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Table of Contents
1 Synopsis and Summary of Facts...............................................................................1
2 Physical flows and Information flows......................................................................1
2.1 Old Traditional System......................................................................................... 1
2.2 New System........................................................................................................... 2
3 Impact on Key Players................................................................................................ 3
4
5 AGRIBUSINE
Barriers ITC faced and there Solutions...................................................................3
Similarities and Differences between Samriddhi and ITC....................................3

SS VALUE
6 The Way Forward........................................................................................................ 4
7 Learning from ITC eChoupal Initiative.....................................................................5

CHAINS
Exhibit#1 - Old/Traditional Buyer Driven Value Chain Flow diagram......................................................6
Exhibit#2 Unproductive Cycle Diagram........................................................................................ 6
Exhibit#3 New Integrated Value Chain Flow diagram.......................................................................7

WAC#1 ITC
Exhibit#4 Impact on Key Player in the Value Chain..........................................................................8
Exhibit#5 Barriers Encountered and their Solutions..........................................................................9

eChoupals
Exhibit#6 Similarities and Differences between ITC and Samriddhi....................................................10

Roll#: 17010059

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1 Synopsis and Summary of Facts

eChoupal is a technological initiative started by ITC Limiteds International Business Division (IBD),
in May 1999, to streamline the value chain of crop soya beans. IBD was lagging behind other companys
division in terms of revenues. IBDs strategy was to reduce costs and inefficiencies by moving away
from current traditional supply chain and reorganizing it, also minimizing the role of middle men in the
process. It was aiming to achieve its goal of Rs.2,000 crore by year 2005 and hoped to shift the
procuring ratio of soya beans to 20% mandi, 80% eChoupal from 50%-50% ratio. To enhance the
capabilities of ITC and Indian agriculture IBD need to focus on the following factors: fragmented farms,
overdependence on monsoons, lack of sophisticated inputs and farming practices. Soya beans and its
byproducts comprised of two-thirds of companys agricultural export business.

eChoupal was originated from Choupal which means meeting place in a rural village. eChoupal is a
virtual market place where a farmer can sell his produce to the company at a better price. It was
developed in house by a company owned subsidiary. Objective of eChoupal was to provide the farmer
with an alternative to mandi system, where he could sell his produce without being exploited. Success of
eChoupal was strongly dependent on trust, transparency of information and freedom of choice it had
developed with the farmers. Opportunity of interacting was the initial driver of Choupal. Farmers were
free to use eChoupal facilities to gain as much information and insights of best farming practices and
global plus local markets. Beside farmers, ITC also benefited with eChoupal initiative. Now the
company had more control over the quality of the product and they were sourced directly with the
farmer. Furthermore, higher quality produce enabled more competitive pricing in the market.

Now IBD is seeking additional application of the eChoupal concept. They are considering using the
Roll Out, Fix It, Scale Up strategy and eventually scale up on a national scale. Then ITC is in view of
replicating the eChoupal for other crops such as wheat and coffee. However, other crops have their own
set of challenges which is a test of ITC entrepreneurial capabilities. Likewise, company is looking to add
various farming input items, i.e. fertilizers, chemicals, seeds etc, to its product portfolio for new
business.

2 Physical flows and Information flows

2.1 Old Traditional System
Traditional system is a buyer driven value chain business model (Exhibit#1 show roles of key player). It
is often in the buyers interest to procure a flow of products and use finance as a way of facilitating and
or committing producers, processors and others in the value chain to sell to them under specific

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condition. In this system middlemen clogged the supply chain reducing profit margins for both farmers
and ITC. CA had the most power in the value chain. This traditional value chain system was far from
efficient. Following are the list issues associated with this system:

Limited technological resources and no access to quality farming inputs to produce quality crops.
Unfair practices how farmers were paid. Instead of getting paid immediately, CAs usually paid a
farmer after an unofficial credit period. Resulted in loss of value in agriculture, as small farmers
could not start preparation of the coming season because of scarcity of money.
Farmers were unaware of market dynamics. The mandis was usually overloaded with soya beans
produce, which further drove down the prices as there were limited buyers. Moreover, as the
transportation cost was high and not storage facilities available, farmers were exploited through a
waiting game to sell their produce at a lower prices. As it was costly for farmer to take his produce
back to village, so he opted to sell it.
CAs knew what prices will be paid by the company and tried to buy the produce at as much lower
cost as possible to maximize his profits. Encouraged malpractices by CAs.

