Your SlideShare is downloading. ×
Itc Project-gurjeet bhatia-indore
Upcoming SlideShare
Loading in...5

Thanks for flagging this SlideShare!

Oops! An error has occurred.

Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Itc Project-gurjeet bhatia-indore


Published on

Published in: Business

  • mail me... will be usefull for me...
    Are you sure you want to  Yes  No
    Your message goes here
  • Can you please mail it to me? I really need it for my presentation.
    Kindly mail it to me, please. Its urgent :(
    Are you sure you want to  Yes  No
    Your message goes here
  • this project is very nice.... and frnd i want ur project for my future college purpose.... if u dont mine will u forward this project on my mail id....
    Are you sure you want to  Yes  No
    Your message goes here
  • i really appreciate the kind of information gathered here.... thank you... thanuj parle
    Are you sure you want to  Yes  No
    Your message goes here
    Are you sure you want to  Yes  No
    Your message goes here
No Downloads
Total Views
On Slideshare
From Embeds
Number of Embeds
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

No notes for slide


  • 1.                         LOGISTICS AND SUPPLY CHAIN MANAGEMENT                                                                                           FINAL PROJECT   ON                                                       LOGISTICS AND SUPPLY CHAIN MANAGEMENT IN ITC                                                                                      SUBMITTED TO                                                                              PROF.DR.T.A.S.VIJAYARAGHAWAN JI                                                                              FACULTY­XLRI, JAMSHEDPUR  SUBMITTED BY:   GURJEET BHATIA­INDORE   STUDENT­XLRI [PGCLSCM­3]   XLRI INSTITUTE OF MANAGEMENT, JAMSHEDPUR                                                 [2008­09]  
  • 2.                    ACKNOWLEDGEMENT                                        WITH GREAT PLEASURE, WE EXTEND OUR GRATITUDE                                        TOWARDS PROF. DR.T.A.S.VIJAYARAGHWAN JI, UNDER WHOSE                           VALUABLE GUIDANCE, CONSTANT INTEREST AND ENCOURAGEMENT WE                                      HAVE BEEN ABLE TO COMPLETE THE PROJECT SUCCESSFULLY.                               THIS CO­OPERATION IS NOT ONLY USEFUL FOR THIS PROJECT                                BUT WILL ALSO BE A CONSTANT SOURCE OF INSPIRATION FOR                                                                           US IN THE FUTURE.                               WE ARE ALSO THANKFUL TO ALL THOSE WHO HELPED US                             CONSTANTLY IN THE PREPARATION OF THIS PROJECT DIRECTLY                                                                             OR INDIRECTLY. 
  • 3. GURJEEET BHATIA-INDORE Company Background ITC is one of India's foremost private sectors companies with a market capitalization of nearly US $ 15 billion and a turnover of over US $ 4.75 billion. ITC is rated among the World's Best Big Companies, Asia's 'Fab 50' and the World's Most Reputable Companies by Forbes magazine, among India's Most Respected Companies by Business World and among India's Most Valuable Companies by Business Today. ITC also ranks among India's top 10 `Most Valuable (Company) Brands', in a study conducted by Brand Finance and published by the Economic Times. ITC has a diversified presence in Cigarettes, Hotels, Paperboards & Specialty Papers, Packaging, Agri- Business, Packaged Foods & Confectionery, Information Technology, Branded Apparel, Greeting Cards, Safety Matches and other FMCG products. While ITC is an outstanding market leader in its traditional businesses of Cigarettes, Hotels, Paperboards, Packaging and Agri-Exports, it is rapidly gaining market share even in its nascent businesses of Packaged Foods & Confectionery, Branded Apparel and Greeting Cards. As one of India's most valuable and respected corporations, ITC is widely perceived to be dedicatedly nation-oriented. Chairman Y C Deveshwar calls this source of inspiration "a commitment beyond the market". In his own words: "ITC believes that its aspiration to create enduring value for the nation provides the motive force to sustain growing shareholder value. ITC practices this philosophy by not only driving each of its businesses towards international competitiveness but by also consciously contributing to enhancing the competitiveness of the larger value chain of which it is a part." ITC's diversified status originates from its corporate strategy aimed at creating multiple drivers of growth anchored on its time-tested core competencies: unmatched distribution reach, superior brand-building capabilities, effective supply chain management and  acknowledged
  • 4. service skills in hotelier. Over time, the strategic forays into new businesses are expected to garner a significant share of these emerging high-growth markets in India. ITC's Agri-Business is one of India's largest exporters of agricultural products. ITC is one of the country's biggest foreign exchange earners (US $ 2.8 billion in the last decade). The Company's 'e- Choupal' initiative is enabling Indian agriculture significantly enhance its competitiveness by empowering Indian farmers through the power of the Internet. This transformational strategy, which has already become the subject matter of a case study at Harvard Business School, is expected to progressively create for ITC a huge rural distribution infrastructure, significantly enhancing the Company's marketing reach. ITC's wholly owned Information Technology subsidiary, ITC InfoTech India Limited, is aggressively pursuing emerging opportunities in providing end-to-end IT solutions, including e-enabled services and business process outsourcing. ITC's production facilities and hotels have won numerous national and international awards for quality, productivity, safety and environment management systems. ITC was the first company in India to voluntarily seek a corporate governance rating. ITC employs over 21,000 people at more than 60 locations across India. The Company continuously endeavours to enhance its wealth generating capabilities in a globalizing environment to consistently reward more than 3, 95,000 shareholders, fulfil the aspirations of its stakeholders and meet societal expectations. This over-arching vision of the company is expressively captured in its corporate positioning statement: ITC was established on August 24, 1910 as the Imperial Tobacco Company of India Limited in Kolkata. Initially, the company was involved in the trading of imported cigarettes. In 1925, in a backward integration move, the company started a packaging and printing business. The name of the company was changed to India Tobacco Company Limited (I.T.C. Ltd.) in 1974. In 1975, I.T.C. Ltd., through ITC-Welcome group, tied up with the US-based Sheraton Corporation to enter the hospitality industry. It acquired its first hotel in Madras (later renamed Chennai) in Tamil Nadu and called it the Welcome group Chola Sheraton. I.T.C. Ltd established ITC Bhadrachalam Paperboards Ltd. (IBPL) in 1975. The company started production at its integrated pulp and paper/board manufacturing facility at Bhadrachalam, Andhra Pradesh, in 1979. In 1990, I.T.C. Ltd. set up an International Business Division (IBD) for export of agricommodities. I.T.C. started a greeting cards business under the brand name Expressions in the year 2000.
  • 5. In the same year, I.T.C. also entered the fashion retailing business by extending its well known cigarette brand Wills. The retail outlets were called Wills Lifestyle and offered premium leisure wear for men and women under the Wills Sport brand. In September 2001, the company was renamed ITC Ltd (without full stops, and with no meaning attributed to the alphabets). In 2001, ITC made an entry into the foods business. In 2002, the company launched another clothing brand, John Players, which targeted the urban youth. In 2004, ITC was one of eight Indian companies to make it to the “Forbes ‘A’ List”8 which featured 400 of “the world’s best big companies”. In Oct 2005, ITC has launched an exclusive line of prestige fine fragrances and personal care products under the Essenza Di Wills brand. In late 2007, ITC launched Fiama Di Wills soaps and shampoos following the success of Essenza Di Wills. In Dec 2007 ITC launches ECF (Elemental Chlorine Free). ITC is the first and only Company in India using the ECF technology.                                                                                                   PRODUCTS  
  • 6. CULTURE ITC's Vision • Sustain ITC's position as one of India's most valuable corporations through world-class performance. • Create growing value for the Indian economy and the Company's stakeholders. ITC's Mission • To enhance the wealth generating capability of the enterprise in a globalizing environment • Deliver superior and sustainable stakeholder value. ITC's Core Values The company’s Core Values are aimed at developing a performance-oriented organization that is highly customer focused and also creates value for those holding stake in it. It fully understands that it has a commitment to its stakeholders to act as a guardian of the company from stakeholder’s point of view and deliver results in a manner that actualizes stakeholder’s interest on a long-term basis. It also delivers on the commitment to its customers by consistently addressing their needs on product quality, value and overall satisfaction. It respects the values of people and also encourages individuals to pursue their dreams, values their differences and helps them to experiment in the pursuit of various opportunities. ITC firmly believes in the concept of Excellence with their mantra being, “we do what is right, do it well and win. We will strive for excellence in whatever we do”. It is constantly in the pursuit of better and newer products, processes, services and management practices. Apart from the interest of shareholders they also address their commitment to the nation to generate economic value, at the same time ensuring that in achieving these goals no compromises are made whatsoever in complying with rules and regulations as specified by law. ITC’s Philosophy   ITC believes in practicing ethical behaviour among the corporate citizen. The company follows an HR policy that is regulated by Teamwork, Trust, Collaboration, Mutuality, Meritocracy, Objectivity, Collaboration, Self-respect and Human-dignity. It is also deeply committed to make the company a gender friendly place for each individual while also ensuring enhancement of equal opportunities for men and women, preventing sexual harassment of any form and the adherence to good employment practices. It is ensured that the interest of the company is foremost and in this context acceptance of any kind of gifts or payments from suppliers or customers is viewed as a serious breach of company discipline. And such acts are also considered as damaging to the reputation of the company.
  • 7. High standards of house keeping and hygiene are followed to ensure excellent physical working conditions. It is understood that all the directors, senior management and employees shall conduct themselves in an honest manner and avoid any conflict of interest. The top officials and employees of ITC believe that ITC provides them freedom at work and resources to experiment. Employees take pride in working for ITC for its work culture, environment, and the way people are treated. They are consulted before a new projectsystem is introduced and their concerns and suggestions addressed. ITC also gives a lot of input to develop their skill and career. They give utmost importance to equal opportunities, better work environment. Structure ITC has a three-tier management structure   At the top are Chairman and Board of Directors, who are responsible for the strategic supervision of ITC, its wholly owned subsidiaries and their wholly owned subsidiaries. The ITC board is a balanced board comprising Executive and Non-Executive Directors. The Board ensures that the Company has clear goals relating to shareholder value and its growth. It sets strategic goals and seeks accountability for their fulfilment. There are four board committees, namely, the Audit Committee, the Nominations Committee, the Compensation Committee and the Investor Services Committee. At the second level is the Corporate Management Committee, which is responsible for the strategic management of the company's businesses within Board-approved direction/framework. It comprises all the Executive Directors and three or four key senior members of management. Third level consists of divisional CEOs of each business assisted by their own divisional management committees. Corporate Functions of the Executive Management Team includes Planning and Treasury, Accounting, Legal, Secretarial, Human Resources, Communications, Internal Audit and Information Technology.
  • 8. Formal 3-tiered governance structure     The company’s organizational structure and governance processes are designed to support effective management of multiple businesses while retaining focus on each of them." This three-tier governance structure ensures that: For and on behalf of the shareholders the company believes in incorporating strategic governance in its work culture so as to ensure that despite being free from involvement in the task of strategic management of the Company, it can be conducted by the Board with objectivity, thereby sharpening and ensuring accountability of management;
  • 9. With mundane tasks of everyday executive management being delegated the management remains focused on issues of immediate importance; The Executive management of the individual businesses that are free of handling strategic management responsibilities of ITC as a whole is then able to channelize their energies and time in enhancing the effectiveness and overall growth of their individual units. Corporate Governance as defined by ITC is a systemic process by which companies are directed and controlled to enhance their wealth-generating capacity. A company employs vast sums of societal resources during this process of wealth generation. ITC is of the firm belief that the governance process being followed should ensure that these resources are used optimally to meet the aspirations of its stakeholders and society. This is further reflected in the deep commitment of the company to contribute to the ‘Triple Bottom Line’, which is the development of the nation’s economic, ecological and social resources. The company believes in empowering the executive management. But corporate governance ensures a system of checks and balances to ensure that these powers that are bestowed upon the executive management are used in a responsible manner so as to meet shareholder and societal expectations. The core strengths of ITC's governance philosophy are trusteeship, transparency, empowerment and accountability, control and ethical corporate citizenship. The practice of each of these creates the right corporate culture that fulfils the true purpose of Corporate Governance. Overall, the structure of ITC has high complexity because of horizontal differentiation within the organization. The most visible evidence is that of specialization and departmentation. Complexity also increases because of spatial differentiation. The ITC Code of Conduct, as adopted by the Board of Directors, is applicable to all Directors, senior management and employees of the Company. This Code is derived from three interlinked fundamental principles, viz. good corporate governance, good corporate citizenship and exemplary personal conduct. The Code covers ITC's commitment to sustainable development, concern for occupational health, safety and environment, a gender friendly workplace, transparency and audit ability, legal compliance, and the philosophy of leading by personal example. Since non-adherence to the code is brought to the attention of the immediate reporting authority, formalization is also there in ITC.                        Decision-making is decentralized, as the company believes in giving executive freedom to the management to drive the enterprise forward without undue restraints but this freedom of management should be exercised within a framework of effective accountability.                                                   
  • 10.                                            DESIGN   Looking at the structure and culture of ITC, we can say that its design is based more or less on the Divisional Structure. ITC has a diversified presence in different industries and each of its businesses act as an autonomous unit which are coordinated by the top level, i.e. the board and corporate management committee. The divisional managers are responsible for performance and hold complete strategic and operating decision-making authority. The top management provides support services to the divisions. It acts as an external overseer, evaluating and controlling performance. Hence the top management is free from being concerned with the day-to-day operating details so they can pay attention to the long term. Big picture, strategic decision making is done at the top level.                                                                                                                                  Areas of Diversification ITC has transformed itself from a leading cigarette manufacturer to an umbrella group that offers a diversified product mix to enhance its brand image and reduce dependency on tobacco related products. It has forayed into the hospitality service industry and has become a major player in the hotels segment. Its position in the FMCG (fast moving consumer goods) business is also on a growth curve; especially its confectionery and biscuits which are slated to achieve the top ranks among its peers. It has made heavy investments to strengthen its IT (information technology) segment and to compete with the big players like Infosys and Wipro. Although the ITC group is marketing its image as an ideal corporate citizen and a company that takes its social responsibility seriously, it still earns 80% of revenues from selling cigarettes and other tobacco related products. The major areas in which ITC has diversified are: FMCG • Cigarettes • Food • Lifestyle Retailing • Greetings and stationery • Safety Matches • Incense sticks Hotels Paperboards and Packaging • Paperboards and specialty papers • packaging Agri-Business • Agri- exports • E-choupal Information Technology
  • 11. BCG MATRIX Restructuring and Rationalising STRATEGIC FOCUS  
  • 12.                                                    ITC in FMCG Sector • Cigarettes ITC is the market leader in cigarettes in India. With its wide range of invaluable brands, it has a leadership position in every segment of the market. It's highly popular portfolio of brands includes Insignia, India Kings, Classic, Gold Flake, Silk Cut, Navy Cut, Scissors, Capstan, Berkeley, Bristol and Flake. The Company has been able to build on its leadership position because of its single minded focus on value creation for the consumer through significant investments in product design, innovation, manufacturing technology, quality, marketing and distribution. All initiatives are therefore worked upon with the intent to fortify market standing in the long term. This in turns aids in designing products which are contemporary and relevant to the changing attitudes and evolving socio economic profile of the country. This strategic focus on the consumer has paid ITC handsome dividends. ITC's pursuit of international competitiveness is reflected in its initiatives in the overseas markets. In the extremely competitive US market, ITC offers high-quality, value-priced cigarettes and Roll-your- own solutions. In West Asia, ITC has become a key player in the GCC markets through growing volumes of its brands. ITC's cigarettes are produced in its state-of-the-art factories at Bengaluru, Munger, Saharanpur and Kolkata. These factories are known for their high levels of quality, contemporary technology and work environment. CigarettesBusiness  
  • 13. • Foods ITC made its entry into the branded & packaged Foods business in August 2001 with the launch of the Kitchens of India brand. A more broad-based entry has been made since June 2002 with brand launches in the Confectionery, Staples and Snack Foods segments. For ITC, the packaged foods is an ideal business to utilize ITC's proven strengths in the areas of hospitality, branded cuisine, contemporary packaging and sourcing of agricultural commodities. ITC's world famous restaurants like the Bukhara and the Dum Pukht, nurtured by the Company's Hotels business, demonstrate that ITC has a deep understanding of the Indian taste and the expertise required to translate this knowledge into delightful dining experiences for the consumers. ITC has stood for quality products for over 98 years to the Indian consumer and several of its brands are today internationally benchmarked for quality. All products of ITC's Foods business available in the market today have been crafted based on consumer insights developed through extensive market research. Apart from the current portfolio of products, several new and innovative products are under development in ITC's state-of-the-art Product Development facility located at Bengaluru. ITC has over the last 98 years established a very close business relationship with the farming community in India and is currently in the process of enhancing the Indian farmer's ability to link to global markets, through the e-Choupal initiative, and produce the quality demanded by its customers. This long-standing relationship is being utilized in sourcing best quality agricultural produce for ITC's Foods business. The Foods business is today represented in 4 categories in the market. These are: 1. Ready To Eat Foods 2. Staples 3. Confectionery 4. Snack Foods In order to assure consumers of the highest standards of food safety and hygiene, ITC is engaged in assisting outsourced manufacturers in implementing world-class hygiene standards through HACCP certification. The unwavering commitment to internationally benchmarked quality standards enabled ITC to rapidly gain market standing in all its 6 brands: 1. Kitchens of India 2. Aashirvaad 3. Sunfeast 4. mint-o 5. Candyman 6. Bingo! Recently, on Aug 1, 2008, ITC Foods has drawn up plans to extend its Kitchen of India brand to frozen foods. ITC’s Branded Packaged Foods business continues to expand with sales growing by 23% over the previous year. Apart from the development costs of new products, the business has had to contend with the recent economic slowdown and severe cost increases in input commodities including wheat, vegetable oil, maize and skimmed milk powder, in addition to the soaring fuel prices.
  • 14. Having acquired reasonable scale in a relatively short span of time, the business is progressively focusing on consolidating the portfolio in certain categories, improving market servicing and driving supply chain efficiencies. Market and Competition Indian Foods market is a monopolistic market. There are many competitors in all the categories and although they all have similar products available at similar prices, they are trying to prove themselves different through their marketing strategies. However, entry to this business is easy and ITC has utilized this fact very efficiently to their benefit as they entered into the several categories among this Foods business. READY TO EAT ITC entered into the branded and packaged foods business in with the launch of Kitchens of India brand. In 2004, the company launched KoI brand fruits and spice conserves and cooking pastes. The fruits and spice conserves, were developed jointly with Karen Anand, a food expert. Priced at Rs. 70, these were targeted at the premium segment. The KoI cooking pastes, which were priced at Rs.30 for a 100g pack, also targeted the high-end market. Multi-purpose cooking pastes were also launched under the Aashirvaad brand and these were priced at Rs. 10 for 80g pack. The manufacturing of these products was outsourced to contract manufacturers for saving the operating cost. ITC entered the branded spices market in 2005 and the Instant Mix segment in 2006, both under the Aashirvaad Brand. As on April 2006, the total turnover in the Indian ready-to-eat and ready-to-cook segments was only around Rs. 700 million, but it continued to post an annual growth of 20%. By early 2006, though ITC had captured a 35% market share in the ready-to-eat segment, MTR was the clear market leader with close to 60% in market share. ITC exported 40-50% of KoI brand products (in terms of volumes) to the US, Canada, the UK, Switzerland, and Australia. In May 2006, ITC planned to introduce ten more varieties under the KoI brand within a price range of Rs. 35 to Rs. 98. In 2007, some new products have been launched under Ready To Eat category like chutneys, curries, conserves, biryanis (Noor Mahal, Bhori Biryani and some new range of products under Gharana (Paneer Malai, Keema Mutter). After launching all these products ITC FOODS is looking to share 50 to 60% of market by 2008-2009.Following are the major competitors ITC is competing with in Ready to Eat category: Brands Description Gits produces the selected range of popular ready to cook and instant Gits foods that cover a range of ethnic Indian cuisine-and where the recipes have "Global pallete acceptance".
