Return to Previous Page

SELCO: Mission or Market? *

CASE STUDY, STRATEGIC MARKETING (MANAGEMENT)
ET Cases, 12 pages
AUTHOR(S) : S.R.Asokan (Associate Professor, Institute of Rural Management, Anand, Gujarat), Pankaj Kumar Mohanty (Academic Associate, Institute of Rural Management, Anand, Gujarat)

Case Preview

SELCO: Mission or Market?

SELCO Solar Private Limited (SELCO India) is a social enterprise providing solar home lighting solutions to the rural households. SELCO focusses on villages which are off the grid of electric supply. SELCO made steady profit till 2005 but thereafter began to lose money. The management was under immense pressure from the investors to trim operations. However, Harish Hande (Hande), the Founder and the Managing Director of the company was against any such move as it was against the mission of the company. As a social enterprise it was their mission to provide technology-based solutions to a large number of rural households. Hande managed to raise money from a new set of investors and bought out (rather crammed down) the original investors. By 2010, SELCO began to make operating profit. Hande was aware that unless he made money the patience of the new investors might wear away. He was contemplating scaling up the activity to increase the revenue. He was in a dilemma whether to expand to other states as the operations of the company was confined to Karnataka or to go deeper by widening the product portfolio or do both. Hande called for a workshop for the staff as well as the external stakeholders to brainstorm about the future course of the company..........

Status of Electrification in India

Energy consumption had a positive and statistically significant impact on economic growth. One way of accelerating growth and increasing income and thereby reduce poverty was to provide increased access to energy for the poor rural consumers. However, the divide between urban and rural areas in energy consumption was huge in many developing countries like India since there were persistent gaps between demand and supply of power..........

SELCO

SELCO Solar Private Limited (SELCO INDIA) was established in 1995 at Bangalore with the objective of bringing solar lighting systems to the areas and households hitherto not touched by grid supplied electricity. The company was set up on the premise that the poor should be able to afford technology and it was possible to run an enterprise commercially while serving a social need. Harish Hande, the Founder, leveraged the idea of bringing solar energy to the rural households on a visit to Dominican Republic as part of his PhD thesis at the Centre for Sustainable Energy at the University of Massachusetts, US.........

Product and Service

SELCO’s primary focus was providing home lighting systems to the rural households. However, it diversified into other products such as solar water heating system, energy efficient stoves, etc. Solar powered table lamps for school children, head lamps for midwives were other products developed by the company. Still around 85% of the revenue was accounted by the solar home lighting systems, water heating system contributed 14% and the rest 1% came from other products.............

Service Centres – Proximity to the Consumers

Going closer to the consumer to make the product available as close as possible to the consumer is one of the important elements of the marketing mix called ‘place’. SELCO had created a network of service centres. The Energy Service Centre (ESC) was closest to the consumer. Each ESC had an area of operation for which it was responsible for marketing, installing and servicing SELCO’s energy services. ESCs was staffed with three to seven employees including a manager, technicians and sales staff depending on the volume and potential of the work in their territory.............

Approach to Affordability

Potential customers need light but at affordable price. The segments in need of solar lights could be well-off farmers whose villages were not connected to the grid and could afford the system with self-funding or small and marginal farmers who had to raise a loan to finance the purchase. SELCO was not targeting the very poor as the priority for them may be food and shelter rather than lighting. Even if SELCO managed to provide them the system by funding through donors or NGOs they might sell it to purchase food.................

Promotion

SELCO did not use any mass media such as radio, newspapers or televisions nor non-conventional media like wall paintings, street plays, video vans as was being done by many FMCG and consumer durable companies for promotion in the rural areas. There was no provision for promotional activities in SELCO’s budget. The company relied on demonstrations to create awareness about solar energy. Once the technicians arrived in a village to install the light in a client’s house they created lot of buzz to arouse the curiosity of the villagers..............

Restructuring

SELCO achieved break even for the first time in 2001 and was making small profits which touched a high of $88,380 in 2005. However, the investors were getting impatient over the return on their investment. SELCO tried to scale up geographically by opening branches in nearby states of Andhra Pradesh and Maharashtra. As customization, bank finance, service schedule, etc., were well-established in Karnataka some of the ESCs were handed over to franchisees. In 2007, Germany began to give subsidies for solar power which led to heavy demand for solar equipment...........

The Road Ahead

Hande looked back with lot of satisfaction on the journey SELCO had made in the last 15 years despite many challenges and crisis along the way. He and his team had gone through a steep and difficult learning curve in customizing the product, creating service centres closer to the customers, working with the banks to finance the purchase of solar lights to achieve the objective of bringing technology to the homes of the villagers to serve a social need..............

Assignment Questions

I. Can SELCO be classified as a social enterprise?
II. Discuss the approach of SELCO in customizing the product to make it affordable to the prospective clients?
III. ...............

Exhibits

Exhibit I: Status of Village Electrification

Exhibit II: Source of Lighting for Households in India (in %)

Exhibit III: Range of Lighting Solutions

Exhibit IV: Operations Structure of SELCO

Exhibit V: Linkages between Savings, Earnings and Repayment of Loan

Exhibit VI: Profile of the Investors

Exhibit VII: Profit and Loss Account

$7.31
Rs 0
Product code: STG-1-0003

Abstract


This case study describes the dilemma about the scaling up issues faced by a social enterprise. SELCO is a for profit enterprise engaged in providing solar lights to rural households in the state of Karnataka, India. The case study gives an opportunity to highlight the divergence and convergence of passion and interest of the social entrepreneur and the expectations of the financiers of such ventures. Through the story of Harish Hande, the Founder, the case study looks at the various strategies that SELCO undertook for scaling up its activities in other states, broaden the product portfolio and bring in fresh investment to maximize profit and turn the enterprise into a full-blown profit making entity.


Pedagogical Objectives

The objectives of the case study are to expose students to the:

  • Challenges faced by the social entrepreneur in finding the right kind of capital to pursue his/her passion of creating social benefits
  • Innovations needed in finding market-based solutions in providing a social need
  • The difficulties faced by the social enterprises in replicating or scaling up their success

Case Positioning and Setting

This case study can be used in the MBA Course as well as in Executive Development Programs for the following courses:

  • Social Entrepreneurship: To highlight the divergence and convergence of passion and interest of the social entrepreneur and the expectations of the financiers of such ventures
  • Courses relating to BoP segments such as Marketing to BoP and rural marketing: the innovations needed in managing or tweaking the marketing mix of price, product, place, etc., to be successful could be analyzed through the case study


* GSMC 2014, IIM Raipur

This Case Pack Includes:
- Abstract
- Case Study

$7.31
Rs 0

Related products




Request for an Inspection Copy

(Strictly for Review Purpose, Not to be Used for Classroom Discussion/Trainings)