INTERIM REPORT CAPSTONE PROJECT : STRATEGIC GROUP ANALYSIS OF HUL

Submitted To Pf. T.Vishwanathan

Submitted By Anshul Rawat Anup Kumar Khanuja Supreet Manu Gupta Shuchi Bhargava

Rationale & objective(s) for selection of project topic:

Strategic group is a group of firms in an industry following the same or similar strategy along a set of strategic dimensions. Dimensions include strategic decision variables that best distinguish the business strategies and competitive positions of firms within an industry such as scope and mode of competition. All companies should have a clear strategic perspective to achieve competitive advantage. The selected strategies should be in accordance with objectives, competencies and competitive rules prevailing in the market. So the aim of strategic group analysis is to find out if clusters of firms that have a similar strategic position exist within an industry or no. It involves identifying groups or clusters of businesses that adopt similar strategies and that tend to be affected by, and respond to, competitive actions and external events in similar ways. Strategic group analysis is an intermediate step between industry analysis and firm analysis Strategic group analysis is important to understand the competitive structure of an industry. It also provide an understanding of the dynamics of strategic group which is useful in explaining changes in competitive strategy over time.

Reasons for carrying out strategic group analysis : The reason of this can be explained by the benefits of identifying the strategic groups. The most important benefits of strategic group concepts is to facilitate organization when analyzing COMPETITORS (not all but unorganized sector)-OUR PROJECT PROBLEM, making strategic investment decisions, and developing successful strategies by simplifying the market structure. Other reasons for carrying out this project are as follows:

Potential applications of strategic group analysis: Simplification of analysis of the strategic heterogeneity of the market is one of the oldest

applications of strategic group analysis. Analyzing the strategies of the market on a firm basis is a time consuming and expensive process. Strategic group analysis can eliminate these problems by providing a global idea about the market.

The analysis of business rivalry can be markedly simplified through strategic group analysis. (competitor analysis) The link between the performance and the strategic groups was concluded empirically by some researchers, like Porter (1979

The strategic group analysis can be used for determining the strengths and weaknesses of a firm. The evolution of the market can be analyzed in a structured format. In this way, the information about changes in the number of the strategies implemented in the market and convergence or divergence of these strategies can be monitored. One benefit of strategic group analysis is that, it can be used to alert the companies to the identities of companies which can be easily imitated. Also, it attracts attention to those companies which are different from them but have a capacity to threaten their existence.

REASONS FOR SELECTION OF SECTOR AND INDUSTRY-

These are as follows:

IS ORGANIZED SECTOR ENJOYING A SAFE HAVEN?

Apart from the reasons that benefits the organization by undertaking this project, it will also help us to understand the strategic group i.e. companies using SIMILAR RESOURCES TO CATER SIMILAR MARKETS, not only constitute threat of capturing market of each other (among the group) but other players that form the unorganized sector hurt the market share of big FMCG companies in ( rural market- (LIONS SHARE OF SOAP MARKET)).

WHAT MARKET SIZE?(Is it worry some)

Idea is to understand where in lays the real competition for HUL, real in terms of the sizeable chunk held by unorganized sectors.

WHY FMCG?

FMCG, We as a group has interest in this industry and it WILL BE INTERESTING for to us to put Strategic group concepts which we have learnt in class to practice.

The above reasons state the objectives and rationale that why we want to undertake the project include strategic group analysis of HUL particularly for personal care segment.

Genesis and brief description of the problem:

Unorganized sector consists a larger part of Indian Economy. For example In several villages, farmers still go to traditional money lenders like zamindars for meager sums of a few hundred or thousand rupees this is how banking sector face the problem from unorganized sector. Similarly Indian retailing is still dominated by the unorganized sector and there is still a lack of efficient supply chain management. FMCG market is the fourth largest segment in the economy, It has strong MNCs presence and it is characterized by a well established distribution network and intense completion between organized and unorganized sector. But it has facing several challenges:

WHY IS UNORGANISED SECTOR PRODUCT CHEAPER THAN ORGANISED SECTOR? The first challenge faced by FMCG Sector is competition from the unorganized sector. Traditional retailing has established in India for some centuries. It is a low cost structure, mostly owner-operated, has negligible real estate and labour costs and little or no taxes to pay. Consumer familiarity that runs from generation to generation is one big advantage for the traditional retailing sector

WHY IS ORGANISED SECTOR PRODUCT EXPENSIVE THAN UNORGANISED SECTOR? Players in the organised sector have big expenses to meet, and yet have to keep prices low enough to be able to compete with the traditional(UNORGANISED) sector. High costs for the organised sector arises from : higher labour costs, social security to employees, high quality real estate, much bigger premises, comfort facilities such as air-conditioning, back-up power supply, taxes etc. Organised sector also has to cope with the middle class psychology that the bigger and brighter a sales outlet is, the more expensive it will be.

