SUMMER INTERNSHIP PROJECT REPORT

Strategies to be adopted by Patanjali to develop strong

distribution system

A report submitted to

Asian business school, Noida

as partial fulfillment of Full time

Post Graduate Diploma in Management (PGDM)

(Approved by AICTE, Ministry of HRD)

Submitted to:Submitted by:

Dr Syed Aijaz Ahmad Manjeet Singh
Assistant Professor ABS/PGDM/JULY18/069
Asian Business School PGDM
Noida

Asian Business School (ABS)

A2, Sector -125, Noida
Website: www.abs.edu.in

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 SUMMER INTERNSHIP PROJECT REPORT

EXECUTED AT

Patanjali Ayurved Limited

SUBMITTED IN PARTIAL FULFILMENT FOR THE AWARD OF DIPLOMA

IN,

POST GRADUATE DIPLOMA MANAGEMENT

FROM

ASIAN BUSINESS SCHOOL, NOIDA

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SPECIALIZATION: MARKETING

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 Guide Name: Dr Syed Aijaz AhmadAsian Business School
Dept. Of Management A2, Sector -125
Noida

CERTIFICATE

This is to certify that the dissertation entitled Strategies to be adopted by Patanjali to

develop strong distribution system is submitted to Asian Business School, in the partial
fulfillment of the requirements for the award of the Post Graduation Diploma in
Management, and is a record work by Manjeet Singh ABS/PGDM/JULY18/069.The
project has been done under my supervision & guidance and the project has not formed
the basis for the award of any degree or any other similar title to any candidate.

SIGNATURE SIGNATURE
Internal Examiner External Examiner

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DECLARATION

I, the undersigned solemnly declare that the project report titled Strategies to be
adopted by Patanjali to develop strong distribution systemare based on my own work
carried out during the course of my summer internship. The work contained in the
report is original and has been done by me under the supervision of my supervisor.
The work has not been submitted to any other Institution / University for any other
degree/diploma/certificate or by any other candidate in this institution. I have
followed the guidelines provided by the institution in writing the report. Wherever I
have used materials (data, theoretical analysis, and text) from other sources, I have
given due credit to them in the text of the report and given their details in the
references.

SIGNATURE
Manjeet Singh

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ACKNOWLEDGMENT

To complete the work successfully, a source of inspiration and guidance is

always there. I, hereby take the opportunity to thank those people who helped me a lot
in many different ways.

I am thankful to Mr. Romin Gupta (Marketing Head) for giving me the

opportunity to work with Patanjali Ayurved and learn.

I express my deepest thanks to Mr. Vivekanand Mishra (Sr. Regional Manager)

and my mentor Mr. Ramakant Gupta (Assistant Manager) for taking part in useful
decision & giving necessary advice, valuable guidance and arrangement of all
facilities to make life easier. I choose this moment to acknowledge his contribution to
gratefully. Without their support, it would have not been possible to complete this
project.

I would like to thank all my teachers and mentor for their guidance and support to
complete this project.

I perceive as this opportunity as a big milestone in my career development. I will

strive to use gained skills and knowledge in the best possible way, and I will continue
to work on their improvement, in order to attain desired career objectives.

Manjeet Singh

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 EXECUTIVE SUMMARY

Patanjali, founded in 2007 by Baba Ramdev and his aide Swami Acharya Balakrishan
has grown into a 5000 crore company in 2015. It has disrupted the entire FMCG
market with its unconventional growth story. The credit goes to Baba Ramdev who
has very meticulously decided the timeline for each action and delivered
unprecedented success. Patanjali’s vision is to provide herbal/ayurvedic/natural
solutions to all the problems and in this pursuit it is also elevating the livelihoods of
local farmers. It has leveraged the emotional route by bringing in the ‘Swadeshi’
angle to market its products. The drivers for Patanjali purchase are lower price points
which induce sampling and when they find no noticeable difference with the pricey
brands, they tend to stick to Patanjali. The key differentiators for Patanjali are its
herbal or ayurvedic offerings and the free consultation it provides to the customers at
Arogya Kendra’s/ Chikitsalayas through its certified Ayurvedic doctors. Besides it
has also increased its distribution channels through franchise stores, retail chains and
kirana stores. However the supply is not proportional to demand and a lot of
customers are not able to find the desired products. To solve this, they have invested
in food parks and have outsourced manufacturing to other SMEs while conducting
stringent checks to ensure consistent quality.
The strategy followed by Patanjali is unconventional in that they have not made any
significant investment in marketing and promotion and have relied on word of mouth
publicity. Baba Ramdev has done minimal promotion by endorsing the brand in his
yoga sessions televised on national channels. The FMCG giants cannot rely on such a
strategy because they cannot sell the products at such low prices or provide free
doctor consultations and other activities on a continuous basis. Thus it is not feasible
for other companies to follow this model.
The FMCG industry has a lot of big players with dominant market leaders in each
category. Patanjali is in direct rivalry with most of them and with time has been able
to take away market share from the best-selling brands. In retaliation, the market
leaders are bringing out newer herbal products at lower price points or putting into
action other strategies. However Patanjali has the advantage of being the forerunner
and have gained sufficient traction that it will be difficult to displace them. The
entrance of Patanjali has not just marked its increased share of the pie but it has also
managed to increase the size of the pie itself.

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 Chapter - 1
INTRODUCTION

The Company:
Patanjali Ayurved was formed in January, 2006 as a private limited company by yoga
guru Ramdev and his partner Sri Acharya Balkrishnaji. In June, 2007, it was
converted to a Public Ltd. Company. It is registered under the Companies Act, 1956
and has its registered office in Bijwasan, New Delhi and three other offices in
Haridwar. The company was started with the vision of uplifting the life of Indian
farmers by locally sourcing the raw materials from them and making their lives better
while at the same time provide an opportunity to the Indian masses to move towards
healthy lifestyle by promoting Ayurveda and herbal products. Baba Ramdev started
off as a yoga trainer who featured in televised programs in Aastha and Sanskar
channels and made Indians realize that they have forgotten Indian tradition and art
forms- one of them being yoga. He got wide acceptance and word of mouth publicity
helped him reach to a wider audience. He projected Yoga as a panacea to all the
health problems. In its first year of operations, 2008, Patanjali generated revenue of
over 60 crores.1 Almost 10 years later; the home grown venture has grown to be a
5000 crore company and is posing a threat to the well-established companies in the
FMCG.
Patanjali range of products Patanjali has a wide range of products with the theme of
Ayurvedic/herbal being common across all categories. It has four business divisions:
food and beverages, cosmetics and health, health drinks and home care. The highest
revenue grossing products are Patanjali cow ghee, Dant Kanti, Kesh kanti, Patanjali
Atta noodles and Patanjali Aloe Vera juice and gel, amla juice, patanjali atta etc.
The customer base of Patanjali is very huge and with each passing day, it is growing
bigger. A major ramp-up came when Patanjali was relaunched by Baba Ramdev in
2014. After that it has not looked back. The company is finding it difficult to cater to
the demand of all the customers. It has increased its distribution channels and
expanded its reach multifold from the point when it started. Production has also
increased and it has now over 450 products in its portfolio.

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Organization structure:
The Board of Directors is formed of three founding people. Swami Acharya
Balkrishnaji is serving as the Managing Director of the company. Two other members
Swami Muktanandji and Sri Ajay Kumar Arya are also holdingpositions as the
Directors of the company. Swami Ramdev do not hold any position or stake in the
company but does act as the Ambassador for the entire Patanjali Brand. The
operations department is headed by Ramdev’s brother Ram Bharat. Everyone else
from the finance, logistics and other teams report to him He is the informal CEO but
designations are not very formalized within Patanjali.3 Patanjali has over 200,000
employees in total. They hire street-smart people and do not look for MBA graduates
only. This helps them to keep costs down while also delivering unprecedented growth.

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Patanjali growth story:
In terms of revenues and net profit, the company had nearly grown 10 times in a span
of last 5 years.

Revenues:

YEARS REVENUES (In ₨. Crore)

2010 – 11 185
2011 – 12 453
2012– 13 841
2013– 14 1,184
2014 – 15 2,006
2015– 16 5,000
2016– 17 10,561
2017 – 18 11,000

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Production:
Patanjali Food and Herbal Park at Haridwar is the main production facility operated by
Patanjali Ayurved. The company has a production capacity of ₹350
billion (US$5.1 billion) and is in the process of expanding to a capacity of ₹60,000
crore (equivalent to ₹640 billion or US$9.3 billion in 2018) through its new production
units at several places, including Noida, Nagpur, and Indore. The company plans to
establish further units in India and in Nepal.

In 2016, the Patanjali Food and Herbal Park was given a full-time security cover of 35
armed Central Industrial Security Force (CISF) commandos. The park will be the
eighth private institute in India to be guarded by CISF paramilitary forces. Baba
Ramdev is himself a "Z" category protectee of central paramilitary forces.

Product:
Patanjali Ayurved produces products in the categories of personal care and food. The
company manufactures more than 900 products including 45 types of cosmetic
products and 30 types of food products. According to Patanjali, all the products
manufactured by Patanjali are made from Ayurveda and natural components. Patanjali
has also launched beauty and baby products. Patanjali Ayurvedic manufacturing
division has over 300 medicines for treating a range of ailments and body conditions,
from common cold to chronic paralysis.

Patanjali launched instant noodles on 15 November 2015.Food Safety and Standards

Authority of Indiaslapped a notice on the company as neither Patanjali nor Aayush,
which are the two brand names under which Patanjali got licenses, have got any
approval for manufacturing instant noodles.

In 2016, Patanjali has announced to enter the textile manufacturing centre. The
company is reported to manufacture not only traditional clothes such
as Kurta Payjamabut also popular western clothes such as jeans.

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On 5 November 2016, Patanjali announced that it will set up a new manufacturing plant
Patanjali Herbal and Mega Food Park in Balipara, Assamby investing ₹1,200
crore(US$170 million) with the manufacturing capacity of 1,000,000 tonnes of goods
per year. The new plant will be the largest facility of Patanjali in Indiaand will be
operational by March 2017. Patanjali already has around 50 manufacturing units
across India.

DISTRIBUTION CHANNEL:
The distribution function of marketing is comparable to the place component of the
marketing mix in that both center on getting the goods from the producer to the
consumer. A distribution channel in marketing refers to the path or route through
which goods and services travel to get from the place of production or manufacture to
the final users. It has at its center transportation and logistical considerations.
Business-to-business (B2B) distribution occurs between a producer and industrial
users of raw materials needed for the manufacture of finished products. For example, a
logging company needs a distribution system to connect it with the lumber
manufacturer who makes wood for buildings and furniture.
Business-to-customer (B2C) distribution occurs between the producer and the final
user. For instance, the lumber manufacturer sells lumber to the furniture maker, who
then makes the furniture and sells it to retail stores, who then sell it to the final
customer.

Direct vs. Indirect:

In marketing, goods can be distributed using two main types of channels: direct
distribution channels and indirect distribution channels.
Direct Distribution:
A distribution system is said to be direct when the product or service leaves the
producer and goes directly to the customer with no middlemen involved. This occurs,
more often than not, with the sale of services. For example, both the car wash and the
barber utilize direct distribution because the customer receives the service directly from
the producer. This can also occur with organizations that sell tangible goods, such as
the jewelry manufacturer who sells its products directly to the consumer.
Indirect Distribution:
Indirect distribution occurs when there are middlemen or intermediaries within the
distribution channel. In the wood example, the intermediaries would be the lumber
manufacturer, the furniture maker, and the retailer. The larger the number of
intermediaries within the channel, the higher the price is likely to be for the final
customer. This is because of the value adding that occurs at each step within the
structure.

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Distribution:

Distribution means the process by which we make the goods or the service available to the
end consumer. Generally, the place of production is not the same as the place of
consumption. So the goods have to be distributed to overcome the barrier of place.

