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STRATEGIC MANAGEMENT PROJECT REPORT ON NIRMA
WORD COUNT- 1500 ACTUAL WORD COUNT- 1820
SECOND TRIMESTER SUBMITTED BY NAMITA SINGH
• INTRODUCTION • VISSION MISSION AND PHILOSOPHY • COMPANY PROFILE • STRATEGY OF NIRMA • STRENGHTS OF NIRMA • ACHIEVEMENTS • CORPORATE SOCIAL RESPONSIBILITY • PHASES OF DEVELOPMENT • SIGNIFICANT PROBLEMS OF NIRMA • CAUSES OF FAILURE • APPENDIX • BIBLIOGRAPHY
The Indian fabric wash products market was a highly fragmented one. There was a sizeable unorganized sector. Of the 23 lakh-tonne market, laundry soaps and bars made from vegetable oils accounted for around seven lakh tonnes with synthetic detergents making up the rest. Detergent cakes accounted for 40% of the synthetic detergent used, while powder accounted for the rest. Washing powders were categorized into four segments - economy (selling at less than Rs.25 per kg), mid-priced (Rs.25 - Rs. 90 per kg), premium (Rs. 90 Rs. 120 per kg) and compact (selling at over Rs. 120 per kg). The compact, premium and medium priced segments together accounted for 20% of the volume share and 35% of the value share. The economy segment made up the remaining lion's share of the market. The fabric wash industry in India was characterized by low per capita consumption, especially in rural markets. The major players in the Indian detergent market were HLL, P&G, Nirma and Henkel (through its joint venture with SPIC, a leading petrochemical company based in the south Indian city of Chennai).
VISSION, MISSON AND PHILOSOPHY
Nirma is a customer-focused company committed to consistently offer better quality products and services that maximise value to the customer. This customer-centric philosophy has been well emphasised at Nirma through:
Continuously exploring & developing new products & processes. Laying emphasis on cost effectiveness. Maintaining effective Quality Management System. Complying with safety, environment and social obligations. Imparting training to all involved on a continuous basis. Teamwork and active participation all around. Demonstrating belongingness and exemplary behaviour towards organisation, its goals and objectives.
A statement of sustained innovation, an unceasing effort to deliver better value to consumers, through better product quality.
Nirma is a group of companies based in the city of Ahmedabad in western India manufacturing products ranging from cosmetics, soaps, detergents and salt. Karsanbhai Patel, a well known businessman, industrialist and philanthropist of Gujarat, started Nirma as a one-man operation. Today Nirma has 14000 employees and a turnover of Rs. 2500 crores. In 2004, Nirma's annual sales touched 800,000 tonnes. Nirma is one of the most recognizable Indian brands. Its story is a classic example of the success of Indian entrepreneurship in the face of stiff competition. Nirma took on the might of giant multinationals and wrote a new chapter in the Indian corporate history. Starting as a one-man operation in 1969, today, Nirma has about 14, 000 employee-base and annual turnover of more than Rs. 25, 00 crores.Founder of Nirma is Dr. Karsanbhai Patel, son of a small-time farmer and a qualified Science graduate. In 1969, the year he founded Nirma, Karsanbhai Patel was working as junior chemist in Government laboratory. In the night Karsanbhai used to make detergent in the 100 Sq. Ft. back yard of his home, using bare hands and bucket. In 1960s and 1970s, the domestic detergent market had only premium segment, with very few players and was dominated by MNCs. After making the detergent Karsanbhai used to pack it in polythene bag and sold it door-to-door. He priced the detergent at Rs. 3 per kg, when the available cheapest brand in the market was Rs. 13 per kg. In a short span of time, with indigenous process, packaging and low-profiled marketing, Nirma created an entirely new market segment in domestic marketplace and quickly emerged as dominant market player. Nirma catapulted Surf, which was a well-established detergent product by Hindustan Lever, and occupied the top slot in the detergent products segment-a slot it has made its own. In 1990, Nirma entered the toilet soap market and today it is the second largest toilet soap brand in India. Today, Nirma has one of the largest volume sales with a single brand name in the world.
