Cultural Diversity in International Markets - Case Study Example

Cultural Diversity in International Markets and How Companies Have Attempted To Penetrate Foreign Markets Culture is a dynamic and ever evolving concept that consists of a vast body of rituals, norms and traditions that are based on mutually accepted and widely shared perceptions among members of a society. Culture, in a sense, identifies a society and gives it a distinct flavor and personality. Large corporations that do business across continents and cultures must be wide awake to the highly unwelcome possibilities that might arise due to translation blunders and cultural faux pas that might unwittingly occur if their product positioning violates these basic ground rules. Such a translational blunder occurred when ‘Nova’, a car manufactured by the South Asian automobile giant Hindustan Motors was exported to Spain. While ‘Nova’ meant a ‘bright star’ in rest of Europe, it meant ‘going nowhere’ in Spain. You would not expect very many Spaniards to buy such a car, would you? Similarly, while the color yellow is usually associated with a sporty, cheerful and chirpy character and ambience, it is considered a bad omen in China as it is associated with Yellow River or the river of sorrows that causes untold havoc and misery in the lives of numerous people living along its banks by flooding their homes and fields every year. A Japanese car manufacturer learnt it the hard way when its cars failed to leave showrooms in a flurry as they were doing elsewhere in the world. Thus, culture has emerged as one of the most important criteria in positioning a product, especially for companies manufacturing consumer products and services. Traditional approaches have been determined with domestic markets in mind. Such an approach, known as Local Consumer Culture Positioning (LCCP), was very prominently displayed in advertisements of ‘Marlboro Man’ where the specific traits of individuality and masculinity, so very intertwined with American psyche, were exploited to the hilt to create the image of the so-called Marlboro Man that struck an immediate cord with numerous American males. Similarly, while promoting Bowmore Islay Single Malt Scotch Whisky the producers quite rightly try to propagate the myth and mystery associated with the western islets off Scotland. One visit at their website [Bow07] convinces the visitor that here is a product that has centuries of history and tradition backing it. The mists of Bowmore and the spray of waves crashing against giant boulders almost envelopes the visitor, leaving him with an overpowering longing for a dram of this fabled whisky. Any lover of good whisky is bound to be impressed by this overpowering aroma of old world mysteries that is so very unique of whiskies made in Scotland. The other approach adopted by marketers, especially when they attempt to penetrate new markets, is known as Foreign Consumer Culture Positioning (FCCP) where the product is positioned as symbolic of a desired foreign culture. This is most apparent in case of perfumes and wines where any association with France is bound to increase their desirability many times over. Same is the case when the name of Scotland gets associated with whisky. Sometimes the name of a country is alluded to impart a unique character to the product as in Foster’s ‘Australian for Beer’ or in Harley Davidson’s ‘very American’. The reference of Fèis Ìle or the ‘Festival of Malt and Music’ in Bowmore Islay Single Malt Scotch Whisky similarly evokes spirit of festivity and joy that is so inextricably associated with Islay, world’s most famous centre of whisky tourism. At times, while marketing a culturally blocked product as Kentucky Fried Chicken, in a predominantly vegetarian Indian milieu, the marketer ‘soft positions’ the product as globally popular and widely accepted by adopting the FCCP option. However, with the advent of globalization, multinational companies have penetrated almost every economy of the world, and with consequent diffusion of products, a global consumer culture has gradually built up resulting in homogenization of global consumption that is highly interlinked with brands and their images among consumers across the world. Multinational companies are taking advantage of this new phenomenon and are now marketing their products through the relatively new technique of Global Consumer Culture Positioning (GCCP) where they are projecting well known brands and assisting global consumers to portray their desired self images by associating with these international brands. A case in point is the luxury fashion brand of Louis Vuitton (LV). It is internationally acclaimed as being the ultimate watermark of high fashion and is inseparably wedded to the otherwise nebulous concepts of discerning taste, class, craftsmanship and luxury. Through years and millions spent in carefully orchestrated campaign where LV products have been endorsed and promoted by celebrities, the brand has attained a status where a customer wearing the brand immediately appropriates all the attributes of the brand while silently yet very stridently trumpeting his or her discerning taste and elevated social status. The other prominent example of