Mahindra Samriddhi: Achieving Growth through Rural Prosperity*

Mahindra Samriddhi: Achieving Growth through Rural Prosperity

Rural markets in India have been recognized as growth opportunities for most businesses. The Tata Strategic Management Group team reported that with 69% of Indian population living in rural areas, rural markets represent a market opportunity that organisations cannot afford to overlook, especially considering that the rural  consumption in value terms has grown at 17.2 % p.a. between 2008 and 2010 and that close to one third of FMCG and consumer durable sales come from rural  markets Further, between the years, 2009 and 2012, rural India spending reached $69 billion, compared to $55 billion urban market spending [2]. The Accenture  (2013) report states that rural growth has exceeded company expectations, and if companies wish to succeed in this growth area, they need to establish effective sales and distribution in rural areas and with intensification of competition, companies would need to devise innovative strategies that shall not only fulfill the needs of the rural customers, but also build scale through mutually beneficial relationships with rural communities with collaboration being recognized as the key driver for growth in rural markets.

The Mahindra Group, a major Indian conglomerate, has been an integral part of the rural market space through its flagship company-Mahindra& Mahindra,  manufacturing and supplying Mahindra tractors, since the early 1960s. In recent years, Mahindra & Mahindra has been intensifying its agribusiness in rural markets, by enhancing farm productivity and revenues of farmers........................

ABOUT MAHINDRA

A $16.5 billion group, the Mahindra Group is a diversified business group in India with businesses in industries spanning automobiles, aerospace, aftermarket, components, consulting services, defense, energy, financial services, logistics, real estate, retail, and two wheelers...........

HISTORY

The Mahindra group was founded in 1945 by two brothers, JC Mahindra and KC Mahindra and began as a steel trading company in Mumbai. Partnering with Ghulam Mohammed, the company, Mahindra & Mohammed, began assembling jeeps under license from Willys, USA. Along with the manufacture of the Jeep, under a license and an agreement with Willys Motors Inc., Toledo, Ohio, U.S.A., the Company also acted as exclusive distributors for the whole of India for their entire range of vehicles including.............

AGRICULTURE IN INDIA

India is primarily an agrarian country with 60% of its population being dependent directly or indirectly on agriculture. A McKinsey Report (2013) has recognized the agriculture sector as one which has the potential to help India emerge as a major global agriculture and food powerhouse - while India has emerged as the third largest agriculture producer in the world, after USA and China even though, the sector has earned only 50%-60% of its potential yield. India is the world’s largest producer of pulses and second largest producer of rice and wheat, the sector suffers low crop yields due to lack of information.............

Mahindra’s Presence in Agriculture-Mahindra Agribusiness

Mahindra &Mahindra has had a presence in the agriculture sector for a long time through its Mahindra brand of tractors. Mahindra and Mahindra’s Farm Equipment Division, within the Mahindra and Mahindra Ltd., - the flagship company of the Mahindra Group, began manufacturing tractors in the early 1960s for the Indian market and grew in the following fifty years to become the world’s largest seller of tractors by...........

Mahindra Shubh Labh Services Ltd.

Mahindra’s focus on the agribusiness began with the establishment of a subsidiary, Mahindra Shubh Labh Ltd. (MSSL), in 2000. Operating under Mahindra Agribusiness, MSSL, was established as a single point source of access to farmers for raising farm productivity through products and services including high quality seeds, crop protection solutions and later, the business of MSSL extended to the procurement of fresh farm products, primarily fruits for the domestic market as well as for export..........

Mahindra EPC

To complete being part of the agro-value chain, Mahindra entered the micro-irrigation business through the acquisition of EPC Industries in 2011. The demand for Micro irrigation solutions has increased due to...............

Mahindra Samriddhi

Being a rural focused company and having identified that low farm productivity led to lower farm revenues, Mahindra & Mahindra decided to focus on improving farm productivity, allowing the farmer to improve his earnings, which would allow the company’s growth as well.............

Reaching Rural Customers in India

High cost to serve rural markets has been identified as the biggest challenge in marketing to the rural customers, while an efficient sales and distribution model is what has emerged as most critical for companies to successfully expand their businesses in rural markets in India, with inadequate distribution networks being one of the biggest obstacles in reaching the rural customer which includes partners with limited capabilities..............

Future

Mahindra & Mahindra is also considering expanding into organic farming, oilseeds and dairy; however, it plans to keep away from fertilizers and agricultural pumps, since, the fertilizers segment has the presence of large PSUs while the agricultural pumps market has a large number of small players competing on price.............

Mahindra Samriddhi: Achieving Growth through Rural Prosperity

Synopsis

Mahindra and Mahindra recently began converting its Mahindra Tractors dealers into Samriddhi Centres: retail outlets for Mahindra’s agricultural products and  services. The Samriddhi initiative is a part of Mahindra Farm equipment division, world’s largest tractor company by sales volume and aims at promoting farm  productivity thereby promoting farmer’s prosperity, hence, the name Samriddhi, a Hindi term, meaning prosperity. At a Samriddhi centre, farmers are provided with farming solutions including soil and irrigation water testing facilities, technology interface through the internet, productivity demo farms, agri counseling facilities, finance & insurance products, sale of second hand tractors, micro-irrigation products, seeds & crop care products.

Mahindra has been into the agriculture business for many years, mainly through its well-known Mahindra tractors. The Mahindra tractor has evolved as a value for money, trust worthy brand that enjoys strong relationships with farmers, having owned by generations of the farmer. Mahindra increased its focus on agriculture business through the launch of Mahindra Shubhlabh Services Ltd. in 2000 for supply of ari-inputs, while in 2011, Mahindra acquired EPC Industries, for the supply of microirrigation tools.

MSSL is a provider of high yield seeds; crop care solutions such as insecticides, pesticides, herbicides, nutrients which were distributed through a large  network of distributors along with company sales representations. Apart from agri-inputs, MSSL also partnered with farmers through contract farming to procure and supply fresh farm produce, especially fruits, which Mahindra supplies to large domestic customers as well as exports to a number of countries. ......

Expected Learning Outcomes

The case helps in the attaining of the following learning outcomes:

• • Appraise factors required for successful marketing of Agri inputs in rural markets which include tractors, farm mechanisation equipment and other agri-inputs such as crop care solutions, which would need an understanding of the following specifics stemming from the case:
• • Factors affecting farmer purchase decisions: identify means of building relationship with farmers
• • Need of guidance and advisory support services to build farmer awareness , which then aid in the purchase decision of the agri-input products: Understand the role of training and improving farmer productivity which in turn lead to building of trust and long term relationship, hence loyalty towards rural marketer.
• • ..................................................

Case Positioning and Setting

The case may be discussed in a general Marketing Strategies course in Semester 2 or in an elective course in Marketing, such as Rural Marketing [both in  Semester II or Trimesters V/VI in case trimester system followed]. The case primarily strives for students of Marketing, especially in the course of Rural  Marketing to gain insights into how a company can build rural distribution strategy, especially for agri-inputs.

Assignment Questions

• I. What factors are needed to succeed in the Agri-input business in rural markets in India?
• II. What factors led to Mahindra starting the Samriddhi initiative? [Alternatively: Q. Do you think the decision to convert Mahindra Tractor dealers to Samriddhi centers makes sense-why/why not? Could Mahindra have begun marketing its agri-inputs through another distribution mechanism?
• III. ...................................