Retail Sector - Group 7

Retail sector- Group 7
Chapter 1
Retail Industry:
Kousali Institute of Management Studies Page 1

The retail industry emerged in the US in the eighteenth century, restricted to general stores.
Specialty stores were developed only in those areas that had a population of above 5,000.
Supermarkets flourished in the US and Canada with the growth of suburbs after World War
II. The modern retail industry is booming across the world.
A marketplace is a location where goods and services are exchanged. The traditional market
square is a city square where traders set up stalls and buyers browse the merchandise. This
kind of market is very old, and countless such markets are still in operation around the whole
world.
In some parts of the world, the retail business is still dominated by small family-run stores,
but this market is increasingly being taken over by large retail chains.
Retail is usually classified by type of products as follows:
 Food products
 Hard goods ("hardline retailers") - appliances, electronics, furniture etc.
 Soft goods - clothing, apparel, and other fabrics.
There are the following types of retailers by marketing strategy:
 Department stores: Very large stores offering a huge assortment of "soft" and "hard
goods; often bear a resemblance to a collection of specialty stores. A retailer of such store
carries variety of categories and has broad assortment at average price. They offer
considerable customer service.
 Discount stores: Tend to offer a wide array of products and services, but they
compete mainly on price offers extensive assortment of merchandise at affordable and
cut-rate prices. Normally retailers sell less fashion-oriented brands. However the service
is inadequate.
 General merchandise store: A hybrid between a department store and discount
store.
 Supermarkets : Sell mostly food products.

 Warehouse stores: Warehouses that offer low-cost, often high-quantity goods piled
on pallets or steel shelves; warehouse clubs charge a membership fee.
 Variety stores or "dollar stores": These offer extremely low-cost goods, with
limited selection.
 Demographic: Retailers that aim at one particular segment (e.g., high-end retailers
focusing on wealthy individuals).
 Mom-And-Pop or Kirana Stores: It is a retail outlet that is owned and operated by
individuals. The range of products are very selective and few in numbers. These stores are
seen in local community often are family-run businesses. The square feet area of the store
depends on the store holder.
 Specialty Stores: A typical specialty store gives attention to a particular category and
provides high level of service to the customers. A pet store that specializes in selling dog
food would be regarded as a specialty store. However, branded stores also come under
this format. For example if a customer visits a Reebok or Gap store then they find just
Reebok and Gap products in the respective stores.
 Convenience Stores: It is essentially found in residential areas. They provide limited
amount of merchandise at more than average prices with a speedy checkout. This store is
ideal for emergency and immediate purchases.
 Hypermarkets: It provides variety and huge volumes of exclusive merchandise at
low margins. The operating cost is comparatively less than other retail formats. A classic
example is the Metro™ in Bangalore.
 Supermarkets: It is a self service store consisting mainly of grocery and limited
products on non food items. They may adopt a Hi-Lo or an EDLP strategy for pricing.
The supermarkets can be anywhere between 20,000-40,000 square feet. Example:
SPAR™ supermarket.
 Malls: It has a range of retail shops at a single outlet. They endow with products, food
and entertainment under a roof. Example: Sigma mall and Garuda mall in Bangalore,
Express Avenue in Chennai.
 Category Killers or Category Specialist: By supplying wide assortment in a single
category for lower prices a retailer can "kill" that category for other retailers. For few
categories, such as electronics, the products are displayed at the centre of the store and
sales person will be available to address customer queries and give suggestions when

required. Other retail format stores are forced to reduce the prices if a category specialist
retail store is present in the vicinity. For example: Pai Electronics™ store in Bangalore,
Tata Croma.
 E-tailers: The customer can shop and order through internet and the merchandise are
dropped at the customer's doorstep. Here the retailers use drop shipping technique. They
accept the payment for the product but the customer receives the product directly from the
manufacturer or a wholesaler. This format is ideal for customers who do not want to
travel to retail stores and are interested in home shopping. However it is important for the
customer to be wary about defective products and non secure credit card transaction.
Example: Amazon and Ebay.
 Vending Machines: This is an automated piece of equipment wherein customers can
drop in the money in machine and acquire the products. For example: Soft drinks
vending at Bangalore Airport.
Some stores take a no frills approach, while others are "mid-range" or "high end", depending
on what income level they target.
Other types of retail store include:
 Automated Retail stores: These are self service, robotic kiosks located in airports,
malls and grocery stores. The stores accept credit cards and are usually open 24/7.
Examples include ZoomShops andRedbox.
 Big-box stores : These are the larger department, discount, general merchandise, and
warehouse stores.
 Convenience store: A small store often with extended hours, stocking everyday or
roadside items.
 General store: A store which sells most goods needed, typically in a rural area.
Company Background – Pantaloon Retail India

Founded in 1987, by Mr. Kishore Biyani, Pantaloon Retail in India’s leading Retail
Company. It is the flagship company of the future group. Starting its 1st outlet in 1997,
Pantaloons in Kolkata, it currently has over 4 mm sq. ft. of area under business. The company
operates under multiple formats – hypermarket, apparel stores, specialty stores under various
brands including Big Bazaar, Pantaloon, Food Bazaar, Collection, E Zone, etc. The company
also operates an online portal, futurebazaar.com. Pantaloon Retail (India) Limited is today
recognized as one of the pioneers in the business of organized retailing in the country.
Pantaloon Retail is one of the leading retail houses in India. As of November 15, 2006,
Group/Company operated 46 retail stores, including three stores which are operated by
Pantaloon franchises. These 46 stores are spread over about 1,113,000 square feet and are
located in 17 states across India. In efforts to strengthen Pantaloon supply chain,
Group/Company has set up seven regional distribution centers and an apparel manufacturing
plant. The company is headquartered in Mumbai with zonal offices at Kolkata, Bangalore,
and Gurgaon (Delhi). It has 4 kinds of stores; Pantaloon stores, Central Malls, ALL Stores,
Fashion Stations and Mela Store. In the Value segment, Group/Company cater to the masses
through Pantaloon Big Bazaar, Food Bazaar outlets and Gold Bazaar Stores with over 6.5
lakh sq. ft. retail space across Kolkata, Mumbai, Thane, Pune, Hyderabad, Bangalore,
Nagpur, Ahmedabad, Kanpur, Chennai and Gurgaon (Delhi). Subsequently, with evolution of
retail industry in India and change in consumer aspirations, Group/Company diversified
Pantaloon portfolio of offerings to include other retail goods. Currently, Group/Company sell
readymade apparels and a wide range of household merchandise and other consumer goods.
It began its retailing operations in India way back in 1987. Currently, it manufactures and
sells ready-made garments through its own retail outlets and two discounting stores.
Group follows the concept of value retail in India. In other words, Pantaloon business
approach is to sell quality goods at reasonable prices by either manufacturing ourselves or
directly procuring from manufacturers (primarily from small and medium size vendors and
manufacturer). Group/Company endeavor to facilitate one-stop-shop convenience for
Pantaloon customers and to cater to the needs of the entire family. Group/Company believes
this concept as helped us grow to Pantaloon current size within a short time frame of four
years.

Company background –Wal-mart:
Walmart was founded in 1962, with the opening of the first Walmart discount store in
Rogers, Ark. The company incorporated as Wal-Mart Stores, Inc., on Oct. 31, 1969. The
company's shares began trading on OTC markets in 1970 and were listed on the New York
Stock Exchange two years later.
The company grew to 276 stores in 11 states by the end of the decade. In 1983, the company
opened its first Sam’s Club membership warehouse and in 1988 opened the first supercenter
-- now the company’s dominant format -- featuring a complete grocery in addition to general
merchandise. Wal-mart became an international company in 1991 when it opened its first
Sam's Club near Mexico City.
Wal-Mart is the world’s largest corporation (Fortune, 2003). Wal-Mart is also the largest
private employer in the United States of America. Wal-Mart is U.S.A.’s biggest seller of
DVDs, diamonds, groceries, toys, guns, CDs, apparel, dog food, detergent, jewellery,
sporting goods, videogames, socks, bedding, and largest film developer, optician, private
truck fleet operator, energy consumer, and real estate developer (Fortune, 2003).
Americans save about US$10 Billion by shopping at Wal-Mart. Wal-Mart’s revenue

accounted for 15% of the entire U.S. retail market in 2002, excluding automobiles. Sales
globally have been affected over the recent weeks. International sales increased 14.3% to
$10.3 billion.

Chapter 2
1. Block Diagram:

Road Ahead
According to industry experts, the next phase of growth is expected to come from rural
markets.
According to a market research report published in June 2008 by RNCOS titled, 'Booming
Retail Sector in India', organised retail market in India is expected to reach US$ 50 billion by
2011. The key findings of the report are:
• Number of shopping malls is expected to increase at a CAGR of more than 18.9 per
cent from 2007 to 2015
• Rural market is projected to dominate the retail industry landscape in India by 2012
with total market share of above 50 per cent
• Driven by the expanding retail market, the third party logistics market is forecasted to
reach US$ 20 billion by 2011
• Apparel, along with food and grocery, will lead organised retailing in India
Exchange rate used: 1 USD = 45.81 INR (as on June 2010)

Chapter 3

Competitive structure:
Indian Retail Scenario
The retail scenario is one of the fastest growing industries in India over the last couple of
years. India retail sector comprises of organized retail and unorganized retail sector.
Traditionally the retail market in India was largely unorganized; however with changing
consumer preferences, organized retail is gradually becoming popular. Unorganized retailing
consists of small and medium grocery store, medicine stores, subzi mandi, kirana stores, paan
shops etc. More than 90% of retailing in India fall into the unorganized sector, the organized
sector is largely concentrated in big cities. Organized retail in India is expected to grow 25-30
per cent yearly and is expected to increase from Rs35, 000 crore in 2004-05 to Rs109, 000
crore ($24 billion) by 2010.
Indian organized retail industry is one of the sunrise sectors with huge growth potential. Total
retail market in India currently stands at USD 350 billion in 2007-08 and estimated to attain
USD 573 billion by 2012-13. Organised retail industry accounts for only 5.5% of total retail
industry and expected to reach 10% by 2012.
Retail and recession:
The global economic slump has had its impact on the India retail sector. One of the earliest
players in the Indian retail scenario Subhiksha's operations came to a near standstill and
required liquidity injection. Vishal Retail secured corporate debt restructuring (CDR) plan
from its lenders while other players like the Reliance Retail run by Mukesh Ambani and
Pantaloon led Kishore Biyani by went slow on expansion plans and even scaled down
operations. However, during the last quarter a bit of confidence was restored as the economy
showed signs of growth.

Quick facts on Indian Retail sector:
• Indian Retail sector is the fifth largest global retail destination.