GCCP would surely be products of Apple. Though much ridiculed by arch rival Microsoft, sales of iPod exceeded even the most optimistic forecasts of avid supporters of Apple by crossing 170 million units within five years of its appearance in the market. Apple has, over the years, been able to associate itself with creativity and an aura of individuality that a consumer can acquire by shifting away from the mainstream Microsoft and purchasing an Apple product. By buying an iPod or an Apple Mac computer, an individual can assert his or her independence. The company has in no small measure played upon this theme and projected a separate lifestyle and culture that it claims is the hallmark of its products and those that use these. Thus owning an Apple product has become much more than owning a computer or a portable digital music player; it has become the proud symbol of membership of a select, sophisticated and discerning international club. Thus, culture is the prism through which consumers perceive or interpret their view of the world and "reflect the sum total of their experience that is projected on to a situation".[Flo97] It may trigger favorable or unfavorable behavior and can create distinct competitive advantage, if it is used properly. Creating an effective fit requires an understanding of consumer's values that are driven by culture and traditions, particularly for consumer products and services. These products are bought on the basis of whether or not they conform to consumer's cultural traditions and customs. Industrial products, on the other hand, are bought on the basis of technical specifications and utilitarian requirements, without regard to cultural characteristics. Culture emerges as an important criterion in designing consumer product positioning strategies in global markets. Bowmore Islay Single Malt Scotch Whisky – a brief review of the product The word ‘bowmore’ actually means great sea reef or sea rock and while only few outside Scotland would actually know the meaning of the word, the rhythm and swing of the word surely lends the product an exotic attraction. Whiskeys from Isle of Islay, especially Bowmore, are being projected as remaining true to the tradition that has seen many ups and downs of history and stand as sentinels of time. This antiquity immediately attracts a connoisseur of whisky to this product. The special section on history of Bowmore, as a place and also the product, bolsters the element of tradition in a brilliant way. The remarkable aspect of this website is it never loudly proclaims the superiority or uniqueness of the product; rather it gently welcomes the visitor to take a tour through the shaded alleys and winding walkways of dusty pages of history that this famous whisky has been witness too. The page where tasting tips are provided also exudes an aura of luxury that unmistakably lures the visitor to taste the product. Backed by years of market presence, the company can afford to retain such an elitist stance as it rests assured on the support and continued patronization by its countless committed consumers. However, the scene undergoes a drastic transformation as this superior Scotch whisky tries to make a foray into hitherto uncharted waters of Asian, or more specifically, Indian markets. Indian market for Scotch whisky – an overview Before we undertake an analysis of Indian markets it might be worthwhile to peep into the international market for Scotch whisky. In a newspaper article published in Daily Record (Glasgow, Scotland) on March 23, 2005, John Penman noted while the domestic market for Scotch whisky grew at grew 0.3 per cent to more than 114 million bottles, published figures for 2004 showed overseas sales of more than pounds 2.2billion - the 12th year in a row the pounds 2billion barrier was been broken. In terms of economic statistics it meant 30 bottles a second were flowing out of Scotland - and pounds 71 a second was flowing into the Scottish economy. However, amid the celebrations, there was frustration that exports had fallen by six per cent and at the difficulty brands face breaking into new markets. Campbell Evans of the Scotch Whisky Association noted India is a growing economy but many of the people still don't have a lot of disposable income. The result is that it is very hard to break deeply into that market. The statement is borne by the fact that of the 80 million cases of spirits sold in India, only a million are imported and not all Indian brands are as high-quality as the Bangalore-distilled Amrut, the first Indian malt granted a UK import license, and went on sale in the country all the while garnering glowing reviews from tasters. There are some products that try to sound Scottish but, according to Campbell, are hugely inferior to the imported Scotch. The exceedingly high tariff – 550% on imported scotch that was there till 2007, also prevented the Scottish whisky players to have a level playing field and some of them wanted India to follow the path China took as it signed into World Trade Organization. A mere reduction of 10% import duty from its earlier level of 75% saw the value of Scotch imports has rise from pounds 1million to pounds 25million in only five years. Campbell echoed the sentiments of a majority of distillers that if India went on with its policy of shutting its door on Scotch whisky, they would look for alternative markets as Poland which has 70 million people and a spirit-drinking tradition. There are emerging markets in the form of Brazil, Russia and Turkey also that vied for the distillers’ attention.