PART-II

Mini Cases 1
BYJU’S—THE LEARNING APP, GIVING VALUE AND CAPTURING VALUE
‘Byju’s—The Learning App’ meant for schoolchildren is becoming an event in the school education
scene of our country. Launched in 2015, the K-12 self-learning mobile application (app) focused
largely on maths, science and English is being cited as a disruptor in the tech- based education field
in India. It has already been used by millions of schoolchildren across the country. To quote the
managing director of Sequoia Capital India, a major investor in Byju’s, ‘Byju’s will be one of India’s
Biggest Education Stories; this company will soon change the way the world will learn’.
Byju’s is an ambitious business start-up. In two years, the start-up is valued at Rs 45 billion. Some of
the world’s biggest investors, such as Zuckerberg and Tencent, have put their money into it.
Education Is Big Business in India
In India, education is big business. School education, in particular, is a fast-growing and highly
thriving business, owing to India’s big population of school-going children. India, today, has the
largest K-12 education system in the world, with over 260 million enrollments. The new
technologies in learning have opened up the online education field in a big way.
Byju Raveendran, the founder, puts it in a very interesting way: ‘We want to Disneyfy education;
make learning a Disneyland of entertainment for children by taking out the drudgery and fatigue
associated with learning. The unique combination of media, technology and content is helping us
move towards this promise we made to children’.
The business idea: With the use of technology, try out an alternative to the age-old school
education/teaching system of the country. Any change in education patterns should start early in the
child’s life, so concentrate on school-going students in classes 4-12.

The first question he raised was: What should the new offer do? And how would it do it? He did not
have to stretch too much for an answer. The lapses/problems with our education system were too
obvious and debated at various levels. The new offer had to address those drawbacks and rectify
them.
• There is a huge mismatch in the way students learn concepts and how they should ideally be
doing it.
• Learning happens- because of the fear of exams; it never evokes a love for the subject.
• In a conventional crowded classroom, access to personalised teaching is very meagre.
• High-quality teachers are costly and scarce. The very profession of teaching has become
somewhat unattractive to ambitious youngsters; it is all the more true of teaching in schools.
Byju’s task was cut out for him: his new package had to fill up these gaps.
Creating the Product Offer; Building New Benefits/Value into It
Aim: Give a teacher to every student; let him learn when he feels like doing it.
It is done: With the new app, the teacher is there on their mobile phones, tabs or computers at just a
click of a bitton. He explains anything and everything that is given in their school-books in the most
innovative way and that too in real time, by creating effective technabled learning programmes.
Aim: Children are learning only by ‘rote’ and out of compulsion; bring the child’s natural curiosity
back, get him involved and make him ask questions.
It is done: By creating products in a format that they like: laced with videos, stories, animation,
colour, quizzes and even music. Tutors-bring the real world into the act—using pizza to explain
fractions, a birthday cake to teach circles and segments, and a basketball game to demonstrate
projectile motion. Science experiments are overlaid with animation. High-quality learning modules
with interactives are the strong points.
Aim: A teacher to every student is not enough. A good professional teacher who is an expert on the
subject must teach, so that the child is not the victim of inept teaching.
It is done: Real-life expert teachers are used to deliver the lessons. This coupled with technology as
an enabler makes the delivery of concepts easy, effective and engaging. Overall, the programme is a
complete integrated learning experience, where the teacher’s knowledge and skills are several times
amplified through the scope of technology. The teachers are given access to varied tools and
technology to make teaching more interesting and impactful.
Aim: A good professional teacher is not enough; even the provision of one-to-one interaction is not
enough. As a teacher and trainer himself, Byju was very well aware that a lesson delivered to a
student will become purposeful only if the student has the opportunity to get feed-back about his
grasp of the lesson/performance. This is easier in the normal classroom but difficult on an online
platform. It has to be done; this unique benefit has to be given.
It is done: Every student is offered customised feedback and recommendation based on their
performance. It is here that the maximum use of technology comes in. Whenever they make a
mistake, the right remedial method gets into action. What a personal tutor would do, Byju’s app is
doing. This serves as the best differentiator and, therefore, the best ‘value- add’ to Byju’s offer.
Why do children find value in this offer?
Personalised coaching and feedback for each student is the trump card of Byju’s.
How does Byju’s manage it?
The backbone of Byju’s personalisation rests on the rich learning profile that is built for every
student. It is done by leveraging big-data analytics to trace the learning fingerprint of every student.
This is supported by deep Knowledge Graphs of over 50,000 concepts that have been created to
design personal learning journeys—videos, questions, adaptive flows, quizzes, flashcards and so on.
Additionally, the learning content is also tagged to multiple other properties and parameters.
Aim: Online learning provided by most service providers is limited to simply digitising content and
taking it online. It almost amounts to the traditional classroom minus a teacher! Remove this big
defect.
It is done: The measures listed above are making Byju’s the most entertaining and yet the most
purposeful classroom for the child—a classroom at the child’s convenience, at his level of comfort.
Aim: Parents, as a class, are big stakeholders; target them and satisfy them.
It is done: The motives and compulsions of the parents are separately addressed. The firm
(introduced Byju’s Mentor App that helps the parents understand the child’s progress, that too in
real time.
Communicating the Value of the Offer
Byju’s used the digital media and the outdoors to propagate the uniqueness of the app.
Schoolchildren being the target, sports events were used in a big way for promotion. As more
investments came in, more budget was allotted for communication. The most rewarding experience
for the firm was the fact that the actual users of the product—children themselves—became the
best ambassadors of the product. They carried their newly found enthusiasm for the subjects to their
classroom. In quick time, Byju’s became an easily recognised and well talked-about brand.
Delivering the Offer
The smartphone as a learning device, the app as a medium and the Internet as the pathway together
gave the firm almost infinite reach in delivering the offer. The product would run on smartphones
with Android and IOS platforms, tabs and computers. The rapid expansion of smartphones in the
country has deepened the company’s reach. The product now has a reach of over 1,700 towns and
cities.
Pricing the App: Offering Value to Customer and Capturing Value Back to the Firm
This was quite naturally a critical decision for the new product. The user is the school kid; the payer
is the parent. The child must be happy with the product; the parent must be happy with price. The
payment is not part of the child’s school expenditure; it is an additional cost. Although the app was
mostly targeted at urban parents and children, the affordability factor had to be kept in view. These
were the arguments in favour of pegging the price low.
For the firm, the development cost of the app was high; it was employing high-quality- content
developers, teachers, tech people and studios. Even psychologists were on the rolls to get the right
clue to the children’s psyche. The cost of upgrading the app, development of new offers,
administration of the online platform, all put together pointed towards a premium price. Through
trials, the firm found out that its app with so much of benefits and value packed into it can fetch its
rightful returns back. For example, the app is priced at an annual fee of Rs 23,000 - Rs 30,000 for
classes 4-10 for maths and science. Classes 4-10 are the main target group, and maths and science
the main subjects handled. Two years of performance proves that Byju’s app is offering the due
value to the customers and collecting due value back to the firm’s kitty. It already has 300,000 paid
subscribers, and 1,000 new subscribers are being added every day.
Value Does Not Imply Cheapness
The moment one mentions the term ‘value’, people are tempted to feel that the whole thing is about
something cheap, something with a low price. It is not so. Look at Byju’s. A class 4 child is paying
Rs 23,000 to buy this app. It happens solely because the parent who pays is convinced that for his
child, this product is worth that price. He is getting his money’s worth! And for the firm, at this
price, the product returns value to the firm’s kitty. The firm is now confident that at this price their
investment is worth it! That was the sweet spot in pricing.
Competition with Wide-ranging Price Offers
It is not as if the absence of competing offers facilitated such a pricing from Byju’s. The opposite
was the case.
In fact, the nonprofit Khan Academy is a mighty competitor; funded by Bill Gates Foundation,
Khan is offering absolutely free services with free YouTube videos. Khan is already a global
operator. So, Byju’s stood at the other extreme, with a high price tag. Still the product was welcome
to the market. To quote the firm, ‘We are our biggest competition and the focus is to
outplaypurselves every time with new innovations which make learning more fun’.
Augmenting Value
To strengthen the tech capabilities, Byju’s recently acquired Vidyartha, a career guida ice and
academic profile builder, and TutorVista and Edurite from Pearson. To supplement the online
system, the firm started traditional classrooms also. The direct personal contacts with the teachers
gave a fillip to the whole programme. They commenced it in Delhi NCR, Bengaluru and Chennai.
Mini Cases 2
NEXA: MARUTf’S INNOVATIVE VALUE CREATION
The kind of dominance Maruti Suzuki enjoys in India’s passenger car industry is simply enviable; the
company now sells one out of every tvyo cars sold in the country. From a market share of 38 per
cent in 2012, it has risen to nearly 52 per cent in 2017, the rise mostly driven by new launches.
The Company Fails in Premium Cars
Suzuki’s long-term plan was to become a dominant player in virtually all segments of India’s fast-
evolving car industry, including the premium segment. Baleno, Ciaz, Vitara Brezza, Ignis and S-
Cross were premium offerings with very clear differentiation; they were the outcome of the long-
term plan of the parent company. They were the big bets. Despite such a well- planned and
resource-intensive corporate plan, Suzuki was surprised to find that its Indian arm could not make a
mark in the premium segment of the market. Premium offers such as Ciaz, Vitara Brezza and S-
Cross simply failed to enthuse the market. Some of the models had to take big price cuts in the
launch year itself.
Maruti Gets a Peep into the New Customer’s Psyche
In 16 cities, Maruti conducts a ‘Brand Track’ on every customer who buys its cars. The market
research (MR) team assess the results on a weekly basis. The survey helps them position their
vehicles effectively. The team says: ‘Even though the cars might be in the same price and size
segment they may not be in the same mind space'. In spite of such professional approach, the
company could not locate the larger problem brewing up.
Maruti Seen as Just a Commoner’s Car Company
Faced with the new predicament, Maruti studied the issue in detail; research at different
levels/different agencies were conducted; the answer came readily: Maruti was seen as just a
commoner’s car company! And the name Maruti was equated with just small cars! The details of the
findings were big revelation to the company:
• The mood around automobiles and the people who drive them has changed drastically over the
years. It is a new consumer, with rising incomes and different expectations that are in stark
contrast to that of earlier generations.
• A car no more was just a means of transportation; it had become a ‘lifestyle statement’.
• Price and affordability are not the issue. In the case of Dzire sales, over 50 per cent of buyers
have opted for Dzire as their first car purchase. For them, it was the entry-level car; for the
company, it was a premium offer to which a customer from entry level had to migrate.
• Indian customers are steadily maturing into large car purchase.
• Design is emerging as one of the important drivers of differentiation. Technology = Car engine
was the old formula; now, in his car, the modern customer demands multiple benefits out of
technology. The company Maruti was not seen to be in such a bracket.
How to Reposition the Company as a Maker of Premium Cars
It is interesting to see how the company handled the issue. The company’s senior executive director,
marketing and sales, who spearheaded the strategy to targe;, and bring in the premium segment of
customers says:
Our company that put India on the automotive world map and has churned out millions of cars over the past three
decades was grappling for an answer.
About two years ago, we had around 46.7% market share. We were asking why the remaining 53-54% customers
were not coming to us. Now we have the answer. Our research shows that young customers—the third generation
customers, who may already have a Maruti Suzuki vehicle in their family ... they think of Klaruti Suzuki as dad’s
car or grandfather’s car.
The Hindu, 5 July 2015
Nexa Was the Answer: Showcase the Cars and Show the Company
The task was not easy; it amounted to repositioning the company itself from the image of a
commoner’s car company to a ‘premium car maker’. The company took a decision: a new company
cannot be created but the premium products can be showcased in such a way that they point
towards a new carmaker. Thus, Nexa was born: the company’s exclusive line of showrooms that sell
its premium car portfolio. One important input was that the buyers of premium cars were not even
comfortable with the Maruti showrooms; they wanted not only great cars but also a fine buying
experience.
The Nexa Effect
The Nexa chain of showrooms was launched in 2015. The plan was to introduce 50 outlets in the
first year. The campaign to launch and propagate the showrooms was as intense as the promotions
done for new car launches. From the traditional black and white print to digital, all media platforms
were used to bring the new-Gen customer to Nexa. A full-page print ad in English dailies did not
advertise any of the premium Maruti cars or the picture of a Nexa showroom; it just showed a
young, modern couple in their wedding attire, beaming with happiness. Yes, their new journey had
to start at Nexa!
The showroom with its aesthetics, space, high-tech displays and personal attention given to every
customer by proficient sales executives really was a class apart from Maruti’s popular retail outlets.
And the premium cars on display really added to the show. One self-evident aspect was that there
was no intrusion by the compacts and other older cars to distract the new visitor. He had to give his
mind space to only those things that mattered to him! Especially when he was planning to shell out
Rs 10-14 lakhs on his new purchase.
The Take-off Was Dull
Some of the negative prophecies came true; there were warnings that sales of models unveiled
through the new channel may be hit. And it did happen; S-Cross, the first model to be introduced
via the channel, failed to gain traction initially. Priced at Rs 8.34 - Rs 13.74 lakhs, the car soon took a
price cut of about Rs 2 lakhs on select variants.
Nexa Gains Footfalls
The trend soon changed. As more models were introduced through the new channel—Ciaz, Baleno
and Ignis—and more and more showrooms were introduced at a fast pace, footfalls to Nexa rose
and it soon reflected in sales. In just two years, 280 Nexa showrooms were in place, giving an
extensive display effect to the channel and the products. Maruti’s senior executive director,
marketing and sales, said, ‘After the first 50 showrooms were in place and fully operational, we saw
the Nexa bet paying off. People were appreciating the benefit of the showrooms. It wasn’t a typical
Maruti Suzuki experience....’ (The Hindu, 5 July 2015)
Maruti Starts Selling More Cars in the Higher-end Segment
Sales of premium models including that of Vitara Brezza soon surged. PricewaterhouseCoopers
(PwC) reported,
Maruti Suzuki, the country’s largest car maker, reporter, a 47.5% jump in third-quarter profit (Oct-Dec 2016)
after it sold more cars in the higher-end segment. The company’s strategy of using Nexa as a channel for
distribution of premium cars had also paid off. Nexa has helped them push sales of their premium vehicles, which
they were not able to sell earlier.
PricewaterhouseCoopers report, January 2016
Customer Decides What ‘Value’ Is
To sum up in the words of the marketing man who championed value creation,
We had brought in a powerful portfolio of products in the last 4-5 years. But we could not establish the line....
Being a company with such a widespread product portfolio, we should have segregated the products as per the profile
of the customers. The company needed focus. It is a pampered generation. Today we had to respond to the new
customer. Digitisation was the first step. About 75% of customers search online. We wanted to provide them with a
seamless experience from where they left the research. Nexa was designed accordingly. Nexa gave them the kind of
new-age experience they are used to in other areas of their life.
The Hindu, 5 July 2015
Nexa Sells 300,000 Vehicles in Less than Three Years
Looking back, it has been a wonderful experience for Maruti. The company now has 280 Nexa
showrooms and has sold 300,000 vehicles through the channel during its two and a half years
performance. By 2020, Maruti wants 20 per cent of its target of 2 million vehicles sales to come
from Nexa. Nexa has its job cut out! May be, Nexa is an idea whose time has already come!
The Lesson: New Value Created and Added Through Distribution
The products were already there; they were also distributed. But it did not reach and occupy the
mind space of the targeted customer.
The new showroom by itself was a product offer carrying certain unique benefits/values that
mattered to the modern buyer.
The Company Is Actually Getting Repositioned
We should not lose sight of the larger process that is set in motion by the Nexa experiment. Its
impact is not confined to the fast growth in sales of the premium offers of Maruti.
Yes, the company Maruti Suzuki is getting repositioned. That will be a topic of a bigger case in due
course!

corporate-wide responsibility. If marketing has failed with a given product/brand, the inference,
more often than not, ought to be that the firm has failed in equipping the product with the value
ingredients essential for its success. So the practice of value delivery has to commence at the top
management level and permeate the corporation as a whole.

