ITC IN RURAL INDIA

By: Group 6 Sec C

Introduction: ITC ltd.

Incorporated in August 1910 Diversified business

• Cigarettes & leaf Tobacco• Packaging & printing• Hotels• Education• Paperboard• Lifestyle retailing• FMCG business

Market capitalization > $22 Billion Asia’s FAB 50 India’s largest exporter of Agricultural products One of India’s biggest Forex earner, $3.2 Billion Employs 26,000 at over 60 locations across the country Over 3,73,000 shareholders

RURAL MARKETING IN INDIARural Population- 627 million; 74.3% of total population

Rural development programmes

Employment opportunities

Steady growth

Exploitation and

exploration

Vast and scattered

Opportunities compared

to Urban sector

Maximum population and regions

Maximum number of consumers

Government of India schemes

Proper irrigation

Infrastructural

developments

Grants for fertilizers

Improved conditions

of rural masses

Rural Market- generates more than half of the country’s income• Market for consumer goods- Durable and non durable goods• Market for agricultural inputs- fertilizers, pesticides, seeds etc.

Scope- • Selling of agricultural items in the urban areas• Selling of manufactured products in the rural regions

Agricultural Marketing

Rural Marketing

Features-

PEST Analysis: Post Independence

POLITICALCongress Dominance

Politically Active Unions

Govt. took over ‘sick ‘ companies.

MNCs urged to liquidate equity with a cap of 40%.

ECONOMICFavored Capital Goods, increased black market.

Low competition in domestic market

Not competent enough for international level.

Lower purchasing power of consumer.

Foreign Investment Discouraged

SOCIALAbundance of low wage labor

88% of the rural population below poverty line

Rural access hampered by poor rail, road and telecommunication links

NGOs to assist smaller level cooperatives.

TECHNICAL

New technologies were not accessible.

Limited access to information for rural sector.

Limited mediums available to promote brand building.

Post Independence

PEST Analysis: Recent Scenario

POLITICAL

Multi Party Coalitions causing political uncertainty

Rural job program launched in 2006

Reduced economic controls & opened economy to imports

Govt. approved 51% FDI, provided company engaged in single branding

ECONOMICIndia’s rapid GDP growth led to increase in spending power.

Increase incomes - 56% demand for FMCG products from rural sector

Most of the retail sector was unorganized

SOCIAL

Combination of low wage & relatively highly skilled labor

Improved rail, roads and telecommunication links through Rural Job Programs

TECHNICAL

IT Sector grew rapidly

Internet usage access to rural sector

Increased mediums to information available – ITC provided web portal

Recent Scenario

SWOT Analysis

Strengths

•Good distribution network and skills

•Product quality

•Highly diversified product range.

•Strong Brand Presence

Weaknesses

•Still people connected ITC with a tobacco brand which is related with poor health and premature death.

•Still dependent upon tobacco for its revenue generation.

Opportunities

•New product discoveries

•Still most of the Indian rural market is unexploited

•Per capita consumption of personal care products in India is one of the lowest in world

Threats

•Changing customer needs and preferences

•Rivals from domestic and international market

•Change in govt. policies

Porter’s Five Forces ModelBargaining power of customers

Bargaining power of supplier

Threats of potential entrants

Threats of substitute products

Competitive Rivalry

HIGH - Unfavorable

• Low Switching Cost.

• Buyers are numerous and fragmented.

• Considering buyer power retailers, they are able to negotiate price with the company

LOW - Favorable

•Large number of suppliers in the country

•Cost of switching suppliers is low.

•Prices of substitutes are low.

HIGH - Unfavorable

• Too many small firms.

• No dominating firm.

• Little product differentiation.

• Customer switching costs are low.

MEDIUM

• Numerous substitutes are available.

MEDIUM

• Multitude of choices.• Buying

product of one brand or the other does not cost customer anything leading to high competition.

Marketing Mix of ITC’s Rural Strategy

Product• Highly diversified product range.• Related products selling - white

goods, diesel, fertilizers, insurance, etc.

• Products are of relatively high quality

Price• Agricultural inputs were

aggressively priced (lower than competitors)

• Comparable products at lower price under different brand name.

Marketing Mix of ITC’s Rural Strategy

PlaceDeveloped procurement hubs , rural mini malls in the vicinity of villages.

All products available under one roof.Selling, purchasing and storage at

the same place.

Promotion• products were sold through

samyojaks, sanchalaks who were among the villagers.

• Awareness among farmers, CSR activities. job opportunities, farmers’ self-efficacy.

• Better facilities at hubs.• Fair dealing with farmers.• Skilled central management group.

Creating a positive vicious cycle

more money in

the pocket of farmers

more re-investment by farmers

more profits for farmers

more purchasing power of farmers

more sale of ITC rural

malls

More opportunities to farmers

first putting

the money in farmers’ pocket

then extracting back the

same money.

HUL’s game plan-Shakti Program

Distribution

•The company distributors brought products from district warehouses to village entrepreneurs home whereas ITC uses procurement hubs.

Self-help groups

•The self help groups were trained by a 1000 people strong field force and moved in groups of three to five from door-to-door to sell HUL products.

Custome

r

•The end customers got the benefit of doorstep delivery of products, got introduced to new product launches and proper use of particular products.

Apprehensions - ITC Elimination of middle-men and shopkeepers selling fertilizers and agri

products.

Back step taken by Govt. FCI

more dependence on private players

private players could step back any day when they see diminishing profits

no social responsibility

BCG Analysis - ITC

• Hotels• Paperboards /

• Packaging• Agri Business

FMCG Cigarettes

ITC InfoTech FMCG - Others

Suggestions

Brand image development: Currently associated with tobacco mainly.

Innovative reward schemes for farmers. Door to door selling by sales

representatives. Innovative product and business

diversification like farming equipments, contract farming etc.