I.

“BIG BULL” HARSHAD MEHTA SCANDAL

Harshad Mehta was an Indian stock broker caught in a scandal beginning in 1992. He died of a
massive heart attack in 2001, while the legal issues were still being litigated. Early life Harshad
Shantilal Mehta was born in a Gujarati Jain family of modest means. His father was a small
businessman. His mother's name was Rasilaben Mehta. His early childhood was spent in the
industrial citys of Bombay. Due to indifferent health of Harshad's father in the humid environs of
Bombay, the family shifted their residence in the mid1960s to Raipur, then in Madhya Pradesh and
currently the capital of Chattisgarh state. An Amul advertisement of 1999 during the controversy over
AMUL saying it as "The Big Bhool" (Bhool in Hindi means Blunder) He studied at the Holy Cross
High School, located at Byron Bazaar. After completing his secondary education Harshad left for
Bombay. While doing odd jobs he joined Lala Lajpat Rai College for a Bachelor's degree in
Commerce. After completion of his graduation, Harshad Mehta started his working life as an
employee of the New India Assurance Company. During this period his family relocated to Bombay
and his brother Ashwin Mehta started to pursue graduation course in law at Lala Lajpat Rai College.
His youngest brother Hitesh is a practising surgeon at the B.Y.L.Nair Hospital in Bombay. After his
graduation Ashwin joined (ICICI) Industrial Credit and Investment Corporation of India. They had
rented a small flat in Ghatkopar for living. In the late seventies every evening Harshad and Ashwin
started to analyze tips generated from respective offices and from cyclostyled investment letters,
which had made their appearance during that time. In the early eighties he quit his job and sought a
job with stock broker P. Ambalal affiliated to Bombay Stock Exchange (BSE) before becoming a
jobber on BSE for stock broker P.D. Shukla. In 1981 he became a sub-broker for stock brokers J.L.
Shah and Nandalal Sheth. After a while he was unable to sustain his overbought positions and
decided to pay his dues by selling his house with consent of his mother Rasilaben and brother
Ashwin. The next day Harshad went to his brokers and offered the papers of the house as guarantee.
The brokers Shah and Sheth were moved by his gesture and gave him sufficient time to overcome his
position. After he came out of this big struggle for survival he became stronger and his brother quit
his job to team with Harshad to start their venture GrowMore Research and Asset Management
Company Limited. While a brokers card at BSE was being auctioned, the company made a bid for the
same with financial assistance from Shah and Sheth, who were Harshad's previous broker mentors.
He rose and survived the bear runs, this earned him the nickname of the Big Bull of the trading floor,
and his actions, actual or perceived, decided the course of the movement of the Sensex as well as
scrip specific activities. By the end of eighties the media started projecting him as "Stock Market
Success", "Story of Rags to Riches" and he too started to fuel his own publicity. He felt proud of this

1
accomplishments and showed off his success to journalists through his mansion "Madhuli", which
included a billiards room, mini theatre and nine hole golf course. His brand new Toyota Lexus and a
fleet of cars gave credibility to his show off. This in no time made him the nondescript broker to
super star of financial world. During his heyday, in the early 1990s, Harshad Mehta commanded a
large resource of funds and finances as well as personal wealth. The fall In April 1992, the Indian
stock market crashed, and Harshad Mehta, the person who was all along considered as the architect of
the bull run was blamed for the crash. It transpired that he had manipulated the Indian banking
systems to siphon off the funds from the banking system, and used the liquidity to build large
positions in a select group of stocks. When the scam broke out, he was called upon by the banks and
the financial institutions to return the funds, which in turn set into motion a chain reaction,
necessitating liquidating and exiting from the positions which he had built in various stocks. The
panic reaction ensued, and the stock market reacted and crashed within days.He was arrested on June
5, 1992 for his role in the scam. His favorite stocks included 1. ACC 2. Apollo Tyres 3. Reliance 4.
Tata Iron and Steel Co. (TISCO) 5. BPL 6. Sterlite 7. Videocon. The extent The Harshad Mehta
induced security scam, as the media sometimes termed it, adversely affected at least 10 major
commercial banks of India, a number of foreign banks operating in India, and the National Housing
Bank, a subsidiary of the Reserve Bank of India, which is the central bank of India. As an aftermath
of the shockwaves which engulfed the Indian financial sector, a number of people holding key
positions in the India's financial sector were adversely affected, which included arrest and sacking
of
K. M. Margabandhu, then CMD of the UCO Bank; removal from office of V. Mahadevan, one of the
Managing Directors of India's largest bank, the State Bank of India. The end The Central Bureau of
Investigation which is India's premier investigative agency, was entrusted with the task of deciphering
the modus operandi and the ramifications of the scam. Harshad Mehta was arrested and investigations
continued for a decade. During his judicial custody, while he was in Thane Prison, Mumbai, he
complained of chest pain, and was moved to a hospital, where he died on 31st December 2001. His
death remains a mystery. Some believe that he was murdered ruthlessly by an underworld nexus
(spanning several South Asian countries including Pakistan). Rumour has it that they suspected that
part of the huge wealth that Harshad Mehta commanded at the height of the 1992 scam was still in
safe hiding and thought that the only way to extract their share of the 'loot' was to pressurise
Harshad's family by threatening his very existence. In this context, it might be noteworthy that a
certain criminal allegedly connected with this nexus had inexplicably surrendered just days after
Harshad was moved to Thane Jail and landed up in imprisonment in the same jail, in the cell next
Harshad Mehta's. Mumbai: Just as the year 2001 was coming to an end, Harshad Shantilal Mehta,
2
boss of Grow more Research and Asset Management, died of a massive heart attack in a jail in Thane.
And thus came to an end the life of a man who is probably the most famous character ever to have
emerged from the Indian stock market. In the book, The Great Indian Scam: Story of the missing
4,000 crore, Samir K Barua and Jayanth R Varma explain how Harshad Mehta pulled off one of the
most audacious scams in the history of the Indian stock market.
Harshad Shantilal Mehta was born in a Gujarati Jain family of modest means. His early childhood
was spent in Mumbai where his father was a smalltime businessman. Later, the family moved to
Raipur in Madhya Pradesh after doctors advised his father to move to a drier place on account of his
indifferent health. But Raipur could not hold back Mehta for long and he was back in the city after
completing his schooling, much against his father's wishes. Mehta first started working as a dispatch
clerk in the New India Assurance Company. Over the years, he got interested in the stock markets
and along with brother Ashwin, who by then had left his job with the Industrial Credit and Investment
Corporation of India, started investing heavily in the stock market. As they learnt the ropes of the
trade, they went from boom to bust a couple of times and survived. Mehta gradually rose to become a
stock broker on the Bombay Stock Exchange, who did very well for himself. At his peak, he lived
almost like a movie star in a 15,000 square feet house, which had a swimming pool as well as a golf
patch. He also had a taste for flashy cars, which ultimately led to his downfall. Newsmakers of the
week: View Slideshow "The year was 1990. Years had gone by and the driving ambitions of a young
man in the faceless crowd had been realised. Harshad Mehta was making waves in the stock market.
He had been buying shares heavily since the beginning of 1990. The shares which attracted attention
were those of Associated Cement Company (ACC)," write the authors. The price of ACC was bid up
to 10,000. For those who asked, Mehta had the replacement cost theory as an explanation. The theory
basically argues that old companies should be valued on the basis of the amount of money which
would be required to create another such company. Through the second half of 1991, Mehta was the
darling of the business media and earned the sobriquet of the 'Big Bull', who was said to have started
the bull run. But, where was Mehta getting his endless supply of money from? Nobody had a clue. On
April 23, 1992, journalist Sucheta Dalal in a column in The Times of India, exposed the dubious ways
of Harshad Metha. The broker was dipping illegally into the banking system to finance his buying.
"In 1992, when I broke the story about the 600 crore that he had swiped from the State Bank of India,
it was his visits to the bank's headquarters in a flashy Toyota Lexus that was the tipoff. Those days,
the Lexus had just been launched in the international market and importing it cost a neat package,"
Dalal wrote in one of her columns later. The authors explain: "The crucial mechanism through which
the scam was effected was the ready forward (RF) deal. The RF is in essence a secure shortterm

3
(typically 15day) loan from one bank to another. Crudely put, the bank lends against government
securities just as a pawnbroker lends against jewellery. The borrowing bank actually sells the
securities to the lending bank and buys them back at the end of the period of the loan, typically at a
slightly higher price." It was this ready forward deal that Harshad Mehta and his cronies used with
great success to channel money from the banking system. A typical ready forward deal involved two
banks brought together by a broker in lieu of a commission. The broker handles neither the cash nor
the securities, though that wasn't the case in the leadup to the scam. "In this settlement process,
deliveries of securities and payments were made through the broker. That is, the seller handed over
the securities to the broker, who passed them to the buyer, while the buyer gave the cheque to the
broker, who then made the payment to the seller. In this settlement process, the buyer and the seller
might not even know whom they had traded with, either being know only to the broker." This the
brokers could manage primarily because by now they had become market makers and had started
trading on their account. To keep up a semblance of legality, they pretended to be undertaking the
transactions on behalf of a bank. Another instrument used in a big way was the bank receipt (BR). In
a ready forward deal, securities were not moved back and forth in actuality. Instead, the borrower, i.e.
the seller of securities, gave the buyer of the securities a BR. As the authors write, a BR "confirms the
sale of securities. It acts as a receipt for the money received by the selling bank. Hence the name bank
receipt. It promises to deliver the securities to the buyer. It also states that in the meantime, the seller
holds the securities in trust of the buyer." Having figured this out, Metha needed banks, which could
issue fake BRs, or BRs not backed by any government securities. "Two small and little known banks
the Bank of Karad (BOK) and the Metorpolitan Cooperative Bank (MCB) came in handy for this
purpose. These banks were willing to issue BRs as and when required, for a fee," the authors point
out. Once these fake BRs were issued, they were passed on to other banks and the banks in turn gave
money to Mehta, obviously assuming that they were lending against government securities when this
was not really the case. This money was used to drive up the prices of stocks in the stock market.
When time came to return the money, the shares were sold for a profit and the BR was retired. The
money due to the bank was returned. The game went on as long as the stock prices kept going up, and
no one had a clue about Mehta's modus operandi. Once the scam was exposed, though, a lot of banks
were left holding BRs which did not have any value the banking system had been swindled of a
whopping 4,000 crore. Mehta made a brief comeback as a stock market guru, giving tips on his own
website as well as a weekly newspaper column. This time around, he was in cahoots with owners of a
few companies and recommended only those shares. This game, too, did not last long. Interestingly,

4
however, by the time he died, Mehta had been convicted in only one of the many cases filed against
him.
Question:
Comment on the role of banks and investors in the scandal. Do you think, they could have averted the
scam?

