Harvard Case - Mysore Ghee Stores: Expansion Strategy for Clarified Butter Business
"Mysore Ghee Stores: Expansion Strategy for Clarified Butter Business" Harvard business case study is written by Sivakumar Alur, Durgaprasad M, Sulagna Mukherjee, U Srinivasa Rangan. It deals with the challenges in the field of Strategy. The case study is 17 page(s) long and it was first published on : Mar 1, 2018
At Fern Fort University, we recommend Mysore Ghee Stores (MGS) pursue a multi-pronged expansion strategy focused on market penetration, product development, and strategic alliances. This approach leverages MGS's strong brand equity, established distribution channels, and commitment to quality while navigating the challenges of a competitive and evolving market.
2. Background
Mysore Ghee Stores, a renowned Indian company specializing in clarified butter (ghee), has a rich history of over a century. They are known for their traditional methods of production and high-quality products. Facing increasing competition from both domestic and international players, MGS seeks to expand its business and secure a sustainable future.
The case study highlights the following key players:
- Mr. R.K. Rao: The current managing director, responsible for driving the company's growth strategy.
- MGS team: A dedicated team of employees committed to maintaining the company's legacy and quality standards.
- Competitors: MGS faces competition from both established players and new entrants, including large-scale manufacturers and smaller, local brands.
3. Analysis of the Case Study
To thoroughly analyze MGS's situation, we employ several frameworks:
a) SWOT Analysis:
Strengths:
- Strong brand reputation and customer loyalty
- Traditional production methods and high-quality standards
- Established distribution network across India
- Loyal customer base and strong brand recognition
- Strong financial position
Weaknesses:
- Limited product portfolio
- Dependence on traditional production methods
- Lack of significant online presence
- Limited international presence
Opportunities:
- Growing demand for healthy and natural food products
- Increasing consumer awareness of ghee's health benefits
- Expanding market for premium and organic ghee
- Potential for international expansion
- Leverage technology to enhance efficiency and reach
Threats:
- Intense competition from both domestic and international players
- Rising input costs for raw materials
- Changing consumer preferences and trends
- Potential for regulatory changes impacting the industry
- Economic fluctuations impacting consumer spending
b) Porter's Five Forces:
- Threat of new entrants: Moderate, due to the established nature of the industry and the need for specialized knowledge and infrastructure.
- Bargaining power of buyers: Moderate, as consumers have a range of choices but are willing to pay a premium for high-quality ghee.
- Bargaining power of suppliers: Moderate, as MGS relies on a limited number of suppliers for key raw materials.
- Threat of substitute products: Moderate, as consumers may opt for other cooking oils or dairy products.
- Competitive rivalry: High, due to the presence of both large-scale manufacturers and smaller, local brands.
c) Value Chain Analysis:
MGS's value chain comprises the following key activities:
- Inbound logistics: Sourcing high-quality raw materials (milk, butter)
- Operations: Traditional ghee production process, quality control
- Outbound logistics: Distribution network across India, online sales
- Marketing and sales: Brand promotion, building customer relationships
- Customer service: Addressing customer queries and feedback
- After-sales service: Maintaining product quality and customer satisfaction
d) Business Model Innovation:
MGS can explore business model innovation by:
- Expanding product portfolio: Introduce new ghee varieties (flavored, organic, etc.) and value-added products (ghee-based snacks, condiments).
- Direct-to-consumer approach: Leverage online platforms to reach a wider audience and offer personalized experiences.
- Strategic partnerships: Collaborate with retailers, restaurants, and health and wellness brands to expand reach and market penetration.
- Subscription model: Offer regular deliveries of ghee to loyal customers, fostering customer loyalty and recurring revenue.
4. Recommendations
MGS should adopt a multi-pronged expansion strategy focusing on market penetration, product development, and strategic alliances:
a) Market Penetration:
- Strengthen online presence: Develop a user-friendly website and e-commerce platform, leveraging social media marketing and digital advertising to reach a wider audience.
- Expand distribution channels: Partner with online retailers, supermarkets, and specialty food stores to increase product availability.
- Targeted marketing campaigns: Develop campaigns focused on specific customer segments, highlighting the health benefits and unique qualities of MGS ghee.
