Marketing Strategy and Organisation

Program & Batch: | PGDM FT 2013-15 | Term: | II | Course Name: | Marketing Strategy and Organisation | Name of the faculty: | Dr. Sita Mishra | Topic/ Title : | Mahindra: Creating sustainable channel relationshipsin rural India | Original or Revised Write-up: | Original | Group Number: | 5 (Five) | Contact No. and email of Group Coordinator: | Siddhant BakshiContact: +91 9871299517Email: ft13siddhantbakshi@imt.ac.in | Group Members: | Sl. | Roll No. | Name | | 1 | 1301-364 | Mayanka Sharan | | 2 | 1301-044 | Ashutosh Navgaje | | 3 | 1301-208 | Shatarupa Das | | 4 | 1301-557 | Ratul Chakraborty | | 5 | 1301-349 | Jeremiah Jacob | | 6 | 1301-214 | Siddhanth Bakshi |

INTRODUCTION

As CK Prahlad’s book “Fortune at the Bottom of the Pyramid” sates “ profits can be earned by selling products to bottom of pyramid customers .This is a valid statement as total customer spending and per capita GDP in rural India has been increasing at a much faster rate as compared to cities. Along with sub standard infrastructure and vast geographical area developing effective channel relationships is not easy. This is because of lack of loyalty and skills in rural channel partners.

When any company enters a rural market a lot of decisions need to be made but the most crucial is the one addressing distribution channels. As rightly said in the book “Supply Chain Management” by Chopra and Mendi - “An inappropriate network can have serious negative effects”. The majority of population in India continues to reside in rural areas and majority live in areas of low density (<5000 people). Hence any company needs to manage inventory and transportation in hundreds of thousands of centres to make easy product availability for rural populations. E-Commerce will play a very important role as presently 1 out of 20 purchases online are from rural areas but eventually this number is bound to increase.

Some of the stats pertaining to of different industries in the rural markets are 1. Automobile sales of close to 35 % are made in the rural areas. 2. The rural FMCG market is expected to stand at 100,000 Crore. 3. Rural mobile market is fastest growing with almost 150 million Smartphone users expected by end of 2014. 4. In consumer durables sector rural and semi urban areas account for 35 % of total market and this segment is showing a CAGR of 25% per annum. 5. Rural retail market worth almost 300 billion in India and in the next 5 years half this growth will be led by the rural sector.

Mahindra Group:
The Mahindra Group is an Indian multinational conglomerate formed in 1945 to trade in steel. Presently it has grown to over 100 countries with presence in automobile , aerospace ,farm equipment, real estate, financing and retail sectors to name a few. It is a very active CSR organization with keen involvement in philanthropy and volunteering. They have a trust in the name of their founder KC Mahindra which aims at fostering literacy in rural areas. They also have employee social options plans in which almost 35000 employees participated last year.

OBJECTIVES

To analyze sustainable measures adopted by Mahindra to drive sales in rural areas . This report aims to study the rural sustainable initiatives adopted by Mahindra to become a trusted brand in the eyes of rural consumers. This report also studies how these steps have led to increased use of Mahindra’s services by the rural population and how this will shape Mahindra’s future given the fact that rural business divisions will be outpacing its other businesses.

SUSTAINABLE RURAL DEVELOPMENT INITIATIVE BY MAHINDRA
(MAHINDRA KISAN MITRA)

Mahindra Samridhi:

To meet the existing and new demand of food grains one has to look for innovation and technological advancements in farming. Mahindra are doing their bit in aiding farmers to increase their productivity and yield. Mahindra samiridhi is one such initiative which provides recognition and support for innovation in farming machinery and high yielding variety of seeds. It aims to recognize the contribution made by individuals/institutions that have driven positive changes in field of agriculture. It follows the policy “Men and women of the soil are the backbone of India’s growth story”. They have award categories like Farmer of the year, PSO of the year, NGO of the year, Agro University of the year, Lifetime achievement awards to bolster innovation in farming. With cash prices raging from 50,000 to 5 lakhs.

