2013

Manish

Future Retail vs Reliance Retail11/29/2013

Resource Based Theory

RESOURCE BASED VIEW

(Comparison and contrast wrt the resources, capabilities and competenciesof two leading Retail firms in India)

A firm has to work with assets: including people and the value of its reputation

Resources are inputs to the firms production process. Resources include capital, employee skills, equipment, brand names, finance, talented managers etc. The resources can be classified as :

Tangible: Financial assets, Physical Assets, Human capital, Organisational Assets etcIn Tangible: Technology, Innovation, Brand, reputation, Corporate culture

As recently as 10 years ago portfolio planning, the experience curve, PIMS, Michael E. Porter’s five forces—tools like these brought rigor and legitimacy to strategy at both the business unit and the corporate level. Strategy consulting boutiques expanded rapidly and achieved widespread recognition. At the business unit level, the pace of global competition and technological change has left managers struggling to keep up. As markets move faster and faster, managers complain that strategic planning is too static and too slow. Strategy has also become deeply problematic at the corporate level. Waves of new approaches to strategy were proposed to address these multiple assaults on the premises of strategic planning. Many focused inward.

A framework that has the potential to cut through much of this confusion emerged from the strategy field. The approach is grounded in economics, and it explains how a company’s resources drive its performance in a dynamic competitive environment. Hence the umbrella term academics use to describe this work: the resource-based view of the firm (RBV). The RBV combines the internal analysis of phenomena within companies with the external analysis of the industry and the competitive environment (the central focus of earlier strategy approaches). Thus the resource-based view builds on, but does not replace, the two previous broad approaches to strategy by combining internal and external perspectives. It derives its strength from its ability to explain in clear managerial terms why some competitors are more profitable than others, how to put the idea of core competence into practice, and how to develop diversification strategies that make sense.

A Brief History of Strategy

The RBV sees companies as very different collections of physical and intangible assets and capabilities. No two companies are alike because no two companies have had the same set of experiences, acquired the same assets and skills, or built the same organizational cultures. These assets and capabilities determine how efficiently and effectively a company performs its

SUBMITTED TO

PROF M AKBAR

IIM LUCKNOW( NOIDA CAMPUS)

Manish Agrawal ( wmp 5031), Medha.Mathur ( wmp 8071 )Praveen Malik, (wmp8075)Simranjeet ( wmp8083 ) Jitendra Sharma (wmp 7096)

functional activities. Following this logic, a company will be positioned to succeed if it has the best and most appropriate stocks of resources for its business and strategy.

Valuable resources can take a variety of forms, including some overlooked by the narrower conceptions of core competence and capabilities. They can be physical, may be intangible, such as brand names or technological know-how. The Walt Disney Company, for example, holds a unique consumer franchise that makes Disney a success in a slew of businesses, from soft toys to theme parks to videos. Or the valuable resource may be an organizational capability embedded in a company’s routines, processes, and culture. Take, for example, the skills of the Japanese automobile companies—first in low-cost, lean manufacturing; next in high-quality production; and then in fast product development. These capabilities, built up over time, transform otherwise pedestrian or commodity inputs into superior products and make the companies that have developed them successful in the global market.

Competitive advantage, whatever its source, ultimately can be attributed to the ownership of a valuable resource that enables the company to perform activities better or more cheaply than competitors

Problem areas / Gaps in theory

Priem and Butler raised four key points of criticism:

The RBV is tautological, or self-verifying. Barney has defined a competitive advantage as a value-creating strategy that is based on resources that are, among other characteristics, valuable. This reasoning is circular and therefore operationally invalid.

Different resource configurations can generate the same value for firms and thus would not be competitive advantage.

The role of product markets is underdeveloped in the argument.

The theory has limited prescriptive implications

However, Barney provided counter-arguments to these points of criticism.

Further criticisms are:

It is perhaps difficult (if not impossible) to find a resource which satisfies all of the Barney's VRIN criteria.

There is the assumption that a firm can be profitable in a highly competitive market as long as it can exploit advantageous resources, but this may not necessarily be the case. It ignores external factors concerning the industry as a whole; a firm should also consider Porter’s Industry Structure Analysis (Porter's Five Forces).

Long-term implications that flow from its premises: A prominent source of sustainable competitive advantages is causal ambiguity. While this is undeniably true, this leaves an awkward possibility: the firm is not able to manage a resource it does not know exists, even if a changing environment requires this. Through such an external change, the initial sustainable competitive advantage could be nullified or even transformed into a weakness.

Premise of efficient markets: Much research hinges on the premise that markets in general or factor markets are efficient, and that firms are capable of precisely pricing in the exact future value of any value-creating strategy that could flow from the resource. Dierickx and Cool argue that purchasable assets cannot be sources of sustained competitive advantage, just because they can be purchased. Either the price of the resource will increase to the point that it equals the future above-average return, or other competitors will purchase the resource as well and use it in a value-increasing strategy that diminishes rents to zero.

The concept of rarity is obsolete: Although prominently present in Wernerfelt’s original articulation of the resource-based view and Barney’s subsequent framework, the concept that resources need to be rare to be able to function as a possible source of a sustained competitive advantage is unnecessary. Because of the implications of the other concepts (e.g. valuable, inimitable and non substitutability) any resource that follows from the previous characteristics is inherently rare.

Sustainable: The lack of an exact definition of sustainability makes its premise difficult to test empirically. Barney’s statement that the competitive advantage is sustained if current and future rivals have ceased their imitative efforts is versatile from the point of view of developing a theoretical framework, but is a disadvantage from a more practical point of view, as there is no explicit end-goal.

The relational view is an extension of the resource-based view for considering networks and dyads of firms as the unit of analysis to explain relational rents, i.e., superior individual firm performance generated within that network/dyad.

RETAIL

The sale of goods or commodities in small quantities directly to consumers is known as retailing. A "retailer" buys goods or products in large quantities from manufacturers or importers either directly or through a wholeseller and then sells smaller quantities to the end user.

