Company Name: Big Bazaar

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

Political and Legal Factors

A stable government at the centre will facilitate speedy economic recovery

and create an encouraging investment climate
Problems of getting subsidy from different taxes like land, water taxes
Problems of taking over properties and real estate

Economical

India, one of the fastest growing economies(6-6.5% GDP growth rate)

Retail Industry to grow to 300 billion by 2010
 Increase in the percentage contribution of the service sector to GDP
Increase in the investment on IT with focus on cost minimization

Socio-Cultural Factors

Increase in Nuclear families

People prefer to shop in local stores with the reasonable prices
Increase in working womens proposition
Life style changes
Shift in Product and service preferences
Increase in Young population

Technological

Technological development for fast billing and the service

Better applications of information technology in the modern retail industry,
like in supply
chain management, store management, point of sale and customer
relationship management

Q2. Carry out a SWOT Analysis for the firm.

STRENGTHS

LOW PRICE/Different discount scheme: The Big Bazaar Outlets sold a

variety of products at prices which is lower than the market price. Almost
everything has some kind of discount in Big Bazaar. Consumers accept the
fact that they come from faraway places because it is cheap in Big Bazaar
for bulk shopping. Big Bazaar is able to secure stock directly from the
manufacturer which they are selling as Private label. Big Bazaar gets some
extra benefits from manufacturer like display income, Manufacturer
discount and Extra Distributor Discount.
There are huge synergies in terms of bulk purchasing, central warehousing
and transportation.
 Big Bazaar provides discounts ranging from 6-8%to the market and offers
special discounts and offers up to 60% of 1,60,000 products 365 days a
year. Price is the basic value propositions at Big Bazaar.
HUGE DISPLAY AREA, avg 30,000sq/ft: Big Bazaar displays all their grocery
and all other product that customer can touch and feel the quality. They
offer self service.
PRODUCT DIVERSITY: Big Bazaar offers the maximum variety for each
category of product and this is cited by the customers as one of the main
reasons why they like shopping at the Big Bazaar (Range of apparels,
accessories, baby accessories, cosmetics, grocery, vegetables, crockery,
dress material, suiting, shirting, footwear, toys, house hold appliances,
home textiles, luggage, linens, saris, large product mix. Stocks about 30000
items in over 20 product categories). The product is the same in every store
in the city but the brand options are more in Big Bazaar. They have a huge
carpet area in an average of 30,000 square feet.
Huge promotional activities undertaken to ensure enough footfall
Infrastructure
Ambience of the Big Bazaar is not like the hypermarket in West, which
follows liner layout. It is not only providing good parking ,AC ambience to
create a no hassle shopping experience but also designed in a way that it
provides a traditional bazaar like environment, where the most Indian feel
comfortable.
The customers trust retail chains with quality of the product. They feel food
products of Big
Bazaar will have no adulteration. This quality is not assured in a kirana
store.
High Brand Equity

WEAKNESSES

Store unable to meet the growing consumer demand. General Perception

of consumer.
Depend on distribution channel of Brands for products like FMCG.
 Lack of strong supply chain like other big player
Perception among consumers

OPPURTUNITIES

Early Entry in Indian Retail

Organized retail
Evolving consumer preferences
Targeting area more prone to developments
Global Expansion
In-Store Experience improvements

THREATS

Government policies like complex sales and excise policies.

Unorganized retail.
Large Foreign Competitors like Wal-Mart, Metro and Domestic player like
Reliance.
Burgeoning real estate prices which leads to high rentals.
Economic Conditions
Lowering Margins

Q3. Carry out a comprehensive industry and competitor analysis for the firm
using Porters 5 Forces Model

INDUSTRY ANALYSIS (PORTERS FIVE FORCES)

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

High High High High Low

Porters five force framework

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.

Bargaining Power of Suppliers

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.

Bargaining power of customers

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.

Tackling Competition & Developing Competitive Advantage: Big-Bazaar was the

first to enter a supermarket type business in India, thus giving organized retail
industry a different direction. Thus the time of its entry, it did not have any strong
organized competition. The main challenge it faced was from the unorganized
retail Kirana. Indias Multi-Brand Retail Industry Big Bazaar, which were
embedded in shopping habits of people. However, by offering value propositions
of low cost, more variety and better shopping experience, it has changed
shopping habits of people in metros and cities of its presence. Therefore, because
of its success, it started facing the heat of organized competition. It faced two
types of organized competition. Generic competition was from stores such as
Reliance Retail, Vishal-Megamart, Spencers, More and Star Bazaar. It also faced
category specific competition from stores such as Westside (garments), Health
and Glow, Globus .

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.

