Strategic

Analysis of
Retail Industry
Presented By:
Chandrashekhar Sharma (16/MBA)
Prashant Agarwal (34/MBA)
Rohit Pandey (41/MBA)
Sumit Chahar (48/MBA)
Varun Gupta (54/MBA)
 Table Of content
S No. Topic Slide No.
1. Introduction 3
2. Porter’s Five Force for Retail Industry 18

3. Tesco – UK Retail Giant 25

4. Big Bazaar – Indian Retail Giant 35

5. Wal-Mart – World Retail Giant 45

6. References 56
Introduction

Retail Industry
 Contd..
Retailing consists of the sale of goods or
merchandise from a fixed location, such as a
department store, boutique or kiosk, or by mail, in
small or individual lots for direct consumption by
the purchaser.

In commerce a retailer buys goods or products in

large quantity from manufacturer or importer,
either directly or through a wholesaler and then
sells smaller quantity to the end user. Retailers are
at the end of the supply chain.
 Global Retailing
The top 20 Retailers alone contribute for 30% of
worldwide demand. Retail sales are generally
driven by people’s ability (disposable income)
and willingness (consumer confidence) to buy
goods and services.

Positive forces at work in Retail consumer

markets today include high rates of personal
expenditures, low interest rates, low
unemployment and very low inflation.

Source:- Wikipedia
 Top Retail Players
Rank Name of Company Country Format

1. Wal-mart U.S. Discount, Warehouse,

Supermarket, Hypermarket

2. Carre Four France Convenience

, Discount, Supermarket,
Hypermarket
3. Royal Ahold Netherlands Cash&Carry, Discount,
Supermarket, Hypermarket
, Drug, Convenience

4. Home Depot U.S. DIY, Specialty

5. Kroger U.S. Convenience

, Discount, Supermarket,
Hypermarket
 Various Formats in Retailing
 Supermarkets - sell mostly food products;

 Department stores - very large stores offering a huge assortment of "soft" and "hard
goods";

 Discount stores - tend to offer a wide array of products and services, but they
compete mainly on price;

 General merchandise store - a hybrid between a department store and discount

store;

 Warehouse store - low-cost, often high-quantity goods piled on pallets or steel

shelves

 Variety store or "dollar store" - extremely low-cost goods, with limited selection;

 Demographic - retailers that aim at one particular segment (e.g., high-end retailers
focusing on wealthy individuals).
 Indian Retail Industry

 The Indian retail industry is divided into organized and

unorganized sectors.

 Organized retailing refers to trading activities undertaken

by licensed retailers, that is, those who are registered for
sales tax, income tax, etc.

 Unorganized retailing, on the other hand, refers to the

traditional formats of low-cost retailing, for example, the
local kirana shops, owner manned general stores,
paan/beedi shops, convenience stores, hand cart and
pavement vendors, etc.

Source:- Report by Corporate

Catayst India
 Contd..
India’s retail sector is wearing new clothes and
with a three-year compounded annual growth
rate of 46.64 per cent, retail is the fastest
growing sector in the Indian economy.

The Indian retail sector is highly fragmented

with 92.5 per cent of its business being run by
the unorganized retailers like the traditional
family run stores and corner stores.

Source:- Report by Corporate

Catayst India
Source: Ernst &Young, the Great Indian Retail Story, 2006

Comparative Penetration of
Organized Retail

Source Ernst & young Survey 2009

 Contd..
On one hand where markets in Asian giants like
China are getting saturated, the AT Kearney's
2009 Global Retail Development Index GRDI),
for the second consecutive year Placed India
the top retail investment destination among the
30 emerging markets across the world.

