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Executive Summary

Khadi and Village Industries Commission is a statutory body of Government of India, which has been identified as one of the major organisations in the decentralised sector for generating sustainable nonfarm employment opportunities in rural areas at a low per capita investment.

It undertakes activities like skill improvement; transfer of technology; research and development; marketing for a diverse range of handcrafted products which ultimately helps in generating employment opportunities in rural areas.

KVIC sells these products through 7050 retail stores, inclusive of 12 Department Sales Centre (DSC) owned directly by the organisation. All other stores are being owned by KVIC affiliated institutions.

This is an era of sustainability where everyone wants to do their part to sustain the natural resources for upcoming generation. Khadi India provides plethora of handcrafted products which are produced without throbbing the environment, along with being a socially responsible entity. Though at the retail front, the shopping environment offered by KVIC is not appealing the Indian consumers and is also confusing them with incongruent store names at different locations. Due to these reasons, KVIC has not been able to settle on a brand identity for Khadi India.

For handcrafted products, the consumers are not price conscious but discerning enough to zero down on a quality product that is comfortable, skin friendly, nature friendly and certainly attractive. Being a decentralised organisation, KVIC has not been able to provide a standardized product across all stores as the affiliated institutions are separate business units, which are operating with limited funds. Due to this, there is a lack of design elements and size specifications in Khadi apparels.

Reengineering Khadi India

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With such an extensive retail presence and a wide product mix, there is an extreme potential for KVIC to establish itself as a brand that can provide quality products and satisfy the needs of right target consumers.


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Objectives

The major objective of this Reengineering business plan is to revitalize the current structure of KVIC and make it a profit earning organization which will offer value proposition in following areas:

• Retail Makeover of 12 Department Sales Centre

• Establishing Khadi India as a brand.

• Instilling Brand Preference

• Cost effectiveness achieved through Supply Chain and Distribution

• Effective Sales training

• Offering standardized products.

In the first year, 12 Department Sales Centres have been selected for revival on the basis of their ownership, location and sales performance. The other stores would be revitalized in the next three years on the basis of their institutions grading system.

Key Financials

The initial investment required for the business plan is Rs. 15,96,38,646. The total projected sales after implementation of the plan amounts to Rs. 58,38,89,500 and the projected net profit at the end of the first year comes out to be Rs. 1,02,47,263 after providing for all expenses. The breakeven point in sales amounts to Rs. 53,62,13,406 which is achieved in the first year itself.


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Organisation Overview

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Khadi & Village Industries Commission (KVIC) is a statutory body established under the Khadi and Village Industries Commission Act, 1956 (61 of 1956), underneath the protection of the Ministry of Micro, Small and Medium Enterprises. The organisation is engaged in promoting and developing Khadi and village industries for providing employment opportunities in the rural areas, thereby strengthening the rural economy. (KVIC Annual Report, 2008-09)

2.1 Organisation Objectives

(KVIC Annual Report, 2008-09)

2.2 Organisation Functions

Planning, promotion, organisation and implementation of programs for the development of Khadi and other village industries in the rural areas in coordination with other agencies engaged in rural development.

Building up of a reserve of raw materials and implements for supply to producers, creation of common service facilities for processing of raw materials as semi-finished goods and provisions of facilities for marketing of KVI products apart from organisation of training of artisans engaged in these industries and encouragement of co-operative efforts amongst them.

Including the use of non-conventional energy and electric power with a view to increasing productivity, eliminating drudgery and


The social objective of providing employment The economic objective of producing saleable articlesThe wider objective of creating self-reliance amongst the poor and building up of a strong rural community spirit.

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otherwise enhancing their competitive capacity and arranging for dissemination of salient results obtained from such research.

Providing financial assistance to institutions and individuals for development and operation of Khadi and village industries and guiding them through supply of designs, prototypes and other technical information.

Undertake directly or through other agencies studies concerning the problems of Khadi and/or village industries besides research or establishing pilot projects for the development of Khadi and village industries.

Establish and maintain separate organisations for the purpose of carrying out any or all of the above matters besides carrying out any other matters incidental to its activities.

Undertakes research and development activities through in-house research and also by sponsoring projects to other R&D organisations. The main objectives of the R&D programme are achieving increase in productivity and wages of the workers, improvement in quality, efficient use of local skills and local raw materials, and reduction of human drudgery. In addition to Jamnalal Bajaj Central Research Institute (JBCRI) now renamed as Mahatma Gandhi Institute for Rural Industrialization (MGIRI), Wardha, KVIC undertakes R&D activities through Central Bee Research and Training Institute (CBRTI), Pune; Dr Ambedkar Institute of Rural Technology and Management (AIRTM), Nashik; Kumarappa National Handmade Paper Institute (KNHPI), Sanganer, Jaipur; Central Village Pottery Institute (CVPI), Khanapur, Karnataka; and Khadi Gramudyog Prayog Samiti (KGPS), Ahmedabad.

For quality control measures KVIC has made arrangements with the National Institute of Design (NID), Ahmedabad; ‘Dastakar’, Andhra Pradesh; IIT, Delhi; and Textiles Committee, Mumbai. The Memorandum of Understanding signed between KVIC and the Textiles Committee, a statutory body under the Ministry of Textiles


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facilitates 13 laboratories of the Committee situated throughout the country, which are being used for testing of Khadi and polyvastra. Under the arrangement, the quality of Khadi is expected to receive a fillip, thereby improving its marketability. A number of Khadi institutions have availed of benefits of this arrangement. (KVIC Annual Report, 2008-09)


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2.5 Retail Structure

The retail stores under KVIC is a venture of Micro, Small & medium Enterprises. Khadi institutions are mostly nongovernment organizations (NGO) formed either under the Societies Registration Act (1860), Charitable Trusts registered under Indian Trust Act, 1882, Section 25 of the Companies Act, 1956 or State Cooperative Societies Acts.

2.6 Production and Sales Performance

The KVI sector recorded an improved performance during 2008-09 in comparison to the previous year (2007-08). The total KVI production during 2008-2009 (provisional)stood at Rs. 17,358.00 crore (Khadi – Rs 565.00 crore and VI – Rs. 16,793.00 crore)as against Rs. 16,677.71 crore (Khadi – Rs 543.39 crore and VI – Rs. 16134.32 crore) during 2007-08, thus reflecting an increase of 4 %.


KVIC12 Khadi Department Sales Centre5,549 Institutions1,952 for Khadi3,597 for Village Industries7,050 retail sales

outlets

Both Producti

on & Retailing

Only Producti

on

Only Retailing

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Similarly, sales of KVI products also registered an increase to Rs. 21,006.00 crore (Khadi – Rs.855.00 crore and VI Rs. 20,151.00 crore) during 2008-09.(KVIC Annual Report, 20008-09)


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2.7 Khadi

Khadi is the single largest product of the KVI subsector. Within the KVI subsector, Khadi is considered to have the most potential for inclusive development due to its marked emphasis on gender, minorities, and other socioeconomically marginalized people, as well as community based processes. At the bottom of the pyramid of the Khadi process are the spinners, weavers, and other artisans, such as skilled embroiders collectively referred to as artisans, are employed or engaged by Khadi institutions. KVIC has 1,252 affiliated Khadi institutions and KVIB has 700. These institutions are engaged in production which comprises hand spinning of cotton sliver, silk, and/of wool; hand reeling silk into yarn; handloom weaving yarn into fabric; processing for finishing; and garment making followed by retailing of Khadi products. A few Khadi institutions are integrated into the production of raw materials (sliver or threads) from cotton.

Top Khadi Producing States:Rank Cotton Khadi (%

Share)Wool Khadi (% Share)

Silk Khadi (% Share)

1 Uttar Pradesh (45.36)

Haryana (23.48) West Bengal (31.48)

2 Tamil Nadu (8.59) Uttar Pradesh (19.12) Tamil Nadu (31.02)

3 Gujarat (6.74) Rajasthan (18.46) Karnataka (7.69)4 Haryana (6.41) Karnataka (10.20) Gujarat (6.13)


Production: 1952 Khadi Institutions

Artisans: Spinners,

Weavers,Embroiders

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(ADB Report, 2008)


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2.7.1 Khadi Value Chain


Cotton BalesProducer : Farm householdsProcess: Farm productionMarket/Marketer: Sliver (or cotton threads on spindles) plantsSliverProducer: 6 Central Sliver plants: KVIC (6), Khadi InstitutionsProcess: Cotton bale converted into cotton tapes, which is then used to produce sliver, a loose soft untwisted strand of textile fiber produced by a carding or combing machineMarket/Marketer: Khadi institutionsYarnProducer :Spinners, mostly poor womenProcess: Sliver is traded by khadi institutions to spinners who convert sliver into yarn on hand powered spinning equipment (charkas).Market/Marketer: Khadi institutions buy back the yarn from the spinners on payment of conversion chargesFabricProducer: Weavers, mostly poor menProcess:The yarn is traded by khadi institutions to weavers who weave the fabric on handlooms and sell it back to the khadi institutions in return for conversion chargesMarket/Marketer: Fabrics are sold as processed cloth, a more refined product than yarn, either directly to the end consumer through khadi institutions own retail outlets, traded with other khadi institutions, or through direct sales outlets of KVICGarmentProducer: Tailors working under Khadi InstitutionsProcess: The fabrics are processed (e.g., dyed) and converted into garments using mechanized means for preset designs, developed as customized garments, or embellished with value additions, e.g., embroidered by skilled artisansMarket/Marketer: Khadi institutions owned stores, KVIC owned store

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2.8 Marketing Mix

2.8.1 Product mix

KVIC offers a diverse range of handcrafted products in its stores, which are environment friendly and are made in rural parts of India.


Customer Solution: sustainable and handcrafted clothing, Skin friendly personal care productsAcceptability: By fewCost: Artisans wages, loans. Affordability: By middle class and aboveConvenience: Many storesAccessibility: EasyCommunication: Low emphasis on communicationAwareness: LowProduct: Diverse Range of Handcrafted productsPrice: Moderately PricedPromotion: Print & Outdoor Advertising, Local Cable Network

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2.8.2 Price

The KVIC products are moderately priced, which can be affordable by people in the middle class category and above.

Product Price (INR)Duppatta 350-800Tie 150-250Shirts 250-1000Kurta 175-350Bed Sheet 450-1500Saris

Tassar Silk 300-350 Matka Silk 450-550 Woolen Khadi 200-250 Pure Silk Sari 850-1250 Baluchari Sari 4000-4500 Kantha Work Sari 3650-4000

2.8.3 Place

KVIC has got an ultra wide retail presence with 7050 retail stores across the country, which are owned by 5549 Khadi & Village institutions. These institutions are affiliated with KVIC and state KVI Boards. Also some of the Khadi personal care products are available in department stores like Big Bazaar, Apollo Pharmacy.

2.8.4 Promotions

KVIC’s communication has been low profile through ATL activities, but they have picked up the pace with BTL activities in recent times.

For details, refer Advertising on Page Reengineering Khadi India

Above the LineRadioTelevision (Doordarshan)Hoardings: Railway Stations, Bus Stands, Govt Offices , Major AirportsBEST busesBelow the LineExhibitions & Trade FairsFashion Shows SponsorshipsConferencesSeminarsWorkshopsPeople's Education Programme

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2.9 Customer Profile


DemographicsAge- 18-65yrs (Indians, foreigners) Gender- Male, FemaleOccupation- Students, Professionals, Politicians, FarmersSocial Class- Middle & Upper Middle Income Group Religion- AnyEducation- Schooling, Undergraduates, Postgraduates PsychographicsLifestyle- simple & classy.Attitude- motivating, self dependent ,nature lovers. Activities- spend money on self adornment, like to know about Indian culture Values- modern, traditional

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Environmental Analysis

Population:1.15 Billion (July 2008)Population growth rate:1.1578%Age Structure:0-14 yrs: 31.5%15-64 yrs: 63.3%65 – Over: 5.2%Sex ratio:At birth: 1.12 male/femaleUnder 15: 1.10 male/female15-64 yrs: 1.06 male/femaleTotal population: 1.064 male/femalePopulation Projections:2010: 1.175 bln2015: 1.256 bln2020: 1.331 bln18

3.1 Demographic Environment

It is the study of human population in terms of size, density, location, age, gender, race, occupation and other statistics. It is of major relevance for KVIC because it involves people and people make up markets.


