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PGDM 2012-14 Term - V

END-TERM EXAMINATION

Marketing Elective: Retail Management

Time: 2 hours Date: 19 -12 - 2013

Mode: Closed Book

nstitute of

anagement Technology

Mf Nagpu r

Max Marks: 40

Weightage: 40%

Part A (10 marks)

Answer anyone of the following

1. Discuss how the Retailers are classified

discuss in detail the various types of store based formats

of retailing with Eg.

OR

2. Discuss the process involved in understanding the retail shopper

the factor influencing the

shopper with ego

Part B (10 Marks)

Caselet

Life after divorce: What next for Bharti and Wal-Mart?

Bharti and Wal-Mart part ways ...

The parting of ways between Walmart and Bharti was long time coming. Apparently, Walmart found

the Indian government's local sourcing requirement not feasible. The discomfiture of the retail giant on

this regard was known from the beginning. As regards the foreign ownership of the new retail

companies, the government, after dragging its foot for a long time, agreed to allow 100% equity

ownership by the foreign investor in multi-brand retail. This cleared the air about overseas investors'

foray into the retail sector. But, the insistence that they procure 40% of their goods from inside India

was too stiff a condition for Walmart to agree with. This continues to make Wal-Martjittery.

The joint venture between Bharti and Walmart had opened 20 cash-and-carry wholesale stores under

the name 'Best Price Modem'. After the two partners separate, these stores will be fully owned by

.Walmart. The new diluted foreign ownership of the government permits this.

It is well-known that Bharti felt its wings clipped in the company of Walmart. It has big ambitions in

retail. To fulfill this, Bharti has' already opened nearly 200 stores under its own umbrella in the name

Easyday'. After the severance of relationship with Wal-Mart, Bharti will give its full energy to the

retail business. Hopefully, it will aggressively open more stores and upgrade the existing ones.

In the last few years, India has seen many foreign -Indian collaborations falter due to opaque and too

restrictive legislations. This reflects poorly on the government's ability to make India an attractive

investment destination for overseas investors. The myriad administrative clearances a joint venture has

to obtain before starting a business is too frustrating for an investor. Rampant corruption, sloth in the

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government machinery and overbearing politicians combine to make starting a new venture in India a

nightmare. To circumvent these restrictions, foreign investors often tie up with local companies. The

latter use their knowledge of India's internal dynamics to clear the many hurdles in the initial stages.

Sadly, after the venture gets going, the foreign collaborator gives short shrift to the Indian partner, and

runs the business in its own way.

Something like this happened in case of the Bharti- Walmart joint venture. Allegations of bribery and

lobbying against Walmart further muddied the waters for the joint venture. Bharti had done all the

initial ground work like market survey, deciding of store loucations and setting up of back-end

operations rather successfully. All these will soon be forgotten as Walmart begins to run its operations

with its own expertise. However, the local-sourcing requirement will continue to strangulate it for the

foreseeable future till the government changes its policy. With the elections approaching, the

environment will remain hazy, to the detriment of companies like Walmart.

The challenge

Bharti has been together with Bentonville-based Walmart for six years now, starting their joint venture

in 2007. At that time, the government allowed up to 100 per cent foreign direct investment, or FOI, in

cash and carry. However, FOI in front-end multi-brand retail was not allowed. Interested parties

lobbied hard to open up the sector fully. Walmart had signed up with Bharti in the hope that they

would extend the partnership to front-end retail once India permitted FDI in multi-brand retail as well.

With this in view, Bharti set up EasyDay retail stores under another company called Bharti Retail. It

was understood that Walmart would buy into the business once government opened up the sector.

In September 2012, the Union Cabinet permitted up to 51 per cent FDI, but Walmart didn't move its

application. Riders in the multi-brand policy, especially mandatory 30 per cent sourcing from small

and medium sector units in India and a minimum 100 million investment into fresh facilities of which

50 per cent would be in backend, have held Walmart back. Also, it has been left to the states to decide

whether they want foreign retail chains or not. Several states, especially those not ruled by the

Congress and its United Progressive Alliance allies, have said they will not let them in because that

will hurt the traditional grocery stores. Most overseas retailers turned cautious. Not just Walmart, even

UK's Tesco and France's Carrefour have decided to wait and watch.

The government has refused to bend any of the conditions linked to the multi-brand FDI policy.

Commerce

Industry Minister Anand Sharma reportedly said that policies are not made for specific

companies. The government should be pragmatic, and not dogmatic, says Arvind Singhal, founder

and chairman of Technopak Advisors, a retail consultancy. But, ahead of so many state polls and

. general elections, the government cannot afford to relax the norms in retail as multi-brand FOI has

already been a politically sensitive matter.

