This article is based on the viewpoints expressed by the author in the 2 earlier posts - What Ails Indian Aviation Industry & What is Core Competence...
In my earlier post I mentioned that businesses should follow a consistent strategy and take a position according to the strategy. To throw further light on this statement, I like to cite few examples where companies tried taking multiple positions and failed to deliver.
- Maruti Udyog is the market leader and a very strong brand in entry level segment and cars in price range of 3 to 7 Lacs. Maruti tried taking a strong position in Cars/ SUVs in 16 to 20 Lacs price segment by launching Maruti Grand Vitara & Maruti Kizashi but both the products never really took off and bombed badly.
- Hyundai is a strong brand in 4 to 7 Lacs price band with offerings like i10, i20, Santro etc. It also tried to compete in SUVs in price range of 20 to 25 Lacs by launching Hyundai Santa Fe but again failed badly.
The above are examples where businesses tried to do something not consistent with their Core Strategy and also Core Competence and fell flat.
If a company wants to come with a successful offering which is not consistent with their Core Strategy, then they need to create a separate brand/ company and keep it completely independent. I will elaborate this with few examples:
- Toyota is a hugely popular brand in mid-segment sedans with offerings like Corolla and Camry. When it wanted to offer a product in luxury segment, it created a new brand - LEXUS. The entire leadership team, employees, dealerships, service stations etc for Lexus is separate and does not share anything with Toyota.
- Tatas, again hugely popular in entry level cars (3 to 7 Lacs), when decided to operate in premium luxury segment, decided to buy-out JLR.
- Volkswagen, again very popular in mid-segment sedans created a new brand AUDI in premium segment. It also has another successful brand - SKODA.
From the above examples it is obvious that businesses need to be consistent with their Core Strategy, else they will not be successful. Another important point to be noted here is that when a business focuses consistently on the same strategy, it further enhances its Core Competence thereby increasing the distance between itself and its nearest competitors.
Core Strategy & Core Competence are interlinked and one drives another thereby improving the brand, positioning and success of a business.
Above article clearly identifies importance of Brand association & Brand recognition. In order to have presence in varied product portfolio, companies use tactics such as operating under different brand names or developing new brand to relate to customer preference.
ReplyDeleteHowever, FMCG companies such has HUL (house of Brand) can operate all brands under one umbrella of HUL.
Very true Mangesh... FMCG companies operate each brand individually & most of the times, a consumer doesn't know which Company is the owner of the individual brand.
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