Shoppers Stop: Retail Marketing - Essay Example

?Retail Marketing Table of Contents Introduction 3 2.Brief Overview about Company: Shopper’s Stop 4 3.International Viability of the Company: Internal Analysis 5 3.1.Retail Value Chain 5 3.2.Value Chain Analysis of Shopper’s Stop 6 4.International Retailing 9 4.1.Factors Influencing the International Retail Marketing 9 4.2.Gaining Competitive Advantage in International Retailing 11 4.3.Brand Management in International Market 12 4.4.Overcoming the Challenges in International Retailing 13 4.5.International Retailing Market Mix 15 4.5.1.Product 15 4.5.2.Price 16 4.5.3.Place 16 4.5.4.Promotions 16 4.5.5.People 16 4.5.6.Process 17 4.5.7.Physical Evidence 17 5.Recommended Strategies for International Retailing 17 6.Conclusion 18 Reference 19 1. Introduction The effect of globalisation has affected the entire world economy as well the activities of human. The most important aspect of the globalisation is the development of international trade and business. The emergence and popularity of the free trade policies have facilitated the international expansion of the multinational corporations as the free trade policies have multiplied the opportunities in the international market. In case retailing marketing, the international exposures have paved the way for better market expansions and hence many leading retailers like Wal-Mart, Tesco, and Sainsbury etc have entered many international markets with better opportunities. However, many academics believe that from the very early period of business, the retailers used to go for international business. At presented, the entire process of international trade have become more structured and as retailers have started to open their international divisions and units with multiple retailing stores. The multinational retailers have realized that potential opportunities underlying in the international and development market like China, Middle East, India etc. The process of international retailing becomes a notable instance during late 1990s. With increasing global competition, many scholars perceive that for long term sustainability, retailers must opt for the internationalisation of their business as some of expert retail analytics have commented that “by the year 2005....retailer will either be global...or they will be gone” (Lamba, 2002, p.06). This paper will also attempt to present a retailer’s international viability through analysis and discussion. Therefore, as a retailer, India’s retail chain group, Shopper’s Stop has been selected as it does not have international business unit. In order to assess its international viability, an internal analysis of this retailer will be conducted using the value chain model. Next, for international exposition, retailer also needs to understand the basics of international retailing. Hence, it is necessary to identify the factors affecting the international retailing and the way to gain the competitive advantages. Moreover, for international retailing expansion, strategic framework must be in according and hence, finally, a set of plausible and relevant recommended strategies will be given followed by a conclusion. 2. Brief Overview about Company: Shopper’s Stop Shopper’s Stop is a popular Indian retail chain and it is primarily India-based retailing company. This retail chain was established on October 07, 1991 and it was founded by the K. Raheja Group of Companies, one of pioneers in hospitality and real estate business. Initially, the retail chain was brand shop and gradually, it a brand store family store for Fashion and Lifestyle. It has experienced a rapid growth in Indian competitive retailing industry and many considered it as “the highest benchmark for the Indian retail industry”, and moreover, it keeps expanding its business in the domestic market by target the non-catered regional markets (Shoppers Stop Ltd.-a, n.d.). It is an public ltd. Company and listed in the Bombay Stock Exchange. The company aims to be the top retail company in India in department store category with a set of pre-defined values including innovative, fair, respect, social responsibility etc (Shoppers Stop Ltd.-b, n.d.). There are two primary reasons for its rapid success in India. First of all, the Indian retailing market is one of the fastest emerging retailing markets in the world and due to Indian retailing policies, the foreign retailers are barred from making direct FDIs in Indian multi-brand retail market (Pitalwalla and Maiti, 2011). Secondly, its strong leadership followed by effective retailing strategy for Indian market. 3. International Viability of the Company: Internal Analysis As per the above brief discussion on Shopper’s Stop, it has been clarified that the company has been performing well in Indian retailing and hence, it has been able to acquire an upper hand position in the Indian market. However, as per the future probability, the many foreign retailers are aiming to enter in this market as Indian government is trying to free the multi-brand retail market. As a result, the competition in Indian retail market is supposed to intensify ((The Economics Times, 2001). Therefore, the threat of potential entrances may lead to hamper Shopper’s Stop’s sustainability and profitability. Hence, it will be quite logical for the retailer to expand in international market. In this respect, it is necessary to analyse its computability through value chain model. 3.1. Retail Value Chain Value chain model, first developed by Michael E. Porter is an effective analytical model for analysing and evaluating the internal position. The retailing business in service based industry and hence, its value chain differs from other manufacturing company. A retail value chain model has been below. Figure 1: Retain Value Chain (Source: Bhatia, 2008, p.286) As per the above figure, the primary task in retailing business is to manage the supply chain, logistic and customer management. In order to manage a successful retailing business, the retailers must focus on these areas. 