They also entail initiatives like know your soil which talks about benefits of choosing the right kind of soil and a fertility map which informs about the type of fertilizer to be used for what kind of crops and how to do sampling of soil techniques. For example, mountain soils needs to be sampled once in 4 years. It also talks about the major crops like rice, wheat, rice, maize, cotton and the varieties, season to grow, cultivation, weed management, harvesting and in short serves as a “ GUIDE TO RURAL FARMERS” .They also have a log in for the farmers where in they can submit their innovations and clear their queries.

Another major reason why our farmers are less productive is because of lack of power supplies and absence of cutting edge machinery. They have also provided farmers with an option to hire machinery. They have also a page where in they recognize success stories of farmers for example Rajesh Patil of Orissa who along with International Development Enterprises (IDE) who work with farmers like Rajesh to develop micro entrepreneurs .These people in turn are seen as role models for the farming community in general and also leads towards a sustainable model of small scale commercial farming and poor farmers can rise above subsistence farming. They also recognize new methods and off beat systems of using machinery, for example Sanjay Gugawad of Gandhi Nagar developed a new method for growing pomegranate through Kar-TFBTL, a training institute. They also recognize women farmers in general to promote equal opportunity, for example women farmers in Himachal Pradesh who started to cultivate organic crops with help of vermicompost and herbal sprays.

Mahindra rural finance:

Due to an increase in aspirations and needs of rural consumer, Mahindra rural finance provides easy loans starting from two wheelers, utility vehicles to tractor loans. The very vision statement of Mahindra Finance is, “To be a leading financial service provider in semi urban and rural India”. This shows their dedication and seriousness towards rural relationships. Kisan Credit Cards have been created to clear short term money needs of the farmers for cultivation of seasonal or perennial crops. They also have land purchase schemes in which they provide loans to farmers to buy or rent agricultural land. A Dairy Plus scheme for the farmers on milk procuring societies. Horticulture finance is also provided for fruit orchids as well as short term fruit crops. The two wheeler loans are located at over 400 centres. They provide trade advance facilities to dealers and try to fulfil the dream of owning a Mahindra UV true (rural aspiration).It has over 500 branches spread across 25 states and 4 union territories.

Insurance Schemes:

They also provide details of National and State schemes put in place by government to protect interests of rural farmers. It is an extensive source with information ranging from objective of the scheme, eligibility criteria, concerned department, coverage procedure, risks covered. It covers schemes like National Agricultural Insurance scheme, farm income insurance scheme to name a few. Also schemes in public private partnerships are mentioned for example Government of Rajasthan’s initiative with ICICI Lombard which provides for weather insurance.

Mahindra Rural Housing Finance

Mahindra believes in order to provide affordable housing to all, private sector is the way forward. The rural customers find it difficult to get loans due to lack of documentation and income proof. Rural moneylenders are the next option for them but as we all know they charge high rates. This division has a customer base of close to 1 lakh rural customers as it looks to provide credit access to low income groups. Home loans are provided for new construction, extension of homes, converting of mud structures to brick and mortar. There is a finance scheme available for everyone be it, first time construction or small renovation. It is operating in 9 different states and 12.5% of its stake is held by National Housing Board which is a subsidiary of Reserve Bank of India.

Mahindra farm equipment division:

Through this business division Mahindra has been transforming productivity of farmers and creating farmer empowerment. All their products in this division (mainly tractors) are sold in close coordination with farmers deepening on usage pattern of tractors. Their philosophy of putting “ farmer at the centre of our products” has led them to be a domestic market leader for 3 decades now which is commendable given the size of more than 200,000(in volume) tractor sales in our country and the fact that the consumer base in highly dispersed. The tractor industry is highly dependent on political(rural subsidies by government),economical(credit availability at affordable rate),social(awareness among farmers),technological(innovation),ecological (cropping cycle), legal environment(agriculture policy). According to the BCG matrix the STAR is 31-40 hp tractor, cash cow is 21-30 hp tractors and 41 to 50 hp tractors are QUESTION MARKS.

