The
ITC eChoupal Initiative
Daniel
Stone
Ohio
Dominican University
The ITC eChoupal
Initiative
Current situation
The
I.T.C. Limited, formally named India
Tobacco Company Limited, created the eChoupal due to an ineffective supply
chain for agricultural goods resulting in their International Business Division
lagging behind the other divisions of the company (Applegate, Austin, &
Soule, 2009). The harvest supplied by farmers were losing
60-70% of their value. This equated to
yields of 70% the value of global standards (Applegate et al., 2009). The reason for this were middlemen, formally known as commission agents
(CAs), who were reducing the profit margins for ITC (Applegate et al., 2009). Unfair practices with the farmers were
carried out by the CAs by using a crude weighing system that only accounted for
50% of the farmer's quantity (Applegate et al., 2009). Furthermore, farmers were not paid on time and in full as the law
required from the CAs.
Farmers would travel up
to a full day hauling their produce to the mandi (marketplace) to be auctioned (Applegate et al., 2009). Once at the mandi, the farmers had to wait an
additional two to three days before getting into the market (Applegate et al., 2009). At the mercy of the CA's low offers, the
farmers did not have a way to store unsold produce (Applegate et al., 2009). As a
result, the farmer would take his harvest to the winning bidder's shop to be
weighed (Applegate et al., 2009).
The farmers were
isolated and price discovery took place upon arrival at the mandi and was
received via mouth. If the farmer was
fortunate, while at the mandi, he would receive a large enough payment to cover
transportation costs, but had to settle for whatever he could get (Applegate et al., 2009). Weather reports were inaccessible, which
affected the farmer's harvest. Not
having to rely on the monsoons would allow the farmers to improve their crop
quality and streamline the process of
having it brought to the market (Applegate et al., 2009).
ITC Limited sought to remove the middlemen and provide an alternative to the mandi (Applegate et al., 2009). By doing this, the farmers were able to sell
directly to one of the ITC's 44 hubs (Applegate et al., 2009). The distance to the ITC hub was the same as the distance to the mandi (Applegate et al., 2009). However, at the ITC hub, ITC provided
compensation for transportation costs and had a retail outlet where farmers
could buy farming supplies and equipment.
Also, the ITC provided scientists and facilitated educational sessions
that demonstrated how the farmers could get more out of their crops by practicing
more effective methods (Applegate et al., 2009).
Also, the ITC sought to
rectify how the information was being delivered to the farmers (Applegate et al., 2009). This was achieved with the creation of
eChoupal, a website featuring weather reports, global crop standards, best
practices, market pricing from around the world, a Q & A forum, and the
news page (Applegate et al., 2009).
Current
Performance. ITC
Limited seeks to maintain its reputation as One of World’s Most
Reputable Companies by Forbes and a
Top 50 Asia’s Best Performing Companies by Business
Week. ITC
Limited employs over 26,000 people, at more than 60 locations across
India with approximately 6,500 eChoupals installed (Forbes Magazine, 2013).
Corporation
performance. ITC
Limited is considered one of India's most valuable corporations through
world-class performance, creating a growing value for the national economy and
ITC's stakeholders (Forbes Magazine, 2013).
For the ITC's agriculture business, is expected to invest
Rs 5,000 crore over 5-7 years in 2006 (ITC Limited, 2013). Because eChoupal has been able to preserve
product identity and manage product pricing, ITC has been able to gain market
share (ITC Limited, 2013). Chief
Executive Officer, S Sivakumar, states that the profitability of eChoupal will
be a challenge to measure due to an annual growth rate of 40% since 2005 (ITC
Limited, 2013).
Strategic Posture. ITC
Limited 's mission statement is "To enhance the wealth generating
capability of the enterprise in a globalizing environment, delivering superior
and sustainable stakeholder value" and has the vision statement to
"Sustain ITC's position as one of India's most valuable corporations
through world class performance, creating growing value for the Indian economy
and the Company's stakeholders" (ITC Limited, 2013). The objective for the eChoupal was to be an
improvement to the supply chain by serving as a delivery mechanism for its
agriculture business (ITC Limited, 2013).
As
a business strategy, ITC was committed beyond the market and did this creating
economic freedom in reengineering it's supply chain, fixing market
inefficiencies, information sharing, and product differentiation (ITC Limited,
2013).
