Reason behind rising of Patanjali
Patanjali Ayurved Ltd is an Indian FMCG that has registered phenomenal growth in the past five years. The company was founded in 2006, and it has managed to register an impressive year on year growth with commendable top and bottom lines in the past five years. The company has greatly benefited from the close association with the well-known yoga guru Baba Ramdev. The company has become the fastest growing Indian FMCG organization, and its growth rate has managed to create high benchmarks for competitors to emulate (Ghoshal, 2016). Since its establishment, the company has managed to roll out a range of products including hair care, dental care, healthcare, food, toiletries and much more at a breathtaking speed. The idea of the company is to present as many categories as possible so hat to provide customers with many choices and profits are normally reinvested in capacity expansion and innovation so that pricing can be more competitive.
The company’s revenue is larger than or equal to the domestic revenues of established companies such as Marico, Emami, Dabur, and Godrej consumer. Ghee tends to be the biggest money spinner for the company followed by healthcare, and toothpaste Dant Kanti (Maheshwari, 2017). Today, Patanjali stands as one of the main players in the Indian fast moving consumer goods. There tend to be several reasons that have contributed to the meteoric rise of the company.
The company’s pricing strategy is a factor that has contributed to its rise. Patanjali’s products are usually sold at a price of 15-30% lower than that of the competition apart from the cow ghee that is sold at a premium in the market (Ghoshal, 2016). The company’s pricing strategy has greatly helped Patanjali to establish itself in the marketplace. Patanjali has been able to keep costs low because it tends to source from the farmers directly and also pays modest salaries to its employees. Patanjali can offer low prices to the consumers because of the very low selling, distribution, and general costs at the 2.5% of revenues. Smart pricing is a factor that has contributed to the rise of the company (Maheshwari, 2017). According to Ramdev, the company’s profit margins are minuscule since the main aim is not making a profit. Profiting from the patients is considered to be against the philosophy of Ayurveda; hence, they usually aim at a minimum profit from their health products (Somvanshi, 2016). The input costs for the company are low because it usually sources directly from the farmers and in this way avoid the middlemen. The pricing strategy used at Patanjali ensures that products are available at an attractive discount as compared to their rivals.
Another factor contributing to the rise of Patanjali is the segmentation and targeting aspect of the company. Patanjali tends to have segmented its market based on demographic and psychographic aspect. The company’s target segment does comprise of health-conscious people who normally prefer value for money natural products. The company has products that are targeted at children and elderly people. Almost all of Patanjali’s products are affordable; hence, the income segmentation strategy works (Pandey & Sah 2016). The success of the firm can also be attributed to the increasing number of health-conscious people. In the recent days, people are becoming more health conscious which is evident from the idea that company is investing a lot of money in Ayurvedic and organic products.
Patanjali’s distribution system is also a factor behind its rise. Patanjali shunned the conventional distribution network and prefer relying on its channels of super distributors, franchise dispensaries, and health centers that sell Ayurvedic remedies (Pandey & Sah 2016). When the company turned to retail outlets, it saw a significant growth in revenues. Patanjali normally uses several distribution channels to cater to its markets. In the case of the new market, Patanjali tends to drive trials and consumption through using dedicated stores. The stores are Ayurveda clinics that are run by entrepreneurs with their investment. The company normally extends its support through training and certifying medical practitioners who are nominated by the stores in Ayurveda and also offers usage of Patanjali brand name (Somvanshi, 2016). The stores also help regarding being locations where product introductions are done efficiently and decisions to continue scaling up the product can happen in a short time. There are currently over 10,000 dedicated stores that contribute up to 60% of Patanjali’s revenues (Pandey & Bhatia 2016).
Patanjali has managed to develop a very large and trustworthy system of distributors and vendors to ensure that its products are available in every corner of the country. With the stores in place, it helps to make sure that its products do not fall at the end point of the supply chain (Pandey & Sah 2016). Baba Ramdev as the brand ambassador is also a reason for the rise of Patanjali. The image of Baba Ramdev does favor the company a lot as he is a recognized face across India and beyond. Patanjali is usually able to create the brand perception of health and wellness among Indian masses because of Ramdev association with the brand as he is considered to be a veteran of yoga and also a firm believer of Ayurveda.
Ways to sustain growth
Patanjali is leading in the market of FMCG majors, and it has caught the attention of all the big brokerages. Patanjali is targeting much older fast-moving consumer goods majors like Nestle, Colgate, Dabur, and HUL with its wide variety of products (Pandey & Bhatia 2016). The company competes directly with the products from heavyweights, and when looking at the packing of Patanjali’s products, the design similarities make it’s clear which market leader it is targeting. In less than a decade, Patanjali managed to record a turnover higher than some companies have managed to achieve in over several decades.
