Understanding the management concept of competitive advantage and how it works in India


Michael Porter, the father of the concept of Competitive Advantage, had written and still writes volumes on the subject. This single concept is at the center of most Strategic Management discussions in the world. Not a single author can escape referring to the concept at any point in time when they come forward with new concepts. Certain aspects of the concept as it applies in India, are discussed in some detail in this article.

Introduction

What exactly is Competitive Advantage? In the simplest of terms, this concept simply means that the particular organization is several notches above that of its competitors because it has several strengths that can neither be copied or duplicated so easily. In building such strengths, the organization would have spent several years working on several aspects of the business as it applies to it. In other words, it would have systematically exploited certain specific plans of action that lead to positive results. Such plans are normally called Strategies. We are not going into too many technicalities here. Those specific technicalities will be discussed in detail in several articles that will follow this article.

Be that as it may, Competitive Advantage in India has resulted by and from a) Systematic building of a huge range of Core Competencies b) Systematically leveraging the reach of such competencies c) Bringing in new products for different classes of customers d) Systematically developing Shop Floor competencies and e) Building of formidable strength through human resources.

Systematic building of a huge range of Core Competencies

In the very simple terms, Core Competencies can be defined as bundles of skills and technologies that can enable an organization to offer superior benefits to customers. While doing so, the organization goes on perfecting each of such Core Competencies to a new level of excellence, which the competitors can only emulate and then duplicate only to some extent.

For example, Hindustan Unilever (now called Unilever India Limited), has formidable marketing strength, as it spends large amounts of money, running into several thousands of crores on advertising. If any layman would open his television at home and watch any movie, he would come across advertisements that speak about RIN, SURF Excel, Haman, Lux or any other such brand. If we go to any supermarket, the number of brands from this single company would literally force at least six out of ten buyers to buy one brand or the other. For example, Surf Excel is the number one brand in detergents in India. There are hundreds of other competitors, and even Ariel from P&G cannot beat this product. A large number of local players in every State, all have niche products that sell quite a bit and then go into that niche. It becomes very difficult to grow beyond a point. For example, Vim is from Unilever. Its big competitor, pan-India, is an Indian company product, called Pril, that comes from Jyothi Laboratories. Systematically, each brand is so powerfully built and then the competitors are not able to match the product.

For example, the kids are always attracted by Pepsodent. This toothpaste is the "first choice" toothpaste of most kids. In one supermarket, when this author was doing some research, he found 22 out of 31 customers with either their daughters or son, all less than eight years old. The child would pick up only Pepsodent, while the elders might go in for Colgate products. It became obvious that the targetted advertisements of Unilever worked so well. This happened in Coimbatore city, in the evening in a span of ninety minutes when the consumer behavior was actually seen by three MBA students and this author.

Systematically leveraging the reach of such competencies

Vim is available, anywhere in India. So is Pril, though it is from an Indian company. When the reach is Pan-India, the natural competitive advantage is always there. This becomes possible because the overall sales are spread over a very wide area. For specific reasons, the smaller players can never aspire to be National players. For example, Fanta is available Pan-India. Fruity is available Pan-India. But Bovonto, which targets more or less the same market is available mostly in South India. The manufacturers manage only a small market share. ITC has a superb brand of hotels called the Welcome group. This is a pan-India product. It is impossible to compete against such giants.

Bringing in new products for different classes of customers

Maruti Suzuki, which is owned one hundred percent by Suzuki, has a clear Competitive Advantage, since it has a different car at a price difference of Rs.30,000. Apart from this, the service network is very much spread out throughout India and its strengths here can never be duplicated by any rival so easily. They are also in the business for such a long time and know the pulse of customers far better than any other competitor. Hero Honda, TVS Motors and Bajaj Auto all operate on the same strategy. They have a range of products that attract different sets of customers. Even within the same product range, the class of customers flocks to buy products from the same company. For example, Lux is a beauty soap. Hamam is a health soap. Rexona is more of a family soap and so on. Hamam has now attempted the "empowered woman" positioning as well.

The games of each player are reflected in a complex range of strategies. There is virtually no full stop. It is a war at the marketplace, more so, in FMCG products.

