Вы находитесь на странице: 1из 7

Strategic Management

Soap Industry Analysis

Sridhar KM
18472
The soap industry is one of the oldest operating industry and it generates around $17 billion revenue
per year. Soaps were once considered a luxury but now due to the rise in the disposable income it is
a highly demanded product, and to a great extent a necessity in India. There are 48,000 tonnes of
soaps manufactured every year in our country. There are around 68 companies with 205 brands in
the fiercely competitive Indian market. Penetration of soaps is around 98% in our country. (Adithya,
2011) Soaps have become an integral part of an Indians life. Soap could be counted as an economic
indicator to our economy. Soap being a necessity, helps us understand the condition of our
economy.

Now the industry having gone through rapid changes, has expanded multi-fold. There are many
more brands in our country. The population in our country is heading towards an economy which
highly focuses on the personal hygiene.

Soaps can be mainly classified into three main categories- Beauty soaps, Health soaps and others.
Beauty soaps take the major portion of the market categorisation. Health soaps are catching up with
the imminent growth of the market due to health conscious customers. The increasing spread of
health and hygiene is giving the players a good opportunity to expand. A lot of demand is from the
rural market. Herbal category is also growing especially in the foreign markets.

The major brands playing in India are Lux, Santoor, Dettol, Vivel and others. Lux alone has a market
share of 13.5% followed by Santoor. (Indian Mirror, 2016)

There is not much differentiation in the beauty soaps category. Companies rely on the expensive
promotional campaigns launched to lure the customers.
HUL Godrej ITC Wipro Colgate Palmolive

Dove Cinthol Fiama Santoor Tender Care


Lifebuoy No. 1 Vivel Chandrika Palmolive
Lux Superia Yardley
Axe Savlon Aramusk
Pears
Hamam
Liril
Rexona

This is just a glimpse into the soap market. There is high competition to get the prime spot in the
market. We cannot measure the reason behind customers being loyal. That is the reason why the big
players in the industry keep focusing on promotional events to grab the attention of the customer.

Industry Life Cycle:


If we look at the life cycle of brands, there are many companies who have gone to the verge of death
and then have been pulled back e.g: - Lifebuoy, Lux. This is the situation with many brands in our
country. Due to the presence of a huge number of brands in our country, it is easier for the
customers to switch. There are a lot of options available for the customers. There are no switching
costs at all.

Brands are fighting to attain loyalty from customers. Revenues are not so uniform. Most of the
companies have an array of products to cover up the losses from the soap segment.

There are many other local players in the market. Such brands are not so popular, but are able to
push the products based on lower pricing. A huge customer profile still opts soaps which are
cheaper, than look for quality. The situation is mainly prevalent in rural areas.

Based on these details we can infer that soap industry has hit the ‘maturity’ stage. The major reason
being the awareness spread regarding the utility of soaps. The government has taken many steps to
make citizens understand the importance of soaps. There have been many ads to showcase the
importance of washing hands before eating, with a soap. Even the spread of literacy is an important
factor to spread the awareness of using soaps. 98% of the Indians use soap, this quantifies the
spread of soaps. Soaps are also facing competition from body washes which are replacement to the
way a person takes bath.

Hence we can say that the soap industry in our country has hit the maturity stage.

When we look at the herbal soap segment or the health soaps, we see that the products are getting
greater recognition amongst the customers. This particular category in the soap industry is seeing
good prospects of growth. The demand for these soaps have especially risen in the foreign markets.
People are understanding and appreciating the uses of these soaps.

Hence, we can say that Herbal soaps are on a ‘growth’ trajectory.


Strategies based on Industry Life Cycle:
 As it is clear in the description above we need to concentrate mainly on the herbal category.
This is a promising category for the company. Companies like Patanjali have grown on the
run of the herbal soaps. We could use this product category to target the middle segment
and the upper middle class segment. This is the segment which is understanding and
appreciating the usefulness of the herbal segment.
 The product categories which have hit the maturity stage, we need to boost their sales. We
need to retain the customers and offer them incentives to stick to us.
The one possible way is to give many offers on our products and bundle them up. We should
not reduce the price but show them our quality. The products which are loss making should
be done with or strategically be bought back into the profit making category.
 Those products which have lost the growth trajectory and reached the maturity stage, and
also there are very bleak chances of bringing them back should be our ‘Cash Cows’.
 To bring back a product into the profit making areas and to add more customers there one
main thing we need to do, promote out products well. Marketing will play a key role in the
stage for the company.

