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:Amulsvisionistoprovidemoreandmoresatisfactiontothefarmers,theircustomers,employees anddistributers.

MISSION: we the motivated and dedicated workforce at amul are committed to produce wholesome and safefoodsofexcellentqualitytoremainmarketleaderthrough developmentofqualitymanagement system, state of art technology, innovation and eco-friendly operations to achievedelightment ofcustomers 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 INDUSTRYThe 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 FACTORSMarketing 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: StrengthTechnical ManpowerDemand is highMargin of profit is veryminuteStrong Brand Image.QualityCultural Preference.Mother Dairy: WeaknessesProblem inDistributionPerish abilityCompetition

Nestl: StrengthGrowing Sales and ProfitAggressive MarketingQuality ProductStrong Supply chain system.Nestl: WeaknessTarget Market is UpperMiddle class and high classCompetitorsEconomic slow down hasslow down demand

Private Diary: StrengthAbsolutely OptimisticDemand ProfilePotential Target market sizeis larger.More than 80%milk isproduced in unorganizedsectorPrivate Diary: WeaknessPerish abilityLack of control over the yieldProblem in Disturbution

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 FACTORSExternal Factors which are those factors which help to identify acompanies opportunities and threats a company has to face in theinternational environment. 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 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 IndustryIntense 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 Co-operatives 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 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 ProductThe 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 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.

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

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 moneyQuestion 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

3) PROBLEM ANALYSISFrom 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 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: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 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 LeadershipAMULs 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 ActivitiesIn 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.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 ProvidersWell 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 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

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 OUTCOMEUsing 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.

CONCLUSIONThe 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 long-termperspective. 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. 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.

BIBLIOGRAPHY

www.amul.com Times of india www.amul.tv www.google.com Strategic management books22