Over the past few years, the retail sales in India

are hovering around 33-35 per cent of GDP as
compared to around 20 per cent in the US.
 Retail Sector in INDIA

 Number of Person Employed 21 million

 Estimated Number of new jobs in next 2 years 02 million

 Space occupied by Traditional Retailers 100-500sq feet

 Space occupied by Emerging Retailers 35mn sq feet

 Opening of Malls in 2007 114

 New Malls under construction 361

 Space occupied by Malls 117mn sq feet

 New investment by 2011 30 billion

Source :-Economist,2007
 Entering of Big Players

Large Indian players like Reliance, Ambanis, K

Rahejas, Bharti AirTel, ITC and many others are
making significant investments in this sector
leading to emergence of big retailers who can
bargain with suppliers to reap economies of scale.

As of now i.e. before July, 2010 the Government

has allowed only 51 per cent FDI in the sector to
‘one-brand’ shops like Nike, Reebok etc and 100
FDI in Cash and Carry Store.
 Current Status
 India’s retail industry accounts for 13 percent of its
GDP and 8 percent of the employment to reach $17
billion by the end of 2010.

 The BMI India Retail Report for the third-quarter of 2010,

forecasts that the total retail sales will grow from US$ 353
billion in 2010 to US$ 543.2 billion by 2014.

 China and India are predicted to account for almost 91 per

cent of regional retail sales in 2010 and by 2014 their share
of the regional market is expected to be more than 92
percent.
 Contd..

According to a McKinsey & Company report

titled 'The Great Indian Bazaar: Organized
Retail Comes of Age in India', organized retail
in India is expected to increase from 5 per cent
of the total market in 2008 to 14 - 18 per cent
of the total retail market and reach US$ 450
billion by 2015.
  
Organized Retail Penetration
across categories (%)

Source:- E& Y the Great Indian

Retail Story,2009
 Contd..
As noticed in the figure above, the Organized
Retail Penetration (ORP) is the highest in
footwear with 22 per cent followed by clothing.
Though food and grocery account for largest
share of retail spend by the consumer at about 76
per cent, only 1 per cent of this market is in the
organized sector. However, it has been estimated
that this segment would multiply five times taking
the share of the organized market to 30 percent in
the coming years.
Porter’s Five Forces Model
Porter Five Forces Model for
Retail Sector
1st force - Threat of New Entrants
 Favorable supply contracts

 Coordination with customer and supplie

 Presence over wide regions

 Competitive and profitable

Government regulation
Moderate

2ND Force – Bargaining Power of Suppliers

 Fragmented supplier industry

 Strong brand powers of retailers

 Distribution capability of stores

 Ability to sell and display favorable products

LOW
3rd Force – Bargaining Power of Buyers

 Almost similar product line

 Collective power high but Individually low

 Bargaining with salesman is difficult

Moderate
4th Force – Threat of Substitute Products or Services

 Local Bazaar or independent retail outlets

 E- shopping/Retailing

 Brand manufacturer with retail outlet

 Restaurants

Low
5th Force – Rivalry Among Existing Competitors

 Slow market Growth

 Cutthroat price competition

 Customer loyality

 Major players fighting with coat tailing

 Cost of switching is not high Intense

Company
Logo

Tesco Plc
Every Little Helps
 Company overview
Tesco’s
Tesco’sisisaaUnited
UnitedKingdom
Kingdombased basedinternational
international
supermarket
supermarketchain.
chain.ItItisisthe
thelargest
largestBritish
Britishretailer
retailer
both
bothby
byglobal
globalsales
salesand
andby bydomestic
domesticmarket
marketshare.
share.
Established
Establishedinin1924.
1924.
Tesco
Tescoisisthe
theFourth-largest
Fourth-largestretailer
retailerininthe
theworld
worldnext
nexttotoWal-
Wal-
Mart,
Mart,Carrefour,
Carrefour,The
TheHome
HomeDepot,
Depot,Inc Incand
andisisoperating
operatingaround
around
2,440
2,440stores
storesand
andemploying
employingover
over4,00,000
4,00,000people
people
www.Tesco.com
www.Tesco.comisisrecognized
recognizedasasthe
theworld’s
world’slargest
largest
online
onlinegrocer,
grocer,with
withaacustomer
customerbase
baseofoflittle
littleless
lessthan
than
11million
millionand
andmore
morethan
than250,000
250,000orders
ordersaaweek.
week.