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3.2 PEST Analysis

Political Environment

Political factors have a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses.

Economic Environment

Marketers need to consider the state of a trading economy in the short and long-terms.


Stable Government : since six years.Government Policies: favorable policies for KVIC like 10% rebate to all customers on all purchses from stores (The Hindu Business Line, 2009).Extensive Institutional Framework: Like any other Government institution, KVIC also has a very rigid framework.Government policies have a very positive view towards KVIC, because it provides employment to a very high number of people.GDP Growth: 6.7% (2009) (The Hindu, 2009)Unemployment: 6.8% (2009)Agricultural and allied sectors accounts for about 60% of the total workforce.Economy going through recessionary phase.

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Social Environment

The social and cultural influences on business vary from country to country. It is very important that such factors are considered for KVIC.

Technological Environment

Technology is vital for competitive advantage, and is a major driver of globalization.


Hindu religion dominated country.Indian products are preferred by a major proportion of population.Men are still the dominant part of society, though in Rural India both men and women work together. Society is becoming aware of benefits of using Khadi products.Latest technologies facilitate manufacturing of goods lesser time, at cheaper prices and of better quality.Technological advancement has removed complexities of handling supply chain in rural India.

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3.3 Competitor’s Analysis

India’s forte of hand crafted products is predominantly known because of Khadi and the village industries, comprising the maximum strength of artisans working under its institutions. But there are other players like Fabindia, Anokhi, COIR board, Central Cottage Emporiums, State Emporiums, and local players at street markets which are also selling handicrafts like KVIC. Though nobody has surpassed the retail giant because of its vast presence and utmost grasp of artisans, Fabindia has given away a probable intimidation in terms of its quality products and brand image.

Fabindia being a private limited company is considered as the only nearest competitor player for KVIC’s retail chain.

Figures in crore

Sales 2008-09

Sales 2007-08

Average Sales Per store

Average Sales Per store

KVIC 21006 21543.48 2.97 3.05Fabindia

300 257 2.7 2.37

With 108 stores across the nation, Fabindia produced similar average sales per store, produced by that of KVIC’s 7050 retail stores. Fabindia’s retail footprint is a mere 1.5% of KVIC’s presence, but it has tapped the emerging market with a faster pace by working on following areas:

Quality product offerings and satisfying market needs

Helping artisans as well as building brand image

Better shopping environment


Key facts about Fabindia108 retail stores650 employees; 90% women with nominal shares to all employees750 producer groups (7500 artisans) across 20 states in IndiaBusiness philosophy to help artisans and satisfy market needs95% sales in domestic market and 5% in export market (S. Singh, 2007)

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3.3.1 Fabindia’s Marketing Mix

Products

The major product categories of Fabindia are Apparels, Home Furnishings and Personal Care which are on the competing lines with KVIC’s products.

Price

The price ranges for Fabindia are a bit above then of KVIC’s products, as they are offering better designs and consistent quality of fabric.


Products Price Range (Rs)Mens Kurtas 399- 1700Mens Shirts 519-699Mens Pyjama’s 375-735Women’s Kurtas 420-1219Women’s Tops/Shirts 425-768Skirts 810-1400Women’s Pants and Capri’s

425-500

Dupatta’s 385-1550Bed Linen 477-1375Quilts 1570-1885

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Place

There are 108 Fabindia stores in India which are located in up market areas. Internationally, it has got six stores in Rome, Dubai, Qatar and China. Fabindia operates itself with three kinds of stores:

Promotions


Premium: Wide range of products, high proportion of high ticket itemsRegular: Wide range of products but low proportion of high ticket itemsConcept: Test stores opened in new markets.Outlet level promotion/ ‘in shop’ promotionLabelling of various types of organic products like certified (Green) , in-conversion (Blue) and natural (Yellow)Marketing partnership with Tea Board for organic Darjeeling tea logoPromotional literature Participation in organic/traditional food, festivals/rural exhibitions/melas Advertorials, PR activities

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3.3.2 Fabindia’s Supply Chain

Fabindia has moved from centralized model to regional supplier companies in the recent times. The company has a philosophy to maintain long-standing, personalized relationships with suppliers that go back a generation. This leads to a consistent growth of artisan suppliers linked exclusively to Fabindia.

Fabindia ensures complete geographic coverage of crafts and supply chain through the 17 Community owned companies


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3.4 A comparison of Khadi India and Fabindia

Parameters Khadi FabindiaProducts Apparels

o Menso Womeno Children

Fibre Products Personal Care

Apparelso Menso Womeno Children

Fibre Products Personal Care

Price Low to medium priced Medium pricedLocation In all the states of India, All

major markets and streets Up market areas in all the major cities across India

Store atmosphere

Improper layout of stores done, Not a soothing ambience.

Soft lighting, signifying a chic ambience. Spacious, simple, devoid of extravagance or loud displays.

Customer service Lack of sales training Friendly and helpfulNo. of stores 7050 stores across India 108 stores

Promotions Magazines, Television ads on Doordarshan, exhibitions, trade fairs, events like Paridhan Utsav, hoardings

Word of mouth publicity, monthly interactive sessions known as 'Coffee Mornings' at some of the stores, to which customers were invited.

Future plans Modernization of Khadi outlets , to go for value addition

Increase the number of stores to 250 and the number of rural artisans to 100,000 by 2010

Challenges To improve upon the marketing activities in India, establishing itself as

Fast growing requirements,Need for more artisans,


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Rivalry amongst Competing Firms in

Industry

Threat of New Entrants

Bargaining Power of Suppliers

Threat of Substitute Products

Bargaining Power of Buyers

a brand. need of setting more regional centres, issue of inventory control

3.5 Porter’s Five Forces model of competition

Threat of New Entrants

The Threat of New Entrants is a moderate threat for KVIC, due to the following factors:

Economies of Scaleo Khadi India is a perfect example of economies of scale as

they are working on huge operations. No new other new entrant can have such economies of scale.

Product Differentiationo The Manufacturers are an amalgamation of Rural Industries,

which produce all carefully handcrafted products.


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o Apparels, Cosmetics, Fibre Products: the USP of manmade, handcrafted

Capital Requirements o The investments for setting up a retailer like Khadi India

would be really high as the potential competitor will have to raise funds for equal to or more than 7050 stores and make an association of manufacturers.

Access to Distribution Channelso Requires very strong distribution channel to reach rural India,

which would not be easy for a new entrant. Government Policy

o Government of India has many favourable policies for KVIC like 10% rebate to customers. No new entrant would be able to get such benefits from government policies.

Expected Retaliationo KVIC provides income and employment to millions of people

thus a new entrant will have to face retaliation from them.

Bargaining Power of Suppliers

Bargaining power of suppliers is less significant due to the following reasons:

Khadi India dominates the supplier industry as there are large numbers of firms.

o The KVIC will always have an upper hand on suppliers in whole of the India, as the suppliers are all small clusters and mini industries which are surviving because of Khadi. They cannot stand out as individual players.

Suppliers’ products have many substitutes.o Khadi India’s products are all hand crafted and are all made in

mini cottage industries and rural Industries which makes them unique, specially for its customers who prefer to buy natural, herbal, hand spun products. But, Khadi has substitutes of


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machine made fabrics, cosmetics, paper and other things which are all produced in urban industries.

Buyer is not an important customer to supplier.o Khadi as a buyer is the most important customer to all the

suppliers as these little industrial hubs are earning majorly through Khadi only.

Suppliers’ product is an important input to buyers’ product.o The supplier’s product is indeed important to Khadi, as Khadi

deals with multiple suppliers so they can offer everything under roof.

Suppliers’ products are differentiated.o Khadi India sells products which are clearly set apart from its

substitutes offered by the direct as well as competitors. The reason is the identity of products made by rural industries which are completely natural and hand crafted.

Suppliers’ products have high switching costs.o The switching cost aren’t that high in case of Khadi India

suppliers as these are rural industries and multiple suppliers in each category. For instance a natural soap in different aromas comes from Modinagar & Lucknow in UP, Kashipur in Uttranchal.

Supplier poses credible threat of forward integrationo There is no threat of forward integration at all from the

suppliers as individually these are very small units.

Bargaining Power of Buyers

The Buyers from retail store have a very insignificant bargaining power but the institutions that KVIC is dealing with, for bulk orders do have bargaining power.

Buyer has full information.o The buyers are fascinated by products from Khadi India as

they know the fact about these products which are


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handcrafted and picked up from each corner of India to be sold at the stores. These buyers are very knowledgeable about the products.

Product unimportant to quality.o The quality of Khadi India products does matters, especially

for cosmetics product range. Buyer presents a credible threat of backward integration.

o There is no threat from buyers venturing into backward integration.

Buyers’ industry earns low profitso Buyers’ of KVIC products are given 10% rebate for all the

purchases made from KVIC stores, thus this is an extra benefit that they get.

Buyers face few switching costso There is no switching cost involved.

Products are undifferentiatedo Products are partially differentiated as only few private

retailers are providing such hand crafted products at a large scale.

Purchase accounts for a significant fraction of supplier’s sales.o There are multiple numbers of buyers for KVIC products.

Buyers are concentrated or purchases are large relative to seller’s sales

o The buyers are completely fragmented.

Threat of Substitute Products

Threat of substitute products is very high because there are plenty of other synthetic fabrics made apparels in market which are available in all price ranges. Also there are plenty of non herbal cosmetic ranges available.

Rivalry among Existing Competitors


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There are very few direct competitors like Fab India and Mother Earth for Khadi India. But these retailers sell their products at a higher price and possess a smaller foot print as compared to Khadi India. Thus there exists a very subtle rivalry among existing competitors.


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3.6 SWOT Analysis

Based on the complete background study and environment scanning, a SWOT analysis of KVIC as an organisation has been done.


StrengthsGovt aided organisationUltra wide retail presence- 7050 outletsDiverse Variety of products under one roofRural EmpowermentWeaknessesCarries the perception of a govt run organisationLess trained staff.Unorganised storesLess of marketing activities No strategic advertising.Lack of store planning & layoutingOpportunitiesWidespread retail presence can be utlised in an efficient manner.Funding of financial resources frmo Govt of India, Asian Developmnet Bank.The eco friendly era of sustainability.ThreatsFab india has already tapped this market and is doing great abroad as well

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Problems Identified

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4.1 Issues with KVIC

Khadi is estimated to constitute less than 1% of India’s textile market. The textile industry has made tremendous strides with the adoption of modern technology, branding, and savvy marketing. In contrast, Khadi India has been unable to adapt to economic and technological advancements. As a result, the community-based production and marketing model of a product is still revered, is neither able to gain market share nor substantially contribute to rural employment.

Weak Links in the Value ChainKhadi production and marketing under the KVIC Khadi program are constrained by the following:

o Raw Materials. The lack of proper quality control procedure and equipment leads to uneven raw material quality which affects the quality of the final product.

o Equipment. With out-dated equipment and raw material quality constraints, khadi production cannot be expanded even if demand grows rapidly.

o Marketing. Khadi is primarily sold through 7,050 dilapidated retail outlets of khadi institutions that are isolated from current marketing trends.

o Institutions. Khadi institutions are fragmented and dispersed, lack the expertise, financial means, and unified vision to adjust to changing market trends.


Raw MaterialsLack of proper quality control procedure and equipment leads.InstitutionsFragmented.No expertise.Less Financial meansLimited product development capability.Out-dated equipmentRetail7,050 retail outlets isolated from current marketing trends.Dismal performance

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4.2 Key Problems


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Project Strategy & Plan

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5.1 Business Idea: “Reengineering Khadi India”

KVIC products are sold through 7050 stores across India. The purpose of this business idea is to reengineer the entire working of KVIC in such a manner that it can be made more profitable and yet keeping in mind the social objective of providing employment. Under this business idea we look forward to propose plans for restructuring the following key functions:

Creating Umbrella Brand.

Restructuring existing stores (Store Layout, Visual Merchandise, etc).