• India retail market is dominated by the unorganized sector.
• The top five companies in retail hold a combined market share of less than 2%.
• The Indian retail market has been ranked by AT Kearney's eighth annual Global
Retail Development Index (GRDI), in 2009 as the most attractive emerging market for
investment in the retail sector.
• Currently the share of retail trade in India's GDP is around 12 per cent, and is
estimated to reach 22 per cent by 2010.
• According to Government of India estimate the retail sector is likely to grow to a
value of Rs. 2,00,000 crore (US$45 billion) and could yield 10 to 15 million retail jobs
in the coming five years; currently this industry employs 8% of the working
population.
• India continues to be among the most attractive countries for global retailers.
According to the Department of Industrial Policy and Promotion, approximately US$
47.43 million was the amount of Foreign Direct Investment (FDI) inflow as on
September 2009, in single-brand retail trading.
• More than 80% of the retail sector in the country is concentrated in the large cities.
A study reveals that among the more than 20 locations, for organized retail in India,
Mumbai was found to be the most preferred location followed closely by Bengaluru in
the second position.
Key Players in Indian Retail Sector:
• AV Birla Group has a strong presence in apparel retail and owns renowned
brands like Allen Solly, Louis Phillipe, Trouser Town, Van Heusen and Peter England.
The company has investment plans to the tune of Rs 8000 – 9000 crores till 2010.
• Trent is a subsidiary of the Tata group; it operates lifestyle retail chain, book and
music retail chain, consumer electronic chain etc. Westside, the lifestyle retail chain
registered a turnover of Rs 3.58 mn in 2006

• Landmark Group invested Rs. 300 crores to expand Max chain, and Rs 100
crores on Citymax 3 star hotel chain. Lifestyle International is their international brand
business.
• K Raheja Corp Group has a turnover of Rs 6.75 billion which is expected to
cross US$100 million mark by 2010. Segments include books, music and gifts, apparel,
entertainment etc.
• Reliance has more than 300 Reliance Fresh stores; they have multiple formats and
their sale is expected to be Rs 90,000 crores ($20 billion) by 2009-10.
Pantaloon Retail has 450 stores across the country and revenue of over Rs. 20 billion
and is expected to touch 30 million by 2010. Segments include Food & grocery, e-
tailing, home solutions, consumer electronics, entertainment, shoes, books, music &
gifts, health & beauty care services.
Future Trends of Indian Retail:
• Lifestyle International, a division of Landmark Group, plans to have more than 50

stores across India by 2012–13.
• Shoppers Stop has plans to invest Rs250 crore to open 15 new supermarkets in the
coming three years.
• Pantaloon Retail India (PRIL) plans to invest US$ 77.88 million this fiscal to add
up to existing 2.4 million sq ft retail space. PRIL intends to set up 155 Big Bazaar
stores by 2014, raising its total network to 275 stores.
• Australia's Retail Food Group is planning to enter the Indian market in 2010. It has
plans to clock US$ 87 million revenue in five years. In 20 years they expect the India
operations to be larger than the Australia operations.
Competitive advantages of Indian retail sector:
The key factors that drive growth in retail industry are young demographic profile,
increasing consumer aspirations, growing middle class incomes and improving demand
from rural markets. After downturn of 18 months, retail industry is witnessing improving
signs.

With key parameters like customers entry, same stores sales, average transaction per bill
improving at faster pace, the industry expects the recovery to be fast going forward. Most of
the front line players who have freezed their expansion plans have renewed it in the last
couple of months.
Industry experts predict that the next phase of growth in the retail sector will emerge from
the rural markets. By 2012 the rural retail market is projected to have a total of more than
50 per cent market share. The total number of shopping malls is expected to expand at a
compound annual growth rate of over 18.9 per cent by 2015. According to market
research report by RNCOS the Indian organized retail market is estimated to reach US$ 50
billion by 2011.
Indian retail and Global retail:
China and India are predicted to account for almost 91 per cent of regional retail sales in
2010 and by 2014 their share of the regional market is expected to be more than 92 per cent.
Growth in regional retail sales for 2010-2014 is estimated by BMI at 72.2 per cent, an annual
average of 14 per cent. India should experience the most rapid rate of growth in the region,
followed by China. For India, its forecast market share of 13.9 per cent in 2010 is expected to
increase to 14.3 per cent by 2014.
Moreover, for the 4th time in five years, India has been ranked as the most attractive nation
for retail investment among 30 emerging markets by the US-based global management
consulting firm, A T Kearney in its 8th annual Global Retail Development Index (GRDI)
2009. India remains among the leaders in the 2010 GRDI and presents major retail
opportunities. India's retail market is expected to be worth about US$ 410 billion, with 5 per
cent of sales through organised retail, meaning that the opportunity in India remains
immense.
Retail should continue to grow rapidly—up to US$ 535 billion in 2013, with 10 per cent
coming from organised retail, reflecting a fast-growing middle class, demanding higher
quality shopping environments and stronger brands, the report added.

Bharti Retail strengthened its position in northern India by opening 59 stores, Bharti Wal-
Mart is expected to open 10 to 15 wholesale locations in the next three years, and Marks &
Spencer is considering plans to open additional outlets in the next few years. India continues
to be among the most attractive countries for global retailers.
Foreign direct investment (FDI) inflows between April 2000 and April 2010, in single-brand
retail trading, stood at US$ 194.69 million, according to the Department of Industrial Policy
and Promotion (DIPP).
• Leading watchmaker Titan Industries Limited plans to invest about US$ 21.83 million
for opening 50 premium watch outlets Helios in next five years to attain a sales target
of US$ 87.31 million.
• British high street retailer, Marks and Spencer (M&S) plans to significantly increase
its retail presence in India, targetting 50 stores in the next three years. M&S currently
operates 17 stores in India through a joint venture (JV) with Reliance Retail.
• Chinese retail major, Yishion has entered the Indian market and plans to have at least
125 points of sales, including exclusive stores and multi-brand outlets, across India by
2012. It will open its first exclusive store in New Delhi by September 2010.
• Spain's Inditex, Europe's largest clothing retailer opened the first store of its flagship
Zara brand in India in June 2010. It further plans to open a total of five Zara outlets in
India.
• Bharti Retail, owner of Easy Day store—supermarkets and hypermarts—plans to
invest about US$ 2.5 billion over the next five years to add about 10 million sq ft of
retail space in the country by then, according to a company spokesperson.
• Raymond Weil plans to invest US$ 883,665 in India during 2010, according to
Olivier Bernheim, President and CEO, Raymond Weil
Competitive Strengths of Pantaloon and Wal-mart:
Pantaloon Wal-mart

• Strong understanding of the ‘value • Supply chain management

retail’ segment • Communication strategy with
• Strong and efficient supply chain suppliers and associates
management • Relationship strategy with suppliers
• Strong and efficient logistics and and associates
distribution network • People strategy
• Group/Company is in a position to • Cost strategy
leverage Pantaloon geographical • Location and market strategy
spread • Ability and inspiration from Sam
• Group/Company possess the ability to Walton
identify new locations to promote • Customer service strategy
Pantaloon business plans
• Knowledge management
• Group/Company derive substantial
• Innovation in I.T. and warehousing
revenues from Pantaloon private
and inventory management
labels
• Group/Company effectively use
information technology systems
• Group/Company have a highly
experienced and competent
management team
Major Milestones of Pantaloon:

• 1987: Company incorporated as Manz Wear Private Limited. Launch of Pantaloons
trouser, India’s first formal trouser brand.
• 1991: Launch of BARE, the Indian jeans brand.

• 1992: Initial public offer (IPO) was made in the month of May.
• 1994: The Pantaloon Shoppe – exclusive menswear store in franchisee format
launched across the nation. The company starts the distribution of branded garments
through multi brand retail outlets across the nation.
• 1995: John Miller – Formal shirt brand launched.
• 1997: Pantaloons – India’s family store launched in Kolkata.
• 2001: Big Bazaar, ‘Is se sasta aur accha kahi nahin’ - India’s first hypermarket chain
launched.
• 2002: Food Bazaar, the supermarket chain is launched.

• 2004: Central – ‘Shop, Eat, Celebrate In The Heart Of Our City’ - India’s first
seamless mall is launched in Bangalore.
• 2005: Fashion Station - the popular fashion chain is launched
ALL – ‘a little larger’ - exclusive stores for plus-size individuals is launched
• 2006: Future Capital Holdings, the company’s financial arm launches real estate
funds Kshitij and Horizon and private equity fund Indivision. Plans forays into
insurance and consumer credit.
Wal-mart and India
• India is a ripe and appealing market for Wal-Mart with its growing middle class of
250 million and an economic growth rate of nearly 9%
• In November 2006, Wal-Mart beat out Tesco for a joint venture opportunity with
Indian mobile services leader, Bharti.
• The company’s priority seemed to be an early entry.

• Bharti would manage the front-end of the business, while Wal-Mart would take care
of the supply chain, logistics and other back-end operations.
• The proposed Bharti venture seeks to serve the retail market by supplying it with
goods directly from producers such as agriculturists, craftsmen and artisans.
Global business – competitiveness:
• This refers to the ability of a country (or firm) to provide goods and services which
provide better value than their overseas rivals.
• This is competitive advantage but on a international scale.
Determinants of international competitiveness:
• Price relative to competitors

• Productivity - output per worker
• Unit costs
• State of technology
• Investment in capital equipment
• Quality
• Reliability
• Lead time
• Exchange rate
Increasing competitiveness:
• Rationalization output to get rid of high cost plants

• Relocating to places where labor costs are lower

• Process innovation
• Product innovation
• Incorporating the latest technology into investment
• Sourcing from abroad where appropriate
• Seeking out new market opportunities
• Improving relationships with suppliers and customer
Wal-mart and International expansion:
Wal-Mart was enticed into international markets by a conviction that it could achieve
competitive advantage abroad by applying its combination of technology, logistics and
human resources with its tremendous buying power with multinational consumer goods
suppliers. Wal-Mart’s strategy has been to acquire companies and convert them into the Wal-
Mart way stores European retailers like Carrefour and Ahold, have more than 20 years of
international experience than Wal-Mart.
Multinational retailer’s entry is usually by mergers & acquisitions, which is what Wal-Mart
did in its initial entry into Mexico, with a joint venture with CIFRA, the most powerful
retailer in Mexico. This results in a faster and more reliable learning knowledge base. CIFRA
enables Wal-Mart’s entry with stronger networks in the trade especially with vendors and
understanding the local needs and culture while Wal-Mart brings in its competency like
logistics and service.

