Rural marketing in India Assignment

Rural marketing in India Assignment Words: 1667

Indian’s rural markets offer unprecedented opportunities for global and local companies to experiment with approaches and business models, which if successful, may be replicated in rural markets of other emerging economies. India is on the march. Its momentum is not only evident in metros-?? it is apparent in small towns and villages as well. Collectively, all over Indian’s rural heartland and in its teeming cities, India is readying for an even more impressive era of economic growth. There is no question that Indian’s rural markets are becoming a powerful economic engine. One telltale sign: rural accounts now comprise over 50 percent of new subscribers for some of the leading telecoms providers. The rural multiplier effect is what excites policy makers and business leaders alike. For every new opportunity for a villager to use his mobile phone to protect his crops, there is a knock-on opportunity for him to purchase a small refrigerator or a motorcycle. There is a growing realization that global investment and growth will increasingly come from rural populations, as their savings reinstate into consumption. But, there is one more theme that cannot be ignored. It is about the enormous disparity in incomes and living standards and lack of sociolinguistics’s across India. This report chronicles the business sector’s growing confidence in Indian’s rural markets.

It draws on the new Accentuate survey results to demonstrate the strength of business leaders’ belief in the future of the rural opportunities in India and their willingness to invest in the opportunities. Just one snapshot: more than half of our survey respondents foresee 20 to 50 percent of their revenues coming from rural markets ever the next three years. As this report explains, businesses can do much to accelerate employment, educational opportunities, infrastructure development, and wealth creation. In particular, they are in prime position to help bring education, healthcare and productive employment to a youthful workforce whose size promises to make it the major engine of Indian’s future workforce and economy. The report also offers a framework that highlights the characteristics of high-performance businesses in rural markets.

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The framework identifies three distinctive capabilities-the ability to create, shape and develop arrests; the ability to adapt and optimize supply chains; and the ability to co-create value through innovative use of technology. The report explores each of these tenets in detail, before highlighting the facets of organizational culture essentials to the organization’s growth strategy. Accentuate firmly believes that businesses that are benefiting by providing goods and services to rural consumers have a duty to bring more inclusive, sustainable, social and economic growth to those consumers’ communities. We believe this report can accelerate those efforts.

We look forward to discussing its findings with you. Sandy Dewar OPAC Supply Chain Lead 3 4 Growing business confidence in rural opportunities Indian’s rural markets present opportunities that companies seeking to become high-performance businesses cannot afford to ignore. But the size and scale of those markets (three-fourths of the country’s approximately 1. 1 billion people live in villages) have been offset by concerns about the profitability of these markets and the durability of rural demand. Now, though, there is abundant evidence to indicate that businesses are seeing more promise in Indian’s hinterland. There are several strong regional and macroeconomic reasons or greater confidence.

And, there is a growing body of statistics to demonstrate that rural markets, fueled in part by rising purchasing power, hold real prospects for profitable growth across a wide range of industry sectors. (c) The government has increased spending in rural areas, from IIS$9 billion for the financial year ending March 2007 to an anticipated IIS$16 March 2010. 3 (d) Improved access to finance and institutional credit has brought greater cash inflows to rural households. Institutional credit to the agriculture and allied sectors increased from INANER. 6 billion (US$14. 5 billion) n 2002-03 to INNER. 6 trillion (US$55 billion) 2008-09. 4 Figure 1. 1 .

Government budgeted expenditure on rural development 20 Five reasons for greater business confidence in rural India (a) Rural spending is now less dependent on farm income, which now constitutes less than 50 percent of the total rural income. Income remittances from migrant rural populations and increases in nonfat activities such as trading and agro-processing are boosting nonfat income. (b) The increase in procurement prices (the minimum price that farmers earn on produce sold to the government) is putting more money into the hands f the rural population. A series of good harvests, on the back of several good monsoons from 2005 to 2008, has accelerated rural employment in agricultural and allied activities. (e) Policy measures such as the IIS$13. -billion waiver of agricultural loans and the National Rural Employment Guarantee Scheme (NURSES), which guarantees 100 days of employment to one member of every rural household, have helped to reduce rural under-employment and raised wages. The official minimum average per-day wage paid under NURSES has increased from INNER (IIS$I . 4) in 2006-07 to INNER (IIS$I . 8) 2008-09. 5 us billion 0 Source: Ministry of Rural Development 5 Figure 1 . AAA. FMC-??Rural market share as percent of all India market Source: National Council for Applied Economic Research (NCAR) 6 The increase in rural purchasing power is reflected in many ways. Rural incomes have been growing at more than 7 percent over the past few years, helping to account for almost 40 percent of Indian’s total consumption of goods and services. Non-food expenditures are growing at an 8. 2 percent annual compound rate.

