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Course Project Report
Rajarshi Rakshit (05305024) M.L.Narasimham (05305025) Ashish Gudhe (05305028) Kartik Vaddadi (05305044) Course Instructor Prof. K. Narayanan
April 2, 2006
Department of Humanities & Social Sciences Indian Institute of Technology, Bombay Mumbai
1 Introduction 2 Strategies 2.1 BY COMMUNICATING AND CHANGING QUALITY PERCEPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 BY PROPER COMMUNICATION IN INDIAN LANGUAGE 2.3 BY TARGET CHANGING PERCEPTION . . . . . . . . . . 2.4 BY UNDERSTANDING CULTURAL AND SOCIAL VALUES 2.5 BY PROVIDING WHAT CUSTOMER WANT . . . . . . . . 2.6 BY PROMOTING PRODUCTS WITH INDIAN MODELS AND ACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7 BY ASSOCIATING THEMSELVES WITH INDIA . . . . . . 2.8 BY PROMOTING INDIAN SPORTS TEAM . . . . . . . . . 2.9 BY TALKING ABOUT A NORMAL INDIAN . . . . . . . . . 2.10 BY DEVELOPING RURAL-SPECIFIC PRODUCTS . . . . . 2.11 BY GIVING INDIAN WORDS FOR BRANDS . . . . . . . . 2.12 BY ACQUIRING INDIAN BRANDS . . . . . . . . . . . . . . 2.13 BY EFFECTIVE MEDIA COMMUNICATION . . . . . . . . 2.14 BY ADOPTING LOCALISED WAY OF DISTRIBUTING . 2.15 BY ASSOCIATING THEMSELVES WITH INDIAN CELEBRITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.16 MELAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.17 PAINTINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Case Studies-1: AKASHGANGA 4 Case-Study 2: ITC e-Choupal 4.1 About ITC-IBD . . . . . . . . . . . . . . . . . . 4.2 ITC e-Choupal and the Strategy . . . . . . . . . 4.3 Operational costs and comparision with Mandis 4.4 Vision and Planning Behind the e-Choupals . . 4.5 Strategies to be followed . . . . . . . . . . . . . 1 3 6 6 6 7 7 7 8 8 8 8 9 9 9 9 12 12 12 13 13 14 14 15 17 17 19
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A study by the Chennai-based Francis Kanoi Marketing Planning Services says that the rural market for FMCG is worth $14. It is no wonder that even MNCs have cottoned on to the idea of a resurgent rural India waiting to happen.7 billion for cars.4 billion. Coke ventured into the hinterland. the upper income class those with household incomes of over Rs one million [$22. Even better. India’s premier economic research entity. that represents a market worth a whopping $27 billion. the average rural income has gone up to 63 to 64 per cent by 2001-02 and touched almost 66 per cent in 2004-05. Higher rural incomes have meant larger markets. Already. Adi Godrej. Four years ago. Its global rival Pepsico took a wider approach to the business when it was 3 . Coke is not the ﬁrst MNC to have cottoned on to the rural lure. With urban markets getting saturated for several categories of consumer goods and with rising rural incomes. far ahead of the market for tractors and agri-inputs which is estimated at $10 billion. chairman of the Godrej group that is in a range of businesses from real estate and personal care to agri-foods. marketing executives are fanning out and discovering the strengths of the large rural markets as they try to enlarge their markets. Rural India also accounts for sales of $1. A survey by the National Council for Applied Economic Research(NCAER). It is a myth that rural consumers are not brand and quality conscious. Now Coke’s rural growth of 37 per cent far outstrips its urban growth of 24 per cent.700] per annum is projected to go up to 21 million by 2009-10 from four million in 2001-02. has no hesitation proclaiming. the lure of rural India has been the subject of animated discussion in corporate suites.1 Introduction For quite some time now. the rural tilt is beginning to show. From 55 to 58 per cent of the average urban income in 1994-95. And there is a good reason too. recently conﬁrmed that rise in rural incomes is keeping pace with urban incomes. The rural middle class is growing at 12 per cent against the 13 per cent growth of its urban counterpart. Today. In total. It will have a 22 to 23 per cent rural component. the idea has grown out of its infancy and dominates discussions in any corporate boardroom strategy session. scooters and bikes and over one billion dollars of durables.