Now the distribution of the products can be done by the organization itself which is direct
distribution. Or it can hire intermediaries and form distributions channel i.e. indirect
distributions. The plan will depend on several factors, some of which are

 Product: Whether the product is perishable or durable will be a factor in

deciding its distributions model.

 Market: The size of the market will be a factor. In a large market, the direct
distribution may not be a perfect choice. Also if the markets are scattered indirect
channel will be more suitable

 Company: The size of the company and its product-mix are also deciding
factors in the decision about distributions.

 MarketingEnvironment: In a slow economy or depression a shorter

distributions chain is preferable. In a healthy economy, there is a wider choice for
alternatives.

 Cost: The cost of the channel like transportation, warehousing and storage, tolls
etc. is obviously a factor in this decision.

Types of Intermediaries:

These are the middlemen that ensure smooth and effective distribution of goods over your
chosen geographical market. Middlemen are a very important factor in the distribution
process. Let us take a look at the types of middlemen we usually find.

 AGENTS: Agents are middlemen who represent the produces to the customer.
They are merely an extension of the company but the company is generally bound
by the actions 0of its agents. One thing to keep in mind, the ownership of the
goods does not pass to the agent. They only work on fees and commissions.

Wholesalers: Wholesalers buy the goods from the producers directly. One
important characteristic of wholesalers is that they buy in bulk at a lower rate than
retail price. They store and warehouse huge quantities of the products and sell
them to other intermediaries in smaller quantities for a profit.Wholesalers
generally do not sell to the end consumer directly. They sell to other middlemen
like retailers or distributors.

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  Distributors: Distributors are similar to wholesalers in their function. Except
they have a contract to carry goods from only one producer or company. They do
not stock a variety of products from various brands. They are under contract to
deal in particular products of only one parent company

 Retailers: Retailers are basically shop owners. Whether it is your local grocery
store or the mall in your area they are all retailers. The only difference is in their
sizes. Retailers will procure the goods from wholesaler or distributors and sell it to
the final consumers. They will sell these products at a profit margin to their
customers.

In the reality of the market, all producers rely on the distribution to channel to
some extent. Even those who sell directly may rely on at least one of the above
intermediary for any purpose. Hence the distribution channel is of paramount
importance in our economy.

WORKING OF DISTRIBUTION CHANNEL:

The distribution channel or actor may be involved in various ways, to a various extend,
at various stages, on a various price, in delivering the product from the manufacturer to
the customer.

The role of the distribution channel involves several functions that can each be
performed by one or multiple intermediaries.

Distribution channels are intended to limit the number of the transactions goods have to
go through on their way towards its final destination.

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Wholesalers and retailers break bulk. This means they order large quantities of products
from the manufacturer and then sell single products to the end customers.

Channel intermediaries create assortments, which mean that they will source different
products and allow the customer a larger choice.

A main task of distribution channels is to have high efficiency. Transportation and

storage, which is another task of distribution channels, are to be used at maximum
capacity at minimum cost. Wholesalers and retailers will move the goods from one
location to another to store until there is demand for the product.

Intermediaries will usually offer more added values on the product, for example
facilitate returns, offer customer support, etc.

A common added value for all distribution channels is they all share the risk with the
manufacturer. That is why manufacturers have vested interest to sell in bulk, in large
quantities, while retailers have a vested interest to carefully asses if a particular product
will be sold.

Distribution channel members handle communication with end customer, including

being partially responsible for advertising.

Distribution channels are responsible to create a two-sided connection from the

manufacturer to the customer. We usually focus on one direction of that relationship –
getting the product from the factory to the customer basket.

However, the distribution channel returns profits, products for repair and customer
feedback back to the manufacturer. The selected distribution channel member’s
policies regarding any of those three functions, should influence a manufacturer’s
decision whether or not they use them in theirs channel.

The amount and role of distribution channel members determines the level of the
distribution channel. Philip Kotler came up with the definition of the zero-level
distribution channel where one manufacturer sells directly to the customers.

If the manufacturer uses a distributer to get the customer, that would be a one-level
channel. And if that distributer sells to a retailer, that would be a two-level distribution
channel.

3 TRADITIONAL TYPES OF DISTRIBUTION CHANNELS IN

MARKETING:
As we already established, the distribution channel influences multiple other marketing
decisions – the price, the product development, employee management, organizational
structure etc.

This article aims to give you examples of successful strategies with different
distribution channels, as well as traps to look out for when you choose one or the other.

Continue reading on if you feel like you need to create, change or improve upon your
distribution strategy. We hope you find it helpful.

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Type – 1 Direct Sale:
Direct sales are a good distribution model for selling any sort of product that is in the
middle price range, it is not purchased every day, and has long shelf-life. Stationery, air
purifiers, or jewelry to name a few.

Direct distribution would mean that the manufacturer finds a way to directly
communicate to customers without using any market intermediaries and will deliver the
goods themselves.

Internet and E-commerce has really popularized direct distribution, however, we find
E-commerce is very specific and therefore we have allocated a special place for
E-commerce at the bottom of this article.

Here are 10 strategies to encourage in direct sales:

 Features: As soon as you establish contact with a potential customer, they will
want to assess if your product can be useful to them. The basis of your
conversation needs to center around the features of your product and its purpose.
If the features do not match the customer’s needs they will not be interested.

 Advantages: If you have captured the customer’s attention, after listing the
features you will be in a place to defend your product against the competition.
What makes your product unique?

 Benefits: Give your customers the logic between using your product and
finding a solution to their needs. Tell them how it will save them time, how it
will make them money, or how it will resolve their organization issues.

 Intimacy: Establish a personal connection with the user. At this point of the
conversation you have grabbed their attention, but you have not necessarily
closed the deal. Spend the time to convince them you have their best interest in
mind – go off topic if you have to.

 Reciprocity: Do the customer a favor. Fish for the kind of favor they would
respond to – free samples, discounts or affiliation code. Create the feeling the
favor is exclusive. Whenever a customer feels you have done them a favor, that
creates the need to return it. They will feel obliged to do you a favor and this
subconscious feeling will create an imbalance in the situation they would like to
rectify.

 Reasoning: Studies have proved giving multiple reasons, even if they are
obvious reasons will tip the scales in your favor. Never run out of reasons. Do
not just assume the customer can come up with the logic themselves. In other
words – do not be afraid to state the obvious.

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  Q&A: Learn more about the customer – when and how they use their training
shoes. Tell them how you believe they should be used. Tell them you are not
just selling them shoes. You are selling them a pathway to a healthy and
beautiful body. Then ask for your favor back and close the deal.

 Disclaimer: Close the deal by reminding the customer once again they will
have a choice. They can buy the item now but then they would have to approve
of it upon delivery, or return it to the delivery person. And even then they can
return their item in a 30-day period. And even then within the next 60 days they
can still get a replacement or store credit. They still have a choice.

 Small steps: When you are getting one ‘No’ after another, the customer might
be unwilling to establish a new connection. Put your foot in the door. Ask just
for a meeting. Start a relationship and work on from there.

 Affiliate: For whatever reason the customer is not willing to take your offer.
Establish a good connection and ask for recommendation. Do they know
anyone who might be happy to use your service? Ask them for a contact.

Type – 2 Brokers And Distributers:

If a manufacturer choses to work with agents and brokers, they decide to directly
delegate part of their tasks to those Intermediaries. They act as an extension of the
producer in the sense they represent them before the end customer.

Before contracting a broker, the food manufacturer would have to offer the stores the
production themselves.

And that is usually the case with smaller vendors. However, as the business expands,
they would look for alternatives for shipping their produce to the store.

That would be done by a broker to handle the sales, or a distributer, who would take
care to ship the goods to shops in various locations.

Advantages of introducing a broker to a distribution channel:

If the manufacturer contracts a broker, they would sign a contract and said broker
would be responsible for the offerings to the shops. Brokers are normally not
responsible for the shipping itself. The broker is mainly responsible to close the sale.

A broker would have a portfolio of manufacturers they work with in a particular

geographic area. They have key retailers they work with and their incentive is to
completely satisfy the needs of those retailers.

Brokers will be very selective about the portfolio they assemble. They will not offer a
manufacturer as a part of their line to a retailer unless they are sure the retailer will list
their items. Therefore they usually have quick access to retailers and have well
established relationships with them.

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The sales costs for vendors would be fixed. And for their taxes they will offer additional
services such as invoicing, inventory control, sales reports and others.

Disadvantages of introducing a broker to a distribution channel:

Brokers work for a high fee of the invoiced price of the total production – around 5% –
10%.

At the same time, they will not take responsibility over the shipping of the produce.

Brokers do not have a great incentive to get to know a product or introduce it as a new
line to a retailer. Their services normally do not include promotion.

If sales of one of the products of the manufacturer slow down, an entire line may be
dropped from the broker’s portfolio and be substituted by another, more lucrative line.

The vendor will still be responsible for the logistics, the returns, the invoicing.

Advantages of introducing a distributer to a distribution channel:

A store will normally work with several distributers and several dozen independent
manufacturers. A distributer will directly buy the produce from the vendor and resell it
to a retailer for direct distribution at a 20% – 30% margin, with which they purchase,
ship and invoice the goods.

The distributer will work directly with the retailer, they will service their needs they
will manage the inventory themselves and they will more often introduce new products
since they are incentivized to sell off what they have purchased. They handle returns
and product recalls.

Disadvantages of introducing a distributer to a distribution channel:

Since distributers do shipping and inventory management, they will have an incentive
to defend a particular brand in front of the store, however, they will have a limited time
for it.

The manufacturer must ensure the distributer they work with knows their product well
and they can increase awareness for it at the retailer in the small amount of time they
have allocated to stock, ask questions, answer them and take orders.

Distributers take on the risk of underselling and It is therefore very costly for them if a
product is not performing well. Maybe a line is not selling for reasons that have nothing
to do with the manufacturer – pricing, shelf placement, location of the store etc.

Still, the distributer can and will drop a line and will not pick it back up.

Type – 3 Wholesalers/Retailers:
Working with wholesalers and retailers is usually a preferred distribution chain link
because wholesalers and retailers do purchase the product from the manufacturer and
therefore they take on the risk if the products do not sell well.

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Here are several strategies on how to create and maintain the relationship with
your resellers:

 Create a base: In additions to traditional wholesalers and retailers, companies

may benefit from asking big buyers if they want to become resellers for the
brand. Give them an offer they cannot refuse.

 Your relationship must be profitable for both sides: Take interest to know
how well your resellers are doing and what is their opinion for the connection
between their success and the products you are offering.

 Communication is key: Make sure the tasks and strategies are completely
complemented by your reseller’s efforts and workflow. Do not allow everyday
business issues to stop you from making sure the products reach the customer
smoothly.

 Build a relationship: Regardless of the scope or the profitability of the reseller,

find time to make them feel included, becoming a part of your company culture.
Build trust and loyalty.

 Allow your resellers to know your product: Resellers are often with the
mindset they are in the business of sales, not consultation. Prepare short, easy to
comprehend presentations or handouts they can absorb or redistribute to their
customers.

 Gather feedback: Resellers and manufacturers have a common goal. To get

more product out to the market. Gathering and processing feedback for the
manufacturer may improve the brand perception, the development process and
customer loyalty.

Sales and Distribution:

Patanjali Ayurved sells through nearly 4,700 retail outlets as of May 2016.Patanjali
also sells its products online and is planning to open outlets at railway stations and
airports. Patanjali Ayurveda has tied up with Pittie Group and KishoBiyani’s. Future
Groupon 9 October 2015. As per the tie-up with Future Group, all the consumer
products of Patanjali will be available for the direct sale in Future
Group outlets. Patanjali Ayurveda products are also available in modern trade stores
including Reliance retail. Hyper city and Star Bazaar apart from online
channels. Patanjali Ayurved, co-founded by yoga guru Ramdev, is targeting Rs
11,000-crore revenue in 2017-18, after sales grew 150 per cent in the previous financial
year to Rs 5,000 crore.
Patanjali Ayurved has also started its FMCG expansion in form of dealership and
distributorship channels across the country and expects wider growth in overseas
distribution as well.

