DRIVE SPRING 2016

PROGRAM (MBA)
SEMESTER III
SUBJECT CODE:- ML0018

Q1) Explain the scope and significance of project management in retail.

Retail in India is a mix of organized and unorganized retailing with very high percentage of
unorganized retailing but at the same time rapidly growing organized retailing.
A1) Scope and Significance of Project Management in Retail
The scope of project management is defined in two parts; namely, the business scope and
features (technology) scope. Both these scopes must be documented in a scope management
plan.
Business scope: The business scope defines the desired effects of a new project on the profile
and performance of business. How the product line change will fit the strategic intent and content
of the business, will it affect the current product lines, distribution network, culture, managerial
resources, cost of capital, credit worthiness, client relationship, organisational structure,
equations among people, and many such other impacts, are measured and documented as the
business scope of the project. From the retail considerations; one needs to
think of the kind of business, types of merchandise, potential customers and their profiles,
desired geographic expansion, modes of expansions, and time line of desired milestones.
Features (technology) scope: The features scope defines the project-specific activities and
goals. Targeted output of the project, scale of activities and commitment, time-wise resources
needed, project construction alternatives, execution team and roles and responsibilities of each
sub-team, and many such areas come under the features scope of the project.
Scope management plan: This is a document in which the project scope is defined with the
purpose of communicating with internal and external world. An internal detailed document will
act as a guide for the project team and management, and the external document, which could be
brief but precise, will explain the scope of the project and ensuing benefits to the shareholders
and other external stakeholders.
Understanding the structure of retail in India: Retail in India is a mix of organized and
unorganized retailing with very high percentage of unorganized retailing but at the same time
organized retailing is growing rapidly. Modern retailing in India is cluttered with small as well as
large format stores, meeting different requirements of customers. Organized retail in India
largely consists of formats like malls, Exclusive Brand Outlets (EBOs), Multi Brand Outlets
(MBOs), super markets, departmental stores, hypermarkets, discount stores/factory outlets,
convenience stores, exclusive showrooms, and speciality stores. Retail formats is a fundamental
parameter for any retail set-up. These can be either company-owned or franchisee-owned
businesses.

Types of projects in retail: Project management retail requires basic understanding of various
types of retail management projects. Retail projects can be divided into five basic categories as
follows:
Structural Projects
Investigation Projects
Reengineering Projects
Procurement Projects
Execution Projects
Every project has different goals and objectives, varied ways of dealing, diverse processes and
different evaluation parameters.
Identification of projects in retail: Initiation of any project is based on idea or a concept. This
is the first step towards any project. Many organizations have a separate system for supporting
generation and capturing ideas through various formal-informal systems. These systems can be a
combination of several formal, semi-formal and informal systems. Various ideas generated at
different levels are classified based on pre-decided criteria such as routine or non-routine, capital
or revenue, large or small, strategic or tactical, conventional or non-conventional and others as
per the nature of the organization.
Project formulation and pre-appraisals in retail: Generation of an idea is followed by
formulation of the project. Franchise business model has gained huge popularity in retail
industry. In depth understanding of financial commitment, and skills for assessing market and
technical and managerial appraisals required in a retail project.
Project planning in retail stores: The project failures could be due a multitude of reasons, but
generally, this can be said to be a mismatch between expectations and reality of execution in a
fast changing environment, with many factors outside the control of the organization. This could
result in either functional or operational failures. The detailed project planning is done once the
appraisals give green signal to go ahead. Every project carries risk of different nature.
Project scheduling in retail: A project is an amalgamation of numerous activities. Many of
them depend on each other and are quite varied in nature, thus requiring different expertise. A
detailed project report is a complete blueprint of project network, resource planning and
budgeting and organization for implementation. It also deals with preparation of detailed project
report and imparts an understanding of critical areas concerned for successful retail store.
Project execution in retail stores: After the capital is allocated and a detailed retail project
report is prepared with network diagrams and resource allocation, the firm is ready to start
executing the plan. In this chapter, retail project execution and control is examined. Real and
visible retail project activities begin after the detailed retail project report, with a blue print of
implementation, is prepared. Important functions such as timely review of various activities,
monitoring and control and handing over the retail project after completion,
Project lifecycle in retail stores: Retail projects are generally executed over a long period of
time and performed in phases. Each phase indicates completion of specific work towards

