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Essay: Competitive position of Dabur in domestic and international markets

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  • Competitive position of Dabur in domestic and international markets
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The report provides a critical examination of the competitive position of Dabur in domestic and international market by conducting a detailed analysis of the effectiveness and efficiency of the key success factors which help in evaluating the possibilities of launching the company in the UK. Also, the value chain analysis discovered the core competencies of Dabur and the improvements the company needs to make in devising the strategies suitable to excel in the dynamic market. The market attractiveness of the UK for Dabur is done by using CAGE and Hofstede model. A critical evaluation is done in the end after assessing its SWOT analysis, challenges company might face and the above-mentioned theories to conclude with an apt market entry mode in UK.

MARKET AUDIT OF DABUR

Macro environmental analysis

In order to analyse the macro environment, a PESTLE analysis has been conducted to conclude that the results found from the sources are critical enough to enter in the dynamic conditions of a new market, also analysing the threats and opportunities within the FMCG industry and a framework called Porter’s five forces is used to check the competitive intensity and attractiveness of the company. The findings from pestel will be explained in further detail.

Political factors

Introduction of GST as a unified tax regime will lead to a re-evaluation of procurement and distribution arrangements. FMCG organizations would now be able to guarantee that their logistics and distributional infrastructure is progressively ideal from a business perspective instead of an administrative perspective. That would be a major basic lift for FMCG organizations from the GST execution (Motilaloswal.com, 2019). As a result, the GST regime will lead to a fall in logistics cost which will considerably cut costs and provide cheaper consumer goods (Gstinindia.in, 2019).

Government has put into practise certain restrictions in the import policies. Despite of this, tax exemptions in sales and excise duty are provided for small scale industries which will allow the SME’s to invest more and increase in the number of new entrants. This shows that the trading policies are favourable for the Dabur company so it can export its products which will be helpful for the company to grow.
The government initiatives like the Union Budget 2019-20 is mainly to increase the spending amongst the middle class in order to boost their confidence and to create demand generation for branded consumer products (Ibef.org, 2019).

Economic factors

The demand of goods is more or less inelastic irrespective of recession or inflation. Also, the rising inflation and the fall of rupee has not much affected the Fmcg sector. To offset the inflation pressure, consumers usually tend to cut down their spending on luxury products, but they can’t minimise the day-to-day necessities of living resulting out to be a positive sign for Dabur (Indianretailer.com, 2019).
One source said that the retail sales have risen with the consolidated net profit for 2018-19 marked a 6.5% growth (businesstodayin.com, 2019). It seems to be an opportunity to expand in an international market as the current scenario of the company in domestic market turns out to be stable.

Social factors

The rising awareness, ease of access and the change in lifestyles are the key growth drivers for the consumer market. The focus on MSME’s, infrastructure and tax rebate under the Union Budget 2019-20 is expected to directly impact the Fmcg sector. The above-mentioned initiatives are expected to increase the disposable income among the common people in the rural area, which will be a boon for the sector.
The rural India plays an important role in the contribution to Fmcg sector as it is the fourth largest contributor to India GDP, out of it the rural contributes 60% which shows the intensity of rural Fmcg market, also Dabur is making its move towards that segment and making sure that the products are affordable and replaceable to their home-made remedies in order to sustain in the market and to hold the attention of the major chunk of the population (Sakshi and Caroly, 2018).

Technological factors

FMCG major Dabur expects online sales channel to contribute up to 3 per cent of its total sales in the next three to five years. The company has tied up with e-commerce major Amazon for an online Ayurveda marketplace which will help Dabur to foster in international market as well (TheEconomicTimes.com, 2019).

The technology in India has improved because of the initiatives which helped the country to move towards cashless payments and moving tax filing online. The government has kickstarted several initiatives to move the country toward a digital economy by measures such as encouraging cashless payments and moving tax filing online.

Environmental factors

Dabur has developed methodologies in order to address the sustainability concerns which identifies environmentally sensitive species of medicinal plants and herbs. Also, they have joined hands with local NGOs across the country and have been imparting special training programmes for farmers, villagers and tribal communities to train them on sustainable and environment-friendly cultivation processes (Dabur.com, 2019). This shows that the company is up to date with its CSR activities and depicts a better reputation especially when a company wants to expand its horizons in an international market.

Legal factors

When contemplating PESTLE, the model is very supported as it is used to make strategic decisions for companies, it likewise allows companies to see conceivable business openings and starting to transform the thought into the real world. Lamentably, there are a few criticisms in regard to the utilization of PESTLE, such as, it is tedious, exorbitant, difficult to keep up with the market, etc. Yuksel has contended that the model does not bolster the integrated approach to analyse effectively (Yuksel, 2012) which numerous scholastics have concurred with this statement. However, to include a positive to PESTLE, Yuksel seems to concur that “… gives information and data … to foresee circumstances and conditions that may happen later on” which can be useful to Dabur when setting up abroad.

