GOOD KNIGHT

IN 1973, when Mohan boarded a second class compartment of the Jayanti Janata Express to Mumbai (Bombay) from Thrissur in Kerala in South India in search of a job, little did he realize that he would be known as Good Knight Mohan in a few years time. Jobs came easy to this young new Electrical Engineer, but he was not satisfied. After switching jobs twice, Mohan started a trading firm to deal in ceramic insulators. While this paid for his livelihood, he experimented with the design and production of indigenous diapers from his flat in Kalina. Sales were limited and market never picked up for want of perfection. Also many people did not know then what a diaper was all about. In 1981-82, when electrical equipment industry went through a bad patch Mohan had to sell his insulator business. It was at that time that he was looking for a safe anti-mosquito repeller to protect his little daughter from mosquito bites and sleepless nights. He finally located an effective repeller in the form of a paper mat under the brand name Vape in one of the shops in Mumbai. Although the shop-keeper did not show much interest in selling it apparently to avoid any risk of nonperformance of an unknown product, Mohan bought it as he wanted to try it out. The next day itself Mohan felt that it would be a high successful product if it were marketed well and he soon took over the distributorship of the little known Vape. Although Mohan was convinced about the future prospects of Vape, the managing director of the company did not give him any support in terms of advertisement and reliable distribution. It was when Vape started fading away that he decided to explore possibilities of starting a firm of his own to manufacture mosquito mats in collaboration with Sumitomo of Japan. Technology and financing His attempts to collaborate with the Sumitomo group of Japan which had a monopoly of the technical materials, was faced with obstacles. He met their liaison officers in Mumbai several time. They were polite but asked him to wait for some more time before they could make up their mind. After several futile attempts Mohan felt it was becoming an unending waiting. There was still no firm response from Japan although he knew that they were keen on an Indian collaboration. Finally he flew down to Osaka in 1983 on a courtesy ticket obtained through his wife who was working for the Air India then. He phoned up the corporate office of Sumitomo from his hotel room and sought an appointment. The very next day he met senior officials of Sumitomo who, to much a surprise, had preserved all the correspondence he had made for the purpose of collaboration. Soon Mohan returned to Mumbai with an agreement for the supply of the technical ingredient called Allerthin for the manufacturer of mosquito repellent mats, and the single equipment for dipping Allethrin. They did not give him any credit. Further, Sumitomo was free to supply the material to anyone else in India.

Prepared by Prof. K. Ramachandran Cases of the Indian Institute of Management, Ahmedabad, are prepared as a basis for class discussion. Cases are not designed to present illustrations of either correct or incorrect handling of administrative problems. Copyright 1993 by the Indian Institute of Management, Ahmedabad

Another, major hurdle was yet to be crossed. It was finance, and he did not have any money with him. His friends and family members who had supported him in experimental diaper business could not help him. His banker with whom he had long years of association dilly-dallied for eight months with his loan application before finally rejecting it. In the mean time the Sumitomo machine had arrived in Mumbai airport and was lying idle there. His loan application was rejected by almost 30 banks and financial institution on grounds of non viability. Finally, in 1984 one private financier offered to lend Rs.0.20 million @ 5 % interest PM, taking Mohans flat as collateral. Since he had no other option open he took it and got the machinery released from the airport. The financiers son offered funds for purchase of raw material on a condition that he be given sole Distributorship of Good knight. In mid 85 the father-son franchisers came with a proposal of 50% stake in the company, lest they would pull out immediately from the business, and Mohan have to settle their accounts forthwith. Though he was pushed to the wall, he did not give up. Finally, on hearing his story a loan officer of the Bank of India who had provided him with a credit facility of Rs 0.5 million earlier agreed to bail him out. The total liability that Mohan had with the bank of India came to Rs. 2.10 million after settling his dues with the private financiers. HE had promise to repay the bank by November 1985. It was mid 85 and a personally known advertising agency made a television advertisement for Rs.0 .50 million and on 45 days credit. The first television commercial of Good Knight came on 31st July 1985; only large reputed company