MARKETING MANAGEMENT I
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Harshita Baranwal A4 Anshika Aggarwal A6 Avantika Kansal A13 Ankit Gupta A41 Nishant Jayaswal A42 Rishibha Rai A48 Nandini Mahajan A53
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Rural Marketing Initiative by Reliance Communication
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INTRODUCTION From the strict marketing point of view, the market structure in India is dichotomous having rural and urban markets. But many do not concur with this view as they contend that consumer everywhere is a consumer and hence their needs, aspirations, beliefs and attitudes will also be the same. The fact, however, remains that there are certain unique characteristic features which call for separate marketing strategies to be distinctively developed to suit the rural and urban market behavior. Conditions existing in urban markets at present can also be analyzed in this context. First, the urban markets have almost reached a saturation level that further tapping them with a high profit margin has become difficult. Secondly, competition is becoming tough in urban markets compelling many firms to incur heavy costs in promotional expenditure. Thirdly, the awareness level of urban consumers is high and hence product features have to be changed often. Needless to say this process needs a huge investment which will have a negative impact on profitability. Thus, except perhaps for easy reach the urban markets have become as oasis.
Significance of Rural Markets The rural markets are estimated to be growing fastly compared to the urban markets. The potentiality of rural markets is said to be like a 'woken up sleeping giant'. These facts are substantiated in a study of market growth conducted by various researches. In recent years, rural markets have acquired significance in countries like China and India, as the overall growth of the economy has resulted into substantial increase in the purchasing power of the rural communities. On account of the green revolution in India, the rural areas are consuming a large quantity of industrial and urban manufactured products. In this context, a special marketing strategy, namely, rural marketing has taken shape. Sometimes, rural marketing is confused with agricultural marketing – the later denotes marketing of produce of the rural areas to the urban consumers or industrial consumers, whereas rural marketing involves delivering manufactured or processed inputs or services to rural producers or consumers. A number of factors have been recognized as responsible for the rural market boom to come into existence:
2. A marked increase in the rural income due to agrarian prosperity. Standard of living is also increasing in rural areas. 3. Large inflow of investment for rural development programmes from government and other sources.
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1. Increase in population and hence increase in demand.
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4. Increased contact of rural people with their urban counterparts due to development of transport and wide communication network. 5. Increase in literacy and educational level and resultant inclination to sophisticated lives by the rural folks. 6. Inflow of foreign remittances and foreign made goods into rural areas. 7. Change in the land tenure systems causing a structural change in the ownership patterns and consequent changes in the buying behaviour. 8. Rural markets are laggards in picking up new products. This will help the companies to phase their marketing efforts. This will also help to sell inventories of products out dated in urban markets.
What makes Rural Markets Attractive? Rural market has following arrived and the following facts substantiate this. 742 million people Estimated annual size of the rural market FMCG Rs. 65,000 Crores ‐ Durables Rs. 5,000 Crores ‐ Agri‐inputs (incl. tractors) Rs. 45,000 Crores ‐ 2 / 4 wheelers Rs. 8,000 Crores In 2001‐02, LIC sold 55 % of its policies in rural India. Of two million BSNL mobile connections, 50% in small towns/villages. Of the six lakh villages, 5.22 lakh have a Village Public Telephone (VPT) 41 million Kisan Credit Cards issued (against 22 million credit‐plus‐debit cards in urban) with cumulative credit of Rs. 977 billion resulting in tremendous liquidity.
