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JOINT VENTURE AND

ACQUISITION
Assignment :1

(A REPORT ON JOINT VENTURES


IN APPAREL OR RETAIL SECTOR
IN INDIA)

Sanya Mohindra
Mum13ap11
INTRODUCTION
The Indian retail market is growing at a very fast pace of about 20% and has a
market size of US$ 500 billion. The retail sector is the second largest employer
after agriculture. The retail industry alone managed to generate more than 35
million job opportunities.
The Indian retail industry is segregated into two sectors: organized and
unorganized retailing. Organized retailing comprises of those kind of trading
activities which are undertaken by retailers who are registered for sales tax,
Income tax etc. Corporate backed hypermarkets, retail chains, privately owned
large retail businesses are some of the examples of organized retailing.
Unorganized retailing mainly comprises of local kirana shops, owner managed
general stoes, street vendors, convenience stores etc.
However now it can be seen that traditional markets are paving way for
development of departmental stores, supermarkets, specialty stores. shopping
from malls and buying branded products is also gaining momentum. Inspite of all
this Indian retail sector is mainly dominated by Unorganized segment with 95%
-97& share. The reason for this being deep penetration of this sector in the rural
areas and large number of mom and pop stores in the urban areas.
Some of the key players in the organized retail sector
Pantaloons Retail Ltd, a future group venture
Shoppers Stop Ltd
Spencer Retail, RPG enterprises
Lifestyle, Landmark Group Venture
Other major indigenous players in retailing are Reliance Retail, Bharti Retail,
Globus, Aditya Birla "More" etc.
Many Foreign players have entered India through Joint Venture with domestic
firms like :
Carrefour in New Delhi, which launched its first cash and carry store here.
Wall Mart, joint venture with Bharti Retail, owns Easy Day
British retailer TESCO Plc entered into JV with Trent , retail segment of
TATA group.
Marks & Spencer joint venture with Reliance Retail

TRENDS IN RETAIL INDUSTRY


The new store formats: Including hypermarkets, large supermarkets (35005000 sq ft), mini supermarkets (1000-2000 sq ft) and convenience stores (7501000 sq ft). Penetration of organized retail into the lower income groups and
increasing consumer demand for value-for-money has improved the development
of retail format.

Modern retail formats: The growth of western style malls is changing the way
customers shop. The size of these stores is about 50,000 sq ft.

Shoppers Stop Department Store format


Westside Emulated the Marks and Spencer model of 100 percent private
label

Giant and Big Bazaar - Hypermarket / cash and carry store

Pantaloons and The Home Store Specialty retailing

A new entrant in the retail environment is the discounter format: It is


also known as Cash-and-Carry or Hypermarket. These formats usually work on
bulk buying and bulk selling. RPG group has set up the first discounter in
Hyderabad called the Giant.

FOREIGN DIRECT INVESTMENT IN RETAIL


100% FDI has been permitted, under the government approval route, in single
brand product retailing as per DIPP guidelines. For projects involving FDI beyond
51% it is mandatory to source atleast 30% material from indigenous small and
cottage industries, having a maximum investment of about 5 crores in plant and
machinery.
In multi brand retail Central government has permitted 51% FDI. However final
decision rests with the state government. States that are led by Congress party
like Delhi, Assam, Haryana, Rajasthan foreign supermarkets will be allowed to set
up their ventures. However states led by BJP like Gujarat, West Bengal Kerala etc.
will not permit 51% FDI in multi brand retail.

REASONS FOR THE FAST GROWTH OF RETAIL COMPANIES IN

INDIA:
The retail companies are found to be rising in India at a remarkable speed with
the years and this have brought a revolutionary change in the shopping attitude
of the Indian customers. The Growth of Retail Companies in India is facilitated by
certain factors like Existing Indian middle classes with an increased purchasing power
Rise of upcoming business sectors like the IT and engineering firms
Change in the taste and attitude of the Indians
Effect of globalization
Heavy influx of FDI in the retail sectors in India

SCOPE OF THE INDIAN RETAIL MARKET


The scope of the Indian retail market is immense for this sector is poised for the
highest growth in the next 5 years. The India retail industry contributes 10% of
the countries GDP and its current growth rate is 8.5%.
In the Indian retail market the scope for growth can be seen from the fact that it
is expected to rise to US$ 608.9 billion in 2009 from US$ 394 billion in 2005.
The organized retailing sector in India is only 3% and is expected to rise to 2530% by the year 2010. There are under construction at present around 325
departmental stores, 300 new malls, and 1500 supermarkets. This proves that
there is a tremendous scope for growth in the Indian retail market.
The growth of scope in the Indian retail market is mainly due to the change in the
consumers behavior. For the new generation have preference towards luxury
commodities which have been due to the strong increase in income, changing
lifestyle, and demographic patterns which are favorable.
The scope of the Indian retail market have been seen by many retail giants and
thats the reason that many new players are entering the India retail industry.

PANTALOON RETAILING
The flagship company of Future Group, Pantaloons Retail operates over 16 million
square feet of retail space, has over 1000 stores across 73 cities in India and
employs over 30,000 people. It can boast of launching the first hypermarket Big
Bazaar in India in 2001. The companies also operates in other retail segments
such as - Food & grocery (Big bazaar, Food bazaar), Home solutions (Hometown,
furniture bazaar, collection-i), consumer electronics (e-zone), shoes (shoe
factory), Books: music & gifts (Depot), Health & Beauty care services (Star, Sitara
and Health village in the pipeline), e-tailing (Futurbazaar.com), entertainment
(Bowling co.)

