Global Delivery Model

Global Delivery Model

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Global Delivery Model is the most successful outsourcing model amongst all the other models. It’s a combination of onsite model and offshore model. In the global delivery model the service provider has its offshore development centers spread out across the entire globe. The service provider can use the resources of their partners located around the globe instead of having their own centers around the globe, to follow a global delivery model. This provides the client with a large working team with varied qualities and expertise in different fields and service providers to serve the customers efficiently and satisfactorily without having a huge workforce.

Tasks accomplished by the onsite team:

• Understanding the client’s requirements.
• Directly interacting with the client to get a better idea of their needs and changes in them, if any.
• Acting as a mediator between the client and the offshore development centers.
• Planning & Designing the initial steps of the project.
• Allocation of Tasks amongst the available resources.
• Testing the outcome of the project in tandem with the client’s team.
• Executing the project successfully at the client’s place.
• Provide the required support for maintenance.

Tasks accomplished at the offshore development center:

• Detailed design that will be continuation of what the onsite team designed.
• Deciding any specific technological requirements for the project.
• Development.
• Testing before handing over to onsite team.
• Continuous technical support.

Advantages of Global Delivery Model:

• Lower Risks: In case of any disaster/emergency at one of the offshore centers, the work continues at or is transferred to other offshore development centers. So the risk involved is low.
• Round-the-clock productivity: 24*7 work cycle becomes possible because of the time-zone difference.
• Best Results: Accomplishment of high quality work is possible, as the client will get the benefit of skilled manpower spread out across the globe.
• Shorter lead-time: Shorter project completion time as the work is completed by a number of offshore development centers working together with the same target.
• Cost benefits: The cost saving benefits for the client resulting from offshore outsourcing is also appreciable.
• No new employee additions required: The service provider can provide the client with a large working team with varied skill set, which the client may not be able to employ for just the task at hand.
• No possibility of communication gap: Onsite team, which will be in direct contact with the client, is able to understand the client’s needs in a better way. So no chance of misunderstanding the client’s needs.
• Faster Response: Because of onsite team’s presence response to changes in client’s requirements is fast.

Global delivery model is preferred:

·         Where the client requires that the job be done in a quick manner, which is made possible by the number of offshore teams working together towards the completion of the task.

·         Where the project is very big requiring sufficient skilled manpower to complete the task.

 

Hurdles:

Having a perfect co-ordination between all the offshore development centers and that too in accordance with the client’s satisfaction is a big task. However this limitation can be overcome today by making the best possible use of the most modern means of communication.

Example: MachroTech is one of the leading Ecommerce Consulting companies following a Global Delivery Model. With its business presence in Bridgeport, CT, USA and an Offshore Software Development center in Pune, India, MachroTech serves its clients on a 24*7 model to meet their technology requirements

The 4 Ps and 4 As of Rural Marketing

The 4Ps and 4 As of Rural Marketing

 

Most of the companies treat rural market as a dumping ground for the lower end products designed for an urban audience. But, this scenario is slowly changing and importance is given to the need of the rural consumer. Hence it is important to understand the 4Ps along with 4 As of rural marketing with respect to a rural consumer.

 

4Ps

1. Product

A product is the heart of rural marketing. It is a need satisfying entity to a rural consumer. NCAER has classified consumer goods into 3 categories. These categories cover most of the products from Rs. 100 to Rs. 20000 and above.

Category I – These products are of immediate use to the family

·         Pressure Cookers, Mono Cassette Recorders

·         Pressure Pans

·         Wrist watches (mechanical)

·         Wrist watches (quartz)

·         Radio/Transistors

·         Electric irons

·         Ceiling Fans

Category II- These products reduce the strain of the households and also act as a source of entertainment.

·         2-in-1 (mono)

·         2-in-1 (stereo)

·         B and W TV (S)

·         B and W TV (R)

·         Instant Geyser

·         Sewing Machines

·         Storage Geysers

·         Vacuum Cleaners

·         Table Fans

·         Bicycles

 Category III- These are combination of means to supplement income.

·         C TVs (S)

·         C TVs (R)

·         VCRs/ VCPs

·         Scooters

·         Mopeds

·         Motor Cycles

·         Refrigerators

·         Washing Machines

·         Mixer/grinders

The hierarchy depends on the needs of the rural consumers. Rural branding aims at creating and disseminating the brand name so that it is easily understood and recognized by the rural consumers.

 

The following have to be kept in mind while the marketer makes a decision on the product.