3.2. Value Chain Analysis of Shopper’s Stop Shopper’s Stop has been able to manage its supply chain by maintaining its customers. The company has kept the pace with the chaining trend of retailing industry and hence, it has incorporated multiple improvements like information technology, and supply chain management systems like ERP operations. The company claimed that its strong and efficient logistics and distribution system and process have created sustainable competencies. Currently, it has established its four “Distribution Centres covering more than 400,000 square feet handiling over 400,000 SKUs per year, and working 24x7” (Shopper’s Stop Ltd.-c, 2010, p.40). On the other hand, its human resource capital is also highly skilled competent to meet the market demand. Primarily, its employees especially, the Customer Care Associates (CCAs) are able to meet the customers’ demand by offering satisfactory retailing services. It has also been able to maintain a higher level of commitment and motivation by providing better compensation and remunerations to its employees. The following table represents its customer satisfaction index as an effect of better customer management. Figure 2: Customer Satisfaction Index Score (Source: Shopper’s Stop Ltd.-c, 2010, p.17) In the light of the data, it can be interpreted that the retailer has been aiming to offer a value added customer service, and therefore, its retailing strategies like branding and marketing mix etc are value oriented. Another major strength for the company’s efficient managements and higher customer satisfaction is its focused process backed on improved systems. It keeps investing for implementing system for major tasks like customer management, supply chain & logistic management etc. However, such effective retailing management is primarily an outcome of effective and efficient management leadership and corporate governance. Moreover, its relationship with suppliers is also major strength for its high quality and high brand product and it has acquired a upper hand position and high bargaining power over its multiple suppliers (Shopper’s Stop Ltd.-c, 2010, p.40). It overall better performance has also led to strengthen its financial positions, and five years income statement of the company is given below. Table 1: Profit and Loss Statement, 2010, (figures in INR crore: i crore=10 million) (Source: MNS Money, 2011) As per above table, the retailer has been experiencing a massive growth since 2005-06. As a result of global economic downturn it has faced a steep decline in its profit. However, during 2009-10, it has made a tremendous comeback with huge surplus. 4. International Retailing 4.1. Factors Influencing the International Retail Marketing In order to expand the retail market in the foreign countries, Shopper’s Stop need to identify the multiple factors that might influence the international expansion of retailing business. Primarily, in case of internationalisation of business, the macro-economic factors are major factor which has a greater impact on economy’s trade and business. Therefore, assessing these factors are prime concern. In this respect, the government and political related factors are major concern as the country’s governing body are responsible for maintenance of trade and commerce and economic prosperity. The legal framework for protecting a business is necessary for the security. On the other hand, the economic condition is also crucial as it determines the availability of necessary resources and sufficient amount of target consumers. It will be unwise to expand retailing business where customers’ purchasing power is very low due to poor income level. Consumers from these countries are not frequent purchaser, and moreover they are not able buy high brand products that cost higher (Samli, 1998, p.48). The social and cultural factors are necessary as it is associated with the consumers taste and preference and work culture. Basically, an industry’s structure and trend revolves around the demand of consumers and their behaviours. For example, U.S. and UK consumers more focus on the fashion and they are brand conscious; whereas, the Indian retail consumers are more price-sensitive (Newman and Cullen, 2002, p.456). On the other hand, availability of technology, degree of competitions etc are important determinant. Many scholars have also suggested for considering the retail life cycle before entering into an international market. The following figure depicts a retail life cycle. Figure 3: Retail Life Cycle (Source: Pradhan, 2009, p.88) Considering the above life cycle, retailers must analyse country specific retail life cycle and frame strategy accordingly. 