IntroductionThe two Gurus, Micheal Porter and the late C.K. Prahalad, were the founder of the concepts of Competitive Advantage and co-founder of the concept of Core Competencies in the world. In the simplest of terms, Competitive Advantage refers to the unbeatable positions of any organization in any industry, achieved after several decades of hard work and strategic prowess. To achieve the end of Competitive Advantage, Micheal Porter does not advise any business organization to try to be in any industry, where nobody wins. Instead, it is his take that companies "must decide what particular kind of service they want to deliver-- they are going to have a chance to have an advantage at the end of the day". (Business Today, February 7-21, 1997, page 83)
For the purposes of this article, we will discuss the core concept of Competitive Advantage of Micheal Porter, and how some Indian organizations have given a concrete shape to his thoughts and ideas. His concept of Generic strategies was centered around four different strategies namely, Cost Leadership, differentiation, Focus Strategy with differentiation focus, and Focus strategy with a low-cost dimension. We will discuss all the four in some detail. Similarly, we will restrict the discussion to the core idea of Core Competencies, when we discuss the late C.K. Prahalad's contribution.
Cost Leadership Strategy This has to be analyzed in conjunction with Low Cost and broad industry-wide implementation. In this case, the company aims at being a low-cost warrior and tends to be present throughout the entire range of product segments as the premium products. For example, both Cavinkare and even smaller companies compete directly with the big branded products in the shampoo segment and the toilet soap segment and even detergent segments. In Tamil Nadu, though, it is present in only a niche market segment, Power soap is present in the toilet soap and detergent segments. It offers some competition to both HLL and P&G. The purpose and goal are to simply wean away at least some consumers who would be tempted to go in for the cheaper product that is just about okay and offers them value for money. In a particular product segment, the competition is industry-wide and the point is that there are too many smaller players as well.
The company protects its market share and even sort of grows it, based entirely on the cost dimension. Professional Couriers and the S.T. Couriers, both of which are branded, couriers in South India, operate on this strategy throughout India and, particularly, Southern India.
This has to be understood by the strategy of differentiation, based on product uniqueness. In the simplest of words, the differentiation strategy is centered around some vital differences in the product or service that stands out. These points add good value to the customer, who might belong to different economic brackets. However, the strategy revolves around the ability of organizations to really bring about the differences in terms of whatever unique selling propositions that they seek to address. This strategy is quite possible when the market leader keeps on offering new products that have different value propositions but nevertheless have captured slots that are so difficult for the competitors to match.
For example, Colgate Palmolive has a product that emphasizes the value of salt with its Colgate Salt brand. It has the generic toothpaste, firmly entrenched in the mind of the customer. It has herbal value propositions with Colgate Vedsaskthi. The product-mix straddles the entire toothpaste and toothpowder market but is so highly pronounced in terms of what is known as "memory recall" in the mind of the customer. This reinforcement of the value of the brand goes on and on.
Similarly, the brand Raymonds stands for a product that is premium priced but offers good value for money. Bata is another glorious example. The higher-end cars from Maruti Udyog compete effectively with the bigger brands and offer a service network that is unmatched by any competitor. Result? Increased sales and the market leadership position, even today.
Focus Strategy(differentiation) This has to be analyzed in conjunction with Focus Strategy and the specific market segment. The MTR brand of ready-to-cook packed food product segment is one such example. ID, the fastest growing product of idli and dosa batter, sold in most metro and big city markets is a good example.
The product quality has to be really good. Of course, there will be competition. For example, Nilgris, in South India, which is now part of the Kishore Biyani group, also manufactures the idli and dosa batter. Brand Nilgris is also a famous brand that has been around for decades. ICICI Bank's relationship managers are there to always chase only the high net-worth individuals. The reason is simple. ICICI Bank is part of a big financial supermarket that straddles life insurance, general insurance, fixed deposits, and what have you. However, this is a market where it differentiates itself and is confined to one market segment, the size of which is relatively small in India.
Focus Strategy(low cost)This has to be analyzed with specific reference to a limited market segment, and also the low-cost proposition that goes along with the product or service. Indigo Airlines, with its low-cost, no-frills offerings and on-time performance is the perfect example of this strategy.
Meera Herbal shampoo and the Vibro Panneer soda from Kalimark are perfect examples of this strategy. The company always wants a limited geographical area and is contended to be a king in that area only.
Core CompetenciesThe late C.K. Prahalad, along with Gary Hamel, was the co-founder of the Core Competencies strategy. In the simplest of words, core competencies refer to a bundle of skills and technologies that enable an organization to offer superior benefits to customers.
Steeve Jobs of Apple computers started to bring out products, the market for which never existed before. The Apple iPhone and iPad are glorious examples. The competitors were found napping and could not do anything. Even Samsung, the biggest competitor to Apple computers throughout the world, is no match to the technical superiority of the products from the later.
Nearer to home, the example of the e-choupal initiative of ITC is a classic example of Core Competencies. The most important point about Core Competencies is that such competencies are never built overnight. They take as many as even two decades to perfect, but when perfected, the organization goes from one strength to another in terms of technology, and the competitors have "entry barriers". The concept of entry barriers is simple. These barriers effectively block any competitor from even attempting to enter the market.
For example, Brakes India Private Limited of the TVS group is the sole supplier of brakes to every plant of Suzuki, throughout the world. Even if Mukesh Ambani were to enter this industry, it will take him 15 years to master the competencies required to become world-class. It is not the size of the company that matters. Brakes India Private Limited is now approximately Rs.10,000 crores in terms of turnover.
The product and technical competencies are so unique to even think of. This is how companies like TVS, Rane Group, Bharat Forge, and Thermax, among others, have created entry barriers to their competitors.
Focus on human resource management in acquiring core competenciesThe TVS group, Mahindra&Mahindra, Rane group, and a few other companies have the prestigious Deming Award for excellence in the management of Quality processes. Deming Award is no joke. It involves the greatest amount of preparation and it also involves aiming for global markets to perfect competencies.
To this end, the key is human resources management. Across the entire TVS group, it is common to find the third or sometimes the fourth generation of employees from the same family. They are wedded to the TVS philosophy of world-class quality and planning to acquire the required competencies. For instance, the Foundry Division of Brakes India Private Limited is based at Sholinghur, a small town in Ranipet District of Tamil Nadu. Not many know, however, that this Foundry is among the ten best in the world. Its product quality is simply world-class. Its rejection levels are less.
The employees in each of these companies are no-nonsense men and women, who go on perfecting the core competencies in line with clear organizational goals and can clearly give any global competitor a run for their money on any day. Similarly, Apollo Hospitals, Chennai, and Sankara Netralaya, Chennai are known for world-class health care and eye treatment. The list of such organizations is growing day after day.
Conclusion Based on just one or two concepts of the world-class experts, Michael Porter and the late C.K. Prahalad, the Indian examples have been discussed in some detail. Most importantly, it should be noted that the concepts will stay on forever and will find new examples emerging in any country from time to time. In India, the last word has never been said at all. The learning process is always a work in progress.