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Godrej Performance
Analysis and Future
Recommendations
Strategic Management
Assignment
Group 3: Deep Mathur | Sumant
Bhattacharya | Jayesh Tripathi |
Sakshi Kapoor | Mohit Madan

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1. Executive Summary
Established in 1897, the Godrej group is one of the Indias oldest, widely diversified, and
most trusted brands with 7 major companies including real estate, FMCG, industrial
engineering, appliances, furniture, security and agri-care and having overall turnover
crossing 3.3 billion dollars. Godrej has 25% of business in overseas with presence in more
than 60 countries. Since 1897, Godrej has emerged itself from mere a lock making
company to a present day conglomerate. It took over a century for this phenomenal
transformation and tells us how successfully the group has adapted itself to the
dynamically changing environment and consumer demands.
Godrej Industries (GIL), a member of Godrej Group, is India's leading manufacturer of oleo
chemicals and makes more than a hundred chemicals for use in over two dozen
industries. It also manufactures edible oils, vanaspati and bakery fats. Besides, it operates
real estate. The company was initially called Godrej Soaps until March 31, 2001.
Thereafter, the consumer products division got de-merged into Godrej Consumer
Products, and the residual Godrej Soaps became Godrej Industries. This led to the
formation of two separate corporate entities: Godrej Consumer Products and Godrej
Industries.
Besides its three businesses, Godrej Industries also runs four divisions Corporate
Finance, Corporate HR, Corporate Audit and Assurance and Research and Development
which operate on behalf of the entire Godrej Group. GIL has built a strong
manufacturing base capable of delivering international quality products at competitive
prices. It operates two plants, one at Velia in the Indian state of Gujarat and a second at
Vikhroli in suburban Mumbai. The company's products are exported to 40 countries in
North and South America, Asia, Europe, Australia and Africa, and it leads the Indian
market in the production of fatty acids, fatty alcohols and AOS.
With the liberalization of 91, competition from MNCs, and emerging global market, Godrej
evolved from an image of a closely held family business to professionally managed
organization. The evolvement has been gradual and marked with a number of hindrances
and milestones.
The two major companies of Godrej group Godrej & Boyce and Godrej Industries
Limited, have seen change of difference in organizational culture and focus areas. While,
Godrej & Boyce continues to focus on consumer, industrial and office equipment products,
Godrej Industries Limited is more dynamic and focuses on range of sectors including
FMCG, retailing, food, IT, real estate, etc. It gives a lot of independence to its affiliate
companies and subsidiaries in decision-making. However, the control of Godrej family
exists with family members having full control or as board members in some of the

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companies. The company had other shares of troubles as well, for instance unsuccessful
partnership with P&G.
Despite all the troubles, the second and third generation of Godrej families (fourth
generation has entered the fray recently), continued to follow the vision of its founders.
They diversified, ventured into new areas, and became global. However, they never
allowed majority ownership to any of their foreign partner and survived when most of the
other businesses closed down. It relies on building well-known brands, continues to
expand in its own way and not let the majority stake to be ever diluted. The company
continues to achieve operational efficiencies by continuous learning and improvement.
The HR practices of the group are considered amongst best in the country. The practices
have been influenced by family control, which considers employees as the groups biggest
asset. The employee-friendly policies have contained attrition rates and increased loyalty.
The CSR practices form a part of organizational values and are widely practiced.


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2. Group Organization Structure
Godrej group of companies is one of the largest privately held diversified industrial
corporations in India. Godrej Group comprises of more than 20 companies. Post-
liberalization Godrej moved from a product division structure to Strategic Business Unit
structure (independent units) and entered into a number of alliances.
GODREJ GROUP COMPANIES
Godrej & Boyce Mfg. Co. Ltd. (G&B) and Godrej Industries Ltd. are two flagship holding
companies of the group, which have all other companies in the group as theirs
subsidiaries and affiliates.
Jamshyd N Godrej, cousin of Adi B Godrej, Chairman of the Godrej Group, chairs Godrej
& Boyce Mfg. Co. Ltd. The company has several subsidiaries in which it has the majority
stake.
Godrej & Boyce Mfg. Co. Ltd. has 14 major divisions, 1 corporate entity, 1 joint venture,
and 4 international entities under it.
Godrej Industries also has 1 division, 3 corporate entities, 2 joint ventures, and 7
international entities under it.
Refer figures 1 and 2 for detailed Godrej organization structure and group companies.


