Concept of liberalization:

Introduction:

The early 1990s was an era of intense changes in the Indian economic system. The torrent of international companies that we see today in India was born as a result of the economic transitions the country went through in 1991. It was the age of relaxation of a number of rules popularly known as “Liberalization”. With liberalization, there was an increase in competition and certain categories were facing competition for the first time. There could be no lackadaisical attitude on the part of the companies existing pre-liberalization as the whole economic system was overthrown to willingly accommodate more players. Liberalization had far reaching impacts. One are which it impacted significantly was the arena of advertising. Organizations couldn’t take their customers for granted as there were other organizations waiting to eat into their market share. Advertisements hence became a more incisive tool for organizations to make their presence felt and appeal to their target audience. It is this change in the pattern of advertising that this thesis wishes to track.

Literature Review

Exploring the Concept of Liberalization:

“…in July 1991… with the announcement of sweeping liberalization by the minority government of P.V. Narasimha Rao… opened the economy… dismantled import controls, lowered customs duties, and devalued the currency… virtually abolished licensing controls on private investment, dropped tax rates, and broke public sector monopolies…. We felt as though our second independence had arrived: we were going to be free from a rapacious and domineering state…” – Das (2000), on the reforms that originated with the July 1991 package announced by Manmohan Singh (Panagariya, 2004).

To ‘Liberalize’ means remove or loosen restrictions on (something typically an economic or political system).  Generally, Liberalization (Liberalisation) refers to removal or relaxation of restrictions imposed by the previous government usually in areas of economic or social policy.  In the area of social policy, liberalization refers to the relaxation of laws for example, laws on homosexuality, drugs, abortion, divorce etc.  In the area of economic policy, liberalization can either be privatized or be liberalized.  Like, India has liberalized various markets, instituting a system of competition, but still some of the departments like Gas and Energy remain partially or completely in government ownership.

The economic liberalization in India refers to the current reforms in India.  The Indian economy was liberalized in 1991.  That marked the end of “License Raj”.  License Raj, also known as Permit Raj, was the brainchild of Jawaharlal Nehru, India’s first Prime Minister.  It was the result of Nehru’s decision to have a planned economy in India where all the aspects of economy are controlled by the government (state).  License Raj refers to the elaborate licenses and regulations and the accompanying ‘red tape’, which was required to set up and run businesses in India between 1947 and 1990.                In the late 80s, the government led by Rajiv Gandhi eased restrictions; removed price controls and reduced corporate taxes. This did increase the rate of growth, but it in turn led to high fiscal deficits and a worsening current account. Soviet Union, India’s major trading partner collapsed at the same time and the first Gulf War, which caused a spike in oil prices, caused a major balance-of-payments crisis for India. The Gulf war also led to a reduction in repatriation from expatriate workers (an important source of foreign exchange at that time).  India asked for a $1.8 billion bailout loan from IMF, which in return demanded reforms.  In response to this, Prime Minister Narasimha Rao and the finance minister Manmohan Singh initiated the economic liberalization of 1991. The reforms did away with the License Raj and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. On licensing, the new policy explicitly stated, “industrial licensing will henceforth be abolished for all industries, except those specified, irrespective of levels of investment.” (Sivadasan, 2007)

Liberalization is about –

• Encouraging growth of private sector
• Simplification of policy, regulation, tax structure
• Facilitating Foreign Direct Investment
• Restructuring public sector for efficiencies
• Providing incentives for exports and allowing more imports
• Put emphasis on modernization of plants and equipment through liberalized imports of capital goods and technology (Sivadasan, 2007)
• Expose the Indian industry to competition by gradually reducing the import restrictions and tariffs
• Moving away from protection of small scale industries

Realization that economies of scale is necessary for economic growth (Singh & Shankar, 2008)

Life before 1991

Various rules were imposed on foreign companies operating in India, under the Foreign Exchange Regulation Act (1973).  Foreign ownership rates were restricted to below 40% in most industries. In addition, restrictions were placed on the use of foreign brand names, on remittances of dividends abroad and on the proportion of local content in output (under the Phased Manufacturing Program).   (Sivadasan, 2007)

• Very limited brands available on the supermarket shelves
• Upto 97% taxes on private players
• High-level corruption.  Frustrated Entrepreneurs
• State monopoly in many key sectors including TV broadcast.  Hence, the monopoly of Doordarshan. [Television and public policy: change and continuity in an era of global liberalization, David Ward, 2009]
• Legendary battle between the two textile magnates – Dhirubhai Ambani and Nusli Wadia in the latter part of 1986.  The battle between these 2 corporate rivals – Dhirubhai Ambani, Chairman Reliance Industries Ltd., is not the first in the history but the weapons such as the Press employed by them on the large scale is certainly without a parallel. This shattered the concept of objective journalism in a business controlled press (Aggarwal, 1989)
• Movies of that era – young man rebelling against the ‘system’ – a reflection of common man’s angst against a state-run, corrupt, bureaucratic machinery which slowed down the progress of India rather than facilitating it.

