Business Strategy

Strategy Analysis of Marico Industries
1/14/2010 Submitted To: Mr. Suresh Submitted By: Hitesh Goyal
Reg. No.- BLR 0903071001

Table of content
Content Table of content Introduction Internal analysis of Marico Industries PROFIT Analysis Physical resources Reputational resources Organizational resources Financial resources Technological resources VRHN Analysis Valuable Rare Hard to imitate Not substitutable Internal analysis Strength Weaknesses Internal factor evaluation Importance of understanding competitor Rational behind identifying competitor Competitive profit matrix (nature care segment) Competitive profit matrix (health care segment) Analysis of CPM & IFE External analysis of Marico Industries Porter s 5 forces Threat of substitutes Threat of new entrants Determinant of supplier power Determinant of buyer power Rivalry among existing players External factors evaluation Threats Opportunities Conclusion References Page number .. 1 2 .. .. 2 2 .. 2 2 3 3. ..3 3 3. ..3 4 . 4 .. 4 . 4.. 5 6 .. 6 7 .. 7 8 . 8 . 8 . 8 .. 8 . 8 9 .. 9 9 . 9 . 9 . 9 . 10 . 11 .. 12

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Introduction:
I have chosen Marico Industries limited for study of internal forces and external analysis with reference to strategically way. The company has witness the substantial revenue growth of 21% in their market share (Shukla, 2008) . According to FICCI¶s annual report the FMCG industry will witness double digit growth rate in the coming year as well. There are various factors behind this growth i.e. the increase in the FDI limit by government in the retail sector and many other regulations (FDI in retail sector will boost growth in FMCG sector:Study:FICCI in news, 2009). In this report we will discuss the internal factors that will have impact on the company¶s overall strategy and operations. This report is prepared taking competition as one of the important factors and we try to figure out where the company stands in terms of their st ategy to utilize their r strength, encounter their weaknesses and how to withstand the completion.

Internal analysis of Marico Industry: There are numerous strategic concepts which are applied
to find out the internal analysis, those are as follows:

PROFIT Analysis:
Physical Resources: The Company is buying raw material for its hair oil market from various copra (raw material for coconut oil) from various south Indian states like Tamilnadu and Kerala. The company is having four plants two in Maharashtra and one each in Goa and Kerala. The company is using Kardi and corn as raw material for their edible oil business (Oil's Well- Views on News from Equitymaster, 2009). Reputational Resources: The Company¶s brands are leaders in their segments of operations, the brands like Parachute and Revive are synonyms for the product category in which they are operating (Venkatraman, 2006). So the company is having high brand value or reputation in the industry.

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Organizational Resources: The Company is having the values such as excellence, innovation; transparency etc and company¶s operations are always adhering to these values. The company is always comes up with innovative products i.e. they are the first one to come up with instant starch (Revive) in the market, same is the case with their brand Parachute Stars which is the first brand which is targeted to the children in the age group of 8-15 years (Srinivasan, 2009). Financial Resources: The Company is consistently making double digit profit since last three quarters, in the last quarter the company¶s net profit grew by 21% (Reporter, 2009). The company is utilizing this fund in expanding their business by acquiring the foreign brands or strengthening their brands in foreign market (Marico gets big on international biz, open to acqistion oppurtunities, 2008) . Technical Resources: The Company is implementing SAP systems in their supply chain and in various operations from India to South Africa, which results in less procurement and operating cost. The company is using G-talk for the instant communication between various levels of employees (Rawal, 2009).

VRHN Analysis (Empirical Analysis):
Valuable: The company¶s product line is concentrated on three segments i.e. hair care (brands like Parachute, Hair & Care etc), personal care (includes edible oil like Saffola and Sweekar) and recently the company has launched person skin care clinics Kaya. The company has positioned the products is such a manner that all of their products are of high value for the consumers. Rare: The raw material for the manufacturing of Coconut oil and edible oil are easily available in the market and are easy to procure (Venkatraman, 2006).