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Figure 1







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Figure 2



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3. Godrej as a brand
With a history of over 114 years behind it, Godrej has stood the test of time. Not only has
Brand Godrej survived, but through expansions, extensions and innovations, has
remained relevant through the generations. Recently, the Godrej Group, has been valued
at USD 2.86 billion brand through a valuation exercise undertaken by global brand
consultancy firm Interbrand.
The home-grown corporate group had started out with security equipment and soaps.
Over the years it has diversified into several businesses ranging from typewriters and word
processors, machine tools and process equipment to refrigerators and furniture, from
engineering workstations to cosmetics and detergents, and from edible oils and chemicals
to agro products. JWT has been handling its creative duties for the past 44 years.
Godrej is one of foremost consumer brands in the country, used by 470 million Indians,
with a scope straddling almost 70 per cent of household consumption. Over a period of
time, there was a need felt for the brand to re-energise its bond with a new, optimistic,
resurgent India. The brand adopted a new positioning of Brighter Living based on core
consumer insights anchored in the territories of freedom, optimism, progress and
expression. Thus, there was a re-launching with a new synergistic identity and a cohesive
and clear set of values capable of taking the Godrej brand forward.
The journey of rebranding has been divided into three phases: re-launch, acquisition of
new values and acquisition of new franchise. In Phase I, brand Godrej was re-launched in
2008 in order to communicate the new brand positioning and identity. There was a launch
campaign, Good Morning Wall, which successfully delivered the first step towards
changing the perspective of millions of Indians towards Godrej coinciding with the first
season of IPL. This was the first time that the Godrej master-brand was communicating
with its consumers above the margins of its category portfolio.
Phase II saw Godrej work relentlessly towards evolving beyond its traditional brand value
of trust towards new vistas of expression, progression, experience and empathy. This was
accompanied by a number of initiatives to communicate the change in positioning and
identity of various parts of the portfolio. The first major communication initiative of Phase II
was the Godrej Aerospace campaign, which gave an unprecedented technological sheen
to Godrej and helping it resonate with values of progression and empathy. The second big
communication initiative of this phase was production and launch of Indias first branded
lifestyle game show: Godrej Khelo Jeeto Jiyo, a unique concept showcasing the Godrej
range of products wired into a singular proposition of Godrej Lifestyle. After a long time,
Godrej started becoming bigger than the sum of its parts.
Phase III has just started with the launch of GoJiyo.com, said to be Indias first virtual
world. GoJiyo brings together the power of social networking, virtual worlds and gaming on
a simple, developing country friendly browser based platform.

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Godrej has always believed in going beyond tag lines to imbuing all its communication
endeavours with a unique ethos and essence. By putting a distinctive brand at the core of
their company actions across portfolio, Godrej is trying to be better positioned to meet the
advancing expectations of the consumers of their products.

Global presence of Godrej :
The picture below shows the countries where Godrej is operating presently.

Figure 3
Today Godrej is on the verge of becoming an Indian multinational'. Godrej has adopted a
global 3x3 strategy - presence in three continents - Asia, Africa and Latin America
through three core categories - home care, personal wash and hair care.
One Africa strategy
After acquiring three companies in Africa since 2006, Godrej now plans to have a One
Africa' strategy by merging the operations of Rapidol and Kinky in Africa.

