Contents

Business Overview .................................................................................................................................. 2 Value Chain Analysis ............................................................................................................................... 2 Primary ................................................................................................................................................ 3 Secondary............................................................................................................................................ 3 Framework .............................................................................................................................................. 4 Porters five forces .............................................................................................................................. 4 BCG Matrix .......................................................................................................................................... 6 Evaluation of options .............................................................................................................................. 7 Pros and cons of going global and the different transaction costs involved ...................................... 7 Options ................................................................................................................................................ 8 Financial Statements (Source MoneyControl) ........................................................................................ 8 Balance Sheet...................................................................................................................................... 8 1

Cash Flow ............................................................................................................................................ 9 Profit & Loss Statements................................................................................................................... 10 Conclusion and Recommendations ...................................................................................................... 11

DABUR INDIA LIMITED

Business Overview
Today, Dabur is the leading consumer goods company in India with a turnover of Rs.1899.57 crores. Dabur's products fall under the heads of Health care, Personal care, Ayurvedic Specialties and Foods. Dabur has 13 ultra-modern manufacturing units spread around the globe and its products are marketed in over 50 countries. Dabur India Limited has two major strategic business units (SBU) i.e. Consumer Care Division (CCD) and Consumer Health Division (CHD). The CCD (70% of revenues) comprises health supplements, digestives and candies, hair care, oral care, baby oils and skin care. The CHD (8% of revenues) includes products of the erstwhile Ayurveda Division and a set of OTC products. The International Business Division (11% of revenues) comprises the company's business in Dubai, South East, and Bangladesh. The Food division (10%of revenues) comprises of Real fruit juice homemade cooking paste and lemoneez. Source: www.dabur.com

Value Chain Analysis

Primary
Inbound Logistics: Operations: Semi-Automated processing capability. Ayurveda special competence. Apprentice Trainee Course ensuring stable source of skilled manpower. Kaizen & TPM team continuous drive to improve efficiencies. Long term contract with raw material suppliers. Personnel at regional offices for overseeing the smooth transit of goods. Transparency and monitoring through deployment of IT all transactions through ERP. Efficient storage facilities easy storage and retrieval.

Outbound Logistics: Distributors, all across the country. Long term contracts with transporters higher volume of business to transporters ensures competitive price. Regional Sales Office linked through ERP application. Efficient security system for prevention of any kind of pilferage

Marketing and Sales: Large network of dealers Structured approach to understanding the requirements of individual customers QFDs conducted at regular intervals. Clear identification of product requirements, leading to development of innovative products Quick assessment of the changing market dynamics and consumer

After Sales (Services): Efficient collection of data from field and communication to the respective plants. Pan India presence. Large network of distributors & retailers.

Secondary
Procurement: E procurement initiative. Long term relationships with a stable and loyal pool of suppliers. Technology driven procurement SAP and VCM. 3

Localized supplier base at mfg. locations low inventory levels.

Infrastructure: Multi Location facilities Strong leadership under the aegis of Hinduja Brothers Best in class prototype building facilities Technology ERP application Large product portfolio

Technology: Approximately 2% of the annual profits of the company invested in research and development. Knowledge portal helps employees keep abreast with the latest technologies. Extensive prototype building and testing facilities. Formal benchmarking process.

Human Resources:

Vast pool of technically competent managers. Focus on development of managerial capabilities -executive training programs at premier business schools. Career advancement schemes.

Framework
Porters five forces

The Threat of Entrants: The FMCG sector in India is characterized by a well-established distribution network, intense competition between the organized and unorganized segments and low operational cost. The easy availability of key raw materials, cheaper labor costs and presence across the entire value chain makes the FMCG sector an attractive area for new entrants. Moreover, as stated earlier, The FMCG sector is expecting a 100% increase in demand attracting new producers towards it. But on the other hand the marketing and advertising costs in this industry are very high therefore economies of scale to be achieved becomes a very important part of being able to survive in the industry. According to estimates based on China's current per capita consumption, the Indian FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4 billion in 2015. The dominance of Indian markets by unbranded products, change in eating habits and the increased affordability of the growing Indian population presents an opportunity to makers of branded products, who can convert consumers to branded products. Dabur should focus on product differentiation to maintain its hold in the market. It is one of the most trusted names in the FMCG sector and enjoys a loyal customer base but as the demand increases (which it is expected to); the company will have to focus on aggressive marketing strategy to attract new customers. The changing Indian demographic profile clearly shows the emergence of the 'youth' as dominant consumers. Currently, 75 per cent of consumers are under 35 years of age, and of this 54 per cent are less than 25 years old (Economic Times,2006). Dabur should focus on targeting at this segment of the market while it maintains its popularity amongst the middle aged consumers.

