Submitted By

Kuricheti Mounika
Reg no-11815867
Priyansha Raj
Reg no-11813177
Rashmi Burman
Reg no-11813234
Aayush Sharma
Reg no-11813249
EVALUATION PARAMTERS FOR WRITE UP

CATEGORY 1 2 3 4 5 Points
awarde
d

Introduction The topic The topic Introduces the The topic Does not display an
(topic sentence is an sentence is a paragraph. It sentence does not understanding of the
sentence) excellent good introduction does not introduce the topic. Not in line
to the paragraph. introduce the paragraph. with the topic. (1)
(5marks) introduction to
It may too broad topic very well (2)
the paragraph. or have a detail and it includes
It tells the main included. (4) too many
idea and gives details. (3)
the big picture
(5)

Links to the Student makes Student makes a Student makes Student makes Student makes more
other no errors in couple of errors several errors in many errors in than ten errors in
readings/ linking or in linking or linking or linking or linking or referring
referring the referring the the case.(1)
references referring the referring the
case (3) case.(2)
(5marks) case (5) case.(4)

Ideas The topic has Student knows Student uses just Information is
(5 marks) been discussed the subject but the facts to relay gathered from
The topic has not related it thoughts. There is electronic sources
from different
been discussed with different not much of the but the student does
angles and
properly and angles (3) student's own not know its
student has personality in the relevance and
student has a
given excellent writing (2) importance (1)
good grasp of the
grasp of the
subject. (4)
topic. (5)

Question The answer is The answer is The answer is The answer is The answer is least
Handling convincing and convincing and convincing and somewhat related related with the
(5 marks) does not contains very few contains few with the question question asked (1)
theoretical asked but the
contain any theoretical errors
errors (3) answer is not
theoretical (4) convincing.(2)
errors (5)

Practical Student makes Student makes Student has Student makes Student has not
application no errors in little error to tried to relate many errors in related with
and relating appropriate relate the the concepts practical practical
concepts with practical concepts practically and application and no applications and no
Real World application and practically and Clear clear conclusion conclusion can be
and Detailed Clear conclusion conclusion is can be formed formed.(2)
conclusions are reached from from the facts
Conclusion is reached from
reached from the the facts offered.(4)
(10 mark) facts the facts offered. (6)
offered.(10) offered.(8)

TOTAL
 NIRMA
In the early 1970s, when Nirma washing powder was introduced in the low-income market,
Hindustan Lever Limited (HLL) reacted in a way typical of many multinational companies. Senior
executives were dismissive of the new product: "That is not our market", "We need not be
concerned." But very soon, Nirma's success in the detergents market convinced HLL that it really
needed to take a closer look at the low-income market.

Starting as a one-product one-man outfit in 1969, Nirma became a Rs 17 billion company within
three decades. The company had multi-locational manufacturing facilities, and a broad product
portfolio under an umbrella brand – Nirma. The company's mission to provide, "Better Products,
Better Value, Better Living" contributed a great deal to its success. Nirma successfully countered
competition from HLL and carved a niche for itself in the lower-end of the detergents and toilet
soap market. The brand name became almost synonymous with low-priced detergents and toilet
soaps. However, Nirma realized that it would have to launch products for the upper end of the
market to retain its middle class consumers who would graduate to the upper end.

Case Introduction
Karsanbhai Khodidas Patel, CMD, Nirma Ltd., is a man who can disappear in the crowd. It is
precisely this commonness that probably accounts for his uncommon success. An incisive
understanding of the needs and sensibilities of the common man on the street. This eye for value
as commonly understood, coupled with aggressive cost containment has made Nirma1 the legend
it is today.

