STM Assignment Workbook

Faculty: Prof. Anshuman Tripathy

Contents
1

Executive Summary............................................................................................................................................................... 4

Industry Overview.................................................................................................................................................................. 5
2.1

Nature and Size of the Industry....................................................................................................................................... 5

2.2

Key Growth drivers for the industry................................................................................................................................. 6

2.3

Identification of Critical Success Factors (CSF)................................................................................................................ 6

2.4

Market Analysis based on CSFs....................................................................................................................................... 7

2.5

Industry Benchmarks....................................................................................................................................................... 7

2.6

PESTEL Analysis............................................................................................................................................................. 12

2.7

Porters Five Forces Analysis.......................................................................................................................................... 13

2.8

Strategic Group Mapping............................................................................................................................................... 13

2.9

Competitive Landscape................................................................................................................................................. 13

2.10 Market Segmentation.................................................................................................................................................... 14

2.11 Buying Criteria Analysis of the Industry......................................................................................................................... 14
2.12 Key trends and future developments............................................................................................................................. 15
3

Company Overview.............................................................................................................................................................. 16
3.1

Company background.................................................................................................................................................... 16

3.2

Timeline with key milestones and their strategic impact............................................................................................... 16

3.3

Vision, Mission, Goals, and Strategic Themes................................................................................................................ 16

3.4

Key Product and Service Portfolio.................................................................................................................................. 16

3.5

Core Competencies of the firm...................................................................................................................................... 16

3.6

Business Model of the organization............................................................................................................................... 16

3.7

3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)........................19

3.8

SWOT Analysis............................................................................................................................................................... 19

3.9

Competitor Analysis (identify competitors)................................................................................................................... 19

3.9.1

Based on Critical Success factors............................................................................................................................ 19

3.9.2

Based on Financial indicators.................................................................................................................................. 19

Future Growth Strategy for the organization........................................................................................................................ 20

4.1

Portfolio Analysis........................................................................................................................................................... 20

4.1.1

Based on BCG Matrix............................................................................................................................................... 20

4.2

Companys Strategic Roadmap for future...................................................................................................................... 20

4.3

Product Market Investment Strategy............................................................................................................................. 21

4.4

Re-imagining the Organization with the transformed business model or Use-case based on SMAC and IOE................21

1 Executive Summary
Guidelines

The executive summary should provide a brief overview of the organization and the industry in which it
operates. It should also illustrate the results of the analysis made in the report. It should provide the
future growth prospects in the industry for the organization. It should also highlight on the strategy for
any organization to gain competitive advantage in this industry.

India is the 5th largest retail market in the world. The country ranks fourth among the surveyed 30 countries in terms of global
retail development. The current market size of Indian retail industry is about US$ 520 bn (Source: IBEF). Retail growth of 14% to
15% per year is expected through 2015. By 2018, the Indian retail sector is likely to grow at a CAGR of 13% to reach a size of
US$ 950 bn. Retailing has played a major role the world over in increasing productivity across a wide range of consumer goods
and services. In the developed countries, the organised retail industry accounts for almost 80% of the total retail trade. In
contrast, in India organised retail trade accounts for merely 8-10% of the total retail trade. This highlights a lot of scope for
further penetration of organized retail in India.
The sector can be broadly divided into two segments: Value retailing, which is typically a low margin-high volume business
(primarily food and groceries) and Lifestyle retailing, a high margin-low volume business (apparel, footwear, etc). The sector is
further divided into various categories, depending on the types of products offered. Food dominates market consumption with
60% share followed by fashion. The relatively low contribution of other categories indicates opportunity for organised retail
growth in these segments, especially with India being one of the world's youngest markets.
Because retail depends so vitally on the strength of the economy, and factors like job growth and interest rates, the economy in
general will have to become healthy again before the retail sector can rebound fully. Particularly, retail sales related to homes,
home improvement services and furniture need a rebound in the real estate market in order to turn around. As demographics
change, retailers will have to keep up with the changing needs of the populations in their locations. Ethnic minorities, such as
hispanics, are estimated to account for 30 percent of the United States' population by the middle of the century and this may
affect the success of some stores and the desirability of different products in these stores.
Transition from traditional retail to organised retail is taking place due to changing consumer expectations, growing middle
class, higher disposable income, preference for luxury goods, and change in the demographic mix, etc. The convenience of
shopping with multiplicity of choice under one roof (Shop-in-Shop), and the increase of mall culture etc. are factors appreciated
by the new generation. These factors are expected to drive organized retail growth in India over the long run.

2 Industry Overview
2.1 Nature and Size of the Industry
Guidelines

Brief Description of the industry segment or sub segment

History and Evolution of the Industry
Position of Industry depending on Industry Life Cycle (Introduction, Growth, maturity, decline)
Size (% of National GDP) of the industry

History and Evolution of the industry

The origins of retail are old as trade itself. Barter was the oldest form of trade. For
centuries, most merchandise was sold in market place or by peddlers. Medieval
markets were dependent on local sources for supplies of perishable food because
Journey was far too slow to allow for long distance transportation. However, customer
did travel considerable distance for specialty items. The peddler who provided people
with the basic goods and necessities that they could not be self-sufficient in, followed
one of the earliest forms of retail trade. Even in prehistoric time, the peddler travelled
long distances to bring products to locations which were in short supply. They could be
termed as early entrepreneurs who saw the opportunity in serving the needs of the
consumers at a profit Later retailers opened small shops, stocking them with such
produce. As towns and cities grew, these retail stores began stocking a mix of
convenience merchandise, enabling the formation of high-street bazaars that become
the hub retail activity in every city. The modern retail industry is booming across the
world. Revenues from retail sales in the US alone stood at $4.48 trillion in 2007,
according to a report by the US Census Bureau.