Mini Cases 3
HOW ITC HAS BEEN PLANNING AND ACHIEVING GROWTH
ITC Pioneered Marketing in India
From 1912, the year of its entry, until the 1970s, ITC was known as the cigarette company,
sometimes referred to as the ‘Scissors Company’. The company’s popular cigarette brand had
become synonymous with the company. ITC not only brought a new product—cigarette— into
India but also practically pioneered marketing in India! The marketing work carried out by the
company in establishing a new product from the very idea stage, its later day strategies to establish
and build a brand, the subsequent competitive battles with newcomers and the concurrent growth of
cigarettes as a big industry and ITC as a big enterprise carry in its fold some of the best marketing
lessons. Mini Case 11.1 on ‘PLC of Scissors’, in Chapterll deals with this story separately.
Interestingly, in the very same path of establishing its cigarette business, the company also faced
some of its worst market experiences.
Faced Survival Threats on Many Occasions
On more than one occasion, its flagship brand (in its one and the only business!) almost faced
extinction; none of its marketing strategies were coming good. It was ‘pull out some extra-efficient
strategies or exit’ situation for the whole company. That ITC finally prevailed and the brand and the
business were brought back was the litmus test of ITC’s marketing expertise. (In Mini Case 11.1 in
Chapter 11, we are discussing the marketing strategies employed to save the brand and the
company.) This episode is enough to understand that it is ‘marketing strategies’ that make or mar a
business.
The Cornerstone of Subsequent Strategy: Build Flexibility to the Business Portfolio
By the 1970s, the world over cigarette industry became the centre of attack from the ‘health
movement’ and the product found itself in a de-marketing situation. This was a turning point in the
history of strategic planning by ITC. ITC took this call and transformed the company into its
present position of a serious player in diverse businesses outside of cigarettes, businesses ranging
from atta to lifestyle products and luxury hotels.
ITC set a major objective: Built enough flexibility to the business portfolio and reduced the
overdependence on cigarettes. The company studied various options and entered the following
industries, which met those criteria.
New Business Pursuits: The 1970s to the 1990s
Hotels and tourism: Launched the hotel chain Welcomgroup around 1975. Hotels business picked
up fast, underwent major expansions in the 1980s, received 200 crore investment, built new hotels
and expanded existing ones, and by 1995, the chain had 18 hotels with 2,200 rooms, earned a profit
of Rs 97 crore and foreign exchange valued at Rs 30 crore on a turnover of Rs 250 crore. It was
taking shape as a star business for ITC.
Paper and paperboards: Entered in 1976 with the subsidiary companies, Bhadrachalam Paperboards
Ltd (ITC-B) and Tribeni Tissues. The two companies together gave ITC a strong leadership position
in the various segments of the paper industry.
Invest and grow: This was the direction from corporate strategy for the paper business. With this
focus, Bhadrachalam underwent massive modernisation/expansion in the early 1990s, at a capital
cost of Rs 675 crore, making it on par with the large paperboard mills in the world.
Packaging and printing: The business was related to paper, and the company found it profitable.
Financial services: ITC embraced financial services as another portfolio. The company saw an
opportunity in it in the wake of the liberalisation of the financial sector.
Agribusiness: Studies showed it a high potential business. The company entered this growing
business in the mid-1980s. The next 10 years saw big efforts by ITC to almost transform ITC into a
‘farmer’s company’ with a strong presence in.agribusiness. This business too was shaping up as a
star.
Exports and global trading: Over the years, ITC was active in exports and global trading. In the
early 1990s, it set up the International Business Division to convert the activity into a major line for
the company. Subsequently, a subsidiary company, ITC Global, was set up, with headquarters in
Singapore. A target of $1 billion was fixed for group exports for 1997.
Position of Portfolios by 2000
Hotel and tourism was doing well; the Welcomgroup chain was by now well established. Cigarettes,
the business the company wanted to underplay, was doing well in every way, contributing 70 per
cent of the total turnover of the corporation despite the ‘health movement’ and government
regulations. Diversification into financial services had ended up as a debacle; exports and global
trading too was a poor show; ITC Global ran into serious business-cum-legal problems; agribusiness
performance was a chequered one; efforts at brand development too had not yielded intended
results. The paper business too was in trouble; import liberalisation since 1991 led to a rapid
reduction in customs tariffs rendering ITC- Bhadrachalam non-competitive.
The Decisions ITC Took by the Year 2000
ITC made the following business choices:
• Stay with the objective of increasing the non-cigarette businesses
• Cultivate ongoing non-cigarette businesses of hotels, agribusiness and paper; and exit others
• Diversify into new areas such as
 packaged foods
 modern lifestyle products like garments
 personal care products
Period 2000-2012, ITC Becomes a Major FMCG Player
To achieve the kind of growth envisaged and to bring down the dependence on cigarettes, ITC
needed to get into some FMCG businesses that were new to it. ITC entered
• packaged branded foods and
• personal care products
ITC reckons them as its ‘new’ FMCG businesses (cigarettes and the like being part of its traditional
FMCG portfolio). In its planning, ITC provided for the needed investment in business development
and brand building in respect of the new businesses. The brand-building investments grew from Rs
100 crore in 2002 to Rs 5,500 crore in 2012. The main strategy is to take this effort forward. The
ITC chairman said, ‘the top line from this segment is expected to triple over the next 5 to 7 years—
to Rs15,000 crore by 2017-20’.
Be a Big Player in Foods
That was the aim. The planning included developing new categories (not merely new brands) in
foods, converting traditional foods and recipes to commercial scale. The strategy was to build strong
brands and compete on differentiation strength. An array of brands were developed, committing
time, money, distinctive value inputs and marketing skill. Brands such as Sunfeast, Bingo and
Kitchens of India led the show.
Be Aggressive in Personal Care: Aim Big
That was the brief. In personal care, products for the emerging new lifestyle were the route. And
here too, strong brand-building measures were initiated. There was no shortcut available to ITC in
these businesses which were the forte of well-entrenched strong players, MNCs and Indian
companies.
ITC as a Challenger to HUL in Personal Care Business
ITC chose an aggressive strategy. In a slew of products such as soaps, shampoos, gels, fairness
creams and perfumes, Indian market witnessed a new battle. Here was a case of a Goliath taking on
another Goliath. HUL and ITC were coming face to face.
ITC Builds Brands, Fights on Differentiation Strength
In diverse products in personal care, ITC started building brands such as Vivel, Fiama, Essenza,
Superia and Mikkel Eau De Toilette. Big funds were committed for advertising the new brands in
TV, print and outdoors. And each of these brands saw extensions. For example, the company
extended its Fiama Di Wills line of premium soaps to shampoos and shower gels in an attempt to
develop it into a mega brand in total personal care. Bollywood actor Deepika Padukone was the face
for this premium line, while Amrita Rao promoted Vivel, positioned for a different segment.
With an expanding portfolio of brands, ITC was now playing in several segments of the market,
both premium and mass. ITC was aware that it had to wait for the brands to deliver; it cannot realise
big sales immediately. And, ITC got ready for it.
Uses Its Distribution Strength and Enlists the Support of Retail Trade
Through its cigarette business, ITC has developed huge strength in distribution, in both urban and
rural markets of India. ITC’s products were already available in over six million retail outlets in the
country, and the company’s distribution organisation has been directly servicing more than two
million of these outlets. This reach was fully tapped by ITC to establish its new brands. While
launching the new categories/brands, ITC offered higher margins to the retail trade at the launch
stages and got their support in stocking the new brands and introducing them to the customers.
ITC’s CEO on Their Marketing Strategy for Personal Care Business
ITC’s CEO, personal care products, observed:
 Leveraging the opportunities in the FMCG markets, which is expected to triple in size to over Rs 3,55,000 crore
by 2018, means a face-off with entrenched incumbents ... we don’t opt for short cuts. We have a mix of objectives in
distribution, as we are developing a portfolio of brands for various segments. For a given brand too, our distribution
objectives change based on our marketing objectives. For example, on brands like Superia in the personal care space,
our initial objective was to ensure distribution in larger markets and towns of the country. As the brand has
bloomed and matured, we are taking it deeper to smaller markets and towns. The objective is to go still deeper into
the market. So Superia may not be seen in trade channels frequented by the upwardly mobile. In many outlets, it
may not be stocked at all, whereas in some other market it is a key brand. That is the advantage of a portfolio
strategy, deploy your brands to meet the needs in a differentiated manner and minimise overlap within your portfolio.
So you serve different consumers in the same category with different brands. Fiama serves one particular segment,
Superia serves another. We are into all these segments with the right Brands. (Quote taken from an interview the
CEO had with the Economic Times in 2011)
By 2012, 57 Per Cent of Corporate Income from Non-cigarettes
By 2012, ITC’s revenues from the non-cigarette businesses had substantially gone up; 57 per cent of
corporate income was now from this segment. And this crucial objective was achieved by the timely
divestments and the strategic choices ITC made with regard to new businesses and the way it
executed them.
The Current Times
Today, ITC, with a corporate turnover of Rs 3 7,000 crore (2017), has become a formidable player in FMCG
and hospitality businesses, in addition to its time-old leadership clout in cigarettes. Their brands are everywhere: in
staples, snacks and meals; dairy, beverages and confectionery; apparel, personal care, education and stationery; safety
matches and agarbattis and, of course, in luxury hospitality.
Now, foods is the second largest business for ITC, after cigarettes. The company is investing Rs 4,000 crore in the
next two—three years (2018-2020) to set up eight factories to manufacture food products. The company says that
they will not spare any Indian food item from their ‘menu’.
They have already entered the dairy business with Sunfresh, taking the battle to Nestle and Amul.
It is non-stop planning that is going on at ITC.
Source: ITC Chairman’s speech at Company AGMs from 1980 to 2017; Reports in the Press.