accomplishing the project goals and objectives. Hence it is important for every retailer to
understand the life cycle of the project and take as stock of each of such phases and events and
refer it to logical sequences of activities for achieving success in the retail project. Unit 10
elucidates various stages of project life cycle in retail stores with the understanding of each phase
and its importance. These phases are:
Concept stage
Analysis stage
Planning stage
Execution stage
Completion stage
Project expansion in retail stores: A firm can grow in the form of sales, profits or assets which
constitutes the growth cycle. Firms should grow to stay competitive. They can grow bigger and
better by enhancing economies of scale. Firms grow either in terms of diversified product lines
or markets by careful strategic planning.
Human resources and project management: Human resources are critical assets for the
success of any retail project. Human resource management (HR) of a retail project aims to make
the most effective use of skills and expertise of personnel involved in a project. The project team
and the sub-teams deal with day to day challenges of constrained resources, conflicting
schedules, stress from various levels of management, cross functional politics and many more.
Project HR strives to build a team that can efficiently handle the project till its successful
completion under a dynamic leadership.
Project risk management: Project risk management is a process to know the relative risk
involved in different alternative approaches so that the project team can take an informed
decision in meeting or exceeding determined objectives of the project.
ICT in retail: ICT is a huge term which takes into consideration all the aspects ranging from
systems, devices and services used for data processing and transmission, telecommunications, all
related services, and equipment utilized for such functions.
Project quality management: Project Quality Management includes all activities of the overall
management function that determine the quality policy, objectives, and responsibilities and
implements them by means such as quality planning, quality control, quality assurance, and
quality improvement, within the quality system.
Q2) What is a hypermarket?
Hypermarkets aim to meet the needs of large middle-class segment of India who are extremely
price sensitive.
A2) This format aims to meet the needs of large middle-class segment of India who are
extremely price sensitive. These stores are characteristically large, generally occupying area
around 40,000 sq.ft. and are usually located outside the city limits. Hypermarkets primarily cater

to daily necessities and grocery items at highly competitive rates. Sales promotions and products
on discount is a regular trend in these stores. For example, Reliance Hypermart.
Q3) Explain how projects are classified.
A suitable classification of projects gives a solid logic for building a system for effective
decision-making.
A3) Classification of Projects
A suitable classification of projects gives a solid logic for building a system for effective
decision-making. Classification of projects is the pre-requisite for creating an effective system of
project planning and execution. Issues related to the process of handling project proposals,
various authorities involved in the process and their powers and duties.
Project classification is helpful in determining at what level a given type of project
proposal will be handled and at what depth the analysis will be done. Below table gives the basis
of project classification and their objectives.
The above table gives an idea about various ways in which retail projects can be viewed and
divided. It also gives direction as to the extent a project needs attention from central level or
whether it can be delegated at local level or not. However, different projects are treated
differently at different organizations as per its strategic value and philosophy. One may observe
that a single project can fall into over two to three different classifications e.g. Opening up of a
new store requires decisions pertaining to occurrence as well as size and also nature of the
project if it deals with acquisition or requires R&D. Understanding of nature and classification of
projects helps in making the entire process more effective and efficient with right understanding
of objectives and decision making. Categorization of schemes also changes as per the changing
focus of business. Strategic thrust areas are reflected in the categorization of the schemes.

Q4) Discuss the financial compensation and rewards in relation to project human
resource management.
Compensating the employees involved in the project team is one of the important functions of
project HR.
A4) Financial Compensation and Rewards
Compensating the employees involved in the project team is one of the important functions of
the project HR. Insufficient compensation may lead to low morale and de-motivated employees.
The compensation function for the project management is generally separated from the routine
organization compensation activities as the project involves employees with special skills, many
times with dual responsibilities for the activities having severe deadlines and work pressures.

