Dabur

DABUR INDIA LTD. - GLOBALIZATION

CASE ANALYSIS

ECONOMIC ANALYSIS FOR BUSINESS DECISIONS (EABD)

CASE SYNOPSIS

Set in June 2007, the case is about an Indian enterpriseattempting what few other consumer packaged goods (CPG)companies from emerging markets have attempted to do i.e.,move beyond national geographical boundaries to the globalarena. In most emerging markets, including India, CPG is alocal business characterized by indigenous players aspiringto rule at provincial levels. Very few graduate to nationalstatus. Having acquired a place among the top 10 CPGcompanies in India, Dabur India Ltd. (Dabur) has taken thenext step forward. The case examines whether globalexpansion, uncommon among its genre, is logical for Dabur.It looks at the issues not only in the context of Dabur’sunique positioning in the domestic market, which itself isgrowing, but with particular reference to the ongoingexpansion in Nigeria.

CASE ISSUES

Should Dabur build scale first in India before investing in

global operations?

Does global expansion detract the company from its core

market?

What are the reasons why Duggal and his team are

expanding globally?

What are the domestic competencies that Dabur can

leverage in a global market?

Is the company’s template for globalization workable?

Why is the template not working in Nigeria?

How should Dabur address the Nigeria market?

Should Dabur build scale first in India before investing in global operations?1.

Yes

1. Scale enhances the level of resources – financial, human and operational –with which Dabur could better manage the business uncertainties of globalexpansion. Domestic scale reduces the risks involved in global operations.

2. Scale provides a set of internal capabilities and skill sets that the companycould deploy readily in overseas markets.

3. Scale lowers the cost of entry into a newmarket.

4. Building scale in the home market should be central to Dabur’s growthstrategy because the Indian market is becoming competitive. Retaining marketshare (and its ranking among the top 10 in India) would be difficult unlessDabur builds scale locally.

Should Dabur build scale first in India before investing in global operations?1.

No

1. Domestic scale offers a platform for the next leap forward for global expansion,but it is not a prerequisite.

2. Neighbouring markets are expanding. There is an opportunity cost to letting goof growth possibilities outside India.

3. There is nothing like countries as markets. In an increasingly global world, theperception of a market cuts across geographical boundaries.

4. Dealing with competitors in markets outside India provides better insights todealing with competitors within India, particularly when the competitors in bothlocal and global markets are the same.

Does global expansion detract the company from its coremarket?2.

Yes

The company has articulated three routes to building global scale: expandinggeographically, driving alliances and acquiring assets. Expanding overseas isunlike expanding locally. The markets are alien, relationships are new andintegration is a challenging task. Driving the fit takes considerable managerialattention, best spent on expanding locally.

No

The Indian economy is on auto-pilot, and growth is assured in the domesticmarket over a long period of time. Even at the current levels of resourcedeployment, Dabur can be certain of maintaining its rate of growth in thedomestic market. The company should therefore look at new growth optionssuch as internationalization.

What are the reasons why Duggal and his team are expanding globally?3.

1. The customers that Dabur is dealing with in its overseas markets are similar to itscustomers in India. This is particularly true of the Indian Diaspora that the company hasbeen targeting so far.

2. The multinational competitors that Dabur is dealing with in its overseas markets arethe same as those it is competing with in India.

3. The company has a core value proposition – herbal ingredients providing therapeuticeffects – that can be replicated across diverse geographies. Its products have universalappeal, requiring only minor adaptations to suit individual markets.

4. The personal ambitions of senior managers who, together, need to prove that aprofessionally managed company (where members of the founding family have movedout of executive responsibilities) can grow, expand and diversify. Dabur is an uncommonexample of a CPG company from among emerging markets going global, itself amotivation for company managers for whom internationalization also opens up newhorizons of personal and professional development.

5. Investor apprehensions about Dabur’s geographical expansion are more about short-term fluctuations in stock price than about the company’s intrinsic capabilities.

What are the domestic competencies that Dabur can leverage in the

international markets?4.

1. New product development: New products or variants contribute betweenfive per cent and seven per cent of sales revenue every year at Dabur.

2. Sales force focused on channels: Sales organization structure in Dabur’s focusmarkets is oriented towards channels, not products.

3. Independent supply chain for each business segment.

4. Ayurveda as a growth platform.

5. Herbal ingredients in its products with therapeutic attributes.

6. Ability to identify consumer needs, develop localized products and createniches to drive long-term growth.

Is the template for globalizationworkable?5.

Yes

It provides the single largest defence for the CEO favour of global expansion.Global expansion will proceed on track if the company sticks to it. There areseveral elements of the template that ensure success. For example: A newmarket for entry should be margin-accretive even in the short run; it should bein the landscape between Nigeria and China; the company’s herbal platformwill remain the basis for new customer acquisition and brand development;and overall brand architecture will be limited to four core brands. Theseelements eliminate the risks of global expansion.

The manner of market segmentation is another reason why Dabur is in goodshape with global expansion. Spending resources only on Focus marketsensures that resources are not frittered away in unproductive avenues.

Why is the template not working in Nigeria?6.

Nigeria is a focus market, but it is unlike any of the focus markets

that Dabur has been doing business with. Nigeria does not have

Indian Diaspora. The products with which Dabur has penetrated

other global markets do not sell in Nigeria. The country is,

however, a large market for categories like toothpastes, soaps and

mosquito repellents. But there is lack of alignment in each of

these categories. Toothpaste is not a focus product for Dabur in

any market. Soaps sold in Nigeria are cosmetic while Dabur’s

soaps come with therapeutic attributes. Mosquito repellents are

consumed in the form of coils in Nigeria while Dabur’s offering is

in the form of a cream.

How should Dabur address the Nigerianmarket?7.

One of the issues here would be whether changes are required inthe standard template in Nigeria.

Secondly, what are the specific domestic competences that Daburshould deploy in Nigeria to grow the market? Developinglocalized products to suit customer needs is one of them. Themismatch between product attributes and Nigerian needs is bestaddressed by tweaking exiting products through technology.

Thirdly, what are the opportunities for creating niches in theNigerian market to drive long-term growth?

THANK YOU