Tesco’s
Tesco’smarket
marketshare
shareofofUK
UKretailing
retailingisis30%.
30%.
 Contd..
Tesco
Tescohas
hasmoved
movedinto
intoareas
areassuch
suchasasclothes,
clothes,
consumer
consumerelectronics,
electronics,consumer
consumerfinancial
financialservices,
services,
internet
internetservices,
services,consumer
consumertelecoms
telecomsand
andgas
gas
stations.
stations.
Tesco
Tesconow
nowcontrols
controlsover
over30%
30%ofofthe
thegrocery
grocerymarket
market
ininU.K.
U.K.

As
AsofofMarch
March2008,
2008,Tesco
Tescohave
haveaastore
storeininevery
every
postcode
postcodeofofthe
theUK.
UK.
1960 1970 1980 1990 2000
 SWOT Analysis
Strengths Weakness
•Increasing market share
•Reliance upon the UK market
•Strong hypermarket portfolio
•Tesco online •Signs point to serial acquisitions
•Brand value •Weaker span of control
•UK market leadership reinforced
•Size allows for competitive buying terms

Opportunities Threats

•Non-food retail •UK structural change could spark a

•Health and beauty price war
•Enter new Asian markets •Overseas returns could fall
•Strategic alliances with local firms •Challenging international competition
•Move towards premium
 Porter’s Five Forces Model of Tesco
Threat of
New Entrants
(Medium)

Bargaining Power Rivalry Among Bargaining Power

Of Suppliers Competitors of Buyers
(Low) (High) (Medium)

Threat of Substitute
Products
(Low)
 Contd..
Threats of New Entrants- Moderate
 Tesco, Asda, Sainsbury and other supermarket chains put up
considerable barriers to entry. (around 70% market share).

 Majority of large chains have built their power due to operating

efficiency, one-stop shopping and major marketing-mix expenditure.

 It becomes rather difficult for new entrants to raise sufficient capital

because of large fixed costs and highly developed supply chains.

 Economies of scale and differentiation, product development,

promotional activity and better distribution.
 Contd..
Bargaining Power of Suppliers- Low

 There is little threat as often large supermarkets dictate the

price they pay to the supplier.

 Suppliers are also threatened by the growing ability of

large retailers to source their products from abroad at
cheaper deals.
 Contd..
Bargaining Power of Buyer - Medium
 Buyer power also acts to force prices down.

 Porter theorized that the more products that become standardized or

undifferentiated, the lower the switching cost, and hence, more power
is yielded to buyers.

 Consumers also have become more aware of the issues surrounding

fairer trade.

 Ecologically benign and ethically sound production of consumer.

 Crucial change in food retailing has occurred due to a large demand of

consumers doing the majority of their shopping in supermarkets.
 Contd..

Threat of Substitute Products - Low

 Tesco competition from other supermarkets which can

provide substitute goods drives the prices of both
companies down.

 In the grocery industry this can be seen in the form of

product-for-product or the substitute of need.
 Contd..
Power of Competitor - High

 Competitive Rivalry is considered a high threat and are

people like Amazon and Asda including other supermarkets
and non-food retailers who are involved in the same concept

 Operating in a mature, flat market where growth is difficult

and consumers are increasingly demanding and sophisticated.

 Innovation can be seen in the development of a range of

trading formats, in response to changes in consumer
behaviour.
Big Bazaar
 Big Story Future’s glory
 A chain of shopping malls in India currently with 31
outlet owned by Kishore Biyani’s Pantaloon Group.

 Provides the best products at the best price.

 Reflect the look and feel of Indian bazaars at their modern

outlets .

 All over India, Big Bazaar attracts a few thousand

customers on any regular day.
 Target Audience
 Big Bazaar targets higher class and upper middle
class customers .

 The large and growing young working population

is a preferred customer segment.

