retail sector- group 7

Retail sector- Group 7

Chapter 1

Kousali Institute of Management Studies


Retail Industry:

The retail industry emerged in the US in the eighteenth century, restricted to general stores.

Specialty stores were developed only in those areas that had a population of above 5,000.

Supermarkets flourished in the US and Canada with the growth of suburbs after World War

II. The modern retail industry is booming across the world.

A marketplace is a location where goods and services are exchanged. The traditional market

square is a city square where traders set up stalls and buyers browse the merchandise. This

kind of market is very old, and countless such markets are still in operation around the whole

world.

In some parts of the world, the retail business is still dominated by small family-run stores,

but this market is increasingly being taken over by large retail chains.

Retail is usually classified by type of products as follows:

Food products

Hard goods ("hardline retailers") - appliances, electronics, furniture etc.

Soft goods - clothing, apparel, and other fabrics.

There are the following types of retailers by marketing strategy:

Department stores : Very large stores offering a huge assortment of "soft" and "hard

goods; often bear a resemblance to a collection of specialty stores. A retailer of such store

carries variety of categories and has broad assortment at average price. They offer

considerable customer service.

Discount stores : Tend to offer a wide array of products and services, but they

compete mainly on price offers extensive assortment of merchandise at affordable and

cut-rate prices. Normally retailers sell less fashion-oriented brands. However the service

is inadequate.


http://en.wikipedia.org/wiki/Marketplace

http://en.wikipedia.org/wiki/Discount_store

http://en.wikipedia.org/wiki/Department_store

http://en.wikipedia.org/wiki/Retail_chains

http://en.wikipedia.org/wiki/City_square

http://en.wikipedia.org/wiki/Market_square

http://en.wikipedia.org/wiki/Market_square


General merchandise store : A hybrid between a department store and discount

store.

Supermarkets : Sell mostly food products.

Warehouse stores : Warehouses that offer low-cost, often high-quantity goods piled

on pallets or steel shelves; warehouse clubs charge a membership fee.

Variety stores or "dollar stores": These offer extremely low-cost goods, with

limited selection.

Demographic: Retailers that aim at one particular segment (e.g., high-end retailers

focusing on wealthy individuals).

Mom-And-Pop or Kirana Stores: It is a retail outlet that is owned and operated by

individuals. The range of products are very selective and few in numbers. These stores are

seen in local community often are family-run businesses. The square feet area of the store

depends on the store holder.

Specialty Stores: A typical specialty store gives attention to a particular category and

provides high level of service to the customers. A pet store that specializes in selling dog

food would be regarded as a specialty store. However, branded stores also come under

this format. For example if a customer visits a Reebok or Gap store then they find just

Reebok and Gap products in the respective stores.

Convenience Stores: It is essentially found in residential areas. They provide limited

amount of merchandise at more than average prices with a speedy checkout. This store is

ideal for emergency and immediate purchases.

Hypermarkets: It provides variety and huge volumes of exclusive merchandise at

low margins. The operating cost is comparatively less than other retail formats. A classic

example is the Metro™ in Bangalore.

Supermarkets: It is a self service store consisting mainly of grocery and limited

products on non food items. They may adopt a Hi-Lo or an EDLP strategy for pricing.


http://en.wikipedia.org/wiki/Variety_store

http://en.wikipedia.org/wiki/Warehouse_clubs

http://en.wikipedia.org/wiki/Warehouse_store

http://en.wikipedia.org/wiki/Supermarket

http://en.wikipedia.org/wiki/General_merchandise_store


The supermarkets can be anywhere between 20,000-40,000 square feet. Example:

SPAR™ supermarket.

Malls: It has a range of retail shops at a single outlet. They endow with products, food

and entertainment under a roof. Example: Sigma mall and Garuda mall in Bangalore,

Express Avenue in Chennai.

Category Killers or Category Specialist: By supplying wide assortment in a single

category for lower prices a retailer can "kill" that category for other retailers. For few

categories, such as electronics, the products are displayed at the centre of the store and

sales person will be available to address customer queries and give suggestions when

required. Other retail format stores are forced to reduce the prices if a category specialist

retail store is present in the vicinity. For example: Pai Electronics™ store in Bangalore,

Tata Croma.

E-tailers: The customer can shop and order through internet and the merchandise are

dropped at the customer's doorstep. Here the retailers use drop shipping technique. They

accept the payment for the product but the customer receives the product directly from the

manufacturer or a wholesaler. This format is ideal for customers who do not want to

travel to retail stores and are interested in home shopping. However it is important for the

customer to be wary about defective products and non secure credit card transaction.

Example: Amazon and Ebay.

Vending Machines: This is an automated piece of equipment wherein customers can

drop in the money in machine and acquire the products. For example: Soft drinks

vending at Bangalore Airport.

Some stores take a no frills approach, while others are "mid-range" or "high end", depending

on what income level they target.

Other types of retail store include:


http://en.wikipedia.org/wiki/No_frills


Automated Retail stores: These are self service, robotic kiosks located in airports,

malls and grocery stores. The stores accept credit cards and are usually open 24/7.

Examples include ZoomShops andRedbox.

Big-box stores : These are the larger department, discount, general merchandise, and

warehouse stores.

Convenience store : A small store often with extended hours, stocking everyday or

roadside items.

General store : A store which sells most goods needed, typically in a rural area.

Company Background – Pantaloon Retail India

Founded in 1987, by Mr. Kishore Biyani, Pantaloon Retail in India’s leading Retail

Company. It is the flagship company of the future group. Starting its 1st outlet in 1997,

Pantaloons in Kolkata, it currently has over 4 mm sq. ft. of area under business. The company

operates under multiple formats – hypermarket, apparel stores, specialty stores under various

brands including Big Bazaar, Pantaloon, Food Bazaar, Collection, E Zone, etc. The company

also operates an online portal, futurebazaar.com. Pantaloon Retail (India) Limited is today

recognized as one of the pioneers in the business of organized retailing in the country.

Pantaloon Retail is one of the leading retail houses in India. As of November 15, 2006,

Group/Company operated 46 retail stores, including three stores which are operated by

Pantaloon franchises. These 46 stores are spread over about 1,113,000 square feet and are

located in 17 states across India. In efforts to strengthen Pantaloon supply chain,

Group/Company has set up seven regional distribution centers and an apparel manufacturing

plant. The company is headquartered in Mumbai with zonal offices at Kolkata, Bangalore,

and Gurgaon (Delhi). It has 4 kinds of stores; Pantaloon stores, Central Malls, ALL Stores,

Fashion Stations and Mela Store. In the Value segment, Group/Company cater to the masses


http://en.wikipedia.org/wiki/General_store

http://en.wikipedia.org/wiki/Convenience_store

http://en.wikipedia.org/wiki/Big-box_store

http://en.wikipedia.org/wiki/Redbox

http://en.wikipedia.org/wiki/ZoomShops

http://en.wikipedia.org/wiki/Automated_Retail


through Pantaloon Big Bazaar, Food Bazaar outlets and Gold Bazaar Stores with over 6.5

lakh sq. ft. retail space across Kolkata, Mumbai, Thane, Pune, Hyderabad, Bangalore,

Nagpur, Ahmedabad, Kanpur, Chennai and Gurgaon (Delhi). Subsequently, with evolution of

retail industry in India and change in consumer aspirations, Group/Company diversified

Pantaloon portfolio of offerings to include other retail goods. Currently, Group/Company sell

readymade apparels and a wide range of household merchandise and other consumer goods.

It began its retailing operations in India way back in 1987. Currently, it manufactures and

sells ready-made garments through its own retail outlets and two discounting stores.

Group follows the concept of value retail in India. In other words, Pantaloon business

approach is to sell quality goods at reasonable prices by either manufacturing ourselves or

directly procuring from manufacturers (primarily from small and medium size vendors and

manufacturer). Group/Company endeavor to facilitate one-stop-shop convenience for

Pantaloon customers and to cater to the needs of the entire family. Group/Company believes

this concept as helped us grow to Pantaloon current size within a short time frame of four

years.

Company background –Wal-mart:

Walmart was founded in 1962, with the opening of the first Walmart discount store in

Rogers, Ark. The company incorporated as Wal-Mart Stores, Inc., on Oct. 31, 1969. The

company's shares began trading on OTC markets in 1970 and were listed on the New York

Stock Exchange two years later.

The company grew to 276 stores in 11 states by the end of the decade. In 1983, the company

opened its first Sam’s Club membership warehouse and in 1988 opened the first supercenter

-- now the company’s dominant format -- featuring a complete grocery in addition to general

merchandise. Wal-mart became an international company in 1991 when it opened its first

Sam's Club near Mexico City.



Wal-Mart is the world’s largest corporation (Fortune, 2003). Wal-Mart is also the largest

private employer in the United States of America. Wal-Mart is U.S.A.’s biggest seller of

DVDs, diamonds, groceries, toys, guns, CDs, apparel, dog food, detergent, jewellery,

sporting goods, videogames, socks, bedding, and largest film developer, optician, private

truck fleet operator, energy consumer, and real estate developer (Fortune, 2003).

Americans save about US$10 Billion by shopping at Wal-Mart. Wal-Mart’s revenue

accounted for 15% of the entire U.S. retail market in 2002, excluding automobiles. Sales

globally have been affected over the recent weeks. International sales increased 14.3% to

$10.3 billion.

Chapter 2Kousali Institute of Management Studies


1. Block Diagram:

Road Ahead



According to industry experts, the next phase of growth is expected to come from rural

markets.

According to a market research report published in June 2008 by RNCOS titled, 'Booming

Retail Sector in India', organised retail market in India is expected to reach US$ 50 billion by

2011. The key findings of the report are:

Number of shopping malls is expected to increase at a CAGR of more than 18.9 per

cent from 2007 to 2015

Rural market is projected to dominate the retail industry landscape in India by 2012

with total market share of above 50 per cent

Driven by the expanding retail market, the third party logistics market is forecasted to

reach US$ 20 billion by 2011

Apparel, along with food and grocery, will lead organised retailing in India

Exchange rate used: 1 USD = 45.81 INR (as on June 2010)



Chapter 3

Competitive structure:

Indian Retail Scenario

The retail scenario is one of the fastest growing industries in India over the last couple of

years. India retail sector comprises of organized retail and unorganized retail sector.

Traditionally the retail market in India was largely unorganized; however with changing

consumer preferences, organized retail is gradually becoming popular. Unorganized retailing

consists of small and medium grocery store, medicine stores, subzi mandi, kirana stores, paan

shops etc. More than 90% of retailing in India fall into the unorganized sector, the organized

sector is largely concentrated in big cities. Organized retail in India is expected to grow 25-30

per cent yearly and is expected to increase from Rs35, 000 crore in 2004-05 to Rs109, 000

crore ($24 billion) by 2010.



Indian organized retail industry is one of the sunrise sectors with huge growth potential. Total

retail market in India currently stands at USD 350 billion in 2007-08 and estimated to attain

USD 573 billion by 2012-13. Organised retail industry accounts for only 5.5% of total retail

industry and expected to reach 10% by 2012.