Chapter 4
BCG Matrix

Wal-mart:
Walmart’s total share in the market is of USD 258 billion and of Tesco is 236.62 billion (i.e
146.3 billion pounds). Their each contribution in SBUs is al shown in the table. Regarding
the growth there was only 2% growth in grocery whereas the growth was in decline or it was
stable. Therefore for no growth, growth rate is 0%.
Tesco
Wal-mart
Growth Radius (r of
Sl. No Attributes RMS
(USD in rate the circle)
(USD in bn)
bn)
Grocery
1 131.58 70.99 2% 1.85 0.47
Entertainment and
2 33.54 118.31 0 0.283 0.34
electronics
3 Home and usages 25.8 35.493 0 0.73 0.31
Sports goods,
automobile
4 67.08 12.52 -12 5.36 0.4
accessories and
hardware
• RMS value = Revenue of wal-mart in the sector/ revenue of Tesco(competitor ) in the

sector
• Radius calculation:

Sqrt(revenue of one sector/ total revenue of the company)= v1

Pie *r2 = v1
Therefore calculate r Thus we get the BCG matrix as follows:
12 Star Question mark
3 2
0 Cash cow Dog
-12 4
10 1 0
Scale: X axis= Total GDP
Y axis: RMS
Thus from the graph plotted above grocery is in star region and is having the highest
is leading the company, whereas the other contribution is very less.
PORTERS FIVE FORCE MODEL:

1 Threat of New Entrants
Majority of large chains have built their power due to operating efficiency, one-stop shopping
and major marketing-mix expenditure. This powerful force had a great impact on the small
traditional shops, such as butchers, bakers and etc. Hence, nowadays it possesses a strong
barrier for new companies who desire to enter the grocery market. For instance, it becomes
rather difficult for new entrants to raise sufficient capital because of large fixed costs and
highly developed supply chains. This is also evident in huge investments done by large
chains in advanced technology for checkouts and stock control systems that impact new
entrants and the existing ones. Other barriers include economies of scale and differentiation
(in the provision of products or services with a higher perceived value than the competition)
seen in aggressive operational tactics in product development, promotional activity and better
distribution. Some of the other factors are:
• Product differentiation
Pantaloon strategic intent is to build private labels. However, in categories such as

commodities, it is easier to build private labels. At present, nearly 15 percent of Pantaloon
hypermarket brands comprise private labels. Today Tasty Treat, the ready-to-eat private label
of Food Bazaar, is leading with a 16 per cent share among the rest of the snack brands. Today
Pantaloon Retail has 80 products comprising 350 SKUs with five private labels. Since
PepsiCo’s rejection, it has promptly approached local manufacturers such as Prakash Snacks

in Indore and Pogo Chips in Kolkata to manufacture its snacks brands. PRIL plans to grow in
the home solutions business over the next few years.
Walmart helps consumers in accessing their brand of their choice. This is done by demand
forecasting by the company to know the needs of the customers and such products are
brought. They create a difference by Everyday Low Pricing strategy.
• Capital Requirements
Investment Estimation: 2006-2011

Revenue(2006) Rs million 530,125
Revenue in 2011 Rs million 1,796,758
Increase in revenue Rs million 1,266,623
Revenue per sq.ft. Rs/sq.ft. 10,000
Floor Space required Million sq.ft. 127
Furnishing Rate Rs/sq.ft. 1500
Cost of furnishing property Rs million 189,993
Working capital required Rs million 25,332
Working capital(% of revenue) percent 2
Total capital invested excluding real estate Rs million 215,326
Loss funding Rs million 44,902
Investment required till 2011 Rs million 260,228
Investment per year Rs million 52,046
The initial investment of around $100m in the deal could scale to $1.4b in India by Wal-Mart
for its establishment.
For pantaloon it required $650 million for its establishment in India.
• Access to Distribution Channels
Group/Company have Pantaloon own fleet of 200 trucks, which helps us to transport
and deliver Pantaloon products in a cost and time efficient manner. Group/Company believe
that Pantaloon distribution and logistics set up is well networked and allows us to fulfill the
store requisition within short time period of generation and receipt of order, which has helped
us to optimize in-store availability of merchandise and minimize transportation costs.
Pantaloon strong distribution and logistics network has enabled us to dispense with the
requirement of a dedicated storage space at every store, which is an industry practice, and
instead undertake periodical replenishment of depleted stock.
Wal-Mart maintains its own fleet of 2000 plus trucks which have scheduled deliveries
between warehouses to stores minimizing delays and over reliance from suppliers.
• Government Policy
The retail sector in India is expecting that in this Budget 2010 it is seeking industry status,
which can reduce the cost of capital and to allow FDI in retail that can increase investments
and global competitiveness. Indian organized retail industry is one of the sunrise sectors with
huge growth potential. Total retail market in India currently stands at USD 350 billion in
2007-08 and estimated to attain USD 573 billion by 2012-13. Organized retail industry
accounts for only 5.5% of total retail industry and expected to reach 10% by 2012.
Policy Clarifications to allow investments by financial investors: Current FDI policy

allows 100% FDI in Cash and-carry wholesale formats and 51% FDI is allowed in single
brand retailing. However, the regulations have been interpreted as guiding to a blanket ban on
foreign investments in the sector. Thus, even investments by financial investors like FIIs and
PE funds are prohibited, limiting the flow of capital required for the growth of the sector.
Create a Single Window clearance: To strengthen retail industry in India, the government
can provide a single window clearance system. The single window clearance will further
streamline license processes associated with the establishment and management of retail
stores. Customs Duty and other entry taxes: A reduction in the customs duties relating
to consumer items would greatly channelize funds to boost the economy.
Served from India Scheme: "Served from India Scheme" should be made available for
Retailers. Any sales using foreign currency/international credit cards must be counted against
this and duty credit entitlements must be credited for retailers. This can be used for import of
items. Income tax depreciation rate on Furniture, Fixture and Building improvement etc
should be increased to 25%.
2. Bargaining Power of Suppliers
This force represents the power of suppliers that can be influenced by major chains and that
fear of losing their business to the large supermarkets. Therefore, this consolidates further
leading positions of stores in negotiating better promotional prices from suppliers that small
individual chains are unable to match. Suppliers are also threatened by the growing ability of
large retailers to source their products from abroad at cheaper deals. The relationship with
sellers can have similar effects in constraining the strategic freedom of the company and in
influencing its margins. The forces of competitive rivalry have reduced the profit margins for
supermarket chains and suppliers. Some of the other factors are:
• Supplier industry is dominated by a few firms
The stores purchases large good required as per the customer requirement. Thus the
suppliers also get into contract of buying the required products for the main supplier and
supply it to the retail outlet. Some of the products is produced and sold by the retail outlet as
pantaloon does for the outlets by having food bazaar and is in contract with it has promptly
approached local manufacturers such as Prakash Snacks in Indore and Pogo Chips in Kolkata
to manufacture its snacks brands. Thus suppliers industry are dominated to few firms.
• Suppliers’ products are differentiated
The Future group has recently acquired a stake in Aadhar which operates rural
retailing formats. It purchases crops from farmers (especially wheat and paddy) and provides
them with feasible solutions to operational problems. It also provides techno-commercial
suggestions to improve their output. The private label product proposition: Quality and price,
primarily, relative to branded alternatives. Supplier innovation if often what allows them to
stay ahead of retailer private label. Innovative suppliers can come out with new products that
retailers haven’t necessarily thought of. This may be one reason why the UK has greater PL
penetration than the US – UK retail is more consolidated than US retail. Right now, India
retail is highly fragmented, so there’s a long way to go.

Thus difference in supply of products will lead to difference in revenue of the

organization.
• Suppliers’ products have high switching costs
From the recent analysis done by Wal-Mart it is seen that it requires $200000 to retain the
customer. Thus non availability of the product by the supplier or delaying of the product will
lead the customer to switch to other stores which will also lead to switching of products. The
lifetime value of these lost customers can be $ 200,000 or more as estimated by Wall mart.
Observing inconsistent store management tops the priority list of over 90% of the retailers
and further more than 71% of the retailers believe that efficient store management is very
important for the overall business success.
3 Bargaining Power of Customers
Porter theorized that the more products that become standardized or undifferentiated, the
lower the switching cost, and hence, more power is yielded to buyers. Loyalty card remains
the most successful customer retention strategy that significantly increases the profitability of
the business. In meeting customer needs, customizing service ensure low prices, better
choices, constant flow of in-store promotions enables brands to control and retain their
customer base. It has also provided supermarkets with a new strategic expansion into new
markets of banking, pharmacies, etc. Some of the other factors are:
• Buyers are concentrated or purchases are large relative to seller’s sales
The customers are given discounts on the purchase made by the customers. There are
green cards issued in retail stores. In pantaloon, every Wednesday there is low pricing on
purchases and on having loyalty card they get discount of 5 %. On purchase of Rs20000 there
is a discount of 7.5% and if the customer is having loyalty card he will have a discount of
additional 5%. On purchase of Rs40000 there is a discount of 10% and if the customer is
having loyalty card he will have a discount of additional 5%. There is everyday low pricing
in Wal-Mart.
• Buyer has full information
Websites and advertisements give more information about the products. The customers are
also allowed to touch and feel the product which will help them to know about the product.
Thus the customers get full information of the product and also a decision for their choice.
Wal-Mart maintains a simple and effective marketing strategy which it has managed to
replicate globally apart it being the focus of its strategy. The Every Day Low Price (EDLP) is
simple and eliminates unnecessary advertising trying to push sales, as Wal-Mart has
successfully sold the concept to the customers, that it sells its products at the lowest prices,
everyday. This is one of the most interesting attributes of Wal-Mart.
4 Threats of Substitutes
General substitution is able to reduce demand for a particular product, as there is a threat of
consumers switching to the alternatives. In the industry this can be seen in the form of
product-for-product or the substitute of need and is further weakened by new trends, such as
the way small chains of convenience stores are emerging in the industry. Some of the other
factors are:
Wal-Mart is the only retailer to be in Fortune’s 100 Best Places to Work. Wal-Mart’s
empowerment of Associates is laudable with instances such as allowing its Associates to get
on the network and lower its prices, nationwide if its found to be higher than its competitors,
all this done without any consultation or permission requests from superiors.
• Electronic security systems in place of security guards
Electronic data interchange was developed in 1970 to improve the purchasing process. IT has
been used by retailers ranging from Amazon.com to eBay, in order to radically change the

buying behavior across the globe. This has contributed to 15% of increase in sales in IT
sector. In traditional supply chain inventory management, orders are the only information
firm’s exchange, but information technology now allows firms to share demand and
inventory data quickly and inexpensively. Some of the electronic equipments which have
been used by retailers are as listed below: Electronic shelf labeling, Self check-out machine,
Radio Frequency Identification (RFID), Electronic Point of Sale (EPoS), Electronic Funds
Transfer Systems(EFTPoS) , Electronic scanners, Fax machines in place of overnight mail
delivery
Wal-Mart’s technology and inventory management systems and software are better than the
best in the world and also the lifeline of the organization. Experimentation apart from
investments light-years ahead of its time into VSAT capabilities have boosted its success.
Pantaloon has an in-house team and it has outsourced ABAP resources. They are also in the
process of setting up a SAP Competency Centre. The system runs on a HP Superdome server
on HP UNIX 11i and the database is from Oracle. The cost of this project was about $10
million.
Effect of POS Implementation : According to the field research report prepared by

Microsoft that interviewed over 580 retailers (who had deployed POS systems), with each
interview lasting for more than 30 minute on average, the findings have been tabulated as
below:
Based on the above data we can say that the application of technology leads to increment in
sales and reduction in expenses, thus causing a rise in profitability. However, it would be an
erroneous statement to say the least. The correct interpretation of the data shown above can
be stated as follows: Technology by itself does not cause sales increases or expense
reductions, but rather the way the information that technology provides is used causes the
increased sales and reductions in expenses.
5 Bargaining Power of Competitors
The environment has seen a very significant growth in the size and market dominance of the
larger players, with greater store size, increased retailer concentration, and the utilization of a
range of formats, which are now prominent characteristics of the sector. Operating in a
mature, flat market where growth is difficult (a driver of the diversification into non-food
areas), and consumers are increasingly demanding and sophisticated, large chains are
accruing large amounts of consumer information that can be used to communicate with the
consumer. This highly competitive market has fostered an accelerated level of development,
resulting in a situation in which retailers have had to be innovative to maintain and build
market share. Such innovation can be seen in the development of a range of trading formats,
in response to changes in consumer behavior. The dominant market leaders have responded
by refocusing on price and value, whilst reinforcing the added value elements of their service.
The biggest competitor for organized market is the unorganized market, which is occupying
more than 95% of Indian market. Whereas in other countries it has hardly occupied 15%.
Thus India is great market for organized retailing.
The retail industry is divided into organised and unorganised sectors. Over 12 million outlets
operate in the country and only 4% of them being larger than 500 sq ft (46 m2) in size.
Organised retailing refers to trading activities undertaken by licensed retailers, that is, those
who are registered for sales tax, income tax, etc. These include the corporate-backed
hypermarkets and retail chains, and also the privately owned large retail businesses.
Unorganised retailing, on the other hand, refers to the traditional formats of low-cost
retailing, for example, the local kirana shops, owner manned general stores, convenience
stores, hand cart and pavement vendors, etc. In India, a shopkeeper of such kind of shops is
usually known as a dukandar.

