Subject Code: UCS1E Paper: Case Study Specific Instructions:

Answer all the questions mentioned at the end of the case. Marks allotted 100. Each Question carries equal marks.

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The Nirma Story "It all started to earn a side income, and at that stage, I had never imagined this kind of success." !arsanbhai Patel" C#$" Nirma %td& "Like other FMCGs, we have not concentrated only on marketing strategy. From the very eginning, o!erational strategy in cost containment, ackward integration, economies of scale, innovative !roduction, !ackaging and !enetration schemes have received e"ual attention." 'iren ! Patel" C#$" Nirma Consumer Care %td& (Nirma)s mar*etin+ arm, Introduction -n the earl% 1./0s0 when 1irma washin# &owder was introduced in the low-income market0 2industan 3e+er 3imited $233' 1 reacted in a wa% t%&ical of man% multinational com&anies. !enior e(ecuti+es were dismissi+e of the new &roduct4 5 hat is not our market50 5We need not "e concerned.5 6ut +er% soon0 1irma7s success in the deter#ents market con+inced 233 that it reall% needed to take a closer look at the low-income market. he com&an% launched toilet soa&s for the &remium se#ment. 2owe+er0 anal%sts felt that 1irma would not "e a"le to re&eat its success stor% in the &remium se#ment. -n 20000 1irma had a 158 share in the toilet soa& se#ment and more than 908 share in the deter#ent market. - 'umble .e+innin+ -n 1.:.0 ;arsan"hai <atel $<atel' 20 a chemist at the =u,arat =o+ernment7s >e&artment of Minin# and =eolo#% manufactured &hos&hate free !%nthetic >eter#ent <owder0 and started sellin# it locall%. he new %ellow &owder was &riced at )s. 9.50 &er k#0 at a time

when 2337s !urf was &riced at )s 15. !oon0 there was a hu#e demand for 1irma in ;ishna&ur $=u,arat'0 <atel7s hometown. 2e started &ackin# the formulation in a 10(12ft room in his house. <atel named the &owder as 1irma0 after his dau#hter 1iru&ama. <atel was a"le to sell a"out 15-20 &ackets a da% on his wa% to the office on "ic%cle0 some 15 km awa%. hus "e#an the #reat ,ourne%. 6% 1.?50 1irma washin# &owder had "ecome one of the most &o&ular deter#ent "rands in man% &arts of the countr%. 6% 1...0 1irma was a ma,or consumer "rand @ offerin# a ran#e of deter#ents0 soa&s and &ersonal care &roducts. -n kee&in# with its &hiloso&h% of &ro+idin# qualit% &roducts at the "est &ossi"le &rices0 1irma "rou#ht in the latest technolo#% for its manufacturin# facilities at si( &laces9 in -ndia. 1irma7s success in the hi#hl% com&etiti+e soa&s and deter#ents market was attri"uted to its "rand &romotion efforts0 which was com&lemented "% its distri"ution reach and market &enetration. 1irma7s network consisted of a"out 400 distri"utors and o+er 2 million retail outlets across the countr%. his hu#e network ena"led 1irma to make its &roducts a+aila"le to the smallest +illa#e. After esta"lishin# itself in -ndia0 1irma e(&anded to markets a"road in 1.... -ts first fora% was into 6an#ladesh0 throu#h a ,oint +enture @ Aommerce B+erseas 3imited. Within a %ear0 the "rand "ecame the leader in the deter#ent market in 6an#ladesh. he com&an% also &lanned to enter other re#ions like the Middle East0 Ahina0 )ussia0 Africa and other Asian countries. The /oad to Success he use of deter#ent &owder was &ioneered in -ndia "% 2337s !urf in 1.5.. 6ut "% the 1./0s0 1irma dominated the deter#ent &owder market0 sim&l% "% makin# the &roduct a+aila"le at an afforda"le &rice. -n 1..00 1irma entered the -ndian toilet soa&s market with its 1irma 6eaut% soa&. 6% 1...0 1irma "ecame -ndia7s second lar#est manufacturer of toilet soa&s "% acquirin# a 158 share of the 50900000 tonnes 4 &er annum toilet soa& market. hou#h wa% "ehind 2337s share of :580 1irma7s &erformance was remarka"le as com&ared to =odre,0 which had a share of ?8. 6% 1...-20000 1irma had also #arnered a 9?8 share of -ndia7s 2.4 million tonnes deter#ents market. 2337s share was 918 for the same &eriod. 0 'i+her Costs N1 Within a short s&an0 1irma had com&letel% rewritten the rules of the #ame0 "% offerin# #ood qualit% &roducts at an un"eata"l% low &rice. 1irma7s success was attri"uted to its focus on cost effecti+eness. *rom the +er% "e#innin#0 <atel had focussed on sellin# hi#h+alue &roducts at the lowest &ossi"le &rice. he com&an% endea+ored to kee& im&ro+in# qualit% while cuttin# costs. o kee& &roduction costs at a minimum0 1irma sou#ht ca&ti+e &roduction &lants for raw materials. his led to the "ackward inte#ration &ro#ramme0 as a &art of which0 two stateof-the-art &lants were esta"lished at 6aroda and 6ha+na#ar. his resulted in a decline in raw-material costs. 0 .rand 2ars 3ES 1irma also had inno+ati+e marketin# strate#ies. -n the mid-nineties0 1irma successfull% e(tended its "rand to other &roduct cate#ories like &remium deter#ents $1irma !u&er

