A Drive for Consolidation and Building Core Competencies

A study on how an Indian Conglomerate and the Retail and Telecom Sector consolidated and built competencies
5/15/2013 PGPM912 ACAD GRP 8 DIV A DEEP DEY AJIT MISHRA EDWARD MARTIS ASHWIN LALCHANDANI ADIT PAUL DEBNATH ROYCHOWDHURY

................................................................................................................................................. 10 How Consolidation can complement Core-Competencies? ................................................................................................................................................................................................................................................................................................................................ 2 The Tata Group Post Liberalization – A quantum leap ................................................................................................................... 13 Recent Developments ................................................................................................................................................................................................................................. 5 Evolution of the Tata Group post liberalisation ........................ 9 Drivers for Consolidation in Indian Telecom Sector......................... 6 The Indian Telecommunication Sector ................................. 11 Mergers and Acquisitions ................................................................................................... 12 Regulatory Changes .................................................................................... 14 Introduction to Indian Retail ................. 16 Product Differentiation – Key to success ........ 15 Strategies for Core Competence and Competitive Advantage ..................................................................................................................... 2 Core Competency – A definition ........................................................................................................Table of Contents Report Objective .......................................................... 17 Specialty Retailing .............................................................................................................................. 17 Signs of Consolidation in the Retail industry in India .......................................................................... 15 Challenges ................................................................................................................................................................................... 4 Brand Management .............................................................................. 18 Conclusion ............................................................... 18 1 ............ 3 Consolidation ......................................... 3 Globalization and Acquisition Strategy ...........................

A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage). a reliable process. At the same time.Report Objective Indian Conglomerates have evolved from being local giants in the days of the License Raj to internationally recognized global brands. 2 . It may also include product development or culture such as employee dedication. Thus. it is said to be a sustainable competitive advantage. including technical/subject matter know how. a competitive advantage enables the firm to create superior value for its customers and superior profits for itself. responsible for this remarkable transformation against the backdrop of the following:    Evolution of the Tata Group Evolution of the Indian Telecom sector Evolution of the Indian Retail sector Core Competency – A definition A core competency is something that a firm can do well and that meets the following three conditions specified by Hamel and Prahlad (1990):    It provides customer benefits It is hard for competitors to imitate It can be leveraged widely to many products and markets. If a core competency yields a long term advantage to the company. the core industrial sectors such as Telecom and Retail have also evolved in parallel from being a closed sector apprehensive of growth to a more globally integrated market. 1998). or deliver benefits that exceed those of competing products (differentiation advantage). and/or close relationships with customers and suppliers (Mascarenhas et al. A core competency can take various forms. Modern business theories suggest that most activities that are not part of a company's core competency should be outsourced. The objective of this report is to explore one of the underlying themes – drive for consolidation and building of core competencies.

power.unstructured. while nine companies operated in the IT space. Management consultancy McKinsey was brought on board to help with the reorganisation.The Tata Group Post Liberalization – A quantum leap The Tata Group has. five were involved in pharmaceuticals. It all started in 1991 when post liberalisation taking the newly-opened economy into account. changed more than ever before in its long and illustrious history. followed. took greater control of the other Tata companies. Ratan Tata implemented a three-part strategy. The remnants of the era of government controls combined with independent functioning of group companies in past decades could be seen in the way the group had grown till then -. entering new ones. but now there is a method to the business expansion. It functions as a cohesive unit. with overlapping business across multiple companies. Tata set about streamlining with a vengeance. cement. It was a threat because Tata was vulnerable That meant rationalising the Tata business structure. manufacturing breakthrough products and expanding into foreign markets are among the initiatives the Group has undertaken with vigor during this period. One of his first acts was to sell Tomco. He focused the group on six industries that have provided most of its revenues since 2000—steel. the Tata group shifted its focus to technology-driven leadership. there were three group companies manufacturing cement. over the past decade-and-a-half. global competitiveness and being among the top three domestically. Ratan Tata undertook a program of consolidation followed by an ambitious global acquisition program. and increased the Tata Group’s revenues 40-fold from 1991 to 2009. His attempts to sell companies he 3 . To achieve these goals. Tata Sons' gradually rebuilt its ownership stake in the core Tata companies. Liberalization was both an opportunity and a threat. the consolidation of the Tata group post liberalization is explained in greater detail in the sections below. As a result. information technology (IT) and hotels—and increased its often paltry shareholding in these core businesses. When Ratan Tata took over. telecoms. regardless of the line of business. It was an opportunity because it set Tata free: the economy had been so tightly regulated that you could be fined or even imprisoned for exceeding your output quotas. swift exits from pharma and textiles and. motor vehicles.Mr. Consolidation In response to the challenges the Tata Group faced in the 1990s. later. he shook up the Tata Group's portfolio of companies. First. Rejuvenating existing businesses. The Tata Group is still a diversified. salt-to-software group. announcing a goal that all Tata companies would be in the top two or three in their respective industries.

