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Acasestudyon

DisruptingtheIndianFMCG

Patanjali

andDivyaPharmacy

Culture,Structure&Strategies

Submittedto:
NeetuYadav
AssistantProfessor
DepartmentofManagement
BITSPilani,PilaniCampus

Preparedby:
NileshLahoty(2014B3A4656P)
NitishKundala(2014B3A4761P)
RajasPandey(2014B3A7582P)
AnjulMishra(2014B3A8660P)
KrishnaZanwar(2014B3A4497P)

Introduction

ManyarticlesareregularlybeingwrittenaboutPatanjaliAyurvedsdisruptionintoIndias
traditionallystableFMCGspace.Alotofresearchhasthusgoneintotheworkingofthis
organisation,whoseemergencewasalmostashocktomany.ThecaseofPatanjaliisalsoa
goodstudyintothepsycheoftheIndianconsumer.Itaddressestheeffectsofspiritual
brandingandtheriseofnationalisticfeelingamongIndianconsumerswhenitcomesto
FMCGproducts.Comparativelowcosts,effectiveadvertising,andexploitingeconomiesof
scaleareintegraltoPatanjalisfunctioning.Andnow,withPatanjaliplanningtojumpfroma
Rs.2000croreturnovertoRs.5000croreturnoverbytheendof2016,itpromisestodisrupt
conventionalmanagementideastoo.

TherearetwocompaniesregisteredunderthetitlePatanjaliAyurvedPatanjaliAyurved
LimitedwithCINU24237DL2006PLC144789andRegistrationno144789whichhasan
authorizedcapitalofRs500million.ThiscompanyisregisteredinNewDelhiandisthe
consumerfacingpartofthePatanjaliGroup.ThesecondisPatanjaliAyurvedPrivateLimited
whichisregisteredasaIndiannongovernmentcompanywithCIN
U52311KL1995PTC009012andRegistrationno9012withanauthorizedcapitalofRs1
million.ThiscompanyisregisteredinErnakulam,andistheAyurvedicB2Barmofthe
PatanjaliGroup.

ThebrandPatanjaliissetupthroughaggressivepreachingandpromotionbythewidely
popularyogaGuruBabaRamdev.BabaRamdevhasbeensynonymouswithyogaandhealth
care.Himbeingthefaceofthebrandhasresultedinitspenetrationintotheheartofthe
Indianconsumerinaverysmalltime.Itsaneverexpandingempireofconsumergoods,
makingcleansers,creamsandhealthsupplementsfromtraditionalAyurvedicrecipes.They
claimtobedifferentfromMNCsbyusingwhollyIndianandorganicrawmaterialstosatisfy
theneedsoftheIndianconsumer.ByinducingthefeelingofBharatSwabhimanintheirads,
Patanjalihasmanagedtoalignitselfwiththenationalistsentimentsandwithmovementslike
MakeinIndia.

Startedin1997asasmallayurvedicpharmacy,Patanjaliwasincorporatedin2006andit
begansellingherbalfooditemsandbeverages.Today,ithascloseto500productsranging
fromhaircaretowashingpowders,fromsharbatstoinstantnoodles.Itusedtheinfrastructure
ofthePatanjaliArogyakendratoactasitsoutletinitially,andnowhasover5000franchises
sellingitsproductsallacrossthecountry.InOctober2015,ittiedupwithFutureGroupto
sellover300ofitsproductsthroughoutletslikeBigBazaar.Inthepresentcontext,thus,a
studyofPatanjaliscultureandstrategieswillpresentaninterestingpictureofthe
managementandmarketingstrategiesthatworkintheconsumergoodssectorinIndia.

OrganizationCulture

Thecultureofanyorganizationreflectsasharedsetofpracticesandvaluesthatultimately
determinehowanorganizationreactstothechangingenvironmentwithinandoutsidethe
organization.InthecaseofafairlynewcompanylikePatanjali,itmainlycomesfromthe
visionofitsfoundersandthetopmanagement.