Retail is India’s largest industry, accounting for over 10 percent of the country’s GDP and around eight percent of employment. Retail in India is at the crossroads. It has emerged as one of the most dynamic and fast paced industries with several players entering the market. That said, the heavy initial investments required make break even hard to achieve and many players have not tasted success to date. However, the future is promising; the market is growing, government policies are becoming more favourable and emerging technologies are facilitating operations.

The Indian retail industry in valued at about $300 billion and is expected to grow to $637 billion in 2015. Only three percent of Indian retail is organised. Retailers of multiple brands can operate through a franchise or a cash-and-carry wholesale model.

FUTURE GROUP

Future group has Retail 15 million sq. ft. Of retail space with 204 stores under its value format , Big-Bazaar and Future Bazaar accounts for 55% of this value.

Apart from the Metros these stores are also doing well in the tier II cities. These stores are normally located in high traffic areas. Big Bazaar aims at starting stores in developing areas to take an early advantage before the real estate value booms.

In order to gain a competitive advantage Big Bazaar has also launched a website www.futurebazaar.com, which helps customers to orders products online which will be delivered to their doorstep.

Core Competency of Future group

Choice of more than 2,00,000 products Delivery across more than 1500 cities covering around 16000 pin codes Dedicated customer care helpline for any queries Special emphasis on apparels and life style products (27% vs 17%) Fast delivery –tie up with world leader logistics and transportation services.

VISION Future group shall deliver everything, everywhere, everytime for every Indian consumer in the most profitable manner.

MISSION

We share the vision and belief that our customers and stakeholders shall be served only by creating and executing future scenarios in the consumption space leading to economic development.

We will be the trendsetters in evolving delivery formats, creating retail realty, making consumption affordable for all customer segments – for classes and for masses.

We shall infuse Indian brands with confidence and renewed ambition. We shall be efficient, cost- conscious and committed to quality in whatever we do. We shall ensure that our positive attitude, sincerity, humility and united determination shall be

the driving force to make us successful.

RELIANCE RETAIL

Reliance Retail, Ltd. operates retail outlets in India. Its retail outlets offer foods, groceries, apparel and footwear, lifestyle and home improvement products, electronic goods, and farm implements and inputs. The company’s outlets also provide vegetables, fruits, and flowers. It focuses on consumer goods, consumer durables, travel services, energy, entertainment and leisure, and health and well-being products, as well as on educational products and services. The company was founded in 2006 and is based in Mumbai, India. Reliance Retail, Ltd. operates as a subsidiary of Reliance Industries, Ltd.

VISION Through sustainable measures, create value for the nation, enhance quality of life across the entire socio-economic spectrum and help spearhead India as a global leader in the domains where we operate.

MISSION

Create value for all stakeholders Grow through innovation Lead in good governance practices Use sustainability to drive product development and enhance operational efficiencies Ensure energy security of the nation Foster rural prosperity

SWOT ANALYSIS

FUTURE GROUP

Strengths

Wide presence in India covering almost all major cities and townsHigh Brand Equity in evolving Retail Markets State of the Art Infrastructure of Big Bazaar OutletsPoints of purchase promotions to increase the purchaseVariety of stuff under single roof increasing customer time and available choices

Weakness

Unable to meet store opening target till now

Falling revenue per square feet

Opportunity

Organized retail is just 4.15% of total pie of Indian Retail Market.Evolving customer preference in recent years.

Threat

Competitors, global big players planning to foray into market Unorganized Retail Market of IndiaGovernment policies are not well defined in emerging market in India.

RELIANCE RETAIL

4.1 Strength: The strength of any organization lies in the different attributes that a firm carries with itself and makes it a powerful standing in the market. Such attributes of Reliance retail are discussed below:

(a) Brand Equity: Reliance retail is a vertical of Reliance industries limited and one of the leading firm in India. It is listed among the “fortune 500 companies of World” by Forbes magazine. A reliance industry Ltd apart from retail has many SBU’s (Strategic business Units). Starting with textiles in the late seventies, Reliance pursued a strategy of backward vertical integration- in polyester, fibre intermediates, plastics, petrochemicals, petroleum refining and oil and gas exploration and production- to be fully integrated along the materials and energy value chain. So, the brand equity is one of its strength.

(b) Good financial position: Reliance retail has a strong financial position in the market because it is the only retail organization invested Rs. 25000 crores in retail. Apart from that the Reliance industries Ltd the umbrella brand is the organization which is listed in the “Fortune 500 companies” by Forbes magazine and the owner of Reliance industries Ltd. Mr. Mukesh Dhirubhai Ambani” is among the richest peoples of India.

(c) Backward Integration: Reliance retail is among the few organizations which entered Indian Retail sector with backward integration. Before discussing the aspect of backward integration as per the Reliance Retail let’s discuss the concept of backward integration.

‘Seeking ownership or increased control of a firm’s suppliers’ is backward integration. Both manufacturers and retailers purchase needed materials from suppliers. Backward integration is a strategy of seeking ownership or increased control of a firm’s suppliers. This strategy can be especially appropriate when a firm’s current suppliers are unreliable, too costly, or cannot meet the firm’s needs.

Reliance retail has conceptualized the concept of contract farming for their need of agricultural products and for other identities like they have different SBU’s they are as follows:

Subsidiaries of Reliance retail Ltd Function

Reliance Dairy Foods Limited Producing dairy products under “ Dairy Pure” Label.

Reliance Integrated Agri Solutions Limited Producing Agri products under labels “ Reliance Select and value”.

Reliance Lifestyle Holdings Limited Producing Home furnishing products under the “Home One” Label.

Reliance F & B services Limited Producing food and beverages under the label :Reliance elect and Value”.

Reliance Food Processing Solutions Limited Producing processed food under ‘Reliance select’ label.

The strategy of backward integration by Reliance retail endows it with much strength like:

(i) Minimizing the supplier’s power as explained in the “Michael Porter Five forces model.(ii) Able to meet the demand and supply(iii) Reducing the cost o outsourcing.