5
 I. ANALYSIS OF THE CASE STUDY

1. Situational Analysis:

Harshad Mehta, a well-known and registered broker, exploited the Bombay Stock Exchange (BSE)
alongside his colleagues by exploiting banking system flaws. Mehta was accused of working with
bank staff to get fraudulent bank receipts (BRs). He utilised these BRs to persuade other banks to give
him money under the guise of government securities lending (G-Secs). This money was subsequently
invested in the stock market, causing share values to skyrocket by up to 4,400 percent. Mehta
subsequently sold these shares for a substantial profit and repaid the money to the banks. Mehta
cheated banks of approximately Rs 4,000 crore in total. Banks learned that they were in possession of
bogus BRs with no value once his stock market scam was discovered and revealed. As a result, the
BSE Sensex increased from 2,000 to 4,000 points in March 1992. People began to look up to him as
the 'Big Bull' as the markets proceeded to reach new highs, and they began buying the stocks he
invested in. Many ordinary investors ended up putting large sums of money into equities. The Mehtas
were raided by the tax agency on February 28, 1992, after the scheme was discovered. A number of
papers as well as stock certificates were confiscated. The CBI conducted a search of the Mehtas on
June 4, 1992. Harshad Mehta's tax return for the assessment year 1992-93 was consequently rejected.
In 1992, Mehta was sentenced to jail. In 1992, the Reserve Bank of India established the Janakiraman
Committee to present a complete picture of the fraud. In the aftermath of the Haeshad Mehta scandal,
a joint parliamentary committee (JPC) was formed in 1993 to investigate anomalies in securities and
banking transactions. Mehta was found guilty of 74 criminal offences by the Bombay High Court and
the Supreme Court. His legal fights stretched on until 2001, when he died of a heart collapse in jail.
He was 47 years old at the time. The Harshad Mehta financial fraud prompted a slew of
improvements in India's financial regulatory structure. The Securities Laws (Amendments) Act of
1995 expanded Sebi's authority, allowing it to oversee depositories, foreign institutional investors
(FIIs), venture capital funds, and credit rating organisations. Sebi may make it necessary for
corporations issuing securities to make disclosures in order to maintain investor interest.
The Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 ('the Act') is
a Special Act. The offences it deals with involve amounts of unusual magnitude procured by brokers
from banks and financial institutions. In respect of two notified parties, namely, the Harshad Mehta
Group & Fairgrowth Financial Services Ltd., the time is approaching for distribution of their assets.

6
2. Statement of the Problem (or) Formulation of the Problem:

With the active participation of senior bankers, Harshad Mehta was primarily guilty of breaking
capital markets and securities regulations. Since it was bank money that he misappropriated, there
was unaccounted or black money involved in his stock market activities.

3. List of Critical Factors or Facts:

 Came to Mumbai dirt poor

 Became the “Big B” of the stock market
 The most treasured man of the Income Tax department
 Lived life king size
 Orchestrated India’s biggest scam
 Got a staggering surge in market value
 The biggest stock market scam exposed
 Poor banking system
 Allegation against Prime Minister
 Case magnitude

4. SWOT Analysis:

STRENGTHS
Advantages of the organization
Activities of the company better than
competitors.
Unique resources and low cost
resources company have.
Activities and resources market sees as the
company’s strength.
Unique selling proposition of the company.
WEAKNESSES
Improvement that could be done.
Activities that can be avoided for Harshad
Mehta.
Activities that can be determined as your
weakness in the market.
Factors that can reduce the sales.
Competitor’s activities that can be seen as your
weakness.

7
 OPPORTUNITIES
Good opportunities that can be
spotted. Interesting trends of industry.
Opportunities for Harshad Mehta can be
obtained from things such as:
Change in technology and market strategies
Government policy changes that is related to
the company’s field
Changes in social patterns and
lifestyles. Local events.
THREATS:
Company’s facing obstacles.
Activities of competitors.
Product and services quality standards
Threat from changing technologies
Financial/cash flow problems
Weakness that threaten the business.

5. Solutions for the questions in the Case study:

Comment on the role of banks and investors in the scandal. Do you think, they could have averted the
scam?
Harshad Mehta got away with it since there were little laws and restrictions put forward by banks and
investors before to 1992. In 1992, the settlement cycle was 14 days, there was no requirement for a
consumer to have a minimum balance to acquire stocks, all trades were handled through dealers and
thus entailed a high level of execution risk, and trade settlement was done through paper, all of which
favored Harshad Mehta. The fraud exposed the company's banking sector's flaws in no time. He
manipulated stock prices and received funds from a number of institutions by falsifying bank receipts.
As a result, I am certain that the banks and investors could have prevented the fraud. If SEBI had the
rules, it has right now, the scam could have been easily avoided.

8
6. Conclusion:

Given India's purchasing power at the time, it's fair to say that the Harshad Mehta Scam was the most
well-known and deadly scam in the country's history. In this scam, the majority of victims lost their
life savings, and some even attempted suicide. When the word stock market scandal was used, the
name of Harshad Mehta sprang to everyone's consciousness, from top businessmen to roadside
sellers. He rose to the position of king of con artists. The fraud not only shocked everyone with its
effects, but it also helped to expose flaws in banking and stock markets.

9
 II. CASE STUDY ON COACH

According to Coach’s website, the company has built a distinctive style and prestigious image over
the past 40 years to develop a reputation as “America’s preeminent designer, producer and marketer
of fine accessories and gifts for woman and men including handbags, business cases, luggage and
travel accessories, wallets, outerwear, eyewear, gloves, scarves, and fine jewelry”. Coach employs a
multi- channel distribution strategy to reach its customers including the company owned boutiques in
the stores of prominent specialty retailers both within the United States and abroad and the company
operates an online store. Consumers who purchase Coach products are generally willing to pay the
premium price due to the superior quality of coach’s Product as well as the perceived prestige of
owning a Coach product. Coach stresses these features in their advertising campaigns and regularly
allows movies and television shows to favorably feature Coach products in appropriate scenes. Over
last five years, Coach has partnered with automobile manufacturers such as Lexux to produce
automobile with coach interiors. In an effort to expand its international reach, Coach intends to
increase its international distribution and is expanding into Japan through Coach Japan, Inc. a joint
venture with a local company that will allow coach to control international distribution and to
maintain a consistent branch strategy domestically and abroad.

Questions:
1. Discuss how vertical integration can create value by enabling a firm to exploit its
vulnerable, rare and costly-imitate-resources and capabilities.
2. Identify the sources of cost advantage.
3. Analyze the strengths of the firms in its international distribution strategy.

10
 I. ANALYSIS OF THE CASE STUDY

1. Situational Analysis:

Coach’s huge success has been largely attributable to Its focus on quality and stylish products which
respond to consumers’ needs based on Its extensive marketing research. Its “affordable luxury goods”
price strategy also helps drive growth by appealing to a wide range of consumer domestically and in
abroad. All the Coach’s products were manufactured by third-party suppliers in Asia, which allowed
Coach to maintain a significant pricing advantage relative to other luxury accessories and gifts for
woman and men including handbags, business cases, luggage and travel accessories, wallets,
outerwear, eyewear, gloves, scarves, and fine jewellery”. Coach employs a multi-channel distribution
strategy to reach its customers including the company owned boutiques in the stores of prominent
specialty retailers both within the United States and abroad and the company operates an online store.
Coach reshaped the brand image in the time and started positioning in the “Accessible usury segment
of the handbags and accessories All the Coach’s leather products were manufactured by third-party
suppliers in Asia, which allowed Coach to maintain a significant pricing advantage relative to other
luxury handbag brands. Coach reshaped the brand image in the time and started positioning in the
“Accessible usury segment of the leather handbags and accessories Industry by appealing attractive
pricing and satisfying traditional luxury customers with the quality and styling of Its products. Coach
used the scale of economy to cover lower profit margins offsetting by Increased sales volume and
expanding Its distribution channels and leveraging the global opportunities. Monthly product
launches enhanced the company’s voguish Image and gave consumers reason to make purchases on a
regular basis. Industry by appealing attractive pricing and satisfying traditional luxury customers with
the quality and styling of Its products. Coach used the scale of economy to cover lower profit margins
offsetting by Increased sales volume and expanding Its distribution channels and leveraging the
global opportunities. Monthly product launches enhanced the company’s voguish Image and gave
consumers reason to make purchases on a regular basis.

