Innovating in Emerging Markets: Tata & Unilever

Point: How you get a product to market may be as important as what you get to market.

Story: The previous post looked at product systems innovation to build a new car. Going a step further: some companies expand the systems thinking to include distribution and service. Consider Tata Motors, which created the world’s cheapest car, the Tata Nano. To reach a retail price of $2,000, Tata focused on the costs of every system of car, including the system for distributing and selling the car. To keep costs low, Tata created a modular design and an innovative distribution model. Tata will manufacture modules centrally and, in some cases, ship the cars as kits to local entrepreneurs who will assemble & sell them. Tata designed to the modules to be glued together rather than welded because gluing is less expensive and doesn’t require costly welding equipment. Tata will also train the entrepreneurs to do servicing.

Similarly, Hindustan Unilever pioneered a distribution model in 2001 to get its personal care products into the hands of rural villagers. A significant fraction of rural villages lack paved roads, making traditional truck-based distribution very difficult. The company developed a network of 14,000 women and women-owned co-ops to serve 50,000 villages. The women handle the logistics and door-to-door retailing of a range of personal care products. To address the needs of the market and the novel distribution system, Hindustan Unilever changed product packaging. By using this approach, Hindustan Unilever does not have to deal with the problem of moving product in rural India. The women or their employees come to the company’s urban distribution centers to get the product.

Action:
* When designing new products or services, consider how those products will be distributed.
* Think about the role that local entrepreneurs or business partners can serve
* Design the product to support the distribution channel (e.g., modularity, ease of assembly, packaging, etc.)

For more information: Vijay Govindarajan discussed Tata Motors’ strategy at the HSM webinar on March 18 and will be speaking at the World Innovation Forum being held May 5-6, 2009 in New York City

Hindustan Unilever’s distribution model: Discussed at MIT Center for Transportation and Logistics Roundtable on Supply Chain Strategies in Emerging Markets led by Dr. Edgar Blanco.

4 Comments »Case study, Entrepreneurs, Growth, How-to, Innovation, New Product Development, Opportunity, Strategy

4 Responses to “Innovating in Emerging Markets: Tata & Unilever”

  1. Claire Walter Apr 13th 2009 at 01:56 pm 1

    The notion of glued-together Tata cars bouncing along third-world roads boggles the mind. I hope those local entrepreneurs are ready to reglue, re-reglue and re-re-reglue!

  2. Andrea Meyer Apr 13th 2009 at 02:36 pm 2

    Just to ease your mind, we?re talking industrial-strength glues here, which are getting stronger & stronger (I did get a grin out of the image your comment evoked!) In fact, your comment prompted me to do a dig a little deeper into this notion of gluing, and I discovered that BMW uses a high-performance glue to attach the roof to its BMW M3 CSL: http://www.azom.com/news.asp?newsID=4753

  3. Brett Borders Apr 14th 2009 at 01:04 pm 3

    Tata has an incredible marketplace. A billion people and cars are still very, very much a luxury for the rich. I remember being at a party in Goa and these playboys from Mumbai drove a yellow Ford Escort hatchback econo right into the party – got out… propped their sunglasses on their head and started swigging bottled water and conspicuously littering it. Hopefully Tata can come up with clean, green cars to give more people transportation without destroying what is left of the environment.

  4. Andrea Meyer Apr 14th 2009 at 01:13 pm 4

    Yes, Tata does indeed have plans for a green car as well. Tata Motors is working with a French firm to develop an electric Nano. More info is at: http://www.ecogeek.org/content/view/1943/69/ But you’re right – it’s all a tough balancing act between providing transportation while not destroying the environment.

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