Features Of Retailing Management - Research Paper Example

Features Of Retailing Management Table of Contents Features Of Retailing Management 1 Table of Contents 1 Literature Review 2 Research Methodology 8 Research Question 9 Sample size 9 Hypothesis 9 Research Methodology 10 Data Collection 10 Data Analysis 11 Results 13 Time Scale and Plan 14 Annexure 18 Project Aims and Objectives Retailing is one of the most important industries of the world. The concept of retailing could be traced to the ancient times when ‘Barter system’ was prevalent. Under this system, goods were purchased in return for other goods. The concept of retailing has however evolved with the passage of time. The present retail market constitutes of mega malls, supermarkets which are backed by the use of high technology. The global retail industry is dominated by players like Wal-Mart, Carrefour which have presence in almost every retail market in the world. The present value of global retail industry is pegged at seven trillion dollars (Anand & Nambiar, n.d., p.2). The advent of globalisation has resulted in retailers breaching geographical boundaries in an attempt to establish their hold in different consumer markets. The present study aims to analyse the various aspects of retailing especially in the context of Foreign Direct Investment. The study tries to examine the impact of FDI on domestic retailers based in Thailand. The choice of Thailand assumes significance as the nation has a vibrant consumer market. There has been much debate regarding the presence of FDI in the retail sector. It has been observed that the existence of major global players like Wal-Mart in the retail market adversely affects the small and marginal players as they do not have the resources or the expertise to match the global players. Global players like Wal-Mart have considerable strategic advantage which allows them to provide greater value to the customers. This keeps the small and the marginal retailers in a tight position as they tend to lose their market share. This paper tries to identify the challenges that are posed by the entry of foreign players in the market. The research would try to analyse the problems and would also recommend strategies for small retailers to help them sustain in the competitive market. In order to analyse the research question, a secondary research in the form of literature review would be carried out. In addition, primary study would also be carried out to identify the challenges as well as the opportunities faced by the small and marginal domestic retailers. Literature Review The aspect of FDI in retail has been an interesting subject of discussion in many articles. Organizations across the world have conducted numerous researches on this subject. Rege (2010) conducted a study on the impact of FDI in the retail sector. He stated that the advent of FDI in the retail sector led to enhanced benefits for the whole economy. FDI in the retail sector also brings about large volumes of investment in the farm sector which would enhance the productivity of the nation. The supply chain initiatives would help in prevention of wastage of goods which often lie rotten due to lack of demand. These foreign players have presence in numerous markets which would provide ample opportunities to the local producers to showcase their products in the lucrative foreign markets. In addition to this, the entry of global players would increase the avenues of employment. The foreign players also have considerable expertise in the field of supply chain management; their entry in the domestic markets would help in making the existing processes of supply chain more efficient (Rege, 2010, p.1-3). FDI in retail also has many critiques who view this aspect as one which brings about greeter number of negative outcomes. A study by the Communist Party of India (Marxist) states that the advent of FDI in the retail sector would cause irreparable damage to small and the marginal retailers which are based domestically. They also quoted the example of Thailand where a large number of domestic players were forced to close down their business after global players established their units in the nation. They stated that foreign players have access to huge resources apart from their expertise in the field of logistics and supply chain. The use of technology has enabled these organizations to provide greater value to the customers. This has put the small and marginal domestic retailers in a vulnerable position as they do not have the necessary resources or the expertise to provide goods at cheaper rates along with enhanced value proposition. The authors state that the closing down of large number of retailers would create unemployment. Apart from this, large number of other social obligations are also associated with the impact of FDI in the retail sector (Communist Party of India Marxist, 2005, p.1-8). Guruswamy, Sharma, Mohanty & Korah (No Date) conducted a study on the retail sector in a developing nation. They stated that in developing nations like India where approximately 98 percent of the total retail business lies in the unorganized sector, the entry of major players like Wal-Mart could have devastating effects on numerous local players. The cash rich players like Wal-Mart have the ability to sustain long gestation periods which puts the domestic retailers in a susceptible position. They also stated that the entry of players like Wal-Mart would mean tremendous job losses and the traditional retailer would be forced to close shop as they would not be able to withstand the pressures of competition posed by large players. The authors also stated the example of Thailand where the government was forced to enact legislatures after widespread protests which marked the entry of foreign players (Guruswamy, Sharma, Mohanty & Korah, n.d., p.4-19). Pradhan (2009) conducted a research on various aspects of FDI in the retail industry. He stated that the advent of FDI in retail sector would help in bringing large amount of foreign exchange into a nation. This would help in boosting up the economy of the nation. This has considerable significance for a developing nation like Thailand which could use