CHAPTER-I
INTRODUCTION
Business is an economic activity which is related with continues
and regular production or purchase and sales of goods undertaken,
with an objective of earning profit and acquiring wealth through
the satisfaction of human want.The scope of Business is wider than
of the terms Trade and commerce. The term trade and commerce are
often used synonymously. This usage is not correct with exchange of
goods and service. It performs the function of acting as an
intermediary and thereby it transfers goods from the producer to
the consumer. On the other hand, commerce is a wider term. It
includes Trade as well as Aids to trade i.e. the various activities
which facilitates trade.The term business may be classified into
Industry and Trade and commerce. Industry is referred to as
production of goods and materials while trade and commerce referred
to distribution of goods and materials manufactured.1International
Investment:The strategy of selecting globally-based investment
instrument as part of an investment portfolio, International
investing includes such investment vehicles as mutual funds,
American Depository Receipts, Exchange-Traded Funds (ETFS) or
direct investments in foreign markets. People often invest
internationally for diversification, to spread the investment risk
among foreign companies and markets and for growth, to take
advantage of emerging markets. Here we are going to Study about FDI
in retail market.2Meaning of FDIForeign direct investment (FDI) in
India has played an important role in the development of the Indian
economy. FDI in India has a lot of ways enabled India to achieve a
certain degree of financial stability, growth and development. This
money has allowed India to focus on the areas that needed a boost
and economic attention, and address the various problems that
continue to challenge the country.FDI stands for foreign direct
investment is also referred to productive investment by any foreign
investment actually means the flow of the total investment in any
enterprise or ongoing business, which is operating for the growth
of the country economy. The investment are the summation of long
term money or capital, equity capital earnings and also short term
money. The investment is incorporated in the various sectors like
the infrastructure development projects. These kinds of projects
include areas like flyovers, bridges, offices, industries and much
more. The investments in other sectors include financial sectors
that incorporate insurance services and banking and also retail
sectors and other real estate development projects. India is a
country that has been able to restore investor confidence in its
markets, even during the toughest of times. Increase in capital
inflows, foreign direct investments (FDI) and overseas entities
participation reflect the fact that Indian markets have fared well
in recent times. Moreover, foreign companies are viewing the
South-Asian nation as a strategic hub for their operations and
investments owing to investor-friendly policy environment, positive
eco-system and huge potential for growth. India Incs increasing
presence over the global canvas and Indian governments consistent
support to the FDI space has facilitated remarkable developments
and investments from overseas partners. MEANING OF RETAIL
MARKETRetailing means a piece of or to cut up. This implies that
retailers acquire large quantities of product and divide them up to
smaller units to be sold to individual consumer. In the era of
intense competition, most companies contemplate different forms of
distribution. Companies are able to sell direct to consumers from
their place of location. Stores combine direct marketing by use of
advertisements, catalogues telephone sales or electronic media with
their retail outlet. Tourism industry also makes use of these
distribution channels in reaching out to its customers. 1.1
RATIONALE FOR SELECTING THE TOPICIn our day-to-day life we are
engaged in several activities. In that, business is very important
activity of selling goods or services to the final consumer. If
goods are channelized to the consumers through foreign direct
investment by the foreign investor in home country is known as FDI
in retail sector. While selecting the topic for my project FDI in
retail marketing is the hot topic. This issue was discussed even in
the parliament for longer period. So I am interested to analyze the
pros and cons of FDI in retail sector.1.2 SCOPE OF THE STUDYThe
techniques used for data collection was one-on-one interviews
individual responses to arrive at the opinion on various issues.
The instrument for data collection in the form of structures
questionnaire was designed to elicit information demographic
aspects. This study is conducted from the period of Jan-march 2012.
The survey is carried out in the semi-urban areas to the business
people, professionals, and retailers with a sample size of 50.1.3
NEED AND IMPORTANCE OF THE STUDYConsumption of various kinds of
goods and services is the part and parcel of human life. Almost
every activity in which a human being may be engaged involves that
consumption of goods and services. Marketing is an integral
financial activity of the human being in their day-to-day.
Presently marketing has occupied a predominant role in the process
of industrialization which is turning emerged as a concept of
economic development of traders. This study will explain the
advantages and disadvantages of FDI in retail market. The study
summarizes whether the FDI in retail market in boon or ban.1.4
STATEMENT OF THE STUDYThis study deals with the proposal announced
by the United Progressive Alliance as 51% in FDI in multi-brand
stores and 100% in single brand made by the central government on
14th Nov 2011. In this context, an attempt is made to collect the
opinion of retailers in the Chennai city whether the proposed bill
could be implemented by the central government or not.1.5
OBJECTIVES OF THE STUDYIn order to examine the FDI decision stated
above the following are the specific objectives of the study. To
collect the opinion from the retailers about the proposal made the
government with regard to FDI in retail marketing. To identify the
constraints which would be faced by the retailers if the proposal
is implemented To analyze the positive and negative effects of FDI
in retail marketing from the retailers perspective in Chennai1.6
LIMITATIONS OF THE STUDY Due to time and resources constraints, the
sample size and restricted to 50 retailers, business people,
professionals and so scientific method was used in arriving at it.
The study is restricted to retailers in Chennai city only. The
findings are based entirely upon the research conducted in Chennai
and hence may not be applicable directly too other metropolitan
areas on counts of socio-cultural diversity and contractual
factors.1.7 RESEARCH METHODOLOGYDescriptive Study is used for the
purpose of research. Descriptive research includes surveys and a
fact finding enquires of different kinds. The major purpose of
descriptive research is the description of the state of affairs as
it exists at present. A descriptive study requires a clear
specification of who, what, when, were, why and how aspects of the
research. Convenience Sampling method is used in collecting the
data in this study. The date collected were classifieds, tabulated,
analyzed and interpreted. From analysis, conclusions are drawn and
suggestions are also given.4
Data collection:The study is based on both primary and secondary
data.Primary Data: The primary data was collected from the 50
retailers, business peoples and professionals with use of
predetermined questionnaire directly and face to face interview was
conducted to elicit opinion from academicians bureaucrat and
general public. The details of questionnaire are given in the
annexure. The survey was carried out between Jan to March
2012.Secondary Data: In additions to the field research, secondary
data were collected from articles prescribed in dailies, magazines
and through visits to libraries and also from the World Wide
Web.Design of questionnaire:The main tool used for this study is
structured questionnaire. The questionnaire contains different
forms of question like Open ended questions Dichotomous form
Multiple choice questions Open ended question i.e. inviting free
response. Here the respondents are free to answer of their own
words.Dichotomous form i.e. yes or no answer. Her the question will
have only 2 choice yes or no and the respondent have to choose any
one.Multiple choice questions will contain more choices from which
the respondents can select any one of their own.
Tools for data analysis: Percentage analysis Charts Chi-square
This analysis shows the entire respondents in terms of percentage.
It is used to make comparison between two or more series of
data.Percentage = No of respondents x 100 Total respondentCharts:A
chart is a visual representation of data, in which the data are
represented by symbols such as bars in a bar char and lines in the
line chart. A bar chart uses bar to show frequencies or value for
different categories A pie chart shows percentage values as a slice
of pie.Chi-square: Chi-square symbolically written as an x2
(pronounced as ki square) is a statistical measure with the help of
which it is possible to assess the significance of different
between the observed frequency and the expected frequency obtained
from some hypothetical universe. Chi- square test enables us to
test whether more than two population proportion can be considered
equal. In this test, assuming null hypothesis (ho), the expected
frequencies should be calculated. Then comparing the calculated x2
value with tabulated x2 value, we can conclude the test of
goodness. The formula for computing chi-square is X2 = {(oi EI) 2 /
EI}Oi- observed frequencyEI-Expected frequencyHYPOTHESIS:It is an
assumption to be proved or disproved. A research hypothesis is a
predictive statement capable of being tested by scientific methods
that relates an independent variable.1.8 REVIEW OF
LITERATUREForeign direct investment (FDI) in India has played an
important role in the development of the Indian economy. FDI n
India has a lot of ways enabled India to achieve a certain degree
of financial stability, growth and development. This money had
allowed India to focus on the areas that added a boost and
economies attention, and address the various problems that continue
to challenge the country.India has continually sought to attract
FDI from the worlds major investors. In 1998 & 1999 the Indian
national government announced a number of reforms designed to
encourage and promote a favorable business environment of
investors.A number of projects have been implanted in areas such as
electricity generations, distribution and transmission, as well as
the development of roads and highways, with opportunities for
foreign investors.The Indian national government also granted
permission for FDI to provide up to 100% of the financing required
for construction of bridges and tunnels, but with a limit to
foreign equity of INR 1, 5000 crores approximately $352.5
million.Currently; FDI is allowed in financial services; including
the growing credit card business. There also include the
non-banking financial services sector. Foreign investors can buy up
to 40% of the equity in private banks, although there is
conditioned that these banksMust be multilateral financial
organization up to 45% of the shares of companies in the global
mobile personal communication by satellite services (GMPCSS)
sectors can above purchased.5What is foreign direct investment
(FDI)? Instead of investing in local business, putting money in the
company functioning or incorporated in another country in foreign
direct investment for the country which is attracting the
investment. The investor is a considered a foreign direct investor.