Systematically developing Shop Floor competencies

The TVS group, Mahindra&Mahindra, TAFE, Rane group of companies, Murugappa group, and Tata Motors, among several others, have formidable competencies in manufacturing. Their cost of production is far less than their competitors as they have won the Deming Award or have practiced Total Quality Management (TQM) and Total Productive Maintenance ( TPM) and so on.

The cost of redoing any product or process in each of these companies is zero. Their production competencies are core competencies built over a period of twenty or twenty-five years. Their patience in developing such competencies is of course, context-specific. For example, each of the TVS group Manufacturing companies is so powerful in supplying world-class products to auto majors around the world. Hence, their production core competencies are simply world-class. Not a single competitor can ever touch them.

Building of formidable strength through human resources

Even very small banks like the City Union Bank, which is based out of a small town called Kumbakonam, ( ninety kilometers from the nearest Airport city of Tiruchirapalli, in Tamil Nadu), has formidable strengths in Information Technology. Their loan portfolio is always safe and they manage through jewel loans, as this is entirely very safe. Their exposure to Corporate giants is much. More importantly, their recruits are trained in the intricacies of addressing every single customer requirement, in double-quick time.

Ditto for its competitor, called Karur Vysya Bank, one of the fastest-growing banks of India. Similarly, there are other organizations in other industries where their human resources play a vital role in keeping their level of Competitive Advantage at such a high level. Take Larsen & Toubro for example. This organization is a giant in executing massive projects that no competitor can ever match. L&T's "concept to design to manufacture and service, which is one major chunk of their business enables it to simply leverage all its learning and enter into the most complicated businesses, worldwide. Such competencies reside in the minds of thousands of employees. These employees document such data and their databases are so powerful indeed. This is the crux of their strength. Systematically, an entire chunk of engineers is involved in perfecting Core Competencies in each area: whether it is design, or new technology or marketing or whatever. L&T made a bold decision to come out of cement. It was a big player. Yet, its larger-than-life CEO, who is still on the Board as its Chairman, Mr. A.M. Naik, convinced the Board that coming out of cement was the best thing to do.

In Information Technology, it has now acquired Mindtree and it remains to be seen how it can rival the competitors like Tech Mahindra. But it has all the competencies to take on any challenge. Human Resources can form the biggest difference even in academic institutions. For example, till this date, the Indian School of Business (ISB) is so powerful that it has even overtaken the prestigious IIM, Ahmedabad, in terms of Faculty Excellence, as it is able to pay Global salaries to attract the best. It also has tie-ups with the global B schools for visiting faculty as well. When an institution has such a profile, it gives it a big Competitive Advantage. Another excellent organization is Asian Paints. This organization has grown from strength to strength. However, its strengths in Marketing, Advertising and so on is so complete that it can always be right on top, for all time to come.

Conclusion

The aforesaid discussion is only indicative. The most important general points of Competitive Advantage, without the technicalities, have been discussed. One can easily notice that the concept is very much applicable in India. However, no organization, even the likes of L&T, can rest on their glory and relax. There will always be someone watching to attack from all directions. Most Indian organizations are alive to such challenges at any point in time.


Comments

Author: Venkiteswaran26 May 2020 Member Level: Diamond   Points : 6

This article deals on a very significant topic in management strategy named 'Competitive Advantage'. It does not entwine us in technical jargons but says in a simple way.

In the Annual reports of companies, we can see comparative diagrams showing the competitive advantage the company has over its rivals in the same product line. Competitive advantage is the profit advantage the company has got in comparison to the common performance or average of the sector or industry in the same field or product.
That is an advantage and there can be many causative reasons for this. While planning and implementing their strategies the management will have to aim at a noticeable competitive advantage.

In India, this was not a popular term in the early days as many products were monopoly productions. It is only after the late eighties that professional management terms started becoming relevant to Indian business. A very Indian example of how competitive advantage can be obtained by 'specific targeting' is the story of Velvette shampoo and then Chik shampoo. Even now when we travel through different states we can see different versions of the same brand product in different sizes, different packagings, different offers etc. That is a strategy for getting a competitive advantage.

It is true when the author states that the points discussed in the article are only indicative. The scene is ever dynamic and prone to changes and new competitions.



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