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Analysis of applied strategy, internal and external analysis of Amul company

1.0 Introduction:

Anand Milk Union Limited or Amul is an Indian dairy cooperative, based at Anand in the state
of Gujarat.

Formed in 1948, it is a brand managed by a cooperative body, the Gujarat Co-operative Milk
Marketing Federation Ltd. (GCMMF), which today is jointly owned by 3.6 million milk
producers in Gujarat.

Amul spurred India's White Revolution, which made the country the world's largest producer of
milk and milk products.

The white revolution was spearheaded by Tribhuvandas Patel under the guidance of Sardar Patel
and Verghese Kurien. As a result, Kaira District Milk Union Limited was born in 1946.
Tribhuvandas became the founding chairman of the organization and led it until his death. He
hired Dr Kurien three years after the white revolution. He convinced Dr Kurien to stay and help
with the mission.

Kurien, founder-chairman of the GCMMF for more than 30 years (1973–2006), is credited with
the success of Amul. Amul has become the largest food brand in India and has ventured into
markets overseas. Amul products are now available in more than 20 countries.

1.1 History of Amul:

In 1929, Peston Edul Polson established Polson Model Dairy at Anand to manufacture butter,
ghee and casein and in 1944; the Bombay Municipal Corporation Milk Supply was inaugurated.
Monopoly rights were awarded to Polson for Procuring milk from Kaira.
Amul's genesis is linked to the freedom movement in India. Sardar Vallabhbhai Patel, an
eminent Indian freedom fighter encouraged the dairy farmers from the Kaira district in Gujarat to
form a cooperative to counter the 'exploitatively' low prices offered for their milk by the
monopoly milk Supplier of the area, Polson's Dairy. The dairy farmers met in Samarkha (Kaira
district, Gujarat) on the 4th of January 1946, and decided to set up a milk producers' cooperative
that would deal directly with the Bombay government, the final buyer of their milk. This was the

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Analysis of applied strategy, internal and external analysis of Amul company

origin of the Anand model.

Initially, when the Bombay government refused to deal with the cooperative, the farmers
called a strike. The government finally relented when Bombay went without milk for a fortnight.
The successful union registered itself as the Kaira District Cooperative Milk Producers' Union
Ltd. (KCMPUL), Anand, in Gujarat in December 1946. And so did GCMMF and brand AMUL
establish consequently.
The main motto of Amul is to help farmers i.e. Milk producers. Amul system works under
the objective of highest possible compensation to the milk producers and lowest possible price to
consumers. Farmer is paid money in cash payment for the milk. Milk gives them money for the
daily necessities. Amul is the one who started using their profits for the milk producers common
good.

Amul’s Vission:

“Our Vision is not just to be rated among the top 5 brands of India in Interior Field, but, more
importantly, to strive to attain the leadership position in making our people aware to protect &
save the nature by using plywood and related products for their woodwork.”

Amul’s Mission:

“Our Mission is to manufacture world-class products of outstanding qualities, providing related

services and solutions to our client while utilizing latest technologies, highest business standard,
work ethics Corporate Governance so we can make every customer smile.”

1.2 Literature Review:

Amul is one of the most successful Indian business firms. It provides various
milk products in which its main brand product Amul Butter is also present. Amul begins with a
just little group of milk-producing villagers and now become the largest
milk producing cooperative society in India. It had started with two village cooperatives with
250 litres of milk-producing capacity and now it collects daily a 6.5
million(average) of milk from a very large no of Indian villages. It has become a
hope for poor villagers who were exploited by middlemen before the origin of Amul or
Gujarat milk marketing federation or Kaira union. By originated Amul got its first

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Analysis of applied strategy, internal and external analysis of Amul company

chairman Shri Tribhuvandas Patel who through his integrity had the favor of
villagers and understands the needs of cooperative society. Through their
interpersonal faith and cooperation, Amul got this success history besides facing
various difficulties. Gujarat Milk Marketing Federation is a cooperative society. It
done a very good job in milk marketing, making way for poor villager’s earnings. It not only
provides effective returns to the farmers but also take cares of customers interests. It
serves for customers on the basis of Indian ethics. They provide milk with better
nutrients,
better quality products regularly and help in meeting the country’s need for daily
milk requirements.

2.0 Methodology:

We have to look for several things to complete our analysis on Amul. The things we looked for
included:

 Amul’s Applied Business Strategies:

In this sector, we look for their frequently used strategies from the four business strategies.

 Amul’s Internal Factors:

In this part, we look for their internal capabilities and resources such as capital, management etc.

 Amul’s external factors:

Here we analyse their external factor such as their factory, land, pressure from other factors etc.

 SWOT analysis:

Finally, we search for their Strength, Weakness, Opportunities and Threat to better understand
their current and assume their future business condition.

