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Lecture 10

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University of Manitoba
International Business
INTB 2200
Luming Wang

Lecture 10: Tapping the Rural Market Problems While the rural market of India certainly offers a big attraction to marketers, it would be totally naive to think that any firm can easily enter the market and walk away with a sizeable share of it. A firm seeking a share of this market has to work for it, as the market bristles away with a variety of problems. The enterprise has to grapple with these problems and find innovative solutions to them. In fact, only because a few pioneering firms correctly understand these problems and came up with innovative solutions to them, that we now see a wonderful trend of growth in rural markets. What are these problems? How are they peculiar to the rural market? And how does a firm solve them? The existing problems in rural marketing are: a. Physical Distance b. Language/Culture c. Accessibility d. Money/Expensive e. Lack of Human Resource f. Competition g. Technology h. Rules & Regulation i. Lack of Information j. Size of the Market k. Buying Power l. Image Major Problems in Tapping the Rural Markets and the possible solutions are as follows: 1. Managing Physical Distribution In Rural Markets 2. Channel Management In Rural Markets 3. Sales Force Management In Rural Markets 4. Marketing Communication In Rural Markets 1. Managing Physical Distribution In Rural Markets The main problems in physical distribution in the rural context relate to: a. Transportation: Inadequate railways Bad or no roads Immediate carriers or cargo operators Eg. Accidents in India 1per day and 1 in 4 days complete loss to property and some life b. Warehousing Problems No electricity (only 35% of India have electricity) Unavailability of godowns Marketing purposes c. Communication Problems Only 3% of India is connected by phones Unreliable post and telegraph facility 1947 – 1 postman for 9000 people 2000 – 1 postman for 47000 people Transportation problems th Transportation infrastructure is quite poor in rural India. Though India has the 4 largest railway system in the world, many parts of the rural India remain outside the rail network. As regards road transport, nearly 50% of the 576000 villages in the country are not connected by roads at all. Many parts in rural India have only kacha roads and many parts of the rural interiors are totally unconnected by roads with any mandi level town. As regards carriers, the most common mode is the animal drawn cart. Because of these problems in accessibility, delivery of products and services continues to be difficult in rural areas. Warehousing problems In warehousing too, there are special problems in the rural context. Business firms find it quite difficult to get suitable godowns in many parts of rural India. And there is no public warehousing agency in the interiors of rural India. The central warehousing corporation (CWC) and the state warehousing corporation (SWC’s) which constitute the top tier in public warehousing in India, do not extend their network of warehouses to the rural parts. They go only upto the nodal points or major market centers. The warehouses at the mundi level which constitute the second tier in the warehousing chain are mostly owned by cooperatives. And the same is the case with rural godwons, which form the third tier. None of these tiers function as public warehousing agencies ; they provide the warehousing service only to their members. As such, a business firm has to manage with the CWC/SWC network which stops with the nodal points, or it has to establish its own depots or stock points run by its stockists / distributors. Of course, in such cases, the commercial advantages of operating through a public warehousing agency like CWC/SWC are lost to the firm. Communication problems Communication infrastructure, consisting of posts and telegraph and telephones, is quite inadequate in rural areas. Since communication is the first requirement of efficient marketing, lack of proper communication infrastructure poses difficulties, especially in physical distribution. Cost-Service Dilemma Gets More Acute The effect of these problems on the physical distribution front is certainly felt by any business firm venturing into the rural market. They adversely affect the service aspect as well as the cost aspect. Maintaining the required service level in the delivery of the products at the retail level becomes very difficult. At the same time, physical distribution costs get escalated with 80 per cent Of the total rural consumers living in the 'less than 1,000 people' category of villages. The scattered nature of the market and its distance from the urban based production points, compound the difficulty arising from the constraints in transportation, warehousing and communication. Larger pipeline stocks and bigger inventories in warehouses are the natural outcomes of these constraints. It means higher costs of transportation, higher inventory carrying costs and transit and storage losses. And as we will see in detail in the next section, costs of distribution channels too are much higher in the rural context. Consequently, the total distribution cost per unit is higher by as much as 50 per cent on an average in the rural market, as compared to the urban market. In fact, the experiences of some companies operating in the 2rural market show that the cost of distribution in rural areas is two and a half times that of urban areas. Solving of Physical Distribution Problem The marketers have to find solutions to the distribution problems. While deriving solutions, the marketers have to keep in mind cost and the service to the consumers. Some of the solutions are as follows: The Firm can Share Physical Distribution Responsibility with Its Stockists or C & F Agents With a view to keeping the costs low, some firms try out remote control marketing. But experience shows that firms with major aspirations in rural marketing cannot depend on such remote control operations; they cannot take the route of ‘simply consigning the goods’ and retiring the bills through banks.' For them, effective presence in the market is a must. While it may not be necessary to have a netw6rk of own stock points throughout the marketing territory, the firm should have a network of stockists or clearing cum forwarding agents(C&F agents) at strategic locations for facilitating physical distribution can be shared by the firm and the stockists. Combining different modes of transportation may be advantageous As regards transportation, the system of rail-cum-trucks for long distance movement, trucks for medium/ short distance movement and delivery vans and bullock carts for local haulage should effectively serve the purpose. Water
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