In terms of an organizational strategy, ITC worked with
the village culture by having
transparent pricing, technology available at the village level, and a
waiting area at processing facilities. ITC
Limited provided reimbursement for transportation to the farmers and there was
no commitment from the farmers required to join ITC's eChoupal network (ITC Limited, 2013).
As an information strategy, it was imperative that there
was Internet access for remote villages.
ITC provided the villages an equipment kit comprising of computers,
connection lines, power supply, and a printer.
With these tools in the hands of the farmers, ITC provided technology
training to the farmers. To remove the
guesswork, ITC created pricing trends allowing flexibility for the farmers in
terms of when to sell their harvest.
Furthermore, to remove the fraud, waste, and abuse, ITC computerized the
weight process hereby eliminating the crude manual weight system, which had 50%
of the farmer's crop unaccounted for (ITC Limited, 2013). All of ITC's policies have the foundation of
trust, transparency, empowerment, accountability, control, and being an ethical
corporate citizen (ITC Limited, 2013).
External Environment Opportunities and
Threats
Societal
Environment. In evaluating the
external environment of opportunities and threats of the social relations
between ITC and those around, the economic, technological, political, legal, and sociocultural opportunities and
threats were examined. For example, one
of the technological opportunities was the introduction of new technology. Farmers were able to access the Internet,
which provided the economical opportunities of receiving market information (Upton
& Fuller, 2004).
Furthermore,
when the ITC streamlined the supply chain, this provided economical
opportunities of reducing costs for the farmers (Upton & Fuller,
2004).
While
the eChoupal Initiative provided many
economical and technological opportunities, the economical threat of negative
market change and the political and legal threat of government regulations
still loomed (Upton & Fuller, 2004).
Task Environment. The
threat of new entrants was low to moderate and the threat of substitute
products was moderate (ITC Limited, 2013). On the one hand,
the bargaining power of buyers was high. On the other hand, the bargaining
power of suppliers was moderate to high (ITC Limited, 2013). In terms of
rivals, the eChoupal Initiative competes against the mandi (Upton & Fuller, 2004). Other key factors
are opportunities for the eChoupal Initiative such as other products besides
the soybeans and wheat (ITC Limited, 2013). Also, environmental and weather threats still
present challenges to the task environment (Upton & Fuller,
2004).
Internal Environment
Strengths and Weaknesses
Corporate Structure. In
evaluating the internal environment of strengths and weaknesses, the corporate
structure at ITC was a system of management in which the decision making process was initiated at the highest level (ITC
Limited, 2013). ITC
Limited was organized on a basis of function, projects, and geography by
exercising its strengths of low transportation costs and not having a middleman
in the new format (Upton & Fuller, 2004). In addition to
this, the weaknesses of the ITC were exposed with IT equipment and hub
locations (ITC Limited, 2013). On the one hand, the ITC's structure was understood
and consistent with the strength of having the information exchange (Upton
& Fuller, 2004). On the other hand, the use of technology by the
farmers was a weakness of the structure (Upton & Fuller, 2004).
A similar comparison to ITC's
eChoupal Initiative, is the Apollo Tele-medicine Networking Foundation
(ATNF). Similar to ITC, ATNF has the
mission of "Bringing healthcare of international standards within the
reach of every individual" (The ATNF's vehicle to achieve this was the e-Health
program, which is similar to ITC's eChoupal (
Corporate Culture. The transparency of prices in the new format of eChoupal
was a strength for making ITC a well defined or emerging culture. Whereas, the education level of the farmers
was a weakness in this setting (ITC Limited, 2013).
ITC Limited's culture was consistent
with the objective of the eChoupal as
the vehicle to improve the
ineffective supply chain for agricultural goods with
the corporate strategy of the following:
"(a) create multiple drivers of growth by developing a portfolio of
world class businesses that best matches organization capability with
opportunities in domestic and export markets" and "(b) continue to
focus on the chosen portfolio including the agriculture business and Information Technology" (ITC Limited,
2013).
Corporate
Resources. ITC
Limited has research and development centers in two different locations in
India. In one location, the focus is on
product technology cells, common service modules, and advanced research
initiatives. At the other location, the
focus is on tobacco crop cultivation (ITC Limited, 2013).
Summary
of Internal Factors. ITC Limited believes that "One business derives strength
from another" (ITC Limited, 2013).