Life after 1991

• Foreign direct investors were now allowed up to 51% equity stakes in certain industries, under the “automatic approval route”. Further, restrictions relating to use of foreign brands, remittances of dividend and local content were relaxed. Following these reforms, there was a significant increase in amount of foreign direct investment into India(Sivadasan, 2007)
• Media Explosion
• Introduction of Cable TVs.  Since most of the Doordarshan’s programming was seen to be unimaginative and dull, large audiences switched to satellite television channels made available through cable.
• Influx of western ideas and lifestyle
• Conspicuous consumption
• Entry of foreign players and hence multiple players in each category.  Great increase in competition and hence, customer at the advantage
• Increase in challenges of Media Planning and Brand Building due to the widespread channels
• Emergence of TVR, GRPs, TAM ratings etc

· Much more buoyant and optimistic state of mind was reflected in Bollywood.  Hence, all soft, mushy, romantic blockbusters like ‘Hum Aapke Hai Kaun’,’Dilwale Dulhaniya Le Jaayenge’,’Kuch Kuch Hota Hai’ (Joshi, 2001)

Defining Advertising:

Advertising is so familiar to modern readers that it may seem odd to ask what an advertisement is.  Although advertising is all around us – perhaps because it is all around us – we don’t often pause to think about its nature as a form of discourse, as a system of language use. There are multiple definitions of advertising like –

• ‘Advertising is simply one of many available channels of communication’ and ‘Advertisements are the messages that advertising carries, in an attempt to achieve those ends.
• Advertising is a form of communication used to influence individuals to purchase products or services or ideas
• Advertising is a non-personal form of promotion that is delivered through selected media outlets that, under most circumstances, require the marketer to pay for message placement
• Any paid-for communication, intended to inform and/or influence one or more people is Advertising

Of few of the above mentioned definitions, I could best relate advertising being ‘any paid-for communication, intended to inform and/or influence one or more people’

• Paid-for – Any advertisement that is not paid for is not an advertisement
• Communication – Every advertisement is attempting to bridge a gap between a sender and one or more potential receivers.  That bridge is a form of communication.
• Intended – Not all advertisements ‘work’, in the sense of achieving their desired objectives, but they are nonetheless part of advertising.
• Inform and/or influence – The purely informative advertisement may be rare and the distinction between information and persuasion may be difficult to draw, but an advertisement does not have to set out to influence either attitude or behavior in order to qualify

(Bullmore, 2003)

History of Advertising

World’s first ever advertisements appeared some 3000 years B.C. as ‘stencilled inscriptions on bricks’ made by the Babylonians. History tells us that out-of-home advertising and Billboards are the oldest form of advertising.  Printed advertising began to make itsappearance for ‘Royal announcements’ in early Europe: China, Turkey, England (1100 -1711). Moving on to American advertising in 1729 – 1850; several changes occurred interms of medium, message, manner of presentation. These changes are nothing but areflection of the social, economical and technological changes over time.

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Changing times and society called up for changes in the way advertising was planned. There has been one or the other peculiar aspect of advertising strategy, which kept it growing in volumes of success and importance. In 1870 the first ‘Brand advertisement’ for St. Jacobs Oil appeared and this phenomenon continued till early 80s. Further ‘slogans and trade characters’ took over the job. Then there came a time to appeal; variety of creative appeals (humor, sex, fear, love, affection etc.) made the further way up for advertising (Pincas & Loiseau, 2008)

Medium of Advertising

Medium is nothing but a channel that carries the Advertiser’s message.  There are six major categories of advertising media –

1. Print Media – refers to any published, printed medium such as Newspapers and magazines.

a. Newspapers – are one of the traditional mediums used by all types of businesses to promote their product or service or idea.