(d) Horizontal Integration. Reliance retail is among the few organizations which entered Indian Retail sector with Horizontal integration. Before discussing the aspect of Horizontal integration as per the Reliance Retail let’s discuss the concept of horizontal integration.

“Seeking ownership or increased control over competitors. Horizontal integration refers to a strategy of seeking ownership of or increased control over a firm’s competitors. One of the most significant trends in strategic management today is the increased use of horizontal integration as a growth strategy. Mergers, acquisitions, and takeovers among competitors below for increased economics of scale and enhanced transfer of resources and competencies.

Before entering Indian market Reliance retail acquired ‘Adani Retail’ a famous supermarket chain in Gujarat. Apart from that the multi-format presence of Reliance Fresh is also an example of horizontal integration. The different formats of Reliance retail are as follows:

Reliance Retail Limited Subsidiary of RIL

(e) Strong IT and backend operation: In today’s world being functional is not important the thing which is important is being efficient. The areas which make an organization more efficient are the backend operations and usage of IT. Reliance retail Ltd entered Indian market after doing a research for 2 years. The backend operations are strengthens by using specific interface of information and technology. Reliance Fresh (the SBU of Reliance retail) was the first retail firm to use SAP in retailing in India, it is and ERP system helps in Warehouse. Vendor and supply chain Management. Therefore making backend operations more efficient.

The POS (Point of Sale) software which is used by reliance retail is “RETALIX” it is one of the finest retail POS software worldwide and also used by many global players.

(f) Experienced management team. Reliance industries Ltd the umbrella company of Reliance industries Ltd. Is working in Indian market from seventies have a team of experienced and qualified managers. There are many examples which can be quoted to defend this statement. The examples are as follows:

(i) Reliance retail entered Indian market with backward integration to reduce the cost and suppliers dependency.

(ii) Entered Indian market after a research and study of two years.

(iii) When Reliance Fresh outlets are opposed by UP (Uttarpradesh) Govt and were being closed. The management reacted immediately and utilized the space,. Distribution centre for the other formats. For example opening Reliance Jewel store at Shopping Mall, Sector-61, Noida.

4.2. Weakness: Weaknesses are attributes of the organization that are harmful to the achievement of the objective. A weakness is a opposing forces to a company unable it to achieve its goals and objectives. There is a quote that there is no success without difficulties. The weakness are the areas which are developed to win because sometime “Even dreaming for roses one has to through with the thrones”. I tried to find as many as weakness I can collect and search but I am unable to find more than two weakness. The weakness I am unable to understand are as follows:

(a) Multi Format Presence.Presence of Reliance retail in horizontal integration is one of the strength bus am way it is weakness too. Having a big organization structure increases following costs:

(i) Increase in the cost of operations.

(ii) Increase in workforce management.

(b) Presence at Prime Locations. Presence of Reliance retail at prime locations gives it strength of visibility and awareness but the increasing real state cost in India is increasing the operating cost of Reliance retail store. Hence, reducing the profits simultaneously.

(c) Loses due to joint ventures: Reliance retail has many joint ventures with the foreign retail brands but due to the primer sis in US market has slow down the speed of expansions and new product offerings;

(i) Reliance retail, Citibank tie up for customer finance.

(ii) Europe’s Pearle tie up with Reliance Retail for optical products.

(iv) Reliance Brands, a subsidiary of reliance Retail, has entered into a 49.51 joint venture with Italian fashion house. Sixty Group, to retail its brands in India.

4.3 Opportunities. Opportunities are external conditions that are helpful to the achievements of the objective. Opportunities are the platforms where a firm can perform and achieve it objectives and goals.

The opportunities in front of Reliance retail are as follows:

(a) Growing retail market. Indian retail market is growing with a high speed Indian market is heading the charts for the GRDI (Global Retail Development Index) as per the AT Kearny. Indian Market is the most preferred market for retail investments.

(b) Increasing buying power of Indian consumers. The buying power of Indian consumers in increasing. As per the research of Global Retailing 2006, IGD it is around 414 US$ annually and it is increasing due to the increase in the number of working women’s.

(c) Many untapped Markets in India. There are many untapped markets which are still waiting the entry of modern retailing. These areas include the Tier-2, Tier-3 cities and rural India.

4.4 Threats. Threats are external conditions that are harmful to the achievements of the objective. The threats involved in context to the Reliance retail are as follows;

(a) Increasing competitions. Increasing competitions due to the entry of many national and global players (due to the entry of FD)). There are many players like Pantaloons Retail, Aditya Birla group , Bharati, Tata , Subhiksha, RPG and Shrilalmahal eetc are some of the national players and some of the global players like Wal-Mart, Metro, SPAR, Carefour and Woodworth etc.

(b) Low Price Competitions. It is facing Low-Price competition from players like Subhiksha, Big-Bazar etc because these store have low operating cost as compared to reliance stores and are able to offer low price merchandise as compared to reliance.

(c) Government restrictions. Government restrictions on the concept of contract farming in some states the concept of backward integration opted by Reliance retail. Apart from that entry of modern players in some of the states and rural areas of India (UP state and Kerala Rural) hampering the expansion plans of reliance retail.

(d) Increase in the operating costs. Increase in the operating costs due to increasing price of real estates, sales tax and petrol directly increasing the operating cost and hence a threat.

7 P’s

FUTURE GROUP

Product

FutureBazaar.com is India's favorite online shopping site. FutureBazaar is the online venture of the Future Group, owner of India's largest retail brands Big Bazaar, Pantaloons, Central and eZone. FutureBazaar sells a wide range of products like Fashion including Men's apparel, Women's apparel, Mobiles, Mobile accessories, Electronics like LCD TVs, Flat TVs, DVD players, Home Theatres, iPods, MP3 players, MP4 players, Digital Cameras, Video Cameras, Music systems, Home appliances, Kitchen Appliances, Dreamline Kitchen ware, Hindi movies, English movies, DVDs, VCD, Gold jewellery, Diamond jewelry, Fiction Books, Non-Fiction Books, Car Acccessories and others. Big Bazaar sales such as Sabse Sasta 3 Din and Mahabachat are also available for shopping online at FutureBazaar. Whether you want to buy

mobiles or buy electronics from FutureBazaar, you can do so with complete confidence as FutureBazaar only sells genuine products with manufacturers' warranty.