the foreign exchange reserves to bring about general development of the nation (Pradhan, 2009, p.53). Retail Sector in Thailand The retail industry in Thailand has evolved from tiny shops to the present age malls and supermarkets. The most interesting aspect of this transition is that it happened in a short span of forty years. Most of the developments in the retail sector have been limited to the capital city of Bangkok which accounts for over half of the nation’s GDP. The present structure of retail market presents a highly fragmented scenario. The nation’s retail market can be sub divided into six major segments namely, 1. Supermarkets 2. Superstores and Discount based stores 3. Convenience stores 4. Departmental stores 5. Speciality stores 6. Old Traditional stores (Untachai, UdonThani Rajabhat University, Mizerski & Edith Cowan University, n.d., p. 301-303). Traditional stores are further sub divided into two major segments namely, the local ‘mom and pop’ stores and the traditional food markets. The ‘mom and pop’ stores account for nearly two thirds of the market share. The rest of the market share is distributed among the organised sector. The nature of competition is intense with large number of small stores competing for a share of the customer’s wallet. The intensity of competition is amplified in metropolitan areas like Bangkok. The retail sector has shown a growth rate of seven percent on an annual basis. In case of organized sector, majority of market share is being shared by two prominent retailers namely the Charoen Pokphand Group and the Central Retail Corporation. Organized retail market of the nation is dominated by foreign players. The Thai market presents numerous opportunities to global retailers since the urban upper and middle sections of the society have reported huge growth in their disposable income. This has generated demand for luxury products which are available with the global retailers (Untachai, UdonThani Rajabhat University, Mizerski & Edith Cowan University, n.d., p. 301-303). Thailand also has the presence of numerous franchisees which operate in collaboration with different partners (USA International Business Publications & Usa, 2007, p.98). The intricacies of Foreign Direct Investment in Thailand have been widely studied by various researchers. A study conducted by the Communist Party of India (Marxist) states that the impact of FDI in the retail sector has been marked with certain demerits. They stated in their report that FDI inflows in the retail sector has led to considerable decline in the number of small and marginal retailers. They also mentioned in their research that the growth in the organized retail space has been equally matched by the closure of traditional ‘mom and pop’ store. This could lead to disastrous consequences by generating large scale unemployment (Communist Party of India Marxist, 2005, p.3). The retail market in Thailand was dominated by small domestic player till the year 1997, when the government removed the restrictions on foreign players. The latter took advantage of the lucrative consumer market potential and used their expertise to set up shops and gradually expand their operations in the nation. The entry of foreign players was marked with the creation of supermarkets and discount stores. This led to considerable pressure on the existing domestic players who did not have the expertise or the resources to match up to the challenge thrown by global retailers. This resulted in large scale closure of traditional stores. The suppliers and the manufacturers also faced considerable issues as regards to the entry of foreign players in the market. Large players resorted to large scale bargaining which reduced their profit margins. This also led to a series of problems for the local manufacturers as they could not earn profits even after selling their products at much lower price. The global recession also compounded the problems of local retailers and manufacturers who were unable to sustain their businesses due to the unavailability of bank credit which further shrunk the profit margins. The entry of foreign player also brought about considerable benefits. It led to the development of supermarkets which provided world class shopping ambience. The customer also got greater value for their money as they enjoyed the luxury of world class shopping experience at their doorstep at competitive prices. The upper middle class and the middle class population which now had access to greater amount of disposable incomes favoured these stores instead of domestic retailers who could not provide them with the value proposition that was being offered by the global retail players. The emergence of supermarkets also improved the image of the nation as an ultimate shopping destination. In addition to this, the entry of foreign players also saw the creation of larger Greenfield projects which helped in the generation of precious foreign exchange. In addition to this, the entry of foreign players also provided the option of exports. The presence of large global players also provided the local manufactures an access to the lucrative foreign markets as they could now export their products to the foreign nations which had a huge demand for their products. The effect of FDI in the retail sector also had positive effects on the manufacturers. The local manufacturers were now able to upgrade their business processes under the guidance of foreign players who had access to greater technological advances. Local manufacturers now used high end technological processes like ERP in their business enterprise. This led to considerable improvements in their business processes. Global players also provided expertise to local manufacturers. An example in this regard would be the instance of the retailer Ahold in developing a supply chain initiative for the local manufacturers and producers of fruits and vegetables. This provided them with technological expertise as well as access to markets (Mukherjee, Patel, Department of Consumer affairs & Indian Council for research on International Economic Relations, 2005, p.37). The study conducted above throws considerable light on various aspects of FDI in the