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Hard to imitate: Since the company is operating in the FMCG industry so most of their products are easily substitutable and one can produce the same product with little or no differentiation, but still their products like Mediker and Revive doesn¶t have any competitor in the organized market (Nandita, 2001). Non substitutability : Some of the company¶s brands like Mediker (Anti lie shampoo) and Revive (starch) are highly non substitutable in the organized market but there are products in non-organized market which acts as a potential threat for them (Venkatraman, 2006), on the other hand other brands like Parachute (hair oil) and Saffola (edible oil) are having close substitutes in the market. In spite of the stiff competition the company¶s brand managed to hold majority share in their segment of operation (Indiainfoline.com, 2008) .

Internal Analysis:
Strengths:1. The company¶s brands like Parachute hair oil (with 48%); Saffola and Mediker are leaders in their segment of operation (Indiainfoline.com, 2008).

2. The company is having strong presence in foreign market like Bangladesh, Egypt and other
South African countries. (Nandita, 2001)

3. No close competitor for most of their product lines. (Manju, 2009) 4. The company¶s strong distribution network because of which the company has got the
distribution rights from its competitor P&G for their products like Clearasil, Old Spice and Pampers. (Manju, 2009).

5. The company¶s aggressive global and local acquisitions (Marico gets big on international biz,
open to acqistion oppurtunities, 2008). In the last 18 months the company has finalized 8 mergers and acquisitions in India and abroad as well (Venkatraman, 2006)

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6. The company is consistently coming up with new innovation, products and business ideas;
this is the reason why the company is able to differentiate their products from their competitors. (Venkatraman, 2006)

7. Fastest growth rate in the industry, the company is witnessing double digit since last three
quarter(the company witnessed 21% increase in the sales in quarter in the last quarter) whereas the other competitor like HUL have seen decrease in their profit margins (Srinivasan, 2009).

8. The companies understanding of the rural market, the company is repositioning and
repackaging the products according to rural taste and preferences (Oil's Well- Views on News from Equitymaster, 2009).

Weakness:1. The major sales of the company comes from their two brands Parachute and Saffola, the
other brands were not in very profitable segments (Nandita, 2001).

2. The company has seen constant decrease in their earning per share ratios, in the year it was
11.92 and in present is around 2.9 this indicates that the company is not paying proper dividends to stock holders which will present a threat to the company from the share holders (Marico Ltd-ratios like PE,EPS, liquidity etc, 2009).

3. The company¶s current ratio is 2.72, which is far greater than the industry standards it
indicates that the company is unable to allocate its funds properly (Marico Ltd-ratios like PE,EPS, liquidity etc, 2009).

4. The company is still ranked third in their health care segments, they are still having 23%
market share whereas the nearest competitor Agro Tech Foods having 34% market share in the organized sector (Nandita, 2001). There is still a wide difference in terms of market share that the company has to bridge.

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Internal Factor Evaluation:
Key Internal Factors Strength Dominant Market share by their brands Strong presence in foreign market No close competition in most of product line Strong distribution network aggressive global and local acquisitions Innovation driven Fastest growth in industry Understanding of rural market Weakness Major revenue generation from few brands Consistent decrease in earnings per share ratios High Current ratio Wide difference in terms of market share Weight 0.17 0.12 0.06 0.15 0.07 0.05 0.07 0.11 Rating 4 3 3 4 4 3 4 3 Weighted Score 0.68 0.36 0.18 0.6 0.28 0.15 0.28 0.33

0.08 0.05 0.05 0.02 1

1 2 2 1

0.08 0.1 0.1 0.02 3.16

Importance of understanding Competition:
Understanding the competition is very important for every organization because it helps the company in making their future strategy and policies, through the competition the company can figure out the where the brands or products of company stands and how they can improve it, how they can differentiate their products from that of competitors. The company is operating in FMCG industry where the companies are facing stiff competition, so it¶s really very important for the firm to take that into consideration before coming up with any decision. Along with the existing competitors we have taken latent competitors or potential competitors in to the consideration because in the Indian FMCG sector there are lots of players who can come up with new product or brand at any given time.

