TERM PAPER

ON
MGT-635
TOPIC: LAUNCH A NEW SOAP IN
ORISSA.

SUBMITTED TO:
MR. HITESH JHANJI

SUBMITTED BY;
CHANDAN KUMAR SINGH
SEC:- RT1902A-27
REG NO:- 10903162
 ACKNOWLEDGEMENT
I provide full justice to this term paper which is prepared by visiting various web-sites,
magazines, articles etc.

I would like to take an opportunity to thank all the people in collecting the necessary information
and making of the report. I am grateful to all of them for their time and wisdom.

My project becomes a reality only due to cooperation of many people who had helped me in
completing this project. I sincerely extend my gratitude to Mr. Hitesh Jhanjhi who has given
me this precious opportunity to have know about the Indian Rural Market.

Objective of the study.

 To launch a new soaps for rural people in Orissa.
 To create an effective market for our product.
 To create long-term brand value for our customer.
 Focus on awareness and interest to building loyalty of our customer.

INTRODUCTION OF ORISSA
Orissa is situated in the east coastal region of the country. Its geographical area is almost 4.74%
of India and its population is 36.7 million (2001census), about 3.57 per cent of India’s
population. The population density of the state is 236 persons per sq. km. (in 2001), but there is
a sharp divide here between the coastal and inland districts (the inter-district coefficient of
variation in this respect is of the order of 63.56 per cent, a reflection of a significant differential
in the ‘carrying capacity’ of land). The urbanization rate, at 14.97 per cent (2001), is the lowest
among the major states of India and also there is a very marked inter-district variation
(Coefficient of Variation (C. V): 73.29 %: 2001).

The rate of growth of population of Orissa during the decade 1991-2001 has been only 15.94 per
cent as against 21.34 per cent for all-India, and indeed this has been the third lowest growth rate
of population among the major Indian states, higher than only Kerala (9.42 %) and Tamil Nadu
(11.94%). This has occurred not because of a normal process of demographic transition (as in the
case of Kerala and Tamil Nadu), but due to a peculiar demographic regime, namely, a relatively
faster decline in the birth rate from a relatively low level on the one hand and a relatively slower
decline in the death rate from a relatively higher level on the other.
  Population Distribution in Orissa:

Rural Urban Combind

Male Female Male Female Male Female Total
15.7 15.5 2.9 2.6 18.6 18.6 36.7
 Percentage of Working Population: 40%

Cultivators Agriculture House hold Other workers

Industry workers
33% 39% 5% 23%
 No and Percentage of Population below the Poverty line:

Poverty line
Rural 48.0% 323.9
Urban 42.8% 473.1
 Per capita Consumption:

Food Non Food

64.1 35.9
 Average expenditure on FMCG:

Urban Rural
5982.0 2512.0
 Village Town Distribution:

Village Town
Wq 51352 138
 Rural Household Assets:

No of Banking Electricit Radio TV Phone Bicycle Bike Car

household service y
6782879 20 19 21 9 1.6 49 4.5 0.6
 Media Coverage in Orissa:

Press Satelite Raido Cinema Hatts TV

All 14 4 19 13 3445 39
Rural 11 0.9 15 30 2865 34
Urba 31 22 30 20 580 68
n
 Facts and Figures About Orissa
Geographical area 155,707 sq. km
Total forest area 58136 sq. km.
Coastline 480 km.
Capital Bhubaneshwar
Population of Orissa 36804660 (2001 census), 3.58% of country's Population.
Population density 236 per square km. Male - 1,86,60,570,
Female - 1,81,44,090 and the sex ratio F:M is 972:1000. The
urban population is 55,17,238 whereas rural is 3,12,87,422.
Literacy rate Total 63.08 percent; 71.35 percent male and 50.51 percent
female.
Religion The majority (over 94 percent) consists of Hindus. Muslim,
Christians, Sikhs, Buddhist and Jains form a very small
minority.
Language Unilingual Oriya speaking state.