Retail and recession:

The global economic slump has had its impact on the India retail sector. One of the earliest

players in the Indian retail scenario Subhiksha's operations came to a near standstill and

required liquidity injection. Vishal Retail secured corporate debt restructuring (CDR) plan

from its lenders while other players like the Reliance Retail run by Mukesh Ambani and

Pantaloon led Kishore Biyani by went slow on expansion plans and even scaled down

operations. However, during the last quarter a bit of confidence was restored as the economy

showed signs of growth.

Quick facts on Indian Retail sector:

Indian Retail sector is the fifth largest global retail destination.

India retail market is dominated by the unorganized sector.

The top five companies in retail hold a combined market share of less than 2%.

The Indian retail market has been ranked by AT Kearney's eighth annual Global

Retail Development Index (GRDI), in 2009 as the most attractive emerging market for

investment in the retail sector.

Currently the share of retail trade in India's GDP is around 12 per cent, and is estimated

to reach 22 per cent by 2010.



According to Government of India estimate the retail sector is likely to grow to a

value of Rs. 2,00,000 crore (US$45 billion) and could yield 10 to 15 million retail jobs

in the coming five years; currently this industry employs 8% of the working

population.

India continues to be among the most attractive countries for global retailers.

According to the Department of Industrial Policy and Promotion, approximately US$

47.43 million was the amount of Foreign Direct Investment (FDI) inflow as on

September 2009, in single-brand retail trading.

More than 80% of the retail sector in the country is concentrated in the large cities. A

study reveals that among the more than 20 locations, for organized retail in India,

Mumbai was found to be the most preferred location followed closely by Bengaluru in

the second position.

Key Players in Indian Retail Sector:

AV Birla Group has a strong presence in apparel retail and owns renowned

brands like Allen Solly, Louis Phillipe, Trouser Town, Van Heusen and Peter

England. The company has investment plans to the tune of Rs 8000 – 9000

crores till 2010.

Trent is a subsidiary of the Tata group; it operates lifestyle retail chain, book

and music retail chain, consumer electronic chain etc. Westside, the lifestyle

retail chain registered a turnover of Rs 3.58 mn in 2006

Landmark Group invested Rs. 300 crores to expand Max chain, and Rs 100

crores on Citymax 3 star hotel chain. Lifestyle International is their

international brand business.

K Raheja Corp Group has a turnover of Rs 6.75 billion which is expected to

cross US$100 million mark by 2010. Segments include books, music and gifts,

apparel, entertainment etc.



Reliance has more than 300 Reliance Fresh stores; they have multiple formats

and their sale is expected to be Rs 90,000 crores ($20 billion) by 2009-10.

Pantaloon Retail has 450 stores across the country and revenue of over Rs. 20 billion

and is expected to touch 30 million by 2010. Segments include Food & grocery, e-

tailing, home solutions, consumer electronics, entertainment, shoes, books, music &

gifts, health & beauty care services.

Future Trends of Indian Retail:

Lifestyle International, a division of Landmark Group, plans to have more than 50

stores across India by 2012–13.

Shoppers Stop has plans to invest Rs250 crore to open 15 new supermarkets in the

coming three years.

Pantaloon Retail India (PRIL) plans to invest US$ 77.88 million this fiscal to add

up to existing 2.4 million sq ft retail space. PRIL intends to set up 155 Big Bazaar

stores by 2014, raising its total network to 275 stores.

Australia's Retail Food Group is planning to enter the Indian market in 2010. It has

plans to clock US$ 87 million revenue in five years. In 20 years they expect the India

operations to be larger than the Australia operations.

Competitive advantages of Indian retail sector:

The key factors that drive growth in retail industry are young demographic profile,

increasing consumer aspirations, growing middle class incomes and improving demand

from rural markets. After downturn of 18 months, retail industry is witnessing improving

signs.

With key parameters like customers entry, same stores sales, average transaction per bill

improving at faster pace, the industry expects the recovery to be fast going forward. Most of

the front line players who have freezed their expansion plans have renewed it in the last

couple of months.



Industry experts predict that the next phase of growth in the retail sector will emerge from

the rural markets. By 2012 the rural retail market is projected to have a total of more than

50 per cent market share. The total number of shopping malls is expected to expand at a

compound annual growth rate of over 18.9 per cent by 2015. According to market

research report by RNCOS the Indian organized retail market is estimated to reach US$ 50

billion by 2011.

Indian retail and Global retail:

China and India are predicted to account for almost 91 per cent of regional retail sales in

2010 and by 2014 their share of the regional market is expected to be more than 92 per cent.

Growth in regional retail sales for 2010-2014 is estimated by BMI at 72.2 per cent, an annual

average of 14 per cent. India should experience the most rapid rate of growth in the region,

followed by China. For India, its forecast market share of 13.9 per cent in 2010 is expected to

increase to 14.3 per cent by 2014.

Moreover, for the 4th time in five years, India has been ranked as the most attractive nation

for retail investment among 30 emerging markets by the US-based global management

consulting firm, A T Kearney in its 8th annual Global Retail Development Index (GRDI)

2009. India remains among the leaders in the 2010 GRDI and presents major retail

opportunities. India's retail market is expected to be worth about US$ 410 billion, with 5 per

cent of sales through organised retail, meaning that the opportunity in India remains

immense.

Retail should continue to grow rapidly—up to US$ 535 billion in 2013, with 10 per cent

coming from organised retail, reflecting a fast-growing middle class, demanding higher

quality shopping environments and stronger brands, the report added.

Bharti Retail strengthened its position in northern India by opening 59 stores, Bharti Wal-

Mart is expected to open 10 to 15 wholesale locations in the next three years, and Marks &

Spencer is considering plans to open additional outlets in the next few years. India continues

to be among the most attractive countries for global retailers.



Foreign direct investment (FDI) inflows between April 2000 and April 2010, in single-brand

retail trading, stood at US$ 194.69 million, according to the Department of Industrial Policy

and Promotion (DIPP).

Leading watchmaker Titan Industries Limited plans to invest about US$ 21.83 million

for opening 50 premium watch outlets Helios in next five years to attain a sales target

of US$ 87.31 million.

British high street retailer, Marks and Spencer (M&S) plans to significantly increase

its retail presence in India, targetting 50 stores in the next three years. M&S currently

operates 17 stores in India through a joint venture (JV) with Reliance Retail.

Chinese retail major, Yishion has entered the Indian market and plans to have at least

125 points of sales, including exclusive stores and multi-brand outlets, across India by

2012. It will open its first exclusive store in New Delhi by September 2010.

Spain's Inditex, Europe's largest clothing retailer opened the first store of its flagship

Zara brand in India in June 2010. It further plans to open a total of five Zara outlets in

India.

Bharti Retail, owner of Easy Day store—supermarkets and hypermarts—plans to

invest about US$ 2.5 billion over the next five years to add about 10 million sq ft of

retail space in the country by then, according to a company spokesperson.

Raymond Weil plans to invest US$ 883,665 in India during 2010, according to

Olivier Bernheim, President and CEO, Raymond Weil

Competitive Strengths of Pantaloon and Wal-mart:

Pantaloon Wal-mart



Strong understanding of the ‘value

retail’ segment

Strong and efficient supply chain

management

Strong and efficient logistics and

distribution network

Group/Company is in a position to

leverage Pantaloon geographical

spread

Group/Company possess the ability to

identify new locations to promote

Pantaloon business plans

Group/Company derive substantial

revenues from Pantaloon private

labels

Group/Company effectively use

information technology systems

Group/Company have a highly

experienced and competent

management team

Supply chain management

Communication strategy with

suppliers and associates

Relationship strategy with suppliers

and associates

People strategy

Cost strategy

Location and market strategy

Ability and inspiration from Sam

Walton

Customer service strategy

Knowledge management

Innovation in I.T. and warehousing

and inventory management

Major Milestones of Pantaloon:



1987: Company incorporated as Manz Wear Private Limited. Launch of Pantaloons

trouser, India’s first formal trouser brand.

1991: Launch of BARE, the Indian jeans brand.

1992: Initial public offer (IPO) was made in the month of May.

1994: The Pantaloon Shoppe – exclusive menswear store in franchisee format

launched across the nation. The company starts the distribution of branded garments

through multi brand retail outlets across the nation.

1995: John Miller – Formal shirt brand launched.

1997: Pantaloons – India’s family store launched in Kolkata.

2001: Big Bazaar, ‘Is se sasta aur accha kahi nahin’ - India’s first hypermarket chain

launched.

2002: Food Bazaar, the supermarket chain is launched.

2004: Central – ‘Shop, Eat, Celebrate In The Heart Of Our City’ - India’s first

seamless mall is launched in Bangalore.

2005: Fashion Station - the popular fashion chain is launched

ALL – ‘a little larger’ - exclusive stores for plus-size individuals is launched

2006: Future Capital Holdings, the company’s financial arm launches real estate

funds Kshitij and Horizon and private equity fund Indivision. Plans forays into

insurance and consumer credit.

Wal-mart and India

India is a ripe and appealing market for Wal-Mart with its growing middle class of

250 million and an economic growth rate of nearly 9%

In November 2006, Wal-Mart beat out Tesco for a joint venture opportunity with

Indian mobile services leader, Bharti.

The company’s priority seemed to be an early entry.

Bharti would manage the front-end of the business, while Wal-Mart would take care

of the supply chain, logistics and other back-end operations.



The proposed Bharti venture seeks to serve the retail market by supplying it with

goods directly from producers such as agriculturists, craftsmen and artisans.

Global business – competitiveness:

This refers to the ability of a country (or firm) to provide goods and services which

provide better value than their overseas rivals.

This is competitive advantage but on a international scale.

Determinants of international competitiveness:

Price relative to competitors

Productivity - output per worker

Unit costs

State of technology

Investment in capital equipment

Quality

Reliability

Lead time

Exchange rate

Increasing competitiveness:

Rationalization output to get rid of high cost plants

Relocating to places where labor costs are lower

Process innovation

Product innovation



Incorporating the latest technology into investment

Sourcing from abroad where appropriate

Seeking out new market opportunities

Improving relationships with suppliers and customer

Wal-mart and International expansion:

Wal-Mart was enticed into international markets by a conviction that it could achieve

competitive advantage abroad by applying its combination of technology, logistics and

human resources with its tremendous buying power with multinational consumer goods

suppliers. Wal-Mart’s strategy has been to acquire companies and convert them into the Wal-

Mart way stores European retailers like Carrefour and Ahold, have more than 20 years of

international experience than Wal-Mart.

Multinational retailer’s entry is usually by mergers & acquisitions, which is what Wal-Mart

did in its initial entry into Mexico, with a joint venture with CIFRA, the most powerful

retailer in Mexico. This results in a faster and more reliable learning knowledge base. CIFRA

enables Wal-Mart’s entry with stronger networks in the trade especially with vendors and

understanding the local needs and culture while Wal-Mart brings in its competency like

logistics and service.



