ibs assignment

8/13/2019 IBS Assignment

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Introduction

Retailing across the world is a major revenue driver for the world economy. Touted to be the largest

sector in many economies, it is the final step in the distribution process where producers meet the

end consumers. With a revenue of over $15 trillion across the globe, the top 250 firms in retail

contribute over 40% of this. Developed nations have a strong penchant for having high associationto the organized retail, while the majority of retail trade in developing nations is in the unorganized

sector. Asia heads this paradigm but with a slow acceptance to the organized sector that is slowly

catching up.

The largest 10 retailers in the world are Walmart, Carrefour, Tesco, Metro, Kroger, Schwartz,

Walgreen and Home Depot in order. The top 10 retailers constitute 10% of the retail revenue across

the globe. The top 2, Walmart and Carrefour gets over 55% of their revenue from overseas

operations. The top 10 retailers have a larger footprint compared to the total of the organized retail

across the world.

To suit the changing trends, retailing is undergoing transformations and innovations. Many trade

policies and reforms like FDI, competition etc. have made the industry thrive and strive for

betterment. Across the world, retailers be it big or small have made it big time. Big players are trying

to set foot in many of the developing nations knowing that the trends have caught up to them owing

to the media habits that have been developed. The changes that have caused the retailers to take

the world by storm has also posed to develop many challenges.

The industry often employs 10-15% of the total work force in a country apart from those in informal

trade. Retail also constitutes a significant part of the GDP in almost all the countries, where it can be

as high as 8% in US and 14% in India.

The growth of retail is attributed to factors like domestic market saturation and competitor growth.

As the market becomes complacent for the domestic market, big retail brands move to countries in

search of better regions. The competition trends also initiates the growth.

Emerging Markets and Revival post Crisis

Post the economic crisis, the economy started the phase of bounce back in 2010. Even with the

economic conditions tough to thrive growth, retail, too followed suit, but had its share of problems

mainly owing to the limited investor confidence, underemployment and downtrodden European

market conditions. As the developed markets reached a state of saturation and with European

economy going down the drains, emerging nations become the source of major revenue generation.

As the consumers in emerging markets are price conscious, the retailers were unable to increaseprices to increase the top line and bottom line. They are creating measures to bring down the cost to

sustain the profits. They follow innovative steps to do so by close supervision of sales, employees

and supply chain.

The past year has seen the slowdown of markets of US, Brazil, China and India owing to the

aftermath of the European crisis. Also the East Asian economies have been affected by the

slowdown in Chinese markets.

It is of great interest to infer that the axis of global markets is attributed to the escape velocities

attained by the markets in US and China. Structural changes are the need of the hour at the area

where the economies need to gear up for the changes that will in turn affect the whole world.

Global Market Opportunity


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The term Global Market Opportunity refers to the favourable combination of circumstances,

locations and prospects for exporting, importing, investing, sourcing and partnering in a foreign

market. This is summed up as the marketing of products and services, establishing units to

manufacture cost effectively, lost cost raw material procurement etc.

To assess the possibility that a market is having an opportunity to succeed, the firm must keep inmind the following:

1. Country Selection: Select the market where the company can service its products/services.The process is as follows:

a. Identify basic demand (country climate, absolute bans)b. Identify available resources (labour, land, materials, financing)c. Assess national business environment (PESTEL)d.

2. Product Appropriateness: Assess the appropriateness that the product has in the market.The culture, lifestyle, purchasing power etc. has to be kept in consideration. The assessmentof the firms products and services is with regards to:

a. foreign customer characteristics and requirementsb. government mandated regulationsc. expectations of channel intermediariesd. characteristics of competitors offerings

The product is chosen based on whether:

a) it sells well in the domestic marketb) it will cater well to the universal marketc) address a need that is not served in the particular marketd) address a new emergent need abroad

3. Market Analysis: To analyse the market potential of the product/service. The firm needs toidentify:

a. Demographicsb. Competitors market sharesc. Import export volumesd. Distribution networke. Marketing approachesf. Retail sales levelsg.

Income elasticityh. Market size

i. Market growth ratej. Market intensityk. Market consumption capacityl. Commercial infrastructurem. Economic freedomn. Market receptivityo. Country risk

4. Site and Market selection: Select the partners of the business and servicing areas. The majoraspects to be taken into account are:

a. Field trips


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b. Competitor analysisTypes of partnership can be majorly licensing, franchising, collaborative venture, global

sourcing, contract manufacturing and supplier partnerships

5. Estimate Company Sales Potential: This is majorly to forecast a 3-5 year performance of acompany in the target market. The factors that determine sales potential are:

a. Partner Capabilitiesb. Access to distribution channelsc. Intensity of competitive environmentd. Pricinge. Human and financial resourcesf. Brand reputation

Key Industry Trends

The major factors retailers are ensuring are that the industry is getting increasingly concentrated.

1. Firm Concentration: The larger firms are buying out small stores and the retail chains arereplacing the independent shops. This has led to a few companies to control the lions share

of the market in many countries. Countries like Sweden, Finland and many parts of Europe

faces this paradigm.

The lifestyle changes owing to increased media acquaintance has made the approval of the

big stores more feasible among the general public.

2. Global Expansion: Most big players like Walmart, Carrefour and Tesco are in the process ofgrowing outside the home country. US retail giant Walmart has operations in 28 countries,its French counterpart has operations in 33 countries while Tesco runs its business in 13

nations.

Including India, the major part of the south-east Asia has local stores playing a major role to

aid the consumption of the local population. These countries are slowly in the path of

deregulation paving way for the foreign big players to set foot.

3. E-Tailing: This is an extensively growing sector in the retail markets. While exclusive onlinesellers like Amazon lead the game, the brick and mortar stores have transcended the

boundaries and sought to go online as well. Around 5% of the total retail sales in the world is

done online.

Market Attractiveness

The market attractiveness is a factor that is strategically analysed based on certain parameters like

country risk, population size, wealth and modern grocery distribution sales per capita. According to

the AT Kearney Global Retail Development Index, the emerging economies are possessing zealous

potential to grow while the developed economies are facing a path of anaemic growth. Among the

top30 developing economies, Brazil ranks 1stposition owing to its continuous expansion, organic

growth, infrastructure development and high customer and investor confidence. With the 2014

World Cup and 2016 Olympics, the surge to the path of development that government has been

giving to the nation is pretty immense.


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The other 3 in the BRIC are slowing down in terms of the angle of development they are aiming.

Russian economy is in doldrums, India is setting up policies not conducive to foreign investors and

China, once the most sought after nation needs to get going in the direction of a consumer pull

environment.

The big names in the retail industry like Walmart, Abercrombie & Fitch, Starbucks, and Hollister haveentered many markets in 2012-13.

The evolving trend shows that the developmental path is paving way from the BRIC to MINT

(Mexico, Indonesia, Nigeria and Turkey).

Every market has its own challenges that requires certain strategies put in the right measure to

attain success.

References

Wikipedia

AT Kearney Global Retail Development Index

Deloitte Global Powers of Retailing 2013

PWC- 2013 Outlook for Retail and Consumer Products in Asia

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