You are on page 1of 95

INTRODUCTION TO ENTREPRENEURSHIP

Concept of Entrepreneur Historical perspective

ENTREPRENEUR - derived from French word Entreprendre which means to undertake i.e. the person who undertakes the risk of new enterprise. Early 16th century those who undertook military operations i.e. leaders of military expeditions were referred to as Entrepreneurs. 17th century extended to cover civil engineering activities such as construction and fortification i.e. architects and contractors. Early 18th century R.Cantillon, an Irishman living in France was the first person to use the term Entrepreneur as a person who buys factor services at certain prices in order to produce a product, with a view to selling it at uncertain prices. J.B.Say expanded Cantillons ideas and developed the concept of entrepreneur a little further. According to Say, an entrepreneur is one who combines the land of one, labor of another and the capital of yet another and thus produces a product. By selling the product in the market, he pays interest on capital, rent on land, wages to laborers and what remains is his profit. This concept of an entrepreneur survived for almost two centuries. Joseph A.Schumpeter, in 1934, assigned a crucial role of innovation to the Entrepreneur in his magnum opus, Theory of Economic Development. According to Schumpeter, an entrepreneur is one who innovates, raises money, assembles inputs, chooses managers and sets the organization going with his ability to identify them. ENTREPRENEUR -- DEFINITIONS

The true Entrepreneur is one who is endowed with more than average capacities in the risk of organizing and coordinating the various other factors of production Francis A.Walker

An Entrepreneur is one who always searches for change, responds to it and exploits it as an opportunity. Innovation is the central tool of entrepreneurs, the means by which they exploit change as an opportunity for different business or service. Peter F.Drucker ROLE OF ENTREPRENEUR IN ECONOMIC DEVELOPMENT 1. ENTREPRENEURSHIP promotes capital formation by mobilizing the idle saving of the public. 2. It provides employment opportunities. 3. It promotes balanced regional development. 4. It helps reduce concentration of economic power. 5. It leads to equitable redistribution of wealth and income. 6. It encourages effective resource mobilization of capital and skill which might otherwise remain unutilized. 7. It promotes countrys export trade, an important ingredient of economic development.

QUALITIES OF AN ENTREPRENEUR:

1. Opportunity Explorer: An entrepreneur looks for an opportunity and takes appropriate actions when he identifies the opportunity. Successful, growth-minded entrepreneurs have a focus on opportunity. They start with the opportunity and let their understanding of it guide other important issues. They seize unusual opportunities to start a new business, obtain financing, land, work space or assistance. Sources of business opportunities arise just from an entrepreneur being alert to possibilities. Consumers, business associates retailers, wholesalers, manufacturers representatives are potential sources of business ideas. Technically oriented individuals also identify business opportunities when working on other projects.

2. Calculated Risk Taker: Any venture is subject to some risk and the entrepreneur needs to be an intelligent risk taker. A risk situation occurs when the potential outcome of an action is not known. An entrepreneur will face situations where he has to make a choice between two or more alternatives, each with its own risk elements. The ability to judge risks, evaluate them, take risk mitigation measures as well as being ready for course correction when the risk actually occurs are qualities which he should possess. A higher degree of risk taken has the potential of yielding higher returns or of resulting in higher losses. Good entrepreneurs are not afraid of taking risks, whereas a person without an entrepreneurial bent of mind will not take risks in order to avoid failure. But taking moderate risks is almost always necessary for achieving success in an entrepreneurial venture. A good entrepreneur also realizes that a risk cannot be taken when the outcome of an action is entirely based on chance and not on effort. Taking a risk which can be averted or minimized by taking

actions in a planned manner and effort is a challenge which a good entrepreneur enjoys. 3. Perseverance: This means the ability to work hard without getting demotivated by intermediate setbacks, having patience to wait for the result without being impulsive or hasty in giving up or not giving adequate attention to his venture. Persistency is required in solving problems or obstacles that are impeding business operation. Although entrepreneurs are extremely persistent, they are realistic in recognizing what they can and cannot do and where they can get help in solving difficult but unavoidable tasks. 4. Communication ability: Communication encompasses both communicator and communicate i.e. sender and receiver. In effective communication, the communicator and the receiver understand each other and are being understood. An entrepreneur communicates effectively with customers, employees, suppliers, bankers and creditors. 5. Flexibility: Entrepreneurs are flexible in adapting to changes when it does not help to adopt conventional and routine ways of doing things. 6. Innovator: Entrepreneurs are innovative in that they endeavor to develop new products, processes or markets. If there is already a product in the market, an entrepreneur succeeds in creating a differentiation in the product to capture a market share. 7. Motivator: Success of an entrepreneurial venture also depends on the activities carried out by the people deployed by the entrepreneur in his business venture. The entrepreneur therefore needs to keep them motivated to give their best. The term motivation is derived from the word motive which means a need or an emotion that prompts an individual into action. As a motivator, the entrepreneur needs to keep the motivation level of his employees high. As a motivator, the entrepreneur understands that apart from financial incentives like wages, non-financial incentives like recognition of good work done, better working conditions, job security etc. play a role in motivating the workers.

8. Self confidence: A person has self confidence when his belief in his own ability is high and seldom wavers. Even during down periods, such an individual maintains his confidence and lets people around him know it. This helps the others sustain their own self confidence and optimism necessary for efficient group effort. A successful entrepreneur has high self confidence.

9. Stress Taker: A person who succumbs to stress has a low tolerance for failure. But entrepreneurs use failure as a learning experience. Setbacks and disappointments are an integral part of the learning experience, and most effective entrepreneurs are realistic enough to expect such difficulties. Many of them believe that they learn more from their early failures than from their early successes. Some of the methods they can adopt for coping with stress are networking with other business owners for sharing experiences, taking short holidays as an antidote to immersion in business, good communication with employees, gain new perspectives on life apart from the adopted business, delegate chosen tasks to others to gain time, physical and exercises like walking, meditation etc. 10. Optimistic: Entrepreneurs approach the opportunity that they have chosen with a hope of success and an optimistic attitude. The optimistic attitude reflects the confidence to achieve success rather than the fear of failure. Optimism leads to positive thinking which can turn an adverse situation into a favourable situation. Even when failure occurs, an optimist persists with a positive outlook. 11. Using Feedback: Effective entrepreneurs also have a strong desire to know how well they are doing, and how they might improve their performance. In making such a determination, they actively seek out and use feedback. Feedback is also central to their learning from their mistakes and setbacks.

12. Independence: The desire for independence is a driving force behind contemporary entrepreneurs. An entrepreneur usually tries to accomplish tasks in his or her own way instead of in a bureaucratic way, This is not to say that entrepreneurs must make all the decisions; however, they do not want the authority to make the important ones. This implies that they do not get controlled by others. 13. Planner: Planning is a managerial function and is an essential quality for an entrepreneur. It implies determining the course of action to be followed i.e. deciding what to do, when to do, how to do and who will do a particular task. It is a process of looking ahead and is required to be done prior to other managerial functions like organizing, staffing, directing, coordinating and controlling. 14. Achievement Oriented: Entrepreneurs are self starters who appear to others to be internally driven by a strong desire to compete, to excel against self-imposed standards, and to pursue and attain challenging goals. They try to accomplish challenging tasks. In doing so, they are aware of their own strengths and weaknesses, the facilitating factors and constraints in the environment and the resources needed to accomplish their tasks. 15. Human relation ability: Maintaining good relations with customers, employees, suppliers, and creditors is an essential quality for entrepreneurial success.