  • 15. Offers packaged Bhel puri chats such as Sev Puri, Chana Masala, Haldirams Samosa, Pakoras, Alu Tikki, Pao Bhaji, Gol Gappa, Dhokla among others Offers packaged sweets,syrups,namkeens, cookies, pickles, aloo Ethnic Kitchens Masala, Bhujia, Bhelpuri, Chana Dal, Kajui Ladoo and many more items. MTR foods currently comprise twenty-two delicious and completely MTR authentic Indian curries, gravies and rice. Priya has a range of popular traditional recipes starting from Dal Makhani, Navaratan Kurma to Palak Paneer, Paneer Butter Masala, Priyafoods Punjabi Chhole and Rajma Masala along with true southern delicacies like Andhra Veg Pulav, Mango Dal, Gongura Dal.   Market Share - Ready To Eat 9% ITC Ltd. 8% MTR 48% Kohinoor 35% Others(Gits, Priya Foods etc.)     CONFECTIONERY Confectionary market in India is about Rs.2500 crore. It is loosely divided into seven categories: 1. Hard boiled candies 2. Toffies 3. Eclairs 4. Chewing gum 5. Bubble gum 6. Mints 7. lozenges ITC has currently in market with its two brands “Mint-o” and “Candyman”. ITC’s Mint-O fresh secured a 17% share of Indian cough lozenges market ahead of former leader Perfetti which only
  • 16. achieved 14.3% with chloromint. The Indian giant marked the confectionary sector in 2002 and has only two brands “mint-o fresh” and “Candyman”. But in overall confectionary market they are lagging behind having just 3% market share as compared to market leader Perfetti with more than 37% market and providing larger number of brands. Perfetti van melle ITC Ltd. Nestle Cadbury Alpenliebe Candyman . Kit Kat Bubbaloo . Kit Kat Lite Alpenliebe Minto . Milky Bar Dairymilk Creamfills . Munch Eclairs Alpenliebe Lollipop . Milk Chocolate . Fun Bar % Star Big Babol . Polo Gems . Polo Power mint Center Fresh . Munch Pop Choc Perk Center Fruit . Éclairs Halls Center Shock Chatar Patar Chlor-mint Chocotella Cofitos Fruittella Happydent White Protex Happydent Marbels Mentos Chocoliebe  
  • 17. Market Share - Confectionery ITC Ltd. 3% Perfetti Van Melle 42% 37% Cadbury Nestle 7% 11% Others(Parle, Joyco, HUL etc.)   STAPLES ITC entered the staples market in 2002 with wheat flour under the Aashirvaad brand. In 2003, ITC extended the Aashirvaad brand to edible salt. By early 2006, ITC had a 40% market share in the Rs. 6 billion packaged flour business. Its closest competitor HLL’s Annapurna brand was trailing behind with a market share of 18%. The market was growing at 12%. Under its Aashirvad brand ITC FOODS also launched salt, mixers, ready to cook pastes. In the Rs. 4 billion organized salt market (as of 2006), Tata Salt was the market leader with a 28% market share. ITC had only a 5% share of the market. Other players in this business are HLL (Knorr Annapurna), Nirma (Shudh), Marico Industries (Saffola), etc. Market Share - Staples ITC Ltd. 24% HLL 42% Pillsbury 13% Others(Sri Lal 21% Mahal, Local Brands etc.) BISCUITS: Indian biscuit market is estimated to be around 5000 crore. Biscuit industry in India in the organized sector produces around 60% of the total production, the balance 40% being contributed by the unorganized bakeries. ITC with its premium product, SUNFEAST, is acquiring a big share of market. Within few years, they are able to get 12% share of the market.
  • 18. Britannia ITC Ltd (Sunfeast) Parle Priyagold Tiger Marie Parle-g Butter Bite Nutrichoice Junior Dream cream Krack-Jack Classic Cream Good Day, Milky Magic Monaco Butter Lite 50 50, Fit kit Kreams Big Boss Treat Choco Nut Hide and Seek Marie Lite Pure Magic, Butter Nut Milk Shakti Magic Gold Milk Bikis Good Morning. Market Share - Biscuits ITC Ltd. 8% 12% Priyagold 10% 32% Britannia Parle 38% Others(Bonn, Anmol etc.)   SNACKS: Snacks industry overview Snacks industry in India is worth 1800 Crores of Rs. and growing at 10% is one of the largest markets in the world, out of which potato chips holds the major market share of around 85%. Product Price Product Price Product Price (ITC Ltd) (Frito Lay) (Haldiram)
  • 19. Bingo Lays Namkeen Rs. 5 Rs. 5 Rs. 5 Rs. 10 Rs. 10 Rs. 10 Rs. 20 Rs. 20 Rs. 20 Lehar Namkeen Rs. 5 Rs. 20 Kurkure Rs. 5 Rs. 10 Rs. 20 Market Sahre - Snacks 12% 16% ITC Ltd. FritoLay India 27% Haldiram's Others 45%   FINANCIAL DATA  ITC Ltd. started their food division in the year 2001. Since then the growth has been fantabulous. Their investment has increased year by year considering the scope of food market. However, they could not sustain the constantly increasing profit margins, mainly because of their valuable investment in market research, surveys, R&D, costly advertisements and expansion plan. Moreover they entered in a whole new market of food, but for this market they already had strong distribution market, which they are using for their tobacco product. So considering all these factors and short span of time period, surprisingly they did good job, particularly in snacks, biscuits, Ready to Eat and staples market.
  • 20. Annual Results (ITC)  ‐  In Rs. Crores  Mar ' 08  Mar ' 07  Mar ' 06  Mar ' 05  Mar ' 04  Sales  13,947.53  12,369.30  9,790.53  7,639.45  6,470.44  Operating profit  4,403.94  3,956.41  3,327.38  2,792.56  2,360.59  Interest  4.61  3.28  11.93  42.43  24.79  Gross profit  5,010.23  4,289.62  3,601.53  2,985.94  2,560.68  EPS (Rs)  8.28  7.18  5.95  8.79  6.43    Annual results in details    Mar ' 08  Mar ' 07  Mar ' 06  Mar ' 05  Mar ' 04  Other income  610.90  336.49  286.08  235.81  224.88              Raw material  4,639.35  5,644.34  4,124.90  2,837.40  2,572.78              Employee expenses  733.32  630.15  541.40  467.26  416.48                                                  Other expenses  4,176.61  2,397.88  1,938.52  1,610.08  1,310.04  Provisions made  ‐  ‐  ‐  ‐  ‐  Depreciation  438.46  362.92  332.34  312.87  241.62  Taxation  1,451.67  1,226.73  988.82  836.00  726.21  Net profit / loss  3,120.10  2,699.97  2,235.35  2,191.40  1,592.85             
  • 21.             Net  Operating  employee  Rate of Increase  Sales        profit  raw material  interest  profit  cost  / loss   ACTORS AFFECTING NET PROFIT  2005  18.07     18.30     37.58  10.29%  12.19%  71.16%  2006  28.16     19.15     2.01  45.38%  15.87%  ‐71.88%  2007  26.34     18.90     20.79  36.84%  16.39%  ‐72.51%  2008  12.76     11.31     15.56  ‐17.81%  16.37%  40.55%  Projection for 2009  21.33     16.92     18.98  18.67%  15.21%  ‐8.17%  The selling of 13544 crores, with net turnover at 3900 crores registered a growth of 18.4% driven by the non-cigarette business, which grew by 29% due to new investments in FMCG market. Overall projection for the year 2009, for sales is projected to be at growth rate of 21.33%. SALES OF FOOD SECTOR AND ITS PROJECTION:   2006  2007  2008  2009(projected)  Sales (crores)  1230.54  1698.53  2526.60  3410  The foods business is expanding rapidly with sales growth of 35% in the year 2007. This range of product includes more than 150 different products. The growth of this sector in terms of product categorization is as follows. Sales in biscuits category grew by 55%. Sales in staples category grew by 52% Sales in confectionary grew by 51%. Sales in RTE grew by 35% ITC Food is looking to expand its RTE category to maximize its profit. ITC’S NEW CHALLENGES: This food industry is the industry with very less profit margins. So low operation cost is the key. Also, Indian middle class is price sensitive. In this area international, national and also regional competition is very tough. With that wheat, petrol and labor cost is increasing day by day. Different types of restrictions imposed by the government are also playing a vital role in reducing profit margins. For example, exporting non-vegetarian foods out of India is restricted. To cover this up, ITC is trying to reduce cost of its biscuits by acquiring mass production of wheat directly from farmers through its e-chaupal initiatives. Also in this way ITC is able to reduce the price of its staples. As far as Confectionary market is concerned, ITC is looking to launch its brand of chocolate in collaboration with an American company. After analyzing the food sector, one can say that it is one of the toughest market to compete in as all the market giants are already there.
  • 22. GROWTH AND INVESTMENT PLANS:   This food sector is the most promising field and has already overtaken IT and PHARMACEUTICALS Sector of India. Even Indian Government is looking to develop this sector. That’s the reason central Government has already passed several projects for food parks. In this way FDI in this sector is possible. Also government in its 2006 budget has reduced custom duty from 16% to 8% on packaged food and also excises duty on instant food mixes. This will help ITC to be competitive in the market. Recently ITC has started exporting packaged food from its Bangalore plant. It is also planning to open one more new plant in Calcutta for Indian market. They are looking to add several products in their RTE list which will be exported as well. Also in late 2007 ITC has acquired one Australian Plant and seed technology industry. Through this they will provide highly valuable seeds and other solutions to farmers in India, which ultimately will increase the productivity and cost effectiveness for their staples and biscuits business. Its turnover in the foods business was around Rs. 8 billion in 2005-06 which further increased to Rs. 10.2 billion in year 2006-2007. ITC has decided to make an investment of 300 crores over a period of 5 years. ITC Foods has also decided not to make heavy investments in manufacturing unless volumes pick up. As of today ITC has invested 20 crores in R & D and planning to invest further 15 crores to produce new products in different categories. Thus looking at all the strategy of ITC future investment and planning. The future investment plan is as follows Rate of Increase Sales Operating Profits Net Profit/loss 2005 18.07 18.30 37.58 2006 28.16 19.15 2.01 2007 26.34 18.90 20.79 2008 12.76 11.31 15.56 2009(Projected) 21.33 16.92 18.98
  • 23. Rate of Increase of Sales w ith Projection for 2009 30.00 28.16 26.34 25.00 percent increase 21.33 20.00 18.07 15.00 12.76 10.00 5.00 0.00 2005 2006 2007 2008 Projection for 2009 years   Rate of Increase of O perating Profit w ith Projection for 2009 25.00 Percent Increase 20.00 19.15 18.90 18.30 16.92 15.00 11.31 10.00 5.00 0.00 2005 2006 2007 2008 Projection for 2009 Years   Rate of Increase of Net Profit/Loss with Projection for 2009 40.00 37.58 35.00 Percent Increase 30.00 25.00 20.00 20.79 18.98 15.00 15.56 10.00 5.00 2.01 0.00 2005 2006 2007 2008 Projection for 2009 years  
  • 24. Major Strategies Adopted by ITC Foods Entering the foods business was itself a strategic decision for ITC. While ITC’s core business, tobacco, was under pressure owing to several factors like government bans on advertising and on smoking in public places, hikes in the excise duty for cigarettes, and anti tobacco campaigns, ITC planned to deploy its surplus in the packaged food business where it saw huge business potential. Following are some of the strategies that ITC adopted to make its food business a success: • Entering into less competitive or unexplored markets (Ready to eat, Staples, Wafers): When ITC entered into the foods business in 2001, it focused on unleashing the areas where the competition is very less or there is no competition. It started with packaged ready to eat food and later extended that to Aashirvaad brand of edible salt and Atta. Recently ITC has announced its desire to forge in the frozen foods category in the domestic market. Players in this category are limited and ITC hope to exploit this fact. Also, in Bingo, although the competition is tough but there is only one player with whom ITC has to compete i.e. Frito Lay. This strategy has helped ITC to quickly establish itself in the above mentioned businesses. • Distribution Network: ITC already had a huge distribution network due to its tobacco business. ITC used this network to distribute their biscuits and wafers. This not only provided a good launch to their products but also helped in boosting sales. Today, ITC’s Bingo and Sunfeast are available at nearly 1.8 million outlets whereas Parle is available at only 1.5 million outlets. • Market differentiation (Ready to eat, Biscuits): ITC started packaged foods business with the KoI brand of ready-to cook products. They were positioned as premium products with target groups including tourists, NRIs, etc. In Biscuits also, ITC launched differentiated products in each and every segment. For e.g. it introduced an Orange Marie, a butterscotch cream biscuit, chilli flakes in a biscuit and even honey flavor under the Sunfeast brand. In March 2005, ITC Foods launched Sunfeast Pasta, a whole wheat based product targeted at children. It was expected to compete with products like Nestle’s Maggie noodles. With this strategy ITC built for itself new markets. • Cost control strategy (all products): When ITC started the foods division, its main challenge was to compete with the players who were already there. To overcome this challenge, ITC realized that they have to offer products at a price which is either equal or less than what the competitors are offering. To do this, they planned to capitalize by leveraging the strength of the group’s other businesses. ITC’s printing and packaging business provided high-quality, cost-effective, and innovative packaging. ITC also enjoyed cost advantages over its competitors owing to its electronic procurement system called e-Choupal. This helped ITC to compete with the best.
  • 25. • Diversification of products (Biscuits, Wafers, and Ready to Eat): One of the ITC’s successful strategies has been the method of diversifications among its various products. If we talk just about Bingo, ITC has come up with 16 flavors in comparison to its competitor ‘Lays’ of ‘Frito Lay’ which has only 4 major flavors. Same is the case with Ready to Eat food category and Biscuits. This strategy has helped ITC to attract a wide range of market. • Extensive advertising (Biscuit, confectionary, wafers): Just like a Bollywood movie needs good publicity to be a super hit, every new product launched in the market needs to be known to the consumers before it is launched. Advertising is where ITC made the difference in comparison to its competitors. They hired the best professionals and the best ambassadors in the country to make their products famous. This is evident form the award winning marketing campaign for Bingo and Minto Fresh. The tagline "Jab Laila ko karna tha impress to majnu ne khayi mint o fresh" has stood the test of times and is still widely known and remembered. Hiring the best people from the film industry and sports (Sharukh Khan and Sachin Tendulkar for Biscuits, Rakhi Sawant for Minto Fresh) showed ITC’s urge to be the best. On television, the company booked 10 to 15 spots per channel per day on youth channels such as MTV and Star World, mass Hindi channels like Zee and Star TV, and news channels. It also had around 20 spots on a variety of radio channels and advertised in most leading national dailies. In the top-30 cities, over 1,000 outdoor hoardings advertised the product. According to industry estimates, ITC spent close to Rs 100 crore on marketing.This kind of promotion of products helped ITC to make its products known to everyone and now it was not difficult to attract consumers. • Regular introduction of new products (all products): Having acquired reasonable scale in a relatively short span of time, ITC realized that, to remain in the competition it had to introduce new products regularly. ITC has been expanding its distribution network aggressively and also their product range. In biscuits and wafers range, it is launching new products or flavours week after week. Same is the case with Ready to Eat and Kitchen of India. • Innovation (all products): When the need to introduce new products arrived, ITC shifted its focus on to the innovation. Also, ITC was innovative in identifying the market or niche for all its products. • Maintenance of freshness and hygiene (all products): ITC positioned its wheat flour on the health & hygiene and value for money terms. Success in the staples business, especially in the branded and packaged wheat flour business, depended on two factors – an effective distribution network and the quality of the product. Therefore, ITC attempted to ensure that the supply chain was responsive, and laid emphasis on making accurate sales forecasts using inputs from distributors, sales personnel and a well-managed MIS system. To maintain
  • 26. freshness of the product, the company strove to minimize the transit time by regulating the shippers to maintain company-specific transit norms. The physical aspects of the supply chain like warehouses and trucks were closely monitored to maintain cleanliness. • From Analyzers to Prospectors (Biscuits): When ITC entered the biscuits market with Sunfeast in 2003, with three varieties of biscuits - glucose, marie, and cream, they did what any new player in the market does, imitating and emulating the leader that was Britannia. Their strategy was to manufacture those products which are already a success in the market. But, as ITC got hold of the market, it started to manufacture flavors which were never heard of. This was the result of ITC’s desire to exploit new product and market opportunities. All the above strategies and with the help of launch of Bingo in 2007, ITC finally tasted success in its food business in 2008 when it became a profitable business for the first time since its launch in 2001 Effectiveness Organizational    Effectiveness criteria Rating Remarks Entered into food business because of the various constraints in cigarette industry. 1  Flexibility 9 Launch of various new products in diverse categories in accordance to the demand of the consumer market. Outsourcing manufacturing of confectionary items, acquisition of an Australian firm for new improved seeds, set 2  Acquisition of resources 8 up new plant in Haridwar, where there is no tax for first 5 years. Expanding size of work force by expanding target market Goals are clear and well understood as they are clear about 3  Planning 7 the markets they want to enter in and the markets they do not want to enter.(they didn’t enter into chocolates, milk products) Combining various facilities to improve efficiency (manufacturing along with printing and packaging) Prices of almost all the products are at par with the 4  Productivity and efficiency 8 competitors. Also their selling has increased considerably at an average rate of 20-25% in last 6 yrs. In 2007, At their Haridwar plant they are able to get the more production with the limited technology and machine utility which they had in 2006.
