KIT: The dairy market in India

Strategic tools for the practising manager

THE MARKET SIZE OF the dairy industry was $45 billion in 2006-07 and it is estimated to grow to $83 billion by 2015. THE PROCESSED DAIRY category accounts for 73 per cent in value terms and 35 per cent in volume terms. THE PROCESSED market is $32.9 billion in value terms.

THE ORGANISED sector contributes 24 per cent or $7.9 billion to the processed category. SWEETS, HOMEMADE ghee and yogurt contribute significantly to the organised segment.

NUGGETS
Selections from management journals

WHY IS IT SO DIFFICULT
for established companies to pull off the new growth that business model innovation can bring? Here’s why: They don’t understand their current business model well enough to know if it would suit a new opportunity or hinder it, and they don’t know how to build a new model when they need it.

Drawing on their vast knowledge of disruptive innovation and experience in helping established companies capture game-changing opportunities, consultant Johnson, Harvard Business School professor Christensen, and SAP co-CEO Kagermann set out the tools that executives need to do both.

Successful companies already operate according to a business model that can be broken down into four elements: a customer value proposition that fulfills an important job for the customer in a better way than competitors’ offerings do; a profit formula that lays out how the company makes money delivering the value proposition; and the key resources and key processes needed to deliver that proposition.

Game-changing opportunities deliver radically new customer value propositions: They fulfill a job to be done in a dramatically better way (as P&G did with its Swiffer mops), solve a problem that’s never been solved before (as Apple did with its iPod and iTunes), or serve an entirely unaddressed customer base (as Tata Motors is doing with its Nano). Capitalising on such opportunities doesn’t always require a new business model: P&G, for instance, didn’t need a new one to leverage its product innovation strengths to develop the Swiffer.

A new model is often needed, however, to leverage a new technology (as in Apple’s case); is generally required when the opportunity addresses an entirely new group of customers (as with the Nano); and is surely in order when an established company needs to fend off a successful disruptor (as the Nano’s competitors may now need to do).

Reinventing your business model
By Mark W Johnson, Clayton M Christensen and Henning Kagermann
Harvard Business Review, December 2008
Read this article at www.hbr.com

FIRMS WITH
ill-considered globalisation strategies, say Alexander and Korine of London Business School, are poised to become targets for breakup or overhaul by activist share owners. Yet many businesses have made complacent assumptions about the need to go global and moved full steam ahead toward failure. If they had paused to answer three simple questions, they might well have avoided their missteps.

Are there potential benefits for our company? Moves that make sense for some firms won’t necessarily work for others. Do we have the necessary management skills? Even if potential benefits do exist for a company, it may not be in a position to realise them.

Will the costs outweigh the benefits? Global efforts can be rendered counter-productive through unanticipated collateral damage. TCL, the Chinese electronics major, has expanded rapidly into the US and Europe. Along the way, the company’s infrastructure has become unwieldy; the cost of managing it has outweighed the benefits of increased scale and resulted in losses.

When you shouldn’t go global
By Marcus Alexander and Harry Korine
Harvard Business Review, December 2008 Subscribe this article at www.hbr.com

CHASING ASPIRATIONAL
16-year-olds and new money in emerging markets is “out,” while pampering the wealthiest and most loyal customers is “in,” according to luxury retailers at the recent Wharton conference. Said one panelist: “The core for a luxury brand is a customer with very considerable wealth.”

Luxury brands: Marketing the upscale during a downturn
China Knowledge@Wharton
November 2008
Read this article at www.knowledgeatwharton.com.cn