Sales Force training.

Promotions strategies.

Product strategies and differentiation.

5.2 Value Proposition:


Merchandise: Apt with latest trendsAssociation with sustainable actsTrue representative of Indian essenceBetter shopping experienceImproved Customer ServiceReliable product quality

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5.3 Selection of Stores

There are more than 7000 retail outlets which are affiliated to KVIC and KVIB, of these 12 stores are directly operated by KVIC. In the first year of re-engineering KVIC, the scope of work would be to revive these 12 departmental sales centers.

These DSC’s represent the true picture of KVIC in India, as only few of these DSC’s are making profits, rest all are in losses.

These DSC’s are directly under the control of KVIC, therefore the implementation of the retail makeover plans would not be a lengthy process. In case of institutions owned stores it

would have been a prolonged process as these institutions don’t have enough capital to invest for a make-over. They will be demanding for a loan from government which requires passing a lot of bills.


Basis of SelectionControlwise ZonewiseProduct CategoryInstitutions grading

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These DSC’s are in all regions of India. They cater to diverse target groups, thus it will be a holistic coverage, by understanding the Target consumers and implement branding techniques accordingly.

Successful revival of these 12 stores will set the example for all Khadi institutions to implement the changes.

The size of these stores varies between 1000 Sq ft and 20,000 Sq Ft thus these stores are the ideal sample representative of all Khadi stores in India.

5.4 The Initial Plan


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5.5 Segmenting, Targeting and Positioning

Segmentation

Khadi is perhaps the only brand which has the reach and acceptability in every nook and corner of the country, thus the growth potential is immense. The target market of Khadi is extremely vast rightly said by Gandhi ji, Khadi is the fabric of India. In rural India, apparels, bed sheets and fabrics are the most selling items of Khadi India. The target group of Khadi in urban India is vast, most of the teenagers likes the herbal cosmetics ranges of Khadi, while few also like the Kurta’s sold at Khadi outlets. Professionals and businessmen are regular customers of Khadi leather range. For Housewives, Khadi stores have a range of sarees, fabrics, fiber products, processed fruits, vegetables and cereals. About the corporate sales, KVIC has an impressive clientele list already which includes Indian Railways, Defence, Government Hospitals, and Boarding Schools etc.

Thus on a broad term, Khadi target customers can be divided into two segments:


RuralFarmersArtisansUrbanStudentsProfessionalsHousewivesPoliticians

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Targeting

Segment1: Rural Consumers

Khadi stores in villages are perceived as an expensive branded store by the villagers, thus the target customers are elite class villagers which are into farming as well as Panchayati Raj, artisans like sculpture makers, weavers which can afford to buy readymade Khadi Kurtas, fabric materials, Bed sheets and Durries from Khadi.


Age (Yrs)33 - 4545 - 65GenderMaleFemaleAnnual Income (Rs)1,20,000- 1,50,000 INROccupationFarmersArtisansFamily Life CycleFamilies with adolescentsLaunching children and moving onFamilies in later lifeGenerationParentsGrand ParentsSocial Class in VillagesUpper Middle ClassHigh Class

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Demographic Segmentation

Psychographic Segmentation

Behavioural Segmentation


LifestyleConservativeTV, Radio, Melas source of entertainmentPersonalityDominatingDecision MakersValuesNature friendly Social welfareOccasionsPanchayats, sabhasMarriagesVillage FestivalsBenefits ComfortNature friendly User StatusRegular UsersUsage RateHighLoyality StatusHard core loyalBuyer Readiness stageInterestedIntend to buyAttitudePositive

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Segment 2: Urban Consumers

Demographic Segmentation:


Age (Yrs)18 - 2324 - 3233 - 4445 - 65GenderMaleFemaleAnnual Disposable Income (Rs)Above 2,40,000 INROccupationStudentsGovernment Officials, PoliticiansProfessionalsHome-MakersFamily Life CycleSingle young adultsFamilies with young childrenFamilies with adolescentsLaunching children and moving onFamilies in later lifeGenerationYoung AdultsParentsGrand ParentsSocial ClassUpper Middle ClassHigh Class

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Psychographic Segmentation

Behavioural Segmentation


LifestyleContemporaryWell aware PersonalityClassyDown to earthValuesNature friendly Social welfareGandhian way of livingOccasionsFor Students- College wearFor Government officials, Politicians- meetings, electionsFor Home Makers- social get togethersBenefits Eco friendlySocially ResponsibleComfortableUser StatusRegular Users- government officialsFirst Time Users- students, professionalsUsage RateLow HighLoyality StatusHard core loyalSplit loyalBuyer Readiness stageAwareInformedInterestedIntend to buyAttitudePositive

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Positioning

In the brand re-engineering process, Khadi will be repositioned as a nature friendly, socially responsible trendy brand by:

Revitalizing the retail structure which includes renovation of retail stores and training the sales staff to bring out synchronization in the retail outlook across the country. For revival of the stores, Vinoba Seva Samiti, an A+ grade Khadi institution can be benchmarked, as they have recently renovated all their stores in Delhi and Rajasthan and are having fruitful results.

Brand Building through extensive advertising strategy New product development.


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5. Pricing Strategy

KVIC is currently working with cost plus pricing where the institutions have a given cost chart, authorized by KVIC.

Cloth Manufacturing (15.2 meter roll) in Rs

Cotton Khadi Silk

Yarn 370.1 1730.27Weaving 87.5 134.5Weaving Labour 31 31Employee Funds 19.3 36.73Processing Charges 26.5 26.5Total 534.4 1959Interest @ 4% 21.4 78.36Insurance @ 1% 5.3 19.59Trading Spend @ 3% 16 58.77Margin @ 20% 106.9 391.8Total cost per than 684 2736.25Cost per Meter 45 180

This cost chart is easy to calculate but is an inflexible way of pricing with several drawbacks:

Reduces the scope for enhancing artisan earnings. Inhibits creativity, enterprise, and the potential for artisans to

enhance earnings. No focus on quality and performance of the products Ignores competitor’s pricing

Instead of cost plus pricing, Market oriented pricing is proposed which will be flexible enough to take in consideration the scope of improvisation in designs, in sync with the marketing trends.


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5.8 Roll Out Plan


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5.9 Methodology

Typical data was collected from primary and secondary sources. To understand the organizational working the head of KVIC was

visited wherein interviews were taken from marketing manager, publicity manager, finance manager and assistant to CEO of KVIC.

To understand the manufacturing and distribution process KVIC central sliver plant was also visited. For the same purpose many KVIC affiliated institutions were also visited in Delhi, Jaipur, Kerala, Uttar Pradesh and Bassi, Rajasthan.

For retail study various stores in Delhi, Jaipur, Mumbai, Kerala, Agra and Amritsar were visited.

5.10 Limitations:

Unwillingness of government employees to reveal information Data constraints: KVIC doesn’t records any data except for sales and

production figures, thus a very limited secondary data was available.

Due to time limitation, few numbers of stores have been selected for retail makeover.

KVIC has a vast product mix, where each and every product cannot be focussed upon due to time limitations. For this purpose, three foremost categories are being strategically selected for the project.

o Apparels: Scope of Product Development, Promotionso Personal Care: Best performing category, Scope for Exportso Fiber Products: Slow moving products


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Branding

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Branding ‘Khadi India’

The strengths of KVIC make it different from its competitor Fabindia as KVIC is backed by Government with a gigantic retail presence of 7050 retail stores. These stores provide diverse range of products under one roof, sourced from all regions of India. KVIC aspires to make Khadi cloth and various other rural traditional handicraft items more popular in the domestic and international markets.

KVIC has its retail brand called Khadi India, with an authorized logo by KVIC. The logo’s visibility is there on the retail store boards on the fascia and on some roadside hoardings in local markets.

The retail stores operated directly by KVIC have the frontal boards with this logo, however the retail stores operated by state boards have an obligation to mention both the state board and central board logo. But the retail stores which are operated by institutions

are working with freedom of giving their own names to the retail store like Khadi Niketan, Khadika, Khadi Gramudyog Bhawan, Khadi Mandir, Khadi Bhandaar, GramShilpa etc. Only few of these institutions place the KVIC logo on a corner, but mostly these frontal boards have a certification stamp by KVIC, Government of India.

Due to these different names at all the stores, the customers do not perceive it as a brand. Though there are efforts done by KVIC to position it


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as a brand but it is always taken as a laidback business run by the government with drowsy retail stores, unconcerned sales people and not so trendy Khadi apparels.

In the product category, KVIC has three registered brands under the purview of KVI sector:

Khadi Brand: Mainly for premium and export oriented products

Sarvodaya Brand: Products for consumption of middle and lower income group

Desi Aahar: Organic food items

6.1 Brand Identity

Brand identity is all that an organization wants the brand to be considered as. It is a bundle of mental and functional associations with the brand. These associations are not “reasons-to-buy” but they provide familiarity and differentiation that’s not replicable getting it.


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Brand identity leads to brand loyalty, brand preference, high credibility, good prices and good financial returns

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CharacteristicsGovernment aided organisationProvides rural employmentRetail presence- 7050 retail storesParticipation in IITF, other trade fairs, fashion shows.BenefitsEco friendly ProductsSocially responsibleWide reach for consumersPerformanceAll kinds of Khadi(cotton, wool, silk) produced in varied qualities in different regions of India.Diverse range of products under one roof Service SupportInstitutionsClusters of artisansValuesTraditional Handicraft of Rural IndiaGandhian PhilosophyRural Population

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6.1.1 Brand Identity Prism

Brand Personality

Khadi India tries to reflect itself as holistic brand which provides a diverse range of all handcrafted products under one roof, in a very simple yet traditional atmosphere. The communication of the brand over the years has also been very traditional, the TV commercials that are being telecasted on Doordarshan still portrays Khadi as a traditional brand which keeps in mind the sustainability factor.

Brand Physique

The retail outlook of any brand speaks a lot about itself. Khadi India’s brand physique is not established yet because all the retail stores have different structures and outlook, which doesn’t gives any clarity to the consumers. The ambience and environment inside mainstream stores is simple and unappealing. The extensive usage of orange colour is the only common aspect amongst majority of stores and usage of word “India” in logo clearly lives the impact of being a brand of India with Indian products that are environment friendly.


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Brand CultureThe culture of Khadi India right from its inception has been to provide employment to the rural India. Khadi was popularised by Mahatma Gandhi during the era of freedom movement. It was the Gandhian philosophy to wear and promote this hand spun and hand woven fabric which till date stands as an indispensable part for brand’s inspiration.

Brand RelationshipThis brand identity element is the key driver of a brand’s image. Khadi India always portrays itself as a socially responsible Indian brand, thus it shares a very patriotic relationship with Indians. Khadi India’s relationship with the consumers is also very conventional because of its age old existence.

Brand Reflection

Brand reflection is the reflected image of its target customers in its communication. Khadi India portrays itself as socially responsible brand with a motive of providing employment to Rural India, and as a nature friendly which follows all sustainable acts at every step of production.

Brand Self Image

The target consumers of Khadi India are very particular about their personal health and hygiene and they find authenticity in comfortable to wear fabrics, naturally processed foods and skin friendly personal care products provided by them. Though the notion of social welfare is secondary, but it does strikes in their mind once, that by buying Khadi products, they have made their contribution for rural empowerment.


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6.2 Brand Elements

Analysing Brand Elements of Khadi India

Memorability

The Khadi Logo is prominent on the store frontals and on some roadside hoardings, POS displays. The boards are widespread everywhere which makes the logo easily recognisable.

The visibility of KVIC’s symbol is not as extensive as of the logo, and is more used internally for organisation.


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KVIC have a website which was initiated by MSME Government of India. The website mentions about the organisation, its structure, schemes and products made by Khadi and Village industries. It has not developed any memorability because the website is for the organisation, and not for the retail business. Thus, it does not form a direct connection with the end consumers.

KVIC has a slogan- ‘Threading Lives, Weaving destinies’. This slogan talks about the rural empowerment which has happened through their organisation. This slogan has not gained any importance as it is used very rarely by some of the institutions.