advertised these days. Product To drive mosquito away people had been using an organic coil which emitted smoke on lighting. Yet another method followed was use of skin ointments. Transelektra Domestic Products introduced Good Knight as a substitute to all such mosquito repellers. Operationally it was simple. A rectangular light blue colored paper mat of 3.5 cm x 2 cm is electrically heated at 106 degree C temperature using a heating element to inactivate mosquito. A mat is effective for eight hours when heated this way. In order to maintain temperature at the specified level, they used Electronic Mosquito Destroyer (EMD) which worked on imported thermistors. An EMD consisted of a plate to seat the mat, a thermistors to heat the mat, a plastic cover and an entire wire. Transelektra got EMDs assembled through sub-contractors using imported thermistors from Sumitomo from Japan. They have had three sub contractors since beginning. These were started and owned by people known to Mohan. In, 1992, they were paid fifty paise per piece in terms of labour charges as it involved only manual assembling . Later in 1992, they started manufacturing 70,000 thermistors a year in Bangalore using indigenous raw materials. The rest of their requirements were met through import from Japan, and later from Italy too. Harpanhali who was Mohans colleague in his earlier job made a research break through for them by developing the raw material used in the manufacture of thermistors, otherwise called tablet. He had settled down in Bangalore, and after this development his laboratory was converted into a factory to produce light weight and compact thermistors. He joined the company as the factory manager there. Lakshmanan, a supervisor in the Mumbai factory who started his career as a typing assistant to Mohan, mentioned that Transelektra was the only firm which made thermisters in India. Indigenization of thernistors brought their cost down by a third to Rs.12. besides, several problems of import such as restrictions on foreign exchange release by the Reserve Bank of India, and carrying of about five months inventory could be avoided. Most competitors used cheaply available ordinary heating elements. Mohan mentioned that a few cheap imitators of Good Knight EMDs without thermistors were available in the market and they often had to get police help to stop them. In any case, the effect of initiation was not substantial.

The production process was simple. It started with cutting an easily available special type paper into the size of a mat and impregnating it with the brand name ' GOOD NIGHT'. This job was subcontracted and Tran Elektra received impregnated mats. The next stage involved adding specified drops of a mixture of chemicals which include allethrin, evaporator, fragrant etc. to the mats with the help of a small machine. Mats were manually placed on a slowly moving conveyer belt above which a burette carrying the chemical mixture was placed. It was adjusted in such a way that only a drop of the chemical mix would fall on each mat. It took ten hours for the blue colored chemical spread uniformly on the mat. Mats were than individually packed into strips of ten using thin transparent plastic sheets. Samples of mats were weighed before and after the addition of chemicals, and samples of finished mats were tested for quality in a mosquito chamber in their laboratory located in the head office. MOHAN never compromised on quality; said LAKSHMANAN. In 1992, they had introduced EMDS in blue and red colours. They had also reduced the size of packing. The factory consisted of a three storied block with a total area of 6,500 sq ft. The ground floor housed the store, and the other two floors production. They had four dipping machines- two, six- track and two, three-track, three of which were locally fabricated using the design of the imported machine. Each of the two six track machines could produce 6 000 boxes of 30 mats each and the threetrack machines 3 000 boxes each per shift. They used to operate three shifts a day but switched over to single shift in 1991. The installed capacity was 10 000 boxes per day in 1985. Wastage in terms of defect etc. constituted about ten percent which anyway was not a source of concern to them, said Lakshmanan . Finished mat remained in stock for a day. They opened a new factory in Chennai (Madras) in 1991, where the factory space was expanded from 5,000 to 8,000 sq.ft with in a year. 50 out of 100 employees were contract workers. Production capacity of Chennai Units was 70,000 boxes of mats per day Raw material supply become easy by 1991 .In October that year they started importing allethrin from France. Market Their first ever TV advertisement was telecast in the evening on 31 July 1985 in Mumbai. The theme was, no smoke, no cream, no ash, sweet dreams, Good Knight. Mohan positively responded to the large number of enquires for distributorship and dealership that followed. By 1992, the company had 2, 50,000 retail outlets