Thumbs Up Will Be Given For Answer.

A)

B)

The 4P's are: (Product, Price, Place, Promotion)

Chapter 17 - Marketing Globally With regard to your specific X-Culture project company, how do you assess the potential demand in a foreign market? How can gap analysis help you? Case Question: Discuss the application of the 4P's in Danone .V.case. CASE Grameen Danone Foods in Bangladesh 102 Professors Jon Jungbien Moon and John D. Danies investors may recoup their original capital input. Unlike NGOs, charities, and not-for-profit organizations, a soca business must sustain itself by earning profits competitive rather than receiving new contributions to carry on In 1932, U.S. President Franklin D. Roosevelt referred to an impoverished person as "the forgotten man at the bottom [base of the economic pyramid." Later, the term -short- ened to "Bop"--became business jargon after publication in 2010 of The Fortune at the Bottom of the Pyramid. Few places have more impoverished people than Bangla desh. With 169 million people in 2015, its per capita GDP at PPP was $3,581, with 43.3 percent of the population below the international poverty line of $1.25 per day. Thus, Ban- gladesh has conditions that correlate closely with poverty: an adult illiteracy rate of 42.3 percent, a high incidence of infectious diseases, a poor infrastructure, high underemploy- ment, crowded conditions (imagine half the U.S. population squeezed into the state of lowa), and more than its share of natural disasters-especially periodic flooding-that impede development. In the face of these ominous conditions, two companies-the Grameen Foundation from Bangladesh and Groupe Danone from France-formed a joint venture (JV) social business to serve Bangladesh's BoP. The Grameen Bank and Foundation The Grameen Bank (GB) began when Yunus lent $27 to a group of indigent villagers who repaid the money even though he had required no collateral from them. This small beginning contrary to Bangladeshi bank practices, led to GB's mico- financing program. It has competed primarily with usundis money lenders who charge as much as 10 percent interes per day. GB's typical rate of 20 percent per year may souru high, but Bangladesh has had an inflation rate of nearly cent, and GB supports many noninterest loans as well banks outside Bangladesh, such as Citigroup and Bank, have since used GB's example as a model. Before GB, hardly any Bangladeshi loans women, and Yunus had to convince religious of that the Prophet Muhammad would have suppor he was doing. Today, about 97 percent of GB women, and audits show a repayment rate o (Borrowers must repay a loan in order to get a uses repayments and interest to make additional to support the Grameen Foundation's pov ects. Its loans, which in 2015 came to almost included initial financing for street vendo tion of more than 600,000 houses. It prov tion Citigroup and Deutsche What is a Social Business? Mohammad Yunus, founder of the Grameen Bank in 1974 and winner of the Nobel Peace Prize in 2006, originated the social business concept, which aims to generate social benefit by creating a sustainable business. The Grameen Danone Foods JV was established to make a profit but pay no dividends. All earnings are reinvested, except that except that shi loans went eligious oppositor e supported what cent of GB's loans go lent rate of 98 percent no get a new one.) te additional loans and n's poverty-fighting pro anost $1.18 billion had Vendors and construc provides more than CHAPTER 17 Marketing Globally Source: Georg Kristiansen/Alamy Stock Photo dont loans and 50,000 scholarships per year. It interest loans to more than 70,000 beggars so behavior, with a corporate mission to bring health through food to as many people as possible." Nevertheless, Danone must generate profits, and its management must answer to shareholders. The Bangladeshi JV could offer several poten- m - 20,000 student loans and 50.000 sch has given noninterest loans to mo they can sell trinkets during their house-to-house beggine The Foundation's activities have expanded into a variety of businesses, such as telephone service, solar power genera- tion, and health care. The above photo shows a Grameen bank member collecting money from borrowers. Maturing of Traditional Markets Groupe Danone The demand for Danone's products has been maturing in wealthier countries, which have been Danone's traditional France's largest food company, Groupe Danone (spelled markets. Hence, its management has been shifting more "Dannon" for the U.S. market) operates in four product emphasis to poorer countries. Between 1999 and 2010, divisions: dairy (world's largest, with Danone being almost the share of its sales coming from LDCs increased from generic word for yogurt); bottled water (ranked second 6 percent to 49 percent. Yet, even there its sales have obally, including such brands as Evian and Volvic); babycentered on affluent segments, about which its chairman, (second globally under the Bldine brand), and medical Frank Riboud, said, "It would be crazy to think only about (largest in Europe). It operates worldwide and had the peak of the pyramid." Thus, Bangladesh could serve as a laboratory for learning about customers and ways of sales of 22.4 billion ($25.2 billion). Before its JV with operating at the Bop. sen, it had no Bangladeshi operations. In fact, it aimed its products, such as its Activia and Actimel brands yogurt, at higher-end consumers. Promoting LDC Growth Critics complain that MNEs contribute to economic under- Invest in a Social Business? development by pushing poor consumers to purchase Danone, or anyone, want to invest in an op yields them no dividends or capital 9 nutrition (largest in EU most of its products, Why would Danone, fion that yields th contends that peop desire