BUSINESS SPECIAL .....................Why rural connect of Indian MNCs is a boon

Why rural connect of Indian MNCs is a boon





The rural DNA of Indian MNCs is their biggest strategic asset that will be hard for any other country to match

In the last three years, I had the fortune of visiting ten developing countries with the largest rural population seven in Asia (India, China, Indonesia, Pakistan, Bangladesh, Vietnam and Philippines) and three in Africa (Nigeria, Ethiopia and Egypt). These ten countries collectively include about 2.2 billion rural consumers out of more than 3.4 billion rural consumers in the world (around 65%) and 3 billion rural consumers in Asia and Africa (around 73 %).

During my travels, I conducted hundreds of interviews with companies and NGOs and did market visits to rural areas and urban slums for my next book on the emergence and dynamics of rural consumers in developing countries. India leads this pack and the world with more than 800 million consumers living in rural markets and more than 150 million rural migrants living in urban centres who maintain links with their families, visiting them during festivals, special family occasions and harvest times, and supporting them financially through remittances. Rural migrants living outside India (especially in the Middle East) are connected with their families through Skype and mobile phones and remit extensively. Despite urbanisation, number of Indian consumers living in rural markets is not going south any time soon.

The rural BRIC

Consider the much talked about BRIC countries: Brazil, Russia, India and China. Brazil and Russia are mostly urbanised with less than 15% and 26% of their populations living in rural areas respectively. In fact, Brazil is more urbanised than the USA. Further, both of these countries have GDP per capita of more than $10,000 and are not considered developing countries as per my first book on developing countries, The 86 % Solution.Although China's GDP per capita is still less than $10,000, it has an active agenda to accelerate urbanisation -about 48 % of its population lives in rural markets, the second largest in the world. In terms of percentage of population living in urban areas, India is where the USA was at the end of 19th century and China is where it was in 1920s. Time will tell how fast India and China will attain the current percentage USA urban population size of more than 80%.

So how do the progressive companies grow in India? They grow by having an inclusive strategy that focuses both on urban consumers and rural consumers. It is in their DNA. Consider Hindustan Unilever Limited (HUL). Although it is a European MNC, its Indian DNA is very rural along with Pakistan and Bangladesh, other two members of the top ten rural club, who report to its Mumbai office.

Unilever, in these three countries, caters to the needs of more than 1 billion rural consumers (more than 33 % of rural consumers living in Asia and Africa). It is not a coincidence that HUL requires its new executive recruits to spend some time in rural markets. I met a few senior executives during my travels who credit this feature of their HUL initiation for their success with their new positions.

HUL is considered a rural innovation hub in the Unilever universe. Many of its rural innovations have been rolled out to other developing countries (e.g, Shakti Amma , Help A Child Reach 5 campaign).

Rural aspirations and missed calls

During my travels, I was not surprised to find that aspirations of rural mothers are not any different from their urban counterparts.Why should they be? They also want the best for their families and children. Overall, their incomes are increasing and thanks to mobile and satellite technologies; they are connected via mobile phones and television.Consider, for example, the recent acquisition of Bangalore-based ZipDial by Twitter.ZipDial has capitalised on the “missed call“ behaviour of Indian consumers and is helping companies like HUL connect their brands to rural consumers. “Missed Call“ behaviour is not unique to Indian consumers. During my travels, my drivers communicated with me through missed calls. Even the Indian TV industry is using rural or semi-rural settings and stories to create successful TV serials that appeal even to urban consumers. Directbroadcast satelliteinternet service providers, like Dish in the USA, are broadcasting these stories all over the world.

Indian MNCs are leading the way in rural consumer markets. I learned a lot from a number of companies from different sectors, including Dabur, Marico, Hero, Maruti , CEAT, Dish TV, Airtel, Micromax, Mahindra, Aadhaar Retailing, FINO, ICICI Bank and Amul. I did not realise that India has one of the largest tribal populations. I was moved by the work done by an amazing NGO called PRADAN that helps tribal families attain sustainable living and make them potential consumers for the various products and services. Social Franchisors created by World Health Partners are bringing medical advice and medicines to the rural consumers via emerging video technologies.It is now crossing the seas to Africa. FICCI and Government of India Technology Board is working with the IC2 Institute at the University of Texas at Austin, my academic home, to nurture young entrepreneurs to develop rural innovations and solutions that they can export to other developing countries also.

In my opinion, the rural DNA of Indian MNCs is their biggest strategic asset that will be hard for any other country to match.It is the rural DNA that they can and are carrying across the 86% of the world population that lives in developing countries. They understand how to appeal to the aspirations of rural consumers amidst lack of infrastructure, economic and language diversity, and unorganised retail markets. Consider Africa. Almost all of its 50 plus countries have huge rural populations including Tanzania, Kenya, Uganda, Sudan, South Africa and Mozambique. I am sure this is not news for some of the Indian MNCs. Many of them are already there.

By Vijay Mahajan CDET27FEB15