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Marketing Channel Strategies In Rural Emerging Market segments Marketing Essay

Design of Distribution Network

The paper talks about that when a corporation provides its products and services in a rural market, the most important decisions it to make the circulation network design.

A company which manages in developed areas has to carefully consider its circulation network design & companies functioning in rural emerging market face particular challenges due to low people density and bad transportation infrastructure.

Because of the low human population density companies have to face escalating inventory positioning and transportation costs because they are made to stock and manage sales tips in thousands of villages to have the ability to meet goals for availability.

This paper focuses on syndication network design for fast moving consumer durable (FMCG) products like food products and cosmetics, as well as for consumer durables like gadgets. An important point is the fact, the circulation network must be personalized to meet the needs of the business enterprise and its customers irrespective of type of product or service of the business.

FMCG: Hub-and-Spoke Model

Fast response time is demanded by FMCG products' consumers; that is, whenever a consumer makes a decision to either eat a delicious chocolate or clean their laundry with Nirma detergent, the consumer desires their desired product to be accessible immediately for sale. A corporation which enters into a rural growing market with FMCG products should make the product available at the neighborhood community level.

Distribution sites that hold local inventories are ideal for products with high demand, especially if transportation is a big small fraction of total cost. These networks incur higher inventory cost but lower transport cost and offer a faster response time.

Some of the firms choose to stock many small village shops with the products. For example, Hindustan Unilever Small (HUL)'s products are available in 6. 3 million retail outlets in India, and HUL's rival Nirma claims that its products can be purchased in 2 million retail outlets.

Colgate took this approach while identifying how to best reach small villages in rural India with

its oral maintenance systems. The company had attempted stocking suppliers in really small villages, but discovered that its traditional sales force-driven model was not economically possible in geographically dispersed villages with low levels of demand. Colgate decided to seek the services of local entrepreneurial youth to distribute its products in villages with weekly marketplaces called haats. The young ones bought Colgate products with cash from a local distributor, and then biked inside a 10 kilometer radius offering the merchandise to villagers. Although Colgate payed the children a small stipend, they received less margin than a professional sales person would have plus they reduced Colgates inventory costs

Other FMCG companies have had success with the hub-and-spoke (with the spokes being local enterprisers). Coca-Cola has applied the hub-and-spoke model in multiple rural appearing markets. "Manual Syndication Centers" were create in Africa. Within this "an independent person was given the protection under the law to distribute Coca-Cola products within a precise radius". These cases show that the hub-and-spoke model is effective for FMCG products as it covers the travel infrastructure conditions that are associated with distributing products in rural rising markets.


The paper then talks about the next troubles resting in creating a highly effective distribution network on the ground. The first concern that your company may face is that the logistics features required by the company may not currently exist in the market. To increase the problem, the company may also face problem to keep its costs low for the low prices that rural customers need.

If the business previously had made certain demand in the market, it can make a custom distribution network with relatively low risk. Eveready making of batteries, does this in India. To reach deep into rural marketplaces, Eveready procured 1, 000 vans and 44 warehouses and began distributing to 600, 000 retail outlets. As Eveready has 80 percent market show in flashlights in India, the large expenditures necessary to make distribution system could be produced with good assurance that you will see customers when an Eveready truck went to a little village.

But, if a company doesn't have something and brand which recently has good yank from the marketplace, it is dangerous to create an expensive custom circulation network. As Marketing consulting organization in India, remarks, large companies are "incurring huge costs" to send out their products into rural regions of India and they're finding it challenging to "design a distribution model that is affordable.

Pharmaceutical industry is a good example of the problem of fabricating a syndication system from existing marketers and logistics companies. There is increasing demand for medical products in rural India, the industry has not been able to meet this as their syndication network is inefficient and made up of private clearing and forwarding agencies and small retailers.

The paper gives the known reasons for the pharmaceutical industry's problems in India:

The main problems are highly fragmented character of the circulation network, limited progression in regulatory reforms, and existence of strong level of resistance from lobbies of investors mixed up in supply chain of pharmaceutical products.

An example given in the paper is pharmaceutical company Cipla's try to break out of the existing distribution network and deliver its asthma drugs right to homes of customers failed as the trader's lobby began boycotting Cipla and stopped stocking its drugs in retailers. Cipla was required to stop its circulation network innovation and give into the trader's lobby.

The newspaper further points out way to keep costs low and increase success chances, the getting into company should as much as possible piggyback on top of successful distribution networks which either have been completely created by companies or that already established in the neighborhood world. Piggybacking has been identified in the academic literature as a good alternative to creating a new distribution network.