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Situation analysis:
For the situation analysis, we look at the 5Cs of marketing:

Context:
The entire world is disillusioned with the harmful side effects of all packaged
products be it food or personal care products. Everyone wants to return to nature and
live a healthier lifestyle. This provided Baba Ramdev an opportunity to give back to
society. He started Patanjali Ayurved, a company that would bring the goodness of
nature with each of its products, which would be natural and would make everyone
healthier. He shot to fame because of the yoga lessons he gave to the masses through
television channels and other workshops all across India. And people adopted Yoga;
they found it useful and easy. Thus he had a huge mass following. So when he started
the company, a lot of people immediately sought after his products. He branded all of
the products as natural and containing the secrets of Ayurveda. Thus Patanjali, which
is fully aligned with the trend of healthy lifestyle, was conceived as merely an
extension from healthy exercise to healthy natural products.

Customer:
The huge number of followers of Ramdev’s yoga constitutes the main customer base
of Patanjali. Besides this, people in the age group of 35 years and above, people living
in urban cities who are health conscious are the customers of Patanjali products.
These people are worried about the chemicals in all the modern day so called healthy
packaged food and other personal care products.
The lower price points of Patanjali products have promoted sampling and once they
use it and like it, they continue using the product. Customer base is also expanding
because of the positive word of mouth marketing by friends, colleagues and family
members. People from other segments have also started using the products.

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Company:
Strength:
Patanjali sources most of the raw materials from local farmers and thus can offer
products at lower prices. All the products have some ayurvedic touch to it. This
appeal to the masses. Besides there are no chemicals used for manufacture of the
products. Having Baba Ramdev as the brand ambassador leads to a transfer of
credibility from Ramdev to the brand itself. Thus it does not have to work hard to
build trust among its customers. Finally Patanjali has a very good distribution channel.
It has 1200 Patanjali Chikitsalayas, 2500 Arogya Kendra’s, 7000 open stores in
villages and 5600 marketing vehicles8 apart from tie-ups with hypermarkets like Big
bazaar, Reliance retail, Hypercity, Star Bazaar(Tata), D-mart, Spencer retail,
More(ABG retail). It has also recently tied up with Apollo pharmacy and thus had
license to use its 22009 stores in India for distribution of its products. Baba Ramdev
has strong political affiliations which he can utilize to get benefits from the
government. He has already helped Patanjali secure loans at lower interest rates and is
also being offered subsidized land as food parks. These are the strengths of Baba
Ramdev but it is not sustainable if he deserts the company.

Weaknesses:
The sourcing of the raw materials is done from local farmers and is therefore
dependent on the produce of these farmers. Thus the supply is not steady and
therefore they are not able to cater to the demand of the customers. It does not have
any definite strategy on scaling and thus might leave a trail of unsatisfied customers
behind since it would not be able to cater to their demand. Secondly, the positioning is
done to attract people above age group of 35 years of age and it does not appeal to
younger generations. This can seriously impact growth of the company after a certain
point if it cannot reposition its appeal towards the younger generations.
Thirdly, the packaging is not good or up to the standard of the current big players.
This might impact adoption of the products. They have been trying to manufacture
products in a lot of categories but only a select few have been successful. They should
try to build those into bigger brands rather than investing their resources in a lot of
products so as to gain market share. They are not focused as of now. Despite having a
wide distribution network, Patanjali does not sell their products through kirana stores
as extensively as other FMCG giants. This is crucial as one of the insights regarding
consumers’ purchase of FMCG products is that they purchase those 8 almost 90% of
the time through kirana stores. Besides since they price their products very low,
therefore they are not able to give higher margins to sellers which might lead to
strained relations.

14
Threats:
The differentiation that Patanjali has created is in terms of ayurvedic knowledge and
use of herbal and natural ingredients in the products. Secondly, Patanjali products are
generally available at lower price points compared to other branded products.
However, the competitors can easily make their foray into the herbal space and they
can spend big bucks on marketing their products as well. Besides they have stronger
distribution channels. Secondly the bigger companies can always create newer brands
to start a price war with Patanjali (e.g. Colgate created Cibaca Vedshakti and is selling
at lower price than Patanjali). This might drain Patanjali’s resources in the long run
compared to the bigger companies who can burn more cash. Another strong point of
Patanjali is the backward integration with local farmers to source their products.
However other FMCG companies are also doing that to some extent. If they begin to
extend their backward integration, then it might create sourcing problems for
Patanjali.

Opportunities:
The targeting can be changed to appeal to younger generations as it is yet to capture
that segment. For this they need to build a good brand which they can do by working
on advertising and packaging that appeals to broader segments. They are trying to
acquire more food parks in India so as to solve the problem of sourcing. This will
create stability in the availability of products and they can cater to the increased
demand. They can scale up even more through franchise model or tie-ups with more
supermarkets/hypermarket chains. Finally, it can price its products a bit higher,
especially the best-selling ones as people have become loyal and are willing to pay a
premium. This benefit can be passed on to the sellers in the form of higher margins
which would lead to better sales.

Collaborators:
Patanjali Ayurved does not have the capacity to produce everything they sell as it is
difficult to source such huge quantities of different items. So they outsource the
manufacturing to other manufacturers and then pack them using the Patanjali tag.
This is done across most of the items starting from biscuits to rice and other personal
care products. So they outsource and have a lot of dealings with manufacturers.
Other than that, for the distribution, they have their own Arogya Kendra’s and
Chikitsalayas but those are not enough. So they have many franchises all over India to
widen their reach. Apart from that, Patanjali has also signed up with a lot of big retail
chains like Future group’s Big Bazaar, Reliance among others. This makes it available
even to the upscale people who go for shopping at these chains contrary to the lower
middle class people who generally go to Kirana stores. It has also made its products
available in about 2 lakh kirana stores all over India.
Competitors Patanjali had made a string of enemies amongst the FMCG giants. With
its aggressive stance, it is giving each of its competitors a tough time. Some of the

15
notable mentions are Colgate, Dabur and HUL. Colgate had lost around 5% of market
share to Patanjali since it launched its Dant Kanti. Dabur also lost a significant market
share in Chawanprash and honey. The bigger FMCG companies like HUL, P&G, ITC,
etc. are not affected to a great extent but Patanjali has competing products in a lot of
health and personal care, beauty products and food and beverage products. It would
not be long before they recognize Patanjali as a threat and take counter measures. A
few companies have already taken steps. Colgate has launched new herbal toothpaste
at a lower price point than Patanjali.

Competitors:
Patanjali had made a string of enemies amongst the FMCG giants. With its aggressive
stance, it is giving each of its competitors a tough time. Some of the notable mentions
are Colgate, Dabur and HUL. Colgate had lost around 5% of market share to Patanjali
since it launched its Dant Kanti. Dabur also lost a significant market share in
Chawanprash and honey. The bigger FMCG companies like HUL, P&G, ITC, etc. are
not affected to a great extent but Patanjali has competing products in a lot of health
and personal care, beauty products and food and beverage products. It would not be
long before they recognize Patanjali as a threat and take counter measures. A few
companies have already taken steps. Colgate has launched new herbal toothpaste at a
lower price point than Patanjali. HUL is creating a new arm to produce herbal
products and include them in their product portfolio. They have also acquired
‘Ayush’recently to increase their expertise in ayurvedic offerings.

Branding:
Ramdev is the face and the man behind the whole brand of Patanjali Ayurveda. The
story started even before the idea of Patanjali was conceptualized. Ramdev started as
a yoga guru offering a healthy life style choice and quickly escalated to fame by TV
and live yoga sessions, which had a huge reach and created a big impact on the Indian
people. One of his erstwhile disciple & friend, Acharya Balakrishna who also happens
to be an Ayurveda expert, used this opportunity to launch a range of Ayurveda &
herbal products under brand Patanjali.
Combining these products with the yoga of Ramdev was a good move as they were
complementary to each other and helped each other as a sort of unwritten co-branding.
Patanjali products started to get promoted by Ramdev via the TV channel (Aastha)
and also in his yoga sessions. This association of Patanjali with the popular and mass
accepted yoga guru Ramdev has been a strong and favourable one. Hence salience or
awareness of the brand is high, significantly more in North India and parts of Western
India than other regions, the reason behind can be due to usage of Hindi as its prime
language of communication and promotion. The brand recall is also quite high. The
imagery that Patanjali carries is quite a positive one, which is seen as a pure, good
quality indigenous product and a healthier alternative than other FMCG products
typically found in market. In terms of performance, by our market research and
interviews, the customers are satisfied with it. Most of the consumers feel that
Patanjali is a brand that can be trusted and hence advices each other to use these

16
products. Since it is lifestyle choice of choosing the healthier alternative among the
existing brands, there is a resonance among the consumers which results in strong
brand loyalty. It is observed that once a consumer starts using a particular Patanjali
product, he or she starts using other products too of the same brand since all are
aligned with Ayurveda. From its inception, Patanjali has been following ‘Branded
House’ strategy that is keeping everything under one umbrella brand, unlike most of
the other FMCG companies like HUL, P&G etc. which uses ‘House of Brands’
strategy i.e. there is a standalone brand for each product line offering. This gives
Patanjali a significant advantage in building a unified brand for itself, its current range
of products and new products which are going to be launched since it can leverageon
the already established brand of Patanjali.

Industry Analysis
The FMCG market in India is worth $49 billion USD as of January, 2016 and is
expected to grow to $103.7 billion USD by 2020. It is the India’s fourth largest
industry. The growing awareness, rising disposable income of the masses and easier
access are the key drivers of demand growth. There is also an increased demand for
premium products because of the growing youth population. Besides the penetration
into rural areas is increasing and thus newer geographies are made into playgrounds
for the myriad FMCG companies. The FMCG industry has three main segments:
Food and beverages (18%), Health care (32%) Household and personal care (50%).
The FMCG sector has witnessed a CAGR of 11.9% between 2007 and 2016. The
urban sector account for 65% of the revenues, while the semi-urban and rural make up
the rest 35%. The current trends in FMCG are product innovation (e.g.
Honitusnon-drowsy), product customization/mass customization, premiumization,
backward integration, outsourcing, increasing ruralpenetration, outsourcing,
expanding distribution networks, smaller sized SKUs, increasing private label
penetration and reducing carbon footprint.

Impact on Global FMCG companies in the Indian Market of

Patanjali:
The Indian FMCG market is a fiercely competitive one with products of the same
category across brands has almost no differentiation priced almost the same, making
all of them a ‘me too’ product. All the players in the FMCG market hence keeps tab
on its competitors. Any change in price points or a new product launch is quickly
copied and tackled by the rest of the players giving very little space to play in this
market.
In such a market, Patanjali came with a whole new offering of pure, natural, herbal
and indigenous Ayurvedic products with medicinal values and health benefits that
also at a price point lower than these FMCG brands. Not only they had a

17
Differentiating factor, they got a significant cost advantage. This disrupted the whole
market as Patanjali flooded the market with their products. The impact was huge on
the other FMCG brands, particularly in those categories where Patanjali was
exceptionally strong. Colgate was hit in the tooth paste category as Dant Kanti ate up
its market share which is up to 4-5%. In the wakeof Patanjali Dant Kanti’s success,
both volume growth and share of the company fell down in FY16. Dabur was also
affected by the impact since they also played along the herbal range. As a counter
move to Patanjali’s rise, Dabur too wants to revamp its offerings in the women’s
healthcare range. Dashmularishta and Ashokaristha, which are both traditional
Ayurvedic post-natal health tonic and menstrual pain relief tonic respectively is
introduced by them. They want to enter the baby care and health segment too soon
after this. HUL also is taking counter measures to prevent Patanjali eating up its
share. It is focusing on ecommerce hoping that digitalization will take over the
Ayurvedic market too, and when that happens, they become the key player by having
the early mover advantage. In 2015, it relaunched its Ayurveda brand Ayush as a
premium brand, thus avoiding price wars with Patanjali Ayurvedic products. Recently,
it also acquired Indulekha which was Mason group’s flagship brand and positioned
differently as ‘naturals’ and ‘therapeutic’.
For a company that started as a small pharmacy in 1997, Patanjali has launched more
than two dozen mainstream FMCG products — from toothpaste, shampoos and other
personal care products to modern convenience foods such as cornflakes and instant
noodles. Annual sales have doubled every year since 2013 to touch Rs 10,500 crore by
March 2018.

