ITC ECHOUPAL INITIATIVE:

A CHALLENGE OF INCLUSIVE
GROWTH
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices Olivia Momosor
Case Information
Discipline: Value Chain
Description: ITC Chairman challenged International
Business Division (IBD) to generate a new business
plan that would increase the divisions revenues to
$442.6 million by 2005.
Learning Objective: To figure out how to improve the
ineffective supply chain for agricultural goods.
Subjects Covered: Indian culture, supply chain,
technology
Setting: India; Soybean Industry; 2003


Dahod 25 KM S
Olivia Momosor
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
Imperial Tobacco Company of India
Limited
Founded August 1910
Indian Conglomerate
Changed to I.T.C. Limited in 1974
Vision: A Commitment Beyond the Market
Business Portfolio
Cigarettes & Tobacco
Hotels
Information Technology
Packaging, Paperboards & Specialty Papers
Agri-Exports
Foods
Lifestyle Retailing
Greeting Gifting & Stationery

http://www.itcportal.com/the_itc_profile/history_evolution.html
Olivia Momosor
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
Business Strategy
ITC Vision
Sustain ITC's position
as one of India's most
valuable corporations
through world class
performance, creating
growing value for the
Indian economy and
the Companys
stakeholders

ITC Mission
create a sustaining
high economic growth
rate with equity over
many years in order to
convert the worlds
largest pool of
economically
disadvantaged people
into viable consumers,
thereby translating
development into
economic freedom.

Olivia Momosor
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
Definitions
Choupal: Hindi word for evening gathering,
where villagers chat, gossip, or share stories
and news from the day
Mandi: Hindi word for market yard


Olivia Momosor
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
Information Systems Strategy Triangle
Business Strategy:
-A Commitment beyond the market
- Create economic freedom
- Reengineer supply chain
- Fix market inefficiencies
- Information sharing
- Differentiation



Organizational Strategy:
- Work with village culture
- Have transparent pricing
- Technology is available to everyone
- Reimbursement for transportation
- Waiting area at processing facilities
-No commitment required to join ITC eChoupal network


IS/IT Strategy:
- eChoupal kiosks
- Computer
- Connection lines
- UPS power supply
- Printer
- Internet access for remote villages
- Technology training for farmers
- Created pricing trends
- Computerized weightbridge
- Performed soil testing


Olivia Momosor
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
DAvenis 7 Ss

Which of DAvenis 7 Ss is most applicable to
ITC?
Shifting the Rules of Competition
Found new ways to serve their customers and
transformed the industry

Steve Hartman
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
Porters Competitive Forces
Model
Threat of New
Entrants?
Low-Moderate
Bargaining Power of
Buyers?
High
Bargaining Power of
Suppliers?
Moderate-High
Threat of Substitute
Products?
Moderate
Industry
Competitors?
Low
Steve Hartman
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
Four Actions Framework
ELIMINATE:

Intermediaries
Farmers Risk Aversion
Time Pressure (Perishable)
RAISE:

Crop Yield
Quality of Product
Level and Quality of Information
REDUCE:

Inefficiencies in the Market
Inconvenience to the Farmer
Instability of Income
CREATE:

New Marketplace
Trust and Transparency Throughout
the Supply Chain


Steve Hartman
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
1. What was ITCs motivation for creating the
eChoupal?
IBD lagging behind other divisions
Ineffective supply chain for agricultural goods
Farmers losing 60-70% of potential crop value
Agricultural yields of 1/3 to of global standards
Middlemen reduced profit margin
Unfair practices
Farmers had limited capacity for risk
Minimized investment in crops
Lower crop value, slimmer margins
Farmers didnt want to risk new farming methods
Tracey Abdo
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
2.(a) What were the old & new physical flows &
information flows in the channel?
Old Physical Flows
Farmers hauled produce on a 1-day journey to
mandi for auction
Often had to wait 2-3 days to get into market
1700 farmers per day
Farmers at mercy of CAs offer
No way to store unsold produce
Then hauled to winning bidders shop for weighing
Manually operated scales resulted in 0.5% loss
Cash payment delayed after unofficial credit period
CA brought produce to ITC processing facility
CA receives reimbursement for soybeans
Tracey Abdo
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
2.(a) What were the old & new physical flows &
information flows in the channel?
Old Information Flows
Choupal served as primary source of information
for farmers
Due to isolation of farmers, no market price
information other than word of mouth
Farmers hauled to market in hopes of receiving
enough to cover their costs of transport
Forced to settle for whatever they could get
No access to weather report
Poor access to crop education
Tracey Abdo
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
2.(a) What were the old & new physical flows &
information flows in the channel?
New Physical Flows
Eliminate the middle-man the mandi
Farmers sold directly to one of 44 ITC hubs
Same distance as mandi
ITC hubs serve as one-stop shop
Herbicides, sowing seeds, gas lanterns, soy bean oil
ITC saved $5/ton on freight cost
In return, reimbursed farmers for travel time, resulting
in $8/ton increase fore farmer.

