What an Impact!

IIPM: An intriguing story of growth and envy

so it turns out that Walmart’s ambitious five-year long ‘Project Impact’, to redesign the overly cluttered stores and to create a shopper-friendly environment by reducing the merchandise, has resulted in declining sales of the Bentonville retail major. Reason: Less merchandise on display and losing on to millions of square feet of merchandise space has affected per square feet sales. So what should be the way forward for Walmart? Abandon the project, or continue with it? “Changes generally don’t go too well with consumers. Starbucks’ sales were impacted similarly when it underwent a transformation last year and Starbucks was forced to go back to its original positioning. Cutting down on unwanted merchandise may be impacting sales currently, but in the long run, it will help Walmart to rationalise its SKUs,” avers Beth Higgins of Euromonitor.

Savreen Gadhoke

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Source : IIPM Editorial, 2010.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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SOME UNUSUAL BUSINESS

The last year had not been easy for Hindustan Unilever (HUL). But India’s largest FMCG behemoth fought the blues and posted a net profit of Rs.24.96 billion for the 15-month ending March 2009.

HARISH MANWANI, CHAIRMAN, HUL

How did HUL do it? Well, in Chairman Harish Manwani’s words it was via a paradoxical strategy of “business as usual on growth and business unusual on costs.” At first, struggling with increasing prices of critical raw materials, HUL tried every known trick in the trade to balance its cost, price and profit equation. They raised prices of their shampoos, detergents and tea brands and even reduced grammage of some products. While these measures helped HUL in achieving decent sales growth, increased prices led to a simultaneous decline in volumes. But when inflation reared its ugly head, HUL was again forced to cut prices of its key brands to stay competitive.

It was then that Manwani took the decision to convert the impending crisis into an opportunity. Realising that those conventional strategies would be unable to bail HUL out of its predicament, Manwani implemented three crucial strategies to balance the company’s toplines and bottomlines. He first declared a ‘war on waste,’ wherein the company reduced its fixed cost component. Primarily, HUL began buying its raw materials (commodities) on a monthly basis instead of the previous annual cycle to take advantage of the fluctuations in the commodity market. Says Dibyajyoti Bora, FMCG Analyst, CII, “In the long term, the move will help HUL take advantage of futures contracts and save costs.” The company followed this up by ‘straddling the pyramid’ to capture uptrading opportunities. Actually with an increase in prices, HUL had started losing market share to cheaper rivals.

To counter this, they rationalised their stock keeping units (SKUs) and spread out their vast product portfolio at new price points. Tweaking their go-to-market strategy to cut flab at the front end added more push. For FY10, HUL has decided to revamp its entire product portfolio and relaunch several brands like Rexona, Breeze, Kissan Fruit Jam, et al. The bid is to enhance ad budgets for brands like Hamam and Liril. Business unusual? Naah!

Savreen Gadhoke

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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HYUNDAI MOTORS

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Once upon a time, Maruti was the only rival for the sunshine car. Till Tata Motors came along...

Here’s a Korean auto major, who boasts of three ambassadors – SRK, Preity Zinta and Sania Mirza. Yes! Hyundai, and small wonder then that the brand has been able to dent Maruti’s un-challengeable dominance to some extent. Arvind Saxena, VP, Marketing and Sales, Hyundai Motor India, explained to 4Ps B&M: “We have been doing product specific campaigns during the last year based on our requirements.” He added that the company will consistently focus on 2 core areas – innovation and reliability in all its communication. Hyundai posted sales of 299,513 units in CY06, an elephantine increase of 18.5% as compared to CY05. Anticipating similar momentum, HMIL is setting up its second plant, taking the total production to 600,000 units by end of 2007 from the current 300,000 units. The company is building up an extensive network of dealers, expanding their numbers from 183 to 250 by this year end. In a bid to boost consumer satisfaction, aftersales service network are also being increased to about 1,000 in 2007. This will give Hyundai the much needed edge to come at par with Maruti and continue to keep the sun shining brightly on its India story!

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Source : IIPM Editorial, 2008

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative

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