Strategic Management Dabur India Limited

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Index

Company Profile 2

Strategy Management 2

Strategic Intent Of Dabur India Ltd 6

Board of Directors 7

Risk Management 9

SWOT Analysis of Dabur India Ltd 10

Porter’s five force model Analysis of Dabur India Ltd 13

Future Global Strategy 19

Recommendations 20

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DABUR INDIA LTD

Company Profile

Dabur India Limited is a leading Indian consumer goods company with interests in health care, Personal care and foods. Over more than 100 years we have been dedicated to providing nature-based solutions for a healthy and holistic lifestyle.

Leading consumer goods company in India with a turnover of Rs.2233.72 Crore (FY07)

2 major strategic business units (SBU) - Consumer Care Division (CCD) and Consumer Health Division (CHD)

3 Subsidiary Group companies - Dabur Foods, Dabur Nepal and Dabur International and 3 step down subsidiaries of Dabur International - Asian Consumer Care in Bangladesh, African Consumer Care in Nigeria and Dabur Egypt.

13 ultra-modern manufacturing units spread around the globe Products marketed in over 50 countries Wide and deep market penetration with 47 C&F agents, more than 5000

distributors and over 1.5 million retail outlets all over India

Vision

Dedicated to health and well being of every household.

Strategic management: It is the art, science and craft of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its long-term objectives. It is the process of specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives and then allocating resources to implement the policies and plans, projects and programs. Strategic management seeks to coordinate and integrate the activities of the various functional areas of a business in order to achieve long-term organizational objectives. A balanced scorecard is often used to

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evaluate the overall performance of the business and its progress towards objectives.

Strategic management is a combination of three main processes which are as follows

1) Strategy formulation

• Performing a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macro-environmental.

• Concurrent with this assessment, objectives are set. These objectives should be parallel to a timeline; some are in the short-term and others on the long-term. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives.

• These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives.

This three-step strategy formulation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there. These three questions are the essence of strategic planning. I/O Economics for the external factors and RBV for the internal factors.

2) Strategy implementation

• Allocation and management of sufficient resources (financial, personnel, time, technology support)

• Establishing a chain of command or some alternative structure (such as cross functional teams)

• Assigning responsibility of specific tasks or processes to specific individuals or groups

• It also involves managing the process. This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and

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efficiency of the process, controlling for variances, and making adjustments to the process as necessary.

• When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.

Thus, when the strategy implementation processes, there have been many problems arising such as human relations and/or the employee-communication. At this stage, the greatest implementation problem usually involves marketing strategy, with emphasis on the appropriate timing of new products. An organization, with an effective management, should try to implement its plans without signaling the fact to its competitors.

In order for a policy to work, there must be a level of consistency from every person in an organization, including from the management. This is what needs to occur on the tactical level of management as well as strategic.

3) Strategy evaluation

• Measuring the effectiveness of the organizational strategy, it's extremely important to conduct a SWOT analysis to figure out the strengths, weaknesses, opportunities and threats (both internal and external) of the entity in question. This may require to take certain precautionary measures or even to change the entire strategy.

In corporate strategy, Johnson and Scholes present a model in which strategic options are evaluated against three key success criteria:

• Suitability (Would it work?) • Feasibility (Can it be made to work?) • Acceptability (Will they work it?)

Suitability

Suitability deals with the overall rationale of the strategy. The key point to consider is whether the strategy would address the key strategic issues underlined by the organisation's strategic position.

• Does it make economic sense?

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• Would the organisation obtain economies of scale, economies of scope or experience economy?

• Would it be suitable in terms of environment and capabilities?

Tools that can be used to evaluate suitability include:

• Ranking strategic options • Decision trees • What-if analysis

Feasibility

Feasibility is concerned with the resources required to implement the strategy are available, can be developed or obtained. Resources include funding, people, time and information.

Tools that can be used to evaluate feasibility include:

• cash flow analysis and forecasting • break-even analysis • resource deployment analysis

Acceptability

Acceptability is concerned with the expectations of the identified stakeholders (mainly shareholders, employees and customers) with the expected performance outcomes, which can be return, risk and stakeholder reactions.

• Return deals with the benefits expected by the stakeholders (financial and non-financial). For example, shareholders would expect the increase of their wealth, employees would expect improvement in their careers and customers would expect better value for money.