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GCPL has put in place the One Africa' strategy, which is to look at Africa as an
opportunity right across the continent. The company has a substantial business in hair
extensions in South Africa and is looking to leverage that across Africa through a hub-
and-spoke' model. Tapping into the opportunities across the African continent, Nigeria
with 150 million people is a huge opportunity both for Godrej and Tura. It will help the
company bring in products from the South African business the hair colour brand
Inecto, the market leader for ethnic hair colour, and Kinky, the hair extension brand.
The Tura acquisition is a great opportunity for GCPL to extend its portfolio and over a
period of time even look at other Godrej brands that can get into the African continent
Rapidol was acquired by GCPL in September 2006. This acquisition gave GCPL an
opportunity to enhance its global presence through the modern trade network and the
ownership of strong ethnic hair colour brands such as Inecto and Soflene in ten
countries
Inecto is the leading ethnic hair colourant in SA with 92 per cent market share (volume)
according to The Nielsen Company's data for December 2009. Today Rapidol has also
begun sourcing Inecto powder hair colour from GCPL India.
Kinky was acquired by GCPL in April 2008. Established in 1971, Kinky offers a variety
of products which include hair, hair braids, hair pieces, wigs and wefted pieces to the
South African consumer. It also has hair care products such as styling gels, hair sprays
and oil-free shampoo. All Kinky products are manufactured at plants located in Durban,
South Africa and sold through Kinky-owned stores as well as Cash-n-Carry outlets.
Asian mission
As for its latest venture, in Indonesia, that would help GCPL fortify its position in Asia
as well. The Rs 600-crore Megasari group is a manufacturer and distributor of
household products which include household insecticides, wet tissues and air
fresheners. It is less than 15 years old and has plants in West Java.
Megasari is also the second largest player in the household insecticide market in
Indonesia having a 35 per cent share in the category with brands such as the Rs 250-
crore Hit (household insecticide) followed by smaller brands Stella (air fresheners) and
Mitu (babycare). Interestingly, one of Godrej's own insecticide brands is called Hit.
Latin American Mission
Continuing with its spate of fast and furious acquisitions, there is no stopping the
Godrej group this year as it gets ready to enter the Latin American market.

Additional Information

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International Operations

Popularity of GCPL products has been growing rapidly in international market, and to
meet this emerging demand, the company is also expanding the breadth of its
operations. GodrejCP products are now exported to 30 countries worldwide.

Subsidiaries

Subsidiaries of Godrej Consumers Products include Kinky Group (Pty) Limited, South
Africa, Keyline Brands Ltd, Godrej Global Mideast FZE, Sharjah, and Rapidol Pty Ltd.
South Africa.

Keyline Brands Ltd

Keyline Brands Ltd. is one of the most popular U.K brands which has brilliant track
record in the toiletries and personal care sector. Some of its well-known brands are
Cuticura, Aapri, Erasmic and Nulon. Brian Boyce and Vicki Dryden Wyatt founded the
company in 1990, and in the month of October, 2005, it was taken over by the Godrej
Consumers Products.

Rapidol Pty Ltd. South Africa

Rapidol Pty Ltd which is South Africa based company, and internationally known for its
hair color brands named 'INECTO' and 'SOFLENE.' It was acquired by Godrej
Consumers Products in September, 2006.

Godrej Global Mideast FZE, Sharjah

Godrej Consumers Products has enhanced its global presence by acquiring Global
Mideast FZE on October 1, 2007. Based in Sharjah, this company was initiated to
make Godrej FMCG products in countries like Kuwait, Bahrain, Oman, and Saudi
Arabia.


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Kinky Group (Pty) Limited, South Africa

Kinky is another subsidiary of GCPL which was acquired in April 2008. In addition to its
products such as, hair, wigs and wefted pieces, hair braids, and hair pieces, this
renowned company also has hair accessories like hair sprays, oil free shampoo and
styling gels. The company is based in Durban, South Africa.

4. Diversification
Investigating the reasons that drove the House of
Godrej
Under the resource-based view, there are primarily 3 theories that govern the growth
business houses that ultimately turn them into diversified conglomerates in developing
economies:

Theory 1: The greater the market imperfections, the greater the importance of
business groups in an economy.
Economists assume that diversified business groups can only exist in the absence
of a well- functioning market. Thus, they regard business groups as functional
substitutes for allocation failures in the markets for production inputs. Business groups
emerge as attempts by entrepreneurs seeking to overcome the difficulties of obtaining
capital, labor, raw materials, components and technology in emerging economies. Groups
step in where the market does not work or is not allowed to work by institutionalizing an
alternative allocation mechanism so that production can take place.
The rise of the Godrej business house can, thus, be attributed to the pre-independence
era in India. When the group was diversifying into soaps (1918), steel cupboards and steel
office furniture (1923) and shaving products (1932) for instance, the Indian economic
market was premature, to put it mildly. The absence of a healthy market ecosystem must
have helped the Godrej group, to first come into existence and then diversify by driving
and building upon its own resources and ingenuity.