There are currently over 15. to replace imported fruit.82 billion to $20. Its four-pronged programme creates income-generating capabilities for underprivileged rural women. Hindustan Lever Ltd. The company imported a state-of-the art tomato processing plant from Italy to Punjab.given permission to set up shop in India in the late 1980s and investment in food processing and farming was a pre-condition for entry. As Ashok Gulati of the US-based International Food Policy Research Institute put its. has also got on the bandwagon. With such an emphasis on rural marketing. Shakti aims to have 100.000 of India s 640. their incomes increased because of the huge jump in productivity. Between the 8th (1992-97) and the 10th (2002-07) Five Year Plans. By the end of 2010. Pepsi is now heralding a citrus plantation drive in the state and other parts of the country for its brand of Tropicana fruit juices.000 Shakti entrepreneurs covering 500. the processor. most of them women. Vertical integration of the food market from farm to ﬁrm to fork becomes the best way to achieve eﬃciency and serve the interest of every stakeholder in the chain the farmer. Telecom giant Sunil Mittal.2 billion. successive governments have tripled the spending on rural development from $6. the $2. It’s Project Shakti uses self-help groups across the country to push Lever products deeper into the hinterland.000 villages. touching the lives of over 600 million people. improves rural quality of life by spreading awareness of best practices in health and hygiene. consumption patterns are changing and it signals a change in the regulatory environment. Farmers weren’t complaining because even though prices fell. All this potential has got India’s big business houses rushing to enter and expand rural businesses. The future of Indian agriculture in general and the farmer in particular depends on the how soon they can become globally competitive. In ﬁve years. productivity improved from 16 tonnes to 52 tonnes per hectare and there was a tomato glut in the state. Indian economic policy realises this. the country’s largest FMCG company. in 61.3 billion Indian subsidiary of Unilever. the retailer and the consumer. chairman of the $2 4 . empowers the rural community by creating access to relevant information through community portals and it also works with NGOs to spread literacy.400 villages across 12 states.000 Shakti entrepreneurs.
Tata Chemicals and Rallis India. Tata Chemicals ran a chain called Tata Kisan Kendra. the $2. which oﬀered farmers a host of products and services ranging from agriinputs to ﬁnancing to advisory services.billion mobile telephony major Bharti Tele.000-strong Mahindra tractor customer base and the 400-plus dealer network. Says Vikram Puri. a network of onestop shops providing everything from inputs to know-how to loans. among the country’s most recent entrants to the ranks of big business. Its subsidiary. ran separate rural initiatives till 2003. was launched. If the hinterland has caught the attention of Mittal. it has also not escaped the radar of the oldest business house. the 700. Its retailing arm. Mahindra & Mahindra Ltd is India’s largest farm equipment company. is another unabashed ﬂag-bearer of the ’go rural’ strategy. Like the Tatas. The group’s two companies. was partnering ICICI Bank and Hindustan Lever in oﬀering deals to farmers that covered operations from the pre-harvest to post-harvest stage. In 2004. the Tata Kisan Sansar has 421 franchisee-run centres in three states and reaches out to over 3. the two operations were merged and Tata Kisan Sansar. and leverages the strong Mahindra brand. and it has also introduced a new variety of grapes in Maharashtra. Mahindra Shubhlabh Services. which has consolidated its rural operations. has operations in 11 states.6 billion Mahindra group has successfully established a synergy between its current businesses and the planned rural forays. In an interesting business diversiﬁcation. to provide a complete range of products and services to improve farm productivity and establish market linkages to the commodity market chain. head of Mahindra Shubhlabh Services.Ventures. Mahindra Krishi Vihar. the $17 billion Tata group. Almost 80 per cent of 5 . on the other hand. has been instrumental in increasing the groundnut yield in Rajasthan through a new seed sourced from the state of Maharashtra. Rallis. Mittal’s initial investments include an agriculture research centre and model farm in Punjab. He is conﬁdent that the next ’explosive’ phase of demand for cellular connections is going to come from the villages. he points out. Today.6 million farmers. Its ﬂagship. he has tied up with the legendary Rothschilds of Europe for a $51 million food processing venture and export of fruits and vegetables. We can replicate our pre-eminence in IT agriculture and transform the country into a global food basket.