He persuaded the companies to impose a mandatory retirement age of 75. Globalization and Acquisition Strategy Though Ratan Tata aimed to reduce the number of Tata companies and the number of industries they operated in.00% 20.30% 33.00% 15.30% 30. and cement.00% 5. Ratan Tata brought about important leadership changes at the Tata companies.80% Third. forcing out the "satraps" of his predecessor's era . He financed this consolidation with the proceeds of selling other business and with a private issue of Tata Sons stock to the Tata companies.00% 0.00% 10.30% 1. he began to increase Tata Sons' ownership stake in the remaining companies. allowing for the possibility of a coordinated global strategy that would have been unimaginable as recently as 1990.40% Tata Sons ownership stake in 1995 Tata Sons ownership stake in 2007 2.60% 31.00% 30. the Group embarked on an ambitious acquisition strategy both in India and internationally that helped increase its revenue forty-fold during Ratan Tata's tenure and increase the footprint of the group globally. he arranged for himself as Tata Sons chairman to become chairman of many other Tata companies as well. but he succeeded in moving the Tata Group out of legacy industries like soap.00% 25. Though using money raised from the Group companies to buy Group companies' stock was controversial. At the same time. to strengthen ties between Tata Sons and managers at the Tata companies.thought could not meet this standard met with resistance at first.60% 32. These changes changed the nature of the Tata Group.00% 35. As the following table shows. textiles. he did not intend the Tata Group to shrink.00% Tata Chemicals Tata Power Tata Steel Tata Motors 7. it proved successful. This strategy of acquisition was made possible only due to liberalization.long-tenured managers and directors at individual companies who had grown accustomed to near-total control of their fiefdoms. Tata Sons' stake in its largest companies grew past the 26% threshold needed under Indian law for veto power over board decisions. Second. announcing a long-term goal of majority ownership. Table1: Tata Son’s Growing Stake 40. Instead. 4 .90% 5.

The total cost of these acquisitions lay somewhere between $15 and $20 billion. Some of the purchases were poorly timed. the acquisition strategy was seen as a success. government for a bailout for Jaguar Land Rover (which ultimately proved unnecessary). controlling. America's Tyco Global Network and Eight O’clock Coffee Company. Tata companies that did not use "Tata" in their names would pay a lesser fee of 0.1%. the Tatas' buying spree was much larger. with a cap at 5% of net profit.K. in 2004 they made six. Tata Sons increased its investment in the communications sector by buying a 47% share of government-owned telecommunications provider VSNL (now Tata Communications) for $532 million in 2002. and with demand dropping during the recession.25% of total revenue. and two of its biggest companies. and taking advantage of a unified Tata brand. Tata Steel was known as TISCO (Tata Iron and Steel Company). the Tata Group had made no attempt to create and manage a single Tata brand. and Trent (Tata Retail Enterprises) bought a majority share of Indian retailer Landmark in 2005. and Britain's Jaguar Land Rover and Corus Steel. shortly after Tata Teleservices bought a majority stake in Hughes Telecom for roughly $180 million. but this greater association with Tata Sons would not be costless. an old and respected English brand. Today it earns about three-fifths of its revenue abroad and employs more British workers than any other manufacturer. The new chairman pushed for more Group companies to use the Tata name and logo. Tata Chemicals merged with Hind Lever Chemicals in 2004. Tata Steel announced it would close a Corus steel plant and Tata Motors petitioned the U. are listed on the New York Stock Exchange." To use "Tata" in its name. Tata Motors was TELCO (Tata Engineering and Locomotive Company). on average. On the whole. Tata Sons asserted its rights to the Tata brand and persuaded the Tata companies to sign a "Brand Equity and Business Promotion Agreement. Boston's Ritz-Carlton became the Taj Boston. Outside India. and the soap business Ratan Tata sold to Unilever bore the name TOMCO (Tata Oil Mills Company). Some Tata companies bore the Tata name only as the first letter of their acronym: in 1991. Brand Management The second prong of Ratan Tata's strategy to unify the Tata Group and protect it from hostile capital consisted of building. coming at the peak of the boom market in 2005-2007.In India. Since then. The proceeds were used to 5 .15% or 0. the European press toke note when Tata Tea bought Tetley Teas. The pace of foreign acquisitions grew dramatically: in 1995-2003 Tata companies made. When Ratan Tata became chairman in 1991. one purchase a year. In 2000. and in 2005-06 more than 20. But by mid-2010 profits for both companies had rebounded-Jaguar Land Rover showed a 70% sales increase in a single year--and Tata Motors stock rose to a record high. Tata Motors and Tata Communications. various Tata companies have bought such large and prominent firms as Korea's Daewoo Commercial Vehicle Company. each company would have to pay Tata Sons 0.