Mini Cases 4
COMPETITIVE ADVANTAGES OF MARUTI SUZUKI
The Background: Maruti Attains Preeminent Position in the Passenger Cars
Maruti Suzuki closed 2017, crossing a new milestone in its annual domestic sales. It sold 1.6 million
units in the year. The total output was about 1.75 million units. It grabbed 50 per cent of the
passenger car market in India All the top five bestselling vehicles in the country in the year were
Marutis. As many as 7 out of the top 10 bestsellers were Marutis. In the entry- level segment, Maruti
Alto continued to dominate with sales of over 2.5 lakh units.
The company, which had revolutionised personal transport in the mid-1980s, has consistently
maintained its dominance throughout the next three decades. In addition to high absolute growth, it
has excelled in rate of growth and growth relative to the other players competing in the industry.
Maruti is also the top exporter of passenger cars in the country. Maruti Suzuki is also one of the
world’s top carmakers by market capitalisation. There are only a few markets in the world where a
carmaker enjoys the kind of dominance Maruti Suzuki enjoys in India. The pole position of the
country’s largest carmaker is likely to continue, thanks to its endeavour to be present across several
car segments and price points, and its strong CAs.
Competitive Advantages
How did Maruti become the country’s largest carmaker and manage to maintain the position over
the years without anyone anywhere near to challenge the dominance. What are the CAs that took
Maruti Suzuki to this prominent position? Maruti Suzuki has built up a huge bunch of CAs over the
years. We will consider some of the main ones.
Cost Leadership: A Major CA
From the word ‘Go’, Maruti paid attention to gaining cost advantage. During the years when it was
adopting a price-led marketing strategy in the 800 segment, cost leadership in the industry was
absolutely essential for Maruti to excel. Maruti Suzuki entered at a time when passenger car was a
luxury item in India; the number of car buyers was limited. Maruti had to make its small car
affordable for the growing middle class of the country. On the strength of an affordable price,
together with high fuel efficiency, Maruti soon cornered more than 70 per cent share of the
expanding passenger car market of the country.
Size advantage: Related to cost leadership is ‘size advantage’. Maruti had considerable size
advantage by the standards of those days, and it translated into a cost advantage. Its large production
capacity—225,000 to start with—gave it a relatively low unit cost and conferred on it an enviable
pricing cushion.
Cost advantage independent of size: Maruti also had ‘cost advantage independent of size’. Low
initial investment was one such advantage. Investment costs steeply went up for those entering the
industry in subsequent years. Unique concessions from the government were one key source of cost
advantage for Maruti. As the early bird, and as a public sector firm (at that time), Maruti received
several concessions from the government, which were not available to later-day players. And Maruti
nurtured it well. Moreover, Maruti’s first set of plants had been fully depreciated by 1998. Maruti
also indigenised its manufacturing rapidly and achieved cost competitiveness. Consistent capacity
expansions completed on schedule further supported the cost advantage and pricing freedom. New
players found it difficult to compete against Maruti (in the entry-level segment), with its large
production capacity, depreciated low-cost plant and highly indigenised sourcing of components.
Product Strength: Another Key CA
Constant introduction of new products: The introduction of new products helped Maruti expand its
customer base. It remained accountings process with the company. Even in recent times, popular
new products such as Vitara Brezza, Baleno and the new Dzire enhanced its road presence. Maruti
has been at the forefront in launching new models at various price points at regular intervals. This
CA has helped it become the unchallenged leader. The product pipeline not only gave it better
visibility but also helped it enter new segments. It successfully introduced several vehicles in the
premium segment. It launched 8 products in the past 3 years and plans to launch another 15 new
vehicles by 2020.
Dzire achieves 1 lakh mark in record time: Maruti hit gold with the latest model of its successful
compact sedan Dzire. It crossed the 1 lakh sales mark before the close of 2017. It had been
launched only in May 2017.
Investment Level and Production Capacity also Served as a CA
Maruti Suzuki has been constantly and consistently enhancing its investment and production
capacity. The Gujarat plant has been the latest to go operational (in 2017). In the same year, Maruti
announced fresh investments of about $0.6 billion or almost Rs 3,900 crore to add a third
production plant at the Hansalpur facility. Once all three are operational, the Gujarat facility will
have a capacity of 7.5 lakh units. This will take Maruti’s total investment in the facility to about 3,400
crore.
Showroom/Channel
Maruti Suzuki has a very extensive and strong dealer-cum-service network spread across the country.
Many of them are state-of-the-art showrooms. In all of them, trained sales personnel are available to
guide customers in finding the right car. In 2015, the dealer network had a strength of over 1,800.
Nexa—the New Niche Channel for Premium Models Added to the CA
Maruti established its additional network of showrooms/channel, Nexa, a premium channel network
to serve premium customers and to take care of its premium vehicles/models. Nexa became another
CA of Maruti. We saw this in Chapter 1.
Maruti’s Service Infrastructure
From the beginning, it had concentrated on developing service centres across the country. This is
one of the CAs that has helped the company to reach a huge market share in the Indian passenger
car market and then hold on to it for many years. Maruti has been continuously beefing up its
service infrastructure. It has 50 per cent more service centres than all the other car companies put
together. Apart from the superiority in the extent of service network, Maruti also created an edge for
itself in the quality of after-sales service. The combination helped Maruti in holding on to its
distinctive lead position in the small car segment in particular.
Other Factors Too Served as CAs for Maruti
Being close to the customers, understanding their needs- The ability to understand the
customers’ needs has helped Maruti sustain volume growth and market share over the years. Brand
perception, ease of maintenance, spare parts cost, distribution and sales network, all played a big part
in Maruti getting close to the customers.
Loyalty of existing customers: Maruti enjoys the loyalty among its existing customers. This will be
evident from the fact that a good part of buyers of higher-grade Maruti vehicles are existing owners
of Maruti’s entry-level cars. Many customers automatically go for a Maruti vehicle when they decide
to have an upgraded car. In most independent consumer satisfaction in surveys, Maruti secures a
high satisfaction index.
The shrewd move of concentrating on petrol segment: Maruti steadfastly banked on the petrol
car segment, even when the trend in the industry was to bring in many diesel vehicles because of the
government policy on diesel. Maruti has always maintained a 60 per cent plus market share in the
petrol car segment. With the government tightening emission norms to curb spiralling pollution,
consumer preference for petrol vehicles has been increasing. The fact that most of Maruti’s cars are
petrol-driven works as a CA for the company in this context.
Close to the knitting, staying focused on auto industry: The company has chosen to focus on
auto industry without getting deviated to different kinds of diversification plans. Its policy not to
divert its attention from its core strength to some unknown areas also helped it in the competitive
game. Maruti believes that there is a significant further growth potential for the automotive sector,
and as a leader it has more to gain by staying focused within the sector.
Wins ‘Company of the Year’ award for corporate excellence: The multiple CAs of the company
have helped it to hold on to its leadership in the industry. In 2017, Maruti Suzuki was recognised as
the ‘Company of the Year’ by the Economic Times. The award recognised the longevity of its high
performance. Maruti had a market share of 50 per cent in 2003. Fourteen years later, it has not only
defended this high market share very ably, but while doing so, it also achieved a strong growth in
profitability. It outpaced its rivals in profitability. It was winning in a tough and open market.

Mini Cases 5
A DEKHO INTO INDUSTRY STRUCTURE AND COMPETITION: SMARTPHONES
INDUSTRY
The Indian smartphone industry is a growth industry presently. In late 2015, India emerged as the
second largest smartphone market in the world, overtaking the USA.
Size
The size of the Indian smartphone market was around 120 million units in 2016. Smartphone sales
in the country have tripled in three years to reach this figure in 2016. Most of the smartphones sold
in India are imported. According to International Data Corporation (IDC), 28 million smartphones
were shipped to India in Q2 of 2016 by all global players together, and the industry registered 3.7
per cent quarter-on-quarter growth.
Players in the Industry, Their Relative Positions and Nature of Competition
The industry embraces several players, global as well as Indian. The Chinese, followed by the
Koreans, have been the leaders. Apple with its iPhone has been in a league of its own.
Global Players Operating in India
Samsung and Xiaomi are the leading players in the Indian smartphone industry. Vivo, Oppo and
Lenovo/Motorola group are the other significant players. Samsung remained the number one
smartphone vendor in India in Q2 of 2017 with 24 per cent market share. The Korean company,
however, witnessed a decline of 4 per cent from the same period of last year. Samsung was followed
by Xiaomi, in the number two position in Q2 of 2017. Interestingly, the Chinese smartphone maker
has been closing in on Samsung in market share. It is confident of snatching the number one
position from the Korean major soon. Its Xiaomi Redmi Note 4 is now the highest shipped
smartphone in a single quarter with over 2 million smartphone units sold in Q2 of 2017. Samsung is
not growing with the same pace as the market. Chinese players Vivo and Oppo grabbed the third
and fourth spots, with 13 per cent and 8 per cent shares, respectively. Vivo made a significant jump
from 4 per cent market share in the same period last year. Vivo saw 26 per cent quarter-on-quarter
growth. Oppo’s shipments declined by 13 per cent quarter-on-quarter. Lenovo and Motorola
together are the fifth largest smartphone vendors in India with 7 per cent market share.
Xiaomi, Vivo, Oppo and Huawei were the fastest growing brands. Xiaomi grew by 60 per cent in
Q2 of 2017. Vivo grew by 45 per cent and Oppo by 33 per cent. Figure 6.1 explains their shares in
the second quarter of 2017.
India is an extremely important market for all global smartphone players. Samsung, the Korean
company, and Xiaomi, the Chinese company, in particular, look to the Indian smart-phone market
as their route to global leadership in the industry. The other Chinese companies such as Vivo, Oppo
and Huawei also view the Indian market as one of their priority geographies. The Chinese
smartphone makers consider the Indian market as its most crucial market outside of its home
market.
Xiaomi: The Challenger and Likely Future Number One
Xiacmi, the Chinese smartphone, maker was founded in 2010. It entered the Indian market in 2014,
a time when Indian consumers were almost desperately looking for an affordable yet reliable
smartphone. Soon Xiaomi became a big name in the smartphone sector. It saw exponential growth
in India and today it enjoys

FIGURE 5.1 Top Five Smartphone Companies in India: Market Share, Q2 of 2017
Source: IDC Quarterly Mobile Phone Tracker, 16 August 2017.
Notes: The ‘company’ represents the current parent company (or holding company) for all brands owned and operated
as subsidiary; Lenovo Group includes all three brands, namely Lenovo, Motorola and ZUK.
market leadership in the smartphone segment. Xiaomi is now the second largest smartphone vendor
in India and IDC had ranked Xiaomi India as number one smartphone brand in India in Q3 of
2017. With 23.5 per cent market share each, Xiaomi has joined Samsung as top smartphone brand.
Xiaomi India team has promised the parent company 100 per cent growth every year from India.
Xiaomi has not only been one of the fastest growing brands, but in absolute terms its growth has
also been unparalleled. Xiaomi’s India revenue rose by 328 per cent in the first half of 2017.
Subsequently, it crossed the 2 million mark in the year. Xiaomi is setting up its third manufacturing
plant in India. Samsung’s four-and-a-half-year reign at the top of India’s smartphone rankings is
under threat, with Xiaomi ending the quarter through September 2017, almost side by side with the
South Korean market leader.
Indian Smartphones Losing Out to the Chinese Vendors
According to an IDC report, the Chinese vendors have grown in the first quarter of 2017 by a
staggering 142.6 per cent which translates into a 51.4 per cent share of smartphone shipments to
India. The share of homegrown vendors has fallen to 13.5 per cent from 40.5 per cent.
General Features of the Industry
The following are some of the general features of the Indian smartphone industry:
• A technology-intensive and investment-intensive industry
• A mature industry; at the same time, an industry in transition as well
• A growth industry as well but could be vulnerable to technology change
• The next wave of transformation will be in the area of artificial intelligence (AI), which will have
a major impact on the industry
Entry Barriers in the Industry
Scale: It is not easy to be a successful player in the industry without scale.
Cost leadership: For getting the scale, one needs to be a player in the mass segment of the users.
This segment is quite price-sensitive. The implication is clear. The players need cost advantage to
succeed.
Channels: Both online and offline channels are needed for success. Since the already established
players have built strong channels for themselves, ‘channel’ has also become an entry barrier.
After-sales support: After-sales support could also be a source of CA in the industry. In quite a few
cases, the sloppy after-sales support experience and non-availability of spare parts had hurt customer
experience and brand reputation.
How the Different Players Competed in the Industry
The smartphone business in India is getting extremely competitive. Marketing strategies were
coming under test to full measure in the marketplace.
Samsung: Worldwide, Samsung adopted a strategy of substantial discounts on Galaxy S7, and
Galaxy S7 Edge helped to make way for the new Galaxy S8 and Galaxy S8+. Outside of the high
end, the product mix continues to shift towards more affordable models. It adopted the same
strategy in India as well.
Xiaomi: Price was the weapon. Xiaomi’s strategy has been to give high-quality, high- specification
phones at half the price of competitors. At the time when Xiaomi entered India, over 50 per cent of
the phones in the market were under Rs 6,000 budget phones; Xiaomi decided to come with mid-
range phones, and it almost instantaneously became the perfect device to upgrade for all the low-end
phone users. It was all about pricing and timing. Both happened to be perfect. In three years, the
company has become the number two brand in the overall Indian smartphone market, close to the
long-standing leader, Samsung. Xiaomi’s online-offline hybrid model has worked for the brand.
While traditional players like Samsung kept guarding their offline turf, Xiaomi focused on online and
made it big. Its big offline push now is ably supported by online reach. Analysts started commenting
that Xiaomi was the new Samsung. Xiaomi also utilised its position as one of the first Chinese
companies to ‘Make in India’. It has two manufacturing facilities currently operating at Sri City
Special Economic Zone, near Chennai, where ‘a phone is produced every second’. The third factory
is in the offing. Xiaomi launched Redmi Note 4 in January 2017 and the device, priced between Rs
9,999 and Rs 12,999, has been the company’s biggest seller. It sold a million units within a few days
of the launch. The budget Redmi 4A, priced at ?5,999, was launched later.
Huawei: It demonstrated its stable position in the premium market with the P and Mate series, and
a strong presence in the affordable sector with its Y series and Honor brand. The launch of the new
P10 flagship and the new P10 Plus presented consumers a valid third option (outside of Apple and
Samsung) with premium design and similar performance.
Vivo: It focused on the highly fragmented unorganised retail market. It drove sales by investing in
marketing campaigns, displacing local vendors that once thrived in this space. Vivo carried out many
novel marketing activities and promotions. Its sponsorship of the Indian Premier League 2017
helped to increase Vivo’s brand presence in the market. Vivo also relied on a key model with selfie
camera features, targeted at the below 30 age group. It also increased the number of exclusive stores
in India.
Oppo: Its mid-range, camera-focused R9s was a crucial model in China that helped it to see strong
shipments to the Indian market. Its growth has, in fact, been stronger outside of China with nearly a
quarter of shipments from international markets. Its strong retail presence has helped it to grow. It
has been aggressive in both above-the-line and below-the-line promotion activities in India.
Billboards and placards of Chinese mobile handset brands Oppo and Vivo are omnipresent at
events dwarfing the presence of rivals such as Samsung, Micromax, Karbonn and Lava. The
awareness and demand for Oppo and Vivo mobile phones has risen very sharply. Oppo and Vivo
also stepped up their after-sales service efforts. Both Oppo and Vivo have launched a clutch of
‘selfie-centric’ phones—a segment that has grown ninefold according to a Counterpoint report. In
terms of price, the Rs 15,000 - Rs 20,000 segment grew by 158 per cent and the Rs 10,000 - Rs
15,000 segment grew by 58 per cent
Lenovo: Currently ranked fourth in sales, it has launched Moto G5 and Moto G5 Plus phones in
the Indian market. The Moto G series has been very popular with Indian consumers.
Disribution: Channels Used by the Players
The online market for smartphones has reached a saturation point; therefore, it has become critical
for smartphone brands to up their offline presence. The players, by and large, use both online and
offline channels. This has become a necessity. It is also becoming the standard pattern. Another
settled feature is ‘exclusive stores’, whether the online or offline channel is the pattern. The Chinese
players started by taking the route of exclusive online sales in partnership with ecommerce stores.
Later they started to focus equally on the offline segment. In 2017, Xiaomi opened exclusive
‘Xiaomi stores’ in India called Mi Homes. The company has announced setting up of 100 Mi Homes
across India within 2 years. The move may benefit the users in non-metro regions where e-
commerce is less prevalent or non-existent. The move will benefit the company to reaching out to
the smaller regions in the country and gain volume sales. The company entered the market in
partnership with Flipkart, India’s leading online retailer, using ‘hunger marketing’ tactics to market
its value-for-money smartphones. Interested customers had to register for the sale, and Xiaomi only
made available a limited stock of devices that were sold out in a few seconds.
CAs of the Players
Channel/distribution network: Samsung enjoys the widest distribution network in India. Xiaomi,
which had started with an online-only model of retail sales, has expanded sales through brick-and-
mortar stores as well in a bid to tap a larger market, which has helped it make rapid growth in an
intensely competitive market. The company was expecting 25 per cent of its total sales to come from
the offline model by the end of 2017, which would rise to 50 per cent within the next 2-3 years.
Replacement demand: Players such as Xiaomi, Oppo and Vivo have a CA in replacement demand in
mid-segment.
Focus—another CA: Xiaomi does not play in the high-volume feature phone segment nor did it
have a traditional offline sales network until its expansion requirements compelled it to add the
latter. Unlike other Chinese brands, it does not market or advertise its products through
conventional mediums. The focus served as a CA for Xiaomi.
Also, the China-based vendors primarily cater to the Chinese market, which is four times bigger than
the Indian market, thus enjoying economies of scale.
The Possible Future Trends
The proliferation of Chinese players in the domestic market may be the biggest trend over the past
one year, but there are more disruptions in the offing and the market promises to remain highly
dynamic. Experts believe that there will continue to be widespread changes in size and shape of
handsets, screen resolution, cameras and evolution of network. The scene would offer opportunities
for both, new players and old ones. Any company—Indian, Chinese or other multinational—that
identifies potential changes in the market early and innovates will have a chance to grow fast.
Source: Inputs from International Data Corporation (IDC) and Counterpoint Research.

