Case Analysis on Nirma

SUBMITTED BY:Aditya KashyapMohit Sharma

Amit KumarAbhay ChauhanHarkesh Singh

In NIRMA Case , these are the main points to be discussed:-

Its sense of CSR(corporate social responsibility)

Its Beginning and Growth Product Range

Technological & Overseas Operation

Emerging Issues for Nirma

INTRODUCTION

NIRMA is a perfect example of :-

SMEs vs. MNCs

NIRMA vs. HUL, P & G

Low priced vs. Premium ranged

NIRMA -

AN ORGANISATION WITH SENSE OF

CORPORATE SOCIAL RESPONSIBILITY

(NERF) Nirma Educational and Research Foundation , 1994

Nirma Labs

Nirma Memorial Trust and Nirma Foundation, 1979

In mid-2000s, Nirma was becoming known for its philanthropic , educational and charitable Institutions.

Was it always like this?

Lets take a look at Nirma’s story ……..

The detergent market can be classified into premium (Surf, Ariel), mid-price (Rin, Henko, Tide) and popular segments (Nirma, Wheel, Mr. White)

a) They account for 15%, 40% and 45% of the market respectively,

which is only 60 per cent of the total market.

b) Regional and small unorganized players still account for a significant 40% of the total detergent market.

c) Per capita consumption of detergent in India (2.7 kg) is lower than any other country

Nirma’s success “ Provide the common man with a quality product at an affordable price.”

In 1977… Surf - 31%...... Nirma - 12%

In 1987… Surf - 07%...... Nirma - 62%

FACTS

Inferior Quality.“Nirma contained no ‘active detergent’, whitener, perfume, or

softener. Tests performed on Nirma confirmed that it was hard on the

skin and could cause blisters.

To conclude:-

SUCCESS

Overall low cost structure--- Low overheads Indigenous machinery Lean and frugal top management Cost control.

Not only this ……..

Launched massive TV campaign ….

AFTER NIRMA SUCCESS

In 1987, HLL launched “WHEEL”.

---- low priced @rs.14/kg.

---- equivalent quality.

---- wheel blue and wheel green.

------> surf launched massive TV campaign .

RESULTS

NirmaHL

Wheel

Sales

(US$ million)150 100

Gross Margin (%) 18 18

NIRMA---- 1990’s Consisted of 5 companies:-

Nirma detergents limited, (NDL) Nirma soaps and detergents limited, (NSDL) Shiva soaps and detergents limited, (SSDL) Nilima chemicals limited, (NCL) Nirma limited.

MERGED in 1997.(Economies of scale, business synergy, reduction of overheads)

MARKETING AND DISTRIBUTION Alpa marketing enterprise, (AME).

Manufacturing at :-

--- 7 Locations in GUJARAT.

--- MP,UP,MAHARASHTRA.

1989, 350 Distributors. Distribution through 675,000 retail outlets.

SALES

44%

24%

20%

12%

WEST

NORTH

SOUTH

EAST

•Toilet soap•Tooth paste

•shampoo

TOILET SOAPSNirma bath (lever lifebuoy)Turnover 30% (total)Average growth 12%Tfn 60%Nirma beauty (lux,p&g ganga)Tfn 70%Nirma premium (camay)Tfn 80%

BUREAU OF INDIAN STANDARDSGrade 1 – TFM 76%

Grade 2 – TFM 70%

Grade 3 – TFM 60%

ToothpasteCompetition to babool & vicco

Market leader colgate

Failure

SHAMPOO

Patels launched shampoo

Principle “VALUE FOR MONEY”

Convert non-users of shampoo

Launched 100ml bottle retail 30

TECHNOLOGICAL EXPANSIONBesides low cost, labor intensive technique

they have modern manufacturing plants They plan for expansion and technological up-

gradationZero waste policy (vacuum drying).

DIVERSIFICATIONNirma soda ash plant at Bhavanigarh costing

Rs 1040 crore.Linear Alkyl benzene manufacturing facilityThese two chemicals account for three-

fourth cost of manufacturing detergentNirma LAB projects was the second of its

kind in Asia.As a part of backward integration, produce

oleum and sulphate

NIRMA`S OVERSEAS OPERATION

In Bangladesh Nirma cornered 60% of the market share because lower price then market leader Hindustan Lever Ltd.

Other countries under consideration China Russia Sri lankaOverseas operation contribute rs 20 crore

SOME EMERGENT ISSUES (IMAGE PROBLEM)

A “cheap” image attacked by rivals portraying the brand to be inferior, cheap and less smart alternative.

Rival attempts to reposition all Yellow powder as low quality.

rising income and ads by MNC emphasis zed that quality was more important than a marginal difference of price

RISING COSTDifficulties in maintaining low cost because

of raw materials such as soda ash and LAB.It had ensured respect and its moves would

be under sharp notice.

CHALLENGES FOR NIRMA1. How to make itself a professional.2. Identify its existing competences and new

one to fight global companies and at home as well

Sourcing tie-up Nirma entered in to the arrangement with the

P&G for an exclusive marketing of “Camay” Camay decision was based on quantitative

and qualitative research commissioned by Nirma to know customer needs and attitude

CAMAY LEVERAGE THE BRAND NIRMA After launch of new advertisement for Camay

Mr. Patel commented that “campaign reinforce the image of Camay as a skin care and earlier it was accessible to particular segment now anyone can buy it”

(PERCENTAGE BY VOLUMETOTAL VOLUME = 423.195 TONNES)

MARKET SHARES

STRENGTHS WEAKNESS

OPPORTUNITIESTHREATS

Nirma is an excellent example to see how to exploit 3 focus strategies of Porter:-

‘Cost Leadership’

Successfully carving out a ‘Niche Market’ .

This David of detergent ‘Differentiated its Product ’ from Industry Goliaths(HLL).

SUMMARY

Nirma is among the top 3 players in detergent industry as well as toilet soaps markets.

Aggressive pricing without compromising on quality.

Extensive Distribution Network

Backward integration (into 2 main raw materials- alkyl benzene and soda ash)

successful implementation of Porter’s 3 strategies..