HLL in 1959, through its blue powder Surf pioneered the bucket wash concept in India, to relieve
housewives from the drudgery of laundry soap scrubbing. But it was Nirma that took away the
detergents market by providing the benefit at an affordable price. Karsanbhai Patel was a chemist
with the Gujarat government's Department of Mining and Geology, in 1969, when he created his
wonder powder and started selling it locally. Nirma was launched at Rs.3.50 per kg when surf was
Rs.15 per kg, and the lowest priced detergent then was Rs.13.50 per kg. His home town Kishanpur
(Gujarat) was brimming over with demand, and he was soon mixing and packing the formulation
in a 10 x 12 foot room at his Kishanpur home. He sold 15-20 packets of the detergent a day on his
way to the office, on bicycle, some 15 km away2. Thus started the great journey. It all started to
earn a side income.

Within a short span of three decades, Nirma has completely rewritten the rules of the game.
Offering quality products at unbeatably low prices. In the process, Nirma has helped expand the
entire soaps and detergents market to a level ofRs. 82 bn. Today, Nirma has a Rs.17 bn share in
this market and has been acknowledged as a marketing miracle. This has been possible through
focus on cost effectiveness by integrating latest manufacturing technology facilities with
innovative marketing strategies to create world-class brands.

Products:

Consumer products:

SOAP detergents
SALT sourcing products

What the Company has been doing?

Backward Integration

Nirma decided to backward integrate in the year 1988. The logic is that captive production plants
for raw materials are the best way to keep production costs under check. The objective was
twofold; one to cut cost and second to pass on the price benefit to the customer. The Nirma brand
does not have any aspirational value and consumers trade up as soon as income levels allow.21
Besides, when brand loyalty is almost non-existent at the lower end, a consumer will opt for any
unorganized sector brand, if it's even a rupee cheaper.

Nirma had undertaken two major backward integration projects for manufacture of Soda Ash and
Linear Alkyl Benzene (LAB). The backward integration projects form an integral part of Nirma's
corporate policy which are based on the following rationale:

 Soda Ash and LAB are basic raw materials for Detergents.
 Entire capacities will be captively consumed leading to substantial reduction in raw
material costs.
 Ensures assured supply of desired quality raw material at controlled costs
 Cost Advantage.

The Alindra detergent complex in Baroda has a capacity to churn out 65,000 tpa of N-Paraffin.
The integrated project to manufacture Linear Alkyl Benzene and synthetic detergents has
technology sourced from UOP Inter America, USA. Canada based SNC_Lavalin Group Inc., is
the project consultant. The first phase of the plant at Baroda having begun in 1996 was completed
in December 1997. The cost was, Rs.380 cr. The second phase was completed in January 2000
(six months ahead of schedule). It was completed at a cost of Rs.250 cr, against an earlier estimate
of Rs.280 cr.

The more ambitious of the two projects is the one at Bhavnagar. This plant intends to make an
awesome 420,000 tonnes of soda ash every year. These are volumes that global managers gawk
at. The company has sourced Akzo Dry Lime Technology from Akzo Noble engineering, Holland,
which runs the largest soda ash plant in the world. Bhavnagar's inhospitable terrain made building
the plant an uphill challenge. Lack of water, roads and power added to the problem. Nirma had to
build an 18 km road to the location. As the soil was treacherous, the plant had to be constructed
on 15000 piles. A force of 8,000 laborers, 60,000 tonnes of steel and 100,000 tonnes of cement
have gone into the plant, which also has 108 km of salt bunds 22.

Distribution Network

Nirma has a two-pronged distribution system. It has a network of 400 distributors covering more
than 2 million retailers. As Nirma's operational area for the distributors is the district, about 80%
of Nirma's distributors are exclusive. Most of these transact huge volumes and have between 50
and 80 people working under them. Nirma has curtailed the cost of distribution by doing away
with intermediaries. In some places, such as Andhra Pradesh, Tamil Nadu and Southern Karnataka,
Nirma has started maintaining depots, as getting stocks to these places becomes difficult at times.
The distribution was built more out of necessity than out of choice. Initially the volumes were so
low that, people who tried to trade in smaller territories just failed. Only those in the bigger
territories survived. Based in the major districts, these distributors managed such huge volumes
that duplication of the same was not possible. Typical of the family style of Indian businesses, they
are all invitees to the social do's organized by the Patels. Credit has been extended when required
and dud products are never dumped on them. A culture of accessibility right from the early days
is paying off now. The distributors are free to contact top management directly for any problem
they might face.