Key Consumers of this industry and

their changing needs

The retail industry has reached a tipping point. Tough economic times have brought
into rapid focus the reality of changing consumer behaviours. A shopper today has
vastly different expectations of product, service, value and environment than even five
years ago. In this new reality, incremental adjustments to the store format and portfolio

will no longer be sufficient to survive, a radical rethink of the purpose of the store in the
consumer shopping journey and the number of stores required to reach the consumer is
necessary.
1. Personalized Customer Service
Customers want in-person service they cant get online. This is crucial to differentiating
your store from the one-dimensional online shopping experience.
2. A Sensory Experience
Retail locations that are visually attractive and appealing are a big draw. Sensory
experiences can take opposite forms. If your target market is kids or teens, you might
want sensory overload with lots of excitement. If its moms, you might want a restful,
relaxing escape from the stress of daily life.
3. Fun and Entertainment
Customers no longer have to go to stores to buy, so you have to work harder. Its
always been the case that retail is competing for discretionary dollars, but today its
even clearer that your store is competing with other leisure activities like going to a
park, museum or sporting event.
4. A Curated Experience
Buying online is convenient, but can also lead to overload, as anyone whos ever
shopped for shoes on Zappos.com can attest. Consumers often feel overwhelmed by
the abundance [of choices] offered online and want retailers to curate, the report
states.
5. Online/Offline Integration
Customers expect a seamless transition between shopping on your website (if you have
an e-commerce site) and shopping at your store. If your business has both an
eCommerce and brick-and-mortar component, make sure the experiences are
integrated so one is an extension of the other.

6. Mobile Technology
Big retailers are taking advantage of customers reliance on mobile phones to grab tons
of data and personalize the sales experience. Lots of this is still beyond a small
businesss budget, but its important to be aware of.
Stage in the Industry Life cycle

The retail industry is presently in the Growth stage of the Life cycle because Retailing
has played a major role in the global economy. In developed markets, retailing is one of
the most prominent industries. In 2008, the US retail sector contributed 31% to the
GDP at current market prices. In developed economies, organised retail has a 75-80%
share in total retail as compared with developing economies, where un-organised retail
has a dominant share.

Total Available Market Size (National

and Global)

The size of Indias current retail market is estimated at 3,893,425 crore ($ 648.90
billion), according to the India Retail Report 2015 produced by the Images Group.

Total Serviceable Market Size (National

and Global)

Global: $22.492 trillion

India: US$520 billion
Source: http://www.emarketer.com/Article/Retail-Sales-Worldwide-Will-Top-22-TrillionThis-Year/1011765
http://www.rai.net.in/EY-RAI_Pulse_of_Indian_retail_market_Final.pdf

2.2 Key Growth drivers for the Industry

Key Growth drivers
1. Location

Rationale
Finding a large patch of land which can be used for industrial purpose (not an
agricultural land) used to be difficult. That was followed by a lot of completion and
negotiation to acquire the land. Moreover, the stringent laws made it difficult to gain
ownership of land. Hence, renting high-priced land being the only option, the
profitability matrix for company used to be skewed. Due to change in scenario by entry

of foreign players and positive change in consumer sentiments, owning a place has
become easier which leads to better profitability.
Source: http://www.pwc.in/industries/retail-and-consumer-key-success-factors.jhtml

2. Removal of entry barriers:

Foreign Direct Investment(in
India)

3. Market Size(in India)

4. Demography(in India)

In January and December 2012, Indian Government allowed 100% ownership in single
brand retail (with a requirement that the single brand retailer source 30% of its goods
from India) and 51% ownership in multi-brand retail. This attracts foreign investment
due to which A T Kearney, A US based Global management consulting firm has ranked
India as the fourth most attractive nation for retail investment among 30 developing
markets.

The sheer market size of 1.2 billion is a motivator for investment in retail. Indias retail
market is likely to touch Rs 47 trillion (US$ 738.71 billion) by 2016-17, expanding at a
CAGR of 15 per cent, a Yes Bank-Assocham study says.

Half of Indias population is less than 30 years of age. Youth is more inclined towards
spending money on retail. Roughly one-third of Indian population lives in cities. They
hence have better access to retail stores. Moreover since the rest of the population
lives in villages and rural market is almost unexploited, there is great potential.
Source: http://www.ibef.org/industry/retail-india.aspx

5. Expansion in e-commerce(in
India)

On account of digital revolution, there is rapid expansion of e-commerce in the country

due to which the online retail market is expected to touch USD 14.5 billion by 2018.
Source: http://www.ibef.org/industry/retail-india.aspx

Availability of Credit(liberal monetary policy)

6. Economic Factors(in India)

Purchasing Power Parity(According to CIA World Fact book, India ranks third with a PPP
of $ 4990 billion) as a result of which disposable income of people has increased
GDP growth(it increases consumer confidence)
Decrease in Interest rates(liberal monetary policy)

2.3 Identification of Critical Success Factors (CSF)

Critical Success Factor identified

Rationale

CSF 1 Understanding Consumer

Behaviour

Retailers have the opportunity to access masses of data on product sales, the impact
of promotions on sales and individual consumers purchase histories. They must
analyze and use that data to plan the product lines they will carry, in-store
promotional activity and relationship programs aimed at consumers.

