INDIAN INSTITUTE OF MANAGEMENT UDAIPUR

GROUP ASSIGNMENT 1

SUBJECT: MARKETING 1 INDUSTRY: RETAIL CHAINS (MULTI BRAND RETAILING) INSTRUCTOR: Prof K.R.Jayasimha

NAME MANISH KAKATI NIVEDITHA NADIMPALLI SONU ROSHAN EKKA VIKRAMADITYA GUHA

ROLL No. 111025 111028 111052 111058

EXECUTIVE SUMMARY

With the opening up of FDI in multi-brand retailing, ShopSmart, the leading retailer in the world, intends to foray into the $ 600 billion market. We did a SWOT analysis on ShopSmart and analyze the critical decision areas and also their future prospect. SWOT for ShopSmart: Strengths: World leader in retailing. Unmatched distribution centre and logistic capabilities. Low cost, customer focus high quality products. Best in class inventory management provides platform for innovative pricing strategy. Immense buying power. Weakness: Inexperience in dealing with diverse cultural environment with diverse needs. ShopSmart s SCM is modelled on developed economies. Opportunities: Access to a $ 600 billion retail market. Access to fastest growing economy with growing middle-class (target customers). Future prospect of getting into rural market. Potential of merger and acquisition of local retail centres. Experience of working in diverse cultural environment. Threats: Competition not only from fellow foreign retailers but also from local retailers who have much better understanding of the local market. Socio-cultural threats. Lack of infrastructure in India in terms logistic. High realty price Diverse Consumer behaviour.

Taking into consideration the SWOT analysis, we have identified some critical decisions that ShopSmart has to take: y y y y y Joint venture with a reputed Indian company with vast experience of the Indian market. Tweaking their Supply chain management to suit India s supply chain market. Concentrate on building customer relationships and also educate them. Categorizing its product-line based on their purchasing power taking into consideration different demographic groups & regional sensitivities. Training farmers and unskilled youths.

Once they set their foot firmly, the $577 billion rural market is also in the offing.

MACRO ENVIRONMENT ELEMENTS

The various elements that have a profound effect on the macro environment can be listed as follows:
Demographic elements :

 With a population of 1,189,172,906 with a growth rate of 1.344% (July 2011 EST.) India is a country with a large population base which is an indicator of the size of the market.  The population age mix is balanced with a significant amount falling in the 15-64 years category (64.9%). Hence there should be a demand for a wide range of products.  74.04% of the country or close to 740 million people in the country are literate which makes it easier for product promotion and also while raising customer awareness.
Economic elements :

 Being the 4th largest GDP in the world with a growth rate of 7%-9% , the Indian economy promises to be robust with good income standards  According to forecasts by McKinsey Global Institute, India s income distribution curve will change from a peak to a flatter plateau, indicating increasing incomes across the population. This indicates opportunities for new products to be introduced.  The Indian rural consumer market is expected to touch USD 577 billion. This again is an indicator of a potentially large untapped market.
Political and legal elements :

 The Indian government has sanctioned FDI, not only single brand but also in multi brand retail sector. This presents an opportunity for various foreign companies to extend their business to India  There have been efforts to boost the economic growth of the rural population hence endowing them with the increased purchasing power  India s legal scenario has direct impacts on the market with the introduction of Consumer Protection Act and consumer courts. There is a requirement for good quality product and services.
BRIEF INTRODUCTION ABOUT THE COMPANY

ShopSmart is a global leader in the retail industry. It is an American public multinational corporation that runs chains of large discount department stores and warehouse stores. The company is the world's 18th largest public corporation, according to the Forbes Global 2000 list, and the largest public corporation when ranked by revenue. It is also the biggest private employer in the world with over 2 million employees. ShopSmart currently wishes to grab a foothold in the Indian market.