FUNCTIONS OF ENTREPRENEUR

Entrepreneur performs various primary functions from the stage of starting an enterprise to its success level. PLANNING - Planning process involves the following steps:

a) Scanning of the best suitable idea b) Selection of product line c) Determination of type of business organization (Individual or Partnership or Corporate) d) Estimation of capital needed e) Selection of capital resources f) Selection of raw materials g) Studying the govt. rules, regulations and policies h) Study of availability of labor force i) Study of market and market strategy to be adopted ORGANIZATION - An entrepreneur assembles, coordinates and supervises land, labor and capital during the promotion stage and at the performance stage for optimum utilization of resources. Efficient expansion and growth depends on organizational network employed and monitored by the entrepreneurs. DECISION MAKING a) b) c) d) Determination of the business objectives of the enterprise Decision regarding procurement of machine, material, labor and money Decision regarding development of a market for the product Maintenance of good relations with public authorities and with society at large

MANAGEMENT refers to the working of the venture and also managing day to day problems. It includes future expansion, direction of men, material, money etc. INNOVATION

a) b) c) d) e)

Launching a new product Introduction of new technology Creation of new market Discovery of new and better source of raw materials Creation of monopoly or breaking up of monopoly

RISK BEARING An entrepreneur undertakes the responsibility for loss that may arise due to unforeseen contingencies in future. UNCERTAINTY BEARING refers to uncertain trends in the market Other functions include diversification, expansion, maintaining cordial relations, tackling labour problems etc. CLASSIFICATION OF ENTREPRENEURS Entrepreneurs can be classified according to Types of business Business entrepreneurs are those individuals who opt for a new product or service and then translate the same into business reality; tap both production and marketing resources to develop a new business opportunity; set up a big establishment or small unit e.g. printing press, textile processing house, advertising agency, readymade garments, confectionary etc. In majority of cases, entrepreneurs are found in small trading and manufacturing business. Entrepreneurship flourishes when the size of business is small. Industrial entrepreneurs are essentially a manufacturer who identifies potential needs of customers and products or service to meet the marketing needs. He should have the ability to convert economic resources and technology into a profitable venture. Corporate entrepreneur is an individual who demonstrates his innovative skill in organizing and managing a corporate undertaking. He plans, develops and manages a corporate body.

Agricultural entrepreneurs are the ones who undertake agricultural activities such as raising and marketing of crops, fertilizers and other inputs of agriculture. They are motivated to improve agriculture through mechanization, irrigation and application of technologies for dry land agricultural products.

Use of professional skill. Technical entrepreneur is one who is essentially a craftsman. He develops improved quality of goods because of his craftsmanship. He concentrates more on production than on marketing. He demonstrates his innovative capabilities in the matter of production of goods and rendering of services. Non-technical entrepreneurs are those who are not concerned with the technical aspects of the product in which they deal. They are concerned mainly with alternative marketing and distribution strategies to promote their business. Professional entrepreneur is interested in establishing a business but does not have interest in managing or operating it once it is established. He sells out the running business and starts another venture with the sales proceeds. Motivation. Pure entrepreneur is an individual who is motivated by psychological and economic rewards. He undertakes entrepreneurial activity for his personal satisfaction in work, ego and status.

Induced entrepreneur is one who is induced to take up an entrepreneurial task due to policy measures of the government that provides assistance, incentives, and concessions and other facilities to start a venture, enter business due to financial, technical and other facilities provided to them by the state agencies to promote entrepreneurship. Motivated entrepreneurs come into being entrepreneurs because of the challenge involved in developing and marketing a new product for the satisfaction of consumers. If the product succeeds, the entrepreneur is further motivated for launching of newer products. Growth entrepreneurs are those who take up a high growth industry which has substantial growth prospects. Super growth entrepreneurs are those who show enormous growth or performance in their venture. Stages of development First generation entrepreneur is the one who starts an industrial unit by his innovative skill. He is the one who combines different technologies to produce a marketable product or services. Second generation entrepreneur is the one who takes over the business from his preceding family member. Modern entrepreneur is one who undertakes a venture which goes well with the changing demand in the market. He undertakes a venture which suits the current market needs. Classic entrepreneur is one who is concerned with maximizing the economic returns at consistent level. He is concerned more about the survival of the firm with or without an element of growth. Attitude According to attitude, entrepreneurs can be classified into innovative and imitative categories.

Innovating entrepreneurs are generally aggressive in collecting information, analyzing and experimenting attractive possibilities. They are quick to convert old established products or services by changing their utility, value, economic characteristics into something new, attractive and utilitarian. They can see the opportunity for introducing a new technique of production process or a new commodity or a new service or even the reorganization of an existing enterprise. They are very commonly found in developed countries, while there is dearth of such entrepreneurs in underdeveloped countries. They are always creative and bring in innovation in their work. Imitative entrepreneurs are ready to adopt and are more flexible in imitating techniques developed by others. They exploit opportunities as they come and are mostly on a small scale. He is more of an organizer of factors of production than a creator. In the context of a poor country, he is definitely a change agent and hence he is important in underdeveloped countries. Fabian entrepreneurs are very cautious and skeptical while practicing any change. They do not take risks and just follow predecessors. Their entrepreneurial decision is determined by custom, religion, tradition and past practices. They imitate only in situations when it becomes absolutely necessary. Drone entrepreneurs are those who never allow any change in their production and style of functioning. They never explore anything. They are laggards and get pushed out of the market when product loses its marketability. Situation based entrepreneur Need based entrepreneur is a person who starts his venture with the thought process of surviving i.e. to earn a living e.g. street vendors. Opportunity based entrepreneur is a person who starts his venture with the thought process of expansion or one with the zeal to create a niche for himself.

Gender based entrepreneur. Government of India has classified women entrepreneurs by defining them as part of an enterprise owned and controlled by women or a woman having a minimum financial interest of 51% of the capital in the enterprise. Social entrepreneur. The Ashoka International Organization defines social entrepreneurs as individuals with innovative solutions to societys most pressing social problems. Bill Drayton, CEO and founder of Ashoka says Social entrepreneurs are not content just to give fish, or teach how to fish. They will not rest until they have revolutionized the fishing industry. Rather than leaving societal needs to the government or business sectors, social entrepreneurs find what is not working and solve the problem by changing the system, spreading the solution and persuading entire societies to take new leaps. Social entrepreneurs identify resources where people only see problems. They view the villagers as the solution, not the passive beneficiary. They recognize when a part of society is stuck and provide new ways to get it unstuck. Unless traditional business entrepreneurs, social entrepreneurs primarily seek to generate social value rather than profits. Examples are Dr.Verghese Kurian, who set up the Anand model of cooperative development and made India the largest milk producer in the world. His model was adopted by the Govt. of India in setting up the NDDB (National Dairy Development Board which replicated the model on a nationwide basis. Vinobha Bhave conceived the idea of the land-gift movement, which came to be known as Bhoodan. He made inspiring appeals in several villages to prosperous people to donate land, and by 1954, he and his co-workers had collected 2.5 million acres, far exceeding any land reform achieved by the government for land to be given to poor farmers. The Jaipur foot is another famous Indian invention which has given life to thousands of amputees and is the best prosthetic feet for conditions in developing countries. Serial Entrepreneur. A serial entrepreneur is one who continuously comes up with new ideas and invests in new businesses. While some believe that a more vibrant and mature venture capital eco-system in India is contributing

to the trend, others say interesting business models that have developed over time has made the difference. Internet is one such area that has seen a spurt in activity from entrepreneurs to repeat their success. Serial entrepreneurs are repeat business starters who in the past have sold or closed down a business which they at least partly ran and owned and who currently run another, possibly new business which they at least partly own. Estimates of the scale of serial entrepreneurship are relatively scant. In India, a well known example of Capt.Gopinath can be cited, who started and ran the low cost airline Air Deccan, then sold his business to Kingfisher and later started Deccan 360,which is a logistics company aimed at commenting 17 airports and 24 cities in India. The Information Technology area in the U.S cites a number of serial entrepreneurs.

