This case study traces the rapid success of an Indian sanitary napkin company whose founders suddenly faced a crucial decision that would determine the nature and fate of their company. How that decision arose and how they faced it make valuable reading for all students of entrepreneurship.
Fast-growing entrepreneurial businesses pass through a series of predictable stages. Understanding these stages and predicting the nature of the next set of challenges that are likely to occur can help entrepreneurs better navigate their company on its entrepreneurial journey.
This case study examines the stages through which one such company has passed. It asks students to address a key decision that confronted the founders of Royal Hygiene Care, an Indian company that had achieved rapid success with its original business model but suddenly faced a supply problem that compelled it to find a new way forward. The way it responded to its dilemma would determine not only whether it succeeded or failed but also the kind of company it would become. The case also illustrates two other key components of entrepreneurship: the ability to turn a problem into an advantage and the willingness to change direction in response to a change in circumstances.
Royal Hygiene Care had its genesis in a moment of crisis for an Indian entrepreneur, Rakesh Kaul, who, having built up a successful polymer recycling business, faced a sudden crisis when his sole supplier of raw material went bankrupt, taking with it a large sum in advance payments.
Having had a good relationship with Rakesh and wanting to minimise the impact on his business, the supplier gave Rakesh access to his warehouse in Canada and suggested that he take whatever he wanted. Entering the building, Rakesh found row after row of boxes filled with sanitary napkins, a relic of the supplier’s other role as a major broker of high-quality sanitary napkins for private-label suppliers.
With his polymer business facing a bleak future, Rakesh called a contact in India, Mustaq Hemani, and asked him to conduct a quick analysis of the marketing possibilities for these products. The results were promising. At a time when traditional conservative attitudes towards feminine hygiene products in India were changing and when prices for sanitary napkins were relatively high, there appeared to be an opportunity. Encouraged, Rakesh removed the 11 million napkins from the warehouse and shipped them to India.
This case study highlights some of the many problems that can face entrepreneurial businesses. Import duties on the napkins turned out to be twice as high as expected. Due to difficulties with storing such delicate products, warehousing costs were four times original forecasts. Their plan to sell the napkins as white-label products for other companies to brand was thwarted by the small size of each order, making it impossible for them to move the products at anywhere near the rate necessary to make the business profitable.
The partners had to change their plan completely, creating a brand for the napkins, packaging them at a range of different price points and selling them into the large retail chains that were expanding rapidly in India, as well as beginning an intensive programme of innovative door-to-door promotion. The result was a surge in demand for Royal Hygiene’s napkins that consumed the large but limited stock far more quickly than Rakesh and Mustaq had anticipated.
That was when the partners suddenly found themselves facing a dilemma that went to the heart of their business. They had established a successful brand and a growing market but they were rapidly running out of stock. Failure to fill orders was likely to see them lose customers to rivals, so they had to make a swift decision on how to build more stock, whether by developing an importing operation or by setting up a manufacturing side. Both of these options contained potential advantages and disadvantages, with neither emerging clearly as the obvious option.
Based on extensive interviews with the founders and analysis of conditions in wider Indian society and the economy as well as in the retail market, this case study is highly useful as a basis for the discussion of some of the many kinds of problems that can affect entrepreneurial companies and how they can be addressed.
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