Airo International Research Journal March, 2016 Volume VII ......EY‘s Renewable Energy Country...
Transcript of Airo International Research Journal March, 2016 Volume VII ......EY‘s Renewable Energy Country...
Airo International Research Journal March, 2016 Volume VII, ISSN: 2320-3714 Impact Factor 0.75 to 3.19
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Airo International Research Journal March, 2016 Volume VII, ISSN: 2320-3714 Impact Factor 0.75 to 3.19
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INTERNATIONAL MARKETING STRATEGY FOR INDIAN
COMPANIES: MARKETING STRATEGIES WORK
Durgesh Chandra Gupta
Research Scholar Himalayan University
Ashok Kumar Purohit
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ABSTRACT
The paradox of India's dismal share in world trade is baffling, for a country housing a billion
people. This paper analyses this paradox from the point of view of the value-addition process,
and country image. The authors, supported by case studies from their consulting assignments,
suggest a two-pronged strategy to lift India's share of the world markets to new heights. In
Particular, the authors look at branded, manufactured goods and value-added services as
potential winners. Building a firm's image in international markets through conscious and well-
directed strategies is discussed in terms of concrete actions which the firm can take. Marketing
strategy is a process that can allow an organization to concentrate its limited resources on the
greatest opportunities to increase sales and achieve a sustainable competitive advantage . The
marketing concept of building an organization around the profitable satisfaction of customer
needs has helped firms to achieve success in high-growth, moderately competitive markets.
However, to be successful in markets in which economic growth has leveled and in which there
exist many competitors who follow the marketing concept, a well-developed marketing strategy
is required. Such a strategy considers a portfolio of products and takes into account the
anticipated moves of competitors in the market.
KEYWORDS: Branded Goods, Value-added Services, Country Image, Firm's Image.
INTRODUCTION
Power is one of the most critical
components of infrastructure crucial for the
economic growth and welfare of nations.
The existence and development of adequate
infrastructure is essential for sustained
growth of the Indian economy. India‘s
power sector is one of the most diversified
in the world. Sources of power generation
range from conventional sources such as
coal, lignite, natural gas, oil, hydro and
nuclear power to viable non-conventional
sources such as wind, solar, and agricultural
and domestic waste. Electricity demand in
the country has increased rapidly and is
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expected to rise further in the years to come.
In order to meet the increasing demand for
electricity in the country, massive addition
to the installed generating capacity is
required.
India ranks third among 40 countries in
EY‘s Renewable Energy Country
Attractiveness Index, on back of strong
focus by the government on promoting
renewable energy and implementation of
projects in a time bound manner.
India has moved up 73 spots to rank 26th in
the World Bank's list of electricity
accessibility in 2017, according to Mr
Piyush Goyal, Minister of State
(Independent Charge) for Power, Coal,
Renewable Energy and Mines, Government
of India.
In September 2017, the Government of India
launched the Saubhagya scheme to provide
electricity connections to over 40 million
families in rural and urban areas by
December 2018 at a cost of US$ 2.5 billion.
In many ways, the electricity industry makes
an unlikely candidate for disruption. Not
much changed between the 1880s, when
Thomas Edison began building power
stations, and the start of the 21st century.
Top business leaders rarely had to think
about electricity. They got their electricity
from the power plant, or the local utility, or
the government, and had little say in how it
was produced, delivered, or managed.
Utility executives, for their part, could make
and execute long-term plans with a great
deal of security. Demand tended to rise
along with the economy; natural monopolies
were the norm. No longer. Several
coincident, significant transformations are
causing a revolution in the way electricity
— the vital fuel of global commerce and
human comfort — is produced, distributed,
stored, and marketed. A top-down,
centralized system is devolving into one that
is much more distributed and interactive.
The mix of generation is shifting from high
carbon to lower carbon, and, often, to no
carbon. In many regions, the electricity
business is transforming from a monopoly to
a highly competitive arena.
Until recently, for most users, electricity was
a commodity over which they had little
choice. Now, consumers can choose from a
wide array of potential power sources and
providers. Technology is giving them
greater autonomy and more choices in the
way they source, use, and store electricity —
and maybe even the opportunity to make
money at the same time. We have entered an
age in which the technology-powered push
and the customer-driven pull have
beneficially collided.
