Financial Daily from THE HINDU group of publications
Thursday, Jun 06, 2002
Columns - Karategy
Dance to a different drummer
A SENIOR manager in a multinational company was perplexed about Amul's moves in ice-cream and pizzas. "It just doesn't make sense," he cribbed. "Look at the pathetic margins they are making, undercutting all of us. No wonder they make such a lousy return. Just spoiling the market."
And yet, if you've been tucking into more ice-cream this summer than ever before, I am sure you have sent silent blessings to Amul for having brought down prices so dramatically.
It is this incomprehensibility of its motives that works so well in Amul's favour.
Price may be Amul's most obvious differentiator - but the fountainhead of its strategy is its commitment to the cooperative movement and the anti-MNC feeling that fuels its management.
They say you shouldn't judge a man till you've walked a mile in his shoes. Understanding your competitor's imperatives and recognising his flexibility will enable you to predict his moves with a greater degree of clarity.
This is where strategic competitor role play comes in. Strategic role play enables you to see your business future by simulating what happens if you do this and your competitors do that.
Quite simply, competitor role play involves putting yourselves in your competitor's shoes, and living life from his perspective.
Competition has ballooned in the last few years in so many categories, largely because a market which may be too small for a giant like Hindustan Lever Ltd (HLL) is very attractive for a smaller company. Understandably, a Rs 20-crore opportunity will excite a Rs 50-crore company no end, while for HLL, it will be a rounding-off error. As a result, in many consumer products, we now have a fragmented market structure, with nimble-footed local players making enough money (for their expectations!) and building a base for entering other areas.
When what your rival expects from the market is so fundamentally different, you have to examine whether you can compete on the same terms. L'Oreal debuted in India in 1991, and expects to break even in 2004.
How does an Emami with the promoter's wariness of haemorrhaging losses compete with a relentlessly patient L'Oreal which is willing to take a Rs 180-crore accumulated loss? How does a Candico tackle a Perfetti?
Understanding the long-term expectations of your rivals will bring sharply into focus the changes you need to bring in your tactical and strategic moves.
0Its total advertisement budget is fixed at something like one per cent of turnover. Compare that to the mammoth 7-9 per cent for HLL or Nestle!
Again, entrepreneurs have a totally different mindset. Compare the management style of a Jyothy Labs, to that of say, Reckitt, and you find that the former, with no share price worry, no foreign parent to please, is far more in touch with ground realities. This translates to products eminently suited to local or regional markets. Jyothy's Ujala now dominates the fabric whitener market despite the latter's Robin being a much older brand.
Similarly, a local player like Medimix has captured the regional ethos extremely well in its communication, leading to massive brand loyalty. But there is a flip side to this as well - as regional players extend nationally, they could lose this unique feel for the market.
How does a manager in a multinational, dancing as he is to a different drummer, understand the motivations of his counterpart in GCMMF, who, incidentally earns some 40 per cent of his salary? GCMMF says it "sometimes enters a segment only to discipline the multinationals" and almost works as a market intervention body to pin down spiralling prices.
Amul will follow HLL in ice creams wherever it goes - economy or premium. So HLL's belief that if it vacated the popular ice-cream segment, it could focus undisturbed on the premium category turned out to be a short-lived illusion: Amul has launched its sundaes too (at a substantial discount, of course).
Understanding the personality of the company is crucial. Especially for promoter-driven companies, where the company is basically an extension of the person.
Reconstruct or deconstruct
In their search for growth, small players and new entrants are always looking for a chink in your armour. And they are not constrained by holy cows like flagship brands and current business models. If you don't cannibalise your products, they will. You have to constantly introspect, examining your range of offerings with a dispassionate - almost predatory - eye, to look for vulnerabilities. Marico has done an excellent job of this, plugging its hair oil portfolio with a constant stream of innovations, even cannibalistic ones. Not surprisingly, it has successfully fought off competition (including HLL) in hair oils.
Finally, role-playing your competitor enables you to identify the company's genetic code and resources. No matter what they do, they are limited by their resources and their corporate genetic code. If you understand this, you can sift serious threats from less worrying ones. Can Medimix's essentially Southern brands and communication be translated to the North? Jenson & Nicholson pioneered consumer colouring machines and Velvette pioneered shampoo sachets, but were unable to exploit them fully.
When seriously played, competitor role-play offers you a risk-free simulation of the real market in which you compete. Its success depends on how well you know your market, how your customers make its choices, what actions are available to you and your competitors, and the cost and timing of those actions. It enables you to explore future scenarios, develop a winning strategy and to stress-test your strategy before you risk it in real life. With the cost of failure removed, you are free to examine unconventional possibilities. That's how you can think different and build a competitive advantage.
(The author is a Chennai-based consultant. Feedback can be sent to firstname.lastname@example.org.)
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