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EXECUTIVE SUMMARY
In this assignment the main highlight is about a Dairy Cooperative AMUL,in
western India that has developed a successful model for doing businessin large
emerging economy. It has been primarily responsible, through itsinnovative
practices, for India to become worlds largest producer of milk. This draws various
lessons from the experiences of AMUL that would beuseful to cooperatives
globally as well as firms that are interested in doingbusiness in large emerging
markets like India and China.Many of these economies have underdeveloped
markets andfragmented supply bases. Market failures for many of these
smallproducers are high. On the other hand, the size of both, markets and
thesuppliers is large. As a result, firms that identify appropriate businessstrategies
that take into account these characteristics are more likely tosucceed in these
markets. The following are some key message fromAMULs success: firms in
these environments need to simultaneouslydevelop markets and suppliers to match
demand and supply planning,develop or become a part of network of producers
(i.e., cooperatives inthis case) to obtain scale economies, focus on operational
effectiveness toachieve cost leadership to enable low price strategy. In addition, a
centralfocus to bring the diverse element together and a long-term approach
arerequired.
This report contains how Amul was formed , its measures of success
interms of sales turnover and identifying the problems faced by Amuland the
strategies used, the reason for such a success afterimplementing the strategies , the
weaknesses and threats associated. This report has also highlighted Amuls foreign
ventures.

Vision & Mission statement of AMUL:


VISION:A mu l s v i s i o n i s t o pr o v i d e m o r e a n d m o r e s a t i s f a c t i o n t o
t h e f a r me r s , t h e i r c u s t o m e r s , employees and distributers.
MISSION: we the motivated and dedicated workforce at amul are committed to
produce wholesome and
s a f e f o o d s o f e x c e l l e n t q u a l i t y t o r e m a i n m a r k e t l e a d e r t hr o u g h
d e v e l o p m e n t o f q u a l i t y management system, state of art technology,
innovation and eco-friendly operations to achievedelightment of customers and
milk producers.

Objective of the project:


Primary Objective:
To know the awareness level among the consumer for the Amul Milk.
To find out the causes of buying the Amul Milk.
Secondary Objective:
To find out the causes of not buying the Amul Milk.
To know the awareness level of Amul Gold and Amul Double Toned milk.
To study the usage pattern and buying behavior of Amul Milk.

1) INTRODUCTION
Strategic Management may be defined as the tool which is been usedby a
company to define their operation, image, values, goals,objectives, roles and
responsibilities, timelines etc. StrategicManagement involves integrating activates
of the various functionalsectors of a business such as marketing, sales, production
etc toachieve organizational goals.

1.1 INDIAN DARIY INDUSTRY


The Dairy industry in India has quadrupled its milk output of 84.6million
tons in2001. It has achieved the strength of a producer-ownedand professionally
managed cooperative system, despite the fact thata majority of dairy farmers are
illiterate or semi-literate and run smallmarginal operations, for many dairy farmers,
selling milk is their solesource of income. More than ten million dairy farmer
belong to 96000local dairy cooperative,Which sell their product to one of 170 milk
producers cooperative unions which,in turn, are supported by fifteen state
cooperative milk marketing federations.
Amul was setup in the year 1946, is a dairy co-operative in India .It is
abrand which is managed by an cooperative society which is Gujarat Co-operative
Milk Marketing Federation Ltd.(GCMMF).Which is been jointlyowned by 2.8
million milk producer in Gujarat. Amul has establisheditself as a uniquely
appropriate model for rural development. Amul hasspurred the White Revolution
of India, which has made India thelargest producer of milk and milk products in
the world It is also theworlds biggest vegetarian cheese brand Amul deal with a
wide range of milk products like Amul milk, Amulbutter, Amul milk powder, Amul
Ghee, Amul Spray, Amul Cheese ,AmulChocolates, Amul Srikand, Amul Ice
Cream, Nutramul and Amulyawhich make it a leading food brands in India.

1.2 INTERNAL FACTORS


Marketing decisions are guided by the overall objectives of thecompany for
now it is important to understand that all marketingdecisions, including price, work
to help achieve company objectives.We have to understand our business internal
strength andweaknesses. For example the main advantage of Amul is its widerange
of product. Were as its weakness is Amul deals with highlyperishable products.
Since Amul has a lot of competition in the market amul deal with a wide range of
milk products like Amul milk, Amulbutter, Amul milk powder, Amul Ghee, Amul
Spray, Amul Cheese ,AmulChocolates, Amul Srikand, Amul Ice Cream, Nutramul
and Amulyawhich make it a leading food brands in India.the most effective tool
which can be used is SWOT (Strength,Weakness, Opportunities, and Threats)
analysis which will help us toknow the companies strength and weaknesses over its
competitors. The main competition for Amul is Mother Dairy, Nestle, Britannia
andother Private Dairies.