Franchise in India

Franchise in India is relatively a new model for businesses; though it has gained suffice accolades among entrepreneurs across Indian territories. No doubt, the concept has to have a reason to cheer with Indian laws becoming more liberated over globalization. The mindset has opened many doors for major companies to enter India through franchising, making the nation a fertile destination for businesses to grow. Even the analytical reports, over franchise India growth, seem to praise its pace of development in India. Expert approaches claim a bright future for franchise industry with a

promising growth of more than 30 per cent, contributing a major part to the boosting economy of India. By observing the uphill slope of franchise in India, many sectors are emerging out to gather as well as to contribute opportunities, by the route of franchising business. With the progressive stories of companies via franchise India, several other companies, especially of small background, are getting confident to subscribe to this route for improved approach towards customers.

Franchising - The fastest Growing and ever changing Industry in India Though at a nascent stage the industry has witnessed 30 to 35 per cent growth in the last 4-5 years Home to over a billion people, including a flourishing class of urban consumers possessing considerable amounts of disposable income together with the continued growth of the economy have strengthened Indias claim to be a viable and beneficial destination for a foreign franchisor. In the USA, almost a third of the retail sales come from franchised outlets, with sales of trillion of dollars while in India, the industry is few million. An important aspect which determines the feasibility of any franchising business in a country relates to the class of consumers it caters to. India is a multi ethnic country with the second largest population in the world. Indian consumers have experienced the standard of services offered overseas and have sufficient exposure through media, which has further fuelled their expectations. There are approximately 1150 national and international business format franchise systems in India in 2007. Around 8 to 10 per cent Indian franchise systems have entered international markets. There are an estimated 70, 000 units operating in business format franchises.

The growth rate in franchised units from 2005-06 to 2006-07 was 30 to 35 per cent for the last 4-5 years. Some 500000 persons are employed in business format franchise organizations. Franchising contributed less than 4 per cent to Indias Gross Domestic Product (GDP) in 2007. Annual turnover is approximately us$ 4 billion. Almost every product or service has a market in India but sometimes, innovative strategies like Indianisation of its products and marketi ng techniques must be employed by a foreign franchisor to further access the sizable market of India. In a franchised business, over 90 per cent succeed. This success rate usually lures entrepreneurs with no experience but with a surplus capital and a will to succeed towards franchising. The franchisee benefits from a tried tested and proven business concept, which can dramatically reduce the chances of failure. Franchising as a concept has been prevalent in India since a long time. However, shifting consumer trends including growing preference for branded products, global exposure and use of international brands is driving adoption of the franchising route to growth. According to KPMG in India estimates, the franchising industry is expected to quadruple between 2012 and 2017 There is scope for the franchising industry to contribute to almost 4 percent of Indias GDP in 2017 (assuming 6 percent Y-o-Y GDP growth between 2012 and 2017), growing from a current estimated contribution of 1.4 percent of GDP This is also expected to create job opportunities (including both direct and indirect) for an additional 11 million people by 2017.

Franchising Opportunity: Sector Overview As per KPMG in India analysis, retail and consumer services sectors are expected to emerge as high potential service sectors within franchising to cater to the prevailing consumption boom. Non-traditional segments such as food service, jewellery, pre-schools etc. also present a huge opportunity for growth in franchising. Despite the challenges the country presents, there have been many successful

case studies of franchising in India. From franchisors such as Aptech and NIIT which have pioneered the franchising model in India to new age franchisors such as Gitanjali and VLCC who are adopting innovative expansion models within franchising, many brands/companies are adopting the franchising model to expand and provide a consistent and quality experience to its end customers.

Franchise Business Models Firms that have created an easily replicable business model, often choose franchising as their preferred route to expand their operations and scale their brand. However, within the realm of franchising, there are several franchising models that differ significantly in terms of operation, control and legal scope. While certain operating models within franchising such as area development and regional master franchisee appear more attractive than others, diversity in Indian consumer preferences and degree of localization impact the choice of the final model to be adopted.

Attractiveness of India in Global Franchising Many international brands have already entered India and are adopting the Franchise route to growth. Global brands such as Dominos, KFC, and Baskin Robbins have adopted variations of the franchise models to grow in India. Many other international brands are contemplating entry plans into India. However, Indias growing but fragmented market can seem chaotic and difficult to deal with. The international franchisors consider the following factors as challenges while entering into India: Transparent Legislative framework: Due to no specific rules not one market: Entering a new market India is becomes more complicated in case of India where consumers hail from diverse cultural backgrounds. Several cultures, languages and socio-economic diversities make it a set of multiple markets. It becomes a challenge for an international franchisor to understand all diversified tastes and preferences, to establish and expand business in India. Corruption: International franchisors remain Bribe and or laws promulgated in India to address the functioning of franchisors and franchisees, international players perceive a higher risk to business continuity threatened with the bribe and corruption cases in India. Due to no legislation around anti-bribe in India, as in the US; it not only discourages the expansion strategies of many brands, but also impacts Indias credibility in the international market.

Franchise Industry Survey Key Highlights While the survey carried out by KPMG in India corroborated the above key reasons for growth in franchising and operating models, it also brought out certain key findings as mentioned: Franchisors believe that they are providing adequate support to their franchisees; however the latter are expecting more support particularly in the post launch phase of operations. Response to another related question in the survey suggested that almost half of those interviewed were not willing to take up additional franchisees with the existing franchisors suggesting certain level of dissatisfaction. While franchisors adopt franchising model for growth, many primarily offers a safe and relatively easy way of establishing business and is expected to offer higher than market levels of profitability. This trend necessitates the need for franchisors to educate the franchisees on potential profitability and investment returns from the business. Sectors such as jewellery where payback periods could range between a minimum of four to five years are particularly vulnerable to such mismatch in outlook. Real estate rentals are posing a major challenge for the entrepreneurs are opting for the franchising route as it success of franchising. Collaborative efforts between franchisors and franchisees in structuring business models that are sustainable even under such conditions could address this concern.

Franchising Pushing India ahead With a potential to push the Indian economy forward, franchising has been playing a significant role in generating new employment (both in terms of numbers and job quality), provide revenue options for the government in the form of taxes, duties etc. Along with its contribution to the country's gross domestic product (GDP), it has also helped many national and international brands to spread their presence in the country.

Current market landscape for franchising in India Since liberalization, the Indian economy has witnessed steady evolution. Consumerism has risen on account of a growing young population, high disposable income and growing urbanization.

Consequently, retail and service sectors are expected to play a major role in this consumption boom. The macro statistics reveal that agriculture is no longer the chief contributor to the Indian economy. The country is gradually moving towards being a manufacturing and servicebased economy in last the two decades. Today India is home to more than 3000 brands which adopt the franchising model. Bata, one of the leading footwear companies, was among the first franchisors in India. Other pioneers of Indian franchising were NIIT, Apollo Hospitals and Titan Watches. In addition, today several leading global franchise companies, such as Dominos, McDonald's, Yum Brands, Baskin Robbins and Subway, have already established a presence in India. The franchise industry is expected to continue to benefit greatly from government support across various sectors through various measures including allowing foreign direct investments (FDI) in single brand and multi-brand retail. This growth has also given impetus to a huge entrepreneurial appetite. Over the last decade, franchising has surfaced as one of the most prolific and feasible ways of expanding businesses in India. Several industry verticals such as food and beverage, education, fashion, tourism and hospitality are leveraging their growth by franchising their products under various formats.

The economic significance of franchising market in India Franchising contributes to the economic growth of a nation in multiple ways such as job creation, access to necessary goods and services and expansion of a country's tax base. The concept of franchising in India has been growing at an impressive rate since KPMG in India estimates suggest that the Franchising business in India was worth USD 13.4 billion in 2008, as risk-averse Indian entrepreneurs consider it as the most viable option to tap the nation's vast consumer market. 2012 and is expected to witness CAGR of 30 percent over the next 5 years. This amounts to about 1.4 percent of the country's GDP in 2012.

KPMG in India expects both demand and supply side factors to contribute to this growth.