Tracey Abdo
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
2.(a) What were the old & new physical flows &
information flows in the channel?
New Information Flows
Transparency of Information
Access to information via eChoupal
Weather Reports
Global crop standards
Best Practices
Market prices from around the world
Demand, production, prices: highs & lows
7-10 day market outlook on Chicago Board of Trade
Q&A forum
News page

Tracey Abdo
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
2.(b)What made this implementation
successful?
Based on belief that farmer needed an
alternative to the mandi system
Worked with and respected existing culture:
choupal, sanchalak
Transparency of information
No obligation
Tracey Abdo
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
3.(a) What barriers did ITC face in embarking on
this project?
The current supply chain must be broken


Transactions outside the mandi was prohibited
by the Agricultural Produce Marketing Act
The cultural infrastructure in the villages
Perishable product (soybeans) = time pressure
Trust
Lack of technology in villages


Village A Mandi B
Factory
C
Olivia Momosor
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
3.(b) How did the principles espoused by ITC
overcome the obstacles facing the eChoupal?
eChoupal kiosks places technology at the
core of the new supply chain, allowing
farmers to break away from old supply
chain
Government amended Agricultural
Produce Marketing Act to allow legalized
purchases of soybeans (and other
agricultural commodities) outside the
mandi
ITC convinced the government of the potential
benefits to the farmers and the economy

Incorporated new supply chain into already existing of the
Choupal by placing the eChoupal kiosks in lead farmers
homes
Sanchalak lead farmer who received basic IT training, served as
the liaison between ITC and the famers

Olivia Momosor
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
3.(b) How did the principles espoused by ITC
overcome the obstacles facing the eChoupal?
Continued
Time pressure and corruption were extinguished through
the transparency of the eChoupal
Accessible to everyone
Prices being offered were shown in writing
Created price discovery, so farmers were able to make informed
decisions of where to sell their beans
Expanded upon Mandi model
Farmers received cash upon delivery
Reimbursed for transpiration costs
Website provided information on whether, best practices, crops,
market, Q & A, and news
Processing facility offered soil-testing lab

Olivia Momosor
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
4. How was value created in this model? Can
everyone in this supply chain win?

Yes! ITC created a system in which value is created for
everyone along the supply chain (Value Chain Model)
Farmers- Access to new information
Empowered them to make their own decisions
Allowed them to produce a better product
Increased profitability by 8$ a ton
Sanchalak- Farmers representative
0.5% commission on the sale of soybeans
2%-3% commission on complimentary products
Herbicides, sowing seeds, fertilizers, gas lanterns, etc.
Samyojak- Broker between ITC and farmers
2%-5% commission per transaction
1% commission on cash disbursements
More opportunities to earn commission off farm inputs

Steve Hartman
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
5. How should ITC develop this platform for the
future? Is this model sustainable? Why?

ITCs Future
Develop Infrastructure
More Hubs, Kiosks, and Choupals
Create a barrier to entry for competitors
Expand Into Other Regions and Markets
Coffee, Seafood, Wheat
Maintain Founding Principle of Trust and Transparency
Continue to Innovate
Continue to Provide Beneficial Information
Continue to Update and Enhance Information Technology

Steve Hartman
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
Is ITCs Competitive Advantage
Sustainable?

This model will only be sustainable as long as
there are inefficiencies in the market that
technology and information sharing can fix.
Once these inefficiencies are corrected, ITC must
rely on
Ability to Innovate
Loyal network of suppliers
N Steve Hartman
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
Recommendations
1. Continue to Develop Infrastructure
Create a barrier to entry for new competitors

2. Expand into Other Markets and Industries
Maintain principles of trust and transparency

3. Continue to Innovate and Develop
Information Technology

Steve Hartman
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
Lessons to Be Learned
Information is the Key
Allows for more productivity
Creates a better product
More efficient marketplace
Trust and Transparency throughout the
Supply Chain
Creates a value chain that everyone can benefit
from
Acknowledge and Respect the Existing
Culture
http://www.youtube.com/watch?v=qkHWdhobgiM

Steve Hartman
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
Current Position
Over-arching vision of the company:
"Enduring Value. For the nation. For the
Shareholder."
Over 26,000 people employed
More than 60 locations across India
4 million farmers empowered
6,500 e - Choupals installed
Recognitions:
One of Worlds Most Reputable Companies by
Forbes
Top 50 Asias best performing companies by
Business Week

Olivia Momosor
John Wiley & Sons, Inc. & Dr. Chen, Information Systems Theory and Practices
Nation Oriented

"ITC believes that its aspiration to create enduring
value for the nation provides the motive force to
sustain growing shareholder value. ITC practices
this philosophy by not only driving each of its
businesses towards international competitiveness
but by also consciously contributing to enhancing
the competitiveness of the larger value chain of
which it is a part.
--Chairman Y C Deveshwar
Olivia Momosor
Questions?