NIRMA'S DOWNTURN IN THE DETERGENT MARKET
Blame it on Competition

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'David can attack Goliath'-how relevant do you think is this in the case of Nirma?

David attacked Goliath and emerged as a winner vanquishing his much stronger opponent. However, in the case of Nirma versus Hindustan Lever it is a continuing warfare between the two. Goliath is yet to be vanquished and is making it difficult for David to win. An allegory that seems more relevant to me in the Nirma-HLL case is a fight between two lions vying for hunting space with each jealously guarding its own turf.

Going back to the heady days of 1990s when Nirma was making rapid forays into the markets and challenging HLL, one can recall the euphoria that Nirma generated not only in the markets and industry, but also in the academic circles. Business cases were developed illustrating how a homegrown, entrepreneurial venture could take up the cudgel against a well-established multinational corporation. These ideas were also picked up by MNC-haters around the world, and Nirma soon became an icon of the small, nimble local entity fighting valiantly against the big, bad MNC wolves.

Behind the initial success of Nirma, in my opinion, was the down-to-earth approach of its founder, Karsanbhai Patel. How Patel could translate his keen understanding of the production process and marketing of detergents on an industrial scale, despite his modest background, is now a part of the corporate folklore in India. That this happened in Gujarat-the home of entrepreneurs-is nothing surprising. Gujarat showed the way earlier in the white revolution that took place in India.

From a strategic point of view, everything that could be done by Nirma to create a low-cost product was in fact done: A high level of backward integration leading to captive supply sources, in-house manufacturing and packaging design, direct distribution channels, personal and trust-based relationship with distributors, and sustained, enduring, and lowkey promotion. In retrospection, one could discern an integrated approach in the panorama of activities that Nirma performed. Such a strategic approach yielded handsome results.
As it is said, within the success lies the seed of failure and vice versa. I sometimes feel that too much of a good thing may turn out to be bad: Nirma is facing its present troubles owing to its initial successes.

Drucker talked about implicit and explicit theories that organizations develop for their business wherein they incorporate assumptions about the environment, specifically the markets, customers, and important technologies they deal with; the mission and purpose of business; and the core competencies required to fulfill the mission.

Karsanbhai's implicit and explicit theories related to Nirma served it well until the initial assumptions changed as they inevitably had to. I cannot say that Nirma did nothing to respond to those changing assumptions; it did a lot. Nevertheless, it seems these are now proving to be inadequate.

Take the case of its legendary lowcost leadership strategies. I think they outlived their utility long back to the type of business environment that is emerging. Yet Nirma continued to insist on replicating its proven formula for success. The marketing environment was changing yet Nirma did not react fully to it and did not change its assumptions. Is the customer, who relished buying Nirma's product in the 1990s the same as today's customer? I do not think so. Therefore, a mismatch has occurred in what Nirma offers and what the customer really wants. Obviously, the customer is now demanding enough to expect not only low price but better quality too - an area where Nirma, owing to its misdirected attitude to cost cutting, is not able to satisfy.

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