• Risk deals with the probability and consequences of failure of a strategy (financial and non-financial).

• Stakeholder reactions deals with anticipating the likely reaction of stakeholders. Shareholders could oppose the issuing of new shares, employees and unions could oppose outsourcing for fear of losing their jobs, customers could have concerns over a merger with regards to quality and support.

Tools that can be used to evaluate acceptability include:

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• what-if analysis • stakeholder mapping

Strategic Intent Of Dabur India Ltd

Focus on growing our core brands across categories, reaching out to new geographies, within and outside India, and improve operational efficiencies by leveraging technology

Be the preferred company to meet the health and personal grooming needs of our target consumers with safe, efficacious, natural solutions by synthesizing our deep knowledge of Ayurveda and herbs with modern science

Provide our consumers with innovative products within easy reach

Build a platform to enable Dabur to become a global Ayurvedic leader

Be a professionally managed employer of choice, attracting, developing and retaining quality personnel

Be responsible citizens with a commitment to environmental protection

Provide superior returns, relative to our peer group, to our shareholders.

Core Values

Ownership: This is our company. We accept personal responsibility, and accountability to meet business needs

Passion For Winning: We all are leaders in our area of responsibility, with a deep commitment to deliver results. We are determined to be the best at doing what matters most

People Development: People are our most important asset. We add value through result driven training, and we encourage & reward excellence

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Consumer Focus: We have superior understanding of consumer needs and develop products to fulfil them better

Team Work: We work together on the principle of mutual trust & transparency in a boundary-less organization. We are intellectually honest in advocating proposals, including recognizing risks

Innovation: Continuous innovation in products & processes is the basis of our success

Integrity: We are committed to the achievement of business success with integrity. We are honest with consumers, with business partners and with each other.

Board of Directors

Composition of the Board

As on 31st March, 2008 Dabur's Board consists of 10 Members. Apart from the Chairman, who is a Non-Executive Promoter Director, the Board comprises of three Executive Directors (of whom one is Promoter Director), two Non Executive Promoter Directors and four Non-Executive Independent Directors. The composition of the Board as on 31st March, 2008 is in conformity with Clause 49 of the listing agreement, which stipulates that 50 per cent of the Board should comprise of Non-Executive Directors, and if the Chairman is Non-Executive, one-third of the Board should be Independent.

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Table 1: Composition of Board of Director

Role of Board Members

Dabur India Limited has laid down a clear policy defining the structure and roles of different Board members. The policy of the company is to have a Non-Executive Chairman- Dr Anand Burman, a Chief Executive Officer (CEO) -Mr. Sunil Duggal, a Corporate Affairs Director, one promoter Executive Director and six Non Executive Directors. There are clear demarcations of responsibility and authority between them.

The Chairman His primary role is to provide leadership to the Board in achieving the goals of the company, which are in accordance with the charter approved by the Board. He is responsible for monitoring the core management team and in transforming the company into a world class, next generation organization that is dedicated to the well being of all its stakeholders. Also as the chairman of the board he is responsible for all the board matters. He is responsible, inter-alia for the working of the Board and for ensuring that all relevant issues are placed before the Board and that all directors are encouraged

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to provide their expert guidance on the relevant issues raised in the meetings of the Board. He is also responsible for formulating corporate strategy along with the Board of Directors.

The CEO and Executive directors are responsible for implementation of corporate strategy, brand equity planning, external contacts and other management matters within the Board approved direction and framework. They are also responsible for achieving the annual business plan.

Non-Executive Directors, including independent directors are responsible in playing a critical role in imparting balance to the board processes by bringing in their wide spectrum of knowledge and expertise and providing an independent judgment on various issues raised in the Board meetings like performance, business and strategies.

Board Membership Criteria

The nomination committee works with the entire board to determine the appropriate characteristics, skills and experience for the Board as a whole as well as its individual members. The selection of Board members is based on recommendations of the nomination committee.The skill profile of independent Board members will be driven by the key tasks defined by the Board, which is broadly based on:

Independent Corporate Governance Guiding Strategy and Enhancing Shareholders Value Monitoring Performance, Management Development &Compensation Control and Compliance

Risk Management

The company has in place a robust risk assessment and minimization procedures, which are reviewed by the Board periodically. At Dabur we have a structure in place to identify and mitigate the various risks faced by the company from time to time. The company has adopted the COSO framework for internal control. Under this framework risks are identified as per each process flow and control systems instituted to ensure that the risks in each business process is mitigated. The Chief Risk Officer (CRO) is responsible for the overall risk governance in the company and reports directly to theManagement Committee (MANCOM), which consists of various functional heads. The Board provides oversight and reviews the risk management policy quarterly.