The foreign direct investor can have influence in the management of
the companies invested in. The foreign direct investor may have a
varying amount of stake in the invested company. Stakes can be as
low as 10% or may also cross 49% of the stacks or stock ownership.
Some countries may have caps on the amount of equity a foreign
direct investor may hold. For e.g. The RBI allows foreign equity
only unto 505 in investment in specific mining sector in India. It
totally forbids FDI in mining of iron and manganese. The flow of
capital from the foreign investor to the company invested in
becomes an FDI inflow. FDI has three equity capital investment,
reinvested earnings and intra company loans.Retailing means a piece
of or to cut up. This implies that retailers acquire large
quantities of product and divide them up to smaller units to be
sold to individual consumer. The definition of retailing emphasis
the business activity of selling goods or services to the final
consumer.From the above paragraph we can clearly understand the
meaning for FDI in Indian retail market. It is nothing but
investment of foreign countries like USA, UK etc in our Indian
Retail market.L. Natarajan in his book Retail Marketing discussed
about organized and unorganized retail sector. Organized retailing
refers to trading activities undertaken by licensed retailers, that
is, those who are registered foe sales tax, income tax, etc. these
include the corporate-backed hypermarkets and retail chains, and
also the privately owned large retail businesses. Unorganized
retailing, on the other hand, refers to the traditional formats of
law-cost retailing, for example, the local kirana shops, owner
manned general stores, paan/beedi, convenience stores, hand cart
and pavement vendors, etc. The Indian retail sector is highly
fragmented with 97 per cent of its business being run by the
unorganized retailers. The organized retail however is at a very
nascent stage. The sector is the largest source of employment after
agriculture, and has deep penetration into rural India generating
more than 10 per cent of Indias GDP.6FDI policy in India FDI as
defined in dictionary of economics is investment in a foreign
country through the acquisition of a local company or the
establishment there of an operation on a new (Greenfield) site. To
put in simple work, FDI refers to capital inflow abroad that is
invested in or to enhance the production capacity of the economy.
Foreign Investment in India is governed by the FDI policy announced
by the government if India and the provision of the Foreign
Exchange Management Act (FEMA) 1999. The Reserve Bank of India
(RBI) in this regard had issued a notification which contains the
foreign exchange management (transfer or issue of security by a
person resident outside India) regulations, 2000. This notification
has been amended from time to time.The ministry of commerce and
industry, government of India is the nodal agency for motoring and
reviewing the FDI policy on continued basis and changes in sectoral
policy/sectoral equity cap. The FDI policy is notified through
press notes by the Secretariat for Industrial Assistance (SIA).
Department of Industrial Policy and Promotion (DIPP).The foreign
investors are free to invest in India, except few
sectors/activities, where prior approval from the RBI or Foreign
Investment Promotion Board (FIPB) would be required. FDI policy
with regard to retailing in India It will be prudent to look into
press note 4 of 2006 issued by DIPP and consolidated FDI policy
issued in October 2010 which provide the sector specific guidelines
for FDI with regard to the conduct of trading activities.a) FDI up
to 100% for cash and carry wholesale trading and export trading
allowed under the automatic route.b) FDI up to 51% with prior
government approval (i.e.FIPB) for retail trade of single brand
product. Subject to press note 3 (2006 series)c) FDI is not
permitted in multi brand retailing in India.7
Times of India issues that the government feces a fierce
political backlash over its decision to allow FDI in multi-brand
retail with traders. And also issued whats attractive about Indian
retail? Current size of Indian market is $28b and estimated size in
2020 will be $260b.8The Hindu issued that according to the 2011
data on the census of India websites, there are 46 cities that had
a population of 10lakhs of which 25 are unlikely to allow the likes
of Wal-Mart, Carrefour and Tesco to open stores since the political
leadership in these states have gone on the offensive against the
governments move. Slamming the center for its decision to allow FDI
in multi-brand retail sector without consulting the states chief
minister and AIADMK chief J Jayalalithaa demanded immediate
rollback. She charged the Manmohan Singh government with taking a
wrong decision taken pressure from a few retail giants who are
starved for capital infusion for their future survival.9Times of
India issued that FDI in multi-brand retail will help revive the
cash strapped domestic retail industry by attracting funds; feels
India Inc. with FDI in multi-brand sector expected to generate
three to four million direct jobs and four to six million jobs by
2020, most industry leaders are convinced that the move will ensure
parallel growth for both large retail chain as well as small Kirana
stores. They also allayed fear of exploitation by international
retail chains.101.9 CHAPTERISATION: The study report is presented
in the five chapters.Chapter I of this study will provide
introduction, rational for selecting the topic, scope of the study,
need and importance of the study, statement of the study objectives
of the study, limitation of the study, research methodology, review
of literature and chapeterisation.
Chapter II: Retail marketing in India. This chapter is about
organized retailing in India, Function of retailing, Characteristic
of retailing, classification of retailing, types of retailing and
branding in retailing.Chapter III: FDI in India This chapter is
about Trend and pattern of FDI inflow, trends and pattern of FDI
inflow in the world, most attractive location of global FDI, Trends
and pattern of FDI flow in India, source of FDI in India and
distribution of FDI in India.Chapter IV: Analysis and
interpretation. The primary data was collected tabulated and
interpreted in this chapter. And some statistical techniques are
also used.Chapter V: Summary of findings, suggestion and
conclusion. Findings of the study will be presented in this
chapter. And on the basis of findings, suggestions and
recommendations are made.
Foot Notes:1. Dr. Radha, 2005 Business Environment, first
edition. Prasanna & co, Chennai.2. Gilberto juentes.
International investment theory. Www. Ehow.com. 3. Dr. L.
Natarajan, 2010 Retail Marketing, second edition, Margham
publication, Chennai. 4. C.R.Kothari, 2001 Research Methodology
methods and Techniques, Wiswa prakasham, New Delhi.5. Singhal
Arvind, A strong pillar of Indian Economy, www.ksa.techno park
.in.6. Dr. L. Natarajan, 2010 Retail Marketing, second edition,
Margham publication, Chennai7. Press information officer, press
information bureau for uploading the press note on DIPS websites.8.
Times of India, Nov 25, volume- 4, issue-2799. Hindu, Nov 28,
volume- 5, issue-291.10. Times of India Nov 29, volume-4,
issue-282.
CHAPTER- II RETAIL MARKETING IN INDIAMeaning:Marketing is a
managerial process of providing the right product, in the right
place, at the right time and at the right price. Kotler defines
marketing as a social and managerial process by which individuals
and groups obtain what they need and want by creating and
exchanging products and value with others.Retailing is the
interface between the producer and the individual consumer buying
for personal consumption. This excludes direct interface between
the manufacturer and institutional buyers such as the government
and other bulk customers. A retailer is one who stocks the
producers goods and is involved in the act of selling it to the
individual consumer, at a margin of profit. As such, retailing is
the last link that connects the individual consumer with the
manufacturing and distribution chain. The retail industry in India
is of late often being hailed as one of the sunrise sectors in the
economy. AT Kearney, the well-known international management
consultancy, recently identified India as the second most
attractive retail destination globally from among thirty emergent
markets. It has made India the cause of a good deal of excitement
and the cynosure of many foreign eyes. With a contribution of 14%
to the national GDP and employing 7% of the total workforce (only
agriculture employs more) in the country, the retail industry is
definitely one of the pillars of the Indian economy.
2.1 Organized Retailing in IndiaThe retail industry in India is
today transformed into a well developed retail hub. The Indian
retailing scenario has dual aspects- a large number of small
retailers on the one hand and a small number of large retail
outlets on the other.Unorganized retail sector comprises 98 per
cent while the organized retail trade is only two percent of the
total trade. Super markets and hypermarkets fuel the growth of
retail trade in India. Food and grocery items account for 76 per
cent of the total consumer expenditure in the country.Shoppers stop
is a part of K. Rahejas Group. It forayed into the retail industry.
The company operates more than 13 department stores across the
country. It is the most recognized brand in the retailing sector.
The stores established in Mumbai and Bangalore became successful.
These stores turned into cash cow due to first mover advantage.
Subsequently, store expansion in other markets like, Jaipur,
Chennai and Hyderabad resulted in accumulated losses. Then the
company took some corrective measures and reported modest profit.
2.2 Functions of retailing:Generally, retailers are involved in the
following functions:1. Functions of breaking bulk.2. Functions of
creating place utility.3. Stocking varieties of goods.4. Providing
credit facilities to customers.5. Providing information to
customers and wholesalers.6. Estimating the demand and arranging
the purchase of the product7. Acting as consumers agent.8.
Marketing functions.9. Connecting link. 2.3 Characteristics of
Retailing1. Marketing orientation.2. Multi-channel retailing.3.