Also, ITC Limited created a diversified
conglomerate because this provided the opportunity to expand into an unrelated
set of businesses, whereby ITC has been able to link branding, trade marketing,
and distribution to create a competitive superior value proposition. Furthermore, the most important competency is
succession planning and ensuring that there is a clear plan at ITC (ITC
Limited, 2013). The
eChoupal has 70 warehousing hubs that are outsourced through service providers (Upton
& Fuller, 2004).
Analysis of Strategic Factors (SWOT)
Situational
Analysis. The most important internal factors from a situational
analysis was
ITC's support of the supply chain (Upton & Fuller, 2004). First, the use of
technology due to the delivery of computer kits to each village made it
possible for farmers to receive information that was transparent and in
real-time (Upton & Fuller, 2004).
Next, capitalization for the farmers was
essential in ensuring immediate cash payment at the fair market value to the
farmers and ITC made this possible (Upton & Fuller, 2004). The transactional
costs in the new format had low costs and the process was (Upton &
Fuller, 2004). Lastly,
the conversion of CAs to Samyojak made use of the key component of the supply
chain by educating and training the farmers with the use of the computers in
the villages and ITC hubs Upton & Fuller, 2004).
In terms of weaknesses, power
availability in the rural part of India was scarce. Consequently, the telecommunication
infrastructure was inferior (Bolton,
2013). Roads
were inadequate as vehicle access was limited.
Also, competitors attempted to divert produce from farmers (Upton
& Fuller, 2004).
The most important external factor from
a situational analysis was the new format that allowed for the supply chain
to perform more efficiently for the ITC's International Business Division (Upton
& Fuller, 2004). ITC Limited was able to sell products at the point of
sale when farmers brought in their harvest.
By doing this, ITC was able to access rural markets that were previously
in a difficult situation (Upton & Fuller, 2004).
In
terms of threats, the relationship between ITC and the Sanchalaks potentially
threatened ITC's supply chain. The
Sanchalaks acted as the hosts of the evening assemblies of information
gathering and distribution by the farmers.
The gatherings were uneven at times due to the demand of unwarranted
additional payments from the Sanchalaks.
These demands came due to the Sanchalak's homes being the site where the
computer kits were held (Annamalai, & Rao, 2003). Also, the new format took money and freedom
away from the middlemen, the Samyojaks. As
a result, the relationship between the Samyojak and ITC was strained in the new
setting (Annamalai, & Rao, 2003).
In terms of the present and future performance of the
eChoupal, the focus of the ITC is to grow for the future in a sustainable way (ITC
Limited, 2013). Therefore, the ITC needs
to focus on infrastructure development and innovation. These things will strongly affect the
corporation's present and future performance (ITC Limited, 2013).
First, infrastructure development will provide more hubs,
kiosks, and choupals, which will allow more convenience with the farmers (Upton
& Fuller, 2004). By doing this,
competitors will have more difficulty entering or competing in the market (Annamalai,
& Rao, 2003).
Next, the ITC needs to focus on innovation. By focusing on innovation, the ITC will
continue to provide beneficial information to its stakeholders, primarily the
farmers (ITC Limited, 2013). Also, ITC needs to be cognizant that they are
ahead of the continuous technological advances and are moving at a steady pace
that is consistent with the end users, the farmers at the eChoupal (Annamalai,
& Rao, 2003). While focusing on
innovation, ITC must also maintain the principles of transparency and trust (Upton
& Fuller, 2004).
Review Mission and
Objectives. ITC Limited should not
change mission or objectives since these address strategic factors and problems
by "enhancing the competitive power of the portfolio through synergies
derived by blending the diverse skills and capabilities residing in ITC's
various businesses" (ITC Limited, 2013).
Strategic Alternatives and Recommended Strategy
Strategic Alternatives
TOWS Matrix. In
regards to the TOWS Matrix, the strengths and opportunities, strengths
and threats, weaknesses and opportunities, and weakness
and threats are addressed.
From
a strengths and opportunities standpoint, one alternative strategy would be to use
strengths to maximize opportunities to introduce new technology for information
exchange. The
foundation for this is the computer kit
stationed at the Sanchalak's home in the farmers' village. To introduce
new technology, the utilization of mobile phones to
the eChoupal infrastructure would reinforce this position (ITC Limited, 2013). By doing this, this would allow more freedom for
the farmers and make the farmers easier to access (ITC Limited, 2013).
From a strengths and threats
standpoint, one alternative strategy that
would use strengths to minimize threats is for ITC to provide
transparency of prices to the farmers exclusively by eliminating new entrants
from picking up market share in the region.
