Unilever garima

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Unilever garima

  1. 1.  Unilever  in  India  –  Hindustan  Lever’s  Project  Shakti  –  marketing  FMCG  to  the  Rural  Consumer  Submiited  to  Dr.  G  Sridhar  By  Garima  Dhamija  (ePGP-­‐03-­‐113)                                                                                                                              As  a  part  of  Sales  and  Distribution  Management      
  2. 2.  Q.  What  are  the  key  features  of  Shakti?  What  are  its  positive  aspects  and  what  are  its  drawbacks?  Facing  a  loss  in  turnover  in  sales  and  net  profit,  HUL  was  ready  to  launch  something  new  to  be  used  to  jumpstart  to  higher  level  of  revenues.  Keeping  this  in  mind  HUL  introduced  project  Shakti,  a  flag-­‐ship  program  with  this  and  another  objective  of  capturing  untapped  rural  markets.  In  other  words,  Project  Shakti  was  launched  with  the  aim  of  winning  a  share  the  rural  market  and  creating  a  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  Self  Help  Groups  (SHGs).  One  member  in  each  group  was  selected  as  an  entrepreneur.  The  entrepreneurs  sold  the  products  to  the  local  outlets  at  a  price  keeping  in  mind  that  the  retailer  could  further  win  a  margin  when  selling  to  consumers.  HUL  sold  its  products  at  a  discount  to  the  entrepreneurs  at  a  price  that  would  enable  them  to  avoid  channel  conflict.    In  order  to  help  the  entrepreneurs  grow  their  businesses,  HUL     • hired  RSP  to  coach  women.     • pressed  into  service  the  incentive  mechanism  for  newly  appointed   entrepreneur  (cash  rewards  for  visiting  a  cluster  of  homes  in  addition  to   the  incentives  on  amount  .  Additional  incentives  on  selling  some   particular  brands)   • collaborated  with  local  banks  to  defer  the  first  installment  of  loans  by  a   few  months.    Positives  of  Shakti   • An  opportunity  to  capture  the  rural  market  and  to  add  to  revenue   • Created  a  possibility  to  increase  net  profit   • Initiated  a  communication  to  create  a  brand  name  synonymous  with  rural   population   • Is  s  social  platform  to  better  economic    prospects  and  therefore  standard   of  living  of  rural  India.   • Started  Shakti  Vani  to  create  health  consciousness.      Drawbacks-­‐     • High  dependence  on  SHG.  So  the  places  where  SHGs  are  not  prominent  it   there  are  no  mechanisms  for  Shakto  to  work  well.   • Possible  conflicts  in  selecting  an  entrepreneur  in  SHGs.     • Channel  conflicts  can  happen  with  the  discounts  that  are  offered  to  the   entrepreneurs.  
  3. 3. • Margins  to  retailers  are  limited  ,  so  also  the  margins  to  entrepreneurs.    Q.What  was  the  motivation  for  the  Shakti  initiative?  Was  it  a  CSR  activity?  To  handle  increasing  competition  as  a  result  of  the  changes  in  the  economy  (also  the  liberalization  brought  about  in  1991),  Unilever  tried  to  find  a  new  area  of  business.    There  was  a  gap  in  the  rural  markets  both  financially  and  socially.  As  per  as  the  case,  the  motivation  was  both  to  find  a  new  market  and    to  improve  the  standard  of  living  by  giving  a  boost  to  the  incomes  .  Since  CSR  entails  “community  growth  and  development”    and  “deliberate  inclusion  of  public  interest  into  corporate  decision  making”  (source  –  wikipedia),  Shakti  inititative  does  fall  into  CSR.      Q.  How  can  Shakti  make  a  contribution  to  HLL’s  bottom  line?  Make  an  economic  case.  What  is  the  Economic  Value  created  by  Shakti?  What  is  the  social  value?      Shakti  was  launched  to  capture  the  lower  ranks  of  the  economic  pyramid.     • There  are  above  600,000  villages  across  India.       • Unilever’s  reach  is  upto  100,000  villages.     • Shakti  can  tap  a  large  chunk  of  the  untapped  500  million  population.     • direct  distribution  to  rural  market.     • MACTS-­‐  partners  to  SHGs,  would  purchase  the  products  from  Unilever   and  the  sell  it  to  SGH  entrepreneur,  who  then  can  sell  it  directly  to  the   consumers  or  through  retailers.     • Many  incentive  mechanisms  to  the  entrepreneurs  to  motivate  them.  Tie   ups  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-­‐  encouraging  health  consciousness     • iShakti-­‐  Empoer  people  with  information  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   • In  2004  total  turnover-­‐  10040.54  
  4. 4. (USD)    So,  Shakti  has  given  a  good  result  in  the  total  portfolio  and  good  growth  in  revenue  over  a  period  of  time    For  entrepreneurs  With  an  investment  of  Rs  10000,  they  had  the  potential  to  achieve  sales  of  upto  Rs  120,000  and  earn  Rs  700  per  month  (including  Rs  200  to  be  paid  out  for  loan  payment.)  This  would  be  over  and  above    other  incentives.      Q.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     • Motivation  of  Entrepreneurs  –  They  should  organize  formal  training  to   develop  skills  and  create  a  viable  business.   • Shakti  Vani  should  be  kept  intact  and  thus  can  connect  it  to  the  people   there.     • Should  introduce  some  promotional  products  during  social  get  togethers   and  for  special  occasions   • Out  of  more  than  30  products,  4  products  have  50%  share.    So  managers   should  stress  upon  these  products  to  penetrate  rural  markets  further.      They  should  continue  with  the  project.  This  has  to  be  looked  at  from  the  long  term  perspective.  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  selected  geographies  (districts)  and  focusing  efforts  on  the  existing  entrepreneurs  should  help.  Also,  the  positioning,  as  a  socially  responsible  organization  will  also  hold  Unilever  in  good  stead  always.  

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