[Pen05] The situation in India however changed dramatically in 2007 when India, following a directive from WTO, reduced the massive import duty but it still remained at an exceedingly high level of 150%. But Scotch Whisky Association chief executive Gavin Hewitt was optimistic that the end of the highest tax regime would open up new markets for European producers in India. [Dai07] However, two years before the tariff rates came down, to strengthen its presence in India, Cutty Sark International had launched its premium single malt whiskey brand Glenrothes in the last quarter of 2005 though sales from India accounted for just about 1% of the total global sales. The company took the plunge as it foresaw India as a rapidly emerging market (hoping for a double digit annual growth) and thought it would be prudent to harvest the first mover advantage. The price of $218 for a 700ml bottle surely was way beyond the reach of the general whisky drinking population, but the company wanted to retain a premium image for its product and sold it through selected boutiques in New Delhi and Mumbai. [Asi05] Scotch whisky being a premium product with a huge market appeal is surely an attractive target for counterfeiters. India and China being the latest new markets for Scotch producers it is only natural that these producers would be wary of unethical and illegal trade practices that might be resorted to by local producers. However, their fears were to a certain extent mollified when Lord Jeff Rooker, the then minister for Sustainable Food and Farming, announced in early 2008 British government’s intention of giving Scotch whisky Champagne-style geographical definitions to protect the 2.5 billion-dollar industry against counterfeiting. The minister said "This will help meet the industry's request to protect Scotch whisky here and in global markets from counterfeit products and misleading practices. The proposed legislation will make special provisions relating to Scotch whisky and more tightly define the descriptions applied to it - for example "single malt" or "blended grain." [Hin08] With these provisions Scotch whisky's geographical provenance, such as Highland or Islay, also became tightly defined ensuring that if the product used the name of a distillery, then it must also came from that distillery. High end Scotch whisky brands as Bowmore Islay Single Malt Scotch Whisky that prided on their origins remained protected from the greedy claws of unscrupulous predators. The year 2009, however, saw a marked increase in competition in Indian Scotch whisky market. Early in January 2009, Vijay Mallya-promoted United Spirits began bottling of Scottish whisky Whyte & Mackay Special in India. This however did not come as a surprise for industry watchers as United Spirits, earlier known as McDowell, which already has 140 brands in its portfolio, had acquired Whyte and Mackay in 2007 for Rs 4,800 crore. So, it was only a matter of time before Vijay Mallya would start bottling the exotic product in his home turf. [Pre09] The other new entrant in the rarefied market for Scotch whisky in India is Edrington Group that expanded its offering in India to cash in on the country's growing consumption of spirits. It launched its premium blended Scotch whisky brand 'Black Grouse' in India in October 2009, making it only 16th market globally where the flavored blended spirit brand from Scotland's top whisky maker is sold. The industry anticipation that Scotch whisky consumption in India would touch 1.3 million cases in 2009, up from 1.1 million cases the previous year was most certainly a very strong driver in the decision making process of these well known Scotch whisky producers. [Pre091] Indian market for Scotch whisky – an analysis through the prism of Porter’s five forces Michael Porter envisaged a situation where every industry is influenced by five basic forces and the chances of survival of a particular firm depended on how well it negotiated and manipulated these forces. In the current context of entry of Bowmore Islay Single Malt Scotch Whisky in Indian markets it would be well worth the while to evaluate the situation in terms of Porter’s five forces. [Qui07] Rivalry – The industry concentration in Scotch whisky market in India is pretty high as there are quite a few market players in this thin sliver of top end whisky market. As detailed in the previous section, several Scotch whisky distillers together with the local liquor giant United Spirits have jumped into the fray making it really difficult for new entrants to make a mark. The market being fragmented is highly competitive with a markedly low concentration ratio. The other peculiarity of Indian market is a decisive lack of proper education among the consumers about the lineage and specialties of various types of scotch whiskies. This makes the scene even more precarious for new entrants as