Introduction of Rural Marketing in India

The rural India has a plethora of opportunities all waiting to be harnessed. Not surprisingly, it has
become the latest marketing buzzword for most of the FMCG majors. Many of the FMCG
companies are busy formulating their rural marketing strategy to tap the chance .To name few
companies showing deep interest in rural India are HLL, Marico industries, Colgate – Palmolive
and Britannia Industries. Rural markets are an important and growing market for most products
and services Including FMCG. The characteristics of the market in terms of low and spread out
population and limited purchasing power make it a difficult market to capture. The Bottom of
the pyramid marketing strategies and the 4 A's model of Availability, Affordability,
Acceptability and Awareness provide us with a means of developing appropriate strategies to
tackle the marketing issues for marketing telecom services in rural area.

Why Rural India?

70 % of India’s population lives in 627000 villages in rural areas.  90 % of the rural population is
concentrated in villages with a population of less than 2000, with agriculture being the main
business. This simply shows the great potentiality rural India has to bring the much-needed
volumes and help the FMCG companies to bank upon the volume –driven growth. This brings a
boon in disguise for the FMCG Company who has already reached the plateau of their business
curve in urban India.

As per the National Council for Applied Economic Research (NCAER) study, there are as many
'middle income and above' households in the rural areas as there are in the urban areas. There are
almost twice as many 'lower middle income' households in rural areas as in the urban areas. At
the highest income level there are 2.3 million urban households as against 1.6 million households
in rural areas.

According to the NCAER projections, the number of middle and high-income households in
rural India is expected to grow from 80 million to 111 million by 2007. In urban India, the same
is expected to grow from 46 million to 59 million. Thus, the absolute size of rural India is
expected to be double that of urban India.

Business plan for launching the new Product.

Company name: Health care Shop.

Mission Statement: “we strive to use naturally based product and try to minimize the impact of
our product on the environment”.

Vision Statement: “your health is our first priority”.

Location: In starting phase we only focus the main 10 District of Orissa.

Head office: Bhubaneswar.

Reasons for this Business: As we know that India is very vast county. The population size is
very high in compare to other country. So, here a lot of opportunity available for the business.
We know that soaps are a FMCG product so the growth is very high for this product.

Top Leading Companies

In the Rs 4,800-crore Indian toilet soaps market, the lead players include:

 HLL.
 Godrej Consumer Products Ltd.
 Colgate Palmolive Ltd and.
 Wipro Consumer Care.
 ITC.
 P&G.

INDIAN SOAP INDUSTRY 

Size of the Industry: The Indian Soap Industry includes about 700 companies with combined
annual revenue of about $17 billion.

Geographical distribution: All the major metropolitan cities.

Output per annum: Indian per capita consumption of soap is at 460 gms per annum.
Market capitalization: 70% of India's population resides in the rural areas and around 50% of
the soaps are sold in the rural markets.

Major issues for starting new business.

For Sales growth they need highly intensive distribution and strong promotions

Sales growth is possible when product remain at fixed price for a specific time period and
this depend on cheapest raw material handling and its transporting

Huge budget for advertising

Huge investment on packaging

Economic crisis

Porters 5 Forces Model for our Business

SUPPLIER POWER

 Supplier concentration
 Switching costs of firms in the industry
  Presence of substitute inputs
 Cost relative to total purchases in industry

BARRIERS TO ENTRY

 Government policy
 Economies of scale
 Capital requirements
 Brand identity
 THREAT OF SUBSTITUTES
 Switching costs
 -Buyer inclination to substitute
 -Relative price performance of substitutes
 BUYER POWER
 Bargaining leverage
 Buyer volume
 Buyer information
 Product differentiation
 Buyer concentration vs. industry

DEGREE OF RIVALRY
 Exit barriers
 -Industry concentration ratio
 Fixed costs/Value added
 Industry growth

New Entrants

The major raw material required for toilet soap is palm oil which is required to be
imported from countries like Malaysia. Palm oil is an expensive ingredient and this gives
a low cost advantage to the soap industry of countries like Malaysia, China etc. The
exporters of these countries could supply good quality soaps at rates less than the Indian
competitors.

Substitutes
Generally one can point at two general broad substitute threats in the Premium soap
category. One threat is from the use of products like body wash and face wash. Though
the use of these products forms a very small part of consumption this is basically due to
the high costs associated with such products. One can see in the some developed
countries which have already registered a cent percent penetration, the consumption of
soap has now decreased due to the customers upgrading to Body wash and Face wash.