Under this system both farmers and processor were locked in an unproductive cycle (Exhibit#2).
Farmers had low appetite for risk due to the unpredictability of the weather, market demand and
customer expectation. Therefore, they minimized the investment and were hesitant to experiment with
new farming methods. Which translated into lower value crop with little margins.

2.2 New System

The newly improved system is an integrated value chain model (Exhibit#3 show roles of key player).
ITC has leveraged existing infrastructure and players to make it efficient and aligned. Main feature of
the new system is that it connects farmers to the market systems and eliminates the need for the
middlemen, who was the drivers in the traditional system. Integrated models involves vertical
integration with in the value chain. Here integration was sought out by ITC. The company was focused
on increasing revenues by meeting consumers demand of quality product. This model depends upon the
degree to which the individual levels are tightly linked. Information and services are passed down the
chain to farmers. The middlemen were replaced by ITC hub warehouses and eChoupals which were
supervised by Sanchalaks. eChoupals created a virtual market where farmers can assess consumer
demands and market dynamics. Distance and asymmetry of markets information no longer restricted
farmers. eChoupals act as an information centers for the farmers. It was equipped with the technological
equipment and access to internet. Through internet farmers attained power of information. They had
access to live data of local and global market systems to make informed decisions. Previously farmers

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relied on word of mouth. Moreover, farmers can learn best farming methods from colleagues and experts
to improve their crop yields and quality. Website also included weather forecast which allowed farmers
to plan and schedule their farming practices. A sanchalak oversaw the eChoupals. Sanchalak was the one
of the most trusted members of the village. He worked closely with ITC (as infrastructure was setup in
his house) to share information with his fellow farmers. This helped eChoupals to provide transparent
information and transactions. ITC hubs provided farmers with an alternative option of selling their
produce. Farmers were immediately paid, depending upon their quality. Farmers were reimbursed for the
cost incurred while transporting their produce to the factory. This provided additional cost saving, time
and an option to avoid the hassle of taking it to the mandis and waiting in queues. ITC hub provided a
platform for farmers to convince the warehousing hubs for keeping additional products which they were
likely to purchase. This provided ITC with an opportunity diversify their product portfolio and create an
additional revenue stream.

The new system allowed the company to buy directly from farmers. Now they had more control over
quality of the product. This enabled knowledge sharing of best practices which aided in producing
higher quality products. Higher quality produce enabled more competitive pricing in the market.

3 Impact on Key Players

See Exhibit#4 for comparison analysis of impact on key players due to change in business models.

4 Barriers ITC faced and there Solutions

See Exhibit#5 for barriers encountered and there solution analysis.

5 Similarities and Differences between Samriddhi and ITC

Both approaches were aimed to reduce the influence of middlemen in the value chain. However, their
objective was different. Samriddhi aim was empowering poor marginal vegetables and fruit growing
farmers, whereas ITC wanted more control over the quality of produce to reach their revenue goal by
year 2005. Samriddhi replaced the CAs and local mandis with collection officers (responsible to collect
crops from farmers according to the market demand) and hubs. On the contrary, ITC established a two
way communication via internet. This helped the company to better understand a farmers needs.
Furthermore, ITC reassigned roles CAs to samjoyaks, introduced sanchalaks to act as a liaison between
ITC and farmers. Hub provided farmers with an alternative to sell their produce, where they feel they
would not be exploited by the buyers. See Exhibit#6 for similarities and differences.