The projects are for limited period and so as the tenure of employees involved in it. Hence,
compensation for the employees involved in the project has to be uniquely designed in a way that
it attracts and motivates the employees with particular skills and abilities.
4.3.1 Issues in Project Compensation
The project HR faces certain unique issues while managing compensation for the project. They
are as follows:
Difficulty in establishing job routine: The responsibilities of team members in the project are
highly dynamic and volatile. It becomes very difficult for the project HR to establish a job
routine for project employees as base for calculation of compensation.
Multiple reporting of project team members: The performance of the project employees is
very difficult to be judged by project HR since many project employees have dual
responsibilities and are reporting to multiple heads. In such scenario, assessment by which
superior becomes a crucial decision while assessing the performance of the employee. Many a
times, the local reporting boss has a much higher say in judging the employee, as he is in day-today contact with him.
Rewards and recognition: Projects are generally group efforts; hence, it becomes difficult to
quantify performance criteria for rewards and recognition.
Non-routine situations: The projects are for a shorter period and many times away from home
of the employees. Hence, employees have to travel excessively and stay away from home for a
longer period. These conditions have to be considered while deciding on compensation for
project employees.
Adverse environment: In most retail project work, many project team members have to work
in an environment that may be unfriendly. Hazardous, non-constant, action-oriented and
uncertainty-laden environment of project work has to be compensated differently. The project
HR has to provide specific guidelines for compensation systems for the project employees.
Generally, the criteria are based on job classification, basic pay and performance appraisals. Job
classification explains the basic character of the job where overall responsibilities and specific
duties incorporated. Based on the details of job classification, qualification required for the job
and compensation to be provided for the job are decided. Deciding upon incentives is one of the
most critical tasks for the project. Insufficient compensation and incentives can fail in attracting
good pool of talent for the project whereas higher budget for compensation can lead to increase
in the cost of the project. In such scenario project HR provides with a range of compensation
which leaves a room for negotiation with the prospective team members. Performance appraisals
are also dealt with differently at project level as the period and the work involved in the project
are unlike regular functions of the organization. In the project, the performance appraisal system
is based on content, measurability and source of information. Many times practices have to be
modified to assess jointly performed responsibilities. Special recruits for project will have
chance to negotiate the compensation and benefits. Still they would require incentives for
performance. Internally sourced manpower and their compensation will remain a tricky issue.
They continue drawing compensation for their main job in the functional area, but without
compensating them for this special task the project may not fulfil its objectives.

Special pay, one-time compensation, liberal allowances and facilities may be considered to keep
them motivated to work in a project environment which is demanding and usually unfriendly.
The important decision lies in the authority that will take care of performance appraisals. In the
case of dual responsibilities, it is important to take into consideration inputs of both the
authorities. Such situations are common for project personnel.
Q5) What are the basics of franchising?
The foremost benefit of the franchise business model is the brand name of an already established
and credible organization, the support received in setting up the whole unit, quality standards and
procedures to maintain such quality and so on.
A5) Retail Project Formulation for Franchise Business
Franchise business model has gained huge popularity in the retail industry. From food to apparels
to electronics and in every other retail sphere franchising has been a proven way to realize an
entrepreneurial dream. Fast food industry is topping the list in the franchise industry. This section
will provide basic understanding of the franchise business and the evaluation process before
investing in a retail franchise business.
Basics of Franchising
The foremost benefit of the franchise business model is the brand name of an already established
and credible organization, the support received in setting up the whole unit, quality standards and
procedures to maintain such quality and so on. There are two parties involved i.e. franchisor,
who sells the right to use its business trademark/name or service mark or any other commercial
symbol of the company for lump sum amount called as franchisee fees. In addition also charges
ongoing royalty fees popularly on monthly gross sales. The other party is the franchisee who
invests money with franchisor for an established name and business. However, no business is
without dark side. Hence understanding of positives and shortcoming of this business is very
important
Attractions of franchise ownership: Obtaining franchise ownership is like buying a
readymade business proposition as compared to starting a retail business from ground zero. In
most cases the franchising business model has tasted success is due to the relation between
franchisor and franchisee. Here, the franchisor acts as a mentor in setting up and running the
business successfully. Support is provided by franchisor at various stages including location
selection, off and on site training, advertising and in quite a number of cases even protection in
territory by not allowing any other franchisee in a specific trading area. The biggest advantage is
third party financing recommendation by franchisor.
Drawbacks of franchise ownership: The biggest drawback of franchise is the need to follow
the guidelines of the franchisor which most of the times result into dictations broadly in the areas
like layout of the store, lighting, paint colours, flooring, inventory requirements, equipment/tools

and many more. Hence, in spite of making all the capital investments and other start up costs,
franchisee is required to not only make one time franchisee fees and monthly royalty on total
sales but also act according to the directions given by the franchisor. In the franchisee business
model, franchisor lets out various franchisees. Hence, numbers of retailers are doing business
using the same trade name. In such scenario, one franchisee not operating well may affect the
goodwill of the trade name and, eventually, the entire franchisee system gets distressed.