Suppliers

The major input for the soap manufacture is vegetable oil (around 80% of the raw
materials). Earlier Animal Fat was used which was even cheaper, but after the Indian
government banning animal fat, one had to shift to vegetable oils. They are not available
in India and thus have to be imported from countries like Malaysia, Indonesia and China.
There are only few players who export palm oil from these countries and as such these
exporters have a commanding position.

Buyer

To a large extent, Premium Soap is a price sensitive market. Off late there has been an
increasing trend towards downtrading. And this has forced the manufacturers to lower the
prices or offer temporary discounts to woo the consumers who are either downtrading
from the popular segment or graduating upwards from carbolic soaps.

Industrial Rivalry

As India has a low per capita consumption of soaps the growth in this sector has been stagnant.
Penetration though on an average is 95%, consumption in our country, as compared to other
developed countries is a bare minimal (In the rural market, even though penetration is high the
frequency of taking a bath with soap is one out of 5 occasions). Capacity utilization in the
industry varies from as low as 50% to 80%.

PEST Analysis:

Political Factors: --
Earlier the soap industry was under the Licence-raj restrictions. But, after liberalization of
economy by the Narshima Rao government there has been a spurt in the number of players in the
organized as well as the unorganized sector.

Economic Factors

Soaps in India cost very high in India as compared to other countries like Indonesia. E.g. 100
gms of soap in Indonesia costs rs.4.25 whereas in India it costs rs.10 approximately.

Social factors:

The social factor is very important when it comes to Premium soaps segment of the soap market.
With the rising education and disposable income levels, the need for hygiene and personal / skin
care becomes important.

Technological Factors:

The industry though capital intensive is not very technology intensive. Premium soap
manufacturing though compared with other soaps manufacturing relies to an extent on
technology (especially in the finishing stage).

SWOT ANALYSIS

Strengths

 Penetration rate is very high.

 Delicenced Industry

 Increase in rural disposable income of people.

 Rural demand is growing very high.

Weakness

 New player in market.

 Excise duty is high in Orissa.

 Heavy launching cost.
 Less knowledge about the market.
Opportunity.
 Untapped rural customer.
 Exports policies are quite insignificant.
 Internet plays a effective role in promotion.
 Standard of living increase in rual market.
Threats.
 Industry growth is very low.
 Threat of new entrance.
 Other establish player in the market.
 Economy open for all.

Value Chain Analysis

There has been rapid change taking place in the way firms function as a result of changes
in the external environment. Instead of a constant and predictable demand pattern, firms
now have to deal with tremendous variations in demand patterns. In the case of FMCG
companies, this is especially true in the commercial soap business.

Supply Chain Management SOAP-THE NEW (OUT)LOOK

THEN NOW

chain chain
Customer
End of the value Beginning of the value

Brands needs
Offering
Few Variety to suit the

Manufacturer product money

Role of Supplier of Supplier of value for

Promotion t Extensive
Advertising & Sales Intermitten Intense &

function -right product, right place

Distribution
Only support Important role
There are three important and inter-linked variables in the supply chain

 Cost reduction,

 Quality improvement,

 Logistics both inbound & outbound.