Innovative method of thinking and planning.4. Right environment.5.
Unique characteristics of a retailer.2.4 Classifications of
retailers by Philip Kotler1. Store retailers The important types of
retail stores are:1. Specialty store2. Department store3. Super
markets4. Convenience store5. Off-price retailer6. Discount store7.
Super store8. Hyper markets9. Catalogue showroom.Non-store
retailers1. Direct selling2. Direct marketing3. Automatic vending
buying servicesRetail organizations1. Corporate chain store2.
Voluntary chain3. Retailer cooperative consumer cooperative4.
Franchise organizations5. Merchandising conglomerate. 2.5 Types of
retailersRetailing ranges from hawkers and pedlars to hyper
markets. While we have seen the classification of retailers by
Philip kolter earlier, there is yet another classification on
traditional lines on the types of retailers which are given
below:I. Itinerant retailersa) Pedlars and hawkers b) Cheap jacks
c) Market traders d) street traders.II. Fixed shop retailersa)
Street stall holders b) Second-hand gods dealers c) Specialty goods
shop d) General shops. III. Small-scale retailersa) Independent
stores b) Automatic vending c) Discount houses d) syndicate
stores.IV. Large scale retailersa) Department stores b) Multiple
shops c) Mail order shops d) Hire purchase and installment e)
Cooperative stores f) super markets g) hyper markets h)
franchisingg) Shopping malls. I. Itinerant retailers Itinerant
means travelling from place to place. Itinerant retailers have no
fixed place of business. They move from place to place for selling
their selling their goods to the consumers.1. Pedlars and hawkers:
Pedlars are those retailers who carry goods in hand cart to sell
them at the doors of consumers. To hawk means to sell goods in the
streets by knocking on peoples doors.2. Cheap jacks: They have an
independent shop. But, the shop is not a permanent one. If business
at one place is not profitable, cheap jacks will choose some other
location.3. Market traders: They open their shops at different
places, on different days whenever the market is open. For example,
Sunday market in Pondicherry is very popular among shoppers.4.
Street traders: Aiming at the floating population, they choose bus
stops, railway stations, government and commercial offices and
educational institutions to do business.II. Fixed shop retailers
Fixed shop retailers have a permanent place of business.1. Street
stall holders: Street stall holders put up their stalls where there
is heavy pedestrian movement. Having selected a location with
utmost care, they retain that place of business.2. Second hand
goods dealers: these retailers sell second hand goods such as book,
furniture, television sets, radios, cloth, etc. Customers who
cannot afford to buy new goods at market price buy second hand
goods at cheaper prices.3. Specialty shops: Specialty shops deals
in a particular variety of goods. They sell only line of
goods-books, leather goods, toys, watches, electronic goods,
furniture, kitchen articles, etc.4. General shops: General shops
sell goods that are required for day-to-day use. General shops deal
in a wide assortment of goods such as gift articles, biscuits,
plastics, foot wear, flasks soap, oil, etc.III. Small scale
retailers1. Independent stores: Independent stores are
non-integrated retail establishment. They are small in size and
have lesser degree of specialization in their management.2.
Automatic vending: Sale through vending machines has become the
order of the day in advanced countries. Vending machines
automatically vend a particular variety of merchandise.3. Discount
houses: These retail shops offer large discounts to customers on
certain types of merchandise. Goods like jeweler, household
appliances, furniture which carry a higher margin are offered at
discounted prices. Discount houses do not give importance to
customer services. 4. Syndicate stores: syndicate stores are the
extended forms of chain and mail order houses. They operate on a
small scale. They do not deal in national brands of merchandise.V.
Large scale retailersThe large shop which operate on large scale
include (i) Department stores (ii) Chain or multiple stores (iii)
Mail order shops (iv) Hire Purchase and installment (v)
Co-operative stores (vi) Supermarkets (vii) Hyper markets; and
(viii) Shopping malls. 1. DEPARTMENTAL STORES Departmental stores
are of French origin. Departmental stores came into existence in
19th century. Department stores are large scale retail stores
selling less than one roof under one roof under a single control.
They deal in a variety of goods2. CHAIN OR MULTIPLE STORES Under
this type, similar shops are established in many places by a same
management. Chain stores originated in America, it is known as
multiple shops in Europe and other western countries. It is a
network of a number of branches situated at different localities in
the city or in different parts of the country. It is a group of
retail stores which are of similar kind.3. MAIL ORDER SHOPS Under
mail order methods, products are sold through mail. So, in mail
order business, post office plays an important role. This system is
also referred to as shopping by post.4. HIRE PURCHASE AND
INSTALLMENTS Under hire purchase system, the seller agrees to sell
the article on the condition that the buyer shall pay the purchase
price through installments. Ownership in the goods is transferred
from seller to the buyer only on the payment of last installment.
So, if the buyer defaults to pay the installment amount, the goods
will be repossessed by the seller.5. CO-OPERATIVE STORES A
consumers cooperative store is a retail unit owned and controlled
by consumers .Any consumer can join the consumer cooperative store
by buying its shares. Each member has only one vote irrespective of
his share holding. Members get dividend in proportion to their
shares held in the cooperative store. Cooperative stores are run by
the consumers themselves for their mutual benefits.6. SUPER MARKETS
A super market is a large retailing ship where goods are displayed
in such a way that buyers select products for themselves. Buyers
collect their product off the shelves invariably in a trolley and
get them billed by the counter clerk.7. HYPER MARKETS Hyper market
combines the features of a supermarket and a general merchandise
store. The self service basis is followed. A spacious building is
required for a hypermarket. A hypermarket deals in large varieties
of merchandise. Hypermarkets originated in France. 8. FRANCHISING
Franchise means privilege. A franchise is a conditional right given
to a retailer to market the companys products and services under
the banner of the franchiser. In franchising, the franchiser
licenses his brand name, business process or format, product,
service or reputation to the franchisee in return for fees and
royalties.9. SHOPPING MALLSThey sell a large variety of merchandise
to customers. Spencer plaza in Chennai, crossroads in Mumbai, Anzal
plaza in Delhi, shoppers city. Calcutta , and the Sahara mall,
Gurgaon are some important shopping mall established in retail
business.
2.6 BRANDING IN RETAILINGDefinition of a brand Kotler defines a
brand as: A name, term, sign, symbol or design or a combination of
them to identity the goods or services of one seller or a group so
sellers and to differentiate them from those of competitors.THE
ROLE OF BRAND IN RETAIL TRADE Brand is considered a pertinent
marketing tool for retail companies in highly competitive markets.
The marketplace becomes mature. So, there is a need to rise above
the mass competing offers. The brand confers individuality on the
product. In a mature market, retailers experiences slow growth and
declining returns. Each retail organizations, will therefore
attempt to defend its market share. It has to encourage consumers
purchase loyalty and differentiate its outlets and offers.Brand
name The brand name is the pronounceable part of a brand. Brand
name consists of a word, letter, and group of words, letters,
comprising a name which is intendment to identify the goods or
services of a seller or which is intended to distinctly identify
the goods from those of the competitors. In the other words, a
brand name is that part of the brand that can be vocalized.RETAIL
COMMUNICATION AND PROMOTIONDefinition of retail promotion Retail
promotion is the descriptive tern for the mix of communication
activities which retail companies carry out in order to influence
those publics on whom their sales depend.1. Window display(outside
display)Window display induces persons to enter into the shop. It
arouses the interest of passers-by and kindles a desire to buy the
product on display. 2. Interior display While window display is
arranged outside, interior display is done inside the shop.
