SYMBIOSIS INSTITUTE OF INTERNATIONAL BUSINESS (SIIB) constituent of SYMBIOSIS INTERNATIONAL (DEEMED UNIVERSITY

)
(Estd. Under section 3 of the UGC act 1956, notification no. F-9-12/2001(A)-U-3 of the Govt. of India)

Accredited by NAAC with ‘A’ Grade

REPORT Course Name: Business Analysis Code: 020242204

Project name: AMUL –THE TASTE OF INDIA Programme: MBA-AB Season: April 2009. Semester- II Seat No. Name of the Student: Boddu Divya PRN: 09020242007
Submitted to Prof.. Dr. Vivek Sane Presentation date: 1st Dec ‘09

Batch: 2009-11 [Fresh]

Submission date: [to be written by receiver at the time of submission only]

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ACKNOWLEDGEMENT
Being fortunate enough to be a part of Symbiosis Institute of International Business, Pune, I would like to thank Dr.Mrs. Rajani Gupte, Director SIIB and Dr. Vivek Sane for giving me this opportunity to handle and carry out a business analysis project on AMUL, as a part of the curriculum. Through this project, my knowledge about dairy industry has been updated and I hope the same with my colleagues. I would also like to thank my friends who had earlier done similar projects on Amul, for their valuable inputs and support.

DIVYA BODDU

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INDEX
I] ACKNOWLEDGEMENT…………………………………………………….02 II] EXECUTIVE SUMMARY…………………………………………………..04 III] CHAPTERS
1. INTRODUCTION 1.1 HISTORY OF AMUL……………………………………………………………………06 1.2 AMUL FACT-FILE……………………………………………………………………...07 1.3 AMUL LOGO……………………………………………………………………………07 1.4 AMUL PLANTS…………………………………………………………………………08 2. DAIRY INDUSTRY ANALYSIS-PORTER’S 5 FORCES………………………………………11 3. AMUL SUCCESS 3.1 3 C’S MODEL…………………………………………………………………………….13 3.2 SALES TURNOVER……………………………………………………………………..14 3.3 ACHIEVEMENTS………………………………………………………………………..15 4. AMUL BUSINESS MODEL –ANAND PATTERN…………………………………………….17 5. 4 P’S OF MARKETING 5.1 PRODUCT………………………………………………………………………………..19 5.2 PROMOTION…………………………………………………………………………….23 5.3 PLACE……………………………………………………………………………………27 5.4 PRICE…………………………………………………………………………………….28 6. TASTE OF COMPETITION 6.1 THE COMPETITORS……………………………………………………………………30 6.2 THE STRATEGIES………………………………………………………………………31 6.3 THE AMUL- NDDB TWIST…………………………………………………………….31 7. FINANCE MATTERS!! 7.1 CAPITAL STUCTURE…………………………………………………………………..33 7.2 WORKING CAPITAL……………………………………………………………………33 7.3 SOURCES OF CAPITAL…………………………………………………………………34 8. CONCLUSION 8.1 WEAKNESSESS AND THREATS………………………………………………………36 8.2 AMUL GOES GLOBAL………………………………………………………………….36 8.3 THE WAY FORWARD…………………………………………………………………….37

IV] REFERENCES…………………………………………………………………38

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EXECUTIVE SUMMARY
AMUL is the cooperative sector.It is the instution of the farmer, for the farmer and from the farmer.The AMUL gives pleasure to the farmer to change the own price, which was not possible in earliar years. This union was born on 14th December 1946. The union provides facilities to its members like more return, satisfactory price, insemination, first aid, group Insurance, cattle food at concessional price etc. AMUL dairy has five main departments like Finance, Personal, Commercial, Milk Procurement and Production. The finance department does the clerical work and takes care of inflow and outflows of the cash. The other work of Finance Department is to audit of annual work. The Personal Department handles the work regarding personal like the work regarding personal like appointment, requirement, promotion, transfer, dismissal, demotion, performance appraisal etc. The commercial department conducts all promotional activities of local area.The pricing decision of buttermilk is taken at commercial department. The marketing work is handling by GCMMF. The production department produces the product the product with the help of latest technologies. The production is done according to ISO marks requirement. The milk procurement department gets the milk every day two times from 92 routes and 1084 societies. For the maintenance of qualities of milk there are 167 chilling units. This report contains how Amul was born, its measures of success in terms of sales turnover and 3 C’s model, the reason for such a success [4 P’s of marketing, taste of competition], the financial issues related and the weaknesses and threats associated. This report has also highlighted Amul’s foreign ventures and what in my perspective; Amul could do to grow more.