New India Assurance.2 billion. This is the first major acquisition of an international brand by an Indian business group 2001   2002  Tata AIG — a joint venture between the Tata group and American International Group Inc (AIG) — marks the Tata re-entry into insurance. a company wrested from Tata control would no longer be permitted to use the Tata name. UK. the Tata companies contracted to follow a lengthy code of conduct. addressing issues ranging from corporate purpose to conflicts of interest to whistleblower protection and an absolute prohibition on bribery. Evolution of the Tata Group post liberalisation 1996  Tata Teleservices (TTSL) is established to spearhead the group's foray into the telecom sector 1998  Tata Indica — India's first indigenously designed and manufactured car — is launched by Tata Motors. the Tata brand agreement provided that in the event of a hostile takeover. A 2010 report by Brand Finance estimated the total worth of the Tata Brand at $11. taking advantage of Tata's already sterling reputation to build the most valuable brand in India and one of the 60 most valuable brands in the world. set up in 1919. In addition to paying the fee. Finally.increase Tata Sons' holdings in the other companies and to finance attempts to build brand equity. was nationalised in 1956) TCS consolidates market leadership through CMC acquisition Tata Sons acquires a controlling stake in VSNL (now known as Tata Communications) India’s leading international telecommunications service Provider 2003  Tata Consultancy Services (TCS) becomes the first Indian software company to cross one billion dollars in revenues 6 . These efforts proved massively successful. spearheading the group's entry into the passenger car segment The new Tata group corporate mark and logo are launched 1999  2000  Tata Tea (now known as Tata Global Beverages) acquires the Tetley group. (The group's insurance company. in an arrangement some called a "brand pill" after the famous "poison pill" takeover defense employed by American firms.

2008 Tata Motors acquires the Jaguar and Land Rover brands from the Ford Motor Company Tata Chemicals acquires General Chemical Industrial Products Inc (now known as Tata Chemicals North America) 7 . at the 9th Auto Expo in Delhi on January 10. a first-of-its-kind chain of Smart Basics hotels Tata Steel acquires Singapore-based steel company NatSteel by subscribing to 100 per cent equity of its subsidiary. the second group company to do so after VSNL (now known as Tata Communications) Tata Motors acquires the heavy vehicles unit of Daewoo Motors. Sydney (now Blue) Tata Motors creates a new mini-truck segment in India with the launch of Tata Ace Trent acquires strategic interest in Landmark chain of bookstores Tata Sky satellite television service launched across the country Taj group acquires the Ritz-Carlton. India's first national chain of multi brand outlets for consumer electronics and durable products 2007     2008    Tata Steel acquires the Anglo-Dutch company Corus (now known as Tata Steel Europe). the New York Stock Exchange. the People’s Car. UK (now known as Tata Chemicals Europe) Infiniti Retail launches Croma. NatSteel Asia VSNL (now known as Tata Communications) acquired Tyco Global Network. South Korea TCS goes public in July 2004 in the largest private sector initial public offering (IPO) in the Indian market. Tata Teleservices launches Tata Indicom mobile service (consolidated with Tata DOCOMO in 2011) in Mumbai 2004     2005       2006     Tata Motors is listed on the world's largest bourse. NY Taj group acquires a hotel run by Starwood.2 billion Indian Hotels unveils IndiOne (now known as Ginger hotels). making it one of the world's largest providers of submarine cable bandwidth Taj group takes over management of The Pierre. making it the world's fifth-largest steel producer TCS inaugurates TCS China — a joint venture with the Chinese government and other partners The Taj group acquires Campton Place Hotel in San Francisco (now known as Taj Campton Place) Tata Capital established as a new Tata company in the financial sector Tata Motors unveils Tata Nano. Boston (now known as Taj Boston) Tata Chemicals acquires controlling stake in Brunner Mond Group. raising nearly $1.

