Q1. Carry Out A PESTLE Analysis For The Business Environment It Operates in Analyzing Each Factor Political and Legal Factors
Q1. Carry Out A PESTLE Analysis For The Business Environment It Operates in Analyzing Each Factor Political and Legal Factors
Q1. Carry Out A PESTLE Analysis For The Business Environment It Operates in Analyzing Each Factor Political and Legal Factors
About Company:
Founded by Kishore Biyani in the year 2001, Big Bazaar is the largest hyper
mart chain in India. There are 214 stores across 90 cities and towns in India
covering around 16 million sq. ft. of retail space. Big Bazaar is designed as an
agglomeration of bazaars or Indian markets with clusters offering a wide range of
merchandise including fashion and apparels, food products, general merchandise,
furniture, electronics, books, fast food and leisure and entertainment sections.
Big Bazaar stores are aimed at providing a local marketplace feel to the shoppers.
They offer a wide variety of household items including retail apparels, food
products, general merchandise, furniture, electronics, books, fast food, etc.
Several stores also have leisure and entertainment sections. The hypermarket
chain crossed the 100 store mark in 2008.
Future Group also owns Central Hypermarket, Brand Factory, Pantaloons, eZONE,
Hometown, and futurebazaar.com, apart from Big Bazaar.
Q1. Carry out a PESTLE analysis for the business environment it operates in
analyzing each factor
Economical
Socio-Cultural Factors
Technological
STRENGTHS
WEAKNESSES
OPPURTUNITIES
THREATS
Q3. Carry out a comprehensive industry and competitor analysis for the firm
using Porters 5 Forces Model
In India, the retail industry accounts for about $350 billion and is growing at a rate
of 7% per annum. The organized retail sector or modern retail as it is popularly
known, comprises less than 2% of this currently. However, things are changing
and rapidly at that. After Kishor Biyanis foray and tremendous success in this
sector almost all the major industrial houses have followed suit. The industry is
witnessing tremendous growth and there seems to be enough room for all the
players in this attractive industry. For any player in this segment, whether it is
small or big it has to undergo threat analysis for its sustenance as described
below:
Rival intensity Threat of Power of Power of Threat of
entrants Suppliers buyers substitutes
Rival Intensity
BMI India Retail Report forecasts that total retail sales will grow from INR18.85trn
(US$392.63bn) in 2011 to INR26.64trn (US$674.37bn) by 2014. Strong underlying
economic growth, population expansion, the increasing wealth of individuals and
the rapid construction of organized retail infrastructure are key factors behind the
forecast growth. Indias retail market is growing at a faster rate of 7% and is
expected to increase to 15% in 2015. These faster growing retail segment has
attracted many major players like Future group, Reliance Retail, Aditya Birla
Group , Vishal Retails,Bharti and Walmart, Godrej, ITC etc. Big Bazzar which is a
part of Future group will face a tough competition from the other players.
2. Threat of entrants
Allowing 100% FDI in single brand retailing and 51% FDI in multiband retailing has
attracted many foreign players as well as domestic players to enter into retail
industry. The key growth areas include the urban, luxury segment on one end of
the spectrum and serving the rural sector on the other. In addition, government
policy encouraging FDI in the segment has resulted in a plethora of international
retailers keen on entering the market; American retail giant Wal-Mart has tied-up
with Bharti Enterprises and global coffee giant Starbucks' has tied up with PVR
Limited. In addition, Carrefour, Boots and others are also expected to come in.
The top retail companies in India include the Raheja Group, Reliance Retail, Tata
Trent, Future Group, RPG Retail, and Ebony Retail Holdings. Reforms by India in
opening up its economy have greatly improved trade prospects, but major
barriers still exist such as regulatory issues, supply chain complexities, inefficient
infrastructure, and automatic approval not being allowed for foreign investment
in retail. But, some of these are set to change with FDI in multi-brand retail set for
approval. So for all retail players in India threat of new entrants is very high.
