Retail Final 9861655041

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RETAIL INDUSTRY ANALYSIS Page 1

DECLARATION

This is to declare that our team under the guidance ofProf. Haribandhu Panda has completed the report work.

This project is solely the result of our combined efforts and has not been

submitted by anyone earlier either to this University/Institution or to

any other University/Institution for any purpose. The data provided here

are from some primary as well as some secondary sources.

Date: 17/04/2010

GROUP-06

Lagnajit Ayaskant Sahoo(PGDM09015)

Priyanka Raj(PGDM09034)

Somya Ranjan Pattanayak(PGDM09037)

Sanat Kumar Rout(PGDM09042)

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CERTIFICATE

TO WHOMSOEVER IT MAY CONCERN

This is to certify that students with Roll Nos.

PGDM09015, PGDM09034, PGDM09037, PGDM09042 of PGDM

2009-2011 batch, HDF SoM, has done their project headed RETAIL

INDUSTRY ANALYSIS WIH REFERNCE TO BIG BAZAAR under

my supervision and guidance.

During their project they were found to be very sincere and Attentive to

small details whatsoever was told to them.

I wish them good luck and success in their future.

Professor: Haribandhu Panda

(Director, HDF SoM)

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ACKNOWLEDGEMENT

GOING IS GETTING TOUGH, CURRENT IS TORRENTIAL.

SUCCESS IS NOT AFAR, JUST YOUR POTENTIAL.

Following the word of this quote the project is being made.

This report bears the imprint of many people and without there support

it would not have existed.

We acknowledge our deepest thanks to our Project guide Professor

Haribandhu Panda for all their care and encouraging words and giving

suggestion at the crucial stages.

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INDEX

Serial no Topic Page no

1 INTRODUCTION 05

2 OBJECTIVES & ROLE OF RETAIL

INDUSTRY

05

3 PLAYER OF RETAIL INDUSTRY 05

4 KEY DRIVERS OF CHANGE

PEST ANALYSIS

08

5 OPPORTUNITY AND THREAT 08

6 ORGANIZATION ANALYSIS 09

7 ORGANIZATION STRUCTURE 10

8 Big Bazaar Model 11

9 Michael Porters Model 11

10 Stake Holder Analysis 14

11 Value Chain Analysis 16

12 Resource Analysis 17

13 Competitive Strategy 18

14 Conclusion 19

15 References 19

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RETAIL INDUSTRY ANALYSIS (BIG BAZAAR)

1)INDUSTRY ANALYSIS-

1.1)INTRODUCTION-

The Indian retail industry in valued at about $300 billion and is expected to grow

to $427 billion in 2010 and $637 billion in 2015. Only three percent of Indian retail is

organized. Retailers of multiple brands can operate through a franchise or a cash-and-

carry wholesale model.

The Indian retail environment has attained $ 210bn quiche, witnessing a strong

development pace of five percent per year as per latest survey by Price Waterhouse

Coopers. As per the estimation 200 malls, presenting additional 50mn sq ft of retail

space will be ready in next two years. Existing retail space in 160 malls is nearly 32mn

sq ft

1.2)OBJECTIVES & ROLE OF RETAIL INDUSTRY

Retail is clearly the sector that is poised to show the highest growth in the next five

years. The sector is set for a revolution, as both the present players and new entrants are

gearing up to explore the market. This sector contributes 10% of India's GDP and the

current growth rate is 8.5%. The present size of the organized retailing sector is

approximately 3% and is expected to grow to 25-30% by the year 2010. There are about

300 new malls, 1500 supermarkets and 325 departmental stores currently under

construction. Many players are coming up with huge investments, due to which thepresent 12 million mom-and-pop shops and Kiranas stores fear losing their business.

Most predictions say that the sector might reach to US$ 400-600 billion by the year 2010

1.3)MAJOR PLAYER OF RETAIL INDUSTRY

Big Bazaar is a chain of department stores in India, currently

with 75 outlets. It is owned by the Pantaloon Retail India Ltd,

Future Group. It works on the same economy model as Wal-

Mart and has considerable success in many Indian cities and small towns. The idea was

pioneered by entrepreneur Kishore Biyani, the CEO of Future Group. Currently BigBazaar stores are located only in India. It is the biggest and the fastest growing chain of

department store and aims at being 350 stores by the end of year 2010.

Pantaloon Retail forayed into modern retail in 1997 with the

opening up of a chain of department stores, Pantaloons. In

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2001, it launched Big Bazaar, a hypermarket chain, followed by Food Bazaar, a

supermarket chain.