PriceThe tag-line is “Is se sasta aur accha aur kahin nahi”. They work on the model of economics of scale. There pricing objective is to get “Maximum Market Share”. The various techniques used at Big Bazaar are: -· Value Pricing (EDLP - Every Day Low Pricing): Big Bazaar promises consumers the lowest available price without coupon clipping, waiting for discount promotions, or comparison shopping.· Promotional Pricing: Big Bazaar offers financing at low interest rate. The concept of psychological discounting (Rs. 99, Rs. 49, etc.) is used as promotional tool. Big Bazaar also caters on Special Event Pricing (Close to Diwali, Gudi Padva, and Durga Pooja).· Differentiated Pricing: Time pricing, i.e., difference in rate based on peak and non-peak hours or days of shopping is also a pricing technique used in Indian retail, which is aggressively used by Big Bazaar.· Bundling: Selling combo-packs and offering discount to customers. The combo-packs add value to customer.

Place

Big Bazaar has 120 outlets across the country. Big Bazaar has presence in almost all the major Indian cities. They are aggressive on their expansion plans.

Promotion

Big Bazaar started many new and innovative cross-sell and up-sell strategies in Indian retail market. The various promotion techniques used at Big Bazaar include “saal ke sabse saste teen din”, Future Card (the card offers 3% discount), Shakti Card,Brand Endorsement by M. S. Dhoni, Exchange Offer - ‘Junk Swap Offer’, Point-of-Purchase Promotions.Advertising has played a crucial role in building of the brand. Big Bazaar advertisements are seen in print media, TV, Radio (FM) and road-side bill-boards.

People

They are one of the key assets for any organization. The salient features of staff of Big Bazaar are: -· Well-trained staff, the staff employed by Big-Bazaar are well-suited for modern retail.· Employees are motivated to think out-of-the-box. Retail sector is in growth stage, so staff is empowered to take innovative steps.· Employs close to 10,000 people and recruits nearly 500 people every month.· Use of technology like scenario planning for decision making.

Process

The goods’ dispatch and purchasing area has certain salient features which include: -· Proper display / posters of the place like (DAL, SOAP, etc.).· Home delivery counters also started at many places.

Physical Evidence

It deals with the final deliverable or the display of written facts. This includes the current system and available facilities.

RELIANCE RETAIL

Product –

Product Variety – customers want a one-stop shop. So fruits & vegetables + staples, grocery & household products are available together.Product Quality – Though low price, but customers want and are given best quality. Product Stock – should remain fresh ad be available 24*7More.Variety: Instead of 5 Coke and 5 Pepsi bottles it displays 4 each and fits its private label as third brand to increase variety

Price –

RELIANCE RETAIL plays on “value for money”,gives volume discountsAchieved cost cutting – private labelsPrice is no longer a POD. Is more of a hygiene factorDiscount pricing strategyWide price range of each itemsCredit card acceptanceAccept couponsCompetitive pricescomparable cost.

Place –

Physical location – close to consumersNeighborhood store: In small commercial complexes close to 3-4 big residential areas; Close to cross roadsScale & replicate – immediate priorityMoving towards owning the store than leasing it out to control real estate price No franchisee to lower riskTo reduce operating costs, shifted from fixed rentals schemes to revenue sharingBefore launching any hyper mart, senior executives visit at least 35-40 families near a store and have a FGD ( Focussed Group Discussion) to know neighborhood’s preferences

Promotion –

Nature of advertising – newspapers, radio, catalogs, SMSFocus – functional benefits & discountsWeekend – discount dayFestive season discountsRebates & Premiums focusing on bill valueReliance One: customer loyalty programTarget to get its loyalty program in top 10 loyalty card base in worldwide retail sector by 2012 – currently 3 mn customer baseHome delivery of groceriesCustomers not aware of discounts; Big Bazaar: purana do naya lo; Wednesday - hafte ka sabse achcha din Less in-store promotion. Reliance One – can accumulate points only after 6 months; More. – welcome points for new enrolment!Word-of-mouth important. Track social media

People –

Staff uniform – red, green and blue1 week training to staffNeeds to be courteous, well trained and informed - more of a generalistNew CEO – focus increasing on customer satisfaction (Aapki Khushi Hamari Khushi)RELIANCE RETAIL lacking on people front. Numerous customer complaints on bad service, staff not informed on discounts & prices and un courteous staff (highest on consumercomplaints.com)Drive comes from top management. Even CEO has to spend 8 days a year as CSA.

Process –

Degree of customer involvement – highProcess very important in ensuring customer satisfaction and delight Currently process of interaction is standardized and staff not able to handle varying customer problemsTransparency in billing etc missing

Physical Evidence –

Need for evidence – highConsciously segregated non-vegetarian items – “Delight”Different billing counter for < 8 itemsStores open at 07:00 am

Physical infrastructure - importantStale fruits and vegetables!Understaffed billing counters!Diff between quoted & billing priceBad layout & floor maintenanceStandard stores design by Fitch – international retail design firm

IMPORTANT ASPECTS OF FUTURE GROUP

Strategy

A new normal is being defined in the Indian consumer market every day. With far-reaching

socio-economic changes that India has undergone in the last decade, the drivers in urban and

rural India are maturing fast.

With a growth strategy tempered with localization and an inclusive business model, Future

Group is the only pure play local retailer poised to lead India’s consumption story with

sustainable value creation.

Our multi-format retail strategy captures almost the entire consumption basket of Indian customers. As modern retail drives new demand, efficiency and consumption in new categories, our strategy is based on our deep understanding of Indian consumers. We understand the varied buying behaviour of the Indian consumer across regional ethnicities and are constantly innovating to craft strategies that address the subtle differences.Future Group's strategy is aimed at achieving inclusive, sustained and profitable growth with three leversCustomer-orientation

The bottom line in each of our retail success stories is "know your customer". Insights into the soul of Indian consumers - how they operate, think, dream and line - helps us innovate and create differentiating functionally.

