Amul's strategic fit, an enParadigm white paper

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An enParadigm paper on Amuls strategic fit, which gives it a unique market position and makes it virtually immune to imitation by competition.

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<ul><li><p>WHITE PAPER </p><p>enParadigm Simulation-based workshops for your middle and senior management </p><p>Amul: The untold story An enParadigm paper on Amuls strategic fit, which gives it a unique market position and makes it virtually immune to imitation by competition. </p></li><li><p>1. Executive Summary </p><p>2. What is strategic fit? </p><p>3. The Amul story </p><p>4. Amuls strategic fit </p><p>5. About enParadigm </p><p>Contents </p><p>3 </p><p>4 </p><p>5 </p><p>6 </p><p>8 </p><p>enParadigm | White Paper | Amuls strategic fit | 2 </p></li><li><p>enParadigm | White Paper | Amuls strategic fit | 3 </p><p>We all know Amul as one of Indias most recognized brands as a bellwether that </p><p>has shaped a significant portion of the countrys economic and agrarian history. </p><p>One of Amuls primary achievements (which is often ignored) is it established that </p><p>cooperatives can also be competitive, sustainable, independent and profitable </p><p>in the face of national, and even well-muscled international commercial rivals. </p><p>This paper explores how Amul built its strategic fit as a farmer-owned, profit-</p><p>distributing co-operative as well as a lean, market-savvy, R&amp;D-oriented corporate </p><p>entity. </p><p>First, it created a set of powerful, scalable, sector-specific competitive advantages </p><p>that helped it take a leadership position in its market. Next, it ensured these </p><p>activities complemented each other, creating a network of interdependent </p><p>advantages that are, by design, very difficult for competitors to imitate. </p><p>Amuls strategic fit is a clear and uniquely Indian addition to celebrated examples </p><p>like Southwest Airlines, Starbucks and Ikea. </p><p>Executive Summary </p></li><li><p>Strategic fit is a network of interdependent and complementary differentiators </p><p>designed to provide the company with a unique and sustainable competitive </p><p>advantage. From the companys perspective, it is the process of taking up a clear </p><p>strategy based on unique activities relevant to the market and then </p><p>building/matching all its resources and capabilities to strengthen this unique-ness. </p><p>For example, Southwest Airlines, a US-based carrier, has been profitable for 41 </p><p>consecutive years now. Its recipe is a strategic fit, which it achieved by orienting </p><p>and developing all its capabilities with a single target customer in mind the low-</p><p>cost flier looking for point-to-point routes between small towns and secondary </p><p>airports. While this part seems simple enough, it managed to shape every activity - </p><p>from aircraft selection to crew training to ticketing into a set of differentiators that </p><p>supported (and were supported by) the other differentiators. </p><p>The Southwest Airlines Strategic fit What is Strategy, Michael Porter, 1996 </p><p>What is strategic fit </p><p>enParadigm | White Paper | Amuls strategic fit | 4 </p></li><li><p> Amul began as a cooperative movement nearly 70 years ago, and has grown into a </p><p>federation of many cooperatives - 1,44,500 dairy cooperative societies across 188 </p><p>districts in 22 Indian states. Their success has been built around combining the </p><p>advantages of a cooperative and a corporate model. Its core strength lies in its </p><p>stated principles of a) Linking milk producers and consumers directly and eliminating </p><p>the middle-man, b) Ensuring milk producers also control up-stream activities like </p><p>processing and marketing, and c) Professional, commercially-sound management to </p><p>keep them competitive. </p><p>Amul operates on a 3-tier model, with cooperative entities at state, district and </p><p>village level. The village co-ops function as daily procurement cells. Milk then flows to </p><p>processing units at the district level, while the state unit coordinates marketing, </p><p>access, pricing and supply to consumers. It has also established a daily flow of cash </p><p>in the opposite direction cash gets all the way back to village c-ops and farmers are </p><p>paid on the same day. This creates an intrinsically credit-efficient system which Amul </p><p>has utilized to full effect. </p><p>The Amul model With inputs from the IJSER Jan-13 paper by </p><p>Dr. Ruchira Prasad and Dr. Rupali Satsangi, ISSN 2229-5518 </p><p>State Milk Federation </p><p>District Milk Unions </p><p>Village Dairy Co-ops </p><p>Market (consumers) </p><p>Member producers </p><p>Milk Payment </p><p>Milk &amp; milk products </p><p>Sales revenue </p><p>Bonus Dividend </p><p>Additional price diff. </p><p>Cattle feed Vet. and AH services Rural health schemes </p><p>Financial/tech. support for setup, expansion &amp; </p><p>upgrades </p><p>Marketing direction, distribution support </p><p>The Amul story </p><p>enParadigm | White Paper | Amuls strategic fit | 6 </p></li><li><p>Amuls strategic fit is based on a network of complementary and interdependent </p><p>differentiators </p><p>Product Variety </p><p>Reach &amp; availability </p><p>Affordable prices </p><p>Quality Massive, </p><p>loyal supplier base </p><p>Decentralized, networked </p><p>supply chain </p><p>Lean processing &amp; distribution </p><p>Financial security </p><p>Health benefits Equity </p><p>participation </p><p>Products at all price points </p><p>Outsourced non-core activities </p><p>Heavy IT integration </p><p>Surplus/deficit balancing </p><p>Tight inventory control </p><p>No credit, all-cash transaction </p><p>TQM and Kaizens </p><p>Cold-chain highways </p><p>Across the country </p><p>Cattle feed and vet. services </p><p>No-frills marketing, utilizing umbrella branding and </p><p>emotional/patriotic connect </p><p>Profit reinvested in R&amp;D </p><p>The Amul Strategic Fit enParadigm Knowledge Solutions </p><p>Amuls strategic fit </p><p>enParadigm | White Paper | Amuls strategic fit | 7 </p></li><li><p>Amul from the customers viewpoint: </p><p>1. Wide variety of products (most </p><p>comprehensive dairy portfolio by far) </p><p>2. Unparalleled reach (available across </p><p>the country) </p><p>3. Affordable prices (products at all price </p><p>points beginning with the lower end) </p><p>Pricing is a major source of advantage for </p><p>Amul. With its lean processing and </p><p>distribution and scale of operations, it has </p><p>the ability to balance surplus and deficit </p><p>in supply a critical advantage in </p><p>extremely perishable goods. </p><p>Amul offers a full range of </p><p>dairy products, at almost every </p><p>identified price-point, across a </p><p>vast swathe of the country </p><p>with reliable deliveries, </p><p>assured quality and the </p><p>promise of each purchase </p><p>being a socially-conscious, </p><p>patriotic act. </p><p>enParadigm | White Paper | Amuls strategic fit | 8 </p><p>Amul leverages the advantages of both cooperatives and corporate entities, while </p><p>avoiding the pitfalls of both to create an effective fit. As a federation of cooperatives, it </p><p>constantly adds to its membership creating a massive, loyal and geographically-</p><p>distributed supplier base, which is vital for perishable raw materials like milk. </p><p>Amul also exploits its social capital, as a successful co-op and a source of pride for </p><p>India which means it needs to spend less than its competitors to generate the </p><p>same demand for its products. </p><p>Amul from a companys viewpoint: </p><p>1. Massive, loyal supplier base (profit-distributing cooperative model) </p><p>2. Lean processing and distribution (outsources non-core activities) </p><p>3. Focus on research and development (appropriate reinvestment of profits) </p><p>Amul manages its R&amp;D professionally, reinvesting its profits in quality and yield-</p><p>focused research, which ensures they stay abreast of large dairy corporations, while </p><p>miles ahead of other cooperatives. </p><p>Amul thus combines the best of both worlds (cooperative and corporate) to build, </p><p>maintain and constantly enhance a network of interdependent advantages that has </p><p>thus far proven to be imitation-proof. </p></li><li><p>About enParadigm </p><p>We help you turn your managers into a substantial, sustainable competitive </p><p>advantage, through simulation-based interventions aimed at middle and senior </p><p>management. Run by industry experts and IIM Ahmedabad alumni, we have </p><p>conducted workshops for companies such as Citibank, Coca Cola, HCL, Dell, Dow, </p><p>Essar, GMR, HSBC, IBM, Indian Oil, Merck, NIIT, SAP, and Tata Motors. </p><p>One key learning from our workshops is the ability to understand the benefits of a </p><p>strategic fit for the participants company, as well as the tools to effectively work </p><p>towards a fit linking short and long-term activities toward building a unique and </p><p>hard-to-copy position for your firm in its target markets. </p><p>enParadigm | White Paper | Amuls strategic fit | 10 </p></li><li><p>Our offerings </p><p>Our solutions target managers at various levels, and are driven toward specific objectives: </p><p>For senior management </p><p>Leadership Simulation Workshop </p><p>For middle management </p><p>1. Aspire Simulation Workshop </p><p>2. Problem Solving &amp; Decision </p><p>Making Workshop </p><p>Distribution Simulation Workshop </p><p>For sales and distribution managers </p><p>Talent Quest Workshop </p><p>For HR managers </p><p>Operations Simulation Workshop </p><p>For plant managers </p><p>Each workshop is driven toward a specific objective, relevant to participants level of responsibility </p><p>Leadership Simulation Workshop Provide a CEOs perspective of business to AVP, VP and GM level roles </p><p>Aspire Simulation Workshop Build business acumen for middle managers </p><p>Problem Solving &amp; Data Mining Workshop Inculcate data-driven decision making for middle and senior level managers </p><p>Distribution Simulation Workshop Enhance distribution channel effectiveness and improve alignment with channel partners </p><p>Talent Quest Workshop Better business integration and talent management for HR managers </p><p>Operations Simulation Workshop Drive alignment across departments at plant level and enhance operational effectiveness and profitability </p><p>enParadigm | White Paper | Amuls strategic fit | 11 </p></li><li><p>enParadigm Knowledge Solutions </p><p> Simulation-based workshops for your middle and senior management </p><p>Copyright 2014 enParadigm Knowledge Solutions LLP. All rights reserved. The People tree logo, Leadership Simulation Workshop, Aspire Simulation Workshop and Operations Simulation Workshop are trademarks of enParadigm Knowledge Solutions LLP. </p></li></ul>