Most Indian shopping takes place in open markets and millions of independent grocery shops
called kirana. Organized retail such supermarkets accounts for just 5% of the market as of
2010 Regulations prevent most foreign investment in retailing. Moreover, over thirty
regulations such as "signboard licenses" and "anti-hoarding measures" may have to be
complied before a store can open doors. There are taxes for moving goods to states, from
states, and even within states.
EXTERNAL FACTOR ANALYSIS:
1. GDP: A look at the statistics shows that the retail sector in India is worth USD 394
billion and is growing at the rate of 30% annually. A study has found that retailing
($180 billion) contributes to 10 per cent of GDP and employs 7 per cent (21 million)
of the workforce. India is the 4th largest economy as regards GDP and is expected to
rank 3rd by 2010 just behind US and China. Over the past few years, the retail sales in
India are hovering around 33-35% of GDP as compared to around 20% in the US.
2. SIZE (GROWTH IN MARKET): The current size of the overall retail market in
India is estimated to be about 400 billion (Rs 18,00,000 crores). It is expected that
retail will contribute about 23% of the overall GDP within the next three years, and
the market size estimates vary between USD 750 billion (Rs 35,00,000 crores) to a
mind boggling USD 1.25 trillion (Rs 55,00,000 crores), depending upon which
analyst you want to believe. Size of modern retail likely to touch US$ 60+ Billion by
2011: At least 2.5 Million additional direct jobs likely to be created in the next 5
years. The size of modern retail is about US$ 8 Billion and has grown by 35% CAGR
in last five years.
3. Growth in foreign direct investment (FDI): In retail FDI has increased upto 51% in
India. Economic development due to FDI inflow, increase in no of tax payers and
VAT collection
4. EMPLOYMENT: Retailing provides jobs to almost 15 percent of employable Indian

adults. Retail is a big employer in India – though the estimated numbers vary from 3
million (30 lakhs) to somewhat unbelievable 60 million (6 crores) retailers `The Great
Indian Retail Story' this sector is expected to create 2 million jobs by 2010. About 4
crore people are employed in retail trade, assuming each person supports a family of
5, this, implies that about 20 crore people are dependent on this sector.
5. CONSUMPTION: Indians spend over USD 30,000 a year (in PPP terms) on
conspicuous consumption that represents 2.8% of the entire population (which is
approx 30 million people) making it the 4th largest economy in PPP terms next only to
USA.
6. Higher Disposable Income: The disposable income has been showing a rapid
increase from the last few years and is expected to grow steadily because the
proportion of the major consuming class (population having incomes higher than Rs
90,000) is reached 48 percent by 2009-10 from 20 percent in 1995-95, leading to new
consumption patterns due to increasing depth in the consumers’ pocket.
7. Growing Working women population
The propensity to spend in the case of working women is higher by 1.3 times as
compared by housewives. According to the census report, the population of working
women increased to 35 percent in 2010(201324900 people) as compared to 26 percent
in 2001(127628280people).
201324900-127628280=7,36,96,620

Per capita income –Rs.44,000. 60% of the per capita income spent on retail sector i,e
Rs,26400.
So 73696620* 26400=Rs.1,94,55,90,76,800 spending increased on retail sector

from 2001 to 2010.
Organized sector is 5%. So 5 % of Rs. 1.94 lakh crore is Rs.9500 crore for organized
sector.
8. Adoption of Nuclear Family culture
The increase in per capita income paved way to increase the nuclear-family culture.
The proportion of nuclear families as a percentage of total household population has
increased as shown by fall in average household size from 5.57 in 1991to 5.36 in
2007, expected to fall further to 5.02 by 2011. This will fuel the growth of organised
retail. Total households now(2010) in India is 22,41,45,000 in that we have
151897000 nuclear families(67.76%) but in 2000 India has 124749000 nuclear
families.(21.76% increase).
9. Baby Boomer Effect
The demographics of Indian population has a steep growth in earning population (15-
60 yrs). In 2000, 593 million people (58.3 percent of total population) constituted the
age bracket of 15-60 yrs – growing from an unprecedented level of 335 million people
(54 percent of total population) in 1975 at a rate of 77 percent (CAGR of 2.3 percent)
in contrast to a population growth of 64 percent (CAGR of 2 percent) over the same
period of 25 years. In 2010, 729 million people (61.86 percent of total population).
729-593=136 million people.
1360,00,000*26400=Rs.35,90,40,00,00,000.( Rs.26400 on retail sector i.e 60% of

per capita income)
Organized sector-5% of Rs.3590400000000 is Rs 1,79,52,00,00,000.
10. Growth in Urban Population
Urbanization has increased at a rate of 2.7 percent over the last 10 years (1990-2000).
In 2000, the urban population was estimated to be 281 million (27.7 percent of the
total population). This trend is likely to continue and urbanization is expected to grow
at 2.4 percent between 2000 and 2015. In 2015 the urban population is expected to be
401 million, constituting 32.2 percent of the total
population.
11. Robust Outlook towards Branded products
Due to liberalization of manufacturing sector, various organized branded products

have entered into Indian markets, thereby developing and widening the basket for
branded finished goods. With the advent of International competition, new trends and
lifestyles are evolving among India masses resulting into 10-15 percent growth in
branded products and brand conscious among the youth,(60% of the Indian population
is below age of 30 i.e 71,36,22,000) This has established the base for organized retail
market in India.
12. Plastic Money becoming a greater Pie of credit
The use of plastic money in the form of debit and credit cards has expanded multifold
in last 5 years. The number of credit cards has grown at a CAGR of 28 percent.(25
million credit card users) The customers have adopted the habit of electronic
payments and leveraging their pockets shifting from basic needs to lifestyle products.

13. Less Conversion level:
Despite high footfalls, the conversion ratio has been very low in the retail outlets in a
mall as compared to the standalone counter parts. It is seen that actual conversions of
footfall into sales for a mall outlet is approximately 20-25 percent. On the other hand,
a high street store of retail chain has an average conversion of about 50-60 percent. As
a result, a stand-alone store has a ROI (return on investment) of 25-30 percent; in
contrast the retail majors are experiencing a ROI of 8-10 percent.
14. Percolating down:
In India it has been found out that the top 6 cities contribute 66 percent of the total
organised retailing. While the metros have already been exploited, the focus has now
been shifted towards the tier-II cities. The 'retail boom' of which 85 percent has so far
been concentrated in the metros, is beginning to percolate down to these smaller cities
and towns. The contribution of these tier-II cities to total organised retailing sales is
expected to grow to 20-25 percent.
15. Rural Retailing:
India is home to 70 percent of India’s population (i.e population-83,25,59,000) and

that rural per capita incomes have risen by 50 percent in the last 10 years. We have
got 627000 villages in India.Us $ 188 billion of retail sector comes from the rural
retail i.e 55% but we found very negligible percent of modern retail in rural sector and
83 crore population from rural area only. The rural market could be a major growth
opportunity.
16. personal tax change:

Increased exemption limit in personal income tax by Rs 15,000 for senior citizens
and by Rs 10,000 for all other categories of individual tax payers has resulted in
Discretionary spending and is directly linked to income in the hands of the people.
Increase in disposable income will result in increased spending on lifestyle products.
In general, increased consumption is expected to boost the growth of the retail sector
World population: 6,877,400,000
Indian population: 1,189,370,000
Density (population per kmsq): 362
Area (km2): 3,287,240
Number of retail outlets required:
Country Number of stores per 1,000

people
India 22
Japan 10
USA 3.8
• Population growth rate: 1.548% (2009 est.)

• Birth rate: 21.76 births/1,000 population (2009 est.)
• Death rate: 6.4 deaths/1,000 population (2009 est.)
• Literacy rate: 71.7% (Age 7 & above)
• Unemployment Rate: 7.8%
• 864:1000
17. Almost a third of Indians, or over 300 million people, are migrants. Around 30%
percent of Indians are migrants, according to the survey. 35 percent of people in urban
areas and 26 percent of people in rural areas have moved from their place of usual
residence. However, migration in India is largely confined to within the same state. 72

percent of migrant households in urban areas and 78 percent in rural areas have
migrated within the same state.
30% of total Indian population comes upto = 356,811,000 are migrants
70% of Indian population is situated in rural areas which comes = 832,559,000
30% of total Indian population is situated in urban and metropolitan area =

356,811,000
35% of people in urban are migrants= 124,883,850
26% of people in rural are migrants= 21,465,340
Total migrants= 146,349,190
Thus for every thousand people if 22 retail outlets are required then for 146,349,190
people who are migrants 321968 retail outlets are required, which is an opportunity
for the retail outlet.
18. Employment seems to be the most important reason for migration. Some 67
percent of migrant households in urban areas and 55 percent in rural areas reported
migrating for employment-related reasons.
Due to the employment factor in India 67% of urban people = 239,063,370
Due to the employment factor in India 55% of rural people = 457,907,450
Total migrants due to employment factor should be taken in rural area i.e.
457,907,450 since urban people migrate within specified area and there in no much
increase in retail outlets.
Thus for every thousand people if 22 retail outlets are required then for 457,907,450
people who are migrants 10,073,964 retail outlets are required, which is an
opportunity for the retail outlet. This cannot be implemented so easily as it requires

large investment and therefore we can see that the footfall in the retail sector in urban
area will increase.
19. Females migrate more often than males in India, primarily for marriage. 61
percent of urban female migrants and 91 percent of rural female migrants migrated for
marriage.
If the ratio of men is to women is 1000:864 then female in urban and rural will be
469,470,000 and as we know female are shopping. Thus considering this female
population we can build around 10,238,340.
20. Education play a major role in male migration. For urban males, the migration rate
was lowest among the ‘not literate’ (17 percent) and highest among college graduates
(38 percent). For rural males, the migration rate is 4 percent among the ‘not literates’,
and 14 percent for college graduates.
The students lying in the age of 17 to 25 desire to go to retail outlet than the other
students in the range below 17. Thus 38% of males in urban is 83,600,000 and 14% of
male in rural will be 49,953,540. The total of male migrating for education will be
133,553,540. Thus there will be a huge opportunity of opening a retail outlet nearby
schools and colleges and number of outlets comes around 2,938,178. As the density is
high in graduating colleges, assuming the strength to be more then 1500- 2000 the
number of retail outlets reduces to 1,500,000.
21. Some 4 million Indians have migrated internationally. The survey finds that 0.38
percent of Indians, about 4 million people, have migrated out of the country. This is
smaller than the 10 million Indian international migrants that we have from
destination country data. As Indians will reduce by population due to migration. This
is a treat to the retail outlet since the sales reduces by 1% in every outlet
22. Vehicle number: The number of vehicle consumption has increased by 13% globally
and 12% in India which has made accessibility to the retail outlets easier. the sales of
each outlet have increased by 5%
23. Ethnic groups: Around 13% of people are found in the group of ethnic groups. There
is less growth found in these retail outlets. It will add less than 0.5% to the growth of

industry. Since these are getting civilized / modernized this is hindering to the proper
establishment of the retail outlet in these sectors.
24. Age group: About 47% of India’s population is under the age of 20; and this will
increase to 55% by 2015
25. IT placements: there are around 4 million placements to happen in the year 2010
therefore around 88000 retail outlets can be opened considering 1000 people footfall
per outlet. If an IT campus consists of 20000 people (assuming) then the number of
retail outlets required will be less and 8 retail outlets is sufficient for these. 4 million
people will require around 1600 retail outlets.
SL.No Opportunities Weights Rating Total