The Reliance Fresh supermarket chain is RILs Rs 25,000 croreventure and it plans to add more stores across different g, and

eventually have a pan-India footprint by year 2011. The super

marts will sell fresh fruits and vegetables, staples, groceries, fresh juice bars and dairy

products and also will sport a separate enclosure and supply-chain for non-vegetarian

products. Besides, the stores would provide direct employment to 5 lakh young Indians

and indirect job opportunities to a million people, according to the company.

It was started and is managed by Mr. R. Subramaniam, IIMAhmedabad alumni. He also plans to invest Rs.500 crore to

increase the number of outlets to 2000 across the country by

2009.

Food world is a chain of supermarket stores. It was started

in May 1996 as a division of Spencer & Co, a part of the RPG

Group. In August 1999 it became a separate company. Currently it operates 89 stores in

Bangalore, Chennai, Coimbatore, Erode, Hyderabad, Kodai, Pondichery, Pune,

Secunderabad, Salem, Trivandrum and Vellore

DLF Retail Developers Ltd. is one of the troikas of the DLF

Group. Besides being India's largest real estate developer,

DLF is also of the leaders in innovating shopping malls in India. It caught public eye

when it launched the 2, 50,000 sq ft. shopping mall in Gurgaon. It has brought a

dramatic change in the lifestyles and entertainment with its City Centers and DT

Cinemas. DLF has plans to invest Rs. 2000-3000 crore in all the emerging areas frommetros to class cities in the next two years.

Bharti Retail, a wholly owned subsidiary of Bharti Enterprises.

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Has announced two joint ventures (JV)with the international retailing behemoth, Wal-

Mart. The first JV ensures cash and carry business, in which 100 percent FDI is

permitted and it can sell only to retailers and distributors. The second JV concerns the

franchise arrangement. Sunil Mittal, Chairman of the Bharti Group assured that the

ventures will use low prices every day and best practices for the satisfaction of thecustomer

Lifestyle is part of the Landmark Group, a Dubai-based retail

chain. With over 30 years experience in retailing, the Group has

become the foremost retailer in the Gulf. Positioned as a trendy, youthful and vibrant

brand that offers customers a wide variety of merchandise at exceptional value for

money, Lifestyle began operations in 1998 with its first store in Chennai in 1999 and

now has 13 Lifestyle stores, 5 Home Centers and 1 Baby shop store across Chennai,

Hyderabad, Bangalore, Gurgaon, Delhi, Mumbai and Ahmedabad.

1.4)PEST ANALYSIS

1.5)KEY DRIVERS OF CHANGE-

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y Rising incomes and improvements in infrastructure are enlarging consumer

markets and accelerating the convergence of consumer tastes.

y Liberalization of the Indian economy

y Increase in spending Per capital Income.

y

Advent of dual income families also helps in the growth of retail sector.y Shift in consumer demand to foreign brands like McDonalds, Sony, Panasonic, etc.

y Consumer preference for shopping in new environs

y The Internet revolution is making the Indian consumer more accessible to the

growing influences of domestic and foreign retail chains. Reach of satellite T.V.

y Channels are helping in creating awareness about global products for local

markets.

y About 47% of India's population is under the age of 20; and this will increase to

55% by 2015. This young population, which is technology-savvy, watch more than

50 TV satellite channels, and display the highest propensity to spend, will

immensely contribute to the growth of the retail sector in the country.

y Availability of quality real estate and mall management practices

y Foreign companies' attraction to India is the billion-plus population.

1.6)OPPORTUNITY AND THREAT-

1.61)OPPORTUNITY-

Retail industry in INDIA accounting 10% of the countrys GDP.

Successive Indian government have steadily Liberalize policies related to

investment, banking, trading etc.

URBANISATION caused more concentration of middle income and high income

people.

Hypermarket is emerging as the most favorable format for the time being in

India

Increasing workforce of women

Falling real estate prices

Increase in disposable income and customer aspiration

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Increase in expenditure for luxury items

Low share of organized retailing

1.62)THREATS

Automatic approval is not allowed for foreign investment in retail.

Regulations restricting real estate purchases, and cumbersome local laws.

Taxation, which favours small retail businesses.

Absence of developed supply chain and integrated IT management.

Lack of trained work force.

Low skill level for retailing management.

Lack of Retailing Courses and study options

Intrinsic complexity of retailing rapid price changes, constant threat of product

obsolescence and low margins.