the ﬁnancial arm of the World Bank. Rural India accounts for a market worth $27 billion. There is a trade-oﬀ between Quality a customer perceives and a company wants to communicate.1 Strategies BY COMMUNICATING AND CHANGING QUALITY PERCEPTION Companies are coming up with new technology and they are properly communicating it to the customer. The activities of Mahindra Shubhlabh Services have attracted the attention of the International Finance Corporation. rural customer started asking for value for money. Their main focus is to change the Indian customer outlook about quality. Now they know the diﬀerence between the products and the utilities derived out of it. Thus.the farmers registered with us have less than ﬁve acres land. this positioning of technology is very crucial. improving the crop yield and decreasing the cost of crop production. They have started selling the concept of quality with proper communication. 2. one can notice diﬀerence in current market scenario. 2 2.2 BY PROPER COMMUNICATION IN INDIAN LANGUAGE The companies have realized the importance of proper communication in local language for promoting their products. With their promotion. We are making farming an attractive proposition through three basic guiding steps growing what the market requires. which recently picked up a 27 per cent stake in the company. 6 . The perception of the Indian about the desired product is changing. No wonder even MNCs have cottoned on to the idea of a resurgent rural India. As a rural Indian customer always wanted value for money with the changed perception.
Cinthol etc. 2. However. villagers are using soaps like Nima rose. they are exploiting social and cultural values. seven models of Cellular Phones of high technology but none took oﬀ. if the seller provide frills free of cost they are happy with that. even when they can use Neem or Babool sticks or Gudakhu. 2.5 BY PROVIDING WHAT CUSTOMER WANT The customers want value for money. They are happy with such a high technology that can fulﬁll their need. but they want value for money. On the other hand. As ”Motorola” has launched. They do not see any value in frills associated with the products. Breeze. Villagers are constantly looking forward for new branded products.3 BY TARGET CHANGING PERCEPTION If one go to villages they will see that villagers using Toothpaste. which has captured the market. is the paradigm changing and customer no longer price sensitive? Indian customer was never price sensitive. Moreover. Cultural values play major role in deciding what to buy. even when they can use locally manufactured very low priced soaps. They are ready to pay premium for the product if the product is oﬀering some extra utility for the premium. rural people are emotional and sensitive.2. ”Nokia” has launched a simple product. to promote their brands. They aim for the basic functionality. Thus. What can one infer from these incidents.4 BY UNDERSTANDING CULTURAL AND SOCIAL VALUES Companies have recognized that social and cultural values have a very strong hold on the people. 7 .
Whirlpool has also launched a campaign during world cup. during world cup they have launched a campaign ”Jeeta hai jitega apna HindustanIndia India India”.9 BY TALKING ABOUT A NORMAL INDIAN Companies are now talking about normal India. It is a normal tendency of an Indian to try to associate himself/herself with the product. by explicitly saying that they are Indian. Nokia has designed a new cellular phone 5110. Diana Hyden and Shahrukh Khan are chosen as a brand ambassador for MNC quartz clock maker ”OMEGA” even though when they have models like Cindy Crawford. Similarly.6 BY PROMOTING PRODUCTS WITH INDIAN MODELS AND ACTORS Companies are picking up Indian models. ITC is promoting Indian cricket team for years. with the India tri-colour and a ringing tone of ”Sare Jahan se achcha”. 8 . M-TV during Independence Day and Republic daytime make their logo with Indian tri-color.7 BY ASSOCIATING THEMSELVES WITH INDIA MNCs are associating themselves with India by talking about India. 2. he /she becomes loyal to it. they inﬂuence Indian mindset. all the best”. If he/she can visualize himself/herself with the product. actors for advertisements as this helps them to show themselves as an Indian company. With this. 2. That is why companies like Daewoo based their advertisements on a normal Indian family. LG has launched a campaign ”LG ki Dua.2.8 BY PROMOTING INDIAN SPORTS TEAM Companies are promoting Indian sports teams so that they can associate themselves with India. 2.
