Eveready Industries Should Expand Into Rural Markets Marketing Essay

Should Eveready Industries Pvt. Ltd. expand its market to the rural areas in order to increase its sales?

Rationale:

In the present situation of the company, the company is only supplying to the urban markets that is in the cities. Recently Eveready Industries has been expanding all its other businesses, but neglecting the expansion of this business. Thus the company is now working on expanding to the rural market of India.

Theoretical Framework:

Financial and non-financial factors will be taken into consideration will analyzing the company’s new venture. A SWOT and PEST analysis will be done to assess the company’s project. These two analytical tools will help us gain better knowledge about the opportunities and threats that the company is most likely to after the expansion. Ansoff matrix will be used to analyze the projects framework and also the advantages and disadvantages of the project. Investment Appraisal technique will used to analyze the financial feasibility of the project.

Key areas of syllabus:

Marketing

Accounting and Finance

Methodology:

Primary research:

Primary research was conducted by taking interviews of the company’s Mr. Suvamoy Saha, Whole time director of this prestigious company and also of a non executive director Mr. Aditya Khaitan. I conducted these interviews to get an idea for the need of the expansion and also the advantages that the company will have from the expansion. I have also conducted the interview of the marketing head rival company that is already supplying to the rural market to get to know more about the current situation of the rural market.

Secondary research:

I have analyzed the project report that the company has provided me with generously to carry out my investment appraisal technique. I have also searched the internet and the gone through many books to look out for substantial arguments and proof that i can put forth in my commentary.

Action Plan:

Date

Task

Modification

5-12 December 2010

Topic selection

Changed from benefits of expansion to benefits only in terms of profit to increase focus

19 December 2010

Research Proposal Submitted

23 December 2010

Feedback received

Methodology modified, Objectives elaborated upon

1 January 2010

2 main interviews conducted

7 January 2010

Project report studies

10 January 2010

Completed financial data analysis, project report and decision tree

Decision tree omitted due to the lack of data

15 – 21 January 2010

PEST/ SWOT / Ansoff matrix

3 February 2010

First full draft

5 February 2010

Feedback recieved

Minor changes made

15 March 2010

Final submission

Limitations:

Throughout my business project I have faced many difficulties such as obtaining primary and secondary data from within the school, as all the financial websites are blocked due to the school IT policy. I have not been able to take a long comfortable interview of the two associates of the business Mr. Suvamoy Saha and Mr. Aditya Khaitan however I have mentioned the small interview I have had with Mr. Suvamoy Saha and Mr. Aditya Khaitan in the appendices.

Main Research and Findings:

My commentary involved the detailed analysis of the company’s strengths weakness and many other aspects of the company. Some of main research and findings of the company would be:

The company is one of the biggest seller of batteries in India

The company is known for its excellent quality and fast and effective service

The main market of the company is India.

The company has a total of six manufacturing units across India and fifteen sales offices across the entire nation which is a very huge amount

The main research and development laboratory of the company is in Kolkata

The workforce as on 31.12.2009 was a staggering 2700 employees.

The annual sale of the company for the year 2009 was Rs. 92530 Lakh.

With modernization of a few of the rural areas in India and also the increasing population on the rural side has opened doors for the company to market its product in the rural areas.

The company has a very good brand image, which will help to attract more customers in the new market and increase the profit.

Company Details

Eveready Industries India Ltd. a 103 year old company is known for its distribution strength and People Development. Eveready Industries India Limited is one of India’s most reputed FMCG companies. The company has a portfolio comprising dry cell batteries (carbon zinc batteries, rechargeable batteries and alkaline batteries), flashlights (torches) and packet tea. It has recently forayed into the mosquito repellent industry under the brand name, ‘Poweron’.

Eveready is India’s largest selling brand of dry cell batteries and flashlights (torches), with dominant market shares of about 46% and 85% respectively.

Eveready is the world’s third largest producer of carbon zinc batteries, selling more than a billion units a year. Its carbon zinc batteries dominate the Indian market with a complete range for all equipment types.

The turnover in the financial year 2005-06 for Eveready Industries India Limited was approx. US $ 176 million. Eveready celebrated its centenary year in India in 2005. The new tagline “The Next Century of Power” affirms Eveready’s commitment to being technology leaders well into the future, evolving with consumers to meet their changing needs. From small beginnings with an import consignment in 1905 of Rs 500, Eveready today dominates the Indian market and stands for portable power and light to millions of consumers.