FIGURE

SWOT ANALYSIS CHART

Mother Dairy: Strength


Technical Manpower
Demand is high
Margin of profit is veryminute
Strong Brand Image.
Quality
Cultural Preference.
Nestl: Strength
Growing Sales and Profit
Aggressive Marketing
Quality Product
Strong Supply chain system.

Mother Dairy: Weaknesses


Problem inDistribution
Perish ability
Competition

Private Diary: Strength


Absolutely OptimisticDemand Profile
Potential Target market sizeis larger.
More than 80%milk isproduced in
unorganizedsector

Private Diary: Weakness


Perish ability
Lack of control over the yield
Problem in Disturbution

Nestl: Weakness
Target Market is UpperMiddle class and high
class
Competitors
Economic slow down hasslow down demand

Amul has always ensured that the product mix and the sequence inwhich
Amul introduces its product is consistent with the core philosophyof providing
milk and its milk products at an affordable price. Amul have a brand position
which is the perceived fitbetween a product and the needs of the target market ,
relative tocompetitive product offering.

1.3 EXTERNAL FACTORS


External Factors which are those factors which help to identify acompanies
opportunities and threats a company has to face in theinternational environment.
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According to it isunderstood that there is a broad classification of the


externalenvironments, which it refers to as the macro-environment, as listed below:
demographic environment
economic environment
natural environment
technological environment
political environment
cultural environment

POTERS FIVE FORCES will help us in a better understanding of the external


situations which will helps to understand the market for Amul.

With the identification of the limitations of the products, it is necessaryto


analyze competitive forcers in the environment in order to identifyopportunities
and threats. Porters five forces help to do the abovemention analysis.

.1.The risk of entry by potential competitors


Potential Competitors is those companies, which are not in the marketat
present but can make entry if they require. In the current situationAmul have lot of
existing competitors like Mother Dairy, Nestle, PrivateSector Dairies. Amul will
have to take steps for preventing the entry of potential Competitors which are
private dairies and other companieswhich are already popular and are planning to
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launch milk and milkproducts. Amul should take steps in order to safeguard its
marketshare and to generate profit. The prevention of potential companywill help
the existing company to have economies of sale as they willhave to increase the
production and at the same time it would help inmaintaining the brand loyalty as
the choices available would be less.

2.The Intensity of Rivalry among established Companies


withinan Industry
Intense Competition in todays fast-paced domestic markets hascaused
massive reconstruction of the industries and business Dairy industry is one such
industry in India which is growing rapidly and there are a number of dairies Cooperatives and private companyscompetiting to get market threshold.The
competitive struggle between Amul and Mother Dair in the Dairyindustry is to gain
market share from each other. The Competition ison the bases of Price, Product
Design, Advertising and Promotionspending, Direct Selling effort and support.
Since there has beenintense rivalry between Mother Dairy, Amul, Nestle and
Britannia etcthis has caused lowering of prices and in result hike in cost of
production. Intense Competition is treat to profitability.

3. The Bargaining Power of Buyers


The power of buyer is the impact that customers have on a product. Inmarket
were there are lot of suppliers and one buyer the buyer setsthe price .The
importance of each individual buyer to your business,the cost to them of switching
from your product to those of someoneelse, and so on. The customers who are
loyal to the brand will stick tothe same brand and they will be major contributors to
the price.

4. The Bargaining power of suppliers


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The Bargaining Power of suppliers refers to their ability to raise priceand/or


reduce the quality of good and services. Supplier focus relative to buyers is large.
There are many companies competingfor the supply of milk products and few
buyers. Supplier products are not differentiated. In general supplier products do not
have high switching costs and therefore buyers are free to choose between many
suppliers. Power of suppliers in this industry is low.