Mini Cases 6
NEW ENTRANTS OVER THE YEARS, PATANJALI THE LATEST, OFFER
COMPETITION TO MAGGI IN NOODLES MARKET
In India, for long, noodles has meant Maggi. The domination of the instant noodles market by Swiss
giant Nestle with its brand Maggi was total. Maggi enjoyed an overwhelming 90 per cent market
share for many years. However, the entry of new players from time to time had been changing the
competitive game. Market share of Maggi has often been challenged, and Nestle had to resort to
non-stop, high-power promotion to retain its position. And with the latest entrant Patanjali, the
industry witnesses a fresh fight.
Let us trace the past story.
New Entrants of Those Days Cause a Churning
First, the business witnessed quite a few new entrants in quick succession. The list includes ITC
(Sunfeast Yippee), HUL (Knorr Soupy Noodles), GlaxoSmithKline (GSK—Horlicks Foodies) and
the Future Group (Tasty Treat, a private label). They had the capability to change the competitive
game. ITC, in particular, offered stiff competition. Although a late entrant into the business, it
rapidly gained ground and grabbed share from Nestle. ITC’s Yippee actually went on to garner a
double-digit market share in quick time. Although the others did not do as well as ITC, they along
with ITC formed a strong bunch of new entrants.
They were resource-rich and marketing savvy: The new players were resource-rich and marketing
savvy. They did grant a dominant position to Nestle but were strategising to make noodles a multi-
player industry, instead of a monopoly of Nestle. All the three new FMCG players were experienced
and aggressive marketers with deep pockets. In fact, during the initial years, all of them had been
investing heavily on promotion, with very little scope of earning any profits in the near future.
ITC attributes its No. 2 position to factors such as quality, inter-business synergies and distribution
strength. It claimed that the distributors trusted ITC and knew that if there was a problem with the
product, it would take it back or would find a solution to the problem. Nissin Foods of Japan (Top
Ramen), the other contender with some strength and market share, was not in the category of new
entrants but was acting now with a new aggression.
The market was also growing; new entrants found it worthwhile to step up pressure: By now,
the market had evolved. The Indian consumer had become more open to ‘instant foods’ and had
also started enjoying more choices. The instant noodles market in India, which was placed at Rs 1,
300 crore in 2010, had become a 3,000 crore business by 2015. It is presently growing in the range
of 15 per cent-20 per cent annually. Since the market is sizable and is growing, the category that is
growing at 20 per cent annually, and in a country in which instant foods, especially noodles, are no
longer considered a taboo by the burgeoning middle class but have become one of their mainstream
and regular household menu and a preferred food choice, would keep expanding. Moreover, instant
noodles had ceased to be just a metro habit and had become popular in semi-urban and rural homes.
Big FMCG players consider it an attractive industry to be present and invest in.
New entrants brought differentiation: The new players brought in differentiation into the
competitive game. GSK Horlicks Foodies was made available only in the multigrain and wheat
variant, and the brand was being promoted as having higher nutritional value compared to other
brands. The brand also had another USP. Along with every pack came a vitamin-packed health-
maker sachet. HUL, too, used the health plank. Nissin Foods leveraged its early mover advantage
and its ability to put out variants such as ‘cup noodles’, ‘mug noodles’ and a curry variant in the
market.
Regional Players Were Also a Force
Regional players who had carved out some handsome shares in local markets now started expanding
their area of operation. CG Foods, the maker of the Wai Wai brand of noodles, was one such player.
CG Foods had claimed that it had beaten Maggi in the northeast market. It had even claimed that it
enjoyed 16 per cent share in all India. Wai Wai claimed that its sales came to 20 lakh packs of
noodles per day. Other brands like Tasty Treat also garnered some share.
Maggi Fights Back, Using Its CAs
The leader—Nestle—of course did not keep quiet. It widened its product range with new flavours
and new variants. It also jumped onto the health platform. While it continued to treat its refined
wheat flour variants as its mainstay, it came up with some whole wheat and multigrain offerings. It
also tweaked its positioning; unlike earlier, when it was primarily focussing on children, it now
positioned it as a snack for all age groups.
Quality-related Complaints Adversely Affect Maggi, but It Recovers Fast
Although Maggi encountered severe brand image problems in recent times due to quality issues, the
company recovered fast from the fall, through sound strategic initiatives. Today, it is the same old
trusted food.
The Latest Entrant Patanjali Brings New Competition
The latest entrant Patanjali has stirred up the almost settled noodles market into a new
beehive of activity. Patanjali claims distinction on ingredients and process: it is made of atta,
healthier compared to maida which many competing brands use; it uses rice bran oil, compared to
palm oil which many others use. Patanjali claims price advantage: its 70 g pack is priced at Rs 15,
whereas competing brands charge Rs 25. And Patanjali tries to draw added strength from its
‘heritage theme’. The company is putting up big production capacity and is already enjoying good
distribution reach. It is available through organised retail plus the company’s own shop set-up. In
short, Patanjali is taking the posture of a big challenger in the industry. The nature of competition
we have so far seen in this industry is likely to change. The industry overall, and the leader Maggi in
particular; is certainly gearing up for a good fight.
The lesson is that in any industry, powerful new entrants are one major source of competition and
will rewrite the competitive structure of the industry over time.
Mini Cases 7
A NEW ENTRANT DISRUPTS AND ALTERS THE INDUSTRY STRUCTURE: THE
CASE OF RELIANCE JIO
The aggressive entry of Reliance Jio into the telecom service industry is a prime example of industry
disruption by a new entrant, in the Indian context, in recent times. The entry was a veritable
tsunami. The entry compelled the other players in the industry to respond so that they could remain
viable and sustain their relative market position. Not responding to the new entrant was not an
option to them.
At the time of Jio’s entry, Airtel was India’s largest telecom services provider and Idea Cellular and
Vodafone India were the other major players. All three were forced to sit up and rush for new
strategic response, once Jio entered the industry. They had to bring in schemes similar to the ones
brought in by the new entrant; they had to focus on increasing the access to spectrum, on retaining
their existing customers and on cutting out all avoidable costs so as to be cost- competitive with the
new entrant.
Multidimensional Disruption
The disruption caused by Reliance Jio was multidimensional. It included, inter alia, the following:
• Technological disruption
• Disruption by new product forms
• Disruption by pricing
Disruption Through Technology: Launch of VoLTE
Jio’s first disruptive move was technological; it brought in the VoLTE. Over the past few years,
Indian telecom industry had been undergoing a technology disruption phase, wherein the operators
were modernising the networks to keep up with rapid data growth. What is relevant to this case
study out of this process is the onset of VoLTE, or rather Jio’s entry into the industry with VoLTE.
Moreover, the new scenario involved a transformation from voice- based network to a data network.
It brought in complexities. Service providers were now grappling with the challenge of having to
think absolutely differently about the mobile network. A player now needed the help of technology
in many respects to sail through this phase.
Airtel responds with its own 4G VoLTE: The entry of Jio forced Airtel to counter it with its own
VoLTE services. Airtel launched it first in Mumbai and took steps for its deployment to cover all
key geographies. Airtel had already built a world-class 4G network across India. It also promised that
when 4G was not available, the calls would automatically fall back on 3G/2G network. This, Airtel
claimed, would ensure constant connectivity for users. In a country like India, where signal issues
still persisted, this sounded particularly important. In contrast. Reliance Jio’s entire network is 4G
VoLTE one, with no 2G/3G bands fallback.
Disruption Through Product Form: The ‘Bundled Phone’
Jio’s next move was to disrupt the existing players through a revolution in product form. Jio entered
the industry with a bang with its offer of a bundled 4G VoLTE feature phone, the JioPhone, for a
three-year refundable deposit of Rs 1,500. According to industry estimates, users pre-ordered a
whopping 6 million JioPhone units in a short while. Jio offered free voice calls and SMS for life.
Unlimited data offering (500 MB a day) came for Rs 153 per month.
\Existing players had to necessarily follow suit to defend their position. The major rivals in the
industry brought their own versions of bundled handsets with attractive features. They also priced
them attractively.
Disruption Through Predatory Pricing
Jio’s third major move was to disrupt the existing players through pricing strategy. It brought in
aggressive tariffs, offers and plans. To begin with, Jio offered the service for free. It launched its
inaugural Jio 4G broadband service—free voice and data plan—in September 2016 and kept
extending it until 31 March 2017, much to the ire and discomfort of other operators in the industry.
It then made the deal even more attractive by announcing a ‘complimentary offer’ for three months
to those who paid Rs 303 prior to a designated date. Such freebies hit the profitability of the existing
players and disrupted the market. It forced practically all the other players to come up with cheaper
plans of their own, squeezing their margins and in some cases dragging down sales. All three major
existing players, Airtel, Idea and Vodafone, reduced their tariffs and suffered from the cut-throat
competition. The free offers helped the new entrant acquire more than 100 million subscribers
within a span of 170 days and most of them came from existing players. In short, Jio had tied all its
competitors in all sorts of knots with its ‘predatory pricing’. All existing players lost some of their
subscribers to Jio. Tata Teleservices and Reliance Communications lost the most. Airtel lost 12 per
cent of its 3G and 4G user base in the second half of CY 2016.
Existing players forced to respond: Vodafone India and Idea Cellular also unleashed equally
aggressive counter-offers to prevent customer churn. In a way, the disruption by Jio led to the
merger of Idea Cellular and Vodafone.
Battle on the plank of quality and services: Competition in the industry soon entered a new
phase with the players increasingly betting on the quality of the connection and new targeted
offerings/services. They now focused on quality of service, content and apps. They had to try all
possible routes to retain existing customers and acquire new ones. The price route had been almost
exhausted; prices had already reached rock-bottom levels. Smaller players may, however, continue to
play the price game to limit large-scale subscriber desertions from their base. They are constrained
by lack of funds to play the technology and quality game.
Airtel places its bet on quality: Airtel was in the vanguard in the fight on the plank of quality.
While up to a point Airtel fought the battle with Jio on the price plank, it preferred, as a strategy, to
fight it on the quality/services plank. Customer experience across all touch points had by now
become a differentiation plank. Airtel launched ‘Project Next’ to improve its customer experience
under which Airtel rolled out Next-Gen Airtel stores that aimed to make interactions with
customers smoother. It took feedback from thousands of customers in its innovation lab and
identified key insights that led to the plan that their post-paid customers could carry forward their
unused monthly data quota to the next billing cycle. They also started data security and insurance
covers in case of phone damages to increase their customer loyalty. For implementing this new
approach, the Telcos needed to invest big in towers, bandwidth, spectrum and backhaul.
Jio also claims distinction in quality: While Airtel was placing its emphasis on quality, Jio was not
easily conceding to Airtel’s superiority tn this respect. It quoted surveys that had indicated that a
good majority of mid-to-high-end smartphone users using Jio’s free voice and data services were
willing to continue with Jio even after it started charging from April 2017. Jio’s 4G network
coverage was at least on a par with other Telcos, with 41 per cent users considering it to be better,
signalling increasing satisfaction levels with the newcomer’s fast broadband coverage. It was
becoming a challenge for existing players like Airtel to retain their high-end subscribers. ARPUs
could come under pressure for incumbents.
The dynamic pricing strategy helps Jio achieve quick break-even: Jio now started playing with
the prices the other way around. It raised the rates for some of its popular plans.
The dynamic pricing strategy helped Jio in two ways. While entering the industry, Jio opted for a
‘low-price’ strategy. Low prices initially helped Jio to acquire millions of users in quick time and to
consolidate its position. It also helped it to secure cost efficiencies. The subsequent increase in the
prices after acquiring enough users and consolidating its position helped Jio post a positive EBIT
earlier than expected. Some analysts felt that Jio’s early entry into profits was driven by its
accounting method. The relevant point is that Jio had built up many real CAs within the industry, at
its entry itself. Its strategy helped build these CAs, and the latter, in their turn, helped Jio to
formulate and implement successful strategies. Jio was riding on user numbers and higher ARPU. Jio
also had cost advantage due to its investments in 4G technology.
It leveraged its advantages cleverly. The company was now seeking higher revenue from its
subscribers. At the same time, Jio’s decision to double the data allowed on its lowest Rs 149/ month
pack to 4GB signalled its new focus on retention of customers, rather than new costumer
acquisitions. Jio was also now working towards reducing its debt of Rs 250 billion.
The Story Is Not Over
India has been getting ready to go digital and, in the telecom field, to move from voice to data. Jio
had sized up the situation correctly and created in time the foundation for the next- generation
business. But the battle cannot be considered over. The other major players— Airtel, Vodafone and
Idea—are bound to rejig their strategy to suit the new reality. None of them is a pushover. Airtel
had been the industry leader; it continued to be so even after Jio’s entry. Once the Idea-Vodafone
merger is through, the merged entity was going to be the industry leader. Although Airtel will then
slip to the No. 2 position in the industry, it is not going to yield ground to either Jio or the merged
Idea-Vodafone. It has already acquired Tata Teleservices without spending a penny. It will help
Airtel narrow the gap with the merged Vodafone-Idea. Vodafone, on its part, was making its own
moves even before the merger with Idea. It put its bet on segmentation, catering to different
segments with different offers, and rolling out different products and differentiated services that
suited the expectations of given customer segments. With the other weaker players in the industry
becoming insignificant, ‘the rule of three’ was set to operate in the industry. And all three of them
have, in right earnest, started focusing on providing multilayered digital services on top of the basic
connectivity service and aiming at optimisation of their infrastructure.
Discussion Questions
1. Build a scenario of how industry structure and competition would evolve in the telecom service
industry in the coming three years.
2. Do you think the predatory pricing followed by Jio is sustainable? In the next phase of its
growth, what strategy should Jio follow to be a dominant player in the market?

