Bharti Walmart 5 Forces
Q1. Analyze the retail scenario in India in terms of Porter’s Five Forces and investigate the growth across different segments of retailing. Ans:
Indian Retail Scenario in terms of Porter Five Forces
Porter in 1974 has given “Five Forces” model to assess the industry environment.
Five forces of Porter model which determine effectiveness of any Industry are: 1. Barriers to Entry 2. Bargaining Power of Buyers 3. Bargaining Power of Suppliers 4. Threat of Substitutes 5. Rivalry among Competitors
1. Barriers to Entry
India’s Retail industry has high barriers to entry for Global retailers. Reasons are as below. * Strict Regulation to prevent entry of global retailers to operate freely into India. Indian retail industry is mostly unorganized (98% unorganized and 2% organized). India is known as “a nation of shopkeepers”. Government has to protect the interest of 15 million small store owners. * 51% Foreign Direct Investment (FDI) is permissible for Multi-brand retailers. 49% has to be own by Indian entities. * 100% FDI is allowed in wholesale business, for example “Cash & Carry” and “backend logistics” operations. * Only single brand foreign companies are allowed to operate into India as they are not perceived to have direct impact on the predominantly local, small retail outlets
2. Bargaining Powers of Buyers
India’s Retail industry has low bargaining power of buyers. Reasons are as below. * Large number of fragmented buyers. Buyers are price sensitive but not collective to bargain. * There are small number of suppliers either government owned or privately held. * Increase affordability of Indian urban and semi urban families which are becoming more brand conscious and less price sensitive. Large number of working youth of median age of 24 years. 67% of population is below 35 years and 52% under age 24 years. Growing number of working women and many nuclear families living in urban cities. The shift in
Indian Retail Scenario in terms of Porter Five Forces
Porter in 1974 has given “Five Forces” model to assess the industry environment.
Five forces of Porter model which determine effectiveness of any Industry are: 1. Barriers to Entry 2. Bargaining Power of Buyers 3. Bargaining Power of Suppliers 4. Threat of Substitutes 5. Rivalry among Competitors
1. Barriers to Entry
India’s Retail industry has high barriers to entry for Global retailers. Reasons are as below. * Strict Regulation to prevent entry of global retailers to operate freely into India. Indian retail industry is mostly unorganized (98% unorganized and 2% organized). India is known as “a nation of shopkeepers”. Government has to protect the interest of 15 million small store owners. * 51% Foreign Direct Investment (FDI) is permissible for Multi-brand retailers. 49% has to be own by Indian entities. * 100% FDI is allowed in wholesale business, for example “Cash & Carry” and “backend logistics” operations. * Only single brand foreign companies are allowed to operate into India as they are not perceived to have direct impact on the predominantly local, small retail outlets
2. Bargaining Powers of Buyers
India’s Retail industry has low bargaining power of buyers. Reasons are as below. * Large number of fragmented buyers. Buyers are price sensitive but not collective to bargain. * There are small number of suppliers either government owned or privately held. * Increase affordability of Indian urban and semi urban families which are becoming more brand conscious and less price sensitive. Large number of working youth of median age of 24 years. 67% of population is below 35 years and 52% under age 24 years. Growing number of working women and many nuclear families living in urban cities. The shift in