Sunday, April 16, 2017

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 PerformanceIt 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). 
            ITC eChoupal, which essentially began as a supply chain delivery mechanism for its agriculture business, is looking at an investment of Rs 5,000 crore over 5-7 years (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 improve the ineffective supply chain for agricultural goods (ITC Limited, 2013). 
            As a business strategy, ITC was committed beyond the market and did this creating economic freedom in reengineering its 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 economic opportunities of receiving market information Upton & Fuller, 2004). 
            Furthermore, when the ITC streamlined the supply chain, this provided economic opportunities of reducing costs for the farmers Upton & Fuller, 2004). 
While the eChoupal Initiative provided many economic and technological opportunities, the economic 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" (Apollo Telemedicine Network Foundation, 2012).   The ATNF's vehicle to achieve this was the e-Health program, which is similar to ITC's eChoupal (Apollo Telemedicine Network Foundation, 2012).
            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 Agri-Business and Information Technology" (ITC Limited, 2013). 
            Corporate ResourcesITC 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 FactorsITC 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 (Upton & Fuller, 2004). 
            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). 
Chief Executive Officer of ITC, Mr. S. Sivakumar states that due to technology evolving, the next step of the 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 (Appendix A).  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).      
            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 issued by ITC (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 (Appendix B).  The minimum cost of a complete cell phone package is approximately $13.00 in India (Appendix C).  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 are 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). 

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