Inorganic Growth Management at Godrej Consumer Products Limited*

Inorganic Growth Management at Godrej Consumer Products Limited

Presently headed by Adi Godrej, Godrej Group founded in 1897 is located in Mumbai, Maharashtra, India. It has since grown into the largest and the oldest  conglomerates, with its presence in different industries comprising appliances, furniture (also office equipment), precision equipment, machine tools, healthcare, interior solutions, food-processing, construction and information technology to name a few. Vikhroli in Mumbai was the conventional manufacturing base for the  company. However, due to conglomerate nature, the production units were shifted far from Mumbai. Godrej group can be termed as India’s most trusted brand. The brand commands and delights the faith and support of about 500 million Indians on a daily basis. Currently, Godrej group has a turnover above $4.1 billion. Godrej is an essential part of Indian dayto- day living. Moreover, Godrej has about 26% of its consumers overseas and existence in about 60 countries worldwide. With a high international presence, Godrej strives to make its overseas Indian customers feel at home with its products. Godrej’s guarantee to offer better experience to each of its customer has led to gain consumers’ faith in its products. Godrej realizes that valuable service level is the demand of the contemporary consumers. Godrej is currently at a stage of acquiring skills to build a young tomorrow again.......

Godrej Group Structure and Operations

This conglomerate group has seven large companies having diverse interests in sectors such as FMCG, property as well as agro-care to name a few. The group has two holding companies working individually namely Godrej Industries Ltd., and Godrej & Boyce Manufacturing Co. Ltd. (Exhibit I)............

The Indian FMCG Sector

Rise in the demand and change in consumer preferences, backed by rise in disposable income and the revolution in modern retail, has set the Indian FMCG sector on a roll. The FMCG sector is witnessing huge changes as new players enter the market. Multinationals like Hindustan Unilever, Cadbury, Colgate Palmolive, Nestle on global level and Godrej (toilet soaps and hair dye), Tata’s (cosmetics and edible oils) and Marico on the domestic front enjoyed market dominance in the FMCG sector.................

Godrej Consumer Products Ltd. (GCPL): An Overview

GCPL has a revenue of INR6391 crore and has over 10,347 employees, with a presence in 18 countries, with key focus on FMCG goods and being the major manufacturer of toilet soaps. The company has strong household brands such as GoodKnight, Cinthol, Godrej No. 1, Godrej Expert hair color, etc., which have been rated in the year 2012, by Economic Times Brand Equity amongst the “100 Most Trusted Brands” in India. GCPL also leads in hair colors and household insecticides segment...........

Evolution of Hair Color Products in Godrej

It was in the year 1974 when Godrej was looking to enter a new segment it launched its first hair color product. Being the first product in hair color segment, the product was named as Godrej Liquid Hair Dye and was packed in bottles. The success of the product was endorsed by the fact that the term dye became identical with the name Godrej. Companies used to offer.............

Strategy Formulation of GCPL

GCPL focused on 3x3 strategy, i.e., to sustain in three business categories (hair care, home care and personal wash) in three geographies (Africa, Asia and Latin America). The company decided to play only in categories where it was the market leader or had the potential to be the market leader. Unlike its rival companies like L’Oreal, which were rushing to give their brands premium status, GCPL took a calibrated approach...........

GCPL Goes Global

Godrej has a history of successful Joint Ventures (JVs). Godrej has an approach for the national and international JVs i.e., the JVs of the company are temporary provisions and never permanent. GCPL believes that the purpose of a JV is that both the partners in a JV whether foreign or Indian need it for strategic or tactical reasons. Godrej acquired businesses after estimating three core details i.e.,.............

The Inorganic Journey

GCPL has strong presence in the international market. In synchronization to its 3x3 strategy GCPL acquired companies abroad, for instance, the company acquired 60% stakes in a Chilean company, which was in business of hair color. GCPL also acquired two major companies in Argentina, one of Issue Group and second of Argencos,( Exhibit V) both leading hair colorant companies, GCPL owned leading hair care companies across geographies.............

Exhibits

Exhibit I: Godrej Group Structure

Exhibit II: Code of Conduct for the Board of Directors & Senior Management

Exhibit III: GCPL Market Cap

Exhibit IV: Press Release GCPL to Acquire Remaining 51% Stake in Godrej Sara Lee Limited (GSLL) (May 13^th 2010)

Exhibit V: Godrej Consumer Products Limited to Add Argencos SA to its Latin American Hair Care Portfolio

Exhibit VI: GCPL Acquires Rights for 51% Stake in Pan-African Leading Hair

Exhibit VII: Press Release GCPL Launches the All New Godrej Expert Rich Crème Hair Colour (November 23^rd 2012)

Inorganic Growth Management at Godrej Consumer Products Limited

Synopsis

This case study deals with the revitalization of Godrej Consumer Products Ltd. (GCPL) by way of significant international acquisitions (inorganic growth). GCPL focused on 3x3 strategy, i.e., to sustain in three business categories (hair care, home care and personal wash) in three geographies (Africa, Asia and Latin America). The company decided to play only in categories where it was the market leader or had the potential to be the market leader. Unlike its rival companies like L’Oreal, which were rushing to give their brands premium status, GCPL took a calibrated approach. To achieve its goal, the company had to gain access to the latest technology in the industry via inorganic route, which required GCPL to go global. In synchronization to its 3x3 strategy GCPL acquired companies abroad, which allowed it to grow its international footprint. Godrej acquired businesses after estimating three core details i.e., firstly, strong growing opportunities, secondly, it concentrates on the bottom-of-the-pyramid products that are priced rationally and of good quality. Lastly, it focuses on the fact that some of these ideas be imported. This showed the company’s willingness and aggression to acquire companies and learn from them. GCPL’s view on inorganic growth is that it would acquire only if a right fit exists with the company’s business strategy, HR strategy and the aim to meet market expectations. For Godrej it was a demand of opportunity that matches with the company’s strategy.

Expected Learning Outcomes

• Understand the three core factors that GCPL estimates, when it acquires businesses in the developing world
• Discuss the factors that lead to success of JVs done by GCPL
• Understand if GCPL benefited by adopting the inorganic route to become number one in the hair color segment

Case Positioning and Setting

The case can be used in Strategy, International Business modules for students pursuing Masters and Executive Masters Business Administration levels for a module on scope expansion as part of corporate strategy. The conceptual framework on inorganic growth can be introduced with this case in a 70-minute session.

Issues for Class Discussion

1. What is your assessment of GCPL’s inorganic growth strategy?
2. GCPL’s 3x3 strategy is the basis for the inorganic growth route adopted by GCPL. Evaluate.
3. .............

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