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SVKMs NMIMS School of Distance Learning Course : Strategic Management SEM - III Programme PGDBM / PGDHRM / PGDMM / PGDFM /PGDBFM / PGDSCM / PGDITM Assignment Marks : 30

Instructions: AllQuestionsareCompulsory&carryequalmarks. Allanswerstobeexplainedinnotmorethan1000words.Useexamplesasfaraspossible. Allanswerstobewrittenindividually.Discussionandgroupworkisnotadvisable. Copyingfromwebsitesorebookswillcarrynegativemarks.

SUBHIKSHA- A ROLE MODEL FALLS FROM PEDESTRAL R Subramanian an IIM A alumni began his entrepreneurial career through Subhiksha Trading Services (STS) a retail chain in Thiruvanmiyoor near Chennai in 1997. Subhiksha an early entrant in retail and meant to attract aam adami was based on the premise that consumers prefer buying groceries from stores closer to home and at a reasonable price. Therefore, subhikshas stores were set up having space 1000 sq ft across the city unlike a 10,000sq ft big store at one location in Chennai. Subhikshas model of deep discount retailing was a unique and truly Indian why pay more when you can get it for less at Subhiksha! Started as a value focused retailer at a time when organized retailing was only for the elite, STS grew rapidly and had 1600 stores by September 2008. The turnover grew exponentially from Rs 833 crore for FY 07 to Rs 2305 crore for FY08. It targeted 2300 stores and Rs 4300 crore turnover in 2009. As economy suffered slowdown in 2008, the company too suffered. Subhikshas trade cycle collapsed by October 2008. The company was unable to pay salaries to 1500 employees, vendor bills and also the rentals for the stores. Banks refused to lend money. Tata teleservices, the telecom service provider to STS, cut all the fixed line and the corporate mobile phone connections as the bill remained unpaid. The stores were vandalized by employees and other

creditors since there were no security guards. The founder said that the properties have become vulnerable targets, but we are taking all steps to protect our assets. It is really sad that we have been unable to prevent this so far. Cash- strapped due to the collapse of equity market and tightening of credit, STS shut down 130 stores in Gujarat alone. Subhiksha stores which had investors such as Wipros Azim Premji and ICICI Prudential Mutual Fund was rapidly sinking and wore a deserted look with empty shelves having net worth of RS 250 crore and liabilities of Rs 750 crore, the company needed Rs300 crore infusion to re start its operations. Mr. Subramanian was talking with investors lenders to inject liquidity into its operations. Subhiksha-which qualified for a candidate of corporate debt restructuring (CDR) -was searching a strategic buyer/ or a financial investors. The heat of the financial crunch did not spare other major retail players including Spencers mega store and Big Bazaar. The RPG group, which owned the Spencers retail chain had quit operations in Ahmadabad in November2008 and also announced to shut nearly 56 stores across the country. For retailers the competition was intense and the environment was challenging as there were numerous players in the industry. Competition would be more vigorous with the foray of major foreign players like Wal Mart and Tesco. Their entry would pose new challenges and threats before domestic players. To survive in the long run, it would be wise for retail chains to carve out the strategy cautiously, move prudently and plan to match cash inflows with outflows. Modern retail still accounts for less than 5 per cent of the total retail channel in India. The so called Mom and pop stores continue to show growth and profitability that is again by and large, in line with the growth in consumer spending. The consumer spending basket has been showing a consistent shift in the components over the last 20 years or so. Hence while some organized retailers may be facing certain growth or profitability challenges, there are others including Trent Landmark, Fabindia, Shoppers Stop Reebojk, Tommy Hilfiger, Tanishq Croma, The mobile store and others continue to grow steadily and in most cases, profitably. Questions: 1. What in your opinion has gone wrong with Subhiksha? Is it systematic, internal or strategic failure in its case? (answer this question after further research and taking a view) 2. Innovation at Subhiksha seems to have back fired at long last! Do you agree?

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