Washin# <owder and >eter#ent Aake'0 &remium toilet soa&s $1irma <remium0 1ima !andal0 1irma 3ime *resh'. -t followed its ori#inal marketin# and &ricin# strate#ies in the econom% se#ment as well as in the &remium se#ment. he com&an% entered the hair care market with 1irma !hikakai0 1irma 6eaut% !ham&oo0 and 1irma ooth&aste. Cnlike deter#ents0 soa&s were a &ersonal-care &roduct. Man% customers had dee& &s%cholo#ical "onds with their soa& "rands. Moreo+er0 the market was se#mented "% 233 "% &rice0 "% scent a&&eal0 and "% "rand &ersonalit%. !o0 1irma &ositioned 1irma 6ath a#ainst 3ife"uo%50 1irma 6eaut% !oa& a#ainst 3u(:0 1ima )ose a#ainst 6reeDe/0 and 1ima 3ime a#ainst Eai 3ime ?. -nitiall%0 the ad+ertisin# s&end of the com&an% was +er% low0 as com&ared to other *MA= com&anies. 1irma s&ent onl% 1.25-28 of its turno+er on ad+ertisin# as com&ared to the normal :-108. *or endorsin# soa&s0 the com&an% used starlets like !an#eeta 6i,lani0 !onali 6endre0 and )i%a !en0 who were relati+el% unknown at that time. he ad+ertisement messa#es were also +er% sim&le and focused on the "enefit of the &roduct. 1irma alwa%s &referred to &lace the &roduct on the shel+es first0 recei+e feed"ack0 and then create an endurin# ad cam&ai#n. While introducin# toilet soa&s and deter#ents in the &remium se#ment0 1irma relied on its time-tested wea&on @ <rice. he com&an% &lanned to concentrate on +olumes in these se#ments as well. 6ut there was a chan#e in the mar#ins #i+en to retailers. Cnlike the econom% &roducts0 where the cost "enefits were &assed on to the consumers0 1irma &assed on this "enefit to the retailers. -t #a+e them hu#e mar#ins. *or instance0 for 1irma &remium soa&0 it offered 528 and for 1irma sham&oo0 it offered an un"elie+a"le mar#in of 1408. Cnlike deter#ents0 the soa&s and sham&oo market was hi#hl% fra#mented. here were a"out 15-20 "rands0 and it was difficult for an% soa& to #et a siDa"le market share. Moreo+er0 this market was less &rice sensiti+e. !o0 it was difficult for an% com&an% to sustain itself on &rice alone. Anal%sts felt that it would take %ears to chan#e 1irma7s "rand ima#e. Accordin# to a sur+e% conducted "% !amsika Marketin# Aonsultants0 1irma7s marketin# firm0 1irma was considered to "e a chea& "rand. Man% &eo&le were almost ashamed to admit that the% were usin# it. o shed this ima#e0 in the late nineties0 1irma released cor&orate ad+ertisements worth )s 10 "n throu#hout -ndia. Anal%sts felt that the fast #rowin# sham&oo market was a "etter "et than the &remium soa&s market. -n -ndia0 onl% 908 of the &o&ulation used sham&oos and more than /08 of this #rou& was in the ur"an areas. 2owe+er0 accordin# to some anal%sts0 thou#h the &ercei+ed &otential of the rural market was +er% hi#h0 in actual &ractice0 it was difficult to &ersuade rural folk to use sham&oos. Another &ro"lem 1irma faced was that of inadequate infrastructure. hou#h it had a stron# &resence in the smaller towns and +illa#es0 it lacked the network necessar% for &enetratin# ur"an areas. hus0 1irma7s entr% into &remium soa&s and sham&oos seemed to ha+e failed. The /oad -head hou#h 1irma was "etter known as a &roducer of low-cost econom% ran#e of &roducts0 it was successful in the middle- and u&-market se#ments. 6ut at the same time0 com&etition was also increasin#. While 233 continued to "e a ma,or com&etition0 <F= and 2enkel !<-A also ado&ted a##ressi+e measures. <la%ers from unor#aniDed sector were also addin# to the com&etition in the deter#ents and washin# &owder industr%. 2owe+er0 <atel

was confident of tacklin# the com&etition. 2e said0 5We hold the &rice line and the satisfied consumer naturall% re+erts to us.5 -n the &ast three decades0 the "rand had #rown in +alue and +olume on the "asis of his success formula4 5A customer does not look for one-time frills or feel-#ood factors. )ather0 the householder wants a lon# term solution to his or her needs.5 What remained to "e seen was whether 1irma7s cost-focussed model would "e a success in the lon# run.

4uestions:
41 "It all started to earn a side income, and at that stage, I had never imagined this kind of success." ;arsan"hai <atel0 AM>0 1irma 3td. What was the stor% "ehind e+olution and success of 1irmaG 45 What were the marketin# mi( ado&ted "% 1irma to make it such a hu#e success G 46 "Like other FMCGs, we have not concentrated only on marketing strategy. From the very eginning, o!erational strategy in cost containment, ackward integration, economies of scale, innovative !roduction, !ackaging and !enetration schemes have received e"ual attention." 2iren ; <atel0 AM>0 1irma Aonsumer Aare 3td.2ow was 1irma a"le to focus on all the a"o+e mentioned strate#iesG6riefl% e(&lain all the as&ect #i+in# e(am&lesG 47 Ad+ertisin# &la%s a ma,or role "ehind the success of an% &roductG >o %ou think in conte(t of nirma it was a"le to do soG -f not what role ad+ertisin# did in conte(t of nirmaG 48 5A customer does not look for one-time frills or feel-#ood factors. )ather0 the householder wants a lon# term solution to his or her needs.5 >o %ou think 1irma7s costfocused model would "e a success in the lon# runG As a marketin# mana#er what strate#ies %ou would #o forG