Continuous-innovation

As India's largest retailer, we understand the importance of innovation. We rethink strategies and realign businesses with increasing agility to provide diverse customer groups with refreshingly different retail experiences.

Collaborative transformation

Creating a collaborative environment combining our strengths with our suppliers and vendors helps us create immense value for our customers which in turn fosters matual growth.

 Strengthening relationships and fostering mutual growth

At Future Group, we make every effort to ensure our products meet the unique needs of the diverse communities we serve. It is our constant endeavour that consumers have ready access to our products in every corner of urban and rural India. We partner with over 30,000 suppliers across merchandise categories ranging from one-person shops to multinational corporations, maintaining a distinct mix that is key to our success.

At Future Group, we believe our relationship with supply partners is one of our core competitive assets. We are committed to creating successful business partnerships built on mutual trust, transparency, fair business practices and respect across our entire value chain. We strive to create a win-win situation for our customers and partners by combining our strengths and capabilities and developing micro-enterprise models.From sourcing to distribution, we engage with varied business partners, jointly sharing insights, promoting brands, creating new products, expanding our capacity and developing new markets. Our businesses create economic benefits for all our partners, including our suppliers and distributors.Our Sambandh program aims to foster an environment combining our strengths to create immense value for our partner suppliers and, in turn, nurture mutual growth. Our strategic objective is to grow responsibly while enhancing the livelihoods of our partners. 

Encouraging Environmental Stewardship

Climate change is one of the greatest challenges facing the world today. Future Group strives to

reduce environmental impact and optimize energy consumption in its stores and strengthen

green considerations in logistics operations. Our endeavour is to promote eco-friendly products

and raise awareness on environmental issues both internally and externally.

As part of our sustainable-development initiatives, we have made a commitment to care for the environment. Through our commitment, we look to make a significant positive impact on the ecology and surroundings in which we operate.Through investment and innovation we are leading the way in providing a greener way to do business.  We fulfil our responsibility for delivering high quality services in a sustainable and environmentally responsible manner by:                                                              

Reducing the environmental impact of store construction and operations Improving energy efficiency for important environmental benefits and reducing operating costs Strengthening environmental considerations in the design of green products and packaging;

developing green product lines that respect environmental concerns Reinforcing environmental considerations in logistics

Future Supply Chains

FSC (Future Supply Chain Solutions Ltd.) is India's first fully integrated and IT enabled end- to- end Supply Chain and Logistics service provider in India. It provides services to large corporates in Food & FMCG; Apparels, Footwear & Accessories; Consumer Electronics & Hi- Tech; Automotive; Pharma and Light Engineering domain.Promoted by Future Group and Fung Capital, FSC has been a pioneer in modernizing supply chain and logistics by implementing global best practices in the Indian context. This has enabled

FSC to provide customized Supply Chain Solutions & Services which reduce Time- to- Market™ and Cost- to- Market™ of customers

Future Supply Chains Offerings:-

FSC Supply Chain Solutions team studies the business imperatives of customers and designs customized supply chain solutions in collaboration with the customers like:

Supply chain consulting to define business needs and logistics opportunities. Distribution and Transportation network analysis and design Warehouse and Facility modeling and layout, including evaluation of Infrastructure and

mechanization needs Evaluation and implementation of Technology. Labor management opportunity assessment. Operational analysis and improvement 3PL capabilities of high-end Warehousing, Express and Customized Movement Solutions.

FSC’s Service offerings include:

FSC Contract Logistics (Warehousing and Distribution ) GST Ready Network across all High Growth Consumption Clusters of India Facilities are Built-to-Suit, Multi-user and Scalable Deploying global best practices in Technology & Automation; Indianising and Indigenising to

suit Indian conditions Robust Distribution & Last Mile Fulfillment Network, providing end- to- end solutions

FSC Express Logistics (Express transportation services) Safe, secure & all-weather movement through a dedicated fleet of containerised vehicles. Online, Real time consignment tracking through GPS enabled Vehicle Tracking System 24/7, Online Customer Portal which gives end- to- end visibility from pick- up to delivery

Corporate Governance

Future Group’s reputation is earned by our conduct: what we say, what we do, the products we provide, the services we offer and the way we act. Future Group stands on the foundation of integrity and stewardship.

We believe success requires the highest standards of corporate ethics towards everyone we work with, the communities we serve, and the environment we impact. This is our road to sustainable, profitable growth to create long-term value for our people, business partners, customers and shareholders.We have an active, capable and diligent management and leadership team that understands its role in implementing rigorous financial discipline, risk metrics and gold standard corporate governance. Our ongoing efforts encompass financial stewardship in strategic and daily business decisions to ensure accurate financial reporting and effective controls.

Beliefs:

Future Group was founded on a simple idea: Rewrite rules, retain values. This fundamental belief created a new kind of marketplace, forever transforming Indian retail. Today our core values continue to guide how we do business and improve the quality of life of the people we serve.At Future Group we are committed to being a catalyst of positive change in the communities, societies and business sectors in which we operate.  We envision India’s transformation into the legendary 'Sone Ki Chidiya' (golden bird), taking wings once again to reach greater heights.  We take pride in our Indianness. Our belief in inclusiveness for long-term sustainable growth and economic prosperity evokes trust among consumers, employees, suppliers, partners, shareholders and the community. MISSION

We share the vision and belief that our customers and stakeholders shall be served only by creating and executing future scenarios in the consumption space leading to economic development.

We will be the trendsetters in evolving delivery formats, creating retail realty, making consumption affordable for all customer segments – for classes and for masses.