CSF 2 Operating Multichannel

Strategies

Offering consumers a choice of buying in-store, online or from a call centre improves
convenience for the customer and gives retailers the opportunity to capture a higher
share of the customers wallet. Retailers may also open different types of stores to
meet local shopping needs. Supermarket operators, for example, may open
neighbourhood convenience stores or shops within gas stations to capture last-minute
or impulse purchases.

CSF 3 Improving Operational

Efficiency

Operational excellence is a key factor in retail success. Retailers must aim to optimize
store layouts to maximize display space and increase the productivity of their staff
through effective training and supervision. Streamlining checkout processes and
introducing facilities such as mobile payment and self-scanning can realize further
efficiencies, as well as improving convenience for customers. Inventory databases
enable greater control over stock levels, simplify ordering and help retailers plan
effective promotional programs. By improving operational efficiency, retailers can also
maintain or reduce their costs, enabling them to offer lower prices and compete
effectively against other outlets.

CSF 4 Enhancing Customer

The quality of customer experience is critical to the success of stores and online
retailers. Consumers in stores expect clear layouts, convenient parking and opening
hours, prompt service at the customer service desk or checkout, and clear policies on
refunds and warranties. Mobile technology offers retailers new opportunities to
improve the customer experience. By capturing data from Smartphone users who
browse their websites, retailers can provide relevant product information and
personalized offers when consumers use their phones in store. Online shoppers want
a clear website structure, with navigation that is easy to follow and an ordering
procedure that is simple and secure. The website should also include contact details
for customer service, including facilities such as chat or instant messaging.

Experience

2.4 Market Analysis based on CSFs

Region

CSF 1

CSF 2

CSF 3

CSF 4

Global
North
South
East
India

West
North-East
Central
Note: Use data for the year 2013-14

2.5 Industry Benchmarks

Size of industry: 3,893,425 crore ($ 648.90 billion)
Source: http://www.thehindubusinessline.com/features/brandline/the-detail-in-indias-retail/article6442623.ece

Category

Industry Level
(National)

Indicator

Industry Average of Top 5 Firms or

players serving 75-80% of the market
201112

201213

201314

1035.35

1235.86

Size as % of
GDP

.0847%

Inventory
turnover

5.36

2014-15
(till Q3)

Market Leader
201112

2012-13

201314

1623.36

1385.54

1634.35

1935.35

.1035%

.1279%

.1357%

.1637%

.1957%

6.48

5.85

2.48

3.26

3.72

Market Size

2014-15
(till Q3)

Category

Activity Ratios

Indicator

Industry Average of Top 5 Firms or

players serving 75-80% of the market
201112

201213

201314

201112

2012-13

201314

30.25

38.25

41.25

28.01

39.90

48.34

Asset
turnover

1.0689

2.2578

1.5978

0.86

1.09

1.36

Current ratio

1.58

1.51

1.41

1.05

1.22

1.02

Quick ratio

0.62

0.73

0.88

0.58

0.81

0.84

Cash ratio

0.15

0.18

0.20

0.12

0.17

0.17

Debt-toassets ratio

3.58

1.58

2.69

1.25

1.47

1.68

Debt-tocapital ratio

2.25

1.01

1.95

0.55

0.80

1.28

Debt-toequity ratio

2.85

3.01

2.51

0.82

0.96

1.69

Interest
coverage
ratio

2.18

1.85

1.91

2.02

1.07

0.96

Gross profit
margin

8.96%

8.06%

7.51%

6.76%

6.64%

5.48%

Operating

11.68%

12.62%

9.48%

10.15%

11.10%

8.98%

Receivables
turnover

2014-15
(till Q3)

Market Leader

Payables
turnover

Liquidity Ratios

Solvency Ratios

2014-15
(till Q3)

Category

Profitability Ratios

Indicator

201112

201213

201314

Net profit
margin

3.21%

3.48%

Return on
assets (ROA)

168.25

Return on
equity (ROE)

6.88%

2014-15
(till Q3)

Market Leader
201112

2012-13

201314

2.61%

1.81%

3.89%

0.02%

185.57

161.35

125.06

143.47

140.41

7.56%

4.85%

2.90%

8.22%

0.08%

2014-15
(till Q3)

profit margin

Price to
Earnings
(P/E)
Valuation Ratios or
Price Ratios

Industry Average of Top 5 Firms or

players serving 75-80% of the market

65.91
(as on
06.02.201
4)

PEG Ratio =
(P/E Ratio) /
Projected
Annual
Growth in
Earnings per
Share
Price to Cash
Flow
Price to Book
(P/B)

1.18(as
on
06.02.201

Category

Indicator

Industry Average of Top 5 Firms or

players serving 75-80% of the market
201112

201213

201314

2014-15
(till Q3)

Market Leader
201112

2012-13

201314

2014-15
(till Q3)
4)

Price to Sales
Dividend
Yield

Dividend
Pay-out Ratio

0.49(as
on
06.02.201
4)
8.45

6.25

4.25

9.00

4.36

3.43

7.68%

11.25%

6.48%

9.58%

13.15%

8.27%

Enterprise
value (EV is
market
capitalisation
plus debt
minus cash)/
EBITDA
Staff
Turnover or
Industry
Attrition Rate
Competitive Ratios

Staff Cost/
Salary as
percentage
of Sales

Category

Indicator

Industry Average of Top 5 Firms or

players serving 75-80% of the market
201112

201213

201314

Operating
Expenses as
percentage
of Sales

88.86%

87.48%

Depreciation
as
percentage
of Sales

44.57%

Fixed Assets
to Sales
Revenue

0.8135

2014-15
(till Q3)

Market Leader
201112

2012-13

201314

90.35%

89.25%

90.49%

92.47%

49.35%

52.47%

35.18%

41.81%

44.15%

0.8615

0.8914

0.7138

0.7658

0.7851

Advertising
as
percentage
of Sales
Source: http://www.moneycontrol.com/financials/futureretail/ratios/PR03
http://www.futureretail.co.in/pdf/FRL%20Annual%20Report%202013-14.pdf
In case you come across other benchmark ratios used in particular Industry, then please include them as well.