Chapter 4

BCG Matrix



Wal-mart:

Walmart’s total share in the market is of USD 258 billion and of Tesco is 236.62 billion (i.e

146.3 billion pounds). Their each contribution in SBUs is al shown in the table. Regarding

the growth there was only 2% growth in grocery whereas the growth was in decline or it was

stable. Therefore for no growth, growth rate is 0%.

Sl. No AttributesWal-mart

(USD in bn)

Tesco

(USD in

bn)

Growth

rateRMS

Radius (r of

the circle)

1Grocery

131.58 70.99 2% 1.85 0.47

2Entertainment and

electronics33.54 118.31 0 0.283 0.34

3 Home and usages 25.8 35.493 0 0.73 0.31

4

Sports goods,

automobile

accessories and

hardware

67.08 12.52 -12 5.36 0.4

RMS value = Revenue of wal-mart in the sector/ revenue of Tesco(competitor ) in the

sector



Radius calculation:

Sqrt(revenue of one sector/ total revenue of the company)= v1

Pie *r2 = v1

Therefore calculate r Thus we get the BCG matrix as follows:

12 Star Question mark

0 Cash cow Dog

-12

10 1 0

Scale: X axis= Total GDP

Y axis: RMS

Thus from the graph plotted above grocery is in star region and is having the highest

is leading the company, whereas the other contribution is very less.


1

3 2

4


PORTERS FIVE FORCE MODEL:

1 Threat of New Entrants

Majority of large chains have built their power due to operating efficiency, one-stop shopping

and major marketing-mix expenditure. This powerful force had a great impact on the small

traditional shops, such as butchers, bakers and etc. Hence, nowadays it possesses a strong

barrier for new companies who desire to enter the grocery market. For instance, it becomes

rather difficult for new entrants to raise sufficient capital because of large fixed costs and

highly developed supply chains. This is also evident in huge investments done by large

chains in advanced technology for checkouts and stock control systems that impact new

entrants and the existing ones. Other barriers include economies of scale and differentiation

(in the provision of products or services with a higher perceived value than the competition)

seen in aggressive operational tactics in product development, promotional activity and better

distribution. Some of the other factors are:

Product differentiation

Pantaloon strategic intent is to build private labels. However, in categories such as

commodities, it is easier to build private labels. At present, nearly 15 percent of Pantaloon



hypermarket brands comprise private labels. Today Tasty Treat, the ready-to-eat private label

of Food Bazaar, is leading with a 16 per cent share among the rest of the snack brands. Today

Pantaloon Retail has 80 products comprising 350 SKUs with five private labels. Since

PepsiCo’s rejection, it has promptly approached local manufacturers such as Prakash Snacks

in Indore and Pogo Chips in Kolkata to manufacture its snacks brands. PRIL plans to grow in

the home solutions business over the next few years.

Walmart helps consumers in accessing their brand of their choice. This is done by demand

forecasting by the company to know the needs of the customers and such products are

brought. They create a difference by Everyday Low Pricing strategy.

Capital Requirements

Investment Estimation: 2006-2011

Revenue(2006) Rs million 530,125

Revenue in 2011 Rs million 1,796,758

Increase in revenue Rs million 1,266,623

Revenue per sq.ft. Rs/sq.ft. 10,000

Floor Space required Million sq.ft. 127

Furnishing Rate Rs/sq.ft. 1500

Cost of furnishing property Rs million 189,993

Working capital required Rs million 25,332

Working capital(% of revenue) percent 2

Total capital invested excluding real estate Rs million 215,326

Loss funding Rs million 44,902

Investment required till 2011 Rs million 260,228

Investment per year Rs million 52,046

The initial investment of around $100m in the deal could scale to $1.4b in India by Wal-Mart

for its establishment.

For pantaloon it required $650 million for its establishment in India.



Access to Distribution Channels

Group/Company have Pantaloon own fleet of 200 trucks, which helps us to transport

and deliver Pantaloon products in a cost and time efficient manner. Group/Company believe

that Pantaloon distribution and logistics set up is well networked and allows us to fulfill the

store requisition within short time period of generation and receipt of order, which has helped

us to optimize in-store availability of merchandise and minimize transportation costs.

Pantaloon strong distribution and logistics network has enabled us to dispense with the

requirement of a dedicated storage space at every store, which is an industry practice, and

instead undertake periodical replenishment of depleted stock.

Wal-Mart maintains its own fleet of 2000 plus trucks which have scheduled deliveries

between warehouses to stores minimizing delays and over reliance from suppliers.

Government Policy

The retail sector in India is expecting that in this Budget 2010 it is seeking industry status,

which can reduce the cost of capital and to allow FDI in retail that can increase investments

and global competitiveness. Indian organized retail industry is one of the sunrise sectors with

huge growth potential. Total retail market in India currently stands at USD 350 billion in

2007-08 and estimated to attain USD 573 billion by 2012-13. Organized retail industry

accounts for only 5.5% of total retail industry and expected to reach 10% by 2012.

Policy Clarifications to allow investments by financial investors: Current FDI policy

allows 100% FDI in Cash and-carry wholesale formats and 51% FDI is allowed in single

brand retailing. However, the regulations have been interpreted as guiding to a blanket ban on

foreign investments in the sector. Thus, even investments by financial investors like FIIs and

PE funds are prohibited, limiting the flow of capital required for the growth of the sector.

Create a Single Window clearance: To strengthen retail industry in India, the government

can provide a single window clearance system. The single window clearance will further

streamline license processes associated with the establishment and management of retail

stores. Customs Duty and other entry taxes: A reduction in the customs duties relating



to consumer items would greatly channelize funds to boost the economy.

Served from India Scheme: "Served from India Scheme" should be made available for

Retailers. Any sales using foreign currency/international credit cards must be counted against

this and duty credit entitlements must be credited for retailers. This can be used for import of

items. Income tax depreciation rate on Furniture, Fixture and Building improvement etc

should be increased to 25%.

2. Bargaining Power of Suppliers

This force represents the power of suppliers that can be influenced by major chains and that

fear of losing their business to the large supermarkets. Therefore, this consolidates further

leading positions of stores in negotiating better promotional prices from suppliers that small

individual chains are unable to match. Suppliers are also threatened by the growing ability of

large retailers to source their products from abroad at cheaper deals. The relationship with

sellers can have similar effects in constraining the strategic freedom of the company and in

influencing its margins. The forces of competitive rivalry have reduced the profit margins for

supermarket chains and suppliers. Some of the other factors are:

Supplier industry is dominated by a few firms

The stores purchases large good required as per the customer requirement. Thus the

suppliers also get into contract of buying the required products for the main supplier and

supply it to the retail outlet. Some of the products is produced and sold by the retail outlet as

pantaloon does for the outlets by having food bazaar and is in contract with it has promptly

approached local manufacturers such as Prakash Snacks in Indore and Pogo Chips in Kolkata

to manufacture its snacks brands. Thus suppliers industry are dominated to few firms.



Suppliers’ products are differentiated

The Future group has recently acquired a stake in Aadhar which operates rural

retailing formats. It purchases crops from farmers (especially wheat and paddy) and provides

them with feasible solutions to operational problems. It also provides techno-commercial

suggestions to improve their output. The private label product proposition: Quality and price,

primarily, relative to branded alternatives. Supplier innovation if often what allows them to

stay ahead of retailer private label. Innovative suppliers can come out with new products that

retailers haven’t necessarily thought of. This may be one reason why the UK has greater PL

penetration than the US – UK retail is more consolidated than US retail. Right now, India

retail is highly fragmented, so there’s a long way to go.

Thus difference in supply of products will lead to difference in revenue of the

organization.

Suppliers’ products have high switching costs

From the recent analysis done by Wal-Mart it is seen that it requires $200000 to retain the

customer. Thus non availability of the product by the supplier or delaying of the product will

lead the customer to switch to other stores which will also lead to switching of products. The

lifetime value of these lost customers can be $ 200,000 or more as estimated by Wall mart.

Observing inconsistent store management tops the priority list of over 90% of the retailers

and further more than 71% of the retailers believe that efficient store management is very

important for the overall business success.

3 Bargaining Power of Customers



Porter theorized that the more products that become standardized or undifferentiated, the

lower the switching cost, and hence, more power is yielded to buyers. Loyalty card remains

the most successful customer retention strategy that significantly increases the profitability of

the business. In meeting customer needs, customizing service ensure low prices, better

choices, constant flow of in-store promotions enables brands to control and retain their

customer base. It has also provided supermarkets with a new strategic expansion into new

markets of banking, pharmacies, etc. Some of the other factors are:

Buyers are concentrated or purchases are large relative to seller’s sales

The customers are given discounts on the purchase made by the customers. There are

green cards issued in retail stores. In pantaloon, every Wednesday there is low pricing on

purchases and on having loyalty card they get discount of 5 %. On purchase of Rs20000 there

is a discount of 7.5% and if the customer is having loyalty card he will have a discount of

additional 5%. On purchase of Rs40000 there is a discount of 10% and if the customer is

having loyalty card he will have a discount of additional 5%. There is everyday low pricing

in Wal-Mart.

Buyer has full information

Websites and advertisements give more information about the products. The customers are

also allowed to touch and feel the product which will help them to know about the product.

Thus the customers get full information of the product and also a decision for their choice.

Wal-Mart maintains a simple and effective marketing strategy which it has managed to

replicate globally apart it being the focus of its strategy. The Every Day Low Price (EDLP) is

simple and eliminates unnecessary advertising trying to push sales, as Wal-Mart has

successfully sold the concept to the customers, that it sells its products at the lowest prices,

everyday. This is one of the most interesting attributes of Wal-Mart.

4 Threats of Substitutes



General substitution is able to reduce demand for a particular product, as there is a threat of

consumers switching to the alternatives. In the industry this can be seen in the form of

product-for-product or the substitute of need and is further weakened by new trends, such as

the way small chains of convenience stores are emerging in the industry. Some of the other

factors are:

Wal-Mart is the only retailer to be in Fortune’s 100 Best Places to Work. Wal-Mart’s

empowerment of Associates is laudable with instances such as allowing its Associates to get

on the network and lower its prices, nationwide if its found to be higher than its competitors,

all this done without any consultation or permission requests from superiors.

Electronic security systems in place of security guards

Electronic data interchange was developed in 1970 to improve the purchasing process. IT has

been used by retailers ranging from Amazon.com to eBay, in order to radically change the

buying behavior across the globe. This has contributed to 15% of increase in sales in IT

sector. In traditional supply chain inventory management, orders are the only information

firm’s exchange, but information technology now allows firms to share demand and

inventory data quickly and inexpensively. Some of the electronic equipments which have

been used by retailers are as listed below: Electronic shelf labeling, Self check-out machine,

Radio Frequency Identification (RFID), Electronic Point of Sale (EPoS), Electronic Funds

Transfer Systems(EFTPoS) , Electronic scanners, Fax machines in place of overnight mail

delivery

Wal-Mart’s technology and inventory management systems and software are better than the

best in the world and also the lifeline of the organization. Experimentation apart from

investments light-years ahead of its time into VSAT capabilities have boosted its success.

Pantaloon has an in-house team and it has outsourced ABAP resources. They are also in the

process of setting up a SAP Competency Centre. The system runs on a HP Superdome server

on HP UNIX 11i and the database is from Oracle. The cost of this project was about $10

million.