1 GDP 0.06 8 0.48
2 Growth 0.05 7 0.35
3 FDI 0.05 9 0.45
4 Employment 0.05 7 0.35
5 Consumption 0.05 9 0.45
6 High disposable income 0.05 8 0.40
7 Growing women population 0.04 8 0.32
8 Baby boomer effect 0.05 7 0.35
9 urbanization 0.05 7 0.35
10 Branded products 0.03 5 0.15
11 Plastic money 0.04 7 0.28
12 Less Conversion level: 0.04 7 0.28
13 Percolating down 0.03 8 0.24
14 Rural retailing 0.04 8 0.28
15 Personal tax exchange 0.03 6 0.18
16 Employement migration 0.04 7 0.28
17 Female migration 0.04 6 0.24
18 Education migration 0.05 9 0.45
19 Migration due to marriage 0.02 5 0.10
20 Male migration 0.05 8 0.40
22 Vehicle number 0.05 8 0.40
24 Age group 0.05 8 0.40
25 IT placements 0.04 7 0.28

Sl.No Threats Weightage rating Total

1 Migrated internationally 0.80 6 0.48
2 Ethnic group 0.20 4 0.08

Chapter 5
Internal Analysis of Wal Mart:
Strengths:
The strengths of a business or organization are positive elements, something they do

well and is under their control. The strengths of a company or group and value to it, and can
be what gives it the edge in some areas over the competitors. The following section will
outline main strengths of wal mart.
Management:
Human Resources and Training –

Wal-Mart's policies and practices are designed to ensure an environment that is

equitable and inclusive. To that end, Wal-Mart solicits feedback from all of their employees,
annually, regarding their opinions of their work experience and the company's
implementation of Wal-Mart's basic beliefs and values. In addition, they provide training on
working with people, leadership skills, equal employment opportunities, diversity and sexual
harassment prevention.
Wal-Mart is committed to providing all employees state-of-the-art training resources

and development time to help achieve career objectives. They have a number of training tools
in place that keeps then out in front of the competition, including classroom courses,
computer-based learning, distance learning, corporate intranet sites, mentor programs,
satellite broadcasts, skills assessments, and job announcements. These tools are successfully
increasing advancement opportunities for women and minorities. Wal-Mart has been ranked
among Training Magazine's 'Top Training 100' companies for two consecutive years. Respect
for the individual, one of Wal-Mart's company's three core values, is reinforced throughout
their training process.
Wal-Mart is committed to the customers and communities they serve. Wal-Mart hires
locally, representing the diversity and uniqueness of everyone's hometown. As the
demographics of the nation have changed, so has the family of Wal-Mart's employees. More
than 15 percent of their employees are over the age of 55, and they are the nation's largest
employer of Hispanics and African-Americans.
Employee Stock Ownership & Profit sharing
Wal-Mart uses its respectable financial position to attract and retain employees by
offering stock ownership and profit-sharing programs. These programs are available to all
full-time employees of Wal-Mart and make a significant impact on the earnings of
employees. They are allowed to purchase shares of stock at reduced prices, which allows
them an immediate appreciation of their portfolio. With the profit-sharing program, the
employees receive bonuses at the end of the year based on the success of the overall
company. These also provide a significant amount of compensation to their employees.

Wal-Mart also has very strong community-based initiatives. They have continually
gave college scholarships for high school seniors, raised funds for nearby children's hospitals
through the Children's Miracle Network Telethon, provided money and manpower for fund
raisers, school benefits and churches, Boy and Girl Scouts, park projects, police and fire
charities, food banks, senior citizen centers, and more. They also educate the public about
recycling and other environmental topics with the help of a "Green Coordinator," a specially
trained employee who coordinates efforts to make an environmentally responsible store.
Along this same line, Wal-Mart has created Environmental Demonstration Stores in
Lawrence, Kansas; Moore, Oklahoma; and City of Industry, California. These stores serve as
a "test tube" for environmentally friendly building materials and experimental methods for
conserving energy and water.
Core Values of Management-
The corporate structure of Wal-Mart is very well rounded and managed with three
core values: -respect for the individual.
- service to their customers
- striving for excellence.
The management of Wal-Mart is the backbone to the entire company and these core-
values have propelled Wal-Mart to the top of their industry and have allowed Wal-Mart to be
the world's largest company.
Leadership and Teamwork
Wal Mart management today around the world is the best, most strategic leadership
team they have ever had. They are making the changes necessary for company to continue to
stay out in front. They are also teaming up with Wal-Mart’s Board members, who bring
experience from many different backgrounds. The caliber of Board members is tremendous

and allows us to tap into a vast knowledge resource. The Board has been instrumental in
encouraging the Company to more quickly address critical issues.
Culture
From the onset, Sam Walton led by example and emphasized frugality, customer
service, and an open book policy. WalMart’s culture focuses on building loyalty among
associates, suppliers and customers. Associates are seen as playing a critical role in the
success of WalMart and are given more responsibility and recognition than employees of
competitors. Training is decentralized, and managers are given greater local control. Efforts
are made to actively involve employees in the continued success of WalMart, and employee
suggestions are often implemented at great cost savings.
Marketing:
Every day Low Price-
The nature of Wal-Mart's marketing is in its Every Day Low Price (EDLP) campaign.
This is what makes Wal-Mart successful. Sam Walton devised a system for which price
setting was to be followed. Sam wouldn't allow management to hedge a price at all. If the list
price was $1.98, but Wal-Mart had paid only 50 cents, they would mark it up 30 percent, and
that's it. Sam's philosophy was "No matter what you pay for it, if we get a great deal, pass it
on to the customer." The other major campaign Wal-Mart employs is the Rollback. This
occurs when Wal-Mart lowers the already lowered Every Day Low Prices. This has really
been a successful way for Wal-Mart to increase its patrons. When consumers shop, they are
always looking for the best deal, since Wal-Mart already offers low prices, when they
rollback prices, they are able to out-price all of their competition.
Customer Oriented Approach-

Wal-Mart has been known for their customer oriented approach. Wal-Mart maintains
one of the best satisfaction guaranteed programs, which promotes customer goodwill. One
can return virtually any product to Wal-Mart without any problems. They simply take the
product back and promptly refund the price of the product, nearly no questions asked. They
also promote goodwill among consumers by employing a tactic, which Sam created known as
the "Ten Foot Rule." This is simply the idea that if a customer comes within ten feet of an
employee, they are required to greet them and ask if they can help them in any way. This is
also evident through employees getting to know customers on a first name basis.
One Stop Shopping Experience.
The most important marketing aspect of Wal-Mart is that they create the ideal one-
stop shopping experience. Wal-Mart is organized into ten distinct divisions. These include:
Wal-Mart stores, SAM'S CLUBS, Neighborhood Markets, International, walmart.com, Tire
& Lube Express, Wal-Mart Optical, Wal-Mart Pharmacy, Wal-Mart Vacations, and Wal-
Mart's Used Fixture Auctions. Through these divisions, Wal-Mart offers thousands of
products. The Wal-Mart stores contain groceries, clothes, healthcare products, toys,
electronics, bedding, sports and recreation, automotive, among other items. Because of this
conglomeration of products, the typical consumer can go into any Wal-Mart and walk out
without having to stop at another store for anything that they could need.
Thinking globally. Serving locally.
Wal-mart international stores offer working families the things they need at prices
they can afford, and offer the customer service and convenience they’re famous for. In each
of their international markets, they use their strength as a global company to meet the local
needs of our customers, and provide help for their communities.
Saving People Money so they can live better.

Saving people money to help them live better was the goal that Sam Walton
envisioned when he opened the doors to the first Wal-Mart. Today, more than 40 years later
with operations in 16 markets worldwide, Wal-mart continue to deliver that promise to
families around the globe. It’s the focus that underlies everything they do at Wal-Mart. And
for the millions of customers who shop at Wal-mart stores and clubs around the world each
week, it means a lot.‘Saving money — good news in any language’.“Every Day Low Price”
is a epicenter of the Wal-mart marketing strategy.
Vendor relations.
WalMart has made specific supplier choices along the way that are geared towards
minimizing costs and maximizing efficiency. For example, WalMart eliminated manufacturers’
representatives at cost savings of 3-4% and calls its suppliers collect. Buying is centralized at
headquarters which keeps purchasing costs down. WalMart has avoided supplier power by not
allowing any single supplier to have more than 2.4% of its purchases. Therefore, WalMart is better
able to control its negotiation position with its suppliers. WalMart’s electronic data interchange allows
it to communicate with over 3,600 vendors regarding inventory orders, forecasting, planning,
replenishing, and transferring electronic funds. As WalMart has grown, it has developed key supplier
relations into partnerships. Large key suppliers such as P&G and GE are able to share information
with WalMart electronically and have dedicated teams to manage products for WalMart. Key
suppliers have vendor managed inventory systems, which reduces WalMart’s inventory costs and
allows suppliers to increase sales for their products. WalMart actively manages its suppliers by
communicating its expectations and providing annual strategic business planning packets to vendors.
All of these activities are aligned with maximizing revenues and efficiency and keeping costs low.
Human resource:
Wal-Mart proudly states on its website that its culture is guided by the 3 Basic
Beliefs, Sam’s Rules, and the Sundown and 10-Foot rules. The company has consistently
appeared on Fortune’s 100 Best Companies to work for in the United States. It employed
more than 2.1 million associates world wide.
Production/Operations
Favorable access to distribution network –
Perhaps the strongest aspect of Wal-Mart is in its access to distribution networks.