2014-15
(till Q3)

2.6 PESTEL Analysis

Category

Description

Political

Degree of
intervention of
government,
subsidies, tax
rates

Key factors for analysis

1. Policies regarding FDI
2. Change in tax rates
3. Labour laws
4. Real estate laws and
infrastructure

Rationale
1. 100% ownership in single brand retail and
51% ownership in multi-brand retail has
changed the retail scenario in India.
2. Decrease in tax rate leads to more money
left for consumption.
3. Forbidden employment of staff on
contractual basis makes it difficult for 365
days round operations.
4. Easy availability of real estate and
secondary infrastructure support for
logistics is vital to setting up retail shops.

Economic

Interest rates,

1. Liberal monetary policy

Economic

2. Economic growth

growth,

3. Inflation

Inflation,

4. Discretionary Income

Exchange rate,
Discretionary
income, Stage
of Business
CycleProsperity,
Recession and
Recovery

5. Stage of business cycle

1. Low rate of interest leads to easy

borrowing of money which further leads to
more consumption.
2. Economic growth would lead to increase in
demand.
3. Inflation provokes high wage demand and
hence increases cost and hence price.
4. Increase in discretionary income would
lead to increase in consumption and vice
versa.
5. Stage of business cycle in the economy
affects consumer behaviour and
sentiments.

Social

Demographics

1. Social Media

Class structure

2. Health

Education

3. Age-Leisure-culture

Culture
Entrepreneuria

1. The increasing advent of social media can

boost online retail.
2. The current health conscious mass is more
inclined towards trusting organized retail
and food is the biggest retail industry.
3. The young population is more open
towards retail buying as they do not show
traditional buying behaviour and have
more disposable income. Half Indian
population is less than 30 years old and
one third of that lives in cities with better
access to retail.

l spirit
Attitudes
sentiment,
health,
environmental

consciousness,
Leisure

Technological

Innovation

1. Technological innovation

It can lead to better supply chain

management, increase
operational efficiency and
reduce costs.
Economies of scale can reduce cost.
It can help with in-store personalization.
Digital marketing can offer positive online
retail experience.
It can help better integration of buyers

and suppliers(like Walmart)

It can help in better employee
engagement.(
http://www.retailtechnology.co.u
k/)

Environmental

Environmental
consciousness

1. Environment friendly
consumer behaviour

1. Customers are likely pay more to support

retailers who assert sustainable practices,
for instance, by buying products made
with recycled
material. (http://smallbusiness.chron.com/
)

Legal

Consumer
Laws,
Competition
Laws,
Employment
Laws, Health
and Safety
Laws

1. Company Act

1. If the Company Act has a number of

requirements for formation of a firm and
the law is stringent, potential retailers
might be lost. However substandard
retailers would cause problem in the
future.

2. Consumer protection Act

2. An apt Consumer Protection Act in place

would encourage consumers.

2.7 Porters Five Forces Analysis

Porters Five Forces

Description

Key factors for analysis

Rationale

Buyer Power

Power of buyers
in the industry

Switching costs

Switching cost for buyer is very low.

Availability of competition

Competition is high as there are lot of

players in retail-both local and global.

Diversification of buyers group

Buyers information

Buyers are diversified based on age, culture,

need, paying capability, etc.
Buyers are more aware of prices due to
internet.
Hence, buyers can said to have power in
retail industry if they demand price change
as a whole.

Supplier Power

Power of
suppliers in the
industry

Difference in quality with market

Quick and timely delivery
Cost effectiveness

In 1970s, Sears in order to dominate the

household appliance market set very high
standards for quality; suppliers that didn't
meet these standards were dropped from the
Sears line.
Wal-mart places strict control on its
suppliers(as soon as shelves become empty,
an order is sent to suppliers automatically)A
contract with a large retailer such as WalMart can make or break a small supplier.
In the retail industry, suppliers tend to have
very little power.
(www.investopedia.com)

Existing Competition

Threat to new
entrants

Threat to substitutes

Competition
scenario

Pricing
Product availability
Operations

Threat is high
as retail is
growing
comparatively
slowly and
already has a
lot of players.

favorable supply contracts

leases
operational efficiency

Depends on
product offered
by firm

Quality

The slow market growth for the retail market

means that firms must fight each other for
market share. More recently, they have tried
to reduce the cutthroat pricing competition
by offering frequent flier points,
memberships and other special services.
(www.investopedia.com)
There is a decreasing number of independent
retailers.
However, organized retail is growing.
FDI has made new entry easier in India.

Price
Features

Effect of
Complementors

The competition scenario is different country

wise.