Franchise: Sector watch The franchise business in India is increasingly getting popular among domestic and international players across various sectors. Several major industries credit successful franchisees for their rapid progress. The key industries that possess high prospects for the successful franchise opportunities in India are following: Retail franchising Food and beverages Health, beauty and wellness Consumer services Education and training The individual growth and potential of these industries are driving the growth of the overall franchise sector in India.

Retail sector: The retail industry landscape in India is changing rapidly on the back of factors such as favorable demographic profile, rising disposable income levels and the industry appetite to cater to this emerging consumption boom. The organized retail (including Food & Grocery) is estimated to be USD 24 billion in 2012, largely concentrated by retail franchisors in the Apparel, Consumer Durables and Food Groceries space with around 80 percent share. However, India drives only about 2.5 percent of total retail sales (organized and unorganized) through franchise formats, as against nearly 50 percent in the US, indicating huge potential for the market in future. KPMG estimates that over 43000 franchisee establishments (valued at USD 36 billion) may be required by 2017 to meet the growing demand in the retail sector from a current base of 13000 (valued at USD 10.6 billion).

Recent FDI reforms in single brand and multi- brand retail are likely to lure more global retailers to participate in India. Existing retail majors are under pressure to consolidate and increase their franchise network reach. Meanwhile, several multinationals such as IKEA, Wal-Mart is looking to establish their brands in India. Franchising is expected to continue to be one of the most popular business formats among organized retailers to tap the emerging consumption boom, specifically in the tier 2, tier 3 and smaller cities. However recent clarifications issued by the Indian government on FDI regulations in multi- brand retail allowing foreign retailers to only open company owned company operated outlets could be a big blow to growth in Retail franchising in India.

Innovation driven consumer services companies/ brands are also resorting to Franchising as the route to growth

Following are the few case studies highlighting 'innovation' as one of the key success factors in franchising in the consumer services sector in India:

However market potential in absolute terms is highest for sectors with-in retail. Revenue per square feet of area in this sector could range anywhere between INR 20000 to INR 50000.

Overview of Jewellery industry of India

India's centuries-old gold industry is the world's biggest market for the metal, with imports meeting almost all the country's requirements for jewellery and investment. Gems and jewellery are being used by the Indians since ages, for both aesthetic, as well as investment purposes. India has the distinction of being one of the first countries to introduce diamonds to the world. The country was also one of the first countries to mine, cut & polish, and trade in diamonds. The Indian jewellery market is dominated by gold, which consists of almost 80 per cent of the market share, followed by fabricated studded jewellery including diamond and gemstone studded jewellery. Industry Structure The sector accounted for India's 14 per cent of the total merchandise exports. On the contrary, the imports of raw materials for making gems and jewellery stood at 32 per cent at Rs 721.60 billion (US$ 35.20 billion) in 2011-12 over Rs 545.64 billion (US$ 9.84 billion) in 2010-11. The jewellery industry in India is estimated at Rs 1,500 billion (US$ 27.07 billion), of which only 5 per cent is organised, thus creating opportunity for the foreign players to enter the Indian market. India in 2009 faced its weakest year since gold trade was freed up in 1997. Record high prices and a failed monsoon cut imports by 33 percent from the

previous year to 480 tonnes, against an annual range between 600 and 800 tonnes in the previous five years - Imports are high partly because of the large population of about 1.2 billion. Per capita gold consumption is only 0.7 grams, half that of the United States and one-third of the Middle East according to World Gold Council (WGC) India's gold market is estimated to have more than 300,000 jewellers, mostly small, family-run businesses, a WGC study showed. - Only 23 banks and some private and government trading agencies have licences to import gold because of its implications for foreign exchange flows. - India's 2010/11 budget raised the import duty on gold and platinum to 300 rupees ($6.65) per 10 grams from 200 rupees earlier, with the duty on silver raised to 1,500 rupees per kg from 1,000 rupees earlier. - Investment purchases of gold have been rising faster than jewellery purchases. WGC's latest data shows the investment to jewellery ratio was approximately 15:85 in 2009. - Gold in the form of exchange-traded funds is rising. Launched in 2007, the total collection among seven fund houses is more than 11 tonnes, nearly double from a year ago. - In urban areas, gold faces competition from diamonds as incomes have risen, but the higher purchasing power of the lower and middle income sections of the population has brought new customers into the market.

- Large corporate jewellers, such as Titan Industries, Reliance Jewels, Rajesh Exports and the state-run MMTC Ltd are targetting the retail market with plans to have hundreds of shops, hoping to rely on branding to push up sales Worldwide, the gems and jewellery industry has been growing at a good pace and is currently estimated at over US$ 130 billion. In India, it accounts for nearly 20 per cent of total Indian exports. It provides employment to 1.3 million people directly and indirectly. Increasing purchasing power and disposable incomes of Indias middle class has resulted in consumption growth of this industry by about 11 per cent in the five-year period preceding 2006-07. Add to that the insatiable Indian craving for gems and jewellery, and the demand will skyrocket to US$ 20 billion by 2010 and US$ 30 billion in 2015, according to industry experts. Indias gems and jewellery industry has been allowed 51 per cent foreign direct investments by the government in single brand retail stores attracting both global and domestic players to this sector.

According to a report released by Technopak Advisors on Changing Retail Landscape in India, the jewellery and watches market is pegged at about US$ 13.52 billion. It is expected to register a 12 per cent growth by 2012, touching US$ 23.54 billion.

Experts believe that by 2013, India will become the biggest consumer of jewellery.

In the recent years a large number of players have been attracted to the Indian gems and jewellery retail sector:

Reliance Retail is planning an aggressive entry into the jewellery retail market through its about 400 to 500 jewellery retail outlets across the country.

The gems and diamonds industry contributes over 15 per cent of India's total exports. The industry is jewellery industry is predominantly divided into two segments: Gold jewellery and fabricated studded jewellery (diamonds as well as gemstone studded jewellery)

India consumes nearly 800 tonnes of gold accounting for about 20 per cent of the world gold consumption of which nearly 600 tonnes goes into making jewellery.

According to The World Gold Council (WGC) total gold supply in the second quarter this year stood (Q2FY08) at 840 tonnes, whereas the demand was 944 tonnes.

A study by KPMG reveals the Indian jewellery market to be US$ 13.5 billion in fiscal 2006-07, accounting for 8.3 per cent of world jewellery sales.

Retail sector - Jewellery

The jewellery and watch retail market in India is worth Rs1,80,000 crore, of which the organised sector accounts for Rs76,800 crore, or about 42.5%. The overall consumption of jewellery, including gold, is much higher at Rs2,78,000 crore and represents almost 6% of private consumption in India with the difference between the consumption and the retail market size being accounted for by gold or custom-made jewellery not sold in retail outlets. There are some 80 jewellery and watch retailers in the organised space, with 3,150 outlets. Players with a minimum of 10 outlets or minimum annual turnover of `50 crore are considered as organised. The top 20, with 2,250+ outlets, account for `56,700 crore in sales, which translates into almost three-fourths of the organised sector market and almost one-third of the total pie. Branded jewellery is the new mantra in the market, having rapidly acquired a niche over the past few years. Increasing purchasing power and disposable incomes of Indias middle class has resulted in consumption growth of this industry by about 11 per cent in the five-year period preceding 2006-07. Add to that the insatiable Indian craving for gems and jewellery, and the demand will skyrocket to US$ 20 billion by 2010 and US$ 30 billion in 2015, according to industry experts. Focused marketing creating awareness and demand for the products, innovative product range creating excitement and expanding the category as well as transparency and adherence to best practices will help build consumer confidence. The surprising thing about retail investment is that about 20 per cent of retail effort in a planned manner is targeted at rural areas, which is defined as