KVIC participates in IITF since last four years, and this time they positioned themselves as a global brand , by extensively using slogans like ‘Khadi goes global’ and ‘Serving the world’ on boardings, electronic POS displays and other banners.

Besides this they also promoted themselves by another slogan ‘Your eco-friendly Partner’ at various POS displays.

Using more than one slogan doesn’t create an identity and the consumers are able to recall only that slogan which is more prominent to eyes.

With the trade fair venture, Khadi India has got associated with Khadi goes Global more rather than all other slogans.


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The presenter for Khadi India is Mahatma Gandhi along with his trademark Amber Charkha. Brand Gandhi is still the most powerful Indian icon celebrated globally (Economic Times, 2009), and Brand Gandhi stands for Khadi as its brand ambassador.

Brand experts believe that Gandhi’s simplistic image was an extension of a bottoms-up brand building exercise.

Meaningfulness

The Khadi India logo describes the Indian essence into the brand by writing in Hindi Calligraphy to establish a connection with the Indian consumers and they repeat the same words in English intentionally so that the chunk of foreigners who visit India and are fond of handcrafted Indian products can also recognise it.

The oval shaped logo of Khadi India is in Orange colour, which represents cheerfulness and enthusiasm of both red and yellow colour, fascination, creativity, hard work and determination of the artisans .Orange is a very bright colour, which catches a lot of attention, and every passerby gets a glimpse of Khadi because of extensive usage of orange colour even on their boards also.


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The other brand elements like Symbol, Slogans, and URL are not symbolic of a quality product to the consumers, because these elements do not signify anything about the quality of the product apart from mentioning the word ‘eco-friendly’ in a slogan used occasionally.

Khadi means handmade cloth which justifies the apparel category in Khadi India, but somehow other products made by village industries don’t comprise in between the brand name, but the organisation name in augmented form (i.e. Khadi & Village Industries Commission) suggests the diverse range products.

The brand elements doesn’t signify all the attributes of Khadi and village industries products apart from hand spun and hand woven fabric from India.

All the brand elements together leave an impact that conveys a partial brand promise.

Likability

The brand elements are not aesthetically appealing to the consumers as the orange colour is not only used in logos but also excessively used in hoardings, stores frontals, POS displays which takes away the appealing factor out of it and is not pleasant to the eyes. The brand elements are noticeable as the positive aspects are usage of words like Khadi, India, eco friendly as they denote some unique factors but they does not evoke any cheerfulness and excitement amongst the target consumers because of no synergy in the retail outlook of all the stores.

Transferability


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The transferability of Khadi India is limited as the name denotes fabrics and garments made out of Khadi only.

But KVIC have a full range of personal care products under the registered brand name of Khadi, which is exceptionally preferred by urban consumers as it’s totally natural with chemical free contents and superior packaging. This product brand of KVIC is standardised across India.

Though there is a mismatch between the brand name and the product category, it actually sells like hotcakes in all Khadi stores, trade events because people can recognise it, and consider it trustworthy.

Infact all other products are not in sync with the brand name but the share of their sales in total sales comes out to be a massive 96% (Annual Report 2008-09).

The transferability factor is quite contradicting as Khadi India stores are running majorly because of village industries product. The marketers can introduce new product categories but pertaining to the fact that all products should be handcrafted.

The brand elements can cross geographic and cultural boundaries, especially in this era of sustainability as it will represent the Indian culture with extreme pride. Marketers can also strategically enter into new market segments by improvising the quality of the products and positioning itself for bridge to better market.

Adaptability


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The brand elements of Khadi India are not adaptable as they are widespread across the nation with 7050 retail stores and are very peominent because of its presence on such a large scale. It would not be feasible to update the elements at one go.

Protectability

The brand logo is protective under KVIC as it is a government ked organisation, but otherwise all the enterprises which are into similar business league like Fabindia, Anokhi, State Emporiums and designers use Khadi as a word to define their handmade fabrics and garments which is a threat to Khadi India.


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Brand Salience, Brand awareness

Brand Performance

Brand Imagery

Judgement Feeling

Resonance

6.3 Consumer Based Brand Equity Model for Khadi India

Brand Identity: Who is Khadi India?

Despite of the fact that Khadi doesn’t have very a strong and positive brand image, the awareness level of Khadi is extremely high. This is because of its presence in every nook and corner of the country and its age old existence. The recall of brand Khadi is extremely in purchase situation of any naturally produced product.

Brand Meaning: What is Khadi India?

Brand meaning refers to what characterises a brand; this can be distinguished in terms of functional performance, and abstract image-related meanings. To create brand equity, the brand must have strong, favourable and unique brand meanings.


Brand RelationshipBrand ResponseBrand MeaningBrand IdentityRecallNatural CosmeticsHandicraftsNatural FabricsKurtasHandmade stationeryCotton SareesNational FlagDurriesFibre Products

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Brand Performance: Five attributes and benefits underlie brand performance:

Primary characteristics: Natural fabric and processes Product-reliability, durability and service ability: The reliability,

durability and service ability of most of the Khadi products is really doubtful. This is the reason why the competitor’s brands like Fabindia are out beating Khadi India.

Service effectiveness, efficiency and empathy: Extremely poor of service parameter. Just like any other government organization with a laid back and careless attitude.

Style and design: In recent time efforts have been made to update the style and design elements of Khadi products but still they are not at all in sync with latest fashion trends. This is because of decentralized product development activities of Khadi institutions. Each Khadi institution makes their own designs and only very few of them use the services of updated designers.

Price: Khadi India follows a very rigid pricing structure, cost sheets are provided by KVIC which have to be followed by all Khadi institutions. Most of the products of Khadi are moderately priced, except for leather and personal care goods.

Brand Imaging; Four categories underlie the ways the brand attempts to meet psychological or social needs:

User profiles

o Age- 18-65yrs (Indians, foreigners) o Gender- male & female o Occupation- students, professionals, politicians o Social Class- Middle & Upper Middle Income Group o Religion- Any o Education- schooling, undergraduates, postgraduates


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Purchase and usage situations: Khadi products are sold through 7050 retail outlets and through some MBO’s all over India

Personality and valueso Lifestyle- simple & classy, but finicky about themselves. o Attitude- motivating, self dependent, nature lovers. o Activities- spend money on self adornment, fascinated about

Indian culture o Values- modern, traditional

Heritage and history: Very rich and strong heritage. Khadi has the association of India’s freedom movement patronized by Mahatma Gandhi.

Brand Response: What about Khadi India?

Brand Judgments

Brand quality: Khadi India provides its customers with products made through all natural and sustainable processes, which in turn provides employment to rural India.

Brand credibility: Despite of its association with the Government of India, the brand has not gained much of credibility due to corrupted and complex organizational systems.

Brand consideration: The relevance of brand Khadi India for the customers is that they get products that are environment friendly and are providing the employment to rural India.

Brand superiority: Characteristics of the brand Khadi India that differentiates it from brand like Fabindia is association with patriotism, its wide spread foot prints and age old history.


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Brand Feelings: The feelings that brand Khadi India provides to its customers are off warmth, security, social approval, self respect, patriotism, socially responsible, environment friendly.


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Brand Relationship: What about Khadi India and its consumers?

Brand Resonance works at 4 levels with a brand:

Behavioural loyalty Attitudinal attachment Sense of community Active engagement

It can easily be concluded that brand Khadi India has not yet reached the level off resonance. Very few customers are loyal to brand Khadi India, and majority of these loyal customers are loyal to just personal care product range.


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6.3.1 SWOT analysis based on CBBE model

• Strengths• Khadi India brand gets purchase considerations in

various product category.• Brand Awareness depth: Extremely high.• Rich and age old heritage and history of brand.• Association with Freedom movement.• Brand Mahatma Gandhi as patron for Khadi India.• Association with natural and sustainable acts.• Loyal customer base for personal care

• Weakness• Poor brand credibility and brand quality.• No special effort to create a brand identity.• Product reliability, durability and service-ability not

standardized.• Extremely low on customer service parameter.• Product style and designs not in sync with latest

trends.• Product style and designs vary from institution to

institution.• Opportunity

• Scope of instilling brand preference by improvising all customer touch points and providing better products.

• Association with the government of India can be utilized for creating brand credibility

• Strategic usage of all brand elements.• Building customer loyalty

• Threats• Competitors brand creating preference over Khadi

India.• Awareness and credibility of Khadi India is likely to

diminish if branding is not emphasized upon.Reengineering Khadi India

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6.4 Branding traps

Brand Image Trap

A brand is successful when there is no gap between its identity and the perceived brand image. KVIC has never worked for establishing its brand identity, due to which over the period of time their image has become their brand identity. The consumer has defined Khadi India as a brand of laidback governmental organisation, with very dull stores and uninterested staff, which provides all kinds of handcrafted products under one roof, with uneven quality in apparels. The brand needs to create a more accurate portrayal of future brand promise.

The External Perspective TrapKhadi India is struck on external perspective trap, the brand has failed to realize the role that a brand identity can play in helping an organization understand its basic values and purpose. An effective identity is based in part on a disciplined effort to specify the strengths, values, and vision of the brand; it can provide a vehicle to communicate internally what the brand is about. But Khadi India itself has not realized its strengths and values and has never ever made an attempt communicate them. The employees here just work like any other government organization.


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6.5 Branding Proposal for Khadi India

The existing marketing setup of Khadi India with limited brand building activities doesn’t yield any credibility and preference to the brand. To bring out the consistency and gain recognition for Khadi India it has to be methodically promoted as a brand that connotes social, cultural, and environmental values. KVIC has to utilise all its strengths and capabilities to realise the worth of Khadi India as a reliable brand.

The brand re engineering process would focus on shifting Khadi India from a welfare approach to a unique selling proposition approach, and promoting the intrinsic qualities of Khadi, which are Indian, Hand spun and sustainable.

Due to the decentralised system of KVIC, it would be difficult to do standardization of apparels within all Institutions, but the retail structure can be revitalized according to the modern taste and preferences to build some interest and shift the thinking paradigm of consumers from dull environment of stores to a contemporary ambience.

o A shop floor layout and visual merchandising always leave a long lasting impact on the consumer that is why there is a need to bring in a synchronisation amongst all stores of Khadi India with same outlook and only one brand name and single logo of KVIC stores which is ‘KHADI INDIA’.

Khadi India has got powerful brand elements and associations but KVIC hasn’t realised the worth of it. A strategic handling of these elements would lead to a greater upliftment of Khadi India as a


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brand. The following is the list of some suggestive ways of using its brand elements.

o Placement of Logo on requisite customer’s media touch points, stores, packaging.

o Limited usage of orange colour, a mixture with earthy browns and greens to highlight the eco friendly element.

o Extensive usage of Brand Gandhi, as it speaks louder than words. Its recognisable by all kinds of consumers, be it rural, urban or foreigners.

o Opting for one appropriate slogan or merging all the existing ones.

o Using KVIC symbol only for backend operations.o Developing a new URL for brand Khadi India.

Khadi India has to develop a new brand personality for itself by utilising the associated keywords like sustainable, natural, Indian, most widespread, authentic etc and then communicate it in the promotions.

o KVIC hasn’t ever done any far-reaching advertising and promotions of the brand Khadi India, so right is the time to take on integrated marketing communication plans for Khadi India and establish a brand relationship with its users.


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Advertising & Promoting Khadi India

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7.1 Current Advertising

KVIC has empanelled four agencies for its creative and media duties – Prachar Advertising, Pam, Span and Unnati in February 2009. All four agencies are handling the Rs15-crore pan-India account for two years. They will be handling 360-degree account comprising print, TV radio and outdoors.

KVIC put efforts to advertise, but it has always been overlooked due to many reasons:

There is no integration between all the advertisements as all the ads are based on different themes which breaks the synergy.

KViC’s objective of advertising has always been communicating their social objectives through incorrect media vehicles.. All advertisements are based on social cause, where KVIC promotes its social objective of providing employment to rural India. They are running documentaries about Employment generation Programmes, Scheme of Fund for Regeneration of Traditional Industries(SFURTI) and other schemes, but not about the core product and benefits that customers will get.

The ads are very narrow in scope, as each Khadi institution is a separate business entity, they advertise for their own self only, in local newspapers and local cable network in a limited budget.