retail sector and its repercussion on the domestic players based of the nation (Thailand). Analysis of literature reveals that the entry of foreign players in the retail market brings numerous merits to the nation as well as to the consumers. On one hand, it provides a steady source of foreign exchange and on the other it provides world class shopping experience to customers at comparatively cheap prices. It also leads to greater efficiencies in the management of supply chain. It also provides market opportunities to domestic players as they would now have access to the lucrative foreign markets. Customers also stand to gain greater value for money as they now get products at cheaper prices and at a much pleasant shopping experience. The advent of FDI also has its share of demerits; with critics stating that opening up of market to global players would lead to closure of traditional sectors. This assumes significance in the context of a nation like Thailand where a large workforce in presently employed in the unorganised sector. This is primarily because of the fact that the local players do not have the technological back up as well as access to resources that are needed to compete with the global players. Entry of foreign players also has direct impact on the manufacturers as global retailers are known for their bargaining powers by which they get products at highly discounted rates. High bargaining power of retailers leads to a state where the margins of local manufactures are shrunk beyond limits. This puts considerable strain on their profit margins. The government must therefore make suitable strategies so as to ensure that the interests of both the parties are taken care of and they are able to co-exist in the marketing harmony. Research Methodology In order to analyse the effects of FDI on the retail sector of Thailand, a primary study has been carried out. The study uses a questionnaire survey to find out the possible effects of entry of foreign players in the market. Research can be defined as a formal enquiry process which makes use of present methodologies to provide suitable answers to a particular research question (Kumar, 2005, p.7). Research Question A research question is a formal statement that describes the main purpose of conducting a research. The research question used in the study forms the basis of the entire analysis of the project (Maxwell, p.68). The entry of foreign players in the Thai retail market would lead to adverse impacts on the small and the marginal domestic retailers. Sample size A sample size of twenty respondents has been chosen for the study. The respondents would only include the small and traditional retailers who are presently carrying out their business in Thailand. Simple random sampling technique has been used to select the sample. It involves selecting a set of respondents from the entire population where every individual has an equal probability of being selected for the study (Black, 2009, p.224). Hypothesis Hypothesis development involves a set of suitable statements which define the research question. Use of hypothesis testing enables to streamline the research question into sets of meaningful statements that could be analysed using various tools and techniques (Stemmer & Whitaker, 2008, p.20). The null and alternate hypothesis are stated below- H0: The entry of foreign players in the Thai retail market has adverse impacts on domestic retailers. H1: The entry of foreign players in the Thai retail market does not have adverse impacts on domestic retailers. Research Methodology Research methodology can be of two types, namely qualitative and quantitative. Quantitative research methods involve use of numerical data to analyse a research question (Nykiel, 2007, p.55). The research question would be analysed using qualitative approach. The latter has been developed so as to gain a deeper insight into the research question. Qualitative research methods are also found to be more useful in situations where a small sample size has been selected for study (Lehman, 2009, p.3). Data Collection Data collection involves gathering information about the study, which would be subjected to analysis by the researcher. Exploratory research involves gathering data to gain background information about a particular research question (Neelankavil, 2007, p.104). In the course of this particular study, a questionnaire survey would be used to collect data. Various authors have defined ‘questionnaire’ as an instrument which is used for gathering information about a particular research question. They can administered both in the form of a written document or an interview (Punch & Punch, 2005, p.99). The questionnaire would contain open ended questions. The use of an open ended questionnaire assumes significance as it does not limit the respondents with regards to providing information about a particular question in a questionnaire (Brace, 2008, p.52). Data Analysis The respondents were asked certain questions by using focus group interview technique. In this technique a group of respondents were being asked certain questions with regards to a particular research question (Kragan, Wright & Kasch, 2008, p.90). The respondents revealed the following responses. The respondents were of the view that competitive advantage available to them was in the form of a long term relationship with the customer which had been developed over the years. The respondents shared a view that since they have been running their businesses for many years, a long term personal bonding and loyalty among their customers has been developed. This would prevent the customers from switching to superstores. They also added that certain features like personalized services, door to door services were some of the aspects that provided the traditional stores with a competitive edge over their global counterparts. Most of the interviewed retailers accepted that in most of the aspects the traditional retailers were not in a position to compete with their global counterparts. They attributed the reasons to the inability of the small retailers to have access to huge volume of resources that is available to the global retailers. Moreover, they believed