Effect of POS Implementation : According to the field research report prepared by

Microsoft that interviewed over 580 retailers (who had deployed POS systems), with each

interview lasting for more than 30 minute on average, the findings have been tabulated as

below:

Based on the above data we can say that the application of technology leads to increment in

sales and reduction in expenses, thus causing a rise in profitability. However, it would be an

erroneous statement to say the least. The correct interpretation of the data shown above can

be stated as follows: Technology by itself does not cause sales increases or expense

reductions, but rather the way the information that technology provides is used causes the

increased sales and reductions in expenses.

5 Bargaining Power of Competitors

The environment has seen a very significant growth in the size and market dominance of the

larger players, with greater store size, increased retailer concentration, and the utilization of a

range of formats, which are now prominent characteristics of the sector. Operating in a

mature, flat market where growth is difficult (a driver of the diversification into non-food

areas), and consumers are increasingly demanding and sophisticated, large chains are

accruing large amounts of consumer information that can be used to communicate with the

consumer. This highly competitive market has fostered an accelerated level of development,

resulting in a situation in which retailers have had to be innovative to maintain and build



market share. Such innovation can be seen in the development of a range of trading formats,

in response to changes in consumer behavior. The dominant market leaders have responded

by refocusing on price and value, whilst reinforcing the added value elements of their service.

The biggest competitor for organized market is the unorganized market, which is occupying

more than 95% of Indian market. Whereas in other countries it has hardly occupied 15%.

Thus India is great market for organized retailing.

The retail industry is divided into organised and unorganised sectors. Over 12 million outlets

operate in the country and only 4% of them being larger than 500 sq ft (46 m2) in size.

Organised retailing refers to trading activities undertaken by licensed retailers, that is, those

who are registered for sales tax, income tax, etc. These include the corporate-backed

hypermarkets and retail chains, and also the privately owned large retail businesses.

Unorganised retailing, on the other hand, refers to the traditional formats of low-cost

retailing, for example, the local kirana shops, owner manned general stores, convenience

stores, hand cart and pavement vendors, etc. In India, a shopkeeper of such kind of shops is

usually known as a dukandar.

Most Indian shopping takes place in open markets and millions of independent grocery shops

called kirana. Organized retail such supermarkets accounts for just 5% of the market as of

2010 Regulations prevent most foreign investment in retailing. Moreover, over thirty

regulations such as "signboard licenses" and "anti-hoarding measures" may have to be

complied before a store can open doors. There are taxes for moving goods to states, from

states, and even within states.

EXTERNAL FACTOR ANALYSIS:

1. GDP: A look at the statistics shows that the retail sector in India is worth USD 394

billion and is growing at the rate of 30% annually. A study has found that retailing

($180 billion) contributes to 10 per cent of GDP and employs 7 per cent (21 million)

of the workforce. India is the 4th largest economy as regards GDP and is expected to


http://en.wikipedia.org/wiki/Shopkeeper

http://en.wikipedia.org/wiki/Kirana

http://en.wikipedia.org/wiki/Hypermarkets

http://en.wikipedia.org/wiki/Industry


rank 3rd by 2010 just behind US and China. Over the past few years, the retail sales in

India are hovering around 33-35% of GDP as compared to around 20% in the US.

2. SIZE (GROWTH IN MARKET): The current size of the overall retail market in

India is estimated to be about 400 billion (Rs 18,00,000 crores). It is expected that

retail will contribute about 23% of the overall GDP within the next three years, and

the market size estimates vary between USD 750 billion (Rs 35,00,000 crores) to a

mind boggling USD 1.25 trillion (Rs 55,00,000 crores), depending upon which

analyst you want to believe. Size of modern retail likely to touch US$ 60+ Billion by

2011: At least 2.5 Million additional direct jobs likely to be created in the next 5

years. The size of modern retail is about US$ 8 Billion and has grown by 35% CAGR

in last five years.

3. Growth in foreign direct investment (FDI): In retail FDI has increased upto 51% in

India. Economic development due to FDI inflow, increase in no of tax payers and

VAT collection

4. EMPLOYMENT: Retailing provides jobs to almost 15 percent of employable Indian

adults. Retail is a big employer in India – though the estimated numbers vary from 3

million (30 lakhs) to somewhat unbelievable 60 million (6 crores) retailers `The Great

Indian Retail Story' this sector is expected to create 2 million jobs by 2010. About 4

crore people are employed in retail trade, assuming each person supports a family of

5, this, implies that about 20 crore people are dependent on this sector.

5. CONSUMPTION: Indians spend over USD 30,000 a year (in PPP terms) on

conspicuous consumption that represents 2.8% of the entire population (which is

approx 30 million people) making it the 4th largest economy in PPP terms next only to

USA.

6. Higher Disposable Income: The disposable income has been showing a rapid

increase from the last few years and is expected to grow steadily because the



proportion of the major consuming class (population having incomes higher than Rs

90,000) is reached 48 percent by 2009-10 from 20 percent in 1995-95, leading to new

consumption patterns due to increasing depth in the consumers’ pocket.

7. Growing Working women population

The propensity to spend in the case of working women is higher by 1.3 times as

compared by housewives. According to the census report, the population of working

women increased to 35 percent in 2010(201324900 people) as compared to 26 percent

in 2001(127628280people).

201324900-127628280=7,36,96,620

Per capita income –Rs.44,000. 60% of the per capita income spent on retail sector i,e

Rs,26400.

So 73696620* 26400=Rs.1,94,55,90,76,800 spending increased on retail sector

from 2001 to 2010.

Organized sector is 5%. So 5 % of Rs. 1.94 lakh crore is Rs.9500 crore for organized

sector.

8. Adoption of Nuclear Family culture

The increase in per capita income paved way to increase the nuclear-family culture.

The proportion of nuclear families as a percentage of total household population has

increased as shown by fall in average household size from 5.57 in 1991to 5.36 in

2007, expected to fall further to 5.02 by 2011. This will fuel the growth of organised

retail. Total households now(2010) in India is 22,41,45,000 in that we have

151897000 nuclear families(67.76%) but in 2000 India has 124749000 nuclear

families.(21.76% increase).

9. Baby Boomer Effect

The demographics of Indian population has a steep growth in earning population (15-

60 yrs). In 2000, 593 million people (58.3 percent of total population) constituted the

age bracket of 15-60 yrs – growing from an unprecedented level of 335 million people

(54 percent of total population) in 1975 at a rate of 77 percent (CAGR of 2.3 percent)



in contrast to a population growth of 64 percent (CAGR of 2 percent) over the same

period of 25 years. In 2010, 729 million people (61.86 percent of total population).

729-593=136 million people.

1360,00,000*26400=Rs.35,90,40,00,00,000.( Rs.26400 on retail sector i.e 60% of

per capita income)

Organized sector-5% of Rs.3590400000000 is Rs 1,79,52,00,00,000.

10. Growth in Urban Population

Urbanization has increased at a rate of 2.7 percent over the last 10 years (1990-2000).

In 2000, the urban population was estimated to be 281 million (27.7 percent of the

total population). This trend is likely to continue and urbanization is expected to grow

at 2.4 percent between 2000 and 2015. In 2015 the urban population is expected to be

401 million, constituting 32.2 percent of the total

population.

11. Robust Outlook towards Branded products

Due to liberalization of manufacturing sector, various organized branded products

have entered into Indian markets, thereby developing and widening the basket for

branded finished goods. With the advent of International competition, new trends and

lifestyles are evolving among India masses resulting into 10-15 percent growth in

branded products and brand conscious among the youth,(60% of the Indian population

is below age of 30 i.e 71,36,22,000) This has established the base for organized retail

market in India.

12. Plastic Money becoming a greater Pie of credit

The use of plastic money in the form of debit and credit cards has expanded multifold

in last 5 years. The number of credit cards has grown at a CAGR of 28 percent.(25

million credit card users) The customers have adopted the habit of electronic

payments and leveraging their pockets shifting from basic needs to lifestyle products.



13. Less Conversion level:

Despite high footfalls, the conversion ratio has been very low in the retail outlets in a

mall as compared to the standalone counter parts. It is seen that actual conversions of

footfall into sales for a mall outlet is approximately 20-25 percent. On the other hand,

a high street store of retail chain has an average conversion of about 50-60 percent. As

a result, a stand-alone store has a ROI (return on investment) of 25-30 percent; in

contrast the retail majors are experiencing a ROI of 8-10 percent.

14. Percolating down:

In India it has been found out that the top 6 cities contribute 66 percent of the total

organised retailing. While the metros have already been exploited, the focus has now

been shifted towards the tier-II cities. The 'retail boom' of which 85 percent has so far

been concentrated in the metros, is beginning to percolate down to these smaller cities

and towns. The contribution of these tier-II cities to total organised retailing sales is

expected to grow to 20-25 percent.

15. Rural Retailing:

India is home to 70 percent of India’s population (i.e population-83,25,59,000) and

that rural per capita incomes have risen by 50 percent in the last 10 years. We have

got 627000 villages in India.Us $ 188 billion of retail sector comes from the rural

retail i.e 55% but we found very negligible percent of modern retail in rural sector and

83 crore population from rural area only. The rural market could be a major growth

opportunity.

16. personal tax change:

Increased exemption limit in personal income tax by Rs 15,000 for senior citizens

and by Rs 10,000 for all other categories of individual tax payers has resulted in

Discretionary spending and is directly linked to income in the hands of the people.

Increase in disposable income will result in increased spending on lifestyle products.

In general, increased consumption is expected to boost the growth of the retail sector



World population: 6,877,400,000

Indian population: 1,189,370,000

Density (population per kmsq): 362

Area (km2): 3,287,240

Number of retail outlets required:

Country Number of stores per 1,000

people

India 22

Japan 10

USA 3.8

Population growth rate: 1.548% (2009 est.)

Birth rate: 21.76 births/1,000 population (2009 est.)

Death rate: 6.4 deaths/1,000 population (2009 est.)

Literacy rate: 71.7% (Age 7 & above)

Unemployment Rate: 7.8%

864:1000

17. Almost a third of Indians, or over 300 million people, are migrants. Around 30%

percent of Indians are migrants, according to the survey. 35 percent of people in urban

areas and 26 percent of people in rural areas have moved from their place of usual

residence. However, migration in India is largely confined to within the same state. 72

percent of migrant households in urban areas and 78 percent in rural areas have

migrated within the same state.

30% of total Indian population comes upto = 356,811,000 are migrants

70% of Indian population is situated in rural areas which comes = 832,559,000



30% of total Indian population is situated in urban and metropolitan area =

356,811,000

35% of people in urban are migrants= 124,883,850

26% of people in rural are migrants= 21,465,340

Total migrants= 146,349,190

Thus for every thousand people if 22 retail outlets are required then for 146,349,190

people who are migrants 321968 retail outlets are required, which is an opportunity

for the retail outlet.

18. Employment seems to be the most important reason for migration. Some 67

percent of migrant households in urban areas and 55 percent in rural areas reported

migrating for employment-related reasons.

