MNCs in India working in the rural segment with farmers across the country claim that the work they do is symbiotic in nature. Companies help them with progressive farming techniques and in turn get a reliable supply chain. Some call this Corporate Social Responsibility (CSR), while sceptics claim this is another way for MNCs to figure out ways to make inroads into India’s lucrative rural market.
It is impossible to discuss multinational strategies in rural India without mentioning CSR. Filling the gaps left by government, MNCs have built roads in rural India that help them deliver their goods, provided education and health care for communities whose workforces they rely upon, and implemented environmental programs to protect precious natural resources needed to keep supply chains running smoothly. CSR is seen as being more genuine in India, where there is a pressing need for corporates to step in and drive development in the rural belt.
The first and most extensive effort probably was by ITC with its e-Chaupal initiative, which has been around for quite some time, and whose scope has expanded to cover not only commodity information and pricing, but also managing an expanding retail channel. After years of false starts, missed opportunities and flawed strategies, a number of MNCs' India businesses are getting close. Others already are there and are ramping up their rural investments. Out of the country’s over one billion population, two thirds live in rural India and account for half the national income. Rural household income has been steadily increasing, and combined with improving infrastructure, it is easy to see rural India’s attraction.
But any company coming to India for the first time that thinks it will be easy to take advantage of that combination is mistaken. Rural India is hugely complex, not least because of its diverse pace of development. Strategies need to take into account the vast number of languages and social and cultural nuances across the Indian hinterland, and be adaptable and flexible to changing scenarios.
Many lessons have been learned, and some at great expense to the companies launching them. For example, HUL launched its Project Shakti initiative for women entrepreneurs in the rural hinterland to improve distribution, while at the same time pursuing a strategy of smaller less expensive sachets of its Sunsilk and Clinic shampoos for the rural market where few buyers have spare cash on hand. However, HUL is facing growing competition from Procter & Gamble, which launched a cheaper version of its Tide detergent called Tide Naturals.
With rural market penetration for telephony yet to be fully tapped, companies are keenly fighting to secure their place. Strong tussles are currently underway between Nokia and Samsung for control of the rural low end handset market, with competitors from China also stepping into the fray to muddy waters further. Nokia is now branching out to provide rural specific services as well, in order to get the additional advantage.
The rural landscape holds a lot of promise to companies, especially after the late CK Prahlad’s treatise on low paying customers, Fortune at the Bottom of the Pyramid. However, in the race to the bottom, many will see their bottom drop out from under them if they do not take care to better understand the customers’ needs.
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