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SWOT Analysis of Dabur India Ltd.

STRENGTHS :

• One of the largest FMCG companies in India:-Consolidated Turnover of Rs.13.3 billion ( USD 300 mn).

• Differentiated products:-Strong Herbal and Natural profile.-More than 100 years of experience in Ayurveda.

• Wide distribution network:-Covering 1.5 million retail outlets.-High penetration in urban and rural areas.

• Brand strength:-Strong brands in diverse categories of health and personal care.-Mother brand “Dabur” trusted for natural and herbal healthcare.

• Extensive Supply Chain

• IT Initiatives

• R & D – a key strength

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25

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SALESFY 04

PAT FY04

SALESFY 03

PAT FY03

Dabur

FMCG Industry

All figures in percentage

WEAKNESSES :

• Seasonal Demand

-Chyawanprash in winter.

-Vatika not in winter.

• Low Penetration

-Chyawanprash not available in rural areas.

• High price

-Like Vatika.

• Limited differentiation

-As in Hair oil category.

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OPPORTUNITIES:

• Untapped Market

-Chyawanprash

• Market Development

• Export opportunities.

• Innovation

• Increasing income level of the middle class

• Creating additional consumption pattern

THREATS:

• Existing Competition

-Himani, Baidyanath and Zandu for Dabur Chyawanprash

-Marico, Keo Karpin, HLL and Bajaj for Vatika Hair Oil

• New Entrants

• Threat from substitutes

-Bryllcream for Vatika hair oil

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Porter’s five force model Analysis of Dabur India Ltd.

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Porter's five forces analysis is a framework for the industry analysis and business strategy development. It uses concepts developed in Industrial Organization (IO) economics to derive five forces which determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one where the combination of forces acts to drive down overall profitability.

A very unattractive industry would be one approaching "pure competition".

This framework consists of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace. The overall industry attractiveness does not imply that every firm in the industry will return the same

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profitability. Firms are able to apply their core competences, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models have been able to make a return in excess of the industry average.

1) The threat of substitute products:

The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand).

Buyer propensity to substitute Relative price performance of substitutes Buyer switching costs Perceived level of product differentiation

In case of Dabur since it is in major areas of FMCG and health care products so it need not fear threat of substitute products in the recent future. But it has to constantly re invent its existing product lines in order to cope up with the innovations of its competitors.

2) The threat of the entry of new competitors:

Profitable markets that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. Unless

the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level (perfect competition).

The existence of barriers to entry (patents, rights, etc.)

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Economies of product differences Brand equity Switching costs or sunk costs Capital requirements Access to distribution Absolute cost advantages Learning curve advantages Expected retaliation by incumbents Government policies

Dabur India is in business for more than 100 years. Dabur India Ltd. made its beginnings with a small pharmacy, but has continued to learn and grow to a commanding status in the industry. The Company has gone a long way in popularising and making easily available a whole range of products based on the traditional science of Ayurveda. And it has set very high standards in developing products and processes that meet stringent quality norms. So all the advantages of first mover, learning curve, brand loyalty, patents and economies of scale exist with Dabur India.

The various product lines into which Dabur India is operating are:

Personal care through Ayurveda: Dabur introduced Indian consumers to personal care through Ayurveda, with the launch of Dabur Amla Hair Oil. So popular is the product that it becomes the largest selling hair oil brand in India.

Launched Dabur Chyawanprash in tin pack: Widening the popularity and usage of traditional Ayurvedic products continues. The ancient restorative Chyawanprash is launched in packaged form, and becomes the first branded Chyawanprash in India.

Entered Oral Care & Digestives segment: Addressing rural markets where homemade oral care is more popular than multinational brands, Dabur introduces Lal Dant Manjan. With this a conveniently packaged herbal toothpowder is made available at affordable costs to the masses

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Dabur continues to make innovative products based on traditional formulations that can provide holistic care in our daily life. An Ayurvedic medicine used as a digestive aid is branded and launched as the popular Hajmola tablet.