PESTLE Analysis:
1. Political Factors
The industry faces a lot of strict regulations from the government. The main reason being
industry operates with products which come in contact with our skin. There are a lot of
clauses placed in case a product causes harm to any individual. There are strict testing
policies in place before a product is allowed to see the daylight.
The recent election would have hardly impacted the sales of the industry. Soaps are a
necessary product in our country, hence the sales are generally not impacted as per the
industry is concerned.
There are strict rules in place to monitor the import and export of soaps.
2. Economic Factors
It is an industry which was the least affected by the recession, people were conscious of the
prices only the premium segment soaps were affected. This also means that the import-
export is not affected drastically based on the market conditions. The demand to the
industry is spread evenly throughout the year.
3. Social Factors
Cleanliness occupies a prime spot in our society. People are really sensitive about anyone
commenting on their personal cleanliness. In such a situation soaps become a necessary
item. Soaps also form part of the expensive gifting. It is seen now as a status symbol for
people to use expensive soaps. The gifting packages are a combination of various other
cosmetic needs of an individual.
An important factor influencing the customers are the brand ambassadors for a product.
People in India or elsewhere have a mentality to get swayed by the portrayal of their
favourite personality. Companies must choose their brand icons with utmost care.
4. Technological Factors
Technology has impacted the availability of the products to the customers. People are not
required to travel till a store to buy these products, all of them are available online. E-
Commerce websites like Amazon and Flipkart in India has helped the industry in getting a
greater depth in their delivery systems.
Many of the companies themselves own websites to showcase their new products or any
other latest happenings in their company.
The production process has also been impacted positively due to technological
advancements. Companies have the capacity to produce to their optimum possibility.
5. Legal Factors
There are many approvals that need to be taken before a soap is launched. Soaps need to
legally be allowed by the authorities. The Drugs and Cosmetic Act requires all the ingredients
to be approved. There are many documentations required before a product is approved.
Such strict restrictions are in place to ensure that the product causes no harm to the skin.
6. Environment factor
This aspect of the PESTLE is crucial for the soap industry as it’s in constant touch with the
environment. These factors include all those that influence or are determined by the
surrounding environment. The major ingredients for the soap are perfumes, caustic and oil.
Oils & perfume are insoluble in water and if spilled can create problems.

