THE ITC ECHOUPAL INITIATIVE Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

The ITC eChoupal Initiative Case Study Solution

Introduction

ITC Limited deals in fast moving consumer goods and is one of the international business divisions which was founded in the year 1910. After its establishment, it primarily dealt with tobacco. But as the time passed, it started to diversify its business and started dealing with many other products such as soybeans, wheat, coffee and other agricultural products. In the year 1998, it generated a revenue of $100 million from the agricultural commodities and managed to earn a total revenue of $2 billion from other commodities such as paper, tobacco, foods and others.

Soybean was one of the main ITC agricultural exporting businesses and the majority of its soybeans were sourced from the village located in the rural area of Madhya Pradesh. In the area, Madhya Pradesh, around 4 to 5 million tons of soybeans were harvested by farmers. ITC exported the products to many regions such as the United States, Pakistan, Bangladesh, China, and others. The soybeans were bought from Mandi, an area where farmers came to sell their majority of agricultural and other products. The law of the Indian government was that the farmers were required to sell their products in Mandi through bidding.

ITC bought the products from Mandi by appointing government licensed buyer known as commission agents.These agents generally bid on soybeans on behalf of the company. The commission agents in return were paid commissions according to the overall soybeans they brought. Once the deal had been negotiated and finished, the commission agents were supposed to pay cash immediately to the farmers.

Since India was an underdeveloped country during the 1990’s, it lacked many technological innovations and education which caused difficulty indoing business. ITC decided to improve the technology and education sector through changing the infrastructure of India to improve the information of farmers about the market. This strategy was adopted by ITC supplying a computer kit to each of the villagers. Sanchalak who was the leader farmer acted as a role model and trained the other farmers about how to use computers and provided the necessary information to the farmers regarding the weather, crop information, market, and a news page. This information was available on the website www.soyachoupal.com named after the gathering place where farmers came to discuss and gossip.

Problem Statement

The purpose of bringing new changes in the infrastructure was to improve the knowledge of the farmers in terms of market and prices. This resulted in creating a threat for the ITC as if a new player enters the market with better prices than ITC it would drive away the farmers from ITC. Also, it would also cause an increase in the bargaining power of the supplier and the prices would be set according to them. Overall this would affect the profitability and growth of ITC.

Analysis

The analysis of ITC consists of the overall steps and decisions it took for improving the soybean supplying market. The analysis would include the purpose of creating ITC eChoupal, changes in the physical and information flows and principles of the new supply chain.

Purpose of ITC eChoupal

ITC earned a revenue of $100 million from the agriculture sector in India by buying the agricultural commodities and exporting to other countries such as US, Pakistan, Bangladesh. The company made a target of achieving revenues of $442.6 million in the year 2005. For achieving its target goal, the company saw an opportunity by analyzing the suppliers (farmers) market. This opportunity was realized when the Sivakumar was challenged by the ITC chairman for creating a business plan that would result in the increase of profits and growth of ITC. Sivakumar was able to come up with a strategy which could reduce the costs and inefficiency caused by the supply chain. The company’s plan was to eradicate Mandi as the main selling point for farmers, so, the farmers could deal directly with the buyer.

Siva kumar learned that the farmers communicated news, and shared information at a place called Choupal which is a small meeting place for the farmers. He decided to change the complete cultural infrastructure of the villages by improving the technological sector of the country. Siva kumar and his team started to work on the eChoupal initiative in which each village would be installed with a computer kit along with a printer and an internet connection. Each of the farmers would be connected with each other along with ITC which would provide the information regarding the market and the environment. There were various reasons for ITC to work on the eChoupal initiative:

Creating long-term relationship with the farmers by providing the necessary information
Providing information regarding the accurate weather forecasts so farmers are able to take proactive actions for protecting the crops from being destroyed.
Providing information regarding the soil for taking a good soil sample for its agriculture growths.
Providing the farmers with market information regarding the prices of Mandi, demand of the product, Mandi trading volume, and price lists..............

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