2.10 BY DEVELOPING RURAL-SPECIFIC PRODUCTS Many companies are developing rural-speciﬁc products. Gold Spot. Electrolux has acquired two Indian brands Kelvinator and Allwyn this has gave them the well-established distribution channel. Marathi and Tamil tongue. Keeping into consideration the requirements. and to withstand long power cuts.2. The traditional media include 9 . Like LG has used India brand name ”Sampoorna” for its newly launched TV.000. 2.12 BY ACQUIRING INDIAN BRANDS As Indian brands are operating in India for a long time and they enjoy a good reputation in India. keep cooked food fresh. In the past one year. as people believe these brands.11 BY GIVING INDIAN WORDS FOR BRANDS Companies use Indian words for brands. MNCs have found that it is much easier for them to operate in India if they acquire an Established Indian Brand. Electrolux is working on a made-for India fridge designed to serve basic purposes: chill drinking water. They can either go for the traditional media or the modern media. The word is a part of the Bengali. By the end of 1999. 2. a ﬁrm develops these products. all in towns with a population of around 10.13 BY EFFECTIVE MEDIA COMMUNICATION Media Rural marketing is being used by companies. Hindi. but later on they realized that to survive in the market and to compete with their competitor they have to rejuvenate these brands. As well as trust of people. Citra and Limca so that they can kill these brands. roughly 12Thats Rs 114 crore worth of TV sets sold in the villages in a year. LG has sold one lakh 20-inch Sampoorna TVs. Similarly Coke has acquired Thumps up.
farmers. puppetry. Marketing is the process of identifying and satisfying customers needs and providing them with adequate after sales service. while the modern media includes TV.700 chaupals covering a population of around 1. Uttar Pradesh and Maharashtra. This has designed a new way for understanding a new process called Rural Marketing. products. dealers. the lights are switched oﬀ and a torch is ﬂashed in the dark(EVEREADYs tact). which in turn is characterised by various peculiarities in terms of nature of market. LIC uses puppets to educate rural masses about its insurance policies. the e-chaupal project has since grown to around 2. Govt of India uses puppetry in its campaigns to press ahead social issues. the demand for which is basically a derived outcome. which includes participants. Conceived by ITC’s international business division and launched in 2000. Karnataka. radio. ITC’s e-chaupal (chaupal is the common place where villagers gather) has been the most elaborate and extensive venture in this ﬁeld so far. Rural marketing diﬀers from agricultural or consumer products marketing in terms of the nature of transactions. Indian agricultural industry has been growing at a tremendous pace in the last few decades. Andhra Pradesh. 10 . products and processes. The concept of rural marketing has to be distinguished from Agricultural marketing. Rural marketing scientists also term it as developmental marketing. Rural marketing basically deals with delivering manufactured or processed inputs or services to rural producers. modalities.2 million in ﬁve states – Madhya Pradesh. The participants in case of Rural Marketing would also be diﬀerent they include input manufacturers. Brook Bond Lipton India ltd used magicians eﬀectively for launch of Kadak Chap Tea in Etawah district.melas. folk theatre etc. as the process of rural marketing involves an urban to rural activity. The rural areas are consuming a large number of industrial and urban manufactured products. Rural marketing is diﬀerent from agricultural marketing. The rural agricultural production and consumption process plays a predominant role in developing the Indian economy. Rural marketing requires the understanding of the complexities and this article reviews some of the key issues. In between such a show. norms and outcomes. e-chaupal. which signiﬁes marketing of rural products to the urban consumer or institutional markets.
One has to have a strategic view of the rural markets so as to know and understand the markets well. company image and more important farmer economics. consumer goods. distribution and promotion. Strategic aspects Rural marketing in India is not much developed there are many hindrances in the area of market. diesel. One has to understand the market norms in agricultural input so as to devise good marketing strategies and to avoid unethical practices. government agencies and traders. health and environmental sectors. all elements of marketing mix can be better organised and managed. but in practice. The importance of rural marketing can be understood from the fact that today modern inputs i. distribution. product design and positioning. Many of the inputs used for production process have implications for food. fertilisers. 11 . seeds account for as much as 70Green Revolution areas. Rural marketing needs to combine concerns for proﬁt with a concern for the society. The existing approach to the rural markets has viewed the markets as a homogeneous one. there are signiﬁcant buyer and user diﬀerences across regions as well as within that requires a diﬀerential treatment of the marketing problems. Companies need to understand rural marketing in a broader manner not only to survive and grow in their business. money and labour. branding. Most of the jobs of marketing and selling is left to the local dealers and retailers. type of crops and other agro-climatic conditions. pricing. but also a means to the development of the rural economy. These diﬀerences could be in terms of the type of farmers. In the context of rural marketing one has to understand the manipulation of marketing mix has to be properly understood in terms of product usage. thus any strategy in rural marketing should be given due attention and importance by understanding the product usage. which distort the marketing environment. promotion. Further the percentages were higher at 81of land. Rural market for agricultural inputs is a case of market pull and not market push.opinion makers. electricity. besides being titled towards proﬁt. Product usage is central to price. pesticides. The market for input gets interlocked with other markets like output.e.