4.2. Gaining Competitive Advantage in International Retailing In spite of greater opportunities, the global retail market has become too competitive and profitability is decreasing. The retail giants like Wal-Mart, Carrefour, and Tesco etc are successful in the most of international market apart from their respective domestic markets. They have become successful because they have successfully created competitive advantages in the international market that effective enough in gaining a significant portion of market share. Kotabe et al have identified that in retailing business, customer management is the most crucial and a key success factor. The retailers are the medium who comes with a direct contact with retail consumers and hence, the responsibility towards consumers is not less important than the manufacturers. They have also mentioned that for better consumer satisfaction lower “cost of global sourcing and finished goods distribution” (Kotabe et al, 2008, p.408) are major requirement. In order to offer a better consumer satisfaction, retailer should also need to focus on better quality product as value pricing. On the other hand, for better quality product and cost effective services (for offering lower price), retailer must maintain a higher relation relationship with suppliers through proper systematic way. For example, the Wal-Mart’s supply chain management is entirely backed by RFID technology which has help Wal-Mart in increasing the efficiency of its performance through a cost effective method (Nevares, n.d.). Therefore, Shopper’s Stop should have a better and efficient supply chain and logistics management process as these factors are important determinant in case for better consumer satisfaction and for higher return on investment (Weele, 2009, p.375). 4.3. Brand Management in International Market The global consumers are becoming very brand conscious as many of the global retail consumers have developed their specific brand consciousness. The modern competitive retail market has become a marketplace, and retailers are competing with each other on the basis of brand recognition. Therefore, a domestic retailer seeking for international expansion of market must determine their brand position in the new market. Gilbert has described a number of advantages of brand building. Successful retail brands always have an upper hand position in the market as they are able to influence the consumers buying behaviours, and moreover a better brand name is also helpful in negotiating with suppliers on product prices (Gilbert, 2003, p.307-306). In retailing business, the brand loyalty is the strongest competitive advantage for that is helpful in avoiding the unnecessary competition by ensuring a reliable source of sales revenue. However, many analysts have argued that the process of brand building is a process that can be achieved by long term and consistent consumer satisfaction. In this long term process, the retailers must aim to indentify the consumer behaviours of the new international market as retailer should try to offer product as per the market consumers’ demand. In this respect, black box model of consumer behaviour is an effective model which has been given below. Figure 4: Black Box Model (Source: Kotler, 2010, p.117) As per above figure, consumers behaviours is influenced by marketing stimuli and other macro-economic factors. Retailers can frame the appropriate market stimuli to influence their behaviours so that they become loyal consumers. 4.4. Overcoming the Challenges in International Retailing In the process of international retailing, a retailer is supposed to face multiple challenges that can hurt its profitability followed by sustainability. One of the major challenges in a international market is the cultural difference between the multinational companies and host country. This gap or differences often create major problems in managing the human resources. The cultural dimensions between the foreign company and host countries create mismanagements in understanding the local consumers and market trend. Hence, it is necessary to follow local strategy to operate in a foreign market. In this respect, Geert Hofstede’s five cultural dimensions theory are very useful for understanding the cultural dimensions of a country. Geert Hofstede have identified five dimensions i.e. power distance, individualism, masculinity, uncertainty avoidance and long term orientation (Paul, 2008, p.155). Consumers’ acceptance of a foreign brand is another major challenge and hence, the retailers can follow ‘glocalisation strategy’ that mean retailers must “think global, act local” (Herbig, p.43). It is necessary to act as local service providers and the local culture must be presented though the way of doing business. In this respect, retailers must frame their customer centric retailing business model as per given below. Figure 5: Customer Centric Retailing (Source: Tolga, 2010, p.32) In order to follow the above customer centric business model, it is inevitable to frame the strategies considering the customer centric approach for the three major tasks in retailing i.e. merchandizing, marketing and operation. The components needed to be taken into account for each task are depicted through the flowing model. Figure 6: Customer centric Approach (Source: Tolga, 2010, p.32) 4.5. International Retailing Market Mix Service mix serves as the essential component of marketing and strategy formulation that serves as the guiding principle behind a successful market entry strategy. In service based organizations like Shopper’s stop the elements of marketing mix includes the element of product, price, place, promotion, people, process and physical evidence. 4.5.1. Product Shopper’s stop has an ideal product portfolio consisting of apparels, and other general merchandising items including books, items for interior decoration. The company has a stock that comprises of the best known brands available in the retail market. The effervescent product portfolio comprising of such well known brands spread over a wide and diverse portfolio seems very ideal for a replication in the international market. 4.5.2. Price Shopper’s stop has a differentiated pricing approach as it products have prices that are designed to suit the wallet of every customer segment. This strategy works well in case of market entry strategies as it provides a large customer base to the organization. 