AcharyaBalakrishna,ascholarofSanskrit,Vedasandayurvedaisthemanagingdirectorof
PatanjaliAyurvedatthemoment.HehadfoundedDivyaPharmacy,whichlatermergedwith
RamdevsPatanjaliyogpeeth.Thus,BabaRamdevandAcharyaBalkrishnaactasguiding
figuresfortheorganizationalphilosophyanditsoperations.Thereisastrongcurrentofthe
themeofBharatSwabhiman1inthewholevisionofPatanjaliasaorganization.BabaRamdev
hasrepeatedlysaidthatthisorganizationistobreakthedominanceoftheforeignMNCsin
theIndiangoodsandpromoteswadeshi.

Thisisreflectedintheiroperationstoo.Theysourcetheirproducedirectlyfromthefarmers,
whichtheybelievewillempowerthem.Theyusealltheorganicmaterials,becauseofthe
healthbenefitstheybelievetobeassociatedwiththem.ToquoteAcharyaBalakrishna,

profitsfromtheprojectwillbeusedtoempowerruraleconomyandhealth.Patanjaliisin
theprocessofbuildingmodelvillagesthroughoutIndia.

ItsmainmanagementcomesfromthePatanjaliUniversity,wherethepeoplearetrainedin
thisideology.Thus,thecultureisfairlyrigidwhenitcomestotheideologybeing
implementedatallaspectsofoperations.Theirfocusondetailswhenitcomestothe
processingoffarmitemsisunparalleled.Itgivesattentionthatallaspectsofitsproduction
processarenaturalandorganic.Theirculturepromotesoutcomeorientationbytakinga
radicalapproachagainstotherforeignMNCs.Theirtopmanagementsetshightargetsand
theystrivetoachievethat.

Accordingtothefounders,BabaRamdevandAcharyaBalkrishna,theirfocusfromthe
beginninghasbeenthepeopleofIndia.Theyshouldgetthebestqualityproductsatthe
lowestprice.Theirworkcultureisprofessional,yetspirituallyinclined.Theyhirepeople
whowanttogivebacktothesociety,andwishtoworkinanenvironmentwhichvalues
ethicsandfamilyasmuchasitvaluesdeadlinesandtargets.Theyensurethattheirapplicant
doesnotindulgeinsmokingordrinking,butarenotverystringentintheirrecruitment
process.Theydonotlookfortoplevelmanagementgraduates,butforpeoplewitha
conscience.Eventhoughtheirpaypackagesarenotincrores,manyofthepeopleworkingin

ThephilosophyofBharatSwabhimanbelievesinfiveprinciplestoempowerandimprovelifeinIndiaat
thegrassroots.Theseprinciplesarehundredpercentvoting,nationalistthought,boycottofforeign
companiesandadoptionofIndiancompanies,unificationofthepeopleofthenation,andcreateayoga
orientednation.

middleandtoplevelmanagementhavehadexperienceofworkingattheMNCsmostof
whicharenowPatanjaliscompetitors.

Ithasahighfocusoninnovationinitsproductioneitherintheprocessorintheproductsthat
theycomeupwith.Itisthroughthisthattheyhavebeenabletomaintaintheirorganicbrand
image,evenwhenproducingproductslikedetergentsandinstantnoodles.BabaRamdevs
visionandhismanagerialandmarketingacumenguidesmostofPatanjalisoperationstoday.

OrganizationalStructure
Theorganisationalstructureofafirmdescribesthedegreetowhichtheactivitiessuchastask
allocation,supervisionandcoordinationaredirectedtowardsfulfillmentoftheorganisational
goals.Theworkingandperformanceofthecompanydependsontheorganisationalstructure
chosen.Therearemanytypesofstructuresforthecompaniestochoosefrom.Ananalysisof
theorganisationalstructureofPatanjaliAyurvedLimitedisgivenbelow.