Nike started with exclusive stores but soon they realized that they do not enjoy much Brand Equity in India. who is promoted by Reebok. They have to reach the ”local Paan wala. The distribution channel could be a Big scale Super markets. Dabur uses these events to sell products like JANAM GHUTI(Gripe water).2. This pen is signed by Mr. a JV of Gillette and Luxor has launched 500 ”Gajgamini” range of Parker Sonnet Hussain special edition fountain pens. 5000. NCAER estimates that around half of items sold in these melas are FMCG products 12 . Companies are promoting players like Bhaichung Bhutia. so that they can associate their name with players like him and get popularity.15 BY ASSOCIATING THEMSELVES WITH INDIAN CELEBRITIES MNCs have realized that in India celebrities enjoyed a great popularity so they now associate themselves with Indian celebrities.16 MELAS Melas are places where villagers gather once in a while for shopping. They have to reach to local cities with low priced products. they thought that a similar system can be grown in India. soon they realized that to succeed in India they have to reach the nook and the corner of the country.14 BY ADOPTING LOCALISED WAY OF DISTRIBUTING Proper distribution channels are recognized by companies. and to capture the market share in India they have to go the local market shoe sellers. they were wrong. priced at Rs. Recently Luxor Writing Instruments Ltd. Reebok. Makbul Fida Hussain a renowned painter who has created ”Gajgamini” range of paintings. However. 2. Companies take advantage of such events to market their products. Adidas. Local Baniya” only they can succeed. MNC shoe giants. 2.
An entry is made electronically on the farmer’s swipe card. The money can be collected immediately. COKE. Escorts also displays its products like tractors and motorcycles in such melas. low quality caused by manual handling. calculation is done automatically which makes it possible to pay the farmer on the spot rather than having him wait for a couple of days. When a farmer gets milk into the collection point. of course. (SKEPL). it’s weighed and the amount of fat measured and immediately an entry is made on the farmer’s swipe card. the calculation was done by hand and was somewhat complicated. The message is simple and clean. This is the classic catch-22 situation as the farmer does not trust the tool till he tries it. Akashganga attempts to alleviate some of these issues.17 PAINTINGS A picture is worth thousand words. 3 Case Studies-1: AKASHGANGA This case study is about a product and service named Akashganga sold by a small. PEPSI and TATA traders advertise their products through paintings. With the new system. Akashganga is a computerized system. Also the potential for cheating is reduced. 2. it ran up against the skepticism of the Indian rural people against unproven technology. the delays in processing milk. corruption and mismanagement. Akashganga is for diary farmers and it is intended to enable to them to increase their eﬃciency and productivity. When SKEPL wanted to market this service. Rural people like the sight of bright colours. the major ones being low productivity of Indian cows. SKEPL got around this problem by oﬀer13 . endemic dilution of milk with water. The Indian diary industry is plagued by several problems.and consumer durables. entrepreneurial business named Shree Kamadhenu Electronics Private Ltd. and is reluctant to try it till he trusts it. This is marked contrast to the previous system where the ﬁnancial calculation was done later to avoid holding up the queue of farmers ready for milking. and.