MICRO - MACRO ENVIRONMENT

The elements of micro and macro environment relevant to ShopSmart s entry into the Indian market are: With a population of 1 Billion and above the country provides a huge potential customer base.  The GDP of the country indicates a robust economy with people having good purchasing power.  India has a diverse socio-cultural scenario with people from various religions speaking different languages. Hence there is an opportunity to introduce various mix of products to appeal to various strata of society.  The literacy rate of the country is high with a good percentage of media penetration. About 119 million television sets with 62 million cable connection are present in the country. The total number of newspapers circulated in the country is close to 157 million in various languages. Hence this provides a wide scope for promotion and advertising of brand.
ROLE PLAYERS:

1. Customers:  With 1.2 billion population the country provides huge customer base.  ShopSmart tries to attract customers with their low prices and the quality of products  However the average Indian customer associates a big retail store with high prices and is sometimes intimidated by it.

2. Marketing Partners(Suppliers):  The goods and services are being sourced locally, thereby keeping costs to a minimum and adding to the growth of the local economy and creating opportunities.  The company partners with thousands of suppliers in every merchandise category that range from one person shops, to multi-national corporations. Some sell products in just a few stores, others supply nationwide. Maintaining a diverse mix is the key to the success.

Some of the current suppliers are:

CRITICAL DECISION AREAS

 It is imperative for ShopSmart to have an in depth knowledge of the Indian consumer behavior so as to assess the market demands properly. For that purpose ShopSmart can set up a joint venture with a reputed Indian company with vast experience of the Indian market.  ShopSmart buys material directly from farmers. Hence it can set up farmer education programs that can educate farmers on how to best utilize their resources to cultivate high quality crops in fail safe manner.  It is essential for ShopSmart to set up its supply chain management system at par with what it already has globally. However this is a challenging task since the level of infrastructure development in India is not very high and there is scarcity of good quality warehouses and storage systems.  ShopSmart faces a huge competition from the unorganized retail sector (97% of the Indian retail sector) i.e. mainly the kinara stores. Majority of Indian customers are used to shopping at their local kinara stores with whom they are already acquainted to. Hence ShopSmart has to concentrate on building customer relationships.  According to the Indian customer perception large organized stores are mostly associated with high prices. ShopSmart has to make sincere efforts to educate the customer via active promotional campaigns to change the above.  India has large number of different demographic groups. So, the store should be one designed to reflect the different demographic groups the affluent, suburbanites, rural residents etc rather than a one-size-fits-all merchandise. Also they have to take into account the regional sensitivities too.  ShopSmart has to categorize its customers based on their income levels and their purchasing power as "brand aspirationals" (people with low incomes but value brand), "price-sensitive affluents" (wealthier shoppers who love deals), and "value-price shoppers" (people who like low prices and cannot afford much more).

CHANGES IN THE FUTURE Rural Market:

ShopSmart initially plans to open its first stores in Mumbai followed by New Delhi , Kolkata and Bangalore, where they find the customer is already acquainted with the benefits of organized retail, thereby needing comparatively less promotion. However in India , the chunk of the population (72%) lives in rural areas contributing to about half the GDP. More than 50% of the sales of FMCG and durables come from the rural sector. The Mckinsey Report (2007) says that on the rise on consumer market in India predicts that in twenty years the rural Indian market will be larger than the total consumer markets in countries such as South Korea or Canada today, and almost four times the size of today s urban Indian market and estimated the size of the rural market at $577 Billion. Hence, in order to gain a strong foothold in the Indian market it is essential for ShopSmart to seriously consider the opportunities provided by the yet untapped rural market and design its marketing strategies accordingly. This can be done by setting up small multi brand retail outlets in rural areas and pricing the products at a competitive range.

Sources:

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http://www.csi-sigegov.org/3/32_319_3.pdf
http://en.wikipedia.org/wiki/Retailing_in_India http://www.business-standard.com/india/news/fdi-in-multi-brand-retail-may-go-tocabinet/133601/on