a premier US-based engineering services company TCS acquires IT services firm Alti to help drive long-term growth in France 8 .2009     2010    Tata Motors announces commercial launch of the Tata Nano. First outlet launched in October in Mumbai Tata Communications completes world’s first wholly-owned cable network ring around the world Tata AIG Life Insurance Company to be now called Tata AIA Life Insurance Company Tata Steel expands aerospace activities in China Cyrus P Mistry takes over as Chairman. is inaugurated by Tata Sons Chairman Ratan Tata Tata BP Solar becomes wholly owned Tata company (now known as Tata Power Solar Systems) 2012      2013      Tata Global Beverages and Starbucks form joint venture to open Starbucks cafés across India. delivers first Tata Nano in the country in Mumbai Tata Teleservices announces pan-India GSM service with NTT DOCOMO TRF acquires Dutch Lanka Trailer Manufacturers (DLT). UK 2011     Tata Chemicals rebrands its global subsidiaries in the UK. consolidates position as one of the 'Big Four' IT services brands Tata Sons announces formation of the Group Executive Council Tata Technologies acquires Cambric. headquartered in London Tata Chemicals acquires 100-per-cent stake in leading vacuum salt producer British Salt. Tata Sons from Ratan N Tata Tata Motors’ Jamshedpur plant rolls out its two millionth truck TCS adds over $1 billion in brand value. Sri Lanka. the US and Kenya under the Tata Chemicals corporate brand The Tata brand soars into the top 50 club of global brands Tata Medical Centre. a world-class trailer manufacturing company Tata Housing makes waves with its launch of low cost housing in Mumbai TRF acquires UK-based Hewitt Robins International Tata Tea group rebrands itself as Tata Global Beverages. a comprehensive cancer care and treatment facility established in Kolkata.

At the same time.02 million subscribers out of which 861. In fact. the fight for spectrum allocation and infrastructure cost minimization have given birth to consolidation trends in the Indian Telecom sector. medical and governmental activities.66 are mobile subscribers while the remaining 30. decreasing EBITDA margin. This has resulted in massive investments in the industry both by the private and the government sector. the emergence of new technologies as manifested by the convergence of voice and data. The immense potential of the sector fuelled by liberalization has served to attract newer players in the industry which in turn has intensified the competition. Average Revenue Per User (ARPU) has lowered as consumer benefits have maximized which is evident from a huge fall in tariffs.The Indian Telecommunication Sector The Indian Telecom sector has witnessed tremendous growth over the last decade. Table 2: Telecom Growth in India 9 . introduction of high-end smartphones. On the other hand. regulatory issues.36 million are wireline subscribers. 3% of India’s GDP comes from the Telecom sector.57%. As of now. commercial. India has a total of 892. Consequently. The telecom sector have contributed significantly in effecting socio-economic development of India especially in the arena of education. India has the second largest network in the world and also one of the world’s fastest growing telecom markets. Also. with a teledensity of 70. advancement towards 3G and increased focus on Value Added Services (VAS) has prompted the service operators to differentiate themselves in their service quality and offering. Currently. Telecom is the third largest sector which attracts Foreign Direct Investment (FDI) up to 74%. after services and computer software sector.

