Big Bazaar - Indian Walmart - Case Study

1305 WordsFeb 20, 20116 Pages
Case Study: Big Bazaar – The Indian Wal-Mart Retail industry: The last decade has experienced a fundamental change in the Indian retailing industry structure, with a very perceptible shift from unorganized kirana and small independent shops to organized retailing such as retail chains and franchised outlets. This gradual shift is attributed to increased purchasing power along with aspirational demands of a segment driven by exposure to the Westem world because of media. An NCAER study shows that only 0.25% of total population falls in the category of earnings above Rs 5,00,000. Most of the organized retailers are targeting this supra-niche segment for higher margins. Retail sector witnessed the entry of concepts like…show more content…
Big Bazaar has diversified from apparels to household items in its discount stores. This has enabled them to enlarge their basket of offerings. Expansion Plans: This concept of discount stores resemble the Wall-Mart strategy. In India and especially in metro cities like Mumba; Bangalore, Calcutta and Hyderabad, where the population is dense and consists of a high middle—class population, the concept of discount stores is gaining a lot of acceptance. The company plans to expand rapidly. The next year it plans to open its stores in Mumbai and Delhi at critical locations. It has plans to open three Big Bazaars (discount stores) in ‘A~class cities’ like Bangalore. Pantaloon has already bagged substantial retail space in Hyderabad (60,000 sq.ft), Kolkata (35,000 sq.ft), and Bangalore (40,000 sq.ft). In Mumbai it acquired 50,000 sq. ft area at each of its locations at Lower Parel, Mulund, and the westem suburbs. Challenges: The key challenges facing the company are as follows: • Fund raising - The company acknowledges that expansion plans of the company cannot be met from internal resources. This means that the company has to tap external sources to fund expansion. The company has recently allotted shares to promoters at SEBI formula price. It plans to borrow heavily to fund its expansionplans. As a consequence of increased interest payment and depreciation expense, the net profit margins would remain flat. • Competition - Although there
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