42 million rural HHs availing banking services in comparison to 27 million urban HHs. Investment in formal savings instruments: 6.6 million HHs in rural and 6.7 million in urban
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Of 20 million Rediffmail signups, 60 % are from small towns. 50% transactions from these towns on Rediff online shopping site
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Strategies Dynamics of rural markets differ from other market types, and similarly rural marketing strategies are also significantly different from the marketing strategies aimed at an urban or industrial consumer. Rural markets and rural marketing involve a number of strategies, which include: ¾ Client and Location specific promotion involves a strategy designed to be suitable to the location and the client ¾ Joint or co‐operative promotion strategy involves participation between the marketing agencies and the client ¾ 'Bundling of inputs' denote a marketing strategy, in which several related items are sold to the target client, including arrangements of credit, after‐sale service, and so on ¾ Management of demand involves continuous market research of buyer's needs and problems at various levels so that continuous improvements and innovations can be undertaken for a sustainable market performance ¾ Developmental marketing refer to taking up marketing programmes keeping the development objective in mind and using various managerial and other inputs of marketing to achieve these objectives
¾ Unique Selling Propositions (USP) involves presenting a theme with the product to attract the client to buy that particular product. For examples, some of famous Indian Farm equipment manufactures have coined catchy themes, which they display along with the products, to attract the target client that is the farmers. English version of some of such themes would read like: ‐ The heartbeats of rural India ‐ With new technique for a life time of company ‐ For the sake of progress and prosperity ¾ Extension Services denote, in short, a system of attending to the missing links and providing the required know‐how
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¾ Media, both traditional as well as the modern media, is used as a marketing strategy
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¾ Ethics in Business form, as usual, an important plank for rural markets and rural marketing. ¾ Partnership for sustainability involves laying and building a foundation for continuous and long lasting relationship. ¾ Selection of sales force: The salesman in rural markets should be selected from the educated unemployed villagers, trained well and appointed as salesmen. The town‐to‐villages shuttling salesmen are to be replaced by stationary salesman in villages.
Opportunities
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Infrastructure is improving rapidly ‐ In 50 years only 40% villages connected by road, in next 10 years another 30%. ‐ More than 90 % villages electrified, though only 44% rural homes have electric connections. ‐ Rural telephone density has gone up by 300% in the last 10 years; every 1000+ pop is connected by STD
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Social Indicators have improved a lot between 1981 and 2001
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Low penetration rates in rural so there are many marketing opportunities. Durables Urban Rural Total (% of rural HH)‐ CTV & Refrigerator
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FMCGs Urban Rural Total (% of rural HH)‐ Shampoo & Toothpaste
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Marketers can make effective use of the large available infrastructure ‐ Post offices ‐ 1, 38,000 ‐ Haats (periodic markets) ‐ 42,000 ‐ Melas (exhibitions) ‐ 25,000 ‐ Mandis (agri markets) ‐ 7,000 ‐ Public distribution shops ‐ 3, 80,000 ‐ Bank branches ‐ 32,000
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‐ Number of "pucca" houses doubled from 22% to 41% and "kuccha" houses halved (41% to 23%) ‐ Percentage of BPL families declined from 46% to 27% ‐ Rural Literacy level improved from 36% to 59%
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Proliferation of large format rural retail stores which have been successful also. ‐ DSCL Haryali stores ‐ M & M Shubh Labh stores ‐ TATA/Rallis Kisan Kendras ‐ Escorts rural stores ‐ Warnabazaar, Maharashtra (annual sale Rs. 40 crores)
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PROBLEMS RELATED TO RURAL MARKETING The rural market offers a vast untapped potential; it should also be recognized that it is not that easy to operate in rural market because of several problems. Rural marketing is thus a time consuming affair and requires considerable investments in terms of evolving appropriate strategies with a view to tackle the problems. The problems are:
Barter system In the developing country like India, even today the barter system i.e., exchange of goods for goods exists. This is a major obstacle in the way of development of rural marketing.
Underdeveloped people and underdeveloped markets The agricultural technology has tried to develop the people and market in rural areas. Unfortunately, the impact of the technology is not felt uniformly through out the country. Some districts in Punjab, Haryana or Western Uttar Pradesh where rural consumer is somewhat comparable to his urban counterpart, there are large areas and groups of people who have remained beyond the technological breakthrough. In addition, the farmers with small agricultural land holdings have also been unable to take advantage of the new technology.
Lack of proper physical communication facilities Nearly 50 percent of the villages in the country do not have all weather roads. Physical communication to these villages is highly expensive. Even today, most villages in eastern part of the country are inaccessible during monsoon season.
Inadequate Media coverage for rural communication A large number of rural families in own radios and television sets there were also community radio and T.V sets. These have been used to diffuse agricultural technology to rural areas. However the coverage relating to marketing is inadequate
The number of languages and dialects vary from state to state region to region. This type of distribution of population warrants appropriate strategies to decide the extent of coverage of rural market.
