Introduction and Case
Procter and Gamble, the MNE which is placed fifth in the list of “World’s Most Admired Companies” per the press release in 2011, entered new markets around the globe after its production capacity had subverted the domestic demand for products. Besides location diversification, it also diversified its product base. We are going to discuss how the MNE entered the South Asia Pacific region on the basis of its consumer goods by taking into consideration the Porter’s Diamond of National Competitive Advantage. We will understand how the 4 attributes have favored or impeded the entry of P&G in the nations Japan, India and China.
Per the Porter’s theory, the nation’s international success in a particular industry largely depends on the factor endowments, related and supporting industries, demand conditions and firm strategy, structure and rivalry. P&G first entered the Japanese market. America and Japan are big time rivals when it comes to technology and development. P&G had 2 options either through exports or through FDI. It considered FDI as a better option due to the existing trade barriers and strong foot of the existing related industry. Through FDI, P&G established its value-chain activities in Japan and gained better control over its operations in Japan (Tamer, C. ). However, initially P&G had faced negative figures until it realigned its marketing strategy to suit the Japanese culture (Rastogi, C, 2012) by entering into the compact technology. In India, P&G faced tough rivalry against the J&J and HLL, subsidiary of its major universal competitor.
The demand was concentrated only in bigger cities due to the higher valuation of P&G goods. It first launched itself in the soaps and detergents market and later diversified its product portfolio. With various product variants and good marketing strategy, it finally sustained itself. However, it still faces intense rivalry when it comes to prices. This has by no means impeded the efforts and belief of P&G that it has great opportunities in Indian market. On the contrary, in China, P&G witnessed a warmer welcome in terms of sales. Due to its naturally available resources and advanced resources’ concentrated in the technology area; there was lack of well made consumer goods that comprised P&G’s product range. Besides, alluding to the new theory proposed by Paul Krugman, P&G was benefited for being the first MNC of its kind and captured market easily. The other factors like the overall higher income per capita and the national policy of having single child led to an increase in the income that was disposable in the hands of Chinese people. Better quality of the products, good spending power of the people and demand or scope for the products acted favorably for Procter and Gamble’s entry in China (Rastogi, C., 2012). Conclusion
It can be seen how P&G has made its entry into the newer and emerging markets. Considering the factor endowments of Japan, India and China, where availability of labor is cheap and in abundance, P&G has set up its subsidiaries here. The international trade policies of the nations, spending power of the people and the internal cultural differences affected the marketing strategy of the firm in these three nations. Japan was real tough whereas setting up in China was a cake walk. This indirectly affects the demand conditions in the nation. China has invariably larger demand as against in Japan and India. This can be attributed to the existing rival firms and the competition thereby in the industry. Finally, it is the internal strategy that the firm deploys and the structure of the firm that helps it to stand by the various odds, cultural differences, policy variations and trade barriers. P&G’s journey proves its skilled and efficient work force. References:
Press Release, (2011, March 3). “P&G Ranks 5th Overall, 1st in Our Industry and a “Green Star” Among Fortune Magazine’s World’s Most Admired Companies”. Procter & Gamble. (Retrieved May 21, 2013). Rastogi, C. (2012). International Marketing, Market Selection, Modes of Entry in International Market [Powerpoint slides]. http://www.slideshare.net/charurastogi/6-international-marketing-market-selection-modes-of-entry-in-international-markets (accessed 21st May, 2013). Tamer, C. 2009, International Business, First Edition, Pearson Education India, ISBN=8131725170.