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EXECUTIVE SUMMARY
In this assignment the main highlight is about a Dairy Cooperative AMUL,in
western India that has developed a successful model for doing businessin large
emerging economy. It has been primarily responsible, through itsinnovative
practices, for India to become worlds largest producer of milk. This draws various
lessons from the experiences of AMUL that would beuseful to cooperatives
globally as well as firms that are interested in doingbusiness in large emerging
markets like India and China.Many of these economies have underdeveloped
markets andfragmented supply bases. Market failures for many of these
smallproducers are high. On the other hand, the size of both, markets and
thesuppliers is large. As a result, firms that identify appropriate businessstrategies
that take into account these characteristics are more likely tosucceed in these
markets. The following are some key message fromAMULs success: firms in
these environments need to simultaneouslydevelop markets and suppliers to match
demand and supply planning,develop or become a part of network of producers
(i.e., cooperatives inthis case) to obtain scale economies, focus on operational
effectiveness toachieve cost leadership to enable low price strategy. In addition, a
centralfocus to bring the diverse element together and a long-term approach
arerequired.
This report contains how Amul was formed , its measures of success
interms of sales turnover and identifying the problems faced by Amuland the
strategies used, the reason for such a success afterimplementing the strategies , the
weaknesses and threats associated. This report has also highlighted Amuls foreign
ventures.
1) INTRODUCTION
Strategic Management may be defined as the tool which is been usedby a
company to define their operation, image, values, goals,objectives, roles and
responsibilities, timelines etc. StrategicManagement involves integrating activates
of the various functionalsectors of a business such as marketing, sales, production
etc toachieve organizational goals.
FIGURE
Nestl: Weakness
Target Market is UpperMiddle class and high
class
Competitors
Economic slow down hasslow down demand
Amul has always ensured that the product mix and the sequence inwhich
Amul introduces its product is consistent with the core philosophyof providing
milk and its milk products at an affordable price. Amul have a brand position
which is the perceived fitbetween a product and the needs of the target market ,
relative tocompetitive product offering.
launch milk and milkproducts. Amul should take steps in order to safeguard its
marketshare and to generate profit. The prevention of potential companywill help
the existing company to have economies of sale as they willhave to increase the
production and at the same time it would help inmaintaining the brand loyalty as
the choices available would be less.
healthy compound annual growthrate of 23 % over the past four years, on the back
of its superiormarket position. Amul, being a co-operative, has strong control over
its procurement costs; it has the flexibility to fix procurement costs basedon the
profits earned at the end of the year. Moreover, GCMMF has atough financial risk
profile, supported by steady growth in the dairymarket.
The main advantage of Amul is that it maintains its quality atthe same time
make it affordable.Over the years, Amul has come up with many products. There
hasbeen product line extension as well as product category extension withwhich
Amul has been successful in satisfying its customers with various need.
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With the help of BCG analysis we will be able to place Amuls product.
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With the use of BCG analysis we can know which product is the mostimportance
to the brand Amul.
Star Product are the one that generates money
Question mark is a product with small market share in a growingmarket therefore
referred as problem child.
Dog a unit with no future growth as its market is matured.
Cash Cow is a premium product as it has high market share in afast growing
market
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3) PROBLEM ANALYSIS
From beginning with the formation of its first milk cooperative,
AMULnetwork has sustained an impressive growth rate for more than 50
yearsestablishing in the growing of Indian dairy industry as the worlds leading
milk producer. However, it is uncertain whether AMULs strategy andpractices that
have worked well for long can maintain this growth route ina changing
environment with globalization and increased competition. This part of the
assignment describes some of AMULs challenges thatneed to be overcome.
However, in the new rising environment, severalchallenges have become evident
and AMULS network needs to evolvepositive approach to respond to these threats.
First, competitors arecutting into milk supply by offering marginally higher
procurement pricesthereby challenging the practice of provision of services for
long-termgrowth in lieu of higher prices in the short-term.
Second, for a section of its membership, dairy activity is a stepping-stone for
upward mobility inthe society. Typically, such members move on to other
occupations afterraising their economic position through milk production. As a
result, AMULis unable to realize the full benefits of its long-term strategy, and
findsnew members (mostly marginal farmers) to replace those who havehigher
potential and capacity.
AMUL is facing problem on establishing a network of firms in order
toovercome the complexities of a large yet fragmented market like those
inemerging economies by creating value for suppliers as well as thecustomers.
AMUL has led the milk dairy revolution in India that has nowemerged as one of
the largest milk producers in the world.