This has led to a paradigm shift within the
power industry, from a premium on rigid
capacity to a focus on flexibility. Long
known for clear borders with sharply
defined roles — generation, transmission,
distribution, trading, and retail — the global
electricity market is now characterized by
new players and technologies, more
provider–customer interaction, broader
options, and eroding distinctions between
industries. Incumbents accustomed to
dealing only with one another are finding
themselves facing a wide range of upstarts.
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As a result, the electric power system is
evolving from a unilateral system to an
integrated networked ecosystem. The digital
revolution, which is layered on top of these
changes, is transforming the system from
static to dynamic, and from stable to
disrupted. Shares of utility companies were
once referred to as ―orphans and widows‖
stocks — so safe that even the most
vulnerable citizens were secure in holding
on to them. But in the emerging
environment, utility companies themselves
risk the possibility of being left behind. It‘s
no surprise that in PwC‘s 2015 CEO Survey,
utility executives stood out from their
counterparts in other industries in
recognizing that they faced disruption. But
rather than fearing the changes, these leaders
are realizing that they need to embrace them
and seek to take advantage of the emerging
opportunities.
The root causes of the transformation of the
sector are a unique conjunction of global
megatrends. Concerns over emissions and
climate change are bringing heavy political
and social pressure to bear on providers —
pressure both to change the mix of fuels they
use and to encourage efficiency. According
to PwC‘s 2015 Global Power & Utilities
(P&U) Survey, the falling costs of
renewables such as solar energy,
breakthroughs in large-scale and smaller-
scale energy storage, and new energy-
efficient technologies are catalyzing greater
distribution of generation. The rise and
adoption of big data and Internet-based
applications are making systems more
intelligent and interactive; altering the habits
of personal energy usage; and stimulating
the rapid development of new business
models by incumbents, startups, and
aggressive companies in adjacent fields.
This momentum is not confined to mature
power markets. In fact, the processes we‘re
describing may be even more relevant to
less developed countries in which basic
access to electricity remains a challenge. In
regions such as sub-Saharan Africa, the
adoption of distributed energy technologies
is giving customers their first access to
electricity. Just as mobile telephony has
proved to be a leapfrog technology in
Africa, making the development of landlines
unnecessary, local renewable energy
systems have the potential to obviate
centralized generation.
In the face of all this change, companies that
have been in the business and wish to
remain so in the future clearly need to
rethink their strategy. But the revolution
carries implications for all businesses,
whether they are part of the electricity sector
and its supply chain or interact with it
primarily as customers. Instead of being
merely a cost over which companies have
very little control, electricity is becoming
much more variable — and potentially more
valuable. These transformations are opening
up immense opportunities while enabling
consumers of electricity to approach power
in a new way — as ―prosumers,‖ who both
produce and consume energy. Companies
can participate in demand management
programs, strike power purchase agreements
for wind power (and hence bolster their
green credibility), install storage that allows
the avoidance of peak demand charges, and
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deploy data and software services to manage
use effectively. In the coming years, they
will be able to harness the technologies and
applications that will boost the capability of
customers to create and capture real
benefits. Each of these options presents
business opportunities for new entrants, for
companies in adjacent fields, and for savvy
consumers. In short, it is now possible —
even imperative — for a much broader
range of leaders to think strategically about
electricity, to imagine new possibilities, and
to consider whether their capabilities match
emerging demands.
The Industry Responds: In defining future
business models, utilities need to understand
and challenge their company‘s purpose and
positioning in tomorrow‘s markets. In the
past, operating an integrated utility from
generation through customer supply was
well understood. Now, unbundling
opportunities are extending deeper into the
value chain and enabling greater
participation by specialists. As a result,
electric companies will need to rethink not
just their roles and business models, but also
their service and product offerings and
approaches to customer engagement. We
will continue to see utilities act in somewhat
familiar ways. Energy suppliers will conduct
centralized generation and sales, and
systems integrators will focus on
accommodating supply and demand peaks
through technologies now distributed in the
grid. Companies that are focused on asset-
based business models in pursuit of energy
supply and systems integration will likely
fall into several categories: pure-play
merchants — i.e., commodity suppliers —
which own and operate generation assets
and sell power into competitive wholesale
markets at market clearing prices; grid
developers, which acquire, build, own, and
maintain transmission assets that connect
generators to distribution system operators;
grid managers, which operate transmission
and distribution assets and provide
generators and retail service providers with
access to their networks; and ―gentailers,‖
utilities that both own generation assets and
sell retail energy. Highly efficient asset
optimization, in conjunction with ―Internet
of Things‖ technology, will be crucial to
succeeding in these areas. We are also likely
to see a great deal of innovation and
opportunity in new areas, particularly those
that involve customers, data, and
technology. Smart grids, microgrids, local
generation, and local storage all create
opportunities for companies to engage
customers in new ways. Companies that aim
to enhance the value of the grid to all
customers will use technology to improve
system performance and customer
engagement and to provide flexibility. They
will offer solutions in scaled storage, virtual
energy, home automation and convenience,
and demand-side management. In a digital-
based smart energy era, we expect that the
main distribution channel for services will
be online and the energy retailing price will
hinge on innovative digital platforms.