Workspecialization
ThemajorworkofPatanjaliAyurvedtakesplaceintheenormousfoodparktheydeveloped
inHaridwar.Theworkforceinthesefoodparkhavebeendividedintothreemajorgroups
basedontheirspecialization.Thethreepartiesaresupply,processingandpackagingand
transport.Thesupplygrouptakescareofgettingcleanandqualityrawmaterialtothefood
parkandmanagesthestoragefacilityatthefoodpark.Theprocessinggrouphandlesallof
theproductionlinewheretherawmaterialsareturnedintohighgradeFMCGproducts.They
handletheautomatedproductionlineandmakesurethequalityoftheproductisupheld.So
everydepartmentconsistsofemployeeswhoarehighlyskilledintheirparticularfieldand
thusthereishighworkspecialization.

Departmentalization(Functionalandproduct)
FunctionaldepartmentalizationisevidentinPatanjaliAyurvedLimited.Jobsinthecompany
arespecifiedbasedondifferentfunctionssuchasexports,researchanddevelopment,
marketingetc.EachofthesedepartmentshasaVicePresidentwhoisresponsibleforthe
decisionmakingandimplementationofgoals.Thishascontributedalottothesuccessofthe
companyintherecentyears.Peoplewithsimilarspecialtiesworktogether.Thisimproves
coordinationandalsotheperformanceofeachdepartment.

PALalsofollowsProductDepartmentalization.Theproductsofthecompanyaredivided
broadlyunderthreecategories:food,toiletries,andayurveda.Groupingofjobsisdonebased
onthesecategoriesofproductsandeachcategoryhasaverticalheadorrepresentative
responsiblefortheproperachievementoftargetsfortheproductcategory.Acharya
Balkrishna,theChairmanofPatanjaliAyurvedLimitedclaimsthattheproductsoftheir
companyareoneoftheirbiggeststrengths.Thehighqualityproductsmanufacturedbythe
companyaregoodenoughtosellwithoutmuchsupportfromadvertisingtechniques.This

highqualityhasbeenachievedbecauseofthepropergroupingofjobsforvariousproduct
categories.

ChainofCommand
ThecompanyisheadedbyAcharyaBalkrishnawhoisthechairmancumManagingDirector
followedbytheDirectors,
SwamiMuktanandjiandSriAjayKumarArya.Thereisavertical
headforeachofthethreeproductcategoriesmentionedabove
andunderthemaretheVice
Presidentsforvariousfunctionaldepartments.Themiddleandlowerlevelmanagersare
responsibleformanagingdaytodayactivitiesatthecompanyandtheyworkunderthetop
management.

Spanofcontrol
Thetoplevelmanagementconsistsofabout200employees.Underthem,about10,000
employeesworkinthemiddleandlowerlevelmanagement.Thetotalnumberofemployees
arearound2lakhs.

Centralization
TheorganisationalstructureofPatanjaliishighlydistributed.Everyproductcategoryhasa
differentdepartmentandeachdepartmenthasitsownleaderwhoisresponsibleforthe
decisionmaking.Thedecisionmakingpowerofthelowlevelmanagersandtheemployeesis
limitedtoactivitiesrelatedtodaytodayworkingofthestaff.Thedecisionsregardingtargets
forthecompanyandothermajordecisionsaretakenbythetopmanagement.Thethedegree
ofcentralizationismoderatewiththetopmanagementmakingthemajordecisionsofthe
company.

Formalization
ThedegreeofformalizationinPatanjaliAyurvedLtdishigh.Therearecertainsetof
guidelineswhichtheemployeesneedtofollowwhileworkingfortheorganization.Thejobs
arespecifiedandemployeesneedtoworkastheyareinstructedto.Therearemany
constraintsonhowtheemployeeswork.Highformalizationdoesntencourageinnovationbut
thisdoesnotposeasanegativequalityforPatanjaliasthecompanyuseshighlyspecialized
individualswhoworktomakethebestproductquality.

Fromtheaboveproperties,itcanbeconcludedthatPatanjaliAyurvedLtdfollowsa
mechanisticcultureasitshowsahighdegreeofspecializationintheorganizationwithhighly
skilledemployees.Also,theyhaverigiddepartmentalizationbasedondifferentfunctionsas
wellasproducts.Thechainofcommandisclearandthespanofcontrolisalsonarrow.The
decisionmakingisdonemainlybythetopmanagersandthusithasahighdegreeof
formalizationandcentralization.