Mini Cases 8
DIFFERENTIATION AND POSITIONING: PATANJALI WALKS INTO INDIA’S
FMCG DEN
PATANJALI.
For the last two years, the most debated topic in the FMCG scene of India has been Patanjali.
Although Patanjali Ayurved has been functioning for more than a decade, only now it has shot into
such prominence. In fact, most marketing experts of India—marketing heads of companies as well
as academics—were until recently dismissing the relevance of Patanjali in the Indian marketing
scene. The argument was that it is not easy to develop the infrastructure or the marketing
competence to tap India’s FMCG markets; that the Patanjali products would only work on the
gullible/devotees or the extraordinarily price-conscious buyers. They defended that brands with
global pedigree were still struggling to establish in India; they dismissed the whole thing as hype.
Patanjali Takes 10,500 Crores in a Year Rated as Sluggish
But now, when Patanjali took ?10,500 crores in revenues in 2016-2017, the entire FMCG industry of
India, which has been complaining about sluggishness in the market, is silting up.
And it is not one or two players who are affected because Patanjali is suddenly present in dozens of
product categories, from salt and atta to sunscreen and face pack, from basic food items to modem
beauty care and, of course, health products and medicines, which are the company’s forte. Global
and local FMCG majors—HUL, Colgate-Palmolive, Reckitt Benckiser, P&G, ITC, Dabur and
Himalaya—are all busy developing their counter to the new challenger. Patanja i has quietly walked
into the FMCG den, and it looks like he is going to stay there!
To add further flavour to the fight, many investors are now coming forward to buy a stake in the
Patanjali enterprise. The latest is L Catterton’s private equity (PE) fund; they have expressed interest
to buy a $500 million stake.
Patanjali has recently gone for online retail, which will enhance the distribution reach and bring in
more sales. The e-commerce business includes its own portal along with other online grocery
retailers such as Grofers and Amazon. The Future Group have recently observed that Patanjali
products have started eating into the market shares of HUL, Dabur Ltd, Colgate and ITC Foods
Ltd.
The Marketing Strategy of Patanjali:
Wide Array of Product Lines and Many Products Under Each Line
The company has a wide array of product categories such as foods, personal care, home care and
health care. Under each category, there are several products/variants. For example, under foods,
they have five categories: (a) atta, (b) ghee and physically refined cooking oil, (c) rice, pulses and
spices, (d) juice and beverages and (e) biscuits and confectionery. Under each such category, they
have several products; for example, under refined cooking oil, they have rice bran, soya bean,
groundnut, coconut, sunflower and mustard oil.
The company states that it now has around 250 distinct products under its portfolio.
Brands
The company name Patanjali is projected as the umbrella brand name for all the products. There are
separate brand names too such as Saundarya for skincare products, Kesh Kanti for hair care, Dant
Kanti for oral care and Swarna Kanti for beauty care. But, in spite of these individual brand names,
mostly, the entire range of the company’s offers move under the canopy of the Patanjali corporate
name.
Patanjali Claims Distinctiveness in Product Ingredients and Process
We will take up two products, edible oils and a couple of personal care products, from the Patanjali
stable and see the strategies that support their marketing.
Edible Oils
The highlights of the various promotion campaigns are as follows:
Patanjali—Prakriti ka Aashirwad
Embrace Patanjali’s physically refined edible oils’ variety for different regions of India: rice bran,
soya bean, groundnut, coconut, sunflower and mustard.
The technical features and corresponding health benefits:
• Natural benefits of oryzanol-rich (13,000 PPM) rice bran oil
• Boosts immunity, full of vitamin E, ‘Beneficial for skin, regulates insulin level
• Good for controlling diabetes, lowers harmful cholesterol
And the communication gives details, comparing the MRP of Patanjali’s physically refined oils vs
that of Chinese and other MNCs’ chemically refined oils. Patanjali is the lowest priced.
Personal Care Products
The highlights of the various promotion campaigns are as follows.
Patanjali Saundarya Sun Screen Cream
It is all natural; made of cucumber, wheat germ, mango, ginger, turmeric, fenugreek, aloe vera and
coconut oil; and has SPF30. It protects your skin from harsh sunrays.
Caution about skincare is given: Glowing skin makes a mighty difference to how the world perceives
your beauty; a massive concern always remains about the chemicals that are used in cosmetics.
Several foreign brands also tend to be tested on animals which is a major ethical concern. Similarly,
imported products sometimes also contain animal-derived matter which is a strict no-no for
vegetarians. Patanjali’s skincare products, therefore, offer a great alternative as they are derived from
herbs and are 100 per cent natural.
Patanjali Kesh Kanti Hair Oil
Patanjali Kesh Kanti Hair Oil provides deep nourishment and strengthens hair roots, reduces hair
fall and dandruff, and prevents split ends and hair from greying. The regenerating mix of wheat
germ oil, bhringraj, sunflower oil and aloe vera calms the scalp, reduces toxin build-up and helps hair
become soft, smooth and tangle-free. The soft essences of the herbs aid in reducing sleeplessness
and headaches.
Caution about hair care is given: The hair of Indian women is their pride. Of all the countries in
the world, Indians are envied for their lush black hair. But in these days of mighty air pollution and
smoke, keeping your hair clean and well-maintained is quite a task. Shampoo brands by
multinationals position themselves as containing fancy ingredients such as ‘pronourishment’ and
‘beta-carotene’. No one really knows what these ingredients are. For all you know, these are heavy,
lab-created chemicals which will give your hair a temporary shine but damage it in the longer run.
The secret behind the glorious hair of Indians is the time- honoured tradition of Ayurveda. We have
all used shikakai at some point in our life to make our hair lustrous. Patanjali’s hair products bring
the same Ayurvedic formulations in a bottle.
The Various Angles to Patanjali’s Differentiation and Positioning
Let us see the main points.
The Positioning Theme
The company has a positioning theme: Patanjali—Prakriti ka Aashirwad (Patanjali—Nature’s
Blessing). The entire product portfolio of the company claims its strength from this corporate
positioning. And the theme gels fine with the trend of the times.
Differentiation
Nature and Ayurveda are the main differentiators used in the marketing strategy of Patanjali
products.
Ayurveda, as a body of knowledge—on health—is part and parcel of the Indian way of life. And
many companies in India, MNCs and Indian, have been using it to varying degrees to gain business.
Indian firms such as Dabur and Himalaya have built big business hrough this differentiation. MNCs
too have tried their hands on this line. HUL had launched Lever Ayush brand of Ayurveda-based
products, which includes soaps, toothpastes and skincare creams, several years back. They have now
strengthened the brand by taking it national. Colgate had already taken to herbal variants under its
Cibaca brand. And domestic companies such as Dabur and Himalaya are established players in the
Ayurveda segment.
So what is the uniqueness Patanjali can claim? It comes from a combination of factors: It claims to
be a blend of natural, herbal and Ayurvedic. All its products claim the use of plants/ ingredients
traditionally used by the Indian households. Other companies can claim a few products under the
Ayurveda/natural/herbal platform. But Patanjali’s product range looks like a splash of natural,
herbal and Ayurvedic offers. A spread of 250 plus products together is taking the role of a big
differentiator and a difficult-to-take-on challenge.
The Promoter Himself Acts as a Differentiator
The yoga exponent and promoter-cum-brand ambassador Baba Ramdev himself turns out to be
another significant differentiator for the products of the company. Although his expertise has
nothing to do with Ayurveda, his association with this subject looks authentic. Yoga and Ayurveda
both are solely and soully Indian and both deal with the same subject—health. No wonder then that
the tie-up of yoga and Ayurveda looks more credible and genuine, compared to the other Ayurveda-
based offers going around in the market.
The company name, and the corporate brand name, Patanjali, itself is a subtle differentiator.
Patanjali is associated with traditional Indian system of medicine.
Rational Message
The product-cum-promotion message is rational; it uses comparative advertising giving details of
Patanjali brand and competing brands. Then it highlights health benefits, supported by technical
information.
The claim to natural is moderated: There is a moderation built in the claim: All our products are
either 100 per cent natural or with the minimum of chemical ingredients.
Differentiation and Price Are Not Exclusive Strategies: The Ideal Blend of the Winning
Twin
Differentiation and price routes are not either-or strategic routes. When the two are used in tandem
exploiting the benefits of both, the strategy is invincible. It looks like Patanjali is taking to this very
same route. Their prices are lower than their competitors’. Normally, the natural, herbal and
Ayurveda platforms are used to charge a premium price on the buyers. But Patanjali is claiming the
most authentic Ayurveda/natural/herbal products at mass product prices. It looks like the masstige
phenomenon: combination of mass and prestige!
Look at the prices: Rs.5 for 65 ml Litchi drink, Rs.55 for 500 ml Amla Juice, Rs.3 for 8 g Kesh Kanti
Anti-dandruff Hair Cleanser and Rs.50 for 80 g aloevera gel toothpaste. Competition will have to
certainly take note.
The Indian consumers have seen the first phase of carpet-bombing of the market by Patanjali. They
await the response from the other side. The consumers will certainly be on the side of anyone who
combines beneficial differentiation with good pricing.

Mini Cases 9
MANAGING A BRAND’S PLC: THE CASE OF ITC SCISSORS
Scissors cigarette, the breadwinner brand of ITC, has successfully completed a century of its life. Of
the 40 odd ITC brands, Scissors is the oldest and the mulch cow in terms of income and profit.
During its 100-year-plus long life, the brand has seen many ups and downs, and suffered some worst
setbacks. Every time, ITC managed to take the brand out of the rut and conduct it to new peaks of
growth. The Scissors case thus presents one of the best examples of effective PLC management of a
brand. ITC has handled the product decline with care and succeeded in prolonging almost limitlessly
its profitable phase of life.
Scissors Demonstrates that a Brand’s Profitable Stage in Its PLC Can Be Prolonged
The story of Scissors validates the following:
• In managing a brand, there is scope for applying the PLC concept.
• The marketer needs to recognise the distinct stages in the PLC and the associated opportunities
and threats.
• The marketing strategy has to be revised as the brand passes through the PLC.
• Marketing mix elements can be used to extend the profitable phase of the brand’s life.
The Launch Stage
In launching Scissors, in 1912, ITC was introducing not just a new brand of cigarettes but also an
altogether new product sub-category in the market: a new smoking habit or ‘a new form of smoking
pleasure’ for Indians. The smoking habits until then consisted of ‘hookah’, ‘chillum’, ‘cigar’, ‘beedi’
and chewing tobacco.
ITC promoted Scissors as a generic product, being the only cigarette in the market: Initially, ITC
employed a commodity marketing approach for Scissors; low price and high promotion were the
components of marketing in the launching stage. It had to somehow communicate to the
prospective customers, who were used to non-cigarette form of smoking, and tempt them to shift to
cigarettes. It also had to induce non-smokers to try out cigarettes. The promotion campaign extolled
the attributes of cigarettes as such, not the brand Scissors, or the company, ITC. Scissors was
positioned in the market as a new concept in smoking, a novelty. The product itself was the unique
selling proposition (USP). As there was no other brand, a customer for cigarette was necessarily a
customer for Scissors.
Distribution and promotion proved difficult and expensive: Distribution and promotion accounted
for the bulk of ITC’s expenditure in this stage. The ITC salesmen went about on caparisoned
elephants and camels, distributing samples and exhorting people to try cigarettes. Ad media and
communication had not developed. Nationwide promotion was difficult and expensive. Same was
the case with distribution. A low price combined with high expenses on promotion and distribution
resulted in very low profits in the launch stage.
The Growth Stage
During the 1920s, the 1930s and the major part of the 1940s, Scissors was in the growth stage of its
life cycle. The new smoking form was getting accepted. Sales started climbing up substantially. ITC
kept a close vatch on the price-demand patterns and increased the price in small doses. Even though
the tempo of promotion was maintained, the ratio of promotion cost to sales declined, and ITC
started earning handsome profits from Scissors. Figure 11.4 reveals Scissors’ smooth growth path
during the 1920s, 1930s and 1940s.
Beginning of competition ... but Scissors did not feel the heat, not yet: In the early 1940s, the first
competitor Golden Tobacco appeared on the scene and launched Panama. Although priced lower,
Panama had little impact on the growth of Scissors. The latter had by then reached a commanding
position in the market. But competition soon succeeded in fragmenting the cigarette market, based
on price slots! So far, ITC’s job was one of marketing a generic product, cigarette. But competition
changed the game for Scissors. It had to compete! The whole market was no more with Scissors.
The Maturity Stage
Scissors reached the maturity stage by the end of the 1940s. The features that characterised this stage
in the life cycle of Scissors included plateauing of sales, marketing getting tough, promotion of
Scissors getting stale, new entrants threatening Scissors, competition taking a unique brand
positioning and market share of Scissors coming down considerably.
Panama becomes a challenger to Scissors: Now, Golden Tobacco positioned Panama directly
against Scissors and employed a distinct marketing strategy. It claimed that Panama was a new and a
more modern offer, provided a new flavour, had a modern soft-cup pack design and was priced
cheaper than Scissors. Panama’s ad campaigns also tried to exploit the then prevailing ‘swadeshi’
mood. Poised against ITC, then the Imperial Tobacco of Britain, this was a cash-in point for
Panama, which became a distinct brand in the market.
Although a slow starter, Panama started growing in the early 1950s, with the aid of an aggressive
marketing strategy, and sustained marketplace inputs. Panama adopted a high- volume-low-margin
pricing strategy. This directly hit Scissors. Panama also obtained a national franchise as supplier to
government agencies and establishments like the armed forces at discounted prices. On the whole,
Panama was gaining increasing penetration in the market at the cost of Scissors.
The Decline of Scissors
Scissors’ sales stagnated; all the new growth in the market was being gobbled up by Panama;
Scissors’ market share declined. In some years, in addition to decline in market share, Scissors
suffered volume decline too. For example, the sales of Scissors went down to 213 million sticks in
1949-1950 from 234 million sticks in 1948-1949, and went down further to 208 million in 1951-1952
and to 193 million in 1952-1953. However, it picked up to 240 million in 1953-1954 and remained at
that level for the next four years. Market share was on the decline all these years. A little later,
Scissors again started falling down volume-wise too.