To complement sales the Rural financing divisions aids by providing loans to buy tractors. In an industry which is full of competitors like TAFE, Escorts, Eicher (now acquired by TAFE),John Deer Mahindra and Mahindra rural sales were up by 33% as compared to last year in an survey by NDTV Profit in a traditionally low buying period of September. It is heartening as 20% of Mahindra’s assets under management is engaged in tractors.

Marketing Insight by Mahindra in Rural Sector:

Mahindra Max was launched by Mahindra based on two basic planks emotional and rational .Rational need being that space factor as rural consumers generally travel in large groups. Also the engine was high on fuel economy giving more value. Emotional need satisfied was that of a travel companion .Using above insights Mahindra developed a comfortable yet strong and sturdy vehicle satisfying the aspirational needs of rural India.

CONCLUSION

All the above data and facts point towards the fact that Mahindra as a strong rural interest in terms of company portfolio .Their rural portfolio includes rural housing finance limited worth 50 crores as on year ending March 2011;Mahindra and Mahindra Farm Equipment Division with 41 % domestic market share and turnover of almost 44,000 crores ; an investment of 25 crores in Mahindra’s shubhlabh services which provide farmers with single source to access all requirements for running productive farms , example information about products and services. Also Mahindra’s Rural Housing Division has dispersed loans close to 450 crores in financial year 12-13 as compared to only 250 crores till last year. This shows that due to large amount of business being done in rural areas it important to develop sustainable rural channels in order to better understand and serve their prospective and existing customers; i.e rural population.

This can be clearly seen from the fact that CRISIL recently upgraded rating of debt facilities of Mahindra Rural Housing Limited. The reason for this is the fact that Mahindra has in place appropriate risk management system for this segment of consumers. This is in sync with Mahindra Rises group philosophy “Driving positive change in the lives of consumers by focussing and providing services/products to largely underserved rural customers.”

The success of their farm equipment division is no surprise. According to a recent article by LIVE MINT Mahindra sold 22% more farm equipment compared to a year ago in September quarter. This will lead to increase in profit margins for Mahindra. Since the auto business is losing steam the same will be offset by the farm equipment sales division of Mahindra as analyzed by Parag Thakkar, HDFC Securities .Volume growth for the same is expected to be 22% year to date.

The above report clearly illustrates the volume of Mahindra’s rural business divisions and its unprecedented success in rural markets over the last few years . It is one the most trusted rural brands and it provides affordable products/services to lakhs of rural consumers. This is crucial in the time of recession, for companies to be at the top they need to make penetrations in the rural markets as the urban growth story is now stagnant. Inn this regard, we can definitely say that Mahindra is on its way to the top thanks to it sustainable channel relationships in rural areas.

REFERENCES

http://www.mahindrakisanmitra.com/mahindra-samriddhi/irrigate-your-field http://economictimes.indiatimes.com/mahindra-&-mahindra-ltd/directorsreport/companyid-11898.cms http://timesofindia.indiatimes.com/business/india-business/Rural-India-promises-growth-for-retail/articleshow/4371528.cms http://www.mahindra.com/What-We-Do/Farm-Equipment/Companies/Mahindra-and-Mahindra-Farm-Equipment-Division http://www.sannams4.com/?page_id=1406 http://www.ibef.org/download/Consumer-Durables-261112.pdf http://www.moneycontrol.com/news/stocks-views/mahindramahindra-top-pick-parag-thakkar_967092.html http://www.livemint.com/Money/rqzAhJUC9oc0YHzXm4KhxK/Mahindra-to-reap-better-profits-from-robust-tractor-sales.html http://profit.ndtv.com/news/corporates/article-mahindra-tractor-sales-up-33-in-september-327956 http://www.valueindia360.com/component/content/article/47-syndicate-services/230-mahindra-finance-riding-on-rural-growth-story http://www.managementparadise.com/forums/marketing-management/203230-concept-rural-marketing-mahindra.html