Academic journal article Academy of Accounting and Financial Studies Journal

Competitive Advantage and Performance: An Analysis of Indian Fmcg Industry

Academic journal article Academy of Accounting and Financial Studies Journal

Competitive Advantage and Performance: An Analysis of Indian Fmcg Industry

Article excerpt

INTRODUCTION

The profitability of the Indian fast moving consumer goods (FMCG0 industry has be fluctuating widely during the last decade with changes in the competitive landscape, particularly with proliferation of naturals and Ayurveda based personal care categories. During the last decade, the mean, minimum, maximum and standard deviation of return on equity (ROE) has been 25.93%, 2.88%, 105.84% and 26.45 respectively. Till 2012 the Indian FMCG industry was driven by Indian subsidiaries of multinational companies like Unilever (Indian entity- Hindustan Unilever Ltd.), P&G (Indian entity- Procter & Gamble Hygiene & Health Care Ltd.) and Colgate (Colgate-Palmolive (India) Ltd.), with a handful of home-grown companies like Dabur, Godrej and Emami.

The Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homeopathy (AYUSH) movement in India has contributed to growing popularity of Naturals and Ayurveda products in the personal care categories since 2012. Two spiritual organizations, a) one run by Baba Ramdev (Patanjali Ayurveda) and b) other led by Sri Sri Ravi Shankar (Sri Sri Ayurveda) have been key to the AYUSH movement. The two spiritual leaders attract large followings across the country besides other parts in the world. They have been conducting yoga sessions, personally leading mass yoga camps across the country. During the yoga sessions, they would also promote Naturals and Ayurveda based personal care as well as other daily use consumables. In 2014, the Government of India gave a push to the AYUSH movement by establishing the AYUSH ministry and All India Institute of Ayurveda. The government was successful in establishing the International Yoga day (21st June since 2015) with unanimous declaration by the United Nations General Assembly. As per a study by Neilsen India, the contribution of the naturals segment in the Indian personal care industry has increased by about 1 percentage point every year during the last five years. If this trend continues, then the contribution of naturals to the personal care sales will be 50% by 2025.

The changes in the tastes and preference of people towards naturals have resulted in large scale business expansion by the two spiritual organizations mentioned earlier. Acharya Balakrishna, CEO, Patanjali Ayurveda aspires to make his company the number one consumer goods company in India. The current turnover of INR 1000 billion is estimated to double in the next one year. He plans to expand from the current 6 categories to over a dozen categories with head count growing two-fold. The FMCG outfit of Sri Sri Ravishankar, is Sri Sri Tattva. Tej Katpitia, CMO of Sri Sri Tattva, aspires to leverage on the 300 million followers of Sri Sri Ravi Shankar to expand the current portfolio of FMCG products. The traditional FMCG majors have reoriented their strategies to build businesses around naturals and Ayurveda. For example, Hindustan Unilever has launched the master brand "Lever Ayush" which consists of a wide range of products, including tooth paste, soap, hand wash, shampoo and face wash. FMCG companies are strengthening their positions in the entire value chain, from growing raw materials, to establishing spa and panchakarmas that will use these offerings. For example, Dabur, plans to become the largest bulk grower or rare medicinal herbs un India, by more than doubling its area under cultivation 4,500 acres from 2,000 acres at the end of fiscal year 2017.

LITERATURE REVIEW

The structure-conduct-performance (SCP) framework articulated by the modern industrial organization economists, argues that industry structure determined the behaviour or conduct of the firms, whose joint conduct then determine the collective performance of firms in the market place (Porter, 1986). The work of Porter in particular gave rise to the concept of industry analysis and emergence of the positioning school of strategy (Mintzberg & Lampel, 1999). Further work by Porter saw the emergence of competitive advantage through generic strategies as a means of creating superior profit (Porter, 2008). …

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