Due to the employment factor in India 67% of urban people = 239,063,370

Due to the employment factor in India 55% of rural people = 457,907,450

Total migrants due to employment factor should be taken in rural area i.e.

457,907,450 since urban people migrate within specified area and there in no much

increase in retail outlets.

Thus for every thousand people if 22 retail outlets are required then for 457,907,450

people who are migrants 10,073,964 retail outlets are required, which is an

opportunity for the retail outlet. This cannot be implemented so easily as it requires

large investment and therefore we can see that the footfall in the retail sector in urban

area will increase.

19. Females migrate more often than males in India, primarily for marriage. 61

percent of urban female migrants and 91 percent of rural female migrants migrated for

marriage.



If the ratio of men is to women is 1000:864 then female in urban and rural will be

469,470,000 and as we know female are shopping. Thus considering this female

population we can build around 10,238,340.

20. Education play a major role in male migration. For urban males, the migration rate

was lowest among the ‘not literate’ (17 percent) and highest among college graduates

(38 percent). For rural males, the migration rate is 4 percent among the ‘not literates’,

and 14 percent for college graduates.

The students lying in the age of 17 to 25 desire to go to retail outlet than the other

students in the range below 17. Thus 38% of males in urban is 83,600,000 and 14% of

male in rural will be 49,953,540. The total of male migrating for education will be

133,553,540. Thus there will be a huge opportunity of opening a retail outlet nearby

schools and colleges and number of outlets comes around 2,938,178. As the density is

high in graduating colleges, assuming the strength to be more then 1500- 2000 the

number of retail outlets reduces to 1,500,000.

21. Some 4 million Indians have migrated internationally. The survey finds that 0.38

percent of Indians, about 4 million people, have migrated out of the country. This is

smaller than the 10 million Indian international migrants that we have from

destination country data. As Indians will reduce by population due to migration. This

is a treat to the retail outlet since the sales reduces by 1% in every outlet

22. Vehicle number: The number of vehicle consumption has increased by 13% globally

and 12% in India which has made accessibility to the retail outlets easier. the sales of

each outlet have increased by 5%

23. Ethnic groups: Around 13% of people are found in the group of ethnic groups. There

is less growth found in these retail outlets. It will add less than 0.5% to the growth of

industry. Since these are getting civilized / modernized this is hindering to the proper

establishment of the retail outlet in these sectors.

24. Age group: About 47% of India’s population is under the age of 20; and this will

increase to 55% by 2015



25. IT placements: there are around 4 million placements to happen in the year 2010

therefore around 88000 retail outlets can be opened considering 1000 people footfall

per outlet. If an IT campus consists of 20000 people (assuming) then the number of

retail outlets required will be less and 8 retail outlets is sufficient for these. 4 million

people will require around 1600 retail outlets.

SL.No Opportunities Weights Rating Total

1 GDP 0.06 8 0.48

2 Growth 0.05 7 0.35

3 FDI 0.05 9 0.45

4 Employment 0.05 7 0.35

5 Consumption 0.05 9 0.45

6 High disposable income 0.05 8 0.40

7 Growing women population 0.04 8 0.32

8 Baby boomer effect 0.05 7 0.35

9 urbanization 0.05 7 0.35

10 Branded products 0.03 5 0.15

11 Plastic money 0.04 7 0.28

12 Less Conversion level: 0.04 7 0.28



13 Percolating down 0.03 8 0.24

14 Rural retailing 0.04 8 0.28

15 Personal tax exchange 0.03 6 0.18

16 Employement migration 0.04 7 0.28

17 Female migration 0.04 6 0.24

18 Education migration 0.05 9 0.45

19 Migration due to marriage 0.02 5 0.10

20 Male migration 0.05 8 0.40

22 Vehicle number 0.05 8 0.40

24 Age group 0.05 8 0.40

25 IT placements 0.04 7 0.28

Sl.No Threats Weightage rating Total

1 Migrated internationally 0.80 6 0.48

2 Ethnic group 0.20 4 0.08



Chapter 5



Internal Analysis of Wal Mart:

Strengths:

The strengths of a business or organization are positive elements, something they do

well and is under their control. The strengths of a company or group and value to it, and can

be what gives it the edge in some areas over the competitors. The following section will

outline main strengths of wal mart.

Management:

Human Resources and Training –

Wal-Mart's policies and practices are designed to ensure an environment that is

equitable and inclusive. To that end, Wal-Mart solicits feedback from all of their employees,

annually, regarding their opinions of their work experience and the company's

implementation of Wal-Mart's basic beliefs and values. In addition, they provide training on

working with people, leadership skills, equal employment opportunities, diversity and sexual

harassment prevention.



Wal-Mart is committed to providing all employees state-of-the-art training resources

and development time to help achieve career objectives. They have a number of training tools

in place that keeps then out in front of the competition, including classroom courses,

computer-based learning, distance learning, corporate intranet sites, mentor programs,

satellite broadcasts, skills assessments, and job announcements. These tools are successfully

increasing advancement opportunities for women and minorities. Wal-Mart has been ranked

among Training Magazine's 'Top Training 100' companies for two consecutive years. Respect

for the individual, one of Wal-Mart's company's three core values, is reinforced throughout

their training process.

Wal-Mart is committed to the customers and communities they serve. Wal-Mart hires

locally, representing the diversity and uniqueness of everyone's hometown. As the

demographics of the nation have changed, so has the family of Wal-Mart's employees. More

than 15 percent of their employees are over the age of 55, and they are the nation's largest

employer of Hispanics and African-Americans.

Employee Stock Ownership & Profit sharing

Wal-Mart uses its respectable financial position to attract and retain employees by

offering stock ownership and profit-sharing programs. These programs are available to all

full-time employees of Wal-Mart and make a significant impact on the earnings of

employees. They are allowed to purchase shares of stock at reduced prices, which allows

them an immediate appreciation of their portfolio. With the profit-sharing program, the

employees receive bonuses at the end of the year based on the success of the overall

company. These also provide a significant amount of compensation to their employees.

Wal-Mart also has very strong community-based initiatives. They have continually

gave college scholarships for high school seniors, raised funds for nearby children's hospitals

through the Children's Miracle Network Telethon, provided money and manpower for fund

raisers, school benefits and churches, Boy and Girl Scouts, park projects, police and fire

charities, food banks, senior citizen centers, and more. They also educate the public about



recycling and other environmental topics with the help of a "Green Coordinator," a specially

trained employee who coordinates efforts to make an environmentally responsible store.

Along this same line, Wal-Mart has created Environmental Demonstration Stores in

Lawrence, Kansas; Moore, Oklahoma; and City of Industry, California. These stores serve as

a "test tube" for environmentally friendly building materials and experimental methods for

conserving energy and water.

Core Values of Management-

The corporate structure of Wal-Mart is very well rounded and managed with three

core values: -respect for the individual.

- service to their customers

- striving for excellence.

The management of Wal-Mart is the backbone to the entire company and these core-

values have propelled Wal-Mart to the top of their industry and have allowed Wal-Mart to be

the world's largest company.

Leadership and Teamwork

Wal Mart management today around the world is the best, most strategic leadership

team they have ever had. They are making the changes necessary for company to continue to

stay out in front. They are also teaming up with Wal-Mart’s Board members, who bring

experience from many different backgrounds. The caliber of Board members is tremendous

and allows us to tap into a vast knowledge resource. The Board has been instrumental in

encouraging the Company to more quickly address critical issues.



Culture

From the onset, Sam Walton led by example and emphasized frugality, customer

service, and an open book policy. WalMart’s culture focuses on building loyalty among

associates, suppliers and customers. Associates are seen as playing a critical role in the

success of WalMart and are given more responsibility and recognition than employees of

competitors. Training is decentralized, and managers are given greater local control. Efforts

are made to actively involve employees in the continued success of WalMart, and employee

suggestions are often implemented at great cost savings.

Marketing:

Every day Low Price-

The nature of Wal-Mart's marketing is in its Every Day Low Price (EDLP) campaign.

This is what makes Wal-Mart successful. Sam Walton devised a system for which price

setting was to be followed. Sam wouldn't allow management to hedge a price at all. If the list

price was $1.98, but Wal-Mart had paid only 50 cents, they would mark it up 30 percent, and

that's it. Sam's philosophy was "No matter what you pay for it, if we get a great deal, pass it

on to the customer." The other major campaign Wal-Mart employs is the Rollback. This

occurs when Wal-Mart lowers the already lowered Every Day Low Prices. This has really

been a successful way for Wal-Mart to increase its patrons. When consumers shop, they are

always looking for the best deal, since Wal-Mart already offers low prices, when they

rollback prices, they are able to out-price all of their competition.

Customer Oriented Approach-

Wal-Mart has been known for their customer oriented approach. Wal-Mart maintains

one of the best satisfaction guaranteed programs, which promotes customer goodwill. One



can return virtually any product to Wal-Mart without any problems. They simply take the

product back and promptly refund the price of the product, nearly no questions asked. They

also promote goodwill among consumers by employing a tactic, which Sam created known as

the "Ten Foot Rule." This is simply the idea that if a customer comes within ten feet of an

employee, they are required to greet them and ask if they can help them in any way. This is

also evident through employees getting to know customers on a first name basis.

One Stop Shopping Experience.

The most important marketing aspect of Wal-Mart is that they create the ideal one-

stop shopping experience. Wal-Mart is organized into ten distinct divisions. These include:

Wal-Mart stores, SAM'S CLUBS, Neighborhood Markets, International, walmart.com, Tire

& Lube Express, Wal-Mart Optical, Wal-Mart Pharmacy, Wal-Mart Vacations, and Wal-

Mart's Used Fixture Auctions. Through these divisions, Wal-Mart offers thousands of

products. The Wal-Mart stores contain groceries, clothes, healthcare products, toys,

electronics, bedding, sports and recreation, automotive, among other items. Because of this

conglomeration of products, the typical consumer can go into any Wal-Mart and walk out

without having to stop at another store for anything that they could need.

Thinking globally. Serving locally.

Wal-mart international stores offer working families the things they need at prices

they can afford, and offer the customer service and convenience they’re famous for. In each

of their international markets, they use their strength as a global company to meet the local

needs of our customers, and provide help for their communities.

Saving People Money so they can live better.



Saving people money to help them live better was the goal that Sam Walton

envisioned when he opened the doors to the first Wal-Mart. Today, more than 40 years later

with operations in 16 markets worldwide, Wal-mart continue to deliver that promise to

families around the globe. It’s the focus that underlies everything they do at Wal-Mart. And

for the millions of customers who shop at Wal-mart stores and clubs around the world each

week, it means a lot.‘Saving money — good news in any language’.“Every Day Low Price”

is a epicenter of the Wal-mart marketing strategy.

Vendor relations .