1.      The product for the rural markets has to be simple, easy to use and provide after sales service or maintenance.

2.      The product has to be packed for low price and convenient usage.

3.      The pack has to be easily understood by the rural consumer. The information on the pack is preferred in local language communicating the functional benefit of the product not technical advantages.

 

2. Pricing

A rural customer is price sensitive and shops for value mainly because of his lower income levels than his urban counterparts. Hence the marketer has to find ways of making the product affordable to the rural consumer.

For example banks offer loans for tractors, pump sets, television sets and so on to make the product affordable to a rural consumer.

Smaller unit packs are preferred in the case of FMCG products to offer at lower prices.

 

3. Placement or Distribution

Distribution of products is one of the biggest challenges of rural marketing.

A three tier rural warehousing setup exists:

·         CWC/SWCs      (Central/ State Warehousing Corporation)

·         Co-operatives

·         Rural Godowns

CWC and SWCs reach up to the district levels. The co-operatives are at the mandi level. The Rural Godowns are at the village level wherein they are owned by panchayat heads. All these tiers provide warehousing facilities only to their own members. Hence it is a big problem for a company to store its goods in rural areas.

There are some problems of rural distribution:

Ø  Transportation has not been fully developed.

Ø  Lack of proper channels of communication like telephone, postal services, and so on pose a lot of problem to marketer to service the retailer as it is difficult to the retailers to place order for goods.

o   This problem is on the way to have a solution by the advent of mobile phones which are now available at cheaper rates due to tough competition among the players.

Ø  Storage of goods in rural areas is also a problem for the marketers.

Ø  Multiple tiers push up the costs and channel management is a major problem for marketers due to lot of middlemen in the process.

Ø  Availability of suitable dealers.

Ø  Poor viability of rural outlets.

Ø  Rural outlets need banking support for remittances to principals, get fast replenishment of stocks, receive supplies through bank and facilitate credit. This gets handicapped due to inadequate bank facilities.

 

Retailers in rural markets

There are different kinds of retailers.

·         Shops within the village.

·         Shops located on the main road and not exactly within the village

·         Kasba market or the tahsil market.

Margins are very important to a rural retailer. The pushing by the retailers depends on margins and the pushing by the wholesalers depends on retailers.

The gap is very wide because the local manufacturers do not undertake investments either in terms of advertising or anything. Hence they are very fast imitators.

For rural retailers, it’s the question of simple economics – Am I getting more money if I invest on these brands? More the margin better choice to stock and sell.

The rural retailer stocks few brands in each category. This may have important implications for a company and its managers because whoever reaches the market first gets the share of the market.

 

4. Promotion

Communication to rural consumer is through organized media. More number of rural consumer (~70%) listen to radio and many go to cinema.

Rural communication can be through Conventional media or through a nonconventional media.

• Conventional media: Print, Cinema, Television and Print.
• Non-conventional media: Theatre, Posters, Haats, street plays, Melas and through influential person in the area.

The conventional media have excellent reach, less expensive and create a better impact. But at the same time, it is not customized to each village and also offers unnecessary coverage at times.

Problems in rural communication:

Ø  Language

Ø  Low literacy rates

Ø  Cultural & traditional differences

Ø  Rural reach

Ø  Attitudes and behavior

An effective promotion should plan for a proper mix of media which must take care of all the problems of communication to rural consumers.

The Indian rural market today accounts for only about Rs 8 billion (53 per cent - FMCG sector, 59 per cent durables sale, 100 per cent agricultural products) of the total pie of Rs 120 billion, thus claiming 6.6 per cent of the total share. So clearly there seems to be a long way ahead.

ü  Hindustan Lever is the first company that comes to mind while thinking of rural marketing due to its initiative of project ‘Shakti’.

ü  Amul is another case in point of aggressive rural marketing.

ü  Other corporate that are slowly making headway in this area are Coca Cola India, Colgate, Eveready Batteries, LG Electronics, Philips, BSNL, Life Insurance Corporation, Cavin Kare, Britannia and Hero Honda to name a few.

The greatest challenge for advertisers and marketers is to find the right mix that will have a pan-Indian rural appeal. Coca Cola, with their Aamir Khan Ad campaign succeeded in providing just that.

Corporates are still apprehensive to "Go Rural." Since, the rural consumers are scattered and it is difficult to predict the demand in the rural market.