Mass Media Advertising

Nirma's advertising journey began in 1973 when it launched its now famous jingle23,. What
preceded this were wall paintings that used a model resembling Hema Malini. The mass media
advertising has been handled by Ahemdabad based Purnima Advertising since the very beginning.
The company does not coincide product launches with campaign breaks. It first places the product
on the shop shelves, gets feedback and fixes glitches, and then creates enduring ad campaigns that
could run and run. The advertising has always been simple and benefit oriented. For this, it has
used such starlets as Sangeeta Bijlani, Sonali Bendre, Shilpa Shetty, and Riya Sen etc., to endorse
their products. All these stars were relatively unknown before appearing in the Nirma
advertisements. It believes in ever lasting commercials, and has never had to withdraw a campaign.
Moreover, the company has always managed to keep its advertising expenditure as a percentage
of sales at around 2%24, barely heard of in the FMCG sector, where 6% to 10 % is the norm. To
quote Karsanbhai Patel, "Advertising can only inform about the product. Thereafter, it's the success
of the product alone"25.

Putting punch in packaging

In the early days of Nirma, the theory was that, Nirma's pedestrian packaging had a market appeal
mainly because of its ordinariness, just as the average Indian voter would not be very comfortable
with a politician who is dressed in the latest western clothing, the common man is not comfortable
with very modern packaging26. And therein lay the secret to Nirma detergent's success. The color
printing was bad and a loose sealing that could not hold the power inside or keep the moisture
outside. Unlike others, it did not have any frills, which again was a strong selling point with the
average consumer careful about saving money.

To improve its packaging and also to further the cost reduction exercise, Nirma recently ventured
into in-house printing and packaging with the acquisition of Kisan Industries at Moriya, near
Ahemdabad in March 2000. The new complex will add that much needed finesse to its packaging.
The company decided not to sell shabby looking products, no matter how low priced they are.
Earlier the printing was on chrome art paper, but now the printing is on Biaaxially Oriented Poly
Proplelene (BOPP) and polyester, while dry lamination is on maplitho. This is how Nirma products
get a high gloss look.

Company Weaknesses or Failures?

The Image among the Elite

Nirma's image among the elite has not changed. The elite still feel that it is a poor man's brand. In
the past it had to face serious allegations about the detergent affecting clothes and also the user's
hands. Nirma has tried to get into upper segments of the market but with little success.
"Premiumness" defends Hiren Patel "has always been misinterpreted as a function of price"27.
Nirma is trying to redefine the concept by associating it with a quality at an affordable price.
Getting into the premium segment is essential for Nirma, if it wants to grow further. The urban
market is saturated and so is the rural one. The way Nirma can grow is going up the value chain,
making Ariel like products. That would raise volumes only incrementally and the margins would
be good.

In a truly path-breaking move in the prevalent fast-moving consumer goods climate, Nirma has
announced the exclusive marketing and manufacturing arrangement by which Nirma will bring
Camay (brand of P & G, one of the world's leading beauty soap brands), to the Indian consumer
[earlier manufactured by Godrej Soaps]. It also helps Nirma to help it move up in the value chain.
Nirma Consumer Care, the wholly owned subsidiary of Nirma, obtained the license of the
trademark Camay from Procter and Gamble Home Products (PGHP), for an undisclosed license
fee with effect from October 8, 2002. The arrangement is valid for a rolling period of five years
and covers toilet soaps.

Soaps Market

The other point of doubt is whether Nirma can ever hope to alter the rules of the soaps game.
Unlike detergents, soap is a personal use product. Some customers form deep psychological
associations with their brands. What's more, it is a market where HLL has etched the segmentation
patterns in stone (by price, by scent, appeal and by brand personality). Can Nirma win by playing
by HLL's rules? Worldwide floral beauty, health, freshness platforms, account for most of the
soaps sold. What Nirma has done is to produce high fatty matter soaps but with the right scents,
but priced a rung below, thus creating a sub-premium segment. The rest of the game is in managing
the geographical diversity of consumer preferences. If the North prefers pink colored soaps, in the
south it's green that sells.