We shall infuse Indian brands with confidence and renewed ambition. We shall be efficient, cost- conscious and committed to quality in whatever we do. We shall ensure that our positive attitude, sincerity, humility and united determination shall be

the driving force to make us successful. Indianness: Confidence in ourselves. Leadership: To be a leader, both in thought and business. Respect & Humility: To respect every individual and be humble in our conduct. Introspection: Leading to purposeful thinking. Openness: To be open and receptive to new ideas, knowledge and information. Valuing and Nurturing Relationships: To build long term relationships. Simplicity & Positivity: Simplicity and positivity in our thought, business and action. Adaptability: To be flexible and adaptable, to meet challenges. Flow: To respect and understand the universal laws of nature.

IMPORTANT ASPECTS OF RELIANCE GROUP

Location

RELIANCE RETAIL Stores are located mostly in Tier I and Tier II cities. The chain is set to expand to around 800 cities and towns all over India. National Capital Region (NCR) constitutes around 65-70% in terms of number of functional stores as well as business so far. It has followed a policy of one store per 4000 households, regardless of competition from other organized retail outlets.

Being a convenience store, availability of parking space is not a criterion in deciding the location of the store. A busy area near households is selected.

Services

RELIANCE RETAIL sells Fruits and Vegetables, Groceries and recharges mobiles at the same place, much like the kirana stores. Apart from that, there exists potential for selling Financial and travel related products also. Thus, some innovation could be seen in terms of the services being offered.

RELIANCE RETAIL offers free home delivery to its customers above a certain value of purchase and within a range of one to three kilometers. Apart from that, shop on phone service is also being planned.

One important feature is the customer feedback system being implemented. There are three ways to address customer concerns, namely, 1. On the Spot complaints – These are normally related to product quality and billing issues and are handled by the salesperson or the manager directly.

2. Customer Feedback Form – This form is available to all customers who would like to voice their concerns. The forms cover the issues that can be solved at the individual store level.

3. Service Desk Feedback – Two to three customers are randomly interviewed and a comprehensive feedback is solicited by the store manager. The feedback form is sent to the Mumbai headquarters for perusal and action by the top management.

Assortment

RELIANCE RETAIL stores ranging from 2,000 to 5,000 sq feet, provides, customers with a variety of fresh fruits, vegetables, staple foods and other products in a world-class ambience. The assortment varies from store to store depending upon the location of the store and the kind of customers it targets.

RELIANCE RETAIL sells most products needed day to day by the households. This includes vegetables, buckets, razors, chocolates, pulses, fruits, etc. Some RELIANCE RETAIL stores even sell cosmetics. There are exotic fruits that require refrigeration and dairy products also. Being a convenience store, A major share has been allocated to food products. This is followed by personal care products and then the other items such as kitchenware, miscellaneous items such as toys, pooja items, towels, napkins etc. These stores also sell non vegetarian items, which are placed separately from the other food items.

The assortment is decided by a Category Team which constantly reviews the choice of product based on customer feedback.

Store Environment

All the stores are air-conditioned, with cleanliness being given special importance. The employees are uniformed; t-shirts / jackets are of the standard red color with green cap.

There is ample lighting inside the stores and no music. During rush hours, there are announcements in the store about the offers and mark downs. The floor space allocation varies

from store to store; there is no hard and fast rule for the same. The basic principles of traffic flow are taken into the account while designing these stores.

Being a self service format, Reliance allows customer to browse through the entire gamut of products available. A self service format also promotes higher level of involvement. For example, customer can use the polythene rolls provided freely and weigh their vegetables before taking the bags to the counters. With a no bargaining policy, customers are free from haggling, but get the correct price and weight of item they bought.

All the stores have a large Marquee with the store name prominently written on it. However, there is no signage at the entrance that informs the passersby of the product or offers currently available at the store.

Target Segment and Value Proposition

RELIANCE RETAIL is targeting all the people who go grocery shopping. As they have stores in the poorest and richest localities of India they target all kinds of revenues. Also, on a demographic point of view the consumer is a family or a household, which is not characterized by a particular income. Indeed the targeted consumer depends on the city and the location of the store.

The environment of the consumer is often an urban or residential area, which explains the fact that most of consumers are families and households and especially housewives.

On a psychological level, the consumer has a high level of involvement in the purchase and comes often to RELIANCE RETAIL for destination products. It means that the consumer comes to find products he can only find in RELIANCE RETAIL stores such as fresh vegetables.

But RELIANCE RETAIL also provides routine products which are expected to be in all convenience stores.

RELIANCE RETAIL differentiates itself from other convenience stores through its value proposition which includes:

• RELIANCE RETAIL strategy is based on the fact that it provides huge varieties of fresh vegetables and fruits (over 150 varieties of fruits) of good quality at attractive prices. Their prices are usually set lower than the real market prices and outside markets.

• A loyalty program, Reliance One, for frequent and loyal customers. Furthermore the loyalty program benefits RELIANCE RETAIL because it helps in tracking customer preferences.

• RELIANCE RETAIL constantly improves its value offering and tries to satisfy the wishes of the consumer by taking into account customer feedback.

Thus, for the price conscious customer, it offers products at market rates, and sometimes even cheaper. For the high end customer, it offers an AC environment where one can find a considerably wide assortment. Although there have been complaints of fruits and vegetables not being fresh as claimed by Reliance, they are few in number. Based on the above, the value proposition can be worded as below:

RELIANCE RETAIL offers its price and quality conscious consumers an enjoyable shopping environment where a wide range of assured quality daily use products are available at affordable prices and at a convenient location near home.

Pricing Policy

RELIANCE RETAIL follows at-the-market pricing, with the prices of most products being same as the market. This is very much different from the intended proposition of offering below the market prices. Three main reasons can be attributed to this policy, namely,

• The fruits and vegetables are not directly sourced from the farmers, but through mandis, which reduces the margins available for Reliance.

• Prices of Fruits and Vegetables are set every morning. It is believed that the local markets quickly adjust their prices so as to make the two almost the same.

• If a product is fast moving, there is no need to reduce the price.

Thus, the product pricing strategy is dependent upon the competition. The strategy of Reliance has been to sell fruits and vegetables at attractive prices. So those products are priced slightly low if you take into account the quality of the product. But other products such as branded products follow the market prices. Private labels however are often priced lower than the other brands.