AdvertisingAbove the LineRadioTelevision (Doordarshan)Hoardings: Railway Stations, Bus Stands, Govt Offices , Major AirportsBEST busesBelow the LineExhibitions & Trade FairsFashion Shows SponsorshipsConferencesSeminarsWorkshopsPeople's Education Programme

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The reach of media vehicles that they use is very constricted. With magazines like Sandesh Bureau, Srijana and television medium as Doordarshan, the scope of awareness gets even more emaciated.

These media vehicles are reaching a particular group of audience which is very limited. This leads to under- positioning of the brand of Khadi India.

The radio slots are done majorly to advertise about ongoing events like 30% rebate scheme for 90 days and participation in trade fairs. Though the selection of Radio channel was appropriate in the recent times, but the kind of excerpts used in the radio slot weakens the brand value of Khadi India.

A location which gets the maximum eyeballs struck would be ideal at public places but KVIC hoardings are not placed at a noticeable position on Railway stations and Airports. The roadside hoardings are small in size, focussing on the local store offerings, and are present amongst a clutter of


New DelhiSandesh BureauShabdhaboodhHindustan MediacomDalit Adivasi SanvadSrijanaMumbaiSarvodaya SadhnaBhartiya Vidya BhawanNagpurProtsahanParam Mitra Publication Apia Param Mitra

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other hoardings or placed on less height which again is not attention-grabbing


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The above the line activities of KVIC have been unsuccessful to create an aura of Khadi India as a brand which stands for nature friendly unique products, But in the recent times all below the line activities done by KVIC are remarkable enough to generate awareness as well as sales.

KVIC’s Khadi Pavilion has been a huge hit in India International Trade Fair since four years. Many institutions and artisans from all over the country participate in the fair with their own specialised products and the response has been overwhelming. KVIC officials stated that over 85% of footfalls are turned into conversion in Khadi Pavilion, and such exhibitions helps in clearing the stocks of Department Sales Centre of KVIC. Also the event strikes the devoted psyche of people towards Indian products like handicrafts, fibre


ExhibitionsDomestic ExhibitionsIITFGiftex, MumbaiKhadi UtsavIndustrial Trade FairBuyer Seller Meet, World Trade Centre, Mumbai, GoaChennai International Trade FairKhudra Shilpa Mela, KolkattaDestination Maharashtra, MumbaiIndia international Garment Fair, New DelhiMobile ExhibitionsAzad Express train (2007)Mobile VansInternational ExhibitionsNatural & Organic Products International Trade Fair, London (2007) - 5 institutionsSAITEX, Johannesburg (2007)Fibre Products- South Asian countries Commodity Fair, Beijing, ChinaHerbal Products -International Trade Fair, Ethiopia Food Products - International Trade fair, Tokyo

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products, and different kinds of Khadi. The target consumer loves to visit such exhibitions and fairs where they can seek out for variety of handmade articles.

The Khadi pavilion at IITF had a creative visual merchandise that unified all the crafts and specialities of Khadi and village industries from all parts of the country, which was very impressive and just to see the rotating tree of art and craft by KVIC, many footfalls got

generated.

The theme for this year’s Khadi pavilion IITF was “Export of Services-Healthy Growth Progress” and to emphasise they mentioned slogans like ‘Serving the world’, ‘Khadi goes global’, and ‘Your eco friendly partner’ promoted the theme from all aspects.

KVIC has been regularly exhibiting since last two years in various cities in the domestic region. The most interesting exhibition format was in the train Azad Express in which Khadi and village sector’s products were displayed and sold.


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It has initiated participation in International trade fairs and exhibitions also, but the products categories that are being exhibited internationally are majorly non apparels. Khadi has two brands called Khadi, Desi Ahaar which are being exported the most. The international exhibitions are aiming to seek more export orders.

Another BTL activity done by KVIC regularly is fashion shows where they collaborate with some design schools like NID and NIFT to showcase seasonal collections. Khadi over the decades has moved from a freedom fighter’s identity fabric to a fashion garment. Some designers like Sabyasachi Mukherjee, Ritu Kumar, Rohit Bal, Jatin Kochhar etc, have used Khadi in their exclusive designer range which is changing the aspirational value of fabric bringing in more sets of consumers. With this kind of innovative use of Khadi, the fabric is rising on popularity level which has got Khadi back in vogue.

Though the Khadi fabric being used by designers is not always produced by KVIC, but this designer indulgence into Khadi has publicised KVIC’s Khadi Bhawans as well.

These Khadi fashion shows presented by KVIC and other designers are being held all over India in all zones.

The other BTL activities are majorly focussed on promoting and strengthening of KVI deemed with Export Promotion Council (EPC)


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The People’s Education programme is conducted through various essays and debate competitions organised for students, which bring in the awareness about the Khadi and village industries.

7.2 Public Relations

KVIC associates itself with other government bodies like domestic airports and Ministry of tourism’s Incredible India websites where the latter ones mention it as a shopping hub of Khadi and other handicrafts.

During the time of elections, Khadi takes a benefit to publicise about itself. Also fashion shows which are showcasing Khadi collection, create a buzz about Khadi, and KVIC being the owner of this top-of-mind word, gets the undue advantage.


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7.3 DAGMAR Analysis

7.4 VIPS formula Analysis


To what extent advertising aims at closing sale?A very LittleFocus on promoting schemes and social objective.Does the advertising aim at near-term sale by moving the prospect, step by step, closer to the sale?No, only initial step takenDoes the advertising aim at building a long-range consumer franchise ?No, a connection cannot be formed.How important are supplementary benefits of end-use advertising ?Supplementary benefits of Khadi advertisements would be the "Social welfare" aspect of using Khadi products. Although it is important but it should be supported with the primary benefits of product.Visibility Through BTL activities like exhibitions, trade fairs, fashion showsIdentity KVIC’s orange logoPromiseUnclear, due to extensive promotion of social objectiveSinglemindedness Limited concentration on Social objectives, when the business can be profitable.

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7.4 Advertising Proposal for Khadi India

Khadi India advertising has to be in synergy for promoting it as a brand, and for this purpose an ad campaign will be designed with a theme of Unification of all the Handicrafts from all states of India. The Incredible India campaigns can be taken as a benchmark for this, where the motive would be appreciation of rural art and craft and highlighting the Indian essence into the ads.

The message strategy would be instilling brand preference through such feel good ads.

The media mix has to be mechanised in such a way that it reaches both set of urban and rural consumers.

Also , selection of right kind of media vehicles will not only reach the right target segment, but also will help in positioning of the brand Khadi India in the desired way.

The final selection of media mix and the cost would be based on a thorough research for all media touch points of the consumers.

Some innovative ways of reaching the customers will be validated after research.


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Supply Chain of Khadi India

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8.1 Khadi Supply Chain

KVIC is a decentralised organisation where all the Khadi Institutions have their own operations including supply chain. All the institutions have some product specialisation, thus there is a horizontal supply of goods at the institutions level which then keep the goods at their store, along with the usual vertical flow of goods from manufacturers i.e the institutions to the stores.


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8.2 Khadi Production

During the year 2008-09, Khadi production, both in terms of quantity and value, registered better performance over the achievement reported in previous year. The production during the year moved to 76.25 million square meters of fabric valued at Rs, 543.39 crores compared to 71.88 million square meters of fabric valued at Rs 491.52 crores in the previous year. This shows a growth of 10.5% and 6% in terms of value and quantity respectively (KVIC Annual Report, 2008-09).

North Zone Total Production in Volume (In Lakh Sq mt.)

Total Production in Value (Rs in Lakh)

Chandigarh 0.01 0.39Delhi 5.14 218.73Haryana 50.63 4496.59Himachal Pradesh 3.12 392.87Jammu & Kashmir 3.66 1223.26Punjab 25.40 1128.00Rajasthan 38.53 3166.94Total 126.49 10626.78

East Zone Total Production in Volume (In Lakh Sq mt.)


Bihar 10.37 856.94Jharkand 2.01 334.51Orissa 3.50 294.51West Bengal 37.96 5490.35Total 53.84 6976.31

West Zone Total Production in Total Production


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Volume (In Lakh Sq mt.)

in Value (Rs in Lakh)

Gujarat 34.20 3309.33Maharashtra 1.30 395.52Total 35.50 3704.85

North East Zone Total Production in Volume (In Lakh Sq mt.)


Arunachal Pradesh

0.05 9.41

Assam 4.28 618.00Manipur 0.71 67.89Meghalaya 0.10 6.32Mizoram 0.42 0.34Nagaland 0.17 55.95Tripura 0.05 2.67Total 5.78 760.58

South Zone Total Production in Volume (In Lakh Sq mt.)


Andhra Pradesh 27.88 2211.83Karnataka 50.62 3854.84Kerala 25.77 1574.22Pondicherry 0.01 6.95Tamil Nadu 50.98 6316.39Total 155.26 13964.23

Central Zone Total Production in Total Production


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Volume (In Lakh Sq mt.)

in Value (Rs in Lakh)

Chattisgarh 5.93 969.62Madhya Pradesh 7.15 888.10Uttrakhand 22.31 1165.89Uttar Pradesh 350.17 15282.50Total 385.56 18306.11Grand Total 762.43 54338.86


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8.2.1 Per Capita Productivity

Per capita productivity refers to average production of a worker. The annual per capita productivity for Khadi stood at Rs 5,560 in 2007-08 but due to induction of improved tools and equipments the per capita productivity increased to Rs. 5,932 in 2008-09 (KVIC Annual Report, 2008-09). One such initiative was that frame looms machines were replaced by Gram laxmi semi automatic looms. While working Frame looms a weaver can only make use of his hands, but Gram laxmi looms had provision of foot pedals, thus on an average the productivity of a weaver increased from 7.5 meters a day to 15 meters a day.

8.2.2 Production Capacity

Only production that KVIC directly operates is that of sliver. For this purpose they have six sliver plants. These six plants had produced around 3000 tonnes of sliver during 2008/09. These plants operate at their full capacity, but then also they are able to meet just 30% percent of total sliver demand of KVIC institutions. Rest 70% of sliver is produced by few other Sliver plants owned by institutions. Following is the capacity of each plant and their actual production:

S. No

Plant Actual Production Qty in Lakh kgs

Production Capacity Qty in Lakh kgs

Production Variance

1 Kuttur, Kerala 5.16 5.5 6.18

2 Chitradurga, Karnataka

7.35 7.5 2.00

3 Sehore, Madhya Pradhesh

5.71 5.75 0.70

4 Raibareily, Uttar Pradesh

6.16 6.25 1.44

5 Etah, Uttar Pradesh

4.93 6 17.83


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6 Hajipur, Bihar 0.55 1 45.00

Total 29.86 32 6.69 %

Central Sliver Plants

KVIC has six sliver/roving plants to supply the raw material to the Khadi institutions. These six plants had produced around 3000 tonnes of sliver of during 2008/09. The performance of these plants, reported an increase of 26% over previous year.

PlantProduction:

Qty in Lakh kgsProduction Value:

Rs in LakhKuttur, Kerala 5.16 502.01Chitradurga, Karnataka 7.35 638.85Sehore, Madhya Pradhesh

5.71 494.12

Raibareily, Uttar Pradesh

6.16 517.14

Etah, Uttar Pradesh 4.93 479.66Hajipur, Bihar 0.55 59.00

Terms and conditions by Sliver Buyers

Sliver will be checked on 4 point system from MTL/ ITS lab and inspection and quality Certificate should be attached with dispatch documents.

Sliver should be free from defects. Sliver should be in maximum of two shade lots.

The Sliver shall be supplied strictly in keeping with material specifications/ technical parameters specified in the purchase order or Quantity.

Packing roll length should be above 30 meters.


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Sliver dispatched after due date will automatically result in discount on Sliver price/ air freight.

Rejected Sliver will be replaced within 2-3 days. Sliver should be delivered with the original document not with

chalan.


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8.3 Use of Information Across the Supply Chain

Customer Type


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Sales Data

The KVI sector recorded an improved performance during 2008-09 in comparison to the previous year (2007-08). Sales of KVI products registered an increase to Rs. 21,006.00 crore (Khadi – Rs.855.00 crore and VI Rs. 20,151.00 crore) during 2008-09 (KVIC Annual Report, 20008-09).

