Rural Marketing Assigment
Submitted by:
Name: RIDDHI PAUL
Exam Roll No.: 95/MB/180024
Department of Business Management,
Calcutta University ,Alipore Campus
Critically analyse the case of E-choupal and put your
valuable comment with justification of the strategies adopted
by ITC
ITC's Agri-Business is one of India's largest exporters of agricultural products
focusing on feed ingredients, food grains, edible nuts, marine products and
processed fruits. But it faced many problems in agribusiness:
•Insufficient control over supply chain
•Lack of infrastructure for storage, handling and transportation
•Middlemen and other intermediaries blocking market and price information
•No direct control over quality of products.
To address the above problems and to integrate association with rural suppliers,
ITC’s International Business Division started a unique initiative e-choupal. It is an
interlocking network of partnerships(ITC+Met dept+Uneversities+Input
Cos+Sanyajoks)bringing the best in-class information,knowledge and inputs.
Only initiative to attempt to combine Services and an Effective Business Model
successfully.
Designed to address issues
Fragmented farms
Weak institutions
Involvement if intermediaries
Information symmetry
It was initiated to network villages and procure Agri products for export purposes.
For the first time, illiterate farmers who lacked basic knowledge of IT were
conducting e-commerce transactions. E-choupals work as trust building activity
where farmers get all types of crop related information and they can sell their
produce directly to ITC in ITC collection centers. Echoupal made use of IT tools to
network villages and internet to provide information to farmers and others.
It leveraged physical transmission capabilities of intermediaries and
disintermediated them from flow of information and market signals.
There are several problems faced by the E-choupal model, most
of which were unique and hence all the more challenging. ITC faced many
problems like Intermediary unrest, lack of awareness, outdated infrastructure,
problem in electricity supply etc. But gradually ITC States covered 10 Villages
covered 40,000 No. of e-Choupals 6,500 Farmers e-empowered 4 million Prof.
Rajesh Panda 80 Volume III September 2011 SIBM 81 Volume III September
2011 SIBM tried to overcome these problems. The key success to the e-choupal
model lies in its scalability.
The essential objectives are:
Improving price realization for farm produce by providing:
Real-time information on market prices in nearby mandis and international
markets Data and information on supply and demand trends
Expert opinion on expected future price movements
Access to Information, Knowledge, Quality Inputs and Market
Enhancing farm productivity by providing:
Real-time weather information, including the latest district-wise short and
medium-term forecasts
Know-how on best farming practices, both generic and specific, and
specialized knowledge to enable farmers to customise their produce to match
different consumer segments
Supply of quality agri-inputs like seeds, herbicides, fertilizers, pesticides,
etc. through a single channel right in the village.
Minimizing transaction costs by enabling: ITC to buy directly from farmers,
eliminating wasteful intermediaries and multiple handling .
Discussion about the strategies adopted by ITC:
Transparent pricing and weighment practices as well as rationalized transportation
costs Farmers to aggregate demand, and bargain as virtual producers’ cooperatives
to access higher quality farm inputs at lower costs. To the uninitiated, an ITC e-
Choupal is an internet kiosk in the home of a fellow villager. An innovative model
embedded with social goals, the ITC e-Choupal empowers farmers and hopes to
trigger higher productivity and income through a host of services related to know-
how, best practices, timely and relevant weather information, a transparent
discovery of prices, access to quality agri-inputs at competitive prices and so on.
ITC Limited kiosk with Internet access is run by a
sanchalak — a trained farmer. The computer is housed in the sanchalak's house
and is linked to the Internet via phone lines or by a VSAT connection. Each
installation serves an average of 600 farmers in the surrounding ten villages within
about a 5 km radius. The sanchalak bears some operating cost but in return earns a
service fee for the e-transactions done through his e-Choupal. The warehouse hub
is managed by the same traditional middle-men, now called samyojaks, but with no
exploitative power due to the re-organization. These middlemen make up for the
lack of infrastructure and fulfill critical jobs like cash disbursement, quantity
aggregation and transportation.
Since the introduction of e-Choupal services, farmers
have seen a rise in their income levels because of a rise in yields, improvement in
quality of output, and a fall in transaction costs. Even small farmers have gained
from the initiative. Farmers can get real-time information despite their physical
distance from the mandis. The system saves procurement costs for ITC Limited.