towns with a population of less than a million. India has seen a significant growth in disposable incomes as a result of the economic growth that it has been enjoying. This income is spread in the rural areas also. According to the Tata Statistical Outline of India 2005-06, around 60 per cent of the rural income is from north and east. Depending on the size of the market, retailers work with multiple formats currently they are partnering with local jewellers and these jewellers retail their brands, commonly known as the shop in shop. These stores would carry a merchandise mix and are in the range from 600- to 1,000 square feet. Retailers are also looking at mobile store concepts and thinking of innovative ways to connect to the consumer. Brand building, and creating brand identity is the focus of every retailer in India at present. Indian retailers see a huge jewellery consumer market in India but there is a slight speculation that they might soon face stiff competition from within as well as from international brands who are rapidly setting up chain stores. India consumes nearly 800 tonnes of gold accounting for about 20 per cent of the world gold consumption. Out of which nearly 600 tonnes goes into making jewellery. According to The World Gold Council (WGC) total gold supply in the second quarter this year stood (Q2FY08) at 840 tonnes, whereas the demand was 944 tonnes. A study by KPMG reveals the Indian jewellery market to be US$ 13.5 billion in fiscal 2006-07, accounting for 8.3 per cent of world jewellery sales. However the export of diamond-studded jewellery from India is merely 4 per cent of the total export of gems and jewellery worth US$ 18.06 billion. Since the demand of diamond-studded jewellery among Indian consumers has risen sharply, the industry should focus on the domestic market. Diamantaires, in Surat's US$ 11.29 billion diamond industry, are

eyeing jewellery manufacturing in a major way, after DTC has decided to prune supply of rough diamonds to India. If India becomes a manufacturing hub for jewellery as well as a consumption market it will just prove Indias strength in both sectors. The government has offered some concession to the industry by lowering import duty on platinum from US$ 13.82 per 10 gms to US$ 5.03 exempting rough coloured precious gems stones from customs duty at the first stage itself, instead of claiming reimbursements later. Rough, semi-precious stones are already exempt, a move aimed at further promoting the exports of studded jewellery and platinum jewellery. Duty-free import of consumables for metals other than gold and platinum up to 2 per cent of f.o.b. value of exports and duty-free import entitlement for rejected jewellery up to 2 per cent of f.o.b. value of exports. There is increased duty-free import of commercial samples of jewellery to US$ 2.50 and import of gold of 18 carat and above under the replenishment scheme. The Indian retail scene is set to flourish and there is no looking back for those who know how to sell jewellery to a Indian women, since jewellery is a part of Indian tradition and customs.

Jewellery franchising A peek into the Indian jewellery industry reveals that the global market for jewellery is expected to surpass USD 257 billion in 2017. The market is predominantly driven by the Asia Pacific and The Middle Eastern markets, but U.S. continues to remain the dominant player in the industry. Indians no longer prefer buying jewellery from the traditional family jeweler. Because of

the readily available designs and huge variety, people are giving preference to organized retailers.

Chapter 2

Research methodology

2.1 TITLE OF THE STUDY: Franchise opportunities in Jewellery sector with reference to Gitanjali and Shubh Jewellers

Statement of the problem Jewellery in India is a multi-billion dollar industry, with franchise business model expected to play a very big role, thus we must evaluate the opportunities in the sector. 2.2 Scope of the study By conducting this study we can understand the opportunities in Jewellery sector with specific reference to Shubh Jewellers and Gitanjali Jewels in relation to franchise business model

2.3 Objective To understand growth and prospects of franchise industry in India To assess the scope and future trends in jewellery retailing To compare, analyse and evaluate the franchise business model offered by Shubh and Gitanjali jewels

Sample size of the study 1 The owner of Shubh Jewellers franchise

METHODOLOGY Research Design is the conceptual structure within which research is conducted; it constitutes The blueprint for the collection, measurement and analysis of data. It specifies the objective of the study, the methodology & technique to be adopted for achieving the objective. TYPE OF RESEARCH Descriptive research Descriptive research is also called Statistical Research. The main goal of this type of research is to describe the data and characteristics about what is being studied. The idea behind this type of research is to study frequencies, averages, and other statistical calculations. Although this research is highly accurate, it does not gather the causes behind a situation. Descriptive research is mainly done when a researcher wants to gain a better understanding of a topic for example, a frozen ready meals company learns that there is a growing demand for fresh ready meals but doesnt know much about the area of fresh food and so has to carry out research in order to gain a better

understanding. It is quantitative and uses surveys and panels and also the use of probability sampling. Descriptive research is the exploration of the existing certain phenomena. The details of the facts wont be known. The existing phenomenas facts are not known to the persons This research aims at describing or portraying the characteristics of a particular individual, group or a situation. It is more specific than an exploratory study, as it has focus on particular aspects or dimensions of the problem studied. Sampling method: non probability method Non-probability sampling is a sampling technique where the samples are gathered in a process that does not give all the individuals in the population equal chances of being selected.

DATA COLLECTION Data are the basic input to any decision making process in a business. The processing of data gives statistics of importance of the study. The task of data collection begins after a research problem has been defined and research design/ plan chalked out. While deciding about the method of data collection to be used for the study, two things are kept in mind primary and secondary. PRIMARY DATA The information regarding the franchise business model has primarily been collected at source i.e the study utilizes primary data for its analysis.

The primary data predominantly has been collected through the interview method.

SECONDARY DATA Also to provide a much keener insight into the study, data which is secondary in nature also been utilized. This data has been collected from the following sources. Online research papers Company website Various other online forums

PLAN OF STUDY The data collected from the above mentioned primary and secondary sources were completely analyzed in to understand the functioning of franchise business model Where ever possible, facts and graphical diagrams have been used. Such data has been interpreted and recommendations have been developed.

GEOGRAPHICAL LOCATION The entire study has been done in Doddaballapur Area Main road, near market school

REFERENCE PERIOD: The study was conducted in January TOOLS OF ANALYSIS and DATA COLLECTION: The tool for collecting data is questionnaires. There are 20 close ended questions The tools used for analysis are percentage etc, and to present the data through bar graphs, tables, pie charts, etc. These tools will ensure proper understanding, analysis and interpretation of the data collected. Limitations of study: Biased response: The owner of the franchise were not much interested in answering the questions. Lack of information: some of the information that was required for this study was difficult to obtain. Eg some books and internet sites were inaccessible.# Incomplete information provided: There are chances of respondents providing incomplete information.

CHAPTER SCHEME Chapter 1: Introduction This chapter talks about the theoretical background of the study. Part A: About entrepreneurship, Industry Profile- about gold, usage of gold, background of gold and Indian society and major players in the field. Part B: Topic of the study- Business Opportunities- definition, concept, types of business opportunities, advantages and disadvantages of business opportunities and evaluation of potential business opportunity.

Chapter 2: Research Design This chapter includes title of the study, statement of the problem, objective of the study, scope of the study, data collection, sampling method, sample size, statiscal tools, plan of analysis, reference period and limitations of the study.

Chapter 3: Company Profile

This chapter consists of the information about the company. It contains introduction of Shubh Jewellers, history of Shubh Jewellers, vision and mission of Shubh Jewellers, products offered, management of Shubh Jewellers, financials of the company and other aspects of Shubh Jewellers.

Chapter 4: Data analysis and Interpretation This chapter includes title of the table, data table, analysis of the table, inference of the table and graphical representation of the data.

Chapter 5: Summary of findings, recommendations and conclusion

Company profile:

Rajesh Exports Limited (REL) headquartered in Bangalore, India manufactures gold & diamond jewellery. REL exports its products world wide and distributes them within India to the wholesale jewellery market. REL also retails its products through its own network of retail jewellery showrooms Shubh Jewellers spread across India.

"Rajesh Export Ltd's (REL) objective is to establish itself firmly as a leader in the global jewellery market by manufacturing and marketing the finest quality jewellery to consumers across the world. To achieve this objective

REL will put in all required efforts and consequently emerge as a global leader in the field of jewellery"

World's largest manufacturer of Gold Jewellery.

World's lowest cost Jewellery producer.

Fully integrated from Mining to Retailing.

Government recogonised Premier Trading House.

