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Achieving Competitive Advantage: The Case of Innovation at Engro Foods Ltd. Pakistan

Excerpts from Joe Tidd and John Bessant 2013, Dr. Muhammad Nouman (Case write-up for IMSciences) and Engro Foods at www.engrofoods.com

What successful organizations have in common is that they derive their success in large measure from innovation and acquiring and sustaining a competitive advantage. A competitive advantage refers to that characteristic of a business that allows it to outperform its competitors. It's the leverage or edge a business has over its competitors. Whilst competitive advantage can come from size, or possession of assets, etc. the pattern is increasingly coming to favour those organizations which can mobilize knowledge and technological skills and experience to create novelty in their offerings (product/service) and the ways in which they originate and deliver those offerings. Innovation contributes in several ways in helping a firm achieve competitive advantage. For example, research evidence suggests a strong correlation between market performance and new products. New products help capture and retain market shares, and increase profitability in those markets. In the case of more mature and established products, competitive sales growth comes not simply from being able to offer low prices but also from a variety of non-price factors - design, customization and quality. And in a world of shortening product life cycles - where, for example, the life of a particular model of television set or computer is measured in months, and even complex products like motor cars now take only a couple of years to develop - being able to replace products frequently with better versions is increasingly important.

'Competing in time' reflects a growing pressure on firms not just to introduce new products but to do so faster than competitors. At the same time new product development is an important capability because the environment is constantly changing. Shifts in the socio-economic field (in what people believe, expect, want and earn) create opportunities and constraints. Legislation may open up new pathways, or close down others - for example, increasing the requirements for environmentally friendly products. Competitors may introduce new products which represent a major threat to existing market positions. In all these ways firms need the capability to respond through product innovation.

Whilst new products are often seen as the cutting edge of innovation in the marketplace, process innovation plays just as important a strategic role. Being able to make something no one else can, or to do so in ways which are better than anyone else is a powerful source of advantage. For example, the Japanese dominance in the late twentieth century across several sectors - cars, motorcycles, shipbuilding, and consumer electronics - owed a great deal to superior abilities in manufacturing - something which resulted from a consistent pattern of process innovation. The Toyota production system and its equivalent in Honda and Nissan led to performance advantages of around two to one over average car makers across a range of quality and productivity indicators. One of the main reasons for the ability of relatively small firms like Oxford Instruments or Incat to survive in highly competitive global markets is the sheer complexity of what they make and the huge difficulties a new entrant would encounter in trying to learn and master their technologies. Similarly, being able to offer better service - faster, cheaper, higher quality - has long been seen as a source of competitive edge. Citibank was the first bank to offer automated telling machinery (ATM) service and developed a strong market position as a technology leader on the back of this process innovation. Benetton is one of the world's most successful retailers, largely due to its, sophisticated IT-led production network, which it innovated over a 10-year period, and the same model has been used to great effect by the Spanish firm Zara. Southwest Airlines achieved an enviable position as the most effective airline in the USA despite being much smaller than its rivals; its success was due to process innovation in areas like reducing airport turnaround times. Importantly we need to remember that the advantages which flow from these innovative steps gradually get competed away as others imitate. Unless an organization is able to move into further innovation, it risks being left behind as others take the lead in changing their offerings, their operational processes or the underlying models which drive their business.

Engro Foods Ltd. Pakistan based in Sahiwal Pakistan, and a subsidiary of Engro Corporation is one of the leading FMCG companies of the country. It continues a constant effort to innovate in terms of its products, processes and markets in order to sustain its competitive advantage. The company has two broad product categories within which it offers a number of brands;

Food and Beverages

This category includes the following brands;

OLPERS, TARANG, DOBALA etc

Frozen Desserts This category titled "Omore" includes a number of brands.

The major competitors of Engro Foods include Nestle Pakistan, Fauji Foods (formerly Nurpur Foods), Shakarganj Foods and Haleeb Foods etc.

SUPPORTING ARGUMENTS

In order to understand how Engro Foods creates and sustains a competitive advantage against some of its major competitors like Nestle, Fauji Foods (formerly Nurpur Foods), Shakarganj Foods and Haleeb Foods, it is important to understand its innovation strategy from the following perspectives;

The use of knowledge, skills and experience in creating and delivering products. 87 % of Engro Foods is owned by Engro Corporation that has a portfolio of businesses in the following sectors - fertilizers (Engro Fertilizers), foods (Engro Foods), energy (Engro Powergen Limited), petrochemicals (Engro Polymer & Chemicals Limited), trading and processing (Engro Eximp (Pvt.) Limited and chemical storage & handling (Engro Vopak).

The focus on design, customization and quality for product innovation as evident from a wide range of food products highlighted above.

The ability to replace products frequently with better versions, the ability to 'compete in time' and the ability to change products with changing times.

Being able to make something no one else can, or to do so in ways which are better than anyone else is a powerful source of advantage.

QUESTION

Discuss how the Company uses Innovation in order to achieve Competitive Advantage. jQuery2240688945701707925_1597979185185