  • 27. Employees are always consulted before a new project/system 5  Availability of information 8 is introduced. Timely operations are carried out to maintain freshness of the 6  Stability 9 inputs (Transporters are fined in case of delay) ITC leverage human capital for competitiveness by nurturing knowledge, entrepreneurship and creativity 7  Skilled work force 9 It has a no. of training programs which helps the employees gain exposure to the latest technologies and developments. Competing Values Framework   Environment  Culture Design  Structure  Leadership  Leader’s role  Uncertainty  Intensity              Developmental  Adhocracy  Idealistic  Prime mover  High  High        Rational  Market‐oriented  Rational  Expert  Current Framework  Favorable Framework  Environment in which ITC foods division is operating is highly uncertain because of the immense competition that they are facing in each category and due to the launch of new products and flavors in each category every other day. It is also highly intense as the organization’s main strategy to achieve their goals is through extensive marketing and for that they need to know how their products are received in the market. To do this, they are conducting various surveys and also they are launching their products only after a brief research of the market and trials. ITC Foods’ aggressive effort to capture market share and heavy investments in manufacturing and infrastructure suggests that they are focusing mainly on both of their short and mid term goals. Thus, the current design of their organization is rational but as the environment is highly uncertain and intense, they need to move towards a ‘Developmental’ design. The structure of the ITC Foods’
  • 28. division is ‘market oriented’ because of the same reason that they are focusing into the market deeply; but again as the environment is highly uncertain and intense, they need high flexibility within the organization and hence should move towards an adhocratic structure. Leadership in ITC foods division is rational as the leader is functioning logically in accordance to the market forces. Branded Packaged Foods  
  • 29. ITC in Hotel Industry ITC Limited entered the hotels business in 1975 with the acquisition of a hotel in Chennai, which was rechristened Hotel Chola. Since then the ITC-Welcomgroup brand has become synonymous with Indian hospitality. Today amongst India's finest and fastest growing hotel chains, it consists of over 70 hotels across as many destinations in India. These include super deluxe and five star hotels, heritage palaces, havelis and resorts and full service budget hotels. The 440-room ITC Maurya at New Delhi is not only amongst the leading business hotel in the country, but is in a class by itself. Complete with the 'ITC One', the hotel has played host to a galaxy of world dignitaries, including Bill Clinton and Bill Gates. In fact, even as he was leaving the White House, the former US President nostalgically recalled the memories of a fabulous Indian meal he and his family had at the Bukhara restaurant in the hotel. Bukhara has been declared the Best Indian Restaurant in the world, by 'The Restaurant Magazine', UK The 386-room ITC Maratha, opened in February 2001, is perceived as amongst the leading and the finest properties in Mumbai, designed in a grandiose classic style, the hotel pays tribute to Mumbai's colonial roots and the spirit of the Great Marathas. In keeping with its plan to have a presence in every major business destination in India, ITC- Welcomgroup unveiled one of Asia's finest business resort, the 238-room ITC Sonar in Kolkata on December 31, 2002. Another landmark hotel - the ITC Grand Central in Parel, Mumbai was formally inaugurated in January 2005. This five star deluxe property with 242 suites and rooms offers international standards of service, state of the art amenities and culinary excellence. ITC Mughal at Agra, a proud recipient of Asia's first Aga Khan Award for Architecture, is an outstanding resort hotel, lavishly spreading across 35 acres of beautifully landscaped Mughal gardens. ITC-Welcomgroup also pioneered a holistic concept of "branded accommodation" in the hospitality industry. It was the first to launch the powerful idea of a 'Hotel within a Hotel' by segmenting and branding the hotel services. It created the exclusive 'ITC One', 'The Towers' and the 'Executive Club' each catering to the needs of the global business traveller with unmatched quality and a range of services. In 2007, ITC-Welcomgroup entered a new phase in its collaboration with Starwood Hotels & Resorts. ITC-Welcomgroup now has an exclusive tie-up with Starwood in bringing its premium brand, the ‘Luxury Collection’, to India. The seven hotels which are part of this collection are: ITC Maurya in Delhi, ITC Maratha in Mumbai, ITC Sonar in Kolkata, ITC Grand Central in Mumbai, ITC Windsor in Bengaluru, ITC Kakatiya in Hyderabad and ITC Mughal in Agra. The agreement also includes the rebranding of WelcomHotel New Delhi as a Sheraton, while the Chola and the Park in Chennai, and the Rajputana in Jaipur retain their Sheraton connections. The Welcome Heritage brand brings together a chain of palaces, forts, havelies and resorts that offer a unique experience. Welcom Heritage endeavours to preserve ancient royal homes and the historical Indian grandeur, opulence of romance, valour and adventure for the future Indian generations. Welcom Heritage Hotels, provide a
  • 30. fine range of hotel services inside these architectural legacies present in Rajasthan, Punjab, Himachal Pradesh, Madhya Pradesh, Uttaranchal, Jammu & Kashmir, West Bengal, Tamil Nadu, Haryana and Karnataka. ITC-Welcomgroup was also the first to brand its cuisine. The Bukhara, the Dakshin and the Dum Pukht are today powerful cuisine brands, which delight connoisseurs in restaurants in several ITC Welcomgroup hotels. Others included Dublin, West View and the Pan Asian. Fortune hotels are a part of the well thought-out growth strategy that brings out the mid-level business and leisure traveler under the ITC-Welcomgroup umbrella, offering full service properties without compromising on quality. With a strong presence at Ahmedabad, Thiruvananthapuram, Calicut, Darjeeling, Jamshedpur, Vapi, Hyderabad, Gurgaon, Indore, Ootacamund, Madurai, Jodhpur, Tirupati and Port Blair, it will be shortly commissioning several more hotels across India. Hotel Business  
  • 31. ITC in Agricultural Industry ITC's International Business Division (IBD) is the country's second largest exporter of agriproducts with exports of over Rs. 1000 Crores (Rs. 10 billion). Its domestic sales of agriproducts are in excess of Rs. 1500 Crores (Rs. 15 billion). It currently focuses on exports of : • Feed Ingredients – Soyameal • Foodgrains - Rice (Basmati & Non Basmati), Wheat, Pulses • Edible Nuts - Sesame Seeds, HPS Groundnuts, Castor oil • Marine Products - Shrimps and Prawns • Processed Fruits - Fruit Purees/Concentrates, IQF/Frozen Fruits, Organic Fruit Products, Fresh Fruits • Coffee & Spices - Coffee, Black Pepper, Chilly, Turmeric, Ginger, Celery and other Seed Spices Although one of the relatively younger business divisions of ITC, it has, in a short span established itself as a first-choice supply chain partner of several leading international customers. Its major customers include Cargill, Marubeni, Toepfer, among others, who source agriculture commodities and food products from India. Its customer relationship management has enabled it to achieve a very high reputation for quality, reliability and value added services. ITC's unique strength in this business is the extensive backward linkages it has established with the farmers. This networking with the farming community has enabled ITC to build a highly cost effective procurement system. ITC has made significant investments in webenabling the Indian farmer. Christened 'e-Choupal', ITC's web plan for the farmer centres around providing Internet kiosks in villages. Farmers use this technology infrastructure to access on-line information from ITC's farmer friendly website. Data accessed by the farmers relate to the weather, crop conditions, best practices in farming, ruling international prices and a host of other relevant information. Currently, the 'e-Choupal' website - - provides information to farmers across the nine States of Madhya Pradesh, Haryana, Uttaranchal, Uttar Pradesh, Rajasthan, Karnataka, Maharashtra, Andhra Pradesh and Kerala. ITC plans to extend the 'e-Choupal' to cover 10 million farmers across 100,000 villages covering 15 Indian states. Following the impressive success of e- Choupal, the Company unveiled the first 'Choupal Saagar' near Sehore in Madhya Pradesh in August 2004. Eighteen more 'Choupal Saagars' have commenced operations in the states of Madhya Pradesh, Maharashtra and Uttar Pradesh. The 'Choupal Saagar' is a rural hypermarket which provides multiple services under one roof. It creates a platform for farmers to sell their produce. Farmers can also buy quality products for their farm and household consumption from 'Choupal Saagar'. These rural malls also provide farmers the invaluable additional services of soil testing, banking, insurance, medical facilities and restaurant. Such mall, in synergistic combination with the e-choupal network, serves as the core infrastructure to support ITC's rural distribution strategy. Over the next 7-10 years ITC plans to open over 700 such hypermarkets. The business is progressing a pilot project for retailing fresh fruits and vegetables. Three Choupal Fresh Cash & Carry Stores are
  • 32. currently operational at Hyderabad, Pune & Chandigarh. The Company has set up a complete warehousing and cold chain infrastructure for ensuring the availability of fresh products in the market, besides direct linkages with the farmers for sourcing farm fresh produce. In Processed Fruits category, ITC exports from HACCP Certified plants to Western Europe, North Africa, Mid-East, Japan and North America, a wide range of Processed Fruits products made from Mango (Alphonso, Kesar & Totapuri), Guava, Papaya, & Pomegranate for Industrial and Consumer use. ITC is the leading Indian exporter of Organic Fruit Products Certified to European (EC 2092/91) & US (NOP) Standards. Fresh Table Grapes & Pomegranates are sourced from ITC's EUREPGAP Certified Farmer groups & retailed through prominent supermarkets like Sainsbury's & Albert Heijn in Europe , Daiei in Japan. ITC's countrywide network of procurement teams, handling agents and contemporary warehousing facilities enable it to source quality merchandise even at short notice. ITC's processors are handpicked reliable outfits which ensure hygienic processing and modern packaging. Strictest quality control is exercised at each stage to preserve the natural flavour, taste and aroma of the various agri- products. ITC has been a significant exporter of seafoods from India since 1971. It exports frozen as well as cooked shrimps and other seafood products to Japan, USA and Europe. Its well-known brands include Gold Ribbon, Blue Ribbon, Aqua Kings, Aqua Bay, Aqua Feast and Peninsular. ITC's International Business Division continues to use innovation as its core strategy to retain its position as the one-stop shop for sourcing agri-commodities from India. Other businesses  
  • 33. ITC’s e- choupal ITC’s International Business Division, one of India’s largest exporters of agricultural commodities, has conceived e-Choupal as a more efficient supply chain aimed at delivering value to its customers around the world on a sustainable basis. The e-Choupal model has been specifically designed to tackle the challenges posed by the unique features of Indian agriculture, characterised by fragmented farms, weak infrastructure and the involvement of numerous intermediaries, among others. The Value Chain - Farm to Factory Gate:   ‘e-Choupal’ also unshackles the potential of Indian farmer who has been trapped in a vicious cycle of low risk taking ability > low investment > low productivity > weak market orientation > low value addition > low margin > low risk taking ability. This made him and Indian agribusiness sector globally uncompetitive, despite rich & abundant natural resources. Such a market-led business model can enhance the competitiveness of Indian agriculture and trigger a virtuous cycle of higher productivity, higher incomes, enlarged capacity for farmer risk management, larger investments and higher quality and productivity. Further, a growth in rural incomes will also unleash the latent demand for industrial goods so necessary for the continued growth of the Indian economy. This will create another virtuous cycle propelling the economy into a higher growth trajectory Choupal: A Time-Honored Tradition The village of Dahod appeared to be an unlikely setting for a technological revolution. Located 25 kilometers south of Bhopal in India’s central state of Madhya Pradesh, Dahod was dominated by soybean farmers who made their living as their ancestors did, harvesting their crop and selling it in the local market yard. In Hindi, the word for this meeting place was choupal. The choupal constituted an informal assembly, a forum that villagers could call their own, a place where
  • 34. knowledge could be shared and captured.
  • 35. In 1998, International Business Division (IBD) had grossed Rs. 450 crore ($100 million) in agricultural commodities sales, a marginal addition to the total Rs. 7701 crore ($2 billion) in sales generated by ITC’s other divisions, which included tobacco, paperboard, retail, hospitality, and foods, among others. The soybean and its derivatives comprised two-thirds of ITC’s agricultural export business. ITC sourced soybeans from farmers located throughout rural Madhya Pradesh. Madhya Pradesh (MP) had been dubbed India’s “soyabowl,” as its farmers contributed 4 million of India’s 5 million tons of soybean crop. ITC had had a 100-year relationship with farmers (based originally on the tobacco industry) that gave it an integrated presence along the entire value chain, from procuring soybeans from farmers and processing the beans in exclusively hired processing plants, to exporting the processed soymeal via vessel loads and container shipments. When soybeans were processed, about 80% of the crushed bean was turned into soymeal, a high-protein extract that was added to poultry and cattle feed. ITC exported soymeal to countries such as China, Pakistan, Bangladesh, and the United Arab Emirates, as well as other parts of Southeast Asia. The remaining 20% of the soybean material became edible oil, highly valued for its nutritional content and a very popular cooking medium in the domestic market. ITC had been successful in selling soybean oil domestically and processed soymeal internationally, but both the input and output sides of the agricultural supply chain in India were still far from efficient. The limited technological resources in India had constrained the dissemination of know-how in rural farming communities. Farmers did not have access to quality inputs, such as sowing seeds, herbicides, and pesticides, or information, such as accurate weather reports, that would help them improve their crop quality as well as the process of bringing it to market. They did not reap financial benefits from any profits made off the valuable soybean-derived materials. In fact, farmers were losing 60-70% of the potential value of their crop, with agricultural yields only a third to a quarter of global standards. Similarly, on the output side, middlemen clogged the supply chain, reducing profit margins for both farmers and buyers such as ITC. Unfair practices affected the way the farmers were paid, the weighing of the produce, and the amount of time taken by the process. This drastically increased transaction costs, slashing potential profits for the farmer. Both farmers and soybean processors were locked in an unproductive cycle. Farmers had limited capacity for risk and therefore tended to minimize their investment in crops, lest inclement weather or pests destroy their investment. This, however, meant a lower-value crop, which translated into slim margins for both the processor and the farmer. With such risk aversion, farmers were also loath to experiment with new farming methods. Since this meant that few new sources of value were found, the cycle continued unabated.
  • 36. Stunted Growth: From Field to Factory Farmers in Madhya Pradesh made their living in much the same style as their predecessors 50 years earlier. The process of getting crops to market began with farmers harvesting the soybeans and loading them onto tractors and bullock carts. Farms varied in size from under five acres for a small farmer to greater than 12 acres for a large farmer. An average farmer, with about nine acres of farmland, could expect an annual net income of approximately Rs. 20,000 ($443) from soybeans and wheat together. After the harvest, farmers hauled their loads of produce 30-50 kilometers to the closest mandi and then waited for the crop to be auctioned. The auction began when a government- appointed bidder valued the produce and set the initial bid. From here, government-licensed buyers called commission agents (CAs) bid upwards until the crop was sold. ITC contracted with a specific CA in each mandi to bid on behalf of the company. Prices were authorized by ITC’s office in Bhopal, MP. Here ITC employed a team of traders who followed the global market. Although the CA knew what price ITC would pay, nothing prevented him from buying from the farmer at a much lower price, selling to ITC at market price, and pocketing the difference. Once a CA won an auction, the farmer brought his tractor to that CA’s shop in the mandi and waited for the produce to be weighed on a manually operated balance scale that accommodated only small increments of the lot. The actual weight of the crop was often manipulated at this point because of the inaccuracy of the crude beam scales. For example, if the farmer brought 20 quintals of loose soybeans to the mandi, he could expect to lose about 10 kilograms total during the transactions, or 0.5% of his original lot. This translated to a loss of about 100 Rs. ($2.22) per lot. After the weighing process, the product was bagged and the farmer was paid. According to the law, CAs were supposed to pay the farmer immediately, but, in smaller mandis, farmers were often paid after an unofficial credit period. The CA would simply tell the farmer to return after a few days for the money. On any given day, at least 1,000 farmers could be found trying to file into the market to sell their produce. Some had to wait for two or three days just to get into the crowded marketplace. Once inside the mandi, the farmer was faced with further challenges of the chaos and pressure that characterized the market yard. The Bhopal mandi, hosting an average of 1,700 farmers a day and the sole destination for farmers in Dahod, was a dusty yard with a perimeter of booths belonging to the various CAs. It teemed with adolescent boys who ran through the crowd, kicking up dust and eating beans off the farmers’ carts. Laughing, joking men loitered and watched the auctioneers. Farmers suffered as a result of the time it took to sell produce in the mandi, for they were dependent on timely cash flow for subsistence. Thus, when harvest time arrived, they all descended upon the mandi at once. The crop had to go to market immediately, and, more importantly, it had to be sold. Farmers were stuck in the position of not being able to turn down a CA’s offer; in many cases it had taken him all day to reach the mandi from his village, and to return with a full cart of unsold produce would be a waste of time and money. Farmers rarely had access to adequate storage facilities in
  • 37. which to hold the crop if it was not sold. If a farmer were able to store the soybeans, and sell before or after harvest, without the time pressures associated with a perishable product, he would have more leverage over their value. This was impossible, however, under the prevailing system, where the farmer did not have other options. Once a transaction had taken place, the CA brought the produce to an ITC processing facility. There, ITC paid him for the cost of the soybeans. This was effectively a reimbursement, since the CA had paid the farmer in the mandi from his own resources at the time of the sale. The farmers’ isolation from one another and lack of telecommunications meant they had no way of knowing ahead of time what price would be offered the day they arrived at the mandi other than word of mouth. As a result, price discovery occurred only at the end of their growing and selling process. Knowledge shared and captured in the traditional choupal could be extraordinarily useful to farmers, but it had traditionally been limited to verbal communication. In the absence of telecommunications, and even electricity in some places, news from the closest city could take days to reach an outlying farming village. The uncertainty surrounding cash flow prevented the farmers from creating a sound financial base; instead, they had become locked into subsistence living. Prices of Indian soybeans generally followed the agriculture futures market on the Chicago Board of Trade and the Kuala Lumpur Commodity Exchange. Given the volatility of the spot market, and the fact that the value of agricultural commodities was based on largely uncontrollable factors such as weather, disease, and pest infestation, farmers needed to be aware of market activity. They needed to understand their product in its global context, so that they could plan their activities with more confidence. The e-Choupal The e-Choupal was based on the knowledge sharing found in the traditional choupal model, but took the concept one step further. ITC supplied a computer kit to each village with the following components: 1. A PC with a Windows/Intel platform, multimedia kit, and connectivity interface    2. Connection lines, either telephone (with bit rate between 28.8 and 36 Kbps) or, more commonly, VSAT (in 75% of e‐Choupals; average 2003 usage 64 Kbps inbound, 1 Mbps outbound)  3. A power supply consisting of UPS and solar‐powered battery backup  4. A dot‐matrix printer  The total setup cost to ITC was Rs. 170,000 ($3,762) per choupal. Another Rs. 100,000 ($2,213) was spent on people, travel, communication, software, and training. With the arrival of these components, nightly choupals at the home of Kamal Chand Jain were no longer limited to stories and gossip of the village. Farmers were instead accessing the World Wide Web through a site dedicated specifically to them, ITC’s <>. This Web site was updated by the ITC Bhopal office. The data
  • 38. uplink, however, took place in Bangalore, home of ITC Infotech India Ltd., ITC’s own information technology subsidiary responsible for developing the software. The site contained much useful information that was previously unavailable to farmers in Madhya Pradesh. The site opened up by welcoming farmers into the “community” of the e-Choupal. There were eight links to the areas of key information that comprised the e-Choupal: weather, best practices, crop information, market information, FAQs, news, feedback, and information about ITC. The feature set had been developed progressively with full involvement of the farmers using the system. Weather page : India had no private weather service; the government was the only provider of weather information. Before the e-Choupal, weather forecasts were rarely communicated to the remote villages of the rural farmers. When they did reach the villages, they were too generalized and did not accurately cover the 30.75 million hectares of Madhya Pradesh. Farmers needed to know their regional weather in order to accurately expect the rains. ITC negotiated with the Indian Meteorological Department, the national weather service, to get localized forecasts for district pockets of 70-80 square kilometers within MP. The result was that, on the soyachoupal weather page, a farmer could click on his home district to see his localized forecast. This knowledge made a lot of difference in the timing of various farm operations such as the application of herbicides and fertilizers. Furthermore, the difference between harvesting before or after a big rainfall drastically affected the quality of the crop. Ill-timed rains reduced the value of a soybean crop irrespective of the amount of money that was put into it at sowing time. “Farmer A,” for example, might spend 8,000 Rs. ($177)/hectare on inputs in the hopes of getting 15,000 Rs. ($332) in return. Similarly, “Farmer B” could put in 5,000 Rs. ($110)/hectare and get about 10,000 Rs. ($221) in return. Poor rains, however, would reduce the value of both A’s and B’s crops to a 6,000 Rs. ($133) return. Without reasonable knowledge of weather trends, there was reduced incentive for a farmer to spend additional money to produce a higher-quality crop from higher-quality seed. Without an accurate weather forecast, farmers tended to err on the side of frugality. The ability to predict rain patterns would therefore make a difference to the quality of soybeans sown by the farmers. The <> site served to reduce farmers’ weather-based risks and took the guesswork out of determining the best time to harvest. Best practices page :Here a farmer could find out what other farmers of similar land area and crop volume were actually doing and compare these “actual” practices to the “ideal” practices described on the page. This was done in the simple local Hindi vernacular, not in obscure academic lingo. This way, the farmer could immediately identify the gaps between what he was doing and what he should have been doing. Such practices included how to prepare the soil before sowing and how to space the seeds as they were sown. For example, 18-inch spacing was considered “best practice”; many farmers, however, had been spacing their seed rows nine inches apart, which meant that their crops did not receive proper ventilation or light. Such conditions led to an undernourished crop.