The farmers do not pay for the information and knowledge they get from e-
Choupals; the principle is to inform, empower and compete. E-market place for
spot transactions and support services to futures exchange
With appropriate knowledge and services available virtually at the farm gate,
farmers have been able to raise productivity, improve quality, manage risk and
earn better prices. By creating a more efficient marketing channel, e-Choupal
reduces transaction costs and helps farmers to adjust/fine-tune crops types and
qualities to changing trends.The largest internet-based intervention in rural India,
e-Choupal has grown into an ecosystem of services that addresses diverse rural
needs, from agri-extension and other farm-related offerings to retail avenues to
insurance and healthcare.
e-Choupal' also unshackles the potential of Indian farmer who has been trapped in
a vicious cycle of
low risk taking ability
low investment
low productivity
weak market orientation
low value addition
low margin
low risk taking ability.
This made him and Indian agribusiness sector globally uncompetitive,
despite rich & abundant natural resources.
Such a market-led business model can enhance the competitiveness of Indian
agriculture and trigger a virtuous cycle of higher productivity, higher incomes,
enlarged capacity for farmer risk management, larger investments and higher
quality and productivity. Further, a growth in rural incomes will also unleash the
latent demand for industrial goods so necessary for the continued growth of the
Indian economy. This will create another virtuous cycle propelling the economy
into a higher growth trajectory.'e-Choupal' makes use of the physical transmission
capabilities of current intermediaries - aggregation, logistics, counter-party risk and
bridge financing –while disintermediating them from the chain of information flow
and market signals. While the farmers benefit through enhanced farm productivity
and higher farm gate prices, ITC benefits from the lower net cost of procurement
(despite offering better prices to the farmer) having eliminated costs in the supply
chain that do not add value,
So are the tangible savings in the choupal model significant? At ITC’s
huge processing centre in Devas, the motto is customer relationship management.
The layout at the factory has been designed so that waiting times are reduced to
two hours. Material handling systems ensure that tractors, trolleys or trucks can
directly unload their produce without spilling a single grain, a modern weighbridge
ensures precise weighing and cash is paid to the farmer in less than 10 minutes.
Critical analysis of the strategy:
Although e-choupal helps eliminate the middleman and therefore allows farmers to
get a better price for what they grow, it does nothing to solve the more fundamental
problem of the inherent inefficiencies created by so many tiny farms. In addition, it
relies on infrastructure, which is often lacking in rural communities. Electricity and
telecommunication services can sometimes be less than 100 percent reliable in some
of the places where e-choupal has been implemented.
For ITC, this is an important revenue stream (it gets 2-3%
commission from each transaction). The participating company gets a direct
channel to the customer that is entirely pull-based. But the key for ITC is to
preserve the integrity of the relationship with the farmer and carefully monitor the
products that flow through the channel .Through its e-Choupal initiative, the firm
also runs women empowerment programmes particularly focusing on Ultra Poor
Women, which enables development of entrepreneurial skills, besides income
generation. The strategy of this intervention is broadly centred around four distinct
dimensions, which together enable a comprehensive development of the rural
ecosystem.
These dimensions are in the areas of:
(i) information and knowledge dissemination
(ii) access to quality inputs and markets
(iii) generating supplementary incomes, and
(iv) natural resource augmentation.
Conclusion:
The e-Choupal Platform ITC e-Choupal germinated as a means of establishing a
business platform that could connect farmers to national and global markets – a
common structure that would serve them both as producers and consumers by
creating an efficient channel for procuring and providing both goods and services
over a number of locations.
References:
http://www.itcportal.com/sustainability/lets-put-india-first/echoupal.aspx
http://www.echoupal.com
http://pdf.wri.org/dd_echoupal.pdf
http://www.fao.org/rdd/doc/ITC%20e-Choupal.pdf
http://www.peerpower.com/et/782/ITC-e-Choupal-to-quintuple-reach
Journal of Advertising, Vol. 34, No. 4, Integrated Marketing Communication (IMC) (Winter, 2005), pp. 11-
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