An industry analysis

Neha Pithwa
Dinesh Dubey
Dewang Pandya

Pooja Mukundan
Vasudev Maller
Presentation scope & flow :

Need Analysis

What is Retailing & different forms of retailing

PEST Analysis

SWOT Analysis

Porter’s 5 forces Analysis

Stake holder Analysis

Case study
The India Story

TODAY
• One of the fastest growing economies ;
9%+ growth rate for 5 years prior to
current crisis
• Resilient Economy – 5-6% growth at the
peak of the global crisis
• Opening up sectors for investment
• Promising consumer markets
YESTERDAY
• Significant investment in infrastructure
development
• Socialist policies – minimal private sector
role
• Bureaucratic An Enabling Environment
• Protected market
• Small consumer markets • Largest democracy; Stable government.
• Underdeveloped infrastructure • Dominant private sector; Increasing
withdrawal of government from business
• Robust banking sector; Capital markets
• World class IT & telecom infrastructure
• A ‘connected economy’; Economic efficiency &
quality of governance
Consumer Preferences Evolving

• From traditional to… … modernized traditional

• From globalize to… … Indianise

• From functional to… … lifestyle

Once upon a time India was the land everyone wanted for

Exotic Diamonds
Lush Palaces

Elephants Kathakali

Monuments in Gold

snake charmers Majestic Forts

Rediscovering “India”

Rediscovering “India”
Need Analysis

Needs analysis focuses on the requirements related to the goals, aspirations

and needs of the users
Passion

Possession

Consumer Demand Retail

Place

Pleasure

Consumer demand is the prime reason for the emergence of various retail formats
Need Analysis

Product Getting the right product - Choice

Price Right product at right price - Fairness

Consumer

Place Right product at right place - Friendliness

Promotion Right product at right place - information

What drives the “ Need ”

o n
ti
la
p u
P o
n g
ou
Y
(Source: UN)

• India has a demographic advantage

with a large young population
– More than 85% population estimated aged less than 65 in
2050
What drives the “ Need ”

o r
a vi
e h
r B
e
u m
Demographic Changes n s more demanding
Kids become Lifestyle branding
Co
n g
n gi
h a
C

Willingness to experiment Increase in no. of working women More Nuclear families

 Growth Expected in India
To sustain the GDP growth of more than 8 percent, India
requires an investment of USD 1.5 trillion in the next five
years
2006
2006
 GDP – USD 590 billion
 GDP growth rate – 9 %
 Services contribution – 54 %
 FDI limit not 100 percent in major
industry sectors such as Telecom,
Semiconductors, Automobiles,
etc.
 Balance of Trade – USD (-)46.2
billion
 Investment goal – USD 250 billion
Source : IBEF
2008
2008
 GDP – USD 750 billion
 GDP growth rate – 9.5%
 Services contribution – 60 %
 FDI limit is expected to be close to
100 percent in major industry
sectors such as Telecom,
Semiconductors, Automobiles,
etc.
 Balance of Trade – Should
increase with surging exports as
compared with imports
 Investment goal – USD 305 billion
2010
2010
 GDP – USD 900 billion
 GDP growth rate – 9%
 Services contribution – 60-65 %
 FDI limit is expected to be 100
percent in major industry sectors
such as Telecom,
Semiconductors, Automobiles,
etc.
 Balance of Trade – Should be
positive with increased level of
exports as compared with imports
 Investment goal – USD 370 billion
ndia: Increasing Working Population
Growth in Global Working Age Population ( 20 -60 )
Stock Position 2005 Addition to Working Age Population by 2010

3
World 4,168

India 691 71

Africa 500 64
China 934
44
South East Asia 362
33
Latin America 359
31
Southern Asia 132

USA 200 17

Europe 497 10
Japan 85 0

-3 In Million

-5 45 95 145 195 245 295

Countries worldwide are anticipating a shortage of working population in the future. India is expected to emerge as a
clear winner, and by 2050, it will have the largest working age population.
 India: Astounding Demographics

DEMOGRAPHIC TRANSFORMATION OF INDIA

Growth in the higher
income categories of Annual Household Income
India’s population (in USD)
has created an
2 9 20 Rich (Above 115,000)
affluent section of
Population (million)

society, which has 9 17 33 High Income (57,000 – 115,000)

significant level of
purchasing power 48 74 120 Consuming class (23,000 – 57,000)

221 285 404 Working class (10,200 – 23,000)

726 710 613 Needy (Below 10,200)

2001-02 2005-06 2009-10(E)

* In PPP terms

Increasing per capita income

coupled with an emerging middle
class has provided the necessary
impetus to consumerism in India
 A Virtual link between the product and the end
user

Product Consumer

The word retail comes from the French word “ RETAILLER” which
refers to “ CUTTING OFF”

Retailing is activity whereby product and services are sold to final

customers after breaking bulk into small quantities .

