Hindustan Lever Limited: Levers for change

case from London Business School

Case summary

Situation Analysis

In 1991, HLL achieved record growth in volume sales in detergent group and was able to recapture market share from its biggest competitor Nirma. In 1980s Nirma was biggest detergent brand in India with more than 60% market share. HLL could double its volume by 1995 by taking opportunity of 20% growth rate of detergent market. The new threat was deregulation of Indian market by govt. which would increase competition in market.

Prior to 1975, HLL was biggest player in detergent with 40% market share. HLL brand surf was premium product, which lead in both volume and price.
Detergent business had no regulatory constrains; basic technology was easy, with low capital input. With world wide rise in crude oil prices, HLL had to double price between 74 and 75.This created opportunity for local manufacturers.

Competitive Advantage of Nirma
In 1969, low cost detergent Nirma was launched. Low cost strategy that helped Nirma to compete against HLL were
1. The operation cost of Nirma was low. It was more labor oriented and was able to utilize advantage of low labor cost.
2. The levels in distribution network were less as compared to HLL and provided it’s channel partners the opportunity to rotate money at faster rate. Stockiest were appointed as commission agents to avoid CST.
3. It vertically integrated by producing packaging material, chemical and maintain fleet of trucks for raw material deliveries.
This helped Nirma in maintaining its low cost advantage and was successful in implementing its low cost strategy against HLL.

Competitive Advantage of HLL
HLL followed strategy to develop dual competitive advantage
1. R&D team was given task of producing low cost detergent that gives better performance than Nirma.
2. Nirma model of operational cost reduction was adopted and for this HLL setup Stepan chemicals in Punjab and detergent under brand name Wheel was introduced
3. Supplies of wheel were sent directly to the stockiest bypassing HLL’s carrying and forwarding agents.

Sustainability of competitive Advantage
Nirma’s competitive advantage was mainly from its operational efficiency. Which could be copied and HLL was successful in copying the same. HLL was able to achieve that efficiency.
HLL competitive advantage came from its R&D. It not only reduced operational efficiency but was able to deliver better quality product giving HLL dual competitive advantage. It cannot be copied easily and helped HLL to redefine competition in market.

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