As a result. both prices and revenues will go up. In other words. as competition reduces. Based on this context. Table 3: Market Share and EBITDA’s of Telcos 10 . per circle. India has around 15 players with a maximum of 10 MHz of 2G spectrum allocated to an operator. Due to sustained price wars both among the incumbent service providers and the newer entrants. competition for winning new customers has sparked off price wars adversely affecting the operator’s margin while the spectrum crunch has led to inferior service quality.Drivers for Consolidation in Indian Telecom Sector Most countries around the world have 4 to 5 telecom operators with an average spectrum allocation of 17-20 MHz. there will be fewer players in the telecom market which will lead to a decrease in competition. Smaller providers too are not making profits after making huge investment in setting up mobile services. low tariffs are no longer sustainable. Already India has one of the cheapest call rates in the world. the drivers for consolidation are as follows:  Declining ARPU – The race to acquire the maximum number of subscribers has led the telecom operators to lower their price tariffs in a reactive manner. So. So. In contrast. because of consolidation. every telecom operator is now plagued by stagnant revenues and falling profit margins.

As a result.  How Consolidation can complement Core-Competencies? The trend of consolidation in the telecom sector will usher in a new wave of measures to improve the core competencies of the telecom operators. In February 2012. This was soon followed by the exit of some operators – Loop Telecom Private Limited. The immediate ramifications were mostly felt by new entrants. two majorly affected operators – Unitech Wireless Limited and Videocon Telecommunications Ltd. Ltd. Cancellation of telecom licenses – The recent cancellation of telecom licenses and the lukewarm response to re-auction of 3G spectrum have raised the opportunity of further consolidation in the sector. Due to lesser number of telecom operators brought about by consolidation. This increases the cost per subscriber which can be brought down to a great extent by consolidation. –continued their operations albeit at a smaller scale after winning back some of the cancelled licenses in November 2012 in a re-auction that received muted response. In contrast. the newer entrants have a low subscriber base because of which their spectrum allocation remains idle. This is so because each tower including its equipment will then be fully utilised. consolidation will help the operators to optimally use the spectrum and deliver superior service quality by preventing network congestions. the Supreme Court cancelled 122 2G licenses which it awarded 2008 onwards. and S Tel Ltd. even though most of the towers are shared between the operators. only the tower is being shared while every operator has to deploy one’s own set of radio equipment which in most cases goes under-utilised. In the long term. these businesses might not turn out to be viable. Since spectrum is a finite resource. Spectrum sharing – Spectrum is the most important resource that is required for providing mobile services. Currently. On the other hand. Alternatively companies which have no spectrum but have sufficient cash will focus on buying out their spectrum rich competitors. Etisalat DB Telecom Pvt. larger the number of service providers smaller will be the amount of spectrum available to each of them. marketing and maintenance will be reduced substantially. Currently 3G spectrum is owned by only a few service providers and the new entrants who do not have that chunk of spectrum are unable to provide high-speed data services. Sistema Shyam Teleservices Ltd is awaiting verdict on curative petition filed in the Supreme Court. there will be increased opportunity for lower capital expenditure. the cost of service will go down and this will lead to lower tariffs. however some of the licenses of older operators were also cancelled. its availability will be inversely proportional to the number of operators. Presently. Reduced Tariff – Although reduced competition brought about by consolidation coupled with incremental regulatory expenses may prompt the incumbent operators to raise their tariffs but in the long run the costs incurred due to sales. 11 . Economies of Scale – Telecom towers comprise the primary component of telecom infrastructure and hence require significant capital expenditure. Improved Customer Service – Most of the incumbent GSM operators with a high subscriber base have almost exhausted their spectrum reserves. As a result. In this context.

Table 4: Indian Telecom Acquisitions 12 . Chennai by Sterling group from RPG group for Rs.Mergers and Acquisitions The first merger and acquisition deal in the Indian telecom industry occurred in 1998 between Max Group of Delhi and Hutchison Group of Hong Kong. Acquisition of 79. 210 Crores in 2003. In the subsequent years several other mergers and acquisitions took place – the prominent ones are noted below.24% stakes of Aircel. Acquisition of 48% stakes in Idea cellular by Aditya Birla group from the Tata group in 2005. Acquisition of Hutch services in India by Vodafone in 2006. Hutchison acquired from Max 41% of stakes of Orange services in Mumbai. Similarly.     Acquisition of Command Cellular Services in Kolkata by Hutchison from Usha Martin in 2000.