RETAILING CONCEPT :
14
STAKEHOLDERS
 RETAIL FORMAT
The retail format is the store package that retailer presents to
shopper
CLASSIFICATION OF FORMATS

•Convenience store
•Conventional •Vending machine
supermarket •Online store
•Traditional department •Telemarketing/teleshopping
store
•Factory outlet

•Independent
•Chain
•franchise
•Leased department
RETAILING CONCEPT :
15
STAKEHOLDERS
 Evolution of Indian Retail Environment

Modern Formats/
International

Traditional/Pervasive Government Supported

Reach
Historic/Rural Reach

Exclusive Brand
Outlets
Hyper/Super
Markets
PDS Outlets
Department Stores
Convenience Stores Khadi Stores
Shopping Malls
Mom and Pop/Kiranas Cooperatives
Weekly Markets
Village Fairs Availability/ Low
Shopping
Melas Neighborhood Experience/Efficiency
Costs / Distribution
Stores/Convenience
Source of Entertainment
ORGANIZED RETAILING IN INDIA
CLASSIFICATION

RETAILING CONCEPT :
17
STAKEHOLDERS
 A large segment
Rising income of young Nuclear family
levels population

Growing
Expanding literacy urbanization
middle class

Changing
Spending pattern lifestyle

Acceptance of modern retail formats Modern retail

formats

RETAILING CONCEPT :
18
STAKEHOLDERS
ORGANIZED RETAILING IN INDIA

RETAILING CONCEPT :
19
STAKEHOLDERS
 Major Retailers in India

Mahindra
Tata Group Future group
retail

Reliance RPG Aditya

GROUP Birla
 FDI IN INDIAN RETAIL
SECTOR
Indian Government had announced decision to allow FDI up to 51% to single
brand retailing.
July , announced 49% FDI , without any restriction in no. of outlets or
location of stores.
•Improving retail and •Entry of foreign retail
supply chain infrastructure giants would be
•Large-Scale employment detrimental to
•Indian retailers could livelihoods of
absorb some of the best unorganized sector
operational practices. •Small retailers would
•Consumers would benefit not be able to
due to availability of more compete with
product offerings, lower operational
prices and efficient efficiencies and
services financial muscle of
foreign players.
Foreign retailers had other modes of entry into Indian retail
market: franchising, Strategic alliances and wholesale trading
RETAILING CONCEPT :
21
STAKEHOLDERS
hy Indian retail industry – booming ?

“India has evolved into

India is among the one of the world's
three most attractive leading technology India has among the
FDI destinations in the centers“. highest returns on
world. foreign investment.
Craig
Barrett
A T Kearney
By 2032, India will be Intel US
FDI
among the three Corporat Departme
Confidence
largest economies in ion nt of
Index 2005
the world. Commerce

“The Indian market has two

Goldman core advantages - an
Sachs increasing presence of
“We came to India for multinationals and an upswing
the costs, stayed for the in the IT exports”.
quality and are now “India is a developed
investing for innovation”. country as far as Travyn
intellectual capital is Rhall,
concerned”. ACNielsen
- Dan Scheinman,
Cisco System Inc. as Jack Welch
told to Business Week, General
August 2005 Electric
SWOT Analysis
STRENGTH - RETAIL

A low cost, skilled, English-speaking workforce can do

the jobs of Western workers for a fraction of the wages
paid in North America or Europe.

Average annual GDP growth of 8.0% is predicted by BMI

between 2010 and 2014.

With the population forecast to rise from 1.17bn in 2010

to 1.23bn by 2014, GDP per capita is expected to expand
by more than 86% by the end of the forecast period,
reaching US$2,652.

The value of the retail segment is expected to grow from

an estimated INR16.51trn (US$380.39bn) in 2010 to
INR26.02trn (US$679.32bn) by 2014.

Cont….
WEAKNESS - RETAIL

The competitiveness of local firms is undermined by official

red tape, from foreign investment restrictions to inflexible
labour laws.

Intellectual property rights are poorly protected in India, one

of 12 countries on the 2009 priority watch list compiled by
the US Trade Representative.

The rural population of India represents more than 70% of

the total, while almost 37% is classified as not economically
active by the UN. This is a major obstacle for retailers
seeking to rapidly expand their customer base.
OPPORTUNITIES - RETAIL

India could enhance the competitiveness of the local industry

through further liberalization and deregulation.