Advantages –

• Huge reach in a given geographic area
• Flexibility in deciding the size and the placement of the ad
• Exposure to the ad is not limited.  People can go back to see the ad
• Quick turn around.  The ad if decided to run today can be in the hands of the customers in a day or two

Disadvantages:

• Expensive ad space
• Lot of competition
• Poor photo production
• Highly visible medium, and hence the competitors can quickly react to your prices
• Newspapers facing stiff competitions from internet

b. Magazines – more focused, expensive compared to newspapers

Advantages:

• Better targeting of audience
• Higher reader involvement and hence more attention paid to the advertisement
• Better color reproduction

Disadvantages:

• Long lead time
• Limited flexibility in terms of ad placement and format
• Higher costs compared to newspapers

2. Electronic Media – consists of radio and television

a. Radio – is a universal medium enjoyed at one time or another during the day.

Advantages:

• Negotiable rates
• Less inflation in radio media compared to other media

Disadvantages:

• Listener cannot go back to the ads for the important points
• Ads, an interruption in the entertainment
• Radio is a background medium.  Most listeners are doing something else while listening

b. Television – permits you to reach large number of people

Advantages:

• Television permits you to reach large numbers of people on a national or regional level in a short period of time
• New opportunities to pinpoint local audiences
• Television being an image-building and visual medium, it offers the ability to convey your message with sight, sound and motion

Disadvantages:

• Lot of competition.  Requires multiple exposure for the ad to get noticed
• Preferred ad times are often sold out far in advance
• Relatively expensive in terms of creative, production and airtime costs
• Limited length of exposure, as most ads are only thirty seconds long or less, which limits the amount of information you can communicate

3. Out-of-home media – is focused on marketing to consumers when they are ‘on the go’ in public places, in transit, waiting (such as in a medical office), and/or in specific commercial locations.

a. Out door advertising: is essentially used for any type of advertising that reaches the consumer while he or she is outside the home.

Advantages:

• Specific Target Audience
• Good for branding and positioning
• Creates greater consumer awareness

Disadvantages:

• Less effective in tactical and short term campaigns

b. Transit Advertising: Transit advertising is typically advertising placed on anything, which moves, such as buses, subway advertising, truckside, and taxis, but also includes fixed static and electronic advertising at train and bus stations and platforms. Airport advertising, which helps businesses address an audience while traveling, is also included in this category.

Advantages:

• Good for all ranges of a businesses advertising budget
• You get what you pay for
• A target audience is exposed to a single advertisement for a long period of time
• It picks up the speed due to frequency
• Timeliness
• Geographical selectivity

Disadvantages:

• People on transit may not even notice such advertisements, simply because they became used to transit advertising
• Many of those people may not be interested in you and your product at all; hence, transit ads are not easy to target despite the high level of reach

* Design limitations

4. Internet Advertising – is a form of promotion that uses Internet and World Wide Web for communicating with the customers.

Advantages:

• Rapidly growing industry
• Affluent market
• Selective Targeting
• Interactive medium
• Immediate Response
• In-depth information

Disadvantages:

• Security and Privacy
• Slow downloads
• Global marketing limits
• Untested medium

5. Direct Mailers – is a marketing technique in which the seller sends marketing messages directly to the buyer. Direct mail include catalogs or other product literature with ordering opportunities; sales letters; and sales letters with brochures

Advantages:

• Personalized marketing message
• Effectiveness of the response can be easily measured
• Control
• Ad campaign is hidden from the competitors
• Active involvement- the act of opening the mail and reading it

Disadvantages:

• Selectivity problem
• Long lead times are required for creative printing and mailing
• Can be expensive, depending on the target market and size of the campaign

Monitoring Advertising

Dealing with advertising is still one of the hardest tasks facing marketing people.  It remains notoriously difficult to demonstrate this return, to show clearly that advertising is paying its way.  It is also difficult to understand how advertising works, how consumers respond to it.  How do we choose the best way of developing our advertising, testing it, checking it out, ensuring that it meets the objectives we have set for it – let alone evaluating how far it has done so, and how we should improve it? (McDonald, 1998)

Research Problem

To analyze the change in content and pattern with regard to the nature of print advertisements in the pre-liberalization and post-liberalization era

Research Objectives

1. To understand liberalization and the changes resulting as a result of this measure
2. To understand the implications of liberalization on advertising from a regulations perspective
3. To trace the change in the nature of advertisements before and after liberalization

Research Methodology

The research will be qualitative in nature.  And the method which will be used will be content analysis. An analysis of the advertisements of top five brands in the soaps and chocolates category will be carried out, bathing Soaps, coming in daily usage category and chocolates in occasional usage category. Here print advertisements of the top five brands pre and post liberalization will be taken and a content analysis will be done on them. This will be used to track changes in pattern and using these two categories the results will be extrapolated for the FMCG category as such.