2.0) ORGANIZATION ANALYSIS-

Big Bazaar is a chain of shopping malls in India currently with 29 outlets, owned

by the Pantaloon Group. It works on the same economy model as Wal-Mart and has

had considerable success in many Indian cities and small towns. The idea was

pioneered by entrepreneur Kishore Biyani, the head of Pantaloon Retail India Ltd

Big Bazaar is both big and a bazaar. It is unlike, say, a Wal-Mart or even a Food world.

Big Bazaar is almost an air-conditioned version of any Indian bazaar. It is a slightly

orderly and organized version of, say Chickpet for Bangalore guys or Dadar for

Mumbaiites. There is a huge crowd which can move in almost any direction. You can

buy anything (pretty much everything is available at Big Bazaar). It is not a place where

you can browse through at leisure and pick up a few things here and there. This is aplace if you are serious about your shopping. And the worst part is at the checkout

counter; where the line can stretch as much as a line for a famous ganpati pandal or a

cricket match both are the famous events in the city of Mumbai.

2.1) ORGANIZATION STRUCTURE-

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President

Vice President

Marketing HR Category Manager Finance Manager Operation

Manager Manager Head

Marketing HR Category Finance Head Store manager

Head Head Head

But, the place ticks. In both Hyderabad and Bangalore, the outlets dont have a

place for customers to stand especially on weekends. Sometimes customers wait outside

the outlet before it opens in the morning. Bombay is slightly better. Big Bazaar offers

good prices. Really good prices; prices that tempt. Apart from simple price chopping,

there are deals (2 for the price of 1 or prices reduced on a combination etc). The

perception of Big Bazaar is that it facilitates some serious savings on grocery shopping.

And it works. And make no mistake; it attracts the well heeled as much as it attracts

Raju from across the street.

2.2) Big Bazaar Model :

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No one quite liked Kishore Biyani earlier, because the man strongly believed -

and said so bluntly - that his peers in the retail business were mere copycats. "Most

Indian retailers tend to blindly copy from Western models. I am looking for a pan-

Indian model of retailing," he would say to anyone who cared to listen. His search for

the ideal model also meant that he took colossal risks - something that scared awaymost financiers used to dealing with more conventional businessmen. On top of that,

Biyani made no bones about the fact that he liked to run a one-man show. "I use people

as hands and legs. I prefer to do the thinking around here," he once famously said. As a

result, both professional managers and investors avoided him. And few people gave

him any chance of succeeding.

Between then and now, a lot has changed. Biyani has moved centre stage. Today he has

three highly successful retail formats: the Big Bazaar hypermarket; Food Bazaar that

straddles the food and grocery business; his property in Bangalore, a mall called Centralin Bangalore and his original Pantaloons apparel stores. By the end of next year, he

expects to have 30 Food Bazaars, 22 Big Bazaars, 21 Pantaloons and four Centrals. Right

now, he has 13 Food Bazaars, 9 Big Bazaars, 13 Pantaloons and one Central. Between

them, Biyani's stores occupy 1.1 million sq. ft of retail space. By the end of next year,

they will occupy 3 million sq. ft

2.3)Michael Porters Model-

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RIVAL

INTENSITY

THREAT OF

ENTRANTS

THREAT OF

SUBSTITUTES

POWER OF

BUYERS

POWER OF

SUPPLIERS

HIGH HIGH LOW HIGH LOW

2.31) Threat of New Entrants:

Economies of scale (minimum size requirements for profitable operations)

- The new entrants that are entering the retail scenario today are those which have

with them a lot of backing from the financial institutions who are willing to

finance their ventures.

- Taking for example the case of Reliance Fresh which is entering the industry

with a corpus of Rs. 25,000 crore.

- E.g. Reliance Retail, which made its debut on 3rd November, 2006, in Hyderabad

with the opening of a cluster of 11 stores and which now has 22 stores in

operation in Hyderabad, Secunderabad and Jaipur is gearing up to enter its

home state Gujarat with a big bang.

High initial investments and fixed costs

-

The cost of initial investments is very high as the prices of real estates havestarted going very high.

- The recovering the initial costs would take a long time as the initial phase will be

involved in attracting the customers and it will take time until customers will

become the regular.

- Companies coming in are not wary of the high initial costs involved as they are

putting their money in for the long term as the retail industry in India is only in

its nascent stage.

Cost advantages of existing players due to experience curve effects of operation with fully

depreciated assets

- Existing players have the first movers advantage in the market.