Wal-Mart uses a system known as cross-docking. This is simply the process of continuously
delivering goods to warehouses where they are sorted and distributed to their stores within
one day. This enables Wal-Mart to take advantage of economies of scale with shipping trucks
with full loads. This also gives Wal-Mart the ability to increase the speed of deliveries, a
faster response to market demands, and a low inventory. This system has allowed Wal-Mart
to decrease its sales cost by 2 to 3 percent over the industry. This savings is then priced into
the products with the earlier discussed EDLP programs.
This system is maintained through the most important aspect of Wal-Mart, its
employees. With over one million employees worldwide, Wal-Mart definitely has the
manpower to move goods. This is also facilitated with a proprietary satellite-based
communication system that enables managers and point-of-sale systems real-time
information on the needs of each store.
Wal Mart’s hub and spoke distribution network

It is another key strategic piece behind its operations. Merchandise brought in by truck to a
distribution center is sorted for delivery within 24-48 hours. Logistics management by way of
cross docking allows seamless “just in time” inventory delivery and minimizes the cost of
inventory sitting idly in distribution centers.
Operations strategy.
WalMart’s operations activities fit well together to achieve maximal efficiency and
lower costs. By having multiple distribution centers, WalMart is able to lower a store’s
square footage that is devoted to inventory to 10% versus 25% for competitors. This allows
higher efficient use of store floor space for displaying more goods and generating greater
sales volume. Shelf labeling, as opposed to individual product labeling, minimizes handling
of goods thereby keeping costs lower. Inventory is tracked electronically at the point of sale
by UPC scanners and hand held bar code scanners. This information is communicated to the
store’s computerized inventory system, allowing for maximal efficiency in inventory tracking
and repletion.
Research and Development:
Wal-Mart’s innovation keeps it a front-runner in retail as it is regularly turning out

new patents/proprietary technology. Development and innovation are high at Wal-Mart with
regard to their products/services, which is a sure strength in its overall performance.
Computer Information Systems :
Wal-Mart uses a sophisticated system of satellite-based communications.

They also offer a safe, secure and complete website where consumers can purchase all of the

same products found in the store. The website is strength because it is not only a means for
purchasing products, but is also a very thorough informational site. Consumers can log onto
http://www.walmartstores.com/ and do company financial searches, find employment, learn
about the grassroots of Wal-Mart, email the company about problems, and learn about any
recalls of products sold through Wal-Mart.
Wal-Mart pioneered the concept of building competitive advantage through

distribution & information systems in the retailing industry. They introduced two innovative
logistics techniques, cross-docking and EDI (electronic data interchange).
Weaknesses:
Weaknesses of a company or organization are things that need to be improved or

perform better, which are under their control. Weaknesses are also things that place you
behind competitors, or stop you being able to meet objectives. This section will present main
weaknesses of Wal-Mart.
Management:
No formal Mission Statement-
The biggest weakness that Wal-Mart has in the management area is that it does not
have a formal mission statement. While they do have core values, they do not explicitly tell
their employees or consumers what their business is. This is a fundamental aspect of a
company and it provides not definition and direction, but it gives a company a statement on
which to rely on to stay strong and focused.
Few minorities & few females In top management.
Another weakness is that there are few females in top management and there are few
minorities employed. With such a societal demand for equality, Wal-Mart is lacking in this

category. This is not a very good ethical decision for Wal-Mart to be making. They are really
hurting their corporate image by maintaining this position.
No union involvement
The other area that Wal-Mart lacks in is with unions. Currently, Wal-Mart does not
have any union involvement. This is a problem because of the perception of treating
employees poorly. Unions are created to provide bargaining power to employees on issues
that involve their compensation, benefits, and working conditions. This is also a weakness
because of job security. With unions, job security is not as much of a concern.
Marketing :
The biggest source of marketing weakness stems from Wal-Mart lobbying to expand
into new markets. There are thousands of towns across the United States that have tried to
block the introduction of Wal-Mart because of the economic impact that it has on small-town
stores and shops. Wal-Mart has a damaged reputation because when they move into a
location they end up "forcing" these types of businesses out of business.
Human resource:
Non-Unionization
Unlike its competitors in the retail industry Wal-Mart has remained non-unionized. Its
alternative is an open door policy which aims to encourage employees to take their
complaints beyond management. Wal-Mart employees commence at lower wages than
unionized corporations, quitting by the end of the first year

Low Wages.
The average Wal-Mart associate makes between a paltry $12,000 and 17,000
annually. suggest that the company cares more about keeping its prices low than to increase
employees’ wages and thus, in turn, their standard of living.
Discriminating against women.
Wal-Mart has been accused of discriminating against women by its actions of denying
training and promotion opportunities that are generally offered to men. Men are also paid
more than women. In June 2001 a group of six current and former female Wal-Mart
employees filed a sex discrimination lawsuit (seeking to represent up to 500,000 current and
former Wal-Mart workers) against the company . The suit was filed because Wal-Mart failed
to provide equal employment opportunities for women. Women comprise 72% of the
workforce but only small percentages are in supervisory or managerial positions. In addition,
“Wal-Mart is the nation's largest employer of women, but unfortunately they are being
treated without dignity and respect." (Cookson, 2001). The data also shows that women are
rated higher in performance evaluations across all positions except cashier. Women are
disproportionately employed in lower paying hourly jobs Total earnings paid to men is about
$5,000 more than paid to women. Women are on lower hourly rates but have been employed
longer than men. Women scored higher in performance ratings Over 95% of Store Managers
and Co-Managers change stores at least once upon entering the positions. 80% of Support
Manager promotions did not appear in job posting data .
female employees are told that "women do not make good managers", that "a trained
monkey" could do their jobs, and that women with kids couldn't be managers.
Production/Operations :
Slowing speed of checkout lines.
The largest source of concern for this functional area is the slowing speed of checkout
lines. This is simply a product of Wal-Mart's success. Because more and more people are
going to Wal-Mart, and the number of checkout lines is staying constant, the only way to
compensate is for the time to checkout increase. This is a problem because it can and will
cause people to choose other stores that are less congested. They are basically losing sales
due to this fact.
Research and Development :
No site Research.
This is a weakness because they do not actively engage in any research and
development. Specifically, they do not do any prior site research before opening a store. They
simply approach a local government and build.
Key strengths:
The key strengths are Financial position, employees, customer oriented, one-stop
shopping, satisfaction guaranteed programs, employee stock ownership and profit-sharing,
well-rounded business, ease of website, good reputation, and favorable access to distribution
networks.
Key weakness:
The key weaknesses are some ratios are not sufficient, non-unionization, no formal
mission statement, few women and minorities in top management, undifferentiated products
and services, site research, slow speed of checkout service, and finally a damaged reputation.
Strengths
• Wal-Mart is a powerful retail brand. It has a reputation for value for money,
convenience and a wide range of products all in one store.

• Wal-Mart has grown substantially over recent years, and has experienced global
expansion (for example its purchase of the United Kingdom based retailer ASDA).
• The company has a core competence involving its use of information technology to
support its international logistics system. For example, it can see how individual
products are performing country-wide, store-by-store at a glance. IT also supports
Wal-Mart's efficient procurement.
• A focused strategy is in place for human resource management and development.
People are key to Wal-Mart's business and it invests time and money in training
people, and retaining a developing them.
Weaknesses
• Wal-Mart is the World's largest grocery retailer and control of its empire, despite its
IT advantages, could leave it weak in some areas due to the huge span of control.
• Since Wal-Mart sell products across many sectors (such as clothing, food, or
stationary), it may not have the flexibility of some of its more focused competitors.
• The company is global, but has a presence in relatively few countries Worldwide.
Internal factors of Pantaloon:
Strength:
Growth through private labels:
A striking characteristic of Pantaloons has been the strength of its private label
programme. In Pantaloons 70% of apparel sales come from own labels. John Miller, Ajile.
Scottsvile, Lombard, Annabelle, Honey, Bare are some of the successful brands created by
the company.
Manufacturing:
There is a drive for backward integration, into manufacturing. Pantaloons is a

manufacturer retailer. Manufacturing helps the company plan the products better

depending on what is selling at the stores and also helps better margin. The company has
trouser manufacturing unit in Tarapur and a denim plant in Goregaon, Mumbai.
Special activities on every Wednesday for women
This activity is done every Wednesday only for ladies coming to mall, under this
activity we appoint a female emcee, and she takes care of all the announcements & telecalling
to be done for ladies. We arrange some type of games such as “one minute free shopping,
housy, question answer round, followed by distribution of various gifts to the winners.
Strong distribution Network.
Strong distribution and logistics network and supply chain; strong distribution and
logistics network, with our 21 distribution centers covering and Large base of customers and
Strong focus on systems and processes
Other Strengths.
 Pioneer in the industry, largest market share and Capitalization.

 Reputation for value for money (competitive pricing), convenience and a wide range
of products all in one store.
 Presence in major cities.
 Highly strategic human resource management and development. It invests time and
money in training people and retaining them.
 Most trusted and respected brand enjoyed by the customers.
 Being financially strong, it helps Pantaloons Retail India deal with any problems, ride
any dip in profits and out perform there rivals.
 Development and Innovation are high at Pantaloon India with regards to its products
and consumer preferences and life style changes which helps to keep ahead of its
competition.
 Vast Retail Network base of pantaloons
 Considerable Asset Base

 Centralized procurement group

 Experienced manpower in Operations & Management
 Seamless mall
 Brand Availability
 Weekly activities
 Loyal customers and repeated customers
 Each floor dedicated to different clothing
 Presence of food bazaar and inox
 Special activities on every Wednesday for women,
 Shopping experience along with Radio central
 It is the main sponsor in Femina Miss India.
 Strong management team Brand recognition and reputation and Diversity and variety
in products offered on the web (footwear, apparel, sporting equipment etc.) Strong
control over its own distribution channel.
 No bad reputation like child labor or environment pollution
 Brand equity and early mover advantage; Entrepreneur led, professionally managed
by an experienced team; Project execution and operations capabilities; Vast range of
lifestyle and value retail products and services.
Weakness-
Weaknesses found can be the opportunities of improvements. The No of outlets

available in the locations of pantaloons are very low. It does not have a strong presence
everywhere.
Promotional Cost Vs Revenue Less Conversion level:
Despite high footfalls, the conversion ratio has been very low in the retail outlets in a
mall as compared to the standalone counter parts. It is seen that actual conversions of footfall
into sales for a mall outlet is approximately 20-25%. On the other hand, a high street store of
retail chain has an average conversion of about 50-60%. As a result, a stand-alone store has a

ROI (return on investment) of 25-30%; in contrast the retail majors are experiencing a ROI of
8-10%.
Customer Loyalty:
Retail chains are yet to settle down with the proper merchandise mix for the mall
outlets. Since the stand-alone outlets were established long time back, so they have stabilized
in terms of footfalls & merchandise mix and thus have a higher customer loyalty base.
E-retailing is limited –
limited variety of products available online direct sale to consumers is creating

conflicts with its own reseller’s online customer service not "helpful" or easy to find.
Others.
 Pantaloons do not function internationally, which has an effect on success, as they do

not reach consumers in overseas market.
 Pantaloons Retail India is the world’s largest retailer and controls its empire, despite
its IT advantages, could leave its weak in some areas due to the huge span of control.
 Since Pantaloon Retail Ltd, sell products across many sectors, it may not have the
flexibility of some of its more focused competitors.
 Each business line faces competition from specialties’ companies. Fashion segment,
Shoppers Stop, Trent, Lifestyle. In hypermarket – RPG (Spankers), Trent (Star India
Bazaar), in food business, Reliance fresh, Spinach, Food world.
 Negative Operating Margin
 Limited Liquidity Position
 Low Return on Equity
 Unavailability of space
Internal strengths of the Wal Mart