Care with fun: The Ayurvedic digestive formulation is converted into a children's fun product with the launch of Hajmola Candy. In an innovative move, a curative product is converted to a confectionary item for wider usage.

Leadership in health care: Dabur establishes its leadership in health care as one of only two companies worldwide to launch the anti-cancer drug Intaxel (Paclitaxel). Dabur Research Foundation develops an eco-friendly process to extract the drug from its plant source.

Real blitzkrieg: Dabur captures the imagination of young Indian consumers with the launch of Real Fruit Juices - a new concept in the Indian foods market. The first local brand of 100% pure natural fruit juices made to international standards, Real becomes the fastest growing and largest selling brand in the country.

Super specialty drugs: With the setting up of Dabur Oncology's sterile cytotoxic facility, the Company gains entry into the highly specialised area of cancer therapy. The state-of-the-art plant and laboratory in the UK have approval from the MCA of UK. They follow FDA guidelines for production of drugs specifically for European and American markets.

3) The intensity of competitive rivalry:

For most industries, this is the major determinant of the competitiveness of the industry. Sometimes rivals compete aggressively and sometimes rivals compete in non-price dimensions such as innovation, marketing, etc.

Number of competitors

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Rate of industry growth Intermittent industry overcapacity Diversity of competitors Informational complexity and asymmetry Fixed cost allocation per value added Level of advertising expense Economies of scale Sustainable competitive advantage through improvisation

Key players and competitors of Dabur India currently are Hindustan Unilever Ltd., Tata Tea, Nestle India Ltd., Britannia Industries Ltd., Colgate Palmolive Ltd., Marico Ltd., Galaxo Smithkline consumer, Cadbury India ltd., Reckitt Benckiser Ltd., Procter & Gamble. Since the industry is growing at a very rapid pace and so is the no. of players. So Dabur India has to constantly relook at its strategy in order to increase its global dominance.

4) The bargaining power of customers:

Also described as the market of outputs. The ability of customers to put the firm under pressure and it also affects the customer's sensitivity to price changes.

Buyer concentration to firm concentration ratio Degree of dependency upon existing channels of distribution Bargaining leverage, particularly in industries with high fixed costs Buyer volume Buyers Switching cost relative to firm switching costs Buyer information availability Availability of existing substitute products Buyer price sensitivity Differential advantage (uniqueness) of industry products RFM Analysis

Bargaining powers of buyers have increased dramatically with the advent of Globalisation. With increased presence of other players in the market as

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mentioned previously, suppliers have got wide range of choices. So Dabur India has to formulate strategy in such a manner to keep abreast with the increasing competition by improving the quality and reducing the prices over the period.

5) The bargaining power of suppliers:

Also described as market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or e.g. charge excessively high prices for unique resources.

Supplier switching costs relative to firm switching costs Degree of differentiation of inputs Presence of substitute inputs Supplier concentration to firm concentration ratio Employee solidarity (e.g. labor unions) Threat of forward integration by suppliers relative to the threat of backward integration by firms Cost of inputs relative to selling price of the product.

Due to its over 100 years presence Dabur does have a very strong bond with the suppliers. Also Dabur does follow the policy of having good relations with all the peoples with which it deals. This helps in having a good relation with the suppliers. Also the policy of being accountable to stakeholders be it customers, without whom it will not be in business, shareholders, who have an important stake in our business and the employees, suppliers who have a vested interest in making it all happen- are their stakeholders.

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FUTURE GLOBAL STRATEGY:

DEVELOPING MARKET

• Expand business in South East Asia, Middle East and Africa.

• Similar consumer preferences and media spill over.

• Promote 100% subsidiaries / Joint ventures to overcome tariff barriers.

DEVELOPED MARKET

• Target Indian diaspora in the first horizon.

• Large potential markets for herbal/Ayurvedic Offerings

• Set up distribution alliances for entering mainstream herbal segments.

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RECOMMENDATIONS:

• Establishing care centre.

-Such as Vatika hair care centre.

• Provide consumers with innovative products within easy reach.

• Reaching out to new geographies, within and outside India.

• Improve operational efficiencies by leveraging technology.

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