Market Size: Indian power sector is
undergoing a significant change that has
redefined the industry outlook. Sustained
economic growth continues to drive
electricity demand in India. The
Government of India‘s focus on attaining
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‗Power for all‘ has accelerated capacity
addition in the country. At the same time,
the competitive intensity is increasing at
both the market and supply sides (fuel,
logistics, finances, and manpower). Total
installed capacity of power stations in India
stood at 330,860.58 Megawatt (MW) as on
December, 2017.
The Ministry of Power has set a target of
1,229.4 billion units (BU) of electricity to be
generated in the financial year 2017-18,
which is 50 BU‘s higher than the target for
2016-17. The annual growth rate in
renewable energy generation has been
estimated to be 27 per cent and 18 per cent
for conventional energy.
The Indian solar industry has installed a
total of 2,247 megawatts (MW) in the third
quarter of 2017, from 1,947 MW in the
second quarter of 2017. The cumulative
installed capacity reached 7,149 MW in the
first nine months of 2017, covering more
than one-third of total new power capacity
addition in 2017.
Two under-construction hydro projects of
NHPC in Himachal Pradesh and Jammu &
Kashmir (J&K), expected to be
commissioned in 2018, will produce
4,458.69 million units of additional power,
according to the Ministry of Power,
Government of India. The total estimated
potential of tidal energy in India is about
8,000 megawatt (MW), of which 7,000 MW
is in the Gulf of Kambhat, 1,200 MW is in
the Gulf of Kutch and 100 MW in the
Gangetic Delta. The number of small hydro
power projects set up in India stood at 1,085
with total installed capacity of 4,399.355
megawatt (MW) as of November 30, 2017.
New Participants in a Transformed
World: As they work to adjust to the new
environment, utilities have the advantages of
long operating histories, substantial assets,
customer relations, and a host of relevant
capabilities. But they will confront a new set
of competitors. The same forces that are
pushing utilities to change are opening up
new avenues for companies that, until now,
have been only tangentially connected to the
power industry, or that are newcomers
entirely. History teaches us that the majority
of business model innovations are
introduced by newcomers. And the barriers
to entry into the distributed energy market
are much lower now than ever before. The
market, currently worth tens of billions of
dollars, covers a wide spectrum of
opportunities, including energy controls and
demand management activities, local
generation, large-scale storage and regional
super grids, and software that encourages
behavior change. As a result, non-incumbent
companies can take numerous strategic
actions to participate in the rapidly
developing power technology and customer
markets. Engineering and technology
companies such as General Electric and
Siemens have long been important players
as equipment providers in larger-scale
segments of the distributed energy market.
But the growth and extension of distributed
energy is blurring the boundaries between
such companies and the power utility sector,
at both the individual customer and
community levels. For example, Siemens
has been working on a project with the
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Parker Ranch, a large agricultural operation
in Hawaii, which is constructing a powerful
micro grid as part of an effort to reduce
operating costs.
Strategies for Entrants and Customers:
Businesses in word like U.S. that use large
amounts of electricity now have a wide
range of options if they want to pursue
opportunities in the evolving marketplace.
• Become a producer. The distributed
energy market allows all sorts of players
to generate and sell energy. IKEA has
put solar panels atop virtually all its U.S.
stores. Waste Management, the largest
garbage collector in the U.S., has found
ways to pivot into electricity production.
By capturing the methane released in
130 landfills around the country, and
harnessing it to make electricity on-site,
Waste Management has become a
significant producer of what the U.S.