This could be achieved by having the ITC
establish a call center that calls the farmers on their company issued mobile
phones where the ITC informs the farmer directly of the prices. This prevents the farmers from needing to go
to the Sanchalak's home to use the computer if
necessary (ITC Limited, 2013).
From a weaknesses and
opportunities standpoint, one alternative strategy that would minimize
weaknesses by taking advantage of opportunities is to introduce new technology
by educating the end user, the farmer.
The new technology would be mobile phones. ITC Limited could
utilize the Samyojaks as outside sale representatives
for the mobile phone service provider to train the end user on this device and
troubleshoot any issues (Upton & Fuller, 2004).
From a weaknesses and threats
standpoint, one alternative strategy that would minimize weaknesses and avoid
threats is to lobby for government regulations that would make the use of
technology a strength by the end user, the farmer. Lobbyist could focus on telecommunication
infrastructure and remain consistent with the most important internal factors (Bolton, 2013).
Presently, a US-India initiative is
being drafted with the goals of enhancing access and use of government data to
foster innovation, improve delivery of government services and the promotion of
government transparency, accountability, and public participation (Bolton,
2013). Within the next 3-5 years, ITC could accomplish
any of the following recommendations.
These recommendations include (a) the utilization of mobile phones
issued by ITC to the farmers, (b) the establishment of an ITC call center for
the eChoupal infrastructure, (c) furthering the conversion of Samyojaks as
outside sales representatives for a mobile phone service provider, and (d) government
lobbying for telecommunications infrastructure development are strategic
alternatives derived from the TOWS Matrix.
The pros of mobile phones issued by
ITC to the farmers is to not only allow information exchange between ITC and
the farmers, but also between the other farmers and key stakeholders in the
supply chain, such as the Samyojaks and
Sanchalaks (ITC Limited,
2013). The
cons of issuing mobile phones to the farmers is that the farmers may not be
technologically inclined enough to use the device and troubleshooting when
issues arise out in the field (ITC
Limited, 2013).
Next, the pros of ITC establishing a
call center is to provide an alternative to the computer for those farmers that
may be more comfortable in communicating and gathering price information
verbally (Annamalai, & Rao, 2003).
Also, while the farmers traditionally go
to the home of the Sanchalak, where the computer is located on a regular basis,
the farmers can be accessed by ITC between those visits to stay better informed
(ITC Limited, 2013). Furthermore, this
investment will strengthen the bond between the ITC and the farmers (ITC Limited, 2013). The cons of ITC
establishing a call center are a weak telecommunications infrastructure or
other threats, such as weather or environmental issues that may prevent the
farmer from being accessed (ITC Limited, 2013).
Then,
the pro of using the Samyojak as an outside sales representative for the mobile
phone service provider is that to the Samyojak is already a logistical services
provider for the ITC (Applegate et al., 2009). If
there is an issue with the mobile phone or a farmer that doesn't know how to
use the device, the Samyojak can bridge the barrier gap (Applegate et al., 2009). The con of using the Samyojak in this role is that their
income was already reduced from the former format, but more will be asked of them (Applegate et al., 2009).
Lastly, the pros of lobbying for
government regulations is that this would
improve the state of the telecommunications infrastructure in the rural part of
India and it would address an obvious problem that is the core of eChoupal (Bolton,
2013). The cons of doing this depends on if the
Indian government is corrupt and dysfunctional.
This will determine how much time,
effort, and funding will be necessary for government regulations to be
viable (Bolton, 2013). Recommended Strategy. The alternative of mobile phones being issued
by ITC to the farmers will be recommended.
This is justified from a strengths and opportunities standpoint because
ITC would be introducing new and different technology for information exchange
(Ministry of External Affairs, Government of India, 2011).
Mr. S. Sivakumar, CEO of ITC's Agriculture Business stated that due to technology evolving, the
next step of the eChoupal process is to seek opportunities in mobile
telecommunications (ITC Limited, 2013). Despite being small, the farmers will be
allowed to compete at the global level by linking the markets directly as ITC
envisions in the year 2020 (ITC Limited, 2013).