List of KVIC owned retail stores

1. Khadi Gramodyog Bhavan, New Delhi2. Gramshilpa, New Delhi3. Khadi Gramodyog Bhavan,Bhopal4. Khadi Vastragar, Ahmedabad5. Khadi Gramodyog Bhavan,Mumbai6. Khadi Gramodyog Bhavan,Goa


DemographicsAge- 18-65yrs (Indians, foreigners) Gender- Male, FemaleOccupation- Students, Professionals, Politicians, FarmersSocial Class- Middle & Upper Middle Income Group Religion- AnyEducation- Schooling, Undergraduates, Postgraduates PsychographicsLifestyle- simple & classy.Attitude- motivating, self dependent ,nature lovers. Activities- spend money on self adornment, like to know about Indian culture Values- modern, traditional

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7. Khadi Gramodyog Bhavan,Bangalore8. Khadi Gramodyog Bhavan,Ernakulam9. Khadi Gramodyog Bhavan,Patna10. Khadi Gramodyog Bhavan, Kolkatta11. Central Vastragar, Bhubaneshwar12. Khadi Gramodyog Bhavan, Agartala


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8.4 Key metrics

8.4.1 Supply chain planning metrics

ExistenceForecast accuracy No forecastingTotal inventory Worth Rs 46,60,07,177Plant utilization 93.31%

Warehouse utilization

Sliver plants - 21.4%KVIC institutions - 50%Retail stores - Full

Fleet utilizationA fleet of 2 Tata 407 and 3 Tata

Ace, carrying out milk run method

Dwell time through supply chain

Extremely High

Production plan variance

6.69 %

Opening Stock

Particulars 2008-09 2007-08Raw Materials (In Rs) 73500648.57 72779432.29Work in Progress (In Rs) 8636475.86 7288766.99Finished Goods (In Rs) 332792086.6 363227122.2Consumables & Packing Materials (In Rs)

66,46,567.29 70,08,885.75

Total 42,15,75,778.3 450304207.2Closing StockParticulars 2008-09 2007-08Raw Materials (In Rs) 7,98,05,185.92 7,25,93,880.57Work in Progress (In Rs) 85,21,366.46 86,36,475.86Finished Goods (In Rs) 36,68,13,859 33,27,92,086.6


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Consumables & Packing Materials (In Rs)

9959998.31 66,46,567.29

Raw Material in Transit (In Rs) 9,06,768 9,06,768Total (In Rs) 46,60,07,177.7 42,15,75,778.3

Average Inventory = (Opening Stock + Closing Stock) / 2

= (42,15,75,778.3 + 46,60,07,177.7) / 2

= Rs 44,37,91,478

COGS = Opening Stock + Purchases – Closing Stock

= 42,15,75,778 + 94,04,09,000 - 46,60,07,177

= Rs 895,977,601

Inventory Turnover Ratio = COGS / Average Inventory

= 895,977,601 / 44,37,91,478

= 2.02 Times

Plant Utilization

The total manufacturing capacity of six Sliver plants is 32 Lakh Kgs. The actual production for year 2008-09 was 29.86, there was a variance of 6.69% in actual production and the production capacity. Thus, the plants are being operated at 93.31% capacity.

Warehouse UtilizationWarehouses operate in three levels of KVIC supply chain:

Warehouses at Sliver plants - 21.4% Warehouses of KVIC institutions - 50% Warehouses at Retail stores - Full

Warehouses at Sliver plants


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All of the six sliver plants have their own warehouses where the sliver rolls are kept. The capacity of these warehouses is far more than the actual annual production of the plants. For instance the capacity of the CSP at Etah, Uttar Pradesh is 7 Lakh Kgs whereas the annual production of slivers for the year 2008-09 was 4.93 Lakh Kgs. During the visit to the warehouse 1.5 Lakhs Kgs was kept in the warehouse. Thus the warehouse was utilized at just 21.4% of its capacity.

Warehouses of KVIC institutions

There are 5549 institutions which are affiliated with KVIC. Almost each of these institutions has their own warehouses where the stock of raw material, work in progress and finished goods are kept. During the visit to Khadi Gram Udyog Sadan Vikas Samiti, Bassi, Jaipur it was found that the warehouses are utilized at even less than 50% of their capacity.

Warehouse at retail stores

There are 7050 retail outlets affiliated to KVIC and each of these stores has a warehouse. In most cases these warehouses are located inside the outlets whereas in few cases stores, warehouses are located at a nearby place. These warehouses are always utilized up to their maximum capacity, reason for that being lack of inventory management. Most of manufacturing units of Khadi Institutions are located in rural India, thus in order to ensure the availability of merchandise, retailers keep a good amount of stock in their warehouses.

Fleet Utilization

Many of KVIC institutions have their own fleet of vehicles and for transfer of goods with in a territory they use their own fleets, and for the goods that are to be delivered outside the state territory then they send it through the fleet of some transporter. For instance, Vinob a sewa samiti, Jaipur (KVIC Institution) has a fleet of 2 Tata 407 and 3 Tata Ace which


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transfer goods within the territory of Rajasthan. This fleet of both small and big quantity goods carrier ensures that Vinoba sewa samiti achieves maximum fleet utilization. Moreover they also make use of milk run method, wherein one Tata 407 picks up material from the warehouse everyday and one run it delivers material to all of the 33 stores operated by the organization in Jaipur. For transferring goods to other states they use services of Laxmi golden transport cooperation, Jaipur.

Dwell Time

Dwell is the ratio of time an inventory sits idle to the time required to satisfy its designated supply chain mission. It would be the ratio of time the inventory is in storage to the time it is in transit. The dwell time for Khadi would be extremely high, reason being the long value chain. The value chain for manufacturing Khadi products is extremely large; the product spends a long time in the warehouses.


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8.4.2 Supplier relationship management metrics

ExistenceSupplier quality No StandardsPurchase costs Rs 94,04,08,810Delivery performance Extremely GoodSuppliers on time performance

Very Stringent

Purchase CostsFor year 2008-09 the net purchase amount for KVIC stood at Rs 94,04,08,810, this included purchase of finished goods, raw materials and conumables.

Delivery PerformanceDelivery performance of Khadi has been extremely good because of following reasons:

Suppliers keep huge amount of finished goods in their warehouses, thus any demand by KVIC stores is met immediately. However due to heavy inventory levels at warehouses the inventory carrying period and inventory carrying cost of Khadi suppliers remains high.

For each product category there are hundreds of KVIC suppliers available, thus any demand is met by one or the other supplier.

KVIC is a very key client for the suppliers not only because of the huge demand but also because of the risk free payment. Thus suppliers maintain a high delivery performance level, so that they do not lose a client like KVIC.

Suppliers on Time Performance

KVIC has very stringent rules for suppliers on time performance, for regular items like personal care products and apparels, suppliers are given minimum time period depending upon the distance from supplier’s facility to the retail stores. For ex. The Khadi gramudyog bhavan orders shirts and kurta to a Jaipur based supplier (Vinoba


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seva samiti) on a delivery period of two days. If the suppliers don’t deliver the material in 2days time then KVIC has the right to cancel the order. However usually charges a penalty to the supplier instead of cancelling the order.

8.4.3 Customer relationship management metrics

ExistenceCustomer lift No Record MaintainedCustomer retention No Efforts for retentionCustomer life time value ModerateSales performance Rs. 21,006.00 croreSales off take versus out of stock at stores

Stores are rarely out of stock

Promotions goal compliance

No Promotion goals

Customer Lift

Usually KVIC doesn’t maintain any data related to customers sales, but recently few of KVIC affiliated institutions have made an effort to do so. The only customer lift that KVIC gets is during its 3months annual sales, around the month of October.

Customer Retention

No efforts have been made by KVIC to retain the customers, in fact due to better customer relationship practices followed by the competitors like FabIndia, Khadi India has lost its customer base.

Customer Lifetime value

The lifetime value of a Khadi customer is not that high, reason being that Khadi doesn’t have much products for children’s and teenager. The average age of Khadi customer would be 30 yrs, thus the lifetime value will not be that high. But still it is extremely important to retain the


105

existing customer, because getting new customers is always an expensive process.

Sales Performance

The KVI sector recorded an improved performance during 2008-09 in comparison to the previous year (2007-08). Sales of KVI products registered an increase to Rs. 21,006.00 crore (Khadi – Rs.855.00 crore and VI Rs. 20,151.00 crore) during 2008-09 (KVIC Annual Report, 20008-09).

Sales off take versus out of stock at store

Despite of improper inventory management, the stores are rarely out of stock, reason being that stores keep a huge stock of inventory and inventory is replenished on daily basis. Another reason for this is that Khadi has a huge supplier’s base, so even if one supplier is unable to supply in the required time, there is always an alternative available.

8.4.4 Enterprise resource planning metrics

ExistencePerfect order 32340Supply chain costs 3 – 5 %Accounts payable Rs 77,85,17,801.44Accounts receivable Rs 124,92,46,076.60Cash-to-cash cycle times 325 daysOrder cycle time 8 days

Economic Order Quantity

(D) Average Annual Demand = 15,16,596

(C)Average Cost Price = Rs 290

(A)Cost of placing an order = Rs 7,000

(I) Inventory Carrying Cost = 7%


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EOQ = √2AD/H

= √2*1516596*7000/ (290*.07)

= √21232344000 / 20.3

= 32340

Number of Order per year = Annual Demand / EOQ

= 1516596 / 32340

= 47

Interval between Order = 365 / 47

= 7.75 days

Lead time = 10 days

Reorder Point = (Annual Demand/365) * Lead time = 41,550

Accounts ReceivablesParticulars 2008-09 2007-08Departments 7,91,96669.47 43,21,09,096.70Khadi Institutions & Boards

86,64,37,153.55 49,38,19,625.83

Government Departments

19,25,26,786.87 17,85,89,645.84

Other Receivables 1,99,39,934.71 1,64,03,365.02Total 124,92,46,076.60 1,20,00,34,640.76Source: KVIC, Annual Accounts 2008-09

Accounts Payables

Particulars 2008-09 2007-08Departments 36,62,02,729.23 30,96,00,987.64Khadi Institutions & Boards

37,99,70,398.26 35,11,81,588.93

Government 66,90,675.78 1,26,27,121.78


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DepartmentsOthers 2,56,53,998.17 2,06,28,213.94Total 77,85,17,801.44 69,40,37,912.29

Cash to Cash Cycle

Cash to Cash Cycle = Days of sales outstanding + Inventory days of supply - Days of payables outstanding

Days of sales outstanding = Average Inventory / (COGS/365)

= 44,37,91,478 / (895,977,601 / 365)

= 44,37,91,478 / 2454733

= 180 days

Inventory Days of Supply = Average Accounts Receivable / (Sales / 365)

= 1224640358 / (1006356875 / 365)

= 444 days

Days of Payables outstanding = Average Payables / (COGS/365)

= 299 days

Thus Cash to cash cycle for KVIC = 180 + 444 – 299

= 325 Days

The cash to cash cycle for KVIC is extremely poor; which shows that the organization is not efficiently using the working capital. The prime reason for having such poor cash to cash cycle is that, more than 50% of KVIC sales are from government supplies and other institutional sales and there is a huge list of debts receivable by the company.

Order Cycle Time


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Order cycle time refers to time period between placing one order and the next order. At KVIC replenishment orders are placed after every 8 days.


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8.5 Sales Forecasting

For KVIC and all KVIC institutions affiliated with KVIC

Year X Y (Rs in Lakh)

x-x^ y-y^ (x-x^) (y-y^)

(x-x^)2

2006-2007 1 19551.4 -0.5 4026.18 -2013.09 0.252007-2008 2 21543.48 0.5 6018.26 3009.13 0.252008-2009 3 21006 1.5 5480.78 8221.17 2.252009-2010*

27403.72

Total 6 89504.6 9217.21 2.75 x^ 2 y^ 29834.87 b 3351.713 a 23131.44 y^ 36538.29

Thus the forecasted sales for 2009-10 for KVIC and KVIC Institutions is Rs 365,38,29,000.