4.5.3. Place Shopper’s stop’s present operations in India include locations that are largely urban in nature with focus on top metropolitan cities. The exposure to the urban market audience allows it to have a competitive advantage for undertaking an international expansion. 4.5.4. Promotions Shopper’s stop’s integrated marketing communication strategy encompasses large number of marketing channels that help to leverage the benefits of each of these channels. An online advertising strategy would largely help the firm to gain a strategic foothold in the international market arena. 4.5.5. People The efficient training program of the organization coupled with knowledge of Customer relationship management practices would largely help the firm to garner strategic advantages of an international expansion programme. 4.5.6. Process Shopper’s stop has a business process that is carefully knit together using an ERP program that includes cash management, billing and logistics operations that can reap benefits in the international markets to gain a strategic foothold in the new markets. 4.5.7. Physical Evidence A unique blend of traditions and modernization is the essence of the layout of stores of the organization. This unique blend would help the firm to make a strategic impact on the customers in the international markets. 5. Recommended Strategies for International Retailing International expansion is perhaps the buzzword for business organizations of the globalised economy where organizations are breaching geographical and political boundaries to reach out to new markets. A successful market entry strategy would include a market research of the market with regards to the customer behaviour and competitive analysis of the new market. This would serve as the basis for creation of the service mix of the organization. In addition to this the firm must also try to enter a new market by undertaking a tie up with a local market player. This would help the firm as it would gain in on the aspect of the understanding and knowledge of the local player. Strategies for this would include joint ventures, partnerships that would render large scale advantage to the organization. Crafting a well designed service mix with emphasis on promotional activities including online channels would offer strategic advantage to the organizations. The firm should also try to include technologically driven procurement processes that would help in cost reductions. Finally an international marketing strategy should always include the strategy of thinking globally and acting locally. This would help the customers in the target market audience to make a good connect with their culture and behaviour that would help provide long term strategic competitive advantage in the long run in the turbulent and competitive business environment. 6. Conclusion With the development of global economy led by the globalisation and international trade, the global retailing industry is also emerging. This paper has presented a discussion on the international retailing market by focusing on the Indian domestic retailer, Shopper’s Stop. The primary aim of this paper is to assess viability of Shopper’s Stop fir internationalisation. Hence, this paper has presented an internal analysis of the company and on the other hand, the paper has also included the necessary requirements for successful retail marketing in international exposure. As per the analysis and discussion, it be interpreted that, Shopper’s Stop has enough potentials to gain a sustainable portion of market share in a foreign land by countering intensifying competition in global retail market. However, there are certain areas that must be taken into account for international expansion. The divers of international retail market like degree of competitions, macro-economic factors, retail life cycle etc are necessary areas of concern. Customers’ satisfaction in the key success factor for retailers and hence, Shopper’s Stop must focus of customer centric business model and customer centric approaches for drafting strategies for its multiple tasks like marketing, merchandising and operations. Reference Bhatia, R. C. (2008). Retail Management. Atlantic Publishers & Dist. Gilbert, D. (2003). Retail Marketing Management. Pearson Education India. Kotabe et al, (2008). International Marketing : An Asia Pacific Focus. Wiley-India. Kotler, P. (2010). Principles of Marketing: A South Asian Perspective. 13th ed. Pearson Education India. Lamba, A. J. (2002). The Art of Retailing. Tata McGraw-Hill Education. MNS Money. (2011). Shoppers Stop Ltd. [Online]. Available at: http://msn.bankbazaar.com/shoppers-stop-ltd/stock/financials?scid=3429. [Accessed on May 04, 2011]. Nevares, T. (No date). RFID Technology in Business. [Pdf]. Available at: http://www.soe.ucsc.edu/classes/ism050/Winter11/oral_presentations_so_far/ISM50_RFIDinBusiness_TaylorNevares.pdf. [Accessed on May 04, 2011]. Newman, A and Cullen, P. (2002). Retailing: environment & operations. Cengage Learning EMEA. Pradhan, S. (2009). Retailing Management. 3rd ed. Tata McGraw-Hill Education. Paul, J. (2008). International Business. 4th ed. PHI Learning Pvt. Ltd. Samli, A. C. (1998). Strategic marketing for success in retailing. Greenwood Publishing Group. Shoppers Stop Ltd.-a. (No date). History. [Online]. Available at: http://corporate.shoppersstop.com/corporate/history.aspx. [Accessed on May 04, 2011]. Shoppers Stop Ltd.-b. (No date). Vision. [Online]. Available at: http://corporate.shoppersstop.com/corporate/vision.aspx. [Accessed on May 04, 2011]. Shoppers Stop Ltd.-c. (2010). Annual Report. [Pdf]. Available at: http://corporate.shoppersstop.com/uploaded_files/9d95db0-da85.pdf. [Accessed on May 04, 2011]. The Economics Times. (April 20, 2011). 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