Global Crisis Impact on Brand Building in Indian Market

Published:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Financial Crisis is the situation where the value of a financial institution or asset declines quickly. 1Globally crisis has its impact on the world economy affecting every sector. Rapid growth of speculative lending and deregulation of financial market over the past couple of decades has led to increase in global liquidity e.g. 2sub prime lending and mortgage-backed securities, global crisis. Impact of the crisis on growth in the United States and its global spillovers to other parts of the world through international trade and financial system has affected a lot. Social and development Impact-include employment and poverty reduction efforts, there has been drastic change in government's fiscal position, particularly development expenditures.

Impact on India's Economy - Growth declined to 7.3% in 2008, down from 9.3% in 2007. Current Government estimates are for approx 6.5% to 7.5% growth in 2009, but the 3IMF forecast is for growth to fall to 5.1%. As economic growth contracts demand for labour has fallen. There have been large-scale job losses in some sectors, unemployment. It has also lead to downward pressure on wages with increase in reverse migration.

Global financial crisis has affected not only credit and confidence of the banking and 4financial markets but also has affected a lot to brand building and consumer market. The capital market-capital has become more expensive as banks are lending to each other at higher rates. Brand building stage in the global market is also very important which also suffered a lot due to change in market forces and condition. Paper reviews the factors responsible for such crisis affecting the Indian market.

1. Global crisis-financial crisis has hit the global market

2. Sub Prime lending-The term sub prime lending refers to the practice of making loans to borrowers who do not qualify for market interest rates owing

3. IMF - international monetary fund

4 Financial markets - it include capital and derivative market.

Global Crisis-Impact on Brand Building in Indian Market.

INTRODUCTION

In today's changing global environment many organization have voiced the need for global branding of products, which include good ideas and service to have a stronger emphasis on consumer satisfaction. A brand is the identity of a specific product, service, or business. A brand can take many forms, including a name, sign, symbol, color combination. Building brand is important and positioning it in the mind of customer is an essential feature that requires utmost importance after building the brand. It requires several years to get this feature done. The global financial crisis and looming recession have quickly exposed the weakness of the Indian economy and shattered illusions in the country's so-called economic miracle. The global financial crisis is an ongoing issue, which put a number of countries into a recession and the major stock indexes into a downward spiral.

Indian economy has also experienced a downturn where foreign exchange got depleted and rupees also started depreciating after a long spell of growth. India's largest private sector financial group, ICICI Bank, dropped by as much as 28 percent, before ending the day down 20 percent. Its shares have dropped by 46 percent since the end of September amid concerns about the group's extensive operations in the global financial markets. India's second largest mobile phone company, Reliance Communications, fell 21 percent, while the biggest real estate developer DLF Ltd fell 8.8 percent and top engineering firm Larsen & Toubro lost 8 percent.[1]

Brand building contributes to ad wastage

The fall 2008 downturn provides a natural setting for testing the effect of brand equity on share prices and volatility further. The media-tracking specialists recent report found that, overall, 60% of advertising spending is wasted and fails to deliver results. Wastage was highest in the B2C industry at a remarkable 65%. Business-to-business wastage was somewhat lower at 47%.[2] . In building brand innovation is a crucial differentiating factor for many succesful companies. Innovation refers to novelty in ideas, approaches, methods, process, structures, behaviors, attitudes and culture as well as in technology and skills. The global financial crisis came to the forefront of the business world and world media in September 2008, with the failure and merging of a number of American financial companies. Although at the G-20 summit in toronto in july 2010 President Obama promised to keep the economic stimulus going in the US, he does not have the political muscle to announce another stimulus package to ensure economic recovery and job growth.[3]

The Crisis - Global Economic Downturn

World economy has faced unprecedented times. Most economies are in recession or with significantly reduced growth as stated in the following-

Unemployment rate in the UK at 7.8% in March 2010, highest in 12 years .US government implemented a $700bn bailout package to help businesses. UK government implemented a £500bn bailout package to help the banks. Export-led economic recover will take until 2011 (Growth <1% predicted in 2010) (Ernst & Young) Asian Markets are forced to revise their economic models from export to domestic consumption

The Consumer in the Economic Crisis:

Most people have lost value (homes, jobs, and savings). There was dramatically reduction in the spending with the huge uncertainties and less confident of future. Consumer market is the most important so marketer started using trading down strategy in many categories (food, personal care, fashion). People everywhere in the economy started consuming less which leads to halt in spending (housing, cars, white goods). People started putting more of their salary into savings or repaying debt. The Consumer has higher affinity to Brands they trust and have bought over a period. Due to crisis the market is not open to 'risk' in new innovations (products or services) ,is not open to make expensive commitments for the long term and is open to low risk 'promotions' or added value offers but mainly with Brands they trust.

The Retailers in the Economic Crisis:

For retailers it is important to prioritize cash and working capital, de-stocking to free up cash and reduce risk, asking for longer credit terms and more flexible supply, asking for added value and lower prices from suppliers. To curb the aftermath of crisis retailers started running more promotions and offers (av. +9.6% since last year) , average saving offered to shoppers for branded products is 29.0% - 35.4% and own label is 23.3% - 30.4%

Source: Compiled for the Grocer 10 April 2010 issue by Assosia

The ranking of brands for the study were all part of the 100 "Top Global Brands" published by Business Week when the economy was in grip of financial crisis on September 18, 2008

TABLE 1: Sample of 58 of Interbrand's 2008 Top 100 Global Brands

Brand

Value*

Rank

Brand

Value*

Rank

Coca Cola

66667

1

Morgan Stanley

8696

42

IBM

59031

2

Philips

8325

43

Microsoft

59007

3

Thomson

8313

44

GE

53086

4

eBay

7991

46

Nokia

35942

5

Accenture

7948

47

Toyota

34050

6

Siemens

7943

48

Intel

31261

7

Ford

7896

49

McDonalds

31049

8

Harley Davidson

7609

50

Disney

29251

9

AIG

7022

54

Google

25590

10

AXA

7001

55

HP

23509

12

Heinz

6646

56

American Express

21940

15

Colgate

6437

57

Cisco

21306

17

amazon.com

6434

58

Citibank

20174

19

Xerox

6393

59

Honda

19079

20

Yahoo!

