Developing a Market Leader Brand in Cable Market of Sri Lanka.

Abstract

Main competitor acquired by the market leader brand and acquired Company developed better than the acquiring company in cable market Sri Lanka. Both companies catered to the same market segments adopting different marketing strategies whilst People development and motivation delivered exceptionally well results for the acquired company. Presently both brands are house hold brands in the minds of consumers and are delivering customer expectations. Further Electrical consultants, Electrical engineers and Electricians are equally recommending both brands for their customers and institutions. In 1999, ACL Cables was the market leader in the Cable industry in Sri Lanka and the main competitor was Kelani Cables. Both companies were public quoted companies and they supplied 70% of cable requirements in the country. When going through the total share capital of Kelani Cables, 67% of shares were owned by pacific Dunlop Cable Group (PDGC) of companies in Australia,08% shares were owned by DFCC Bank and 25% of shares have been traded among the share Holders in Sri Lanka. Pacific Dunlop Cable Group decided to discontinue the operation in Sri Lanka and based on the agreement between DFCC and PDGC, 67% shares were acquired by DFCC Bank which was owned by PDGC. The share capital of DFCC bank went up to 75%. DFCC Bank wanted to sell out total shares and they got two offers, one from ACL cables and another offer from Hatton national Bank jointly with the management of Kelani Cables. After evaluating all the avenues and considering the future of Kelani Cables, finally DFCC decided to sell the total shares to ACL cables. With this decision, the market leader acquired its main competitor in the cable industry in Sri Lanka. DFCC Bank may have considered the future of Kelani Cables as they had 300 workers and the strength of the acquiring company before they took the decision. When acquiring Kelani Cables, turnover ratio was ACL: Kelani, 79%:21% after seventeen years of acquisition the turnover ratio became ACL: Kelani, 50%:50%.It is an important point to learn how the acquired company reached this level and what strategies and new methods were adopted by Kelani Cables to come to this junction. Chairman Mr Upali Madanayake, Deputy Chairman Mr Suren Madanayake and board of Directors gave a high degree of autonomy to run Kelani Cables independently to get the maximum benefit to the group. This was considered as the most important strategic decision taken at the initial stage for visualizing the future of both companies. Today two strong brands are competing with each other for individual market shares and finally benefitting the group. The other important area was to keep strategic interdependence at a low level and they wanted to operate Kelani Cables independently. Both companies operated based on their own strategies. Mr Suren was well aware of cultural incompatibilities of both companies and he wanted to grow both companies their own way by adopting modern technology. Preservation approach was continued from acquisition to date as Kelani cables operated with a high degree of autonomy and independence. ACL Cables and Kelani Cables had same product portfolio and they catered to the same market segments. Most important and difficult part was to manage two organizations without having conflicts with each other. Mr Suren always set guide lines for both marketing operations and everything did with the intention of growing both the companies. From 1999 to 2003 Mr Suren managed the company as Managing director of Kelani cables and with his busy schedule he couldn’t spend much time and finally Chairman, Mr Suren and board of directors decided to appoint Mr Hemantha Perera as the Managing Director (MD) of Kelani Cables. He managed the company from 2003 to 2010 and during the period many initiatives were taken place for the growth potential of the organization. This was a leadership turnaround of the company. First thing he did was, brought the vision of the organization as “Market Leader in the Cable Industry” and subsequently changed the logo with strategic meaning and with blue and green colors. Even today this is depicted as one of the best logos in Sri Lanka. MD realized that with the union he cannot bring the company to the next level and step by step discontinued the union with so much of difficulties. Parallel a joint consultative committee (JCC) was formed and all workers problems were handled through JCC by giving immediate solutions for their day today problems .Un unionized environment immensely contributed to implement new systems and new things. New HR system introduced to the organization and new employee evaluation system introduced to measure annual performances beneficial way to the workers and to the company. Non-performers were weed out and right people placed to the right positions. Finally performance based increments were implemented at all levels of the organization. Discipline environment created everywhere in the organization, stern disciplinary actions were taken against the people who deviated from set rules. At the same time a considerable amount of money was spent for training and development of people and all company promotions were given based on the performances. This is the set of human resource turnaround took place in Kelani Cables in uplifting its corporate journey. Brand differentiation strategy was started and Kelani brand was differentiated as the safest brand in the category and effective marketing campaigns carried out in his period. The positioning of Kelani brand continue to be associated with safety at all times. Kelani brand visibility has been increased dramatically in the market and this has no doubt helped to increase consumer and dealer loyalty. New product development mechanism was brought to the system and many new products developed and marketed successfully. Service levels improved dramatically and continuous customer feed backs monitored to ensure Kelani service levels. A technical services department was created and free technical services made available for local and international customers on cable selection. Meanwhile, company identified that electrician plays a major role in influencing on cable brand selection and an electricians club was started with the objective of building up relationship between company and the Electricians .Presently more than 7000 electricians are benefited in various ways. In 2007 a “Kelani Saviya” CSR project was started with the assistance of the University of Peradeniya and 50 Electricians are accommodated annually by the University for a one year Program. This program continued for 10 years and extended for another five years by Present Director/CEO and the same program has been started at the University of Jaffna naming “Kelani Shakthi” by his direction. This is one of the remarkable initiatives took place for branding perspective. In 2010, Mr Mahinda Saranapala was appointed as chief executive officer (CEO) of Kelani Cables and he maintained the same growth momentum with the team .He contributed a lot for implementing and maintaining 5S concept in the organization. He came with an engineering background and contributed a lot to development of the operation area. Many productivity improvements were done in many areas in the organization. He maintained the same discipline level what Mr Hemantha Perera initiated and practiced. Presently he serves in the capacity of Director/CEO of Kelani Cables. In brief, those initiatives strengthened the value chain of the company to deliver premium brand value proposition via differentiation. Likewise, the event of ACL acquires Kelani Cables was not just a matter of acquisition but left a proven corporate lesson. Conclusively, this is one of the greatest success acquisitions in Sri Lanka. It is important for management students to learn how competitive advantage is created as a group to develop successful growth strategies through acquisitions. Out of different types of integrations, this can be treated as an example for “preservation approach” where high degree of autonomy and low level of interdependence. The overall content of its case story provides insights to navigate in finding answers on how transformational leadership practiced in an organization and how people motivation delivered exceptionally well results whilst it invites leaners to explore how acquired company grown better than the acquiring company during the last 17 year period.