18
The company forayed into frozen greens such as peas, sweet corn, mixed vegetables
and French fries that will compete directly with giants like McCain by pricing them at
half that of its competition. It also announced its entry into the dairy products segment,
with cow milk, curd, buttermilk, cheese and packaged drinking water recently.

Patanjali Ayurveda’s growth faltered during the past 12 months as rivals, mostly
multinationals, launched natural and herbal products to counter its challenge. Sales
volumes grew 7% during October-March 2018 and 22% in April-September 2017,
according to data from Kantar World panel, a global consumer research firm. That’s a
sharp fall from 52% growth in October-March 2017 and 49% during April-September
2016.

19
 Chapter - 2
Learning objectives of the Internship

The study has been conducted to fulfil the following objective:

 To Design Various Strategies to be adopted by Patanjali to develop strong

distribution system.

 To analyze the attitude of channel partners of the company towards the

promotional and other marketing strategies used the company.

 To identify the opportunities and challenge for Patanjali to develop a strong

distribution system.

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 Chapter - 3
Company profile

Patanjali Ayurved was formed in January, 2006 as a private limited company by yoga
guru Ramdev and his partner Sri Acharya Balkrishnaji. In June, 2007, it was converted
to a Public Ltd. Company. It is registered under the Companies Act, 1956 and has its
registered office in Bijwasan, New Delhi and three other offices in Haridwar. The
company was started with the vision of uplifting the life of Indian farmers by locally
sourcing the raw materials from them and making their lives better while at the same
time provide an opportunity to the Indian masses to move towards healthy lifestyle by
promoting Ayurveda and herbal products. Baba Ramdev started off as a yoga trainer
who featured in televised programs in Aastha and Sanskaar channels and made Indians
realize that they have forgotten Indian tradition and art forms- one of them being yoga.
He got wide acceptance and word of mouth publicity helped him reach to a wider
audience. He projected Yoga as a panacea to all the health problems. In its first year of
operations, 2008, Patanjali generated revenue of over 60 crores.1 Almost 10 years later;
the homegrown venture has grown to be a 5000 crore company and is posing a threat to
the well-established companies in the FMCG domain.

Patanjali’s Supply Chain Management:

The three phases of patanjali’s supply chain are product flow, information flow and
cash flow. Patanjali has recently completed a tie up with Future group to sell the
products. They also sell their products through their own outlets opened in almost every
district/city of India. Each outlet has to send their demand to central office at Hardiwar.
Then as per the demand, various products are gathered from various units of Patanjali.
The items are delivered to outlets majorly through Patanjali transport.

Farmer ---------- producer------------ consumer

Patanjali is working towards a better nation, healthier society and wealthier farmers. It
personifies the essence of Corporate Social Responsibility because profits of Patanjali
Ayurved Ltd are not for any individual but are for the betterment of the society.This
theme is reflected in the every aspect of our working and management. Our focus areas
are education and healthcare.
Currently it has around 450 different kinds of products and it also manufactures over
300 medicines for the treatment of a range of body ailments. The company claims that
all its products are made from natural components and Ayurveda. Patanjali’s Dant
Kanti, Ghee, Kesh Kanti, herbal bath soap and honey are some of the its best-selling
products which have propelled the growth of this company. Patanjali’s noodles were an
attempt to promote a more healthy eating habit in the kids of the country.

21
About the Founder:
1. Baba Ramdev:

Baba Ramdev born as Ramkishen Yadav on 25 December 1965 is an Indian yoga guru
known for his work in ayurveda business, politics and agriculture. He claims he
became paralyzed when he was two & half and was later cured by practicing Yoga. He
studied Indian scripture, Yoga and Sanskritin various Gurukuls (schools). He learnt
yoga from Guru Karanvir, an Arya Samaji. Ramdev took sanyasi diksha and adopted
the name Swami Ramdev from Swami ShankarDev Ji. While living in Kalwa Gurukul
in Jind district, Haryana, Ramdev offered free yoga training to villagers. Then he
moved to Haridwar in Uttarakhand, where he practiced self-discipline and meditation,
and spent several years studying ancient Indian scriptures at Gurukul Kangri
Vishwavidyalaya In the late 1980s, Ramdev met Balkrishna, a person from Nepal at
Gurukul Kalva in Haryana, and thereafter in Gurukul Kanpur. This led to a lifelong
friendship, as Ramdev subsequently taught Balkrishna Sanskrit and Vedas after he
graduated.
Ramdev founded the Divya Yog Mandir Trust in 1995. In 2003, Aastha TV began
featuring him in its morning yoga slot. There he proved to be telegenic and gained a
large following. A large number of people, including celebrities from India and abroad,
attended his Yoga camps. He taught yoga to many celebritiesand in foreign
countries. In 2006, he was invited by Kofi Annan to deliver a lecture on poverty
alleviation at a United Nations conference. He is also the judge of a reality show 'Om
Shanti Om.In 2017, a district court banned the sale of his biography, 'Journey from God
man to Tycoon. In May 2018, Ramdev launched Swadeshi Samriddhi SIM cards in
alliance with BSNL. Over a twenty year career, he became the face of Patanjali
Ayurved, a company that he founded with his colleague (Acharya) Balkrishna.
Patanjali went on to become one of the highest grossing FMCGs in India.
Towards the end of the 1990s, Ramdev settled in Haridwar. He called his family to
Haridwar. Ramdev's family members subsequently played different roles in Patanjali
Ayurveda depending on their capabilities. His father oversees activities in Patanjali
ayurved; his brother Rambharat controls the company's finances.

22
2. Acharya Balkrishna:

Acharya Balkrishna was born on 4 August 1972 in Haridwar, India to a Nepali family
living in India. At the time of his birth, his father, Jaya Ballav, was working as a
security guard in Haridwar, whereas, his mother Sumitra Devi was a housewife.
Balkrishna’s parents moved back to Nepal when he was still a child. He spent his
childhood in Nepal’s Syangja district and completed his primary education at a local
public school. Balkrishna moved back to India as a teenager, while his parents kept
living in their ancestral village in Nepal.

When Balkrishna returned to India, he joined Kalwa Gurukul in Haryana and pursued
an education in ayurvedic medicine. That’s where he met yoga guru Baba Ramdev for
the first time. Their first meeting took place in 1988, and since then they have become
close friends and have worked together for a long time.

After finishing his studies at Kalwa Gurukul, Acharya Balkrishna travelled across
India, studying and testing medicinal values of hundreds of plants. In the early 1990s,
he went to live in a Himalayan cave in Gangotri, India with yoga guru Ramdev.

Since Balkrishna’s knowledge about herbal medicine and medicinal plants was
phenomenal, people started flocking in to seek help from him. Under Ramdev’s
leadership, Acharya Balkrishna founded Divya Pharmacy and Divya Yog Mandir in
mid 1990s.Even though some critics have questioned Acharya Balkrishna’s
educational qualifications, he has consistently said that he has a university (sastri)
degree from the Sampurnanand Sanskrit Vishwavidyalaya, Varanasi.

23
Vision:
Keeping Nationalism, Ayurved and Yog as our pillars, we are committed to create a
healthier society and country. To raise the pride and glory of the world, we are geared
up to serve people by bringing the blessings of nature into their lives. With sheer
dedication, scientific approach, astute planning and realism, we are poised to write a
new success story for the world.

Mission:
 Making India an ideal place for the growth and development of Ayurveda and
prototype for the rest of the world.
 To restart the swadeshi movement
 To produce good quality product at cheapest rate
 To gain maximum market share
 To introduce Indian Ayurveda to modern world

Objective:
 To make a disease free world through a scientific approach to Yoga and
Ayurveda.
 To establish a new World Health Organization, to fulfill the resolution of
making a new world order free from disease and medicine, through research
work on the knowledge-base of our great saints and sages viz. Maharishi
Patanjali, Charak and Sushurut.
 To begin degree and diploma courses for student in discipline of yoga and
ayurved;

24
SWOT Analysis:

Strength:

1. Strong growth in short span of time

2. Strong brand ambassador in the form of Baba Ram divas helped to boost the
brand’s image;

3. Extensively present on e-commerce platform

4. It has strong distribution system helping it to gain economy of scale

5. Broad range of product

6. Portrayals as a healthy ayurvedic option as compared to competitors in FMCG

segment,

7. Government support and yoga followers,

8. Low production cost

Weakness:

1. Revenue are based on few product which are not sustainable in long term

2. Over reliance on Baba Ramdev

3. Difficulty in product consolidation

4. Penetration pricing is not a long term sustainable strategy in order to earn profit.

5. Low export of product

6. Lack of effective distribution

7. Packaging is poor as compared to other competitors companies

25
Opportunities:

1. Low presence of traditional retail

2. Restriction over distribution

3. It has huge potential to expand in rural market

4. Patanjali has successfully tied up with Future group and should continue tie up
with modern retail chains and increase its E-commerce sales.

5. Diversifying to other retail segment can help patanjali in having all around
Indian presence in industry.

Threats:

1. New entrants such as Sri Ayurveda are also entering the organic market after the
awareness created by Patanjali which increases the competition in the market.

2. Any negative word-of-mouth created on social media platforms can affect its
position in the market.

3. Patanjali is heavily dependent on natural ingredients and products and hence

poor agricultural reap can affect its sales.

4. Prominent FMCG players coming up with their own variants of ayurvedic

products

5. Big players have their existing model which is sturdy, which can overcome new
competition from Patanjali

26
STP Analysis:

Segmentation:

From the product line up of Patanjali Ayurved, it can be safely assumed that it does not
segment the customer base as such, making the whole population its potential customer.
As per Ramdev’s vision of bringing welfare and manufacturing good and unadulterated
natural Ayurveda products easily available to the common masses, this stance of not
segmenting the market as such seems aligned. However on analysis, a broad
segmentation can be observed.

Geographic Segmentation:(North India & South India) It is observed that

Patanjali products are a huge hit in the North Indian market but not that much in South
India. One reason might be that Ramdev being from the Hindi belt and Aastha channel
airing in Hindi language, its prominence is not that much down in south. The same
reason holds true for its packaging, which uses either English or Hindi. To be noted that
Patanjali owes its huge success to Ramdev’s active image association with it.

Behavioral Segmentation: (based on lifestyle and types of products consumed or

used) The consumers can be segmented based on their lifestyle & health preference and
by the type of product they use. The main users of Patanjali products are the people who
are health conscious and want to use pure unadulterated natural Ayurveda products.

Demographic segmentation: (based on age) A clear segmentation can be done

based on age. The young generation, i.e. typically children to young adult below the age
of 35 years is a clear segment, while the rest of the population aged more than 35 years
are the other segment. This segmentation based on age makes sense since young adults
&children enjoy life and often are not serious about health or life, which makes them
not a user of these products. On the other hand, once people turn a little old with the
onset of middle age, they start thinking about health & the future. These are the people
who generally make the purchase of Patanjali products.