Products placed in interior display are often kept within the easy
reach of the buyers.3. Show roomsShow rooms play a crucial role in
selling products like books, cars, two wheelers, washing machines,
refrigerators, air conditioners, etc. showroom exhibit the products
meant for sale.1 SALES PROMOTIONThe most important tool used in
promotion is sales promotion. Most consumers relate ideas of
marketing to the use of sales promotion techniques. The other main
forms are advertising and personal selling.Kinds of sales promotion
Sales promotion can be divided as follows:1. Consumers sales
promotion 2. Dealers sales promotion and 3. Sales force promotion
Consumer sales promotions are divided into i) samples ii) coupons
iii) Demonstration iv) contests v) cash refund offer vi) Premium
vii) price off offer viii) consumer sweepstakes ix) buy back
allowances.Dealer sales promotion are divided into i) buying
allowances ii) merchandise allowance iii) price deals iv) push
money or premium v) cooperative advertising vi)dealers sales
contests viii) point of purchase.Sales force promotion are divided
into i) bonus ii) sales force contests iii) salesmen meetings and
conferences.2 SUPPLY CHAIN MANAGEMENTThe retail product passes from
the retailer to consumers. The retail product should reach the
consumers at the right time, in right quality and at the right
place. This needs an efficient supply chain distribution system. A
distribution system is a channel which brings products to the place
of sale.The supply channel and channel flowsRetail operations are
growing in size. Controlling merchandise has become an
indispensable part of store operations. This goes beyond an
administration system. It is the total process by which retail
offer reaches the end consumers for their consumption. The supply
chain structures from retailing point of view may be divided into
(1) extended channel, (2) limited channel; and (3) direct
channel.1. Extended channel: An extended channel is one where the
manufacturer, wholesaler and retailer provide a chain of
facilitation services in order to sell the right product to the
final customers.2. The limited channel: In the limited channel, the
retailer works directly with the producer. The retailer eliminates
the wholesaler and the extra costs that go with it.3. Direct
channel: The final option is the direct channel. The product is
sold directly either by the producer or retailer. There are
different direct sales marketing promotion methods such as (1) face
to face selling, (2) direct mail, (3) catalogue marketing, (4)
telemarketing: and (5) Kiosk marketing.The supply channel The
supply channel is defined as The total process by which a product
reaches the end consumer as goods and services. It consists of a
sequence of events which involves strategic decisions over
different resources. Relationships are focused on delivering
optimum value to the end consumer.RETAIL LOGISTICS The word
logistics is derived from the French word loger which means to
quarter and supply troops. When large number of troops and their
equipment move, meticulous planning is required to move volumes of
goods and ammunition in that direction. From a marketing point of
view, customers are satisfied when they get right product at the
right place, at the right time and in the right quantity. Retail
logistics system ensure smooth flow of goods to consumers though
efficient movement of logistics
FOOT NOTES:
1. Dr. L. Natarajan, 2010 Retail Marketing, second edition,
Margham publication, Chennai.2. SM. Jaw, 2010 Marketing management,
first edition, Margham publication, Chennai.3. Dr. L. Natarajan,
2010 Service Marketing, second edition, Margham publication,
Chennai.
CHAPTER III TRENDS AND PATTERNS OF FDI INFLOWS
INTRODUCTION:
One of the most prominent and striking feature of todays
globalised world is the exponential growth of FDI in both developed
and developing countries. In the last two decades the pace of FDI
flows are rising faster than almost all other indicators of
economic activity worldwide. Developing countries, in particular,
considered FDI as the safest type of external finance as it not
only supplement domestic savings, foreign reserves but promotes
growth even more through spillovers of technology, skills,
increased innovative capacity, and domestic competition. Now a day,
FDI has become an instrument of international economic
integration.
Located in South Asia, India is the 7th largest, and the 2nd
most populated country in the world. India has long been known for
the diversity of its culture, for the inclusiveness of its people
and for the convergence of geography. Today, the worlds largest
democracy has come to the forefront as a global resource for
industry in manufacturing and services. Its pool of technical
skills, its base of an English speaking populace with an increasing
disposable income and its burgeoning market has all combined to
enable India emerge as a viable partner to global industry.
Recently, investment opportunities in India are at a peak.This
chapter covers the trends and patterns of FDI inflows at World,
Asian andIndian level during 1991-2008. 1
TRENDS AND PATTERNS OF FDI FLOW IN THE WORLD
The liberalization of trade, capital markets, breaking of
business barriers, technological advancements, and the growing
internationalization of goods, services, or ideas over the past two
decades makes the world economies the globalised one. Consequently,
with large domestic market, low labour costs, cheap and skilled
labour, high returns to investment, developing countries now have a
significant impact on the global economy, particularly in the
economics of the industrialized states. Trends in World FDI flows
depict that developing countries makes their presence felt by
receiving a considerable chunk of FDI inflows. Developing economies
share in total FDI inflows rose from 26% in 1980 to 40% in 1997.
However, the share during 1998 to 2003 fell considerably but rose
in 2004, again in 2006 and 2007 it reduces to 29% to 27% due to
global economic meltdown. Specifically, developing Asia received 16
%, Latin America and the Caribbean 8.7 %, and Africa 2 %. On the
other hand, developed economies show an increasing upward trend of
FDI inflows, while developing economies show a downward trend of
FDI inflows after 1995.2
MOST ATTRACTIVE LOCATION OF GLOBAL FDI
It is a well-known fact that due to infrastructural facilities,
less bureaucratic structure and conducive business environment
China tops the chart of major emerging destination of global FDI
inflows. The other most preferred destinations of global FDI flows
apart from China are Brazil, Mexico, Russia, and India. The annual
growth rate registered by China was 15%, Brazil was 84%, Mexico was
28%, Russia was 62%, and India was 17% in 2007 over 2006. During
1991-2007 the compound annual growth rate registered by China was
20%, Brazil was 24%, Mexico was 11%, Russia was 41% (from 1994),
and India was 41%. Indias FDI need is stood at US$ 15 bn per year
in order to make the country on a 9% growth trajectory (as
projected by the Finance Minister of India in the current
Budget74). Such massive FDI is needed by India in order to achieve
the objectives of its second generation economic reforms and to
maintain the present growth rate of theeconomy. Although, Indias
share in world FDI inflows has increased from 0.3% to 1.3% from
1990-95 to 2007. Though, this is not an attractive share when it is
compared with China and other major emerging destinations of global
FDIinflows. TRENDS AND PATTERNS OF FDI FLOW IN ASIA
In the South, East, and South East Asia block India is at 3rd
place after China and Singapore. South, East, South East Asia block
registered an annual growth rate of 19% in 2007 over 2006 and
compound annual growth rate of 17% on an annualized basis during
1991-2007. Indias share has increased from 1.5% in 1990- 95 to 9.2%
in 2007 while Chinas share was decreased to 33 per cent in 2007
from 43.4 per cent in 1990-95. It is found that there is an
increment of 5.8% in case of India while there is a decrement of
9.8% in case of China. It is evident from that Indias share among
developing countries in FDI inflow was 1.4% in the last decade and
2.8% in 2000-2007 while Chinas share was 22.6% in 1991-99 and 21.7
per cent in 2000-07. When the shares of these two countries are
compared it is found that Chinas share is 21.7% in the present
decade while Indias share is miniscule (i.e. 2.8%).The doing
business conducted by World Bank put forward certain indicators
where China beats India in attracting high FDI inflows. High trade
and transaction costs are mainly due to the countrys lack of
quality infrastructure. This lack of infrastructure discourages
resource seeking and export oriented investment. The reason for the
low level of FDI in India as compared to China could be any but the
fact is that China opened its door to foreign investment in 1978
while India in 1991.There is an appreciable increase in the level
of FDI inflows in the South Asian Region. Asia registered an annual
growth rate of 17% in 2007 over 2006 and compound annual growth
rate of 18% on an annualized basis during 1991-2007. India,
Pakistan, Bangladesh are receiving higher volume of inflows since
1990. According to World Investment Report77 2007 (WIR), India has
emerged as major recipient of FDI in South Asia. Its share is
nearly 75% of total FDI flow to South Asia. In fact, the
Comprehensive Economic Cooperation Agreement (CECA) withSingapore,
Free Trade Agreements (FTAs) with Singapore and Thailand and by
becoming the member of ASEAN Regional Forum India has made its
presence felt in East Asia region. India, is trying hard so that
the largest free Trade Area, even larger than the existing EU-NAFTA
combined area, could come up in the East Asia region. This
suggested largest FTA would make the bilateral trade to the new
heights in the coming years. Due to CECA and FTAs with Singapore,
it emerged as the third biggest investing country in India. Its
ranking improved by 4th place, and if this pace of investment
continued from Singapore it is hoped that it will become the
largest investing country in India in the coming years and
Singapore may prove to be a Hong Kong or Taiwan to India3.
TRENDS AND PATTERNS OF FDI FLOW IN INDIA
Economic reforms taken by Indian government in 1991 makes the
country as one of the prominent performer of global economies by
placing the country as the 4th largest and the 2nd fastest growing
economy in the world. India also ranks as the 11th largest economy
in terms of industrial output and has the 3rd largest pool of
scientific and technical manpower. Continued economic
liberalization since 1991 and its overall direction remained the
same over the years irrespective of the ruling party moved the
economy towards a market based system from a closed economy
characterized by extensive regulation, protectionism, public
ownership which leads to pervasive corruption and slow growth from
1950s until 1990s.In fact, Indias economy has been growing at a
rate of more than 9% for three running years and has seen a decade
of 7 plus per cent growth. The exports in 2008 were $175.7 bn and
imports were $287.5 bn. Indias export has been consistently
rising,covering 81.3% of its imports in 2008, up from 66.2% in
1990-91. Since independence, Indias BOP on its current account has
been negative. Since 1996-97, its overall BOP has been positive,
largely on account of increased FDI and deposits from Non Resident
Indians (NRIs), and commercial borrowings. The fiscal deficit has
come down from 4.5 per cent in 2003-04 to 2.7 per cent in 2007-08
and revenue deficit from 3.6 per cent to 1.1 per cent in 2007-08.