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Many language and Dialects
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Market organization & staff The size of the market organization and staff is very important, to manage market system effective control. However the existing organizational setup particularly at district and block level needs to be strengthened in order make the services on various aspects available to the farmers timely and also easily accessible to them.
Other influencing factors in Rural Marketing Natural calamities and Market conditions (demand, supply and price). Pests and diseases, Drought or too much rains, Primitive methods of cultivation, lack of proper storage facilities which exposes grain to rain and rats, Grading, Transport, Market Intelligence (up to date market prices to villagers), Long chain of middlemen (Large no. of intermediaries between cultivator and consumer, wholesalers and retailers, Fundamental practices (Market Dealers and Commission Agents get good part of sale of receipts).
Major Losers Small and marginal formers, 75% villagers are illiterates or semiliterate, they facing difficulties like proper paper procedures for getting loans and insurance. The farmers facing high interest rates for their credits (Local money lending system). Most of the credit needed for agricultural inputs like seeds, pesticides, and fertilizers.
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Traditional mind not to react new ideas.
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Agricultural income mostly invested in gold ornaments and weddings.
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Low rural literature.
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Not persuading new thinking and improved products.
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The Major weakness and challenges
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EMERGING TRENDS IN MARKETS
ONLINE RURAL MARKET (INTERNET, NICNET) Rural people can use the two‐way communication through on – line service for crop information, purchases of Agri‐inputs, consumer durable and sale of rural produce online at reasonable price. Farm information online marketing easily accessible in rural areas because of spread of telecommunication facilities all over India. Agricultural information can get through the Internet if each village has small information office.
INFORMATION THROUGH LOCAL AGRICULTURE INPUT DEALERS Most of the dealers have direct touch with the local farmers; these farmers need awareness about pests, decease, fertilizers, seeds, technology and recent developments. For this information, farmers mostly depend on local dealers. For development of rural farmers the government may consider effective channel and keep information at dealers, for farmer education hang notice board and also train the dealer recent changes and developments in agriculture. National Chain Stores: large number of stores set up in different rural areas throughout the country by the same organization for marketing its products. Thus national chain stores can serve large number of customers in rural area.
COST BENEFIT ANALYSIS Cost benefit can be achieved through development of information technology at the doorsteps of villagers; most of the rural farmers need price information of agri‐produce and inputs. If the information is available farmers can take quick decision where to sell their produce, if the price matches with local market farmer no need to go near by the city and waste of money & time it means farmers can enrich their financial strength.
NEED BASED PRODUCTION Supply plays major role in price of the rural produce, most of the farmers grow crops in particular seasons not through out the year, it causes oversupply in the market and drastic price cut in the agricultural produce. Now the information technology has been improving if the rural people enable to access the rural communication, farmers awareness can be created about crops and forecasting of
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future demand, market taste. Farmers can equates their produce to demand and supply, they can create farmers driven market rather than supply driven market. If the need based production system developed not only prices but also storage cost can be saved. It is possible now a days the concept of global village.
MARKET DRIVEN EXTENSION Agricultural extension is continuously going through renewal process where the focus includes a whole range of dimensions varying from institutional arrangements, privatization, decentralization, partnership, efficiency and participation. The most important change that influences the extension system is market forces. There is a need for the present extension system to think of the market driven approach, which would cater the demands of farmers.
PROCESSING INDUSTRY India is the second largest producer of fruits and vegetables in the world with an annual production of more than 110 million tones of fruit and vegetable only 1.3 percent of the output is processed by the organized sector commercially, the reason higher consumption in fresh form. However, as the packaging, transportation and processing capacities increase, the market for processed fruits and vegetables is projected to grow at the rate of about 20 % per annum. 100 % export oriented units (EOU) and Joint venture units required improving the processing industry.
APANAMANDI / KISAN MANDI / RYTHUBAZAAR There is a need to promote direct agricultural marketing model through retail outlets of farmer's co‐ operatives in urban areas. The direct link between producers and consumers would work in two ways: one, by enabling farmers to take advantage of the high price and secondly, by putting downward pressure on the retail prices.
RURAL AGRI- EXPORT Rural produce, raw fruits and vegetable, processing goods, have the potential market in Asian, Europe and western countries. Particularly south countries have commendable potential for Indian rural produce.