The bargaining power of suppliers varies depending upon the target segment, the
format followed, and products on offer. The unorganized sector has a dominant
position, still contributing 95% of the total retail market. There are few players
who have a slight edge over others on account of being established players and
enjoying brand distinction. Since it is a capital intensive industry, access to capital
also plays an important part for expansion in the space. Big Bazaar has many local
suppliers which provide it flexibility. Due to entry of big players like Wal-mart and
other Indian players suppliers are getting more options. So they are demanding
more price for their product which is a threat towards Big Bazaar if they are not
maintaining long term relationship with their suppliers. Also Big Bazaar has very
big suppliers like P&G and HUL which requires different strategy for maintaining
relationship. As they have huge market share in FMCG products and most of the
retail players want their product, so they play a monopolistic role. So we can say
that the bargaining power of supplier is very high.
Indian customers are very much price sensitive. Along with that because of more
number of players in the market they are getting more options ot choose. .
Switching cost is very low as they have wide option available with them easily.
Because of wide availability of internet, Indian young population is showing more
interest towards e-shopping which also provide them free home delivery.So
bargaining power of customers is very high.
Threat of substitutes
The major threat to organized retail sector is the unorganized retail sector wich
still continues to be 90% of total retail market. Mom and Pop stores present at
convenient places help easy access to customers. Along with that unorganized
retail stores provide the credit facility which is not available in the organized retail
sector. Unorganized retial sector also provide free home delivery to the
customers. All these facilities attract customers. But as now a days organized
retail sector is expanding at faster rate with wider option available at convenient
place and price, which is attracting customers. Hence this threat is considered as
low. Availability of bank credit cards has attracted more young customers to shop
from organized retails. Statistics says that 25-30% annual growth in retail loans
and credit cards in 2011.
Q4) Please identify which of Porters generic strategies the firm is following.
The middle class in India, earns less than a third of million rupees per annum. The
earning capacity and inflation rate go hand in hand, not really offering any big
growth in consumption capacity. Thus, consumers really look forward to savings
in their daily consumables. Big Bazaar could see this typical nature of Indian
consumers. Therefore, it adopted cost leadership strategy and offered the
proposition of high savings to Indian consumers by offering value in lowest cost.
There were some activities and resources which Big-Bazaar used to create
competitive advantage. First was BigBazaars ability to offer several brands under
one roof. Thus, although it offered several verities of many brands, but mutual
reinforcement of its activities of bulk purchase and price negotiation with
suppliers helped it in pursuing the strategy of offering low cost commodities to
consumers.
Big Bazaar developed its own warehouses and aligned its distribution networks
directly with manufacturers. This helped in reinforcement, as well as effort
optimization, avoid intermediation of distributor margins. Along with this, Big-
Bazaar could optimize its efforts to network across its own retail outlets and
channelize the procurement directly to either retail stores or to warehouses
which were located either adjacent to or in direct vicinity of its retail stores. Along
with the above activities, which led to achievement of the low-cost strategy
adopted by Big Bazaar, it also offered a world-class shopping environment to its
consumers. This differed from the small and clumsy Kirana stores which did not
provide touch and feel access to goods sold to consumers. Thus, factors such as
self-service lead to direct contact of consumers with goods, which acted as
purchase stimulants. These factors led to a better shopping experience, which
added value to the low-cost strategy offered by Big-Bazaar.
The Low-cost strategy also got reflected in Big Bazaars name. Bazaar literally
means market. Indian consumers have been traditionally shopping in markets.
Markets offer a collection of different small-small retailers offering specialty items
to consumers. The name Big-Bazaar immediately connotes a Big market which
offers all shopping requirements to consumers under one big roof. Thus,
consumers quickly got diverted from traditional household shopping habits and
places to Big-Bazaar. Big-Bazaar was thus successfully able to create a competitive
advantage against the unorganized competition.
Q5)RECOMMENDATIONS
After analyzing the retail market in India as well as understanding the consumer
buying behavior as well as consumer understandings few recommendations made
which can help big retail players to make sustainable existence in near and far
future in the highly competitive market.