However. the wireless service providers can merge their operations if the combined market share of the new entity is less than 60%. Additionally. This is evident from the tax dispute arising out of Vodafone’s acquisition of Hutchison and the consequent establishment of retrospective cost. Some of the important regulation reforms proposed are as follows: Increase in Market Share of merged entity . the Telecom Regulatory Authority of India (TRAI) has evolved to facilitate effective policy formation and execution. Spectrum Sharing – As per the new regulations. Bharti Airtel and Vodafone India. thus reducing the total number of players in the fray. its’ policies have always been beset with uncertainties. Having said that. a substantial increase over the current 40% ceiling.As per the new regulations. the 2G scam has also put a question mark on the role of the regulatory which has further deterred M&A activity. spectrum sharing among different operators has been permitted as long as the extent of frequencies shared does not exceed 25% of the available airwaves in the region. The combined revenue market share of India's largest operators. This has been welcomed by the telecom operators as many new operators have unused capacity while the incumbents have choked networks. is 51% and so as such the new rules will enable any large operator in the country to acquire smaller operators. Table 5: Regulatory Changes 13 .Regulatory Changes Over the years. the proposed new regulations from TRAI seems to be a step forward in encouraging consolidation in the already crowded and ultra-competitive 15 player telecom market. Massive capital expenditure can be avoided through such sharing of spectrum.

000 units of high definition video conferencing simultaneously across the country. 14 . rivals Bharti Airtel and Reliance Communication have joined hands together to provide data connectivity for the launch of 4G LTE services. which in turn can support 250. Under this deal. Reliance would use one of the eight fibre pairs in the cable.4 terra bits per second (tbps).100-km submarine cable i2i connecting Chennai to Singapore. With a capacity of 8.Recent Developments In another unprecedented move in consolidation in Indian Telecom sector. Reliance Jio Infocomm will have exclusive right to use Bharti’s 3.

The core purpose is to inform the target customers about the offering of the mall. At 6%. the mall developer must add a personal touch to his message by carrying out a door-to-door campaign in order to reinforce the message. press releases and viral marketing . signages and specialized props. Strategies for Core Competence and Competitive Advantage Right Positioning The effectiveness of the mall developer's communication of the offering to the target customers determines how well the mall gets positioned in their minds.Govt of India's plan of changing the FDI guidelines in this sector speaks of the importance attached to retailing. Various communication tools available to the mall developer for this purpose may include advertising. However. the unorganised retailing has dominated the Indian landscape so far. the communication has to be more of relative nature. across the length and breadth of the country. Malls and mega malls are coming up in almost all the places be it – metros or the smaller cities. The merchandise presentation ought to be very creative and displays are often on non-standard fixtures and forms to generate interest and add on attitude to the merchandise. Theme or lifestyle displays using stylized mannequins and props. lighting. The mall developer can create awareness about the offering among the target customers in a number of ways. The message should also clearly convey to the target audience that the mall offers them exactly what they call the complete shopping-cumentertainment point that meets all their expectations. Industry has already predicted a trillion dollar market in retail sector in India by 2010. In the name of retailing. buzz marketing (WoM). Effective Visual Communication Retailer has to give more emphasis on display visual merchandising. A McKinsey report on India (2004) says organized retailing would increase the efficiency and productivity of entire gamut of economic activities. According to an estimate the unorganized retail sector has 97% presence whereas the organized accounts for merely 3% . This implies that the message conveyed to the target customers must be effective enough in differentiating the mall's offering from that of its competitors without even naming them. celebrity endorsement. even when compared to Brazil (14%). are used to promote collections and have to change to keep touch with the trend. and would help in achieving higher GDP growth. and Poland (12%). use of print media. which are based on a season or an event. land acquisitions in prime areas give the essence of the mood in this sector. the share of employment of retail in India is low.Introduction to Indian Retail Retailing is still in its infancy in India.Once the message is being conveyed through these channels. Recently moves by big corporate houses like Reliance Industries has further fuelled the major investments in retail sector. persuade them to visit the mall and remind them about the mall. At this stage. the retail industry in India is undergoing a major shake-up as the country is witnessing a retail revolution. The old traditional formats are slowly changing into more complex and bigger formats. 15 . A strategic alliance. The visual communication strategy might be planned and also be brand positioned.

