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BUSINESS 24×7 Insight to the world of business. BUSINESS 24 7. MATINEE BIZZ. -With Poorva Adkar. BUSINESS 24 7. THE GLOBAL MELTDOWN MARKETING YOUR WAY THROUGH RECESSION. Real Estate at a glance. US Real Estate the genesis of Global Meltdown. Indian Real Estate Overview.
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BUSINESS 24×7 Insight to the world of business BUSINESS 24 7
MATINEE BIZZ -With PoorvaAdkar
BUSINESS 24 7 THE GLOBAL MELTDOWN MARKETING YOUR WAY THROUGH RECESSION
Indian Real Estate Overview • Real Estate industry currently estimated to be US$ 48bn • CAGR of 30% • Total Economic Value of US$ 40-45bn accounting for 4-5% of the GDP • Factors contributing to the growth in real estate • Segmentation • Market structure
Effects of recession on Real Estate • Credit crunch • Stalling of existing WIP projects • Drop in demand • Decrease in property rates only in Tier II and Tier III cities • Tier I cities experienced fluctuating prices due to cartelisation
Marketing Strategies adopted to tackle recession • Innovations to cut costs • Aggressive future launch plans with “right product & price combinations” • Renewed focus on the middle income housing segment • Increase in advertising budgets • Use of tactical promotional strategies create high recall value
Lessons to be learnt • Focus on middle income consumers • Low cost housing • More concentration on Tier II & small towns • Dynamic shift in product mix • Innovation in promotional strategies • Do not underestimate the uncertainty factor
INDUSTRY BACKGROUND • Yields will decline by 3% • Industry revenues are expected to decline to US$501 billion • Cargo traffic is expected to decline by 5 %, following a drop of 1.5 % in 2008
IMPACT OF RECESSION • Dilution of Yield • Uncertain increase in Fuel prices • Huge Debt Burden • High taxation policies • Poor Infrastructure • Sticky price point syndrome • Acquisition of new airplanes – pilling inventory
Strategies adopted • Target Pricing • Aggressive promotional strategies • Co-branding • Government Initiatives • Tax breaks and loans given in China • Alternative fuel emission attributes, eg: Qatar Airways flies first commercial passenger flight powered by a fuel on Natural Gas Liquid Blend • Smaller airports in India need to be developed • Alliances • Cartelization • Leasing out their aircrafts
Lessons to be learnt • More concentration on emerging countries like India, China and Africa • Product differentiation • Ethnic Marketing • Different incentives to promote high end travel in bad times
Brief Overview of Global IT Sector • The global software market grew by 6.5% in 2008 to reach a value of $303.8 billion • In 2013, the global software market is forecast to have a value of $457 billion, an increase of 50.5% since 2008. • General business productivity and home use applications segment accounts for 22.7% of the global software market's value. • Americas accounts for 42.6% of the global software market's value. • IBM Corporation, Microsoft Corporation, Oracle Corporation, SAP AG
Brief Overview of Indian IT Sector • TCS, Infosys, Wipro and IBM • $39.52billion 2009, $32.12billion 2008 • 5.8% of India’s GDP • Growth rate dipped to 16-17 percent from about 30 percent in 2004-2008 • Expected to grow at 15% annually till 2010-2011
Impact of recession • Slowdown in US economy • Slump in financial sector • Reduction in IT expenditure • Microsoft reported quarterly loses in April 2009 • Sun Microsystems posted loses of $210 mn for the quarter ending Mar 29
Possible marketing strategies • Product • Price • People • Promotion
Lessons to be learnt • Counter cyclical approach • Mitigation of risk- Geographic and industry wise • Lowering dependence on American market
Slowdown impacts retailers • Current economic uncertainty • Operating costs remain high • Consumer spending is low • Low sales in metros • Business down by 15-20 % • Declined profit margin
Actions to be taken • Minimize losses • Retain customers • Exploit potential untapped areas • Tackle real estate pressure
1. Minimize losses • Reduce Operating costs (e-tailing) • Maintain marketing and advertising budgets • Explore alternate advertising media • Hold on the expansion plans in metros
Retain customers • Fully integrated VMS • Total control over strategy • Self sufficient • Direct contact with consumers • Higher retail markups without raising prices
3. Exploit potential untapped areas • Migrate towards Tier II and Tier III cities • Rural areas
Tackle real estate problem • Pressure on real estate • High rentals • Right location for retail • Franchise system • Quick Global presence with lower investments
Lessons to be learnt • Be selective in expansion plans • Revenue from rural retailing will grow by 60% till 2012 • Consumer and household products • Less resistance as compared to metros • Creating employment to rural people
Industry background • FMCG industry deals with the production, distribution and marketing of consumer packaged goods. • Provides a wide range of consumables and the absolute profit made on FMCG products is relatively small but they generally sell in large quantities • Generally replaced or fully used up over a short period of days, weeks, or months, and within one year
Major Players in FMCG Sector Source: The Global 2000- Forbes.com, 04-08-09
Impact of Recession Percentage change in sales (October 2008-09 over October 2007-08) Source: The Economic Times, 18-12-2008
Is the FMCG Industry In Recession? • FMCG has shown positive sales regardless of a slowdown in the Economy • Some companies in Q3 (Oct-Dec 2008) like HUL, Godrej Consumer Products, Emami showed decline in Profits • Whereas ITC, Dabur, Marico, Colgate-Palmolive, P&G, Britannia reported y-o-y profit growth
Current Scenario • The number of rural households using FMCG products has grown in the past years • Urban population cutbacks on eating out thus affecting full service restaurants and café/bars • Tea has become the cuppa that cheers in the times of recession
Challenges of FMCG Industry • To boost the urban consumer demand which has slowed down due to recession • Meeting rural demand considering the poor infrastructure • Increasing Price sensitivity among consumers
Road to Recovery • Intensified measures to cut costs, Eg: HUL: Consolidated R&D • Focusing more on basic products like soaps, detergents, packaged foods • Sustaining the advertising expenditure
Brand Investment during recession (1) (2) HIGH RECESSION IS OPPORTUNITY HIGH LOSS POTENTIAL Brand Equity (3) (4) DOUBLE OR NOTHING SURVIVAL GAME LOW HIGH Brand Investment LOW
Lesson to be learned Food and Beverages Household Care Personal Care
Summary Research the customer Maintain marketing spending Adjust product portfolios Stress market share Designed by TheTemplateMart.com
Adjust and don’t cut the prices Spend smarter, make the buck longer Instant gratification Deliver value, create delight Touch the customer at unexpected moments Designed by TheTemplateMart.com
PoorvaAdkarasTV Reporter BUSINESS 24 7