The Threat of Substitute products: In Dabur's case there is a threat of generic substitution which happens where products and services compete for disposable income. The disposable income India is expected to rise, therefore increasing the demand in the FMCG sector. Dabur sells a lot of varied products in all price range; it should ensure that it offers quality products for all income groups.

The power of buyers and suppliers: Buying Power is likely to be high if there is a concentration of buyers. In India 8% of an individual's income is spent on personal care products. Dabur should try and maintain its brand value so as to be popular amongst all income groups. For an FMCG company the supply chain is a very important aspect, from buying new raw material to selling of finished goods to the retailer. This calls for maintaining good relationships with the suppliers to avoid incurring the cost of switching a supplier. Competitive Rivalry within the Industry: The expected high growth of the industry may affect rivalry. There may be a competition in achieving the market share which may increase rivalry amongst the competitors. Differentiation is extremely important in a competitive industry. If a company doesn't differentiate its products from those available in the market the consumers tend to shift from one product to another leading to an increased rivalry between competitors. To avoid such circumstances Dabur at all levels should try and differentiate its products.

BCG Matrix
The BCG matrix helps in identifying where the company is at present and the areas where the possibility of growth exists. This helps in forming suitable policies for dealing with competition. It was established by the Boston Consulting Group (BCG). Star: Babool, Vatika hair oil is the product that has a high market share in a growing market and generates high profits for the firm. Question Mark: Odonil exists in the growing market but without large market share Cash Cow: Chyawanprash, Hajmola, Real juice, Amla hair oil are all the cash cows for Dabur India Limited with large market share and generate large profits. Dogs: Odomos are the products with a low market share in static or declining market

It is important for Dabur to invest more in the stars to gain share and market dominance. It is more likely that that Vatika and Babool will demand more investment in terms of advertising and selling both. Whereas Products like Odonil will eat investment and generate low profits. Investing here can be of high risk unless this potentially low margin activity is financed by the profits generated by other segments.

Evaluation of options
Pros and cons of going global and the different transaction costs involved
Pros-The major advantage of global sales is the expanded potential market. Cons- It will have to manage the process and logistics, and might be costly to set up geographic distribution and global marketing and sales Different Transaction costsAs the value-added increases, the cost of transaction also increases Direct marketing channelslow value-added; low cost of transactions e.g. e-commerce, telemarketing Indirect marketing channelsmedium value-added; medium cost of transactions e.g. retail stores, distributors Direct sales channelshigh value-added; high cost of transactions e.g. own sales force 7

Options
Dabur has three options to go overseas. 1. Acquisitions 2. Green Field Venture 3. Joint Venture As mentioned above high transaction costs and starting from scratch and developing the entire value chain overseas is a costly affair. The best option would be to go for Joint Venture as it would have the following advantages Leveraging Resources Exploiting Capabilities and Expertise

Sharing Liabilities Market Access

Flexible Business Diversification

Financial Statements (Source MoneyControl)

Balance Sheet
Dabur India-Balance Sheet ------------------- in Rs. Cr. ------------------Mar Mar Mar Mar '11 '10 '09 '08 12 12 12 12 mths mths mths mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Net worth

Mar '07 12 mths

174.07 174.07 0 0 927.09 0 1,101.16

86.76 86.76 0.14 0 662.48 0 749.38

86.51 86.51 0 0 651.69 0 738.2

86.4 86.4 0 0 441.92 0 528.32

86.29 86.29 0 0 316.9 0 403.19 8

Secured Loans Unsecured Loans Total Debt Total Liabilities Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deferred Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

17.57 235.78 253.35 1,354.51

24.27 81.8 106.07 855.45

8.26 130.72 138.98 877.18

16.45 0.24 16.69 545.01

19.28 0.26 19.54 422.73

766.88 687.23 518.77 467.93 404.3 269.32 236.28 210.45 189.77 168.97 497.56 450.95 308.32 278.16 235.33 11.92 23.31 51.71 16.26 3.71 519.23 348.51 232.05 270.37 145.35 460.58 298.44 261.72 201.15 157.37 202.46 130.48 112.36 100.46 60.98 26.08 48.8 32.16 67.36 49.04 689.12 477.72 406.24 368.97 267.39 461.81 348.94 455.65 206.94 129.19 166.33 115.11 111.53 0.9 1.21 1,317.26 941.77 973.42 576.81 397.79 0 0 0 0 0 539.05 471.73 381.87 345.16 301.78 535.36 440.1 315.1 265.41 77.49 1,074.41 911.83 696.97 610.57 379.27 242.85 29.94 276.45 -33.76 18.52 82.95 2.74 8.64 13.95 19.82 1,354.51 855.45 877.17 544.98 422.73 1,075.89 173.48 174.15 171.24 153.25 6.33 8.64 8.53 6.11 4.67