2. Statement of problem (or) Formulating of the problem:

Coach has partnered with automobile manufacturers such as Lexux to produce automobile with
coach interiors. In an effort to expand its international reach, Coach intends to increase its
international distribution and is expanding into Japan through Coach Japan, Inc. a joint venture with a

11
local company

12
that will allow coach to control international distribution and to maintain a consistent branch strategy
domestically and abroad.

3. List of Critical factors (or) facts:

 Wanted to expand internationally

 Collaborated with the automobile industry
 Produces variety of products both for men and women
 Produced luxury products with affordable prices
 Created an online platform by creating an online website
 Their advertising strategy was very pleasing
 Their advertising created an reputation for the product
 Their products were assumed to be the prestigious products
 They produce superior quality product at premium prices
 They started joint venture in international borders

4. SWOT Analysis:

Strength: Coach made strategic alliances with company like Moved and many others which brought
them into segment of other luxuries as watches, fragrances, foot wares, and also products for men.
The outsourcing strategy helped Coach in low-cost manufacturing and cost cutting to maintain its low
price compared to competitors and proved it as competitive advantage. During a difficult economic
environment, Coach has managed to increase its sales when its competitors are struggling to keep
consumers buying their products. Customer satisfaction is major strength of the company.

Weakness: Factory outlet stores outperforming full price stores. There is a diluting of the brand due
to increased growth of factory outlet stores. Less number of men products is the major reason behind
the lower percentage of sale. Coach has a particular geographical concentration, especially in North
America, Japan and China. As it’s a luxury category, products of coach of inaccessible to most
consumer segments.

1
Opportunity: Coach has the growing demand as a luxury good in emerging global markets such as
India and China. There is tremendous and rapid increase in wealth of consumers in other emerging
markets. There is large number of opening of new stores across the globe. Development of market in
domestic as well as internationally is the great opportunity. Product expansion and increased product
line serves as an opportunity. The company’s website acts as a key communication tool for the brand
to promote traffic in Coach retail stores and department store locations building brand awareness
across different countries and thus drives sales.

Threat: Strong competition from the competitors like Louis Button and many other brands in same
segment is the major threat. Rise of counterfeit goods under same brand name declines the sale of
original and high-priced goods manufactured by the company. Due to economic depression there is
change in consumer behaviour, people try to save a lot and less attracted. Fashion trends changes due
change in consumer taste of luxury and new arrivals from other competitors in vogue of current
fashion can lead the major threat to company if it continues business on same old design and trends.

5. Solutions for the questions in the case study:

1) Discuss how vertical integration can create value by enabling a firm to exploit its vulnerable,
rare and costly-imitate-resources and capabilities?

vertical integration is a risky strategy—complex, expensive, and hard to reverse. Yet some companies
jump into it without an adequate analysis of the risks. This article develops a framework to help
managers decide when it is useful to vertically integrate and when it is not. It examines four common
reasons to integrate and warns managers against a number of other, spurious reasons. The primary
message: don't vertically integrate unless it is absolutely necessary to create or protect value.

Vertical integration can be a highly important strategy, but it is notoriously difficult to implement
successfully and—when it turns out to be the wrong strategy—costly to fix. Management's track
record on vertical integration decisions is not good.1 This article is intended to help managers make
better integration decisions. It discusses when to vertically integrate, when not to integrate, and when
to use alternative, quasi-integration strategies. Finally, it presents a framework for making the
decision.

1
There are four reasons to vertically integrate:

 The market is too risky and unreliable—it

"fails";

 Companies in adjacent stages of the industry

chain have more market power than companies
in your stage;

 Integration would create or exploit market

power by raising barriers to entry or allowing
price discrimination across customer segments;
or

 The market is young and the company must

forward integrate to develop a market, or
the market is declining and independents are
pulling out of adjacent stages.

2) Identify the sources of cost advantage?

1. Product Attribute Differentiation

2. Customers’ Willingness to Pay

The way you price your products or services can set you apart from your competitors. When doing so,
it’s vital to understand your customers’ willingness to pay.Willingness to pay (WTP) is the maximum
price a customer is willing to pay for a product or service. It can be a specific dollar amount or a price
range.

3. Price Discrimination
With an understanding of your customers’ willingness to pay, you may find that different types of
customers are willing to pay different amounts for your products. In such cases, it can be useful to
employ price discrimination, which can be a valuable tool for expanding your company’s reach when
competing with others.

1
4. Bundled Pricing
Bundled pricing is the practice of selling two or more products together in a “bundle,” for which the
cost is different than that of purchasing all of the items separately.

5. Human Capital
A company is only as strong as its people. As such, hiring, training, and retaining a team of skilled
employees is a competitive advantage for any business. Putting in the time and care to select
outstanding candidates for open positions, train current employees, offer professional development
opportunities, and create a culture wherein people feel supported and challenged can pay off.

3. Analyse the strengths of the firms in its international distribution strategy?

International distribution strategy means making choices:

 Selecting the market(s) where you have the best chances.

 Localizing your product and marketing materials, or not…
 Working with local departments, channel partners or online
 If you want to work with partners, selecting and convincing the best ones.
 Monitoring and managing your sales channels properly.
 Supporting your brand with the right (online) advertising and PR

1
6. Conclusion:

Coach’s strategies emphasize product differentiation to take advantage of a niche market AT an

“deteriorate luxury’ segment. As setting Its price In moderate rate, ten middle-income group are also
attracted to the brand. New arrivals keep the customer repeatedly buying the products, which
contributes the sales in both factory stores and full-price stores. Important things for Coach are to
increase its brand awareness globally and to ensure quality of goods is maintained. The good brand
image overcomes the threats from the competitors and makes it a still leading brand in the segment.
There are certain weaknesses like geographical concentrations, but as the markets in emerging
countries are developing, Coach has business opportunity to enlarge its market share there.

Not only globally but also increasing share in the different markets like men’s luxury products gives
Coach another opportunity. Reducing factory stores and increasing full-price stores, especially in the
emerging arrest prevent dilution of its brand image.

It’s also important to raise awareness of counterfeit products so consumers can recognize the
difference between the counterfeit products and the real products. As far as I see, Coach is doing
very well. Coach is positioning itself as “affordable luxury’, which differentiates the brand from
other luxury brands. Market developing in the emerging countries including China and India so forth
improves its brand image and awareness. At the same time there is a huge potential to increase its
sales by increasing presence within the men’s luxury market.

1
 III. WILL COLGATE’S BRANDING STRATEGY BEAT THE COMPETITION?

Case Facts
The brand Colgate has been one of the most trusted brands for decades. It is not only the older
generation which grew up with Colgate, it is a first brand, even for the young, when it comes to oral
care. The brand has faced bursts of competition from time to time and has fought back effectively to
regain market share. In the 1960s and 1970s, Forhans was the challenger brand but it is completely
forgotten today. Binaca, which later became Cibaca and finally got taken over by Colgate, was
another challenger.
However, maybe because of the dominance of Colgate in India, this category has a fewer number of
brands than, say, soaps. Given that neither soaps nor toothpaste have any technological barriers to
entry and most entry barriers are created by marketing muscle, one would have expected to see many
more brands in the fray.
Despite the strong brand and Colgate’s focus on oral care, in the late 1980s Close-Up changed the
way toothpaste looked and felt in the mouth. High on freshness ingredients, the transparent look and
the youth-centric approach gave Colgate some sleepless nights at the time. Close-Up gained a
significant share of the market, forcing Colgate to launch a similar product and alter its strategies for
some time. Colgate has regained its share since then, but Close-Up continues to hold a majority share
in the gel category, with Colgate Gel remaining a distant second.
Unilever also attacked Colgate on the ‘healthy teeth’ platform with Pepsodent, thereby attacking on
two fronts. Currently, despite Colgate accounting for about 55 per cent share of the toothpaste market,
Pepsodent and Close-up are still sniping at its heels with intermittent attacks.
Oral products market in India
The oral products market in India consists of toothpaste, toothbrush, tooth-powder, and mouthwash.
According to IRS data (2011), 66 per cent of Indian households use toothpaste, 24 per cent use
toothpowder, and 18 per cent are non-dentifrice users.
The toothpaste market in India is estimated at Rs 6,000 crore, growing at 19 per cent y-o-y. There are
different segments in the market like gel, sensitivity, whitening, and so on. India’s per capita
consumption is reportedly almost one-fourth that of the US, and less than half that of other emerging
markets. Toothpaste has a high penetration of around 78 per cent in urban India. Colgate is the overall
market leader, with a share of 55.9 per cent.
The broad segments are:
Germ and Tooth Decay: This is the biggest segment; Colgate gets its major share from this segment.
Of late, Pepsodent has begun attacking this segment with its Germicheck variant. As per a recent