WalMart has made specific supplier choices along the way that are geared towards

minimizing costs and maximizing efficiency. For example, WalMart eliminated manufacturers’

representatives at cost savings of 3-4% and calls its suppliers collect. Buying is centralized at

headquarters which keeps purchasing costs down. WalMart has avoided supplier power by not

allowing any single supplier to have more than 2.4% of its purchases. Therefore, WalMart is better

able to control its negotiation position with its suppliers. WalMart’s electronic data interchange allows

it to communicate with over 3,600 vendors regarding inventory orders, forecasting, planning,

replenishing, and transferring electronic funds. As WalMart has grown, it has developed key supplier

relations into partnerships. Large key suppliers such as P&G and GE are able to share information

with WalMart electronically and have dedicated teams to manage products for WalMart. Key

suppliers have vendor managed inventory systems, which reduces WalMart’s inventory costs and

allows suppliers to increase sales for their products. WalMart actively manages its suppliers by

communicating its expectations and providing annual strategic business planning packets to vendors.

All of these activities are aligned with maximizing revenues and efficiency and keeping costs low.



Human resource:

Wal-Mart proudly states on its website that its culture is guided by the 3 Basic

Beliefs, Sam’s Rules, and the Sundown and 10-Foot rules. The company has consistently

appeared on Fortune’s 100 Best Companies to work for in the United States. It employed

more than 2.1 million associates world wide.

Production/Operations

Favorable access to distribution network –

Perhaps the strongest aspect of Wal-Mart is in its access to distribution networks.

Wal-Mart uses a system known as cross-docking. This is simply the process of continuously

delivering goods to warehouses where they are sorted and distributed to their stores within

one day. This enables Wal-Mart to take advantage of economies of scale with shipping trucks

with full loads. This also gives Wal-Mart the ability to increase the speed of deliveries, a

faster response to market demands, and a low inventory. This system has allowed Wal-Mart

to decrease its sales cost by 2 to 3 percent over the industry. This savings is then priced into

the products with the earlier discussed EDLP programs.

This system is maintained through the most important aspect of Wal-Mart, its

employees. With over one million employees worldwide, Wal-Mart definitely has the

manpower to move goods. This is also facilitated with a proprietary satellite-based

communication system that enables managers and point-of-sale systems real-time

information on the needs of each store.



Wal Mart’s hub and spoke distribution network

It is another key strategic piece behind its operations. Merchandise brought in by truck to a

distribution center is sorted for delivery within 24-48 hours. Logistics management by way of

cross docking allows seamless “just in time” inventory delivery and minimizes the cost of

inventory sitting idly in distribution centers.

Operations strategy.

WalMart’s operations activities fit well together to achieve maximal efficiency and

lower costs. By having multiple distribution centers, WalMart is able to lower a store’s

square footage that is devoted to inventory to 10% versus 25% for competitors. This allows

higher efficient use of store floor space for displaying more goods and generating greater

sales volume. Shelf labeling, as opposed to individual product labeling, minimizes handling

of goods thereby keeping costs lower. Inventory is tracked electronically at the point of sale

by UPC scanners and hand held bar code scanners. This information is communicated to the

store’s computerized inventory system, allowing for maximal efficiency in inventory tracking

and repletion.

Research and Development:

Wal-Mart’s innovation keeps it a front-runner in retail as it is regularly turning out

new patents/proprietary technology. Development and innovation are high at Wal-Mart with

regard to their products/services, which is a sure strength in its overall performance.

Computer Information Systems :



Wal-Mart uses a sophisticated system of satellite-based communications.

They also offer a safe, secure and complete website where consumers can purchase all of the

same products found in the store. The website is strength because it is not only a means for

purchasing products, but is also a very thorough informational site. Consumers can log onto

http://www.walmartstores.com/ and do company financial searches, find employment, learn

about the grassroots of Wal-Mart, email the company about problems, and learn about any

recalls of products sold through Wal-Mart.

Wal-Mart pioneered the concept of building competitive advantage through

distribution & information systems in the retailing industry. They introduced two innovative

logistics techniques, cross-docking and EDI (electronic data interchange).

Weaknesses:

Weaknesses of a company or organization are things that need to be improved or

perform better, which are under their control. Weaknesses are also things that place you

behind competitors, or stop you being able to meet objectives. This section will present main

weaknesses of Wal-Mart.

Management:

No formal Mission Statement-

The biggest weakness that Wal-Mart has in the management area is that it does not

have a formal mission statement. While they do have core values, they do not explicitly tell

their employees or consumers what their business is. This is a fundamental aspect of a

company and it provides not definition and direction, but it gives a company a statement on

which to rely on to stay strong and focused.



Few minorities & few females In top management.

Another weakness is that there are few females in top management and there are few

minorities employed. With such a societal demand for equality, Wal-Mart is lacking in this

category. This is not a very good ethical decision for Wal-Mart to be making. They are really

hurting their corporate image by maintaining this position.

No union involvement

The other area that Wal-Mart lacks in is with unions. Currently, Wal-Mart does not

have any union involvement. This is a problem because of the perception of treating

employees poorly. Unions are created to provide bargaining power to employees on issues

that involve their compensation, benefits, and working conditions. This is also a weakness

because of job security. With unions, job security is not as much of a concern.

Marketing :

The biggest source of marketing weakness stems from Wal-Mart lobbying to expand

into new markets. There are thousands of towns across the United States that have tried to

block the introduction of Wal-Mart because of the economic impact that it has on small-town

stores and shops. Wal-Mart has a damaged reputation because when they move into a

location they end up "forcing" these types of businesses out of business.

Human resource:

Non-Unionization

Unlike its competitors in the retail industry Wal-Mart has remained non-unionized. Its

alternative is an open door policy which aims to encourage employees to take their



complaints beyond management. Wal-Mart employees commence at lower wages than

unionized corporations, quitting by the end of the first year

Low Wages.

The average Wal-Mart associate makes between a paltry $12,000 and 17,000

annually. suggest that the company cares more about keeping its prices low than to increase

employees’ wages and thus, in turn, their standard of living.

Discriminating against women.

Wal-Mart has been accused of discriminating against women by its actions of denying

training and promotion opportunities that are generally offered to men. Men are also paid

more than women. In June 2001 a group of six current and former female Wal-Mart

employees filed a sex discrimination lawsuit (seeking to represent up to 500,000 current and

former Wal-Mart workers) against the company . The suit was filed because Wal-Mart failed

to provide equal employment opportunities for women. Women comprise 72% of the

workforce but only small percentages are in supervisory or managerial positions. In addition,

“Wal-Mart is the nation's largest employer of women, but unfortunately they are being

treated without dignity and respect." (Cookson, 2001). The data also shows that women are

rated higher in performance evaluations across all positions except cashier. Women are

disproportionately employed in lower paying hourly jobs Total earnings paid to men is about

$5,000 more than paid to women. Women are on lower hourly rates but have been employed

longer than men. Women scored higher in performance ratings Over 95% of Store Managers

and Co-Managers change stores at least once upon entering the positions. 80% of Support

Manager promotions did not appear in job posting data .

female employees are told that "women do not make good managers", that "a trained

monkey" could do their jobs, and that women with kids couldn't be managers.



Production/Operations :

Slowing speed of checkout lines.

The largest source of concern for this functional area is the slowing speed of checkout

lines. This is simply a product of Wal-Mart's success. Because more and more people are

going to Wal-Mart, and the number of checkout lines is staying constant, the only way to

compensate is for the time to checkout increase. This is a problem because it can and will

cause people to choose other stores that are less congested. They are basically losing sales

due to this fact.

Research and Development :

No site Research.

This is a weakness because they do not actively engage in any research and

development. Specifically, they do not do any prior site research before opening a store. They

simply approach a local government and build.

Key strengths:

The key strengths are Financial position, employees, customer oriented, one-stop

shopping, satisfaction guaranteed programs, employee stock ownership and profit-sharing,

well-rounded business, ease of website, good reputation, and favorable access to distribution

networks.

Key weakness:



The key weaknesses are some ratios are not sufficient, non-unionization, no formal

mission statement, few women and minorities in top management, undifferentiated products

and services, site research, slow speed of checkout service, and finally a damaged reputation.

Strengths

Wal-Mart is a powerful retail brand. It has a reputation for value for money,

convenience and a wide range of products all in one store.

Wal-Mart has grown substantially over recent years, and has experienced global

expansion (for example its purchase of the United Kingdom based retailer ASDA).

The company has a core competence involving its use of information technology to

support its international logistics system. For example, it can see how individual

products are performing country-wide, store-by-store at a glance. IT also supports

Wal-Mart's efficient procurement.

A focused strategy is in place for human resource management and development.

People are key to Wal-Mart's business and it invests time and money in training

people, and retaining a developing them.

Weaknesses

Wal-Mart is the World's largest grocery retailer and control of its empire, despite its

IT advantages, could leave it weak in some areas due to the huge span of control.

Since Wal-Mart sell products across many sectors (such as clothing, food, or

stationary), it may not have the flexibility of some of its more focused competitors.

The company is global, but has a presence in relatively few countries Worldwide.

Internal factors of Pantaloon:

Strength:

Growth through private labels :



A striking characteristic of Pantaloons has been the strength of its private label

programme. In Pantaloons 70% of apparel sales come from own labels. John Miller, Ajile.

Scottsvile, Lombard, Annabelle, Honey, Bare are some of the successful brands created by

the company.

Manufacturing:

There is a drive for backward integration, into manufacturing. Pantaloons is a

manufacturer retailer. Manufacturing helps the company plan the products better

depending on what is selling at the stores and also helps better margin. The company has

trouser manufacturing unit in Tarapur and a denim plant in Goregaon, Mumbai.

Special activities on every Wednesday for women

This activity is done every Wednesday only for ladies coming to mall, under this

activity we appoint a female emcee, and she takes care of all the announcements & telecalling

to be done for ladies. We arrange some type of games such as “one minute free shopping,

housy, question answer round, followed by distribution of various gifts to the winners.

Strong distribution Network.

Strong distribution and logistics network and supply chain; strong distribution and

logistics network, with our 21 distribution centers covering and Large base of customers and

Strong focus on systems and processes

Other Strengths.

Pioneer in the industry, largest market share and Capitalization.

Reputation for value for money (competitive pricing), convenience and a wide range

of products all in one store.



Presence in major cities.

Highly strategic human resource management and development. It invests time and

money in training people and retaining them.

Most trusted and respected brand enjoyed by the customers.

Being financially strong, it helps Pantaloons Retail India deal with any problems, ride

any dip in profits and out perform there rivals.

Development and Innovation are high at Pantaloon India with regards to its products

and consumer preferences and life style changes which helps to keep ahead of its

competition.

Vast Retail Network base of pantaloons

Considerable Asset Base

Centralized procurement group

Experienced manpower in Operations & Management

Seamless mall

Brand Availability

Weekly activities

Loyal customers and repeated customers

Each floor dedicated to different clothing

Presence of food bazaar and inox

Special activities on every Wednesday for women,

Shopping experience along with Radio central

It is the main sponsor in Femina Miss India.

Strong management team Brand recognition and reputation and Diversity and variety

in products offered on the web (footwear, apparel, sporting equipment etc.) Strong

control over its own distribution channel.

No bad reputation like child labor or environment pollution

Brand equity and early mover advantage; Entrepreneur led, professionally managed

by an experienced team; Project execution and operations capabilities; Vast range of

lifestyle and value retail products and services.