Franchise Evaluation Process

To safeguard from drawbacks and benefit from the positives, it is necessary tothoroughly
research and evaluate the franchise options before making a purchase. Following are the steps for
systematic approach to the decision process: Preliminary enquiry, Formally obtaining
information from franchisor, Meetings, Evaluation, Decision
Preliminary enquiry: In the sphere of retail industry franchise business opportunities are
vastly available. The preliminary inquiry can be made through various secondary sources,
visiting trade shows related to franchise business opportunities at national or international level
etc. It is advisable to first short list five to ten franchise opportunities that look lucrative and
affordable. A due-diligence process can then be followed for these short listed franchise
businesses by collecting all information available about each business.
Formally obtaining information from the franchisor: One has to formally obtain
information from the franchisor whose business is of interest after preliminary inquiry. In this
process, potential franchisee is also asked to furnish necessary information before exchange of
information from the franchisors end.
Noteworthy information from the franchisees point of view: From the viewpoint of the
probable franchisee, terms and conditions, available territories, support provided by the
franchisor in terms of training, advertisements, success of other franchisees, history of the
franchisor are some of the important aspects to be checked. It is extremely important to check the
financial stability and strength of the franchisor. Financial strength is a confirmatory parameter
for consistency and growth of the franchisor.
Noteworthy information from the franchisors point of view: From the franchisors
perspective, he is handing over his reputation to the probable franchisee in the form of trade
name. Hence, it becomes important for him to make sure about the desire and skill set needed to
succeed in business lies with franchisee. The basic business skills, franchisees access to
sufficient capital, willingness to learn and invest not only money but also time are some more
critical factors for success.
Meeting with other franchisees: After satisfactory meetings and interactions with franchisor,
the probable franchisee should meet with existing franchisees to learn about their experiences,
problems and issues if any. The existing franchisees will be in a better position provide

operational whereabouts such as involvement of the franchisor in day to day operations, number
of required working hours, flexibility and authority in decision making, staffing issues.
Evaluation: The gathered information now needs an evaluation to take a decision. The
probable franchisee must sit with all the data and evaluate negative and positive aspects about
the opportunity. One must consider matters related to finance requirements, relocation
requirements etc. as crucial decision-making points. Reckoning a long-term perspective
provides a better edge to the decision.
Decision: It is important to narrow down on a decision, keeping in mind the core idea of doing
a particular business. Now the probable franchisee should solicit advice from lawyer to review
the franchise agreement, accountant to review financials and banker for financial assistance.
Q6) Explain financial appraisal.
Financial assessments are part of a retail organizations regular
management practice.
A6) Financial Appraisal
Financial assessments are part of a retail organizations regular management practice. It is also
done at the preliminary stage of project idea and evaluation during the formulation of a project.
The process is then taken further with the reviews of senior management and peer review in few
cases. Financial appraisals are done before asset distribution decision is taken.
Financial appraisal is the centre document for the organization or the financing agency of a retail
project. In this appraisal, financial viability is measured. Based on financial appraisal report, the
organization or the financial institution takes the decision of whether or not to finance the
project. Hence, it is essential to note that financial appraisal is the most important step in
developing as well as purchasing a retail project.
Various methods of evaluation of the capital budget have been in practice as per the needs and
situations. The list of various capital budgeting techniques and their variants are as follows:
(i) Accounting method
(a) Accounting ratios
(b) Accounting Rate of Return (ARR)
(ii) Cash flow methods
(a) Non discounted method
(i) Pay Back Period (PBP)
1. Reciprocal of PBP
2. Life PBP
3. Modified Payback Period (MPBP)
4. Discounted PBP
(b) Discounted Cash Flow (DCF)
(i) Net Present Value (NPV)

1. Profitability Index (PI)

2. Net Terminal Value (NTV)
3. Share Price Appreciation Rate (SPAR)
(ii) Internal Rate of Return (IRR)
1. Terminal Rate of Return (TRR) or Modified IRR (MIRR)
(c) Special DCF methods
(i) Economic Rate of Return (ERR)
(ii) Social Rate of Return (SRR)