Under this concept, both the supply of inputs and servicing of inputs are undertaken at the same point or by the same company.
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INTEGRATED MARKETING
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CONCLUSION Rural markets, as part of any economy, have untapped potential. There are several difficulties confronting the effort to fully explore rural markets. The concept of rural markets in India, as also in several other countries, like China, is still in evolving shape, and the sector poses a variety of challenges, including understanding the dynamics of the rural markets and strategies to supply and satisfy the rural consumers.
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RELIANCE COMMUNICATIONS LINES UP NET CONNECT PUSH Reliance Communications (RCOM) is planning a major rural push for its high‐speed wireless internet service Reliance Net Connect service. The company is expected to announce its rural Net Connect variant at a price range less than Rs 500 per month offering unlimited internet access. RCOM’s rural push is part of its strategy to build an aggressive presence and market share in the fast‐ growing rural internet market for its Net Connect service. According to industry estimates, nearly 20 per cent of the current internet users are emerging from Indian hinterland. Availability of relevant and meaningful local language content and applications on the net, together with affordable high speed access, may become the biggest enabler in the future growth of Internet usage in India, it is believed. Reliance Net Connect will address the gap in availability of high speed internet access at an affordable price point on a pan India basis across 400,000 villages and 20,000 smaller towns where it will introduce its wireless internet service, company sources said. As part of its strategy to drive Reliance Net Connect in Indian hinterland, RCOM is targeting the home user segment to convert dial‐up users in the rural areas where the speeds for such connections can go up to a maximum of 144 Bps. RCOM’s rural Net Connect variant will give the user a completely new experience with speed of up to 4 to 6 times faster than dial‐up connections. RCOM plans to target 30 per cent market share of the rural internet subscriber base over the next one year. The Reliance Net Connect Card will leverage the existing telecommunications infrastructure for its rural roll‐out. Reliance Communications has an established pan‐India, next generation, integrated (wireless and wire line), convergent (voice, data and video) digital network that is capable of supporting best‐of‐ class services spanning the entire communications value chain. Reliance Communications owns and operates the world’s largest next generation IP enabled connectivity infrastructure, comprising over 175,000 kilometers of fiber optic cable systems. The opportunity for RCOM’s Net Connect rural push is huge considering that 63 million of the 368 million literate population in rural India are English‐speaking, as many as 15.1 million are computer literates and 3.3 million active Internet users in rural India.
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An RCOM spokesperson said that the company “continuously evaluates options to enhance the value proposition of our products and services to our subscribers across India to enhance their overall product experience”.
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Anil Ambani’s marketing strategy has made millions of Indians happy; they got the best mobile tariffs in the world‐local call costs at 15 paise/minute, and STD call at 40 paise/minute When the VOICE&DATA jury, comprising eminent professionals from the telecom field, met in Delhi in June to choose the Telecom Person of the Year 2007, the five‐hour selection process was steamy. The reason was obvious: The telecom sector is growing faster than any other segment and naturally their CEOs have a lot to crow about. The jury had to select one from three CEOs, who had made it to the final list through nominations from the industry and the initial scrutiny. Among the three, one of the main contenders was a young CEO. The jury decided that he should come back next year to try and win the coveted award. The list now had two names‐both CEOs of two well‐known companies. The pivotal difference between the two: one is an entrepreneur and the other is not so popular, as his credit is shared among a number of his big daddies. Following a five‐hour closely held, hotly debated discussion, the name was announced: Anil Dhirubhai Ambani, chairman of Reliance Communications. Anil Ambani joined Reliance Industries (currently promoted by his brother Mukesh Ambani, following their split) in 1983 as co‐chief executive officer. Forbes ranked him number 104 among the World's Richest People in 2006. The Ambani family faced criticism when it announced its ambitious plans to build a countrywide telecom network, as its prior expertise lay in commodities‐textiles and petrochemicals‐business only. Apart from that telecom needs a service‐oriented mindset, critics felt. What they did not remember was how the family had served its millions of shareholders.
The same association with politicos gave him negative returns too when the Mayawati Government in Uttar Pradesh put a spanner on his ambitious plans to build a 1,200‐acre SEZ.