Environmental Protection Agency
defines as renewable energy — its
generating capacity, at about 500
megawatts, can provide electricity for
about 400,000 homes. In addition to
using or selling the electricity, Waste
Management has turned these
capabilities into a line of business, as it
becomes a project manager and advisor
to cities that want to build such systems
at their own landfills. Self-generation
has long been a tactic used by intensive
energy businesses. For example,
Scandinavian building products
company Moelven says it has a goal of
obtaining at least 95 percent of its
energy needs from self-produced wood-
chip bioenergy and of taking ―an active
role in the technological and market
development of the bioenergy sector.‖
• Look at your own usage. Electricity used
to be regarded as an immutable fixed
cost. But today, thanks to all the changes
we‘re seeing, opportunities for savings
abound. What was once a cost can
quickly transform into a lever for profits
and operational excellence. In the 2015
PwC Global P&U Survey, energy-
efficient technologies were singled out
as likely to have the biggest impact on
the power markets between now and
2030. However, saving energy is only
one way to profit from the energy
transformation. Shifting demand to
periods when energy is more abundant
and cheaper is another way for industrial
production companies to reduce costs
significantly. Earning money through
flexibility of demand, often referred to
as advanced demand-side management,
is not yet well exploited. That‘s because,
among other reasons, such flexibility is
often not rewarded in the same way as
the provision of energy. However,
negative load — the term for the swift
reduction of electricity use — can, at
times, be as valuable to the power
system as is the provision of energy. As
markets shift from relying on fossil fuels
to incorporating more renewable energy
such as solar and wind (which are
intermittent), markets for flexibility will
need to be established to reward the shift
of electricity demand.
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• Build power use into your brand. One of
the unique factors at work in this
environment is that for many companies,
electricity use has become a part of the
brand image. In the emerging world, the
kind of power you use — and how you
use it — is an integral component of
your corporate culture. Power use
becomes a way of differentiating
yourself and aligning the corporation‘s
values with those of employees and local
communities; it even becomes a form of
marketing and advertising. In February
2015, Apple struck an $850 million deal
with First Solar, under which the
company will purchase the output of a
giant solar farm to be constructed in
California — enough to power its
operations in the state. Doing so was part
of Apple‘s larger effort to be identified
with low-emissions energy and to power
all its global data centers with renewable
electricity.
A Clear Trajectory
In a time of upheaval, companies need to see
opportunities as much as they need to deal
with threats. The energy transformation
demands strategic decisions that should have
board-level attention. Although policies and
the ultimate shape of markets may be
uncertain, the trajectory is clear. To date,
concerns over climate change in conjunction
with technological innovation have provided
the main push for the transformation of the
electricity industry. But we believe that as
customers become more familiar with the
tools at their disposal and as competition
brings more compelling offerings, the
technological pull will take over. That
means that we are just scratching the
surface. The potential for further disruption
is immense — but so are the opportunities.
For the 12th Five-Year Plan, a total of 88.5
GW of power capacity addition is targeted;
of which, 72.3 GW constitutes thermal
power, 10.8GW hydro power & 5.3 GW
nuclear power. In January 2017, the 2nd unit
of Kundankulam Nuclear Power Project,
attained a capacity of 1000Mwe & this is
anticipated to strengthen the overall power
generation capacity in India. In February
2017, a 40-killowatt solar power plant was
inaugurated at Don Bosco Higher Secondary
School in Johrat City, Assam. In May 2017,
the government approved the raising of
bonds worth US$351.03 million for
renewable energy through the Indian
Renewable Energy Development Agency
(IREDA). As of June 2017, total thermal
installed capacity in the country stood at
220.58 GW, while hydro & renewable
energy installed capacity totalled to 44.61
GW & 58.3 GW, respectively.
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Power Sector in India Latest update: February, 2018
With electricity production of 1,160.1 BU in
India in FY17, the country witnessed growth
of around 4.72 per cent over the previous
fiscal year. Over FY10–FY17, electricity
production in India grew at a CAGR of 7.03
per cent. The 12th Five Year Plan projects
that, total domestic energy production would
reach 844 million tonnes of oil equivalent
(MTOE) by 2021–22. Notes: FY - Indian
Financial Year (April-March), BU – Billion-
Unit
Managing Image in the International
Marketplace: Every exporter has to
contend with three levels at which Image
works – Country Image, Corporate Image
and finally, for branded products, the Brand
Image. Most of our exporters suffer due to
the poor image that buyers have of India as a
country, and of Indian companies. India is
perceived as backward, and Indian
companies have a non-professional image in
terms of almost any parameter known to
affect successful marketing. Our quality is
perceived as shoddy, packaging is not up to
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international standards, delivery is
unreliable and export procedures
unfathomable. There are, of course, some
bright exceptions to the generally
lackadaisical export performance. But there
is still an image problem for India‘s goods
abroad. Issues like child labour, lack of
environmental safeguards, and cruelty to
animals have also had a negative image
contribution to various Indian exports such
as carpets, garments and leather goods. The
international image of Japan, South Korea,
Taiwan or Singapore, on the other hand, is
one of an industrialized, highly reliable,
quality conscious country, and this now rubs
off on all the individual suppliers from those
countries. It is however, a point to be noted
that this image was not built up easily. It
came after years of innovative product
design, manufacturing control and
automation and of course, marketing. Some
of the incremental innovations may have
been due to the participatory work culture
followed in some of these countries. In other
words, these countries have been following
good management practices in all the
functional areas. Companies like Canon,
Toyota, Minolta, Nissan and Honda have all
contributed to the powerful image that Japan
now has in the world. With the possible
exception of biotechnology, pharmaceuticals
and computer hardware & software
(Microsoft, Intel and IBM) where US
companies still hold a better image, almost
all other high technology business areas
seem to be in the firm grip of Japan today.