  • 39. Crop information page :This section contained instructional material such as “How to take a good soil sample” and information as to why soil testing was required. It also provided suggestions for further actions to be taken based on soil-test results. Market information: Four links on this page gave the farmer the options of exploring world demand, world production, mandi trading volume, and mandi price lists. This way the farmer became involved in the context of his livelihood. He was given knowledge about the mandi: the prices (lows and highs), as well as the number of bags that had arrived at the mandi to date, and the estimated daily arrivals (usually about 40,000 tons/day in the peak season). The farmer could thus assess the demand for his produce at a particular mandi. This information used to be available only from research institutions or corporations. Now it was being provided directly to the farmer. The site also contained a link to the Chicago Board of Trade, where farmers could find a seven-to-10-day market outlook and track global soybean price trends. One of ITC’s strengths was its ability to communicate with the global markets daily. News page: This contained excerpts of relevant news items, such as the government’s decisions on subsidies or minimum support prices (MSPs), and innovations in other countries’ farming systems. If a farmer did something that was particularly successful or innovative, that was posted to the news section as well. This recognition provided incentive for the farmers, who would otherwise not have the chance to be heard, to try new things. Lastly, <> had a place for suggestions. One of the advantages of the system was that the <> site could be continually tailored to the needs of the farmers. ITC had relied on farmers’ input since the start of the project, and, in an effort to keep the site’s content dynamic and relevant, it was important that the farmers could continue to be involved in its improvement. The e-Choupal served different purposes over the changing seasons. At harvest time, for example, farmers were more concerned about prices, at sowing time they were more concerned about weather forecasts. The e-Choupal initiative was based on the belief that the farmer needed an alternative to the mandi system. By participating in the e-Choupal network, farmers were offered new channels through which they could sell directly to ITC, thus eliminating the cost inflation and cheating that occurred through the middlemen. ITC selected a lead farmer in the village to become the caretaker of this equipment and a liaison between ITC and the farmers. The Sanchalak had to be someone whom people felt comfortable visiting and someone who, in turn, welcomed such gatherings in his or her home.
  • 40. The Sanchalak In the evening, 15-20 people at a time showed up at the Sanchalak’s home for the usual choupal gathering. The ITC computer system that had been put in place offered new impetus to the discussions. In addition to the regular chatter, the Sanchalak would use his assigned user name and password to access <> and share with his neighbors the interactive features of the site. The Sanchalak had received some basic IT training from ITC, as well as instruction in effective methods of communication. This qualified him to open the site to other farmers, who could then navigate the site themselves. The log-in feature was designed with the idea of offering customized content based on the log-in location; in the future, if the content were to evolve into a more personalized form, individual farmers would log in themselves. Until then, however, the Sanchalak, distinguished for his literacy and communication skills, served as the liaison between ITC and the farmers. Weather forecasts and mandi transactions were printed out and posted on a notice board in the Sanchalak’s house. This way, the Sanchalak did not need to open the Web site with the arrival of every visitor. Farmers could stop in and read the printed information at any time throughout the day. If a farmer was unable to read, he only had to ask the Sanchalak’s advice. It was in the Sanchalak’s best interest to advise the farmer correctly, for better-quality produce from each farmer would fetch a higher price from ITC, and this meant a greater commission for the Sanchalak, as well as supporting his reputation as an honest broker. Farmers brought samples of their soybean crop to the Sanchalak’s home, where he was equipped by ITC with moisture meters and other tools used to assess the quality of the beans. The company provided “control samples” with which the Sanchalak could perform a quality comparison. Each Sanchalak was trained (as part of orientation) in quality assessment of his particular crop, so he would be qualified to judge the material based on damage or foreign matter. The soyachoupal Web site provided the “best material price” for “best-quality” beans, so when farmers brought their crop sample to the Sanchalak, he priced the material based on its degree of variance from that “best- quality” example. The Sanchalak then determined whether or not each farmer’s sample matched what he had learned to identify as the best material. Using the samples, he could physically show the farmers: If you grow it like this, you will get a better price. Reorganizing the Supply Chain   The physical setup of the e-Choupal kiosks facilitated a new kind of supply chain, of which technology was at the crux. Trading outside the mandi, for example, was very difficult before the e-Choupal. First, the mandi provided the only means for price discovery, and farmers reasonably assumed they would fare best in open auction. Second, transactions outside the mandi were officially prohibited by
  • 41. the Agricultural Produce Marketing Act. The government had confined agricultural transactions to the mandis to protect the farmers from exploitation by unscrupulous buyers. Open auctions were considered the best safeguard against this. At the conception of the e-Choupal, however, ITC was able to convince the government of the potential benefits to the farmers and the economy, and the government amended the act to legalize purchases of beans (and other agricultural commodities) outside the mandi. The transparency of the e-Choupal - the fact that the Web site was accessible to anyone, including the government, to cross-check ITC’s prices at any time -facilitated the government’s acceptance of the initiative. The Web technology brought price discovery to the village level. This changed the way farmers did business. First, empowered with the knowledge of what price he would get at an ITC hub, as well as the reports on prices at nearby mandis, the farmer was able to make an informed decision about where to go to sell his beans. This knowledge was important, given the costs associated with traveling to the mandi with the beans. By learning about prices in the village itself, the farmer could determine how his revenue would compare to the cost of transportation. If he felt he could get a better deal at the mandi through the open auction process, he could choose to go there. But given the uncertainty of the mandi versus the set published prices offered by ITC’s hubs, in addition to the perk of being reimbursed for transport cost, farmers began regularly defecting from the mandis and choosing ITC. Second, by following the real-time prices on the Web site, the farmers could decide when to sell. Knowing the price in advance meant that the farmer could go to an ITC hub (assuming he was happy with ITC’s price) on his own schedule, even if there were no other reasonable bids on the beans at the mandi. A third feature distinguishing the eChoupal was its transparency. It is arguable that prices could be communicated to farmers by other means, such as telephone or radio broadcast. These methods, however, still relied upon spoken word. The ability to actually see prices being offered, in writing, on the computer screen (in spite of the illiteracy of some of the farmers), was instrumental in establishing the trustworthiness that made the e-Choupal effective. The Web model was also more scalable, since one kiosk could be used by hundreds of farmers. Without price discovery via the Web portal in the villages, selling to ITC hubs directly might be little different than going to the mandi. In fact, the mandi might be more attractive because the farmers would have the opportunity to sell in an open auction. But with the e-Choupal, the farmer was able to make his own informed choice. ITC worked to make its hubs attractive destinations for farmers. In addition to competitive pricing, the hubs contained multiple amenities that were not available to farmers in the mandis.
  • 42. The ITC Hubs ITC had five processing units in Madhya Pradesh and 39 warehouses, making a total of 44 points to which a farmer could bring his soybeans. This compared to 51 large soybean-based mandis in the state. The farmers traveled an average of 20 kilometers to reach a hub, the range being five to 30 kilometers. ITC had 1,695 e-Choupals in MP, covering 8,400 villages and reaching 80% of soybean- and wheat-growing areas in the state. The physical architecture of the e-Choupal model called for a Web kiosk within walking distance (less than five kilometers) and a hub within driving distance (less than 30 kilometers) of every targeted farmer. To make sure this was fulfilled, ITC added three processing hubs and 36 warehouses in MP after the e-Choupal project got under way. The distance between farms and hubs was about the same as what a farmer would travel to get to a mandi. Once the farmer arrived at one of ITC’s hubs, his beans were weighed on a computerized weighbridge, and the weight was multiplied by ITC’s published price. The farmer then received cash on delivery. ITC maintained enough cash in a secure kiosk at the processing plant so that the farmer was fairly and immediately paid. In addition, the farmer was reimbursed for the cost incurred transporting his material to the factory. Depending on how far the farmer had traveled, ITC repaid him based on fixed freight-cost parameters, and that sum was added to the payment for the produce. Simple amenities at the ITC processing plant made the experience considerably more pleasant than at the mandi alternative. After the soybeans had been weighed, a tented seating area provided the farmer with a shaded spot for him to sit and await payment. Restroom facilities were available. None of these existed at the traditional mandi. In addition, there were 15-liter jugs of soybean oil available for purchase. ITC made a point of saying, “This is your oil; this was made from your beans.” When the farmer bought soybean oil directly from ITC, he skipped four or five people in that supply chain, keeping his own purchasing costs to a minimum. The oil was pure and unadulterated because it came directly from the ITC factory. As an added convenience, the processing facility included a soil-testing lab on the premises, where scientists offered recommendations for fertilizers or additives based on the chemical composition of the farmer’s sample. This took three days, while the alternative - going to a government lab - would take longer. Scientists employed by ITC made recommendations on the nutrient dosages that the soil needed based on its properties. They did not recommend any specific brand of fertilizer; they just gave the farmer the soil properties, and then the farmer could choose his own brand of fertilizer based on his soil composition. Freedom of choice was an important principle of the e-Choupal concept. For his involvement in the ITC procurement process, ITC paid the Sanchalak a 0.5 % commission on the sale of soybeans. He was, after all, effectively doing ITC’s buying - buying that would otherwise have taken place at the mandi. The e-Choupal system effectively turned the Sanchalak into an entrepreneur, for he also had the opportunity to earn a 2%-3% commission on orders placed for input items, such as herbicides, sowing seeds, and fertilizers, provided through ITC. Instant-glow gas
  • 43. lanterns and edible oil were also popular sells. With the help of commission from edible soybean oil sales, Dahod Sanchalak Jain earned about Rs. 35,000 ($775) over the three to four months of the 2002 soybean season. Samyojak ITC benefited because of the increase in turnover resulting from Sanchalaks organizing and mobilizing farmers to sell to the company. The farmers were happy to have a better-defined channel through which to sell. But what of the middlemen, the commission agents of mandi life ? All of ITC’s CAs were kept, albeit with a new title: Samyojak. In this role, former CAs were given additional money-making opportunities within the e-Choupal system. ITC mandated that its CAs become Samyojaks if an e-Choupal was being set up in their geographic area. In most cases the transformation was achieved by convincing CAs of the potential revenue to be gained through the transactions in the e-Choupal. The Samyojak role comprised three major areas of responsibility: 1) setting up the e-Choupals; 2) facilitating ITC’s purchasing transactions; and 3) helping with ITC’s selling transactions. In the establishment of new e-Choupals, the Samyojak assisted ITC teams in village surveys to lay the groundwork. This meant assisting in the selection of the Sanchalak, acting as a liaison between villagers and ITC, and helping villagers understand the potential for the new system to be more efficient and profitable for all parties. Samyojaks also managed warehousing hubs attached to the processing facilities that stored bought soybeans. They assisted in the logistics of the cash disbursements to farmers arriving at the processing facility. They also helped facilitate transportation links for farmers who could not reach the ITC processing facility themselves. ITC’s selling transactions comprised the “one-stop-shop” feature of the e-Choupal. Farmers could buy herbicides, sowing seeds, gas lanterns, fertilizers, and soybean oil among other sundries directly from the company. While the Sanchalak had the responsibility of aggregating the orders in his village, the Samyojak would assist in actually moving the goods from ITC’s manufacturing units to the e- Choupals and/or warehousing hubs. Three systems enabled ITC to sell and deliver goods to farmers through the e-Choupal. The first was at the village level, where the Sanchalak aggregated demand for products through orders placed by his fellow farmers. This was done during the traditional choupal time. The Sanchalak then e-mailed the order to ITC, and the items were either a) picked up by the Sanchalak at the ITC warehousing hub, or b) delivered by the Samyojak to the villages. In either case the Sanchalak collected cash payments from his neighbors and remitted them to ITC. Seeds and fertilizers were sold in this way.
  • 44. The second system did not involve any prior orders. Instead, the Sanchalak bought products based on estimated demand and stocked them in his home. Products sold this way were again procured by either Sanchalak pickup or Samyojak delivery. This system was most effective for consumer goods such as salt, matchboxes, soybean oil, and confectionary items. These were all ITC products, and both the company and the Sanchalak earned a fee from any sales. The third system for selling additional goods through the e-Choupal was “shopping” for the products at the ITC processing facility. When Sanchalaks and farmers visited the ITC facility to sell their produce, they also had the opportunity to peruse the warehousing hubs for items on which they might like to spend their freshly earned cash. Samyojaks managed these warehouses, assisting ITC in creating retail storefronts in the setup for 2003. This interactive feature of the e-Choupal system created an opportunity for ITC, the Sanchalak, and the Samyojak to turn profits that were simply not possible under the traditional system. The Sanchalak’s job of arranging and mobilizing the farmers to take their soybeans directly to the ITC processing facility meant greater revenue for the company and commission for the Sanchalak. It was estimated that ITC saved $5/ton on freight cost; from those savings, ITC would reimburse the farmer for the time it took to travel to the ITC facility. The farmer, in turn, earned an average increase of $8/ton. For the Samyojak, income potential in the e-Choupal system exceeded that of a CA in a mandi. ITC paid 1% of the transaction value to the CA when buying through the mandi. The typical CA turned his cash three times in a month during October to December (the time of peak activity), meaning that his gross return came to 3% per month for three months. Thereafter, money lay idle for the most part, except during May and June, when wheat and pulses were harvested. For an ITC Samyojak, there were more frequent opportunities to earn commission off farm inputs and other products being sold through the e-Choupal. Commissions ranged from 2% to 5% per transaction, depending on the product. Samyojaks who assisted ITC in cash disbursements at processing units earned a fee of 1% of the transaction. The advantage of this was that the Samyojak now had the potential to earn from his working capital year-round. The e-Choupal leveraged the physical capabilities of the current middlemen while removing them from the flow of information and market signals. CAs-turned-Samyojaks had good terrain knowledge as well as long-standing relationships with villagers, which ITC also hoped to leverage. Samyojaks continued to operate out of mandis as hub points, allowing the e-Choupal system to coexist with mandis.
  • 45. In fact, ITC continued to buy from the mandis even as the e-Choupal gathered steam. By 2003, ITC was procuring about 50% of its soybeans from the mandis and 50% from the e-Choupal. The company hoped to shift the ratio to about 20% mandi, 80% e-Choupal, as new hubs were added to the e-Choupal system. The hubs had limited capacity, and, at certain points in the season, when market prices for soybeans were particularly low, ITC benefited from buying from the mandi as well as the e- Choupal in order to maximize procurement. Furthermore, the mandi provided a source of “market intelligence” for ITC, as Samyojaks continued to operate there as well. Samyojaks still got a significant amount of income from their work in mandis; they could not yet afford to work solely for ITC. Principles of the e-Choupal The e-Choupal depended strongly on trust. The Web site was simply a medium for the more important human element, the interaction. Interaction was, after all, the initial driver of the choupal concept. No contract bound farmers to sell to ITC once they used the Web site. ITC did not ask for commitment; the farmer was free to do as he wished. In fact, the farmer could use all of the e- Choupal’s facilities, soak in all the information, and still choose to take his crop to the mandi. The bet was that, once given these tools, farmers would realize on their own that selling directly to ITC was the best alternative to the mandi. To ensure the Sanchalak’s integrity in the process, when he received the computer equipment he took an oath that connected him to ITC. At this oath-taking event, the Sanchalak pledged, before the entire village, to uphold ITC’s high standards; not to use the computer for “wrongful” purposes; and to maintain the ethics, image, and concept that ITC has created through the <> site. In addition, the ITC logo was painted on the front of the Sanchalak’s home. This vibrant green and yellow mural stretched across the wall from floor to ceiling, identifying the Sanchalak as a liaison of ITC. Through these steps, ITC created a sense of pride and responsibility that infused the Sanchalak nominations. The Sanchalak became a highly visible figure after the ITC overhaul; as a result, potentially unscrupulous Sanchalaks were deterred from taking advantage of the system. If a Sanchalak were to act dishonestly at any point, it would create uproar throughout the village, and ITC would be able to take immediate action. Because the role was viewed as an honor, however, Sanchalaks usually treated their duties with the utmost pride and seriousness. There were many benefits realized by ITC when the company found a way to buy directly from farmers. First, ITC had more control over the quality of the product it sourced. Direct contact with the farmer enabled knowledge sharing in terms of best practice for sowing, irrigation, and harvesting; therefore, ITC had some additional leverage over what was available to them for purchase. Higher-quality produce, of course, enabled more competitive pricing in the international market. Furthermore, buying directly from the farmer reduced the chance of the produce being adulterated with impurities (which often happened with middlemen).
  • 46. Hunting for Growth Soon after soybeans started showing promise, ITC had set up pilot e-Choupals in three other crops in three different regions of India that were as diverse from one another as possible and representative of all crops in ITC’s product portfolio: coffee in Karnataka, aqua (seafood) in Andhra Pradesh, and wheat in Uttar Pradesh. Learnings from these pilots were expected to help the company scale up on a national level. Each of these projects shared a common management approach with respect to their scale and scope: First, pilot-test the concept in a small number of villages; second, make changes based on the learning from the pilot phase and validate them in a larger number of villages; and third, grow the project to reach as many villages as possible and saturate the region. ITC called this approach “Roll Out, Fix It, Scale Up.” Other Commodities As seen with soybeans, margins could be generated in many other commodities through logistics cost savings between the farm and the factory, where non-value-added activities were eliminated. ITC could potentially generate value via three other primary mechanisms: traceability (i.e., accountability for the quality of the product vis-à-vis its source), ability to match farmer production to consumer demand, and facilitation of an electronic marketplace. The three new e-Choupal models were essentially a validation of these mechanisms. With aqua products, or seafood, traceability provided an opportunity for ITC to generate value (and additional revenue) through the e-Choupal. Global consumers of India’s seafood would pay premium prices for shrimp that could be traced back to its source. If ITC were able to tell customers not only where a given commodity came from but also how it was produced (e.g., with antibiotics or not), significant gains would be possible. By controlling the source, ITC could guarantee the safety and sanitation of the product and thus receive higher prices. Similarly, when ITC had greater knowledge of just what it was purchasing when procuring crops from rural farmers, value increased for both the company and the farmer. The wheat market was an example of this. Wheat varied greatly in both chemical composition and physical appearance, and, through the e-Choupal, farmers learned to recognize which physical characteristics represented certain chemical qualities, such as gluten, protein, or starch content. Customers placed orders based on these chemical qualities. When ITC became able to analyze the crop before purchase, at the farm level, and then purchase and store it by chemical-composition category, there was an opportunity for cost savings, as it was expensive to separate wheat after it had been purchased and aggregated at the mandi. The farmer, too, benefited from this education. By identifying his high- and low-quality wheat, he could then price the varieties appropriately. He could command a higher price for the high- quality wheat and offer low-quality wheat at a reasonable price to customers who might need it, say, for animal feed. This way, he did not have to charge one low price for an amalgamation of wheat of disparate quality.