consumers are not that much aware of the characteristics of specific distilleries and the different aroma that are imparted owing to differences in water, malt and peat used in brewing and the difference in flavor that wooden casks from different origins can impart while whisky is matured in them. If quizzed, probably very few Indian consumers of Scotch whisky would be able to correctly explain, let alone appreciate, ‘legs’ of a specific brand of whisky. Thus, the dream of every distiller – consumer loyalty or brand loyalty is a distant dream in Indian Scotch whisky market. So, rivalry is at its extreme in this market. Price being of very little significance in this high end market, the only option of creating a toehold is through creatively using channels of distribution – doing something that is novel and entirely unheard of in whisky industry, as using high end jewelry boutiques as points of sale. Threat of substitutes – While in standard economic terms substitutes means products that are able to satisfy the requirements of consumers in somewhat similar manner, the term ‘substitutes’ in Porter’s model refer to products outside the industry. While strictly speaking whiskies manufactured in India as such are different products than Scotch whisky and are thus not substitutes, they are the strongest substitutes of this premium brand and are the greatest threat to imported Scotch whisky. Clever branding and positioning of Indian made whiskies often are able to lure potential customers away. Buyer Power – This market has a huge glamour quotient, is exceedingly small in size and exhibits extreme form of buyer fragmentation. Thus there is hardly any mentionable degree of buyer power with buyers unable to exert any form of pressure whatsoever on the supplier. Supplier Power – Scotch whisky is essentially an imported item (with the only exception of United Spirits which bottles it in India). Thus, the issue of supplier power is of no consequence in this case. However, there might be some problems at the distribution end where distributors are a fairly organized lot but that surely never would go out of hand if handled pragmatically. Relevance of Competitive Intelligence in business However small or exclusive a market might be, there can be no substitute of competitive intelligence that every distiller must take pains to continually update in order to prosper in such a highly competitive market as Indian market for Scotch whisky is. Competitive Intelligence is sustained, deliberate and well coordinated monitoring of activities of business competitors so that a properly calibrated response is already in place before the competitor makes the first move. Such advance knowledge helps an organization to retain and increase its market share by properly analyzing available competitive intelligence. [Haa06] Successful firms are those that continually improve their competitive ability and this can only be done through collection of accurate and actionable competitive intelligence. Competitive Intelligence does not only mean information about competitors’ moves but also an ability to anticipate their possible responses to a series of actions that might be taken by the firm in future. Thus a firm must not only have foreknowledge of the moves of competitors but also their retaliatory responses if the firm makes a fresh move. [Fle03] Some people tend to consider Competitive Intelligence as a more detailed form of market research with additional emphasis given on competitors’ moves and counter moves. Though it surely takes into consideration these aspects, Competitive Intelligence, however, is a far broader concept and consists of three distinct approaches [Gil08]: Strategic Intelligence This mainly relates to an understanding of competitor’s short term and long term goals and the strategy it has adopted to achieve these. This also includes competitor’s assumption about itself and its position relative to the industry and its true capabilities in areas of production, marketing. This will also include a precise estimate of intellectual assets of a competitor and a detailed list of its major suppliers and customers. Often these bits of information help in making many a strategically significant moves, especially during tough market conditions as is witnessed during downturns. Tactical Intelligence These are short term; more market oriented and generally related to pricing policies and terms of sale of competitors and how they plan to position their products to create a separate niche for themselves. Counter Intelligence This is related to preventing competitors from getting hold of insider information and centers around secured information technology. But it should also include a thorough inspection of personnel policy and steps taken by the company to retain key personnel. References Bow07: , (Bowmore Whiskies 2007), Flo97: , (Flora and Pierson 1997), Pen05: , (Penman 2005), Dai07: , (Daily Record (Glasgow, Scotland) 2007), Asi05: , (Asia Pulse News 2005), Hin08: , (Hindustan Times 2008), Pre09: , (Press Trust of India 2009), Pre091: , (Press Trust of India 2009), Qui07: , (QuickMBA 2007), Haa06: , (Haag 2006), Fle03: , (Fleisher and Babette 2003), Gil08: , (Gilad 2008), Read More