Strategies based on PESTLE-


 The stock market is on a bullish run with the election results. They should be able to
capitalise on the rise of their prices and should be able to maintain their stance. There has
been a huge rise in the dividend paid by the company from previous year this will give
confidence to the investors. This time they can probably concentrate on retaining in other
areas.
 Godrej can look into the foreign market. In India they are the second largest player after
HUL. They are planning a strong presence in Africa. The recently concluded meeting in the
continent by the top management shows the willingness to spread its brand well.
 The decision by the top management to include employees from the LGBT community shows
the inclusiveness of the company. Godrej is also rated one of the best companies to work
with. The company should put out these impactful decisions in limelight to show their
positive social stance.
 India being one of the fastest growing economy there should be no dearth of market for
soaps. They should look for growth in the rural areas which is untapped. HUL with its deep
market penetration is able to tap into potential rural market. Cinthol being a well-
established brand should be sent to the rural markets.
 They should probably incentivise of them being a purely Indian brand. They could bring more
of the Indian touch into their campaigns. All their ad campaigns should focus on their steps
taken for a better society.
 There should be a dedicated team to monitor the most happening field of interest in our
country. The best example would be the world cup. Godrej should be able to target those
customers who would be interested in buying those products which are related to the world
cup concept. Hence we should also be able to make immediate changes to our products
based on the requirements.
SWOT Analysis:
Strengths Opportunities
 It is 4th largest  A part of the ‘Gifting’.
contributor to our  Growth of consumers
economy. using herbal soaps.
 It is a necessity in our  Technological
country. Soaps make a advancements.
part of the monthly  Increasing demand for
expenditure of a our natural soaps in
family. the foreign market.
 Not affected by
 There is still a huge
economic or political
untapped rural market
situations.
in India.
 Spread of the online
 Online expansions.
platform awareness.
The reach of sites like
Amazon.
 Government’s
constant push for
cleanliness.
Weakness  They should expand  Technology could be
 Low penetration in the into the rural areas of used as a factor to
rural market. the country. lower the prices of
 The products run on  They can try product products. This will hit
low margins. line extension to suit the scales and also
 Heavy competition the needs of the rising help in rural
leads to price wars. Indian rural penetration.
 Brand loyalty is a customers.  Herbal soaps are
concern in this  They should have a growing and we
industry. product for the upper should take advantage
segment of the of the growth.
society.  We can expand into
 Brand loyalty can be various other toiletries
attained by and offer them as part
emphasising on the of gifting. This will
Indian-ness of the boost our soap sales as
brand. well.
 Can have a dedicated
portal to sell our
products.
Threats  We should be on a  The knowledge of
 Products like ‘body look out for the legitimate herbal soap
wash’ are replacing upcoming local brands making is still limited,
the concept of soaps. and collaborate or we should be able to
 Untested products can acquire them. flush the market with
cause chaos.  We should have such these products.
 Start-up costs are advanced technology  Acquire the positive
relatively low. to match the policy start-ups.
changes instantly.  Integrate a column in
our website for online
 The soap  We must be able to commerce. Showcase
manufacturing give an assurance to some of our new
technology is readily people that all our products and
available online. products are tested proposals for new
 Policy changes can be and can be trusted. products.
unfavourable. This will also help in
brand loyalty.

5 Forces Analysis:
1. Competitive Rivalry
There are many brands operating in the same market. The competition is very high in
this market. All the companies hence have a wide array of brands to satisfy customers in
different strata. The switching costs are also very low in the market and hence people
are not reluctant to change.
2. Bargaining power of the Customers
The bargaining power of customers is quite high because of the low switching costs and
also the wide array of product ranges offered by the companies. Customers are not
extremely loyal, but once they are convinced of the quality of the product they will stick
to the product. This is because the product comes in contact with our skin and people
will not want to risk it.
In the current scenario where people are shifting to the herbal products, customers are
looking for these benefits in other products in the same category as well.
3. Bargaining power of Suppliers
The bargaining power of suppliers is relatively low as the companies have a large
number of suppliers meeting their requirements. They are very less chances of a supplier
to forward integrate. The quantity taken from the suppliers are not heavy and hence an
individual will not affect the production of the big companies.
4. Threat of Substitutes
There are no substitutes to the products from the industry. We can argue that body
washes are taking over the soap sales but soaps are also part of the FMCG industry as
are body washes.
5. Threat of new Entrants
This is quite high as the cost of starting a soap manufacturing house is not so high. The
knowledge required is already available online. Any new person interested can start
his/her person. The major challenge comes in the area of scaling the business. The major
players in the industry are extremely huge and have amazing market penetration.

Strategies based on 5 forces:


 Since our major competitor are big players are like ITC, HUL and Wipro, we need to
have a very concentrated strategy to get the market leadership. Currently the
market leader is HUL. They have wide array of products cutting across customer
segments. They have a few soaps in each of the customer category. We could also
expand our product line. We can target mainly the premium segment with our new
products.
 Since the customers have the bargaining power, we need to maintain the prices
lower than the competition yet offer the best quality. We could look into the supply
chain strategies of the company to reduce the costs. We could look into a new
inventory strategy for the company. We should also look into the credit policy of the
company and ensure the retailers are in line with our expectations. We could give
some of the premium customers a credit period. This might boost our sales.
 Since the power of suppliers is relatively low we don’t have the risk of forward
integration. We should look into optimizing the number of suppliers. We should also
look into their frequency of the supply.
 Our major threat id from the unorganised sector after the main players. We should
ensure that our customers get to our products before they get to the local brands.
We should look into the shelf positioning of our products. All our products must be
in a pronounced. We should also the retailers to let out our stock before the local
ones.

These are the strategies for the company ‘Godrej’ based on the Industry Analysis.