  • 47. Coffee presented a new challenge to ITC. Coffee was an estate crop, grown by a large number of small-scale farmers. ITC had a deep knowledge of coffee farm practices; much research had already been done on the industry. The price volatility of coffee was high; variance from base price could reach 40% (compared with 20% volatility in the soybean market), and buyers would routinely renege on contracts if prices altered beyond tolerance. Market participants were savvy speculators. The importance of an agent in coffee transactions was paramount, and effective price discovery was often the critical part of a deal. With its electronic-trading platform, called Tradersnet, ITC improved real- time price discovery by hosting anonymous trades and letting the prevailing selling prices be known. Information sharing carried over to ITC’s customers as well. e-Choupal as a Marketing Channel ITC’s vision for marketing via the e-Choupal involved three features: superior product and distinctive functional benefits, process benefits (simplified transactions between buyer and seller), and relationship benefits (farmers’ willingness to identify themselves and reveal their purchasing behavior). ITC had conceived ideas for various input items that could be developed for new business given this framework. The company believed that these products could be made available to farmers through the e-Choupal, thus increasing the value of the farmer’s product as well as generating additional revenue for ITC. Fertilizers Farmers spent an average of Rs. 26,000 crore ($5.7 billion) annually on urea, diammonium phosphate (DAP), and muriate of potash (MOP). Still, farmers could not easily access the fertilizers they needed. Thirty-five percent of DAP and 100% of MOP were imported. Logistics had proved to be complicated for most companies. They were unable to access many rural markets because of fragmented, or non-existent, distribution channels. Agrichemicals Farmers also spent Rs. 3,500 crore ($774.5 million)/year on insecticides, herbicides, and fungicides. The agrichemical market was highly fragmented and consolidated by multinational corporations such as Dupont, Novartis, and Cyanamid. New chemicals were introduced frequently; however, their life cycles in the market were only two or three years. Given the short product cycle, big companies needed immediate market access. Farmers, too, suffered when they could not access these products. High costs of labor, for example, hurt soybean and wheat farmers whose fields could have been covered with herbicides, instead of weeding workers, at a lower cost. Seeds This was a relatively small, fragmented market of Rs. 3,000 crore ($663.9 million)/year, but only 4% of farms used commercial seed. Government-promoted seed corporations made different types of seeds available though cooperatives, and large multinational companies had entered the market with better-quality material. Still, there were lead times of up to three years to make seed varieties available to rural farmers.
  • 48. Insurance Currently, Indians were collectively paying Rs. 50,000 crore ($11 billion) in yearly life insurance premiums, and that market was expected to reach Rs. 150,000 crore ($33 billion) by 2010. Life Insurance Corporation (LIC) was a government-run insurance provider that had already taken a shine to rural markets. Even in the relatively poor states of West Bengal and Bihar, 6 million rural farmers had taken out policies. In 2000, private insurance companies were allowed to enter the market, and, as a result, at least 12 new companies were seeking to expand their business into rural India to compete with LIC. By 2003, rural business comprised 16% of LIC’s portfolio, but only 9% of private companies’ portfolios. These markets were largely untapped because of a lack of trustworthy intermediaries. ITC believed that it could create a relationship of trust and help farmers understand the rules and benefits of insurance plans. Eventually, ITC envisioned Sanchalaks being able to offer the e-Choupal infrastructure to LIC agents for a fee or to set up its own insurance brokerage company. An opportunity also existed for other types of insurance policies, covering fire, marine, motor, and workmen’s compensation. Insurers, however, had been biased toward larger accounts, leaving less prosperous farmers unable to participate. Insurers lacked quality data on risks and parameters of farm life and were hesitant to insure rural customers. With ITC as a liaison, however, data on rural farmers could be delivered to insurance companies, thus demystifying and uncovering the rural market. Credit A national survey in 2001 had shown that Indians were saving about 30% of their annual income, though not through financial institutions. Both private- and public- sector banks lacked a customer-friendly approach and were often avoided by rural farmers. One of the main reasons that farmers avoided saving through banks was that they were often linked to a loan. If a farmer had savings in the same bank he had borrowed from, the bank could demand that he use those savings to pay back the loan. Oftentimes farmers would rather defer the loan and simply save their cash in their homes, unbeknownst to the bank. ITC believed that a system of trust engendered through the Sanchalak would facilitate financial transactions. It could channel rural farmers into the mutual fund arena and earn a commission from banks on farmers’ investments, using the technology introduced in the e-Choupal. Choupal discussions would create data on likelihood to invest, and the results would be stored in a data warehouse for future campaigns. Sustaining Success Once the sourcing of their core commodities was sufficiently strengthened, and cost-effective supply chains were running efficiently through the e-Choupal, other business opportunities would develop. The poor and fragmented rural consumers were traditionally underserved, but the demand was growing with rising aspiration levels triggered by.
  • 49. <> Welcome Page A first-time visitor to <> finds this page. Farmers are inv enter the Site via the link (written in Hindi) in the center of the page.
  • 50. Screenshot of Farmer Sign-In Page   This page invites farmers into the community of the e-Choupal, though the Sanchalak must first type in his assigned user name and password (left column). The links on the left address the following categories: • Districtwide weather information for Madhya Pradesh • Best practices for soybean farming -Districtwide crop information for Madhya Pradesh - Market information • FAQs -News -Feedback -Company information  
  • 51. Screenshot of Weather Page   This page features a map of the districts of Madhya Pradesh. Each district is “clickable,” and leads the Sanchalak to his localized weather forecast. The day’s general weather forecast for the state runs as a marquee along the top of the screen.
  • 52. Screenshot of Market Information Page                         This page shows world soybean production in metric tons. From left to right, the countries’ volumes listed are the United States (75.38 mt), Brazil (38.4 mt), Argentina (26.5 mt), China (15.4 mt), India (5.2 mt), and other countries (12.2 mt). DEVELOPMENT BENEFIT The e-Choupal system gives farmers more control over their choices, a higher profit margin on their crops, and access to information that improves their productivity. By providing a more transparent process and empowering local people as key nodes in the system, ITC increases trust and fairness. The increased efficiencies and potential for improving crop quality contribute to making Indian agriculture more competitive. Despite difficulties from undependable phone and electric power infrastructure that sometimes limit hours of use, the system also links farmers and their families to the world. Some sanchalaks track futures prices on the Chicago Board of Trade as well as local mandi prices, and village children have used the computers for schoolwork, games, and to obtain and print out their academic test results. The result is a significant step toward rural development.
  • 53. KEY LESSONS The e-Choupal model demonstrates that a large corporation can play a major role in recognizing markets and increasing the efficiency of an agricultural system, while doing so in ways that benefit farmers and rural communities as well as shareholders. Critical factors in the apparent success of the venture are ITC’s extensive knowledge of agriculture, the effort ITC has made to retain many aspects of the existing production system, including maintenance of local partners, the company’s commitment to transparency, and the respect and fairness with which both farmers and local partners are treated. WHAT WORKS: ITC’S E-CHOUPAL AND PROFITABLE RURAL TRANFORMATION Rural India is a difficult business location. Transport, electric power, and information infrastructure are inadequate. Business practices are underdeveloped or outdated. Lack of access to modern resources has resulted in an under-trained workforce. Rural society is structured around subsistence and is unprepared for modern products and services. These constraints, along with many others, have dissuaded most companies from taking on the challenge of rural commerce. Yet such an engagement can serve a dual agenda: bridging rural isolation and the resulting disparities of education and economic opportunity, while at the same time creating a potentially large profit opportunity for the organization willing to tackle the inefficiencies. ITC’s e-Choupal initiative began by deploying technology to re-engineer procurement of soya and other crops from rural India. It has gone on to serve as a highly profitable distribution and product design channel. The effort holds valuable lessons in rural engagement and demonstrates the magnitude of the opportunity while illustrating the social and development impact of bringing global resources, practices, and remuneration to the Indian farmer. THE PARADOX OF INDIAN AGRICULTURE  Agriculture is economically and socially vital to India. It contributes 23% of the GDP, feeds a billion people and employs 66% of the workforce. Agriculture’s share of GDP has shrunk steadily but at 23% it remains a critical component of the economy.    GDP by Sector 
  • 54. Yet despite this economically vital role, Indian agriculture has until recently been regulated in an archaic fashion that limits its productivity. Non-optimal farming practices and capricious weather patterns left post-Independence India with an under-performing agricultural sector, acute food shortages, and dependence on food imports. Legislation from this period brought heavy government intervention in agriculture, including control of land ownership, input pricing, and regulated of product marketing. Produce could only be sold in government-recognized locations to authorized agents. Processing capacities, private storage, futures trading and transport were restricted. The result was corrupt and inefficient systems, in which starvation existed alongside granaries overflowing with food stocks of over 60 million metric tons. At the same time, the unprofessional business environment made the sector unattractive to modern companies and blocked their influence in rationalizing the market. High Production yet Impoverished Producers The goal of being self-sufficient in food supply brought Indian agriculture into the mainstream of political and social consciousness. The Green Revolution brought great strides in agricultural productivity to some parts of India and made the country a net exporter of most food grains by the mid-1970’s, thus resolving previous famine paradoxes. However, the Indian farmer did not progress correspondingly. After independence, the government parceled and redistributed larger land holdings to rectify historical inequities and entrust ownership to end cultivators, thus encouraging productivity. In subsequent years, ownership ceilings were legislated and inherited land was partitioned into smaller lots, such that by 2003, the typical Indian farm is a very small-scale operation with total landholdings often measured by fractions of an acre. Unable to realize economies of scale, most Indian farmers are very poor as a result of land redistribution policies. Figure below illustrates that in 1993, agricultural labourers in most states made barely enough to keep a three- person family above the poverty level. Figure: Incomes of Agricultural Labourers
  • 55. In recent decades, the economy has been growing far more rapidly in non-agricultural areas, especially the service sector in urban areas. From 1993 to 2003, the (primarily urban) service sector has seen its share of national GDP rise by 11.6%, while rural agriculture has seen its share of GDP decline by 5.01% over the same period. There is a vast disparity in access to education and opportunities between urban and rural India. This means that farmers rarely know of non- agricultural opportunities and likely would not have the resources to pursue them even if adequate information were available. Remedying this asymmetry of opportunity will require providing rural India with both the knowledge of opportunities and the ability to pursue them. ITC’s e-Choupal is an example of how a commercial venture can provide a channel for knowledge and opportunity, bringing global resources and practices to Indian villages as well as higher incomes for farmers, and helping create the conditions for many other enterprises to cater to the rural market. PRODUCTION CHANNELS PRIOR TO THE e -CHOUPAL There are three commercial channels for soy: traders, government-mandated markets (mandis), and producer-run cooperative societies for crushing in cooperative mills (see Figure below). In addition, farmers traditionally keep a small amount of their crops for their personal consumption and get the produce processed in a small-scale crushing-plant called a ghani. The system varies among states and districts, as does the percentage of produce going through each channel, but on average, 90% of soy crops are processed through traders and mandis. Figure: Operation of the Mandi Distribution System
  • 56. The Agricultural Products Marketing Act legislated the creation of mandis to enable a more equitable distribution of the gains from agriculture among producers, consumers, and traders. The mandi is central to the functioning of the marketing channel, and acts as delivery point where farmers bring produce for sale to traders. In the soy growing areas of Madhya Pradesh, a mandi typically serves around 700 square kilometers, although the area served by a mandi varies by state. With traditional grains, large portions are used by the farmer or bartered for different crops. But since soy is not native to the Indian palate, its major market is the crushing plant and nearly the entire crop must be exported. This makes the mandi a vital part of the soya chain. Mandi trading is conducted by commission agents called adatiyas (brokers who buy and sell produce).They are of two types: kachha adatiyas are purchasing agents that buy only on behalf of others and pukka adatiyas who finance trade as representatives of distant buyers and sometimes procure crops on their own account. All the adatiyas belong to the Agarwal and Jain community, an economic class distinct from farmers. This community manages grain trade across the entire country including south India, a remarkable feat considering the vast cultural and social diversity across the nation. The lack of professional competition combined with the communal stranglehold on rural trading has made commission agents extremely wealthy. Commission agents from medium sized mandis can possess assets and incomes in the millions of dollars. The adatiyas established and grew the soy industry on the basis of familial and community trust, with buying and selling based upon oral agreements. Their expansive personal networks within the industry and their financial influence make them a formidable presence. The operation of the Mandi consists of a number of different stages, from the logistics of transporting grain to the market to quality inspection, auction, bagging and weighing, and payment. Based upon local information within the village, farmers decide in which of the nearby mandis to sell. They transport their crops to the mandis in carts drawn by animals or tractors. Very often, to avoid peak- time crowds, farmers will arrive at the mandi the night before they intend to sell. When the mandi opens in the morning, farmers bring their carts to display areas within the mandi. The inspection by buyers is by sight. There is no formal method of grading the produce and the only instrument used is the moisture meter; the crop is not tested for oil content. Figure: Mandi Operation Process  
  • 57. Once potential buyers have inspected the produce, a mandi employee conducts the auction, where commission agents place bids. The auctions are typically open oral auctions with incremental bidding. The auction represents a stark contrast from the buyer’s and seller’s perspectives. For the farmer, the moment is pivotal: a scant 30 seconds assesses the results of six months of investment and hard work and establishes the value of one of only two or three paydays he will have in the year. For the commission agent, on the other hand, the moment is routine; he has many more carts of produce to buy and his margin is assured irrespective of the price. Once the price has been established by the auction, the farmer moves the cart to the weighing area run by the buying commission agent. In most cases, the weighing area is in the mandi complex. In some cases, especially if the mandi is small, the weighing area may be at the commission agent’s home near the mandi. Here, the produce is transferred from the cart into individual sacks. The sacks are then weighed, one at a time, on a manual scale. After weighing, the full value of the grain is calculated. The farmer goes to the agent’s office to collect a cash payment. The agent pays a mandi fee (1% of purchase value in Madhya Pradesh) to the mandi. The bagged produce is then loaded on to the buyer’s trucks and transported to the processing plant. Limitations of the Mandi System   The mandi system does not serve the farmer well, and is burdened by inefficiency. Because the farmer does not have the resources to analyze or exploit price trends, the timing of the sale may not result in the optimal price for the crop. Moreover, since the actual sale price is determined at the auction, by the time the farmer gets the price, it is too late to go to another mandi to make his sale. Other expenses and inefficiencies exist: the overnight stay near the mandi costs the farmer money; most crops are displayed in open air courtyards, and are therefore subject to being negatively affected by the weather; the inspection process is unscientific and often arbitrary, tending to favour the buyer, and generally does not provide an incentive to farmers to invest in better seed or farming practices that lead to higher quality—even though quality, especially oil content, matters to soy processors. In addition, farmers find the auction process demeaning. Agents belong to a close-knit community that is socially and economically distinct from the farmers’ community. While they may not collude in pricing, they do collude in establishing the practices of the trade that uniformly favour agents and exploit the farmers’ situation. The farmers also bear the cost of bagging and weighing the crop, which is done by mandi labourers—part of whose compensation is the sale of spilled produce. Needless to say, these labourers ensure that some portion of each lot is spilled. Farmers feel that the weighers consistently under-weigh their produce by applying practiced and timely nudges to the scale. Historical intimidation and long queues waiting behind them dissuade the farmers from protesting. To add to this exploitation, the farmer is never paid the full purchase price up front but is paid a partial amount and asked to return to the mandi later for the remainder. Farmers are not paid interest on the remaining sum—although crushers pay agents usurious rates for
  • 58. the privilege of delayed payment—and repeating the trip to the mandi costs farmers time and money. Since the crop has already been delivered, however, the farmers are at the agents’ mercy. Apart from the exploitation of the farmer, there are other inefficiencies in the system. The multiple points of handling in the supply-chain require the produce to be bagged, which takes four to five times longer to be unloaded at the processing plant than unbagged produce. Traders generally do not have the capacity to store and manage different qualities and grades of produce, inhibiting efforts to produce better crop grades. Pricing is set locally at the mandis, and is not reliably tracked or reported nationally, resulting in a lack of information that reduces the opportunity for arbitrage and leads to market inefficiency. In addition, regulatory restrictions tend to limit arbitrage to small geographic areas. The mandi system also does not serve trading companies such as ITC well; its inefficiencies make the mandi far from an optimal procurement channel. From the company’s point of view, the key problem is the agent’s control of the market and the resulting distortions of price and quality. Agents purchase grain on a trading company’s behalf. Some of the produce they buy is of good quality and therefore commands a premium price, while other crops are of poor quality and therefore sell at a discount. In any given day, an agent purchases produce with a range of crop quality at a range of prices. The agent often mixes the different quality crops together and charges the trading company a single price near the higher end of the price spectrum. Not only does the agent inflate the price to trading companies, he also inflates the price at the mandi. As we have seen, high-quality produce is used to make an entire lot of lower quality produce acceptable. Because of its value to agents, agents pay an inflated premium for high-quality produce, which drives up the high crop price at the mandi for the day. Very few farmers actually get the price for top-quality produce, but this price acts as a benchmark for the next day’s pricing, thereby inflating the mandi price over a period of time and increasing costs for trading companies. Additionally, the trading company establishes a daily price range for its agent to buy within. If the agent’s average buy price that day is lower than the low end of the established price, the agent sells the grain to the trading company at the established low price and pockets the difference. If, however, the average buy price is higher than the trading company’s established high price, the agent will still buy the produce but will report to the company that since its price was not high enough, no grain could be bought. The agent will store the grain and sell it to the trading company the next day when the established price has been raised to make-up for the previous day’s procurement shortfall. Commission agents therefore capture the entire benefit of intra-day price shifts. The agents therefore operate without risk of loss of profit. Officially, the agents’ commission is 1% of ITC’s price. In reality, ITC estimates that the agents’ operating margin is around 2.5-3%.
  • 59. As a result of the commission agent structure in the traditional mandi system, ITC had no direct interaction with the farmer. This gap created a range of supply-chain issues, including limiting ITC’s knowledge of its crops, suppliers, and supply risks, as well as limiting the company’s ability to improve crop quality and quantity by bringing modern agricultural practices to the farmers. The company developed its e-Choupal strategy as a way to communicate directly with the farmer and to bypass the inefficiencies arising out of the agents’ intermediation, thereby achieving “virtual vertical integration.” VISION AND PLANNING BEHIND THE e-CHOUPALS Implementing and managing e-Choupals is a significant departure from commodities trading. Through its tobacco business, ITC has worked in Indian agriculture for decades, from research to procurement to distribution. ITC’s translation of the tactical and strategic challenges it faced and its social commitment into a business model demonstrates a deep understanding of both agrarian systems and modern management. Some of the guiding management principles are: Re-engineer, Not Reconstruct The conventional view of transforming established business systems begins with the failures of the current system and develops means to change it. ITC took a different approach by looking at the successes of the current system and identifying what they could build on. ITC not only retained the efficient providers within the mandi system but also created roles for some inefficient providers. This philosophy has two benefits. First, it avoids “reinventing the wheel” in areas where ITC would not be able to add value through its presence. Second, it recruits and engages members of the rural landscape thereby making their expertise available to ITC while preventing their expertise from being shared with ITC’s competition. Address the Whole, Not Just One Part   The farmers’ various activities range from procuring inputs to selling produce. Currently, the village trader services the spectrum of farmers’ needs. He is a centralized provider of cash, seed, fertilizer, pesticides, and also the only marketing channel. As a result, the trader enjoys two competitive benefits. First, his intimate knowledge of the farmer and village dynamics allow him to accurately assess and manage risk. Second, he reduces overall transaction costs by aggregating services. The linked transactions reduce the farmers’ overall cost in the short term, but create a cycle of exploitative dependency in the long-term. Rural development efforts thus far have focused only on individual pieces rather than what the entire community needs. Cooperatives have tried to provide agricultural inputs, rural banks have tried to provide credit, and mandis have tried to create a better marketing channel. These efforts cannot compete against the trader’s bundled offer. Functioning as a viable procurement alternative, therefore, must eventually address a range of needs, not just the marketing channel.