Features of Indian Rural Markets

• Large and Scattered market: The rural market of India is large and scattered in the sense that it
consists of over 63 crore consumers from 5,70,000 villages spread throughout the country.
• Major income from agriculture: Nearly 60 % of the rural income is from agriculture. Hence rural
prosperity is tied with agricultural prosperity.
• Low standard of living: The consumer in the village area do have a low standard of living because
of low literacy, low per capita income, social backwardness, low savings, etc.
• Traditional Outlook: The rural consumer values old customs and tradition. They do not prefer
changes.
• Diverse socio-economic backwardness: Rural consumers have diverse socio-economic
backwardness. This is different in different parts of the country
• Infrastructure Facilities: The Infrastructure Facilities like roads, warehouses, communication
system, financial facilitate are inadequate in rural areas. Hence physical distribution becomes costly
due to inadequate Infrastructure facilities.
Profile of the Rural Consumer
1) Low Literacy levels: It is estimated that the literacy level in Rural India is 45% as compared to
52% for the whole country. The literacy rate is low so this comes in way for promotion. Therefore
marketer cannot use Print media and Hoardings, he has to adopt Product Demonstrations.
2) Low Income Levels: Though Rural incomes have grown in the past decade the per capita incomes
of rural consumer are low compared to urban counterpart. A large part of the income is spent on
basic necessities, leaving a smaller portion for other consumer goods.
3) Location pattern of rural consumers: India’s urban population is concentrated in 3,200 cities
and towns, whereas the rural population is scattered over 638,667 villages. Of these, only 6,300 have
a population of more than 5000 persons. More than three lakh villages are in the category of 500
people or less (55 percent of the total), and more than 1.5 lakh villages have 200 people or less( 25
percent of the total). Rural consumers therefore are scattered over a large area, unlike their Urban
counterparts who are highly concentrated.
4) Reference Groups: Typically, in a rural area the reference groups are primary health workers,
doctors, teachers and panchayat members. The village trader or the grocer, commonly called
‘Baniya’ or ‘Mahajan’ may also be an important influence in decision making of the rural customers.
This is because the trader extends credit to the farmers. Today, another person who is considered a
change agent is the rural bank’s officer or manager.
5) Occupation: Typically, in a rural area the principal occupation is farming, trading, crafts, and
other odd jobs like plumbing, electric works etc. There are also primary heath workers and teachers.
The different types of farming activities include growing crops, cattle and poultry farming. The basis
for differentiation is obviously the size and ownership of land. Consumption patterns differ according
to income levels.
6) Media Habits: Rural people are fond of music and folklore. In rural Maharashtra a popular form
of entertainment is the Tamasha. Rural folk listen to the brave deeds of their hero Shivaji. Likewise,
in Uttar Pradesh, Nautanki entertains the Rural customer. And then there are T.V, Radio and Video
films.
7) Other variables: Culture, language, religion, caste and social customs are some other important
variables for profiling a rural consumer. Rural consumers have a lot of inhabitations and tend to be
rigid in their behavior. A company has to take intense care while targeting them.

STP Of HLL

Segmentation

As we know that HUL'S product is the most useful for every one.we use the product from
morning to till we sleep.it has many varities of product which is used by everyone from
the age of 5 to 60 years.but according to me teenegers (age 14 to 30) use the product the
most.as we know that there are three class of segments(upper , middle and
lower)according to the income.so HUL has all these three segments because the price of
its product varies. they have the price accordingly.

MARKET POSITIONING
Positioning is the act of designing the company’s offerings & image so that it occupies a
distinctive place in the mind of the target segment. Positioning involves:-

1) Identifying the unique feature of the product (USP) as well as the differences of the
offer vis-à-vis the competitors offer.
2) Selecting the differences that have greater competitive advantages

3) Communicating such advantage to the target audience.

Brand Positioning
Hindustan Unilever Limited, 51.6% subsidiary of Unilever Plc, is the largest FMCG
Company in the country, with a turnover of Rs118bn. The company’s business sprawls
from personal and household care products to foods, beverages, specialty chemicals and
animal feeds. The company has a dominating market share in most categories that it
operates in such as toilet soaps, detergents, skincare, hair care, color cosmetics, etc. It is
also the leading player in food products such as branded packaged tea, coffee, ice cream
and other culinary products. 

The Marketing Mix & The 4 P's for the RIN Detergent

The Marketing Mix is the company’s “offer” to its target group. The Marketing Mix
consists of the so-called 4 P’s when we talk about physical products like the detergent
products and the 7 Ps when we talk about non-tangible products - services. 
It is important for a company to mix the 4/7 Ps in a way that will satisfy its target group.

Product
They company “Detergent” sells organically grown FMCG products, for the consumer
who likes to take care of him or herself. We are talking about so-called convenience
goods with a short durability at relatively low prices.

 Neem soaps.
 Herbal soaps.
 Baby soaps.
 Bathing soaps.
  Washing detergent.
 Vessel Soaps.
Price
The Detergent prices are low/ medium. Based on where you by them ore what you buy.
So the products are comparatively cheap which means that many can afford them. It is
important that the company knows its target group and knows what the target group is
willing to pay for the products. Of course, prices should always be com-petitive.
Therefore it is vital for the company to have information about competitor’s prices.