Piggybacking is described in the newspaper as a non-equity layout wherein one producer markets the products of another maker. The first developer - the carrier in this case - performs as a distributor in marketing the products of the second manufacturer - the rider. The fact that the riders products are being written by another maker may bring important advantages to the rider in comparison with utilizing a regular distributor

The rider decides to piggyback to use advantage of the circulation system of carrier and local knowledge, while the carrier joins in the relationship to add on to the product of the rider or service to its collection. The paper provides exemplory case of Whirlpool piggybacking on Sony's syndication network which occurred in Japan in the 1970s, a partnership which helped in increasing Whirlpoo's sales.

More recently, in India the Energy and Resource Institute (TERI) discovered that piggybacking their solar light circulation on "existing infrastructure and entrepreneurial networks" lowered the price tag on their supply chain.

The key factors for a piggybacking romance should be:

The carrier must have good circulation system that extends to deep into rural areas

The carrier should have long-term interest in making the rider piggyback on its syndication system.

3. The carrier must have a model that is effective for the type of product the rider is providing

In the same manner as Whirlpool does with Sony in Japan, an entering company can also make a relationship with a organization that has an existing distribution network in the prospective geography.

A good example of this within an growing market is the relationship between Sara Lee and Godrej in India. In 1995, Looking to find an access into the enter the India market, Sara Lee acquired a relationship with local conglomerate Godrej to advertise and spread its products. You can find another example of a s commercial piggybacking relationship in the form of Proctor & Gamble and Indian consumer goods company Marico Establishments. , Proctor & Gamble created a "distribution alliance" looking to distribute, detergent, deodorant and diapers in rural elements of India in 1999 by using Marico to make use the Circulation system of the Indian Company.

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PAPER-2 Marketing of Agricultural Products

By FAO(Food and Agricultural Corporation) Rural Radio report, 2006

Agricultural products Marketing has two important tips related to it. The first one is related to the physical process which brings products from providers to consumers; the first levels of this process is the collection, accompanied by packaging, transport, control, storage and agricultural products' retail deal which reaches the finish.

The report puts a a lot of concentration on the purchase price an system of the marketplace which decides the prices of the merchandise produced after agricultural techniques as well as the way in which

producers can get sensible charges for their produce.

Pricing system and demand and supply

Prices of Agricultural rely upon a lot of factors which finally depend on the conditions of demand and supply.

Supply is determined by the total present amount of a specific product and includes -

depending on the particular product - local development, and the creation in neighbouring countries as and also the world production regarding products that are exported. In addition, it depends on certain requirements of providers for ready cash:the more is the requirement of cash at harvest-time, the greater would be the likelihood of inclinination to simply accept low prices. If indeed they decide to stockpile instead of selling the products immediately, market prices have high likelihood of increasing.

Demand has origin from the ultimate users or consumers and its own supply is done by sellers or intermediaries. Demand at Person is inspired by product quality and price. Consumers will be buying more goods if the purchase price is low, but they may be happy to pay a higher price (it depends on their income) if the grade of products is good.

The supplier, who become intermediaries between your producer and the customer, make their benefit from the difference between the price of which product is purchased from producers and this at which they sell the merchandise to consumers. In order To complete this, they have a tendency to seek out production areas that contain easy access and additionally require low costs of transport, and those where crops are present by the bucket load. If plants are in more plethora in neighboring countries, investors will go to that place to acquire the available products at a lower cost.

Distant development area which is often coupled with poor highway and railway infrastructure are major factors that drive prices of the maker down.

If infrastructure is bad, area of the money that the supplier could pay to the

producer will be used to cover travel; therefore, the dealer will have a tendency to bring down the price

offered to the developer to make up for the higher costs of transfer. Another factor that

can affects prices is the existence of competition among traders.

If there are extensive dealers present who want to choose the available products, maker prices will have a tendency to go up. Also, if there is merely one seller and many makers or abundant development, a moderate price will be offered.

Finally, prices also change depending on seasons. During the harvest time, prices are generally low, while they surge at the time when sowing time is close. The capability of producers to stockpile the merchandise made by them can help minimise the seasonal versions by gaining the market only amount of creation which will do to maintain to keep a place price.

So, It is very important for producers to know about 3Ws-which are-when, where, and just how much produce to market, while bearing the marketplace price in mind. In best situations, they should be in a position to find the best output out of the present pricesin the market. To do so, usage of information must be provided on marketplaces and prices prevailing.

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