FIGURE 9.1 Sales Volume/Market Share Graph

FIGURE 9.2 Market Share—Price Movement Correlation

It fell down to 232 million in 1958-1959, to 217 million in 1959-1960 and to 215 million in 1960-
1961. The worst hit came in 1961-1962, when sales tumbled down to 206 million sticks. If we take a
close look at the market share of Scissors during this period, we get a complete idea of the steep
decline of Scissors. In 1948-1949, Scissors commanded a share of 16.6 per cent of the market. By
1961-1962, Scissors had a dismal 6.5 per cent market share. At this stage, the decline and fall of
Scissors looked total and irreversible. Figure 11.5 illustrates this decline.
ITC initiates corrective measures, but the decline continues: ITC revamped its ad campaigns and
also organised bazaar-focused sales promotion. But, at this stage, ITC had not gone deep into the
causes of the decline. It thought that some soft mid-course corrective measures would save the
brand. ITC then attempted to bring in price parity with Panama. To meet the twin objectives, ITC
went in for product shrinking going for cheaper tobacco and reducing the length of the stick. These
course corrective measures introduced in the late 1950s, which were supposed to retrieve Scissors
financially and image-wise, only proved counterproductive, accelerating the downfall; while Scissors
was suffering, Panama was growing stronger.
The Debate: ‘To Revive or to Exit’ and the Decision, ‘Revive’
ITC commissioned a study and found out that Scissors had a poor image rating; it was smoked by
hard-core smokers; its pack was outdated; its advertising was bland; it had poor recall; and it needed
corrections on all the attributes. It decided to aggressively take on the challenge. There was debate
and analysis within ITC, and it was confronted with the two choices: Milk the brand and exit or go
all out with aggressive marketing strategies and inputs, and revive the brand. ITC took the
decision—to revive Scissors.
ITC Meticulously Plans the Revival, Brings in a Multifaceted Strategy
ITC defined the job as one of reestablishing the lost image of the brand. It set the following
objectives as the core of the revival campaign:
• To reassure existing consumers and strengthen their loyally to the brand
• To generate retrial by ex-consumers of Scissors
• To attract possible new consumers
• To wean away consumers of competitors’ brands to Scissors
ITC knew that enriching the product was a key requirement; packaging also had to be improved; and
the new product had to take a distinct image through innovative promotion. Under its revival
mission, product quality was improved, blend was improved and pack was modernised. The
advertising campaign was also revamped so as to beam at a younger, virile- looking smoker and
create a distinctive image of the brand as a favourite of the young and active consumer who desired
‘satisfaction’.
The action-satisfaction theme in advertising: The new ad campaign ‘For Men of Action-
Satisfaction’ was run with a positive note, defining a lifestyle position for users of the brand. ‘Action’
was the theme; the word ‘satisfaction’ was intended to underscore the physical product promise.
Extending the idea to promotion, ‘action’ - oriented promotional contests and rallies such as
national games and scooter rallies were organised. The prime intention was to create new and live
activity around Scissors. In the midst of this action and liveliness, the product too came in a better
blend, with better tobacco—a really improved Scissors, in a new and attractive pack design.
Scissors Comes Back to Life
All these inputs not only lifted the image of Scissors but also reversed the declining volume trend.
Scissors finally overtook the main competition and became the largest selling brand. From 6.5 per
cent in 1961-1962, the share increased to 7.5 per cent in 1962-1963, 9.5 per cent in 1967-1968, 12
per cent in 1968-1969 and 12.8 per cent in 1970-1971 (see Figure 11.5). The volume picked from the
level of 206 million sticks in 1961-1962 to 235 million in 1962-1963, 237 million in 1964-1965, 292
million in 1965-1966, 342 million in 1966-1967, 430 million in 1967-1968, 594 million in 1969-1970
and 675 million sticks in 1970-1971 (see Figure 11.5). Scissors was brought back to a growth path.
Regaining its original eminence from a totally crumbled position, amounted to a feat for Scissors
because by then the cigarette market had undergone substantial changes.
The ‘Second Decline’
Scissors experienced a second decline over the next decade. A peculiar phenomenon was happening
in the cigarette market between 1971 and 1973. Both Scissors and its main competitor were losing
their sales and market shares. Both had to repeatedly increase their prices and customers were
turning away from both these brands, switching over to brands in the lower- priced categories. In
1974, Scissors suffered an additional setback as a result of its ‘unilateral’ price hike, above the
erstwhile price of 10 paise per stick, while its main competitor stuck to 10 paise per stick. The
Scissors price to the stick-buyer segment, which accounted for 70 per cent of the total, took a
quantum jump, to 15 paise per stick and 25 paise for two sticks. The result was disastrous. Scissors’
market share once again nose-dived from 13 per cent in 1970-1971 to 3.9 per cent in 1975-1976.
The volume fell to 191 million sticks in 1975-1976 from 675 million in 1970-1971 (see Figure 11.5).
It was a hard lesson for ITC. After all, the price played a very critical role in this segment at this
stage of the PLC of the brand. With all manufacturers pursuing price-led strategies, the price focus
became the paramount factor in brand choice, particularly in the non-premium segments. Scissors
obviously had not yet attained an image and status to break away from the price barrier. The
consumer did not perceive the brand as adequate value at the enhanced price. The brand had not
been prepared for a price increase—a lessor ITC learnt the hard way.
The Second Revival
The brand had to be retrieved and revamped again. The first decision ITC took now was on the
price front. In 1977, ITC took the difficult decision of reducing the price; it reverted back to the
original price level of 10 paise per stick. The sales and the market share were gradually regained. In
1980, Scissors managed to capture the all-tin e high of 17 per cent market share and a volume of
1,133 million sticks. But this revival was it the cost of profits. While volume and market share
continued to grow, the profitability of the brand continued to decline due to the inability of ITC to
increase the prices in the face of the competitors holding their prices. Also, galloping inflation and
excise duty hikes deeply eroded Scissors profits.
Preparing the brand for a price increase: To stay in the business, a price increase was
unavoidable. But ITC did not repeat its earlier mistake of a quick price increase. Moreover, while
previously product economies were resorted to when faced with dwindling profits, this time ITC
consciously prepared the market for a price increase for Scissors through product improvement.
ITC provided Scissors with fresh inputs in product, packaging, blend and quality. It made heavy
investments on advertising and promotion to improve the salience and image of Scissors. While the
‘action-satisfaction’ theme was retained, more contemporary visuals were deployed.
Image of Scissors fostered to a peak: These inputs on the product and promotion allowed
Scissors to break away from the stranglehold of the competitors’ price. The brand was now ready
for a price increase. The price was increased in 1981, this time, confidently. ITC knew that this time,
the customer would not mind paying a higher price for the improved Scissors. The consumer did
perceive the improved product as good value for money. On this occasion, the volume decline was
only marginal and after a temporary dip, volumes continued to grow and the brand started
occupying the top slot. The revival this time had an added significance—it not only prolonged the
healthy and profitable phase of Scissors’ PLC but also successfully took Scissors out of price
competition. The brand now had a personality of its own.
The Lesson
ITC correctly identified the problems associated with each of the stages of the brand’s PLC, and it
solved them through appropriate changes in marketing strategies. The way the product, price and
promotion were managed in the days of the launch and growth of the brand could no more hold
good in the stages of maturity. ITC understood this reality. It demonstrated that revival of the brand
was possible through appropriate modifications in strategies. Scissors recently celebrated its
centenary.

Mini Cases 10
MANAGING BRANDS: THE CASE OF HUL
HUL has a large brand portfolio consisting of a few dozen brands. In every product line, it has built
a number of brands over a period of time. Quite a few brands have come to its fold from the parent
company. It has also acquired several ongoing brands from the market. HUL also vigorously pursues
brand extension strategy.
Let us see how the company has been handling its brands during the last two decades. A select list
of the popular brands of HUL in different product lines is shown in Table 12.1.

TABLE 10.1 A Select List of Popular HUL Brands

Wheel Knorr
Lifebuoy Lux
Sunlight Closeup
Pears Pepsodent
Rexona Brooke Bond Red Label
Surf 3 Roses
Rin Fair & Lovely
Pond’s Bru
Lakme Kissan
Be a Leader in Every Chosen Category Through Strong Brands: The Aim of HUL
Such an array of brands is the outcome, of a conscious corporate strategy by HUL. As a corporate,
HUL wants to be a leader in every one of its businesses and the strategy is to fight on the strength of
strong brands. It is this strategy that is getting reflected in the development of a multitude of brands.
If we take the business of bathing soaps, as an example, HUL always had the objective of being a
national player (not a niche or a regional marketer) and the leader therein. HUL also wanted about
30 per cent of the corporate income to come from this line.
So HUL opted for the strategy of developing quite a few strong brands in this line, and among
themselves, they cover different market segments and price points. Dove, Lux, Liril, Rexona, Pears
and Lifebuoy are the outcome of such a well-planned brand strategy implemented over time.
Lifebuoy is 100 plus years old and Liril 35 years old. HUL has about 10 brands of toilet soaps each
having good volume of sale to its credit. The point to be noted is that decisions on brand portfolio
are a fundamental expression of the company’s objectives and strategy governing a given business.
HUL Locates Positioning Opportunities
HUL is systematic in exploring opportunities in the businesses it operates, if gaps for possible new
offers are found, it analyses them across benefits, target groups and price points. Existing brands are
checked to see whether they can step in with an extension; if not the company assesses the scope for
a new brand.
HUL Hires Brands to Capture New Opportunities
Towards the close of the 1990s, HUL found that the ‘germicide’ segment of the soap market was
growing fast, with RCI’s Dettol antiseptic soap leading it. HUL did not have a suitable offer in its
stable to capture a share of this segment. It was a real product-gap; Lifebuoy was not strictly meeting
the particular benefit.
It was in this background that HUL decided to hire the Savlon brand from J&j.
It entered into an agreement with J&J for the use of Savlon brand name and the product formula,
and launched the Savlon antiseptic soap. In fact, HUL very deftly managed a successful new brand
launch and emerged as a challenger to Dettol soap.
Cautious in Creating New Brands
HUL believes that creation of a new brand should be done very cautiously. HUL’s views:
The question we ask ourselves each time we consider launching a new brand is: does it have anything distinctive and
superior to competition that consumers will find relevant and appealing in terms of functionality, physical attributes
and positioning? If it has none of these, the new brand can quite easily become just another me-too in an already
overcrowded marketplace. Given the organisational resources and investment required to launch and build a brand, one
has to seriously consider whether such a new brand is worth launching.
Every Brand Must Be Viable in Its Own Right
This is a basic tenet at HUL. Some of the brands will be in an investment phase, while others are
going through steady growth and profitability stages. But the starters should become viable. In
looking at viability, HUL of course, takes a long-term perspective. For instance, HUL’s investment
on brands like Dove soap was based on the assessment that these will be strong, profitable brands in
5 to 10 years’ time.
Determining Number of Brands, Extensions, Variants and Pack Sizes
Each SKU adds complexity and consequently cost to the entire supply chain. HUL has now come to
the view that ‘less is more’ is a good guiding principle in deciding the ideal number of brands,
extensions and variants. HUL’s approach was: If an organisation wishes to grow by introducing real
product breakthrough and new brands in the market, it needs to concentrate its R&D resource and
marketing efforts behind a clearly identified set of big projects that are likely to succeed.
Enriching the Brand
HUL’s market research and R&D wings are constantly involved in the product upgradation task.
HUL conducts 15 to 20 rejuvenation programmes every year, spread over its 30 major brands in
various product categories.
Brand Strategy in Diversification Context: Example of Foods
The second half of the 1990s saw HUL in the grip of major acquisitions, mergers and consolidation.
They were part of the expansion and diversification programmes of the company. One major
diversification was into the food business where a major issue to be sorted out was the brand
strategy. HUL, ‘the soaps & shampoo company’ was now poised to become a foods major.
Naturally, brands were required to wage the battle.
Five Umbrella Brands to Cover the Entire Foods Business
HUL developed a comprehensive brand strategy; it decided to bring its various food lines under five
brands. The five brands were Brooke Bond, Lipton, Kissan, Dalda and Kwality Wall’s. Brooke Bond
and Lipton for beverages, Dalda for edible fats, Kwality Wall’s for ice creams and frozen desserts
and Kissan for natural and wholesome foods.
The idea obviously was to exploit established brand identities. Each of these brands had a
tremendous equity built over the years. For instance, Brooke Bond’s brand worth at that time was
estimated to be ?850 crore; Lipton’s, Rs 370 crore; Dalda’s, Rs 225 crore; Wall’s’, Rs 160 crore; and
Kissan’s, Rs 100 crore. HUL’s strategy was to make these brands work in the market, with more and
more products entering the market under their umbrella.
Kissan, the Traditional Ketchup Brand Widens Its Wings
Traditionally identified as a tomato ketchup and squash brand, Kissan was repositioned as a family
brand for the entire foods business, including even basic food items such as atta and salt. In tune
with the strategy, HUL renamed the Annapurna brand as Kissan Annapurna and planned more
products under the Kissan brand.
HUL stated at that time:
We are right now (1998) in the process of working out a considered investment decision in the food categories to help
make the foods business contribute to around 50 per cent of the total HUL turnover from the present contribution level
of 37 per cent.
The five brands were put to work towards this goal. In fact, these five brands had the responsibility
of earning a revenue of Rs7,000 crore for by 2005.
All Beverage Brands Come Under Brooke Bond/Lipton Umbrella
All ongoing brands in beverages such as Taaza, 3 Roses, Red Label and Taj Mahal were brought
under the Brooke Bond or Lipton umbrella. Lipton Taaza, Brooke Bond Red Label and Brooke
Bond 3 Roses individually had sales of over Rs 100 crore per annum at that time. Brooke Bond A1
was the latest addition; placed in the popular segment, it was launched to upgrade consumers of
loose tea to branded tea.
Brand Portfolio Rationalisation 2000-2001
HUL’s sales and profits have been slowing down during the years 2000 and 2001. Was the army of
nearly 110 brands not working enough?
It was in this context that HUL attempted a substantial brand rationalisation programme in the year
2001.
TABLE 10.2 The 30 Power Brands (2001 Brand Rationalisation)
Lifebuoy Clinic
Lux Axe
Liril Rexona
Dove Red Label
Breeze Brooke Bond A1
Pears Lipton Taaza
Fair & Lovely 3 Roses
Rin Taj Mahal
Wheel Bru
Comfort Kissan
Surf Kissan Annapurna
Vim Kwality Wall’s
Closeup Pond’s
Pepsodent Lakme
Sunsilk Elle 18
Source: Prepared from reports in the press/company websites.
Keeps 30 Power Brands, Plays Down 80 Others
In 2001, HUL initiated plans to prune its brand portfolio—to almost one-quarter of its size. HUL
located around 30 brands to be focused upon as the brands for the future. HUL called them power
brands. The 30 power brands shown in Table 12.2 contributed almost 75 per cent of HUL’s
turnover and profits. Of the 30 brands, 18 are international brands of parent company Unilever and
the rest are India grown. The future warfare had to be fought on the strength of these 30 power
brands.
The list included brands such as Lifebuoy and Lux, which contributed 25 per cent to profits as well
as brands such as Axe and Pears, which did not contribute much profit but were assessed to become
star brands of the future. In the selection, HUL’s criteria were brand’s current performance, its
competitive differentiation and its future potential.
HUL observed:
We are going to ensure we put disproportionate assets behind these brands, whether it’s advertising monies, or the
quality of people working on the brands . . . We will grow them into increasing opportunities of contact with the
consumer by taking them into other relevant product forms and into services. That’s the game plan. (Press brief by
HUL)
The power brands strategy did not mean totally vacating any product category. HUL clarified:
‘Brands are chosen across all our categories, so we are not deprioritising any of our categories. The
30 brands also span all the key consumer segments’.
The 80-odd Brafids Outside the Chosen List to Be Handled Differently
The remaining 80-odd brands, which contributed about 25 per cent of HUL’s turnover, fall under
three categories; they would be given different treatments.
(i) The ‘regional jewels’; this category of brands are exceptionally strong in certain geographic areas;
Hamam, for instance, gets about 60 per cent of its volumes fom Tamil Nadu, where it has 30
per cent market share; HUL will keep such brands as purely regional brands and support them
in these areas.
(ii) Brands which are both small and unprofitable. They will be discontinued or sold off. For
example, we can cite the two variants of Closeup, Oxy Fresh and Renew, and Revel washing
powder and Aim toothpaste.
(iii) Brands with overlapping positioning. The bulk are here; they also overlap in market targeting
with one of the power brands. HUL observed:
Whenever you have the same benefit and same price point, there is no advantage to carry two brands. So what we
would do is merge those brands with some of the power brands. For instance, in toilet soap, HUL has Breeze, a real
winner, which is growing at 50 per cent plus per annum. There is no need for another mass brand like Jai.
Another Strategy Correction
By 2006-2007, after 4-5 years of pursuing the power brands strategy, HUL reversed the steps. It
found that such a brand segregation did not bring the intended results. The new decision was to
keep the brand portfolio more open allowing more flexibility for brands and the brand managers.
Even some brands from the power brands list were divested.
The Present Times
Today HUL’s main focus is to enter new categories that can assure new business and then to build
afresh new brands, grow them and reap the rewards. The company finds that the very categories
such as soaps and fabric wash are posing limitations in growth and as such the brands in these
categories, however strong they may be, will have the same limitation. So categories such as foods
and beauty, and outdoor services in foods and beauty (such as the Knorr kiosks, Swirl ice cream
parlours, Lakme Salons and the Bru World Cafe) are getting priority. New brands are coming up in
these lines.
Taj Mahal Tea House
HUL opened the Taj Mahal Tea House in Bombay in January 2018, marking its entry into high-end
tea retail and service segment. HUL is planning to replicate in a small way the Starbucks coffee
experience in tea. The new restaurant is a 3500 sq. ft. outlet serving over 40 types of fine tea, along
with food, specially designed by a famous French chef! Says HUL: We have developed the market
for tea in the country. We should also be the pioneers in bringing out the experience and romance of
tea! (The Economic Times, 17 August 2018).
Recent brand acquisitions/additions to the company’s stable include hair care brands TRESemme,
TiGi, Indulekha and Brylcreem, and ice cream brand Magnum.
The traditional fighter brands, of course, will continue their fight. And the work on brand building
goes on.