As a result, Indias foreign exchange reserves shot up 55 per cent
in 2007-08 to close at US $309.16 billion an increase of nearly US
$110 billion from US $199.18 billion atthe end of 2006-07. Domestic
saving ratio to GDP shot up from 29.8% in 2004-05 to 37.7% in
2007-08. For the first time Indias GDP crossed one trillion dollars
mark in 2007. As a consequence of policy measures (taken way back
in 1991) FDI in India has increased manifold since 1991
irrespective of the ruling party over the years, as there is a
growing consensus and commitments among political parties to follow
liberal foreign investment policy that invite steady flow of FDI in
India so that sustained economic growth can be achieved. Further,
in order to study the impact of economic reforms and FDI policy on
the magnitude of FDI inflows, quantitative information is needed on
broad dimensions of FDI and its distribution across sectors and
regions.
The actual FDI inflows in India is welcomed under five broad
heads: ( i ) Foreign Investment Promotion Boards (FIPB)
discretionary approval route for larger projects, (ii) Reserve Bank
of Indias (RBI) automatic approval route, (iii) acquisition of
shares route (since 1996), (iv) RBIs non resident Indian (NRIs)
scheme, and (v) external commercial borrowings (ADR/GDR) route. An
analysis of the last eighteen years of trends in FDI inflows shows
that there has been a steady flow of FDI in the country up to 2004,
but there is an exponential rise in the FDI inflows from 2005
onwards.
The FIPB route represents larger projects which require bulk of
inflows and account for governments discretionary approval.
Although, the share of FIPB route is declining somewhat as compared
to RBIs automatic route and acquisition of existing shares route.
Automatic approval route via RBI shows an upward trend of FDI
inflows since 1995. This route is meant for smaller sized
investment projects. Acquisition of existing shares route and
external commercial borrowing route gained prominence (in 1999 and
2003) and shows an upward increasing trend. However, FDI inflows
through NRIs route show a sharp declining trend. It is found that
India was not able to attract substantial amount of FDI inflow from
1991-99. FDI inflows were US$ 144.45 million in 1991 after that the
inflows reached to its peak to US$ 3621.34 million in
1997.Subsequently, these inflows touched a low of US $2205.64
million in 1999 but then shot up in 2001. Except in 2003, which
shows a slight decline in FDI inflows, FDI has been picking up
since 2004 and rose to an appreciable level of US$ 33029.32 million
in 2008. The annual growth rate was 107% in 2008 over 2007, and
compound annual growth rate registered was 40% on an annualized
basis during 1991-2008. The increase in FDI inflows during 2008 is
due to increased economic growth and sustained developmental
process of the country which restore foreign investors confidence
in Indian economy despite global economic crisis. However, the pace
of FDI inflows in India has definitely been slower than China,
Singapore, Russian Federation, and Brazil.A comparative analysis of
FDI approvals and inflows reveals that there is a huge gap between
the amount of FDI approved and its realization into actual
disbursements. A difference of almost 40 per cent is observed
between investment committed and actual inflows during the year
2005-06. All this depends on various factors, namely regulatory,
procedural, government clearances, lack of
sufficientinfrastructural facilities, delay in implementation of
projects, and non- cooperation from the state government etc.4
DISTRIBUTION OF FDI WITHIN INDIA
FDI inflows in India are heavily concentrated around two cities,
Mumbai (US$ 26899.57 million) and Delhi (US$ 12683.24 million).
Bangalore, Ahmedabad and Chennai are also receiving significant
amount of FDI inflows. These five cities together account for 69
per cent of total FDI inflows to India. Mumbai and Delhi together
received 50 per cent of total FDI inflows to India during 2000 to
2008.
Mumbai received heavy investment from Mauritius (29%), apart
from U.K. (17%), USA (10%), Singapore (9%) and Germany (4%).The key
sectors attracting FDI inflows to Mumbai are services (30%),
computer software and hardware (12%), power (7%), metallurgical
industry (5%) and automobile industry (4%). Mumbai received 1371
numbers of technical collaborations during 1991-2008. Delhi
received maximum investment from Mauritius (58%), apart from Japan
(10%), Netherlands (9%), and UK (3%).While the key industries
attracting FDI inflows to Delhi region are telecommunications
(19%), services (18%), housing and real estate (11%), automobile
industry (8%) and computer software and hardware (6%). As far as
technical collaborations are concerned Delhi received 315 numbers
of technical collaborations during 1991- 2008. Heavy investment in
Bangalore came from Mauritius (40%) alone. The other major
investing countries in Bangalore are USA (15%), Netherlands (10%),
Germany (6%), and UK (5%). Top sectors reported the FDI inflows are
computer software and hardware (22%), services (11%), housing and
real estate (10%), telecommunications (5%), and fermentation
industries (4%). Bangalore received 516 numbers of technical
collaborations during 1991-2008. Chennai received FDI inflows from
Mauritius (37%), Bermuda (14%), USA (13%), Singapore (9%) and
Germany (4%). The key sectors attracting FDI inflows are
construction activities (21%), telecommunications (10%), services
(10%), computer software and hardware (7%), automobile industry
(7%), As far as technical collaborations are concerned, Chennai
received 660 numbers of technicalCollaborations during
1991-2008.5
FOOT NOTES:
1.
http://www.realtyplusmag.com/rpnewsletter/Fullstory_Newsletter.asp?news_id=17729&cat_id=12.
http://economictimes.indiatimes.com/opinion/policy-focus-should-be-on-fdi/articleshow/11347045.cms3.
http://profit.ndtv.com/News/Article/fdi-in-pension-funds-to-source-infra-requirements-assocham-2951904.
:http://www.realtyplusmag.com/rpnewsletter/Fullstory_Newsletter.asp?news_id=18086&cat_id=15.
compiled & computed from the various issues of Economic Survey,
RBI Bulletin, Ministry of Commerce
CHAPTER-IV ANALYSIS AND INTERPRETATION
FDI IN RETAIL MARKETING IS BANE The following are the arguments
made by the people while taking survey It is a basic principle that
creating competition in general is good for the market. But we have
a doubt that since proper procurement and distribution system is
not yet fixed, how will the rest fall in the place when the giant
retailers enter our market. Back-end procurement will still remain
a big problem. The debate that by introducing 51% FDI, a lot of
money will flow out of our country is an old school of thought. Lot
of our Indian companies is operating aboard and has successfully
contributed to our economy. The bigger issue is that with benefit
we might end up paying a price hence we must work on a reasonable
solution. Customers feel that retail shares offer better deals but
they sent realize that they end up buying more. If 51% FDI is
allowed in retail market, it will be a big trouble for the small
shopkeepers. The big giants entering the market will surely impact
the small stores owners. The government says that the farmers will
benefit but I feel it will just be a temporary benefit. Once these
giant foreign retails have monopoly, they will start exploiting the
market. In the long run it is not benefited to our economy. For
e.g. in a country like France, walmark was not permitted to set up
its stores whereas in Germany, FDI is not allowed. If the US is not
allowing India goods to be sold in their market, why should then we
give them a chance to set up bare here. This discounts that there
big retail stores offer in order to cure customer are also now
being offered by our kirana stores. I feel that people should not
fall prey to big retail stores because it is a trap where in
consumers end up buying more than what is required. Customers feel
that they are getting between deals, but they are at the same time
enticed to buy more.1 Suryakant Pathak; MD, Grahakpeth &
secretary, grabak panchyat. The Government must discuss property
about 51% FDI and have a law in place to control unfair
competition. We strongly oppose the government allowing 51% FDI as
it will surely have a negative impact on the small retailers in the
market. There big companies with huge investment capacity will buy
goods at lesser rates and pass on big documents to customer,
wherein small local retailers will not be able to stand against the
competition by attracting customers and manufactures, they will
create their own monopoly in the market, which will not be good for
the retail market in the long run. We already have big malls then
why do we want foreign retail chains. Today the government
intention is to remove middlemen and give better price to farmers
but why doesnt it help in bring down transport cost which is
increasing due to rising full prices. The government must properly
discuss the pros and cons of allowing 51% FDI and have a law in
place to control unfair competition when foreign countries dont
allow important of food products from India, then why should we
allow them in our country.2-Ajit setiya, president, porna merchant
chamber Once monopoly set in market, small-time retailers,
consumers and farmers get exploited. I think that by allowing 51%
FDI, it will have a negative impact on our retail market monopoly;
which is not good for economic growth. Brining in big foreign
players will, no doubt, give direct competition to big domestic
retail chains but small retailers will eventually get eliminated.
Though farmers get good rate for their produce and storage
facilities will improve, there are only temporary benefits, in the
history of capitalization, the beginning, consumers and farmers get
exploited.FDI IN RETAIL MARKETING IS BOONSome people are favoring
to the FDI. The following points are made by them. The 51% of FDI
will obviously have a negative impact on small retailers, but it
will benefit the consumers as they will have wider choices at
competitive prices. It will accelerate the retail market growth and
provide more employment opportunities. Farmers will benefits from
FDI us they will able to get better prices for their produce. The
FDI bill will definitely have appositive impact on the retail
industry and the country by attracting more foreign investment.