Weakness -

Weaknesses found can be the opportunities of improvements. The No of outlets

available in the locations of pantaloons are very low. It does not have a strong presence

everywhere.

Promotional Cost Vs Revenue Less Conversion level:

Despite high footfalls, the conversion ratio has been very low in the retail outlets in a

mall as compared to the standalone counter parts. It is seen that actual conversions of footfall

into sales for a mall outlet is approximately 20-25%. On the other hand, a high street store of

retail chain has an average conversion of about 50-60%. As a result, a stand-alone store has a

ROI (return on investment) of 25-30%; in contrast the retail majors are experiencing a ROI of

8-10%.

Customer Loyalty:

Retail chains are yet to settle down with the proper merchandise mix for the mall

outlets. Since the stand-alone outlets were established long time back, so they have stabilized

in terms of footfalls & merchandise mix and thus have a higher customer loyalty base.

E-retailing is limited –

limited variety of products available online direct sale to consumers is creating

conflicts with its own reseller’s online customer service not "helpful" or easy to find.

Others.

Pantaloons do not function internationally, which has an effect on success, as they do

not reach consumers in overseas market.

Pantaloons Retail India is the world’s largest retailer and controls its empire, despite

its IT advantages, could leave its weak in some areas due to the huge span of control.

Since Pantaloon Retail Ltd, sell products across many sectors, it may not have the

flexibility of some of its more focused competitors.



Each business line faces competition from specialties’ companies. Fashion segment,

Shoppers Stop, Trent, Lifestyle. In hypermarket – RPG (Spankers), Trent (Star India

Bazaar), in food business, Reliance fresh, Spinach, Food world.

Negative Operating Margin

Limited Liquidity Position

Low Return on Equity

Unavailability of space

Internal strengths of the Wal Mart

Internal Strengths

Weight

Rating

Weighted

score

Human resources and

Training.0.05 8 0.40

Employee Stock Ownership

& Profit sharing

0.05

5

0.25

Core Values of Management- 0.05 8 0.40

Leadership and Teamwork

0.1

9 0.9

Every day Low Price-

0.10

10 1.0

Customer Oriented Approach- 0.05 8 0.4

One Stop Shopping

Experience.0.1

9 0.9



Saving People Money so they

can live better.0.05 5

0.25

Thinking globally. Serving

locally.0.05 6

0.3

Vendor relations. 0.1 7 0.7

Favorable access to

distribution network –

0.1 8 0.8

Wal Mart’s hub and spoke

distribution network

0.05 8

0.4

Operations strategy. 0.05 6 0.3

Computer Information

Systems :

0.05 8 0.4

Culture 0.05 6 0.3

Total 1.00

Internal weakness of the Wal Mart

Internal Weakness Weight Rating Weighted Score

No formal Mission Statement- 0.3 10 3



Few minorities & few females

In top management.

0.1 8 0.8

Non-Unionization 0.10 7 0.7

Low Wages.

0.15

7

1.05

Discriminating against

women.

0.05 7 0.35

Slowing speed of checkout

lines.

0.15 8 1.2

No site Research. 0.15 8 1.2

Total 1.0



Chapter 6

SWOT Analysis of Pantaloon

Strengths

Leader in the sector

Wide range of products are available

Presence in major cities

Financially strong which enables them to tackle with problems

Pantaloon is the most trusted brand

Spend more time and money on development of HR

Also have their own brand



Pantaloon Retail, is looking to raise as much as Rs 7.5 billion (USD 160 million) through an

IPO,

Lines of Business

The company is present across several lines of business which have various formats (stores)

operational under it. These include:

Food - Food Bazaar, Chamosa, Spoon, Brew Bar, Sports Bar & Sports Bar Express,

Cafe Bollywood,

Fashion - Pantaloons, Central, aLL, Brand Factory, Blue Sky, Top 10, Fashion

Station, Big Bazaar, Lee Cooper (JV),

General Merchandise - Big Bazaar, Shoe Factory, Navras, Electronics Bazaar,

Furniture Bazaar, KB'S FAIR PRICE

Home & Electronics - Home Town, eZone, Collection i

E-tailing (Online Shopping) - www.futurebazaar.com

Books & Music - Depot

Leisure & Entertainment - Bowling Co., F123

Wellness - Star & Sitara, Tulsi

Telecom & IT - Gen M, M Bazaar, M-Port, ConvergeM

Listed on: Bombay Stock Exchange

Pantaloon Retail's core retail revenues, which include value (Future Value Retail) and

home (Home Solutions Retail) businesses, jumped 32 per cent to Rs 2,581 crore in the

September quarter due to the pre-festive season buying.

Operates multiple retail formats in both the value and lifestyle segment of the Indian

consumer market.



The company operates over 10,000,000 square feet (930,000 m²) of retail space, has

over 1,000 stores across 61 cities in India and employs over 30,000 people.

Future Group is present in 61 cities and 65 rural locations. Retail formats of future group

include Pantaloons, Big Bazaar, Food Bazaar, Home Town, eZone, Depot, Future Money and

online retail format www.futurebazaar.com.

The group’s joint venture partners include Italian insurance major Generali, French retailer

ETAM group, US-based stationary products retailer Staples Inc and UK-based Lee Cooper

and India-based Talwalkar’s, Blue Foods and Liberty Shoes.

It purchase cereals and pulses from mills and perishable foods from concessionaries,

has now set up a subsidiary — Pantaloon Food Product — to participate in the supply

chain, by setting up collection centers, importing fruits

Weakness

Don’t have international presence

Not focusing on single product or brand. So this may affect Pantaloon if the competitors

focus on single brand or product

In spite of strong sales, Pantaloon's profits remain low and internal cash generation is not

sufficient to support such ambitious growth plans.

Opportunities



Huge untapped market in organised sector since it is only 5.5% of the total market

Organised sector is estimated to grow at a rate of 25%-30% and reach INR 1 trillion by

2010

Rural retailing

Opportunities for takeover, M & A, JV with global players

In 2010 added more than 500 units

Rural market is projected to dominate the retail industry landscape in India by 2012

with total market share of above 50 per cent

Driven by the expanding retail market, the third party logistics market is forecasted to

reach US$ 20 billion by 2011

Apparel, along with food and grocery, will lead organised retailing in India

Decline in Small Stores: It is observed that small independently owned stores are

gradually losing their foothold in the market place. These stores are generally called

“Mom and Pop” stores and they offer limited merchandise to the consumer.

Growth in foreign direct investment (FDI): In retail FDI has increased upto 51% in

India.

Higher Disposable Income

Growing Working women population

Adoption of Nuclear Family culture

Growth in Urban Population

Plastic Money becoming a greater Pie of credit

Threats

Intense competition from many global and domestic players (ex: Wal-mart Bharti JV)



Increase in real estate price

Target of 100 million sq. ft of retail space by 2010/11 would be difficult after protests forced

the closure of some stores

In 2006 clocking Rs.20,000 billion according to the Indian Retail Report 2007.

In cities like Mumbai, Bangalore, New Delhi, Hyderabad, and Pune the no. of outlets is

expected to grow to275 by 2010

The tax structure

Lack of adequate infrastructure facilities

Restrictions in Foreign Direct Investment

WAL-MART SWOT Analysis:

Strengths

• It is the world largest company in term of revenues.

• It is well known for lowest cost products.

• Wal-mart has the largest employee base.

• The company covered most of the US market and having a huge market share.

• Wal-Mart offers variety of products in their stores.

• Wal-Mart is operating in 14 countries with 2,980 stores.



• It sells 40% of private brands which are produced through contracts with manufactures.

• High customer satisfaction.

• The SAMs Club customers are able to buy the products in bulk quantity and getting the

advantage of low prices.

• A Wal-Mart super store offers non stop shopping for their customers.

• Satisfaction guaranteed programs promoting customer goodwill

• Buy from local merchants when possible

• Stock ownership and profit-sharing with employees

Leads industry in information technology

-Ongoing development of its employees

-Strong community involvement

Everyday low pricing strategy

The company has a core competence involving its use of information technology to

support its international logistics system. For example, it can see how individual

products are performing country-wide, store-by-store at a glance. IT also supports

Wal-Mart's efficient procurement.

A focused strategy is in place for human resource management and development. People are

key to Wal-Mart's business and it invests time and money in training people, and retaining a

developing them.



Weaknesses

• The Corporation is huge but still has presence in 14 countries.

• Customers sometimes are curious about the quality of products.

• Keep poor performance employees on hand.

• The market share is low outside the US market.

• Supplier profit margin is very low.

No formal mission statement

-Membership only for SAM’S Club

-Keep poor performing employees on hand

-Old fashioned store policies

Wal-Mart is the World's largest grocery retailer and control of its empire, despite its

IT advantages, could leave it weak in some areas due to the huge span of control.

Since Wal-Mart sell products across many sectors (such as clothing, food, or

stationary), it may not have the flexibility of some of its more focused competitors.

Opportunities

• Most of the International Market are untapped specially the Asian Countries.

• Joint ventures to increase market share in international market.

• The inflation in US market diverts the customer from buying expensive products towards

cheap products.

• A lot of retail organizations are leaving out of business due to the drop in disposable

incomes. This can help Wal-mart by growing its customer base due to the bargains that it can

provide its customers.



• Due to the cheap rate that the organization is able to buy its products from suppliers, it is

able to provide customers with even better bargains to give confidence them to shop at Wal-

mart.

Consumers want ease of shopping

-Internet shopping growing

-Dollar value increasing

-Similar shopping patterns worldwide

-Retail sales expected to increase

-Environment conscious consumers

-Elderly population growing

Threats

• Regulation of Wal-Mart pharmacies

• Small towns do not want entry of Wal-Mart

• Bad media exposure for Kathie Lee Brand

• Variety of competition nationally, regionally and locally

• Substitute products more easily because of intense competition

• Wal-Mart is criticized several times by community groups.

• The competitors are gaining control over International Market.



• Being a worldwide retailer means that you are uncovered to political troubles in the

countries that you operate in.


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Chapter 7

FINANACIAL ANALYSIS OF PANTALOON RETAIL LTD

Financial Analysis- Financial analysis is the process of evaluating financial and

other information for decision-making.

Ex- analysis of balance sheet, trading and profit& loss account, cash flow, fund flow,

ratio analysis, du Pont analysis market analysis, common size balance sheet.

BALANCE SHEET

Assets: probable future economic benefits

Liabilities: probable future economic sacrifices

Stockholders’ Equity: residual interest, representing ownership interest (also

called net assets)



Current Liabilities (accounts payable, accrued & other current liabilities)

Long-term debt

Commitments & contingencies

Other liabilities

Potential off-balance sheet debt Preferred stock

Common stock

Other paid-in capital

Retained earnings

Treasury stock

Other comprehensive income

Other equity items

REVENUE STATEMENT

Revenues: inflows from major operations

o Expenses: outflows from major operations

o Gains & Losses: changes in equity from peripheral activities

Net income: bottom line all operating activities recorded on the income

statement

Comprehensive income: Changes in equity from all non-owner sources

What are the five major categories of ratios, and what questions do they

answer?