Prime Minister Manmohan Singh is eager to reform the

banking sector to increase the availability of long-term
financing, particularly for large infrastructure projects.

The value of the OTC drug sector is forecast to more than

double by 2014, when it will be worth an estimated
US$6.39bn.
THREATS - RETAIL

The arrival of Western players, including management

consultancy Accenture and technology company IBM, is
raising local wages in the outsourcing sector

China remains a major competitor for FDI flows into India.

India has excessive bureaucracy and poor infrastructure in
comparison with China, which attracted US$60.6bn of FDI in
2005.

International retailers are restricted by India's strict FDI

regulations. Single-brand retailers are able to own a 51%
majority stake in a joint venture with a local partner, but
multi-brand retailers must operate through a franchise or
cash-and-carry wholesale model.
 Porter's 5 Forces Analysis

Rivalry among
competitors

Threat of
Threat of New
High
Substitutes entrants
High High

Industry
Competitivenes

Moderate Low
Ba
rgaining
Bargaining
po
power
wer
of buyers
of
 Threat of new entrants -
high Power of suppliers - Low

• Barriers to start a new store is not • Retailers used to keep high

impossible to overcome quality standards

• Centralized procurement gives • Suppliers who don’t meet the

chain standards will be dropped
stores a competitive advantage
• Supplier tend to have very little
• 95% of the market is made up off power
small uncomputerised family run
stores • A contract with large retailer can
make or break a small supplier
• Govt opening up its retail market
to greater overseas investment
 Bargaining Power of Availability of substitutes -
buyers - Moderate High

• Customers have very little • The tendency in retail is not to

bargaining power with retailers specialize in one good or service

• It is very difficult to bargain with • This means that what one store
the salesman at chain stores offers you will likely find at another
store
• Retailers focus more towards
quality than price
Competitive Rivalry - High
• Bargaining is possible for
unorganized sector rather than
organized sector • Retailers always face stiff competition

• The slow market growth for the retail

market means that firms must fight
each other for market share
PEST Analysis
Political Environment
Democracy
 World’s largest Democracy
 Officially guarantees Justice,
liberty and equality while aiming
to promote fraternity among
citizens
Foreign policy
 India has edged closer to the US
foreign policy
Presence of 2mn strong Indian
diaspora in the US are bringing
two countries together
Coalition
Governments
Coalition Governments
complicates central policy making
 India’s tense relationship with
Pakistan still weighs on regional
stability
Terrorism
 India has experienced a series
of serious terrorist attack over the
past two years
 The fact that the US & India are
democracies and face threats
from militant groups are bringing
countries together
Economic Environment
Disinvestment
Plans to dilute 10% in many
profit making PSUs
A source of spending in social
infrastructure
Fiscal Balance
Driven by stimulus packages
fiscal
deficit currently at 6.8% of GDP.
To be brought down to 3% over 5
years
Tax Reforms
Indirect tax: GST roll out by FY11
To overcome the dual tax regime;
simplified structure; creating a
unified market.
Direct tax: Proposed Direct Tax
code aiming at substantial
increase in income tax limit
Rural Development
72% of population in rural areas
25% of govt. spending is towards
rural schemes; spend has grown
by 45% annually during last 2 yrs.
Social Environment

Young population Social Responsibility

Average age 25 years
 Govt focus on social
50 44
40 34
37 38 responsibility is increasing
30 25

20
10  Organizations spend a
0
considerable amount of money in
U
S

social reforms
C
ia
d
In

R
a
in
h

n
p
a
J
ia
u
s

Social Marketing Urban working

 Govt focus on protecting
Population
consumer rights by stringent laws  Growing urban working
and awareness programs
population brings the social
retail firms should take the lead
reforms
in eliminating socially harmful
products such as cigarettes and  Largest working age population
other harmful drugs etc
worldwide by 2050
Technological Environment
Growth rate of IT
 In India, IT sector is developing with
35% growth rate
India is second country after China
who is using internet at large scale for
e-commerce , e-education and e-
accounting
Incentive for promoting
Technology in India
Indian Govt. has given 100% income
tax exemption for expenses incurred in
research of technology in India.
Govt Focus
 Indian govt. has established 500
technological institutes for providing
education to Indian students. It has
also established 1080 research
institutes
India has strong and positive
technical policy for technological
development
Finances for IT
Promotion
 State financial corporation is uplifting
domestic technology by supporting
finance to domestic Industries.
Demographic Dividend
Population Median Age (In Years):
2008E Growing urban & Working population
50 44
40 34
37 38
• 2nd largest urban population: 29% of the total
30 25 (2007)
20
10
• Projected to reach 37.8% by 2025.
0 • To register the largest addition to the working
age population in the world by 2010.
U
S
ia
d
In

aC
in
h

n
p
a
J
ia
u
s

• Largest working age population worldwide

by 2050.