that they did not have the expertise to match the scale of operations that define the large retailers. They shared a view that greater bargaining power of foreign retailers provided them with greater amounts of bargaining powers which provided them access to goods at comparatively cheaper rates. The retailers could then pass over the cost benefit to the customers in the form of goods at comparatively cheaper rates. Moreover, the foreign retailers by virtue of their access to monetary resources have the ability to provide world class shopping infrastructure. Their spectacular looks help in attracting customers especially if they are belonging to the upper middle and the premium segments of the market. These customer classes are known to have greater disposable incomes and would not mind paying a premium for better services. The integrated supply chain management of these organizations would provide them competitive advantage in terms of cost reduction. The domestic retailers would be unable to match the global players on these aspects. It was also revealed during the course of the interview that most of the traditional retailers made little or no use of technology in their business process. Most of them were unaware of the benefits of technology in their business process. This was mainly because of the fact that use of high end technological innovations requires huge funds and expertise which are found to be seriously lacking in the traditional retail stores. This places these stores on a weaker side as they do not enjoy the massive benefits that are used by their counterparts. On being asked about the possibilities of customers switching over to supermarkets, most of the respondents shared the view that world class shopping experience and price discounts would put the foreign retailers in an advantageous position. The respondents also revealed that upper class and upper middle class were more likely to be lured by the foreign retailers as they do not mind paying a premium for better service quality. It was also revealed during the course of the survey that the major advantage of the foreign retailers can be attributed to their access to monetary resources as well as to the technological expertise. The global players are known to have considerable experience with regards to handling supply chain management. This enhances the efficiency of their business processes in terms of cost savings, which are then passed on to the customers. Presence of these two factors has helped the foreign retailers to provide goods at cheaper prices. The availability of goods at cheaper prices tends to provide greater value to the customers who start flocking the supermarkets to get the best value out of their spending. They also command a greater bargaining power which helps them in negotiating price deals with the manufacturers. The use of high end technologies in their business process makes them more efficient. It also leads to the creation of economies of scale and scope which creates sustainable competitive advantage for the foreign retailers. All these advantages help the large foreign retailers to provide goods at much cheaper rates. This coupled with pleasant and world class shopping ambience constitute the major competitive advantages for the foreign retail players. In response to the aspect of value addition with regards to the present service offering of the traditional retailers, most of the respondents replied that they would try to introduce greater efficiencies in their processes. They would also try to build up on their strengths by providing more value added services so that the customers remain loyal to their stores. They reported that they would also seek access to cheaper materials in an attempt to provide goods at cheaper rates. They also felt that the government should enact legislatures that would protect them against the challenges posted by the entry of large players in the retail market. The respondents also opined that the retail market should be opened in phases so that the traditional and domestic players get sufficient time to re-engineer their processes in an attempt to gain competitive advantage. Results The research conducted above has led to the conclusion that the entry of foreign players would have considerable effects on the domestic retailers. Hence, we can accept the null hypothesis that the entry of foreign players in the Thai retail market will result in adverse consequences for the domestic retailers. Time Scale and Plan The time scale and plan represents the time frame required to undertake a particular project. It also provides the detailed breakup of the activities that form a part of the project. Figure 1: Time Scale and Plan for the project Activity Starting Time Completion Time Topic Selection 15-Oct 16-Oct Background study of the project 16-Oct 18-Oct Preliminary study 18-Oct 22-Oct Empirical study 22-Oct 23-Oct Literature review 23-Oct 26-Oct Primary study 26-Oct 30-Oct Preparing final Report 30-Oct 2-Nov References Anand, V & Nambiar, V. INDIAN FOOD RETAIL SECTOR IN THE GLOBAL SCENARIO. [Pdf]. 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Market research: a guide to planning, methodology & evaluation. Kogan Page Publishers. Lichtman, M. 2009. Qualitative Research in Education: A User's Guide. SAGE. Malhotra, N.K. 2010. Marketing Research: An Applied Orientation. Pearson Education Mariampolski, H. 2001. Qualitative market research: a comprehensive guide. SAGE. McLeod, J. 2001. Qualitative research in counselling and psychotherapy. SAGE. Oxford Business Group. 2009. The Report: Thailand 2009. Oxford Business Group. Panos, M. 2006. Business strategy in a semiglobal economy. M.E. Sharpe. Annexure Questionnaire 1. How long have you been associated with retail business? 2. What are your competitive advantages? 3. Do you feel that you are in a position to compete with global retail players? 4. To what extent do you use technology in running your business 5. Do you feel customers would switch to supermarkets 6. What are aspects on which the global players have competitive advantage as compared to the traditional stores 7. How do you plan to increase the value proposition to the customers Read More