Psychographic Segmentation: Based on the psychology and mindset of the

people, this segmentation is taken into account. There is huge overlap between the
people who attend Ramdev’s Yoga camps or follow him on Aastha. They perceive him
as an ascetic and hence his products too shall be good which makes them purchase these
Ayurveda products of Patanjali. Also to be noted is that Ramdev wanted to create a
Swadeshi sentiment among the customers and thus pitched against FMCGs who are
mainly MNCs or use raw materials/ procedure of foreign origin.

27
Targeting:

Currently Patanjali is competing in all FMCG categories catering to the whole

population, which is otherwise called Total Market Coverage Targeting Strategy. They
have diversified into almost all categories like oral care, hair care, skin care, groceries,
health drinks & supplementary, packaged food etc. Also since they have no differential
products within the same product portfolio, this substantiates the fact that they are not
targeting any particular segment, rather serving the whole population with their
offering. To reach to the maximum number of potential customers, it has to target
specifically though. The house wives and the elderly of the house are the influencers
and decision makers in the purchase process of Ayurveda products. By just producing
packages with South Indian languages, the south market can be targeted.

At present Patanjali is contending in all FMCG categories obliging the entire populace,
which is generally called Total Market Coverage Targeting Strategy. They have
expanded into all categories like oral care, hair care, healthy skin, basic needs, health
drinks and packaged beverages and so on. Additionally since they have no differential
items inside the same item portfolio, this substantiates the fact that they are not focusing
on a specific section, rather serving the entire populace with their advertising. To reach
to the greatest number of potential customers, it needs to be more specific in its
targeting though. The housewives and the elderly of the house are the influencers and
chiefs in the buy procedure of Ayurveda items. By simply producing packaging with
South Indian dialects, the market in the south can be focused on.

Positioning:

The positioning statement of Patanjali is derived to come to the following:

“For the mass Indian consumers, Patanjali Ayurveda offers the complete range of
unadulterated natural/herbal/ organic products which are a healthier alternative to the
other FMCG products at a significantly lower price.”

Ramdev wants to associate Patanjali holistically with Arogyam eco-system, which

means disease free long life. This is actually tying up of yoga, pranayama and
Ayurveda to create such a possibility, something which Ramdev banks on.

He also links the idea of indigenous (Swadeshi) to the company’s products and does
cause marketing for the company by saying that they are helping the farmers to earn
more. He projects Patanjali as a not-for-profit company and that it is there to serve the
masses. He mentions that they do not keep margins on most of the products and hence
the mouth-watering prices.

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4-P Analysis:
Product:
Starting at 2007 with a humble range of products, Patanjali had quickly diversified into
a vast range of offerings: around 800 products13 including 250 medicinal products, 45
cosmetic products and 30 food products.14 Broadly, the product category of Patanjali
can be classified as follows: Ayurveda Medicinal products, Organic natural juices,
Groceries, Oral/ dental care, Hair care, Skin care.
It is interesting to analyze how Patanjali has rolled out its product portfolio and where it
is heading towards in the near future. It started its products with chawanprash, honey,
organic natural juice and Ayurveda medicinal products, which directly resonates with
what Ayurveda stands for. But slowly it started to copy the product portfolio of
everything that a typical FMCG company should have. With the launch of toothpaste,
shampoo, beauty products, noodles etc., it surely is expanding to become one of the
FMCG power houses with a differential offering of Ayurvedic range by the sheer
number of products in each of the categories.

Product Strategy & Development:

Unlike most of the typical FMCG company practices, Patanjali has never been into
any formal market research to find out what product should they come up with or what
market they should enter. Rather they believe in the strategy of making the products
first and then taking it to the market. Many a times, there has been instances where they
entered into a new product category which some other company has been doing it for
years. Low price, purity and innovation are the three main drivers of the product
development strategy of Patanjali. A good example of this can be of the Patanjali Amla
Candy. Before it was launched, there were numerous amla products in the market,
hence the market can be said to be existing. But this particular amla product in the form
of candy was unheard of before, which is a truly innovative move from the company.

29
As for the low price and purity aspects, this product qualifies them too. The amla
farmers were facing loss at a point of time since the market was very small, though
amla has many health benefits. Ramdev took a risk and started promoting the health
benefits of amla leveraging his huge following. This promotion was shortly followed
by the product launch of amla juice and amla candy, which was a hit product in the
market. Another example where Patanjali delivered in the lines of purity can be the
Desi Ghee. There has been always an inherent concern among the consumers about the
availability of pure ghee. This need of the customers did not require an extensive
market research to develop a product based on this line since Patanjali always worked
form the base of the pyramid and had a connect with the consumers and hence came up
with this product which became their best-selling product and accounted for a 37% of
their sales in 2015 which amounted to Rs 442 crore of sales revenue. Hence, it is clear
that Patanjali is using Product Development strategy i.e. developing new products (here
in this case, making Ayurveda variants of products) in an existing market. Their yoga
sessions & camps is an existing service in an existing market, but since it is vital for
Patanjali, they will be looking for Market Penetration by this. By targeting the youth,
they want to enter into a new market with their existing products & service. This
strategy can be a part of their Market Development plan. Finally, they are Diversifying
by bringing in new products in new market like cosmetics, health drinks etc.

Product Life Cycle:

Patanjali has now a huge product portfolio under its brand. But scrutinizing deeply, not
all products were launched at the same time. Rather, they started with few products and
since then have been constantly innovating to come up regularly with new products.
Also, in comparison with other FMCGs, Patanjali is a fairly young company dating
back to 2007. Hence all of its products will be either in introductory or in the growth
phase and has still a long way to go before it reaches maturity.

Introductory Stage: Ayurveda means life-knowledge, which was a system of

medicine practiced in India since ages. Ramdev was the one who materialized and
commoditized that knowledge and broke the barrier of using Ayurveda not only in
medicine but in consumable products too. With this vision, Patanjali was started in
2007. Few products which are in the introductory stage are fertilizers and floor cleaners.
Clearly, the innovators and early adopters are those who are followers of Ramdev and
middle age to old people who are health conscious and believe in the Ayurveda.

Growth Stage: The meteoric rise of Patanjali started from 2012. From 2012 to
2015, it posted CAGR of 64.7% of revenue growth and sales worth Rs. 2000 crore.
Patanjali is already past the gap between early adopter & early majority. Many of its
best-selling products like ghee and Dant Kanti have reached the growth stage.

30
Adoption & Diffusion:Adoption is when an individual makes the full use of an
innovation as the best option available. In the case of Patanjali, this adoption is done by
the innovators and early adopters who are the earnest followers of Ramdev, follows his
yoga sessions regularly, either in-person or over media, middle to old age and believes
in the purity & health benefits of Ayurveda products.
On the other hand, diffusion is when the innovation is communicated through channels
to mass members of the social system over time and is accepted. In the case of Patanjali,
this is done by a strong and positive word of mouth communication from the early users
to the early majority. Other media channels also play a significant role in this process.

Innovation Strategy: A product or service can be innovative, but whether it will be

successfully adopted by the consumers depends on the degree of product change and
the degree of behavioral change that the innovation brings. From market visits and
interviews, it has been found out that Patanjali products are low in the degree of product
change and also low in the degree of behavioral change should the consumers start
using it. This makes the products of Patanjali an Easy Sell. For example, let us take
Dant Kanti, which is an Ayurveda tooth paste. By keeping it in paste form like the
existing Colgate and not powder form, it is ensuring that there is minimal behavioral
change. Also by adding a few key Ayurveda ingredients, they are making a minimal
change in the product. This innovation strategy contributes to the easy adoption and
hence easy sell of these products.
The package size of most of the products is limited. Hence customers do not have the
option to purchase according to his/ her usage requirements. Also the supply of the
products is irregular at times which often causes stock outs or unavailability of the
products or size.

Price:
The costs of products are low since they do not market or advertise their products as
their competitors nor they spend on fancy packaging. Also, they either directly source
the raw materials from the farmers or grow them in their farms. This helps them
significantly to keep the costs low. Moreover, their manufacturing plants are nearby the
sourcing locations. Patanjali does not spend on extensive market research like other
FMCG companies. Also they don’t have neither hire high paying officials in their
company. As claimed by Ramdev, he does not even take anything home, while most of
the promotions are carried out by him. This is one of the main reasons why Patanjali
can offer products at such a low price. A table comparing the prices of Patanjali with
other products across different categories is shown in appendix.
The lesser price for each product in each category has created a Cost Advantage for
Patanjali. Middle class people find it good reason to switch to these products. Even it
urges the first time users to purchase it and give it a try.

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Place:
The main manufacturing unit is in Haridwar, where all the production & manufacturing
takes place. From there on, the products are rolled out in two formats: offline and
online.
Offline Patanjali Chikitsalaya, Arogya Kendra and Retail Stores: These are
channels and outlets which are handled directly by Patanjali, from distribution to
procurement. The Patanjali Chikitsalaya offers free Ayurveda doctor consultation over
& above stocking the Patanjali products, irrespective of whether the customer makes
the final purchase or not.
The Patanjali Arogya Kendra is similar to Chikitsalaya, the only difference being that
the presence of a doctor is not compulsory here. The exclusive retail stores are minimal
& simplistic, stocking only Patanjali Ayurveda products and thus giving the customers
an easy & large offering to choose from.
Big Bazar: As a part of tie up with Future group, Patanjali products are made available
in Big Bazaar retail outlets. The distribution is handled by Future group in this case. But
even in here, the Patanjali products generally have a separate shelf or row of their own
hence breaking away the clutter from the ‘me too’ products of FMCG companies where
there is almost no differentiation.
Yoga Camps: Ramdev actively organizes yoga camps across India round the calendar,
hich lasts for at least 1 week every place where it is organized. These 1-week periods
also provides an opportunity to promote extensively and sell these Patanjali products.

Post Office: Patanjali products are made available in various post offices all over the
country. This is an extremely break through strategy, something which is less explored
and almost not done by the other FMCG companies. Since post office is generally
frequented by the pensioners and old people, it serves at a place where they can make
the purchase while standing on queues.
Online Patanjali: Online Stores Patanjali maintains 2 websites from where their
products can be purchased online. They even have an App in Google Play. Offering this
online option was a good move from the company side since it gives high convenience
to the customers, who are mostly shifting towards online shopping.

32
Also, these websites serve as a one stop place where a customer or potential buyer can
view the entire range of products that Patanjali has to offer, which sometimes is not
possible in an offline brick & mortar store. By this, he can choose & select which
product to buy & makes the purchase from the offline store in the case he does not buy
online. Third party online platforms Patanjali products are also available in various
e-commerce platforms like Amazon, Flipkart, Snapdeal and Big Basket to name a few.
This is a good strategy since it is a platform which is frequented by millennials who
want convenience and choice of purchase. It also acts as a promotional tool since
Patanjali products can come up in the deals or ads section of these sites, hence attracting
the attention of the customers who might end up buying.

Promotion:
From the very beginning, the promotion strategy of Patanjali had two main objectives.
One was definitely to highlight the health benefits of using Ayurveda products & to
evoke the Swadeshi sentiment into the Indian consumer’s mind. The other objective
was to make aware of the customers about the sinister way of the profit making by the
FMCG giants which are typically MNCs: that they not only fool the customers giving
stale, adulterated products but at the same time charging high price at the cost of
exploiting our farmers. All these promotions were carried out via various channels and
modes, some of which are as follows.
Direct marketing: Ramdev with his popular yoga guru image and organizing Yoga
camps across India round the calendar contributes to the direct marketing of the
Patanjali products where they are promoted and advertised along with the main events.
Word of Mouth: Most of the promotion is carried out indirectly by the followers of
Ramdev and the early adopters of Patanjali products who have found these products to
be good. While communicating with their family, friends, relatives, neighbors and
colleagues, they indirectly promote brand Patanjali by sharing their positive experience
with the products. Publicity through word of mouth form users is something that tells
that that the brand sells itself with minimal promotion.
Media Aastha channel: is the TV media where Patanjali is heavily promoted. It
mainly started as a means to spread health awareness & yoga sessions to the masses.
But with the advent of Patanjali, this channel along with the yoga sessions were
leveraged to promote Patanjali products & the health benefits of consuming or using it.
This move was aligned since they were promoting health products in a health related
lifestyle show. Apart from this, Patanjali ads are sometimes observed in few other
channels and print media. . Recently, a new campaign on radio has been launched by
Baba Ramdev (Patanjali apnaiye, desh ko aarthik aazadi dilaiye) 15, which hovers
around the idea of providing financial independence to the nation by the use of
indigenous products.