Our pricing objectives are:

    • The maximization of   long term profits

    • The increase in sales volume

    • The growth in market share
    • Company growth
    • Match competitors prices
    • Survival
    • Enhance the image of brand and product
    • Create interest and excitement about our new product Pricing strategy

Place/ distribution

The company is B2C related which means that its target group is consumers on the B2C
market. They use a mixture between intensive and selective distribution. All the shops are
run on a franchising basis.HUL's distribution network comprises about 4,000
redistribution stockists, covering 6.3 million retail outlets reaching the entire urban
population, and about 250 million rural consumers. 
We have analyzed the distribution network of HUL from the following aspects:

 Evolution of HUL’s distribution network

   Transportation & Logistics
 Channel Design
  Initiatives taken for channel member.
Promotion
The company is against promotion, so they don’t do business by promoting, but
they have their own internet site, where you can see their selection of products. So
the company supports animal and human rights, and the economically cli-mate.

 Haats or weekly markets:- where people from surrounding villages

conduct trade on fixed days. Covering the needs of a minimum of 10 to a
maximum of 50 villages, drawing as many as 51352 villagers.
 Meals:-gatherings of people for entertainment as well as the sale and
purchase of goods and services. Over 3445 melas are held in orissa annually
that hold an average of 2.6 lakh visitors.
 Wall Paintings:-one of the most widespread forms of advertising and are
quite the favorite amongst the Orissa rural masses.
 Customer contact ‘touch points’: includes 'Home-to-Home' campaigns and
other such customer contact programs that help initiate a close interaction.
 Van Campaigns:-one of the most popular modes of communicating with
rural consumers.
 Event Management: There are several folk forms of events that are
performed in different states all over Orissa.
 Folk media: It consists of folk songs, dances, puppetry, street theatre, magic
shows etc.
 Interactive games: Many companies designs interactive games that help
draw large crowds where trials can be induced, thus facilitating spot sales.

 4 A’s approach of Indian Rural Market

 Opportunity
 As a result of the growing affluence, fuelled by good monsoons and the increase in
agricultural output to 200 million tones from 176 million tones in 1991, rural India
has a large consuming class with 41 per cent of India's middle-class and 58 per
cent of the total disposable income. The importance of the rural market for some
FMCG product because the rural consumption increase day to day. The rural
market for FMCG products is growing much faster than the urban counterpart.

 The 4A approach for Orissa

 The rural market may be appealing but it is not without its problems: Low per
capita disposable incomes that is half the urban disposable income; large number
of daily wage earners, acute dependence on the vagaries of the monsoon; seasonal
consumption linked to harvests and festivals and special occasions; poor roads;
power problems; and inaccessibility to conventional advertising media.

 However, the rural consumer is not unlike his urban counterpart in many ways.
 Availability
 The first challenge is to ensure availability of the product or service. In Orissa
there are 51352 villages are spread over 1.2 million sq km; 700 million Indians
may live in rural areas, finding them is not easy. However, given the poor state of
roads, it is an even greater challenge to regularly reach products to the far-flung
villages. Any serious marketer must strive to reach at least 13,113 villages with a
population of more than 5,000. Marketers must trade off the distribution cost with
incremental market saturation. Over the years, India's largest MNC, Hindustan
Lever, a subsidiary of Unilever, has built a strong distribution system which helps
its brands reach the interiors of the rural market.

 To ensure full loads, the company depot supplies, twice a week, large distributors
which who act as hubs. These distributors appoint and supply, once a week,
smaller distributors in adjoining areas.

 Affordability
 The second challenge is to ensure affordability of the product or service. With low
disposable incomes, products need to be affordable to the rural consumer, most of
who are on daily wages. Some companies have addressed the affordability
problem by introducing small unit packs.

 (i) Affordability: The income of rural consumers is unsteady. The sources of

income as well as the size of income earned per day vary. They cannot hence
make planned purchases and large purchases. Small pack sizes help the rural
consumer pick the product at a price that he can afford.
 (ii) Usage: Certain products like detergent and paste are bought in larger
quantities, whereas shampoos, toilet soaps, eatables are bought in small pack sizes.
The reason for this is: ‘The products that are common to family members are
bought in large pack sizes whereas individual-use products are preferred in small
packs’.
 (iii) Storability: The storage life of a product also has a bearing on this
decision. Edibles, for example, cannot last long unless preserved and kept under
ideal conditions. Further shelf space of rural consumers is also limited as they live
in small huts or semi-pucca houses.