5496

65

Oracle

13831

23

Caterpillar

5288

68

Apple

13724

24

Avon Products

5264

60

Sony

13583

25

Gap

4357

77

Pepsi

13249

26

Panasonic

4281

78

HSBC

13143

27

Tiffany

4208

80

Nike

12672

29

Allianz

4033

82

UPS

12621

30

BP

3911

84

SAP

12228

31

Starbucks

3879

85

Dell

11695

32

ING

3768

86

Canon

10876

36

Motorola

3721

87

J.P.Morgan

10773

37

Johnson & Johnson

3582

92

Goldman

10331

38

Marriott

3502

96

Kellogg's

9710

39

Fed EX

3359

99

UBS

8740

41

Visa

3338

100

*Brand Values in Millions of U.S. Dollars.

Source Business Week September 18, 2008

These data come from Interbrand, a branding consultancy based in London and New York specializing in calculating global brand value.2

2See www.interbrand.com for the full list of the 100 brands.

The Global Economic Crisis threatens all companies. No matter what country, no matter what sector they operate in. Brands are a Company's most important asset. In turbulent times, customers and consumers will priorities their business with Brands that they trust to deliver value

Companies that focus on building brands will have the best opportunity to emerge as winner's implication.

To mitigate financial crisis few key success factors have been taken like how to get clear vision and strategy of the product. For examples: Starbucks Coffee -created a unique offering - the coffeehouse as a gathering place. Not just a place to get a cup of gourmet coffee, but also a centre for socializing and work. It strategically expanded their real estate by: creating partnerships with bookstores (eg: Barnes and Noble in USA, Chapters Inc. in Canada). It expanded product ranges by selling bottled version of Starbucks Frappuccino® blended beverage. Starbucks® Ice Cream and Starbucks Ice Cream bars, which quickly became the best selling coffee ice cream in the United States. It is important to focus on core offerings but continue to invest in innovation. Every successful company has a core set of products or services that will deliver 80% of the value to the company. In time of groshawth, the major investment is focused on growth drivers while core products will attract less investment. During the economic slowdown, less people are dining out. To keep attracting their loyal customers - families, young urbanites that enjoy going out and having a good time, Pizza Express launched a series of promotions. The most successful is the Classic Favorite Menu - 10 favorite mains + a drink for £10.

Sources: Harvard Business Review, April 2010 The Grocer February 6 th 2010

Such crisis led to questioning like- Is it possible that in a downturn, it is the large and well-known brands that take most of the beating. 1 [4]

Source - http://www.thehindubusinessline.com/2008/10/21/stories/2008102150440900.htm

Given the importance of FII investment in driving Indian stock markets, the Sensex fell from its closing peak of 20,873 on January 8, 2008, to less than 10,000 by October 17, 2008 (Chart 1)[5].

1A run on the shares of a smaller brand is not likely to create the same downward momentum as a run on a large brand. In a similar vein, the largest global brands are the ones singled out by anti-globalization activists.

Conclusion

In conclusion, size of brands or heritage or history is no protection for Indian brands. Even huge brands can collapse overnight if better value products enter the Indian market (nine million bicycles certainly at risk here, as will be makers of small household durables), especially if the brands have been value ill-treating consumers. The spillover effects of the global financial crisis (Chidambaram 2008) are affecting the Indian Economy. [6]

There is a short time window for Indian brands to revamp their entire consumer value equation and work at a business system to profitably deliver that value. In the meanwhile, in many sectors, perhaps hugely raising the bar on consumer service will keep invaders from gaining quick inroads into the market. How many Indian companies are ready to make a big financial investment to do this? I would bet carefully on this one! The global economic crisis of 2008-09 had a blessing in disguise for India as far as its attractiveness for foreign investments in concerned, a Ficci survey showed. According to majority of the 108 foreign firms with operations in India, surveyed by Ficci, their priority towards India became stronger after the economic and financial crisis. [7]

Writing Services

Essay Writing
Service

Find out how the very best essay writing service can help you accomplish more and achieve higher marks today.

Assignment Writing Service

From complicated assignments to tricky tasks, our experts can tackle virtually any question thrown at them.

Dissertation Writing Service

A dissertation (also known as a thesis or research project) is probably the most important piece of work for any student! From full dissertations to individual chapters, we’re on hand to support you.

Coursework Writing Service

Our expert qualified writers can help you get your coursework right first time, every time.

Dissertation Proposal Service

The first step to completing a dissertation is to create a proposal that talks about what you wish to do. Our experts can design suitable methodologies - perfect to help you get started with a dissertation.

Report Writing
Service

Reports for any audience. Perfectly structured, professionally written, and tailored to suit your exact requirements.

Essay Skeleton Answer Service

If you’re just looking for some help to get started on an essay, our outline service provides you with a perfect essay plan.

Marking & Proofreading Service

Not sure if your work is hitting the mark? Struggling to get feedback from your lecturer? Our premium marking service was created just for you - get the feedback you deserve now.

Exam Revision
Service

Exams can be one of the most stressful experiences you’ll ever have! Revision is key, and we’re here to help. With custom created revision notes and exam answers, you’ll never feel underprepared again.