An Outfit Still run by Family and Friends

Most of the top management at Nirma are the relatives of Karsanbhai Patel. The Patel family owns
more than 70% equity in Nirma Ltd. The Patel family believes that it's a folly on the part of the
market to believe that promoters cannot be professionals.

A Part of the Backward Integration Exercise has turned out to be Ineffective

Nirma had diversified into the production of soda ash as backward integration strategy. The
company has an installed capacity of 4.2 lakh TPA for Soda ash. However, the company could
utilize only 49% capacity during the FY01. Backward integration in Linear Alkyl Benzene (LAB)
and Soda Ash has improved the margins of the company. The installed capacity of soda ash in
India is in excess of domestic demand. Even though the imported soda ash is cheaper, the imports
are limited due to the nature of the product being hygroscopic and bulky and bottlenecks in
transportation. The reduction in import duty on soda ash from 35% to 20% in the budget 2001 has
adversely affected the performance of the company.
Issues: Opportunities Before Nirma

Small-scale Detergent Sector

According to Hiren Patel, MD, Nirma Consumer Care Ltd, " About 30% of the market lies with
the small-scale sectors and we see this as a big opportunity"28. Nirma has launched the Nirma
popular detergent to cater to this segment.

Penetration

The definition of penetration as per National Council for Applied Economic Research is the
average number of households who have bought the product during the reference year in a
population of 1000 people. Even a one-time buy is recorded in overall penetration. So, the actual
figures for the regular use must be substantially low. The per capita detergent consumption of
about 500 gram per Indian when compared to USA where the per capita detergent consumption is
around 2000 grams. (See Charts 5 and 6), is very low. If this goes up even by 20%, volumes will
go up by more than half the current market by 1.48 million tonnes.

Other FMCG Categories

To quote Hiren Patel, "We are thoroughly convinced that the future of our company largely
depends on diversification into other FMCG categories". Nirma took over a small company in
Bangalore called MP confectioneries and used its distribution network to launch Nima rose. The
Nima distribution network unlike the main one is a three tier one with C&F agents. It has 35-40
depots, some stock points and 1700 distributors, who are supplied from the depots. This has helped
them to tap chemists, paanwaalas and other retailers in addition to the two million retailers it
already had. This in turn will help them make inroads into Personal Care products. Nirma already
has a shampoo introduced in the market, which has been quietly introduced into the market, in the
traditional Nirma way, without any hype and hoopla. Nirma also has launched Nirma Shudh
Namak, and was till recently the third largest player in the market, when Dandi Namak beat it, to
the fourth place.

Toilet Soap Segment

There is a huge gap between the market share HLL has in the toilet soap market and Nirma that is
second. Nirma can play catch-up with HLL in this segment of the FMCG industry.

Outsourcing
On June 26, 2002, at the HLL Annual General meeting, Chairman MS Banga said, "HLL's vision
is to build a billion dollar (close to Rs.5, 000 cr) sourcing business out of India". HLL sees it as a
stable earnings opportunity wherein the Inventory and marketing costs are minimum. P&G's India
operations have been identified as a key hub in P&G's global sourcing strategy, which revolves
around deriving the best-cost efficiencies from within the P&G world. Nirma can also act as a
sourcing base via tie-ups with detergent makers from the American and European markets.

Issues: Threats Facing the Organization

Counterfeit Products and Pass offs

This is one problem that is proving to be a major headache for the company as well as every major
FMCG Company in India. This is giving a bad name to the brands. To counter this, Nirma has
gone in for inhouse printing and packaging. It has done so by acquiring Kisan industries at Moriya,
near Ahemdabad.