Research facilities

Eveready has a totally computerized battery testing facility – the only battery testing laboratory accredited by National Accreditation Board for Testing & Calibration Laboratories (NABL) – where batteries can be tested as per BIS, IEC and JEC standards.

Eveready’s research team constitutes highly qualified Scientists, Engineers, Chemists and Technicians dedicated to maintaining technology leadership in Zinc-Carbon batteries , Flashlights and related components.

The Research Centre has Pilot Plant facilities, Analytical testing facilities such as Atomic Absorption Spectrophotometer (AAS), Polarograph, X-Ray Diffractometer (XRD) and a Chemical Laboratory.

The Eveready Research Centre is capable of providing world-class testing and research support to meet stringent customer requirements from across the world.

Eveready Industries has enjoyed a great monopoly till the recent past. Today the company is facing tough competition since there are many competitors in the market. It has been following an old system of working. Now in order to increase its market share, I think Eveready should consider rural markets as in these areas the competition is less and Eveready should be the first one to dominate these areas so that their market share remains normal or in fact better. Eveready has mainly concentrated on the urban cities till now and now I think it is time for them to look into the rural sectors of the country as well because now a days large industries are being set up in these areas and so they will be in need of their products. These industries then wont need to transport materials from the cities which will add to their cost because of the transportation.

SWOT analysis:

The vast product portfolio of Eveready Industries is a very big strength of the company. If in one particular sector one of its products fails, the company can cover up the losses from profits that it gets from the other products from the company. The effective distribution channel also helps Eveready to be certain that its products are reaching to the people. The company has a very good brand image that helps to attract customers. Any new product launched by the company will be well accepted in the market because of the reason mentioned above. Eveready Industries has its sales offices spread all over India and the brand loyalty of the customers is very strong because of the assurance of good quality and affordable prices. Because of this the company will have a competitive advantage over its rivals. It is more likely to maintain its monopoly in the Indian market because of its presence in the country for more than hundred years.

Though the company has quite a few strengths, they do have weaknesses as well. The company follows an outdated system of work which includes excess of paper works which wastes energy and time when the right technology is just next door. Eveready is unable to cope up with the market changes because of its wide spread. As the competition is becoming tuff, the market share of the company is going down rapidly as it is being shared by its different competitors. Due to less cash flow unlike its previous years, the company is saving on advertisements which is not helping them in any way as the people are not informed of the company’s new products and prices. The company has is failing in adopting new technologies whereas its competitors are entering the market fully equipped with the latest technology which gives them economies of scale as well as better quality products. There are no unique products produced by Eveready India PVT. Ltd. The products they make has nothing extraordinary than the product of its competitors.

There are some opportunities for Eveready that if made use of can get its monopoly back in the market. There are still major portions of the rural segment to be tapped by Eveready. If it does so, the company will increase its customer base as well as brand name. There are loads of new technology is available which if utilised, will give the company a lot of advantage over its competitors with its high quality product and already established brand name. The company can also start more advertisements to maintain its brand name and loyalty. Company can also invest in R&D to expand its product mix and target all kinds of customers. In some of the rural areas, it is believed that if the tea packet is red, it means that the tea is better. As Eveready sells its tea in green packets, it may think on changing the colour of the retail packets from green to red to increase its sales. Eveready can easily takeover small companies ruling in the rural areas. Some areas are not feasible for the company to sell goods. So I think they can develop E-marketing where they can sell their goods to any person in the world and can reach them in no time. Eveready can also think of developing products which have alternate usage such as torches which can be used in the dark and also help in detecting counterfeit currency.

After a list of opportunities, the company needs to be aware of the threats to it. The competition is increasing day by day and the consumers are getting greedy to get the best quality product in the least price and all the companies are fighting to get to that stage keeping their profits in mind. A new player in the market maybe a threat as he will be aware of the current market and will have the latest technologies on his side to compete with. Eveready should also be cautious of its competitors that it does not take away its biggest customers. All the companies fight for the price as the least price takes it all. So Eveready also need to assign competitive prices to survive in any market. If the competitor has a superior access to channels of distribution, then their will products would easily reach the people and faster too. So Eveready should also take care of its distributing channels to become successful or remain one.