STRATEGY OF NIRMA
Nirma carved a niche for itself in the highly competitive detergents and toilet soaps market in India. The various strategies employed by the company to counter the competition from the FMCG giants, particularly HUL. It shows how Nirma used its cost-reduction strategies to achieve success.
STRENGHTS OF NIRMA
The strength of Nirma is based on mutually rewarding and satisfying relationship. Nirma pioneered the concept of flat distribution network. Nirma Consumer Care Limited operates with two parallel distribution networks. The NIRMA brand is marketed through the first network, which consists of about 450 exclusive distributors. It is one of the lowest cost FMCG distribution channels of the country. Principal Channel [Nirma Products]:
Lowest Cost system in India Speed in distribution Flexibility
The NIMA range of products is marketed through a parallel marketing network that comprises of more than 2000 distributors. Parallel Channel [Nima Products]:
Wider Reach Speedy Market Intelligence Competitive edge & Better focus Complementing Principal Channel
The ACNielsen Retail Audit (2002/03) has ranked Nirma as India's seventh largest consumer brand. It is, perhaps, the first Indian brand which relied completely on home-grown research and development, and marketing strategies to successfully challenge the marketing might of multinationals. Nirma created the concept of value-for-money and made it part of the Indian marketing lexicon. It was also the first brand to recognise and harness the power of the Indian rural market. Not surprisingly, Nirma became one of the first Indian brands to merit a Harvard Business Review case study.
Nirma's vision visualises itself as a vibrant, pro-active and widely admired, ethical corporate citizen. Nirma believes, that exemplary achievements on the business points are not enough in the making of a good corporate citizen. In fulfilment of this role as a responsible part of the society and environment in which one operates, Nirma has undertaken a host of activities in the educational and social development areas. Realising the significant role of education - especially technical and managerial in socio-economic development of the nation, Nirma played a vital role by establishing the Nirma Education & Research Foundation (NERF) in 1994. Recently, this Foundation has been awarded University status. This status gives way to shape up and expand into a body providing education in other courses like medicine, nursing, biotechnology, etc. along with the existing courses under a single roof of Nirma University. Today, this state-of-the art academic infrastructure runs various institution bodies such as Institute of Technology, Institute of Management, Institute of Pharmaceutical Sciences and Institute of Diploma Engineering. These all institutions are located in a disciplined, serene and pleasant environment. The campus blends beautifully with the green landscaping, aesthetic elegance of arches and the vibrant pursuit of knowledge by the young aspirants. The environment gives full
scope for group activities, which are plenty, as also to individual pursuits for development on preferred tracks
Products of Nirma:
1. Consumer Products:
Soaps: Nirma Bath Soap, Nirma Beauty Soap, Nirma Lime Fresh Nima Rose, Nima Sandal Detergent: Nirma Washing Powder, Nirma Detergent Cake, Super Nirma Washing Powder, Super Nirma Detergent Cake, Nirma Popular Detergent Powder, Nirma Popular Detergent Cake Salt: Nirma Shudh • Scouring Products: Nirma Clean Dish Wash Bar, Nima Bartan Bar
2. Industrial Products:
• • • • • • • • •
LAB (Linear Alkyl Benzene) AOS (Alfa Olefin Sulfonate) Sulfuric Acid Glycerin Soda Ash Pure salt Vacuum Evaporated Iodized Salt SSP ( Single Super Phosphate ) Sodium Silicate
SIGNIFICANT PROBLEMS OF NIRMA
• Soaps and detergents company Nirma Ltd, which gave Hindustan Unilever Ltd’s (HUL) Surf a run for its money in the 1980s, is now battling a shrinking market share in its core business. The company’s profitability and stock price have been on the decline since April 2006. • According to market research agency ACNielsen, Nirma had a 15.2% share of the detergents segment and an 8.2% of soaps (both in terms of value) in April last year. But by June this year, its market share had dipped to 13.5% in detergents and 6.74% in soaps.