With big retail giants coming to India, it will surely improve our
back-end storage and procurement process. Once these multi-chain
retailers establish themselves, they will create infrastructure
facilities, which will also propel the existing infrastructure. The
farmer will benefit from FDI as they will be able to get better
prices for their produce. The elimination of the intermediate
channels in the procurement process will bad to reduction of
process for consumers. The regulation in the FDI bill that 30% of
the total procurement has to come from small and medium enterprises
will benefit the domestic business off course a policy is needed to
protect the small and medium market channels from Chinese invasion.
The fear that FDI will have a negative impact on the small
retailers is completely wrong. It is not that everyone will run to
their giant stores. Foreign brands will promote healthy competition
in market every time the government brings up the subject of FDI
the domestic retailers with the support of some politician jump to
lobby against the bill. As we are initiating the FDI there is bound
to be some problems, which can definitely removed. The government
is near future can appoint a regular body to monitor the retail
sector just like other sector. By allowing 51% FDI in the Indian
market, it will teach the local retailers about the real
competition and help in insuring that they give better service to
Indian consumers. It is obviously good for local competition and I
dont see as a consequence, our local kirana stores disappearing.
The kirana shops operate in a different environment catering to a
certain set of customers and they will continue to find new ways to
retain them. I dont see a problem with FDI as it will boost our
economy.3ADVANTAGES OF FDI IN RETAIL MARKETING Consumers to save
5-10%. Farmers to get 10-30% higher remuneration. Potential to add
3-4m new jobs, another 4-6m jobs in logistic, contract labor,
security etc. To help develop logistic and cold chains Government
revenues to go up by $25-30 billion through various taxes. Huge
investment in the retail sector will see gainful employment
opportunities in agro-processing, sorting, marketing, logistic
management and front-end retail. At least 10 million jobs will be
created in the next three years in the retail sector. FDI in retail
will help farmers secure remunerative prices by eliminating
exploitative middleman. Policy mandates a minimum investment of
$100 million with at at least half the amount to be invested in
base-end infrastructure, including gold chains, refrigeration,
transportation packing, sorting and processing. This is expected to
considerably reduce pose-harvest loosed. This will have a salutary
impact on food inflation from efficiencies in supply chain. This is
also because food, which perishes due to inadequate infrastructure,
will not be wasted. Sourcing of a minimum of 30% from Indian micro
small industry is mandatory. This will provide the scales to
encourage domestic value for employment, technology up gradation
and income generation. A strong legal framework in the form of the
competition commission is available to deal with any
anti-competitive, practices predatory pricing. There has been
impressive growth in retail and wholesale trade offer china
approved 100% FDI in retail. Thailand has experienced tremendous
growth in the agro-processing industry. In Indonesia, even after
several years of emergency of supermarket, 90% of fresh food and
70% of all food still controlled by traditional retailers. In any
case, organized retail through Indian corporate in permissible.
Experience of the last decade show small retailers has flourished
in harmony with large outlet4.
DISADVANTAGES OF FDI IN RETAIL MARKETING Could drive kirana
shops, local retailers out of business. Job may shrink or at best
move from unorganized sector. Farmer will be at mercy of big
chains, having burnt boats with mandis. Flood of cheap imports as
retailers hunt best bargains. Companies have to invest $100 or more
Company has to open stores only in towns with the population of 1
million or more i.e. they can top 53 urban centers. Companies have
to make 50% investment to be in back-end infrastructure like
warehouses, cold chains. More will lead to large-scale job losses.
International experience shows supermarkets invariably displace
small retailers small retail has virtually keen wiped out in
developed countries like the US and in Europe. South East Asian
countries had to impose stringent joining and licensing regulations
to restrict growth of supermarkets after small retailers were
getting displaced. India has the highest shopping density in world
with 11 shops per 1000 people. It has 1.2 crore shops employing
over 4 crore people. 95% of there are small shops run by
self-employee people. Global retail giants will resort to predatory
pricing to create monopoly/oligopoly. This can result is
essentials, including food supplies, being controlled by foreign
organizations. Fragmented markets give larger options to consumers
consolidation markets make the consumer captive. Allowing foreign
players with deep pockets lead to consolidation. International
retail does not create additional markets, it merely displaces
existing markets. Jobs in the manufacturing sector will be last
because structures international retail makes purchases
international and not from domestic sources. This has been the
experience of most countries which have allowed FDI in retail.
Arguments that only foreign players can create the supply chain for
farm produce in bogus. International retail makers have no role in
building roads or generating power. They are only required to
create storage facilities and cold chains. This could be done by
government in India. Comparison between India and china is
misplaced. China is predominantly a manufacturing economy. It is
the largest supplier to Wal-Mart and other international majors. It
obviously cannot say no to their chains opening stores in china
when it is a global supplier to them. India in contract will lose
both manufacturing and service job. 51. FDI in retail is a
non-critical area of intervention. Nobody in urban India is
suffering for lack of accesses to food or grocery items. If at all
it is the public distribution system that is diseased with
corruption and needs to be replaced or removed. Access to food is
an issue in the remote and rural impoverished areas of the country,
where as the fine print tells you, FDI in retail will not be
implemented. Comparative examples that try and portray an
opposition to FDI in retail as regressive are not only misplaced,
they are patently suspected. [Montek Singh Ahluwalia of the
Planning Commission included, who suggested that arguing against
FDI in retail was like complaining that the taxis would dislodge
the Tonga]. To imagine that FDI in retail exemplifies a progressive
mindset shames us into thinking that an ability to buy in the
comfort of a twenty thousand square feet air conditioned space is
more indicative of progress than providing similar quality housing
for its citizen or schools for our children. The taxi took over the
Tonga for reasons of speed and protection from the elements. FDI in
retail projects no such benefit. We already get what we need for
our daily needs through local general stores and local big format
stores. The gloss of a shiny international brand name atop a store
is not enough of a differential.2. Middlemen are key to the
distribution. The myth about farm-to-store supply chain should end
with the simple fact that middlemen will not be removed from the
operation but that existing middle men will be replaced by bigger,
more organized, more prosperous middlemen. Anyone who knows the
business of distribution knows that there is nothing called a
direct sale from farmer to retail, unless it is self-owned farm by
the retailer. The process requires a minimum of three transactions.
From the farmer to the transporter, to the distributor and to the
end supplier. There are middlemen even if you make a direct
purchase and underwrite the farmers produce and each point of
contact costs something to keep his or her services going. The
middleman is not an enemy of the state. The middleman is being paid
for services rendered; his is not a free lunch. He is the conduit
that makes delivery possible. Removing middle men, as is being
claimed by votaries of FDI in Retail does nothing for the families
of those who will be obliterated by the new model that will take
over: the retailer will have his own middle men in the system, and
that is all the difference there will be. The argument advanced by
many including some farmer lobby groups that there are 4 to 10
layers of middle men between producer and retail are not only
humbugging they are undermining free market movements where nobody
can get in line unless he performs a function. The other charge,
that a policy failure produced such layers of middlemen can be
countered with a simple answer FDI in Retail cannot remedy a policy
failure. It is the governments job to fix that, not Walmarts.3.
Farmers will not get better prices. The idea that the farmer will
get a better price for his produce if FDI in Retail is allowed is a
baseless suggestion. The open market does not work on altruism and
social service. It negotiates the best for itself so it can corner
the most for itself. Farmer suicides are not because they cannot
sell, as is being written about by irresponsible columnists and
business leaders but because they are unable to get remunerative
prices for their produce wing to poor quality produce due to lack
of proper crop management or crop failure, an inability to pay back
their loans or make ends meet and lose their land. To suggest that
foreign retailers would be so teary eyed at the plight of farmers
that they would offer a premium on produce which is available at
less is plain childish. Fact is that the markets, if allowed to
function without controls, will take their own route to price
discovery. And remember, the more clout a buyer has, the lesser the
seller gets per capita. That is a law of the free market. FDI in
retail cannot do any more than local big format retailers are
already doing. Those that argue that FDI in retail will bring
succor to farmers and reduce prices for consumers need to explain
why, when there are home grown large format retailers, that is not
already the case. How can you expand on a theme when you admit that
it is not working? The farmer is only an emotional hook in the pro
FDI lobbyists scheme. The truth is that more than 70% of revenues
of large format stores come from non-food items where the farmer
does not even figure. All the stories in media about farmer unions
supporting the move are motivated through two straight facts:
lobbying with a generous dose of cash infusion into these unions by
food majors and retail chains and the other more important fact
they are right about some farmers in their areas, specially Punjab
getting a better deal. But the cost of that is this: big retail and
food processors alter crop selection to have farmers produce to
order. So, because Pepsi needs potatoes for their chips, farmers
skip the Dal season and other such produce in favor of extensive
cultivation and specialization towards potato cultivation. Now they
are right that particular farmer is doing well contract farming is
profitable, but in effect an entire range of products are now in
short supply. Precisely why Dal and cereals and vegetables are
becoming costlier by the day. This is apart from the other real
problem corporate do not like dealing with a dozen small producers.
