2016

David Fights Goliath:

The Nirma Story[Indian soap
and detergent industry]
The story of nirma is a example of a success of Indian entrepreurship is the face of
stiff opposition by the big players in the market .

SUBMITTED TO;MR BAVNIT

SUBMITTED BY; Shashank Thakur (21)
21-Sep-16
INTRODUCTION
Starting as one product, from a room in backyard in 1969 and made
a detergent name “NIRMA”after his daughter nameNirupama. In 1969 Dr.
Karsanbhaipatel , at gujrat government department of minning and
geology manufactured phosphate free detergent powder , started selling
it locally. NIRMA is a group of companies based in city of Ahmedabad in
western india that manufacture product ranging from cosmetics, soaps,
detergents,salt,and many more. Today nirma has over 15000 employees
and turnover of rs. 3550 crores. In 2004 nirma detergent approach
800,000 tonnes one of the largest volumes sold in the world under single
brand name.

STRATEGIES BY NIRMA
Nirma started there market with price- led marketing strategy. They
started with price of Rs. 3/kg, when the available cheapest brand in
the market was Rs. 13/kg. Mr.Patel bet India masses will buy if its
affordable. They firstly focus on rural area. This describe the LAW OF
DEMAND ie. when the price of the product decrease , demand for
that product increase.
Every pack of nirma came with money back gurantee.
Cost reduction strategy of nirma helps them to entre in market
withes. 3/kg. Nirma powder did not contain any ingredient to
improve the whiteness of fabric. it does not contain ant perfuming
agent or active agent in ingredients this is the reason they able to
keep the price low. Nirma relied on low cost technology, process and
raw material.
 Availability of nirma washing powder in different pack sizesie. 30gms,
200gms,500gmsand 1kg for different segment of population.
Nirmaexpand its portfolio by including fabric care product, personal

product.

Countered by HLL (Hindustan Lever Limited)

 HLL led differerentiation led strategy, highlights the merits of surf as
detergents and market it as “premium product”
 The company decide to enter the low price segmentby positioning WHEEL
against nirma at Rs. 11
 To counter In personal care product HLL introduce “breeze”
 Sale promotion campaign by offering bucket with 1kg surf
 HLL do head on attack on nirma that 1kg of surf can was more clothesthan
the low priced yellow washing powder hence economical to buy surf.

Nirma road to success:

Nirma ranked as largest detergent selling product in the world, and second largest
seller0. in toilets soaps by 1999, Nirma had more than 35% market share in
detergent segment and around 20% market share in the toilet soap segment. The
company got listed on the stock exchange in the year 1994.

V1ANALYSIS ON NIRMA STORY

Nirma is based on the monopolistic competition approach. It shows how the
equilibrium price and quality are determined in short run and long run. It is form of
market organization in which there are many seller of heterogeneous or
differential product ,differential products are those that are similar but not
identical and satisfy the same need. For example numerous brands of detergents.

LONG R.
UN: In long run more firms may enter into the market, there may be many
producers and many consumers in the long run and no business has total control
over the market price. There will also be break even situation in the long run Ie;
neither profit nor loss, the firm will make zero economic profit.

SHORTRUN: In short run the competitive firm reduces a differentiated product the
demand curve it faces will be negatively sloped since there are many close
substitute for the product the demand curve is highly price elastic. The price
elasticity of demand is higher the smaller is the degree of product differentiation

POSERS:

1.Would you regard detergents as an industry or a product group?

We regard detergent as an industry instead of a product, because industry is a

place where different kind of products are manufactured and nirma started as an
industry with one head product. Late 1960’s the detergent powder market
featured mainly on the premium segment dominated by big players.

2. Which feature of monopolistic competition is exhibited in the above case?

 High price led strategy of HLL before nirma entered into the market.
 Product differentiation
 More elastic
 Economies of scale
 Selling cost

3. As a managerial economist you can visualize the long term sustenance of a

company that sells a product that has lower quality but also lower price in
comparison to its rival companies?

As a managerial economist we cannot visualize the long term sustenance of a

company that sells product with low quality and low price, because in long run the
income of a customer may rise and they feel ashamed in using the low price
products, they move towards luxury products or other substitutes goods may
enter into the market with a same strategy and with more quality, so we cannot
visualize success in long run.

Years Profit in cores

2011 546
2012 510
2013 386
2014 385
2015 243

From the above table we can conclude that there was graduvallydecrese in the
profit ofnirmabecayse in long run there may be entry of new firms with the same
strategy which leads to increase in its sudstitues and also the income of the people

May rise and they may shift to luxury goods, so we cannot visualize long run
sustenance.

4. Can success of nirma be extended to other product groups?

Yes, the success of nirma can be extended to other products. The some of the
products of nirma which got success are

 Nirma is 7th successful brand in india.

 Soda ash: In 2007 nirma purchased the American raw material company
Searle’s valley minerals making it among top 7 in the world.
 Nirma also entered into toilet soap market to target premium segment and it
become second largest toilet soap brand in India.
 Selling of normal in India:
 Toilet saop-3 million pieces
 Detergent powder-6.2 millions
 Lime fresh toilet soaps-17 millions
 Nirma also entered successfully into other products like
cosmetics,beautysoaps,food products, this shows that the success of nirma
can be extended to other product groups also.