First, the policies that should be developed are allowing
access to ITC's corporate resources from the rural part of India. This policy is known as Bring Your Own Device
(BYOD) which permits employees to bring personally owned mobile devices to use
for business purposes, if the farmer has their own mobile phone (Airwatch, 2013). As of April 2013, 40% of the residents in the
rural part of India had wireless phone subscriptions (Telecom Regulatory
Authority of India, 2013). Next,
allowing the farmer to be able to separate corporate and personal data on their
ITC issued mobile phones is important and developing a policy of
"containerization" will meet that objective (Airwatch, 2013).
Lastly, a mobile phone management policy will cater to
the setting of farmers using mobile phones in the areas of mobile security,
mobile device management, and mobile texting (Airwatch, 2013).
Implementation
Programs. ITC Limited 's
goal is to add value to the entire supply chain according to Mr. S. Sivakumar (ITC
Limited, 2013). This value added program
started in the early 2000s with the implementation of eChoupal and will be
extended with the farmers using mobile phones (ITC
Limited, 2013). As such, the
implementation of the mobile phone usage will be successful based on the belief
that the farmer needs a supplement to the eChoupal. Working with and respecting the existing
culture of the choupal, Sanchalak, and Samyojak
is also crucial. It will also be successful based on transparency
of information and no obligation to the farmer if they already have a mobile
phone due to the BYOD policy (Airwatch,
2013).
Programs
that focus on new ideas and methods, such as the use of mobile phones by the
farmers, are the kind of programs needed.
In particular, these programs should focus on education and training of
the farmers on the use of the mobile phones.
They should also ensure that there is oversight of the Samyojak who will be the go-between for the
mobile phone provider and ITC (Upton
& Fuller, 2004). The Indian government is investing heavily in
the infrastructure development of the telecommunications infrastructure
according to Sam Pitroda, an adviser to the Indian government (Bolton, 2013). The responsibility of the programs,
and development should be a joint-venture between ITC, mobile phone service
providers, and the Indian
government.
Budgets. In India, telecommunications infrastructure
is expected to increase to 20% during 2008-15 to reach 571,000 towers in
2015. The sector's revenue grew by 13.4 %
to reach US$ 64.1 billion in fiscal year 2012 (India Brand Equity Foundation,
2013). Other budgets to accompany the
existing budget for telecommunications infrastructure are the mobile phones and
basic calling and texting plans. A Sony Ericsson Txt Pro costs approximately $144.44
(Sony Ericsson, 2013). The minimum cost of a complete
cell phone package is approximately $13.00 in India (NewAmerica.org,
2013). In India, passive
infrastructure accounts for 2/3 of the total cost of setting up a wireless
network. A passive infrastructure comprises of the tower, antenna , base tower
station shelter, power supply, battery bank, invertors, diesel generator set
for power backup, air conditioner, etc (Ghosh, Aggarwal, & Marwaha, 2009). Priorities are appropriate for these
programs. In particular, the priorities
need to be the Madhya Pradesh area since this is where most of ITC's
agriculture business takes place.
Procedures. The existing
standard operating procedure at ITC known as E-waste policy
will be added to the mobile phone usage for e-Choupal. This is due to the policy having existing
relationships with IT vendors that have a sound management process, minimize
e-waste, and are responsible with the disposable process that confirms to regulatory
requirements and best practices (ITC Limited, 2013).
Evaluation and
Control
Information System. The current telecommunications
infrastructure in Madhya Pradesh is capable of providing feedback on
implementation. First, the region has Internet connectivity at all of its 45
districts. Next, the telecommunications
is reliable due to an optical fiber cable network that runs through 18,000
routes. In most places in Madhya Pradesh
has connectivity that is able to access the network from places that are far
away. As a result, the information can
be accessed in a timely fashion (Business Knowledge Resource Online, 2013).
Control Measures. ITC
Limited has adequate control measures in place that are in the form of its
policies. For example, one of its
policies seeks to sustain development "through the establishment and
implementation of environment standards that are scientifically tested and meet
the requirement of relevant laws"
and "proactively share information with business partners towards
inculcating world-class EHS standards across the value chain of which ITC is a
part" (ITC Limited, 2013).
As
a result, appropriate standards are used.
A system that rewards currently exists, and can recognize good performance. ITC Limited
uses lab tests to reward farmers with bonuses if their crop's quality exceeds
standards (Annamalai, & Rao, 2003).
References
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(2003). What Works: ITC's e-Choupal and Profitable Rural Transformation. Michigan
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http://daniel-j-stone.blogspot.com (C) 2009-13
1 comment:
This submission recieved marks 146 out of 150. Overall score in this course was a A-.
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