Business to the Buddha

Tag: retail

  • Retail update







    I could not resist myself from posting this blog. I am passionate about retail industry and therefore since last three days holding on to the news and finally posting on the blog.

    Govt of India (CoS) has recommended to 51% FDI in Retail industry. As there are always positives and negatives in any decision we make. The FDI brings positives as well as negatives. According to various sources retail adds 13% to Indian GDP of 1.3 trillion, organized retail is only 4% (in any case less than 10%) of the overall retail business in India. So there are immense opportunity of growth for organized retail. If we compare the organized Vs unorganzied retail UK has about 85% of retail done through organized retail. Such high dependence brings a huge risk (take an example of diversifying risk in financial portfolio management).

    The positive for Indian economy here is – lots of jobs, increased in quality of service and affordability of products (due to inherent reason of business of retail). At the same time the challenge is – how to manage possibility of loss of Mom and Pop stores? These are small business people running their small shop for livelihood. A rider to manage that situation is – retailer can operate in cities with populations more than 1 million. Well no sane retailer would want to operate in all nook and corner of India from day one also smaller cities would not provide that much profitability to the organized retailers.

    Growth of Indian economy and possibilities of more growth (compared to other developed economies) brings in more questions (as opposition is asking) regarding the number of 51%. Someone said – is it giving giving control of our retail industry to foreign based giants? I said yes and no both. Yes because 51% investment and No because at the end of the day people and the Govt will control buying decision and policy decisions.

    The competitions will teach few lessons to local retailers as well as learn few lessons on the cultural. As they said – think global act local… let us see whether this lesson of books comes to practice, otherwise we would have other lessons from failures of foreign retailers in India.

  • Porters five forces







    Three or four years back when I was reading the book – Blog – Old path white clouds (Book – Old Path White Clouds), I started looking at businesses with a changed mindset. In India, there are small stalls on roadside. The stalls could be tea stall, paratha stall, idly dosa stall, Sandwich or others. What I observed was, at many places these stalls were near each other e.g. tea stall near the sandwich stall or the idly stall. This is so common that we overlook such arrangements of shops.

    What is the reason of them being next to each other? The reason is roughly 50% of the buyer of sandwich would buy a cup of tea or the other way round some people buying tea would order for a paratha. These offerings are seemingly different for the stall owners, they are selling a refreshing drink or a breakfast however, from the point of view of a customer it is a wholesome offering – tea with paratha/sandwich.

    Well the point I am trying to make with the example is one and the same. In terms of business Prof Mohan Sawhney (of Northwestern University) says ‘Metamarket’ and in Buddhism they called it interdependent co-arising.

    Representation of porters five forces
    In organized retail, there are two parties catering to the end customers. One the manufacturer and the other retailer. Here too, we would see the collaboration or the dependence of one on the other. If I relate the concept of interdependent co-arising further with the very basic management lessons – Porters Five Forces – we would observe few things. Earlier the manufacturers had power (suppliers power) and now the retailers are gaining power (buyers power), and this cat and mouse game would continue. This power would shift to the ultimate buyer – the customer – perhaps it will happen in the future.

    How can the forces be balanced? Well, when we look in the basics we would learn. The idea in any game theory based dilemma (Prisoners dilemma) is that when each one starts co-operating everyone wins. That would apply in long term. Net net – we would have to be on the basics – the concept of interdependent co-arising.

    Image source – http://www.smartcode.com/