The question that needs to be answered here is, how can a fake product reach shop shelves unless
someone has infiltrated the distribution chain. That's precisely the way it works. The wholesalers
themselves manufacture large amount of fakes. For example, if a wholesaler sees a certain product
doing well, he quickly sets up a small manufacturing facility to make that product. The critical
element in the chain is the retailer. For him, the advantage of buying counterfeits is obviously,
higher margins.

Counterfeiting of branded products has been an age-old phenomenon in India, not to mention other
Asian countries such as China. The Federation of Indian Chambers of Commerce and Industry
(FICCI) set up the Brand Protection Committee. It will be the apex body that fights the fakes. One
of the first things that the Brand Protection Committee did was to kick off a study by market
research firm AC Nielsen to put a number to the counterfeit problem. And it came up with findings
that FMCG industry loses around Rs.1700 cr to fake products.

Other Companies doing a Nirma on Nirma

What Nirma did to HLL, it has had to face from other entrepreneurs. The two of the biggest
competitors to have emerged are Kanpur Trading Corporation and Dandi Namak. Kanpur Trading
Corporation are the makers of Ghari detergent. It is headed by a 56 year old Murli Dhar, who
himself is an ardent admirer of Karsanbhai Patel. He is following the footsteps of his idol- both in
sharing a humble beginning marked up by tin shed operations and bicycle marketing, through
fiercely extending flagship detergent brand Ghari to kirana store shelves in UP and adjoining
markets. Ghari has crossed the Rs.550 cr33 sales mark in 2002 and is the largest single brand in UP
and adjoining markets. To give a sense of sizes Ghari is almost as big as Surf, Cadbury and Fanta,
twice the size of Dettol and three times that of Ariel by sales34. Ghari is the fastest growing brand
in the detergent sector at around 40 and 10% volume share on an all India basis.

Suresh Agarwal makes the Kunwar Ajay brand of sarees. The trouble was people bought sarees
twice a year. There were other irritants like retailers returning stocks unsold. To chivy up the
demand he spent Rs.25 cr on a nationwide ad campaign. But sales of the Kunwar Ajay sarees did
not perk up. Then he thought of getting into FMCGs. The two reasons of getting into the FMCG
sector were that buying is much more frequent and goods once sold to the traders aren't taken back.
So he decided to enter something as plebian as salt. Since its launch in October 2001, it shipped
60,000 tonnes to the trade. Agarwal also launched Friendly wash, a detergent in April 2002, in a
bid to take on Nirma.

The Distributors Own Brands

In European and American markets the distributors in the late 80s and early 90s became
competitors by launching what are known as private label or distributor's own brands. Distributors
carried their brands because without them their ability to attract customers into their stores was
limited. Conventional wisdom held that as shelf space was limited and future expansion was not
in sight, brand names already on the shelf would have the power to generate huge cash flows. With
hindsight this optimism was misplaced. In India organized retailing is growing with Food World
in southern India and Vivek's in Tamil Nadu. Over the next few years, these distributors can start
stocking products and brands of their own. Food world is already doing that, though at present it
does not have any products that would compete with Nirma's products.

Contract Manufacturers Coming up with their Own Brands

Traditionally, in fast moving consumer goods companies like HLL and P&G, manufacturing never
drives sales and profits. It is marketing that brings in the margins. Consider this. A small Mumbai
based firm, VVF, contract manufactures soaps for many MNCs in India and abroad. It happens to
supply soap to large number of hotels in the US. In late 2002, VVF launched a replica of Liril,
branded Jo, complete with the unique marble effect on the soap cake. The price is Rs.10 for a
100gram bar, while Liril retails Rs.15 for a 75-gram bar36. This is the latest threat that FMCG
companies are facing and since most of the contract manufacturers will play the money game,
Nirma, which plays the same game is bound to be affected, as more such units get into making
their own brands.

Competition in the Industry

The competition in this industry is basically between Nirma and Hindustan Lever Limited. There
are other players like Godrej soaps, P&G and Henkel Spic. Of late, direct marketer Amway has
also been able to corner substantial stake in the market. Other than these players, there are also,
local level players (like Ghari and Double Dog in UP and Maharashtra, Friendly Wash in Western
India) in every territorial market. At an all India level what makes it a two-way fight is the fact
that no other company has the kind of geographic reach that these two companies have.

