Marketing in India Case Studies: Ajanta Shoes Company Ltd.

CASE STUDIES
Ajanta Shoes Company Ltd
In December 199 the e!ecuti"es o# Ajanta Shoes Company $ere to decide their pricing strategy #or their
products in the #ace o# #ierce competition in the market. %he company has been in business #or the past thirty
years. %i1&1991 the company did not ha"e any prob&em o# se&&ing its shoes since the demand e!ceeded the
supp&y situation. 'o$e"er( a#ter opening up o# the economy the company #aced se"ere competition both #rom
other &eading shoe manu#acturers in the domestic market and a&so #rom the mu&tinationa& companies that had
recent&y entered the market.
It $as estimated that the Indian #oot$ear industry $as $orth )(*** crores in "a&ue terms. %he industry $as
dominated by the unorgani+ed sector to the e!tent o# ,*-. %he organi+ed sector had the insta&&ed capacity to
produce both &eather and non.&eather shoes to the tune o# si!ty.#i"e mi&&ion pairs. %he mu&tinationa&s $hich
had recent&y entered the market main&y #ocused on sports shoes segment.
/ata Shoe Company( the &eader in the market( had di##icu&t times to #ace. %he company #aced sti## competition
#rom mu&tinationa&s. %o maintain its &eading position( the company $as gearing up to impro"e its popu&ar
brands and a&so &aunch ne$ ones. 0or instance its recent &aunch o# 'ush 1uppies range and 2ua 3adis &ine o#
s&ippers $as considered to be a good success. Its other popu&ar brands inc&ude.Ambassador( 1o$er( 4orth
Star( etc. %he company had recent&y re"amped its distribution net$ork by appointing a chain o# #ranchisees to
impro"e its market penetration in rura& and urban areas. %hrough its #ranchising system /ata added 5** ne$
to$ns in addition to 6* to$ns in $hich its products $ere a&ready so&d. %he 1.7** retai& out&ets spread across
the country $as the great strength o# the company. %he company sa$ great #uture #or the 8ata brand name.
%he pricing strategy o# the company $as to appea& to the midd&e.c&ass #ami&ies.
Some o# the the other &eading competitors inc&uded Liberty( Action( Lakhani( 1hoeni!( 1uma and Lotto
besides mu&tinationa&s &ike /eebok and Adidas. Liberty shoes #o&&o$ed high 9ua&ity.high price strategy. A#ter
8ata( it $as the ne!t Indian p&ayer $ho $as ab&e to bring ne$ sty&es and mode&s o# shoes in tune $ith the
changing trends in the market p&ace. %he company $as strong in the schoo&.shoes segment and a&so in casua&(
sporty and a&&.purpose shoes. 8ut it cou&d not compete e##ecti"e&y $ith 1hoeni! $ith its %u## brand and
Action shoes or #or that matter $ith other mu&tinationa& brands in sports shoes segment. %he company
sponsored Miss :or&d 199) and came up $ith some Miss :or&d ranges o# shoes under its Senorita series. %he
company had ;6* e!c&usi"e sho$rooms and o"er (*** mu&tibrand stores across the country. %he prices o# its
products $ere main&y aimed at midd&e.c&ass #ami&ies in metropo&itan cities and suburban to$ns.
:ood&and shoes( Mescos( 3assons and Lumberjack are other competitors $ho aimed at the premium segment.
%he mu&tinationa&s $hich ha"e entered into the market recent&y a&so aimed at premium segment. /eebok(
Adidas and 4ike( #or e!amp&e( $ere trying to estab&ish a niche in the premium market segment. %hese
companies be&ie"ed that $ith the chang51g times( price $as no &onger considered( to be the on&y #actor by the
consumers but 9ua&ity( sty&e( #inish and other "a&ues became important.
/eebok products( #or e!amp&e( $ere aimed at Indian youth $ho $ere increasing&y becoming #itness and
#ashion conscious. %he company $anted to re"o&utioni+e the sports segment $ith inno"ati"e and creati"e
promotiona& strategies &ike organi+ing #itness e!ercise $orkshops( road races( and using ce&ebrities./ahu&
Dra"id in cricket( Misha <re$a& in s9uash( etc. Simi&ar&y( Adidas roped in Sachin %endu&kar( Leander 1aes(
Mahesh 8hupathi to endorse its brands. In addition( it opened e!c&usi"e out&ets in se&ected cities to create
brand a$areness.
