Globalization in Oreo Renault

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GLOBALIZATION (strategic decisions in context of Oreo and Renault)

Kraft Foods, a part of Mondelez International, is one of the leading manufacturers of FMCG goods in the World- best known for its confectionary lines. Under Kraft Foods, Oreo has expanded all over the World- thus necessitating a perspective on marketing in hitherto unexploited markets in developing nations such as China & India. Kraft uses a multidomestic approach to Globalization, which they have adopted in view of several failures among Multinational FMCG companies in the 1990s while entering into developing markets. Thus, there was a realization that existing Market research & prevailing trends were not sufficient to explain or exploit new Markets. Thus, in the past decade, there has a multi-pronged strategic outlook towards FMCG marketing in developing nations. Kraft Foods Oreo has overcome several challenges in this regard, problems that have been explained at length under the titles: Logistical, Strategic, & Social. Logistical Observations:- Firstly, a major disadvantage Kraft Foods faces is the fact that local competitors are able to utilize their distribution networks & knowledge far better than new foreign entrants. Lack of proper Infrastructure impedes Sales in the early days whereas Price factors play a major role in impeding sales in developing markets- especially in case of FMCG goods like Oreo. Bureaucratic inefficiency within the Indian market further retarded avenues for growth- especially in case of new entrants starting from scratch like Kraft. Strategic Observations:- Oreo’s competitors in India were entrenched local competition in Parle (25% market share), Britannia (28% market share) and ITC (12% market share). While the Indian cookie market is big (5500 crore Rupees in 2010, 12500 crore Rupees in 2013) & fast-growing, Kraft Foods had near-zero Brand recognition and no Brand loyalty. Also- Brand awareness is ironically higher for ‘local’ intra-national brands among customers than it is for multinational brands. Social Observations:- Higher ‘face perception’ in customers from developing nations, compared to buyers in developed nations ensures that customers are more receptive to the extrinsic properties of the product compared to its intrinsic ones, all other factors remaining the same. This was detrimental for Oreo’s image- given its non-existent appeal among Indian consumers prior to 2010. Furthermore the lack of a historical base in India meant that Kraft could not count on a case of Classical conditioning in advertising for its signature brands. Thus, while there is a situational decrease in the benefits of associative marketing in these places, there is also optimum scope for establishing a dedicate consumer base. Furthermore the per-capita level of discretionary income is lower in India than Developed & even most developing nations, which precluded the consumption of larger unit volume variants in Oreo & restricted avenues for Mass marketing. While the extensive growth of Social Media has improved the situation, Web advertising is very competitive in nature. Kraft Foods’ approach to these problems has been to leverage its economic clout to launch a hostile takeover of Cadbury in 2010. Kraft further split Cadbury’s existing operations into two- a $16 billion Grocery business and a $32 billion snacks business in order to streamline distribution networks as well as improve value for shareholders. This enabled it to divert resources into logistics & Supply exclusively in Asian & Latin American developing markets. In order to strengthen its Supply Chain in Africa, Kraft acquired Northern Africa’s top cookie maker, Bimo. Kraft further enhances its takeover & integration of other companies as it is horizontally integrated for most part, and decentralizes decision making to its various subsidiaries. The takeover of Cadbury has also enabled Kraft Foods to improve its Brand Awareness among Indian customers. It took 3 years for...
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