Centralized to Decentralized Transformational Structure From an organizational perspective, it is recommended to implement a decentralized organizational structure instead of the centralized

structured being used presently. Decentralization emphasizes empowerment and involves delegation of responsibilities to junior staffers. Managing a huge organization with different levels in a competitive industry such as Retail is a challenging task and a flat organizational structure may not work due to presence of various different departments each with its own set of challenges. In the modern competitive business world big companies have to accept the paradox that to stay big they have to act small. Tesco, largest retailer in UK provides an ideal example of an organization which has successfully implemented this model in their operations. This will enable the top management to focus on most important and high-level issues at hand. Decentralized model serves as a source of motivation for junior staffers and would lead to enhanced productivity apart from a faster and quicker response since senior bureaucracy is not involved. People lower down the chain tend to have a greater understanding of the environment they work in and the people (customers and colleagues) that they interact with. This knowledge skills and experience may enable them to make more effective decisions than senior managers. In the proposed administration structure, the Store Manager will serve as the decision maker at Point-of-Sale with customers.

The Store Manager will report to the Regional Manager who in turn will report to Zonal Manager. The Zonal Managers will be governed by top level management consisting of board of directors, independent directors, managing director and chairman. The top management overviw is illustrated as

Porter Five Forces Analysis The Indian retail industry is now open to foreign players and is packed with players who strive to offer great products and value-for-money to burgeoning Indian consumers. India holds great promises for retailers with the rising disposable income and growing middle class. Indian retail industry is currently valued over USD 500 billion and is growing at a brisk pace of 20%. As per the current landscape of the retail industry small shops and kirana stores largely dominate the market. The industry is, by and large, unorganised with the organised segment still in its nascent stage. However the potential is enormous for organise sector to grow. Foreign giants like Wal-Mart and IKEA have recently received the governments approval to enter the market.

Market Size Indian retail sector is dominated by the unorganised sector with roughly 92% of the total retail market as per a study by Booz & Company. The industry grew at a CAGR of 10.6% between 2010 and 2012. It is expected that the retail market will grow up to USD 750-850 billion by 2015 according to a report by Deloitte. Food and grocery is the largest subsector contributing 60% followed by Apparel and Mobile segment. As per the data released by Department of Industrial Policy and Promotion, FDI inflows in single-brand retail stood at USD 96 million.

Indian Retail Market Size, USD billion

Food and Grocery

11% 3% 3% 4% 5% 6% 8%

Apparel Mobile and Telecom Food S ervice Jewellery Consumer E lec tronics Pharmacy Others

1000 800 600 400 200 0 2010 2012 424 518

869

60%

2015E

Source: India Retail Report 2013, Images Group

Major Organized Players and Organised Retail market share

Source: Deloitte report on Indian Retail Revenue Market, Jan 2013

Segment

Existing Players

Apparel Mass Grocery Beauty & Wellnes Consum er Electroni cs

Pantaloons Shoppers Stop Westside Big Bazaar Reliance Fresh More Apollo Pharmacy Medplus Titan Eye+ Croma Ezone Reliance Digital

(INR crore) 4097 1927 821 6914 7599 NA 860 NA 328 NA NA NA

# stores >65 >50 >60 >210 >400 >575 >1350 >980 >200 >54 >44 >75

100% 80% 60% 40% 20% 0% 45% 15% 85% 55%

20% 40% 30% 80% 60% 70%

5%

95%

Unorganised Retail

Organised Retail

Porter Five Forces Analysis of Indian Retail Industry

Bargaining Power Suppliers MEDIUM Bargaining Power Customers HIGH Established players have a slight edge over others and enjoy brand distinction Access to capital plays an important part for expansion in the space The unorganized sector has a dominant position Healthy economic growth, changing demographic profile, increasing disposable incomes, changing consumer tastes and preferences are some of the key factors that are driving the organised retail sector Wide availability of choice, which will further widen with FDI Reforms by India in opening up its economy have greatly improved trade prospects but major barriers still exist such as regulatory issues, supply chain complexities, and inefficient infrastructure Healthy economic growth, changing demographic profile, increasing disposable incomes, changing consumer preferences are driving the Indian retail industry High competition is characterised by many factors, including assortment products, price, quality, service, credit and availability of retail space etc. New entrants are expected to further intensify the competition and so would the foreign players entry

of

of

Threat of new entrants HIGH Threat of substitutes MEDIUM TO HIGH Competition HIGH