Marketing in India Case Studies: Ajanta Shoes Company Ltd.
Ajanta Shoes Company manu#actured di##erent types o# #oot$ear at its #actory in =anpur. %he product mi! o#
the company consisted o# men>s #oot$ear( &adies #oot$ear and chi&dren #oot$ear. In each category the
company o##ered shoes( sanda&s( and s&ippers. /ecent&y the company a&so started o##ering sports shoes $hich
$ere priced s&ight&y higher than those o# other products. %he price range o# products o##ered by company $as
#rom /s 7** to /s 17**. %he company>s brand name Amanita $as "ery popu&ar among the consumers both in
metropo&itan and suburban areas. ?# &ate the company $as making p&ans to penetrate the rura& markets.
%he Managing Director o# the company said: @:e ha"e.been in business #or the &ast ;* years. Ask any
consumer #or the 9ua&ity and durabi&ity o# our products. ?ur shoes and s&ippers are made o# genuine &eather
and yet so&d at &o$er prices. %he ne$ products &aunched by the big companies are( no doubt( trendy but $ou&d
not &ast &ong. 1eop&e are easi&y s$ayed a$ay by ad"ertisement and promotion gimmicks. :e be&ie"e in
o##ering products o# genuine 9ua&ity. In the &ong run the consumers $i&& #ind out the superiority o# our
products. Indeed our motto is that the product speaks #or itse&#. A satis#ied customer is the best ad"ertisement
$e can ha"e.@
%he company had a $ide distribution net$ork comprising o"er 76* out&ets &ocated most&y in metropo&itan and
suburban areas. %he Marketing Manager $as proud that some o# their dea&ers ha"e been doing business $ith
the company generation a#ter generation. %hey $ere &ooked a#ter by the company through se"era& incenti"es
and promotion schemes. 0urther they $ere a&so in"ited once a year #or training at the company head9uarters
#or about a $eek. A#ter the training programme the company organi+ed a big reception in a #i"e star hote&
$here #ami&ies o# the dea&ers $ere a&so in"ited.
%he Marketing Manager #e&t that though the company>s products $ere o# e!ce&&ent 9ua&ity the sa&es had been
dec&ining o"er the years. 'e said that the reasons #or the dec&ine in sa&es $ere most&y because o# the
competition #rom the mu&tinationa& companies. %hese companies ad"ertised hea"i&y and o##ered "arious
discounts. 'e #e&t "ery bad that some o# them had >a&ready started $ooing the company>s dea&ers to $ork #or
them by o##ering se"era& inducements. 0urther he said that $hi&e the company>s o&d &oya& customers continued
to do business $ith Ajanta Shoes( the younger generation $as s$ayed by the ad"ertisement o# mu&tinationa&s
and they pre#erred to buy trendy shoes( though they $ere "ery e!pensi"e. %he Marketing Manager #e&t that the
company>s inabi&ity to ad"ertise its products on a &arge sca&e $as one o# the reasons $hy the company &ost its
share o# the market to its competitors. 0urther the company $as a&$ays &ate in &aunching ne$ #ashions in
#oot$ear. %he company hea"i&y re&ied on its sa&es persons and dea&ers to get the &atest market trends. %his
caused de&ay in &aunching ne$ products. 8y the time the company $as ab&e to get the #eedback #rom its sa&es
personne&A in"ariab&y the competitors had a&ready introduced se"era& ne$ products and taken the major
In "ie$ o# competiti"e situation( dea&ers demanded "arious discounts and concessions #or se&&ing the
company>s products. %hey #e&t that the company cou&d se&& its products on&y on the basis o# price and they #e&t
that i# the company cou&d reduce the price o# its products that $ou&d he&p them to impro"e sa&es.