spread all over the country, created to by 18 branch depots and 500 distributors. There were 156 field sales staff and area managers employed by the company. Each state had an Area Manager who fixed sales targets for distributors. His sales representatives produced orders from retailers. In reality, about 60 percent orders were produced by them, the remaining by stockists themselves. Customers often had to wait for the product to arrive in those days. When the company was started, sales were limited to the western and northern parts of the country. In 1988, coverage was spread to the southern and eastern regions also. We want to reach the nooks and corners of the country. Good Knight should be easily available everywhere, said Mohan. Operating from a small sized factory in Vasi on the outskirts of Mumbai, his turnover of Good Knight brand mosquito repeller mats and EMDs grew from Rs.9.00 million in 1985-86 to Rs. 110 Millon in 1988-89 and further to Rs 468 million in 1992-93. Sales in quantities rose over the years as given EMD Mat Boxes (30 each) (Fig in millions) 1985-86 ----1986-87 ----1987-88 0.32 1.50 1988-89 0.87 3.33 1989-90 0.95 6.69

1990-91 0.89 9.29 1991-92 1.00 12.70 Initially, they targeted Good night to upper income group. It was based on Gut feeling that they fixed a price of rupee one per mat. Later they provide that the market was open for middle income segment too. EMD which was initially priced at Rs. 25 was raised to Rs. 100 after a couple of years. Mahendran, Executive Director insisted on the Area Managers sending collections to the head office on a fortnightly basis. Area Managers in turn used to pull up distributors, often indiscriminately and would even appoint new distributors for meeting cash dispatch deadlines. They often found scapegoats in head office appointed distributors. Since 1991 Area Managers had to obtain head office permission to change/ appoint distributors The top management allocated targets almost evenly (ranging between 23-28 percent) among the four region. Targets and performance were reviewed in the monthly of the regional managers held at the head office. Production and distribution plans were finalized and divided between their production units in Mumbai and Chennai .they had about 40-50 distributors/Stockists in each state who received goods once or twice a month and paid in advance. Distributors, however, gave 30 days credit to retailers. Mohan felt that over the year some of their Area Mangers had become arrogant to both distributors as well as retailers.I have to correct it he said. In 1991-92, nearly Rs 20 million was spent on good knight advertisement. The national telecasting Agency Doordarshans charges had gone up from Rs 0.10 million for 30 seconds in 1985-86 to Rs 0.40 million in 1991-92. As percentage of turnover, advertisement expenses declined from about 26 Percent of turnover in 1985-86 to 29 in 1987, 17 in 1988, 11in 1989, 9 in 1991 and to 6 in 1992 Most of the other competitors did not stick to quality norms fixed by Sumitomo, said Mahendran. Besides, Good Knight emitted a pleasant odour. He added that they had rejected ideas for making Good Knight in different fragrance. In 1991, they sponsored an all India Good Knight Cup football tournament in Cuddalore 200 kms., away from Chennai. It was inaugurated with a lot of publicity and fanfare. Competition Since entering into the market in 1985 Good knight remained the all India market leader, and in 1992 they had 60% market share. Jet and Banish brands of mats and EMDs with 15% market share each and Odomos with 8% were closest rivals. There were another brands such as Casper, Sumari , Odomos, Six to Six ARS and Knight Queen sharing rest of the market. Casper had come out of fragrance mats and roll in cord EMD. Over the years the expanding market attracted not only small and large firms, but multinationals too and 1992 Bayer and Reckitt & Coleman had also joined the fray. According to Mahendran, they competed neck to neck with Jet in Madhya Pradesh and Banish in a 60:40 ratio in Tamil Naidu. Their market share in Mumbai was 60 percent, Calcutta 80 and Delhi 70 percent. The Economic Times reported on 17th Feb. 1993 the good knight continued to be the all India, market leader in Madhya Pradesh, Rajasthan, Andhra Pradesh and Orissa. Their sales had risen from Rs.1.1 million in 1987 to Rs.140 million in 1992.This report also mentioned that the household insecticide segment was a Rs. 2000 million market growing at 25 % per annum. It consisted of Mat, (45 %) coils (25%), non aerosol liquid (21%), aerosol liquid (4%) and creams (5%). Mats segment grew at more than (25 %) per annum. Mahendran also felt the market growth rate was about (25%) per annum but was likely to stagnate by mid 90s. When Odomos was launched by the Balsara Group in the Mumbai market, Good knight hit back head on effectively by dumping their product all over the city two days before the Odomos launch. This was an approach they adopted with other competitor too.