This is not the only challenge Walmart faces in India. Five Bharti Walmart executives were suspended

in an anti-corruption drive. One among them, Pankaj Madan, was later absorbed by Bharti's telecom

business. A few months ago, Walmart's India head, Raj Jain, was replaced by Ramnik Narsey as

interim chief. At Bharti Retail also, Chief Operating Officer Mitch Slape, an old Walmart hand, was

sent back to Walmart US recently. Another headache was Walmart's investment of 100 million in

Cedar, the parent company of Bharti Retail, in March 20 lOin the form of compulsory convertible

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debentures. This investment is being investigated by the Enforcement Directorate for alleged FEMA

(Foreign Exchange Management Act) violations. While the deadline to convert the debentures into 49

per cent equity, after a few extensions, was September 30,2013, Walmart sought another extension of

one year recently.

The Bharti group, on its part, is learnt to be upset that its cash-and-carry business, the Best Price

Modem Wholesale stores, which was expanding till last year hasn't added even a single store this year

and has been stuck at 20 outlets. Bharti Retail's EasyDay, for which Walmart provides backend

support, hasn't grown either this year beyond a little over the 225 stores it had. The cash-and-carry

venture's losses were pegged at Rs 372 crore as of December 2012. Bharti Retail had accumulated

losses ofRs 1,522 crore as of December 2012. It had reported net loss ofRs 538 crore on revenues of

Rs 1,528 crore for the year ended December 2012.

After US-based Walmart and India's Bharti Enterprises decided to call off their retail joint venture.

attention is now turning to what the two companies will do next, given that both have said that they

still plan on being a part of India's retail market.

For Bharti, its front-end retail 'easyday' chain of stores will be the mainstay till

it

forges a new

alliance with a foreign partner, while Wal-mart will focus on the 20 'Best Price' cash-and-carry stores it

runs in India, spread across an area of just over 1 million square feet

Objective:

1) Analyze what according to you are the reasons

not the reasons for the break up

the all-

important question is can Bharti go alone from here?

2) What according to you should be the future Retail strategy for the Bharti in India Wal-Mart

at the global level? Discuss

Part C 10 Marks

1. Write short Note on any four of the following (Any 4)

a) Merchandise Buying

b) Cat-Man (Category management)

c) EDLP -Everyday low pricing

d) Store Layout

e) Private label

f) CPFR in Supply chain management

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Part D 10 Marks

1. Calculate the GMROI for a Christian Bookstore that has annual sales of Rs 20,000 for T-Shirts, Gross

Margin of 45%, and Average Inventory (at cost) ofRs 75,000.

a 14.67%

b. 8%

c 12%

d. 10%

e 29%

All of the following are advantages of High Inventory Turnover except

a. Increased Cost of Goods Sold

b. Increased Sales Volume

c. Increased Money for Market Opportunities

d. Increased Salesperson morale

e. Increased Asset Turnover

3. Employee productivity is

a. The retailer's sales or profit divided by the number of employees.

b. The retailer's sales or profit multiplied by the number of employees.

c. The retailer's sales or profit added by the number of employees.

d. The retailer's sales or profit subtracted by the number of employees.

e. None of the Above

4 A Category captain is a supplier who forms an alliance with a retailer to

a. Help gain customer insight

b. Satisfy consumer needs

c. Improve the performance potential across the entire category

d. Improve the profit potential across the category

e. All of the Above

5. The smallest unit for making inventory control decisions is called

a. SKU

b. Category

c. Assortment

d. Classification

e. Department

6. Open to Buy system

a. Starts after merchandise is purchased using the merchandise budget plan or staple

merchandise system.

b. Keeps track of merchandise flow while they're occurring specifically they record how much

is spent each month, and how much is left to spend.

c. Prevents merchandise from being delivered when it is not need.

d. Helps merchandise to be delivered when it is needed.

e. All of the Above

7. The part of the supply chain process that plans, implements, and controls the efficient, effective flow

and storage of goods, services, and related information from the point of origin to the point of

consumption in order to meet customers' requirements.

a. Data Warehouse

b. Logistics

c I

d. GMROI

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8. The computer-to-computer exchange of business documents from retailer to vendor, and back. In

addition to sales data, purchase orders, invoices, and data about returned merchandise are transmitted

from retailer to vendor

a. Electronic Data Interchange

b. Electronic Data Exchange

c. Exchange Date Interchange

d. Data Electronic Interchange

e. Data Warehouse Exchange

9. The_ for a strategic business plan describes the company, including its history, product, key

personnel, and mission statement.

a. strategic objective

b. assessment

c. executive summary

d. situational analysis

10. In relation to channel management, which of the following actions should the manufacturer take to

effectively introduce a new product to the marketplace?

a. Use appropriate promotional techniques to inform channel members

b. Establish ethics policies

c. Improve communication with distributors or wholesalers

d. Apply for a line of credit

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