SWOT ANALYSIS FOR PANTALOON RETAILING


Weaknesses
Strengths
High brand equity
Brand embosses
Large variance under one roof
EDLP ( Value pricing)

Opportunities

Management uniform customer


visits
Multi diversified business
No single platform for all the
business needs
No bargaining markets
No interaction of customers for
value pricing
Threats

Increasing interest in organized


retailing
Changing consumer preference
Demographical advantage
Presence of 29 states, 12 different
languages, 72 festivals
Young country- 60% below 30 years of
age
Shut down of Subhiksha

Increasing competitors
Government policies
Unrecognized modern retailing
Local policies
Resistance from small retailer

SHOPPERS STOP
The RPG group forayed into retail with Shoppers Stop, Indias first departmental
store in 2001. It is the only retailer from India to become a member of the
prestigious Intercontinental Group of Departmental Stores (IGDS). They have
signed a 50:50 joint venture with the Nuance Group for Airport Retailing.
Shoppers Stop has a national presence, with over 2.05 million square feet area
across 39 stores in 17 cities. It has also introduced new formats in the market
viz., Home Stop the exclusive home furnishings, decor as well as furniture store
and Hyper City a premium shopping destination for Foods, Home ware, Home
Entertainment, Hi-Tech Appliances, Furniture, Sports, Toys & Fashion. Other
format of the company includes -- Crossword Book Store, Mother Care & Early
Learning Centre (ELC), Estee Lauder group, Airport Retailing, Time Zone
Entertainment.

SWOT ANALYSIS FOR SHOPPERS STOP


Strengths
Variety
Range
Different brands
Pioneer

Weaknesses
Very high prices
Less schemes
Less discounts
Competition from stand alone

Loyal customer
Low risk
Good financial position
Presence across various
segments
Opportunities

Awareness about the brands


Quality
Youngsters
High disposable income
Collaborate
Private levels
Tier 2 and tier 3 cities

Enter new consumer goods


segments

stores
Late entry into value retailing
Store makeover expenditure

Threats

Government policies
Entrance of new players
High attrition
Lesser consumer spending
Entry of foreign players
Unorganized sector

Independent stores

TATA GROUP

Established in 1998, Trent - one of the subsidiaries of Tata Group - operates


Westside, a lifestyle retail chain and Star India Bazaar - a hypermarket with a
large assortment of products at the lowest prices. In 2005, it acquired Landmark,
India's largest book and music retailer. Tatas has also formed a subsidiary
named Infiniti retail which consists of Croma, a consumer electronics chain.
Another subsidiary, Titan Industries, owns brands like Titan, the watch of India
and Tanishq, the Jewellery brand.

SWOT ANALYSIS FOR TATA GROUP

Strengths
Resources and
capabilities
Vast experience
The business model

Weaknesses
Distribution
Value chain innovation
Macro environment
Serving the global markets with high quality
and low price

Opportunities
New markets
Exports

Threats
Indias recent mergers of global markets

Acquisitions

RELIANCE INDUSTRIES
The company owns more than 560 Reliance Fresh stores and recently it has
also launched Reliance Mart Hyper mart. The company further plans to launch its
hyper mart in Delhi / NCR, Hyderabad, Vijay Wada, Pune and Ludhiana region.

SWOT ANALYSIS FOR RELIANCE INDUSTRIES


Strengths
Leading market position
Operational efficiency in refining

Weaknesses

Strong financial performance


Opportunities

Problem with the FCCU


Threats

Increasing long term debt

Joint venture with NOVA chemicals


Acquisition of polyester assests of
Hualon Corporation
Increasing demand for transportation
fuels
Growing demand for petroleum
products

Intense domestic competition


Rising petrochemical supply in
the Middle East
Fluctuating crude oil prices
Economic slowdown in India

ADITYA BIRLA GROUP


The brand portfolio of this group includes brands like Louis Phillipe, Van Heusen,
Allen Solly, Peter England, Trouser town. Also, Madura garments are subsidiary of
Aditya Birla Nuvo Ltd. The recently acquired food and grocery chain of south,
Trineth, has further increased their number of store to 400 stores in the country.
The company also own More supermarkets and hypermarkets. Currently it runs
600 supermarket and nine hypermarkets across India

SWOT ANALYSIS FOR ADITYA BIRLA GROUP

Strengths
Strong brand recognition
Internet sales
Growing international presence
Superior research and
development department
Strong financial returns
Strong sense of culture in the
working environment
Successful experience being
competitive
Effective leadership
Cost leadership
Prestigious client base
Customer loyalty
Diversified business
Product innovation capabilities
Technological excellence

Weaknesses
Complexity of operation
Lengthy processing chain

Good corporate image

Opportunities
Growth of core sector industries
Rapid interaction with global
economy
Booming construction business in
Asia
Growing e-commerce & business
Increasing urbanization

Threats

Entry of global players


Take over possibilities
Political threats
The impact of foreign currency
fluctuation and interest rates

Loss of sales to substitutes