Jet was always priced marginally lower then Good Knight. In 1991 Jet introduced mats which emitted fragrance throughout the day, besides introducing Jet Plus, an EMD with two heating plates, one each for mosquito and fragrance mats. Its price remained the same at Rs.90. Jet also came out with Jet Gypsy, a plug in model. 1992 saw Jet Fighter (Price Rs.245) which used allethrin in liquid form to work with a thermowick. This eliminated the need to replace mats everyday. Transelektra did not pick up fight with the Jet Fighter. Anyway it faded out of the market soon. In the mats segment, Good knights retail price was Rs.37/- per box of 30. The others were priced at 35/- or lower. For sometime in 1991, Good Knight offered 5 mats free with every box of 30. HIT Transelektra expanded their product range to cover aerosol liquids and introduced Hit for flying insects in December 1991. The introduction of HIT for crawling insects was immediately followed by the entry of Bayer India with their Baygon Power cans. Both of them had a major ad campaign to corner market share .Transelektra spent Rs 10 million on advertisement for the launch of both the products, and annually since then. Their cockroach ad on buses etc. created much adverse reaction from public. Their slogan Cockroach Cockroach , Hit Cockroach, No cockroach with pictures of cockroach all over the buses created much repulsion in the minds of public. For this campaign, they used the bodies of Mumbai city buses. Since Mumbai office goers have to take buses at fixed timings to avoid missing connecting trains, they had little choice but to tolerate it. The newspaper reports on it provided extra publicity to Mohan .Although Bayer initially introduced a single product to counter the two different Hits, later they also switched over to follow the Hit strategy. Snuggy Mohans diapers project got a facelift in the light of Good Knights success, and a new company called Diapers India Ltd was started with technical assistance from a US firm. Snuggy brand of diapers was launched in 1989. Use of diapers for babies was still a new idea in India, and the market was limited to a few urban centers. Buyers belonged to upper middle class and upper class. There were two other small manufactures, one in Delhi and the other in Hyderabad, both small firms. They had also appeared in the market about the same time, and all the three were finding it difficult to sell diapers. Transelektra spent Rs. 5.0 million each in 1989 and 1980 for advertisement but discontinued all advertisement in 1991. By 1991 end the other two companies had almost stopped operations, leaving Snuggy to be the sole survivor. 1993 saw revival of Rompies from Delhi. Mahendran claimed that Snuggy had a market share of over 75 percent. Snuggy international , an improved and higher priced product was in introduced in mid 1993 .The price of Snuggy was raised from Rs. 9 per diaper to Rs. 11 in early 1993. Mahendran said that margins were about 10 percent of sales before taxes in diapers at the price of Rs. 9 per piece. It was rumoured in market circles that both Procter & Gamble and Johnson & Johnson were contemplating entry into diapers market. They had started a Snuggy Club in Mumbai for young mothers were mothers could meet and discuss problems of bringing of babies. It provided occasions for social and learning interactions to the mother. One can become a member for a maximum of three years. Cochin and Bangalore had similar clubs with a total membership of 1,200 young mothers. They had introduced Snuggy books containing childrens stories in 1992. It was expected to push the sale of Snuggy. There was no second printing of these books. Their monthly publication for

mothers called Young Mother sold over 20000 copies, and was a competitor to other popular journals. Mohan had been passionate with cinemas, and got into film making in 1990. The first film, which was made in his mother tongue, Malayalam, was a run-away success and had several scenes with Good knight, Hit and Snuggy advertisements in the background. It was the first time anyone had used full-length feature film as advertising. In 1993 he produced his first film in Hindi called Gardish. A week before the release of the film there was rumour in Mumbai that the hero of the film and some others related with it were arrested by the police in connection with a serious of bomb blasts that had rocked Mumbai. In fact, a fortnight before that a popular Hindi film star was arrested with charges of involvement in the bomb blasts conspiracy. The rumour originated from a newspaper distributed in the evening in the over-crowded sub-urban trains in