An enParadigm paper on Amul’s strategic ‘fit’, which gives it a unique market position and makes it virtually immune to imitation by competition.

1. WHITE PAPER
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Amul: The untold story
An enParadigm paper on Amul’s strategic ‘fit’, which gives it a unique market
position and makes it virtually immune to imitation by competition.

2. 1. Executive Summary
2. What is strategic ‘fit’?
3. The Amul story
4. Amul’s strategic fit
5. About enParadigm
Contents
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4
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3. enParadigm | White Paper | Amul’s strategic fit | 3
We all know Amul as one of India’s most recognized brands – as a bellwether that
has shaped a significant portion of the country’s economic and agrarian history.
One of Amul’s primary achievements (which is often ignored) is it established that
cooperatives can also be competitive, sustainable, independent and profitable
in the face of national, and even well-muscled international commercial rivals.
This paper explores how Amul built its strategic ‘fit’ as a farmer-owned, profit-
distributing co-operative as well as a lean, market-savvy, R&D-oriented corporate
entity.
First, it created a set of powerful, scalable, sector-specific competitive advantages
that helped it take a leadership position in its market. Next, it ensured these
activities complemented each other, creating a network of interdependent
advantages that are, by design, very difficult for competitors to imitate.
Amul’s strategic ‘fit’ is a clear and uniquely Indian addition to celebrated examples
like Southwest Airlines, Starbucks and Ikea.
Executive Summary

4. Strategic fit is a network of interdependent and complementary differentiators
designed to provide the company with a unique and sustainable competitive
advantage. From the company’s perspective, it is the process of taking up a clear
strategy based on unique activities relevant to the market – and then
building/matching all its resources and capabilities to strengthen this unique-ness.
For example, Southwest Airlines, a US-based carrier, has been profitable for 41
consecutive years now. Its recipe is a strategic fit, which it achieved by orienting
and developing all its capabilities with a single target customer in mind – the low-
cost flier looking for point-to-point routes between small towns and secondary
airports. While this part seems simple enough, it managed to shape every activity -
from aircraft selection to crew training to ticketing – into a set of differentiators that
supported (and were supported by) the other differentiators.
The Southwest Airlines Strategic ‘fit’
What is Strategy, Michael Porter, 1996
What is strategic ‘fit’
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6. Amul began as a cooperative movement nearly 70 years ago, and has grown into a
federation of many cooperatives - 1,44,500 dairy cooperative societies across 188
districts in 22 Indian states. Their success has been built around combining the
advantages of a cooperative and a corporate model. It’s core strength lies in its
stated principles of a) Linking milk producers and consumers directly and eliminating
the middle-man, b) Ensuring milk producers also control up-stream activities like
processing and marketing, and c) Professional, commercially-sound management to
keep them competitive.
Amul operates on a 3-tier model, with cooperative entities at state, district and
village level. The village co-ops function as daily procurement cells. Milk then flows to
processing units at the district level, while the state unit coordinates marketing,
access, pricing and supply to consumers. It has also established a daily flow of cash
in the opposite direction – cash gets all the way back to village c-ops and farmers are
paid on the same day. This creates an intrinsically credit-efficient system which Amul
has utilized to full effect.
The Amul model
With inputs from the IJSER Jan-13 paper by
Dr. Ruchira Prasad and Dr. Rupali Satsangi, ISSN 2229-5518
State Milk Federation
District Milk Unions
Village Dairy Co-ops
Market (consumers)
Member producers
Milk Payment
Milk & milk
products
Sales
revenue
Bonus
Dividend
Additional price diff.
Cattle feed
Vet. and AH services
Rural health schemes
Financial/tech. support
for setup, expansion &
upgrades
Marketing direction,
distribution support
The Amul story
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7. Amul’s strategic fit is based on a network of complementary and interdependent
differentiators
Product
Variety
Reach &
availability
Affordable
prices
Quality
Massive,
loyal
supplier base
Decentralized,
networked
supply chain
Lean
processing &
distribution
Financial
security
Health
benefits Equity
participation
Products at all
price points
Outsourced
non-core activities
Heavy IT
integration
Surplus/deficit
balancing
Tight inventory
control
No credit, all-cash
transaction
TQM and
Kaizens
Cold-chain
highways
Across the
country
Cattle feed and
vet. services
No-frills marketing, utilizing
umbrella branding and
emotional/patriotic
connect
Profit reinvested
in R&D
The Amul Strategic ‘Fit’© enParadigm Knowledge Solutions
Amul’s strategic fit
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8. Amul from the customer’s viewpoint:
1. Wide variety of products (most
comprehensive dairy portfolio by far)
2. Unparalleled reach (available across
the country)
3. Affordable prices (products at all price
points beginning with the lower end)
Pricing is a major source of advantage for
Amul. With its lean processing and
distribution and scale of operations, it has
the ability to balance surplus and deficit
in supply – a critical advantage in
extremely perishable goods.
Amul offers a full range of
dairy products, at almost every
identified price-point, across a
vast swathe of the country
with reliable deliveries,
assured quality and the
promise of each purchase
being a socially-conscious,
patriotic act.
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Amul leverages the advantages of both cooperatives and corporate entities, while
avoiding the pitfalls of both to create an effective ‘fit’. As a federation of cooperatives, it
constantly adds to its membership – creating a massive, loyal and geographically-
distributed supplier base, which is vital for perishable raw materials like milk.
Amul also exploits its social capital, as a successful co-op and a source of pride for
India – which means it needs to spend less than its competitors to generate the
same demand for its products.
Amul from a company’s viewpoint:
1. Massive, loyal supplier base (profit-distributing cooperative model)
2. Lean processing and distribution (outsources non-core activities)
3. Focus on research and development (appropriate reinvestment of profits)
Amul manages its R&D professionally, reinvesting its profits in quality and yield-
focused research, which ensures they stay abreast of large dairy corporations, while
miles ahead of other cooperatives.
Amul thus combines the best of both worlds (cooperative and corporate) to build,
maintain and constantly enhance a network of interdependent advantages that has
thus far proven to be imitation-proof.

10. About enParadigm
We help you turn your managers into a substantial, sustainable competitive
advantage, through simulation-based interventions aimed at middle and senior
management. Run by industry experts and IIM Ahmedabad alumni, we have
conducted workshops for companies such as Citibank, Coca Cola, HCL, Dell, Dow,
Essar, GMR, HSBC, IBM, Indian Oil, Merck, NIIT, SAP, and Tata Motors.
One key learning from our workshops is the ability to understand the benefits of a
strategic fit for the participants’ company, as well as the tools to effectively work
towards a fit – linking short and long-term activities toward building a unique and
hard-to-copy position for your firm in its target markets.
enParadigm | White Paper | Amul’s strategic fit | 10

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