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6 The Way Forward

Re-crafting of value chain has brought success and growth opportunities for ITC. Company is seeking
new applications of the eChoupals concept. Firstly, ITC should introduce traceability of the produce.
This will allow ITC to create its own brand of soya beans (similar to Samriddhi) to capture greater value
of the consumer price. Example using timestamp technology to market freshness and quality of the
product. Secondly, take measures to match farmer production to consumer demand. ITC and farmers
will have the information how much of a specific product will be bought by the consumers. Will allow
farmers to concentrate and diversify their crop portfolio. Farmers will take on new initiatives and risks
and create new product selling channels. Ultimately, farmers profit will increase and they will invest
more in quality inputs. ITC will have the opportunity of moving into new products for export and meet
consumer expectations and demand better. Thirdly, introduction of electronic market place will provide
both farmers and ITC to evaluate market dynamics and mechanisms. They will gain valuable insights of
demand and expectation of specific markets. This will help them to take on a more focused approach for
a particular market. Also creating an online mandi will facilitate trading. Traders and wholesales will
avoid the inconvenience and cost of transportation and bidding. A direct selling channel can be created
through online portal with customers. Fourthly, ITC requires infrastructure and investment in IT if they
want to sustain growth. Technology is expensive and has a limited lifespan. Advantage for ITC is they
have an IT subsidiary which will help them to keep costs low and developing of website. Besides to
avoid intra organization conflict due to potential revenues. ITC should allow Infotech to receive
revenues from online marketing advertisements. IBD core competency is exporting crops, online
marketing channels should be handled by an IT expert. ITC will communicate which products farmers
are likely to buy through eChoupals. Also ITC can have advert contracts with farming input product
companies (i.e. fertilizers, chemicals, seeds). Fifthly, ITC can introduce video calling or virtual learning
training session with agri experts to help farmers gain better knowledge of agronomy and polices.
Sixthly, collaborate with insurance companies. This will allow ITC to change the risk averse mentality
of the farmers. Up till now insurance companies were focused on large accounts and did not have quality
data on smaller rural customers. ITC can facilitate these companies by providing them with insights
which they have acquired via eChoupals. Seventhly, ITC should not provide credit facilities as it is not
their core competencies. They can act a facilitator for banks and government agencies by providing
farmers with the relevant information regarding loans. ITC can collaborate with government officials
(similar to Samriddhi) to educate farmers about these polices via eChoupals. Eighthly, ITC is focused to
reduce their dependency on mandis. Aim is to reduce procuring ratio from 50%-50% to 20% mandi and

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80% eChoupals. Company can introduce reward system (similar to Samriddhi) where farmers are given
points for producing quality crops. These points can be exchanged with other farming products sold by
ITC. Finally, ITC is considering different commodities in other regions, which will be difficult. ITC will
have to invest in infrastructure and resources. They will have to go through the process of establishing
trust and integrity of the processes, which will take time. In MP, ITC had advantage of 100 years of
relationship with the farmers. To speed up this initiative ITC can collaborate with other companies i.e.
Samriddhi, ORVEM. These companies would already have a local footprint in the region, ITC would
not have to go through the ground work. ITC can work with Samriddhi by connecting and synchronizing
their hubs. Plus, Samriddhi can provide ITC value chain with the much need cold storage for perishable
crops. Joint venture will help companies to share valuable knowledge and data and create a win-win
strategy which will benefit both.

7 Learning from ITC eChoupal Initiative

Following are the learning from the case:

1. Comparing Samriddhi and ITC case, we can see approaches can to be socially or corporate interest
driven. Both approaches can help create and generate greater value in the supply chain.
2. To re-craft the value chain, we should look how roles of key players will be impacted. It is important
to change their ways, so we need to provide them with incentives and show them that the new value
chain will improve their incomes as compared to the previous one. Create a win-win situation.
3. Power of information. Connecting the two extreme end of the value chain, will help farmers to better
understand consumer expectation and demands, so they will plan and schedule their farming
activities accordingly. IT plays a big role as a facilitator of information. IT helps the companies to
gain valuable insights which will help in managing and understanding consumer expectations better.
It encourages farmers to take on more risks and raise their quality standards. Also farmers discover
true value and best prices of their produce. IT helps farmers to adopt best farming methods.
4. Creates entrepreneurial and leadership capabilities for key players such as farmers, sanchalaks and
samyojaks. More focus on investments and opportunities rather than being risk averse.
5. Integrated value chain will allow companies to reduce their costs and make it more efficient by
eliminating the non-value activities.

In the end, this approach is depended strongly on trust and freedom of choice. Establishing and
maintaining trustworthy relationship is a long term and ongoing process. Any company considering to
adopt this approach should make investment for a long term over haul of the value chain.

