1. Analysis of Marico’s strategies to drive growth
Strategy Formulation (SF) Analysis
Analysis of Marico’s strategies to drive growth
Compiled by:
Group 1
Ayush Bagla (B004)
Mitali Bhende (B007)
Aditya Choudhry (B012)
Gagan Gulati (B018)
Shraddha Kalantri (B027)
Nipun Mehta (B038)

2. Overview of Marico Marico’s sustainable competitive advantage
Marico is one of India's leading Consumer Products & Services companies in the global beauty and wellness space.
Marico is present in more than 25 countries across Asia and the African continent. Turnover of INR 4596 crore in
Marico’s sustainable competitive advantage
Backward integration: Supply chain activities
Distribution network
Innovation in packaging
Branding
Overall business growth
Valuable
Rare
Costly to imitate
Non substitutable
Marico achieved revenue from operations of INR 4596 crore(USD 851 million) during FY13, a growth of 15% over FY12. The volume growth was at 12%. .

3. Overview of Marico Segmental business growth Business revenue mix
Marico is a market leader in hair oil, coconut oil and refined edible oil categories. Being a market leader, it has a strong competitive position in these categories and has achieved penetration in the market. Parachute and Saffola recorded a volume growth of 10% and 7% during FY13. Whereas value added hair oils (Parachute Advansed, Nihar and Hair & Care) recorded volume growth rate of 24%.
To reduce its over dependence on its 2 major brands (Parachute and Saffola) which together account for more than 60% of total revenues and to tackle the sluggishness in its core business of hair oil and cooking oil, Marico needs to take a strategic call to tap different categories. Therefore, Marico’s primary task is to fuel growth through other avenues and to change its revenue mix with the help of a more balanced portfolio mix.

4. Corporate Strategy Problem Statement
Marico’s core business of hair oil and edible oil is experiencing slow growths. The oil business, especially coconut oil segment, is faced with tepid demand, fierce competition and commodity price inflation. Also, more than 50% of the revenues come from the oil business and hence there is over dependence on two major brands. The key problem is how should Marico strategize to drive growth in face of these problems?

5. Strategies Adopted
Prompted by sluggishness in its core business of edible oil and hair oil, Marico chose to search new business drivers and spurt growth through following strategies adopted.

6. Analysis of strategies adopted
Product Development
Marico pursued product development strategy through brand extensions of Parachute and Saffola brands. Marico has been attempting to get a foothold in different consumer categories by expanding its portfolio.
Parachute Brand Extension
Saffola Brand Extension
Parachute also entered men’s grooming and body lotion category. Personal care brands have been benefitting from the surge in personal grooming in India. Personal grooming though dominated by major MNCs, boasts growth rates of percent, far higher than 7 percent seen in Marico’s core categories. Men’s grooming brands also are in line with future trends and have a lot of headroom for growth.
Some of the products were neglected as far marketing efforts are concerned. To enter into new categories the company would also require to have the patience and provide monetary backing to have a long term plan for a successful brand..

7. Analysis of strategies adopted
Market Development
Market development involves introducing present products and services into new geographic areas. Marico has expanded its operations into emerging economies of Middle East- North Africa (MENA), South Asia, Bangladesh and Vietnam. These economies provide enough headroom for growth due to rising incomes and low penetration. The company has a presence in over 25 countries.

8. Paras Pharma Acquisition

9. WHAT DID MARICO ACQUIRE?
Personal Care brands of Paras Pharma from Reckitt Benkiser
Including products like Zatak, Set Wet and Livon
Acquistion Cost: Rs 760 Crore
BUY v/s BUILD DECISION
Setting up a similar business from the scratch
Advertising Campaign Cost
Also require to strengthen distribution system
3-5 Years
Rs Crore

10. PRE ACQUISITION ANALYSIS
CHALLENGES
Competitive Intensity
Demands Constant Advertisement Support
Demanding Consumer Base
Shift from traditional Marico Advertising Approach
Distribution extended to Cosmetics Outlets, Chemists