Organized competition however came later from two different types of

competitors. One type was which tried to offer an equally wide mix of
commodities and offered a proposition of low-cost. Stores which tried to cater
with this similar strategy are Vishal Mega Mart, Spencers, Reliance and More.
Other types of competitors specialize in offering some products. These
competitors supply specialized products, and offer them in several propositions.
They not only offer low-cost products as commodities but also offer slightly
premium products in same category which carry better quality. Examples of such
competitors would be Westside, Health & Glow, Globus and Food World etc. Big
Bazaar tackled Organized competition by repeatedly establishing its Cost
leadership strategy in the market. This was done by choosing the set of activities
which facilitate the same, and by actively utilizing its resources towards that end.
Using its resource of an established brand, Big Bazaar launched a series of
campaigns which highlight and penetrate its consumer friendly strategy of being a
broad based low cost differentiator. To name a few activities, it has started EDLP
(Every Day Low Pricing), in which everyday, some products are offered at below
the regular prices. It has started point of purchase price discount and bundle-
purchase discount schemes. It also started price discount offers and adopted
slogans, such as Isse sasta aur achha kahin nahi (cheaper and better products
cannot be found anywhere else). It has also started offering interval based
promotions by developing an Hafte ka Sabse Sasta din (Weeks cheapest day)
offer. It has also started special event based promotions such as Sabse Saste Teen
Din (Cheapest three days), an offer which came on 26th Janin every year & an
extended weekend. Apart from the above activities which reinforce the low cost
strategy and its leadership position in the industry, Big Bazaar has also started
Home delivery services (Maha delivery) for a purchase more than specified
amounts, and within a certain radius of the store. This has added value to its
existing low cost strategy. Using its resources of huge stock, Big Bazaar also
launched The Great Exchange Offer' to corporate offices and various housing
societies which find themselves loaded with junk items ranging from computers,
stationery and printouts and waiting to be disposed of. The Great Exchange
Offer' is a month-long event where consumers give their old junk - including
newspapers, clothes, footwear, plastics, electronics or furniture to Big Bazaar and
get coupons in exchange which can be used to make purchases at the store (upto
25% of the value of the purchase). Big Bazaar also started a Big Bazaar Wholesale
Club which gave to an opportunity to save in bulk as the customers buy in bulk.
In line with the Big Bazaar tradition of providing best deals at best prices, the Big
Bazaar Wholesale Club provided the customers bulk deals at wholesale prices. Big
Bazaar is a part of Future Group, a group which holds multiple interests in
organized retail industry in India. Being a part of a bigger retail house has also
helped Big Bazaar. It has actively tried to utilize the set of resources which are
available to the entire conglomerate. For example, the three popular chains which
Future Group holds are Big Bazaar, Pantaloon Retail Pvt. Ltd. and Central. Big
Bazaar is for mass market, while Pantaloon and Central cater specifically to the
garments segment for lifestyle and premium consumers. Thus competition within
group products is very limited. However, the scope of resource sharing is always
there. This has resulted in cost advantages due to simultaneous activities being
conducted across enterprise for inbound logistics such as procurement, human
resources sharing, inventory warehousing and technology support. The cost
advantages have further been used to reinforce the strategic position of Big
Bazaar of offering Indias Multi-Brand Retail Industry Big Bazaar 17 stable low
priced household products. Big Bazaar has thus been able to make positive use of
its skill-set and resources towards common goals of Future Group profit
maximization without compromising on market value of any of its individual retail
brands. Thus, by effective use of its resources of brand, its parent-group
subsidiaries, its first mover advantage, Big Bazaar was able to create and maintain
its competitive advantage.

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.

Easy Checkout process. Customers usually face problem in billing their

purchased goods. Waiting in long queues forces them to leave certain
products thereby loss of sale to Big Bazaar. So billing counters must be
increased and employees at the billing should be given training so that they
could bill the products in much lesser time and the people at the billing
stations should have the information about the special offers and the
events that are being conducted at the store so that the customer inflow
can be accordingly handled.
 Big Bazaar needs to focus more on Customer Relationship Management
{CRM} and improved in-store assistance (Building loyal customers base and
developing a more profitable loyalty cycle).
Retailing through Internet & web based technologies.
Customer Care Centre to guide and counsel about customer loyalty
program.
Training must be provided to sales personnel not only of their counters but
for other functions also. Job rotation and training will enhance their
knowledge, job profile and boost the morale of employees to effectively
perform their duties and the responsibilities.
More brands should be included.
Exchange offers must be made clear as the consumers are often not clear
about how to use them.
Seating arrangements must be made for customers as well as for
employees also.
Care to be taken to maintain proper inventory levels and the varieties and
offer the customer what is needed rather than offering what is
available.(Brands like Nike, Adidas, Reebok,etc)
Invest in supply chain infrastructure
Ease distribution infrastructure creation
Aggressive expansive plans in II tier cities will open up new world of
opportunities
Added on facilities like Home Delivery and to an extent credit it plays an
important role in Customer Acquisition and retention programs.
Offer most exclusive brands under all categories