  • 60. An IT-Driven Solution From the conception of the model, an IT-based solution was recognized as fundamental to optimizing effectiveness, scalability, and cost. Information technology is 20% of all the effort of ITC’s e-Choupal business model, but is considered the most crucial 20%. The two goals envisioned for IT are: • Delivery of real-time information independent of the transaction. In the mandi system, delivery, pricing, and sales happen simultaneously, thus binding the farmer to an agent. E-Choupal was seen as a medium of delivering critical market information independent of the mandi, thus allowing the farmer an empowered choice of where and when to sell his crop. • Facilitate collaboration between the many parties required to fulfill the spectrum of farmer needs. As a communication mechanism, this goal is related to the commitment to address the whole system, not just a part of the system. ITC did not hesitate to install expensive IT infrastructure in places where most people would be wary of visiting overnight. It is a manifestation of the integrity of rural value systems that not a single case of theft, misappropriation, or misuse has been reported among the almost 2,000 e-Choupals.   Modularity of Investments, in Size and Scope ITC managed its investments modularly along the scope and scale axes in what it terms “rollout- fixitscale up” and “pilot-critical mass-saturation.” This incremental control of investment levels along with the clarity of revenue streams and the social import were critical in getting board approval for the initiative. Risk Assessment and Mitigation ITC identified the following risks as it designed the business model: • Radical shifts in computing access will break community-based business models. • The sanchalaks are ITC’s partners in the community, and as their power and numbers increase, there is a threat of unionization and rent extraction. • The scope of the operation: the diversity of activities required of every operative and the speed of expansion create real threats to efficient management. Managing Bureaucracy When the e-Choupals were conceived, they faced a fundamental regulatory obstacle. The Agricultural Produce Marketing Act, under whose aegis mandis were established, prohibits procurements outside the mandi. ITC convinced the government that e-Choupal would operate according to the spirit of the Act and thus e-Choupal procurement was in line with its goals. Since ITC would not be using the mandi infrastructure for its procurement, and would have to incur its own costs with the e-Choupal.
  • 61. infrastructure, the government offered to waive the mandi tax on the produce procured through the e- Choupal. However, ITC recognized that the tax was a major source of revenue for the government and local mandis and, as ITC’s competition was also subject to the tax, the tax itself was not making ITC uncompetitive. ITC therefore chose to continue paying the tax rather than risking the relationships with the government and the mandis. THE BUSINESS MODEL The model is centered on a network of e-Choupals, information centers equipped with a computer connected to the Internet, located in rural farming villages. e-Choupals serve both as a social gathering place for exchange of information (choupal means traditional village gathering place in Hindi) and an ecommerce hub. A local farmer acting as a sanchalak (coordinator) runs the village e- Choupal, and the computer usually is located in the sanchalak’s home. ITC also incorporate a local commission agent, known as the samyojak (collaborator), into the system as the provider of logistical support. ITC has plans to saturate the sector in which it works with e-Choupals, such that a farmer has to travel no more than five kilometers to reach one. The company expects each e-Choupal to serve about 10 villages within a five kilometer radius. Today its network reaches more than a million farmers in nearly 11,000 villages through 2,000 e-Choupals in four states (Madhya Pradesh, Karnataka, Andhra Pradesh, and Uttar Pradesh), and the network is expanding rapidly. Of the e-Choupals in Madhya Pradesh, the one in Khasrod services about 500-700 farmers in 10 villages; another e-Choupal in Dahod services 5,000 farmers in 10 villages. The average usage is about 600 farmers per e-Choupal in the soy cropping area, with fewer in wheat, coffee, and shrimp. The critical element of the e-Choupal system, and the key to managing the geographical and cultural breadth of ITC’s network, is the sanchalak. ITC channels virtually all its communication through the local sanchalak. Recruiting a local farmer from the community for this role serves several purposes: • For generations, the Indian farmer has been betrayed by individuals and institutions. Trust is the most valuable commodity in rural India. No transaction will happen without trust, irrespective of the strength of the contract. The sanchalak is selected to provide this vital component in ITC’s system. • ITC need not invest in building and securing a physical infrastructure such as a kiosk for housing the e-Choupal computer. • The sanchalak is trained in computer operation and can act as a familiar and approachable human interface for the often illiterate farmers and other villagers. • ITC expects to leverage the profit-making power of the small-scale entrepreneur. Sanchalaks indicate three equally-weighted motivations for assuming their role: a means to help their community, a profitable business for themselves, and a means of getting access to a functional computer. The sanchalaks receive a commission for every transaction processed through the e- Choupal and also benefit from increased social status that accompanies the position—a significant
  • 62. advantage in rural Indian life. ITC insists that sanchalaks should not give up farming, for this would compromise the trust that they command. To help ensure that sanchalaks serve their communities and not just themselves, ITC projects the role as a public office: hence the title “sanchalak,” and a public oath-taking ceremony where the sanchalak takes an oath to serve the farming community through the e-Choupal. Successful sanchalaks usually have a number of common characteristics, including risk- taking ability and the willingness to try something new, ambition, and the aspiration of earning additional income through the e-Choupal. Sanchalaks are usually of median wealth and status in their communities, able to read and write, and are part of an extended family large enough so that they can find time to service the e-Choupal. Sanchalaks undergo training at the nearest ITC plant. They receive education on basic computer usage, the functions of the e-Choupal Web site, basic business skills, as well as quality inspection of crops. For the sale of products through e-Choupal, the sanchalaks receive product training directly from the manufacturer with ITC involving itself only in product design and facilitation. Nonetheless, their role requires considerable entrepreneurial initiative and entails some operational costs, between US$60 and US$160 per year, for electricity and phone-line charges; the latter of which are gradually declining as ITC replaces phone-based Internet connections with a VSAT system. Selecting and training the sanchalaks is just the first step. Most do not have retail experience and may lack motivation to actively promote ITC products. ITC employs a variety of motivation techniques to encourage sales. One technique is to hold a ceremony where sanchalaks are presented with their annual commission checks and public announcements of earnings are made. Stories how sanchalaks spent past commissions serve to demonstrate the income potential and spurs non-performers to work. The zeal to perform sometimes leads to territorial disputes, but ITC does not interfere in their resolution because it encourages sanchalaks to better serve their customer-base. A secondary, but still important, role is played by the samyojaks, or cooperating commission agents. Samyojaks earn income from ITC by providing logistical services that substitute for the lack of rural infrastructure, by providing information and market signals on trading transactions to the e-Choupal system. In effect, ITC uses agents as providers of essential services, not as principals in a trading transaction. They play an especially important role in the initial stages of setting up the e-Choupals, because they know which farmers grow soya, what kind of families they have, what their financial situation is, and who is seen as “acceptable” in the villages and might thus make a good sanchalak. ITC is strongly committed to involving samyojaks in the on-going operation of the e-Choupal system, allowing them revenue streams through providing services such as management of cash, bagging and labor in remote ITC procurement hubs, handling of mandi paperwork for ITC procurement, and as licensed principals for the retail transactions of the e-Choupal.
  • 63. Since the e-Choupal system by-passes the agent-controlled mandis and has considerably reduced commission income, why do agents agree to cooperate with ITC? First, the company has made it clear that they will continue to buy produce through the mandis. Second, the company offers significant commissions for samyojak services. Finally, the agents are fragmented and fear that if they do not agree to work with ITC, another agent will gain the promised e-Choupal revenues. One samyojak reported that he saw globalization as an irresistible trend, and although he saw loss of revenue in the short-term, his long-term interest lay in cooperating with an international company. THE e-CHOUPAL SYSTEM The re-engineered supply chain looks very different from the existing system and has the following stages: Figure: e-Choupal Supply Chain   Pricing   The previous day’s mandi closing price is used to determine the benchmark Fair Average Quality (FAQ) price at the e-Choupal. The benchmark price is static for a given day. This information and the previous day mandi prices are communicated to the sanchalak through the e-Choupal portal. The commission agents at the mandi are responsible for entering daily mandi prices into the e-Choupal. If and when the Internet connection fails, the sanchalak calls an ITC field representative. Inspection and Grading   To initiate a sale, the farmer brings a sample of his produce to the e-Choupal. The sanchalak inspects the produce and based on his assessment of the quality makes appropriate deductions (if any) to the benchmark price and gives the farmer a conditional quote. The sanchalak performs the quality tests in the farmer’s presence and must justify any deductions to the farmer. The benchmark price represents the upper limit on the price a sanchalak can quote. These simple checks and balances ensure transparency in a process where quality testing and pricing happen at multiple levels. If the farmer chooses to sell his soy to ITC, the sanchalak gives him a note capturing his name, his village, particulars about the quality tests (foreign matter and moisture content), approximate quantity and conditional price.
  • 64. Weighing and Payment The farmer takes the note from the sanchalak and proceeds with his crop to the nearest ITC Procurement hub, ITC’s point for collection of produce and distribution of inputs sold into rural areas. Some procurement hubs are simply ITC’s factories that also act as collection points. Others are purely warehousing operations. ITC’s goal is to have a processing center within a 30 - 40 kilometer radius of each farmer. There are currently 16 hubs, but there will eventually be 35 in the state of Madhya Pradesh. At the ITC procurement hub, a sample of the farmer’s produce is taken and set aside for laboratory tests. A chemist visually inspects the soybean and verifies the assessment of the sanchalak. It is important to note that this is the only test assessment before the sale. Laboratory testing of the sample for oil content is performed after the sale and does not alter the price. The reason for this is that farmers, having historically been exploited, are not immediately willing to trust a laboratory test. Therefore pricing is based solely upon tests that can by understood by the farmer. The farmer accepts foreign matter deductions for the presence of stones or hay, based upon the visual comparison of his produce with his neighbours. He will accept moisture content deductions based upon the comparative softness of his produce when he bites it. ITC is working to change farmer attitudes towards laboratory testing. It is developing an appreciation of better quality by using the subsequent lab tests to reward farmers with bonus points if their quality exceeds the norm. At the end of the year, farmers can redeem their accumulated bonus points through the e-Choupal for farm inputs, or contributions toward insurance premiums. After the inspection, the farmer’s cart is weighed on an electronic weighbridge, first with the produce and then without. The difference is used to determine the weight of his produce. Hub Logistics   After the inspection and weighing are complete, the farmer then collects his payment in full at the payment counter. The farmer is also reimbursed for transporting his crop to the procurement hub. Every stage of the process is accompanied by appropriate documentation. The farmer is given a copy of lab reports, agreed rates, and receipts for his records. Samyojaks, who are adept at handling large amounts of cash, are entrusted with the responsibility of Payment , except at procurement centres near large ITC operations where ITC is handles cash disbursement. Samyojaks also handle much of the procurement hub logistics, including labour management at the hub, bagging (if necessary), storage management, transportation from the hub to processing factories, and handling mandi paperwork for the crops procured at the hub. For his services in the procurement process, the samyojak is paid a 0.5% commission.  
  • 65. Farmer Gains   Prior to the introduction of e-Choupal, farmers’ access to agricultural information was incomplete or inconsistent. The only sources of information were word of mouth within the village and the commission agent. E-Choupal allows farmers daily access to prices at several nearby mandis. Some e-Choupal sanchalaks have taken this a level further by accessing external pricing sources such as prices on the Chicago Board of Trade, in order to track global trends and determine the optimum timing of sales. Moreover, through e-Choupal, farmers have access to prices and make the critical decision of when and where to sell his crop. Both factors work together to provide the farmers a better price for their crops. Under ITC’s system, farmers no longer bear the cost of transporting their crops to the mandi and are instead reimbursed for transport to the procurement hub. The transaction at the ITC hub is also much faster than at the mandi, usually taking no more than two or three hours. Moreover, ITC’s electronic weighing scales are accurate and not susceptible to sleight of hand like the manual weighing system at the mandi. The system also does not require produce to be bagged, which avoids the associated loss of produce by intentional spillage. Thus the e-Choupal system has logistical and transaction efficiencies. Finally, the ITC procurement centre is a professionally run operation where the farmer is treated with respect and served as a customer. The dignity accorded farmers by the professional process of the e- Choupal cannot be understated. ITC’s recognition that farmers are not simply agricultural producers, but integral partners in the supply process has elevated the level of respect paid to them. Simple provisions such as a shaded seating area where farmers can sit while waiting for their paperwork serve as indicators of ITC’s respect for farmers and their produce. Though intangible, the self- confidence created by this professional treatment is affecting the way farmers conduct themselves. Sanchalaks and even commission agents have noted a change in farmer attitudes. The incremental income from a more efficient marketing process is about US$6 per ton, or an increase of about 2.5% over the mandi system. Farmers also can make use of the information available to them through e-Choupal to improve yields. Moreover, the seed, fertilizer, and consumer products offered them through e-Choupal cost substantially less than through other local sources such as village traders. Thus there are meaningful net economic benefits to farmers, and it is having a measurable impact on what farmers choose to do: in areas covered by e-Choupals, the percentage of farmers planting soy has increased dramatically, from 50 to 90% in some regions, while the volume of soy marketed through mandis has dropped by as much as 50%
  • 66. ITC Gains The commissions paid to the agents under the mandi system were not excessive, but because of the inefficiencies discussed earlier, the true cost of intermediation through the mandi system was between 2.5 % and 3% of procurement costs. While retaining commissions paid for the sanchalaks’ services, the 0.5% commission paid to them is significantly less than the costs associated with the mandi system. Direct reimbursement of transport costs to the farmer is estimated to be half of what ITC used to pay the commission agents for transport to their factory. Removal of intermediary manipulation of quality and the ability to directly educate and reward quality in the customer base results in higher levels of quality in e-Choupal procurement. This results in higher oil yields, which, in turn, lead to higher profits for ITC. e-Choupal also allows ITC to develop long-term supplier relationships with farmers and attain some degree of supply security over time. Risk is also managed in the e-Choupal system by a far stronger information infrastructure. Sanchalaks and samyojaks working on behalf of ITC provide excellent bottom-up information on pricing, product quality, soil conditions, and expected yields. This allows ITC to better plan future operations. Figure: Transactions Costs Under the Mandi and E-Choupal Systems   In the mandi system, there was a mark up of 7-8% on the price of soybean from the farm gate to the factory gate. Of this mark up, 2.5% was borne by the farmer while 5% was borne by ITC. With e- Choupal, ITC’s costs are now down to 2.5%. Figure above shows transaction costs incurred by the farmer and ITC per metric ton of soy procured in the mandi and e-Choupal. In absolute numbers, both the farmers and ITC save about US$6 (Rs 270) per metric ton.
  • 67. Sustaining Commercial Volume   “Virtual vertical integration” can only work if there is a continuous flow of information between the e-Choupals and ITC. Because of the number and physical dispersion of the e-Choupals, this communication must be initiated by the sanchalaks. If their motivation to communicate with ITC diminishes, the channel will still function for procurement, but will lack the vitality to supply risk management, distribution, or product design. Maintaining continuous commercial flow keeps the sanchalak motivated to spend time and money calling the ITC representative to ask about new products, convey village demand, and providing ITC with local updates. An example of the power of local information was seen early in e-Choupal implementation. A competitor attempted to divert produce coming to the ITC factories by stationing representatives on the roads leading up to the plant. This person would stop farmers on their way to the ITC hub and offer them a price higher than the ITC rate at the competitor’s plants. Farmers alerted the sanchalaks and they in turn provided ITC with the information necessary to address the situation. Sanchalaks thus provide an essential role in the chain of communication. ITC maintains commercial volumes by sequencing procurement and sales year-round, thereby securing the continuous flow of commission checks through e-Choupals. Purchases and sales have been arranged so that kharif (the cropping season that coincides with India’s monsoon, July through October) and rabi (winter cropping season in irrigated areas) inputs and procurement maintain a steady stream of revenue for sanchalaks. Scaling the Model   Profitable re-engineering requires the unambiguous understanding of value provided, the circumstances in which they are applicable, and the revenues they are capable of generating. ITC’s model identifies three sources of value for the company that can help scale the model: • Crop Specific Intervention: ITC recognized that agrarian systems vary by crop. This means that the inefficiencies in the supply chain, the correction required from e-Choupal , and the magnitude and timing of the resulting revenues will differ by crop. For example, the systems, and consequently the e- Choupal models and payback streams, for coffee and shrimp are very different from those for soy.ITC’s goals for soy intervention reflected this nuanced analysis and the project was targeted with recovering the entire cost of infrastructure from procurement savings. This is contrasted with the coffee and shrimp efforts where the source of e-Choupal value is such that the investment recovery horizon is much longer. • Low-Cost Last Mile: The same system of physical and information exchange that brings produce from the village can be used to transfer goods to the villages. As infrastructure has already been paid for by procurement, it is available at marginal cost for distribution. This ties in nicely with ITC’s larger goal of transformation into a distribution super-highway. ITC's current channels reach areas
  • 68. with populations of 5,000 and above. e-Choupals allow penetration into areas with populations less than 5,000. Products such as herbicides, seeds, fertilizers, and insurance policies, as well as soil testing services are sold through e-Choupal. e-Choupal as a distribution channel begins in agriculture but extends well into consumer goods and services. In the traditional channel, comprised of mobile traders and cycle-based distributors, farmers lack the resources to make informed purchasing decisions. More often than not, traders and distributors do not understand the farmers’ issues and end up selling them products and services that do not satisfy their needs. With many larger companies hesitating to serve the rural market, farmers often do not have variety in their choice of products and services. This lack of choice means that not only are farmers forced to buy whatever is available, they often must pay a premium for those products. • Intelligent First-Mile: The global resources, best practices, and remunerations that the e-Choupal brings to farmers have encouraged innovation and provided an avenue to see their ideas realized. This illustrates ITC’s vision of using e-Choupal as the “intelligent first mile.” Farmers are now coming up with products and services that ITC could provide to further improve operations. Farmers are demanding that ITC certify and make available the “Samrat” variety of seeds that is preferred over the currently certified JS300 variety. Some farmers have urged ITC to bring its resources to bear on onion and potato crops. Responding to the fact that the Indian onion crop is regarded as inferior to the Chinese crop in the world market, farmers recognize that this is due to the lack of availability of high quality seeds and information. They have approached ITC with a suggestion to create e- Choupals for these crops, pointing to the mutual profitability of such an effort. ITC’s objective is not to be a platform provider for sale of third-party products and services but rather a network choreographer who orchestrates bi-directional demand and supply of goods through a collaborative business model. ITC intends to differentiate itself by serving only those products and services to which it can add value. ITC’s core asset is its knowledge of the customer. By transforming the value chain and setting up a platform for procuring commodities from them directly, they now have a foundation for forging a close relationship with the farmers. This relationship leads to a better understanding of the issues plaguing farmers. Through e-Choupals, hubs, and processing centers, ITC has the ready infrastructure needed to implement an alternative channel for distribution of goods and services to rural India. e-Choupals can double as storefronts and hubs as centers for stocking inventory. In the long term, ITC sees vast opportunities from its e-commerce platform and low-cost distribution system. In addition, the information infrastructure implemented by ITC can be used to enhance its business decision-making, better manage risk, and identify opportunities for cross-selling and up-selling. The company can leverage detailed transactional data and transform it into actionable knowledge. Data mining and data warehousing will help company executives to better understand the behaviour of their customers, identify unfulfilled needs and ways to serve them efficiently. The communication infrastructure compensates for the lack of physical infrastructure needed for marketing products and
  • 69. services in rural India. It enables rapid, low-cost information dissemination and a trusted brand for introducing new products, while minimizing the need for a travelling sales force. Online ordering and order management eliminate the need for physical storefronts. And the IT infrastructure and local sanchalak provide customer intelligence, thus maximizing customer satisfaction and profitability. TECHNOLOGY Characteristics of the Operating Environment   Understanding the constraints imposed by the physical and social environment in e-Choupals operate is necessary to provide the context for understanding the system design. Overcoming Power Constraints Power availability in rural India is unreliable and the quality of power is sub-standard. As power is usually available for only a few hours a day and at on a sporadic schedule, the e-Choupal computer cannot always be accessed when information is needed. Access to information in a timely manner is critical to the success of the business model. ITC has overcome the problem of local power supply by providing a battery-based UPS (uninterrupted power supply) backup. With the reliability of a battery backup, the sanchalak can use the system at least twice a day—in the morning to check the prevailing mandi prices, and again in the evening to check the rate ITC is offering the next day. While the battery backup addresses the power supply issue, insufficient line power during the day poses the challenge of not having enough power to charge the backup battery. This has caused ITC to explore other power sources and ultimately ITC decided to use solar battery chargers. One full day of sunlight is enough to charge the battery for 70 to 80 minutes of computer usage. The second problem with power is quality. Voltage fluctuations are endemic. The UPS unit is the most affected component. As a result of the erratic power supply, fuses are susceptible to being blown. To overcome this problem, ITC plans to install specially designed UPS units that remain effective between 90V and 300V. In order to control voltage spikes, they have introduced spike suppressors and filters. Phase imbalances, which lead to damage of equipment, have been addressed through the use of isolation transformers to correct neutral voltages. Transportation Most e-Choupal villages lack proper roads, limiting vehicle access. As such, public transportation access to many of the villages is infrequent. Some villages are served only once or twice a day by rural taxis. The population relies on two-wheeled bicycles and motorbikes and bullock carts as the main means of transportation. Moving equipment into and out of the villages is not an easy task. Providing system support and maintenance requires the technician to travel from outside areas to visit the e-Choupal. For these, and other reasons ITC initially placed e-Choupals in villages that are within a ten to fifteen kilometer radius of a city.
