaste was introduced. It was found that mint and menthol were taboo for users of homoeopathic medicines. So a product free of such mints was developed. Auromere Fresh Mint for the young and Auromere Cina Mint containing a combination of cinnamon and peppermint were also introduced. When the company relaised that Auromere was not doing well in Germany because of the forming agent used in the product, it introduced a chemical free variant of the products.


1. Explain the environmental factors which Balsara used to its advantage.

2. What is the strength of AAII to market ayurvedic toothpaste in USA?


NO: 4


The Economic Times, 20 October 2000, reported that Reliance Industries entered into a swap deal for the export and import of 36 cargoes of naphtha over the next six months. Accordingly, three cargoes of 50,000 tonnes each were to be exported every month from Reliance Petroleum’s Jamnagar refinery and three cargoes of the same amount were to be imported to the Reliance Industries’ Hazira facility. The deal was done through Japanese traders Mitsubishi, Marubeni, ltochu, IdCmitsu and Shell. The export was done at around Arabian Gulf prices plus $22.

Reliance, needs petrochemical grade naphtha for its Hazira facility which is not being produced at Jamnagar. Therefore, its cracker at Hazira gets petrochemical grade naphtha from the international markets in return for Reliance Petroleum selling another grade of naphtha from its Jamnagar refinery to the international oil trade.

If RIL imports naphtha for Hazira petrochemical plant, the company does not have to pay the 24 per cent sales tax, which it will have to pay on a local purchase, even if it is from Reliance Petro. Besides Reliance Petro will also get a 10 per cent duty drawback on its crude imports if it exports naphtha from the refinery at Jamnagar.

The export of naphtha with Japanese traders is being looked as a coup of Reliance as it gives the company an entry into the large Japanese market.

Indian refineries have a freight advantage over the Singapore market and can quote better prices.


1. Examine the internal and external factors behind Reliance’s decision for the swap deal.

2. What environmental changes could make swap deal unattractive in future?

3. Could there be any strategic reason behind the decision to import and export naphtha?

4. Should Reliance import and export naphtha even if it does not provide any profit advantage?


NO: 5


TELCO opened bookings for different models of its proud small car Indica in late 1998. The consumer response was overwhelming. Most of the bookings were for the AC models, DLE and DLX. The DLE model accounted for more than 70 per cent of the bookings.

Telco has planned to commence delivery of the vehicles by early 1999. However, delivery schedules for the AC models were upset because of some problems on the roll out front. According to a report in The Economic Times dated 13 March 1999, Telco officials attributed the delay to non-availability of air conditioning kits.

Subros Ltd. supplies AC kits for the DLE version and Voltes is the vendor for the DLX version. Incidentally, Subros is also the AC supplier to Maruti Udyog Ltd.

Telco officials alleged that Subros was being pressured by the competitor to delay the supply of kits. “If this continues, we will be forced to ask Voltas to supply kits for the DLE version too,’’ a company official said.


1. Why did Telco land itself in the problem (supply problem in respect of AC kits)?

2. If the allegation about the supplier is right, discuss its implications for the supplier.

3. Evaluate the ethical issues involved in the case. (Also consider the fact Maruti was 50 per cent Government owned.)


NO: 6


Product and Gamble (P & G), a global consumer products giant, “stormed the Japanese market with American products, American managers, American sales methods and strategies. The result was disastrous until the company learnt how to adapt products and marketing style to Japanese culture. P & G which entered the Japanese market in 1973 lost money until 1987, but by 1991 it became its second largest foreign market.’’

P & G acclaimed as “the world’s most admired marketing machine’’, entered India, which has been considered as one of the largest emerging markets, in 1985. It entered the Indian detergent marketing the early nineties with the Ariel brand through P & G India (in which it had a 51 percent holding which was raised 65 per cent in January 1993, the remaining 35 per cent being hold by the public). P & G established P & G Home products, a 100 per cent subsidiary later (1993) and the Ariel was transferred to it. Besides soaps and detergents, P & G had or introduced later product portfolios like shampoos (Pantene) medical products (Viks range, Clearasil and Mediker) and personal products (Whisper feminine hygiene products, pampers diapers and old spice range of men’s toiletries).