A few agencies are trying to create awareness about the rural market and its importance are Anugrah Madison, Sampark marketing and Advertising Solutions Pvt Ltd, MART, Rural Relations, O&M Outreach, Linterland and RC&M, to name a few. Also, the first four agencies mentioned above have come together to form The Rural Network. The paramount objective of the Network is to get clients who are looking for a national strategy in rural marketing and help them in executing it across different regions.

 

The 4As of Rural Marketing

For rural market 4Ps alone are not sufficient. The 4As also has to be considered and keep in mind while formulating the plan to enter the rural market because these are also critically important.

1. Availability

The first challenge in rural marketing is to ensure availability of the product or service. India’s

7, 00,000 villages are spread over 3.2 million sq km; 700 million Indians may live in rural areas, finding them is not easy. They are highly dispersed.

Given the poor infrastructure, it is a greater challenge to regularly reach products to the far-flung villages. Marketer should plan accordingly and strive to reach these markets on a regular basis. Marketers must trade off the distribution cost with incremental market penetration.

ü  India's largest MNC, Hindustan Lever has built a strong distribution system which helps its brands reach the interiors of the rural market.

ü  Coca-Cola, which considers rural India as a future growth driver, has evolved a hub and spoke distribution model to reach the villages. To ensure full loads, the company depot supplies, twice a week, large distributors which act as hubs. These distributors appoint and supply, once a week, smaller distributors in adjoining areas.

ü  LG Electronics has set up 45 area offices and 59 rural/remote area offices to cater to these potential markets.

 

2. Affordability

The second major challenge is to ensure affordability of the product or service. With low disposable incomes, products need to be affordable to the rural consumer, most of who are on daily wages. A part of it has been mentioned in product (first P).

A solution to this has been introduction of unit packs by some companies. Most of the shampoos are available in smaller packs.

ü  Fair and lovely was launched in a smaller pack.

ü  Godrej recently introduced three brands of Cinthol, Fair Glow and Godrej in 50- gm packs.

ü  Hindustan Lever has launched a variant of its largest selling soap brand, Lifebuoy.

ü  Coca-Cola has addressed the affordability issue by introducing the smaller bottle priced at Rs 5. The initiative has paid off: Eighty per cent of new drinkers now come from the rural markets.

Some product also can be made affordable by making available the loan facility by having alliance with banks.

 

3. Acceptability

The next challenge is to gain acceptability for the product or service. Therefore, there is a need to offer products that suit the rural market.

ü  LG Electronics have developed a customized TV for the rural market named Sampoorna. It was a runway hit selling 100,000 sets in the very first year.

ü  Coca-Cola provided low-cost ice boxes in the rural areas due to the lack of electricity and refrigerators. It also provided a tin box for new outlets and thermocol box for seasonal outlets.

ü  HDFC Standard LIFE topped private insurers by selling policies in rural sector. The company tied up with non-governmental organizations and offered reasonably-priced policies in the nature of group insurance covers.

 

4. Awareness

Building awareness is another challenge in rural marketing. A large part of rural India is inaccessible to conventional advertising media. The media penetration in rural areas is only about 57%.It has been seen that, two out of five Indians are unreached by any media - TV, Press, Radio and Cinema put together. Haats, mandis and melas are opportunities. Family is the key unit of identity for both the urban and rural consumer. However, the rural consumer expressions differ from his urban counterpart. For a rural consumer, outing is confined to local fairs and festivals and TV viewing is confined to the state-owned Doordarshan. Consumption of branded products is treated as a special treat or indulgence. Haats, mandis and melas are the place of opportunities to promote awareness about the product.

 

ü  Hindustan Lever has its own company-organized media. These are promotional events organized by stockiest.

ü  Godrej Consumer Products, which is trying to push its soap brands into the interior areas, uses radio to reach the local people in their language.

ü  Coca-Cola uses a combination of TV, cinema and radio to reach the rural households. It has also used banners, posters and tapped all the local forms of entertainment. Since price is a key issue in the rural areas, Coca-Cola advertising stressed its `magical' price point of Rs 5 per bottle in all media.

ü  LG Electronics uses vans and road shows to reach rural customers. The company uses local language advertising.

ü  Philips India uses wall writing and radio advertising to drive its growth in rural areas. 

Kindred Spirit by David Callahan

Book review of “The Kindred Spirits” By David Callahan

This story is about the extraordinary class of 1949 of Harvard Business School. There are a lot many special things about these class members which makes it very special. To start with most of the 49ers were war veterans of 2^nd world war. Thanks to GI bill which helped them to enter HBS.