33
Celebrity endorsement: Patanjali rarely did any celebrity endorsement since the
popular face of Ramdev was sufficient to carry on the promotion. His image as a yoga
guru totally aligned with the Ayurveda product offering of Patanjali. Celebrity
endorsement is something which was not previously in Patanjali’s promotion. However
lately, wrestler Sushil Kumar has been seen endorsing the Ghee brand of Patanjali. But
this is also to be kept in mind that this was not in a very large scale promotion, nor the
sports celebrity was a top shot. We are yet to see a top shot celebrity endorsing brand
Patanjali.

Patanjali – A Successful Indian Brand Extension:

It an Indian brand of Ayurvedic, herbal and wellness products. When we last reviewed
Patanjali as a brand, it had been in the news because of their inclusion in a “Wish You
Were Listed” report by CLSA which estimated them to be bigger by revenue than
Jyothy Laboratories and Emami. In 2014 Patanjali was already competing with The
Himalaya Drug Company which was then in the Rs 1500 crore turnover range, with
targets around 12% growth. Himalaya however, is a much older company than
Patanjali, founded in 1937, though it started thinking of itself as an FMCG player only
as late as 2009. It has also expanded beyond pharma to wellness and personal care, has
its own stores, and sells online – a very similar journey in fact. In that context,
Patanjali’s growth is indeed commendable. (Biotique is a beauty brand also based on
the Ayurveda platform but has not expanded its product range.)

Its growth becomes even more astounding when we look at Patanjali’s revenue
declaration for FY 2016-17, where the brand clocked revenue of INR 10,000 Crore,
nearly double from the year before. Baba Ramdev declared that he was on a “MNC
bhagao” mission, and that Patanjali would take over as the largest brand in a year or
two, eventually wiping out MNCs.

There haven’t been that many new, successful entrants in the FMCG world in the
recent past at the national level. Barriers to entry are the high cost of awareness required
for a national brand (read celebrity endorsements and mainstream TV advertising),
managing a sophisticated network and uniform quality control. A big cost saver for the
brand was that they didn’t need to spend on advertising in the initial years because of
the high brand recall of Baba Ramdev whose popular TV show and public appearances
had gained him mass media awareness at a very low cost. In addition, the Company
reaps the benefits of a celebrity brand ambassador like Baba Ramdev for free (how he
benefits from the brand is not clear, as he is not listed as an owner). The brand has now
launched a series of advertisements about its various products the most famous being
the Dant Kanti Ad which openly takes on other toothpaste brands. It is a separate matter
that many of Patanjali’s ads are reported for being misleading and challenged in Court.

34
Patanjali has piggy backed not only the awareness of Baba Ramdev but it is built on the
brand strength, firstly of Yoga and its proponent, Baba Ramdev, and of Ayurveda.
Followers of yoga, Ayurveda and Baba Ramdev were its most ardent early adopters,
and they spread the word to others on the efficacy of the products. There is the added
belief that something from this heritage is likely to be pure, and Patanjali has been quite
welcoming of analysts and media to its offices to back this belief. They have research
lab, Patanjali Research Foundation, which, based on its website has a small team
building a framework to prove that yoga works.

In May 2017, Prime Minister Narendra Modi inaugurated the Patanjali Research
Institute at Haridwar. Association with the PM, albeit indirect, is a further boost for
the brand, providing a halo effect of credibility.

The Future:

After entering and expanding in the food and grain market in the last two years.
Patanjali has now announced to enter in the apparel sector with the prospective launch
of Patanjali Jeans and expand its presence in the fast food sector, by opening Quick
Service Restaurants which would provide over 400 vegetarian fast food items. In my
view, QSR is a great idea, especially when the food provided is believed to be organic
and healthy and based on the Indian ethos/Ayurvedic recipes.

I am not convinced about the choice of “Swadeshi Jeans” as there is no connection to

either Indian ethos or Ayurveda. Add the fact that for the first time a Patanjali product
would require a paid brand ambassador, as Ramdev is not known to wear jeans. Were
Patanjali to launch a line of leisure wear along the lines of Yoga clothes it would be a
perfect extension. As of June 2018 the launch of Patanjali jeans has been postponed by
yet another year.

Patanjali has more recently created waves by launching a telecom service on the back
of BSNL and a WhatsApp equivalent, Kimbho, which was rapidly withdrawn after
security concerns were exposed. These attempts to expand beyond FMCG could be
because of flagging growth in that segment – the company said they closed 31 March
2018 with roughly the same revenue as the previous year. Remains to be seen if its
brand (and Ayurveda) are suitable for the telecom and apparel space as well.

The Indian market is growing enough that there is space for both the MNCs and home
grown biggies – as companies like Wipro and Godrej and Marico have shown.
Moreover, if India is able to transform itself into a soft power brands like Patanjali will
do well in affluent countries in the health food and natural remedies segment.

35
 Chapter – 4
LITRETATURE REVIEW

Distribution channel and firm performance:

It has been evidenced for years that distribution channel is important for its ability to
reduce the expenditure of economic transaction (Williamson, 1981). Its capability of
effectively supporting the competitiveness of firms, namely manufacturers, distributors,
retailers, and customers, due to the distance that separates them apart, making
distribution channel a significant function to enhance export performance (Leonidou,
1996; Zou, &Stan, 1998). Other studies that found similar result of its essential role of
distribution channel to be a determinant factor for export improvement can be found in
Shouming (1998) and Carlos et al., (2008), besides product, price, and promotion
strategy.

Innovation and firm performance:

For many years, previous studies related to innovation on its relationship with firm
performance have existed. In general cases, numerous previous studies have found that
firms that adopted and implemented innovation would successfully achieve several
potential benefits. According to Edosomwan (1989), by generating new ideas, firms
would increase productivity that would, in turn, lead to higher firm performance.
Edosomwan (1989) also further asserted that competitive advantages were obtained
effectively all the way through the use of new organisational ideas, which could enable
a firm to generate an encouraging environment that leads to innovativeness, which in
sequence, leads to benefit.

Interestingly, other previous studies had, in contrary, indicated that the impact of
innovation on firm performance itself was found to be miscellaneous. A study by
Geroskiet al., (1993) pointed out that firm profitability was influenced by product and
production process innovations in diverse ways. An additional dissimilar finding by
Hirch, and Bijaoui (1985) in Israel found firms that engaged in export activities had
much higher growth and were far more innovative, unlike firms uninvolved in export
activities. This indication, furthermore, was asserted by Love (2001) on the relationship
of innovation and export performance between the United Kingdom and Germany in
manufacturing plants also showed great significance. The findings demonstrated that
innovation had a strong effect on the tendency to export in both the above mentioned
countries. The finding further indicated that innovation activities were related
positively to export propensity in the United Kingdom, while in Germany where the
degree of innovation intensity was significantly higher, export probability also
increased (Love, 2001).

36
Among others, Harris, and Li (2006) added that innovation also played a crucial role in
overcoming difficulties to globalization. In terms of product and process innovation,
Ozçelik, and Taymaz (2004) showed that in Turkey, product and process innovations
had a positive effect on export intensity. Similar findings were also found by Roper,
and Love (2001) that product innovations had a positive effect on export intensity in
manufacturing firms in the United Kingdom and Germany. Basile (2001) also
corroborated that product and process innovations preface had a positive effect on
export behavior.
However, there are other studies on product and process innovation with firm
performance, which were found to have dissimilarities with studies highlighted earlier.
The conducted study by Kongmanila et al., (2009) on the relationship between
innovation and export performance found a positive effect between product innovation
and profitability, but not between the process innovations. The study indicated that in
terms of process innovation, the negative signs of the path coefficient were found
among production process innovation. This led them to argue that non production
process innovators tended to have higher profitability than production process
innovators. This result also supported the study of Geroski, and Machin (1993) that
process innovations had impact on firm profitability in different ways.

Other similar work, which was carried out by Eitan (2006) on administrative innovation
application on firm performance study, also verified that the influence of administrative
innovation implementations on firm performance was curvilinear. In other words, both
too little and too much implementations had a negative effect on performance.

Firm size and firm performance:

The relationship of firm size on firm performance revealed diverse. Literatures
suggested that economies of scale in production, export marketing, higher capacity,
better opportunities to enhance financing, and sufficient managerial, financial, research
and development, and marketing resources have been usually critical as a positive
impact of firm size, especially on firm export performance. However, Wagner (1995)
argued that u shaped relation was found between size and export. The relationship
indicated that advantages of size only hold to a certain entrance point when
coordination costs causefurther expansion to be non-profitable. This nonlinear
relation between exports and firmsize was further pointed out by Wakelin (1998).
“Although size of the firm is an advantage in exporting, this may not apply to very large
firms, which can be more orientated towardsthe domestic market, for example, a
domestic monopoly giving them no incentive to export” (Wakelin, 1998, p. 833).

On the other hand, a study of Aaby et al., (1989) mentioned that firm size was taken as
controllable factor and became an important determinant of export performance, while
Zou, and Stan (1998) found its mixed effects; firm size had positive effect on export
performance if measured in terms of total sales, and negative effects were found on

37
Export profits if measured by the number of employees. There was a study among
7,899 Korean manufacturing’s that indicated a decrease in growth along with firm size
(Younsuk et al., 2010).

Age of company and firm performance:

Literatures have showed experiences have a significant affect to get succeeded.
Experienced businessmen most probably get more experience than new comers.
Kristiansen et al., (2003) found that the length of time in operation was significantly
associated with the success of business. In their new small firms study, Duchesneau,
and Gartner (1990) found what lead entrepreneurs in successful firms tended to be
raised by entrepreneurial parents. Under such conditions of low asset specificity, with
greater experience in foreign market activities, there was a positive incentive for
exporters to integrate (Klein, & Roth, 1990).

In addition, Cavusgil, and Zou (1994) invented global experience activities of the firm
as one of the key determinants to improve export. The reluctance of firms not to export
was natured by a substantial amount of ambiguity, mostly due to the scarcity of
overseas markets information. A competent firm, thus, for its worldwide experience,
knows the differences in environmental conditions and is more likely to choose the
most attractive markets and gets used to the marketing strategy to contain the precise
needs of those markets. Empirical studies indicated the relationship between global
experience and export performance was mixed (Dean et al., 2000), whereas some
studies indicated negative association between global experience with export
performance (Baldauf et al., 2000; Brouthers, & Nakos 2005).

The justification for the negative relationship between international experience and
export performance is that new firms are strained to go abroad for cost compensation
and inadequate access to resources in their domestic markets (Ursic, & Czinkota, 1984).
The less experienced firms have, thus, larger pressures related to the accomplishment
of higher export performance (Baldauf et al., 2000), and might view international sales
as more central to the long-term profitability of the firm (Brouthers, & Nakos 2005).

Industry sector and firm performance:

A significant influence of different types of industry on firm performance can be found
in Gadenne (1998). Among others due to different marketing strategies and
management practices (Gadenne, 1998). The resource-based view argued that
heterogeneous firm resources, which are difficult to imitate, are not traded on factor
markets and could only be developed over time to drive firm performance (Wernerfelt,
1984). In this view, industry structure is a result of firm choices and firms could adapt
and change industry structure through their resource-based strategies. Furthermore,
empirical evidence provides robust support for the resource-based view that firm
performance is driven more by internal factors than structural elements (Rumelt, 1991).