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INTRODUCTION
1.1 HISTORY OF AMUL
In 1929, Peston Edul Polson established Polson Model Dairy at Anand to manufacture butter, ghee and casein and in 1944, the Bombay Municipal Corporation Milk Supply was inaugurated. Monopoly rights were awarded to Polson for Procuring milk from Kaira. Amul's genesis is linked to the freedom movement in India. Sardar Vallabhbhai Patel, an eminent Indian freedom fighter encouraged the dairy farmers from the Kaira district in Gujarat to form a cooperative to counter the 'exploitatively' low prices offered for their milk by the monopoly milk 6

supplier of the area, Polson's Dairy. The dairy farmers met in Samarkha (Kaira district, Gujarat) on the 4th of January 1946, and decided to set up a milk producers' cooperative that would deal directly with the Bombay government, the final buyer of their milk. This was the origin of the Anand model. Initially, when the Bombay government refused to deal with the cooperative, the farmers called a strike. The government finally relented when Bombay went without milk for a fortnight. The successful union registered itself as the Kaira District Cooperative Milk Producers' Union Ltd. (KCMPUL), Anand, in Gujarat in December 1946. And so did GCMMF and brand AMUL establish consequently.

1.2 AMUL Fact-file

• •

Type :Cooperative Headquarters: Anand, India 7

• • • • • •

Key people: Chairman, GCMMF - P. G. Bhatol Industry :Dairy Products Revenue :INR 67.11 billion, $15.04 billion USD (‘08-’09) Employees :735 employees of Marketing Arm. However, real pool consist of 2.8 million milk producers Website: www.amul.com CRISIL, India's leading Ratings, Research, Risk and Policy Advisory company assigned "AAA/Stable/P1+" to the various bank facilities of GCMMF.

1.1 AMUL LOGO AND ITS IMPORTANCE

Symbol of “AMUL”(Anand Milk Union Ltd.) is ring of four hands, which are coordinated each other. The actual meaning of this symbol is coordination of hand of different People by Whom This Union is now at top. The first hand is of Farmer, second hand of Processor, third hand of Marketer and fourth hand of Customer. It’s the joint efforts & productive team work that has enabled its success.

1.2 AMUL PLANTS

 First plant is at ANAND , which engaged in the manufacturing of milk, butter, ghee,
milk powder, flavored milk and butter milk. It is establish in 1973.

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 Second plant is at MOGAR , which engaged in manufacturing chocolate, Nutramul,
Amul Ganthia and Amul Bite. This plant establish in 1973. It is situated on Anand – Vadodara Highway No. 8.

 Third plant is at Kanjar i , which produces cattle feed. Old plant establish in 1964 &
new plant in 1980. Fourth plant is at Khatra j , which engaged in producing cheese. It is situated between Nadiad – Ahemdabad

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Complex chiller at one of the plants

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DAIRY INDUSTRY ANALYSIS

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2.1 PORTER’S FIVE FORCES

Before we actually analyze AMUL as a company, industrial analysis is a primary requisite. I have used Porter’s five forces model here. There are no entry barriers because, all we need is a bunch of high yielding milch animals, sell the milk, get returns and expand. Consequently there will be many brands and local players making up the competitive rivalry. Bargaining power of customers is high because of various competitors. Bargaining power of suppliers is low because the suppliers are rural milk producers. Even if the milk suppliers are paid Rs. 200 per kg fat of milk instead of say Rs. 245 per kg fat of milk, they would want to bargain much on this.  Threat of substitutes is high because of availability of other products like jams, sauce etc.