India's largest exporter of gold jewellery.

Started a Gold Revolution in the State of Karnataka.

75 retail outlets of SHUBH Jewellers.

SHUBH JEWELLERS

SHUBH Jewellers is a revolutionary mission initiated by Rajesh Exports Limited (REL) to ensure the end of all unethical practices and confusion prevaling in buying of Gold Jewellery. Apart from this, REL has also ensured that the products offered at SHUBH are also of finest finish, technically perfect, unique designs and give you a wide range of selection.

SHUBH Jewellers is the only jeweller who sells Gold Jewellery at Real Rate Per Gram that is whenever you buy gold jewellery you are quoted Rate per

gram of gold by the jeweller, but invariably you would have noticed that when you make the payment, you end up paying much more than the price per gram quoted to you. The difference in most cases is as high as 20% resulting in the gold prices quoted to you becoming meaningless and an eye wash. The excess payment to be made by you is explained as wastage, value addition, making charges etc. Now for the first time in the world all this confusion comes to an end. At SHUBH 22ct(916) BIS Hallmarked Jewellery from out of the 10,000 exclusive designs would be available to you without any extra charges. Just select the Jewellery multiply the actual weight of the Jewellery by the Real Rate Per Gram and that is what you pay, nothing extra.

Only SHUBH is capable of delivering to you BIS Hallmarked 22ct(916) Gold Jewellery of actual physical weight at Real Rate Per Gram because :-

REL is a Rs. 20,000 crore company and the largest importer of gold in India and also the largest jewellery company in the world.

REL is a nominated agency by the Government of India for Direct import of gold into India from mines.

REL has set up the world's largest state of the art gold jewellery manufacturing facility at Bangalore.

REL has strategic tieup with some of the world's largest gold mines. REL imports gold directly from the mines, manufactures jewellery at its own world's largest jewellery manufacturing plant and retails 22ct(916)

Hallmarked Jewellery at its own retail store SHUBH Jewellers. The entire process is fully integrated, there are no middle men in the process, which is the reason due ro which SHUBH Jewellers is able to offer 22ct(916) hallmarked Gold Jewellery at un-believable prices. REL has set up one of the largest research and development unit for developing new manufacturing techniques, which ensure excellent finish, unique designs, guaranteed purity and lower processing cost.

HISTORY OF SHUBH JEWELLERS REL is headquartered in Bangalore, India 1988 - Brothers Rajesh Mehta and Prashant Mehta joined family retail jewellery business. 1990 - Rajesh Exports established the first organized gold jewellery manufacturing facility in India. 1991 - Rajesh Exports established India's first R&D facility in the jewellery sector.. 1994 - Rajesh Exports emerged as the largest exporter of jewellery from India. 1995 - Initial Public Offer (IPO) of securities to fund expansion of manufacturing facility 1995 - IPO overwhelmingly subscribed and REL securities listed and traded on the BSE and NSE

1996 - REL successfully implemented the expansion plan. 1999 - REL plans to set up world's largest manufacturing facility 2002 - REL completes the construction of the World's Largest manufacturing facility. 2003 - REL begins commercial production in the new manufacturing facility 2006 - REL achieves a sales of USD 1.5 billion. 2008 - REL establishes branded retail chain stores under the name of "Shubh Jewellers" 2009 - REL launches the Gold Revolution in the state of Karnataka through Shubh Jewellers. 2011 - REL has launched 73 Shubh Showrooms in the state of Karnataka. REL has set up one of the largest research and development unit for developing new manufacturing techniques, which ensure excellent finish, unique designs, guaranteed purity and lower processing cost. 3.4 VISION AND MISSION STATEMENT: VISION: Our vision is to make Shubh Jewellers A leading trendsetting jewellery brand A brand that customers respect and demand

A brand recognised for practicing fair trade practices and ethical norms. MISSION: Our mission is to create unique high quality jewellery that will be used by our customers for a long time without being affected by fashion trends. Through constant innovation, we seek to delight and surprise our customers with products of superior design and quality.

MANAGEMENT REL is managed by a Board of Directors comprising of experienced people in the jewellery trade and also professionals from other relevant areas. The Board of Directors are responsible for all major decisions. The Board of Directors are assisted by a well defined hierarchy comprising of some of the most experienced Professionals in the jewellery field. The Directors have ultimate responsibility for the management and administration of the affairs of the company. The Articles of Association of the Company provide that, the number of Directors shall not be less than three and not more than twelve. The company may, subject to the provisions of the Articles of Association and the Companies act, alter the minimum or maximum number of Directors by approval of its Shareholders. The Board of Directors NAME POSITION

Mr. Rajesh Mehta Mr. Prashant Mehta Mr.VenuMadhav Reddy Mr. P Shivashanker Mr. Shankar Prasad

Executive Chairman Managing Director Non Executive& Independent Director Non Executive& Independent Director Non Executive& Independent Director

The business addresses of all the Directors in Rajesh Exports Ltd: Batavia chambers, No 4, Kumara Krupa road, Kumara Park East, Bangalore 560001, India. None of the promoter directors have any activity outside of the company that is significant with respect to the company.

Profile of Directors Mr. Rajesh Mehta: Mr. Rajesh Mehta The executive chairman of REL is responsible for the overall functioning of the company, in addition to being specifically incharge of the finance and marketing functions. Mr. Rajesh Mehta has an experience of over twenty years in the functioning and management of the jewellery trade and has travelled extensively within India and overseas for establishing a strong network in the industry. In addition to his post as Executive Chairman of REL he is a member of the export trade advisory committee of the Bangalore Jewellers Association. He

is also the president of the Karnataka Jewellery Exports Association and the Director of Handloom and Handicrafts Export Corporation of India. Mr. Prashant Mehta: Mr. Prashant Mehta Managing Director of the company is in charge of the day to day functioning and holds specific charge of the production unit of REL. He has over twenty years of experience in the jewellery business and is recognized as an authority in the production of Gold jewellery. Mr.Venu Madhav Reddy: Non executive and independent Director in REL. He looks after and advices on the statutory requirements division of the company.

Mr.P.Shivashankar: Non executive and independent Director in REL, is a tax consultant by profession and advises the company on taxation matters. He is an experienced person with thorough knowledge of the subject.

Mr. Shankar Prasad Non executive and independent Director in REL is an established and well known company secretary who advices REL on Company Law related matters.

Gitanjali Jewels is the flagship concept of Gitanjali Group, the only Multi Branded Lifestyle Jewellery Store in India. We offer the bouquet of Worlds Leading Jewellery Brands including Asmi, Ddamas, Diya, Gili, Nakshatra, Maya Gold, Sangini, and Parineeta all under one roof. We are a One Stop Destination of branded jewellery, spanning over 65 retail outlets across 40 cities in India with 25 more stores in the pipeline. Our products are a personification of elegance and grandeur designed to celebrate the enigma of a woman. Our focus is on Quality, Purity, Variety & Exceptional Customer Service which enhances the Jewellery buying experience for the customers. Jewels showcases exquisite Jewellery line that includes ethnic and casual designs under multiple brands and collections, artistically crafted so as to add a true essence to the beauty that a women adorns. Our product category includes everything from earrings, necklaces, rings, pendants, nose pins to tanmanias for mangalsutra, designed to cater the needs of the modern customer under various price segments. Gitanjali Jewels was awarded The Best Jewellery Retail Chain of the Year in Multi brand category by Retail Jewelers India Award 2009 and Fashion

Retailer of the year 2010 and Franchiser of the year 2010 by Franchise India Holdings Ltd and Star Retailer Awards. Values Integrity, Solidarity, Credibility and Perfection these are the fundamentals of Gitanjali's working philosophy as it impacts business and employee relations, transparency of operations and quality assurance, on the way to creating a globally valued organization. These are values painstakingly nurtured and demonstrably proven over 40 years. We live and breathe them. Vision To be the worlds leading manufacturer of diamonds and retailer of branded jewellery, with a strong, globally diversified infrastructure and integrated operations efficiently linking diamonds from rough to retail. Mission To develop, produce and sell high quality jewellery and accessories worldwide and help our customers to get the maximum value for money. To create incremental demand for diamonds through marketing and promotion strategies. To create incremental enterprise and brand value to increase the net worth of the group To build in-house resources of unsurpassable skill in design, manufacture and customer response. To protect worker interest and nurture professional growth. To remain a loyal business partner to DTC.