When Nirma introduced a laundry detergent targeted at low income Indian families, HLL, the
Indian subsidiary of Unilever, reacted in a way typical of many multinationals: they did nothing.
"That is not our market," HLL executives rationalized. "We need not be concerned."Nirma's
Return on Capital Employed (ROCE) for the project was upwards of 121%38. This convinced HLL
that it needed to take a closer look at the low-income market. Elementary market research showed
that there was an opportunity to create a detergent of reasonable quality, catering to the traditional
washing methods used by women from low-income families.

Following Nirma's lead, HLL invested in process, packaging, distribution and pricing innovations
to make that detergent, dubbed "Wheel," a reality. This drove production costs to a minimum.
Rickshaws were used to transport finished goods to the thousands of local stores that would sell
them. In villages, murals of colorful appeal were used for advertising the new HLL product. The
results were astounding: "Wheel" quickly became HLL's largest seller by volume. HLL's ROCE
on its traditional high-end detergent line was in the neighborhood of 22%; ROCE on the low-
income line approached 93%. Unilever was quick to leverage this new insight in Brazil; its "Ala"
detergent is currently selling through more than 10,000 outlets in that country. The major lesson
HLL learned from the Nirma experience was that no niche should be left unplugged. Consequently,
Levers had a brand in virtually every segment of the detergent market. This strategy changed since
MS Banga took over and now HLL concentrates on its 30 brands, which have been identified as
power brands.

Issues to be Addressed:

 Can the past strategy followed by Nirma in the soaps and detergents business ensure
success for it in future now that quite a few new players are waging a low cost war on the
company in certain pockets of the world? Justify.
 Nirma has long relied on family members but now as the company has grown very large it
needs to professionalize its management. How can this be done to ensure future success of
the company?
 The company has to face it. Should it diversify and grow or should it penetrate the market
and expand along the existing line of business? What will be the implications of either
courses of action on the company?

SWOT ANALYSIS
STRENGTHS

 Strong distribution channel

 Low cost production
 Scientific production method
 Cheap labour
 Raw material procurement
 High brand equity

PROBLEMES /weakness

 Wrong way of labour hiring

 Same type of packages
 Same type of advertisement
 Strong compition
 No substitute product
 Lack of managerial staff
 Hazardous to health
 Poor working condition
 Less popular with elite class

Opportunities

 A growing market
 Diversification into related sectors

Threats

 The existing players in market

 Entry of new players as growing market
 Legal and political policies
 Substitute products
 STRATAGIES
UMBRELA
BRANDING

PARELLAL
DISTRIBUTION
MARKET VALUE FOR
CREATION MONEY

BACKWARD
BUSINESS ECONOMICS INTEGRATION
PRODUCT
IDEA OF SCALE INOVVATION

ALTERNATIVE SOLUTION
 Workers should be hired on the probationary period
 Should make innovation in its advertising, packing, and sales promoting
 Nirma should see its benchmark with international competitors for this change its strategies
and policies as per changing environment
 Nirma should hire the skillful managers
 Should produce quality products which are not hazardous to the customers health
 Tie up at global level
 Training programmed for workers

BEST SOLUTION

Change environment of the company which will be beneficial to worker, customers, production.
CONCLUSION
Nirma’s great lay success in converting the unorganized washing soap market in urban and rural
India to detergent powders. As we have prepared this report I come to know many things about
this company.In this era and in era of globalization most of companies believe in profit making in
such a situation Nirma is that company which takes into consideration customer satisfaction above
all aspects.Because of this reason Nirma is able to capture more and more customer market and
with that able to increase its profit Apart from only producing FMCG products Nirma also opened
up education institutes by doing this Nirma also contribute in building the strong future of
India.which will be benefitial to India in many ways thus contributing to corporate social
responsibility.