price.Manufacturer . lean systems and staff should help retailers to get advantage over competitors. The next problem in setting up organized retail operations is that of supply chain logistics. In addition to fragmented supply chain. India lacks a strong supply chain when compared to Europe or the USA. frequent sales operation management. Innovative solutions like performance management. The problem: retail differentiation. production planning. merchandising mix. supply chain management and competition from supplier's brands are the talk of the day. is a combination of customer insight. aspiration.Retailer . Providing great experience to customers can easily be said than done. This implies that global retail chains will have to build a supply chain network from scratch. as we are moving to the next phase of retail development. Getting the right mix of product. The concept of container trucks.Consumer. inventory planning. The private label will continue to compete with brand leaders.Strong Supply Chain Critical components of supply chain planning applications can help manufacturers meet retailers' service levels and maintain profit margins. The existing supply chain has too many intermediaries: Typical supply chain looks like:. each endeavour to offer experiential shopping. The result: significant losses/damages during shipping. aggressive retail mix as well as everyday low pricing strategy can be the strategy to get edge over supplier's brand.Regional distributor . So supplier's brand will take their own way because they have a established brand image from last decades and the reasons can be attributed to better customer experience.Local wholesaler . Challenges Modern retailing is all about directly having "first-hand experience" with customers. which is store specific across organization. In India. This might run foul with the existing supply chain operators. New product development.National distributor . value vs. Retailer has to develop innovative solution for managing the supply chain problems. accessibility of supplier's brand. One of the key observations by customers is that it is very difficult to find the uniqueness of retail stores. Thus challenges like retail differentiation. 16 . Merchandising planning is one of the biggest challenges that any multi store retailer faces. the trucking and transportation system is antiquated. Retailer has to provide more assortments for private level brands to compete with supplier's brand. demand planning. giving them such a satiable experience that they would like to enjoy again and again. allocation and assortment techniques. automated warehousing is yet to take root in India. Changing the Perception Retailers benefit only if consumers perceive their store brands to have consistent and comparable quality and availability in relation to branded products. innovation.

is considering a retail chain for laundry products. electrical products. Big players such as the Dubai-based Jumbo Group. 17 . Hindustan Lever Ltd. Many specialized stores have been set up with various food. in the West.Product Differentiation – Key to success As the retail industry is in the nascent stage it is unlikely that players will play the price war. large scale investments are required. Only basic daily usage high frequency. Other categories being explored by retailers are office products. stationery and furnishings. lingerie. which usually takes place in a mature industry. chocolates. Tatas and some small players are entering the electronics space. toys. Such chains are called specialty retailers or category killers. Specialty Retailing Learning from western countries. To summarize. the FMCG major. they will be set up as stores in malls rather than as standalone stores. paper products. But for growth. As these stores do not require much space.low value items would be sold at lower prices and once the market gets saturated price war may be witnessed in the other product categories also. apparel and footwear brands (both Indian and foreign) and companies like Godrej have already started furniture stores. players are trying to capture the market share bringing out formats catering to single verticals. The players will however try to win the customers by product differentiation or by providing a unique shopping experience. retail sector is set to see whopping growth in next few years and the organized retail-pie is going to get bigger as urbanization of new cities take place.

Table 6: Retail Consolidation Trends in India Conclusion The success of the Tata Corporation serves as a reminder to the potential of Indian firms in acquiring core competencies while attaining consolidation to become bigger and better organizations. Advent of big international players like Wal Mart. Tesco etc. stable environment. 18 . only a few players will dominate. Carrefour. Among international players. lifestyle and home segment retailers do not enter foreign markets as easily as value retailers. better customer service and improved organizational efficiency. in the long run.Signs of Consolidation in the Retail industry in India With growing interest and powerful growth opportunities. Competition will intensify and the industry will witness consolidation. there will be rapid consolidation in few verticals like F&B. certain industry sectors such as Telecom and Retail will continue to show signs of further consolidation which in the future will lead to further growth. will bring in best practices to India in all the aspects. When this happens. India will see the entry of more global giants. In the same context. With foreign direct investment (FDI) is permitted in the sector. dairy products etc.

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