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3.1 3 C’S MODEL

SUCCESS OF AMUL

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COMPANY: ✔ Largest milk brand in Asia. It is no. 1 in Asia and no. 2 in the world ✔ More than 30 dairy brands ✔ Market leader in ghee and butter with 85% market share ✔ Very strong supply chain ✔ Enjoys fine reputation. Though the company has grown so big, it never left its key players- the milk suppliers ✔ Quality with affordability CUSTOMER: ✔ Are extremely satisfied ✔ Moved from loose milk to packaged milk. Moving consumers from loose mil to packaged milk and then gradually moved them up the value chain i.e., the tetra packs. ✔ Being exposed to a brand, its natural for a customer to try more products. This the Umbrella strategy that Amul follows. ✔ Improved socio-eco conditions of the customers, has changed their lifestyle and thus the scope for product innovation has increased.

COMPETITOR: ✔ Amul has to defend against Mahananda, Vijaya, Milma, and other cooperative milk brands ✔ Aggressive moves against Britannia, Nestle, Mother Dairy, Kwality ✔ Amul has a competitive sustainable advantage. This lies in the procurement part. Its ability to collect 7 million liters of milk from 2.6 million farmers and onvert it into Rs. 6 crore worth products and distribute them to 5 lakhs retailers is a tough job. ✔ Intelligent marketing

3.2 AMUL SALES TURNOVER
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The above table clearly shows that the annual sales turnover has been only increasing over the years. The only fall in the sales turnover was noticed in 1998-99 – 1999-00 and that of very less amount.

3.3 ACHIEVEMENTS
 GCMMF bags APEDA AWARD for 11th year in a row [‘06-’07]  Amul Pro-Biotic Ice-cream gets the International Dairy Federation Marketing Award at World Dairy Summit [2007]  Ramkrishna Bajaj National Quality Award [2003] – GCMMF top scorer in service category  Amul - The Taste Of India (GCMMF) receives International Cio 100 Award for resourcefulness in IT management and practices [2003]

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 Rajiv Gandhi National Quality Award – 1999 , for excellence in business results, customer satisfaction as well as societal and environment impact.  ISO 9001 and hazard Analysis Critical Control Point [HACCP] Certification , Australia ✔ 1st food company in Asia ✔ One of the 100 companies in the world

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4.1

AMUL BUSINESS MODEL
ANAND PATTERN
State Marketing Federation All dairies in a State (GCMMF in Gujarat) 22 State Federations in India District Milk Processing Unions Every district in the state 12 district unions in Gujarat 170 unions all over India

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Village Co-operative Societies All villages in a district 72,774 villages in India Milk Producers All milk producers in a village 2.1 million in Gujarat 9.31 million in India

The State Marketing Federation members comprise of the representatives from District Milk Processing Unions and it takes decisions regarding the price paid to the district unions [which is fixed The District The across

4 P’s OF MARKETING

Milk Village

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5.1 PRODUCT
Over the years, Amul has come up with many products. There has been product line extension as well as product category extension. The picture below is a snapshot of various SBU’s of Amul.

Using the BCG matrix for product analysis, we can know which of these SBU’s is of utmost importance to the company or the brand Amul.

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Looking at the matrix above, we may say that Amul needs to perform product innovation if it wants to convert Amul chocolates, masti dahi , Amul mithai mate, Amul lassi to star products. The above matrix also indicates that, Amul may also choose to disinvest in Nutramul and Amul shakti. The following table describes the market share that Amul holds for each product line.

