NIRMA'S DOWNTURN IN THE DETERGENT MARKET
Blame it on Competition
Nirma, one of the leading names in the Indian detergent market,
has been going through a rough time of late, after giving big names like HLL a
run for their money. It seems the big players have cracked the mystery, and are
now finding it easy to turn the table on Nirma. This interview probes the
reasons behind this sudden reversal of fortunes.
Interview by - Pradip
Sinha,
Associate Consultant,
ICMR (IBS Center for Management Research).
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Do you think continuous innovation of products
plays a crucial part in a company's long term sustainability in the
market?
Let me start by saying that despite all the glamour associated with
innovation, I feel it remains an enigmatic human phenomenon: At the same
time that it is invigorating, it is energy sapping too. Corporate
innovation is like that. To resolve this dilemma, I believe the better
approach is to consider innovation as an integral part of the company's
product/service mission. This means selective innovation.
Having said that let me accept that there is no doubt that continuous
innovation of products/services plays a crucial part in any company's
long-term sustainability in the market. However, there are certain caveats
to this proposition. Innovation of products/services must be in response
to emerging customer needs and preferences. It should be tailored to the
market demands, and at the same time fit in with the positioning of the
company's products/services in the market. Any innovation that is just
done to 'keep up with the Joneses' or emerges out of a "me-too" strategy
does not really serve the purpose. Witness the very low percentage of
product/service ideas that reach the commercialization stage, and you
would know the high mortality rate of ideas. |
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A genuine innovation, in my view, is necessarily not a technological
marvel; it could be a unique way to produce and market a product or
service. For instance, it could be a new way to distribute a product or
service that no one in the industry thought of earlier. Alternatively, it
could be a novel way to provide after-sale service. Therefore, product
innovation is just a sub-set of a larger canvas of innovations in all the
value chain activities of a company. Besides that, we must not be ignoring
the potential of managerial innovation: Innovations that bring out novel
ways of managing within organizations. These types of innovations cut
across the product/market boundaries, and help the company apply newer
techniques to a wide variety of product/market combinations.
What according to you is/are the reason(s) for Nirma's
downturn in the detergent segment?
At the immediate level, Nirma's downturn is a combination of offensive and
defensive strategies adopted by its rivals in the detergent segment of the
industry. Having taken an initial beating, Hindustan Levers Ltd (HLL) has
reacted to the low-cost provider strategies of Nirma in so many different ways.
Besides its Project Millennium and continual efforts at restructuring, HLL has
been alive to the market needs. HLL, despite being a bulky and bureaucratic
corporate entity, has always been a practitioner of innovative techniques,
especially in its strong area of rural marketing. HLL has undertaken several
actions, and among these we have the offensive strategies of price-cutting and
defensive strategies of coming up with matching products with some
differentiated elements such as in the case of 'Wheel' detergent.
Besides these, there are other deeper reasons too that I reflect on in my
answers to the other questions.
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