more than econ l business leaders dends or capital gains? Yunus multidimensional and thus may economic gains for themselves. He poin nts superfluous products instead of nutritious food. In contrast, Danone's products are all healthful and sanitary. Although one company's successful marketing of such products is not likely to have a significant impact on development, it is a potential catalyst, which perhaps also leads to favorable or as BoP consumers move upward eco- have more to spend on other Danone or them because of their earlier expe- ed their attention to phila omunes. Danone publicity. Further, as BoP consumers move nomically, they will have more to spend on products and may favor them because of the Sional vision. In hone's JV participation fits this Pion. In fact, it has a history of so e, Gates, Rockefeller) who onllanthropy after amassing large articipation fits this multidimen- a history of socially responsible 88 PART 6 Managing International Operations the poor, comper params, not-for-profin ad charities. Thus, companies ne anies need to ompetition - Given efforts to help the po tion may come from government programs organizations, and charities. Thu outperform this competition or find means cooperatively with it. rience. Riboud said, "When poverty is on the rise, my own growth prospects shrink. (This means that combating pov- erty is good for my business." means of working Strategic Thrust and Orientation Building Sales and Loyalty Abroad Being perceived as socially responsible may improve busi- ness performance in various ways. However, there are an almost infinite number of competing ways to be socially responsible. The amount Danone invested in the JV was $500,000, a small outlay for a company of that size, and Danone stood to get the money back if the operation became sufficiently profitable. Moreover, the fact that it would become one of the first major corporations to invest in a social business could generate free positive publicity globally. After their 2005 Paris handshake, the JV began in less than two years. The partners started wi rural factory to serve only its surrounding poverty area. Given the JV's social objective, the partners that product and production would be as green ble. Even though the factory is the size of only one of Danone's standard factories elsewhere, it has th equipment, treatment of both incoming and outgoing and solar panels to generate renewable energy. v began production arted with a smal ng poverty-stricken e partners agreed e as green as possi- ize of only one percent are, it has the latest ng and outgoing water Product Policies Preceding the Bangladeshi JV At a 2005 lunch in Paris, Riboud asked Yunus what Danone might do to help the poor. When Yunus explained the social et's do it." business concept, Riboud immediately said, "Let's do it," and the two shook hands on setting up their JV. Although this JV is one of the first social businesses established in partnership with a major MNE, Roosevelt's "forgotten man" was not completely forgotten in the interim. Many organi- zations have marketed to the BOP (most notably in India during the 1970s' heyday of the appropriate technology movement), with such devices as dung-powered stoves. These experiences offer the following lessons for com- panies wishing to tap the BOP, especially with a nutritious product: The introductory plant and two more built by 2015 maka The introductory plant and two more bu only yogurt, a product of high nutritional value for children it relies on elicient small-scale production and nearby SUD- plies of the main ingredient (milk). Through market testing, Danone decided to sel a sweeter and thinner yogurt, drinkable directly from the con tainer (subsequent market feedback led the JV to include spoons as well). It fortifies the yogurt with 30 percent of the daily need for vitamin A, zinc, and iodine, and it uses bio degradable technology so that containers can be converted to fertilizer. oners such as farm and transportation ating milk prices, the JV nego 2 Price - Low and stable prices help create and sustain sales, so companies gain an advantage by finding new means to cut and stabilize their own costs, which they then pass on to customers. Product compatibility-High nutrition at a low price alone is insufficient. Products must be compatible with the target market's accustomed habits and visually appealing and flavorful to them. So it is vital to pick the right products and adapt them to local markets. Education-Within some countries the BOP is largely illiterate, has low access to popular media, and is unconvinced about cause-and-effect scientific relation- ships. Hence, it may be important to reach people in this segment by nontraditional means, convince them that changes from nutrition are important and take time, and convey information that they will believe. Promotion-Publicity prior to the start of sales is quite valuable, so the use of opinion leaders (those that the target market group accepts) is essential in developing credibility. hers to better stab Pricing To keep costs and prices low, the plant uses mostly ingredients, mainly from small suppliers such Collect and deliver ers with only one or two cows, who collect and milk in jugs (thus saving refrigeration and transpo costs). Because of fluctuating milk prices, tiated longer-term contracts with farmers to be lize prices; hence, the JV pays higher than marke sometimes and less at other times. Fixed kept low by selling only on commission to saleswomen and 80 percent to sma minimize saleswomen's commissions, cessfully suggested their selling additional ing house-to-house visits. Personnel costs low since completion of its start-up phas only Bangladeshis. Although the yogurt economies, its unit costs are equivalent plants