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Exhibit#1 - Old/Traditional Buyer Driven Value Chain Flow diagram

Exhibit#2 Unproductive Cycle Diagram

Risk
Averse

No
informati Low
on Investme
regarding nt
markets

Traditiona
Low
l Farming
margins
Methods

Low
productivi
ty and
quality of
crop

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Exhibit#3 New Integrated Value Chain Flow diagram

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Exhibit#4 Impact on Key Player in the Value Chain
How roles have changed with the business model
Players Old System
Before the new system farmers were at the
mercy of CA. They exploited with cheap tactics
such as prolonging the deal and improper
weighing techniques, to sell their product at a
lower price by the CA. Farmers were completely
Farmers unaware of the market dynamics. As mandi was
a distance and there were no storage facilities,
farmers were bound to sell their crops below its
true value. Besides, oversupply of crops in the
mandi reduced the chance of a farmer
receiving the true value of his produce.
Traditional were the driver of the value chain.
They were directly in contact with ITC. For each
mandi, ITC had a contracted agent, who used to
bid on behalf of the company. Company
communicated it demand and requirement with
these CAs and they were responsible to have
them full filled. Prices were already fixed by ITC.
Commissi
CAs now had the incentive to bid and buy the
on
produce as low as possible. As the difference
Agents
was their added benefit from the deal.
There was no official role in the old system. The
person was a trustworthy unoffical leader of the
small village. Farmers used to gather at his
house (everyday) to discuss and share
knowledge. Meeting place was called Choupal
Sanchala and was a type of an informal assembly.
ks
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New System
In the new system farmers had the
information to manage and freedom to
make informed decisions regarding
market dynamics, consumer demands,
growing of crops, farming methods and
weather forecasts. Moreover, it gave the
farmers an international perspective to
adopt a global approach and attain a
larger share of the consumer price.
The eChoupals leveraged the physical
capabilities of the CAs while removing
them from the flow of information and
market signals. In the new system these
CA were converted to Samyojak. They
now had the responsibility of setting up
the eChoupal, facilitating transactions,
assisting in logistics and helping in
maintaining warehousing hub creating a
retail sharefronts. Samyojak were paid
1% of the transaction value when buying
through the mandi. Moreover, there they
had more frequent opportunities to earn
commission of other products which were
sold through eChoupals. Commission
ranged from 2% to 5%.
Officially elected by the farmers in the
village. He acted as the liaison between
ITC and farmers. Sanchalaks became
entrepreneurs, they were responsible to
aggregate demand of products which
were sold through eChoupals, opportunity
to earn 2% to 3% commission per order.
They also earned commission for
arranging and mobilizing the farmers to
take the soya beans directly to ITC
facilities. Being elected as a Sanchalak
was a sense of pride for the person.
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Not a player in the old system. Instead the CAs
were responsible for meet ITC demands.
ITC Hubs
Hubs redefined the roles of the CAs. Now
ITC had direct channel with the farmers.
Through hubs ITC had control over the
quality of product and information. It
helped them to meet consumer demands
and become more competitive. Hubs
provided farmers with an alternative to
sell their produce. Moreover, farmers
were given transport reimbursement and
option of purchasing oil which saved
costs. A farmer earned an average
increase of $8/ton.

Exhibit#5 Barriers Encountered and their Solutions

Sr
# Barriers
IBD lagging behind other divisions
in terms of revenues. So
1
undertaking such a big project will
require a significant cash outlay.
Limited technological resources in
villages.
2
Middlemen clogged the supply
chain, reducing profit margins.
3
Malpractice of CAs, exploited
farmers.
Lack of market information of
farmers.
4
Relevancy of information.
5 No irrelevant content was shared to the eChoupals. Enhances
Transaction outside mandi were
prohibited by the government, to
6
protect the interest of the farmers.
Convince farmers to use
eChoupals.
7 Through eChoupals they could easily access any relevant
Trusting the new system was an
issue.
8 meet their responsibilities truthfully. This promoted trust
Solutions
Capitalized IT subsidiary of ITC known as ITC Infotech for
development of software. This is alignment of value chain.
ITC provided the required infrastructure to villages through
their own pockets. Setup cost is 170k per Choupal and an
additional 100k on training, communication etc. Part of
alignment and adoptability of value chain.
ITC collaborated with CAs, now they were earning commission
per transactions. Income potential of Samyojaks exceeded
from that of CAs in a mandi. Part of alignment of value chain.
Created eChoupals in villages. It acted as an information hub.
Farmers had access to market, district wise weather
forecasts, best farming methods and newsletter. Making the
value chain align, adoptable and agile.
Information was controlled and updated by ITC Bhopal office.
adoptability and alignment of the value chain.
Convinced the government through eChoupal website. It was
accessible to anyone, including the government. Officials
could cross check the ITC's prices at any given time. Part of
alignment of value chain.
Attending choupals was a routine for farmers. They did not
have to make an effort of asking around or going to mandis.
type of information they desired. This is part of alignment of
value chain.
Sanchalaks for each choupals was elected by the villagers. An
oath taking event took place where scanchalaks pledged to
among the farmers as they would listen to one of their own
community member. This is part of alignment of value chain.

