Indian market has been the waterloo for many of the MNC's who tried to cash in on the post reform boom. Most of them misread the market potential and the cultural under currents. The myth of 1.1 billion indians eager to swallow 'phirangi' products and the burgeoning middle class with purportedly unlimited purchasing power and pent up demand made these companies enter the market without adequate research. This resulted in them having to incur losses and reorient after licking their wounds. Let us look at some classic cases.
Citibank targetted only the high income earners as an entry strategy, but to their horror realized that they had to take the mass banking route if they were to succeed in India.
Coca Cola reentered the soft drinks market more than 2 years after Pepsi. Instead of setting up their own bottlers and network, Coca Cola acquired Parle Soft Drinks which was holding nearly 60% of the market share through Thumbs up, Limca and Gold Spot brands. The idea was to phase out the Parle brands through cannibalizing them with Coca cola brands. But they were in for a surprise. Customers refused to swichover from Thumbs up to Coke. And for a soft drinks manufacturer, Cola is the segment to win or lose. It took considerable effort, time and money for Coke to overtake its own brank Thumbs up. A case of being too clever by half.
Whirlpool did not try to understand the indian middle class psyche and launched their bigger capacity refridgerators with much fanfare, only to see to their horror that Indians were not keen on buying anything that had a higher capacity than 165 Litres.
Many US brands mistakenly thought that the American tastes were universal. Domino's pizza found this out the hard way. They started replicating American offerings to the Indian market and that too only in metros. When the sales refused to pick up, they were forced to localize the offerings through 'panneer' and 'chettinadu chicken' toppings. The moral of the story - it is tough to change the taste buds that were developed over a period of few centuries.
Mercedes Benz, in 1995 set up a plant in India to manufacture E class sedan. The target market was the upper upper class. But the market just refused to pay a premium for what they considered was an outdated model. In a couple of years the plant was running at about 10% of the capacity and were looking at export market to break even.