Micro environmental analysis

While analysing the micro environment, the Porter’s five forces framework (Porter, 1979) has been conducted in order to effectively assess the external environment. All the five elements are mentioned in detail in this report. Also, the framework is widely used to understand the micro environment and is highly recommended for being able to underline methods to modify the market structure.

Threat of new entrants – The most important factors to consider about Dabur India Ltd are its 100 years legacy, learning curve, brand loyalty, economics of scale, patents and first mover in case of ayurvedic products. While considering these factors which are all in favour of Dabur concludes that there are no potential entry barriers thus no threat for new entrants.

New entrants might face stiff competition from existing FMCG majors because even if they come with differentiated products, it could be easily replicated by the already well-established players.

Threat of substitutes – Availability of close substitutes as there are many other brands like Hindustan Unilever Ltd (HUL) and Patanjali positioned with narrow product differentiation which tries to gain market share competing on prices which increases product substitution. Dabur having a loyal customer base because of the most experienced company for selling some of its products like Dabur amla hair oil which most used oil in the whole country for many years.

Bargaining power of buyers – There exists high brand loyalty for some products which discourages product shifting. Also, the consumers experience low switching costs with regard to other products by several well-established brands as they provide similar prices.
Aggressive marketing induces customers to switch between products.

Bargaining power of suppliers – Due to the Dabur’s 100 years of presence, it has long term relationship with suppliers, and it can negotiate for better rates during times of high input cost inflation which depends highly on International commodity markets.

Competitive rivalry – The Fmcg industry is highly fragmented market because of the various consumer segments to which it caters to. In addition to this, there are many private label brands which already compete with the established brands which makes the going difficult for Dabur.

FINDINGS FROM EXTERNAL ANALYSIS

OPPORTUNITES THREATS

• The rural Indian market presents a huge opportunity for the FMCG sector as still most of it is untapped and yet to be explored.

• Slow and steady rise in per capita income of the Indian population would lead to increase in demand for FMCG products.

• Burgeoning middle class with a lot of potential to spend large amounts of their income on FMCG products.

• India has a huge domestic market with close to 1 billion population.

• Tremendous export potential.

• Increasing rate of inflation which is likely to raise the cost of raw materials thereby increasing cost of production and putting stress on overall industry profits.

• Rise in fuel prices may further lead to increase in distribution costs.

• Declining value of the rupee against other currencies of the world may further reduce margins as cost of importing raw materials will rise.

• Dipping industrial growth and slowing global economy may lead to fall in demand for FMCG products.

INTERNAL ANALYSIS OF DABUR

The objective of internal analysis is to find out and compare the internal strength and weaknesses with external threat and opportunities with a mission statement to offer initial step in the formulation of objectives and strategies (David, 2011). Also, the internal audit comprises of organisation’s resources, capabilities and competencies. This will be evaluated through various models such as marketing mix, CSR, value chain, mission and vision statement. The above-mentioned frameworks can help gain competitive advantage in order to create a marketing strategy to take it overseas.

Mission and vision statement of Dabur

The company’s mission and vision statement stated in a single line is “Dedicated to the health & well-being of every household” (Dabur.com, 2019). Dabur would accomplish them by offering quality based natural products that will improve customer’s health and personal care. Walker (2009) claims that an effective and purposeful mission and vision statement demonstrates the opportunities and goals of the organisation which can bring numerous advantages for the company in the long run. It can be concluded that this statement drafted by the company lines up well with their actual operations and functions.

Values

However, the company has set some core values and intends to offer products that will enhance the lifestyle of consumers through the easing of medical conditions and betterment of the state of mind and body. Their foremost priority is healthy lifestyle of their valued customers and second one is profit maximization of the company. It continuously strives toward the achievement of those attributes which can help the company to sustain in a competitive environment (APPENDIX 1)

Culture

Culturally, Dabur is a unique mix of historical values and contemporary thinking. It expects that the given freedom to their employees is to use and deploy their talent for the benefit of the organization and look for innovative solutions for business problems and need to have an entrepreneurial zeal with a bias for action. Dabur is a very performance driven organization and outstanding performers will be rewarded with challenging roles, assignments and exciting career paths and provides accelerated and customised learning opportunities according to different individuals. As an organization, it is working towards escalating the obdurate diversity of its leadership group, making conscious and continuous effort to build an inclusive workplace that stimulates cultural agility, universal mindset and diversity of experience and thoughts. Simultaneously, organisation’s culture alters and redevelops the apt values and standards for the company so that it can be lucrative and perform accordingly based on those values (Purcell, 2005).

25.5.2019

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