 (iv) Benefits to Retailer : The small pack sizes are convenient to the retailer
to do his business and promote the national brands. The shelf space of rural
retailers is less. He cannot afford big premises. Small pack sizes do not demand
shelf space.
  (v) Display : Smaller sizes are easy to display. They increase the visual appeal
they carry compared to large ones, the colors on the smaller packs are looked at
with more interest.
 (vi) Implications to marketers : Manufacturers prefer producing large
pack sizes. The economies of scale indicate that small pack sizes are less feasible.
However, on the marketing side, benefits are revealing.
 • They induce strongly rural consumers to buy.
 • Trail sales of national brands are on the rise.
 • Regular sales are growing up for many products. The regional\ local players are
finding it difficult to face competition from the big players on their home turf.

 Acceptability
 The third challenge is to gain acceptability for the product or service. Therefore,
there is a need to offer products that suit the rural market. The insurance
companies that have tailor-made products for the rural market have performed
well. The company tied up with non-governmental organizations and offered
reasonably-priced policies in the nature of group insurance covers. With large
parts of rural India inaccessible to conventional advertising media — only 9 per
cent rural households have access to TV — building awareness is another
challenge. Fortunately, however, the rural consumer has the same likes as the
urban consumer — movies and music — and for both the urban and rural
consumer, the family is the key unit of identity. However, the rural consumer
expressions differ from his urban counterpart. Outing for the former is confined to
local fairs and festivals and TV viewing is confined to the state-owned
Doordarshan. Consumption of branded products is treated as a special treat or
luxury.

 Awareness
 Hindustan Lever relies heavily on its own company-organized media. These are
promotional events organized by stockiest.

 The key dilemma for MNC’s ready to tap the large and fast-growing rural market
is whether they can do so without hurting the company's profit margins.

RURAL PRODUCT STRATEGIES OF HLL

The following are the product strategies for the rural market and rural consumers:
1. Small Unit Packing: This method stands a good chance of acceptance in rural
markets. The advantage is that the price is low and is easily affordable by the rural
consumer. Products like shampoos, pickles, biscuits, etc have tested this method.
2. New Product Designs: The manufacturer and the marketing men can think in terms of
new product designs, keeping in view the rural life style.
3. Sturdy Products: Sturdiness of the product either in terms of weight or appearance is
an important criterion for rural consumers. For the rural consumers, heavier weight
means that the product is more durable,
4. Utility Oriented Products: Rural consumers are more concerned with the utility of
the product and its appearance.

5. Brand Name: The rural consumers do give their own brand name on the name of an
item. A brand name or logo is very important for a rural consumer for identification
purposes.

6 Branding: Brand is the term, name, sign, symbol, design or a combination of them,
which helps to identify the seller products & identify them from competitor products. Its
primary purpose is creating an identity of the product.

7 Combi-packs: Another packaging innovation is ‘combi-packs ’. When related

products are packed together and sold at economy prices, the consumer finds it a better
option to buy. The combi-pack may become an assortment when more than two products
are packed together
8 See-through packs: Many companies are coming up with new packages that are
attractive as well as economical.

 FINANCIAL ASPECTS

 FIXED CAPITAL
Sl. No. Details Qty Value (in Rs.)

1 Detergent plodder with 5 HP Motor 1 47,000

2 Sigma blender (350 Kgs. capacity) 1 15,000

3 Stamping machine 1 5,000

4 Platform weighing scale 1 5,000

 5 Miscellaneous expenditure   3,000

6 Furniture and fixture   5,000

Total 80,000

 MACHINERY AND EQUIPMENT

1 Land 5000sqft 500000

2 Godown 3000sqft 1100000
3 Loan 12% of 10lakhs 120000
4 Machinery And Equipment 80000
Total 18,00,000

 Total FIXED COST per kg of production of soap: Rs. 18,00,000

 WORKING CAPITAL PER MONTH
 PERSONNEL

Value per kg
Sl. No. Description Nos.
production

1 Skilled Worker 2 1.5

2 Semiskilled Worker 2 1.25

3 Watchman 1 0.3

Total   3.05

 RAW MATERIALS

Sl. No. Particulars Qty.(Kg.) Rate(Rs./Kg.) Value (Rs.)