Theory 2: The more vertical the pattern of relationships in a society, the greater the
importance of business groups in its economy.

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The postulate is based on the social structure and ambience prevalent in a particular
country at a particular time. Cultural and social inputs do guide the way an organization
develops and moves in a particular country in the long run. The argument revolves round
the concept of authority as developed by the Weberian sociological tradition. In a vertical
authority-led society like India, firms run a by a single paternalistic, figure-head have the
maximum chance of being successful.
In such societies, members of a firm owe obedience and personal loyalty to its patrimonial
figurehead. Owing to the strong personality and authoritative hold of the central figure on
the business, new activities are integrated into the patrimonial household as subordinate
units rather than branching out as separate business efforts. Every effort is made not to
lose control as the household turns into a collection of businesses of greater size and
complexity.
The house of Godrej, headed by Ardeshir Godrej, sat perfectly in the socio-economic
structure like India. Since the firm was lead by a single entity, it commanded the focus and
allegiance required for growth. Throughout the decade, as it entered into new categories, it
absorbed those forays under the same group company.


Theory 3: The greater the autonomy and size of a state, the greater the importance
of business groups in its economy.
The third approach to the study of business groups focuses on late economic development
as a process driven by states. In a first version of this theory, scholars of East Asian
development have observed that autonomous states with the ability to allocate capital and
other resources at will encourage a few entrepreneurs to enter new industries, thus
facilitating the proliferation of business groups. For control and accountability reasons,
autonomous states generally prefer to deal with only a few entrepreneurs as their private
sector agents.
In the early years of Independent India, the state would have liked to go take only slow
and measured steps towards economic growth and privatization per se, owing to political
and ideological reasons. In such an environment, only a few, and big business houses
must have had the chance to encash the business opportunities. That must have helped
the house of Godrej to build upon its existing resources and venture into a diversified
portfolio.
The 3 theories, however, do not expound much on the resource enhancing capabilities of
a firm surging ahead on the path of diversification.

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The Resource-Based theory (Mauro F. Guilln) applied to Godrej
A resource-based view of business groups implies that the inimitability of the set of rare
resources that enable entrepreneurs to diversify is only guaranteed under certain
development circumstances. According to the resource-based view, the importance of
business groups will be greater in emerging economies with asymmetric trade and
investment conditions because they allow a few entrepreneurs and firms to develop the
capability of combining the requisite foreign and domestic resources for repeated industry
entry.
Such a generic capability (1) remains idle if a group does not prepare to enter a new
industry, (2) has multiple uses, and (3) is difficult to trade, encourages those who possess
it to diversify across unrelated manufacturing and service industries.
For Godrej the human resource was generic. However, The main problem faced by the
Godrej group in 1991 was that it was getting too bureaucratic with slow pace, getting
bogged down in routine matters, too many slow-moving products and a reluctance to do
away with old practices. The key to break this shackle, Godrej realized is that to make
everybody accountable and responsive. Godrej went all out into incorporating corporate
governance in all its subsidiaries and group companies (both listed and unlisted). Each
group company had a CEO or a President (not necessarily from the family). Full freedom
was given to these leaders to devise strategy for the companies and lead Godrej in the
liberalized and open economy. However the board of each company still has some family
members to oversee the working of the top management and the company and there is
consultation at both family and business levels on critical issues.
This change led to the concept of divisionalization with each division as a profit centre,
decentralization of decision-making and empowerment of managers at the grassroots
level. Once fit to compete, Godrej went into the alliances and acquisitions spree to exploit
this generic resource.


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5. Mergers and Acquisitions
Godrej group has done several mergers and acquisitions since 1999 to control and
expand its reach in consumers and India and in emerging markets. It is still keeping its
eyes and ears open for any further mergers and acquisitions across the continents of
Asia, Africa and Latin America.