Can India do the same? Possibly it can; and
to do it, one of the things we must do is
mend our image - project ourselves as
people who are industrious, who keep
promises, who guarantee their products
without questions, and consistently maintain
a high quality. It is necessary to work
backwards from there and keep the
marketing strategy tuned to the needs of
customers.
CONCLUSION: As the balance of power
shifts from the manufacturer to the retailer,
an attitude shift in brand and marketing
managers of consumer product companies is
going to become increasingly important.
They will have to stop treating the retailer as
a pain and start considering him a customer.
In addition, increasingly, market segments
will have to be defined by the retailer.
Traditional methods of market
segmentation, such as psychographics and
demographics, will not be of as much utility
as market segmentation based on retailer
patronage. Such knowledge will also affect
marketing strategies, which will have to
become more pull-oriented, in terms of
branding, advertising and sales promotion.
The second change in strategy is a
consequence of the rise of the Internet. As
back office operations and the value chain
becomes increasingly automated, the flow of
operations will have to reverse - companies
will have to drive manufacturing based on
customer insights, rather than depend on
capacity-driven manufacturing. The nature
of advertising, and this is especially true of
India, will also change. As New Media
becomes ubiquitous, you will see more and
more ads on cell phones (as text messages)
and online, which also means the
capabilities of agencies in TV advertising
will become less relevant - they will need to
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upgrade their abilities to match the
requirements of New Media. Then there is
the rise of the services industry. Service
providers will need to understand the
difference in customer behavior for services
and products. Each purchase is a separate
transaction and customer loyalties can
waver. With services, on the other hand, if a
customer is satisfied the first time, he does
not usually shop around. Marketers will now
need to pay attention to the first interaction.
In the consumer packaged goods industry,
the biggest challenge will continue to focus
on a few brands where one can win against
the retailers. In the B2B world, the challenge
will be to demonstrate value in the face of
tremendous price pressure. In both cases, the
push will be to sell solutions instead of
simply selling products. Selling solutions is
about making the customer's life easier by
taking on a greater part of the process. By
cross-selling products and services as an
integrated package, manufacturers can
expand the value-added market.
REFERENCES:
[1] Don Dawson, Earl Simpkins, and
Josh Stillman, ―Waiting for the
Digital Grid,‖ s+b, Winter 2013: The
modernized grid should
revolutionize the way electricity is
distributed and used, but its potential
hasn‘t yet been realized.
[2] ―The Future of Electricity: Attracting
Investment to Build Tomorrow‘s
Electricity Sector‖ (PDF), World
Economic Forum, Jan. 2015: In-
depth look at how the electricity
sector can become more sustainable
and reliable.
[3] PwC 18th Annual Global CEO
Survey, 2015, ―A marketplace
without boundaries? Responding to
disruption,‖: Overview of chief
executive attitudes.
[4] PwC 2015 Global Power & Utilities
Survey: Looks at what is driving the
change in the power sector and
where it is leading.
[5] ―Transforming America‘s Power
Industry: The Investment Challenge
2010–2030‖ (PDF), Edison
Foundation, Nov. 2008: Finds that
up to $2 trillion will be needed to
build out the power capacity required
in the United States.
[6] Einhorn, Bruce, Manjeet Kripalani,
Pete Engardio., "India 3.0: Its
software outfits take on the World",
BusinessWeek, February 26, 2001.
[7] Futrell, Charles M., Fundamentals of
Selling: Customers for Life,
McGraw-Hill/Irwin, New York, NY,
2002.
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