Competitor Analysis
Big Bazaar Big Bazaar is Indias largest indigenous retail market chain which has spread its wings to more than 200 stores across 50 cities with revenues exceeding 11000 crores in 2012. Big Bazaar was launched targeting the middle class family and emphasizing on cost savings on a range of products available under one roof. A typical Big Bazaar store carries 17000 SKUs. Bharti Walmart They formed a joint venture in 2007 and operate nearly 20 wholesale Cash and Carry stores throughout the country. Walmart are yet to open their first retail store and are currently probing into bribery and lobbying allegations against Walmart India. Auchan French grocer Auchan has signed a franchise agreement with Landmark Group (India)-owned Max Hypermarkets to develop hypermarkets in India The partners plan to open 12 to 15 stores across the country within a year and will rebrand 13 existing Spar hypermarkets to the Auchan banner by the end of the current fiscal year Hypercity Hypercity was setup in 2006 by Raheja Group and has expanded to 12 stores across India selling wide range of products such as Food and Beverage, Electronics, Home Furnishing etc. Carrefour Carrefour has set up two entities in India: Carrefour WC&C India Pvt. Ltd. to run cash and carry business and Carrefour Master Franchise Company Pvt. Ltd for its retail business. However as of now, firm has very few outlets. Walmart and Carrefour both specialize in cost saving shopping for daily needs. Both are cost leaders in their respective geographies. They both have strong distribution systems. In India both will face the same fast growing middle class with rising disposable income. So the supplier market and procurement channels may overlap to a large extent. Tesco Tesco PLC from UK had plans to set up a wholesale cash n carry business in India. Tesco is planning a deal with Tatas group retailing subsidiary, Trent.The deal with Tata, Tesco will provide retail expertise and technical capability to support the development of Trents hypermarket Star Bazaar. Metro With a global turnover of 33.1bn Euro, Metro is present in 30 countries with over 650 stores. Headquarter in Germany, it entered in India in 2003 and opened 5 outlets across Bangalore, Mumbai, Kolkata. Looking for expansion opportunities, Metro had signed a MoU of Rs. 900 cr with Punjab Government to open 6 more centres in Punjab.

Reliance Retail Reliance Retail Limited (RRL), a subsidiary of RIL, was set up to lead Reliance groups foray into organized retail. Since its inception in 2006, RRL has grown rapidly and has catered to millions of customers, thousands of farmers and vendors based on its core growth strategy of backward integration. Backed by Reliance group, one of the most successful corporate groups in India, RRL has made rapid progress towards, building an entire value chain starting from the farmers to the end consumers. Keeping in sync with its multi-format store strategy, RRL added new formats to its spectrum.RRL operates in formats such as Reliance Fresh (neighbourhood store),Reliance Mart(all under one roof supermarket) & Reliance Super(mini-mart),which offer a range of products for daily household usage Aditya Birla Group ABG launched its first retail store under the brand name More in Pune. More stores offer a wide range of product categories including fruits and vegetables, staples, personal care, home care, household general merchandise, poultry, dairy products, a pharmacy and a well stocked bakery. Unorganized Retail Hypermarket A minimum of 2000 sq.ft area is required. With soaring real estate prices, it can be detrimental to profit making models Benefits of economies of scale. Capable of eliminating wholesalers from the chain and can provide benefits of saved margins Operational costs are much higher Offer more variety to customer. It is likely to receive the newly launched products earlier than kirana stores Kirana Stores Owned and operated on a small scale, typically on a 500 sq. ft area. These places are easily available within residential localities Doesnt benefit from economies of scale