 Big Bazaar specifically targets working women

and home makers who are the primary decision
makers.
Product Mix

40
Contd..
ELECTRONICS FASHION & FURNITURE CHILD CARE &
OTHER SERVICES
BAZAAR JEWELLERY BAZAAR TOYS

• Television sets •Footwear Bazaar •Living Room •Kids Wear •Mr. right
• Washing Machines •Beauty Care •Bed Room •Toy Bazaar •Bakery
• Refrigerator •Navara •Kitchen •Stationary •Loot Mart
• Personal Care •Star Parivar •Dinning Rooms •Child Care •Tulsi
• mBazaar •Meena Bindre •Kids Room •Future Money
• Microwaves •Been Bags •Future Generally
• Small Appliances •Paintings
•Decorative Items
• Laptops
• Computer
Accessories
• Kitchen Appliances

41
Positioning
High
service

Low price High

price

low 42
service
Porter’s Five Force Model

43
Analysis
5 Forces Analysis
Rivalry among the •Reliance Retail, Aditya Birla Group , Vishal Retail’s, Bharti
competitor and Walmart, etc
Threat of new • FDI policy not favorable for international players.
entrants • Requirement of high amount of capital 

Bargaining power •The bargaining power of suppliers varies depending upon

of supplier the target segment.
•The un-organized sector is still strong.
• There are few players who have a slight edge over others on
account of being established players and enjoying brand
distinction.
Bargaining power • Consumers are price sensitive..
of buyers •Availability of more choice.
Threat of •Unorganized retail
substitutes
44
Introduction
Established by Sam Walton, in Arkansas in 1962.

7,800 stores globally, having over 2 million associates and

covering 16 countries, serves 176 million customers every
week.

In China, retail operations in 1996 with the opening of a

Supercenter and Sam’s Club in Shenzhen.

No.1 on Fortune 500 list with highest revenue and profits

in the merchandise segment and highest growth rate in
industry.
 SWOT Analysis
Strengths Weakness
 Established name brand  Litigation from employees
 Wide network of stores  Negative publicity
 Organization is able to buy in bulk  Dependence on Chinese supplier
 Large portfolio  Keeping poor performance employees
 World’s largest revenue
 Powerful logistics and supply
network

Opportunities Threats
 Mergers & Acquisitions  Political system
 Expanding consumer markets  Bad media exposure
 Economic downturns
 More discounts to customers
Porter’s Five Forces Model
 Porter’s Five Forces Model
Threats of New Entrants - Moderate

 Grocers could potentially enter into the retail side.

 Wal-Mart has an outstanding distribution systems,

locations, brand name, and financial capital to fend off
competitors.

 Walmart often has an absolute cost advantage over other

competitors.

 Large financial structure and strong debt condition makes

Walmart more aggressive against new players
 Porter’s Five Forces Model

Bargaining Power of Suppliers - Low

 Offer a lot of business to manufacturers and

wholesalers.

 Supplier Relationship

 Vertical Integration
 Porter’s Five Forces Model
Bargaining Power of Buyer - Low

 Individual buyer have no pressure on Wal-Mart.

 Porter theorized that the more products become

standardized or undifferentiated, the lower the switching
cost, and hence, more power is yielded to buyers.

 Consumers also have become more aware of the issues

surrounding fairer trade.

 Wal-Mart’s pricing techniques

 Porter’s Five Forces Model

Threat of Substitute Products - Low

 When it comes to this market, there are not many

substitutes that offer convenience and low pricing

 Online shopping proves another alternative because it is so

different and the customer can gain price advantages
because the company does not necessarily have to have a
brick and mortar store, passing the savings onto the
consumer.
Porter’s Five Forces Model

Competitive Rivalry – Intense

 Currently, there are three main incumbent companies that

exist in the same market as Wal-Mart: Sears, K Mart, and
Target.

 Mature industry life cycle

 Price and promotion wars has been a prime factor in

competition wars.
 References
• Wal-Mart remains largest global retailer, according to
Deloitte survey

• On competition By Michael E. Porter, 2008, Pg. no. 4 Ch-

What are five forces of competition.

• Tesco Online Portal

• Big Bazaar Web Portal

• Wal-mart Web Portal

Any queries!!