Isha jain

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1. CCI entered the rural market, it focused on strengthening its distribution
network there. It realized that the centralized distribution system used by the
company in the urban areas would not be suitable for rural areas. In the
centralized distribution system, the product was transported directly from the
bottling plants to retailers .However, CCI realized that this distribution system
would not work in rural markets, as taking stock directly from bottling plants to
retail stores would be very costly due to the long distances to be covered. The
company instead opted for a hub and spoke distribution system (Refer Figure II

Under the hub and spoke distribution system, stock was transported from the
bottling plants to hubs and then from hubs, the stock was transported to
spokes which were situated in small towns. These spokes fed the retailers

Affordability

A survey conducted by CCI in 2001 revealed that 300 ml bottles were not
popular with rural and semi-urban residents where two persons often shared a
300 ml bottle. It was also found that the price of Rs10/- per bottle was
considered too high by rural consumers. For these reasons, CCI decided to
make some changes in the size of its bottles and pricing to win over consumers
in the rural market.

In 2002, CCI launched 200 ml bottles (Chota Coke)9 priced at Rs 5. CCI

announced that it would push the 200 ml bottles more in rural areas, as the
rural market was very price-sensitive. It was widely felt that the 200 ml bottles
priced at Rs. 5 would increase the rate of consumption in rural India. Reports
put the annual per capita consumption of bottled beverages in rural areas at
one bottle as compared to 6 bottles in urban areas.

Acceptability

The initiatives of CCI in distribution and pricing were supported by extensive

marketing in the mass media as well as through outdoor advertising. The
company put up hoardings in villages and painted the name Coca Cola on the
compounds of the residences in the villages. Further, CCI also participated in
the weekly mandies10 by setting up temporary retail outlets, and also took
part in the annual haats11 and fairs - major sources of business activity and
entertainment in rural India

2. Many businesses in developing countries have realized that serving rural

markets is not about simply selling products. They have expanded the nature
of their businesses from mere commercial motives to social ones as well. The
businesses succeed if they go beyond their mandate of making profits. The
future rests on three paradigm shifts taking place in rural approaches –
innovation, transformation of companies into social enterprises and
technological advancements that bring rural consumers closer to companies.

This means that companies need to reinvent their business models and their
very approach of doing business. Such companies stand a greater chance of
success and long-term survival in rural areas. We have taken elements from
the business models of these companies to figure out what the future looks
like.

The companies, we find, followed the design thinking pattern – a solution-

focused and action-oriented mindset towards creating a preferred future.
Vaitheeswaran (2012) writes that to tackle the world’s most wicked problems,
we need a paradigm of design thinking, the open-minded, no-holds-barred
approach that designers bring to their work, rather than the narrow, technical
view of innovation traditionally taught at many business and engineering
schools.

Firms that think like designers, which means embracing experimentation via
rapid prototyping and fast failure, stand to win huge new markets and profits.
They invest in distribution and training of local resources, develop innovative
products and processes, involve stakeholders and, above all, build a social
purpose in their objectives.
The task is not easy, of course. Haanaes et al. (2013) write that straying from
their core purpose could well attract the ire of shareholders who invest in
companies for financial returns. They could well see a company’s social
investments as reducing their returns.

Still, the thrust for transforming business has happened because of the
following reasons:

1. To seek growth and market shares.

2. The growing need for sustainable business activities.

3. To reach a large, underserved market.

4. To develop good corporate citizenship and corporate image.

1. Growth and Market Shares:

Because of saturated markets in the West and of saturated urban markets in

developing countries, it is increasingly being recognized that growth will come
from- (a) emerging markets and (b) underserved markets within emerging
countries. Radical changes in business models to serve the poor have helped
the companies to achieve high growth rates and outperform their competitors.
These companies report better revenues, growth rates and market shares than
other companies in the category.
2. Sustainable Business:

Another reason for this huge change is the realization that companies must
work sustainably and that the unchecked consumption of natural resources
cannot continue unabated. Increasingly, there is pressure on companies to
operate in a sustainable manner.

3. Serving Larger Markets:

Radjou and Prabhu (2012) write that multinationals have realized the
importance of enhancing their capabilities in emerging economies. Products
developed in the West and imported to developing countries are too expensive
to be sold in rural markets, so MNCs are stepping out of their comfort zones by
investing in local R&D and factories to design and produce locally relevant
products and services.

Between 2003 and 2007, multinationals have invested some US$24 billion in
more than 1,100 R&D centres in India and China. “This approach has clear
advantages over importing and selling high-priced products and services
developed and produced in the West,” they write. The challenge for them is to
move from serving urban customers to the much larger BoP population of
urban and rural poor.

4. Good Corporate Citizenship:

Pressure is also mounting on organizations to focus on good corporate

citizenship. Such organizations pursue their objectives while building a social
business. Kanter (2011) writes that firms have to think of themselves as social
institutions than merely profit-making companies. This gives them a long-term
perspective to invest in-the human side of the organization.

These four driving forces have resulted in interventions like the invention of
microfinance, information and problem-solving apps and impact-investing for
difficult problems in rural markets. These ideas are becoming popular as
private companies, NGOs and development agencies are increasingly applying
BoP ideas to their initiatives. Eggers and Macmillan (2013), in their book, The
Solution Revolution, explain how this is giving rise to the ‘Solution Economy’ in
which individuals, businesses and, sometimes, governments work together to
solve societal problems and also make a profit.