So the problem we are going to undertake under this project is the competition faced by FMCG sector by unorganized sector. And to have a clear understanding of the problem we have selected one of the major player in FMCG sector HUL.

 ORGANISED VS UNORGANISED: A RURAL TUSSLE

We have chosen this problem because despite the strong presence of MNC players in FMCG sector the unorganised sector has a significant presence in this industry. In most categories, unorganized sector is almost as big as the organised sector, if not bigger. THUS, an analysis of the present strategies is being done so as to find how productive they have been to defend against the problem, if not counter attack. Marketing strategy of HUL is being highlighted below which is strictly to cater the rural markets(project shakti)-upliftment of rural women(emotional touch point)

DOES AN UNORGANISED SECTOR SOAP COMPANY PAVE ITS WAY

INTO THE HUL STRATEGIC GROUP? So to find out that to face the present situation what approaches should an organization adopt we adopt strategic group analysis as one of the approach to solve the problem. It will let us knowwhere HUL is and what it needs to do to defy a threat with sizeable share in the rural setup dominantly focusing on unorganized sector. We were also try to find out other generic strategies and approaches to give a comprehensive solution for the problem.

Analysis of the problem :

To understand how the unorganized sector affects the operations and growth of organised sector specifically in marketing area we first studying the strategies that HUL had adopted to face the challenges arise from the unorganized sector. In comparison to the urban market, which consists of roughly 250 million people, the rural market is 775 million people across 638,000 villages. Within ten years, per household consumption in rural India is forecasted to equal todays urban levels. To penetrate the rural markets, HUL launched a unique four tier distribution system. Markets were segmented based on their accessibility and business potential.

1. Direct Coverage: HUL appointed a common stockist to service all outlets within a town

and sell a limited selection of the brand portfolio. Towns consisted of populations of under 50,000 people. 2. Indirect Coverage: HUL targeted retailers in accessible villages close to larger urban markets. Retail stockists were assigned a permanent route to ensure that all accessible villages in the vicinity were served at least once a fortnight. 3. Streamline: Streamline leveraged the rural wholesale channel to reach markets inaccessible by road. Star Sellers were appointed among wholesalers in a particular village. Star Sellers would purchase stock from a local distributor and then distribute stock to retailers in smaller villages using local means of transport (e.g. motorcycles, rickshaws).

4. Project Shakti: Project Shakti targeted the very small villages (<2,000) and tapped into

pre-existing womens self help groups (SHG). Underprivileged rural women were invited to become direct-to-consumer sales distributors for HUL products. Termed Shakti Ammas (literally strength mothers), these women represent HUL and sell its home-care, health, and hygiene products in their villages.

Various other projects undertaken by HUL strictly focusing on rural sector. Project STING (Strategy to Inhibit Nirma Growth) Taking a cue from CavinKare, various LUP products from HLL were launched. A new toothpaste called AIM was launched specially for the Indian Rural Market. But later on it was called off from the market & the entire focus was set on Pepsodent & CloseUP.

Operation Harvest:The reach of conventional media and, therefore, the awareness of different products in rural markets is weak. It was also not always feasible for the redistribution stockiest to cover all these markets due to high cost involved. Yet, these markets are important since growth opportunities are high. Operation Harvest endeavored to supplement the role of conventional media in rural India and, in the process, forge relationships and loyalty with rural consumers. Operation Harvest also involved conducting product awareness programs on vans. Cinema Van Operations:Cinema van operations are funded by the redistribution stockiest where films and audio cassettes with song and dance sequences from popular films are shown to consumers along with advertisements of HUL product

These are some of the marketing strategies that HUL has adopted. After studying these strategies we are also trying to find out how HUL through its operations is helping themselves to provide goods which are at par with rates offered by unorganized sector(whether they are successful or not?. And for doing so we have selected the particular segment of personal care soap segment.one of the major reason for selecting this segment is that it has severe competition and high level of brand proliferation

In it we first understand How the market for soap have been segmented. But first we will see who is the market leader in FMCG soap segment, In organised market if we see the major market share has been captured by HUL.

