DABUR INDIA LTD.

- GLOBALIZATION

CASE ANALYSIS

ECONOMIC ANALYSIS FOR BUSINESS DECISIONS (EABD)

CASE SYNOPSIS
Set in June 2007, the case is about an Indian enterprise attempting what few other consumer packaged goods (CPG) companies from emerging markets have attempted to do i.e., move beyond national geographical boundaries to the global arena. In most emerging markets, including India, CPG is a local business characterized by indigenous players aspiring to rule at provincial levels. Very few graduate to national status. Having acquired a place among the top 10 CPG companies in India, Dabur India Ltd. (Dabur) has taken the next step forward. The case examines whether global expansion, uncommon among its genre, is logical for Dabur. It looks at the issues not only in the context of Daburs unique positioning in the domestic market, which itself is growing, but with particular reference to the ongoing expansion in Nigeria.

CASE ISSUES
Should Dabur build scale first in India before investing in global operations? Does global expansion detract the company from its core market? What are the reasons why Duggal and his team are expanding globally?

What are the domestic competencies that Dabur can leverage in a global market? Is the companys template for globalization workable? Why is the template not working in Nigeria? How should Dabur address the Nigeria market?

1.
Yes

Should Dabur build scale first in India before investing in global operations?

1. Scale enhances the level of resources financial, human and operational with which Dabur could better manage the business uncertainties of global expansion. Domestic scale reduces the risks involved in global operations. 2. Scale provides a set of internal capabilities and skill sets that the company could deploy readily in overseas markets.
3. Scale lowers the cost of entry into a new market. 4. Building scale in the home market should be central to Daburs growth strategy because the Indian market is becoming competitive. Retaining market share (and its ranking among the top 10 in India) would be difficult unless Dabur builds scale locally.

1.
No

Should Dabur build scale first in India before investing in global operations?

1. Domestic scale offers a platform for the next leap forward for global expansion, but it is not a prerequisite.
2. Neighbouring markets are expanding. There is an opportunity cost to letting go of growth possibilities outside India. 3. There is nothing like countries as markets. In an increasingly global world, the perception of a market cuts across geographical boundaries. 4. Dealing with competitors in markets outside India provides better insights to dealing with competitors within India, particularly when the competitors in both local and global markets are the same.

2.
Yes

Does global expansion detract the company from its core market?

The company has articulated three routes to building global scale: expanding geographically, driving alliances and acquiring assets. Expanding overseas is unlike expanding locally. The markets are alien, relationships are new and integration is a challenging task. Driving the fit takes considerable managerial attention, best spent on expanding locally.

No
The Indian economy is on auto-pilot, and growth is assured in the domestic market over a long period of time. Even at the current levels of resource deployment, Dabur can be certain of maintaining its rate of growth in the domestic market. The company should therefore look at new growth options such as internationalization.

3.

What are the reasons why Duggal and his team are expanding globally?

1. The customers that Dabur is dealing with in its overseas markets are similar to its customers in India. This is particularly true of the Indian Diaspora that the company has been targeting so far. 2. The multinational competitors that Dabur is dealing with in its overseas markets are the same as those it is competing with in India.

3. The company has a core value proposition herbal ingredients providing therapeutic effects that can be replicated across diverse geographies. Its products have universal appeal, requiring only minor adaptations to suit individual markets.
4. The personal ambitions of senior managers who, together, need to prove that a professionally managed company (where members of the founding family have moved out of executive responsibilities) can grow, expand and diversify. Dabur is an uncommon example of a CPG company from among emerging markets going global, itself a motivation for company managers for whom internationalization also opens up new horizons of personal and professional development. 5. Investor apprehensions about Daburs geographical expansion are more about shortterm fluctuations in stock price than about the companys intrinsic capabilities.

4.

What are the domestic competencies that Dabur can leverage in the international markets?

1. New product development: New products or variants contribute between five per cent and seven per cent of sales revenue every year at Dabur. 2. Sales force focused on channels: Sales organization structure in Daburs focus markets is oriented towards channels, not products. 3. Independent supply chain for each business segment. 4. Ayurveda as a growth platform. 5. Herbal ingredients in its products with therapeutic attributes. 6. Ability to identify consumer needs, develop localized products and create niches to drive long-term growth.

5.
Yes

Is the template for globalization workable?

It provides the single largest defence for the CEO favour of global expansion. Global expansion will proceed on track if the company sticks to it. There are several elements of the template that ensure success. For example: A new market for entry should be margin-accretive even in the short run; it should be in the landscape between Nigeria and China; the companys herbal platform will remain the basis for new customer acquisition and brand development; and overall brand architecture will be limited to four core brands. These elements eliminate the risks of global expansion.
The manner of market segmentation is another reason why Dabur is in good shape with global expansion. Spending resources only on Focus markets ensures that resources are not frittered away in unproductive avenues.

6.

Why is the template not working in Nigeria?

Nigeria is a focus market, but it is unlike any of the focus markets that Dabur has been doing business with. Nigeria does not have Indian Diaspora. The products with which Dabur has penetrated other global markets do not sell in Nigeria. The country is, however, a large market for categories like toothpastes, soaps and mosquito repellents. But there is lack of alignment in each of these categories. Toothpaste is not a focus product for Dabur in any market. Soaps sold in Nigeria are cosmetic while Daburs soaps come with therapeutic attributes. Mosquito repellents are consumed in the form of coils in Nigeria while Daburs offering is in the form of a cream.

7.

How should Dabur address the Nigerian market?

One of the issues here would be whether changes are required in the standard template in Nigeria. Secondly, what are the specific domestic competences that Dabur should deploy in Nigeria to grow the market? Developing localized products to suit customer needs is one of them. The mismatch between product attributes and Nigerian needs is best addressed by tweaking exiting products through technology. Thirdly, what are the opportunities for creating niches in the Nigerian market to drive long-term growth?

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