Unilever’s project Shakti started in the year 2000 in December in Andhra Pradesh, a State in the South of India. The project was under one of Unilever’s subsidiaries, Hindustan Lever Limited (HLL). The aim of this project was to reach the untapped rural market in India and also empower underprivileged rural women in the process. The name Shakti was got from an Indian native language and it means empowerment. This project has since grown to become one of the biggest business ventures in the world as will be seen in the case analysis of the project.
The case analysis focused on Hindustan Lever Limited (HLL), an Indian company that was incorporated in 1933 and has undergone a series of mergers and acquisition since its incorporation. In an effort to tap the rural market, HLL initiated the Shakti Project which required the company to make changes in the distribution and sales organization, as well as, in the communication and technology system. The initiative of Shakti Project involved the use of 12,000 entrepreneurs to serve a total of 40,000 villages spread across the rural area. However, there were a number of challenges that were noted in the project that seriously affected sales, distribution and profitability of the company. Based the above issues, the study emphasized on HLL competitive strategy and the steps the company have taken to tap the rural market. It also examined competitors’ strategies to acquire market shares. The other area examined includes limitations of the current distribution system. This was followed provision of recommendations to that would enable HLL achieve competitive edge and maintain leadership in the FMCG market.
1.1 Background of the study
Hindustan Lever Limited (HLL) is a subsidiary of Unilever Group. The Company has seven business segments of operation. These include detergent bars, soaps, scourers and detergent powder; personal products such as skin care, talcum, hair care, oral care and color cosmetics; beverages segment- tea and coffee; food include culinary (tomato and fruit based products); staples such as bread, salt and atta; ice cream and frozen desert segments and lastly, chemical and water segment. HLL was incorporated in 1933. In 1956, the name was changed to Lever Brothers Limited after the merger with United Traders Ltd and Hindustan Vanaspati Mfg. Co. Limited. In 1972, they acquired Lipton followed by the incorporation of Lipton Tea (India) Limited in 1977. Through international acquisition, Brooke Bond became part of Unilever in 1984. Pond’s India limited also joined the Unilever Group in 1986 after acquiring Chesebrough Pond’s. Several activities- merger and acquisition followed in the subsequent decades (Rangan and Rajan, 2007). The next section examines Unilever India in relation to its market power and rapid growth in the country.
1.1.1 Market Power and Rapid Group of Unilever India
Unilever is the world leading manufacturer of FMCG. The Group reported a global turnover of approximately US$ 55 billion in the year 2004. The revenue contribution of Indian subsidiary was about 110 billion rupees. The gross profit and net income for the HLL was 46% and 11.4% respectively. Comparing this performance to the previous year, there was a slight drop because in 2003 they reported a gross profit of 50% and a corresponding 17 percent net income. As stated earlier in the paper, the company has a broad portfolio of products covering beverage, food, personal products, detergents and soaps. The market share of Unilever across the globe is varied based on the product category however, it is estimated that the aggregated market share for different product portfolio was in the range of 40% and 45%. The next section will focus on the Shakti Project Team initiative it success and challenges (Rangan and Rajan, 2007).
1.1.2 The HLL Shakti Project Team
Hindustan Lever Limited –a subsidiary of the Unilever Group initiated a Shakti Project Team that comprised of people originating from all parts of the country. This project was a marketing initiative targeting customers in the rural areas. This project was headed by Sharat Dhall. According to statistics of the project result provided by the project manager and the executive director, there were a total of 12, 000 women entrepreneurs already appointed to ensure that the project was successful in about 50,000 villages. These women entrepreneurs partnered with about 300 Non-governmental Organizations that are operating in the country. In 2004, results showed that the initiative was successful and had broken even. Despite success in the initial stage, the project team had noted some challenges in the project that were detrimental to future profitability of the project (Rangan and Rajan, 2007).
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