%ab&e 1 presents the pro#it and &oss account o# Ajanta Shoes company #or the year 199). %he #actory $as
$orking on&y at ;*- o# the capacity because o# &ack o# orders. %he company cou&d increase its production
$ithin a short period pro"ided enough orders $ere a"ai&ab&e.
During Apri&( 199)( a#ter going through the reports submitted by the company>s sa&es personne&( the company
top e!ecuti"es $ere serious&y considering $hether the company shou&d reduce the prices o# some o# its
products in the &ight o# suggestions gi"en by most o# its dea&ers. %his $ou&d he&p to impro"e the #actory
capacity uti&isation a"oid &osses $hich the company $as incurring. An independent study made in this regard
re"ea&ed that i# the company cou&d reduce the prices o# its products by 7*- the sa&es $ou&d increase by 6*-.
At a 1*- reduction in price the sa&es $ou&d increase on&y by 7*-.
Marketing in India Case Studies: Ajanta Shoes Company Ltd.
Table 1
/s BC***D
Sa&es 17(***
/a$ Materia&s 5,(**
8o!es ;)*
1ackaging 75*
?ther Materia&s ,5*
?ther "ariab&es Costs ;)*
:ages E Sa&aries ;()**
Ad"ertising 1(7**
1romotion ;)*
Administrati"e ?"erheads )**
%ota& Costs 17(;)*
1ro#its B?r LossD B;)*D
4on.operating Income 17*
4et 1ro#it 8e#ore %a! BLossD B75*D
%he Marketing Manager( ho$e"er( #e&t that price $as not the major #actor. It $as &ack o# a$areness on the
part o# the consumers about the 9ua&ity o# the company>s products that stood in the $ay o# increasing sa&es.
Consumers ha"e become more and more brand conscious. %hough Ajanta &aunched se"era& popu&ar premium
brands in the past( they cou&d not support them $ith ade9uate promotion $ith the resu&t that the competitors
snatched a$ay company>s market share by &aunching ne$er brands aiming at the premium segment. ?nce the
company ad"ertises its products and educate the consumers ho$ the company>s products $ere more durab&e
and o# superior 9ua&ity the sa&es $ou&d increase. 0or this he ad"ocated at &east doub&ing ad"ertising and
promotion e!penditure.
%he Managing Director #e&t that the shoe industry in India had huge potentia&. In a country $ith a popu&ation
o# 96* mi&&ion e"en i# 76* mi&&ion $ere to constitute potentia& market( the si+e o# the market $as too big. 'e
$ondered $hy the company shou&d not go in #or mass market positioning instead o# #o&&o$ing the e!amp&e o#
mu&tinationa&s $hich aimed at premium market positioning. :hy not introduce a ne$ &ine o# shoes and
#oot$ear designs #or the &o$ and medium price rangesF :hy to $aste money on ad"ertisingF Instead( $ou&d
it not be better to reno"ate the company>s retai& out&ets and o##er more incenti"es to the dea&ers to push the
products to the consumers $ho are interested in buying &o$er and medium price range #oot$earF
0urther he $as o# the opinion that the company had to estab&ish a pricing objecti"e $hich $as c&ose&y re&ated
to the o"era&& business strategy. Second&y( he rea&ised that pricing shou&d be treated as part o# o"era&&
marketing mi! strategy. %hird&y( the company had to e!ercise pricing discip&ine. It $as a&$ays tempting to
make short term pricing mo"es( either up or do$n( in response to changing market situation but such mo"e
had to be a&igned $ith the o"era&& objecti"es o# the company.
In the &ight o# the discussions $ith the top e!ecuti"es o# the company the Managing Director $as $ondering
$hether &o$ering price o# the company>s products $ou&d make any &ong term strategic sense and $hat
changes $ere re9uired in the company>s o"era&& marketing strategy and in the marketing mi! to maintain
pro#it &e"e&s and impro"e company>s per#ormance.
Questions
1. G"a&uate the company>s pricing strategy. :hat shou&d be the company>s pricing objecti"esF
7. :hat steps the company shou&d take to arrest dec&ine in sa&esF
;. :hat changes are needed in the company>s marketing mi! strategy to maintain and impro"e its
market share and pro#it goa&sF