So they focus on one or two large producers and create conditions
for the rest to either submit to a larger contractor or just sell
the land and move out of business.4. Brands compete to secure
market share. Market share can only be secured at the cost of
another existing competitor. It is equally naive to imagine that
the anomalies of predatory pricing will be taken care of once the
sector is open to competition. Let us understand the idea of
competition. All competition starts from a baseline price point.
The base line price already exists with the current prices the
farmer gets. All competition is normally over and above that base
line. Nobody sells below his purchase price. But what is being
debated here is the ability of the big retailer to sustain losses
for a long period of time by selling under cost to dismantle
competition owing to deep pockets. Brands will go on a losing spree
to corner market share. That is an old principle. Walmart will
sustain losses to counter Carrefour and a Carrefour will do the
same to contain another competitor. In a fight of such giants, the
small retailer and the kirana shop owner of today stand no chance.
As a caveat, one should be wondering what the local large format
stores would face and why they are supporting a policy shift that
could hurt them. After all, Spencer and a number of smaller
retailers hardly stand a chance in the face of a Walmart. Well the
reason is simple: The only reason you hear some of them support the
idea is because [a] some want to raise money from markets abroad to
run their unprofitable enterprises for a little longer until they
hope to break even [b] access cheaper funds which the Government
and its fiscal laws have made almost non remunerative or [c] hope
to be taken over and bought out. Note that the retail business is
cut throat and many large-format or branded stores have already
folded. Subhiksha in South India and Vishal and Sabka Bazaar in the
North come to mind immediately. Most of the existing local large
format retailers who support the idea are folks who are looking for
a bail out or hoping to sell their operations on the back of decent
valuations.5. Big Retail cannot co-exist with small retail. That
big retail can coexist with kirana is a flat impossibility. It cant
because big retail alters the playing field permanently. The
instruments of small retail are redundant in the schema of big
retail. The grammar of big format selling influences the buying
habits of people. The kirana sells on the basis of daily
consumables of a middle class. The big-format pushes for bulk
sales, weekly big purchases where you buy four when you need one
simply because it is priced in an attractive deal for the day. The
kirana and the small retailer cannot bundle promo packs because it
cant deal directly with producers. Big retail is habit altering. It
is not an alternate, not an expansion of choice but a modification
of the manner of consumption and sale. Big retail does not
encourage balanced consumption but exists on the principle of
overuse, and excess. Big retail altered the psyche of an entire
generation of Americans consumers, producers and manufacturers
alike. The idea that shopping can be a weekend activity, where you
load up on supplies for a week comes from a country where joint
families are not known, buying fresh vegetables daily is unknown,
where women dont cook and burgers are staple diet. Weekend buying
leads to storage. Which leads to oversized freezers; which lead to
more frozen food, and to more heat-and-eat dishes, and the spiral
of the other problems of plenty? Indians dont consume like that and
there is much to be said about buying fresh and local, as the world
is now discovering.6. Big Retail is one big cause of food
inflation. That food inflation will be curtailed with FDI in Retail
is a plain lie. Food inflation has to do with supply side shortages
and distribution bottlenecks that have mostly to do with government
policy in each case. The advent of big retail will not induce any
farmer to grow more food or make any dent in the fossilized
mechanisms of food procurement and distribution policies of
Government. The truth remains that agriculture has suffered for
long, that farmers do not get remunerative prices and that they are
unable to pay back what they have borrowed. Food inflation is a
derivative of the paralysis of government and states and nothing to
do with FDI in retail. Were talking about FDI in retail for Gods
sake, not FDI in agriculture. The other startling aspect of FDI in
retail is that it is being sold as the answer to Indias farming
woes. Congress MP Jyoti Mirdha has pointed out that the FDI
introduced in the agriculture sector in 2006 is yet to show any
progress, so where is the basis for moving on to FDI in retail.
What FDI could not do for agriculture directly, it will do through
FDI in retail is a bit of a big joke.7. Consumers do not get better
prices. Consumers will get lower prices is another figment of the
lobbyists fertile imagination. Prices never come down. Big bazaar
or Walmart, prices never come down. The argument is a facetious
assault on the principle of growth and inflation. Big retail can at
best sell you cheaper potatoes or five such items carefully
selected on seasonal variations or bulk deals with producers cheap
for only a week and no more. For everything else you buy from them,
you will pay more. That is how big retail works. To qualify this,
read this comment from a KPMG expert who was arguing for FDI in
retail: To draw consumers, [big] retailers squeeze suppliers and
ensure efficiencies in categories that drive foot falls. They
balance it out by enjoying higher margins in categories where
impulse buying is high [Anand Ramanathan quoted in Economic
Times,1st Dec 2011] The reason there is no data on this is because
it is not in the interest of big retail or big media to support the
idea. Think about infrastructure and overheads. A large format
retailer, if it is not within an existing mall and aims to be the
size of Walmart stores will have to put up its own air-conditioning
plant, parking, galleys, staff, vans, transport, machinery and
processes that simply cannot offset any purchasing bulk deals to
support the idea of cheaper prices. That prices of food items are
cheaper at big retail outlets is also not without a serious caveat.
Comparing prices is not the only criterion: you have to compare
quality as well. Has anyone ever bought fresh vegetable produce
from a big retailer nobody will accept that quality from a local
vendor. The jargon about cereals and selected stuff being cheaper
is sketchy at best and the reason there is no data on this is
because nobody wants to reveal the modus operandi of selective
discounting by big retailers as a marketing tool rather than any
real principle of lower pricing. The survey published in a
newspaper is an in-house attempt which does not answer to the most
fundamental discrepancy why does every survey attempt at comparing
prices of chosen commodities at kirana stores with big retail
outlets: how about comparing one big retail outlet with another and
explain why they do not conform to the same price principle across
the board?8. Big Retail kills small jobs. More jobs will be created
when big retail comes in is a fallacy and a purposeful falsehood.
For an economy where 80% of the population engaged in trade and
local retailing is self employed, how do the numbers stack up if
you dislodge even 20% of that population? Does any math support the
theory that any number of big retailers in a city likeDelhi will be
able to support 5 lakh people who will progressively be thrown out
of business due to their advent? For a government that is unable to
provide employment in big cities with reasonable opportunities, the
impact in smaller ones will be unmanageable. The 30% caveat that is
being bandied about as a bulwark against large scale displacement
of local producers is also a charade because it does not concern
itself with produce but infrastructure investments that big
retailers must make, [as a safeguard, in the Governments weak
words] without explaining that these could be the plywood and the
roofing they use to set up their retail stores or the marble tiling
and the bathroom fixtures or even the trucks they buy. So what
protection is this worth? Then again, even if this were to be
reworded to ensure that the 30% limit pertained to produce and not
infrastructure, which gigantic micro management agency would pore
over their account books to determine this on a daily or monthly
basis?9. Big Retail is relative to Real Estate. Retail is a first
cousin of the real estate industry. Already the calculators are out
fantasizing about the acreage these new big format retail marts
will need and the newer malls that will be coming by design around
such anchor stores. Big Retail loves Big Development and vice
versa. The upshot is that the already skewed real estate market
will only get more out of control and housing for middle classes
and the ordinary folks that much farther. Big retail creates the
grounds for large scale property price hike throwing up a new
spiral of inflation in real estate space a totally unregulated,
unbridled, black money haven. Another reason why the smaller
retailer will have to pack up and move cant afford the real
estate.10. FDI in Retail is a political hot-potato and a non-issue.
The political expediency attributed to the opposition on the issue
of FDI in Retail is actually misdirected and it is the government
of the day which should be under a cloud of suspicion for the
timing of this move. If this is about proving that there is no
paralysis in governance, it is plainly a bravura act which should
be set aside for the moment. On the other hand, if this passes for
reform, how about we discuss instead FDI in education, a sector
that holds the key to prosperity for this country and its future
generations. If this is a sop for thus and the rest of the west,
let us learn from their mistakes profligacy in consumer spend and
consolidation of business are dangerous instruments in the economic
life of a country. Let us not bail out those who would take us down
the precise route that landed them in hell. India must decide if it
wishes to trade its cultural, dietary and social habits for the old
western paradigm of conspicuous consumption and whether it can
stave off the easy charm of easy money and draw a new plan where
the farmers are attended to immediately, incentives woven into
their crop cultivation habits, offer remunerative prices which keep
him engaged and allows him to prosper. This pandering to the urban
consumer with the idea that he will have more choice and better
pricing is a charade and its bluff must be called. The urban
consumer they are talking about probably earns Rs 5 Lacs annually
on average and is already spoiled for choice. If it is all about
saving a few rupees per kilo on a packet of Ariel detergent, is it
worth sending a man out of work for that? Can a Government which
cannot provide jobs afford to argue with that? All the media
support for FDI in retail is connected to their advertising
potential and business cross holdings. Media houses are naturally
not saddled with the responsibility of finding employment for the
burgeoning population of the country and they must be excused their
fit of greed. The best way to test their integrity is to ask if
they are okay with FDI in media.6
ANALYSIS OF RESULTS TABLE 4.1 AWARENESS TOWARDS FDI IN RETAIL
MARKETING
No. of respondentsPercentage of respondents
Aware 45 90%
Un aware 5 10%
Total 50 100%
Source: Primary Data
INFERENCE: From the data collected, it was found that almost all
of them, except very few who are aware of FDI in retail marketing.