Demographic Profile Powerful production & consumption force

60yrs & • Enormous consumption force: Large youth
above
7.5% 0-19 yrs
population
41.8%
20-59 yrs
50.7% • Global production force in service:
• Large pool of professionals and technocrats
• Largest pool of English speaking manpower after
the US

• Manufacturing force: Labour costs, as a % of

value added - one of the lowest among Asian
countries.
Stakeholder Analysis
Who is a stakeholder ?

Any individual, group or institution who is

affected by a project in a positive or
negative way; or

Any individual, group or institution that has

an interest (or stake) in the project

38
Types of stakeholders

Primary Stakeholder : Are those ultimately

affected either positively or negatively by an
organization’s action.
Secondary Stakeholder :are the
‘intermediaries’, that is, persons or
organizations who are indirectly affected by
an organization's actions

Stakeholder Analysis 39
Types of stakeholders

The success or failure of an industry will depend on the fact whether

they are stakeholder Inclusive or stakeholder exclusive in their
operations. the following are the stakeholders:

Primary stakeholders
Secondary
: Stakeholders
Customers  Government
 Suppliers  Society
 Investors  Unions
 Managers and Employees
 Media and communicators
 Local communities  Trade bodies
 Business Partners  Competitors

Stakeholder Analysis 40
stakeholders
Why to Analyze stake holders ?

• Understand your clients/beneficiary interests,

needs and capabilities
• Clarify all groups that might have an interest
in a project or project concept
• Identify potential opportunities and threats to
project implementation
• Determine the extent to which certain groups
should participate in project planning,
implementation and evaluation

Stakeholder Analysis 42
 Steps in Analysing Stakeholders

1. Identify important stakeholders and their

interests
2. Assess the power and influence of
stakeholders in relation to the project
3. Determine appropriate project response to
each stakeholder/group
4. Plan which stakeholders will participate in
the project cycle, when and how
5. Start to identify risks from stakeholders
6. Develop strategy for building participation
and stakeholder commitment.

Stakeholder Analysis 43
 Stakeholder Matrix

Stakeholder Interest
S.1 Employees Motivation, job security , respect,
working conditions
S.1 Customers Quality product with every day
low prices, Ethical products.
S.1 Customers Convenient store , with strong
service

S1. Investors Financial success of store , earn

money on investment New
contracts

Stakeholder Analysis 44
 Stakeholder Matrix

Stakeholder Interest
S.1 Suppliers Sell their products continuously,
advertise their brands to others
S.1 ShareholdersProfit, performance, truthful
reporting
S.2 Community Jobs, Environmental protection,
truthful communication.

S2. Government Taxation, low unemployment, VAT

Stakeholder Analysis 45
Customer

 Good products of acceptable quality ,that has

sustained over long periods of time may do well in the
market even without a lot of advertising fanfare.

 The customer are looking for value for money and a

good brand provides additional value that goes much
beyond the accepted benefits as it adds to the
prestige value of it buyers as well.
 They need value ,quality, customer care and ethical
products

Stakeholder Analysis 46
Employees :

 The employees are normally willing to work for company

with a good brand name even at lower salary package
the remain optimistic that in the long run the company
will grow fast and with they too will grow.
 Employees must be heard. A business long –term growth,
sustainability depends on incorporating their voices in
the management decision making process and in
strategic planning.

 They need job security Compensation, Respect,Truthfull

Communication

Stakeholder Analysis 47
Suppliers

 For maintaining the quality in the products, the retail industry

depends on its suppliers. The industry needs to develop a seamless
relationship with Their suppliers . This leads to market power,
operational efficiency and Creation of wealth.

 Retail industry is totally dependent on suppliers only. So that there

should be a continuous supply of products at affordable price.

Stakeholder Analysis 48
Government and the Society

 Industry should make profits and then give a part of it

back to the society. Like adopting a village for literacy
and health care which make difference in the life of
people concerned are really required.
 Creating employment . Taxation and VAT for the
development of the country.
 Partnership between the industry and its stakeholders
are going to become the most important drivers for
creation of wealth , sustainable development. And
good management in the future.

Stakeholder Analysis 49
 Response of stake holders - Real Estate Owners

Size and Growth: The size of the Indian real

FORWARD LINKAGES
estate industry is estimated to be at approx. US$
60 billion, with housing, construction and real
estate services growing by 2010
Residential
High Contribution to GDP: Real estate Real Estate Hospitality Retail

forms one of the key components of economy Commercial Warehouses/

and the contribution of real estate services, logistics
IT/ ITES
Office Space
housing and construction sector to the economy Others

is ~18% (2009-10).