They are molded by the hardship of great depression and further war has made them stiffer. They belong to the time when values had meaning. They ran businesses by values and made the crippled American economy back on the feet and in the process created a lot of wealth patiently without cutting the corners. These conscientious leaders have contributed a lot to strengthen the American economy. 

This class included Marvin Traub who turned the Bloomingdales’ Into trendsetter, James Burke who made the Johnson & Johnson company a household name, Peter Mccolough of Xerox corporation fame, Bill Ruane who founded Sequoia Fund which has a record of having a record of being profitable for continuously for 23 years.

Members of this class have created wealth in all the different sectors but hardly anyone of the 49er has sought after money in their life. Most of them became friend for life and their friendship lasted long then them.

If anyone wants to know about how great leaders forms and can contribute, this is a very good book. This book has been written on the basis of exhaustive interviews of the 49ers themselves so has the true fact flown from the great leaders themselves.

Case: 'Project Shakti' of HUL

   Project Shakti

It was a initiative of Hindustan liver limited company to enter the rural market efficiently along with a social objective of empowering rural women. some key questions regarding this are answered in the following text. this is my perspective.

Key features of project "Shakti"?

Key features of project Shakti are:

Ø  It is an effective channel to reach to rural market which is not easily possible with the usual measures.

Ø  It also carries social objective along with it as it helps empowers the women of the village so they can support the family.

Ø  It has targeted the females which is a good proposition as males are busy in other wage earning activities so they might not spare time for the activities of the project Shakti.

Ø  It provide a consistent competitive advantage to HLL over its competitors, as through this channel they are able to reach directly to the consumer, and there is personal touch to consumers as Shakti entrepreneur is one among the villagers only.

   2)How can Shakti make a contribution for HLL bottom line 

By the following measures Shakti can contribute for HLL bottom line.

Ø  Shakti can provide a loyal customer base and a self motivated team of sales representatives which can penetrate the rural market which is largely untapped.

Ø  It can contribute to their brand building through iShakti centre which will make them more interested as this scheme will provide them with the knowledge regarding all the relevant areas. 

3  Economic and social value created by Shakti.

Economic values:

Ø  It added to the reach of HLL to the rural market which was largely untapped before.

Ø  It made rural women self sustained.

Social value:                   

Ø  It empowered the women which is the most marginal part of the rural society through which it helps to improve the living standard and catalyzes affluences in rural India.

Ø  It also enabled villagers to enhance their knowledge about personal hygiene and other basic values through Shakti vani.

Ø  It also provided a platform through iShakti to the villagers so that they can able to know about the knowledge regarding farming, e-governance etc.

Ø  The connection between business and communities will develop lifetime customers for HLL. This involvement may not be the typical role of business, but as long as it is profitable to HLL without compromising moral and legal issues, it will be a good move for HLL to increase its reputation as a socially responsible organization.

Ø  It was seen as an effective measure of corporate social responsibility.

4)      Do you think Shakti is profitable? If yes, why?

                    Yes it is a profitable.

Ø  It has created a vast team of local, credible, one to one endorsers of the company in the rural segment which otherwise would involve a large cost to the company.

Ø  It also created a channel for the company to enter the rural segment effectively.

Ø  It had broken even in 2004.

Private Label Encroaching the share from Bigger manufacturer's brands

_____________Private label_________

Private label products or services are typically those manufactured or provided by one company for offer under another company's brand. Private label goods and services are available in a wide range of industries from food to cosmetics to web hosting. They are often positioned as lower cost alternatives to regional, national or international brands, although recently some private label brands have been positioned as "premium" brands to compete with existing "name" brands.

Types of private labels:

§  Store brands - The retailer's name is very evident on the packaging.

§  Store sub-brands - Products where the retailer's name is low-key on the packaging.

§  Umbrella branding - A generic brand, independent from the name of the retailer.

§  Individual brands - A name used in one category, this is only used to promote a "real" discount product line.

§  Exclusive brands - Again a name used in one category, but to promote "added value" products within the category

§  Distributor brands - Large wholesale grocers and foodservice purveyors often have private labels, for example the Parade brand of Federated Foodservice and the wide array of private brands of the large food service supplier Sysco. These brands are typically seen in non-chain independent restaurants and stores that cannot afford their own private labeling.

§  Copycat private labels - brands owned by a retailer which use similar trade dress, i.e. packaging as a leading national brand.