elsewhere. es. Fixed sales costs and mmission (about 20 percent small local stores. To sions, the company Sub itional products du costs have been kept hase by employing Yogurt plant lacks scat valent to Danone's large = CHAPTER 11 m MAP 17.1 Danone Foods Joint Venture ned the Grameen Foundation to forma and has transformed this knowledge to helbst operate indoned in the of the piramida essent entre Bang Subu ro On Seres d Senegal Dones Bangladesh Transfer of base of the pyramid technology Transfer of base of the pramid technology Indonesia Promotion power," and its symbol is a muscled lion that appears on the product and in ads. Lion-dressed mascots also visit youth areas to describe the value of eating yogurt. Wost promotion is wo event was noteworthy Frenchman in Bangla 2203), to visit the pla Teadlines in newspape Bangladesh, Zizou play signed the cornerston Distribution notion is word of mouth; however, one promotional noteworthy. Riboud arranged for the best-known Bangladesh, the soccer star Zindine Zidane isit the plant's opening, an event that m wspapers throughout the country. While in ou played with youth in the national stadium, herstone of the plant and contributed to instal gnition for the new JV and its yogurt. tekional recognition Bangladesh's high underemployment attracted more than enough women-mainly poor mothers from the target sales market-to work part time selling yogurt. However, the JV had to overcome a backlash similar to the one GB faced when lending to women, the complaint this time was about the impropriety of women going house-to- house. The next big task was to train the saleswomen selling yogurt other than to earn a landing The name put Grameen first be name (1) the significance of selling yogurt other than to The yogurt brand en first because of its high recogni- Shokti Doi, meaning "yogurt for 190 PARTL commission and (2) the essentiality of the yogurt's quality and how to maintain it. First, the significance for selling was primarily nourish- ment. The company engaged doctors who explained that children could regain any physical loss from previously deprived nutrition within 9 to 10 months by consuming only two cups of yogurt per week. Second, selling would help improve the economy by using suppliers who would then hire more people and spend within the community. Maintaining yogurt quality was essential because few homes had refrigeration, and eating a spoiled product could cause illness and future sales losses. The company dem- onstrated to saleswomen how it makes yogurt, provided them with insulated bags, showed them how to use the bags properly, and stressed the need for them to carry only a minimum inventory to lessen the chance of spoilage. and Senegal. (Map 17.1 illustrates the internat tions.) Inspired by this new model of collaboratio MNEs are establishing social businesses with Foundation (e.g., Intel plans to create software a handheld computing devices that address, for agricultural output and lack of prenatal care: BA produce long-lasting insecticide-impregnated ne spread of malaria). Despite the publicity and pro high-profile collaborative ventures, however, Danon to evaluate how brand recognition and goodwill can be harnessed for sales farther up the pyram expand to more affluent market segments. ternational connec oration, other map with the Granice ware applications on ss, for example, low re: BASF plans to ated nets to fight the and promise of thesa ver, Danone will need goodwill at the Bop the pyramid in order to eive from the Gramen oy wanting to be socially respon Evaluation Evaluating the JV's financial performance is straightforward: however, assessing its social effects is challenging. For this, the JV has hired a Swiss-based nutrition organization (GAIN) to develop, test, and validate its performance in terms of meeting the objectives for poor people. Preliminary findings have compared children who have consumed yogurt with and without micronutrient fortification and conclude that the former have grown more in height. In addition, psycho- metric tests show that the former are significantly better at important mental functions such as planning, concentration, problem solving, and conceptual flexibility. QUESTIONS QUESTIONS 17-3. What advantages might Danone receive from the Danone joint venture? 17-4. How much do you think Danone's decision to set up business was motivated by wanting to be socially res sible versus believing the move would help its performance Does the answer to this make any difference? 17-5. If Danone were to add products to sell to the Bop its products would be the best candidates? Why? 17-6. Since establishment of the Grameen Danone Foods some business, the number of social businesses worldwide tas grown so much that there is now an annual global summit in Wolfsburg, Germany. Are there types of companies that might not be good candidates to establish social businesses? If so, what are they and why? 17-7. Can you think of any other MNEs that can collaborate suc cessfully with the Grameen Foundation and help solve specht problems in Bangladesh? How can they do this? 17-8. Initially, Grameen Danone Foods JV was expected to make a Initially Gram profit by 2012. Although no official numbers are published seems that they had not reached that point by 2016. Show Danone continue to invest in this JV? If so, what can be do to improve the financial outlook of the JV going forward The Future Grameen Danone Foods' sales have increased steadily, from 150,000 cups in 2008 to 35.2 million cups in 2013. The number of employees at the end of 2013 was 976, including 697 sales- women. Further, Danone has learned much in Bangladesh about running small-scale production efficiently and is trans- ferring this knowledge to help with its operations in Indonesia