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Integrity of the processes. ITC made all transaction transparent. There was no
9 asymmetry of information. Making the value chain align and
agile.
Farmers feel they are contracted to There was no contract bound. ITC did not seek any prior
sell to ITC. commitment from farmers. They were free to make their own
10
choices where they want to sell their produce. Enhances
alignment of value chain.
Will farmers receive true value of To promote farmers receive true value of their produce. ITC
their produce by selling directly to used computerized weighbridge, and quality testing
11
ITC hubs. equipment. eChoupals was used to cross check pricing of the
produce. Part of alignment and adoptability of value chain.

Exhibit#6 Similarities and Differences between ITC and Samriddhi

Sr
# Similarities
Farmers were trapped in a perpetual poverty
1
trap.
Both values chains were unorganized at the
2 start.
Focus on connecting the vendors and food
3 processors directly with the farmers. Hubs
were established to facilitate this direct link.
Both approaches dependent on establishing
trust.
4
Aim of both cases was to eliminate the
middlemen and intermediaries. As Farmers
5 were exploited by them.
6 CAs dominated the mandis.
Information asymmetry. Focus on stable
pricing mechanism and marketing
7 infrastructure.
8 Streamlined communications between all
players of the supply chain. In both
Differences
Samriddhi aim was to elevate status of farmers. And
ITC focus was to generate and achieve its revenues
targets.
Samriddhi made farmers and vendors their partners
through membership. ITC gave farmers freedom of
choice for selling their goods.
ITC used sanchalaks to established trust among the
local farmers. Whereas Samriddhi had to rely on
personal connections and results/outcomes to show
farmers how beneficial the approach can be.
Samriddhi had collection offices who schedule
collection of crops from the farmers to sell in the
mandi, according to market demand. ITC gave
farmers freedom to sell their produce to ITC hubs
and processing units.
ITC had contracted CAs.
Samriddhi used timestamp technology to ensure
quality of their products. Timestamp was used to
evaluate marketing dynamics and potential market
opportunities where products will be sold. ITC used
website and information to improve quality.
Samriddhi worked with government officials to help
farmers understand polices and subsidies. For ITC

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approaches the facilitator controlled the flow government only supervised the pricing via
of information. Also information is passed eChoupals.
down the chain to the farmers.
Provided a platform for knowledge sharing
9
between farmers and experts.
Focus on producing quality products for the Samriddhi established a brand name for its
consumers. vegetables and bought back leftover vegetables
10
from vendors, to ensure quality of its product and
brand image.
Used IT infrastructure and resources to align ITC used the internet to empower farmers in
11 the value chain. Computer equipment was villages. Samriddhi used timestamp technology to
expensive and had a finite lifespan. keep track of it products.
Once a pilot test is successful, these
approaches are easily scalable. Both are
12
thinking of replicating these approaches in
other regions.
Capable of being used for multiple ITC initially only focused on soya beans.
13
transactions and crops.
Used local talent and people to develop Samriddhi is focusing on joint ventures to expand
14
leaders. into other regions.
In both approaches, farmers captured
greater slice of the consumer price. And
15
these approaches created a win-win
situation for the farmers and the companies.
Established aggregated demand for farming ITC keeps products which the farmers demand.
16 input products. Whereas Samriddhi, coordinated with farming clubs
for procurement.

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