FMCG, THE CHOICE FOR MANAGEMENT GRADUATES POST GLOBAL FINANCIAL MELTDOWN

The Fast Moving Consumer Goods sector (FMCG) has emerged as the most popular industry of choice for the 2009 batch of management graduates in the latest Nielsen Campus Track–B School Survey. Management Consulting (35%), Software/IT Consulting (23%), Foreign Banks and Retailing (both 22%) join FMCG as the top five most popular sectors for students, reflecting a changed order of preference, on the tail of recent global financial turmoil.

According to the Nielsen survey, the “Dream Company” for students includes the likes of McKinsey & Co, Google, HUL, Accenture and P&G, and their most admired role model was Ratan Tata - for more than one in four (27%) students surveyed.


In its ninth year, the nielsen Campus Track-B School survey gauged students’ perceptions of companies and their considerations as they evaluate prospective employers. 1,311 soon-to-be graduates from the top 40 management institutes were interviewed.
“Preferences seem to have shifted in favour of large business conglomerates and the IT sector as a consequence of the current global financial turmoil. In particular, students are opting for FMCG companies over the financial sector,” said Vatsala Pant, Associate Director, The Nielsen Company. “Indeed, considering the current financial job market, the security offered by the FMCG industry has become a major attraction for graduates.”

Industry of the future

A sector showing greatest promise for the future, Retailing tops the list for 30 percent of students. Other industries that feature in the top five industries of the future are Management Consultancies (27%), Entertainment & Media (25%), FMCG (21%) and Investment Banking (19%) .
“The retail industry has been growing in popularity with graduates over the last few years. Changing government policies and the influx of foreign banners in the sector, along with the entry of big Indian banners, etc. have combined to form a strong pull for the industry,” said Pant.

Drivers of choice

Amongst the various factors considered by students before joining a company, personal growth and independence in decision making topped the list. The other factors that emerged as ‘very important’ for students before zeroing in on a company are take-home salary, reputation of the company and flexible working hours .
The average salary expectation of students from their “Dream Company” is rupees 14 lakhs this year although more than half the respondents have mentally scaled back their expected salary because of the recent financial market environment, particularly those specializing in Finance.

Reasons for moving on

According to the Nielsen survey, graduates tend to stay in their first job for two to three years and expect to move on in search of better career options (65%), better salary/ better designation (40%). Interestingly, 17 percent of students expect to move out of their first job to pursue higher studies. Students from premier management institutes are less disposed to pursue higher studies.
“While the demographic profile of students has not changed dramatically, over the years their expectations from a prospective employer have become sharper. For example, these days, the fact that an employer offers flexible working hours might drive choice in their favour,” said Pant.

Source: ACNielsen-India

LongTail and The Indian FMCGs

The theory of the Long Tail is that our culture and economy is increasingly shifting away from a focus on a relatively small number of "hits" (mainstream products and markets) at the head of the demand curve and toward 

a huge number of niches in the tail. As the costs of production and distribution fall, especially online, there is now less need to lump products and consumers into one-size-fits-all containers. In an era without the constraints of physical shelf space and other bottlenecks of distribution, narrowly-target goods and services can be as economically attractive as mainstream fare. 

    One example of this is the theory's predictions that demand for products *not* available in traditional bricks and mortar stores are potentially as big as for those that are. But the same is true for video not available on broadcast TV on any given day, and songs not played on radio. In other words, the potential aggregate size of the many small markets in goods that don't individually sell well enough for traditional retail and broadcast distributio

n may rival that of the existing large market in goods that do cross that economic bar. 

Traditional retail economics dictate that stores only stock the likely hits,because shelf space is expensive. But online retailers (from Amazon to iTunes) can stock virtually everything, and the numbers of available niche 

products outnumber the hits by several orders of magnitude. Those millions of niches are the Long Tail, which had been largely neglected until recently in favor of the Short Head of hits. 

       When consumers are offered infinite choice, the true shape of demand is revealed. And it turns out to be less hit-centric than we thought. People gravitate towards niches because they satisfy narrow interests better, and in one aspect of our life or another we all have some narrow interest (whether we think of it that way or not). 

    Our research project has attempted to quantify the Long Tail in three ways, comparing data from online and offline retailers in music, movies, and books. 

   1. What's the size of the Long Tail (defined as inventory typically not available offline?    2. How does the availability of so many niche products change the shape of demand? Does it shift it away from hits? 

   3. What tools and techniques drive that shift, and which are most 

   effective? 

   

The Long Tail article (and the subsequent book) is about the big-picture consequence of this: how our economy and culture is shifting from mass markets to million of niches. It chronicles the effect of the technologies that have made it easier for consumers to find and buy niche products, thanks to the "infinite shelf-space effect"--the new distribution mechanisms, from digital downloading to peer-to-peer markets, which break through the bottlenecks of broadcast and traditional bricks and mortar retail.    

In a recent report jointly published by Mckinsey and HUL. The report talked about "FMCG sector in recession and its future"...One of the most important findings was the fact that the rural India is growing at the much faster rate compared to urban India. The growth of rural India provided FMCG sector with the cushion which made them grow at 15-20% YoY basis even in these recessionary times. Today with I-banks struggling to survive, IT sector relying on ruthless cost cutting as its only way to survive, FMCG sector is showing promising growth...