The Indian detergent and personal care products market was dominated by Hindustan Lever Ltd. (HLL). In some segments of the personal care products market the multinational Johnson & Johnson has had a strong presence. Tata group’s Tomco, which had been in the red for some time, was sold to Hindustan Lever Ltd. (HLL). HLL, a subsidiary of P & G’s global competitor, has been in India for about a century. The take over of Tomco by HLL further increased its market dominance. In the low priced detergents segment Nirma has established a very strong presence.

Over the period of about one and a half decades since its entry in India, P & G invested several thousand crores. However, dissatisfied with its performance in India, it decided to restructure its operations, which in several respects meant a shrinking of activities – the manpower was drastically cut, and thousands of stockists were terminated. P & G, however holds that, it will continue to invest in India. According to Gary Cofer, the country manager, “it takes time to build a business category or brand in India. It is possibly an even more demanding geography than others.’’

China, on the other hand, with business worth several times than in India in less than 12 years, has emerged as a highly promising market for P & G. when the Chinese market was opened up, P & G was one of the first MNCS to enter. Prior to the liberalisation, Chinese consumers had to content with shoddy products manufactured by government companies. Per capita income of China is substantially higher than India’s and the Chinese economy was growing faster than the Indian. Further, the success of the single child concept in China means higher disposable income.

Further it is also pointed out that for a global company like P & G, understanding Chinese culture was far easier since the expat Chinese in the US was not very different from those back home where as most Indian expats tended to adapt far more to the cultural nuances of the immigrant country.

One of P & G’s big in India was the compact technology premium detergent brand Ariel. After an initial show, Ariel, however, failed to generate enough sales – consumers seem to have gone by the per kilo cost than the cost per wash propagated by the promotion. To start with, P & G had to import the expensive state-of-the-art ingredients, which attracted heavy customs duties. The company estimated that it would cost Rs. 60 per kilo for Ariel compared to Rs. 27 for Surf and Rs. 8 for Nirma. Because of the Rupee devaluation of the early 1990s, the test market price of Rs. 35 for 500 gms was soon Rs. 41 by the time the product was launched. HLL fought Ariel back with premium variants of Surf like Surf Excel.

It is pointed out that, “in hindsight, even P & G managers privately admit that bringing in the latest compact technology was a big blunder. In the eighties, P & G had taken a huge beating in one of its most profitable markets, Japan, at the hands of local company Kao. Knowing the Japanese consumer’s fondness for small things, Kao weaved magic with its newfound compact technology. For a company that prided itself on technology, the drubbing in Japan was particularly painful. It was, therefore, decided that compacts would now be the lead brand for the entire Asia-Pacific region. When P & G launched Ariel in India, it hoped that the Indian consumer would devise the appropriate benchmarks to evaluate Ariel. As compacts promised economy of sue, P & G hoped that consumers would buy into the low-cost-per-wash story. But selling that story through advertising was particularly difficult, especially sine Indian consumers believed that the washing wasn’t over unless the bar had been used for scrubbing. Even though Ariel was targeted at consumer with high disposable income, who represented half the urban population, consumers simply baulked at the outlay.

Thereafter, one thing led to another. Ariel’s strategy of introducing variants was a smart move to flank Lever at every price point by cleverly using the brand’s halo effect. And by supporting the brand in mass media and retaining the share of voice. By 1996, it had become clear that Ariel’s equity as a high-performance detergent had begun to take a beating. Its equity as a top-of-the-line detergent was getting eroded….Nowhere in P & G’s history had a concept like Super Soaker been used to gain volumes…. It was decided that Super Soaker would no longer be supported, nor would Ariel bar be supported in media.


1. Discuss the reasons for the initial failure of P & G in Japan.

2. Where did P & G go wrong (if it did) in the evaluation of the Indian market and its strategy?

3. Discuss the reasons for the difference in the performance of P & G in India and China.