The company’s share price also fell 24% during the period.HUL, leader in the Rs8,000 crore detergents segment, commands a 38% share of the market. In the Rs6,000 crore soaps category, Gore Consumer Products Ltd (GCPL) has surged past Nirma with a market share of around 11%
. • In the 15-month period between April 2006 and June 2007, Nirma’s market share declined by 1.5 percentage points, while GCPL gained by 1.9 percentage points. • .In the year ended December, Nirma’s sales grew 4.3% year-on-year to Rs1,918.8 crore while its net profit fell 15.2% to Rs241.38 crore. In the quarter ended 30 June, sales grew to Rs609.1 crore against Rs525.5 crore in the same quarter last year, while the net profit fell 45% quarteron-quarter to Rs41.1 crore.
CAUSES OF FAILURE
According to experts, Nirma suffers from the inability to innovate in the product categories it is present in and also tinker with its pricing. They say companies in the detergents and soaps categories, both multinationals as well as local players, have built their strategies around viability, affordability and visibility; Nirma’s focus, they add, has largely been on affordability. With rising incomes, consumers are now shifting from economy brands to aspirational purchases and Nirma has failed to capitalize on this shift,” Nirma’s brand promotion efforts and pricing strategy have weakened over the past few quarters. “Nirma has been continuing with the same advertising for years and now; even its visibility is on the decline on TV channels, except for Doordarshan,” it has also not raised its prices for some time despite the increase in prices of LAB (linear alkyl benzene, a key ingredient used in manufacturing detergents) and palm oil (another key ingredient in the manufacture of soap). In its annual report for 2001-02, the company has clearly stated that it faced pressures due to erosion in the market size, degrowth in its products and stiff competition from domestic companies and imports. While the detergent market shrunk 9 per cent in volume terms last year, the toilet soap segment recorded a decline of 12 per cent in value terms. During 2001-02, Nirma's sales dropped by 6 per cent to Rs 2,276 crore while its net profit was lower due to the deferred tax at Rs 185.6 crore. For the first quarter ended June 2002, the gross sales were 4 per cent higher, at Rs 621 crore, but the net profit was down to Rs 45.4 crore.
PHASES OF DEVELOPMENT
Nirma signed a licensing agreement with the multinational firm Procter and Gamble Home Products to manufacture, market and distribute the soap brand Camay in India Nirma will now manufacture and market camay for INDIA. Nirma will use the trademark of Camay for a rolling period of five years and will give royalty payments to P&G. The licence agreement was made through Nirma's subsidiary, Nirma Consumer Care. ''This agreement marks the advent of Nirma into the premium segment of the soap industry. Nirma is looking to broaden its products portfolio with a view to lowering dependence on the increasingly competitive and stagnating washing soaps and detergents market. In keeping with its premium image, Camay will be priced at Rs 13 for a 100gm pack. Though this is lower than the price of competing soaps such as International Lux (at Rs 15 per 75 grams), Dove (Rs 35 for 100 grams) and Pears (Rs 19.50 for 75 grams), it must be remembered that it is an introductory price. Also the company aims to position Camay as a skincare product which Patel says gives it a broader perspective than limiting it to the bath soap segment and will also open another product category for the company personal care. Camay, launched by P&G earlier, did not really set the market on fire but Patel is hopeful of things being different this time. ''The company will position Camay in such a way that all aspects of pricing, distribution and marketing will be taken care of. ''Nirma currently enjoys 20per cent market share in the toilet soap industry under its brands Nirma and Nima. The company plans to introduce a couple of line extensions in the industry every year. Another business the company is said to be looking at is the foods market, particularly the branded staple foods segment. It made an entry into the foods market two years ago with Nirma Shudh Salt. Nirma has been taking a beating in volumes during the past two years.
CHART OF NIRMA
I have collected all the information from www.nirma.co.in • www.google.com
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