Lead players in market can be depicted from the table given below

We can infer from the table that the market shares of the HUL products was greater than other companies, which shows that the acceptance of HUL products are more by consumer. Therefore HUL is considered as the one of the most branded and reliable company and the product are frequently accepted and used by each and every category of consumer. And the HUL put its all effort to maintain its standard with respect to price and the quality of the products

On the basis of information collected on various brands and their prices we have find out following segments from the sources-

The above segments share following share of the market as a whole-

7% 3% 35% 55%

Economy

Popular

Premium

Super Premium

After classifying The segments we compare and correlate this segmentation with the other bases of segmentation that is income level of the customer to find out which customer group prefer which segment. Is there a significant relation with the income of consumer and his purchase, if yes how and to what extent it will affect the choice of the consumer. This will help us to understand the effect of unorganized sector products on HULs products as the major factor that affects organised sector from unorganized sector is COST.

After this analysis we will go for the Strategic group analysis for this we have prepared a table that consist of the major brands of HUL in soap and there close competitors which form the strategic group with them and on the basis of this table we will prepare the stragtegic map for these product in detail report. Here the table is given below:

HUL products

competitors

Variables for strategic mapping Fragrance and price Softness, premium range, target mainly women segment Ayurvedic product, family soap Health and Hygene, medicated freshness Beauty soap Glycerine, gentleness Freshness, natural soap

Breeze Dove

Godrej no.1, nirma Camay,

Hamam Lifebuoy

Margo Dettol

Liril Lux Pears Rexona

Cinthol Santoor Savlon Cinthol

This starategic mapping will help us to understand what strategies HUL is adopting to remain competitive and what more it can do to become market leader and achieve more growth in that particular strategic group. As we understand from the study that unorganized sector did not form any strategic group with HULs high end products but it faced competition in lower end segment by unorganized sector as the product range is almost the same . So after all the study we will be able to find out how HUL is trying to tackle the emerging competition from unorganized sector and by doing this strategic group analysis we are also able to find out where HUL lacks and can suggest some strategies to face this competition in more efficient way.

Approach to find solutions for the designated problem:

To find out the solution to the problem stated above that is the level of competition and threat HUL faced by unorganized sector. Our approach consists of following stepsData collection- Primarily secondary data, but primary data is also been collected from few executives from HUL. Data Analysis- After data collection second step is to analyze the data and for this we are first adopting Strategic group analysis to find out HULs strategic group. To make our study more effective, we have limited this strategic group analysis to the category personal care specifically to the product Soaps. After completing this strategic group analysis, we will be doing strategic mapping by this we will be able to identify the major competitors to the particular segment and brand, this will help us to identify what different strategies HUL can adopt to face the competition by different sectors whether from unorganized or organized, which makes it easier for us to suggest generic and other specific strategies for improvement in market share and growth of HULs Products. Once the analysis of the present situation is done, we plan to come up with a diagnosis stating the problems faced by HUL and how to overcome the threat of unorganized sector using various new strategies complimenting the existing strategy followed by HUL.

BIBLIOGRAPHY

Web references
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

www.HUL.com www.gpcl.com www.jjibp.com www.nirma.com www.colgate.com http://www.hul.co.in/careers-redesign/carreerschoices/marketing/ http://en.wikipedia.org/wiki/Strategic_group http://www.hul.co.in/Images/HULFactsheetApril2011_tcm114-188694.pdf http://www.hul.co.in/Images/USLP%20India_tcm114-241468.pdf www.crisil.com http://www.hul.co.in/Images/HUL%20Sustainable%20Development%20Report %202009_tcm114-226531.pdf

12. 13.

http://www.marketlineinfo.com/library/Default.aspx http://www.aceanalyser.com/

Books References Kotler Philip, Marketing Management, Tenth Edition, New Delhi, Prentice- Hall of India Private Ltd.