Retail tendency is ideally not to specialize in

a good or service but to provide a wide range
of goods and services.
However, the retail firms providing with good
or service of superior quality, less price or
extra features is likely to have less of a
threat from others.

2.8 Strategic Group Mapping

Companies

Number of
brands

Revenue

Pantaloons
228
1285
Westside
1
357.6
Shoppers Stop
24
1930
The figures are given in crores.
Pantaloons was previously owned by Future Group, is now owned by Aditya Birla Nuvo Limited.
Observations and Conclusions:
1. Shoppers Stop sells almost 10% of the number of brands compared to Pantaloons and still earns more. Hence, brand
diversification after a certain extent does not add much value.
2. Westside sells 0.4% of the number of brands compared to Pantaloons and makes almost 28% of Pantaloons revenue.
Marketing strategy of Westside should be studied and adopted to increase ROI.

3. Based on Pantaloons data, we find that every brand on an average contributes to 5.63% of revenue.

2.9 Competitive Landscape

Company

Subsidiary of

Number of Brands

Turnover

Number of
stores

Pantaloons

Aditya Birla Nuvo

Limited

228

1285 crore

86

Shoppers Stop

Promoted by
Raheja Corp Group

24

1930 crore

73

Westside

Tata Group

357.6 crore

60

Lifestyle

Promoted by
Landmark

13

3000 crore

43

FabIndia

William Bissell

Many

1000 crore

177

Globus

Rajan Raheja Group

67 crore

35

Value propositions ( Low Cost, Differentiation, Niche)

1. E-commerce is replacing physical stores. In fact, e-commerce is set to replace physical retail spaces altogether in some
parts of the world. American companies like ToysRUs, looking to gain a foothold in foreign markets, plan to open mobilefriendly retail websites in places like China, Australia and France.
The way of the future is clearly to commit fewer resources towards opening brick-and-mortar stores and instead,
cultivating virtual ones. More and more companies are acknowledging that this is where the real opportunity lies.
2. Smartphones are forcing retailers to keep prices competitive and websites active. This e-commerce explosion is thanks
in no small part to the increasing use of phones and tablets for Web surfing and shopping. But our use of mobile devices
isnt limited to shopping on-the-go or from the couch. A study by Pew Internet shows that more than half of all adult cell
phone owners used their device to help with purchasing decisions while already in store. People either called friends for
advice, used their phones to look up product reviews or investigated the prices of items they wanted. Smartphones give

us direct access to the worlds information on nearly every retail product, which forces retailers to keep their prices
competitive and their Web presence active lest they lose out to more aggressive online retailers and flash sale sites.
3. In-person shopping is being transformed by technology too. Tech in retail is not limited to the Web, of course.
Impressive inventions that will transform the in-person shopping experience making it more interactive, personalized
and helpful are on the horizon. These include interactive magic mirrors that can display how an outfit will look on you
(without actually trying it on), suggest accessories and point you in the direction of similar items; virtual greeters that can
handle everything from conducting eye exams to offering discounts through QR codes; and 3-D printers that consumers
can use to create their own products on the spot, such as towels, utensils and clothes.Some analysts are predicting that
the in-person retail experience may become something else entirely stores like the Gap and Best Buy will simply
become touch-and-feel locations, test centers where people can browse options before getting the actual merchandise
shipped to them at home.
Value propositions ( Low Cost, Differentiation, Niche)
Three of the most widely read books on competitive analysis in the 1980s were Michael Porter's Competitive Strategy,
Competitive Advantage, and Competitive Advantage of Nations.Overall cost leadership requires firms to develop policies
aimed at becoming and remaining the lowest-cost producer and/or distributor in the industry. Company strategies aimed
at controlling costs include construction of efficient-scale facilities, tight control of costs and overhead, avoidance of
marginal customer accounts, minimization of operating expenses, reduction of input costs, tight control of labor costs, and
lower distribution costs. The low-cost leader gains competitive advantage by getting its costs of production or distribution
lower than those of the other firms in its market. The strategy is especially important for firms selling unbranded
commodities such as beef or steel.
The second generic strategy, differentiating the product or service, requires a firm to create something about its product
or service that is perceived as unique throughout the industry. Whether the features are real or just in the mind of the
customer, customers must perceive the product as having desirable features not commonly found in competing products.
The customers also must be relatively price-insensitive. Adding product features means that the production or distribution
costs of a differentiated product may be somewhat higher than the price of a generic, non-differentiated product.
Customers must be willing to pay more than the marginal cost of adding the differentiating feature if a differentiation
strategy is to succeed.

The generic strategies of cost leadership and differentiation are oriented toward industry-wide recognition. The final
generic strategy, focusing (also called niche or segmentation strategy), involves concentrating on a particular customer,
product line, geographical area, channel of distribution, stage in the production process, or market niche. The underlying
premise of the focus strategy is that a firm is better able to serve a limited segment more efficiently than competitors can
serve a broader range of customers. Firms using a focus strategy simply apply a cost leader or differentiation strategy to a
segment of the larger market. Firms may thus be able to differentiate themselves based on meeting customer needs, or
they may be able to achieve lower costs within limited markets. Focus strategies are most effective when customers have
distinctive preferences or specialized needs

2.10 Market Segmentation

Key Products and/or Services
1. Food and Grocery
2. Clothing and Accessories
3. Jewellery
4. Catering Services(F and B)
5. Electronics
6. Pharmaceuticals
7. Home and Office Improvement
8. Entertainment
9. Telecom
10.Footwear
11.Books, music and gifts
12.Beauty and wellness
13.Watches