Mumbai. Lead newspapers reported in the next couple of days that the rumour was a joke, and it was only an advertisement notice for Gardish. The case writer saw the notice in Mohans office the subsequent week and noticed the close resemblance this Good Day had with the popular newspaper Mid Day. Personnel In 1986 when Mohan had just started operations, he was assisted by cousin, one sales representative, one steno typist and 20 workers. He used to get professional advice from Mahendran, a charted accountant who later joined him as Executive director in Feb 1987. Mohan looked after marketing himself, but delegated other functions such as production, finance, and personnel to Mahendran. He, however, had the final say in everything especially in the early days. As business grew and activities expanded he delegated further and got involved in operational details only in times of crisis. Mohan and his wife together owned the entire equity of the company. About team building, Mohan told a group of students I recruit quality people who are capable of delivering the goods. I can train and groom them to be organization men. Values can be inculcated in them. They recruited a purchase manager in mid 1947 and a marketing manager by end 1987. They added professionally qualified people in 1989 for various departments. However, Mahendran said that they found it very difficult to recruit highly qualified people for various functions. In 1992, they employed 30 field sales staff and 200 workers. In one of the meetings with the case writer, Mohan shared his dreams of making Transelektra a big firm manufacturing and selling several innovative products. In the greeting cards area which was started after indentifying creative talents in one of his officers; insult card was one thing. They contemplated a public issue for financing growth. They had plans for expanding production of thermistors and the special quality paper used for the manufacture of mats in large scale, even to the extent of meeting at least part of the requirements of their competitors. They wanted to expand production of Hit also for Indian and overseas markets. They needed nearly Rs. 250 million for these projects, but were not sure whether they would be able to generate enough funds for the share issue for all these without hurting growth of other products. They were also concerned that they did not had enough funds to cover the 25% promoters contribution stipulated by the securities and exchange board of India. Transelektra Changing Hands The process of economic liberation unleashed since 1991 led to series of corporate restructuring in India. Several overseas companies tried to acquisition of existing medium sized companies to quickly establish in India. Some of large Indian companies also started restructuring their portfolios.

Mid 1992 saw Mohan intensely negotiating with a large US based healthcare company for selling more than half of the equity he was holding. To a question whether he was not feeling sentimental about selling his own babies he replied, I have bought these products as children. Now that they are growth up, let someone else with more muscles power run them. I will move on to other new and interesting things. I believe that such strength will be required to be successful in this area in this area in the years to come. Transelektra Domestic products was finally sold to Godrej, one of the largest consumer products manufacturers in India for a net price of one billion rupees in 1994. Godrej obtained the brand good Knight for the western region whose major market was Mumbai. In 1995, Godrej Hi Care Ltd., as the company is named with Mahendran as the Managing Director, acquired their two major competitors Banish and Jet registered a turnover of Rs 842 million in 1994-1995, Rs 1247 million in 1995-1996 and Rs 2017 million in 1996-1997. Net profit after taxes for the same period was Rs 83, 182 and 294 million respectively. In 1997, Godrej offloaded majority of their stake in the company to US based Sara Lee Corporation for Rs 155 billion. While Sara Lee held 51 percent, Godrej had 44 percent and Mahendran the remaining 5 percent of the shares. In 1998, Mohan was already managing a company called Shogun manufacturing different varieties of paper. Shogun was probably the first company in India to produce a high quality facial tissue paper. He was also deeply involved in aero sole bottling and real estate. He collaborated with an Israeli firm to introduce an innovative computer based education programme for the first time in India. Mohan continued to finance films and produced his own films with young and highly creative directors.