- They already have their brand value set and the customers are aware of the

brand.

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Scarcity of important resources, e.g. qualified expert staff

- As the there is rapid expansion in this industry and there are more and more

new players coming in.

- The availability of skilled labor is very scarce in the current scenario.

-

The existing staff is already employed by existing players.- Due to a lot of poaching in the industry, the pay packets keep getting higher to

avoid incurring training costs.

2.32) Threat of Substitutes

Results of an AC Nielsen study for the period 1993-99, published in 2000 showed

`independent retailers' declined by 21 per cent while `multiple retailers' increased by

18.5 per cent.

Indians love to chat with the shopkeeper and the purchase decision is heavily

influenced by the `expert' comments of the shopkeeper.

The friendly greeting and affection of your regular grocer cannot be easily replaced.

The big retailers tend to be impersonal, there is no help around, and the sheer range

of choice can be confusing.

2.33) Competitive Rivalry between Existing Players

There are many players of about the same size

The Shoppers Stop headed by the Raheja Group, Vishal Mart in North India,

Spencer Hypermarket Formats are the existing players who are about the same size

as the Big Bazaar and similar expansion policies.

There is not much differentiation between players and their products

The existing players dont have much difference in terms of the product range they

are offering to the customers. This thus results in price competition.

Low market growth rates

The growth of a particular company is possible only at the expense of a competitor

and capitalizing on the mistakes committed by them.

Barriers for exit are high

High investments by the players makes it very difficult for them to exit the current

scenario in the industry.

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2.34) BARGAINING POWER OF SUPLIER :-

Large Indian players like Reliance, Ambanis, K Rahejas, Bharti AirTel, ITC and many

others are making significant investments in this sector leading to emergence of big

retailers who can bargain with suppliers to reap economies of scale. Hence, discounting

is becoming an accepted practice.

2.35) DEMANDING OF CUSTOMER :-

Indians have grown richer and thus spending more on vehicles, phones and eating out

in restaurants. The spending is focused more outside the homes, unlike in other Asian

countries where consumers have tended to spend more on personal items as they grow

richer. Spending on luxury goods have increased twice as fast with 2/3 of India's

population is under 35, consumer demand is clearly growing.

2.4)Opportunities:

1) Huge potential rural market to be tapped

2) Opportunities available in the cosmetics industry

2.5)Threats:

1) Many major players are foraying in the retail sector like walmart,reliance which may

hamper their margins

2) Customers may lose their trust on the company due to the supply of substandard

products and may even switch to some other company

2.6) Stake Holder Analysis Of Big Bazaar-

The goal of the market stake holders-

y The stockholders People that actually own share of Big Bazaar & there for are

interesting in seen retune of investment.

y The Big Bazaar Executive Many of the top executives received stock options are

part of the salary.

y The Employees Their job is the primary source of income.

y The Communities where Big Bazaar is located Many of those communities rely

on Big Bazaar for jobs & purchase their day to day necessities are a low price.

y Consumers Big Bazaar is the largest grocery retailer and a lot of people

purchase their , that why people depend on their success.

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y Suppliers/ Service Providers rely on continuous & consistent orders for job &

profit.

y Non profit Organization Big Bazaar foundation provides many funding.

According to Big Bazaar Good Works Foundation 97% of foundation goes to

communities were Big Bazaar is located.

y Competitor Interesting to know were Big Bazaar is expanding. Because they

have the ability to lower price and force other retailers out of business.

y Online Retailers the website is a low cost way to deliver goods to consumer

who live in communities without Big Bazaar store.

y Gasoline Retailers both oil companies who have contracts with Big Bazaar &

gas station have stake in this. The local gas station cant compete with Big Bazaar

either price or convenience.

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The goal of non market stake holders-

y The Labor Unions because the strict policy about not having their workers

unionized.

y The International Retail Stores because of the acquired strategy of companieswell established in the destination country.

y The Politicians rely on Big Bazaar for campaign funding.

2.7) Value Chain Analysis-

The value chain of big bazaar shows that how big bazaar is adding value in its all value

addition stage to meet the customer expectation. By considering many value chain it act

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as value system. The objective of the analysis is to be the central star in the value

constellation.

In above chart firstly Big Bazaar acquires the qualitative raw materials from the

potential supplier. Then they going for a quality inspection and then forward it to

warehouse. This is just going from inbound logistic to production and operation. Then

after compilation of the product it makes data entry and forward it for further final

quality check up then to the shelves of the shop. So big bazaar is adding continuous

value to capture all the price sensitive Indian consumer and to be the central star having

the leading market share.