  • 70. Telecom Infrastructure   Telecommunication infrastructure in villages is poor. Telephone exchanges are subject to sporadic power supply and have limited battery backup. When power is lost, phones cease to function. In addition, there is no local support staff to maintain or troubleshoot telephone exchanges. The support team at the main exchange typically is responsible for eight to ten villages and is short-staffed. The turn-around time for fixing problems is often measured in days, not hours. Overhead telephone lines are exposed to the elements and run alongside high voltage power lines which can cause transmission quality problems. Currently, village telecommunication infrastructure is designed to carry voice traffic only and transmission speed is so slow that it renders Internet access impractical. Customer Base Before the arrival of e-Choupal, most villagers had never seen a computer. ITC realized the importance of appropriate user interfaces. They organized meetings and focus groups of farmers to gather information about potential user groups. The main focus of these meetings was to determine what information farmers wanted to see, how the information would need to be presented (graphics or text), and how often each page would need to be refreshed. The feedback that was collected from these focus groups was used in the design of the functionality and user interface of the application. System Specification  The IT infrastructure can be comprehensively understood in the four layers outlined in Figure below.   Figure: E‐Choupal System Technology Specification    The four layers are distinct but deeply interconnected and share goals and constrains. Organizational Architecture   The hardware and software infrastructure captured in the first three layers cannot exist in isolation. They need people, processes, and services to setup, maintain and run them. In the e-Choupal, training, system support (repairing technical problems), and application support (usability query resolution) would provide the most unique information. Training Training the sanchalaks to use a computer effectively is deemed vital to the success of e-Choupal. Sanchalaks function as the human interface of the e-Choupals and therefore must be able to both operate the computer and access the information requested by farmers.
  • 71. The computer installed in the e-Choupals is usually the first computer in most villages. Immediately after sanchalaks are recruited, they are invited to the nearest ITC plant for a day-long training program. The majority of this training is centred around getting the sanchalaks comfortable with the equipment. This first phase of training is comprised of the following: • The fundamentals: What is a computer? What is its purpose and practical applications? • Basic equipment training: Turning the computer on and off, using the mouse, keyboard, printer etc. • Software training: o Word processing: How to use Ankur How to type in Hindi How to open, close, and save files How to create and edit document o Web Browsing: How to use a Web browser and find information on the Internet. o e-Choupal Applications: How to use the soya choupal Web site. What information is available on the Web site and how can it be accessed? At the time of installation, a coordinator usually accompanies the vendor who installs the system. The sanchalak is given some of the same basic training by the vendor. ITC then leaves allows the sanchalak to experiment with the computer for about a week. During this time, typically the younger members of his family also get to use the computer. ITC has observed that children are quick learners and are eager to learn more. After the first week, the sanchalaks are invited to the hub or the plant for the second phase of training. In order to gauge their level of comfort, they are asked to operate the computer. Based on observation, customized training is then provided to raise each user’s comfort and competency level. Sanchalaks may also bring their children or other members of the family that are interested in learning about the computer. During this phase sanchalaks are trained use the e-Choupal Web site and to access information from the site. Sanchalaks are given the opportunity to voice their concerns and ask questions during training. Sanchalaks are generally enthusiastic about learning the computer skills required to carry out their work. After a month, trainees are brought in for a third and final phase of initial training. By this time, sanchalaks are usually fairly familiar with operating the computer and accessing information. The goal of this session is to learn to troubleshoot common problems. ITC hopes that improving the troubleshooting capacity of sanchalaks will significantly reduce maintenance and system support costs. Sanchalak are taught about the importance of other devices such as the UPS and the battery backup. They are given guidelines on what to look for when there is a problem. For instance, they are instructed on the significance of the display lights on the devices. When sanchalaks call for technical help, these details help the support staff identify and resolve problems, perhaps even over the phone, without the necessity of a site visit.
  • 72. ITC considers training to be a continuous process, and one that requires a concerted effort from all field operatives, not just the support staff. All field operatives are encouraged to provide technology assistance when they visit e-Choupals. When the local coordinator visits an e-Choupal, he may be required to help with usability issues, even though this is not his primary job. System Support ITC has about 15 engineers who provide field infrastructure support to the e-Choupals. They average about one or two calls a day. Each e-Choupal is visited about twice a month for infrastructure support. In order to overcome transportation problems, ITC purchased a fleet of approximately 25 motorcycles for its support staff. The support cost is estimated at US$6.60 (Rs. 300) per visit. A majority of the issues reported are software-related. Users’ lack of familiarity with the operating system has led to software issues. For instance, some users inadvertently delete desktop icons and then have to call for help. On other occasions, failures have occurred when users download and install untested or unapproved software. Another issue encountered by the support staff has been the malfunctioning of equipment due to voltage fluctuations. About 20-30% of the calls to support staff are related to a blown fuse in UPS units. Sanchalaks have now been provided with replacement fuses and have been trained to change fuses on their own. Support for hardware failures is provided by the vendor. In the future ITC proposes to improve service and lower costs of infrastructure support through remote help desk tools and network automation. Information Architecture   The e-Choupal system is designed to gather customer information over time. The sources, structure, management, and use of this data are addressed within the information architecture. The technical details are routine, but the data itself and its potential uses are exciting. Data about the rural customer such as their location, creditworthiness, consumer preferences, financial position, and spending patterns represent the first link between this vast untapped market and urban commerce. Such information will eliminate the “unknowns” of rural engagement and enable planning, marketing, and sales of a range of products. The information gathering is currently semi-automated. Information on each sanchalak is gathered during user registration. The sanchalak also keeps a record of farmer visits, inquiries, purchases, etc. The Q & A section of the Web site allows for two-way transport of data that is then stored in a database. The Web site does not currently process live transactions, but ITC has plans to do so in the future. The Web database tracks the Internet usage patterns at e-Choupals. From this database, ITC has gathered information such as peak usage periods, preferred Internet destinations, information most sought after, information least sough after etc. ITC intends to leverage the information gathered to
  • 73. help better understand the behaviour of their customers, identify unfulfilled needs, and develop ways to serve them efficiently. Technical Architecture From dial-up to VSAT: Connectivity Evolution in e-Choupals ITC realized very early that the existing telecom infrastructure was not capable of supporting data traffic. Working with C-DoT (Centre for Development of Telematics), they determined that that lack of synchronization between the village exchange and the main exchange was a major issue. C-DoT proposed the installation of RNS kits in the village exchanges. Even after the installation of RNS kits, however, the data throughput was a mere 12 Kbps. This is not sufficient to support their application requirements. With the help of C-DoT, ITC made modifications to the RNS kit which helped them achieve 40 Kbps throughput. Despite achieving a significant improvement in the throughput rate, sporadic power supply in the village exchanges meant that the dial-up solution was not reliable. Even if the e-Choupal had power, the telephone exchange might not, thereby rendering the system inoperable. As the e-Choupal model has progressed, ITC has realized that dial-up connectivity is not sufficient to drive proposed future applications. In order to support transactional capabilities and multimedia applications, the company needs reliable connectivity with better throughput. They therefore have decided to adopt a satellite-based technology (VSAT) which enables a throughput rate of up to 256 Kbps. This is, however, an expensive solution, costing about US$2,650 (Rs. 120,000) per installation. Figure: Hardware     Figure: Software   Application Architecture The application layer represents the logical muscle that rests atop the skeleton of technical infrastructure.Understanding the application architecture gives us a view of the functions enhanced by information technology and also illustrate how business processes may be adapted to deal with constraints upon the IT infrastructure.The Web site is the gateway for the farmer. The Web site is protected and requires a user ID and password to login. As of now sanchalaks
  • 74. are the only registered users. Immediately after recruitment, an account is created for the sanchalak and he is given a user ID and password to access the system.   Figure: Features of the e-Choupal Web Site   The sanchalaks and others who use the system have learned that there now is a wide variety of information at their fingertips that they can access and benefit from. The following table lists just a few popular Internet destinations. Figure: Other Internet Resources Accessed at the e-Choupal    
  • 75. Strategic fit: Step 1: The implied Uncertainty (Demand and Supply ) Spectrum Predictable low level of implied demand Highly uncertain demand Supply and uncertainties and supply Demand supply uncertainty ITC e-chaupal Most of the agricultural products are example of low level of implied demand uncertainty but significant supply uncertainty based on weather . So our ITC e-chaupal falls in this category. Step 2: Highly Somewhat Somewhat Highly Efficient efficient responsive responsive ITC e-chaupal The responsiveness spectrum This supply chain is capable of low costs and the focus of this supply chain is clearly on efficiency Step 3: Responsive Zone of strategic fit Responsiveness spectrum A Efficient Certain uncertain Demand demand Implied uncertain spectrum Place of ITC e-chaupal in Zone of strategic fit The ITC e-chaupal supply chain can easily be fitted to position A shown in the figure.
  • 76. At present ITC E-chaupal under Intercompany Interfunctional Scope which believe in maximizing the entire supply chain surplus .It forces every stage of the supply chain to look across the supply chain and evaluate the impact of its action on other stages as well as on the interfaces. THE SOCIAL IMPACT OF e‐CHOUPAL  A major impact of the e-Choupal system comes from bridging the information and service gap of rural India. Agricultural research centres (such as the Indian Council for Agricultural Research), universities, and other agencies in India have developed several practices and technologies to improve productivity and crop quality. The impediment to implementation has been affordable, large- scale dissemination of this knowledge. The e-Choupal system leverages technology that can reach a wide audience literally at the click of a mouse. The constant presence of sanchalaks, who themselves are farmers who apply these techniques, ensures that the practices actually make their way from the Web site to the field. Some areas about which information and services are provided by the e-Choupal Web site and e-commerce system include: • Weather: This is a very popular section on the Web site because it provides localized weather information at the district level. Other public sources generally provide only aggregated statelevel weather information. e-Choupal’s weather information is intelligently coupled with advice on the activities in the agricultural lifecycle. One farmer observed that prior to e-Choupal, unreliable weather information would result in prematurely planted seeds that would be washed out by early rains. The availability of accurate rain information has cut losses due to weather by more than half. • Agricultural Best Practice: Scientific practices organized by crop type are available on the Web site. Additional questions are answered through FAQs and access to experts who respond to emails from the villages. • Customized Quality Solutions: After sale of a crop is completed, ITC performs laboratory testing of the sample collected. Based on these results, farmers are given customized feedback on how they can improve crop quality and yield. • Intelligent Product Deployment: Inputs such as fertilizers and pesticides are not generic in their application. The optimal application is relative to the soil and crop. Determining these parameters requires services such as soil testing. Past providers brought inputs but not the information and services required to make them effective. ITC’s “full-service” approach corrects this by coupling the input sale to the information on the Web site and services such as soil testing. The collective impact of better information and new services can be gauged by the fact that prior to e- Choupal, soy cultivation was on the decline. Productivity was stagnant and farmers saw no future in it. In Khasrod, soy production declined from a high of 100% to 50% of farmers planting soy and was expected to decline further. Since ITC’s involvement, soy is seen as profitable again and nearly 90% of farmers are planting the crop.
  • 77. A second major area of impact stems from the ability of the e-Choupal system to open a window on the world and thus impact the future of the villages in which they operate. Computers are bringing the same resources to villages as they brought to urban India, and their impact is no less dramatic. This, coupled with higher incomes and changes in farmers’ attitudes, is causing several shifts in the social fabric of village life. Some accounts from villages include: • Children are using computers for schoolwork and games. A particularly poignant story is that of Khasrod, where 2,000 local students used the local e-Choupal to print their grade sheets, saving them days of waiting and travel time. • Sanchalaks use the Internet to chat extensively among themselves about the status of operations and agriculture in their villages. • Villagers access global resources to learn about agriculture in other parts of the world and are taking action to compete in the world outside, not merely in the local mandi. • Youngsters in the village use computers to research the latest movies, cell-phone models, and cricket news. Winners and Losers Not everyone has benefited from the introduction of e-Choupals. Indeed, lost income and jobs is directly connected to the overall increase in efficiency in the e-Choupal system. Some of the players in the mandi system have suffered loss of revenue. They include: • Commission agents: Despite ITC’s best efforts to maintain mandi volumes and compensate commission agents for lost income, there is little doubt that on the whole they have lower incomes as a result of the introduction of e-Choupals. • Mandi labourers: The workers in the mandi who weighed and bagged produce have been severely impacted by the drop in volume. In the Sonkach mandi, for example, some 28 tulavatis and 300 laborers have been affected. ITC’s long-term vision is to employ many of these people in the hubs in much the same functions as they perform in the mandi. • Bazaars near the mandi: When farmers sold produce in the mandi, they would also make a variety of purchases at local bazaars. This revenue has now been diverted to shops near the ITC hubs. This, however, can be considered a diversion of revenue rather than elimination. • Some mandi operations: ITC still pays mandi tax for all the crops procured through e-Choupals but it now pays the tax to the mandi nearest to the procurement center. As a result, taxes are being diverted from several mandis to the few mandis near procurement hubs. The result of this is that regional mandis have lost taxes that contribute to maintaining their infrastructure. • Competing processors: Even before the advent of the e-Choupal, the soya crushing industry suffered from severe overcapacity (half of all capacity was excess). The efficiency pressures imposed by e- Choupal has spurred industry consolidation.
  • 78.   Weakness of e-choupal Although e-choupal helps eliminate the middleman and therefore allows farmers to get a better price for what they grow, it does nothing to solve the more fundamental problem of the inherent inefficiencies created by so many tiny farms. In addition, it relies on infrastructure, which is often lacking in rural communities. Electricity and telecommunication services can sometimes be less than 100 percent reliable in some of the places where e-choupal has been implemented. Finally, although there is no longer a middleman, e-choupal can be no more effective than the sanchalak (coordinator) in each community. ITC in conjunction with local farmers created the e-choupal system that is acting as a catalyst in rural transformation by providing access to latest information of the agro sector, developing local leadership and creating a profitable distribution. It helps in alleviating rural isolation, improves productivity and income, create transparency for farmers - which improves the economic condition of rural areas. Agriculture is the backbone of Indian economy producing 23 percent of GDP, and employs 66 percent of workforce. Because of the green revolution, India’s agricultural productivity has improves to the point that it is both self-sufficient and a net exporter of a variety of food grains, yet most Indian farmers have remained poor. The causes include remnants of scarcity-era regulation and an agricultural system based on small, inefficient land holdings. The other constraints are weak infrastructure, numerous intermediaries, excessive dependence on the monsoon variation between different agro-climate zones, and many others. The unfortunate result is inconsistent quality and uncompetitive prices, making it difficult for the farmers to sell his produce in the world market. ITC’s trailblazing answer to these problem is the - e-choupal initiative; the single largest information technology-based intervention by a corporate entity in rural India that is transforming the Indian
  • 79. farmer into progressive knowledge-seeking netizens. Enriching the knowledge of farmers & elevating them to a new order of empowerment. ITC aims to confer the power of expert knowledge on even the smallest individual farmer enhancing its competitiveness in the global market. Benefits of e-choupal     “A quiet digital revolution is reshaping the lives of farmers in remote Indian villages.” e-choupal delivers real-time information and customized knowledge to farmer’s decision making ability, securing better quality & price. The e-choupal initiative also creates a direct marketing channel, eliminating wasteful intermediation and multiple handling, thus reducing transaction cost and making logistics efficient. · Digital transformation - ITC began e-choupal with Soya grower in the villages of M.P. e-choupal tried to change the stereotype image of farmers of bullock cart. Farmers now log on to the site through internet kiosks to order high quality input, get information on best farming practices, prevailing market prices for their crops at home and abroad for the weather forecast all in the local language. The e-choupal site is also helping the farmers discover the best price of their quality at the village itself. The site also provides farmers with specialized knowledge for customizing their produce
  • 80. to the right consumer segments. The new storage and handling system preserves the identity of different varieties right through the ‘farm gate to dinner plate’ supply chain. Thus, encouraging the farmers to raise their quality standards and attract higher price. · Credit and Insurance - Farmers’ low income and difficulty in accessing credit limits the capacity to pursue opportunities within and outside the agriculture sector. ITC e-choupal proposes the solution of this problem by making partnership with financial institutions. e-choupal provide various types of loans like non-cash loans for farm inputs, loans to sanchalak (sanchalak can better manage credit risk & have better access to farmers), direct loans to farmers based on sanchalak recommendation, Insurance & risk management services etc. · Local leadership development - ITC uses involvement of farmers in content creation helps to easily customize the information as per the local requirements. Participation of local farmers ensures provision of adequate and decipherable information to e-choupal, which can be employed into the farming, or pricing of the produce. The increased participation in e-choupal develops local leadership quality in farmers. The farmers get attracted towards e-choupal due to increased profits, added services that he could get, saving in time and the ability to use e-choupal for many transactions. E-choupal delivers relevant technologies in the hands of the farmers, which can improve the economic condition of the entire village. e-choupal is one of the very few ICT projects in India that has effectively utilized e-commerce transactions for poverty alleviation. ICT also reduced the number of middlemen between producers and consumers. Now, simple technology solutions are available to create networks in rural areas, which can function as virtual marketplaces.     Other benefits to farmers Farmers are reimbursed for transport to the procurement hub of e-choupal. The transaction time at the ITC hub is also much faster than mandi. ITC has given recognition to integral partner in the supply process & not mere as agricultural producer and thus elevating the level of respect of farmers. Similarly providing shaded seating area while waiting for their paperwork shows ITC really care for farmers.