ContingencyFactors
Strategyframeworks
Thecompanyisplanningtoincreasetheirgrowthinthecomingyears.Theadvantagethat
Patanjalihasoveritscompetitorsisthattheycanefficientlyminimizetheircostasthetop
managersdonottakeveryhighsalaries.Sotheorganizationalstructurethattheyare
followingcanhelpinthegrowthstrategy.Patanjalifollowsmassproductiontechniquesand
theyproducelargebatchesofoutputs.

SincetheenvironmentofPatanjaliisnotstable,themechanisticcultureofthecompanycould
haveposedasaproblem.Buttheiruniqueapproachofcoveringnewproductmarketsby
improvingproductqualityandprovidingtheseproductsatpriceswhichare1040%lessthan
thoseofferedbyothercompaniesintheFMCGmarkethashelpedinthegrowthofthe
companyandstandingamongstthetopcompaniesintheirsector.Thecompanyhasa
researchfacilitywherearound50scientistscontinuouslyworkonfindingproductswhichcan
beinculcatedintoayurved.Sotheyfollowastrategyofexpansionintonewmarketsbecause
ofwhichtheyhavebeenmaintainingthegrowthrateovertheyears.

TraditionalOrganizationalDesign
FunctionalStructure
Patanjalifollowsafunctionalstructurebecauseithasahighdegreeofdepartmentalization
basedonthefunctionperformedbydifferentdepartments.Theyhireprofessionalswhohave
highexperienceintheirrespectivefields.So,thedepartmentalizationhelpsinstrengthening
theperformanceofvariousdepartments.
Thefunctionalstructurealsohelpsincostminimizationbecauseofhiringspecialized
individuals.Also,theemployeesworkwithpeopleofsimilarinterestswhichincreasesthe
motivationforworkingandalsoimprovestheworkingculture.

Strategies
PatanjaliAyurveda,havingavisionofBharatSwabhimaan,hasanaggressivebusinessmodel
butwithanaimtogrowandcatertomorethanearningprofits.Theirlongrunstrategiesaim
atcapturingtheIndianFMCGmarketwhichiscurrentlydominatedbyforeigncorporations
(mainlyHindustanUnileverLimitedandNestle)andprovidingabetterqualityproductatthe
leastpricepossible.Theirbusinessmodelfocusesonprovidingbestqualitygoodsthatthe
customerwillvalueandmakemoneyoutofit,andthenreinvestthatmoneytogrow.
TofulfilltheirmissionofBharatSwabhimaan&providinggoodsatasustainableprice,
patanjaliissetonapathofcapturingthemarket.Therecentgoalsetbytheorganisationisto
achieveaRs.5000Crturnover(agrowthof150%fromlastyears2000Cr),andthisgoalis
notunrealistic.Withaprevioustrackrecordof50%growtheachyearsince2009anda
recentchangeinmarketingstrategy,financialpunditspredictthatpatanjaliwillnotonly
achievetheirtargetforthisfiscalyear,buthasthepotentialtoreachaturnoverofRs.20,000
Crby2020.[EconomicTimesArticle]

MissionStatement:
Customers:Theprimarytargetcustomersweretheonesalreadycomingforthe
PatanjaliyogacampsandwereusingPatanjaliConsultationforAyurvedic
Medication.Now,thetargetiseveryIndianhousehold.
Markets:GeographicaltargetmarketisIndia.Withover200outletsand5000
franchisestore,Patanjaliissettoincreasetheirpenetration.Theyaresoonplanningto
launch500600mobile(auto)storestoreachdeepruralIndia.Theyalsosellonlineon
www.patanjaliayurved.net.
Concernforsurvival,growth,andprofitability:Theyhaveaprofitmarginof24%on
eachgood.Theyarecommittedtogrowthbycapturingmoremarketthenbyeacrning
moreprofitthroughsamequantity.
Philosophy:PatanjalibelievesinBharatSwabhimaan.Theywanttotakethehigher
ethicalstandthantheotherorganisationsandarecommittedtoprovidetheirgoodsat
theleastpricepossible.Theywanttoremovethelootinthenameofgoodquality.
Products:PatanjaliAyurvedsellsnearly500productsrangingfromayurvedic
medicinestowidelyconsumedFMCG.
Technology:Theproductionunitsaretechnologicallycurrentwithproper
optimisationatwhicheverlevelpossible.
Selfconcept:Thecompetitiveadvantagesarebrandloyality,premiumqualityand
extremecompetitivepricing.
Concernforemployees:Withover1lakhemployeesintotal(Allbranchesassociated
withPatanjali),PatanjalihaveanHRdepartmenttotakecareoftheemployees.