1
media

1
report, more than half of Colgate’s overall share comes from Colgate Strong Teeth, which competes in
this segment (and the focus of Pepsodent’s Ad).
Sensitivity: This is the fastest growing segment, already at Rs 950 crore, and is growing at 30-40 per
cent a year. GSK’s Sensodyne has a slight lead
Gel: The second biggest segment (Rs 1,500 crore) and the only one where Colgate significantly trails
the leader Close-Up (60 per cent market share)
Gum: Another upcoming segment where GSK’s Paradontax is making much progress.
Whitening: A segment which has seen renewed emphasis from Colgate with Colgate Visible White
Multi-Benefits: Another segment dominated by Colgate with its Total variant. This segment enjoyed
great significance at one point in the US and was responsible for Colgate becoming No.1 in the US
between 1998-2007 before P&G’s Crest reclaimed the lead
Current Situation:
Besides the direct attack from Pepsodent, entry of a large international player like Oral B has further
intensified competition in the general toothpaste category. Brands such as Sensodyne and Paradontax
have come in with aggressive marketing strategies and have created small sub-categories for
themselves, possibly at the cost of Colgate. Colgate responded with Colgate Sensitive but Sensodyne
still has a larger share of the sensitive toothpaste market.
Colgate has over the years tried to fight the sub-segments through a sub-branding strategy and has
launched sub-brands such as Colgate Gel, Colgate Sensitive, Colgate Herbal, Colgate Active Salt and
Colgate Total. It is clear that the other players, besides Unilever and P&G, are not very keen to take
Colgate head-on in its main product line. Hence, they have started carving smaller segments for
themselves and, with a focused strategy, are managing to remain leaders in their respective sub-
segments.
Their efforts are therefore to slowly grow these categories as well as their shares in the market. While
larger players such as Unilever are trying to grow the market and capture shares, players such as GSK
have created a niche for themselves in the sensitive toothpaste market.
Through a series of extensions, Colgate has increased its share of the market from 52.4 per cent in
2011 to 54.5 per cent in 2012. While the extension strategy seems to have worked in retaining and
marginally growing its share, analysts wonder whether, in the long run, this strategy will be effective.
In other countries Colgate has other brands, such as Elmex and Dentagard, but in India it has
followed a single- brand strategy, apart from its acquisition of Cibaca. With competition set to
intensify in the main category, and small players creating their own niches, will Colgate be risking its
main brands by over- extension and thereby lose share to, say, Oral B or Pepsodent?

1
What you need to do
You are the Brand Manager for Colgate and you have been asked to decide its future brand strategy.
You have to specifically advise the CEO on whether the company should continue with a single-
brand strategy in the increasingly competitive scenario or create different brands to fight the diverse
competition more effectively. The key objective of the brand is to defend and grow its market share
rather than expand the market.
Write to blcasestudies@thehindu.co.in in not more than 700 words. ( For contest rules, click here)
Vishwadeep Kuila, an alumnus of IIM-A, runs marketing consultancy Brand Vectors in Chennai. This
is a case prepared by the author and not an industry review. Figures used are from secondary research
sources and are only inputs for respondents to devise strategy. The author does not claim to have first-
hand information from the company mentioned here.

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 I. Analysis of the case study

1. Situational Analysis:

The main competitive advantage is that Colgate toothpaste product line consist of the well-known
and trusted brands worldwide. The very strong brand image is attributed to the simplicity of the
products, by giving the consumers an all-in-one solution as well as by setting tooth care trends
through Furthermore Colgate has built up trust with the cooperation with dental profession and this
has contributed to Colgate toothpaste being the brand recommended and used most often by dentists
worldwide the global sales figures and market shares of toothpaste mentioned in 3.1.2 underline the
very strong brand image.

In 1873 Colgate introduced its first Up to the present the company could acquire first-class
technological know-how. With 127 years of experience in the business of personal care the company
gained a distinct competitive advantage and became a world market leader. Nowadays Colgate also
holds patents on special ingredients such as Triclosan and Copolymer which guarantee an anti-
bacterial effect and differentiate their products from competitor products.

Colgate’s long-time presence in emerging countries is also a distinct competitive advantage. Local
management has the know-how and experience needed to reach consumers in these vast markets with
a wide range of quality products. To optimize purchasing, logistics and sourcing processes Colgate
has integrated SAP technology. This leads to cost reduction and can be seen as a significant
advantage. With the slogan “Clean your breath while cleaning his teeth" created by Rosser Reeves,
who invented the term unique selling proposition, Colgate could differentiate their toothpaste from
others and gained a competitive advantage Consumers associate the slogan with Colgate’s product as
a unique product to receive healthy teeth and a healthy breath. This has been a milestone for Colgate
consequently becoming a market leader for toothpaste products. Another competitive advantage is the
close cooperation with thousands of small shop owners and local wholesalers. This cooperation
ensures greater availability to their products as well as to provide the right assortment of products
with best visibility in each store.

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2.Statement of the problem (or)formulating of the problem:

Colgate-Palmolive, an international company that deals with the production of personal, oral and
home care, and pet nutrition in spite of being well known and commanding a large share of the
market in the industry, is facing challenges in launching and marketing of one of its new products
(Colgate Max Fresh) in China and Mexico. The fact that the proposed marketing strategies for the
new product in the two countries were different from the one used in the United States which had
been successful raised doubts in the company's president as he wondered whether they would deliver
better results that were above what would have been achieved with the United States marketing
strategy. Apart from being more costly, the overall president of the company wondered if they met
the requirements of a good marketing strategy and what their impact would be to the company. There
is need for the company to come up with marketing strategies that would enable it to introduce new
products in its foreign markets effectively in such a way that consumers’ needs were met and the
impact on the company’s reputation and its profit margins was not negative.

3. List of critical factors or facts:

 Colgate is an American brand principally used for oral hygiene products such
as toothpastes, toothbrushes, mouthwashes and dental floss.
 Manufactured by Colgate-Palmolive, Colgate oral hygiene products were first sold by
the company in 1873, sixteen years after the death of the founder, William Colgate.
 The company originally sold soap
 According to a 2015 report by market research looper Kantar Worldpanel,
 Colgate is the only brand in the world purchased by more than half of all households.
 Colgate has a global market penetration of 67.7% and a global market share of 45%.
 Despite this, it maintained the highest growth rate of all brands in the survey, with 40
million new households purchasing Colgate-branded products in 2014.

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4.SWOT Analysis:

Strength:

 Brand recall & visibility

 Product line
 Efficient Supply chain
 Financial position
 Market share

Weaknesses:

 Saturated market
 Commoditized brand name
 Cost control
 Limited brands under different product categories & segments

Opportunities:

 Expanding their product line

 Tapping the rural market in developing economy
 Strengthening the business through mergers & acquisitions
 Usage rate

Threats:

 Competition in the market

 Low Margin
 Price of raw material
 Ethical issues:
 Frequent Brand switching

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5. Solution for the questions in the case study:

You are the Brand Manager for Colgate and you have been asked to decide its future brand strategy.
You have to specifically advise the CEO on whether the company should continue with a single-
brand strategy in the increasingly competitive scenario or create different brands to fight the diverse
competition more effectively. The key objective of the brand is to defend and grow its market share
rather than expand the market.
Since I am a brand manager, I will refer all of the valid points to the CEO of the company which I
will make him advise to improvise towards the Colgate Palmolive. Colgate Palmolive is a worldwide
producer and distributor of household, healthcare and personal care products. It is a global leader in
the oral care hygiene market, with a market shareof42.1%in the global toothpaste market and 32.3%
in the manual toothbrush market. However, the company has had a relatively challenging fiscal 2019
so far, largely due to due to rising commodity costs and volatile exchange rates, in addition to weak
category demand in many key markets. Despite this, the company’s net sales were up 4% year over
year while organic sales grew 1% year over year, largely driven by volume growth of 2% and flat
pricing globally in the first half of fiscal 2018.As a brand manager of Colgate Palmolive, I expect the
company’s growth to be primarily driven by ongoing innovation in products such as toothpaste and
soaps. Accordingly, I expect Colgate-Palmolive’s revenue to grow by nearly $830 million through
fiscal 2020. To arrive at our fiscal2020 net revenue estimates for Colgate-Palmolive, the company have
broken down the primary revenue streams and projected them separately.

6. Conclusion:

You are the Brand Manager for Colgate and you have been asked to decide its future brand strategy.
You have to specifically advise the CEO on whether the company should continue with a single brand
strategy in the increasingly competitive scenario or create different brands to fight the diverse
competition more effectively. The key objective of the brand is to defendant grow its market share
rather than expand the market. Since I am a brand manager, I will refer all of the valid points to the
CEO of the company which I will make him advise to improvise towards the Colgate Palmolive.
Colgate Palmolive is a worldwide producer and distributor of household, healthcare and personal care
products. It is a global leader in the oral care hygiene market, with a market shareof42.1%in the
global toothpaste market and 32.3% in the manual toothbrush market. However, the company has had
a relatively
2
challenging fiscal 2019 so far, largely due to due to rising commodity costs and volatile exchange
rates, in addition to weak category demand in many key markets.
Despite this, the company’s net sales were up 4% year over year while organic sales grew 1% year
over year, largely driven by volume growth of 2% and flat pricing globally in the first half of fiscal
2018.As a brand manager of Colgate Palmolive, I expect the company’s growth to be primarily driven
by ongoing innovation in products such as toothpaste and soaps. Accordingly, I expect Colgate-
Palmolive’s revenue to grow by nearly $830 million through fiscal 2020. This problem arises from
changing environment as the cultures in China and Mexico are different from those of the United
States implying that the marketing strategy used in the United States cannot be employed in the other
countries as consumer needs also differ. A case fort the problem is the new opportunity that arose
with investment of the company in these two countries. Colgate enjoys a large share of the market in
the two countries which provides it with the opportunity to increase its sales by introducing the new
product.