It has to be noted that the Sales forecasted over here are on the basis of the existing retail structure.


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8.6 Recommendations for Supply Chain

Proposed Vendor Rating Index (VRI)

Implementing the vendor rating index will increase vendor awareness about the KVC

requirements. Such a procedure will ensure that KVIC will get material at best

possible price, of best possible quality and in best possible time.

The format for calculating the VRI will be as follows:

Factors Weight age

Vendor A

Weighted Score

Vendor B

Weighted Score

Lead Time 15 8 12 9 13.5

Quality Supplied 15 6 9 9 13.5

Reliability of Delivery

15 6 9 9 13.5

Credit Facility 10 9 9 8 8

Price Offered 15 8 12 7 10.5

Quantity Rejection 10 7 7 9 9

Capacity 10 10 10 9 9

Overall Service 10 8 8 9 9

Total 100 62 76 69 86

In the above example the weighted score for Vendor A is coming out to be 76

whereas for Vendor B it is coming out to be 86, thus Vendor B would be preferred

over Vendor A. however if the difference between the two parties would have been

minor then both the vendors would have been called for negotiations.

Delivery Authorization

Under delivery authorization system, a supplier is issued a delivery authorization

letter on the receipt of which, supplier dispatch the material. Till now KVIC doesn’t/t

has any such system. When the demand arises, KVIC issues a Purchase Order (PO)

to the supplier, after which the supplier dispatches the material as per the stipulated

date. In case of delivery authorization, KVIC will first issue the bulk purchase order to


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the suppliers, and then delivery authorization letter for smaller quantities will be

issued to suppliers whenever delivery is required at retail stores. Such a system will

reduce the inventory pile ups in retail stores.

Warehouse Utilization

Warehouses at the central sliver plants of KVIC operate at 21.4% utilization level.

The plant utilization of these plants is 93.31% but still these sliver plants supply just

30% of total sliver quantity demanded by Khadi institutions. Thus the market is there

if the production levels are increased. Therefore it is recommended that the excess

of space at warehouses can be utilized for production purposes.

Central Warehouses

After the retail makeover of the stores, it is recommended that 5 central warehouses

should be developed. These 5 warehouses in 5 zones of the country will supply

finished goods to the Khadi stores in their respective zones. This would result in

better inventory management in KVIC. It will also reduce the space required for

storage at retail stores, and thus that space can be utilized for retail sales. Also this

would help in reducing the shrinkage level at retail stores.


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Sales and Distribution for Khadi India

113

9.1 Distribution

The structure is very haphazard and not synchronized. As goods are directly supplied

to retail stores, a storage and distribution centre can be added in between them. So

that the institutions supply the goods to this centre and from there the goods are

further distributed to the stores according to the requirement.


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9.1.1 Proposal

Thus, in order to make it more synchronized one more channel of distribution can be

added in between. The concept of introducing warehouses in between will make the

retail stores to keep minimum of stock at the stores, hence the costly retail space

would be utilized for retailing only. Another benefit for having such a frame work is

that the small institutions who were till now unable to supply material to distant retail

stores can now supply the material to their nearest warehouse.

9.2 Sales Training

Although in past KVIC has taken initiatives for training sales staff about retailing

skills, consumer orientation at the shop floor, accounting and inventory management

the store staff still lacks required skills. At present KVIC have 7 training centres in

India which conducts 138 training programs, but none of them are specialized for

selling skills. This fact proves that the importance is selling skills is totally

underestimated at KVIC. The sales staff at stores has a much laid back attitude

which really doesn’t work in such competitive environment, where the competitors


North Zone Institutions

East Zone Institutions

West Zone Institutions

North Zone Stores

East Zone Stores

West Zone Stores

North Wareho

use

South Zone Institutions

East Wareho

useWest

Warehouse

SouthWareho

use

Flow

of G

oods

Flow of Goods

South Zone Stores

115

like Fabindia are eating up the share of Khadi India purely on the basis of product

quality and service parameters.

To improvise the skills of the store staff a training agency would be hired, which

will initially train the sales staff of KVIC 12 Department Sales centre. The training

would be focussed on the following parameters:

A consideration in all these areas of training would lead to better customer treatment

at the stores, and delighted customers moving out of the store is always fruitful for

the brand.

To motivate the sales force and employees to be comprehensive in all these areas

constantly, various measures to be adopted

Personality grooming sessions to mould the appearance, convincing skills

and language skills of the sales force

Implementation of incentive schemes for the sales staffs to achieve a

sales target on a daily or weekly basis

Weekly briefing and reporting for the sales staffs for giving them clear

guidelines on what are expected out of them and to help them perform

better in the stores and achieve more sales


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9.3 Structure of Retail Store StaffAt present the sales staffs at Khadi India stores is not structured in an apt way.

Though the number of sales staff required is dependent on the store size and staff

requirements, some small stores are overloaded with staff, and some big stores have

less number of staff then necessary.

A restructuring of store staff is required which will provide a sense of responsibility

and designated authority.

For a small Department Sales centre, the authority and responsibilities can be shared

by the staff with a store manager personally taking care of the back end operations

and heading well trained staff who can be trained to do multi tasking. But for a big

store like the Khadi Gramudyog Bhawan, Regal Building, Delhi, a store manager at

the top will be managing both store front end and back end operations with

executives underneath.

On the front end, category supervisors will be positioned who will be responsible for

their own category’s accountability and inventory management. The number of sales

executives can range from 2 to 4, pertaining to the requirement according to stores

size. On the back end, there would be an accounts executive for managing daily

entries and a crew of store keeping staff.

This structure of store staff would be ideal as there is vast variety of product range,

which is not co-related to each other. The clientele for each product category is

different from other. For instance the clientele for personal care products would be


Store ManagerFront EndApparel SupervisorSales executives Personal CareSupervisorSales executivesFiber ProductsSupervisorSales executives CashierBack EndAccounts executiveStore Keeping staff

117

well educated and aware, whereas for a product like Silk sari the customer would be

a traditional Indian house wife.

Khadi India stores have abundance of sales staff at the stores; since all of them are

government employees it is not possible for KVIC to terminate any of them. Thus

such a structure would ensure that all the human resources are utilized in most

efficient manner. Also this structure would ensure that the sales staff would have the

best possible knowledge about the products.

9.4 Key Accounts Management

Key Accounts of KVIC

Potential Clients for Khadi

School uniform fabrics for more government schools

Pushing sales of Khadi fabrics by making it mandatory for schools to use

Khadi fabrics uniform at least once or twice a week by government

Designers for high quality Muslin, Cotton and Silk.

Looking beyond government organizations:

o Uniforms for Offices

o Bed Sheets for Hospitals


Indian railwayBed sheets, spreads and blankets used in Indian railway are supplied by the Khadi and village industries and commission.Indian DefenceRunnersDustersGovernment schoolsUniform materialsRunnersNon Governmental OrganisationsBed SheetsBeddings

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o Airlines curtains and spreads

o Bed Sheets, curtains and cushions for Hotels

o Real estate developers for soft home furnishings

9.4.1 An Effective Selling Process for Institutional Sales

Prospecting and QualifyingUnder this step a database would be prepared for all prospective clients. KVIC has

the benefit of being a government organization, it is very easy for KVIC to build

clientele with other government organizations like Defence, Air India, Hospitals etc.

Pre- approach

Under this step an in depth analysis of the prospective clients will be done. This in

depth analysis will include:

Preparing the list of Key employees of the client organization

Understanding the product needs of client

Understand the working environment of the organization

Study the past purchasing patterns

Understanding what benefits are clients looking for.

Approach

After doing the home work of pre approach, the next step is to approach the client;

this can be done taking appointments, tele calls, emails and direct mailers. Use of a

reference can really help in approaching the client.


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Presentation and demonstration

Under this step the sales staff meets the client and gives his proposal to the client. At

this stage the sales person should emphasize on the benefits that the client would

get out of the product, not the features of the product. Also sales person must carry

the samples along with him to demonstrate the product.

Overcoming objections

If the sales person had done a proper in depth study of the client under pre approach

stage than overcoming objections at this stage will not be a big problem. The sales

person should be able to foresee what all objections the client can have, and he

must have the answer beforehand.

Closing

The closing in case of a successful dealing would be when the payment is received

from the client, but at this stage the sales staff should not think that this was the last

dealing with the client. The life time value of a institutional client is far more than a

retail customer.

Follow up and maintenance

In case of institutional sales there is huge scope of getting repetitive order, thus the

sales staff must maintain a healthy relationship with the client. This can be done

even through season’s greetings and reminders of latest schemes and products.


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9.5 Transactional Selling Model

Emphasis on Sales skills

Khadi sales are majorly done through sales people in the stores. Each product

section has two to three sales staff that takes care of the customers personally and

assists them for the details related to the products and they are expected to help the

customer find the right product and explain them the benefits of using the products.

Therefore the sales skills become very important and the sales majorly revolve

around the sales skills.

Knowledge about the product

The Khadi products are well understood and identified by the sustainability

conscious customers and people who wants purity in their products. Whenever a

customer goes into a Khadi store, the sales staff is a medium through which the

customer gains more information about the products. The knowledge of products in

staff is extremely poor. Although the products are well understood by the customer

but still sales staff should add on the knowledge of the customers..

Respond to customer needs

Due to diverse product offerings the needs of the customers also varies. The staff at

Khadi store thus should emphasize on responding to these needs. Thus employees

should be trained to respond to varied customers’ needs. Also due to diverse product

offerings the scope of cross selling also increases, till now there is no effort made by

the sales to staff to generate cross sales.

Provides quality products

Khadi products are perceived to be upto the quality standards by the target

audience. They are produced in an eco friendly way using natural ingredients and

their cosmetics section is handmade. But still there is a huge scope of improvement,

the quality of product varies from store to store, one store might offer a good quality


Emphasis on sales skills.Knowledge about the product.Respond to customer needs.Provide quality products.Establishing Customer Relationship

121

product but the same product sold at some other store might not be having same

quality level.

Establishing customer relationship

Currently, Khadi is not involved in any customer relationship technique. They are not

using any kind of software to interact with customers, nor are they involved in any

kind of employee training.

Challenges

As KVIC is a government organization, it is very difficult to make changes under this.

The challenges that has to be faced are as follows-

Cannot remove anyone from the existing sales force.

The system of Khadi works in such a way that it becomes very difficult if

someone from the sales force has to be removed or replaced due to lack of

good performance as Khadi has a very rigid working frame.

The sales staffs are usually aged and not very educated. To add on to the

problem most of the sales staffs are stubborn and has a very unfriendly

attitude towards the customers.

Language constraints.

In today’s scenario every brand retail outlets have very trained sales staff as

well as multi language skills. But most Khadi sales staffs lack multi language

skills which apparently leads to language constrains as foreigners are a major

portion of the customers who visit the Khadi stores.

Appointing trainers for such employees.

Appointing trainers for untrained staff also is not easily possible as all the

Khadi stores are not handled by one particular body but some retail stores

come under state institutions some fall under the control of KVIC.

Achieving uniformity in convincing skills and staff appearance.

To create a strong brand identity and a brand feel, there has to be an

implementation of uniformity in terms of convincing skills of the sales force, the

staff appearance, store format and visual merchandising of the stores. But it is

not possible in case of Khadi as it is highly unorganized in terms of stores and

sales staffs.


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10.1 Roll Out Strategy

Roll out PlanYear 0

Year 1

Year 2

Year 3

Year 4

Year 5

Renovation of 12 DSC owned by Govt Renovation of stores under A+ institutions Renovation of stores under A institutions Renovation of stores under B institutions Renovation of stores under C institutions Renovation of stores under D institutions Product Development Research Process Product Development Implementing Retail Outlook Grading System for DSC's, A+ & A institution's stores Implementing Retail Outlook Grading System for B, C, D institution's stores Establishing Zonal Warehouses for all KVIC stores Launching E retail Strategic Participations in International Trade Fairs & Exhibitions E retail Expansion Focus on Participation in International Trade Fairs & Exhibitions Exports

KVIC runs a decentralised system, which allows all the institutions to have complete

authority in producing Khadi apparels as per them. These institutions cater to their

particular target group only, thus they have their own in-house designers for product

development and because of this limited audience they are not in sync with the

market trends and forecasts.

