ASSIGNMENT ON SHAKTI PROJECT OF UNILEVER

1) What are the key features of Shakti? What are its positive aspects and what are its drawbacks? Key Features of Shakti:

• This project was started in 2001 with the aim of increasing the company’s rural distribution reach as well as providing rural women with income-generating opportunities.
• Villages with a population of about 2000-3000 are selected.
• Personnel from HUL approach SHGs.
• Selection of the Shakti Amma.
• HUL vouches for Shakti Ammas with banks from credit.
• One Shakti entrepreneur is appointed for one village & villages that are about 2 kilometers apart from her village.
• The Shakti dealer places initial orders worth Rs.15000(principal customer of HUL)
• The Shakti dealer organizes a “Shakti Day” in the village(display of products & free gifts)
• The recruitment of a Shakti Entrepreneur or Shakti Amma (SA) begins with the executives of HUL identifying the uncovered village.
• The representative of the company meets the panchayat and the village head and identify the woman who they believe will be suitable as a SA.
• After training she is asked to put up Rs 20,000 as investment which is used to buy products for selling. The products are then sold door-to-door or through petty shops at home.
Positive Aspects:
• The Shakti entrepreneur program creates livelihood opportunities for underprivileged rural women.
• The Shakti Vani program works to improve the quality of life in rural India, by spreading awareness of best practices in health and hygiene.
• They are also studying the consumption habits of the rural people.
• The factories that HUL continued establishing in less-developed regions of the country have been engaged in developing rural market in adjacent villages.
• These factory-centered activities mainly focus on training farmers, animal husbandry, generating alternative income, health & hygiene and infrastructure development.

Drawbacks:
• Low margins
• Difficulty in acquiring finance
• Transportation
• Low disposable income (dependence on monsoon)

2) What was the motivation for the Shakti initiative? Was it a CSR initiative?

Motivation:

• To take people aware
• To increase the consumption.
• To increase the income.
• To increase behavior in – Awareness & living standard Lifestyle Self consciousness.
CSR initiative?
• Indeed it was a CSR initiative.
• It helps women in rural India set up small businesses as direct-to-consumer retailers.
• The scheme equips women with business skills and a way out of poverty as well as creating a crucial new distribution channel for Unilever products in the large and fast-growing global market of low-spending consumers.
3) How can Shakti make a contribution to HLL’s bottom line? Make an economic case?

• It was soon felt that HUL's sales and distribution system which had protected it from competitors would be soon replicated by its rivals and to maintain its edge, the company had to increase its reach beyond the urban markets
• Carrying and forwarding agents(CFA)
• More than 70% of India's population lived in villages and made a big market for the FMCG industry
The distribution was a combination of the 3 ways:
• Door to door selling (11% margin on sales)
• Sells from own home (11% margin on sales)
• Retailers (3% margin)
• Averages sales : Rs. 10,000 - Rs. 15,000/month,
• Profit - Rs.1,000 per month

4) What is the Economic Value created by Shakti? What is the social value?

Economic Value:

• It is covering 400000 villages
• 8 million families have received micro-credit
• 76% of micro-credit recipients have crossed the poverty line
• 95% of micro-credit recipients are women
Social Value:
• The Shakti Vani program works to improve the quality of life in rural India, by spreading awareness of best practices in health and hygiene.
5) What are the critical challenges facing HLL in making Shakti work? What should Shakti’s managers do?
Challenges faced:
• Low margins
• Difficulty in acquiring finance
• Transportation
• Low disposable income (dependence on monsoon)
• Differential pricing for rural costumers purchasing from SHG
• Two different channels of same company competing on PRICE.
• Undermining local retailers
• Negligence of flooding of counterfeit products into market place

The Managers should do:
• Through Micro Finance the finance problem can be resolved.
• Develop Best Practices
• Show the success of the system to people who are discouraged
• Use existing networks to create some of the expansion
• Rewards for recruiting friends & associates
• Retain entrepreneurs
6) If Shakti cannot become profitable, should HLL continue the program? Why?
According to me this program if monitored properly can become profitable.
This channel opens the options of selling other products as cross-sell thus minimising the operating cost.
HLL should explore the option of opening own Micro Finance institution
Selling of Insurance products generates revenue.
Selling tractors, mopeds will generate extra revenue