A very happy new year to all readers, now that the world did not end on the 21st (or was it the 22nd?), I want to continue to focus on the funny happenings in the world of local brands in India.
Not only that Grand Sweets had now expanded into restaurants and had a full fledged restaurant on T Nagar. But the flip side of this expansion is that the focus had suffered. One of Archana's(my wife) uncles had even recommended dropping grand sweets from my list and going to another stand alone sweet shop that had now become the one stop shop for savories among the locals.
Had Grand Sweets lost its focus?
The late Sumantra Ghoshal management guru and founding dean of the ISB (Indian School of Business) had written in his book 'Managing Radical Change' that Indian businesses were great at cooking 'sweet' that is expanding and diversifying. The problem came when they had to cook 'sour' that is maintaining processes and establishing quality. So he would not be surprised if he saw what was happening at Grand Sweets and the customer feedback.
This phenomenon is not limited to small businesses. Even larger businesses suffer from this. A good example is Reliance. At its height reliance was a Petrochemical company that had reverse integrated from Polyester all the way to refineries. This was due to the vision and entrepreneurship of Dhirubhai Ambani. for more on that story please visit this link. Later reliance defined its business as the business of energy and soon they had access to Natural Gas reserves as they completed the final step in upstream integration and dared to open retail petrol pumps to down stream.
But soon after Dhirubhai's death the vision changed and Reliance became an infrastructure company. They diversified into Retail, Financial Services, Telecom and Entertainment. The net result is that they lost focus on the Energy space. Today Reliance does not play in the renewable energy space where the Chinese, German and american firms are going head to head. China is betting big on solar panels and the Obama administration has given subsidies to firms manufacturing them in the US. The Europeans have already invested a lot in the space, should not have Reliance been in the race as well?
I had another amusing experience when I made my way to Sri Krishna Sweets in Besant Nagar in Madras (Chennai). Sri Krishna Sweets is famous for a south Indian sweet called Mysurpa. they became famous for introducing various varieties of Mysurpa including one that was called 'Horlicks Mysurpa'. When I enquired at the shop, they had only the plain variety of the sweet. None of the other variants were there. I was disappointed. As I turned around I saw a high stack of ready to eat snacks. Also neatly stacked along this were pickles from Sri Krishna. So Sri Krishna the pioneer in the Mysurpa varieties had none of them in this outlet but was retailing pickle which is also retailed by behemoths like CakinKare and Mother's Recipe.
In the end I feel this is a very bad idea, to leave your core competency and diversify into areas that affect your strength in the first one.
I can see three examples of how diversification should be handled.
But i want to hear your views. Do let me know your experience with brands and their attempts to doversify to unrelated businesses.
(Grand Sweets: Gandhi Nagar. Adyar)
I recently visited Grand Sweets in Madras (now Chennai). Grand Sweets is the one stop shop for all south Indian savories in Madras and the main shop was located in Gandhi Nagar in Adyar (south Madras). The venture was founded by Mr G Natarajan in 1982 and is considered the corner stone in Tamil Brahmin savories. To my amusement I learnt that the two proprietors ( who were sisters) had fallen out with each other. They had divided the shop between the two. Not only that they had both gone on a random expansion spree opening more than 20 franchisees all over Madras and even in Bangalore.Not only that Grand Sweets had now expanded into restaurants and had a full fledged restaurant on T Nagar. But the flip side of this expansion is that the focus had suffered. One of Archana's(my wife) uncles had even recommended dropping grand sweets from my list and going to another stand alone sweet shop that had now become the one stop shop for savories among the locals.
Had Grand Sweets lost its focus?
The late Sumantra Ghoshal management guru and founding dean of the ISB (Indian School of Business) had written in his book 'Managing Radical Change' that Indian businesses were great at cooking 'sweet' that is expanding and diversifying. The problem came when they had to cook 'sour' that is maintaining processes and establishing quality. So he would not be surprised if he saw what was happening at Grand Sweets and the customer feedback.
This phenomenon is not limited to small businesses. Even larger businesses suffer from this. A good example is Reliance. At its height reliance was a Petrochemical company that had reverse integrated from Polyester all the way to refineries. This was due to the vision and entrepreneurship of Dhirubhai Ambani. for more on that story please visit this link. Later reliance defined its business as the business of energy and soon they had access to Natural Gas reserves as they completed the final step in upstream integration and dared to open retail petrol pumps to down stream.
But soon after Dhirubhai's death the vision changed and Reliance became an infrastructure company. They diversified into Retail, Financial Services, Telecom and Entertainment. The net result is that they lost focus on the Energy space. Today Reliance does not play in the renewable energy space where the Chinese, German and american firms are going head to head. China is betting big on solar panels and the Obama administration has given subsidies to firms manufacturing them in the US. The Europeans have already invested a lot in the space, should not have Reliance been in the race as well?
I had another amusing experience when I made my way to Sri Krishna Sweets in Besant Nagar in Madras (Chennai). Sri Krishna Sweets is famous for a south Indian sweet called Mysurpa. they became famous for introducing various varieties of Mysurpa including one that was called 'Horlicks Mysurpa'. When I enquired at the shop, they had only the plain variety of the sweet. None of the other variants were there. I was disappointed. As I turned around I saw a high stack of ready to eat snacks. Also neatly stacked along this were pickles from Sri Krishna. So Sri Krishna the pioneer in the Mysurpa varieties had none of them in this outlet but was retailing pickle which is also retailed by behemoths like CakinKare and Mother's Recipe.
In the end I feel this is a very bad idea, to leave your core competency and diversify into areas that affect your strength in the first one.
I can see three examples of how diversification should be handled.
- When 3M realized that its digitial storage division was not in line with its core product, they hived off the division as a separate company. Today Imation runs as an independent entity and 3M continues to focus on its core business.
- Diversifying into related areas when the core business is under threat. Danone started as a glass bottle manufacturer, but when the business came under threat from the plastics industry they diversified into water and dairy business.
- Reverse Integration- something that Dhirubhai Ambani was famous for. By reverse integrating to upstream energy processes, he became the undisputed energy king of India. Alas his successors did not share that vision and now the company finds itself in all kinds of trouble.
But i want to hear your views. Do let me know your experience with brands and their attempts to doversify to unrelated businesses.
When companies come out of their core product and go for diversification, they lack vision and experience.Also customer satisfaction, focussing on various products is a big challenge.If they want to expand business, they need to seperate it from the core company. Best example TATA and ITC
ReplyDeleteGood post. One other Indian brand which did not let go of its core business is Eureka Forbes Aquaguard. Along with Zero-B, they pioneered the UV-based water purifier market in India. However, as quality of water got hard in the late 1990s, the company's products did not cater to water softening. Instead of diversifying into the watert packaging market (bottled water market), the company stood its ground and invested in water softening technologies. Today, they have the most extensive range of water purifiers.
ReplyDeleteGrand Sweets and SKS should take a leaf from that and figure out what would work best for their strengths. They can perhaps look at MTR which has diversified into the ready to eat as well as easy to cook meals market.
Hi Farook
ReplyDeleteI totally agree and creating a separate entity to look after the diversified business is a good way forward. Tatas and ITC have done it.
Hi Arch
ReplyDeleteEureka Forbes is a good example and i think the focus on the core is very very important.