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In ice cream, HUL is just above the market share i.e.,28.22 % , with Mother Dairy in the 3rd place with 8.66 %. In chocolates, Cadbury has the maximum share of 70 % and Nestle has 20 % of the market share. AMUL, being a co-operative union offers variety of services to the members of village and district level co-operative societies. The main services offered by AMUL are: ➢ Medical Facilities for the Cattle Of Farmer:AMUL provides medical facilities to cattle of farmer at a concessional rate of Rs. 50/- includes medicines, treatment charge.

➢ Cattle Feeding:AMUL provide the “Dan” to the cattle of member farmers. AMUL produces the “by pass protein Dan” and “Purk Dan” to the cattle of farmers at reasonable cost. ➢ Artificial Insemination(Cattle Breeding):AMUL has established “Artificial insemination center” at Ode village near Anand. ➢ Free Animal Vaccination:Often Animals are caught up in unknown diseases. To protect the animals from such diseases periodical Vaccination programme are arranged by AMUL. ➢ Farmer Education Programmed:Generally, farmers believe in superstitions. Further, he is often not aware about how the animal should be taken care which things should be given prime concern while milking the animal. AMUL provide guidance and education through arranging seminar on periodic basis. ➢ AMUL also provides scholarship to children of member of society. 21

Amul does all the above said, to ensure high yield of milk and thus ensure that there is constant supply of the raw material in sufficient quantity. Amul’s STP is as follows Segmentation Segmentation is not so easy because of mixed audience and various culinary applications of Amul products. Nevertheless, we may do segmentation based on: • Consumer type: For Kids- Amul kool, Amul chocolates, Nutramul, etc For Women-Amul Calci + For Youth-Utterly delicious pizza, cheese variants etc For the calorie conciuos-Amul lite, Amul lite slim trim milk etc For health conscious-Nutramul, Amul shakti etc.

Industry type: Milk- Ice cream manufacturer, restaurants, coffee shops etc Butter/Cheese/Ghee-Bakery, pizza retailers, snack retailers

Targeting After segmentation, one has to decide where to find this market segment and what should be the size of this segment. Example, Amul has identified youth as one of its potential segments. Now it has to decide where to find youth who will actually go get their product and the number of youth that the company, i.e., Amul requires. Amul has come up with Amul parlours for this reason. Positioning ✔ A mass market player, no premium offerings 22

✔ USP – Quality with affordability ✔ “Amul” as “Taste of India” - creating value for everyone in the value chain, both customers and farmers. ✔ New offerings for health conscious and vibrant India in the form of Probiotic wellness ice-cream, sugar free delights for the diabetic patients and Amul kool café for the youth of today.

5.2 PROMOTION

One of the most conservative FMCG entities — GCMMF — spends a mere 1% of its turnover on promotions. Amul has written and re- written the rules of the game. Amul butter girl is one of the longest run ad campaigns in the country for 43 years!!!

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And a few more,

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The reason Amul topicals are so successful because, it doesn’t plead the customer to go buy Amul intantly. Instead, Amul captures latest news headlines and showcases them in such a way that the moment we see it, we register it n our brains. The basic aim here is to make butter synonymous to Amul. Next time we go to buy butter, the first brand that will come to the mind is Amul. Amul uses rotational promotion strategy to be in touch with customers/ consumers throughout. After every 3-4 years, Amul comes up with something new and a promotional campaign for the same is placed. ➢ Amul Ice-cream 1996 ➢ Category re-visited in 1999, in order to improve availability of the product and make it affordable ➢ Amul Cheese in 2001 ➢ Amul Masti Chaas in 2004-05 ➢ Nutramul and Kool Kafe in 2006 ➢ Amul Koko — cold chocolate drink in 2009

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Amul promotes itself by conducting various contests such as: • • Chef of the year- in this, the participants are required to use as many Amul products as possible Amul Maharani of the year – in this, the participants are required to fill up questionnaires and then there is a lucky draw.

Amul promotes itself by sponsoring various movies, and tv shows. For example

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Amul publishes some books periodically. Basically they are related to Amul or dairy industry as such.