Liquidity: Can we make required payments as they fall due?

Asset management: Do we have the right amount of assets for the level of sales?

Debt management: Do we have the right mix of debt and equity?

Profitability: Do sales prices exceed unit costs, and are sales high enough as

reflected in PM, ROE, and ROA?

Market value: Do investors like what they see as reflected in P/E and M/B ratios?



Ratio analysis – for ratio analysis we taken five years balance sheet and five years income

statement of pantaloon company

Liquidity ratio

Current ratio= current assets/current liabilities

For 2006=3.03

For2007=4.20

For2008=3.62

For2009=3.19

For2010=1.97

Std ratio is 2:1

Interpretation-

In2007 the c.r is 4.20 it tells that for every one rupee current

liabilities ,current assets of 4.20 are available to meet them so its very

good sign to company to meet there short term liabilities.

In 2010 the c.r is 1.97 its also indicates that satisfy the claims of short

term creditors but compared to 2007 its not that much good

Liquidity position is strong

Quick ratio

Quick ratio=quick assets/current liabilities

For 2010 =0.65

For 2009 =1.45



For 2008 =1.64

For 2007= 2.07

For 2006 =1.29

Std ratio is 1:1

Interpretation

In 2007 the q.r is 2.07 its measure the firm’s ability to meet the short term

liabilities its more than the std ratio so its good sign to the firm.

In 2010 the q.r 0.65 its not meet the short liabilities its not good sign because

all the money was block in debts and also slow paying debts

Inventory turnover ratio-

Inventory turnover ratio=cost of goods sold/avg inventory

For 2010=5.06 times per year

For 2009=3.77

For 2008=3.75

For2007=3.91

For2006=3.91

Interpretation-



In 2010 the inventory turnover ratio is 5.08 times a year means the inventory

was sold 5 times a year high ratio is good to the company

because inventory sold very fast

in 2008 the ratio is 3.75 its poor compare to 2010

Firm might have old inventory, or its control might be poor.

No improvement is currently forecasted.

Leverage ratio

Debt equity ratio=long term debt/s.equity ratio

For 2010=0.36

For 2009=0.93

For2008=0.72

For 2007=0.78

For 2006=0.49

Interpretation:

Its implies that there is combination of debt and equity to purchase

fixed assets so high ratio tells that more of owners contribution in

capital structure low vise verse so in the year 2009 the D.E ratio is 0.93

it indicates that if one rupee liability there is 0.93 owners capital

contribute

Fixed assets turnover ratio

Fixed assets turnover ratio=cogs/avg fixed ratio

For 2006=5.36 high



For 2009=3.55 low

Interpretation

In the year 2006 ratio is high it indicates that well management in using fixed

assets to generate sales and as compared to 2009 there is poor management in

using its assets to generate sales.

Payout ratios

Dividend payout ratio=total dividend/total ne Profit

For 2010=11.16

For 2009=9.63

For 2008=9.90

For2007= 7.35

For 2006=11.94

Interpretation

In the year 2006 the dividend payout ratio is 11.94 it means that out of 100 rupees the

company was paid 11.94 rupees as dividend its states that’s company has making well

profit compared to other year but in the year 2007 company paying low dividend i.e

7.35

Coverage ratio

Interest coverage ratio=EBIT/interest

For 2010=2.08

For 2009=2.15



For2008=2.45

For2007=2.32

For2006=3.61

Interpretation:

In the year 2006 the ratio was 3.61 times it indicates that the company was paid

3.61 times interest out of its EBIT but in the year 2010 the ratio is low 2.08.

Profitability ratio

Gross profit margin=G.p/sales*100

For 2010=6.70

For 2009=5.33

For2008=7.17

For2007=7.98

For2006=6.94

Interpretation -

In the year 2007 the ratio was good compared to rest of years and poor

in the year 2009

Return on Assets (ROA) Ratio-

ROA=Net income/total assets

For 2010=6.99



For 2009= 6.24

For 2008= 7.06

For2007= 10.98

For 2006= 12.17

Interpretation-

Compare to year 2006 all are the below avg from and also there is no

improvement in all years

ROA is lowered by debt--interest expense lowers net income, which

also lowers ROA

The du Pont system analysis-

The Du Pont identity breaks down Return on Equity (that is, the returns that investors

receive from the firm) into three distinct elements. This analysis enables the analyst to

understand the source of superior (or inferior) return by comparison with companies in

similar industries (or between industries).

( profit margin )(Ta turnover )( equity multiplier ) = ROE

NI/SALES*SALES/TA*TA/E= ROE



2009 2.6% x 2.3 x2.2 =13.2%

2008 -1.6%x2.0 x5.2 =-16.6%

2007 3.6%x2.0 x1.8 =13.0

2006 3.6% x2.5 x2.0 =18.0%

What are some potential problems and limitations of financial ratio

analysis?

Comparison with industry averages is difficult if the firm operates many different

divisions.

“Average” performance is not necessarily good.

Seasonal factors can distort ratios.

Window dressing techniques can make statements and ratios look better.

Different accounting and operating practices can distort comparisons.

Sometimes it is difficult to tell if a ratio value is “good” or “bad.”

Often, different ratios give different signals, so it is difficult to tell, on balance,

whether a company is in a strong or weak financial condition

What are some qualitative factors analysts should consider when

evaluating a company’s likely future financial performance?

Are the company’s revenues tied to a single customer?

To what extent are the company’s revenues tied to a single product?

To what extent does the company rely on a single supplier?

What percentage of the company’s business is generated overseas?

What is the competitive situation?

What does the future have in store?



What is the company’s legal and regulatory environment



Chapter 8

STRATEGY AND IMPLICATIONS OF EACH

GROUP MISSION

We share the vision and belief that our customers and stakeholders shall be served only by

creating and executing future scenarios in the consumption space leading to economic

development.

We will be the trendsetters in evolving delivery formats, creating retail realty, making

consumption affordable for all customer segments – for classes and for masses.



We shall infuse Indian brands with confidence and renewed ambition.

We shall be efficient, cost- conscious and committed to quality in whatever we do.

We shall ensure that our positive attitude, sincerity, humility and united determination shall

be the driving force to make us successful.

“The purpose of being business of the future group is clear from their mission statement that

they want to offer products at affordable price (the bold word indicate such meaning) to

everyone in the country. This means that they want to reduce cost.”

OBJECTIVE:

The three main objectives which are clear from their mission statement are

1. To reduce the cost.

2. Reaching everyone section in huge volume.

3. At the same time the stake holder’s value should also increase.

STRATEGY:

Based on the company’s SWOT analysis and company’s objectives it is very essential for

company to cater to rural section and also should reduce its cost of goods sold so for this

purpose we put forth following strategy.

1. GROWTH:

Strategic alliance with the company which has good command over the rural retailing,

experienced and made a significant work in terms of innovation and establishing their

idea, alliance with such company would fulfill the second objective of the company.

Analysis of the value adding activities supporting the generic strategy shows clear

elements of cost focus. Low cost leadership helps the firm above average returns in

the industry despite strong competitive forces. Traces of cost leadership are noticeable

in the value chain. The company is known to negotiate with suppliers for the lowest

cost of the product without any frills and marketing expenses which adds to the cost

later. Company’s purchase by the truckload saves costs again by bulk purchasing.

Following are some possible outcomes:



a. Company should invest ------ to have strategic alliance

b. Except the profit they will get the food products at cost lesser then the vendors. So

SA is not only going to provide presence in rural but also will gain a low cost

advantages.

Stages of Alliance Formation

A typical strategic alliance formation process involves these steps:

Strategy Development: Strategy development involves studying the alliance’s

feasibility, objectives and rationale, focusing on the major issues and challenges and

development of resource strategies for production, technology, and people. It requires

aligning alliance objectives with the overall corporate strategy.

Partner Assessment: Partner assessment involves analyzing a potential partner’s

strengths and weaknesses, creating strategies for accommodating all partners’

management styles, preparing appropriate partner selection criteria, understanding a

partner’s motives for joining the alliance and addressing resource capability gaps that

may exist for a partner.

Contract Negotiation: Contract negotiations involves determining whether all parties

have realistic objectives, forming high caliber negotiating teams, defining each

partner’s contributions and rewards as well as protect any proprietary information,

addressing termination clauses, penalties for poor performance, and highlighting the

degree to which arbitration procedures are clearly stated and understood.

Alliance Operation: Alliance operations involves addressing senior management’s

commitment, finding the calibre of resources devoted to the alliance, linking of

budgets and resources with strategic priorities, measuring and rewarding alliance

performance, and assessing the performance and results of the alliance.

Alliance Termination: Alliance termination involves winding down the alliance, for

instance when its objectives have been met or cannot be met, or when a partner

adjusts priorities or re-allocates resources elsewhere.



The advantage of strategic alliance includes:

1. Allowing each partner to concentrate on activities that best match their capabilities.

2. Learning from partners & developing competences that may be more widely exploited

elsewhere

3. Adequacy a suitability of the resources & competencies of an organization for it to

survive.

Action plan:

The company should identify an appropriate partner in order gain good market. As idea is

new it would require high investment in advertisement and marketing the brand.

Implication this strategy on the finance of the company:

Factor Current

year

Projections

2010-11 2011-12 2012-13

O P ML O P ML O P ML

GDP 9 10 8 9.8 12 8.5 10 15 10 11

Sales(million) 643 868.05 800 855.19 1111.7 1026.22 1068.96 1389.65 1282.75 1336.2

COGS% 69.85 50 55 52 50 55 52 53 60 55

Ad & mkt (crore) 114 130 140 130 125 140 123 120 130 112

Investment(million) 95.4 115.4 120.4 115.4 130.4 135.0 132.0 140.0 143.0 138.0



Net profit 140.58 347.2 320 342.08 559 513 534.5 694.8 641.4 668

ROI(%) 6.74 7.52 6.64 7.41 8.52 7.60 8.09 9.9 8.97 9.68

Biblography:

http://www.walmart.com/


http://www.walmart.com/


http://pantaloon.futurebazaar.com/indexPantaloon.jsp

http://business.mapsofindia.com/india-retail-industry/

http://en.wikipedia.org/wiki/Retailing

http://www.quickmba.com/strategy/porter.shtml

http://www.cci.in/pdf/surveys_reports/indias_retail_sector.pdf

http://www.12manage.com/methods_porter_five_forces.html

http://www.iamot.org/conference/index.php/ocs/4/paper/viewFile/1094/474

http://fmcg-marketing.blogspot.com/2007/11/pest-analysis.html


http://fmcg-marketing.blogspot.com/2007/11/pest-analysis.html

http://www.iamot.org/conference/index.php/ocs/4/paper/viewFile/1094/474

http://www.12manage.com/methods_porter_five_forces.html

http://www.cci.in/pdf/surveys_reports/indias_retail_sector.pdf

http://www.quickmba.com/strategy/porter.shtml

http://en.wikipedia.org/wiki/Retailing

http://business.mapsofindia.com/india-retail-industry/

http://pantaloon.futurebazaar.com/indexPantaloon.jsp

retail sector- group 7

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