History of Gitanjali group

Incorporated as a limited company 'Gitanjali Gems Private Limited'

1986

Started jewellery operations at the manufacturing units in SEEPZ, Mumbai 1991 Converted into a public limited company 'Gitanjali Gems Limited' Launched India's first branded jewellery, GILI, through Gili India Started operations at the manufacturing unit in Borivali, Munbai Started operations at the manufacturing unit in Surat SEZ Formed the D'damas Joint Venture company Formed JV Brightest Cricle Jewellery Private Limited to promote Brand 'Nakshtra' Hyderabad Gems SEZ Limited become Wholly owned subsidiary of the company Initial Public Offering (IPO) of Gitanjali Gems Limited Acquired Samuel Jewelers Inc, USA Acquired Asmi from DTC 1994 1994 1996 2003 2003

2004

2006

2006 2006 2006

Table 4.1:

Table showing investment required for the franchise

25-50lakhs Investment required Shubh jewellers Gitanjali

50-75lakhs

75-100lakhs

1-5cr

Analysis: From the above table it can be found that Gitanjali jewels requires investment of 2-5 crores. Shubh jewellers requires investment of 40-60lakhs

Chart 4.1:

Chart showing investment required for the franchise

Investment required in lakhs

300 250 200 150 100 50 0

2-5 crores

SHUBH GITANJALI

40-60 lakhs

GITANJALI

SHUBH

Inference: Jewellery is a capital intensive business thus it requires large sums of investment. Gitanjali being a large store format and premium retailer requires the franchisor to invest upto 5 crores and Shubh jewellers being a small store format and low margin retailer requires investment of 60 lakhs

Table 4.2:

Table showing other investments required

Other investments required GITANJALI SHUBH

Yes

No

Analysis: From the above table it can be seen that both Shubh jewellers and Gitanjali jewels require investment

Inference: From the above table it can be seen that both Shubh jewellers and Gitanjali jewels require other investment like furniture of store, legal formalities, lightning and fixtures.

Table 4.3:

Table showing duration of the franchise

Duration of franchise Shubh jewellers Gitanjali

1year

3years

5years

Perpetuity

Analysis: From the above table it was found that Gitanjali offers franchise up to 3 years, whereas Shubh offers up to 5 years

Chart 4.3:

Chart showing duration of the franchise

Duration of franchise

5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

5 years 3 years

shubh

gitanjali

Inference: From the above chart it was found that both Gitanjali and Shubh jewellers offer franchise upto 3 & 5 years respectively after which it can be renewed, depending upon terms and conditions.

Table 4.4: Table showing returns on investment made in the business

Returns on investment Shubh jewellers Gitanjali

10-15%

15-25%

25-30%

30-50%

Analysis: From the above table it can be seen that Gitanjali offers return upto 26% while Shubh jewellers give returns upto 20 %

Chart 4.4:

Chart showing returns on investment made in the business

return on investment
30 25 20 15 10 5 0

20 %

26%

return on investment

shubh

gitanjali

Inference: From the above chart it can be found that Gitanjali offers higher return on investment made in the business with returns upto 26% annually, whereas Shubh jewellers offer only 20% return to the franchisees.

Table 4.5: Time duration taken to break even in the business

Time to break even Gitanjali Shubh

2years

3years

4years

5 years

Analysis: From the above table it can be seen that Gitanjali takes 4 years to break even. Shubh jeweller takes 5 years to break even.

Chart 4.5 Chart showing years taken to break even

Time taken to break even


5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

time taken to break even

5 years

4 years

shubh

gitanjali

Inference: Shubh jewellers being a low margin retailer takes 5years to break even while Gitanjali takes 4 years to recoup the investment

Table 4.6: Table showing margins on sale for the franchise

Margin on sale for the franchise Shubh jewellers Gitanjali

1-2%

2-3%

3-5%

5-10%

Analysis : Shubh jewellers offers margin of 2-3% on sale where as Gitanjali jewels offers margin of upto 14%

Chart 4.6 Chart showing margin on sale

margin on sale
12 10 8 6 4 2 0 shubh gitanjali

margin on sale

Inference : shubh jewellers being a low margin retailer offers only 2-3% margin on sale to the franchisor whereas Gitanjali jewels offers margin of 14% as it deals in diamond jewellery

7.Type of jewellery the franchisor deals in? Gold Silver Platinum Diamond

Type of jewellery Shubh Gitanjali

Gold

Silver

Platinum

Diamond

Analysis: Shubh jewelers deal only in gold. Gitanjali deals in platinum, gold silver and diamonds Inference: Gitanjali offers wide variety of jewellery like gold, platinum, silver and diamond. Shubh jewellers deals only in gold.

8. No. of stores under franchise format currently? 10-20 20-40 40-60 60 & above

No. of stores under franchise model


250

200

150 no. Of franchises 100

50

0 shubh gitanjali

Analysis : shubh jewellers has 82 stores and Gitanjali jewels has 215 stores under franchise Inference: Gitanjali jewels being a old player in the market has 215 stores across the world but shubh jewellers has only 82 stores

9. Future plans for expansion of stores under franchise format (next 5 years) ? 10-50 50-100 100-150 150& above

Future expansion
600 500 400 300 200 100 0 shubh gitanjali

Future expansion

Analysis : shubh jewellers plans to expand to 500 stores in next 5 years whereas Gitanjali plans to expand to 400 stores Inference : shubh jewelers has chalked out more aggressive plan to expand across India to increase the no. of stores to 500 and Gitanjali has plan to expand to 400

10. Region wise presence of the company? North South East West

Table showing region wise presence of the companies

Region of presence Gitanjali Shubh

North

South

East

West

90 80 70 60 50 40 30 20 10 0 gitanjali shubh north east west south

Analysis: Shubh jewellers is present only in southern part of India whereas Gitanjali is present across India Inference: Shubh jewellers being a small and new player started out from Bangalore thus it is pre dominantly present in southern India. Gitanjali is a failry large player which is present across the nation

11. Criteria for selection of the franchise Financial strength of the franchise Experience Area All of the above

CRITERIA FOR Finance SELCETION SHUBH GITANJALI

Experience

Area available

Analysis: Criteria for selection for franchise of Shubh jewelers are experience as well as the financial ability of the owner. Gitanjali jewels requires the franchisor to have financial ability as well as required area for the store Inference: Shubh jewellers require the franchisor to have prior experience in jewellery industry so that he can run the store well and Gitanjali requires the franchisor to have adequate financial ability as well as large area for the store

12. Prefereed area of operation? Tier I cities Tier II cities Tier III cities

Preferred area Gitanjali Shubh

Tier I

Tier II

Tier III

Analysis : shubh jewellers franchsie can be set up in tier 1 2 3 cities whereas Gitanjali jewels can be set upm oly in tier 1 & 2 Inference : shubh jewelers being a small retailer can be set up in small to big cities but Gitanjali jewels have to set up in tier 1 & 2 cities, as it is a premium and large retailer

13. Size of the store required? 100-200sqft 200-400sqft 400-800sqft 800& above

Table showing size of the store required

Size of the store required Shubh jewellers Gitanjali

100-200

200-400

400-800

800&above

Analysis: Shubh jewelers require 400 sqft of space where as Gitanjali requires space 1100 sqft Inference: Gitanjali being a large store format and premium retailer requires large space to operate where as Shubh requires a smaller area with lesser investment

Chart showing area required in sqft

AREA REQUIRED IN SQFT


1200 1000 800 600 400 200 0 GITANJALI SHUBH

AREA REQUIRED IN SQFT

14. Franchise training program? Yes, training is available No, its not available

FRANCHISE TRAINING PROGRAM GITANJALI SHUBH

YES

NO

Analysis: Both the franchisors provide training Inference: Shubh jewelers as well as Gitanjali provide training to the franchisors

15. Type of support provided by the franchise

SUPPORT PROVIDED GITANJALI SHUBH

MARKETING STAFF TRAINING

TECHINICAL MANAGEMENT TRAINING

Analysis: Shubh jewellers provide marketing as well as management technical training. Gitanjali provides marketing, technical as well management training Inference: Shubh jewellers only provide training related to technicalities and marketing support to the franchisees, it doesnt provide training to staff and management. Gitanjali jewels provides training to management, technical support and marketing.