Amul also gives away academic excellence awards for school children every year. They are called Vidya Shree – for 10th std and Vidya Bhushan – for 12th std students.

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5.3 PLACE
Amul’s success today is partly because of its strong supply chain design. Below is the schematic diagram of Amul’s supply chain.

With products being highly perishable, the supply chain ought to have to maintain correct temperature, humidity etc and the chain should move fast. To reach out its consumers more directly and let them the total brand experience, Amul has come up with Amul parlours. These are called “Utterly delicious parlours”. They have come up in major cities like Ahmadabad, Bangalore, Baroda, Delhi, Mumbai, Hyderabad and Surat already, and many more starting up real soon. Till date there are about 400 Amul parlours across the country. These parlours are set at prominent locations such as campuses of Infosys, Wipro, IIM-A, IIT-B, temples, Metros etc. 28

Amul has franchisee plans in regards of the Amul parlours. This might start pretty soon, since the talk are almost at the end.

Now, going back to the supply chain of Amul, Amul has gone the e- commerce way. The 1st initiatives taken for an ERP system was in ’94. Tata Consultancy Services was hired to guide in its implementation. The implementation project was named as Enterprisewise Integrated Application System (EIAS). Automatic Milk Collection System units (AMCUS) at village societies were installed in the first phase to automate milk producers logistics. Amul also connected its zonal offices, regional offices and member’s dairies through VSATs for seamless exchange of information. Amul is also using Geographic Information Systems (GIS) for business planning and optimization of collection processes. Indian Institute of Management – Ahmedabad supplemented Amul’s IT strategy by providing an application software – Dairy Information System Kiosk(DISK) to facilitate data analysis and decision support in improving milk collection. There are plans to introduce features like Internet banking services and ATMs which will enable the milk societies to credit payments directly to the seller’s bank account. Distributors can place their orders on the website www.amul2b.com especially meant for accepting orders from stockists and promoting Amul’s products via e-commerce

5.4 PRICING
Decided by the GCMMF by conducting market surveys to check the validity and feasibility of prices in the market and accordingly decides the prices of AMUL products. Price is inclusive of several elements like, ✔ Cost of milk. ✔ ✔ ✔ ✔ ✔ Labour cost. Processing cost. Packaging cost. Advertising cost. Transportation cost. 29

✔ ✔

Sales promotion costs. Taxes etc.

TASTE OF COMPETITION
6.1 THE COMPETITORS
The various competitors of Amul product –wise is given as under:

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The KSF model, to have an overall analysis. The table for the KSF model is given as under:

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6.2 STRATEGIES
Over the years, Amul has adopted many tactics. Nevertheless, few of the many strategies folloed by them are: • • • • • Ice cream: Amul parlours; launched “Fundoo” to combat HUL’s Max Pizza: Launched ready to cook pizza “Utterly delicious” Butter: Protect market share with price Curd: Alignment with other milk coops Dairy whiteners: Dominate with Amulya

6.3 AMUL ND NDDB TWIST

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Like siblings in the same house fight, Amul-NDDB war has been in the limelight for so many years. Though both have the same long term goals, there seems to be a disagreement w.r.t how these goals are to be achieved. Mr. Kurien was the mentor of Mrs. Amrita but then the disagreements have made each other form strategies so as to make more and more profit. Here we are only concerned about these strategies and view NDB as a close competitor. Only a few of the strategies have been listed here. • • • • • • Mother Dairy cuts prices in butter war with Amul [‘05] NDDB -free sugar with its milk. GCMMF- discount on vanilla ice cream against purchase of Amul milk [Mar ‘06] GCMMF sold 2,000 tons skimmed milk powder to Mother Dairy [Mar ‘06] Amul-Rs 30 off on vanilla ice cream after returning the 30 empty pouches of Amul milk.[’06] NDDB plans to import 10,000 MT skimmed milk powder to meet the domestic demand. [Sep ‘09] NDDB - 6,000 litre of milk @ Rs 330 per kilo fat to milk pourers (MPs) @ Surendranagar [ Oct ‘09]

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7.1

FINANCE MATTERS!!
CAPITAL STRUCURE:
AMUL is co – operative organization therefore is nothing like market value of share whenever AMUL needs funds it issue adequate number of share, but only to its shareholders or members of societies and not to the others. The capital structure of a firm would generally denote the ratio of own capital do the borrowed capital. The capital structure thus, indicates how the capital has been raised. The capital structure of the AMUL Dairy figure is given below.