Regions

Source- www.dnb.co.in

2.11 Buying Criteria Analysis of the Industry

Parameter

Details

Distance from the retail

outlet

Shoppers do not travel long

distances for regular
shopping (15 minute rule)
Brazil(78%), US(74%),
France(70%),China(69%),
Russia(69%), India(64%)

End-user Segments

Significance Attached (Low,

Medium, High)

Shoppers buying food and

grocery and other retail
products
Shoppers buying jewellery,
apparel and electronics
(Indian market)

High
Low

Value and Price

Shoppers choose stores that

provide value. Price
comparison is common.
US (39%), India (39%-KVI)

Emerging markets
Developed Markets
(check value for different and
different number of items)

High
Low

Love for Shopping

Some people see shopping as

a leisure activity while for
others it is just another
chore.

Emerging shopping markets

(India-63%, China-41%)
Mature shopping markets(US,
France)

High
Low/Average

Layout of stores

It should be pleasant for

those who see shopping as a
leisure activity and should be
easier to locate items for
those who see it as just
another chore.
Some shoppers insist on
buying fresh food.
India(unpacked vegetables)
China(seafood)

Emerging shopping markets

Mature shopping markets

Trust on retailers

Shoppers would not prefer

going to stores where they
might feel cheated.

BRIC nations(India-67%,
Brazil & China>60%)
Developed nations

High
Medium

Availability of credit

Availability of credit
encourages shopping at retail
outlets.

BRIC nations(India-33%,
270/400 million workforce is
in Agriculture, Brazil-66.66%)
Developed Nations

High

Freshness(Food)

Depending on cooking habits

Fresh food eaters(regular
food shoppers)
Rest

High
High

High
Low

Low

Specific to the Indian Market:

1. Occasion oriented shopping- Apparel and jewellery is shopped based on occasions, for weddings and during festivals
mostly. 38% Indians agree to this.
2. Service- 65% electronics shoppers would pay extra for better after sales service and warranties.
3. Convenience-64% Indians would pay a little more if it the stores are located as per their convenience.
4. Pre-packaged fresh food-65% Indians would never buy pre-packaged vegetables and 41% would never buy packages
seafood, meat, etc. since according to them that means lack of freshness.
5. Loyalty-More than 60% Indians buy from more than one retail stores.

6. Associating brands with quality- When there is not enough information, Indians buy branded products as they associate
them with better quality.
7. Culture- 75% of womens apparel is ethnic and 85% of jewellery bought is of traditional type. However, this is likely to
change with the majority of population so young.(fusion wear is already in)

2.12 Key trends and future developments

Key Trend

Impact on Industry (Low, Medium, High)

Certainty of Impact (Low probability,

medium probability, high probability)

Personalized customer service

(Be it online or offline, customers tend
to buy from an environment that is
more personalized.)
(86% customers and 96% retailers feel
that personalization has some impact
on buying decision.
Sourcehttp://www.retailtouchpoints.com/

Offline-Positive ambience in stores,

same person assists a certain customer
every time
Online-Personalized email(transaction
rate and revenue generation six times
higher than non personalized email),
language personalization, better
recommendations using proper data
analysis methods, based on geography,
twitter trends
High Impact

High probability

Retail mobile apps

(capable of engaging customers more
than any other promotional tool,
exponential growth in customer loyalty,
greater revenues, better convenience)
Occasion based discounts
(India-Diwali, rakshabandhan,

High Impact
(according to past data)

High probability

High Impact
(retailers can get rid of extra stock by

Average probability

Independence Day,
US-Christmas, New Year)
Source-www.mckinsey.com
Social Media serving as shopping
platforms(Nordstorm and Target
retailers are using Like2Buy platform on
Instagram)
Source:www.vendhq.com
Drawn to retailers who spend on CSR
(makes customers feel good that they
are donating to a noble cause, they feel
they are making a difference)
Giving customers extra perks to gain
loyalty
Insisting on buying from safe and
secure portals(so that customer data is
not leaked)

More ecommerce sites setting up shops

offline
Integration of technology in brick and
mortar stores

Bundle offerings by companies

(Two companies might offer
complementing products at a low cost
in a bundle-low cost, less time)

selling at lower prices, win win for

retailers and customers)
High Impact

High Probability

Average Impact

High Probability

Average Impact

High Probability

High Impact
Eg. Apple Pay, assigns unique Device
Account Number to each phone, which
combined with transaction specific
security code is used to process
purchase-never revealing the PIN
number
Average Impact
Eg. Birchbox opened a physical store in
Soho in 2014
Average Impact
Eg. In London, Gucci set up five super
high resolution displays enabling
shoppers to browse products using
hand gestures in 2014
High Impact

High Probability

Average Probability
Average Probability

High Probability

3 Company Overview
3.1 Company background
1. SHOPPERS STOP
Shoppers Stop Ltd (SSL) is Indias prominent retail group. It offers customers an international shopping environment
and a world-class shopping experience with a wide assortment of national and international brands across categories
such as fashion apparel, accessories, cosmetics, perfumes, home and kitchenware. From a single store in 1991, the
company today is the largest chain of department stores in the country.