The pricing decision takes place at the distribution centers. For the fruits and vegetables, the pricing is decided based on the cost of purchase at the mandis. The pricing of the other products is decided by the company’s sourcing team.

One thing noticeable is that the prices are in double decimal digits. For example, a bundle of coriander may cost Rs.4.80 while the market price is Rs.5. This is indicative of an odd even pricing approach. Although not much of a difference, it does conjure an image of selling at a lower price.

In store Brands

In the developed countries, the in-store brands contribute a lot to the revenues of the retail stores. Internationally, private labels contribute around 16% of total retail sales (Source India retail buzz.wordpress.com). The reason is pretty simple, private labels offer far better profit margin to the retailer than branded products of FMCG companies. With the cost advantage, there is always an opportunity to attract customers and it is comparatively easier than promoting high-involvement products under private label.

Reliance has ventured into the high-volume, low-margin (3-5%) segment of retailing liquid milk through its own brand ‘Dairy Pure’. In addition, Reliance has also concurrently launched its private labels “Reliance Select” and “Reliance Value” with the promise of “High Quality and Tasty Food at Affordable Price to all Indian Consumers.”

Although, staple food items like Atta, Rice, Pulses, etc. have initially been put on offer under the private labels, more categories like FMCG and, perhaps, Colas will be added soon. Among the two, select is placed at a slightly higher price point reflecting a higher quality product.

RELIANCE RETAIL’s shelves provide another indication that the group is looking for higher margins. Most of the staples are private label brands. There is a 500g channa dal pack priced at Rs 28, a 500g urad dal pack for Rs 39, all under Reliance’s own brand.

Excepting a few packets of Nestlé’s Maggi, or MTR’s masalas or Pepsi’s Lays chips, there is very little shelf space given to the big brand owners in the country. While, in FMCG space, they have yet not come up with in-store brands, they intend to do it soon.

Promotion Strategy

The promotion strategy can be broadly classified in two types:

1. In-store promotions – This class contribute most of the promotional strategies of Reliance. Their in-house promotion strategy is further divided in two forms. First is through signboards inside the store, and secondly through announcements.

The sign-boards are present throughout the store depicting various running as well as forthcoming schemes of the store. For example, as Diwali approaches, there would be lots of signboards about the discount scheme for Diwali such as Diwali dhamaka. Reliance goes all the way in comparing its prices with the rest of the market through comparison charts of prices of various items, specially staple food items like rice, pulses, masalas, oil etc. These comparisons are mainly with the market prices on daily basis and the prices at which those items are available at the stores.

The announcements are pretty frequent in the store during the peak hours of shopping (6 p.m. to 9 p.m.). Announcements are few during other hours. These announcements range from the prices to discount schemes to the information about loyalty programme etc.

2. Outside Promotions – Very few promotions are done outside the stores. However, they come with few print ads at the time of their launch of some different product category or some big  discount/promotion scheme. Sometimes, promotions are done on Radio-Mirchi i.e. on the local radio f.m. channel, as well.

Customer Loyalty Programme

The qualification criteria to get the loyalty card is a cumulative purchase of Rs.1500/- or more. After getting the card, all of the subsequent purchases shall be recorded in the database. For the discount concept, they have used straight line method where any customer gets 1 point on clearing every milestone of Rs.100/- purchase. Here 1 point can be redeemed for Re.1 on next purchase. Also, this card helps the Reliance people in getting information about the priorities of customers across various categories. This information helps them in targeting the customers for various promotional schemes. The customers are also informed about any changes/updates about their preferred products or related products and about special promotional schemes on their desired products.

Supply Chain Management

The supply network consists mainly of Central Processing Centers (CPCs) and Distribution Centers (DCs). While, CPCs process fresh products like fruits & vegetables (F&V) received from collection centers, DCs distribute them along with other directly procured FMCG products to various stores. The distribution centers do the work of assorting the products, bar-coding them, keeping the stock records and also transporting them to the respective stores while keeping the track of demand and supply pattern at that end.

Disposal system at the stores takes place in two modes:

1. For F&V items – They track it on daily basis. At the end of the day, they see to it as how much is left out and it is in what condition. They keep the record of these perished items as the percentage of total sales in that particular category. Later, all the perished goods are dumped in the municipal truck on the next day.

2. For non F&V items – As soon as the expiry date is passed, they are been transferred back to the distribution center and are kept under the records of GRDC (Goods returned to Distribution Centers) There are two distribution centers for RELIANCE RETAIL in Indore; one is located at Rau and other at Sagar Road.

The Future Challenge

With huge expansion plans spread all over India, RELIANCE RETAIL is slated to be India’s largest convenience store chain. To compete successfully, however, it will not only have to counter the small kirana store owners but also competing chains such as Subhiksha and Margin Free market. The success will depend greatly upon the supply chain efficiencies that Reliance plans to achieve and the use of customer information to effectively satisfy the needs of the customer.

With one year gone, the stage of extensive experimentation is over. Its time put the knowledge gained into practice. At a time when Reliance ought to have been going faster than before, it has actually slowed down. The biggest challenge it currently faces is the political uncertainty facing the Organized Retail Sector.

Reliance Retail Infrastructural Investments --

• Pan India Rural Business Hubs and Collection Centers

• Pre-cooling infrastructure and refrigerated vans for transport

• City processing centres and Distribution centres

• Logistics infrastructure for speedy transport of perishables

CRM at reliance fresh

Customer relationship management (CRM) is a widely implemented strategy for managing a company’s interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business process- principally sales activities, but also those for marketing, customer service, and technical support.

(i) Customer Relationship Management in reliance fresh stores the employees are there are always ready to help the customers.

(ii) Employees are there to make customer feel comfortable in product handling. It any customer is having any problem in finding any product the employees come before hand to help the product.(iii) They always stand in a distance from the customers and look forward if they can help the customers.(iv) They also help the customers by accepting returns from customer if the case is authentic.(v) They also arrange every product after being de-arranged by the customers for the easy of next customers.