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 IV. AMUL’S DIVERSIFICATION STRATEGY: A PIZZA FOR RS 20!

In early 2001, Gujarat Cooperative Milk Marketing Federation (GCMMF) planned to leverage its
brand equity and distribution network to turn Amul into India's biggest food brand. Verghese Kurien,
Chairman of GCMMF, set a sales target of Rs.10 bn by 2006 as against sales of Rs 2.3 bn in 2001. In
2001, GCMMF entered the fast-food market in India with the launch of vegetable pizzas under the
brand name SnowCap in Ahmedabad, Gujarat. GCMMF was also planning to launch its pizzas in
other western Indian cities like Mumbai, Surat, and Baroda.
Depending on the response in these cities, GCMMF would decide to introduce its pizzas in other
cities in India. The pizzas were offered in four flavours: plain tomato-onion-capsicum, fruit pizza
(pineapple-topped), mushroom and 'Jain pizzas' (pizzas without onion or garlic). GCMMF launched
the pizzas in the Rs.20-25 price range. The existing players in the pizza market, like Domino's, Pizza
Hut and Nirula's offered pizzas at nothing less than Rs.39. Analysts felt that GCMMF's move would
force the existing players to reduce their prices in the long run. GCMMF planned to open 3,000 pizza
retail franchise outlets all over the country by 2005. The pizzas would be made at the retail outlets.
The technical training and the recipe for the pizza would be provided by GCMMF. It would also
negotiate with bulk suppliers of vegetables to get these at wholesale rates. These would be provided
to the retailers.
The main cost component of the pizza is the mozarella cheese. GCMMF would offer the cheese at a
bulk rate of Rs.140 per kg, compared to the market price of Rs 146 per kg, thus saving the retailers
Rs.6 per kg. GCMMF on its part would have a ready market for its cheese products.
Analysts felt that the supply of cheese products by GCMMF at a cheaper price would enable the
retailers to price pizzas lower than that of the competitors. R S Khanna, General Manager-North
zone, said that GCMMF intended to do to pizza what it had already done to ice cream. He said, "We
want pizzas to become a mass consumption item. And as in the case of ice cream, we will force
pizza manufacturers to slash prices. Eventually, this would expand the market for cheese."
Background
In 1996, B M Vyas, Managing Director, GCMMF, commissioned the Indian Market Research Bureau
(IMRB) to conduct a consumer survey to identify the products consumers wanted from Amul. Based
on the findings, Amul entered into the following areas: ice cream, curd, paneer, cheese, and
condensed milk. In 1997, Amul launched ice creams after Hindustan Lever acquired Kwality,
Milkfood and Dollops. Positioned as the 'Real Ice-cream,' Amul Ice cream was one of the few milk-
based ice creams in the market.

2
With GCMMF gradually expanding its distribution reach, Amul was all set to strengthen its share
in the ice cream segment. In August 1999, Amul launched branded yoghurt in India for the first
time, when it test marketed, "Masti Dahi" in Ahmedabad first and then introduced it all over the
country. "Masti Dahi" was plain yoghurt sold in plastic cups. Each 400-gm cup was priced at Rs 12.
In January 2000, Amul re-entered the carton milk market6 with the launch of "Amul Taaza" in
Mumbai. Amul Taaza was non-sweetened, plain, low-fat milk. The product was positioned as a
lifestyle as well as functional product. It was targeted at the upper middle-class housewife who could
use it for different occasions. Amul was targeting sales of about 0.1 mn litres per day. In November
2000, Amul decided to promote mozzarella cheese, which was used in pizza.
Why Diversify?
With the liberalization of the Indian economy in the early 1990s, and the subsequent entry of new
players, there was a change in lifestyles and the food tastes of people. The new team that took
over the management of the GCMMF in the mid-1990s hoped to take advantage of the change.
The management adopted Total Quality Management (TQM) and set for itself higher benchmarks
(in terms of growth). They also diversified the Amul portfolio, offering a range of food stuffs such
as ketchup, jam, ice-cream, confectionaries, cheese, and shrikhand.
According to some analysts, this diversification was probably not entirely demand-driven. Being a
cooperative, GCMMF was compelled to buy all the milk that was produced in Gujarat. And with milk
production having increased since the mid-1990s, GCMMF had to make use of additional milk, and
hence the pressure to make and market more and more processed-milk products. Amul had to expand
the consumption base of milk-based products in India. It planned to make its products (butter and
cheese) a part of the regular diet in most households.
Amul launched its new products with the intention of increasing the offtake of its basic milk products,
including cheese. This in turn was expected to increase the earnings of the farmers. The pizzas were
expected to increase the sale of its cheese. The entry into the confectioneries market was another
avenue for increasing milk consumption. This flurry of launches helped Amul broaden its appeal
across all segments. Price was an advantage that Amul enjoyed over its competitors. Amul's products
were priced 20-40 % less than those of its competitors.
Analysts felt that Amul could price its products low because of the economies of scale it enjoyed.
Amul created two new distribution set-ups: a cold chain for ice-cream, and another for limited life
fresh foods like curd. Expecting the demand for ready-to- eat foods to grow, Amul prepared to
leverage the ice-cream cold chain for a new range of frozen foods, beginning with pizza. However,
some analysts felt that as the pizza's would be made by the retailers, Amul would have little control

2
over the quality of the pizzas. That was why Amul was marketing the pizzas under the brand name
SnowCap.
Said S K Bhalla, Chief of Quality Control, "The product has received premature hype. Meeting
consumer expectations will be a challenge, until we make the frozen pizza in our own facilities."
According to some analysts, Amul's obsession with keeping down manpower costs and dealer
commissions could be a weakness. In ice-creams for example, Amul's retail commission in
Ahmedabad city was 17.5% which was 10% lower than what competitors offered.
They also pointed out that Amul might not have the financial muscle that multinationals had to
achieve rapid growth. However, all said and done, Amul seemed to be all set to make steady progress
in the coming years with its products having become quite popular in both rural and urban
households. Said Vyas, "We've handled liberalisation and globalisation far better than our
transnational rivals. It has made us fitter than ever."
The growing demand for mozzarella cheese from pizza making companies like Pizza Hut and
Domino's Pizza was expected to give Amul's cheese sale an additional push. In July 2001, Amul
planned to enter the instant coffee market through a tie-up with Tata Coffee. GCMMF had a strong
national distribution network while Tata Coffee had expertise in manufacturing and marketing
coffee. As a part of the tie-up, Amul was to source the instant coffee from Tata Coffee and distribute
it.

The domestic coffee market was estimated at Rs.11bn, with the instant coffee segment being around
Rs.4.5bn. In August 2001, Amul decided to enter the ready-to-eat stuffed paratha,7 cheeseburger,
cheese and paneer pakoda8, and cheese sandwich segments. The products were to be marketed under
the SnowCap brand. The SnowCap brand would also include tomato sauce and ketchup.

Amul was also restructuring its chocolates business9. Seven of its brands that were withdrawn from
the market were to be relaunched soon. Amul tied up with Campco, the cocoa and arecanuts farmers'
cooperative in Karnataka and Kerala, for the supply of cocoa beans.10 Amul marketed Milklairs,
which was manufactured by Campco. This tie-up was expected to help Amul in the expansion of its
chocolate business.
QUESTION:
1. Why was it necessary for AMUL to diversify?
2. What are the strategies AMUL can follow to compete with other Pizza brands?

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 I. Analysis of the case study

1. Situational Analysis

Amul is a milk co-operative founded by Mr. Verghese Kurian in 1946. The company has its
headquarters in Anand, Gujarat. Amul is an acronym for “Anand Milk Union Limited”, and Mr
Verghese Kurian, the founder of Amul, is also referred to as the father of the white revolution in
India.
Amul is the largest Indian milk and dairy products manufacturer and is considered as one of the most
well recognized and iconic brands in the country. The company was incorporated to protect the
interest of the consumers and the milk producers in India.
Presently, Amul produces and gathers milk and milk products and distributes more than one million
litres of milk every day.The Taste of India, a brand so distinctively Indian has been a part of our lives
for nearly five decades now and still is able to touch a chord in our hearts. As a brand AMUL has
grown from being merely a differentiating factor to protect the interests of producers and consumers.
AMUL inspired ‘Operation Flood’ and heralded the ‘White Revolution’ in India. It began with two
village cooperatives and 250 litres of milk per day, nothing but ooze compared to the flood it has
become today. AMUL distributes over a million litres of milk per day, it also collects and processes
various milk products, during the peak, on behalf of more than a thousand village individually owned
by half a million farmer members. AMUL too has become a symbol of the aspirations of millions of
farmers. AMUL sprung from the seeds sown in the black soil of CHAROTAR, an area in the KAIRA
district of Gujarat, as a cooperative movement to empower the milk producers. At that time POLSON
Dairy was the biggest buyer of the milk being produced in KAIRA. Polson was built on the basis of
providing superior quality products to up-market consumers. However, Polson’s products were not
the reason that led to the rise of AMUL, it was its exploitative practices that started the cooperative
revolution. For several years the KAIRA cooperative supplied milk and allied products without a
formal distribution network leave alone a brand name. The name Amul was most probably suggested
by a quality control expert in Anand. It was derived from”Amulya”, which in Sanskrit, Gujarati and
many other Indian languages, means priceless, and implies matchless excellence. The name was
short, memorable and easily pronounced. It could also serve as an acronym for the organization – the
unusable KDCMPUL (Kaira District Cooperative Milk Producer’s Union Limited) taken from Kaira
Cooperative’s full name, could be substituted by AMUL, standing for Anand Milk Union Limited.