 

Private label strategies which are being followed by various promoters of private labels fall in one of the following category:

v  Generic –very promotional, very low margin, Conway, Walgreen

v  Fast Value Fashion – knock-off brands, Zara and H &M 

v  Premium Store Brands – Retailer’s own brand offers same or better quality at better price.  The most profitable strategy in private label.

  

Retailers believe private brands are their strategy:

v  To differentiate

v  To gain and maintain consumer loyalty

v  To achieve higher gross margin

v  To compete with national brands

v  Change mind set and realize that Private Labels are competing brands

v   Innovate and stay as market leaders to beat PL

v   Stay focused on target audience

v   Increase and market brand imagery to gain and maintain customer loyalty

v   Partner with retailers to produce exclusive brands, SKUS, one-time offers or lines

v   Price competitively and streamline expenses

 

PRIVATE LABEL PROS & CONS:

PROS

v  Exclusivity & differentiation

v  Bring customer loyalty

v  Better margin

v  Better control in deliveries

v  Brand equity

v  Freedom in pricing strategy

v  Increase bargaining power with both national brands and PL factories

CONS

v  Inventory risk

v  Higher R&D expense

v  Higher marketing expense

v  No markdown or return allowance from branded suppliers

v  If product fails, will create negative image

v  Quality control, complex production & import issues

 

Overview of private label industry

v  Worldwide Private Label retail sales have passed US$1 trillion

v  2006 US apparel & shoes retail sales:  $358.6 Billion

v  2006:  45% apparel sales were private label

v  2005:  39% apparel sales were private label

v  2002:  35% apparel sales were private label 

v  By 2010, private label merchandise expects to increase by 22% to 55% of total apparel sales

Why the growth?

v  Consolidation of retailers

v  Brands sell to same retailers and become a commodity

v  Retailers need differentiation and better margin

v  Declining retail prices (women’s apparel prices dropped 2.4% 2007 vs. ‘06)

v  Globalization of Production

 

How do retailers achieve low PL prices?

v  Imitate designer brands to reduce R&D costs

v   Source direct with factories to eliminate middlemen cost

v   Buy in larger volume to receive lower cost

v   Source from low cost, duty and/or quota free countries:  China, India, Bangladesh, Vietnam, Pakistan, South & Central America, Africa

PRIVATE LABEL TRENDS:

v  Combined effort, a win-win strategy: American Living, Simply Vera, Isaac Mizrahi

v  One time exclusive deal – H & M, Target

v  Blending in with Premium brands - INC, Arizona

v  Marriage with a celebrity name – Sarah Jessica Parker, Hilary Duff

 

NATIONAL BRAND COUNTER STRATEGIES:

v  Develop unique products and stay ahead as a trend leader

v  Create own stores

v  Develop a compelling marketing strategy

v  Increase brand loyalty

v  Combine effort by offering exclusive lines. I.e, Simply Vera, American Living,

Liz & Co

v  Create one shot exclusive deliveries and SKUS

v  Evaluate sourcing strategy and production cost

v  Maintain net price (minimal promotions & discounts)

v  Improve forecasting and turnaround time

 

Future of private labels:

v  Private brands will continue to play an important part of the assortment to their growth strategy

v  Becoming national premium lifestyle brands: INC, Alfani, Arizona

v  Branching out to create specialty chain business: George apparel stores, Wal-Mart, UK

v  Increasing depth of multi dimensional merchandising product mix (Tony Hawk mens, boys, footwear and etc)

v  Cannibalize weaker PL brands

v  Deploy a multi-layer strategy in brand, price and quality

Some premium private label brands

v  JC Penney’s – a.n.a., Arizona, Ambrielle

v  Macy’s - INC, Alfani, Style & Co

v  Wal-Mart - Faded Glory, George

v  Target - Mossimo, Circo

v  Kohl’s - Urban Pipeline, Sonoma, Apt 9

v  Zara- Garments brand (Based on copycat strategy)

v  Tesco- Multiple grocery store

v  7-Eleven - convenience

v  Walgreens- Drug-store

v  Home Depot

v  Decathalon – A sports brand

Some Indian PL at Ahmedabad

• v  Jade Blue                            
  
• v  Mochi Ka Juta
  
• v  Food Bazaar
  
• v  Pantaloon
  
• v   Westside
  
• v  Naturals
  
• v  Star foods
  
• v  Reliance fresh
  
• v  Patidar
  
• v  Shree ji
  
• v  Induben Khakhrawala