38
According to Pangakar et al., (2011), their study focused on the period between 1996
and 2001 and they tracked the globalization levels for six different Chinese industries,
as well as the performances of 166 public listed firms among these industries. The
results validated major premise: high levels of industry globalization positively gave
impact the performance of Chinese firms. They also found that when their industries
were globalized, firms with slack resources experienced greater performance
improvement than other firms without these resources. Other study by William (2011)
found that the industry sector did give impact on the ability to export. By using survey
data of 92 exporters and non-exporters to estimate a logistical regression model of the
firm’s export behaviour, the results revealed that industry sector, firm size, and the
nature of the firm’s product were all important factors that influenced export behaviour.

Competitive environment and firm performance:

Over the years, many studies have been carried out investigating the impacts of
environments on firm’s performance (Mintzberg, 1990; Venkatraman, 1990; Prescott,
1990). Studies have found that the environment is the most important force in
improving firm performance (Mc Larney, 1997) and plays a key role to support an
organization’s triumph (Griffin, 1987).

According to Mintzberg (1994), environment is mostly referred to the force of

competition that affects its industry activities. Griffin (1987) stated that the external
force of firm environment consisted of competitors, customers, suppliers, regulators,
and other relatedassociations. The force of competition refers to the level of
competition in price, product,technology, distribution, manpower, and raw materials.
These changes would later expand through value chains and sectors providing a new
environment for SMEs. Therefore, SMEs would be required to fit into the environment
and find their place if they intend to survive.

Raymond and Croteau (2006) also suggested that SMEs in the industrial environment
required proper strategic choices in product innovation, market expansion, and network
extension in order to grow. Besides, Wheelen, and Hunger (1995) noted that the
external environment consisted of variables, such as opportunities and threats that are
usually beyond the control of the organizations. Griffin (1987) indicated that
environmental factors play a key role in thedecisiveness of an organization’s triumph or
failure. Hashim’s (2001) study on the environment’s moderating effect on the
association between strategy types and performance of SMEs showed that environment
influenced the strategies employed, as well as the overall performance of SMEs.

Competitive hostility environment and firm performance:

Kirpalani and Macintosh (1980) observed that the tumble of environmental variables
could seriously hinder the understanding of the determinants of exporting. Grant (1995)
furtheremphasized that a firm's capability to deal with environmental ambiguity was
important to its continued feasibility. The implication of this is that if firms are unable

39
to forecast ormanage its external environment, uncertainty emerges then could
intensely influence the firms’ operations (Miller, 1993). The external environment also
stimulated managerial consideration to the intimidation and opportunities-influences
the venture's strategic choices (Keats, & Hitt, 1988). Exporting could be a spontaneous
measure in the features of uncertainty competitive environmental conditions. New
firms enlarge their exports because of the declining opportunities in their domestic
markets. Rigorous competition in the new venture's domestic market can also
motivate exporting activities (Miles, 1980; Porter, 1980).
However, competitive environment and hostile environment are external conditions as
their changes are apparently crucial to the firm's job or outcome (Edelstein, 1992;
Miller, & Friesen, 1984). According to Edelstein (1992), this environment might be
categorized intopowerful rivalry, low margins, harsh governmental regulations, and
limited growth opportunities. Hostility generally forces the new firms to expand its
exports (Root, 1994),rather than initiate a radical reorientation of product offerings.
Miller and Friesen (1984)pointed out that an enterprise-compete in a hostile
environment tended to come in new markets both in domestic and overseas. Anyhow,
Cooper, and Kleinschmidt (1985) found firms that recognized their domestic
environment had few opportunities-hostility that weremore likely to export than
companies who consider the growth opportunities could beachieved in their domestic
environments only.

Theoretical framework and hypotheses:

Bowesox et al., (1986) define distribution channel as an alliance of mediators that
takes designate to a product throughout the process of marketing, from the first owner
to the lastcustomer. As the nature of distribution channel is that when they are once
established, it is usually difficult to change (Ramaseshan, & Paton,1994), hence, it is
important for firms toconsider the distribution channel carefully to keep awayfrom
long lasting unfavorable costs (Ahmed, 1977).

Due to the distance between producers and last customers, bridging the gap between
themhas become the main function of distribution channel in order to reduce
transaction cost in achieving better competitiveness, which, in turn, would enhance
firm performance. Competitiveness in these points supports the process of goods’ flow
to the consumers at theright time, place, and efficient ways in order to fulfill customers’
demand. Moreover, when the physical gap would be the first gap to be known if the
producers and customers are split in remoteness, mediators will be able to enhance
place and time utility. The reward willgrow better when larger distances get involved
between them. Therefore, one or the other ones should have an initiative to link the
gap among them, as well as presume the cost of flowing the goods would exist (Peter,
1980).

40
Some examples of the distribution channel function are retailers or wholesalers, in
which may be able to generate time utility by holding stocks of goods available to be
pinched bybuyers. Without the responsibility of retailers in this process, the buyers
must place anorder with the producer and wait until the product could be produced and
delivered (Peter, 1980).

Besides, as goods flow from producer to consumer, the goods will be handled by a
variety of distributors. During the handling, transportation and handling costs emerge
that make the goods increase in price. Under this condition, the task of distributors is
fulfilling anessential function to give the consumer easy entrée to goods with
acceptable price. Theresult of the distribution system presents a wide variety of goods
and service be readilyavailable to every consumer (Peter, 1980).

Furthermore, it has been believed that innovation firmly explains firm performance. As
Heide et al., (1994) confirmed the victory of an exporter (manufacturers) in a
developing country was significantly related to how the behavioral of the affiliation
with the overseas clients were managed, the empirical study of using IT in distribution
channel- internet, also was found to be able to assist the internationalization process, as
well as to enhance theaffiliation with other firms within the same value chain of SMEs
(Fern’andez, 2006). Theuse of information technologies among supply chain members
had also been shown to encourage organizational coordination and had positive impacts
on performance. Accordingto Nada (2008), using IT directly promotes a precise type of
synchronization activity, inwhich, would be able to achieve both tactical and working
benefits. Hence, in order to achieve an absolute set of benefits, suppliers should
eventually use IT for both investigation and utilization within the channel.

However, further instance mentioned that the developed method of inventory and
scheduling integration in distribution channel also improves effectiveness and
efficiency performance (Varimna, 2009). In accordance with the use of IT frame work,
tracking ofreturnable packaging and transport units can be supported by IT
implementation to improve efficiency (Martinez et al., 2009). On the other hand,
increasing sales can be improved by enhancing the effectiveness and efficiency of
assortment by product configuration technology buildings, and these methods have the
capability in customizing, which, in turn,present the products to be more competitive to
the customers (Fabricio, 2004). A study of Turkish and Bulgarian SMEs in food
products and beverages also indicated that by implementing IT practice and supply
chain strategy, SMEs could gain competitiveness(Bayraktar et al., 2010).

Innovation in assortment and distribution performance:

The concept of an assortment is “a group of two or more types of goods which either
harmonize each other directly or in total acquire some degree of potency for
futurecontingencies” (Glenn Walters, 1977, pp.199). Poynor et al., (2010) suggested
that

41
Consumers could be more satisfied when choosing an option of goods from a small
assortment than a large assortment. Here, customers could easily shop the
advantageous products in larger assortment than in smaller ones. According to Roger
(1990), assortmentactivities in retailing industry could generate one stop shopping in an
effective and efficientway when purchasing goods.

Moreover, studies have indicated that the new modification of assortment empirically
found significantly effective and efficient way to improve customers’ satisfaction.
According toCadenat (2003), in order to reach efficient assortment in retailing industry,
the retailers should estimate the perception of purchasers’ assortment first so that what
the stores actually recommended could be modified to meet the clients’ needs and
prospects. Fabricio(2004) further asserted that advantages of assortment innovation
also could be examined inproduct configuration technology building. In this method,
innovation could provide the ability in customizing product into a variety of assortment
in order to meet customers’ firstchoice. Then, the method leads to productivity,, which
in turn, enhances sales due to theefficient and effective ways of presenting the products
to the customers. Nevertheless, JuinKuan Chong (2009) added that a forecasting order
of new products and a method of evaluation in replacement patterns in assortment could
also bring decision making to a whole new level of efficiency. These are due to the
optimal assortments that are laid in theright demand characteristic for each product and
the substitution patterns across products. It has indication that innovation in assortment
would improve performance, hence, the firsthypothesis is:

H1a and H1b: Innovation in assortment is positively associated with distribution

performance in terms of effectiveness (H1a) and efficiency (H1b).

Innovation in order processing handling and distribution

performance:
According to Bowersox et al., (1986), order processing is mainly known as a main
logistic activity. The activity would initiate the products’ flow and service delivery.
Order processing also could create command status that provides the logical system to
become flexible. Information flows in handling assisted forecasting in order to handle
departments. The message that is found in order management is the driver device for
the whole logistical system. Hence, the quality and speed of information flow in order
management facilitationintegration of basic logistical system component is considered
as essential. It could be implied that a poor communication network could cause order
bottlenecks or unidentified information errors that could generate problem within the
logistical system. Such malfunctions, then, cause problems in inventory, production
schedules, and inventoryaccumulation patterns (Bowersox et al., 1986).

42
In addition, supported by Bowersox et al., (1986), the order fulfillment process (OFP)
havebeen recognized as one of the crucial factors of business processes in most profit

oriented companies (Kritchanchai et al.,1999). The process is usually initiated by

receiving customer orders and they end up with delivering final products. The process
includes orderhandling activities, for instance, order processing, stock checking, make
or buy decisionmaking, supplier selection, purchase order (PO) planning, final product
assembly, and delivery, in order to fulfill two common objectives: a) delivery of
products to satisfy customers’ expectations at the right time, right place, right quantity,
right price, and b) theachievement of agility to handle uncertainties from internal and
external environments(Christopher, 1992).

Innovation in information sharing and distribution performance:

Effective information sharing has been found vital in achieving distribution channel
performance (Zou et al., 2007). Coordination among independent channel members,
such as raw-material suppliers, manufacturers, distributors, and agents-logistic
providers, is the key to attain the necessary flexibility that would enable them to
progressively advancelogistics processes in response to changing market conditions.
Unfortunate synchronization among channel members then could cause dysfunctional
operational performance. Thenegative impacts of poor coordination cause higher
inventory costs, longer delivery times,higher transportation costs, higher levels of loss
and damage, and lowered customer service (Lee et al., 1997). According to Fern’andez
(2006), the application of IT, like the internet,was also found to be able to enhance
effectiveness as it enables the firm to progress inmarket knowledge and in the
relationship with clients and suppliers or other firms withinthe same value chain. This
application enables firms to facilitate the internationalizationprocess of SMEs, as well
as to improve the relationship with other firms within the samevalue chain.

Besides, the uses of IT among value chain organizations also have been shown to
encourage managerial coordination and have a positive impact on performance. Using
data from 241 suppliers in the computer industry, Nada (2008) directly promoted a
precise category of coordination activity, in which, would be able to accomplish both
strategic and operational profit. Hence, in order to attain a complete set of profit,
suppliers must use ITfor both exploration and exploitation within the channel. Similar
with other innovation addressed earlier, the information system sharing innovation
positively influences performance, and hence the next hypothesis is addressed: H3a
and H3b: Innovation in information sharing system is positively associated with
distribution performance in terms of effectiveness (H3a) and efficiency (H3b).