3.2 Timeline with key milestones and their strategic impact

1. SHOPPERS STOP

2010

Ups stake in Hypercity Retail (India) Ltd to 51 per cent

2008

Wins Emerging market retailer of the year award at the World Retail Congress

2005

Launches Make-up Art Cosmetics (MAC) and Homestop retail store

2003

Receives IT User award for best IT practices in Retail Category award

2000

Acquires Crossword Indias leading retail book chain

3.3 Vision, Mission, Goals, and Strategic Themes

Vision and Mission- To be a global retailer in India and maintain its No.1 position in the Indian market in the Department Store
category.
Values-

We will not take what is not ours.

The obligation to dissent (against a viewpoint that is not acceptable).
We will have an environment conducive to openness.
We will believe in innovation.
We will have an environment conducive to development.
We will have the willingness to apologise and forgive.
We will respect our customers' rights.
We will create an environment of trust.
We shall be fair.
We will be socially responsible.

3.4 Key Product and Service Portfolio

1. SHOPPERS STOP
Clothing for men, women, and kids; accessories, fragrances, cosmetics, footwear; home furnishing and decor products

3.5 Core Competencies of the firm

1. SHOPPERS STOP
Innovation- New philosophy of "Start Something New" to give retail a new dimension, Start Something New in
performance, Start Something New in products, Start Something New in customer service, Start Something New in Life.

3.6 Business Model of the organization

1. SHOPPERS STOP
Key Partners

Crossword Bookstores
Homeshop
Brio
Desi Caf
Hyper City
MAC
Arcelia

Motivations for partnerships

To get into books, music, stationery, toys
To get into home dcor
To get into foods and grocery
To get into cosmetics
To get into maternity segment
To get into airport retailing

Key
Activities

Value
Propositions

MotherCare
Nuance Group
Hyper City Argos
Timezone
Marketing
Loyalty Programs
Merchandising
Distribution
Innovation

Delivering a unique
experience to customers
Identifying customer needs
Providing unique product
Providing a bundle of services
through sister storeseverything for a great
lifestyle
For upper middle class youth

Customer
Relationship
s

Loyalty Program called First

Citizen

Customer
Segments
Key
Resources

Upper middle class

Fabric, Land, Technology to
produce better products,
Designers, Better transport,
brand patents, copyrights,
analysis of consumer data,

Categories
Production
Customer Retention-Convenience, Experience
Customer Relations
Core Competency
Characteristics
Newness
Customization
Design-Innovation
Brand/Status
Price
Cost Reduction-For company
Accessibility
Convenience/Usability
Card is valid across all the Shoppers Stop Stores*
Parking charges can be reimbursed*
Exclusive Sale Preview*
Exclusive Cash Counter*
Free Home-Delivery of altered garments.*
Instore & Outstore Offers & Discounts*
High standard of living consumers
Small homogeneous groups-geography, income
KEY RESOURCE
Human Resource1. Extraordinarily trained employees to make the experience
better than others, to redefine the shopping experience for
customers.

financial capital
Channels

Cost
Structure

Stores(organized retail)
Airport Retailing

Expensive materials- fabric,

land, technology
Expensive ActivitiesDistribution, creating
experience, training
employees, creating design,
marketing, bringing
innovation
Pay for:
Experience
Innovation
Standard/ Status

Revenue
Streams

2. Designers to create innovative products.

3. Techies to help understand consumer preferences and needs.
Channel phases
1. Airport Retailing is in initial phase with tie up with Nuance Group.
2. More than 73 stores of Shoppers Stop
3. Many more of sister stores mentioned above
VALUE DRIVEN BUSINESS
Targets niche customers with higher standard of living
Sell experience and innovation
Great economies of scope with sister stores
Great economies of scale with increase in number of stores
Fixed pricing-based on market evaluation and can anyway afford
that as they are the market leaders with strategy of
differentiation

3.7 3rd Generation Balanced Scorecard (Amalgamation of 1st Generation BSC and Activity System Map)
1. SHOPPERS STOP
1. Financial Performance
Economies of scale and scope reduces cost
Increasing footfall and loyalty so more revenue
Turnover of more than 19.30 billion rupees
2. Customer
Shopping experience key differentiator

2 million loyalty card holders

3. Internal Business Processes

Better distribution with sister stores
More R&D leading to better designs
Better designs and loyal customers leading to different marketing strategy-low cost and maximum result
4. Learning and Growth
Achieving business vision and mission
Leader in Indian retail

3.8 SWOT Analysis

1. SHOPPERS STOP
1. Strength
a. Increasing footfall and conversion rates
b. Strong Management Team
c. Loyal Customer Base(2 mn loyalty card holders)
d. Shopping experience is the differentiator
2. Weakness
a. Follows low risk strategy
b. Employee Retention
c. Promotional strategies inadequate
3. Opportunity

a. Preferred partner for foreign players

b. Geographical Reach
4. Threat
a. New Entrants as retail is attractive in India
b. Existing competition

3.9 Competitor Analysis (identify competitors)

3.9.1 Based on Critical Success factors
Lifestyle, Globus, Central, Ebony, Pantaloons, Fabindia, Westside

3.9.2 Based on Financial indicators(revenues close to Shoppers Stop based on table shown in Competitive
Landscape)
a. Lifestyle
b. Fabindia
c. Pantaloons