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Rational behind identifying competitors:
We have identified Dabur (with Vatika brand) and Hindustan Unilever Ltd (Latent competitor) as competitor in Nature care segment, where the company is having brands like Parachute, Hair & Care etc and on health care segment (brands like Saffola and Sweekar) we have indentified Adani-Wilmar and Agro-Tech as the company¶s competitors. Since Dabur is having their products in every segment where Marico is having and also in terms of market share Dabur is next only to Marico (Rawat, 2009); on the other hand HUL has earlier came up with their hair oil brand Nihar which has captured almost 10% of the market share, but in year 2006 Marico has acquired the brand for Rs. 100 cr (Bureau, 2006), but still the company has the potential to come up with products which can be a threat for the company. In the health care segment the company is ranked third in the organized market next to Agro tech foods and Adani-Wilmar (Oil's Well- Views on News from Equitymaster, 2009). So we are considring this two as major competitor for Marico.

Competitive Profile Matrix (for Nature Care segment):
Marico Dabur HUL Wtd Wtd Rating Score Rating Score Rating Wtd Score 4 0.8 3 0.6 1 0.2 3 0.15 2 0.1 3 0.15 3 0.39 2 0.26 2 0.26 4 0.6 4 0.6 1 0.15 4 4 3 3 3 3 0.6 0.4 0.15 0.15 0.21 0.15 3.6 4 2 3 3 3 2 0.6 0.2 0.15 0.15 0.21 0.1 2.97 4 2 2 3 1 1 0.6 0.2 0.1 0.15 0.07 0.05 1.93

CSFs Market Share Brand image Financial Position Product Quality Distribution Channel Global Operations Pricing of Products Company Image Product Varity Innovation in Product line

Weight 0.2 0.05 0.13 0.15 0.15 0.1 0.05 0.05 0.07 0.05 1

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Competitive Profile Matrix (for health care segment):
Marico CSFs Market Share Brand image Financial Position Product Quality Distribution Channel Global Operations Pricing of Products Company Image Product Varity Innovation in Product line Adani Wilmar Agro tech foods Wtd Rating Score 4 0.8 4 0.01 3 0.39 4 0.6 4 0.6 2 0.2 3 0.15 4 0.2 3 0.21 3 0.15 3.31

Weight Rating Wtd Score Rating Wtd Score 0.2 2 0.4 3 0.6 0.05 3 0.1 4 0.2 0.13 3 0.39 3 0.39 0.15 4 0.6 3 0.45 0.15 4 0.6 4 0.6 0.1 3 0.3 3 0.3 0.05 3 0.15 3 0.15 0.05 3 0.15 4 0.2 0.07 2 0.14 4 0.28 0.05 1 3 0.15 2.98 3 0.15 3.32

Analysis of CPM and IFE:
With the analysis of the competitive profile matrix (CPM) we can conclude that the company¶s strategy in the Nature care segment is better than that of their existing and latent competitors, on the other hand the company has to adopt new strategy to strengthen their position in the health care segment. As the analysis of internal factor evaluation (IFE) we can say that the company¶s strategy is aligned with the strength and weakness of their organization. We have also recognized how the study of internal factor and competition will help in determining the strategy for the organization.

External analysis of Marico Industries:
Porter¶s five forces:
Threat of substitute products: The products in Fast Moving Consumer Goods (FMCG) industry are highly substitutable. For every single product there are many players giving almost the same product or with some differentiation.

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Threat of new entrants: The establish companies have very huge base of loyal customers, which will create entry barrier for any new entrant in the market. Even if some new competitor will be a potential threat for the companies the companies will buy out that competitor. Determinants of supplier¶s power: The industry is dependent mostly on the local players for the supply of their raw material, so there the quality and supply constrains comes in to the picture which affects the company¶s business in adverse way. Determinants of buyer¶s power: Since the products in the industry are highly substitutable and the number of sellers in industry is comparatively very less with respect to the number of buyers. The market is also very price sensitive, if a company increases the price of their products the customer has many options to choose from. So the buyers can switch from one product to the other. Rivalry among existing players: There is intense rivalry among the companies operating in the Indian FMCG market; they sell the products with little or no differentiation. This includes some big and established names in the market like HUL, Dabur, and P&G etc.

