Transcript Section VI - Rural Marketing

ITC E- Choupal
Xavier Institute of Management,
Bhubaneswar
Case Background
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Rural markets are complex and challenging
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Business practices are under- developed
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Infrastructure constraints are many
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Market access for the producer is an issue
ITC Innovation
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E- choupals ( information centers) connected
to the internet
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Linking farmers to firms and markets
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Supply chain integration
Indian Agriculture – A Paradox
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Economically vital but archaically regulated
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High levels of production with low productivity
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High levels of information asymmetry
ITC Intervention in Soya Bean
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Oil seed complex
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Groundnut & Mustard( traditional)
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Sunflower & Soya( non- traditional)
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Shortage in the 1970’s and 80’s
Continued
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Policy measures to increase production
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Soya & Sunflower boosted production
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ITC Intervention in Soya beans
Traditional Soybean Marketing
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90 % of the produce marketed through
traders & government regulated markets
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Mandis, traders & producer co-operative
societies
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Modalities & Norms
Mandi
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Central to agricultural marketing
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APMC act
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Soyabean mandi services around 700 sq
kilometers
Commission Agents
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Kuccha and Pucca Adatiyas
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The Agrawaal & Jain community
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Formidable presence and stranglehold over
the business ( Norms)
Mandi Operations( Modalities)
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Inbound logistics
Display and inspection
Auction
Bagging and weighing
Payment
Outbound logistics
Inefficiencies ( Process Improvements)
Inbound
logistics
Cost
to farmers
Information asymmetry
Display and
inspection
Crop
Auction
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Bagging &
Weighing
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Payment
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Irregular payments
Outbound
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Delays
exposed to the elements
 Inspection unscientific & arbitrary
 No incentive for quality
Loss of dignity
Farmer bears the cost
 Wastage by Tulawatis
Other Inefficiencies
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Limited storage
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Unreliable information services and platforms
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Potential of forward contracts unrealized
ITC Analysis of Soya Trade
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Price and quality distortions
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Distance from farmer
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Daily price inflation
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Intra day price changes
Creation of ITC e- Choupal
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Virtual vertical integration
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A social imperative
e- Choupal Strategy
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Reengineering Vs Reconstructing
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Addressing the whole
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An IT driven solution
IT Driven Solution
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Delivery of real time information
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Facilitating collaboration
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Crop specific intervention
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Low cost last mile
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Intelligent first mile
E- Choupal Operation
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Sanchalak & Samyojak
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1000 farmers per Choupal
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Trust the foundation of the business
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Grass-root level leadership
Trust: Sanchalak Selection
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Living from farming
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Median wealth
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Progressive
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Ambitious
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Literate
Transaction in ITC Platform
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Pricing
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Inbound logistics
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Inspection & gradation
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Weighing & Payment
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Hub – logistics
Transaction: Efficiencies
Pricing
Static
average quality price
 In situ quality control and price offer
 VSAT connectivity
Inbound
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Inspection &
grading
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Weighing
and
Payment
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30-40 Kms from farmers
Warehouses or ITC factories
Methods the farmer can understand
No lab tests
Electronic
Full payment and reimbursement of freight
Gains to Farmer
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Better information content
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Better timing of information
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Reduced transportation cost
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Shortened transaction time
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Increased weighing accuracy
Gains for ITC
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Risk management
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Reduction in freight cost
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Control on quality
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Procurement savings
Harnessing the Power of the Network
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Procurement
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Rural Distribution- 100 partnering
companies
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Financial Services
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Rural retail
Concluding Thoughts- Vallabh & Sridhar
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Manpower driven TO Technology driven
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Disintegrated TO Integrated supply chain
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From Finance TO information as a source of
control
Negative Effects
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Loss of business for bazaars adjacent to
Mandis
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Loss of revenues to Mandi
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Crushing units loose business
Kiosk Business Planning
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Number of Services
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Total revenues
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Break up of revenues
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Number of customers
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Categorisation of customers
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Average revenues per customer
Types of Services
Customised services
Free services
Offline services
Recurring services
Value and Demand of Services
Low Demand and High Value
High Demand and Value
Low Demand and Value
High Demand and Low Value
Customer Profiling
Regular low value customer
High Value regular customer
Low/ no value irregular
customer
High Value irregular customer
Infrastructure/ Cost Considerations
Low cost reliable infrastructure
High cost reliable
infrastructure
Unreliable low cost
infrastructure
High cost unreliable
infrastructure
Technology and Applications
Cost of technology
Competing Technologies
Scalability & robustness
Level of customization
Number of applications
Adaptability
Efficiency of servicing
(promptness)
Cost of Servicing
Partner Organisations
Risk sharers
Revenue sharers
Infrastructure Sharers
Promoters
Overall Considerations
Communication
channels
Documentation
methods
Learning curve
Time table of
withdrawal of
subsidies/grants
Objectively verifiable
parameters
Indicators and
early
warning systems
Projections
Cost
Revenue
Close of Sessions
Thank You