Weighted
score
Internal Strengths Weight Rating
Human resources and
Training.
0.05 8 0.40
Employee Stock Ownership 0.25
& Profit sharing
5
0.05
Core Values of Management- 0.05 8 0.40
Leadership and Teamwork 9 0.9
0.1
Every day Low Price- 10 1.0
0.10
Customer Oriented Approach- 0.05 8 0.4
One Stop Shopping 9 0.9
Experience.
0.1
Saving People Money so they 0.25
can live better.
0.05 5
Thinking globally. Serving 0.3

locally.
0.05 6
Vendor relations. 0.1 7 0.7

Favorable access to 0.1 8 0.8
distribution network –
0.4
Wal Mart’s hub and spoke 0.05 8

distribution network
Operations strategy. 0.05 6 0.3

Computer Information 0.05 8 0.4

Systems :
Culture 0.05 6 0.3
Total 1.00
Internal weakness of the Wal Mart
Internal Weakness Weight Rating Weighted Score

No formal Mission Statement- 0.3 10 3
Few minorities & few females 0.1 8 0.8

In top management.
Non-Unionization 0.10 7 0.7

Low Wages. 7
0.15 1.05
Discriminating against 0.05 7 0.35
women.
Slowing speed of checkout 0.15 8 1.2

lines.
No site Research. 0.15 8 1.2
Total 1.0

Chapter 6
SWOT Analysis of Pantaloon
Strengths
Leader in the sector
Wide range of products are available
Presence in major cities

Financially strong which enables them to tackle with problems
Pantaloon is the most trusted brand
Spend more time and money on development of HR
Also have their own brand
Pantaloon Retail, is looking to raise as much as Rs 7.5 billion (USD 160 million) through an
IPO,
Lines of Business
The company is present across several lines of business which have various formats (stores)
operational under it. These include:
• Food - Food Bazaar, Chamosa, Spoon, Brew Bar, Sports Bar & Sports Bar Express,
Cafe Bollywood,
• Fashion - Pantaloons, Central, aLL, Brand Factory, Blue Sky, Top 10, Fashion
Station, Big Bazaar, Lee Cooper (JV),
• General Merchandise - Big Bazaar, Shoe Factory, Navras, Electronics Bazaar,
Furniture Bazaar, KB'S FAIR PRICE
• Home & Electronics - Home Town, eZone, Collection i
• E-tailing (Online Shopping) - www.futurebazaar.com
• Books & Music - Depot
• Leisure & Entertainment - Bowling Co., F123
• Wellness - Star & Sitara, Tulsi
• Telecom & IT - Gen M, M Bazaar, M-Port, ConvergeM
Listed on: Bombay Stock Exchange
Pantaloon Retail's core retail revenues, which include value (Future Value Retail) and
home (Home Solutions Retail) businesses, jumped 32 per cent to Rs 2,581 crore in the
September quarter due to the pre-festive season buying.

Operates multiple retail formats in both the value and lifestyle segment of the Indian
consumer market.
The company operates over 10,000,000 square feet (930,000 m²) of retail space, has
over 1,000 stores across 61 cities in India and employs over 30,000 people.
Future Group is present in 61 cities and 65 rural locations. Retail formats of future group
include Pantaloons, Big Bazaar, Food Bazaar, Home Town, eZone, Depot, Future Money and
online retail format www.futurebazaar.com.
The group’s joint venture partners include Italian insurance major Generali, French retailer
ETAM group, US-based stationary products retailer Staples Inc and UK-based Lee Cooper
and India-based Talwalkar’s, Blue Foods and Liberty Shoes.
• It purchase cereals and pulses from mills and perishable foods from concessionaries,
has now set up a subsidiary — Pantaloon Food Product — to participate in the supply
chain, by setting up collection centers, importing fruits
Weakness
Don’t have international presence
Not focusing on single product or brand. So this may affect Pantaloon if the competitors
focus on single brand or product
In spite of strong sales, Pantaloon's profits remain low and internal cash generation is not
sufficient to support such ambitious growth plans.

Opportunities
Huge untapped market in organised sector since it is only 5.5% of the total market
Organised sector is estimated to grow at a rate of 25%-30% and reach INR 1 trillion by
2010
Rural retailing
Opportunities for takeover, M & A, JV with global players
In 2010 added more than 500 units
• Rural market is projected to dominate the retail industry landscape in India by 2012
with total market share of above 50 per cent
• Driven by the expanding retail market, the third party logistics market is forecasted to
reach US$ 20 billion by 2011
• Apparel, along with food and grocery, will lead organised retailing in India
• Decline in Small Stores: It is observed that small independently owned stores are
gradually losing their foothold in the market place. These stores are generally called
“Mom and Pop” stores and they offer limited merchandise to the consumer.
• Growth in foreign direct investment (FDI): In retail FDI has increased upto 51% in
India.
• Higher Disposable Income
• Growing Working women population
• Adoption of Nuclear Family culture
• Growth in Urban Population
• Plastic Money becoming a greater Pie of credit
Threats
Intense competition from many global and domestic players (ex: Wal-mart Bharti JV)
Increase in real estate price

Target of 100 million sq. ft of retail space by 2010/11 would be difficult after protests forced
the closure of some stores
In 2006 clocking Rs.20,000 billion according to the Indian Retail Report 2007.
In cities like Mumbai, Bangalore, New Delhi, Hyderabad, and Pune the no. of outlets is
expected to grow to275 by 2010
The tax structure
Lack of adequate infrastructure facilities
Restrictions in Foreign Direct Investment
WAL-MART SWOT Analysis:
Strengths
• It is the world largest company in term of revenues.
• It is well known for lowest cost products.
• Wal-mart has the largest employee base.
• The company covered most of the US market and having a huge market share.
• Wal-Mart offers variety of products in their stores.
• Wal-Mart is operating in 14 countries with 2,980 stores.
• It sells 40% of private brands which are produced through contracts with manufactures.
• High customer satisfaction.

• The SAMs Club customers are able to buy the products in bulk quantity and getting the
advantage of low prices.
• A Wal-Mart super store offers non stop shopping for their customers.
• Satisfaction guaranteed programs promoting customer goodwill
• Buy from local merchants when possible
• Stock ownership and profit-sharing with employees
Leads industry in information technology
-Ongoing development of its employees

-Strong community involvement
Everyday low pricing strategy
• The company has a core competence involving its use of information technology to
support its international logistics system. For example, it can see how individual
products are performing country-wide, store-by-store at a glance. IT also supports
Wal-Mart's efficient procurement.
A focused strategy is in place for human resource management and development. People are
key to Wal-Mart's business and it invests time and money in training people, and retaining a
developing them.
Weaknesses
• The Corporation is huge but still has presence in 14 countries.
• Customers sometimes are curious about the quality of products.
• Keep poor performance employees on hand.

• The market share is low outside the US market.
• Supplier profit margin is very low.
No formal mission statement

-Membership only for SAM’S Club
-Keep poor performing employees on hand
-Old fashioned store policies
• Wal-Mart is the World's largest grocery retailer and control of its empire, despite its
IT advantages, could leave it weak in some areas due to the huge span of control.
• Since Wal-Mart sell products across many sectors (such as clothing, food, or
stationary), it may not have the flexibility of some of its more focused competitors.
Opportunities
• Most of the International Market are untapped specially the Asian Countries.
• Joint ventures to increase market share in international market.
• The inflation in US market diverts the customer from buying expensive products towards
cheap products.
• A lot of retail organizations are leaving out of business due to the drop in disposable
incomes. This can help Wal-mart by growing its customer base due to the bargains that it can
provide its customers.
• Due to the cheap rate that the organization is able to buy its products from suppliers, it is
able to provide customers with even better bargains to give confidence them to shop at Wal-
mart.
Consumers want ease of shopping

-Internet shopping growing
-Dollar value increasing
-Similar shopping patterns worldwide

-Retail sales expected to increase

-Environment conscious consumers
-Elderly population growing
Threats
• Regulation of Wal-Mart pharmacies
• Small towns do not want entry of Wal-Mart
• Bad media exposure for Kathie Lee Brand
• Variety of competition nationally, regionally and locally
• Substitute products more easily because of intense competition
• Wal-Mart is criticized several times by community groups.
• The competitors are gaining control over International Market.
• Being a worldwide retailer means that you are uncovered to political troubles in the
countries that you operate in.

Chapter 7

FINANACIAL ANALYSIS OF PANTALOON RETAIL LTD
Financial Analysis- Financial analysis is the process of evaluating financial and

other information for decision-making.
Ex- analysis of balance sheet, trading and profit& loss account, cash flow, fund flow,
ratio analysis, du Pont analysis market analysis, common size balance sheet.
BALANCE SHEET
• Assets: probable future economic benefits

• Liabilities: probable future economic sacrifices
• Stockholders’ Equity: residual interest, representing ownership interest (also
called net assets)
• Current Liabilities (accounts payable, accrued & other current liabilities)
• Long-term debt
• Commitments & contingencies
• Other liabilities
• Potential off-balance sheet debt Preferred stock
• Common stock
• Other paid-in capital
• Retained earnings
• Treasury stock

• Other comprehensive income

• Other equity items
REVENUE STATEMENT
• Revenues: inflows from major operations

o Expenses: outflows from major operations
o Gains & Losses: changes in equity from peripheral activities
• Net income: bottom line all operating activities recorded on the income
statement
• Comprehensive income: Changes in equity from all non-owner sources
What are the five major categories of ratios, and what questions do they
answer?
 Liquidity: Can we make required payments as they fall due?

 Asset management: Do we have the right amount of assets for the level of sales?
 Debt management: Do we have the right mix of debt and equity?

 Profitability: Do sales prices exceed unit costs, and are sales high enough as
reflected in PM, ROE, and ROA?
 Market value: Do investors like what they see as reflected in P/E and M/B ratios?
Ratio analysis – for ratio analysis we taken five years balance sheet and five years income
statement of pantaloon company
Liquidity ratio
 Current ratio= current assets/current liabilities
For 2006=3.03
For2007=4.20

For2008=3.62
For2009=3.19
For2010=1.97
Std ratio is 2:1
Interpretation-
 In2007 the c.r is 4.20 it tells that for every one rupee current
liabilities ,current assets of 4.20 are available to meet them so its very
good sign to company to meet there short term liabilities.
 In 2010 the c.r is 1.97 its also indicates that satisfy the claims of short
term creditors but compared to 2007 its not that much good
 Liquidity position is strong
Quick ratio
 Quick ratio=quick assets/current liabilities
For 2010 =0.65
For 2009 =1.45
For 2008 =1.64
For 2007= 2.07
For 2006 =1.29
Std ratio is 1:1
Interpretation
 In 2007 the q.r is 2.07 its measure the firm’s ability to meet the short term
liabilities its more than the std ratio so its good sign to the firm.