11. INVESTMENT RATIONALE INVESTMENT RATIONALE
Higher Growth Rates Compared to Categories Marico then operated in
Youth Oriented Portfolio
Leveraging on the synergies of the Male Grooming Category
Demographic Dividend

12. SPACE MATRIX
SPACE MATRIX

13. Evaluation

14. FY 2014 Performance (Half Year)
Youth brands reported revenues of Rs 42 Cr with a 30% Y-o-Y growth in H1FY14 and the segment is expected to main a 25% growth rate in the medium term

15. ACQUISITION OF KAYA Analysis of strategies adopted
Unrelated diversification
ACQUISITION OF KAYA

16. Slow Growth for Marico before the acquisition
Slow Growth in Sales
Declining/Stagnant RoCE
2001
2002
2003
Cash
46.74
128.08
182.90
D/E
0.02
0.03
0.05
High cash balance
Low debt

17. The Grand Strategy Matrix
Rapid Market Growth
1. Market Development
2. Market Penetration
3. Product Development
4. Horizontol Integration
5. Divestiture
6. Liquidation
4. Forward Integration
5. Backward Integration
6. Horizontal Integration
7. Related Diversification
1. Retrenchment
2. Related Diversification
3. Unrelated Diversification
4. Divestiture
5. Liquidation
1. Related Diversification
2. Unrelated Diversification
3. Joint Ventures
Weak Competitive Position
Strong Competitive Position
Slow Market Growth

18. Advantages outweigh the concerns
Growth of branded salons
Problems with present oil business
Aspirational image
Unsaturated market
No first-mover advantage
No previous experience
May not be sustainable in long run

19. Rationale behind acquisition of Kaya
High cash balance and low debt
Concerns for merger with Kaya
No first mover advantage
No previous experience
May not be sustainable in the long run
2001
2002
2003
Cash
46.74
128.08
182.90
D/E
0.02
0.03
0.05
Rationale behind the acquisition
Problems with present oil business
Growth of branded salons
Unsaturated market
Aspirational Image
Strong management confidence

20. Porter’s Five Forces Theory for Retail Skin-Care Market
Threat of New Entrants: Moderate
Economies of scale are not very important
Visibility ,number of outlets, brand name & recall
Exit & entry barriers
Intensity of Rivalry
Threat of new entrants
Bargaining power of buyers
Threat of substitutes
Bargaining power of suppliers
Competitive Rivalry: High
Product differentiation
Organized and unorganized sector
Market positioning, promotional campaigns
Bargaining Power of Suppliers: Low
Products produced in-house
Large supply of the dermatologists and staff
Bargaining Power of Buyers: High
Female urban consumers with a high disposable income
Can switch to local salon and independent dermatologists
Threat of Substitutes: Moderate
Service is customized and has a high aspirational value
Cheaper substitutes/better brand name
Customer loyalty programs

21. SWOT Analysis of Marico and Kaya as a combined entity
Strengths
Unrelated Diversification Of Portfolio
Unsaturated Retail Skin-Care Market
Weaknesses
Weak Financial Performance
Lack Of Entrepreneurship
Lack Of Consolidation
Opportunities
Growth Opportunities Of Retail Skin-Care
Threats
Under Utilization Of Talent
Cultural Differences

22. Conclusion CONCLUSION
Having analyzed strategies pursued by Marico to spur growth, we conclude that some of the strategies were aimed in the right direction while others are critically analyzed to suggest alternatives. The strategies pursued by Marico result in diversification of portfolio to introduce a host of brands from breakfast foods, men’s grooming, hair care and personal care. These categories hold promise of high growth rates and leverage on large young demographic across emerging economies. Introduction of new brands has decreased the over dependence on Marico’s business strongholds and introduced newer capabilities. The business is poised to grow faster as the newly acquired/built brands bring resources in form of India’s young demographic.