Grasim Industries Ltd and VSF - Expanding a Commodity Market through Branding and CRM
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Case Code: BSTR214 Case Length: 22 Pages Period: 1999-2006 Pub Date: 2006 Teaching Note: Available |
Price: Rs.500 Organization: Grasim Industry: Textile, Apparel, and Accessories Countries: India Themes: Product Development |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
VSF: Fluctuating Fortunes
Historically, the prices of substitute fibers had often had an impact on the demand for VSF. The demand for VSF was at its peak in the 1960s, when it commanded a market share of 20% in the global fiber market. Over the years, this had declined gradually. Over the decades, the production cost of VSF had risen steadily, owing to soaring raw material (especially wood pulp) costs and the highly power intensive nature of the production process. In the 1990s, the low price of cotton and falling polyester prices made VSF the costliest fiber, causing a decline in its market share. In the 1990s, VSF's global market share had shrunk to 4%...
Service Beyond VSF
In 2002, Grasim began implementation of its 'Service beyond VSF' strategy. The company had the following objectives:
- to provide complete solutions for its customers' fiber related needs,
- to ensure maximum customer satisfaction resulting in higher customer retention,
- to achieve higher sales by making customers increase the usage of VSF in their yarn,
- to fully utilize its production capacity, and
- to gain market share from cotton and polyester.
Offering Value Added Services to the Entire Value Chain
Grasim believed that the market could be enlarged only if it worked with every segment of the VSF value chain. Therefore, the company implemented the 'Service beyond VSF' strategy to cover the entire VSF value chain. It encouraged the usage of VSF by disseminating information regarding the key attributes of the fiber. It provided several services to the various entities in the textile value chain which included garment manufacturers, weavers, knitters, fabric finishing/garmenting units, textile technical consultants, dealers/agents, processors, and major buying houses/agents who sourced fabric/garment supplies...
Product Devoloment Initiatives
Grasim recognized that its efforts to enlarge the market for its VSF would be futile unless new applications and products were brought out regularly. Product development in VSF was virtually nonexistent as compared to other fibers which regularly came out in newer versions. Therefore, along with its provision of value added services, Grasim made efforts to introduce newer variants of VSF...
Other Efforts
In 2002, Grasim unveiled plans to create a new brand identity for VSF by replacing the brand Birla Viscose with Birla Cellulose. The re-branding efforts took months of discussions with its marketing consultants, Quadra Advisory and its ad agency Lemon. Grasim wanted to create an identity which denoted naturalness, and a feeling of comfort and softness, and which would help it compete against imports as well as other fibers. The logo, in a vibrant green, was intended to underline the fashion element for which VSF was admired among some of the world's leading designers...
The Impact of 'Service Beyond VSF'
According to company sources, the "Service beyond VSF" strategy was a remarkable success. The strategy was believed to be directly responsible for increasing its key customers' asset utilization by 18%, and their fiber to yarn recovery by 1%, and for bringing about a 40% improvement in quality in their products...
Outlook
In 2004-05, in order to cater to the rising demand for its VSF, Grasim increased the installed capacity of VSF by 3,650 tpa to 257,325 tpa through de-bottlenecking. Grasim's factories, which need large quantities of water for VSF production, faced problems due to water scarcity at several locations. The problem was particularly acute at Nagda. This diminished the ability of its factories to meet demand. To overcome this problem, Grasim increased the height of its water reservoir at the Nagda plant in 2004, and also implemented several schemes for water conservation...
Exhibits
Exhibit I: About Viscose Stale Fiber (VSF)
Exhibit II: Grasim Industries
Exhibit III: Production at Various VSF Plants of the AB Group
Exhibit IV: A Production, Consumption and Prices of Major Fibers
Exhibit V: Birla Cellulose
Exhibit VI: Value Chain of VSF
Exhibit VII: Comparison of Properties of Cotton, Viscose (VSF) & Polyster
Exhibit VIII: Production and Sales of Grasim's VSF
Exhibit IX: Major Players in the Fiber Market
Exhibit X: Lenzing AG
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