Innovation in product and distribution scheduling and distribution

performance:

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 Product and distribution scheduling is logistic activity concerning to the group
quantities of good that cover when and where to be formed and delivered or it is one
decision on when, where, and in what quantity the production should take place

(Ballaou, 1978). Production and distribution scheduling could optimize income and
source utilization at the product and distribution stages individually. The delivery
consignment cost generally consists of a fixed and variable cost that is comparative to
the total distance of the way taken. For instance, the number of shipments used and the
specific routes taken determine the total distribution cost. Hence, in order to
accomplish shorter lead times, more deliveryshipments should be used, which would
lead to higher distribution costs. Therefore, optimizing the tradeoff between the
distribution cost and the customer service level hasbeen often a main goal among the
decision makers of the trade system (Bowersox et al., 1986).

Furthermore, a study by Wang et al., (2009) found that product scheduling is also
simultaneously considered production scheduling, material supply, and delivery, which
have been proven effective to improve speed problem. The determination of the
optimal production quantities, the time to start producing and the vehicle routes by
computerized methods were also found to be effective and efficient that could drive
total profit (Chen etal., 2009). Hence, innovation in integrated scheduling of inventory
and distribution scheduling significantly found to be able to improve efficiency
(Varimna, 2009). A new method of polynomial-time algorithms in solving
distribution and productscheduling was found to be able to reduce process inventory
and transport cost (Wang etal., 2009). Other study related to the use of a new method of
scheduling was conducted in electronic industries by Tadeusz (2009). Using what it
was called monolithic and hierarchical approach for coordination of the supply chain
product flow, gave similar results, in which, both approaches were be capable of
finding good coordinated supply chain schedules for large size problems in a logical
computation time using commercially available software to integrate scheduling
(Tadeusz 2009). While related with integrated system, the study of using integrated
scheduling system also can obtain operational performance in terms of effectiveness
and efficiency in supply chain network (Subramanya,2009).

H4a and H4b: Innovation in product and distribution scheduling system are positively
associated with distribution performance in terms of effectiveness (H4a) and efficiency
(H4b).

Innovation in inventory and distribution performance:

Inventories are an important element for any business enterprise (Kruger, 2005).
Inaccuracies in an inventory can generate a series of problems, cause loss in high
efficiency, increase unwanted items, lessened the degree of customer dedication, create
costly material inventories, and disappointment (Meyer, 1991). The cost savings that
are accumulated from superior practices in inventory management (IM) are significant

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(Meyer,1991). Hence, avoiding mismanagement of viability inventory risk control is
considered crucial (Sprague, & Wacker, 1996). Commonly, it is impractical for firms to
be able to manufacture products, and then, deliver them immediately to the customers.
In this case, inventory adds time utility to attain product availability level. Hence,

inventory needs to be maintained as a connection between supply and demand. An

effective inventory management practice would allow an enterprise to minimize
inventory costs and avoid the direct consequences from scarcity of material resources.
This series of proceedings have special significance in the circumstance of SMEs and
inventory management. Chikan (1990) observed that a sound inventory management
system is a decisive factor in a firm’s success. Natarajan (1991) discussed the linkages
between inventory management (IM) and competitive advantage, bringing into focus
the integration of strategic and competitive factors, such as cost, delivery, and quality.
Natarajan (1991) argued that reducing time by faster value addition to the materials
provides a firm with a distinct edge in competitive environments. However, inventory
costs are determined not only by their level of inventory, but also by the time the
materials spent in the system.

However, while the critical role of inventories to a firm’s survival is well recognized in
theory, IM does not necessarily drive practice in many SMEs. When business strategies
are formulated, IM is not generally treated as a critical or strategic activity (Sprague,
&Wacker, 1996). It is considered thatfirms would store the products as inventories
before delivering to their customers, hence, it is also estimated that innovation in
inventory will enhance distribution performance.

H5a and H5b: Innovation in inventory is positively associated with distribution

performance in terms of effectiveness (H5a) and efficiency (H5b).

Innovation in transportation/shipment coordination and distribution

performance:
Transportation systems have been found to be a crucial part in providing better logistics
efficiency, reducing operation cost, and promoting service quality in order toincrease
both the competitiveness of government and enterprises (Yung-yu Tseng, 2005).
Moreover, according to Chang (1988), around one third to two thirds of the logistics
costs were spent on transportation. This cost proportion was assured further by the
investigation of National Council of Physical Distribution Management (NCPDM), in
average, accounted for 6.5% of market revenue and 44% of logistics costs. Hence, poor
coordination in transportation could stimulate higher costs, longer delivery time, higher
levels of loss and damage, and lowered customer service (Lee et al., 1997).
Moreover, Stefansson (2009) introduced the method on how to use transportation
coordination. The model included three major components of smart transportation
management: smart goods, smart vehicles, and smart infrastructure, which could affect

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supply chain performance. Besides, using IT in coordination among channel members
in product flow could improve channel members’ performance too (Nada, 2008).

H6a and H6b: Innovation in transportation is positively associated with distribution

performance in terms of effectiveness (H6a) and efficiency (H6b).

Innovation in warehousing & finished good handling and distribution

performance:
The role of warehousing is to create time utility in terms of raw material, industrial
material, and finished products. In the customers’ perspectives, according to Koyle, and
Bardi (1976), establishing market oriented of warehousing could lead customers’
satisfaction in terms of both physical supply (raw material) and physical distribution
(finished goods). Even though the warehouses become a permanent node in the
logistics system whereby raw material, semi-finished goods or finished goods are
stored and maintained in the diverse periods of time, the halt of goods within over
periods give indications of bottleneck of the flowing goods that could add cost on the
products (Koyle, & Bardi, 1976, Pp.100). According to Koyle, and Bardi, (1976), a
second function of warehouse is assortment of activities for customers’ orders.
Companies regularly produce product lines, which have thousands of sorts of products
(colour, size, shape, and others). Another function is to provide service. The readiness
of goods in terms of time and quantities when an order is received from customers
could accelerate customer fulfillment and give more future sales. Other function of the
warehouses could be protecting against contingencies of transportation delays, vender
stock out, strikes, and so forth.

On the other hands, material handling in the warehousing system becomes an essential
aspect of the facilities. As there were some cases that goods were flowed several times
in each of the area mentioned, hence, to improve the effectiveness of working
conditions, all materials system should be designed to minimize the possibility of
danger to people who are working around the area and improve logistic service, for
instance, support handling system more quickly to respond customers’ requirement
(Bowersox et al., 1986). From the literature addressed earlier, it was implied that
effectiveness and efficiency are the main targets of warehousing and finished good
handling in distribution. Innovation by adopting technology and typical method enable
firms to improve the distribution performance, which, in turn, leads to firm
performance. The following empirical studies embrace how innovation in distribution
channel-warehousing and material handling would bring distribution performance
advancement. Automatic and simulation in warehousing and material handling
supported by computerized hardware and software could be a solution for improving
effectiveness and efficiency in the operation. A simulation program, known as lotus
1-2-3, could be an alternative choice to gain improvement in existing system in the

46
warehousing and material handling (Diaz, 1988). On the other hand, Satya (2009)
shared that the involved human and technical implementation factors in improving
material handling operation performance did matter for effectiveness and efficiency.
Heragu (2009) added further, in accordance with innovation in technology, the use of
technology application- autonomous vehicle storage and retrieval systems (AVS/RS)
and a web based design conceptualization tool for AVS/RS let warehouse effective and

efficient on the operational cost. This method also could control costs, extended
capacity, and improved service to consumers.

H8a and H8b: Innovation in warehousing is positively associated with distribution

performance in terms of effectiveness (H8a) and efficiency (H8b)

Innovation in acquisition and distribution performance:

“Acquisition is logistic activity that makes the product available to the logistic system-
the selection of supply source locations, quantities to be acquired, the timing of
purchases, and the form in which the product is to be acquired” (Bowersox et al.,1986,
p.12-13). As buying policy has geographical and time dimension that influence logistic
cost, acquisition is then considered essential to logistic. “Acquisition or purchasing
refers to those activities that take place between the organization and its suppliers”
(Ballou 1978, p.298)-In this department, besides product and prices, precise delivery
becomes the key element of the flow system. Usually, firms spend between 40% and
60% of its sales to purchase materials; therefore, the efficiency of this flow stage should
be managed carefully. Considering the important decision of acquisition with their
impact on logistic cost, purchasing quantities, timing of purchasing, source location,
and form of the goods become some factors to be importantly considered. The
effectiveness of acquisition could be considered as a wanted goal in order to achieve the
scheduled time of material delivery that would give impact to the flow of goods to
customers. Therefore, choosing single or multiple suppliers, hedging price due to the
changing currency value, pricing, and so forth would become concerns to be looked
into further (Ballou, 1978). Using technology in acquisition would enable a firm, as a
buyer, to obtain strategically valuable resources, achieve market power, or generate
strategic renewal (Graebner et al., 2010).
H9a and H9b: Innovation in acquisition is positively associated with distribution
performance in terms of effectiveness (H9a) and efficiency (H9b).

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48
 Chapter – 5
RESEARCH METHODOLOGY

The research design is descriptive and exploratory in nature, because the aim is to
describe about Patanjali brand image in other firm and their interest in promoting the
industry and also find out various problems faced by the existing retailers also taking
their feedback and suggestions. Primary data was collected through questionnaire and
secondary data was collected through articles, journals, magazines and online sources.
A sample of 100 respondents was collected from various area of Agra district.
Hence a perception survey was conducted to know the perspective of retailers including
a sizeable section of Patanjali product. The study attempt to examine the relationship
between retailers perception about the branding of Patanjali product which is dependent
on independent variable like brand image, product quality, product knowledge, product
involvement and product attribute.

Sample Design:
The sample for this study is composed of working professionals as well as
self-employed people. The technique of convenience sampling was chosen for this
study. Convenience sampling method was used as it is adequate for an exploratory
study and is the quickest way of obtaining information. A total of 15 questionnaires
were circulated random to the mentioned sample and 100 responses were eventually
collected.

Data collected source:

Primary data: These are those which are collected fresh and for first time and thus
happen to be original in character. The data is collected in form of questionnaire.
Secondary data: It means that are already available that is they refer to the data,which
have already been collected and analyzed by someone else for its own use and later the
same data is used by a different user or person. It is based on secondary source of
information

Research Design:
Type of research - Descriptive and exploratory

Data collection Technique - Questionnaire (survey)

Source of data collection – Primary (questionnaire)

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Sampling:

Sample area – Agra (Uttar Pradesh)

Sample size – 100 people

Sample technique – Random Sampling

Sample unit – Male/ Female,

Time period-60 days

Different retailer shop to be considered-

1. Kirana Stores
2. General Stores
3. Departmental Stores
4. Provision Stores
5. Mega Stores
6. Medical Stores
7. Pharmacy Stores

QUESTIONNAIRE

Q-1:Are you selling or interested in Patanjali Brand?

a. Yes
b. No
Q-2: Reason for Selling Patanjali Product?

a. Margin
b. Demand
c. Credit Policy
d. Other Reasons

Q-3: How do you rate the schemes of the company?

a. Good
b. Average
c. poor

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Q-4: How do you rate the credit policy of the company?

a. Good
b. Average
c. Poor

Q-5: How do you rate the Margin of the company?

a. Good
b. Average
c. Poor

Q-6: How much time does it take for delivery of Patanjali Product after ordering?
a. 6-12 Hours
b. 1 to 2 Days
c. 2 to 7 Days
d. More Than 7 Days
Q-7: How do you rate the Quality of Patanjali Product?

a. Good
b. Average
c. Poor

Q-8: How do you rate the Supply norms of the company?

a. Good
b. Average
c. Poor

Q-9: Does the company executives convey schemes on time?

a. Yes
b. No

Q-10:How do you rate the Damage Policy?

a. Highly Satisfied
b. Satisfied
c. Dissatisfied
d. Highly Dissatisfied

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Q-11: Are you satisfied with the distribution channel of Patanjali Product?

a. Yes
b. No

Q-12: Is any opportunities and challenges for Patanjali to develop a strong distribution
System?
a. Yes
b. No

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