5.The closeness of substitutes to the Product


The treat that Amul competitors like Mother Dairy, Nestle, Britanniaact
provides in relation to the price has an impact on the sales of Milkand milk
products. , as customers can easily switch to substituteproducts which are being
available in the market causes a great threat.In above the context the company has
to pay the price of switchingsuch as redesigning the product and evaluating the
strategies that canhelp to attract the customer. The greater the switching cost the
lowerthe chances of the customers to change its brand.

2) THE CURRENT MARKET POSITIONING OF AMUL


Amul has a very strong brand appeal, wide product portfolio, Amul isAsia
number one dairy brand which has well-spread distributionnetwork, and aggressive
marketing strategy. Amul has always beenproactive in maintaining its leadership
position in the dairy productssegment by launching new products, research and
developmentinitiatives, and innovative sales strategies to enhance customer
satisfaction. Amul hasbeen the leading market leader for products like ghee and
butter andbeen owing a market share of 85% .Amuls turnover has increased at a
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healthy compound annual growthrate of 23 % over the past four years, on the back
of its superiormarket position. Amul, being a co-operative, has strong control over
its procurement costs; it has the flexibility to fix procurement costs basedon the
profits earned at the end of the year. Moreover, GCMMF has atough financial risk
profile, supported by steady growth in the dairymarket.
The main advantage of Amul is that it maintains its quality atthe same time
make it affordable.Over the years, Amul has come up with many products. There
hasbeen product line extension as well as product category extension withwhich
Amul has been successful in satisfying its customers with various need.

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With the help of BCG analysis we will be able to place Amuls product.

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With the use of BCG analysis we can know which product is the mostimportance
to the brand Amul.
Star Product are the one that generates money
Question mark is a product with small market share in a growingmarket therefore
referred as problem child.
Dog a unit with no future growth as its market is matured.
Cash Cow is a premium product as it has high market share in afast growing
market

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3) PROBLEM ANALYSIS
From beginning with the formation of its first milk cooperative,
AMULnetwork has sustained an impressive growth rate for more than 50
yearsestablishing in the growing of Indian dairy industry as the worlds leading
milk producer. However, it is uncertain whether AMULs strategy andpractices that
have worked well for long can maintain this growth route ina changing
environment with globalization and increased competition. This part of the
assignment describes some of AMULs challenges thatneed to be overcome.
However, in the new rising environment, severalchallenges have become evident
and AMULS network needs to evolvepositive approach to respond to these threats.
First, competitors arecutting into milk supply by offering marginally higher
procurement pricesthereby challenging the practice of provision of services for
long-termgrowth in lieu of higher prices in the short-term.
Second, for a section of its membership, dairy activity is a stepping-stone for
upward mobility inthe society. Typically, such members move on to other
occupations afterraising their economic position through milk production. As a
result, AMULis unable to realize the full benefits of its long-term strategy, and
findsnew members (mostly marginal farmers) to replace those who havehigher
potential and capacity.
AMUL is facing problem on establishing a network of firms in order
toovercome the complexities of a large yet fragmented market like those
inemerging economies by creating value for suppliers as well as thecustomers.
AMUL has led the milk dairy revolution in India that has nowemerged as one of
the largest milk producers in the world.

3.1 STRATEGY
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In order to determine which strategy is best suited for the problemfaced


Amul the Grand Strategy Matrix is being used ,which helps todecided which is the
most appropriate or which strategy should beselected in order to solve the
problem.This is done by evaluating internal and external success factors .The
following are the problems faced by Amul.

AMULs business strategy is driven by its twin objectives of overcoming the


challenges faced by the organization like (i) long-term,sustainable growth to its
member farmers, (ii) value proposition to a largecustomer base by providing milk
and other dairy products a low price (iii)to make proper use of its funds.Its
strategy, which evolved over time,comprises of elements described below.

1.Simultaneous Development of Suppliers and Customer ROMs:


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When Amul was first formed, the cooperative should have realized
thatcontinued growth for the long-term was conditional on matching supplyand
demand. Further, given the primitive state of the market and thesuppliers of milk,
their development in a synchronous manner wassignificant for the continued
growth of the industry. The organization alsoshould recognize that in spite of the
poor infrastructure in India, suchdevelopment could not be left to market forces
and realistic interventionswere required. Accordingly, AMUL and GCMMF
adopted a number of strategies to assure such growth. For example, at the time
AMUL wasformed, the vast majority of consumers had limited purchasing power
andwas value conscious with very low levels of consumption of milk and
otherdairy products.
Thus, AMUL adopted a low price strategy to make theirproducts affordable
and guarantee value to the consumer. The success of this strategy is well
recognized and remains the main plank of AMUL'sstrategy even today. The choice
of product mix and the sequence in whichAMUL introduced its products is
consistent with this philosophy. Beginningwith liquid milk, the product mix was
enhanced slowly by progressiveaddition of higher value products while
maintaining desired growth inexisting products. Even today, while competing in
the market for highvalue dairy products, GCMMF ensures that adequate supplies
of low valueproducts are maintained. The supply side, as mentioned earlier,
themember-suppliers were typically small and marginal- farmers had
severeliquidity problems, were illiterate and had no prior training in dairyfarming.
AMUL and other cooperative Unions adopted a number of strategies to develop the
supply of milk and assure steady growth. First,for the short term, the procurement
prices were set so as to provide fairand reasonable return. Second, aware of the
liquidity problems, cashpayments for milk supply was made with minimum of
delay. For the long-term, the Unions followed a multi-pronged strategy of
education andsupport. For example, only part of the surplus generated by the
Unions ispaid to the members in the form of dividends.
A substantial part of this surplus is used for activities that promote growth
of milk supply andimprove yields. These include provision of veterinary services,
support forcold storage facilities at the village societies etc. In parallel, the
Unionshave put in place a number of initiatives to help educate the members.The
dual strategy of immediate development of the market and memberfarmers has
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resulted in parallel growth of demand and supply at a steadypace and in turn


assured the growth of the industry over an extendedperiod of time.

2. Cost Leadership
AMULs objective of providing a value proposition toa large customer base
led naturally to a choice of cost leadership position.Given the low purchasing
power of the Indian consumer and the marginaloptional spending power, the only
possible option for AMUL was to priceits products as low as possible. This in turn
led to a focus on costs and hadsignificant implications for managing its operations
and supply chainpractices.
For example the company has been very aggressivelymarketing its cheese
product. When the low cost pizza was introduced ,AMUL used this strategy were
to increase sale of one product cheese they reduced the cost of another product
pizza.

3. Focus on Core Activities


In spite of Amul having a small beginningsand limited resources, it became
clear quite early that AMUL would not bein a position to be an integrated player
from milk production to delivery tothe consumer. Accordingly, it has to chose a
strategy to focus on coredairy activities and depend on third parties for other
complementaryneeds. This viewpoint is reflected in almost all phases of AMUL
networkspanning R&D, production, collection, processing, marketing,
distribution,retailing etc. For example, AMUL focused on processing of liquid milk
andconversion to variety of dairy products and associated resedevelopment. On the
other hand, logistics of milk collection anddistribution of products to customers
was managed through third parties.

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However, it will play an important role in making support servicesavailable


to its members wherever it found that markets for such serviceswere not
developed. For example, in the early stages, its small andmarginal member farmers
did not have access to finance, veterinaryservice, knowledge of basic animal
husbandry etc. Thus to assurecontinued growth in milk production and supply,
AMUL actively requiredand worked with partners to provide these required
services. In caseswhere such partnerships could not be established, AMUL
developed thenecessary capabilities and provided the service.

4. Managing Third Party Service Providers


Well before the ideas of core competence and the role of third parties in
managing the supplychain were recognized and became fashionable, these
concepts werepracticed by GCMMF and AMUL. From the beginning, it was
recognizedthat the core activity for the Unions lay in processing of milk
andproduction of dairy products. Accordingly, the Unions focused efforts onthese
activities and related technology development. Marketing efforts(including brand
development) were assumed by GCMMF. All otheractivities were entrusted to
third party service providers.
These includelogistics of milk collection, distribution of dairy products, sale
of productsthrough dealers and retail stores, some veterinary services etc. It is
worthnoting that a number of these third parties are not in the organizedsector, and
many are not professionally managed. Hence, while thirdparties perform the
activities, the Unions and GCMMF have developed anumber of mechanisms to
retain control and assure quality and timelydeliveries . This is particularly critical
for a perishable product such asliquid milk.

