Page 191 - DMGT509_RURAL MARKETING

Rural Marketing

Notes 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 as much as half.
At the same time, ITC benefits from net procurement costs that are about 2.5% lower
(it saves the commission fee and part of the transport costs it would otherwise pay to
traders who serve as its buying agents at the mandi) and it has more direct control over the
quality of what it buys. The system also provides direct access to the farmer and to
information about conditions on the ground, improving planning and building
relationships that increase its security of supply. The company reports that it recovers its
equipment costs from an e-Choupal in the first year of operation and that the venture as a
whole is profitable.
In mid-2003, e-Choupal services reached more than 1 million farmers in nearly 11,000
villages, and the system is expanding rapidly. ITC gains additional benefits from using
this network as a distribution channel for its products (and those of its partners) and a
source of innovation for new products. For example, farmers can buy seeds, fertilizer, and
some consumer goods at the ITC processing center, when they bring in their grain.
Sanchalaks often aggregate village demand for some products and place a single order,
lowering ITC's logistic costs. The system is also a channel for soil testing services and for
educational efforts to help farmers improve crop quality. ITC is also exploring partnering
with banks to offer farmers access to credit, insurance and other services that are not
currently offered or are prohibitively expensive. Moreover, farmers are beginning to
suggest, and in some cases, demand, that ITC supply new products or services or expand
into additional crops, such as onions and potatoes. Thus farmers are becoming a source of
product innovation for ITC.

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 future 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 towards rural
development.
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. The case
also shows the key role of information technology, in this case provided and maintained
by a corporation, but used by local farmers, in helping to bring about transparency,
increased access to information and rural transformation. 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.

Question
Discuss the plan and find out the improvements possible in the plan.

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