With the understanding of longtail in mind, we'll find that in modern times we just cannot ignore the demand of rural India. Though they belong to the bottom most strata of the pyramid, yet they have immense potential if aggregated properly. A modern day business needs to have such cushions for survival even in the bad times.

By: Shakti Pandey & Prashant Gupta

( Symbiosis Institute of International Business )

Amazon - Business Model

Amazon – Business Model

 

Company Overview:

•  Founded in 1994; Started selling books online and now operate Web sites that offer various products and services, which include: music, DVDs, videos, electronics, camera and photography, clothing apparel, shoes, etc.
•   Features include: one-click shopping, customer review and e-mail order verification.
  
•   The company is in coalition with other retailers and offers various new, refurbished, and used items in categories.
• Headquarters is in Seattle (Washington) with an additional office in Coffeyville, Kansas. It has six global websites to serve domestic customers in the US, the UK, Germany, France, Japan and Canada.

Vision:

Our vision is to be Earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.

Mission:

The company’s six core values: customer obsession, ownership, bias for action,  frugality, high hiring bar, and innovation. The company motto: ‘Work Hard, Have Fun, and Make History’.

External Opportunities:

• —  Construction of an extensive community of buyers
  
• —  Positive changes in the business model of the book market
  
• —  Internet taxes prohibited by the Internet Tax Freedom Act (1998) and its extensions (2001 and 2003)
  
• —  Growth of internet users in the next five years, predominantly in the international market
  
• —  E-commerce expansion in Asia and the Pacific
• —  Several product categories with high penetration of retail on-line sales
• —  13% jump of Latinos going online in 2003 in the US since 2001
  

 

External Threats:

• —         eBay, Barnes & Nobles, and Wal-Mart
  
• —          Possible rejection to on-line sale in international markets if new taxes (Value Added taxes: VAT) in products are levied
  
• —        Population segment not targeted to on-line sales due to their lack of internet access
  
• —        Weak economic performance of Germany and France in the last year
  
• —  Competition will increase due to the low barriers to entry in the market: offline companies are coming online

 

Few of the things that make that Amazon what it is today:

•   Very large database
  
•   including out of print and used books
  
• Not restricted catalogue
  
• Not just buying from Amazon but a network of booksellers
• Not just books
• One stop shop – web supermarket
  
• Useful features like:   Reviews by readers, readability scores, sample   pages,   Filter searches by price, genre.

 

Collaborative Filtering:

• —        Collaborative filtering based on user profiles tracking
  
• —   What books/cds/dvds/etc people have bought
  
• —         What web pages they have visited
  
• —         Aim is to recommend items to people who share similar tastes.
  

 Business Structure

           Competitive Environment

Competitive Advantage: 

Market Strategy:

• —          Strong brand name
  
• —       Customer service support (Highest score in 2002 American Customer Satisfaction Index)
  
• —       Developed and upgraded technology: software and hardware
  
• —       Two segments: B2C and B2B e-commerce.
  

 

How Amazon works ?

• —       Bulk Purchase from source.
  
• —       Huge Distribution Capacity
  
• —      No intermediaries- An effective B2C purchase model.
  
• —      Excitement-Jeff Bezos describes it as “Thrill Factor” associated with Amazon.
  

  

Sales figures:

 

Major competitors in Internet Space: pic here

Strategic Mergers & Acquisitions:

• —        Highly aggressive growth strategies in thr form of Organic as well as Inorganic growth.
•        Bookpages (April 1998, Amazon.co.uk)
•         Telebuch (Telebook) Inc. (April 1998, Amazon.co.de)
•         Paid $200M to acquire e-Niche, Inc., Music Find, Accept.com, and Alexia Internet Company (1999)
•          Bought 35% of HomegrocOffered a co-branded credit card with Nextcard (1999)
•        Annouched plans to open a Target store at www.amazon.com (2001)
  
•        Others partnered with: BabiesRUS, ToysRUS, and Borders Group (2001)
  

 

Stock & Shareholder Policies:

• —        Trading on NASDAQ, ticker symbol AMZN.
  
• —  IPO: 1997 ($18 per share)
  
•  —  Dividends have never been declared or paid on the common stock.
  
•  —  Reason: Earnings are retained to finance future growth and therefore do not anticipate paying any cash dividends in the foreseeable future.
  
•  —  The Company currently does not offer a Direct Stock Purchase Plan.
  

 

Control System:

• —        Financial reports annually and quarterly if necessary
  
• —  Customer feedback program
  
• —  Top level management meetings to assure goals are achieved
  
• —  Determine corrective actions after the first year if annual objectives weren’t accomplished
  

 

Road Ahead:

• Primary: Expanding to emerging Asian Markets
  
• Introducing new product categories
•  Expanding to Central and South American markets
  
•  Research and Development to increase the innovation and quality of customer services provided
• Increasing marketing expenditures in order to reach new population segments and fastest growing trends and tendencies

 

Compiled by:

Prashant Gupta

MBA - Symbiosis Institute of International Business ( SIIB )