Patanjali is a trendsetter in FMCG sector in India. Patanjali has been able to give multinational consumer product makers a run for their money in India. For the company to sustain its growth, Patanjali should consider expanding to overseas markets. The East Asia region tends to be a huge market that Patanjali can consider in its expansion efforts. There are some of the Indian companies that have performed very well in these markets, and it is important that Patanjali should consider expanding to this market (Lahiri & Nair 2017). The firm has planned to cater to the increasing demands of people in India; however, it has managed to fulfill this objective through having many manufacturing units in the country (Jain et al. 2014). Since Patanjali has managed to capture almost all of the Indian market, it needs to consider other countries if it wants to sustain its growth and continue being competitive.
Another way that Patanjali can use to sustain its growth is through developing alternative channels. While the company’s pace of growth has bewildered many FMCG players, the idea of winning in the alternative channels is not new. Certain players have managed to adopt a flanker strategy for bypassing competition, entrenching their position, and launching a frontal attack in the mainstream channels. Hence, it is right if Patanjali can consider an alternative distribution channel that will help the company gain even a bigger market and increase its growth (Pandey & Bhatia 2016). The key to Patanjali success has been attributed to its distribution channel. So that to be successful in the FMCG industry, the distribution channels does play a major role; therefore, considering the great competition in the market, it is vital that Patanjali should consider strengthening their distribution channel. It is necessary that Patanjali should make sure that their products are available everywhere and at all times. Patanjali can consider tying up with other key retail stores and make its presence felt.
A company that can widen its distribution channel will manage to always stay at the top of the FMCG industry. While strengthening the distribution network, Patanjali should also focus on reaching out to traders. So that to achieve this, Patanjali’s advertising strategy must target traders instead of only consumers (Somvanshi, 2016). As there are some established competitors in the industry, for Patanjali to sustain its growth, it needs to focus a lot on the quality. When it comes to the FMCG products, quality is usually of great significance. Patanjali must continue paying much attention to the level of quality of their products (Jain et al. 2014). For the company to success, it must make sure that it maintains or improves the level of quality in the future. Patanjali products are usually known for their quality, and most people purchase these products because of the equality. Therefore, for Patanjali to sustain its growth and continue performing better in the market, it needs to make sure that it maintains a high level of quality in everything that it does.
How multinational corporations compete with Patanjali
The multinational corporations tend to play a major role in international trade for many years. With the success that Patanjali have in India and considering how the company has captured the market, it tends to be very hard for multinationals to achieve success. Therefore, for multinationals to compete successfully with Patanjali, they should consider building broad and deep collaborations and partnerships. Success in the emerging markets does require the companies to focus on the external as they should establish extensive networks and also look beyond the traditional types of partnership (Pandey & Bhatia 2016). Multinationals operating in India can consider using joint ventures based on well-defined roles, shared vision of goals, long-term commitment, and open and strong communication so that to ensure that parties are aligned and have great chances of success.
As multinationals are working to compete with Patanjali successfully, they need to make sure that they are leveraging the world’s technologies and the knowledge at home (Jha et al. 2008). The multinational companies need to consider the value of the local people and use them in their operations. The multinational companies should consider the local community and employ this person as that will be a key component to success in the region. Multinational organizations should also consider local integration. The local team in the market tends to have an additional advantage for Patanjali, and it is vital that multinational corporations should consider this aspect (Kotler & Armstrong 2008). The local team is of great advantage because it tends to anticipate changes since it is actively engaged in the development of the playing field and also co-evolving with it. The multinational corporation needs to work closely with the local communities and also be engaged in what is happening in the community so that to know what the community expects from the corporations. The local integration for multinationals does require an active involvement and commitment of the companies to a place and the communities.
Innovation and differentiation is a key strategy that multinational corporations can use so that to compete successfully with Patanjali in the future. Differentiated products normally satisfy the needs of the consumers through sustainable competitive advantage. It does allow the companies to desensitize the prices and also focus on the value that generates a high price and a better margin (Samuel & Ogutu 2012). Patanjali enjoys success in the market because it sells its products at a lower price, while it might be hard for multinational to consider this strategy, they may adopt differentiation strategy. The multinational corporations should segment markets so that to targets their products at a specific segment; hence, generating higher than the average price (Kotler & Armstrong 2008). With this strategy, the corporations will incur additional costs in achieving competitive advantage; however, the costs will be offset by the increase in revenue that will be generated through sales. The multinational corporations should also focus on innovating and continuously improving their products and services so that to succeed in the market.
Reference
Ghoshal, M (2016) The Phenomenal Success of Patanjali in FMCG Sector-An Analytical Study. Research Journal of social science & management 6(4)
Koshy, A., Kotler, P., Keller, L., & Jha, M. (2008). Marketing Management: A South Asian Perspective, Pearson Education India
Kotler, P & Armstrong, G (2008) Principles of marketing. Pearson Publication House
Kumar, V., Jain, A., Rahman, Z., & Jain, A. (2014). Marketing through spirituality: A case of PatanjaliYogpeeth. Procedia-Social and Behavioral Sciences, 133
Lahiri, S & Nair, N (2017). Patanjali will soon be an international brand.
Carolyn Morgan is the author of this paper. A senior editor at MeldaResearch.Com in Online Paper Writing Service. If you need a similar paper you can place your order from Professional Custom Writing Services.