Rural households are purchasing a wide range of products-??cars, flat-screen televisions, microwaves-??that until gently would have been beyond their reach. Some industrial sectors have seen surprising growth coming from rural consumers. Fifty percent of revenues from the fast moving consumer goods (FMC) sector now come from rural sales. In the case of the telecoms sector, subscriber base in the semi-urban and rural markets (Circle C geographies) has grown at a phenomenal 98 percent over the last five years in comparison to other circles representing metros and urban markets (see Figure 1 . C. ). Figure 1 . B. Automobile-??Share of rural market as a percent of all India market Figure 1 . C.

Total telekinesis ownership per hundred population) Source: Edelweiss Research Source: Telecoms Regulatory Authority of India (TRAIT) *data for the period April 2009 to September 2009 7 8 The attractions and distractions of rural markets The macroeconomic data clearly point to the soaring potential of Indian’s monaural markets. But the statistics do not give clues to how interested business leaders might be in the opportunities at hand. Nor do they say whether companies are prepared to make the kind of investments that are required to unlock long-term value from rural markets. Are business executives who do express interest in the nation’s rural opportunities typically looking at them as consumer markets or as sources of raw materials and labor-??or both?

Do they believe they have what it takes to understand what exactly rural consumers want now and in future? And have business leaders really begun to identify the challenges and drivers that will influence their approaches to rural opportunities? To get answers to questions such as these, Accentuate commissioned a quantitative survey of 109 large and mid-sized multinational and domestic companies with revenues ranging from IIS$200 million to more than IIS$II billion (see “About the research” for more information). Rural markets present opportunities Rural presence strengthens competitiveness The overarching trend that emerged from our survey findings is that businesses are confident about the opportunities that rural India has to offer.

Further, they plan to strengthen their presence in seminarian and rural areas over the medium to long term. More than half of our survey . Ark respondents foresee 20 to 50 percent of their revenues coming from the rural market over the next three years. And, more than 65 percent of the organizations surveyed have Inca already invested in rural India, in some cases more than five years ago see Figure 2. 1). Our survey findings indicate that corporate leaders believe a rural presence can help strengthen their overall competitiveness. As Figure 2. 2 illustrates, the investment decision depends on factors that range from access to cheap labor pools and sources of raw materials to market expansion and an improved public image.

Figure 2. 1 . Businesses are investing in rural markets (Percent of survey respondents) 21% We also interviewed select C-suite executives from companies in a range of industries to learn more about what made them succeed in rural markets. Here are the key findings, slighting the attractions and distractions of rural markets. 9 Figure 2. 2. Rural markets offer opportunities across the value chain (Percent of survey respondents) match tax breaks Rural markets are home to resources and talent Rural markets suffer from persistent structural handicaps Rural markets encompass eager consumers who want to share the fruits of Indian’s industrial growth.

More than half of the senior executives surveyed were keen to tap rural areas’ new segments of consumers (see Figure 2. 2). From a supply-side perspective, more than 40 percent wanted to access raw materials. Unsurprisingly, more than a hired of respondents agreed that rural markets offer labor pools at much lower cost than in urban markets. Issues such as inadequate infrastructure, low literacy, and high levels of poverty raise serious question marks about the sustainability of the rural opportunity. Our survey findings indicate how concerned businesses are about these issues. Around 74 percent of respondents reported that lack of proper linkages for roads, railways and telecoms infrastructure are big hindrances.

Another 40 percent cited the lack of skilled talent and 34 percent highlighted fragmented demand patterns as key challenges. Other barriers to profitability and scalability include Rural markets are crucibles for business model innovation Many consumers in rural areas lack the prejudices that make their urban counterparts resistant to change. They are keen to experiment with new products, new services and new processes. “Ready to be trained rural talent is far more hard-working, experimental, ready to adjust and learn,” was the opinion of an executive in a telecoms company. The lack of granular information on rural markets and consumers, and limited access to financing options.

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