PEST analysis:

In order to expand in the rural areas of India, Eveready has to keep in mind many political, economical, social and technological factors in mind so that they can conclude whether it will be to their advantage or disadvantage by expanding in the rural sectors of the country.

Their can be trade restrictions in the rural areas. Materials coming from the cities may have to be taxed which will add to their cost and will ultimately affect its end users i.e. the customers. Before entering into the rural sector of a state, the company has to look into the political stability of the state. If the political conditions are not stable, then there will be protests and strike very often and the labours wont come for work half of the time and then the company will suffer a huge loss. The employment laws of the rural areas should also be reasonable so that the labours can be hired easily and it would also become easier for the company to deal with. Frankly speaking, in urban areas it is easy to set up an industry but it is very difficult to get land. But in the case of rural areas, it is very easy to get land but very difficult to set up an industry because of the various pressure groups acting in these areas. More of farming nd breeding takes place in these areas and the farmers are very particular about the industries setting up there as most of them tend to demolish or harm the crops in some way or the other. Like the TATA NANO plant in Singur, West Bengal. The farmers protested against the plant setting up there and the company had to suffer a huge loss as they had already bought a huge land and had started building the factory for the production of the world’s cheapest car.

Now coming to economical factors, the company has to keep in mind the potential economical growth of the place they are going to set up their industry in. They also have to keep in mind the taxes collected by the state government whether they are reasonable or not.

Coming to social factors, Eveready has to have healthy labours and also has to keep in mind that it does not deteriorate the health of the people in an around its factory. If the career attitudes of its managers, labours etc are not good, then instead of making a profit and increase in market share, the company may suffer a huge loss. People will only work with the company if the company assures them their safety whether health or financial. Till the company doesn’t involve in a good amount of advertising and publicity, their market share wont increase much as the consumers wont be aware of the products made by the company. So Eveready also has to keep in mind the possibilities of marketing its products in these areas so that people buy their goods.

The main factor which any company would definitely look into while setting up factories in any location (urban or rural) is the technological factors. The company needs to know about the possible technologies in the area and which technology needs to be imported. There has to be a good automation in the factories so that the products are produced fast and are of a good quality. Eveready has to look into the possibility of using the nearby resources and setting up a good R&D facility to compete with its competitors. If Eveready thinks that there is even a little technology incentive, then they could probably consider expanding in the rural areas of India.

Ansoff Matrix:

Analyzing the current the expansion of the project can be done using the Ansoff matrix also. The company is planning to expand its market, that is the company is introducing the same product that it has been producing in an entirely new market. The Eveready Industries is seeking to sell its Eveready batteries in the rural market, which is the new market in this case. The company is using the market penetration technique which is a medium risk venture, where the company’s product is successful in the present market but in the new market it might not be that well accepted. The initial investment will be at stake.

ANSOFF MATRIX:

MARKETS

PRODUCT

EXISTING

NEW

EXISTING

MARKET PENETRATION

PRODUCT DEVELOPMENT

NEW

MARKET DEVELOPMENT

DIVERSIFICATION

As you know in the Ansoff Matrix, the main analysis is all if the product or the market of a particular company is changing. We generally use the Ansoff matrix analysis tool when a particular company is planning to introduce a new product or introduce itself to a new market or sometimes doing even both. There is also another case in which the product or market is only being improved.

Market Penetration: This usually happens when the company tries and improves its market or its product by introducing new minor changes to it and not by completely introducing a new product or a new market. It is a low risk feature as the company and its product is known in the market from before, thus bringing in minor changes would not be much of a risk.

Product Development: This usually occurs when a particular company introduces a completely new product in the same market that it has been supplying to from a very long time. This a medium risk feature because the company may be known for its quality and services in the market but the consumers are not very sure about the new product that the company has just launched.

Market Development: This condition usually arrives when the company expands its business to a new market. The product that the company is the same but the market that they are supplying it to is new. This is a medium risk feature as the product of the company maybe well known but the company itself may not be very well known by the consumers in that particular region.