3.1 STRATEGY
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When Amul was first formed, the cooperative should have realized
thatcontinued growth for the long-term was conditional on matching supplyand
demand. Further, given the primitive state of the market and thesuppliers of milk,
their development in a synchronous manner wassignificant for the continued
growth of the industry. The organization alsoshould recognize that in spite of the
poor infrastructure in India, suchdevelopment could not be left to market forces
and realistic interventionswere required. Accordingly, AMUL and GCMMF
adopted a number of strategies to assure such growth. For example, at the time
AMUL wasformed, the vast majority of consumers had limited purchasing power
andwas value conscious with very low levels of consumption of milk and
otherdairy products.
Thus, AMUL adopted a low price strategy to make theirproducts affordable
and guarantee value to the consumer. The success of this strategy is well
recognized and remains the main plank of AMUL'sstrategy even today. The choice
of product mix and the sequence in whichAMUL introduced its products is
consistent with this philosophy. Beginningwith liquid milk, the product mix was
enhanced slowly by progressiveaddition of higher value products while
maintaining desired growth inexisting products. Even today, while competing in
the market for highvalue dairy products, GCMMF ensures that adequate supplies
of low valueproducts are maintained. The supply side, as mentioned earlier,
themember-suppliers were typically small and marginal- farmers had
severeliquidity problems, were illiterate and had no prior training in dairyfarming.
AMUL and other cooperative Unions adopted a number of strategies to develop the
supply of milk and assure steady growth. First,for the short term, the procurement
prices were set so as to provide fairand reasonable return. Second, aware of the
liquidity problems, cashpayments for milk supply was made with minimum of
delay. For the long-term, the Unions followed a multi-pronged strategy of
education andsupport. For example, only part of the surplus generated by the
Unions ispaid to the members in the form of dividends.
A substantial part of this surplus is used for activities that promote growth
of milk supply andimprove yields. These include provision of veterinary services,
support forcold storage facilities at the village societies etc. In parallel, the
Unionshave put in place a number of initiatives to help educate the members.The
dual strategy of immediate development of the market and memberfarmers has
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2. Cost Leadership
AMULs objective of providing a value proposition toa large customer base
led naturally to a choice of cost leadership position.Given the low purchasing
power of the Indian consumer and the marginaloptional spending power, the only
possible option for AMUL was to priceits products as low as possible. This in turn
led to a focus on costs and hadsignificant implications for managing its operations
and supply chainpractices.
For example the company has been very aggressivelymarketing its cheese
product. When the low cost pizza was introduced ,AMUL used this strategy were
to increase sale of one product cheese they reduced the cost of another product
pizza.
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5. Financial Strategy
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In spite of the wide market that Amul has in India it is been taking steps toits
expand it market abroad. Were Amul has been quite successful ininternational
market by achieving a 34%market growth (Mathur andMathur,2009). Amul has
already introduced its products to countries likeU.S.A, Nepal South Africa, Kenya,
Bhutan, Bangladesh, Thailand, Australia,Singapore and gulf countries etc.Amul is
also planning to introduce itsproducts to countries like Russia, UAE, Japan and
Srilanka. Amul has madeagreement with international retail chain Wal Mart to
sell Amul s product through its outlets under the brand name Amul itself.
Amul has also beenplanning to make tie ups with international company to
introduce newproducts in the market .For example Amul has made an agreement
withGlaxo were Amul will pair up with this company in order to produce
andlaunch baby food which will be a add on to Amul product list.
4) PRODUCTION OUTCOME
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CONCLUSION
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The market for milk and milk product is more customers oriented
thanSupplier Centered as a result requires a close look at customers
needsand quality .Due to the strong competition from its competitors
therehas been a variation on the sale of Amuls Products.In this report
various Parameters on which sale of Amul dependswhich were been
discussed.
Environments with underdeveloped markets and suppliers as in the
caseof AMUL add one more aspect of difficulty relating to the relative
pace of growth of these two areas. Through its pricing strategy, AMUL
has beenable balance the growth in markets and suppliers and has
achieved somedegree of management. Otherwise, gaps between demand
and supplywould require balancing strategies.
Development of suppliers likewise requires nurturing with a longtermperspective. It is interesting to note that this was achieved by
AMUL through a process of education and social development activities
-activities that are not usually considered to be standard
businesspractices. This type of out of the box vision is essential for
developinginnovative mechanism in new, unfamiliar environments
where building of relationship with consumers goes much beyond
marketing messages anduseful product offerings.
The example of Amul is the informative example for
multinationalcompanies and others contemplating operations in
emerging marketsby taking advantage of the local small and medium
enterprises.
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BIBLIOGRAPHY
www.amul.com
Times of india
www.amul.tv
www.google.com
Strategic management books
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