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7.2 WORKING CAPITAL
In AMUL there is no credit with the federation. GCMMF is owned by 11 union members and wholesale dealers. Requirement of working capital in winter season is much higher and availability of fund is lesser. To meet with this working capital requirement, AMUL has got certain provision and short – term investments. From the monthly sale, GCMMF gives returns to AMUL from which it covers up its short – term expenses.

7.3 SOURCES OF CAPITAL

Inflow:Source of capital of AMUL are:  Federation gives them dairy amount decided by union. 35

 Fix deposit of society is major source of finance.  Interest of fix deposit of bank like SBI, BOB, GEB Bond, and Sardar Sarovar Bond etc. is one of the sources of finance.  Share Capital of AMUL. Share of AMUL is not for public but only for the society members.  Net profit of AMUL during the year 2007 – 2008 is 451.51 lack. Bankers: U.T.I bank: - For the salary related Transaction.  Kaira District co – operative bank: - For the payment of society.  State Bank of India.  Bank of Baroda.  Bank of Maharastra.  State Bank of Saurastra.  Corporation Bank.

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8.1

CONCLUSION
WEAKNESSESS AND THREATS
Every entity in the world will have its weaknesses and will face some or the other threat. The following are the weaknesses and threats associated with Amul brand: • • • • • • Less control over milch yield Cannot accommodate transport delays (perishables) Dependence on poor infrastructure for supply (roads, electricity etc) Increasing population , increasing requirement Adulteration Saturation point not far away 37

• • •

Unorganized players Other dairy co-operative societies Competitors are companies, not bound by inherent obligations of co-operatives

8.2 AMUL GOES GLOBAL

In spite of the above mentioned, Amul has been doing exceptionally well in abroad too. The following are some facts: • • • • • U.S.A, Nepal, South Africa, Kenya, Bhutan, Bangladesh, Thailand, Australia, and Gulf countries etc Prospective markets- Russia, UAE, Japan, Sri Lanka Agreement with Wal-mart : Wal-mart agreed to sell Amul products on its shelves under brand Amul itself. Agreement with Glaxo : Glaxo and Amul will get together to produce baby food Amul’s growth rate in international market : ~34%

8.3 THE WAY AHEAD
• Product improvisation -Amul basundi, gulab jamun, chocolates etc., since they are not as popular as Amul butter or Amul ice cream. There is a need to understand the cause through proper MR. • • Amul horadings are successful. But there is a need to advertise by Cable channels, newspapers etc. to reach the rural areas etc For a company where perishability of its products is very high, strengthening of liquidity and working capital is a must. 38

• •

Supply chain add-ons must be further strengthened Venture into processed fruits and vegetables, because the same Anand pattern can be followed here, so strategizing won’t take much of a time. And moreover, they give higher margins

Try nullifying threats and weaknessess

References
✔ www.amul.com ✔ www.amul2b.com 39

✔ www.quickmba.com ✔ www.nddb.org ✔ www.indianexpres.com ✔ www.thehindubusinessline.com ✔ www.business-standard.com ✔ www.icmrindia.org ✔ www.blogger.com ✔ www.wikipedia.com ✔ Works of students who did summer training at GCMMF ✔ Marketing Management – Philips Kotler ✔ FINANCE INDIA [Vol. X No. 2, June 1996] Dairy Co-operative and Rural development- MANOB KANTI BANDYOPADHYAY

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