  • 81. Cost and revenue Stream e-choupal has been successful. It has reduced the cost of procurement and the cost of transit and the material handling cost. Procurement transaction costs are reduced from the industry standard of 8 percent (farmers incurs 3 percent and the processor incurs 5 percent) to 2 percent (with farmer saving all his 3 percent, and the processor ITC – saving 3 percent). The total cost incurred on the initiatives so far has been Rs.50 million (Rs.35 million as capital cost towards computers and other hardware at the kiosks as well as central servers and Rs.15 million revenue expenditure incurred towards portal development, people overhead etc.). But ITC has gain benefit Rs. 20 million, which is the equivalent of full investment on 40 percent of the Choupals (Kiosks). In terms of future revenue, the outflow is 52.1 million in 2001-02 which reduces to 3.90 million in 2005-2006 and for 2006-07 is estimated as 2.70 million. Where as inflow in 2001-02 is 15.3 million where as 65.0 million in 2005- 2006 and estimated as 85.0 million in 2006-2007. The internal rate of return (IRR) on the project works out to be 21.55 percent. In the mandi system, there was a mark up of 7-8 percent on the price of soybean from the farm gate to the factory gate of this mark-up 2.5 percent was born by the farmer while 5 percent was borne by ITC with e-choupal, ITC cost are down to 2.5 percent. In absolute terms, both the farmers and ITC save about $ 6 per metric ton. Challenges As the power is usually available for only a few hours a day at on a sporadic schedule, the e-choupal computer cannot always be accessed when information is needed. Phase imbalances leads to damage of equipments. Telecommunication infrastructure in villages is poor. Telephone exchange also have limited battery backup. In addition, there is no local support staff to maintain or troubleshoot telephone exchanges. The support team is also short-staffed. Other challenges are: - · Illiteracy about computer in rural areas as well as rural population has low trust on electronic system. · Selection of an educated, intelligent, reliable and matured person as a sanchalak. · Improper knowledge about rural market. · Vicious circle of intermediaries (Adatiya & Brokers). · Improper and complex user interface on e-choupal. · Lack of rules and regulation related to electronic choupal. · Mistrust about inspection, testing and weighing of produce on centres. ITC’s example show the key role of IT in providing and maintaining by a corporation, but used by local farmers – to bring transparency, to increase access to information, and to catalyze rural transformation, while enabling efficiencies and low cost distribution that make the system profitable and sustainable . Critical factors in the apparent success of the venture are ITC’s extensive knowledge of agriculture, the effort ITC has made to retain many aspects to the existing production
  • 82. system, including retaining the integral importance of local partners. ITC e-choupal is committed to transparency and respect and fairness towards farmers as well as local partners. The e-Choupal advantage ITC's e-Choupal project is a winner—for farmers who get better remuneration and for the company that's assured quality inputs for its business Imagine an illiterate farmer in a remote village in Madhya Pradesh sitting at a desktop wired up to the WWW through a small VSAT link, powered by a tiny power generator by the side, and surfing away to glory downloading invaluable information about weather forecasts and sowing trends. Imagine farmers checking prices for soya beans at the nearest government-run market, or even on an international commodities exchange. IT for the Masses The eChoupal project covers over 35,000 villages in Madhya Pradesh, Uttar Pradesh, Maharashtra, Karnataka, Andhra Pradesh, Rajasthan, Haryana and Uttaranchal providing millions of farmers with critical information on farming. The Choupal services are being delivered by over 6,000 Sanchalaks and over 17,000 Upa Sanchalaks to these remotest areas. Multiple Benefits Farmers can look at weather forecasts, order fertiliser and herbicide, and consult an agronomist by e-mail when their crops turn yellow. At some e-Choupals they can even buy life insurance, apply for loans and also check their children’s exam results. While much has been written about the social benefits of ITC’s e-Choupal, the matter of the fact is that the project was conceptualised with a pure business focus to create farmer communities in villages to facilitate sourcing of high-quality farm produce for the company’s fast growing agribusiness. Better Payment In IT parlance, e-Choupal is an intelligent blend of applications like CRM and supply chain management. For instance, by helping the farmer identify and control his inputs and farming practices, and by paying more for better quality, ITC has been able to preserve the source and improve the quality of produce. The project was built using .NET. The first implementation of a Soya Choupal took eight months but later extensions like the Aqua Choupal for aquamarine farmers took between six and eight weeks. Today e-Choupal is a flexible, easy to deploy solution. ITC Infotech provided an inhouse team of 25 to 30 people in the initial stage and this gradually came down to around 20 people, and finally a five- member team to maintain the project. The portfolio of commodities sourced has been vastly expanded to include maize, barley, sorghum, and pulses, and the sourcing cycle is extended almost around the year. In the commodities market, these two factors are helping ITC create a definite competitive advantage.
  • 83. The Problems Power cuts in rural areas can run for eight to 10 hours. ITC even went so far as to provide gensets at a few locations hoping to spur DoT to doing the same. It didn’t work out and in 2001 ITC shifted its focus to using Ku Band VSATs. Power remained a problem and it was solved by using solar panels. The e-Choupal Roadmap ITC now plans to leverage its e-Choupal infrastructure to sell third-party products, provide rural market research services, and in the social sector, to provide services like health advisories and enable e-governance. ITC e-Choupal has embarked in on providing best of the class retailing and shopping experiences to the rural consumers by building retail shopping complexes that provide integrated facilities under one roof. Under the brand ‘Choupal Sagar,’ these shopping complexes house—a procurement centre, retail store, food court, farmer facility centre and healthcare clinic. In healthcare services, a pilot project has been launched along with leading corporate healthcare service providers, to extend reliable and quality healthcare services to the remotest villages. Several health camps conducted during the pilots are encouraging and the project is in the midst of scaling up to other locations. ITC e-Choupal is currently piloting delivery of quality education services to the rural areas leveraging the physical and digital infrastructure developed for commodities sourcing and consumer retail services. STRATEGY FOR THE FUTURE ITC recognizes the limitations of today’s e-Choupals as a vehicle of procurement efficiency. Not every crop lends itself to such an intervention. In crops such as soy where value can be maximized, followers will soon imitate ITC and eliminate the company’s competitive advantage. ITC’s vision for e-Choupal extends many generations as e-Choupal evolves into a full-fledged orchestrator of a two- way exchange of goods and services between rural India and the world. The soy e-Choupal is “Wave 1,” with several more to follow. • Wave 2. The source of value in this generation will be identity preservation through the chain. This is a significant source of value in crops such as wheat, where the grade of the grain determines its end use. The ability to separate different grades from field to consumer will command a price premium. E-Choupals in Uttar Pradesh have already started wheat procurement. • Wave 3. This wave takes identity a step further by building the concept of traceability into the supply chain. This is vital for perishables where traceability will allow ITC to address food safety concerns and once again provide a value that the customer is willing to pay for. Shrimp is a good example of a crop for which Wave 3 will be important. ITC’s intervention in such products will occur level of production. ITC will define standards that producers must adhere to and work with farmers to ensure product quality. Farmers in turn will get the best price from ITC because ITC commands the traceability premium.
  • 84. • Wave 4. The first three waves fill institutional voids while Wave 4 creates institutions. The first three waves apply to environments in which ITC is the sole buyer in the e-Choupal channel. In commodities where the underlying markets have reached a high degree of efficiency, such basic sources of value will not exist. In crops such as these, e-Choupal will serve as the market-place where multiple buyers and sellers execute a range of transactions. A good example of this is coffee. ITC’s source of value will be the sunk cost of the IT infrastructure and the transaction fees. • Wave 5. While the first four waves related to sourcing from rural India, the fifth wave elaborates the rural marketing and distribution strategy. This is not the same as the rudimentary distribution of agri- inputs that is being done today. ITC plans to bring together knowledge of the customer, knowledge of the business, deployed infrastructure, its reputation, and experience gained over the first four waves, with an organization of people, processes, and partners. This base will allow ITC to bring value- added products and services to rural India. • Wave 6. After the sourcing of goods from rural India, ITC’s last wave has the ambitious vision of eventually sourcing IT-enabled services from rural India. Telemedicine, eco-tourism, traditional medicine, and traditional crafts are some of the services that can be sourced from rural India. While still a ways off, it is an agenda that inspires scale of the vision and potential impact on development in rural India. Analysis of Technology Costs Figure : Cost Allocation of Technology Requirements  
  • 85. e-choupal:Strategic Thrust  
  • 86. ITC in Paper Industry ITC is one of the world's most modern and contemporary manufacturers of packaging and graphic series of boards. ITC's Paperboards business has a manufacturing capacity of 360,000 (TPA) tonnes per annum and is India's market leader across all carton-consuming segments including cigarettes, foods, beverages, pharma, personal care & toiletries, durables and match shells. ITC makes some of the premium graphic boards used for greeting cards, covers, sleeves, tags and playing cards. The Company produces both Virgin and Recycled boards spanning the full requirement of a packaging customer. The erstwhile ITC Bhadrachalam Paperboards Limited was incorporated in 1975. It set up an integrated pulp and paper/board manufacturing facility in 1979 at Bhadrachalam in Andhra Pradesh in South India, 300 kms. east of Hyderabad. Since then, the mill facilities have been continuously upgraded to achieve internationally benchmarked quality standards and operational efficiencies. In 1998, the Paperboards business commissioned a new production line for coated boards. This production line incorporated Paper Machine 4, with original capacity of 120,000 tonnes per annum (TPA) and finishing & packing lines sourced from internationally renowned suppliers. This machine has been fitted with a sophisticated 'Web Detection and Inspection system' and since been modernised further with the addition of the latest web forming technology. The PM4 board machine can deliver international quality boards for Cigarette, Liquid, Food and Pharma Packaging by providing a flawless surface for print reproduction. To meet the growing requirement for high quality paperboards , PM5 was commissioned in 2003 with a capacity of 80,000 TPA. In September 2002, ITC's Bhadrachalam Paperboard Unit commissioned a 110,000 TPA Elemental Chlorine Free (ECF) fibre line. This is a state-of-the-art fibre line and the only one in India, which meets effluent norms, set by the Ministry of Environment and Forests of the Government of India and Pollution Control Boards. The product range has also been enhanced as ECF pulp uniquely fulfills the demand for food-grade packaging and environment-friendly paper. To meet its growing need for bleached pulp, a second ECF pulp line with a capacity of 120000 TPA is now nearing completion at Bhadrachalam. ITC is the largest exporter of coated boards from India. The Company exports nearly 15 percent of the coated boards it produces. Its coated boards fulfill exacting customer requirements in Malaysia, Sri Lanka, Bangladesh, Iran, Australia, UAE, UK, Italy, Poland and Russia. ITC has set up India's first world-class plant for the manufacture of premium Cast Coated Boards that meet highly sophisticated packaging and printing requirements. The Unit at Bollaram has been expanded further to accommodate specialized converting production lines. ITC has added a modern Poly-extrusion line to its production facility, to meet the growing demand for food packaging and beverage cups. A 2nd poly-extrusion line is due for commissioning in Jan 2008 , to meet the growing demand for barrier boards. The Super-Calendering line installed at Bollaram Unit near Hyderabad has also added Art Boards and Ivory Cards to its product range. ITC has also pioneered the
  • 87. development of Liquid Packaging Boards and Plasterboard liners. Continuous product development has reinforced ITC's market leadership in the Paperboards business. ITC's Paperboards business has a strong customer focus. The Company's Paperboards business devoutly practices a 'TPM' philosophy during each stage of manufacture. Lean management techniques have also been introduced in making the operations more responsive and efficient. Statistical Process & Quality control supplement the state-of-the-art on-line process controls and scanning systems in the production lines. ITC is the premier manufacturer of Specialty Papers in India, with a diversified product portfolio. ITC's Specialty Papers are used in the manufacture of opaque lightweight fine printing papers, cigarettes, papers for decorative laminates, electrical insulation-grade papers , fireworks fuse tissue and automotive filter paper. This Division pioneered the manufacture of Specialty Papers for the Indian cigarette industry in 1949. It currently offers a comprehensive range of Cigarette Tissues, Plug Wrap, Tipping Base, Printed tipping papers and Metallising Base. The Specialty Papers Unit of PSPD at Tribeni, Chandrahati, West Bengal aims to reach out and fulfill existing and emerging customers needs. The Unit reconfigures systems and processes to meet specific customer requirements. Quality control processes at the Unit are designed to ensure consistent high quality at every stage of manufacture. On-line monitoring and documentation of production parameters are carried out for continuous correction and updation of quality standards.A Product Development Team ensures Total Quality Management (TQM) in all operations. The TQM group closely dovetails its operations with marketing, production and research teams to ensure international standards in products and services. The business creates long-term product development solutions on the basis of customer specifications and market trends.ITC has demonstrated strong capability in product development and research in pulp and paper. The Company has collaborated with the United Nations Development Programme (UNDP) and the Government of India on research programmes to develop high quality pulp. The Division exports cigarette tissues and décor paper for laminates to Iran, Turkey , Nepal, and Bangladesh. Paperboards Business  
  • 88. ITC in Apparels ITC’s Lifestyle Retailing Business Division has established a nationwide retailing presence through its Wills Lifestyle chain of exclusive specialty stores. Wills Lifestyle, the fashion destination, offers a tempting choice of Wills Classic work wear, Wills Sport relaxed wear, Wills Clublife evening wear, fashion accessories, Essenza Di Wills – an exclusive range of fine fragrances and bath & body care products for men and women and Fiama Di Wills – a range of premium shampoos and shower gels. Wills Lifestyle has also introduced Wills Signature, designer wear by leading designers of the country. With a distinctive presence across segments at the premium end, ITC has also established John Players as a brand that offers a complete fashion wardrobe to the male youth of today. The recent launch of Miss Players with its range of trendy fashion wear for young women has been a successful addition to the youth portfolio. With its brands, ITC is committed to build a dominant presence in the apparel market through a robust portfolio of offerings. This season, Wills Lifestyle presents a complete fashion wardrobe that complements every facet of your lifestyle - at work, when you're relaxed, while you party and for those special occasions. Wills Lifestyle has been established as a chain of exclusive specialty stores providing the Indian consumer a truly 'International Shopping Experience' through worldclass ambience, customer facilitation and clearly differentiated product presentation. Our stores have established themselves as preferred shopping destinations in the prime shopping districts across the country. At Wills Lifestyle, customers can browse at leisure, and shop in a relaxed and pleasing atmosphere. The use of space is refreshing, which is reflected even in the spacious changing rooms. Every store offers an international retailing ambience with the extensive use of glass, steel and granite, reflecting the most contemporary trends in store design, thereby creating a splendid backdrop for the premium offerings. superbrand 2006 was awarded to Wills Lifestyle by the Superbrands Council of India. At the Images Fashion Awards 2001 & 2003, Wills Lifestyle was declared ' The Most Admired Exclusive Brand Retail Chain of the Year'. Wills Lifestyle is now title partner of the country’s most premier fashion event - Wills Lifestyle India Fashion Week. Taking the celebration of the event to its stores, Wills Lifestyle has partnered with leading designers Rohit Bal, Rajesh Pratap Singh, Manish Malhotra and Rohit Gandhi - Rahul Khanna to create a new edition of Designer wear, which is now available at Wills Lifestyle Wills Sport, fashionable relaxed wear for men and women has, over fifteen seasons, become the vibrant face of contemporary fashion. At the Images Fashion Awards 2001, Wills Sport was declared ‘The Most Admired Brand Launch of the Year'. Following this, Wills Sport was declared 'The Most Admired Women's wear Brand of the Year', at Images Fashion Awards 2002. This season, Wills Sport presents a collection designed to complement your exuberant lifestyle. Vibrant designs create magic in breezy fabrics. Racy stripes and enchanting details add charm to the purest linen and cotton. Wills Classic work wear was launched in November 2002, providing the premium consumer a distinct product offering and a unique brand positioning. Featuring luxurious fabrics crafted to perfection with the most contemporary styling, Wills Classic work wear is positioned as the
  • 89. brand for new age leaders, who are changing the rules of business and encouraging a dynamic culture of enterprise, innovation and teamwork. Showcasing the epitome of new age luxury. Featuring the finest shirts, crafted in Italy. Complemented by exquisite trousers and jackets, made by European master craftsmen. Experience a new language of charming sophistication this season. Wills Lifestyle complements the range of premium apparel with a tempting choice of fashion accessories. This season a wider choice of accessories will be offered across ties, cuff links, socks, caps, hand bags, wallets, belts, eyewear and shoes. With the introduction of premium formal and relaxed jackets in the range, Wills Lifestyle will continue to offer the definitive look of the season. Continuing with its philosophy of bringing to Indian consumers world class products that enrich the quality of their lives, ITC launched Essenza Di Wills - an exclusive range of fine fragrances and bath & body care products for men and women in July 2005. Inizio, the signature range under Essenza Di Wills provides a comprehensive grooming regimen with distinct lines for men (Inizio Homme) and women (Inizio Femme).The rich and sensual fine fragrances are all day offerings designed by the leading international fragrance houses in France. The personal care range includes a host of bath and body care products that share the same olfactory signature of the men’s and women’s fine fragrances to offer you a harmonized fragrance experience. ITC forayed into the youth fashion segment with the launch of John Players in December 2002 and John Players is committed to be the No. 1 fashion brand for the youth. This foray leverages ITC’s proven competencies in understanding consumer insights, brand building and design capabilities. Hrithik Roshan, Superstar and Youth Icon, with his innate style, vibrancy and playfulness best personifies the core attributes of the brand as its ambassador.   FMCG Business Initiatives Lifestyle Retailing
  • 90.   FMCG Business Initiatives Personal Care Products   FMCG Business Initiatives Incense sticks                                                                                                                              
  • 91.                                                            ITC in Information Technology ITC InfoTech, a global IT services company, is today one of India’s fastest growing IT and ITES service providers. Since it's inception in October 2000, the company has established itself as key player in offshore outsourcing, providing outsourced IT solutions and services to leading global customers. While an enterprise range of technology capabilities and world class quality processes form the foundation of ITC InfoTech’s cutting-edge IT service strength, a sharp domain focus ensures that IT and It’s delivery always places business needs ahead of technology. The company enjoys the rare advantage of having a practitioner's expertise with a strong vertical focus in Consumer Packaged Goods (CPG) and Retail, Travel, Hospitality and Transportation, and Manufacturing - domains that its parent, ITC Limited, has traditionally dominated - as well as in the main stay of technology service providers: Banking, Financial Services and Insurance. ITC InfoTech offers services through a global delivery platform with a strength of over 2,000 employees and delivery centers across North America, Europe and Asia-Pacific that serve Fortune- listed companies in 42 countries. ITC InfoTech conforms to the highest standards in international process quality, with ISO 27001, ISO 9001, SEI CMM Level 5 and BS 7799 accreditations. These reflect the company’s ongoing enterprise-wide focus to ensure that every engagement, program and project delivers international quality consistently. Industry Recognition: Premier analyst and market research agencies have recognized ITC InfoTech’s position as the preferred IT partner. It has been: Featured amongst Top 100 Global Outsourcing Companies in the Leaders category - International Association of Outsourcing Professionals Ranked amongst Top 10 Specialty Application Development Providers – Global Services, CMP Media Named amongst major Indian global service providers for PLM implementation and engineering services - ARC Advisory Listed as a leading Player in CRM & CPG Space – Forrester Mentioned amongst Top Offshore SAP Service Providers - Forrester Referred to as a Key Offshore Testing Services Provider - AMR Research ITC Infotech  
  • 92.                                                               STRATEGIES OF ITC   Corporate Strategies   Marketing Strategies
  • 93. Bibliography:    •  •  •  •  •  •  •  •  •  •  •  •  •  •  •  •  •