2
2. Statement of the problem (or)formulating of the problem:

Amul had to expand the consumption base of milk-based products in India. It planned to make its
products (butter and cheese) a part of the regular diet in most households.
Amul launched its new products with the intention of increasing the offtake of its basic milk products,
including cheese. This in turn was expected to increase the earnings of the farmers. The pizzas were
expected to increase the sale of its cheese. The entry into the confectioneries market was another
avenue for increasing milk consumption. This flurry of launches helped Amul broaden its appeal
across all segments. Price was an advantage that Amul enjoyed over its competitors. Amul's products
were priced 20-40 % less than those of its competitors. Analysts felt that Amul could price its
products low because of the economies of scale it enjoyed. Amul created two new distribution set-
ups: a cold chain for ice-cream, and another for limited life fresh foods like curd. Expecting the
demand for ready-to- eat foods to grow, Amul prepared to leverage the ice-cream cold chain for a
new range of frozen foods, beginning with pizza. However, some analysts felt that as the pizza's
would be made by the retailers, Amul would have little control over the quality of the pizzas. That
was why Amul was marketing the pizzas under the brand name Snowcap.

3. List of critical factors or facts:

 “Amul spurred India’s White Revolution, which made the country the world’s
largest producer of milk and milk products and became the largest food brand in
India.”

 “Full form of Amul Name is Anand Milk Unions Limited. its also associated with the
Sanskrit Word “Amoolya”

 “Amul’s architect and chairman late Dr Verghese Kurien died in the 50th year of the creation
of Amul.”

 “The Amul girl was born in 1966. She already completed 50 years, Amul celebrated
her golden jubilee a couple of years ago.”

 The (original) Amul Girl was created by Sylvester daCunha (daCunha Communications)
to counter the Polson dairy girl (a locally-owned dairy in Anand)

3
  “Amul owns 85 percent share in butter market. 65 to 66 shares in Cheese with Market Leader.
It also has 88% market share in butter,63% share in infant milk and 45% market share in
dairy whitener.”

 “The present Amul Butter cartoons are drawn by Jayant Rane.”

 “Amul already launched Indian Desi Cow Milk(A2 milk) which boost the Mind power and
its also Planning to launch Camel Milk First time in India.”

4. SWOT Analysis

Strengths of Amul

1. Investment in Technology

2. Production Capacity

3. Market Share

4. Strong Brand Value

5. Quality

6.Large Consumer Base

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Weaknesses of Amul

1. High Operational Cost

2. Lack of Success in Certain Areas of Portfolio Expansion

3. Frequent Legal Issues

Opportunities for Amul

1. High per capita Milk consumption

2. International Expansion

3. Expansion of Product Portfolio

Threats for Amul

1. Increasing Competition

2. Growing trend of Veganism in India

5. Solution for the questions in the case study:

1) Why was it necessary for AMUL to diversify?

The entry into the confectioneries market was another avenue for increasing milk consumption. This
flurry of launches helped Amul broaden its appeal across all segments. Price was an advantage that
Amul enjoyed over its competitors. Amul's products were priced 20-40 % less than those of its
competitors. Analysts felt that Amul could price its products low because of the economies of scale it
enjoyed. Amul created two new distribution set-ups: a cold chain for ice-cream, and another for
limited life fresh foods like curd. Expecting the demand for ready-to- eat foods to grow, Amul
prepared to leverage the ice-cream cold chain for a new range of frozen foods, beginning with pizza.
However, some analysts felt that as the pizza's would be made by the retailers, Amul would have little

3
control over the quality of the pizzas. That was why Amul was marketing the pizzas under the brand
name Snowcap.
Depending on the response in these cities, GCMMF would decide to introduce its pizzas in other
cities in India. The pizzas were offered in four flavors: plain tomato-onion-capsicum, fruit pizza
(pineapple-topped), mushroom and 'Jain pizzas' (pizzas without onion or garlic). GCMMF launched
the pizzas in the Rs.20-25 price range. The existing players in the pizza market, like Domino's, Pizza
Hut and Narula’s offered pizzas at nothing less than Rs.39. (Refer Exhibit I). Analysts felt that
GCMMF's move would force the existing players to reduce their prices in the long run.

GCMMF planned to open 3,000 pizza retail franchise outlets all over the country by 2005. The pizzas
would be made at the retail outlets. The technical training and the recipe for the pizza would be
provided by GCMMF. It would also negotiate with bulk suppliers of vegetables to get these at
wholesale rates. These would be provided to the retailers.

2. What are the strategies AMUL can follow to compete with other Pizza brands?

Marketing Decision Problem Amul was hopeful that the right mix of product quality and affordable
price will lead to a demand explosion and could perhaps lure customers away from the established
pizza chains. Besides eating into their market shares, this was a strategic move towards forward
integration into the fast-food segment. "Instead of waiting for the pizza market to grow, we decided to
create a new mass market ourselves, "Mr. Vyas, Managing Director, Amul said in an interview to
media. The main reason behind Amul’s foray into the market was the growing acceptance of pizza by
the Indian customers. Pizza has become popular in all major cities and towns. According to industry
sources, it formed almost 50 percent of the fast-food business at that time. Amul’s pizza failed
because the pizza portion of Amul's business model did not match its core strengths or the major
brand areas it's recognized for. "Getting into pizza was a wrong move as the basic product was bread
and not cheese. The same failure was faced by Cadbury when it tried to launch biscuits”, observes
Halve of chlorophyll, a brand consultancy. 5 In this project we would be looking at certain strategies
which Amul can implement to either relaunch pizzas in the market or launch pizzas under the new
brand. Scope and Limitations In this project we will be focusing on the Pizza market in the urban
cities of the country. Amul has a vast variety of products and only the current existing products will
be taken into account, no new planned products would be considered for any analysis. As the product
was launched by Amul way back in the 2000s the data for that time might not be relevant in the

3
current scenario regarding the pizza consumption in the country. Hence, consumption data from
current brands like Dominos, Pizza Hut, and Pizza Corner will be used to study market share
scenario. Similar trends from international projects may be looked into for the analysis. As the
company is also not listed, the secondary data would be taken from sources like Amul website,
leading newspapers, magazines, journals, and databases present in the library. Methodology Pizza by
Amul were launched almost one and a half decade back, hence the current scenario for them could
not be directly captured. Hence, we would be using data from secondary sources regarding the
product success/failure at that point of time and would try to fit it with the current pizza market in
the country. Secondary Research: Collection of secondary data from external sources would be a
starting point of this study. Data on the current pizza market would be captured, its penetration into
the market, product offerings, pricing, and growth trajectory would be looked into. Previous strategy
applied by Amul would be used to understand the reasons

6.Conclusion

AMUL has risen from Indian soil and it remains Indian in every sense. With roots well established in
the domestic market Amul is all set to fight in the global arena. With the commitment it has shown in
the past it will not be too long when Amul emerges a winner on all fronts. There is ample scope in the
low-priced segment as also in other categories where consumers presently are dissatisfied with the
quantity being provided vis a vis the price being charged. Delhi market is not restricted to monopoly
outlets. There are a significant number of retailers who are currently stocking more than two brands.
So Amul can overcome it as earlier it had to overcome this problem in the Mumbai market. Kwality
Walls is right now in an investment mode and is concentrating on expanding the market as also its
reach. Amul should direct its resources towards cashing in on Walls market development.

Amul has the opportunity to capture the more evolved young adults and children who are open to new
products provided they meet their expectations

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 V. BAN ON TOBACCO ADS BY THE GOVERNMENT OF INDIA

On Feb 6, 2001 Government of India (GOI) dropped a bombshell on the tobacco Industry
when it announced that it would shortly table a bill banning Tobacco Companies from advertising
their products and sponsoring sports and cultural events. The objective of such a ban was to
discourage adolescents from consuming tobacco products and also arm the Government with powers
to launch an anti-Tobacco Program.
This decision seemed to have sparked an intense debate, not just over the ethical aspects of
Government's moral policing but also over the achievability of the objective itself. Reacting strongly
against the proposed ban, Suhel Seth, CEO, Equus Advertising said, "The ban does not have teeth. It
is a typical knee-jerk reaction by any Government to create some kind of popularity for itself.
The Legislation has not been thought thorough". In its reaction to the GOI's decision, ITC
Ltd1. announced that it would voluntarily withdraw from all of the sponsorship events, irrespective of
the legal position on the subject.
In a statement it said, "ITC believes that this action on its part will create the right climate for
a constructive dialogue that will help develop appropriate content, rules & regulations to make the
intended legislation equitable and implementable". The complexity of the issue was that, the issue
involved the tussle between the ethical and commercial considerations. On the one hand, was
tobacco, the most dangerous consumer product known, which killed when used as the makers'
intended. Therefore, from an ethical standpoint, the Government had to discourage the habit, as it
was responsible for the welfare of its citizens.
On the other hand, the tobacco Industry was a major contributor to the State Exchequer (In
the Year 2000-01 it contributed about Rs. 8000 crores in excise revenue) which was extremely
important, given the financial crunch which it faced. In the light of the above statements, what
approach should the government choose-the ethical or commercial and is it proper for government to
interfere in matters of personal choice in the first place? To make the matter more complex, there was
the question- was the objective achievable at all and was it equitable? The answers to these questions
lay in understanding the viewpoints of both sides-those in favor and those against such bans.
The Ayes'
The ban was not unusual keeping in view the international precedents. Countries like
France, Finland, and Norway had already imposed similar bans. Advocates of free choice opposed
to these bans, saying these amounted to unwarranted intrusion by the state in the private lives of its
citizens.

