Executive Summary
HLL has enjoyed a
competitive advantage as a sole provider of personal hygiene care
products before the liberalization of India’s economy. However, with the
entry of foreign MNC, HLL is suffering from stagnant growth and lower
profit margin. Project Shakti was created to address these issues. The
high growth of Shakti has created managerial challenges to the project
management team. As Shakti grows, the current management structure has
become inefficient to make it profitable with minimum costs. Thus,
restructuring management measure is crucial to sustain Shakti in the
long run and to provide HLL with competitiveness.
Challenges of Project Shakti
Rural
market is already giving HLL a competitive advantage. But competitors
are also tapping into the rural market with existing HLL direct
channels. Thus to continue HLL competitive edge, Project Shakti is
essential. Until 2004, Shakti is contributing 3.5% (pg 6 & 17: 15 x
20 / 85) towards HLL total revenues and it still has potential to
continue growing. This is because personal hygiene awareness is in the
increase. Shakti may be able to achieve the founder’s dream of 15%-20%
of total revenues, assuming that Shakti can increase the usage rate of
current consumer. However it will not achieve the market penetration of
over 500 million rural population as this figure signifies that HLL will
nearly monopolize the rural market with 80% penetration rate. The
greatest challenges that Shakti face are costs and management control to
make it profitable.
Managing Project Shakti in the long term
The
Shakti system in the beginning of the project was good but not
sufficient to handle the growth it had obtained. Thus changes are needed
to make it more cost effective and profitable. As Shakti matures, there
are a number of entrepreneurs who are more successful than the others.
HLL’s RSP can organize a monthly gathering for all entrepreneurs in the
same district, encouraging interaction and communication among
entrepreneurs. By doing so, the experience and knowledge of the
successful entrepreneurs will motivates others. This will increase the
efficiency of each entrepreneur (profit increase) and also decrease the
amount of time spent by RSP to visit individual entrepreneur, giving RSP
more time to explore untapped villages in the same district. Thus the
current 500 RSP is sufficient to manage 25,000 entrepreneurs. Also, HLL
should be focus only in states with SHG movement to increase its cost
effectiveness. HLL should also cultivate more successful entrepreneur
from existing entrepreneur as organic growth of these entrepreneur is
faster and easier to give profit. As HLL penetration to rural market is
only a mere 16% (1 entrepreneur in 5 villages, pg 12), the market
potential and market size is big enough to give a fair share to every
player, thus the conflict between Shakti entrepreneurs and direct sales
channel, if ever arise will be minimal. Moreover, a control measure can
be applied by limiting the number of entrepreneur in each district thus
minimizing conflict.
iShakti and Shakti Vani – survivals for Shakti
iShakti
and Shahti Vani are Shakti’s initiatives created to provide rural India
with access to information and social communication. Although the
setting up costs for those two programs are quite high, Rs 150 million,
funding is likely to be achievable because this cost occupies about 3.6%
of Shakti’s revenues (150 / 3.5% x 120,000 (pg 2)) and therefore Shakti
itself can finance these programs. Funding is also possibly receivable
by persuading other profits centers to invest in the programs and by
using the revenues of iShakti to finance Vani. Furthermore, iShakti will
have high potential revenues from selling MR to the internal customers
and to sell the channel to other interested, non-competitor parties,
e.g: banks, insurance companies,
farm equipment etc. Vani itself does not generate revenues directly,
but it is a powerful tool to increase hygiene awareness in rural India,
as a result indirectly increase HLL sales at long term. In short,
iShakti and Vani will be workable and scalable to help Shakti success.
Social Impact and Role of Business
HLL
should make a social impact on rural India. By involving in the
improvement of rural living conditions, HLL can and will continue to
enjoy the competitive advantages as the main company to participate
in social development. The connection between business and communities
will develop lifetime customers for HLL. This involvement may not be the
typical role of business, but as long as it is profitable to HLL
without compromising moral and legal issues, it will be a good move for
HLL to increase its reputation as a socially responsible organization.
Conclusion
Project
Shakti started to suffer from growing so big that the current structure
needs to be adjusted. Restructuring the managing measure of RSP to
entrepreneurs, focusing Shakti in selective districts and prioritizing
efforts in existing entrepreneurs, Shakti will generate higher revenues
with minimal increase in costs. Shakti should continue as it is
providing HLL a distinct competitive edge and increase HLL’s profits and
growth. Moreover, Shakti helps to position HLL as socially responsible
organization.
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