Table 4.16: Table showing the main competitors to the franchisees

COMPETITION

LOCAL/SMALL PLAYERS

BIG/ORGANISED PLAYERS

GITANJALI SHUBH

Analysis: Shubh jewellers have competition from local players where as Gitanjali has competition from big players in the market

Inference: Shubh jewellers being a small player has competition from local/unorganized sector whereas Gitanjali being an organized player has competition from big/organized players in the markets

Table 4.17: Table showing if any performance guarantees are given to unit franchisees

Performance guarantees Yes Gitanjali Shubh

No

Analysis: From the above table it can be seen that Shubh jewellers and Gitanjali jewels do not give any performance guarantees

Inference: From the above table it was found that the franchisors do not give any sort of performance guarantees to the franchisees. It is upto the franchisees to perform and make sure they get their desired returns.

Table 4.18 Table showing if exclusive territorial rights given to a unit franchise

Territorial rights GITANJALI SHUBH

YES

NO

Analysis: From the above table it can be seen that Gitanjali doesnt provide any territorial rights to the franchisor where as Shubh provides territorial rights to the franchisee

Inference: From the above table it can be seen that Shubh jewellers provides exclusive territorial rights to its franchisees, where as Gitanjali does not provide any territorial rights to its franchisees.

Table 4.19:

Table showing if any deposit or upfront payment to be made as security

Upfront deposit Gitanjali Shubh

Yes

no

Analysis: From the above table it can be seen that Shubh jewellers requires the franchisee to make a upfront payment, where as Gitanjali jewels doesnt require any upfront payment

Inference: From the above table it can be seen that Shubh jeweller requires the franchisee to provide collateral to the company like property papers etc where as Gitanjali only requires the franchisee fees which is included in the initial investment made.

Table 4.20:

Table showing if jewellery of other brands can be sold within the same store

JEWELLERY OF OTHER BRANDS GITANJALI SHUBH

YES

NO

Analysis: From the above table it can be seen that both Shubh jewellers and Gitanjali jewels do not allow jewellery of other brands to be sold with that of theirs in the same store.

Inference: From the above table it can be seen that under no circumstances the franchisee is allowed to sell jewellery of other brands in the same store as it is against the policies of the companies.

5.1 SUMMARY OF FINDINGS.


It was found that jewellery is a capital intensive business thus it requires

large sums of investment. Gitanjali being a large store format and premium retailer requires the franchisor to invest up to 5 crores and Shubh jewelers being a small store format and low margin retailer requires investment of 60 lakhs

Gitanjali and Shubh jewellers offer franchisee upto 3 & 5 years

respectively after which it can be renewed, depending upon terms and conditions.

Gitanjali offers higher return on investment with returns upto 26% annually,

whereas Shubh jewellers 20% return

It can be seen that Shubh jewellers being a low margin retailer offers only

2-3% margin on sale to the franchisor whereas Gitanjali jewels offers margin of 10- 14% as it deals in diamond jewellery It was found that Gitanjali offers jewellery in gold, platinum, silver and

diamond. Shubh jewellers deal only in gold. It can be seen that Gitanjali is a bigger player than Shubh jeweller. Gitanjali

has over 200 stores across the country and Shubh jewellers has only 80+ stores in South India

It was found that Shubh jewellers require the franchisee to have prior

experience in jewellery industry so that he can run the store well and Gitanjali requires the franchisee to have adequate financial ability as well as large area for the store.

A Shubh jeweller store can be set up in small to big cities as it is a small

and low margin retailer but Gitanjali jewels have to set up in tier 1 & 2 cities, as it is a premium and large retailer. Both Shubh jewellers and Gitanjali jewels do not offer any performance

guarantees to their franchisees

Shubh jewellers provide territorial rights to its franchisors where as Gitanjali

does not provide any rights to its franchisors

It was found that under no circumstances the franchisee is allowed to sell

jewellery of other brands in the same store.

Recommendations
Gitanjali jewels require very high investment to start the business; hence many potential franchisees may not be able to afford it. Shubh jewellers offer jewellery in gold only thus customers who are looking for platinum, silver and diamond may choose other retailers Gitanjali jewels do not operate in tier 3 cities, thus they are missing on the large chunk of semi urban and rural population Shubh jewellers doesnt offer high end products for the upper class customers, thus it can create a separate sub brand for the niche market Both the franchisors do not offer any performance guarantees to the franchisees, which may deter potential franchisees may taking up the business. Gitanjali jewels must offer territorial rights to its franchisees as it avoids competition from same brand Shubh jewellers must increase their presence in other parts of the country too, as it has presence only in southern part of the country Shubh jewellers offer very low margin to the franchisees in the investment intensive business, thus it must increase the margins steadily.

Conclusion
Both Shubh jewellers and Gitanjali jewellers target different segment of customers of same industry. Shubh jewellers targeting low to medium income group where as Gitanjali jewels targets the upper class people. Any person looking to take up the franchisee of either of the two businesses must first of all decide the location, investment and target market. If a person is looking to set up the business in a rural place, then he must choose Shubh jewellers as it offers value to the buyer, who is cost conscious vice versa any person looking to set up in urban area must decide upon the target group of customers and jewellery he wants to sell. Both the companies have its pros and cons, it is upto us to decide depending upon the location, investment and customers.

BIBILIOGRAPHY http://www.way2franchise.com/resource/article/shubh_jewellers_aims_to_be_ the_no_1_jewelry_franchise_in_india http://www.franchiseindia.org/news/Shubh-Jewellers-plans-on-an-expansionspree-106/ http://www.franchiseindia.net/gitanjali.php http://www.franchiseindia.com/business-opportunities/preciousjewellery/gitanjali/

ANNEXXURE Questionnaire 1. Investment required for the franchise 25-50 lakhs 50-75 lakhs 75-100 lakhs 1 -5cr

2. Are there other investments required? Yes No

3. How long is franchise term for? 1 year 3 years 5 years Perpetuity

4. Is the term renewable? Yes No

5. Returns on investment in the business annually?

10-15% 15-25% 25-30% 30-50%

6. Time duration taken to break even in the business 2 year 3years 3years 4 years

7. Margins on sale for the franchise? 1-2% 2-3% 3-5% 5-10%

8. No. of stores under franchise format currently? 10-20 20-40 40-60 60 & above

9. Future plans for expansion of stores under franchise format (next 5 years) ? 10-50 50-100

100-150 150& above

10. Region wise presence of the company? North South East West

11. Criteria for selection of the franchise Financial strength of the franchise Experience Area All of the above

15. Size of the store required? 100-200sqft 200-400sqft 400-800sqft 800& above

12. Franchise training program? Yes, training is available No, its not available

13. Type of support provided by the franchise Marketing support Staff training support Technical support Management training support

14. Competition from local and other large retailers? Yes No

16. Are any performance guarantees given to unit franchisees? Yes No

17. Is there exclusive territorial rights given to a unit franchise? Yes No

18. Is there any deposit or upfront payment to be made as security? Yes No

19. Can jewellery of other brands be sold? Yes No

You might also like