CEM at reliance fresh

Customer experience management (CEM) is “the process of strategically managing a customer’s entire experience with a product or a company”. Reliance marketing focuses on establishing and building a long term relationship between a company and a customer.

Tool and technologies.

Customer feedback

(i) Reliance fresh conduct periodic customer satisfaction research to assess the opinions and experiences of their customer base. While this information can be useful, it tends to be very broad in scope, offering little practical information to the front-line.

(ii) Feedback is in the form of feedback form in which there is follow up in reliance fresh tries and improve it.

(ii) Feedback is also done through personally asking the customer about their shopping experience in the store. This is a quick process.

Incentives

(i) Reliance fresh provides rich metrics for rewarding managers and service staff at all levels of the organizations.(ii) The motivational power of Reliance fresh lies in the fact that the metrics it generates are relevant, easy to understand, frequently reported and fair. Because the date are continuously viewable, managers and employees know precisely where they stand- there is no surprise at the end of bonus periods.

(iii) At the employee level, rewards are associated even more closely with day-to-day achievement.(iv) The same reporting tool displays the results of customer feedback. Monitoring and auditing can also display points earned and allow employee to redeem those points for merchandise, cash or other relevant rewards.(v) The return on investment in such systems tends to be high, as the behaviors and skills rewarded are directly aligned with customer retention, purchasing levels, word-of-mouth advertising and other profit-building activities

RELIANCE GROUP VS FUTURE GROUP

Younger Reliance Retail breathing down the neck of Future GroupEver since Mukesh Ambani revealed that retail will be one of his priority sectors after Energy, we expected him to stand among the leaders one day.

But Reliance Retail has beaten market leaders and is continuing on its rise just nine years into the segment.

One of the major competitors for Ambani's retail ventures is the market veteran Future group led by Kishore Biyani.

We take a look at the contrasting work culture, working and the role of their leaders of these two retail majors.

Timeline

Biyani entered the retail scenario in 1997 while Ambani waited till 2006 to make his foray into it. This means that Future Group is twice as old as Relaince Retail in the sector. 

Retail space

Reliance has 9 million sq feet of retail space in its via its 700-odd RELIANCE RETAIL stores and another 290 of its stores are under speciality formats like fashion, lifestyle and jewellery.

Future group has 15 million sq feet of retail space with 204 stores under its value formats, Big Bazaar and Future Bazaar, accounting for 55% of this value.

Leadership Style

Kishore Biyani leads from the front and is heavily involved in the operations on the ground. He is very much involved in planning and executing.

Mukesh Ambani on the other hand has a passive presence and directs from behind the scenes.

He has a vision which is shared by his leading team handling Reliance Retail but he is not directly involved.

Corporate Culture

For all of Reliance being a promoter-led operation and Modi's influence, Reliance Retail is seen as a collective where a vision has been communicated and the second and third rungs are empowered. 'In Reliance Retail, there are no tall people,' says the Reliance official.

Future group is an entreprenuer led group where KB, as he is fondly known, is a critical part and key motivator. About two years back, Biyani had moved out of day-to day operations in the Future Group, and the organisation was seen as having lost some of its energy. He's back now, and stamping his presence.

 Business Strategy

Future which has been around for a long time has to be very cautious due to debts. It is approaching its future with ideas of consolidation and planned expansions. 

Reliance on the other hand continues its great run with massive scaling up in numbers and size. Aggressive expansion is the key for the company backed by a powerful entity aka RIL.

Intuition Vs Precision

Biyani is back roaming the stores, trying to figure out the Indian consumer and crack the retail code. In the way he built Future Group, Biyani relied immensely on intuition and on-the ground observations.

Reliance on the other end derives its success and momentum from precisely planning its moves rather than going by intuition, a clear difference in approach.

Value retailing — usually, big format stores offering discounts to customers — is at the heart of both operations. Reliance Retail derived 56% of its revenues from value retailing in 2012-13, via its 700-odd RELIANCE RETAIL stores. Another 290 of its stores are under speciality formats like fashion, lifestyle and jewellery. Future doesn't give up a similar break-up of revenues, but it has 204 stores under its value formats, Big Bazaar and Future Bazaar, accounting for 55% of its stores and space. Value retailing is a rare point of convergence in the two groups. In where they are in their respective businesses and how they are building, Future and Reliance are, yet again, studies in contrast.

Top Line Vs Bottom LineBoth have grown at a frenetic pace in the five years to 2012, the last common data point available. While Future Retail posted a compounded annual growth rate of 27%, Reliance Retail did better with 96%, though on a smaller base. In the last two years, Reliance has hit its straps. For the year ended March 2013, its turnover surged 42%. The comparable figure for Future is not available as it was yet to declare its results for that period. Profitability, though, is another matter. Reliance posted a slim operating profit margin of 0.7%. In the last five years, Future's operating margin has been 8-9.4%. More than growth, Future's immediate focus is pruning costs, especially on interest outgo, and staying profitable.

Shareholder Vs Bank FundsA big reason why Reliance Retail has been able to chase growth is its parentage. Reliance Retail is a subsidiary of Reliance Industries Limited ( RIL), which earned Rs 21,003 crore as net profit in 2012-13 and which held Rs 82,975 crore in cash. Thus, 'free' equity from its parent — Rs 8,316 crore as of March 2012 — was Reliance Retail's main source of funding and the company has virtually no debt on its books. By comparison, about two-thirds of Future Group's funding is debt, and it ended up paying Rs 629 crore as interest cost alone. Selling the Pantaloon format and exiting non-core businesses will reduce Future's debt burden; a

February 26 research note by ICICI Securities expects debt to fall to Rs 3,400 crore by March 2014, from the current Rs 5,300 crore.

BIBLIOGRAPY:

http://www.futureretail.co.in/about-us/overview-retail.html

http://www.futureretail.co.in/about-us/leadership-team-retail.html

http://www.futureretail.co.in/businesses/hypermarket-supermarket.html

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