Rural Market - A Blue Ocean
A step towards sustainability


By

Ms. Shivi Jawalia
Lecturer - HR & Strategic Management
Xavier Institute of Management and Entrepreneurship
Bangalore
 


ABSTRACT

The shrinking profit margins in the developed countries forces corporates to focus on the 'Bottom of pyramid' (BOP). Rural India is one among the largest BOP of the world which is yet untapped. This paper visualizes Rural India as a blue ocean an untapped universe not only because it offers expanded market boundaries but because it's needs are not yet recognized. The imperative for marketers is to understand this market empathetically as it's the unique most market of the world because of its politico-socio cultural background; make efforts to develop the rural market not with the imported excellence models but the one which is required indigenously and the fruits of which could be available at reasonable price to these BOP people. This requires value innovation- integration of value creation & innovation. The paper presents some individual, institutional & corporate innovations which act as a tool in navigating this huge ocean.
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It would be apparent that any strategy for inclusive and sustainable growth would necessarily need to encompass rural India.

These words of ITC  Chairman provides a glimpse of 18th century benevolent strategist Mahatma Gandhi's vision of self reliant  sustainable villages; This sustainability found it's new manifestation in the Prahlad's BOP which forces marketers  not only to design their campaigns according to the local tastes & preferences but also to take up the cause of Rural Development so as to emanate the sustainable advantage through this Blue Ocean.

INTRODUCTION

Kim has suggested industries to break out of bloody competition (Red Ocean) by creating uncontested market space that makes the competition irrelevant (Blue Ocean) .

Till recently, a large part of marketing was done targeting the urban consumer i.e. top of the pyramid, With near saturation and cut-throat competition in urban markets they've turned out to be the  "Red Ocean" which raised the question on corporate survival  and this makes the gargantum migration of corporate giants  to rural areas.

This paper focuses the case of Indian rural market as a "blue ocean" an Untapped Universe which could act as a test market for Prahlad's   Bottom of Pyramid (BOP).This Indian BOP is widely embraced by the sons of the soil representing typical Indian character. According to a report of National Council of Applied Economic Research NCAER, there are almosrt 400 million people in India who belong to the BOP.

Anatomy of Rural Market

Class

Annual Income (Rs.)

No. of people(mn.)

The Very Rich

Above 2,15,000

4

The Consuming Class

45,000-2,15,000

115

The Climbers

22,000-45,000

331

The Aspirants

16,000-22,000

170

The Destitute

Less than 16,000

124

               Source: NCAER

Albeit not all rural population come under BOP but most of BOP section belongs to rural, Slums in cities & other far flung regions. The above table if put in the pyramidical form shows:


Potential of Rural Market

Mass and Velocity together generates Momentum- a Vector notation (p=m*v). Indian rural market is the best combination of both mass and velocity. Large mass and high velocity becomes an attraction for all those who want to earn supernormal profits. With 128 million households, the Indian rural mass is nearly 3 times than that of the urban. It has an estimated annual market potential of Rs. 1.23 lakh crores.   There are almost twice as many 'lower middle income' households in rural area as in the urban area. More than half of the Indian middle class population is in rural India, and 50% of turnover of many MNCs come from rural India.

As far as velocity (growth rate) is concerned it's zooming ahead, the purchasing power in rural India is on steady rise and it has resulted in the growth of the rural market. The market has been growing at 3-4% per annum adding more than one million new consumers every year.

The NCAER projected 111 million middle and high income households in rural India by 2007,offering large market for durable and non durable products i.e. food, construction, electrical, electronics, automobiles, banking, insurance etc, including 100% of agricultural input products such as seeds, fertilizers, pesticides and farm machinery.

As a result of the growing affluence, fuelled by good monsoons and the increase in agricultural output to 200 million tones, rural India covers more than 50% of India's middle-class and 58 per cent of the total disposable income. NCAER projection shows that in near future, lowest income class (25,000 & below) will shrink by more than 60% & the absolute size of rural market is thus expected to double that of Urban India.

All this positively reinforces the marketers.

Rural India a unique market

India has contributed Global management a unique rural market, which is not individualized in nature like West, Indian rural dwell in large families " Kunba" (joint family)- a unique feature. Here the unit customer is even a large chunk, which offers opportunity to sell big in unit effort. On the other hand like rural Africa (Mtubi, Sauri & others); marketers need not to start infrastructure development from the very scratch, which in turn increases their cost.

There are many factors which make rural market rewarding. India, being a democratic country political leadership is captive of masses. The very first opportunity from rural market has been identified in the form of ballot market. This in turn resulted into fulfillment of certain promises of enhancing infrastructures of village on the one hand and also made rural people to be more informed and exposed to environment, which they otherwise could not be. Moreover, 74th Amendment Act, of the constitution provides constitutional status to the Panchayati Raj institutions, which in-turn has paved way for rural development through the desire of sharing power.

Common perception about Rural Market

This exorbitant growth of Rural market make marketers feel optimistic that they could take advantage of new market for extending their product life Cycle which Urban market now can't support and it turned out to be a nightmare for them   ; Even those who operated through this principle and yet gaining should re-assess their future as it is not more than the stage of "Satisfactory Underperformance"

Marketers have to understand that serving this Indian rural BOP markets is not the same as serving existing markets better or more efficiently.  There are many underlying factors for that. This paper discusses two major issues

1) Rural Indian Market- Not an expansion of Urban Indian Market.

2) Rural Indian market is not homogenous.
 

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Source: E-mail December 2, 2010

          

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