Operated by owners themselves, low operational costs Target a much smaller market, is likely to be in immediate locality and thus have a better understanding of customer preferences .can be more responsive in terms of their exclusive demands More familiarity with customer. Huge benefit specially in FMCG products

Caters to more number of customers and hence not so familiar

USP Positioning

In price oriented positioning, Big Bazaar is an established market leader focussed primarily on Family Shopping making it difficult for new entrants to compete in that segment. Service oriented positioning is the ideal choice offering high degree of customer satisfaction albeit at slightly higher prices which would also help in customer retention. Emphasis must be laid upon providing an experience to the customers which would always draw them back to the store. The various elements include well-trained staff, clean interiors, prominent sign boards, well-spaced alleys, wide assortment of goods, replace and return policies, quick billing services, attractive loyalty schemes / reward programs etc. Concept of Happy Hours and student discounts can be explored to attract more footfalls. Target Audience

Figure: Young and Rubicam Consumer Segmentation

Higher and Middle class family Aspirer Community Status Conscious Large and growing young working population Working women and home makers who are primarily decision makers

Shopper versus Customer Normally, it is observed that during weekdays when adult members of a household are busy in offices, they send shoppers such as house-maids, drivers etc. to shop on their behalf. However, on weekends, it is noted that most of the footfalls are of customers themselves and not of shoppers. Thus, t is imperative to tailor offerings based on the type of person who enters the store. An example includes strategy of Big Bazaar and Surf Excel who offer a free bucket on weekdays while give a heavy price discount on weekends thereby knowing whom to focus upon at different intervals of time. Challenges Cost of real estate: These stores typically operate out of better buildings along the bigger roads, unlike kirana stores that operate out of older buildings on small streets. Cost of people: Constant churning of store staff due to difficult timings, long hours, weekend work. And new hires will always come at higher costs. Sometimes untrained people are in charge on the front desk, where they have no clue about the hundreds of FMCG goods which people ask questions about. The kirana stores are run typically by family folk who do not mind the difficulties. Proportion of low margin products: 60-70% of the items in a store are packaged, branded items that have to be sold at MRP (or below that during

skills

promotions), and where the margins are low. Most of the remaining 30-40 per cent consists of fruits, vegetables and dry groceries (grains, dals, etc). Higher Margin Product Sales: Challenge would be to convert the loyal customers and increase their share of wallet by driving the sales of higher margin categories such as Apparels & Footwear (A&F), Digital Communication & Information Technology (CDIT), which would be a tough task because of presence of exclusive outlets in the market for these categories which offer more variety and better offers. Policies: There are number of taxes applicable on goods as goods are manufactured and distributed around the country. Some of them are excise duty, value added tax, service tax, sales tax-central and state, entry tax, turnover tax, octroi etc. This not only increases the costs but also makes system inefficient on account of double taxation and creation of hurdle in movement of goods within the country. Goods and Service Tax (GST) is now being discussed to address above issues. Infrastructure: a) Underdeveloped Supply Chain: This is the key bottle neck in the growth of retail in India. Inefficient and unreliable transport system in terms of roads, rails and ports. Supply chain management systems have very low penetration particularly in rural India. Also missing is investment in cold storage warehousing. It is estimated that lack of storage facilities results in loss of Rs 50000 Crs. of farm produce every year. b) Utilities: Inadequate supply of electricity, clean water and natural gas in urban areas is a bottle neck for large organized retail in India. Retailers have to pay substantial amounts for these facilities with no reliability resulting in huge amount of cost for customers. Power shortage all over India is responsible for lack of cold storage and automation. c) Information Technology Infrastructure : Although there has been considerable improvement in tele-density in India, yet the growth of IT related infrastructure mainly mobile communication and internet has been restricted to urban areas only. This has severely handicapped the setting up of organized retail on rural belt. d) Supply Base Hurdle: A fragmented supply base prevents economies of scale. Vendors are small players taking advantage of SSI subsidies and are highly unreliable in terms of timely deliveries. Dealing with large number of them increase transaction costs for the retailer. Supply side uncertainty cause higher inventory demanding more space and cost. All this adds to the cost of operations for the retailers e) Inadequate Human Resources: While retail industry is now turning out to be one of the largest employers in India, but lack of trained manpower is bottle neck specially in middle management levels. There is no university-industry partnership for imparting in these disciplines.