3
But others pointed out that the state had the right to intervene in the overall interest of the
citizens. They cited the example of drugs like cocaine, which was, banned the world over.
In 1981, the Supreme Court (of appeal) in Belgium gave its ruling that a ban on tobacco
advertising was not unconstitutional. In 1991 the French Constitutional Council declared that the
French ban on advertising tobacco products was not unconstitutional as it was based on the need to
protect public health and did not curtail the freedom of trade. There were many precedents of
restrictions being imposed on the advertising of dangerous or potentially dangerous products even if
these products remained in the market (e.g. firearms, pharmaceutical Products).
According to the World Health Organization (WHO), tobacco accounted for over 3 million
deaths in 1990, the figure rising to 4.023 million deaths in 1998. It was estimated that tobacco related
deaths would rise to 8.4 million in 2020 and to 10 million in about 2030. There was an increasing fear
that tobacco companies were inducing children and young people to begin experimenting with
tobacco products, and in this way initiate regular smoking, as this held the key for the industry to
flourish.
Internal industry documents2 released in the United States, described 14-24 year olds as
'tomorrow's cigarette business.' In a case which started in 1991 and ended in 1997, RJ Reynolds
Tobacco company, marketer of Camel cigarettes, was forced to withdraw its mascot, Joe Carmel, an
animated camel, from all its advertisements, after the California Supreme Court (USA) ruled that the
company could be prosecuted for exploiting minors.
The accusation was that the slick, colorful advertisements (using an animated camel) appealed
to the children and encouraged them to smoke. In India, analysts estimated that cigarettes contributed
only 0.14% of the G.D.P and the health costs roughly translated to 0.21% of the G.D.P. So the
revenue logic of huge contribution in the form of excise to the Exchequer did not seem to be valid.
Also, given the state's significant contribution to health care, smokers, by damaging their health were
in fact enhancing the State's expenditure. Questions were also raised about the economic impact of
such a ban, given the fact that the tobacco industry provided direct and indirect employment to 26
million people.
However, a study on tobacco consumption and employment3, showed that effective policies to reduce
smoking were likely to increase, and not decrease employment. The reason for this was that when
people stopped smoking, the money did not disappear from the economy. It was spent on other goods
and services, which the study showed, were more labor intensive. This, in turn produced more jobs.
The impact of cigarette advertising on consumers was another contentious issue. A World Bank
report4, had pointed out that policymakers who wanted to control tobacco should be aware of the fact

3
that bans on advertising and promotion would prove effective, only if they were comprehensive-
covering all media and all uses of brand names and logos.
The report also published the details of a comprehensive study of over 100 countries,
comparing the consumption trends over time in those countries where were relatively complete bans
on advertising and promotion and where were no such bans5. In the countries with nearly complete
bans, the downward trend in consumption was much steeper (Refer Figure 1)
FIGURE I
TRENDS IN CIGARETTE CONSUMPTION

In 1992, the Department of Health (DOH), UK reviewed various forms of evidence to assess
whether tobacco advertising affected the aggregate demand for tobacco products.6 Four countries
(Norway, Finland, Canada and New Zealand) were chosen, as these countries had already imposed an
advertising ban and enforced it effectively. The main conclusion of the DOH was that the evidence
available on these four countries indicated a significant effect.
In each case, the banning of advertising was followed by a fall in smoking. In 1997, in a
similar study for the International Union against Cancer, the available data in the same four
countries was examined7. It was found that per capita consumption of cigarettes (15 years +) had
dropped between 14 and 37 % after the implementation of the ban. (Refer Table I).
TABLE I
THE EFFECT OF BAN ON TOBACCO CONSUMPTION
Country Date of Ban Drop in
Consumption until
1996
Norway 1st July 1975 -26 %
Finland 1st March 1978 -37 %

3
 New 17th December -21 %
Zeeland 1990
France 1st January 1993 -14 %
In three out of the four countries, smoking among young people had decreased, while in one
it remained stable. The conclusion was that advertising bans worked if they were properly
implemented as part of a comprehensive tobacco control policy8.
The Nays'
Those who opposed the ban contended that by putting a ban on advertisements and sponsorships by
tobacco companies, the state was effectively stepping in to tell smokers that they were incapable of
deciding by themselves what was good or bad for their health and that, therefore it had to play the
role of a responsible nanny. Said Amit Sarkar, Editor, Tobacco News9, "Adults who consume
tobacco do so of their own free choice. The risk falls entirely on them and is fully explained to them.

If we lose sight of this principle, then we lose sight of the truth on which all the free societies depend,
namely that freedom and risks are inextricable, and whomsoever assumes the right to save us from
risks, is also assuming right to limit our freedom". The Supreme Court in Canada, held, "The State
seeks to control the thought, beliefs and behavior of its citizens along the line it considers acceptable.
This form of paternalism is unacceptable in a free and democratic society".
Also, if it were legal to manufacture and sell tobacco products, it should be legal to advertise
it as well. Tobacco companies around the world have been vehemently denying that they sell the
concept of smoking. They insist that the role of marketing, was merely to assist adults in making an
informed brand choice and that advertising merely enhanced the market share of a particular brand.
The companies claimed that advertising for a particular brand was most relevant to consumers
who already smoked that brand. Cigarette advertisements were least relevant to people who did not
smoke and were neither directed at them nor likely to influence them. They also denied that they
targeted teenagers and young people as a growth strategy and said that they only targeted adult
smokers. In 1998, in a survey conducted by the Indian Market Research Bureau (IMRB), 49% of the
respondents said they started smoking to see what it was like, 24% said 'all my friends smoke'; and no
one said advertising had induced them to start smoking.
Skepticism regarding the effectiveness of the ban also stemmed from the fact that the ban
seemed to have ignored the reality of the Indian Market. The organized-sector, which mainly
produced cigarettes, comprised only 16% of the market, while remaining 84% was accounted for by
other products like 'beedi,' 'ghutkas,' etc. The ban was likely to have no major impact on their sales.

3
Analysts felt that ban on ads would reduce the consumers ability to distinguish between products of
differing quality, and slow down the progression of Indian consumers up the scale from harmful
tobacco consumption (like ghutka, zarda etc.) to more refined forms.
Some analysts pointed out that the ban could lead to spurt in surrogate advertising, which
could defeat the very purpose of the ban. Moreover, there seemed to be no sense in imposing such a
ban on the domestic players, when the foreign magazines that sold in India and the television
channels that were uplinked from foreign countries carried advertisements by cigarette
multinationals.
For example, Marlboro, which sponsored Formula I racing was very popular with well-to-do
Indian youth, even minors. Formula I could be viewed on the sports channels, as they were
uplinkeding from outside the country. Analysts felt that this would put the Indian industry at a
disadvantage. The Tobacco industry was a large contributor to the State Exchequer. In 2000-01 it
contributed Rs 8,182 crore which was 12% of the total excise revenue. About 90% of this came from
cigarettes. India was the world's third largest tobacco maker, with an annual output of 550 million Kg.
Analysts were of the opinion that any control may have an adverse impact on the contributions to the
state exchequer.
Again, the industry provided direct and indirect employment to 26 million people- of this,
roughly 6 million were farmers and almost 5 million were 'beedi' rollers. Stringent measures could
cause millions of workers to be displaced. It was also felt that, India, being the third largest producer
of tobacco in the world, with all the multiplier effect, and with one of the lowest per capita tobacco
consumptions in the world, should tread the anti-tobacco path with caution.
Some analysts contested claims that the state had to spend considerable amounts on providing
healthcare as a result of smoking induced illness. They pointed out, that in a developing country like
India, where the expenditure on public healthcare, insurance and pension systems was meagre, the
argument of health costs was irrelevant.
Even allowing those illnesses caused by smoking led to an increase in state spending on healthcare, it
could be argued that these illnesses also reduced the state's liabilities on old-age pensions- assuming
that those who fall ill would die prematurely as a result.
A number of research studies conducted to determine the relationship between advertising and
smoking indicated that advertising did not seem to influence people to smoke (Refer Box). A study
conducted by the Center for Monitoring Indian Economy (CMIE), found that there was only a weak
correlation between the money spent by cigarette companies on advertisements and the consumption
of the cigarette (Figure II).