External factor evaluation:
Threats:1. The majority of sales in the industry come from unorganized market, which is priced at almost 50% less than their branded counterpart. This will lead to negative growth trends in the industry. 2. The industry is infamous because of production malpractice of duplicate products in the rural market. The FMCG majors in Indian rural market are facing this problem (Business Line, 2000). This factor also acts as a threat to the industry. 3. Strong and multinational competitors. In the Indian FMCG market there is intense rivalry between both the national and international players. So the industry is always a innovation driven.

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4. Price difference between premium and low priced brand. 5. Future disputes between retailers and the companies. There are clashes of interest between the FMCG companies and their suppliers. 6. The companies in Indian FMCG market have to depend on volume for their profit maximization; they cannot play the margin game for their growth. 7. Very few transporters with nationwide presence, so most of the work is being handled by the local players so the quality and supply assurance is another issue (vinod, 2007).

Opportunities:1. Consistent growth in demand in the market. According to FICCI, the FMCG industry will witness to grow 20-30 per cent in 2009-10, comparatively 10-20% in 2008-09 and the industry is supposed to quadruple its current size in the coming ten years (GST,FDI can quadraple FMCG turnover in 10 years: FICCI in news, 2009). 2. Scope for the development of new products in the market. The industry is innovation driven, so there is consistent scope for the development of new product lines or to fill the voids between the existing product lines. 3. Opportunities for Merger and Acquisition (M&A) activities in India and abroad as well (Marico gets big on international biz, open to acqistion oppurtunities, 2008). 4. Expenditure in development of rural infrastructure will improve the income of rural house hold therefore will increase the disposable income for them. The rural market is witnessing 40% growth (in terms of sales) whereas urban market is growing by 25%. 5. Exemption on personal income tax will increase the disposable income in the hand of the consumers. Income tax slab in India has been raised to Rs. 1.5 lakhs from the existing 1.1 lakhs. This will give a relief of Rs. 4000.00 for each Indian tax payer (Budget, 2009-10). This will result in higher spending, that will significantly contribute to the development of the industry.

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6. The industry will also get benefited from the fringe tax which adds to the cost unnecessarily, the government has decreased the fringe tax by around 30% (Budget:A major boost to FMCG sector:Reddiff business news, 2009). 7. Huge customer base: India has a population of more than 1.170 Billion and it is expected to be around 1.450 billion by 2030. FMCG Industry which is directly related to the population, which is expected to maintain a robust growth rate. 8. Increase in Foreign Direct Investment in organized retail sector. The FDI limit in the retail sector is raised from 26% to 49%, this step will enable to increase the size of industry (FDI in retail sector will boost growth in FMCG sector:Study:FICCI in news, 2009) 9. Export potential: Cheap labor, quality product & services have helped India to represent as a cost advantage over other Countries. Even the Government has offered zero import duty on capital goods and raw material for 100% export oriented units.

Conclusion:

