Global Marketing and Strategy-Unilever in India

Posted: September 9th, 2013

Global Marketing and Strategy-Unilever in India

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Global Marketing and Strategy-Unilever in India

Question 1

Motivation

Motivation for Shakti comes from the huge underserved rural areas in India. After India became liberalized since 1991, it was opened up to competition as other companies came in to serve the huge population. Competition intensified within the urban areas and many companies including HLL, and sought to increase its sales. However, India was quite unlike developed markets since there were more than 4 million outlets that sold fast-moving consumer goods, while developed markets had few large sales. Thus, these outlets were potential customers, and HLL had to seek a way of reaching as many as possible to drive its sales. Additionally, motivation came from the need to improve the rural areas that were rarely served.

Key features

Shakti is a rural initiative for marketing by HLL, which is the largest fast-moving consumer goods company in India. The project is largely based on network between small entrepreneurs that are based in the highly underserved rural areas. Some of its key features include

1. It seeks to empower women within the rural areas to be independent and participative in economic activities
2. makes use of the women entrepreneurs in building relationships with customers by providing them with the goods they need
3. involves the women in door-to-door selling in the rural areas to reach the rural customers with their branded goods
4. it enabled the large company to penetrate the rural market

Positive aspect

Shakti has a variety of positive aspect especially meant for the rural residents who have rare access to goods as well as to the company itself.

• One of the positive aspects is the ability to offer the company a chance to capture the rural market, which otherwise would be hard considering the number of outlets it has to serve.
• It offers the opportunity for increasing company revenues
• It is a strategy that creates a brand within the rural area through its communication with the rural residents
• Offers women an opportunity to be independent by earning livelihoods that are empowering and enables them to participate economically.
• Has helped the communities through making affordable the branded goods that are of high quality
• Increases customer awareness to issues such as health and consumer habits  and finally
• It has enabled the company to sell branded goods in the rural areas without making much branding efforts.

Drawbacks

Despite its positive aspects, it does not lack some drawbacks and challenges to the people involved including the company.

• It requires some huge amount of finance for training the entrepreneurs as well as convincing rural residents and authorities to allow the program.
• It poses a difficulty since it aims at building a new market within a new environment with different target consumers
• It is reliant of self-help groups that include NGOs. Thus, areas without such groups are not served

Question 2

How Shakti can contribute to HLL baseline

Shakti can only contribute to HLL’s baseline though reaching out to more people within the rural area that has a huge population of more than 700 million. In the rural India, there are around 600,000 villages. HLL has only reached a sixth of these villages, which translates to 100,000 villages. Thus, the program features can allow Shakti to tap a large portion of the untapped rural market of around 500 million people. Thus, it will involve HLL in distributing to rural markets, which is the way it contributes to the company’s bottom line. Additionally, through the self-help group federations known as MACTS, the company is able to sell the products to the entrepreneurs who in turn sell to the customers directly or to retailers. Entrepreneurs are also provided with incentives to keep them motivated, where the HLL collaborates with banks to allow them late payment of loans. Additionally, it can contribute to HLL bottom line through the iShakti that offers information to consumers and Shakti Vani concerned about health.

Economic value

Shakti has created quite a huge economic value to HLL through taping a previously untapped rural market. Additionally, it has created an economic value to the entrepreneurs as well who are able to make a livelihood from the company. The economic value can be broken down as below

Number of villages = 638,365. Total population in rural = 700,000,000, the tapped village market = 100,000 that amounts to a population of 220,000,000 while the untapped village market is 538,365 that translates to 480,000,000.

Its economic value in monetary terms can be realized from its turnover in 2004 that was four and a half times bigger than the previous year. It grew from 2231.232 to 10040.54 (figures presented in USD). On the other hand, entrepreneurs also realized economic values where with an investment of RS 10,000 they could make sales of up to RS 120,000. They could earn RS 700 every month and from this amount, they only pay RS 200 to banks as loan payment.

Social value

Shakti also creates a huge social value to the markets it serves. For the women who are its entrepreneurs, they are empowered to have a decent livelihood and make profits. It provides the women in rural areas to become independent and rely on their efforts other than relying on other people especially men in providing for them. This creates a chance for economic prosperity in rural India where provision of fast-moving consumer goods. From its Shakti Vani and iShakti, the program offers consumer and the entrepreneurs with important information about concerning health as well consumer information about quality goods. This provides a social value for the consumers and entrepreneurs. On the other hand, it provides a social value to the company through good relations with the consumers as well as the entrepreneurs and self-help groups that collaborate to make the program work.

Question 3

Critical challenges and their solutions

Entering new markets is not easy for any company especially when the market is remote and no large retailers are available. The remoteness of the rural areas is one of the challenges that Shakti face. Additionally, their being new to most of the people makes it a challenge to gain trust of the new customers in order to build a strong brand. With this kind of challenge the managers should seeks to cover more markets to increase the popularity of their brand. This would earn more trust from the people when they recognize it as the most popular within their areas. The other challenge is keeping the entrepreneur motivation high in order to continue engaging in the project. Considering that majority of the women my not be skilled, they require formal training to develop their skills necessary for managing the business. This can be done through iShakti and Shakti Vani. However, formal sessions for the entrepreneurs should be offered through the self-help groups that are at a better position in providing formal training to the entrepreneurs. The other challenge is selling all their products where four products out of thirty are taking up 50% of the share. Through promotion during gatherings, the company can penetrate these products to the rural market where competition is not quite stiff. Additionally, the management can offer incentives for the entrepreneurs to take up more stock and of the products that need to be penetrated into the rural market. The other challenge is the costs of entering these markets considering they are filled with small outlets unlike few big outlets within developed areas. Thus, the program has to deal with so many entrepreneurs in order to reach the rural areas. The managers should continue with the project since as they cover more markets, the market will mature and it will be easy to reduce some of the costs.

Question 4

Should HLL continue the program if it does not make profit

From the financial statements provided, it is clear that Shakti has provided some profit to the company. Within the fist two years, it was able to make a significant contribution to the turn over of the whole company. Therefore, even if the project is making no profits currently, the managers should continue with the project. The first reason is the reputation the company has made through its corporate responsibility of empowering women. Additionally, it has helped many people within the rural areas access quality products ahead of other conglomerate companies. The rural markets are growing at a fast rate while many are moving to urban areas. This puts the company at an advantage since those who move will be likely to remain loyal to HLL while those in the rural areas continue to remain their customers. Therefore, in years to come, the program will be able to make more profits. Additionally, the company has been able to access a big part of the rural market and can be increased twofold. This places the company at a big advantage than any other company within India in terms of serving the rural market. Thus, with a developing rural area, the company should continue with the program since it will yield more profits in the future as well as retain and build company reputation.