Cash Flow
Cash Flow of Dabur India ------------------- in Rs. Cr. ------------------Mar '11 Mar '10 Mar '09 Mar '08 12 12 12 12 mths mths mths mths Net Profit Before Tax Net Cash From Operating Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing Activities Net (decrease)/increase In Cash and Cash Equivalents Opening Cash & Cash Equivalents 596.26 338.61 -222.22 527.03 481.49 -267.54 425 323.57 -238.38 365.18 313.29 -179.77

Mar '07 12 mths 284.22 234.43 -60.57

-87.89 28.5 163.91

-201.88 12.07 151.84

-9.77 75.42 68.26

-119.3 14.22 54.04

-168.06 5.79 44.45 9

Closing Cash & Cash Equivalents

192.41

163.91

143.68

68.26

50.25

Profit & Loss Statements

Dabur India-Profit & Loss account ------------------- in Rs. Cr. ------------------Mar '11 Mar '10 Mar '09 Mar '08 12 mths 12 mths 12 mths 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost

Mar '07 12 mths

3,305.42 2,891.00 2,435.85 2,128.02 1,782.08 30.99 23.58 27.52 34.39 36.93 3,274.43 2,867.42 2,408.33 2,093.63 1,745.15 39.16 27.95 29.3 17.92 12.46 78.31 9.68 38.89 3.04 22.19 3,391.90 2,905.05 2,476.52 2,114.59 1,779.80 1,740.68 1,393.97 1,271.74 1,026.98 42.39 35.43 36.63 38.42 230.84 212.34 167.32 149.69 800.46 30.59 118.66 10

Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses Operating Profit PBDIT Interest PBDT Depreciation Other Written Off Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)

25.21 22.74 17.59 15.59 8.65 589.09 557.26 425.16 400.82 456.11 100.15 103.84 84.68 75.32 48.2 0 0 0 0 0 2,728.36 2,325.58 2,003.12 1,706.82 1,462.67 624.38 663.54 12.93 650.61 37.73 16.6 596.28 0.25 596.53 124.85 471.41 987.68 0 200.19 32.82 551.52 579.47 13.28 566.19 31.91 5.66 528.62 -0.19 528.43 93.7 433.33 931.61 0 173.6 29.5 444.1 473.4 14.47 458.93 27.42 3.94 427.57 -0.72 426.85 51.44 373.55 731.38 0 151.39 25.73 389.85 407.77 10.92 396.85 25.75 5.67 365.43 -0.86 364.57 48.4 316.77 679.85 0 129.6 22.03 304.67 317.13 4.43 312.7 21.98 6.49 284.23 -0.13 284.1 32.15 252.08 662.21 0 122.13 17.13

17,407.24 8,675.86 8,650.76 8,640.23 8,628.84 2.71 4.99 4.32 3.67 2.92 115 200 175 150 175 6.33 8.64 8.53 6.11 4.67

Looking at above financial statements of Dabur for last five year we can conclude that it on growth path and this trend seems to follow suit of expansion in both domestic and overseas market.

Conclusion and Recommendations

Looking at the large Indian expatriate population spread across the globe and large demand for Ayurvedic products we can assume Dabur certainly has a very big advantage which can be exploited to the maximum .Also the FMCG sector in India is expected to grow at a tremendous speed. As the industry sees fast growth the entry of new players will be all set to follow. Dabur as of now enjoys customer loyalty and is well established in the market. But for the years to come the company will face fierce competition. Dabur seems to realize that and therefore as discussed above is planning on aggressive expansion policies. This will lead to an increase in market share and brand recognition worldwide (The best and cost efficient way would be a Joint Venture). But in the entire process Dabur should not forget its existing market and constantly work towards improving it like it has for the past years. All its core brands, viz. Dabur, Vatika, Anmol, Real and Hajmola enjoy tremendous recall value for consumers, and provide with a platform to leverage on going forward. Dabur should aim on maintaining their growth while expanding its business worldwide. While geographical 11

expansion and new product initiatives to take care of top line growth for the next few years, esourcing initiatives coupled with higher in-house production would help enhance margins going forward.

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