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Policies in India are made in line with Ambani's vision, says an industry expert. His business acumen and closeness to politicians assisted him in making it to the Rajya Sabha in June 2004, as an independent member. Ambani chose to resign voluntarily on March 25, 2006.
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Media sees his aggression when he announces financial results for the Reliance ADA group of companies, and when he attends the annual general meetings and faces questions from shareholders. When he meets the press, he has answers to all their questions. He also remembers to call select journalists by name. To merchant bankers he, who has already contributed immensely to the financial reforms of the country, is one of the financial wizards of the world. May be because of his expertise, he gave up in the race to grab Hutchison Essar stake, after indirectly jacking up the valuation. His negotiations with the Qualcomm chief are also a folk theory now.
How did Ambani become the VOICE&DATA Telecom Person of the Year 2007? What are his personal and organizational achievements in the recent past? His path‐breaking marketing strategy that was put in by the strongest team of telecom professionals the country has ever seen, has made millions of Indians happy as they got the best mobile tariffs in the world. The aggression resulted to adding to his already swollen kitty. Every hour India will be adding around 20,000 new mobile customers, and Reliance Communications over 4,000.
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Achiever's Pride
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Undertook financial restructuring of Reliance communications
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To spend Rs 16,000 crore to expand and strengthen network coverage
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After expansion, Reliance Communications will have the single largest wireless network in the world
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Launched the lowest‐cost classic brand handset at Rs 777
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Subscriber base grew to over 28 mn during last fiscal, registering 60% growth
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Total Revenue shot up to Rs 14,468 crore, an increase of 34%
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Net Profit rises to Rs 3,163 crore, an increase of over 600%
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Revenues of the wireless business increased by 46% to Rs 10,728 crore
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When mobile telephony first began in India, a local call cost Rs 16 per minute; an STD Rs 50; and a call to the US Rs 100 per minute. With Reliance Communications's pioneering price initiative, a local call now costs a mere 15 paise per minute, STD 40 paise, and a call to the US costs less than Rs 2 per minute. The presence of Reliance Communications is making the competition in India panicky. Global telecom forces will also shortly start feeling the heat. Ambani has also recently announced his Rs 1,200 crore buyout of Yipes Holdings.
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Broadband achieved revenue growth of 123% to Rs 1,144 crore
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Market capitalization crossed Rs 100,000 crore
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Will add 23,000 more towers
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Telecom services will be available in over 23,000 towns and 600,000 villages
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To launch premium IPTV services in top cities
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Next generation DTH network will be launched before end of the year
Reliance Communications' wireless subscriber base grew to over 28 mn last fiscal, registering a 60% growth. This makes it one of the top two wireless operators in India. "Economic growth in the future will be indexed to connectivity of millions of enterprise and individual customers. Over the next few years, we will have over 100 million customers, making us one of the top 5 telecom players in the world. In four years, we put up a total of 14,000 towers across the country. This year alone we will add 23,000 more towers. Our wireless network is currently available in 10,000 towns. By the end of this year, it will be available in over 23,000 towns and 600,000 villages," Anil Ambani said at the first annual general meeting of Reliance Communications since the re‐organization of the Reliance Group in June 2005. "In four years of operations, we invested around Rs 32,000 crore. This year alone we will invest over Rs 20,000 crore. At the end of this year, we will have covered over 90% of our population. If Version 1.0 of the Indian telecom story was all about affordability, Version 2.0 will be about reach. Our network expansion will give us the power to drive the market and stay ahead of the curve," Ambani adds. According to Ambani, the financial restructuring of Reliance Communications is the biggest turnaround story in the history of corporate India. The inherited ownership structure of Reliance Communications was complex. The reorganization has yielded a simple, fair, and transparent ownership structure, and given Reliance Communications 100% ownership of all operational and associate companies.
In addition to organic growth, Reliance Communications will leverage the advantages derived from this impressive financial platform to explore and pursue any significant opportunities available in the telecommunications sector. "We are currently evaluating a number of inorganic opportunities in select international markets to further expand our footprint," Ambani said.