 In 2010 the q.r 0.65 its not meet the short liabilities its not good sign because
all the money was block in debts and also slow paying debts
Inventory turnover ratio-
 Inventory turnover ratio=cost of goods sold/avg inventory
For 2010=5.06 times per year
For 2009=3.77
For 2008=3.75
For2007=3.91
For2006=3.91
Interpretation-
 In 2010 the inventory turnover ratio is 5.08 times a year means the inventory
was sold 5 times a year high ratio is good to the company
because inventory sold very fast
 in 2008 the ratio is 3.75 its poor compare to 2010

 Firm might have old inventory, or its control might be poor.
 No improvement is currently forecasted.
Leverage ratio
 Debt equity ratio=long term debt/s.equity ratio

For 2010=0.36
For 2009=0.93
For2008=0.72
For 2007=0.78
For 2006=0.49
Interpretation:
 Its implies that there is combination of debt and equity to purchase

fixed assets so high ratio tells that more of owners contribution in
capital structure low vise verse so in the year 2009 the D.E ratio is 0.93
it indicates that if one rupee liability there is 0.93 owners capital
contribute
Fixed assets turnover ratio
Fixed assets turnover ratio=cogs/avg fixed ratio
For 2006=5.36 high
For 2009=3.55 low
Interpretation
 In the year 2006 ratio is high it indicates that well management in using fixed
assets to generate sales and as compared to 2009 there is poor management in
using its assets to generate sales.
Payout ratios
 Dividend payout ratio=total dividend/total ne Profit
For 2010=11.16

For 2009=9.63
For 2008=9.90
For2007= 7.35
For 2006=11.94
Interpretation
 In the year 2006 the dividend payout ratio is 11.94 it means that out of 100 rupees the
company was paid 11.94 rupees as dividend its states that’s company has making well
profit compared to other year but in the year 2007 company paying low dividend i.e
7.35
Coverage ratio
Interest coverage ratio=EBIT/interest
For 2010=2.08
For 2009=2.15
For2008=2.45
For2007=2.32
For2006=3.61
Interpretation:
 In the year 2006 the ratio was 3.61 times it indicates that the company was paid
3.61 times interest out of its EBIT but in the year 2010 the ratio is low 2.08.
 Profitability ratio
Gross profit margin=G.p/sales*100

For 2010=6.70
For 2009=5.33
For2008=7.17
For2007=7.98
For2006=6.94
Interpretation -
 In the year 2007 the ratio was good compared to rest of years and poor
in the year 2009
Return on Assets (ROA) Ratio-
ROA=Net income/total assets
For 2010=6.99
For 2009= 6.24
For 2008= 7.06
For2007= 10.98
For 2006= 12.17
Interpretation-
 Compare to year 2006 all are the below avg from and also there is no
improvement in all years
 ROA is lowered by debt--interest expense lowers net income, which
also lowers ROA

The du Pont system analysis-
The Du Pont identity breaks down Return on Equity (that is, the returns that investors
receive from the firm) into three distinct elements. This analysis enables the analyst to
understand the source of superior (or inferior) return by comparison with companies in
similar industries (or between industries).
( profit margin )(Ta turnover )( equity multiplier ) = ROE
NI/SALES*SALES/TA*TA/E= ROE
2009 2.6% x 2.3 x2.2 =13.2%
2008 -1.6%x2.0 x5.2 =-16.6%
2007 3.6%x2.0 x1.8 =13.0
2006 3.6% x2.5 x2.0 =18.0%
What are some potential problems and limitations of financial ratio

analysis?
 Comparison with industry averages is difficult if the firm operates many different
divisions.
 “Average” performance is not necessarily good.
 Seasonal factors can distort ratios.

 Window dressing techniques can make statements and ratios look better.
 Different accounting and operating practices can distort comparisons.
 Sometimes it is difficult to tell if a ratio value is “good” or “bad.”
 Often, different ratios give different signals, so it is difficult to tell, on balance,
whether a company is in a strong or weak financial condition
What are some qualitative factors analysts should consider when

evaluating a company’s likely future financial performance?
 Are the company’s revenues tied to a single customer?

 To what extent are the company’s revenues tied to a single product?
 To what extent does the company rely on a single supplier?
 What percentage of the company’s business is generated overseas?
 What is the competitive situation?
 What does the future have in store?
 What is the company’s legal and regulatory environment

Chapter 8

STRATEGY AND IMPLICATIONS OF EACH
GROUP MISSION
We share the vision and belief that our customers and stakeholders shall be served only by
creating and executing future scenarios in the consumption space leading to economic
development.
We will be the trendsetters in evolving delivery formats, creating retail realty, making
consumption affordable for all customer segments – for classes and for masses.
We shall infuse Indian brands with confidence and renewed ambition.
We shall be efficient, cost- conscious and committed to quality in whatever we do.
We shall ensure that our positive attitude, sincerity, humility and united determination shall
be the driving force to make us successful.
“The purpose of being business of the future group is clear from their mission statement that
they want to offer products at affordable price (the bold word indicate such meaning) to
everyone in the country. This means that they want to reduce cost.”
OBJECTIVE:
The three main objectives which are clear from their mission statement are
1. To reduce the cost.
2. Reaching everyone section in huge volume.
3. At the same time the stake holder’s value should also increase.
STRATEGY:
Based on the company’s SWOT analysis and company’s objectives it is very essential for
company to cater to rural section and also should reduce its cost of goods sold so for this
purpose we put forth following strategy.

1. GROWTH:
Strategic alliance with the company which has good command over the rural retailing,
experienced and made a significant work in terms of innovation and establishing their
idea, alliance with such company would fulfill the second objective of the company.
Analysis of the value adding activities supporting the generic strategy shows clear
elements of cost focus. Low cost leadership helps the firm above average returns in
the industry despite strong competitive forces. Traces of cost leadership are noticeable
in the value chain. The company is known to negotiate with suppliers for the lowest
cost of the product without any frills and marketing expenses which adds to the cost
later. Company’s purchase by the truckload saves costs again by bulk purchasing.
Following are some possible outcomes:
a. Company should invest ------ to have strategic alliance
b. Except the profit they will get the food products at cost lesser then the vendors. So
SA is not only going to provide presence in rural but also will gain a low cost
advantages.
Stages of Alliance Formation
A typical strategic alliance formation process involves these steps:
• Strategy Development: Strategy development involves studying the alliance’s

feasibility, objectives and rationale, focusing on the major issues and challenges and
development of resource strategies for production, technology, and people. It requires
aligning alliance objectives with the overall corporate strategy.
• Partner Assessment: Partner assessment involves analyzing a potential partner’s
strengths and weaknesses, creating strategies for accommodating all partners’
management styles, preparing appropriate partner selection criteria, understanding a
partner’s motives for joining the alliance and addressing resource capability gaps that
may exist for a partner.

• Contract Negotiation: Contract negotiations involves determining whether all parties

have realistic objectives, forming high caliber negotiating teams, defining each
partner’s contributions and rewards as well as protect any proprietary information,
addressing termination clauses, penalties for poor performance, and highlighting the
degree to which arbitration procedures are clearly stated and understood.
• Alliance Operation: Alliance operations involves addressing senior management’s
commitment, finding the calibre of resources devoted to the alliance, linking of
budgets and resources with strategic priorities, measuring and rewarding alliance
performance, and assessing the performance and results of the alliance.
• Alliance Termination: Alliance termination involves winding down the alliance, for
instance when its objectives have been met or cannot be met, or when a partner
adjusts priorities or re-allocates resources elsewhere.
The advantage of strategic alliance includes:
1. Allowing each partner to concentrate on activities that best match their capabilities.
2. Learning from partners & developing competences that may be more widely exploited
elsewhere
3. Adequacy a suitability of the resources & competencies of an organization for it to
survive.
Action plan:
The company should identify an appropriate partner in order gain good market. As idea is
new it would require high investment in advertisement and marketing the brand.
Implication this strategy on the finance of the company:
Projections
2010-11 2011-12 2012-13
Factor Current
year O P ML O P ML O P ML

GDP 9 10 8 9.8 12 8.5 10 15 10 11
Sales(million) 643 868.0 800 855.1 1111. 1026.2 1068.9 1389.6 1282.7 1336.2
5 9 7 2 6 5 5
COGS% 69.85 50 55 52 50 55 52 53 60 55
Ad & mkt (crore) 114 130 140 130 125 140 123 120 130 112
Investment(million 95.4 115.4 120. 115.4 130.4 135.0 132.0 140.0 143.0 138.0
) 4
Net profit 140.58 347.2 320 342.0 559 513 534.5 694.8 641.4 668
8
ROI(%) 6.74 7.52 6.64 7.41 8.52 7.60 8.09 9.9 8.97 9.68

Biblography:
http://www.walmart.com/
http://pantaloon.futurebazaar.com/indexPantaloon.jsp
http://business.mapsofindia.com/india-retail-industry/
http://en.wikipedia.org/wiki/Retailing
http://www.quickmba.com/strategy/porter.shtml
http://www.cci.in/pdf/surveys_reports/indias_retail_sector.pdf
http://www.12manage.com/methods_porter_five_forces.html
http://www.iamot.org/conference/index.php/ocs/4/paper/viewFile/1094/474
http://fmcg-marketing.blogspot.com/2007/11/pest-analysis.html

Retail Sector - Group 7

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Retail Sector - Group 7

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Retail sector- Group 7

Kousali Institute of Management Studies Page 1

Retail is usually classified by type of products as follows:

There are the following types of retailers by marketing strategy:

Kousali Institute of Management Studies Page 2

Kousali Institute of Management Studies Page 3

Other types of retail store include:

Company Background – Pantaloon Retail India

Kousali Institute of Management Studies Page 4

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Company background –Wal-mart:

Americans save about US$10 Billion by shopping at Wal-Mart. Wal-Mart’s revenue

Kousali Institute of Management Studies Page 6

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Exchange rate used: 1 USD = 45.81 INR (as on June 2010)

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Indian Retail Scenario

Retail and recession:

Kousali Institute of Management Studies Page 10

Quick facts on Indian Retail sector:

• Indian Retail sector is the fifth largest global retail destination.

Key Players in Indian Retail Sector:

Kousali Institute of Management Studies Page 11

Future Trends of Indian Retail:

• Lifestyle International, a division of Landmark Group, plans to have more than 50

Competitive advantages of Indian retail sector:

Kousali Institute of Management Studies Page 12

Indian retail and Global retail:

Kousali Institute of Management Studies Page 13

Competitive Strengths of Pantaloon and Wal-mart:

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• Strong understanding of the ‘value • Supply chain management

Major Milestones of Pantaloon:

Kousali Institute of Management Studies Page 15

• 1987: Company incorporated as Manz Wear Private Limited. Launch of Pantaloons

trouser, India’s first formal trouser brand.

• 1991: Launch of BARE, the Indian jeans brand.

• 2002: Food Bazaar, the supermarket chain is launched.

ALL – ‘a little larger’ - exclusive stores for plus-size individuals is launched

Wal-mart and India

Kousali Institute of Management Studies Page 16

Global business – competitiveness:

• This is competitive advantage but on a international scale.

Determinants of international competitiveness:

• Price relative to competitors

• Rationalization output to get rid of high cost plants

Kousali Institute of Management Studies Page 17

Wal-mart and International expansion:

Kousali Institute of Management Studies Page 18

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• RMS value = Revenue of wal-mart in the sector/ revenue of Tesco(competitor ) in the

Kousali Institute of Management Studies Page 20

Sqrt(revenue of one sector/ total revenue of the company)= v1

12 Star Question mark

0 Cash cow Dog

Scale: X axis= Total GDP

PORTERS FIVE FORCE MODEL:

Kousali Institute of Management Studies Page 21

1 Threat of New Entrants

Pantaloon strategic intent is to build private labels. However, in categories such as

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