PLACE Central location must be chosen which provides easier accessibility for general public. Parking is of prime importance and ample space must be provided to accommodate vehicles. Most of the big retailers have space to accommodate 10002000 vehicles. Proximity of location to places like coaching institutes, offices, temples, schools etc would be an added advantage to bring in customers who were visiting that are for a different purpose. There should be enough walking space in between product racks and products in all sizes should be available on display unlike retailers such as Big Bazaar which normally stock only larger sizes of products. Lighting and air-Conditioning are considered a pre-requisite for any modern retailer. As per a survey conducted by AT Kearney in 2006, most Indian consumers do not prefer to travel more than 30 minutes to shop for goods and hence place assumes great significance in marketing mix. Tier 2 cities such as Surat, Nagpur, Mysore represent the cities moving toward urbanization and must be targeted by firms to establish presence and gain acceptance. PRODUCT Product variety is a major factor in influencing customer response. The shop should not limit itself to brands of few selective companies only. The range of items available should suit the local requirements. There should be a optimum balance between branded goods and local products. The shelf space should be efficiently utilized to give maximum exposure of the product to the public. The store should include beauty products in its display because women are chief buyers in departmental stores. The products should be clearly categorized as high-end or lowend. The customers should be assured of quality of non-branded items like loose packs of wheat flour, pulses etc. Diversification of product type is recommended. PRICE Value Pricing Promotional Pricing Differentiated Pricing PROMOTION Word of Mouth promotion provides huge potential for creating awareness in market. Thus, it is imperative to provide customers a level of service which would make them vouch for the store and serve as store ambassadors. Below the Line: Gift Coupons, Discounts, Gifts, Cash Back, Reward Points Above the Line: Television, Radio, Print, Internet The store should use in-store advertising to make best use of large floor space by putting up discount boards inside the store above a particular product as well as just outside the shop.

Growth Plan and Objectives a) Increase number of retail outlets by establishing presence in Tier 1 and Tier 2 cities with primary focus on relatively untapped market of Tier 2 cities. Launch at least 5 new stores in FY 2013-14 after assessing local market conditions and monitor their performance periodically. The success in retail lies in maintaining profitability by following low cost strategy. A prerequisite for the same is achieving volumes by taking advantage of economies of scale. By increasing their size they will be in a better position to manage power of suppliers who are big FMCG companies like HUL, P&G, ITC, NIKE, etc. With large size they will be able to bargain better. Large size also would require investment in fixed assets both in terms of stores and larger supply chain. New entrants would not be able to match their size and this would create huge entry barriers for them b) More Brands/ More SKU: Another key competitive strategy for success is to increase number of SKUs held by a retail store. The company should not only focus on more number of SKUs, but also on more brands for particular SKU so that they are able to provide enough choices for customers c) Diversifying -Backward Integration: Diversifying into related fields is a strategic bet to strengthen position in the industry. Success in retail is largely dependent on success in managing the supply chain. Warehousing and cold storage are integral elements which ensure smooth transfer of goods across supply chain. These require huge investments but would lend a competitive advantage over rivals in market and create entry barriers. d) Human Resource: Lack of skilled manpower is a challenge faced by retail industry which hampers its growth. Quality manpower is a scarce and critical resource especially of great significance to service industry which is driven by workforce. The firm should invest heavily in training and imparting skills to its people. They should forge partnerships with leading management institutes in India and World for retail management and training its manpower thereby gaining unique competitive advantage.