2.8)Resource Analysis-

We do this analysis to know the strength and weakness of the resource of anorganization and to know the core competence of an organization. In case of big

bazaar with reference to human resource it is having Well Trained Staff having

good appearance. The executives of big bazaar empower Individuals to do work to

their best encourag to think out of the box it employ close to 10,000 people and

recruit nearly 500 additional people every month .it uses scenario planning as a tool

for quick decision making . But if we will see the data the employee attrition rate is

high in big bazaar. So it is having a good skil of acquiring human resource but not

retaining.

If we will see the financial data the sales and the net profit of big bazaar in

December 2007 was 1228.07 and 31.65 million respectively but in December 2008 the

same was increased by 24.35% and 5.97% and reached to 1527.20 and 35.54 million

respectively. The purpose of showing the data is it has good capacity to rais the

money from the market (Financial Capability) .

It has subtle resource like Brand name, its marketing capability is very good. Its

Advertising capability is also very strong. Its production process is also very faster.

2.81) Strength-

1) Good supply chain management (Distribution Capability)

2) Variety of products available under one roof (Marketing Capability)

3) Higher PROFIT margins on sold products(Financing Capability)

4) Good brands available at affordable prices(Low cost Production Capability)

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5) Cheap goods available to the consumers due to the absence of middlemen

(Marketing Capability)

2.82) Weakness:

1) High attrition rate(Low management capability)

2) Employees are not well trained in handling esteemed customers(Bad Human

Resource Development Capability)

3) Sub standard Quality of goods (Weak Quality Management System)

4) There is no proper channel of advertising for promoting their products(Bad

Promotional capability)

2.9) Competitive Strategy-

When a firm sustains profits that exceed the average for its industry, the firm is said to

possess a competitive advantage over its rivals. The goal of much of business strategy is

to achieve a sustainable competitive advantage. For that reason big bazaar is making its

strategy as follows to take the competitive advantage.

Michael Porter identified two basic types of competitive advantage:

y cost advantage

y differentiation advantage

A competitive advantage exists when the firm is able to deliver the same benefits as

competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of

competing products (differentiation advantage). Thus, a competitive advantage enables

the firm to create superior value for its customers and superior profits for itself. Thats

why big bazaar is setting its layout in such a way that it can get economics of scale at a

lower cost and can take the cost advantage.

Cost and differentiation advantages are known as positional advantages since they

describe the firm's position in the industry as a leader in either cost or differentiation. Sobig bazaar has positioned itself as low cost producer in the industry

A resource-based view emphasizes that a Big Bazaar utilizes its resources and capabilities

to create a competitive advantage that ultimately results in superior value creation. The

following diagram combines the resource-based and positioning views to illustrate the

concept of competitive advantage:

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Big Bazaar succeed in cost leadership because of the following internal strengths:

y Access to the capital required to make a significant investment in production

assets; this investment represents a barrier to entry that many firms may not

overcome.

y Skill in designing products for efficient manufacturing, for example, having a

small component count to shorten the assembly process.

y High level of expertise in manufacturing process engineering.

y Efficient distribution channels.

3.0)Conclusion-

To ensure that all its stores are full, Big Bazaar is taking care to see that regional

preferences are catered to. Big Bazaar, "At least 20-25 per cent of the range has to cater

to local tastes, especially in apparel where the choice of colours varies from region to

region. They do a catchment study to design our product range." Star India has gone to

the extent of selling "oiled dal" in Ahmedabad, which is the way the locals like it. And

to keep the cash counters ringing, it has introduced store credit cards. Also, it has

empowered the women, many of whom would otherwise have not been eligible for a

credit card. Consequently, they are seeing more spending." And that's exactly what

retailers are betting on. They're convinced that the Indian consumer's changing lifestyle

and attitude will drive him to spend more. After all, at an estimated $230 billion, the

size of the entire Indian retail sector today is less than Wal-Mart's turnover- $285 billion.

Of this, the organised sector accounts for just 3 per cent, or $7 billion. That's expected to

grow by over 400 per cent to $30 billion by 2010, according to Ernst & Young. As

Levermore says, "Given the potential size of the market, there's plenty of room for more

players." That may be true but even early birds cannot afford to take it easy!

References-

www.bigbazaar.com

It Happened in India- Kishore Biyani

www.ibef.org www.google.co.in

www.economictimes.com

futurebazaar.com

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