5. Financial Strategy
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AMULs finance strategy is driven primarily by itsdesire to be self-reliant


and thus depend on internally generatedresources for funding its growth and
development. This choice wasmotivated by the relatively underdeveloped financial
markets with limitedaccess to funds, and the reluctance to depend on Government
supportand thus be obliged to cede control to bureaucracy. AMULs
financialstrategy may thus be characterized by two elements: (a) retention of
surplus to fund growth and development, and (b) limited/ no credit, i.e.,
alltransactions are essentially cash only.
For example, payment for milkprocured by village societies is in cash and
within 12 hours of procurement (most, however, pay at the same time as the receipt
of milk). Similarly, no dispatches of finished products are made withoutadvance
payment from distributors etc. This was particularly important,given the limited
liquidity position of farmer/suppliers and the absence of banking facilities in rural
India. This strategy will strongly help AMULimplement its own vision of growth
and development. It is important tomention that many of the above approaches
were at disagreement withindustry practices of both domestic and MNC
competitors of AMUL.

3.2) AMULS PLANS TO GO GLOBAL


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In spite of the wide market that Amul has in India it is been taking steps toits
expand it market abroad. Were Amul has been quite successful ininternational
market by achieving a 34%market growth (Mathur andMathur,2009). Amul has
already introduced its products to countries likeU.S.A, Nepal South Africa, Kenya,
Bhutan, Bangladesh, Thailand, Australia,Singapore and gulf countries etc.Amul is
also planning to introduce itsproducts to countries like Russia, UAE, Japan and
Srilanka. Amul has madeagreement with international retail chain Wal Mart to
sell Amul s product through its outlets under the brand name Amul itself.
Amul has also beenplanning to make tie ups with international company to
introduce newproducts in the market .For example Amul has made an agreement
withGlaxo were Amul will pair up with this company in order to produce
andlaunch baby food which will be a add on to Amul product list.

4) PRODUCTION OUTCOME
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Using the Delphi Method of forecasting that helps in evaluating thefuture


trends based on a series of questioning repeatedly by expertsfor suitable
information and decision making.Using the method of prediction the main
advantage in setting up smalldistribution units with in each district helps in
reducing the fuel costwhich would be much higher when it is to be taken to a
common place for processing.
The outcome is to save the profits by cutting minimal fuel costs. Alsothe
initial costs which has to be incurred for setting up the distributionunits would be
high as each district will have one processing unitincreasing the expenditure and
other important costs.
Second evaluation is Amul has to see to it that the Member farmersare being
provided with all the AMULs journey towards excellence ismarked by some
critical understanding of the business environment inlarge emerging economies
like India where markets have to bedeveloped by combining efficiency related
initiatives with increasingthe base of marginal suppliers and consumers. It
combined market andsocial development in an emerging economy. It recognized
the inter-linkages between various environments that governed the lives of
marginal milk farmers and the unmet needs of consumers. It also changed the
supply chain paradigm in order to reduce the cost to theconsumer while increasing
the return to the supplier.

CONCLUSION
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The market for milk and milk product is more customers oriented
thanSupplier Centered as a result requires a close look at customers
needsand quality .Due to the strong competition from its competitors
therehas been a variation on the sale of Amuls Products.In this report
various Parameters on which sale of Amul dependswhich were been
discussed.
Environments with underdeveloped markets and suppliers as in the
caseof AMUL add one more aspect of difficulty relating to the relative
pace of growth of these two areas. Through its pricing strategy, AMUL
has beenable balance the growth in markets and suppliers and has
achieved somedegree of management. Otherwise, gaps between demand
and supplywould require balancing strategies.
Development of suppliers likewise requires nurturing with a longtermperspective. It is interesting to note that this was achieved by
AMUL through a process of education and social development activities
-activities that are not usually considered to be standard
businesspractices. This type of out of the box vision is essential for
developinginnovative mechanism in new, unfamiliar environments
where building of relationship with consumers goes much beyond
marketing messages anduseful product offerings.
The example of Amul is the informative example for
multinationalcompanies and others contemplating operations in
emerging marketsby taking advantage of the local small and medium
enterprises.

In suchcases large businesses are built by forging linkages with


these enterprisesthereby changing the boundaries of the entering firm.
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Such a partnershipreduces the operational risk while providing a credible


source of understanding the behavior of the consumer through the
experience of partners. It also provides operational flexibility and makes
the networkresponsive to changes within and outside. To be effective it
is importantthat decision-making be decentralized to the extent possible,
withappropriate coordination mechanisms to ensure consistency in
thesystem. The leadership of such organizations have always been
largerthan life and have been seen to play an important role in the
building of the society even today.

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BIBLIOGRAPHY

www.amul.com
Times of india
www.amul.tv
www.google.com
Strategic management books

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