3.0 Findings of Analysis:

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Analysis of applied strategy, internal and external analysis of Amul company

3.1 Findings of strategic Analysis;

By studying the business plan and online articles of Amul, we find out that Amul is followings
three strategies models s, and those are:

1. Differentiation model

2. Best Cost provider model, and

3. Niche or Focus model and

4. Low-Cost provider model.

The justification for Differentiation Strategy:

 The farmers owned the dairy,

 Farmers elected representative to manage the village societies and district union,

 They employed professionals to operate and manage its business,

 They increase milk product’s price in short-term to stable the price in long-term as well
as accelerate the growth of milk production,

 Amul extend its product line and also included other items such as pizza, ketchup etc,

 Amul follows Total Quality Management (TQM) to ensure the product’s quality,

 During Yatrathe, distributors and salesmen are taken to visit Ananda and shown dairy
plants, their upkeep, international standard of hygiene and quality, the practice adopted
for clean milk and above all the co-operative philosophy,

 Amul introduce their own three-tier co-operative model,

 Each milk supplier payment is based on the percentage of fat and the SNF content,

 Any producer can become a DCS member,

 At the end of every year, a portion of DCS’s profit used to share with its members,

 District union provide many facilities to DCS and their members such as feed, veterinary
care, artificial insemination and even training and consulting,

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Analysis of applied strategy, internal and external analysis of Amul company

 Some state federation produce feed support other unions,

 Engineers of Amul was innovative,

 Amul outlets follow the franchise model,

 Introduced verities of chocolates,

 The institutional infrastructure – village co-operative, dairy and cattle feed plants and
state and national marketing is owned and controlled by farmers, etc.

The justification for Best Cost provider strategy:

 Amul offers a fair price for their products,

 Amul pattern aims at maximizing profit while ensuring a quality product at a reasonable
price,

 Amul ensures value for the money.

The justification for Focus Strategy:

 Amul expands their business to Bangladesh, USA, UAE, China, Mauritius, Australia,
Singapore, Hong Kong, Cambodia, Philippines, Japan, Sri Lanka and some South African
countries.

 Sugar-free ice cream for diabetes patients,

 Baby food items,

 Launched CHOCOZOO for young children,

 By 2012 Amul increase their outlets 5000 to 1000,

 Its concentrated on healthy chocolate,

The justification for Low-Cost provider strategy:

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Analysis of applied strategy, internal and external analysis of Amul company

 Amul provided chocolate products at a lesser than its competitors,

3.2 Findings of Internal Analysis:

There are several internal factors, which help Amul to become the market leader and these are
their core advantages over their competitors. From several of their internal advantages, some of
them are the following:

 Amul has a huge capital,

 They have a perfect management team, who knows how to handle any situation,

 Their research and developing department is so strong, and often developing new
process,

 They are using advanced machineries,

 They have well established distribution network,

 Their suppliers are mainly owned their dairy and they share a strong bond with Amul,

 They introduced the three-tier Anand pattern,

 Farmers choose their own representative to manage their village society and district
unions, as well as they employed professional to manage dairy,

 Amul has a strong marketing team, etc.

3.3 Findings of External Analysis:

There are verities of external factors that make them one of the market leader. Some of them are:

I. Bargaining Power of buyers:

 The switching cost of brand is high for some brand, so the buyers have less bargaining
power,

 The value the get from consuming Amul is greater than other similar brand against their
spending,

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Analysis of applied strategy, internal and external analysis of Amul company

 Amul ‘s buyers are spread all over the India and in some foreign countries and yet the
buyers do not have any bargaining power against Amul’s superior quality, etc.

II. Bargaining Power of Suppliers:

 Under the co-operative rules farmer’s rights are well protected, and they are getting a
good return for their supplies,

 Farmers has limited rights to bargain and has a moderate power of bargaining, etc.

III. Threats of New Entrants:

 It is very difficult for new competitor to match with Amul’s capital,

 It is very hard to compete with Amul’s reputation,

 The raw material procurement is very difficult for new entrants,

 Amul’s customers are loyal to their brand. So they will not easily switch the brand to a
new brand,

 For a new entrant it would be very difficult to make distribution network strong as Amul,
etc.

IV. Threats from Substitutes Product:

 The threat from substitutes product is the major competitive pressure for Amul,

 There are different substitutes products are available for different Amul’s products at a
low price,

 These substitutes products are equal in quality,

 The rate of customers switching to substitutes products are very high, etc.

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Analysis of applied strategy, internal and external analysis of Amul company

V. Rivalry Among Competitors:

 The demand of Amul’s product are increasing smoothly,

 In milk product and chocolate categories, they face competition from Cudbary and
Nestle,

 In ice cream categories, they face competition from Kwality Walls Max and Havmor,

 In butter and cheese categories, they face competition from Britannia.

3.4 Findings of SWOT Analysis:

SWOT analysis refers to a company’s strength (S), weakness (W), opportunities (O) and, threats
(T).

Strengths:

 Huge capital based company,

 First mover advantages,

 Proper management team,

 Huge number of distribution channels,

 Well marketing and, research and development team,

 Fair pricing,

 Quality products,

 Wide range of product,

 In strong position to compete with pressure from rivals, new entrants, buyers and supplier
bargaining power, etc.

Weakness:

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Analysis of applied strategy, internal and external analysis of Amul company

 Amul’s chocolate product could not gain a fair market share,

 Difficult to compete international brands,

 Government has allowed free import of dairy products, which open a door for importing
subsidized dairy product,

 Difficult to control cost operation in international market,

 Having so many outlets increase expenses, etc.

Opportunities:

 Milk and milk related products demand increasing day by day,

 Amul expanding their business to foreign countries,

 Being an established brand they can introduce new products to their product line, etc

Threats:

 Substitutes products are great threat to Amul,

 Local companies can create problems for them,

 Low- cost providers are creating difficulties for them,

 Their product such as ice cream is a seasonal product. Which will only run on summer,
etc.

4.0 Conclusion:

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Analysis of applied strategy, internal and external analysis of Amul company

Amul is one of the successful Indian organization. The reason behind their success is their co-
operative management system. They bring the farmers together and make fortune for them as
well as own self. Which teach the whole world a proper management system for dairy products.

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