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Reliance Communications is now among the three most valuable private sector companies in India, and the five most valuable telecom companies in Asia. In the current fiscal, Reliance Communications will spend Rs 16,000 crore to further expand and strengthen its network coverage across India and the rest of the world.
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Reliance Communication’s One India, One Tariff plan allowed millions to connect across India at just one rupee a minute. The company was the first one to break the Rs 1,000 entry‐barrier with the launch of the lowest‐cost classic brand handset at Rs 777. As per its expansion plan, Reliance Communications will have the single largest wireless network in the world, covering over 900 mn Indians or more than 15% of the global population. It will cover 23,000 towns or every single Indian habitation with a population of over 1,000. Reliance Communications will cover almost 100% of all rail routes, providing seamless voice, video, radio, and Internet connectivity to 14 mn commuters every day. It will also cover almost 100% of all national highways, and 84% of all state highways, giving millions of users the power to talk, text, surf, play, chat or simply stay in touch across nearly the entire length of India's 2,00,000‐ km‐long road network. Having achieved tremendous growth, the main challenge for Reliance Communications is to improve quality of service and ARPU. Its enterprise business is also not in a position to compete with the global majors. Stock market valuations may boost the fortunes of an entrepreneur, but Ambani needs to address the issues faced by the growing mobile customer base, especially in India, where bureaucracy takes pride in checking the businessman.
If you formulate a list of India Inc.’s most aggressive, Reliance Communications would be a frontrunner. Be it the sassy branding activities, bold marketing campaigns or strong below the line activities, RCL has constantly stormed the Indian telecom market with its aggressive streak. One experiences this belligerence in RCL’s approach, even when talking to Sanjay Bahl, Branding Head of the company: “Reliance has been a pioneer in spearheading the value creation and product innovation in the Indian telecom market. The spirit of our marketing strategy lies in leading the market growth,” he iterates. Always hawkish in its approach, the RCL brand has been creating maximum stir over the last few months, by launching a series of campaigns last year. Most of its initiatives like the Mobile TV, RIL India calling card, internet on the move and One India Plan (launched by RCL even before BSNL)
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went a long way in changing traditional market paradigms.
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Cooperative Limited (KRIBHCO) for selling its products in rural India. The JV company known as KRIBHCO Reliance Kisan Ltd is aimed at synergising the strengths of both companies to create a rural distribution model for sales of telecom and non‐telecom products. KRIBCO will hold 60% equity in the JV company with the balance 40% held by Reliance ADAG. RCOM’s tie‐up aims to be a counter to that of Bharti Airtel, which has a similar JV with Indian Farmers Fertiliser Cooperative (IFFCO), the country’s largest fertiliser PSU unit. In May, Bharti and IFFO had formed IFFCO Kisan Sanchar Ltd (IKSL) and said that the JV would harness the power of telecom to add value to the farm sector. Here IFFCO has a 50% stake while Airtel and Star Global have 25% each. According to industry estimates, the two state‐owned fertilizer units ‐ IFFCO and KRIBHCO ‐ jointly have more than 100 million farmers under their fold. This is a huge captive audience that these telcos are trying to exploit as they expand their services to rural India. In fact, such JVs will form a key as over 50% of all new cellular additions are accounted for by rural India. Besides, the potential in rural India as tele‐ density in these regions is a less than 15% compared to over 70% for the urban areas. RCOM’s president, wireless, S P Shukla told ET that the telco had chosen KRIBHCO because of its extensive reach across India. KRIBHCO has over 25,000 cooperatives, 6300 member cooperatives and 60 Krishi Seva Kebdras spread across the country. "Apart from their reach, they (the fertiliser company) has expertise in handling huge scales. We not only sell SIMs, but also handsets, fixed line phones, data cards and PCOs and we therefore need this scale and reach of KRIBHCO," he added. KRIBHCO Reliance Kisan Limited would also distribute in future products and services of other business enterprises of Reliance ADA Group including Reliance Capital, Reliance Entertainment and BIG TV DTH, the company said. The Joint Venture would provide additional source of business to Agricultural Cooperative Societies and help in strengthening the rural economy and the cooperative movement of the country, it added. This joint venture with Reliance Communications Infrastructure is a significant step forward which would result in an unmatched platform that would go a long way in providing each and every product/ service in rural India at par with urban India.
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