Some of the keyacquisitions done by Godrej group between 1999 and 2010are as follows:




The company over the last eighteen months acquired five companies at a net expenditure
of Rs 3,000 crore feels buyout of firms would continue to be an option for it to expand its
footprint in international markets.

In words of Managing director Mergers and acquisitions is a major part of our growth
strategy and we always keep our eyes and ears open to acquire a company that is a
strategic fit for us

Majority of the acquisition done by Godrej group ranges between $50 million (Rs 240
crore) to $250 million (Rs 1,200 crore).

Over the last couple of years major acquisitions of Godrej group include Indonesian
household product firm Megasari Group, Argentine hair colour brand Issue Group. In June
this year, GCPL bought 51% stake in Darling Groupthe African hair products firm for
$100 million (Rs 480 crore).

These buyouts are in sync with Godrejs 3 by 3 strategy whereby the company wants to
increase its presence in emerging markets across Asia, Africa and Latin America through
its three core categoriespersonal wash, hair care and home care.


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6. Strengths of Godrej Group
Godrej is a well established brand in market standing on the pillars of loyalty and the core
strength of the Godrej Group is its value system put in place by the founders. Godrej has
established and developed its brand in a way that it has always enjoyed the loyalty of its
customers since decades.
The group has developed network of dealers, distributors and branches which is helping
the group in reducing marketing costs tremendously. The trade is nurtured meticulously
using a multi-tier approach (local/regional/national contact).Throughout its history Godrej
has considered People as its most valuable asset. Its relationship with its dealers and
suppliers has always given it an advantage over other firms
Godrej has always been able to take up large projects through internal funding and
available resources such as land, machinery, technology, competent management teams,
social goodwill.


7. Conclusion

Foremost amongst the points that emerge out of the analysis of the Godrej Group, is the
tight, coherent decision making that guides the group. Since the fortunes of a family-run
business are tied to the dynamics within the family, it can become quite topsy-turvy. A
conflict can grow big, create fissures, and can even bring down a business. On that score,
Godrej comes out trumps. By staying away from control and succession related conflicts,
the Godrej family and board has presented a united and strong face to its stakeholders.
While some of the divisions, such as appliances, are facing losses due to a lack of fierce
focus, the others are faring well. The group may face problems deciding the strategic fate
of the divisions facing difficulties. At the same time, there could be a lot of exit barriers that
may prevail like family culture and control, goodwill in the market, social and psychological
barriers, such as emotional attachments of family members that may result in renewed
vigour for such divisions.

Overall, the group derives a lot of strength from the united vision and values of the family
that runs the business. It has enabled the group companies to survive and grow even
during adverse external conditions. The unity of vision, in turn, seems to have outlined the
strategic path for the group that is clear to all its stakeholders. And as the group
companies have common objectives in the interest of the group, it has reduced agency
costs giving it an advantage over its competitors.

A resource-based analysis of the Godrej group indicates that it is extremely rich in
resources of different types. Be it tangible resources such as manpower, machinery,
technological expertise and land or intangible resources such as brand, customer and
supplier loyalty and acquired knowledge, the group has been able to build up impressive

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assets over the decades. This is due to the scale of operations of Godrej, and has
increased continuously with time.

Godrej also has had a typically higher duration of tenure of the family members. This
has helped them invest in long term benefits and also invest in next generation leaders.


8. Going Forward
Much of the success of the group can be attributed to the values and vision of Godrej
family, which continued as the generations passed-by. To continue reaping the benefits of
such a strong a stable value system, the group must have a clear succession plan at
hand. Power struggle can become ugly and for a group as big and diversified as Godrej, it
can wreak havoc.

During the latter half of the century, Godrej made the right moves by adopting strong
corporate governance practices while trying rightfully to shed its image of a family-run
business. However, it must instill far more energy into its outlook. Compared to the vast
scale of its operations, Godrej still has a long way to go to overcome the existing inertia in
the organization that must have crept in due to the family control. The current strategies
adopted by Godrej Industries Limited are more in line in this direction; however, Godrej &
Boyce is still lagging behind. The group has an enormous potential and with lots of
opportunities in the India market, it will have to be more dynamic to sustain and grow in
the future.