3
The Nays' Contd...
FIGURE II
CORRELATION BETWEEN CIGARETTE CONSUMPTION AND AD SPEND

In the US, a study10 was done to examine the relation between cigarette advertising and
consumption between 1961-90. The finding was that "aggregate advertising expenditure and total
consumption of cigarettes in the United States were not significantly related from 1961-90." An
advertising ban was implemented in Norway in 1975, but consumption of tobacco remained virtually
unchanged from the period before the ban all the way through 1995. Researchers from the Norwegian
National Council on Smoking and Health11 who compared smoking trends in Norway with those in
seven other European countries, also found that Norway had the highest per capita proportion of adult
smokers among all the countries surveyed.
Smoking among young people increased in Finland after its tobacco-advertising ban in 1978,
according to researchers at the University of Helsinki who conducted studies in the late 1980s and
early 1990s. A 1993 study12 examined annual cigarette consumption in 22 OECD (Organization for
Economic Co-operation and Development) countries from 1964 to 1990. The conclusion was that
advertising bans, where they existed, did not reduce tobacco consumption.
The Haze
Tobacco consumption was growing in the developing countries while it was falling in the
developed countries. Concerned over the welfare of its citizens, who were fast becoming a prey, the
Indian government decided to ban advertising by tobacco companies as a first step towards its goal of
discouraging smokers. But the advocates of free choice and the cigarette companies (the worst hit in
the tobacco industry when the ban was imposed) insisted that ban was no solution to the problem.
Said Shunu Sen, CEO, Quadra Advisory, "Excess of anything is bad. Excess of coffee, tea...whatever.
Where do we draw the line?" They argued that that the ban was unjustified, as advertisements didn't
promote smoking, and that the ban was not the right solution to the problem. The Cigarette
companies expressed concern that the ban would deny them level-playing field.

4
The issues discussed above at best gave an idea of how complex the problem was. This was the crux
of the problem. The problem itself seemed so intricate as it questioned the very domain of propriety;
both ethical and commercial and the 'ifs and buts' were too hazy and one too many. No wonder the
debate over the state control on tobacco consumption was clouded in an enigmatic tussle-a tussle
between rhetoric and plain talk, of arguments and counter arguments, of claims and counter claims.
Only time would say who would have it, the Ayes or the Nays.

4
 I. Analysis of the case study

1. Situational Analysis

On February 6, 2001, Government of India (GOI) announces a bill about banning Tobacco companies
from advertising their product and sponsoring sport and cultural events. The bill mission is to reduce
consumption of tobacco products. This paper is based on information provided by the case study and
is divided into four sections. The first section summarizes arguments in favor of the ban on tobacco
advertising in India. The second section summarizes arguments in opposition of the ban on tobacco
advertising in Indian. The third sections discuss the conflict-of-interest issue as it pertains to
government in India. And the last section offers some suggestion on what government should do in
regards to tobacco advertising.

Favor in the ban of tobacco Advertising

Some advocates argue that this ban is the same as government effort to meddle their citizen private
lives, but other argue that government did have right to intervene in the overall interest of their
citizen. There are many countries in the world that already did similar bans. In 1991, French
constitutional council declared that French government ban on tobacco is not based on nothing. As
this ban is needed to protect their citizen health.
Many fears that tobacco advertisements will influence children and young adult to smoke. It is
become concern, especially since it is noted that future cigarette business lay on the age 14-24 years
old. California government has done some effort to prevent that. For example, in a case which started
in 1991 and ended in 1997, RJ Reynolds Tobacco company, marketer of Camel cigarettes, was forced
to withdraw its mascot, Joe Carmel, an animated camel, from all its advertisements, after the
California Supreme Court (USA) ruled that the company could be prosecuted for exploiting minors.
In India, analysts estimated that cigarettes contributed only 0.14% of the G.D.P and the health costs
roughly translated to 0.21% of the G.D.P.

However, a study on tobacco consumption and employment, showed that effective policies to reduce
smoking were likely to increase, and not decrease employment. The reason for this was that when

4
people stopped smoking, the money did not disappear from the economy. It was spent on other goods
and services, which the study showed, were more labor intensive.

A World Bank report, had pointed out that policymakers who wanted to control tobacco should be
aware of the fact that bans on advertising and promotion would prove effective, only if they were
comprehensive-covering all media and all uses of brand names and logos.
The report also published the details of a comprehensive study of over 100 countries, comparing the
consumption trends over time in those countries where were relatively complete bans on
advertising and promotion and where were no such bans.
In 1992, the Department of Health (DOH), UK reviewed various forms of evidence to assess whether
tobacco advertising affected the aggregate demand for tobacco products. Four countries (Norway,
Finland, Canada and New Zealand) were chosen, the main conclusion of the DOH was that the
evidence available on these four countries indicated a significant effect.
In 1997, in a similar study for the International Union against Cancer, the available data in the same
four countries was examined. It was found that per capita consumption of cigarettes (15 years +)
had dropped between 14 and 37 % after the implementation of the ban.
In three out of the four countries, smoking among young people had decreased, while in one it
remained stable. The conclusion was that advertising bans worked if they were properly implemented
as part of a comprehensive tobacco control policy.
Some analysts contested claims that, they pointed out, that in a developing country like India, where
the expenditure on public healthcare, insurance and pension systems was meagre, the argument of
health costs was irrelevant.
Even allowing those illnesses caused by smoking led to an increase in state spending on healthcare, it
could be argued that these illnesses also reduced the state's liabilities on old-age pensions- assuming
that those who fall ill would die prematurely as a result.
A study conducted by the Center for Monitoring Indian Economy (CMIE), found that there was only
a weak correlation between the money spent by cigarette companies on advertisements and the
consumption of the cigarette (Figure II).

According to researchers at the University of Helsinki who conducted studies in the late 1980s and
early 1990s, stated that Smoking among young people increased in Finland after its tobacco-
advertising ban in 1978.

4
Tobacco consumption was growing in the developing countries while it was falling in the developed
countries.The Indian government decided to ban advertising by tobacco companies as a first step
towards its goal of discouraging smokers. But the advocates of free choice and the cigarette
companies (the worst hit in the tobacco industry when the ban was imposed) insisted that ban was no
solution to the problem, Said Shunu Sen, CEO, Quadra Advisory, he stated that "Excess of anything
is bad coffee, tea... whatever" and they argued that the ban was unjustified, as advertisements didn't
promote smoking, and that the ban was not the right solution to the problem. The Cigarette
companies expressed concern that the ban would deny them level-playing field.
The issues discussed above at best, gave an idea of how complex the problem was. We can do
arguments or counter the arguments, or claims and counter claims.
Only time would say who would have it, the Ayes or the Nays.

2. Statement of the Problem (or) Formulation of the Problem

The Main problem of the case can be viewed from two different level, one: There was an increasing
fear that tobacco companies were inducing children and young people to begin experimenting with
tobacco products.
Second: In India Cigarettes contributed only 0.14% of the G.D.P and the health costs roughly
translated to 0.21% of the G.D.P.

3. List of Critical Factors (or) Facts

 There are about 4000 chemicals in tobacco, and out of the 100 identified poisons, 63
are known to cause cancer.
 Nicotine is an addictive drug that takes only 6 seconds to reach your brain.
 Smoking kills more people than cocaine, heroin, alcohol, fire automobile accidents,
homicides, suicides, and AIDS combined.
 Every 8 seconds, someone in the world dies from a tobacco related illness.
 More than 3 million people under the age of 18 smoke about a ½ billion cigarettes each year,
over half of those people consider themselves dependent on cigarettes.

4
4. SWOT Analysis:

STRENGTHS WEAKNESS

 Big players.  Hazardous product

 Strong distribution network.  Health risks

 Financially sound companies.  High cost

 Variety of brands.  Lack of government support

 Strong marketing campaigns.  Increasing death tolls

 Large customer base.

 Employment and GDP contribution

OPPORTUNITIES THREATS

 E-cigarettes  Government regulations.

 Market development  Warning labels
 Product development  Anti-tobacco campaigns
 Alternative uses  Cheap labels
 Exports  Increased taxes
 Declining market

4
5. Solutions for the questions in the Case Study.

1. Briefly explain the arguments against the ban of Tobacco advertising. (Explain from the readers
point of view).

Those in favor of the ban argued that effective policies to decrease smoking, if properly implemented,
would generate more jobs. They also argued that bans on tobacco advertising in other countries were
very effective in reducing the number of smokers (Ban on Tobacco, 2010, 3). The arguments in
opposition of the ban on tobacco advertising in India are: - The 1st argument linked smoking to the
free will and freedom of people. It found no basis for the government to step in and decide for people
what to do, and what to choose. - The 2nd argument observed that if it was legal to make and sell
tobacco, why would it be illegal to market it? these were the 2 arguments stated by the Tobacco
Companies against the ban of Tobacco advertisements in India.

2. What was the objective of banning tobacco advertisements in India?

BAN ON TOBACCO ADVERTISEMENT IN INDIA In 2004 the government of India banned

tobacco companies from advertising their products and sponsoring sports and cultural events. The
objective was to discourage adolescents from consuming tobacco products as well as empower the
government with the power to launch an anti-tobacco program.

3. Suggest better ways to prevent the consumption of Tobacco?

Prevention can take in the form of policy-level measures, such as increased taxation of tobacco
products; stricter laws (and enforcement of laws) regulating who can purchase tobacco products; how
and where they can be purchased; where and when they can be used,and Prevention can also take
place at the school or community level. Merely educating potential smokers about the health risks
which has proven effective.

4
6. Conclusion

Only the ban of Tobacco advertisements will not be going to stop the people from smoking, So
Governments can also take so many measures to prevent Tobacco, Government should make posters
available everywhere in India warning the public about the dangers of cigarette. Educating them on
the various diseases such as cancer, stroke, coronary heart disease, tuberculosis, premature death and
many others which are related to tobacco consumption. Also, there should be tax increment in all
companies producing risky products to the detriment of citizens. This is because tobacco is not the
only health hazard product available in the nation but other products such as firearms,
pharmaceutical products which are in the market but nothing is said about their effect. Government
should sensitize parents to expose the effects of smoking to their children, so that even if you they
watch such advertisements, they will no longer be persuaded.