David Fights Goliath: The Nirma Story[Indian soap and detergent industry]

INTRODUCTIONStarting as one product, from a room in backyard in 1969 and made

a detergent name “NIRMA”after his daughter nameNirupama. In 1969 Dr. Karsanbhaipatel , at gujrat government department of minning and geology manufactured phosphate free detergent powder , started selling it locally. NIRMA is a group of companies based in city of Ahmedabad in western india that manufacture product ranging from cosmetics, soaps, detergents,salt,and many more. Today nirma has over 15000 employees and turnover of rs. 3550 crores. In 2004 nirma detergent approach 800,000 tonnes one of the largest volumes sold in the world under single brand name.

STRATEGIES BY NIRMANirma started there market with price- led marketing strategy. They started with price of Rs. 3/kg, when the available cheapest brand in the market was Rs. 13/kg. Mr.Patel bet India masses will buy if its affordable. They firstly focus on rural area. This describe the LAW OF DEMAND ie. when the price of the product decrease , demand for that product increase. Every pack of nirma came with money back gurantee.Cost reduction strategy of nirma helps them to entre in market withes. 3/kg. Nirma powder did not contain any ingredient to improve the whiteness of fabric. it does not contain ant perfuming agent or active agent in ingredients this is the reason they able to keep the price low. Nirma relied on low cost technology, process and raw material.Availability of nirma washing powder in different pack sizesie. 30gms, 200gms,500gmsand 1kg for different segment of population.

Nirmaexpand its portfolio by including fabric care product, personal

product.

Countered by HLL (Hindustan Lever Limited) HLL led differerentiation led strategy, highlights the merits of surf as

detergents and market it as “premium product” The company decide to enter the low price segmentby positioning WHEEL

against nirma at Rs. 11 To counter In personal care product HLL introduce “breeze” Sale promotion campaign by offering bucket with 1kg surf HLL do head on attack on nirma that 1kg of surf can was more clothesthan

the low priced yellow washing powder hence economical to buy surf.

Nirma road to success:Nirma ranked as largest detergent selling product in the world, and second largest seller0. in toilets soaps by 1999, Nirma had more than 35% market share in detergent segment and around 20% market share in the toilet soap segment. The company got listed on the stock exchange in the year 1994.

V1ANALYSIS ON NIRMA STORYNirma is based on the monopolistic competition approach. It shows how the equilibrium price and quality are determined in short run and long run. It is form of market organization in which there are many seller of heterogeneous or differential product ,differential products are those that are similar but not identical and satisfy the same need. For example numerous brands of detergents.

LONG R.

UN: In long run more firms may enter into the market, there may be many producers and many consumers in the long run and no business has total control

over the market price. There will also be break even situation in the long run Ie; neither profit nor loss, the firm will make zero economic profit.

SHORTRUN: In short run the competitive firm reduces a differentiated product the demand curve it faces will be negatively sloped since there are many close substitute for the product the demand curve is highly price elastic. The price elasticity of demand is higher the smaller is the degree of product differentiation

POSERS:

1.Would you regard detergents as an industry or a product group?

We regard detergent as an industry instead of a product, because industry is a place where different kind of products are manufactured and nirma started as an industry with one head product. Late 1960’s the detergent powder market featured mainly on the premium segment dominated by big players.

2. Which feature of monopolistic competition is exhibited in the above case?

High price led strategy of HLL before nirma entered into the market. Product differentiation More elastic Economies of scale Selling cost

3. As a managerial economist you can visualize the long term sustenance of a company that sells a product that has lower quality but also lower price in comparison to its rival companies?

As a managerial economist we cannot visualize the long term sustenance of a company that sells product with low quality and low price, because in long run the income of a customer may rise and they feel ashamed in using the low price products, they move towards luxury products or other substitutes goods may

enter into the market with a same strategy and with more quality, so we cannot visualize success in long run.

Years Profit in cores2011 5462012 5102013 3862014 3852015 243

From the above table we can conclude that there was graduvallydecrese in the profit ofnirmabecayse in long run there may be entry of new firms with the same strategy which leads to increase in its sudstitues and also the income of the people

May rise and they may shift to luxury goods, so we cannot visualize long run sustenance.

4. Can success of nirma be extended to other product groups?

Yes, the success of nirma can be extended to other products. The some of the products of nirma which got success are

Nirma is 7th successful brand in india. Soda ash: In 2007 nirma purchased the American raw material company

Searle’s valley minerals making it among top 7 in the world. Nirma also entered into toilet soap market to target premium segment and it

become second largest toilet soap brand in India. Selling of normal in India:

Toilet saop-3 million pieces Detergent powder-6.2 millions Lime fresh toilet soaps-17 millions

Nirma also entered successfully into other products like cosmetics,beautysoaps,food products, this shows that the success of nirma can be extended to other product groups also.