1 Oil 100 32 3200

2 Soda Ash 16 38 608

3 Water 50

4 Sodium silicate (binder) 100 9 900

5 Filler powder 50 3.25 162.5

6 Foam booster 2 120 240

7 Color 0.5 500 250

8 Perfume 0.2 200 40

Total 318.7 ≈ 315 5400

 Cost of raw materials to produce 1kg of soap: Rs.17.14


 UTILITIES

Sl. Cost per kg of production

Particulars Cost per month
No.

1 Power 5000 0.5

2 Water 200 0.02

Total 1,700 0.52

 OTHER EXPENSES

1 Postage and Stationery 400 0.04

2 Repairs and Maintenance 400 0.04

Total 800 0.08

 DEPRICIATION

 10% of Rs.12000 per month: Rs.0.06 per kg of production of soaps

 Total VARIABLE COST per kg of production of soap:

 3.05+17.14+.52+0.08+0.06 = Rs.20.85



 TOTAL SALES (Per Annum)

         

By sale of 1,20,000 kg @ Rs. 30 per kg Rs. 36,00,000


        

 PROFITABILITY (Per Annum)

         Profit =36,00,000 – 20,56,800 – 1,20,000(interest on loan)= Rs. 14,23,200

         Net Profit Ratio : Net profit x 100 / Turnover

         14,23,200 * 100 / 36,00,000

         = 39.53%

         Rate of Return : Net profit x 100 / Total Investment

         14,23,200x 100 / 18,00,000

         = 79.06%
       




 BREAK EVEN ANALYSIS

 Sales price = Rs. 30 per kg
 Variable cost = Rs. 20.85 per kg
 Fixed cost = Rs. 18,00,000
 Break Even Quantity = X

 Fixed Cost + X * Variable Cost = X * Sales Price
 18,00,000 + X * 20.85 = X * 30
 X = 196721 kg
 Taking 10,000 kg per month production capacity,
 No. of months required to achieve Break-Even Quantity = 196721/10000 = 19.67 ≈ 20 months

CONCLUSION
As we know that the Indian rural market is one of the big markets in the world. Rural
Market is Gold Mine which is paved with Thorns but HLL has rightly tapped it. However
there is a long way to go to capture all the rural markets. In Rural markets company face
various problems like Underdeveloped People and Underdeveloped Markets, Lack of
Proper Physical Communication Facilities, Many Languages and Dialects, Dispersed
Market , Low Per Capita Income, Low Levels of Literacy , Different way of thinking of
Rural Consumer, etc. HLL was the first FMCG to tap rural markets and has generated
huge revenues from rural markets. We say that HLL used the effective strategy to
promote or distribute the products. So we try to adopt the HLL Strategy to grap to the
rural as well as urban customer.
RECOMMENDATIONS
We are not a major FMCG to enter rural markets, but not the only one now. There are
many companies which entered rural markets. we needs to be competitive and keep on
updating its strategy to have a foothold in the Rural markets. For India to maintain and
improve economic growth it is imperative to improve rural markets. Even today there is
imbalance in rural development. Government and Marketers have to undertake measures to
improve the rural markets.

Thus, Product innovation, smart merchandising and distribution would be of key

importance for FMCG products to become a success in the coming years. While
marketers will need to explore new areas of growth potential, FMCG marketers also warn
against being laid back to the fact that retail shelves are overcrowding by the day.
 BIBLIOGRAPHY
 Pradeep Kashyap, Amp, Siddhartha Raut, (July  2005): Rural Marketing.
 Ramkishen.Y, (2nd Edition, 2004): Rural & Agricultural Marketing
 C.S.G. Krishnamacharyulu and Lalitha Ramakrishna, Rural Marketing,
published in 2002.
 Philip Kotler, (10th Edition) : Marketing Management
 Rajan Saxena, (2nd Edition) : Marketing Management

Websites:

 Singh, R.L. (ed.) (1971). India: A Regional Geography, Natural

Geographical Society of India, Varanasi
 http://www.scribd.com/doc/34884904/Rural-Marketing-Strategies-Hll
 http://www.scribd.com/doc/20541418/Distribution-Strategies-in-Rural-
Markets
 http://www.slideshare.net/aashimna3/hindustan-lever
 http://www.indianmba.com/Faculty_Column/FC213/fc213.html
 http://www.oppapers.com/essays/Unilever/447582