Diversification: This condition is a very high risks feature in the Ansoff matrix as in this conditions both the market as well as the product is completely new. A company introduces a new product in a new market that is not familiar with it. It but obvious that the consumers will find it hard to use the product.

Investment Appraisal:

The company has been able to provide me with some of its very rough project details looking at the financial aspect. The company has calculated the estimated cost of the expansion to the rural areas project to be around Rs 300 crore. The company has estimated its annual sales for the project as follows:

Initial Investment

Rs 300 Crore

Year

Estimated Sales

1

55

2

60

3

65

4

75

5

80

PAYBACK PERIOD

The payback period technique gives an estimated time in which the total amount of the initial investment will be recovered.

Using the payback period technique of Investment appraisal the payback period of this project is coming up to be around 4 years and 6 months.

ANNUAL AVERAGE RATE OF RETURN

It calculates the average profit on an investment project as a percentage f the amount invested.

ARR = (total profit during projects/no. of yeas of project * 100) / initial amount invested.

Using the above formula the annual average rate of return comes up to be 22.3 %.

Analyzing the Investment Appraisal

The values in the Investment Appraisal, obtained by me subject to change. There are many factors that contribute to this claim of mine.

The company is working towards the expansion to the rural areas, which in turn will lead to their betterment in some way. This may get the company some concessions from the government.

Government has promised the company a reduction in the percentage of the tax of their annual sales. This could help increase the annual average rate of return and decrease the payback period of the project.

The people living in the rural areas will not be able to pay the amount that the batteries cost because none of them have fixed jobs and the recent recession worsened their condition.

There is increasing inflation which shows growth and opportunities for the company, but it also shows decreasing demand as it reduces the disposable income of people.

The project will contribute towards both local and global environmental benefits. This will help the firm to fulfil its Corporate Social responsibility towards its stakeholders.

The area of expansion is completely unknown and is subject to failure.

The management and the staff will also be unfamiliar to the market, thus there is need for specialized employees, which could further stall the project.

With expansion economies of scale namely – technical and purchasing economies of scale can be gained.

Conclusion:-

After analysing the PEST and the SWOT analysis, we see that there are many advantages and fewer disadvantages for Eveready India Pvt. Ltd. if it thinks of expanding in the rural markets of India. Because of the more competition in urban areas and the decrease in sales of Eveready, it is a very good option for the company to remain in the urban areas but increase its market share by also moving into the rural areas.

Appendix

Product Mix

Batteries

Torch

Packet tea

CFL

Coils

Vaporizer

Dish wash

Pencil AA

Brass ( Jeevan sathi Range)

TEZ

EL Range

8 HR

60(45+15) NIGHTS

DW-100

Pencil AAA (Remote Battery)

Aluminum

JAGO

PL Range

10HR

DW-200

D size(Big size Battery)

Plastic

CLASSIC

Metal Halides (Industrial)

12HR

DW-400

C size(Medium Size Battery)

Led Torches (Digi Led)

GOLD

Halogens

Rechargeable Batteries & Chargers 700 mAh

Rechargeable Torch

Rechargeable Batteries & Chargers 2100 mAh

Recharge Batteries – AAA – 600mAh

Cordless Phone Batteries – T107,110,109

Strengths

Wide product range

Effective distribution channel

Known brand name

Competitive advantage

Familiar with the Indian market because of its presence for more than hundred years.

Weaknesses

Outdated system of work

Unable to cope up with the changes

Decreasing market share

Excess of paper works

Decreasing advertisement

Failure to adopt modern technology

Undifferentiated products

Opportunities

Still major portion of rural segment to be tapped

New technology is available

Can use advertisements to utilize its brand name

Research and Development to expand product mix

Change packets green to red.

Can takeover small companies.

Developing e-market

Product with alternate usage

Threats

Increase in competition.

New player in the market

Rival technology with improved version

Competitor having a strong hold on its biggest customers

Price war

Competitor has superior access to channels of distribution.

Political

Environmental regulations

Tax policy

Trade restrictions

Tariffs

Political stability

Employment laws

Pressure groups

Economical

Exchange rates

Economic growth

Interest rates

Inflation rate

Social

Health consciousness

Career attitudes

Emphasis on safety

Population growth rate

Advertising and publicity

Technological

Automation

R&D activity

Rate of technological change

Technology incentives