sales. As a result of these factors. the agricultural commodity trading business was small compared to international players. sales or service helped tremendously. Of course. Initially. Also. Hotels. etc. ITC has a diversiﬁed presence in Cigarettes. Paperboards & Specialty Papers. 4 4. This helped earn the trust of the villagers. Large international companies had better margin-to-risk ratios because of wider options for risk management 14 . transparency. the opening up of the Indian market had brought in international competition. The company also provided responsive and eﬃcient after-sales service. It established a service network covering the rural areas.1 Case-Study 2: ITC e-Choupal About ITC-IBD ITC is one of India’s foremost private sector companies with a market capitalisation of over US $14 billion and a turnover of US $3 billion. fairness. By 1996. and typically would attend to a compliant within a few hours of receiving it. This was a very important factor that helped the farmers relate to and trust the company. the company had a solution that was superior in terms of time. it now generates US $150 million in revenues annually. since the villagers would not be disposed to make a journey to a town or city to learn about their products.ing free trials and delayed payment schemes stretching up to several months. SKEPL gained a threshold in this large market and earned respect among farmers. Shree Kamadhenu Electronics used local people for marketing. etc. It’s important to note that the company’s local presence whether for marketing. The company also used a name Akashganga that Indian villagers can relate to. and that played a big role in their success. Greeting Cards and other FMCG products. Packaged Foods & Confectionery. Packaging. Branded Apparel. service. Its International Business Division (ITC IBD) was created in 1990 as an agricultural trading company. Agri-Business.
and closure of IBD. With this strategy it can also enhance its competetiveness in global market for agri exports. ITC ultimately decided to retain the business. The ITC-IBD taken the challenges to use information technology to change the rules of the game and create a competitive business that did not need a large asset base.2 ITC e-Choupal and the Strategy ITC followed a diﬀerent media/communication strategy which is more elaborate and extensive in rural marketing so far. and serves an average of 600 farmers in 10 surrounding villages within about a ﬁve kilometer radius. and processed fruits. coﬀee. which beneﬁts both the farmers and the organization. The strategy is use the Information Technology and bridge the information and service gap in rural INDIA which gives an edge to market its products like seeds. increasingly. is linked to the Internet via phone lines or. 4. The company has initiated an e-Choupal eﬀort that places computers with Internet access in rural farming villages. typically housed in the farmers house. In 1998. A pure trading model does not require much capital investment. by a VSAT connection. The computer. food-grains. edible nuts.and arbitrage. For an Indian company to replicate the operating model of such multinational corporations would have required a massive horizontal and vertical expansion. in contrast. has required that ITC make signiﬁcant investments to create and maintain its own IT network in rural India and to identify and train a local farmer to manage each e-Choupal. after competition forced ITC to explore the options of sale.000 to set up and about US $100 per year to main15 . black pepper. the e-Choupals serve as both a social gathering place for exchange of information (choupal means gathering place in Hindi) and an e-commerce hub. Today.000 and US $6. Each e-Choupal costs between US $3. marine products. fertilizers and pesticides and other products like consumer goods. IBD is a US $150 million company that trades in commodities such as feed ingredients. The eChoupal model. merger.
at prices lower than those available from village traders. Maharashtra and Rajasthan). ’e-Choupal’ services today reach out to more than 3.5 million farmers growing a range of crops . Using the system costs farmers nothing. the sanchalak typically aggregates the village demand for these products and transmits the order to an ITC representative.soyabean.000 villages through 5200 kiosks across six states (Madhya Pradesh. wheat. incurs some operating costs and is obligated by a public oath to serve the entire community. They also use the e-Choupal to order seed. the farmer then transports his crop to an ITC processing center. Launched in June 2000. has already become the largest initiative among all Internet-based interventions in rural India.Uttar Pradesh. ITC oﬀers to buy the crop directly from any farmer at the previous days closing price.tain. as well as to track global price trends or ﬁnd information about new farming techniqueseither directly or. 16 . Andhra Pradesh. ’e-Choupal’. rice. The farmer is then paid for the crop and a transport fee. the sanchalak beneﬁts from increased prestige and a commission paid him for all e-Choupal transactions. The farmers can use the computer to access daily closing prices on local mandis(governmentmandated markets). shrimp . pulses. Karnataka. but the host farmer. In addition they can also know about weather forecast(local) and best practices in the world from e-Choupal website. called a sanchalak. because many farmers are illiterate. At harvest time. coﬀee.in over 31. where the crop is weighed electronically and assessed for quality. and other products such as consumer good from ITC or its partners. fertilizer. via the sanchalak (the village farmer who runs the e-Choupal and acts as ITCs representative in the village).