Source:YourStory

http://yourstory.com/2016/03/patanjalistory/

SWOTAnalysis:
BriefIntro
TurnoverofRs.2300CroreinFY201415,Rs.5000CroreinFY201516
andatargetofRs.7000Crore($1billionGMV)forFY201617,keeping
EBIDTAaround1520%
PotentialtoleavebehindoldestablishedFMCGfirmsinFY17
Strengths
Natural,herbalandorganicproducts
BrandRamdev
Competitivepricing(2030%lower)
Marketingspirituality
Establisheddistributionchannels
SocialResponsibilityofBharatSwabhimaanandmakeinIndia.
Weaknesses
Alreadyestablishedcompetitorswithlargemarketshare
Prejudicesforreligionassociation
Lessruralpenetration
Lowexports
Opportunities
Largedomesticmarket
Untappedruralmarket
Competitivepricingimpliesriseinrealincomeofconsumers
Potentialforexports
Threats
Politicalinterference
FMCGbiggieslikeHULandtheirayurvedicdivisions
AdaptivecompetitorslikeDabur
Riseinimportsifrestrictionsareloosened
Sectorslowdown

CorporateStrategies:
Growth:
Patanjalihasanaggressiveexpansiongrowthstrategy.Till2014,keeping
theirtargetmarketPatanjaliYogpeethconsumers,theywereexpandingtheirproducts
andmarketsandreachedamarkof450+productsincludingcategorieslikefood,
cosmetics,ayurvedicgoods,ayurvedicmedicines.Post2014,theyarenowinstead
expandingtonewproductsareexpandingtonewtargetconsumers.Ashiftfrom
productexpansiontoreachexpansion.
Concentration:
Anaggressiveconcentrationstrategytill2014whichledtothe
current450+linesofproduct.
VerticalIntegration:
Patanjaliexcelinverticalintegrationbeitbackwardor
forward.Patanjaliisalreadyaselfsupplierformostofitsproductsinputsfrom

PatanjaliFoodandHerbalPark
(
backwardverticalintegration
).Theyalsohavea
lotofcontrolonthedistributionchannelandarealsodirectlyconnectedwiththe
customerservicesactivitiesunderPatanjaliArogyaKendra&patanjali
Chikitsalayaswhichalongwiththeprimarypurposeofayurvedicconsultationalso
servesasadistributionchannelforPatanjaligoods.Theyarepresentinalmostevery
cityinIndia.WiththerecentdealswithFutureGroup(Bigbazaar),relianceretail,
HyperCityandotherretailchains,theyaremovingfromastrict
forwardvertical
integration
toaloosenmodeltoincreasetheirreach.Alongwithbigretailchains,
Patanjaligoodsarealsoavailableofsmallretailshops,butpatanjalikendrasactingas
intermediaries.
Horizontalintegration:
Patanjalihadaoneandonlymajorhorizontalintegration
withDivyaPharmacy(1997)toprovidemorediverseandoptimumayurvedic
products.SincethebeginningoftheBharatSwabhimaanVision,theyareagainstthe
competitorswhicharechargingalotmorethantheyshouldorareforeign
organisation,leavinghorizontalintegrationonabackfoot.
RelatedDiversification:
Patanjali,justlikehorizontalintegration,isnotinmuch
favorofrelateddiversificationbecauseitmightrequirethemtocompromiseontheir
vision.Butiftheyfindtheperfectstrategicfits,theymightconsiderthisasan
optionifithelpthemwiththeirmission.ThatwasthereasonPatanjaliandDivya
Pharmacyaresocloselylinkedbutnotwithotherfirms.
UnrelatedDiversification:
Themajorreasontogoforunrelateddiversificationisto
enterthemarketwithhigherfinancialreturns.Patanjaliisnotmuchconcernedabout
financialreturns.Therefore,unrelateddiversificationisirrelevanttothem.
StabilityStrategy:
ThoughPatanjaliisonapathofgrowth,theyalsohavesome
elementsofstabilitystrategyforindividualgoods.Forexample,pricesensitive
commoditieslikepulsesmayleadtolossesiftheykeepfollowingtheconstant
averagedoutpriceforexpectedprofitof34%.Buttomaintainthestatusquo,theydo
notraisetheprice.
RenewalStrategy:
Beinganewfirminthismarketandnothavingmanyweaknesses
fornow,Patanjalidonothavearenewalstrategy,whichisjustified.