- Price optimization: Analyze pricing strategies to remain competitive while maintaining profitability.
b) Product Development:
- Introduce new product lines: Expand the product portfolio with flavored ghee, organic ghee, ghee-based snacks, and other value-added products catering to diverse consumer preferences.
- Focus on premiumization: Develop a range of premium ghee products with unique packaging and branding, targeting health-conscious and affluent consumers.
- Innovation in packaging: Explore innovative packaging options that enhance shelf life, convenience, and sustainability.
c) Strategic Alliances:
- Partnerships with retailers: Collaborate with leading supermarkets and specialty food stores to increase product visibility and distribution.
- Strategic alliances with restaurants: Partner with restaurants and food service providers to promote MGS ghee as a premium ingredient.
- Collaboration with health and wellness brands: Partner with health and wellness brands to leverage their reach and promote the health benefits of ghee.
- International expansion: Explore strategic alliances with international distributors and retailers to enter new markets.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with MGS's core competencies in traditional ghee production and commitment to quality. They also support the company's mission of providing authentic and healthy ghee products.
- External customers and internal clients: The recommendations cater to the needs of both existing and potential customers, while also considering the capabilities and aspirations of MGS employees.
- Competitors: The recommendations aim to differentiate MGS from competitors by leveraging its brand equity, product quality, and unique value proposition.
- Attractiveness: The recommendations are expected to generate positive returns on investment through increased sales, market share, and brand value.
6. Conclusion
By adopting a multi-pronged expansion strategy, MGS can leverage its strengths, capitalize on market opportunities, and navigate competitive challenges. This approach will enable the company to achieve sustainable growth, enhance brand value, and solidify its position as a leading player in the clarified butter market.
7. Discussion
Alternatives:
- Mergers and acquisitions: MGS could consider acquiring smaller competitors or merging with another company to gain access to new markets, technologies, or distribution channels. However, this option carries significant risks and requires careful evaluation.
- Vertical integration: MGS could consider integrating backward into the dairy supply chain by acquiring or partnering with dairy farms. This would give them more control over raw materials and potentially reduce costs. However, it requires significant investment and expertise.
- Outsourcing: MGS could outsource certain functions, such as manufacturing or distribution, to focus on core competencies. However, this could compromise control over quality and potentially damage the brand reputation.
Risks and Key Assumptions:
- Competition: The market for clarified butter is becoming increasingly competitive, and MGS needs to constantly innovate and adapt to stay ahead.
- Consumer preferences: Changing consumer preferences and trends could impact demand for ghee. MGS needs to stay abreast of these trends and adjust its product offerings accordingly.
- Economic fluctuations: Economic downturns could impact consumer spending and affect demand for premium products. MGS needs to develop strategies to mitigate these risks.
8. Next Steps
- Develop a detailed strategic plan: Define specific goals, timelines, and resource allocation for each recommendation.
- Implement a robust marketing and sales strategy: Develop targeted campaigns and promotional activities to reach new customers and drive sales.
- Invest in technology and innovation: Upgrade IT infrastructure, implement digital marketing tools, and explore new product development opportunities.
- Monitor performance and adapt: Continuously track key performance indicators, analyze market trends, and adjust the strategy as needed.
By taking these steps, MGS can successfully navigate the evolving market landscape and achieve its growth objectives while preserving its legacy of quality and tradition.
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Case Description
Mysore Ghee Store (MGS) produced and marketed ghee (clarified butter) in the city of Hyderabad in India. Most of its ghee sales were B2B to businesses like restaurants and sweetmeat makers that used it for food preparation. Decreasing B2B market margins and increased packed ghee sales to end users through the retail market prompted Satish Kumar, MGS's current owner, to enter the B2C market. He tied up with More (pronounced `moray'), a national retail chain for supplying packed ghee in October 2013. MGS's packed ghee was also made available across multiple retail channels ranging from independent mom and pop stores to regional/local chains' retail outlets and e-retailers. Packed MGS ghee sales through the various retail channels were somewhat encouraging. In April 2016, MGS was looking at two sets of issues. The first was how to proceed with the brand building driven marketing communication effort. The second was to rethink the strategic options in front of MGS and assess the need for and viability of a new strategic direction for the company.
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