3 Strategies of Leading Companies

In the world of uncertainty, what helps active organisations is Out of Box thinking. These organisations up the game in situations when the whole world seems to be  looking in the eyes of gloom.

  • How do they do so?
  • What do they do different?
  • What do they have in them – that other do not?

My experience is they do the following:

  • Diversification.
  • Premiumization.
  • Differentiation.

So lets have a look at what these really mean? and how does this make a difference?

Diversification:

One of the most simple at yet elusive strategy is Diversification. What makes it so difficult is looking into the future, anticipating the change, envisaging the change, taking action & persisting with the actions till diversification is successfully implemented.

Refer below example of ITC: From tobacco major they are moving to non-tobacco company.

In 2016-17 58% of top-line & 85% of Bottom line is from Cigarettes, & FMCG Turnover in same year is around 10,000 Cr & plans are to make FMCG reach 1 Lakh Crore by 2030

ITC – FMCG Business Growth.

How would they achieve this:

  1. Entering new segments in similar business. E.g. entering body was segment from being No.2 in Shower gel.
  2. Extending Product portfolio in existing segment, e.g. Aashirwad brand extending to spices from Atta.
  3. New Segments. Dermafique – a Skin care brand.
  4. Non – Organic growth. B Natural juice maker acquired, Shower to Shower & Savlon from Johnson & Johnson, Charmis from Colgate Palmolive, etc.

There will be lot of other initiatives in Hotels, Paper Board, etc.

In a Nut Shell, it always helps to diversify  – not to keep all your eggs in one basket.

For more details refer link below:

https://economictimes.indiatimes.com/industry/cons-products/fmcg/itc-explains-how-it-plans-to-diversify-business-through-fmcg-bold-play/articleshow/63763594.cms?from=mdr

Premiumization:

An amazing strategy that takes care of companies Top and Bottom line at the same time. The process though is slow and steady – inching up one step at a time.

Refer an example of Hyundai: How they have been able to slowly capture the market share from @ 14% in early 2000’s to 19.4% in 2019. When the whole auto was down in higher two digits Hyundai maintained themselves in low single digit.

“Our rate of (sales) decline is much smaller than that of those of other OEMs and that has led to the increase in our market share to 19.4%, which is the highest-ever. Automotive industry is a key contributor in some of the major economies and huge contribution comes from the value chain companies as well,” Mr. Kim said.

So how did they do the premiumization?

Remember that the vehicle line-up Hyundai has Entry Level : Eon, i10, Hatch Back : i20, Sedan : Verna, SUV : Creta & now Venue.

Important to note here that while earlier around 2007, in benchmark comparison i20 was pitched against Maruti Swift (though i20 has premium features, price of Swift was closer to i20)

Specs comparison of i20 Vs Swift Vs i10 Nios.

Hyundai over the years has added premiumization quotient in their offerings and today when they launch i10 NIOS, specifications are similar to current Swift – may be a tad better.

How does this help Hyundai?

They can charge premium on i10 & more over the i20 is pitched higher so higher premium on i20 than earlier.

As an OEM they take discounts from vendors on the old car models and here you can also charge premium from customers, increasing net contribution to the bottom line.

I would just sum this up as cashing the successful product.

Differentiation:

In today’s world of me too products successful companies will always create the differentiation in their products. This helps them to

  1. Command premium from customers.
  2. Keep the regular customers in there kitty.
  3. Maintain their leadership in selected segments.

This is highlighted by some of the class leading features incorporated by companies in their products:

  1. I20 was the first budget segment car to  launch parking cameras.
  2. Engage Deo’s – Launched a pocket pack with 2 perfumes.
  3. MG Hector – Launched internet car / connected car.
  4. Paper Boat – in market dominated with cola’s & Orange drinks they launched differentiated fruit juices.
  5. Oppo Camera Phones – in the market of all smart phones with faster chip-sets, big batteries, bigger screens, Oppo marketed their phones as Camera Phones.

So to sum up the above article, Dynamic organisations can fall back upon the Diversification, Premiumization & Differentiation to fight the averse market conditions to stay afloat & keep growing.

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