Mini Cases 11
WALMART ACQUIRES FLIPKART: BEHEMOTHS WALMART AND AMAZON TO
BATTLE IT OUT IN INDIA’S ONLINE MARKETPLACE
The World’s Biggest E-commerce Deal
In May 2018, Walmart completed its acquisition of Flipkart. It acquired about 77 per cent stake in
Flipkart, paying $16 billion. The deal had valued Flipkart at $20 billion.
It is the largest ever acquisition in India by a foreign firm and the world’s biggest e-commerce deal.
It is also one of Walmart’s biggest foreign investment ever. With this acquisition, Walmart was
announcing its readiness to battle out its rival Amazon in what is probably the biggest and fastest-
growing retail market in the world.
Walmart Pips Rival Amazon
In the process of this acquisition, Walmart has pipped its rival Amazon, which had also been vying
to acquire Flipkart. Of course, acquisition of Flipkart by Amazon would have posed issues of
dominance/monopoly and consequent legal issues, as both were huge players in the same business
of online retail.
Walmart Had a Compulsion to Acquire Flipkart, Beating Amazon
Walmart did evince a degree of desperation in clinching the deal. The price paid for the deal was a
sign to that effect. Walmart had to pay a premium price and acquire Flipkart beating Amazon for
three main reasons:
• India Entry was vital for Walmart.
• Amazon’s India march had to be halted.
• Flipkart was the only serious option for acquisition.