4. Future Growth Strategy for the organization

4.1

Portfolio Analysis

1. SHOPPERS STOP
1. Homestop
HomeStop is the first-of-its-kind premium home concept store at Bengaluru Magrath road and Royal Meenakshi Mall,
Mumbai Malad, Vashi and R-City Mall, New Delhi, Pune, Lucknow, Ahmedabad and Vijayawada offering a wide range
of products and some of the most reputed national and international brands. It is a one-stop-shop for all home needs
ranging from home dcor to furniture, bath accessories to bedroom furnishings, mattresses to draperies, carpets to
modular kitchens & health equipment all under one roof.
2. Crossword Bookstore
Spacious, well laid out bookstores that feature methodical classifications, clear signages, dedicated enquiry /orders
desks and attractive displays along with cafs, reading tables and chairs within the store make Crossword the leader in
the lifestyle bookstore category. It currently has 86 stores. Its unique product mix of books, magazines, CD-ROMs,
music, stationery and toys is further enhanced with services like Dial-a-book and Email-a-book and facilities like gift
vouchers and Return, Exchange & Refunds policy.
Mothercare and Early Learning Centre
Shoppers Stop Ltd. has an exclusive retail arrangement (for the department store segment) with Mothercare PLC of
UK to open & operate shop-in-shops of Mothercare and ELC stores in India within Shoppers Stop stores. Mothercare
is UK's premium international brand for maternity, infant and childcare products. Currently there are 38 stores of
Mothercare (including 6 standalone stores) with a presence in 11 cities.
Estee Lauder Group
Shoppers Stop Limited has entered into non exclusive retail agreement with worldrenowned cosmetics major Estee
Lauder to open M.A.C, Clinique and Estee Lauder stores in India. M.A.C (Makeup-Art Cosmetics) the professional
brand of choice, is the first brand under the Estee Lauder Group of Companies' portfolio to enter the Indian retail
market. Currently, with Shoppers Stop Ltd. there are 20 M.A.C. stores operating in Mumbai, Bengaluru, Delhi,
Amritsar, Chennai, Hyderabad, Pune, Kolkata and Ludhiana. Clinique currently has 10 stores/doors (including 2

standalone stores) and Estee Lauder has 5 stores/doors including 3 standalone stores, one each in Mumbai,
Bengaluru and Delhi.
HyperCity
Shoppers Stop Limited has acquired a majority stake of 51% equity share capital in Hypercity Retail (India) Ltd, thus
making it a subsidiary of Shoppers Stop Ltd. HyperCity operates 12 stores one store each in Ahmedabad, Pune,
Ludhiana ,Amritsar, Bhopal, Jaipur, Navi Mumbai and Hyderabad and 2 stores each in Mumbai and Bengaluru.
HyperCity has redefined the experience of the Indian consumer in the big store format. Its offering includes food
and grocery, general merchandise and apparel. The business operates a More to Discover by-line and delivers
quality product at great value in a bright, spacious, modern environment.
Airport Retailing
Currently has 1 store in Hyderabad domestic airport and 2 stores in Bengaluru domestic airport. 4 duty free stores
are run by the JV Company in the international airport at Bengaluru.
TimeZone Entertainment
Shoppers Stop Ltd. believes that the Indian consumers are looking for multiple options to entertain themselves and
their families. It has forayed into the Entertainment sector by acquiring a 45% stake in Time Zone Entertainment
Private Limited which is in the business of operating Family Entertainment Centres (FECs). TimeZone currently has
17 doors in key cities in India.

4.2

Based on BCG Matrix

1. SHOPPERS STOP
MARKET SHARE
MARKET
GROWTH
HIGH

HIGH

MARKET
SHARE

MARKET
GROWTH

MARKET
SHARE

MARKET
GROWTH

MARKET
SHARE

MARKET
GROWTH

HIGH

LOW

LOW

HIGH

LOW

LOW

STAR

CASH COW

QUESTION MARK

DOG

Louis Phillipe, Adidas, US

Polo

F21, Stop Mens, Levis

Calvin Klein, Esprit

Provogue, Celio

4.3

Companys Strategic Roadmap for future

Near Term (<- 2 years)

Mid Term (2-5 years)

Long Term (5-10 years)

Experience
Crossword, Hypercity,
Timezone
Analyze current consumer
experience and compare with
expectations, possibilities and
competitors
Stronger loyal customer base

Infrastructural innovation
Brio, Homestop, MAC, Nuance
Group airport retailing
Strong financial capital and
state of the art technology
development needed for it

Product Innovation
Desi Caf, Arcelia, Mothercare

Increase in footfall

Enforcing brand image

Rewards

Better customer retention

Brand building

Attracting new customers

Better customer retention

Differentiation
Attracting new customers

Risks

Spending too much and not

getting proportional return

Losing change averse

customer

Losing not ready to

experiment kind of customers

Key Success Factors

Training of employees, their

understanding of each
customer

technology

R&D

Growth Areas
High Level Tasks

Potential Benefits to be
achieved

A good R&D team along with

a good customer relations
team needed

4.4
Country of
Investment

Product Market Investment Strategy

Category of
Investment

Industry
Reward to
Risk Ratio (A)

Country
Reward to Risk
Ratio (B)

Risk Adjusted
Rewards
( 0.65A +
0.35B)

Product Market
Investment Strategy

Investment
Rationale

Which Industry?

Strategic Alliance?

High Profit?
Potential
Market ?

Which
Product/service?

Mergers/acquisitions?
FDI?

Cost
efficiencies?

Ratio calculations based on reward and risk ratings from Business Monitor International Report March 2014

4.5

Re-imagining the Organization with the transformed business model or Use-case based on
SMAC and IOE

Reimagining
Reimagining
Reimagining
Reimagining
Reimagining

Business Models
Business Processes
Customer Segments
Products & Services
Workplaces

Reimagining Channels