In this piece, I explain how the makers of Indomie noodles used the same strategy Dangote Group had deployed across industrial sectors to defeat Dangote Noodles. The accumulation of capability which Dangote Group uses to crush competitors did not work because Dufil Prima Foods (makers of Indomie) did the same thing from electricity generation to production, for its noodles business. With their vertically integrated business, there was no left inefficiency which Dangote could exploit to improve quality and reduce price.
In the end, an established brand won and Dangote Noodles could not dislodge them. Dangote Group later sold its noodle business to Dufil Prima Foods. There is a big lesson here: if you build a strong moat, you can protect your castle. Indomie noodles built a moat and was able to defend itself from Dangote Noodles.
As you utilize, combine and recombine factors of production to create products and services to fix market frictions, you must acquire, develop and deploy upstream capabilities, to remain competitive in markets. Those capabilities must compound over time and must cushion strategic positioning.
How are you defending your business castle? Are you vulnerable to new entrants? What is your playbook? Are the capabilities compounding?
Since we started Tekedia Mini-MBA, more than 15 companies in Nigeria (source: internal intelligience) have tried the same model including a university. But all of them have all gone or abandoned the idea. For us to win today and tomorrow, we must acquire capabilities to stay relevant. That is what business is all about.
Are you doing the same on your mission? How can you put efforts to anticipate the perception-needs of your customers before they even ask for those? Protect your #castle, build a strong moat!
Comment 1: This sounds like academic theory to me. Dangote cannot, and should not, invest in all industry sectors. Dangote could not compete with Dufil Prima Foods because their product was simply not good comparatively. Did you ever get to taste Dangote Indomie? That’s the same reason his Liberty Bank and MRS (Texaco) downstream oil business died. They had no exciting value proposition and their service culture was just too bad. Does Dangote Group ever engage Business Strategists to design their Value Proposition? How can a business compete without competitive value proposition? I think the man is just throwing money about. Maybe he gets the money cheap in the market. He has indicated interest in Peugeot Auto Assembling and Tomato Processing. Must he play in all industry sectors? I have been waiting to hear about his entry in the Telecom industry too. I cannot fathom his so called “Play Book” rather what I see with Dangote Group is “Copy Book” QED!!
Comment 1A: “They had no exciting value proposition and their service culture was just too bad.” Indeed the two most important elements of winning in an industry space. ‘Value proposition’ is a key element of strategy development and ‘culture’ is so powerful, as Peter Drucker penned, “eats strategy for breakfast”.
My Response: “They had no exciting value proposition and their service culture was just too bad” because he failed. You listed all failed endeavours and concluded: bad product, no competitive advantage etc because those are convenient. The academic theory is that Indomie defended their castle, UBA/Zenith/Firstbank etc did same against Liberty Bank, etc. If those entities exit, you will notice that Dangote Noodles, Liberty Bank, etc have value propositions. Simply, the story cannot be all about what or not Dangote did, but what others did. And that is my focus in the piece. Why? Liberty Bank would be here if not for GTB/FBN/UBA, etc.