Grasim Industries Ltd and VSF - Expanding a Commodity Market through Branding and CRM

            
 
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Case Details:

Case Code : BSTR214
Case Length : 26 Pages
Pages Period : 1999-2006
Organization : Grasim
Pub Date : 2006
Teaching Note : Available
Countries : India
Themes: Business Strategy | Product Development
Industry : Textile, Apparel, and Accessories

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"There is no such thing as decline. When markets are not moving, there are two things that you can do - take on competition and see that your offering is better in all ways, and the other way is to grow your market." 1

- Shailendra K. Jain, President of Grasim Industries Ltd., in 2004.

"Viscose has been underutilized because of a lack of awareness among fashion designers and end-users. Internationally viscose blended fabrics are extensively used in apparels. This not the case in India." 2

- M P Joseph, Secretary General, Association of Man-made Fiber Industry of India (AMFII),3 in October 2005.

Introduction

In March 2006, Grasim Industries Ltd. (Grasim) announced plans to establish an integrated plantation cum pulp plant in Laos to source raw material for its Viscose Staple Fiber (VSF) production units in India, Thailand and Indonesia as well as for future production facilities.

The announcement came as a surprise, indicating to industry watchers that Grasim had not just succeeded in arresting the decline in its sales of VSF, but was confident of future growth too. Grasim started production of fabric using imported VSF in 1950. VSF was then the cheapest available fiber and was referred to as 'the poor man's cotton'. In 1963, Grasim adopted a vertical integration strategy and started producing its own VSF. As a cost-saving measure, the company even began producing major raw materials (wood pulp and caustic soda) for VSF in-house. It also developed a more eco-friendly process for manufacturing VSF. These measures, though successful in increasing its sales, were not sufficient to reverse the gradual loss of market share of its VSF to its substitutes - cotton and polyester fibers.

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By the 1990s, a combination of increasing raw material costs and low polyester and cotton prices made VSF the costliest fiber. As a result, demand for VSF declined rapidly.

In 1999, Grasim embarked on an aggressive marketing campaign to salvage its VSF business. The campaign did succeed in increasing the demand for VSF to some extent. However, in 2002, with the fall in cotton prices, demand for VSF fell again.

It was at this juncture that Grasim chalked out a strategy to reduce the impact of price fluctuations of substitute fibers on demand for its VSF, while at the same time moving to increase its share in the fiber market.

The strategy involved several product development initiatives and is believed to have helped create value for the company and its customers.

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1] "Test of Fiber", www.grasim.com, 2004.

2] "Product Development Key to Growth of Viscose in India," www.expresstextile.com, October 31, 2005.

3] AMFII, headquartered at Mumbai, was formed to represent the various companies in the man-made fiber industry.

 

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