Thus it would be very difficult to standardize the Khadi apparels at the initial stage of

reengineering. So the major focus in KVIC’s re-engineering would be ‘retail

makeover’ as a synchronisation in the outlook of the stores is required, to create a

brand out of KVIC.


Project Implementation

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10.2 Marketing Feasibility

Khadi and village industries were originally promoted by Mahatma Gandhi in 1920s

for rural self employment. Khadi is estimated to constitute less than 1% of India’s

textile market. The growth in production and sales of Khadi is marginal compared to

the increase in the production of textiles at a compound growth rate of 7% in volume

and 15% in value during FY2002–FY2006. The textile industry has made

tremendous strides with the adoption of modern technology, branding, and savvy

marketing. In contrast, Khadi has been unable to adapt to economic, technological

advancements and changing consumer needs. As a result, the community-based

production and marketing model of a product that is still revered, is neither able to

gain market share nor substantially contribute to rural employment.

For detailed analysis of marketing feasibility please refer the business plan.


125

10.3 Operations and Management FeasibilityThe 12 selected stores are located in all regions of India, therefore the re-

engineering taskforce can work according to zonal segmentation:

The scope of work during first year of re-engineering would include:

Renovating the 12 DSC’s

Hiring a marketing team that would

develop a marketing strategy for

KVIC.

Training the sales staff at retail stores.

Prospecting new clients for

Institutional sales.

Emphasize on Visual merchandising

aspects of the stores.

Product development according to the

latest trends.

Following is the list of job positions that

would be required to attain above mentioned

objectives:

Marketing team: 1 Marketing

manager, 1 Brand manager and 4

marketing executives.

Institutional sales: 1 Institutional sales

head and 8 Key accounts managers

(2 for each zone).

Visual merchandising: 4 Visual merchandisers (1 for each zone).

Product development: 2 Designers


NorthDelhi (2 Stores)EastBhubaneshwarPatnaKolkata AgartalaWestGoaMumbaiAhmedabadBhopal SouthErnakulumBangalore

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10.4 Financial Feasibility

Sales Forecast:

The best performing store is KGB, New Delhi which accounts for nearly 61% of total

sales of all these stores, while Kolkata and Mumbai are the next in league with a

share of 14.5% and 7.1% sales respectively. Thus an increment of 25 to 30% is

expected after revival of these stores.

The other stores at Ernakulam, New Delhi are having a share of 5.7% and 4.2%

respectively which is a very minimal share, thus these stores have a lot of potential

which can realised after revival, with a 50% increment in sales.

All other stores are poor on performance despite of being owned by KVIC directly. A

revival for these stores can yield more than 70% sales.

“Vinoba Sewa Samiti” is one of the NGO affiliated with KVIC owns 37 Khadi stores in

India. During FY 2007-08 the institution renovated all of its 37 stores, they also

advertised through vernacular media tools. Since then the stores have been

achieving a growth in sales varying between 30% and 70%. This growth strategy of

the Institution has been taken as the bench for this business plan.

About the corporate sales, KVIC has an impressive clientele list already which

includes Indian Railways, Defence, Government Hospitals, and Boarding Schools

etc. After implementing Key account management, KVIC stores can have an

increment in the range of 25% to 75%, by approaching prospective clients like

Private hospitals, schools, NGO’s, Designers, Cotton garment manufacturers.

The total increase of sales in percentage comes out to be around 32% in the first

year itself.

Product Costing

Cloth Manufacturing (15.2 meter roll) in Rs

Cotton Khadi (B)

Cotton Khadi (A) Silk

Yarn 370.1 419.68 1730.27


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Weaving 87.5 112.7 134.5

Weaving Labour 31 31 31

Employee Funds 19.3 24.79 36.73

Processing Charges 26.5 26.5 26.5

Total 534.4 614.67 1959

Interest @ 4% 21.4 24.59 78.36

Insurance @ 1% 5.3 6.15 19.59

Trading Spend @ 3% 16 18.44 58.77

Margin @ 20% 106.9 122.93 391.8

Total cost per than 684 786.78 2736.25

Cost per Meter 45 52 180

Costing for a Product in Rs Mens Cotton Khadi Shirt

Mens Cotton Khadi Kurta

Womens Silk Kurta

Cloth Cost per meter 45 52 180Consumption per Shirt (meter)

2 2.75 2.5

Cost of Cloth 90 143 450Washing 10 12 12Cutting 10 12 12Button Holes 2 2 2Stitching 10 15 15Collar 10 6 7Arm Bands 6 0 0Labels 2 3 2Buttons 2 1 1Checking 2 3 3Ironing 2 3 3Packing 4 6 6Total Cost 150 206 513Add: 42% Mark Up (30% 50 68 169


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Margin)

Retail Price 200 274 682

The Average Selling Price of three most selling garments i.e Mens Cotton Khadi

Shirt, Mens Cotton Khadi Kurta, Women’s Silk Khadi Kurta comes out to be Rs 384.


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Profit and Loss Account

Particulars Amount (Rs) Total Sales 58,38,89,500 Less: COGS (75% of Sales) 43,79,17,125 Gross Profit (25% of Sales) 14,59,72,375 Less: Employee CostsSalaries of New Employees 75,60,000 Salaries of existing employees 2,93,07,353 Incentive Allowance 2,20,947 Medical Aid to Staff 4,40,501 Employees PF 30,13,639 Advertising and Promotions (8%) 4,67,11,160 Less: Operating ExpensesPrinting and Stationery 4,23,732 Electricity 5,80,812 Depreciation 36,41,875 Telephone 3,22,813 Miscellaneous 8,75,196 Insurance 3,23,047 Legal Expenses 1,26,239 Vehicle Running Expenses 3,45,722 Uniform Expenses 2,12,686 Travelling Allowance 4,51,260 Rent, Rates and Taxes 6,89,486 Logistics 1,16,77,790 Postage and Telegram 1,19,928 Gratuity 3,31,581 Watch and Ward 7,30,763 Service and Maintenance 33,449 Freight and Cartage 18,215 Guest Entertainment 1,73,592 Repairs,Renewals 4,29,703 Conveyance 1,37,794 Preliminary Expenses W/O 2,68,25,830 Net Profit 1,02,47,263

Cost sheet has been worked out for all additional expenses that will be incurred for

implementing the re-engineering strategy. Re-engineering of the 12 Khadi DSO’s will

lead to sales of Rs 58,38,89,500 in the first year, the net profit on which would


130

work out to be Rs1,02,47,263. Thus it is feasible to move ahead with the project

work. These are certain assumptions related to the cost sheet:

Preliminary expenses will be written off over the period of 5 years.

Average selling price is estimated to be Rs 384, based upon the average of

prices of 3 high selling items.

Initial Advertising and Promotions amount is assumed to be @ 12% of Total

Sales.

Due to the limitation of data availability, the expenditures for 12 DSC’s have

been worked out on consolidated basis. KVIC has 37 revenue generating

centres; out of these 12 are the DSC’s. Thus the total expenditure for these

DSC’s has been divided in the proportion of 12:25.

Preliminary Expenses

Preliminary Expenses: Amount

Renovation Expenses of 12 stores 1,67,51,250

Advertising and Promotions (20%) 11,67,77,900

Training Cost 6,00,000

Total 13,41,29,150

Preliminary Expense W/o in 5 Years 2,68,25,830

The preliminary expenditure for the project in calculated to be Rs 11,67,77,900 which

would be written off over the period of next 5 years. These preliminary expenses

include the Renovation Expenses of 12 stores, Advertising and Promotions and

Training Cost.

The total initial investment requirement for the project will Rs 16,05,90,465 which

will sourced through budgets that are annually allocated by the central government

to the Khadi and Village Industry Commission.

Initial Investments: Amount Working Capital Requirement 2,46,12,495.84

Renovation Expenses of 12 stores 1,67,51,250 Advertising and Promotions 11,67,77,900 Training Cost 6,00,000


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Fixed Assets 8,97,000 Total Funds Required 15,96,38,646

Break Even Analysis

Particulars Amount (Rs)

Fixed Costs 12,11,70,302

Variable Cost Per Unit 298

Selling Price 385

Break Even Quantity 13,92,762

Break Even Value 53,62,13,406

Working Notes

Fixed Costs AmountSalaries of New Employees 75,60,000 Salaries of existing employees

2,93,07,353

Incentive Allowance 2,20,947 Medical Aid to Staff 4,40,501 Employees PF 30,13,639 Advertising and Promotions (8%)

4,67,11,160

Electricity 5,80,812 Depreciation 36,41,875 Telephone 3,22,813 Insurance 3,23,047 Legal Expenses 1,26,239 Uniform Expenses 2,12,686 Rent, Rates and Taxes 6,89,486 Watch and Ward 7,30,763 Service and Maintenance


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33,449 Repairs,Renewals 4,29,703 Preliminary Expenses W/O 2,68,25,830 Total Fixed Cost 12,11,70,302

Variable Cost Amount

COGS (75% of Sales) 43,79,17,125

Printing and Stationery 4,23,732

Miscellaneous 8,75,196

Vehicle Running Expenses 3,45,722

Travelling Allowance 4,51,260

Logistics 1,16,77,790

Postage and Telegram 1,19,928

Gratuity 3,31,581

Freight and Cartage 18,215

Total Variable Cost 45,21,60,548

Variable Cost Per Unit 298

The break even of the project will be achieved at the sales figure of 53,62,13,406,

which would be achieved with in first year of operations. The reason for this early

achievement of breakeven is that more than 80% of the cost is variable cost.


133

10.4.1 Scenario Analysis

A Scenario analysis has been done where in the forecasted sales figures have been reduced by 20%.

Particulars AmountTotal Sales 467111600Less: COGS (75% of Sales) 350333700Gross Profit (25% of Sales) 116777900Less: Employee CostsSalaries of New Employees 7560000Salaries of existing employees

29307352.59

Incentive Allowance 220946.8872Medical Aid to Staff 440501.2302Employees PF 3013639.149Advertising and Promotions (8%)

46711160

Less: Operating ExpensesPrinting and Stationery 423731.6772Electricity 580811.571Depreciation 3641875Telephone 322813.0845Miscellaneous 875196.1932Insurance 323046.9048Legal Expenses 126238.9638Vehicle Running Expenses 345721.6365Uniform Expenses 212685.669Travelling Allowance 451259.8827Rent, Rates and Taxes 689485.7982Logistics 9342232Postage and Telegram 119928.4101Gratuity 331580.8593


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Watch and Ward 730763.3508Service and Maintenance 33448.9506Freight and Cartage 18214.6338Guest Entertainment 173592.2769Repairs, Renewals 429703.0131Conveyance 137794.0971Preliminary Expenses W/O 26825830Net Profit 8197810.533

Even if the sales have been reduced by 20%, the company will still make profit of Rs 81,97,810.

Reflections


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Reflections

Under this highly competitive and consumer oriented environment, it imperative for

India’s own brand “Khadi” to revive itself. Khadi is estimated to constitute less than 1% of India’s textile market. The textile industry has made tremendous strides with the adoption of modern technology, branding, and savvy marketing. In contrast, Khadi India has been unable to adapt to economic and technological advancements. With such wide spread footprints the s cope of growth for Khadi India is immense.

This project is aimed at converting the weakness of Khadi into its strengths. The project started with analyzing the weak links in the structure of KVIC, following by implementing the feasible solutions. Implementing any new project in any of government institutions counters retaliation, but this plan has been structured keeping in mind the interest of all stakeholders, be it employees, institutions or the top management of KVIC.

In past also KVIC has taken many initiatives to revive the brand but all of them had backfired, thus before making the plans lessons were taken from previous failures. The final outcome of the project would be a win-win situation for all, weavers and artisans in villages will get more employment, KVIC employees will get to enhance their skills, affiliated institutions will get more business and KVIC will convert itself from a liability on Indian government to a an asset that would represent India’s textile and apparels industry.


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