Showing posts with label MNC. Show all posts
Showing posts with label MNC. Show all posts

Tuesday, April 02, 2013

Getting Back, Getting Even

From a Time when they were Playing for Survival Against MNCS, a select few Indian FMCG firms are Quickly Turning The Tables. Still, The Head-to-Head Score goes in Favour of MNCs

Even though some Indian FMCG players like Godrej and Dabur have a legacy of more than 100 years, yet they have traditionally been players with modest ambitions till the 1980s. But like other industries, the big churn came in post-liberalisation era. Over time, and especially post liberalisation, foreign players like Nestle, HUL, P&G and Reckitt Benckiser significantly grew in size and stature in the Indian market, and left the Indian firms behind by miles.

The domestic FMCG majors had to desperately play the survival game. Local companies like Dabur, Marico, Emami, Himalaya, Amul, understood that the market was changing and that they had to change with it. They shed their regional ambitions and started investing into distribution, packaging, product innovation & marketing. Players like Godrej went for a complete brand repositioning, and brought in a more professional management structure that emphasised on youth and looked to go global. But to what extent has their radical transformation helped Indian companies move up the steep learning curve that they largely stayed away from earlier? Are Indian firms taking the score back from the MNCs?

A Booz & Company and Confederation of Indian Industry (CII) report pegs the Indian FMCG industry at around Rs.1.3 trillion. The sector witnessed a CAGR of about 11% from 2001 to 2010. The last five years have shown a CAGR of approximately 17%. If the industry could continue to grow with a CAGR of 12-17%, it will become a Rs.4-6 trillion industry by 2020.

The real inflexion point for Indian players was 2001. According to the report, large Indian players grew sales by 12% from 2001-2005 and by 19% from 2006-2010. MNCs, in turn, saw sales growth of just around 2% in 2001-2005 before recovering to see growth of around 16% from 2006-2010. This has reflected in key market share gains as well. Godrej No. 1 is the leading soap brand in Northern India and third largest overall. Wipro’s Santoor holds sway in South India; ahead of the likes of Lux, Lifebuoy or Dove. ITC (well, if you were to consider it an ‘Indian’ company) is giving sleepless nights to HUL with innovations in personal care and food categories. The USP of Indian FMCGs – natural and herbal-based products – is attracting Indian customers, for whom ‘foreign’ ostensibly doesn’t carry the same attraction as before. In fact, differentiated products like Chyawanprash, Navaratna oil and Parachute have been immensely beneficial, as MNCs have consciously not invested in these products.

Consider the situation in personal care and home categories. According to Euromonitor International, Indian companies have been either holding steady or steadily gaining market share since 2005 in these segments. Even as Hindustan Unilever’s market share dropped marginally from 36.6% in 2005 to 33.3% in 2010 in the personal care segment, Dabur marginally upped its market share from 4.7% to 4.9%; while Godrej raising its share to 4.5% from 3.9%. ITC has doubled its market share to 1.4% in 2010 from 0.7% in 2008. But other international players have been gaining ground as well. Colgate-Palmolive’s market share rose from 6.4% in 2005 to 6.8% in 2010. P&G India’s share has also risen from 4.2% to around 5.4%. In these rapidly growing segments, MNCs have a clear edge over Indian players.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist). For More IIPM Info, Visit below mentioned IIPM articles
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Friday, January 11, 2013

MEET THE SURVIVORS

That we irreverently make a slim play of Marshall Goldsmith’s quote is obvious (we use him inside too), but that we do so to describe a group of intemperately argumentative entities that refused to accept India as a losing proposition, is perhaps slimmer than they would agree with.

It wasn’t just that the MNCs were suffering the classic Levittian marketing myopia, for even if they weren’t, the fact was that the so-called promised land – one billion people with purchasing power – never existed in India. The cookie that they came prepared for never existed and the investments that were made in the initial mad rush, ended up in crucifying financial statements to no ends. Look around. From the automobile sector to soft drinks to television media, leave one or two MNC players, the rest have been in considerable losses.

But there were exceptions. We found nine. Nine who not only understood the 4Ps, but also how to co-create a Prahladian value not necessarily from the bottom of the pyramid, but from the middle and the top. Finnish, Koreans, Americans, Europeans, our meetings with these inter-continental companies answered some questions and threw up many more. But for those, there’ll be another day. With credit, today is theirs.
 

Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
For More IIPM Info, Visit below mentioned IIPM articles.
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Friday, October 19, 2012

Namaskar! And all ‘thi bast’...

Post liberalisation, MNCs gatecrashed without the due diligence

Liberalisation seemed godsend for numerous multinationals that were waiting since ages to tap the lucrative Indian market. They were extremely confident that their global strategies would work wonders in India as well. Some, out of their desperation, could hardly wait for the right Indian partner. The result?!? A woeful saga of strategic blunders, which shocked them to the roots one by one. Consider some examples.

US-based watch company Timex, which jumped into the Indian market within one year of liberalisation, tied up with Tata’s Titan, but faced issues from the word go. Titan wanted Timex to grow under their umbrella. “Titan was interested only in our technology and we found that we need to have our own strong brand positioning, which was difficult to achieve with Titan. We were totally in the wrong place,” explains Kapil Kapoor, Senior VP, Asia Pacific, Timex Corporation. Finally in 1998, Timex bid adieu to the Tatas and decided to go ahead on its own. Similarly, US-based consumer durable major Whirlpool felt the need to break free from the shackles of TVS. The Whirlpool-TVS tie-up was a mismatch, as being a primarily electronic company, TVS could not match standards with the home appliances business of Whirlpool.


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face

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Monday, September 10, 2012

Another breach into the dragon’s lair?

Mobile handset production in India has seriously lagged the Telecom Services Revolution. Current trends provide an opportunity to rectify this anomaly. Can India take it up when it matters?

Post liberalisation, the grand telecom story has been a flagship of India’s corporate prowess, and has developed business models that are benchmarks for players across the world. However the flip side of the story is that while players, both Indian and international, have lined up in good numbers for the telecom services space, a similar exuberance wasn’t visible in the telecom handset manufacturing space in the initial years.

Slowly but surely, the MNCs that saw India as a market also started seeing its potential as a manufacturing hub. LG has manufacturing facilities for handsets near New Delhi and on the outskirts of Pune. It is further planning now to set up a facility in South India to exporting handsets from here to European and CIS countries. Its Korean counterpart Samsung also manufactures mobile phones at its facility in Chennai. Market leader Nokia set up its plant at Sriperambadur, Chennai with a manufacturing capacity of 5,00,000 units per day. The Indian Cellular Association (ICA) came out with a report titled ‘Enabling the mobile handset and component manufacturing value chain in India’ in 2005, where it had mentioned that indigenous design and manufacturing would help companies achieve higher localisation.

Considering the present scenario, the field is expected to split wide open now with the right impetus. India has become the world’s second largest mobile handset market with handset sales expected to reach 140 million units in 2010 and grow to 206 million units in 2014, a CAGR of 20% (Gartner). Trends could soon change, considering the thrust being provided by the emerging domestic players who have eaten up a substantial market share from established international players in a short time. As was reported by IDC some time back, market leader Nokia saw its market share drop alarmingly to 36.3% in 2009 compared to 54% in the previous year due to players like Micromax, Spice, Lava, Karbonn and G’Five (read related story on G’Five in this issue of B&E).
 

Source : IIPM Editorial, 2012.
For More IIPM Info, Visit below mentioned IIPM articles.
 
IIPM : The B-School with a Human Face
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