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References:Bureau. (2006, January 28). Marico buys Nihar from HLL for Rs 100 cr. Retrieved September 9, 2009, from Business Standard: http://www.businessstandard.com/india/news/marico-buys-niharhll-for-rs-100-cr/233665/ Budget:A major boost to FMCG sector:Reddiff business news. (2009, July 7). Retrieved August 18, 2009, from Reddiff Business: http://business.rediff.com/report/2009/jul/07/budget09 -major-boost-to-fmcg-sector.htm FDI in retail sector will boost growth in FMCG sector:Study:FICCI in news. (2009, July 10). Retrieved July 14, 2009, from FICCI: http://www.ficci.com/news/viewnews1.asp?news_id=2879 GST,FDI can quadraple FMCG turnover in 10 years: FICCI in news. (2009, July 9). Retrieved August 14, 2009, from FICCI: http://www.ficci.com/news/viewnews1.asp?news_id=2870 Indiainfoline.com. (2008, september 8). Retrieved september 2, 2009, from Indiainfoline: http://www.indiainfoline.com/company/innernews.asp?storyId=66423&lmn=4 Manju, M. (2009, August 16). ICICI direct.com::Pick of the week. Retrieved August 16, 2009, from ICICIdirect.com: http://content.icicidirect.com/marico.asp Marico gets big on international biz, open to acqistion oppurtunities. (2008, April 27). Retrieved August 18, 2009, from The Economic Times: http://economictimes.indiatimes.com/News/News-By-Industry/ConsProducts/FMCG/Marico-bets-big-on-international-biz-open-to-acquisitionopportunities/articleshow/2987397.cms Marico buys HLL's Nihar for Rs. 240cr -India Business. (2006, January 28). Retrieved August 17, 2009, from Times of India: http://timesofindia.indiatimes.com/NEWS/Business/India-Business/Marico-buys-HLLsNihar-for-Rs-240cr/articleshow/1390107.cms Marico gets big on international biz, open to acqistion oppurtunities. (2008, April 27). Retrieved August 18, 2009, from The Economic Times: http://economictimes.indiatimes.com/News/News-By-Industry/ConsProducts/FMCG/Marico-bets-big-on-international-biz-open-to-acquisitionopportunities/articleshow/2987397.cms Marico Ltd-ratios like PE,EPS, liquidity etc. (2009, March 6). Retrieved September 10, 2009, from Rediff Money: http://money.rediff.com/companies/marico-ltd/11120039/ratio Nandita, D. (2001, April 30). Money.outlookindia.com. Retrieved september 2, 2009, from Outlook Money: http://money.outlookindia.com/article.aspx?87019

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Oil's Well- Views on News from Equitymaster. (2009, april 2). Retrieved September 3, 2009, from Equitymaster.com: http://www.equitymaster.com/detail.asp?date=12/6/1999&story=13 Rawal, A. (2009, March 24). Biztech Indai>Marico's SAP implementation. Retrieved September 08, 2009, from biztech2.com: http://biztech2.in.com/india/casestudies/enterprise-solutions/maricos-sap-integrationexperience-in-south-africa/51152/0 Rawat, V. S. (2009, September 05). Dabur to organize the market. Retrieved September 09, 2009, from Business Standard: http://www.businessstandard.com/india/storypage.php?autono=369119 Reporter, B. (2009, July 24). Marico Q1 results. Retrieved September 8, 2009, from Business Standard: http://www.business-standard.com/india/storypage.php?autono=364787 Ratna, B. (2009, July 2009). Marico to move count on coconut oil excise notice. Retrieved August 15, 2009, from Economic Times Delhi: http://epaper.timesofindia.com/Repository/ml.asp?Ref=RVRELzIwMDkvMDcvMTQjQXI wMTgwMg==&Mode=HTML&Locale=english-skin-custom Shukla. (2008, May 21). FMCG set to grow by 16% in FY09:FICCI-DNAIndia.com. Retrieved August 14, 2009, from DNA read the world: http://www.dnaindia.com/money/report_fmcg-set-to-grow-by-16pct-in-fy09-ficci_1165608 Srinivasan, L. (2009, July 29). Good show promts Marico to eye global buys. Retrieved September 3, 2009, from Financial Express: http://www.financialexpress.com/news/goodshow-prompts-marico-to-eye-global-buys/495169/ Venkatraman, L. (2006, October 6). The Hindu Businessline. Retrieved September 2, 2009, from Business Line: http://www.thehindubusinessline.com/2004/10/06/stories/2004100600850200.htm Shukla. (2008, May 21). FMCG set to grow by 16% in FY09:FICCI-DNAIndia.com. Retrieved August 14, 2009, from DNA read the world: http://www.dnaindia.com/money/report_fmcg-set-to-grow-by-16pct-in-fy09-ficci_1165608 vinod, k. (2007, February 5). Farm to Factory. (M. Pradita, Interviewer) Kolkata: Business Standard.

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