Multiplier Effect: Established significant

BACKWARD LINKAGES
linkages with other sectors and an estimated
250 associated industries apart from the Steel
Core
considerable multiplier effect it has on the Cement Industries
economy as a whole. Paints/ Chemicals
Heavy Engineering Equipments
Brick/ Tiles
Importance for Indian Economy: Survey by REAL ESTATE/
Electronics CONSTRUCTION
(Equipments, Raw Materials Copper &–Aluminum)

ICRA highlights that Construction ranks third

amongst 14 major industries in terms of direct,
indirect & induced effect on all sectors of the Transportation/ Logistics
Service Labour Services
economy. Direct Labour
Financial Services
Response of stake holders - Government

Setting up Regulatory & Information Dissemination

Framework… enabling growth

CSO
Central Statistical Organisation
CASE STUDY

RETAILING CONCEPT :
52
STAKEHOLDERS
WHY SUBHIKSHA FAILED

RETAILING CONCEPT :
53
STAKEHOLDERS
 Back Ground

 Largest retail value chain in India with 1600 outlets

spread over India
 First opened in 1997 at Chennai by
 Mr. R Subramaniam, IIM Chennai & Ah’d Alumnus
 Revenue generation of Rs. 2200 Million by ’02
 Aimed Rs. 2800 million by the end of ‘05
 MAJOR SHARE HOLDERS :

 ICICI Venture – 23%

 Azim Premji (Wipro) – 10%
 ICICI Prudential – 5%

PRODUCT PORTFOLIO :

 Super Markets, Fruits & vegetables, Telecom, Pharmacy

& IT

RETAILING CONCEPT :
55
STAKEHOLDERS
 BUSINESS DECISIONS :

To provide products at sustainable low price right at the

door step by-

 Lowest prices and great savings

 wide selection of goods
 Guaranteed doorstep delivery & at point of sales
 Simple return policy
 Generate customer database for cross-selling CRM
activities – Customer supports

56
 KEY CHALLENGES FACED

 Risk in retailing and expansion

 Need for IT solution
 Inefficient Inventory Control
 Absence of Departmentalization
 Absence of MIS System
 Inadequate Logistic and Supply Chain Mgt.
 Lack of Decentralized planning

RETAILING CONCEPT :
57
STAKEHOLDERS
 Oct, 2009 Tabloids report on-

 Problem in the cash flow at Subhiksha-

 Employees clamor for salaries
 Vendor cutting off supplies
 Default on rents for the stores
 In Jan,2009 – R Subramaniam admits Shubhiksha
needs Rs. 300 Crores to keep a float

RETAILING CONCEPT :
58
STAKEHOLDERS
 Reason 1 Unmindful
Expansion
 Rapid stores expansion
 Rapid increase of workforce
 From Groceries & medicine to mobile & electronics to
Consumer durables & IT
 Huge investment and cash flow
 Reason 2 Growth without
consolidation
 2004 marked a departure in Subhiksha Philosophy

 Very few stores would have been profitable in terms of

cash flow
 Reason 3 Profit – Loss Cash
Flows
 Uncontrolled increase in stores and personnel were
bleeding the treasury

 Turn over being the ‘Mantra’ so, it worked on slim and

zero margins

 Thus, cash out flows were high whereas inflows in

terms of margins were non existent
 Reason 4 Mastering the SCM

 A Wall mart bails scale through integrated supply

chain, not by being a re-seller

 Down stream supply chain was not integrated

 Reason 5 Managing Vendors

 Shubhiksha tried to build scale on bulk quantity

purchases from vendors and a liberal credit term
extended to them
 Reason 7 Inventory
Management

 Credit defaults caused breakage

 It let to either huge inventories going bad

OR
 The stores didn’t have stocks
 Reason 8 Quality of Ground Level
Mgt

 Personnel recruited to run operation were local and

untrained

 Tendency towards dishonest practices in face of

tremendous turnover and turn around pressure in
place of huge margin

 Quality of store service was bad, adherence to rules of

retail were minimal
 Reason 8 Diffused Focus

 It sold fresh vegetables, Medicines, Groceries, Mobile

Phones, Accessories and more……

 Where was the focus ?

 How robust was the business model and the

manpower to handle such diversity ?
 Reason 9 Unethical Practices

 Unrestrained practices like reselling to small retailers,

made companies squeeze supplies

 Inconsistency resulted in customer dissatisfaction with

store franchise
Thanks