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"Rivals Can't Copy a Consumer Company With a Strong Distribution Network"

"Rivals Can't Copy a Consumer Company With a Strong Distribution Network"

Shekhar Bajaj, CMD, Bajaj Electricals

Photograph by Rachit Goswami Photograph by Rachit Goswami

Q. What was the problem that you were grappling with?

A. Bajaj Electricals consumer-facing business - such as small appliances, fans and domestic lighting products - faces challenges from local products because of the low-entry barrier in these product categories. Therefore, it becomes imperative to keep a check on competition and devise a strategy to create a long-term, sustainable and competitive organisation.

Q. Who did you approach and why?

A. We approached Eliyahu Moshe Goldratt, an Israeli business management guru, who is known for his Optimized Production Technique, the Theory of Constraints and Critical Chain Project Management.

Q. What was the advice?

A. Goldratt said that ubiquitous availability is the key to lasting success of a consumer brand. If the consumer company has a strong distribution network, the rivals will not be able to copy it easily. When we pursued creating a strong network, we realised our distributors and retailers were unhappy as their return on investment was poor due to pressure from wholesalers. Based on the advice and feedbacks, we decided to shut down wholesaling, despite the fact that we were growing 15-20 per cent year-on-year.

The new distribution-led supply chain model had many detractors. But we embarked on the journey, knowing well that it would have a short-term hit on financial performance. It was my son and then MD, Anant Bajaj, who spearheaded this transition.

Q. How effective was it?

A. It would have been a challenging initiative for any professional manager because top management expects good quarterly results, and such a decision, to take a short-term hit, was risky. Perhaps the biggest challenge for me was to counsel and steer my team to make this change and implement the model fearlessly. Now that it has succe-eded, everybody hails it as a right decision. Competitors tried to copy this model, but have not succeeded.