Unilever in India -Project Shakti free essay sample

U 2011 Unilever in India: Hindustan Lever’s Project Shakti- Marketing FMCG to the Rural Consumer Riddhi Biswas PGP/14/236 Section E ? Q1. What are the key features of Shakti? What are its positive aspects and what are its drawbacks? Key features of Shakti: Axiomatic truly , ‘Rural caravan’ of HUL as it can be popularly called is Project Shakti. Untapped and unexplored for years Indian rural market remain unnoticed and undiscovered as par as the business opportunities, especially in FMCG sectors, are concerned. As its Balance sheet and income statement had been quite less heavy due to the loss turnover in sales and net profit, HUL was all afoot to launch something new to be used as the springboard to jump to higher level of revenues and make its financial corpus to look promising. Keeping these spectrum of issues in mind HUL introduced project Shakti, a flag-ship programme was initiated by HUL to capture untapped rural markets. We will write a custom essay sample on Unilever in India -Project Shakti or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The model of shakti built on the features that best suit the rural folks. So the project shakti featured to win a big pie of the rural market and also wanted to create a deep social impact. HUL partnered with recipients of the micro-credits by offering the village women to be micro-entrepreneurs. HUL tied up with MACTS to sell its products, which subsequently would sell it into the SHGs. A member of each SHG was appointed entrepreneur by the SGH members. The entrepreneurs sold the products to the local outlets at a price that enabled the retailer to win a margin when sold to consumers. HUL sold its products at a discount to the entrepreneurs in such a price that it can avoid the channel conflict. To help the entrepreneurs to create and grow businesses , HUL hired RSP to coach the omen. Sensing the low sales volumes in initial months HUL pressed into service the incentive mechanism for newly appointed entrepreneurs, rewarding them in cash for visiting a cluster of homes independent of the amount sold attached with it the additional offering of incentives on selling some particular brands. In addition it also collaborated with local banks to ensure that the first installm ent towards loans be paid after a few months of set up. Positive aspects Shakti throws open a swathe of good aspects. These are discussed below ? A great opportunity to capture the rural market. ?To increase sales ?To net up profit ?A communication initiative to create a brand name synonymous with rural population ? A sales and distribution initiative to place it at a higher trajectory of growth ? A social platform to build up economic prospects in rural India and improve the standard of life ? I-shakti portal to make people information packed ?Shakti Vani to make people more health conscious The whole positive aspects can be summerised as follows- Project Shakti moves the wheel of business and society Drawbacks- Every rose has its thorns. Though ‘Shakti† promises a lot of goods, it also spawns some drawbacks. ?It much depends on SHG. So the places where SHGs are not prominent it has not hammered out any kind of fit mechanisms that can work well. ?As its target entrepreneurs are women, it is less likely that women can work as efficiently as the men as in India there are so many social taboos are involved. ?Selecting an entrepreneur can be sometimes conflicting in nature in SHGs. ?The discounts that are offered to the entrepreneurs can be channel conflicts. The price that is asked for from retailers are not of a great margin, so the margins that entrepreneurs receive is limited. ?Being a diverse country India has cultural obstacles and language barriers to name a few. And dialects also differ from region to region Q2. What was the motivation for the Shakti initiative? Was it a CSR activity? Being economically liberalized in 1991, Indian market became competitive and othe r companies started breathing down the neck to the existing players and as a result the profit share and revenues both plummeted. As the proverbial maxim says â€Å"There is a will, there is a way. † Feeling the competition HUL tried to find a new lease of business area. It was found that a large part of rural areas are badly snapped of the mainstream life and utterly inaccessible and non-communicable. They found an institutional void across this markets. There are 638,365 Indian villages but their reach is to only a meager amount of 100000 villages. So still more than 500 million people are yet to be brought under its consumer segments. o the motivation starts in the chronological order shown below As per as the case is concerned it can be said that they were also motivated to improve the rural standard of lives and give a boost to their incomes. This might be a good way to serve a society. CSR Initiative Before pinpointing let’s define CSR- â€Å"Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business ) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. The goal of CSR is to embrace responsibility for the companys actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Furthermore, CSR-focused businesses would proactively promote the public interest(PI) by encouraging community growth and development, and oluntarily eliminating practices that harm the public sphere, regardless of legality. CSR is the deliberate inclusion of PI into corporate decision-making, that is the core business of the company or firm, and the honouring of a triple bottom line: people, planet, profit† (source:Wikipedia) If we see the Shakti model, it fits to it to a good extent. So it can be called a CSR initiative Q3. How can Shakti make a contrib ution to HLL’s bottom line? Make an economic case. What is the Economic Value created by Shakti? What is the social value? HUL’s Diamond model Shakti was launched to capture the lower rungs of this economic pyramid. There are above 600,000 villages across india. But HUL’s reach is upto 100,000 villages. So the way Shakti was formulated it can tap a large chunk of the untapped 500 million population. So in this project HUL will be involved in direct distribution to rural market. The partnered Federations of SHGs, known as MACTS will purchase the products from HUL and the sell it to SGH entrepreneur, who then can sell it directly to the consumers or through retailers. There are many incentive mechanisms to the entrepreneurs to motivate them. HUL also tied up with some local banks to help the entrepreneurs to late repay loans. This project was also bolstered with the introduction of Shakti Vani and iShakti. Shakti Vani- it will not only help the people to be health conscious but also indirectly promote to take HUL products out of shelif. iShakti- make people information packed and find better ways to serve the rural clusters. Economic Value – Number of villages- 638,365. Total population -700 million Tapped village market- 100,000 Total Population- 220 million Untapped village market- 538,365 Total population- 480 million In 2003 total turnover 2231. 232(figures in USD) In 2004 total turnover- 10040. 54(for details see the excel sheet) So the growth of revenue post Shakti is shown below: So inclusion of Shakti has given a good result in its total portfolio. As it is well understood in initial phases it could not do much better but as years progressed it clocked a good revenue growth. So the there is every reason to cheer up for the economic prospect. For entrepreneurs With an investment of Rs 10000, they could achieve the sales of whopping RS 120,000 and earn Rs 700 per month and out of this Rs 200 to be paid out for loan payment. This is in addition to other incentives. Social Value- The following social values are created Q5. What are the critical challenges facing HUL in making Shakti work? What should Shakti’s managers do? If Shakti can not become profitable, should HUL continue the programme? Why? Challenges Managers should strive to keep the entrepreneurs motivated to be engaged in the project. For this they should give formal training to develop skills and manage the viable business. Shakti Vani should be kept intact and thus can connect it to the people there. They can introduce some promotional products during gathering and gift for some special cases. With this the internal challenges to be rooted out and convince the brand managers to invest in establishing the HUL brands. Out of more than 30 products, four products taking a share of 50%. So managers should stress upon these products to penetrate rural markets more. They should continue with the project. This is the project that gives them a very first mover advantage and can reap much benefit in years to come. They have already received good results out of it and Shakti had contributed 1% to 3% in its total revenues in one or two years. So still they can reach as much as an additional 250 million consumers by 2010. So focusing on the selective districts and prioritizing efforts on the existing entrepreneurs can propel HUL much ahead than its competitors. Moreover project Shakti has already established it as socially responsible organization and it has already having co-operation from some Government like A. P and people are also increasingly known to the HUL products.