BCGMatrix:
DevelopedbyBostonConsultingGroup,itclassifiesfirmsonthebasisoftheir
marketshareandindustrygrowthrate.Havingaveryhighgrowthrateandahighgrowthin
thecurrentlylowmarketshare,PatanjaliisrightnowaQuestionMarkfirm.Butitisseton
apathtobecomeaStarbecausetheotheralternativeforQuestionMark(s)(gettingsold
off)willnothappenforPatanjalibecauseofitsvision.AndlatertheStartmightturnintothe
differentCashCowwhichaimsandnotbeingtheCashcow.

CompetitiveStrategy:
Witha
competitivestrategylargelyfocusedon
qualityandprice,Patanjalihasadistinctive
competitiveedgewhenitcomesto
premiumqualityatlow(competitive)price.
Ayurvedicproductswereseenascostlyto
use,alsogettingwhatthecustomers
actuallywantedwastoughbeforePatanjali
cameintothepicture.

(Infographcourtesy:
BrandEquity
)

FiveForceModel:
Threatofnewentrants
:SriSriRavishankarsArtofLivingandRamRahimSinghs
MSGinternationalarealsoenteringthesegmentafterthesuccesfulstoryofPatanjali.
Threatofsubstitutes
:mobilityofconsumerscanbehighbecauseofthealready
establishedcompetitors.
Bargainingpowerofbuyers
:Alreadylowerpricesleavesnoscopeforbargaining.
Bargainingpowerofsuppliers
:Patanjaliisthemajorsupplierandretailerofits
goodsleavinglessbargainingpowertothesuppliers.
Currentrivalry
:ThekeycompetitorsofPatanjaliareDaburandTheHimalayaDrug
Company.OtherrivalsincludeEmami,Zandu,HindustanUniliver.

10

Ebusinessstrategies:
Patanjaliplanstoexpandtheircustomerbasefurtherbygoing
online.InarecentstatementRamdevsaidthatthecompanyintendstosoonbepresentinall
modernretainchainformats.Itrecentlylauncheditsecommerceportal.Inastatement
Ramdevsaidthattheyplantoinvest1000crorein2016forexpansionprojectswhichwill
mainlyfocusonecommerceandexports.

Conclusion
Patanjaliprovidesaninterestingcaseintermsofitsculture,structureandstrategies.Its
cultureisguidedbythevisionofitsfounders,BabaRamdevandAcharyaBalkrishna.Ithas
anaggressive,targetorientedcultureintermsofcompetition.Italsofocusesonitsimpacton
thepeople,bothitsemployeesandthepeopleofIndia.
Eventhoughtheyhaveamechanisticstructureinadynamicbusinessenvironment,the
organisationalstrategychosenbyPatanjalihashelpedittogrowatanexponentialrateina
highlycompetitivemarketsegment.Itsstrategyhasprimarilybeengrowthoriented.Priorto
2014,itwasmainlyfocussedonproductexpansion.After2014,ithasfocussedonmarket
shareexpansion.ItsstoryisoneofthemostinterestingtolookatinthepresentIndian
context.

References
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andfunctioningofvariousdepartmentsoftheorganization)
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