Indian Entry Was Vital for Walmart

Walmart considers India as one of the most attractive markets for retail and potentially the best
growth market in the world. It forecasts that growth rate of India’s retail will be four times as much
as that of the global retail industry as a whole. Apart from the USA and China, there was no other
market with the scale and size of India, as far as opportunity is concerned. It was very important for
Walmart to have this market. Facing heat in the US market from Amazon, which is now moving
from online-only to a bricks-and-mortar plus e-tail model, Walmart had to get into India’s consumer
segment of e-commerce. In the USA, it had allowed a lot of time to Amazon to get access to the
customer wallets. It did not want to give such time to Amazon in India as well and play the catch-up
game subsequently. Dominance in India is a coveted asset for both US giants. Amazon is just behind
Flipkart n market share in the Indian e-commerce pie.
The Chinese Alibaba Group’s intent to became the third major online player in India was an
additional reason for Walmart to expedite its India entry. Walmart was also trying to make up for its
earlier failed venture in India. It had entered India in 2007 but exited and restricted its operations to
wholesale (cash-and-carry) stores, in the face of strict curbs on foreign direct investment (FDI) in
the multi-brand retail sector. Even in cash-and-carry stores, its progress was limited. It had only 21
wholesale (cash-and-carry) stores in India. It was trying for a breakthrough, leading to a dominant
position in India’s online retail and online marketplace. Walmart was looking at the future market
that India will provide in 15 years.
Amazon’s India March Had to Be Halted
Walmart’s arch-rival Amazon was already present in India and was surging ahead. It had also
adapted its site to Indian conditions. It has been fairly successful in cracking India’s e-commerce
opportunity. About 90 per cent of serviceable Indian pin codes placed at least one order on Amazon
during festive sales. According to Forrester, Amazon had 31 per cent share of Indian online retail
market in 2017, about 8 percentage points behind its home-grown rival Flipkart. Amazon began
operations in India only four years ago, while Flipkart is celebrating its 10th anniversary. Amazon
displays over 12 million products and 14,000 brands for Indian consumers.
Amazon has been expanding in the country on its own. It has committed $5.5 billion to the country
recently. It was running a marathon in India and was focusing on adding new customers. It was
especially focused on new buyer addition from Tier-Ill (cities) and beyond. It is also focused on
customer retention and has been reporting an impressive 70 per cent retention rate. It is also
aggressively catching up in terms of total customers, gaining more than 100 million now as
compared to Flipkart’s 135 million. Amazon had invested in its Indian marketplace 79 per cent more
than what Flipkart had done in its retail platform. Amazon has also introduced in India its Al-backed
Echo devices powered by Amazon’s intelligent voice assistant Alexa. For a more detailed fact sheet
on Flipkart, see Exhibit 18.4. From Walmart’s point of view, Amazon had to be stopped on its
strides.
Flipkart Was the Only Serious Option Available for Acquisition
Walmart had to pay the premium price and acquire Flipkart, as the latter was the only player on
whom it could place the bet in India. The acquisition, incidentally, also indicates that Flipkart has
been a huge success story as a start-up in India, leading the transformation of e-commerce in the
Indian market. Early entry in India through Flipkart will help Walmart access the country’s growing
middle-class consumers. The acquisition offered the opportunity to catapult into a leadership
position straight away.
Flipkart Was Bringing Something Substantial to the Table
In Flipkart, Walmart gets an e-commerce company that ended the year through 31 March 2017 with
a gross merchandise value (GMV) of $7.5 billion and net sales of $4.6 billion. Control of Flipkart
will provide Walmart access to Flipkart’s network of 1 lakh sellers who retail 80 million products
across 80 categories, from mobile phones to apparel and books, and its 54 million active customers.
Myntra and Jabong came to Walmart along with Flipkart. Walmart knew that Myntra and Jabong
together formed a fast-growing fashion e-commerce platform which is an important category to win
for Walmart. This wing of Flipkart is positioned well with India’s growing middle class and the
relatively young population as a whole. Flipkart was ably defending and enlarging its market share in
both smartphones and fashion, two of the largest categories where it was leading Amazon India.
Flipkart had built an effective ecosystem. It was more than just a marketplace, and its logistics and
payments business made it unique. Flipkart’s supply chain arm Ekart serves more than 800 cities,
making 5 lakh deliveries daily. The PhonePe payments business supports the growth and developme
it of e-commerce, delivering innovations to merchants and customers to simplify transactions.
Flipkart had solved this important piece of e-tail puzzle and built the ecosystem. It also challenges
Alibaba, which backs the local rival Paytm Mall. Finally, Flipkart also has a huge database. It meant
that Walmart could just build warehouses in cities and start delivering focd and grocery online to
customers in the database. With J Flipkart in its kitty, Walmart can also use India as a learning
ground providing lessons for its global operations on how to partner and build retail ecosystems
around the world.
Battle Royale Begins Between Walmart and Amazon
The two US rivals—the world’s largest retailer and the largest online marketplace—Walmart-
Flipkart and Amazon will now lock'horns and get into direct competition with each other for
dominance of India’s online marketplace. Since Amazon is also into offline retail (in the food
business), Walmart will fight Amazon in that category too, using its clout in wholesale (cash- and-
carry) business and Flipkart’s offline foray. Given the constraints on FDI in multiband retail,
Walmart could dominate India’s retail trade only through e-commerce, which it could use as a bridge
to reach out to the offline retail market. The battle between the two companies is shifting to
acquiring the next set of Internet users, beyond the top 30 million Net-savvy buyers mostly found in
the large metro cities.
E-commerce Being Cash Guzzler, Walmart and Amazon Will Compete on Investment
Both Walmart and Amazon need to keep investing. Walmart has an option to invest an extra $3
billion in its new company. Walmart-Flipkart may also go for a public listing in due time. It could be
the largest initial public offer (IPO) for an Indian Internet company and among the biggest in the
world. Walmart could also increase its shareholding to 51 per cent in tranches. With Walmart’s
support, Flipkart will now begin to enjoy a clout that Amazon has been enjoying from its parent
company in the USA. The earlier constant problem about raising funds to keep competing with
Amazon will be off Flipkart now. And it could help Flipkart to focus more on driving the business.
Both Pay Attention to Logistics
With the acquisition of Flipkart, Walmart will be able to extend its expertise in managing physical
goods to the digital world—a strength that Flipkart lacked. Walmart India owns and operates 21
omni-channel cash-and-carry stores under the brand name Best Price in 9 states across the country.
Walmart India also opened its first fulfilment centre (FC) in Mumbai in November 2017. As per
research firm RedSeer, Flipkart today has 21 major warehouses. Ekart covers 35 per cent of around
20,000 pin codes in India.
Amazon has not been keeping quiet either in this matter. Through its 34 FCs—packaging and
delivery houses—Amazon keeps a close watch on each and every stage of delivery once an order has
been placed. Amazon Transportation Services covers 28 per cent of pin codes in India.
Battle for Supremacy in Mobile Phone/Smartphone
Mobile phone is one category where the two giants may cut each other’s throat. For both, mobile
phone is among the largest revenue-generating category, which is why both have been focusing on
expanding this segment by adopting incentives such as no-cost EMIs, interest-free schemes and
exchange programmes. Both will be more aggressive now in terms of pricing, availability of newer
devices, variety and reach. As per Counterpoint Research, Flipkart had cornered a 51 per cent share
of the online smartphone market in 2017, while Amazon had a 33 per cent share.
War in Grocery and Food on the Cards
The augmented Flipkart backed by Walmart’s expertise in grocery raises the chances of a big fight
with Amazon in the grocery category.
Amazon has already taken a lead in selling food items directly to consumers in India. In 2016, when
India opened food-only retailing to FDI, Amazon secured permission to invest $500 million in a
wholly owned venture—Amazon India Retail Pvt. Ltd—to retail locally produced and packaged
food products through offline and online channels. It became the first foreign e-commerce firm to
enter food-retail venture in India. Amazon has rolled out its own food-r bailing business in India
with a pilot outfit in Pune. It is also on the lookout for a strong bricks-and-mortar presence in India
and is in talks with several players, prominent among them being the Future Group.
The rival Walmart-Flipkart combine also plans to make an aggressive play in the food/ grocery
sector. A substantial chunk of their investment in India is earmarked to build back-end food and
grocery infrastructure; the aim is to gain pole position in India’s online and offline food-retail
markets. Walmart’s proposed investment in Flipkart will be used to build infrastructure, including
food parks, cold chain, collection centres, sorting and grading facilities, centres for food excellence
and allied facilities. Food is an important part of Walmart’s cash-and-carry (wholesale) business
comprising around 60 per cent-65 per cent of sales annually.
Walmart could use Flipkart’s consumer database to push low-priced grocery.
Discount-peddling Likely to Continue and Expand
Given the purchasing habits of Indians, the business will continue to be heavily dependent on
discount-peddling. Consumers can look forward to more discounts with a stronger Walmart-
Flipkart and a moneyed Amazon set for an intense fight. Consumers would be courted by both
Amazon and Walmart-Flipkart in a bid to gain and retain customer loyalty.
Competing to Gain Consumer Data Will Intensify
For both Walmart and Amazon, access to consumer data is a valuable competitive advantage. Both
are strong in this respect. Amazon has been gathering vital data on consumers in India over the past
few years. As for Walmart, by controlling the Flipkart platform, it could access and control the
database in the possession of Flipkart. Both giants will now try to get one up in the matter of
consumer data.
The New Walmart-Flipkart Will be a Hugely Augmented Player
With Walmart entry, Flipkart stands immensely augmented. First, the financial strength. Walmart
will aid Flipkart with its deep pockets. Second, Walmart’s expertise would be available to Flipkart
and the latter could leverage it to strengthen its marketplace in terms of back-end systems, process
automation, supply chain knowledge and sales. Flipkart will also leverage Walmart’s omni-channel
expertise and expertise in grocery. Walmart will have access to Flipkart’s talent, technology,
customer insight and innovative culture. The two bring to the table their individual strengths in
cash-and-carry and online, respectively. They will leverage their combined strengths. The augmented
Flipkart will make deep investments in technology, innovation, supply chain and business processes.
Flipkart will also get access to nearly 2,000 of Walmart’s products exclusively. Walmart will also aid
Flipkart with its decades of retailing expertise in skills such as logistics to marketing.
The Multidimensional Impact
The Walmart-Flipkart deal will be a big disrupter in not just India’s online retail industry but also the
retail industry as a whole. The largest company in the world has finally come to one of the largest
and the fastest-growing markets in the world.
It Will Be Goliath vs Goliath
Walmart clearly does not want to be left behind in the race, as India is a critical piece. It is going to
be a battle of two US Goliaths for the online market estimated as $20 billion currently and expected
to grow 10 times in next 10 years to reach $200 billion. Both Amazon and Walmart would be willing
to invest big bucks and take a hit today.
Impact Will Differ, Segment to Segment
For the consumers, the deal will mean a bonanza in the short and medium terms. They will benefit
in the form of high discounts and low prices for the relevant products. As Walmart tries to win
more Indian consumers and as the competition intensifies, consumers should be getting benefits
such as online sites that are easy to use, customer service that strives to give them what they want
and give them quickly and reliably, and prices that are low. In short, for the consumers, it will just be
‘cheap, fast, easy’ all the way. In the long term, however, the implications could become different.
For brand marketers (companies making consumer products), the chance to sell their wares through
Walmart-Flipkart and Amazon could be a great development—a huge audience, good display, easy
to be found. They may also get their sales from the huge market. But they will be squeezed by both
Walmart and Amazon to part with a huge margin. Both will be looking to the best possible deals for
themselves. While the business could be big in volume, the profitability could be tiny:-
For retailers selling the same product categories as Amazon and Walmart, life will become tough.
They will have to face stiff price competition from the giants, Walmart in particular. No one can
ever beat Walmart on price, or undersell them. Walmart never gives up. So the retailers have to work
out strategies for competing by offering customers something the giants do not: it could be the
human touch, service with a smile or originality in the offer. Otherwise, for them, it could be just a
choice between being Walmarted or Amazoned. Walmart will push to get the best deal for Walmart;
Amazon will push to get the best deal for Amazon.
As for the smaller e-commerce players, some will be acquired by the Big 2, some may fold up and a
few innovative ones alone will prosper.
The Likely Long-term Impact
The impact and implications will not stop there. The benefits to consumers could stop in the long
term. Just two options, or just three at the maximum for consumers to shop from, is a bad situation
for them to be in. Both Walmart and Amazon will be doing whatever they must for gaining a
dominant position in India’s online retail industry as well as India’s retail industry in general. Both
will keep investing and keep absorbing losses. Gaining control is their aim. Their economics
including cost of their investment and valuation operate on a distinct set of parameters. Once their
basic objectives are met, they both will try to reap the benefits for themselves. In Chapter 2, we had
discussed the overarching influence of the tech giants over the tech inventions space, the global
wealth space and the human mind space and its implications to societies and marketers across the
world. We need to add to those tech giants the investment giants and retail giants as well. The
implications of such dominance by them—to a country like India in particular, which has a huge and
tempting market, but does not have home-grown tech or investment or retail giants—will be
enormous.
A Boost for Indian Start-ups
Another impact, a favourable one at that, of the takeover of Flipkart by Walmart is the respect it
brings to Indian start-ups. Critics of Indian start-ups may not any longer be summarily dismissive of
Indian start-ups and their ability to prosper in an open-for-all market. This is a one lakh crore plus,
all cash, deal. It is a certificate for Indian start-ups! As an individual firm, Flipkart can take the credit
for having given India its big start-up success story. With its acquisition at a valuation of $20 billion,
Flipkart has demonstrated that it was the most valuable start-up in India. It is perhaps even more
valuable than $20 billion. Two factors are relevant here. Walmart was buying its future, not just an e-
commerce enterprise. Also, Walmart was paying that price to prevent Amazon from getting Flipkart.
Had it got Flipkart, Amazon would have completely shut Walmart out of the Indian market. Second,
as Flipkart’s business grows, and as India’s online retail grows, the purchase price now paid may
seem low.
Mini Cases 12
INTEL INSIDE: ADVERTISING BUILDS A GREAT BRAND
Computer chip producer Intel made it to the top 10 of the world’s most valuable brands as per
Interbrand Survey 2012. It was at number 8 and worth $40 billion then. It is now in the league of
consumer products companies such as Coca-Cola, McDonald’s, Apple and Samsung, and
technology companies such as IBM, Microsoft and Google.
A Product Neither Seen Nor Touched by the Consumer Becomes the Trusted Brand
Marketing of computers was almost always driven by either computer manufacturers or software
producers; naturally, computer firms such as Dell and IBM and software firms such as Microsoft,
Oracle and Java became some of the earliest and well-respected IT brands. It is into this category
that Intel managed its entry first through subdued promotion and then through very innovative and
dynamic advertising. The unseen product became customer’s trusted brand when it came to the
purchase of a computer.
Stage 1: Promotion Through Vendors
In the early days, Intel solely relied on its vendors to propagate its product. To quote the director,
Marketing and Operations, South Asia, Intel:
Though the technical advances of processors played a central role in transforming the PC from a basic production tool
to an entertainment, education and business device, Intel, the major processor-player relied only on its vendors t? spread
its message. This gave Intel a limited reach. It was in 1989 that Intel started prsmoting its product directly to final
users. It promoted its 386X microprocessor to IT managers.
Slowly, ‘marketing’ entered the scene. The marketing team of Intel studied the strategies used by companies supplying a
component or technology such as NutraSweet and Teflon. It is this enquiry that revealed to Intel the importance of
‘ingredient marketing’. Intel found that communicating the benefits of the component to the end user was very
advantageous in expanding the market.
Stage 2: Mid-1990s: Intel Inside Ad Campaigns ‘Multiply’ and ‘Chips’ Commence
The advertising agency Dahlin Smith White and Intel’s marketing team developed the famous Intel
Inside tagline and mnemonic. Intel’s Pentium brand as we know it today was born in the mid-1990s
and built through worldwide ad campaigns, bombarding Intel Inside. Since then, Intel has been
advertising all its new platforms such as Centrino Duo for light-weight notebooks, Viiv for digital
home/entertainment and vPro for IT managers. Ad campaigns ‘Multiply’ and ‘Chips’ for Centrino
Duo elaborately taught end users, especially the non-tech laymen users, the difference a processor
can make to their computers. The message read: ‘Everything you love about a computer is because
of its processor, be it software, graphics or peripherals’. This was the message Intel spread through
all its campaigns; TV was a major medium; the message was drilled into the minds of millions of PC
users/potential buyers worldwide. Intel’s objective was to make the layman buyer throughout the
world ask for the computer with Intel Inside! Apart from TV, Intel spent a lot of money on
advertising in language press, billboards and hoardings.
Cooperative Advertising
For better coverage and involvement of computer makers, Intel also resorted to incentive- based
cooperative advertising scheme, where it partnered with computer firms such as HP, Lenovo and
Acer. Intel shared the advertising costs of these firms for their PC print ads that carry the Intel logo.
The Intel logo not only gave more stretch for the ad budget of these firms, but it also conveyed an
assurance that their systems were powered by the latest technology.
Awareness Campaigns for Developing Markets Like India
Intel ran special campaigns for unfolding markets like India. Here, the assembled, no-name PCs was
coming up as a big market. The Intel campaigns and personal selling targeted such shops. The
results were visible. To quote the director, South Asia, Intel: ‘In India about 40-50 percent of our
products is supplied to no-name shops who gain credibility because of the powerful Intel brand we
have built up’. A major portion of the huge assembled PC market of India is now going to Intel
through these shops. The assemblers do not bother about the makers of the various
components/parts that go into the PC, but when it comes to the processor, they insist on Intel.
Stage 3: New Campaigns for Modern Times
2007—chatting and singing little processors: Intel discontinued the ‘Multiply’ ads and launched a
new ad campaign, which was more processor-specific. These were for ‘Centrino Duo’ and the ads
featured ‘debonair and charming’ little processors chatting and singing inside designed fab. The ads
were all fun and straight to the point: Great computing starts with Intel inside.
2009—Intel’s dancing engineers: Intel featured its engineers in its new global ad campaigns. The
tag was: ‘Our rock stars are different from your rock stars. Your rock stars are seen, so they are
famous; our rock stars are not seen...’.
And the question was: What if Intel’s scientists are treated like rock stars?
Intel was making a light-hearted argument that its engineers play a key role in creating new
technologies, a role that generally goes unseen in PCs, laptops and other high-tech gadgets. The
campaign ‘Sponsors of Tomorrow’ was a high-budget one and ran in various media.
2012—new ad campaign for Ultrabook laptops: This has been Intel’s biggest marketing
campaign so far, a campaign that included TV, print, outdoor, online and other advertisement
placements, as well as in-store and online retail campaigns. Paid promotion on Twitter was a first of
its kind in online marketing. The campaign ran in 50 countries across 26 languages, a campaign that
the company itself commented as ‘cinematic and epic’! It was not about processor; it was about the
new laptops, the Ultrabook, Intel was associating with. A new class of slim, lightweight, fast-waking
laptops that use the company’s low-power processors. They were positioned as devices from ‘the
future’. And Intel was spending hundreds of millions of dollars behind a huge advertising campaign
to promote the new category of computers.
Technology Demystified for the Layman Through Advertising —Intel Brand
In short, it has been amazing that an ingredient could so well demystify itself through its simple
rhythmic slogan and global ad campaigns. The Intel brand development story is a real lesson on the
power of advertising.
It is interesting to see what Intel insiders say about this story; to quote Heather Dixon, an Intel
marketing manager, ‘Intel doesn’t sell anything the everyday consumer can buy. That’s the challenge
of being an ingredient brand; Intel ads made its brand a must-have when consumers are PC
shopping.... We want Intel to be top-of-mind’.
Frank Grady, president of Grady Britton ad agency, says: ‘They are marketing to the consumer
through somebody else’s product, and I think they’ve done that very well in the past; it can only
happen if they have the brand attributes to pull that off’. Yes, that precisely was Intel’s success; it
had a great tech product on hand; it pitched for top quality, bet on performance and did not
compete on price with rivals like AMD. It kept bombarding Intel Inside and kept its tech
upgradation on top priority. It first ensured its product superiority.
Now Intel is poised to move away from the Intel Inside theme, as the company is fast moving
beyond its traditional microprocessor business. The company is now developing graphics chips,
dabbling in new wireless technologies, serving many industries. The company is taking the focus off
its individual products and trying to build its corporate name—just Intel. The Inside theme is being
dropped. The company is obviously reaching out to a much wider audience.
Source: http://www.oregonlive.com/2009/05/intel_ad_campaign; http://newsroom.intel.eom/4 April 2012.
PART III

Some commonly asked questions in Placement Interviews:

1. Can you explain the primary responsibilities of a marketer?

2. Can you explain the primary responsibilities of a sales executive?
3. Can you do sales analytics? If yes, what analytics can you do?
4. What qualities should a successful marketer have?
5. If you are not provided any database, how will you develop database
of prospective clients/customers?
6. How can you acquire customers?
7. What is unique about you?
8. Why should we hire you?
9. We put a lot of pressure on our employees. How can you handle that?
10. What are your expectations from our company?
11. Show how to sell. Can you do sales job?
12. How can you convince a dealer/retailer to stock your newly launched
brand?
13. Why do you want to work in FMCG/Banking/Retail/Pharma
sectors?
14. Why have you shifted from accounting/economics/science/arts to
management?
15. Why were you rejected in your last interview?
16. Tell us about one innovation that you have done in last 6 months.
17. What is your favourite subject? Why?
18. What subjects have you studied in MBA?
BIBLIOGRAPHY

1. Noel Capon & Siddharth Sekhar Singh, Managing Marketing-An Applied

Approach Wiley India Pvt. Ltd 2014

2. Phiip Kotler & Kelvin Lane Keller, Marketing Management, Pearson 2018
(15th Edition)

3. Ramaswamy & Namakumari, Marketing Management-Indian Context, Global

Perspective, SAGE 2018 (6th edition)