4 Vision and Planning Behind the e-Choupals Implementing and managing e-Choupals is a signiﬁcant departure from commodities trading.Figure 1: Transactional costs under Mandi & e-Choupal system 4.3 Operational costs and comparision with Mandis Fixed Cost of Equipment at e-Choupal (in Rs.000 24000 92.000 30000 122.000 30000 122. ITC has worked in Indian 17 . Through its tobacco business.) Printer Power related 19000 15000 15000 14000 12000 VSAT 90000 70000 70000 60000 50000 PC Total 2001-02 2002-03 2003-04 2004-05 2005-06 7000 7000 7000 6000 6000 39000 155.000 4.000 27000 107.
therefore. he reduces overall transaction costs by aggregating services. ITC decided to build e-Choupal on existing system. As a result. ITCs translation of the tactical and strategic challenges it faced and its social commitment into a business model demonstrates a deep understanding of both agrarian systems and modern management. must eventually address a range of needs. in areas where eﬃcient agents are there. Functioning as a viable procurement alternative. 18 . Cooperatives have tried to provide agricultural inputs. fertilizer. pesticides. Already ITC has trading agents in local mandis for its tobacco business. He is a centralized provider of cash. Rural development eﬀorts thus far have focused only on individual pieces rather than what the entire community needs. First. from research to procurement to distribution. and also the only marketing channel.e. It retained the eﬃcient providers and created roles for ineﬃcient people. Not Reconstruct Present Mandi system have some success factors in it. It recruites and engages members of landscape thereby making their expertise available to ITC. not just the marketing channel. and mandis have tried to create a better marketing channel. Not Just One Part The farmers various activities range from procuring inputs to selling produce. Second. With this principle ITC can avoid the reinventing the system in areas where it can add no value with its presence i. • Address the Whole.agriculture for decades. the village trader services the spectrum of farmers needs. the trader enjoys two competitive beneﬁts. but create a cycle of exploitative dependency in the long-term. seed. These eﬀorts cannot compete against the traders bundled oﬀer. The linked transactions reduce the farmers overall cost in the short term. The principles followed in implementing the e-Choupals are • Re-engineer. rural banks have tried to provide credit. Currently.. his intimate knowledge of the farmer and village dynamics allow him to accurately assess and manage risk.
Build the concept of traceability into the supply chain which will allow to address the food safety concerns.g: For perishables such as shrimps. In the mandi system. 4. E-Choupal was seen as a medium of delivering critical market information independent of the mandi.5 Strategies to be followed (1). which decays quickly with in short 19 . there is a threat of unionization and rent extraction. thus binding the farmer to an agent. they will look elsewhere for satisfaction. – If ITC fails to fulﬁll the aspirations of farmers. thus allowing the farmer an empowered choice of where and when to sell his crop.ITC e-Chopal provide services as a bundle what the entire agricultural community needs. and as their power and numbers increase.g: Wheat (2). and sales happen simultaneously. • Risk analysis & challenges – Radical shifts in computing access will break community-based business models. pricing. – The scope of the operation: the diversity of activities required of every operative and the speed of expansion create real threats to eﬃcient management. e. – The sanchalaks are ITCs partners in the community. • An IT-Driven Solution Delivery of real-time information independent of the transaction. e. delivery. Adopt the ability to determine the grades of the crop(grains) in the ﬁeld which commands the price premium for the crop.
it need to deﬁne standards of production and product quality. in addition to marketing agri inputs. e.period of time. and the respect and fairness with which both farmers and local partners are treated. 4. an innovative strategy which is elaborative and extensive in rural markets sofar. Critical factors in the apparent success of the venture are ITCs extensive knowledge of agriculture. Marketing value added products and services to rural INDIA .6 Conclusion ITC e-Choupal. (3). the eﬀort ITC has made to retain many aspects of the existing production system. (4). It will reduce the operational cost of e-Choupal such as IT infrastructure and transaction costs. traditional medicine and traditional crafts are some of the services that can be sourced from rural INDIA. Provide the service as market-place for commodities where ITC is not a sole buyer. Sourcing IT-enabled services from rural INDIA. (5). Telemedicine. 20 . ecotourism .g: coﬀee grains. the companys commitment to transparency. through e-Choupal system. including retaining the integral importance of local partners.
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