Nearly 90% of total sample respondents aware of FDI. Only 10% of
total sample respondents were unaware of FDI in retail marketing.
This reveals that FDI proposal grasp the attention of all the
people.
FIGURE 4.1
AWARENESS TOWARDS FDI IN RETAIL MARKETING
TABLE: 4.2
PERCENTAGE OF FDI PREVAILING IN INDIA
Percentage of FDI In IndiaNo. of respondentsPercentage of
respondents
Less3672%
More1428%
Total50100%
Sources: Primary Data.
INFERENCE: From the above table 72% of the respondents said that
FDI is prevailing less in India. Only 28% of the respondents said
that FDI is prevailing more in India. This table implies that FDI
is prevailing less in India.
FIGURE: 4.2
PERCENTAGE OF FDI PREVALING IN INDIA
TABLE: 4.3
HOW MUCH SHARE OF FDI COULD BE ALLOWABLE PERCENTAGE OF SHARE
NO.OF RESPONDENTSPERCENTEGE OF RESPONDENTS
< 25%1734%
< 50%3264%
< 75%12%
TOTAL50100%
Sources: Primary Data
INFERENCE: From the above table we came to know that 34% of the
respondents are of opinion that < 25% of share is allowable in
FDI. Nearly 64% of respondents opinion is < 50% of shares could
be allowable in FDI. Only 2% of respondents prefer < 75% of
shares. The above table reveals that only < 50% of shares could
be allowable in FDI of India.
FIGURE: 4.3 HOW MUCH SHARE OF FDI COULD BE ALLOWABLE
TABLE: 4.4 WHICH SECTION OF ENTERPRENEURES WILL BE AFFECTED BY
FDI
EntrepreneursNo. of respondentsPercentage of respondents
Itinerants retailers3060%
Fixed shop retailers510%
Small-scale retailers1020%
Large-scale retailers510%
Total 50100%
Source: Primary Data
INFERENCE: This table implies that about 60% of itinerants
retailers will be affected by FDI proposal. 10% of fixed shop
retailers will be affected by FDI proposal. Nearly 20% of
respondents said that small scale retailers will be affected. Only
10% of respondents opinion is large-scale retailers will be
affected. From this table we came to a conclusion that mostly
itinerant retailers will be affected by the FDI proposal.
FIGURE: 4.4
WHICH SECTION OF ENTERPRENEURES WILL BE AFFECTED BY FDI
TABLE: 4.5
PERCENTAGE OF FAVOURINGS TOWARDS THE FDI PROPOSAL
Favoring of proposalNo. of respondentsPercentage of
respondents
Favorable1224%
Unfavorable3876%
Total 50100%
Sources: Primary Data
INFERENCE: From the above table only 24% of the respondents are
favorable towards the proposal of FDI in retail marketing made by
the central government. Nearly 76% of the respondents are
unfavorable to proposal made by the central government. This table
clearly implies that most of respondents opposing the FDI proposal
made by the central government.
FIGURE: 4.5
PERCENTAGE OF FAVOURINGS TOWARDS THE FDI PROPOSAL
TABLE: 4.6
WHO WILL GET BENEFIT BY FDI PROPOSAL
ParticularsNo. of respondentsPercentage of respondents
Consumer510%
Farmer816%
Government3264%
Retailers510%
TOTAL50100%
Source: Primary Data
INFERENCE: This table implies that 10% of the respondents said
that consumer will get benefit by FDI proposal. 16% of respondents
have an opinion on farmer will get benefit by FDI. Nearly 64% of
the respondents said that government will get benefit by FDI
proposal. Only 10% of the respondents have the opinion of retailers
will get benefit. From this table we came to know that majority of
the respondent have the opinion that government will get benefit by
the FDI proposal.
FIGURE: 4.6
WHO WILL GET BENEFIT BY FDI DECISION
TABLE: 4.7 RESULT OF EMPLOYMENT OPPORTUNITIES BY FDI
PROPOSAL
Employment opportunitiesNo. of respondentsPercentage of
respondents
Shrink3876%
Expand1224%
Total50100%
INFERENCE: From the above table nearly 76% of samples said that
employment opportunities will shrink. Only 24% of samples prefer
the opinion that employment opportunities will get expand. This
implies that employment opportunities will get shrink by the FDI
proposal.
FIGURE: 4.7 RESULT OF EMPLOYMENT OPPORTUNITIES BY FDI
PROPOSAL
TABLE: 4.8 EFFECTIVENESS OF THE SUPPLY CHAIN BY THE RETAILER
ParticularsNo. of respondentsPercentage of respondents
Less effective1224%
Moderate effective2856%
More effective1020%
Total50100%
Sources: Primary Data
INFERENCE: This table implies that 24% of the sample respondents
have an opinion that the supply chain is less effective. Nearly 56%
of the respondents said that the supply chain will be moderately
effective. Only 20% of the respondents said that the supply chain
will be more effective. From this we came to know that majority of
the respondents have the opinion that the supply chain will be
moderate effective.
FIGURE: 4.8 EFFECTIVENESS OF THE SUPPLY CHAIN BY THE
RETAILER
TABLE: 4.9
FDI POLICY PROPOSAL AND ECONOMIC GROWTH
ParticularsNo. of respondentsPercentage of respondents
Yes3774%
No1326%
Total50100%
Sources: Primary Data.INFERENCE: This table implies that 74% of
the respondents have an opinion that FDI dont not help for the
growth of our economy. Only 24% of the respondents told that FDI
will help for our economic growth. By this we came to a conclusion
that FDI policy doesnt help for our economic growth.
FIGURE: 4.9 FDI POLICY PROPOSAL AND ECONOMIC GROWTH
TABLE: 4.10Promotional toolsNo. of respondentsPercentage of
respondents
Credit sales48%
Providing gifts1530%
Facilities for their shopping2652%
More advertisement510%
Total50100%
PROMOTIONAL TOOLS TO RETAIN THE CUSTOMERS Source: Primary
DataINFERENCE: This table shows that 8% of respondents idea is
credit sales will help to retain their customer. 30% of the
respondents idea is providing gift is tool to retain the customer.
Nearly 52% of the respondents advice is by providing facilities for
shopping will help to retain their customer. Only 10% of the
respondents idea is by more advertisement, the retailer can retain
their customer. From this table we can come to a conclusion that by
providing facilities for their shopping the retailer can retain
their customer.
FIGURE: 4.10 PROMOTIONAL TOOLS TO RETAIN THE CUSTOMERS
TABLE: 4.11 FDI PROPOSAL IS BOON OR BANEParticularsNo. of
respondentsPercentage of respondents
Boon1122%
Ban3978%
Total50100%
Sources: Primary Data
INFERENCE: The above table refer that only 22% of the respondent
is favor to the FDI in retail marketing proposal. Nearly 78% of the
respondents are opposing the proposal of FDI in retail marketing.
This table clearly shows that most of the people not ready to
accept the FDI in retail marketing.
FIGURE: 4.11 FDI PROPOSAL IS BOON OR BANE
TABLE: 4.12 SUGGESTIONS
ParticularsNo. of respondents Percentage of respondents
By strict rules1122%
Reducing the percentage of FDI3978%
Total50100%
Source: Primary Data INFERENCE: This table implies that only 22%
of respondents told that by strict rules we can overcome the FDI
proposal. Most of the respondent that is nearly 78% of the
respondent reported that by reducing the percentage of the FDI we
can overcome this problem. This implies that by reducing the
percentage of the FDI in retail marketing we can overcome this
problem.
FIGURE: 4.12 SUGGESTIONS
HYPOTHESIS CHI SQUARE TEST- IPERCENTAGE OF FDI vs. EDUCATIONAL
QUALIFICATION
Educational Qualification No. of respondents Total
LessMore
Under graduate10515
post graduate20525
professionals6410
Total361450
Step: 1 Let us take that null hypothesis (H0) is no significant
difference between the factor percentage of FDI and educational
qualification.
Step: 2 Level of significance=5%Degree of freedom=(C-1) x (R-1)
= (2-1) x (3-1) =2 Tabulated value at 5% level of significance and
degree of freedom 2 is =5.991
Step: 3 Calculation of expected frequency and x2 value. O E
(O-E) (O-E)2 (O-E)2/E
1010.8-0.80.640.059
2018240.222
67.2-1.21.440.2
54.20.80.640.152
57-240.571
42.81.21.440.514
501.718
Step: 4 Calculated value Table value1.718 < 5.991 Since
calculated value is less than table value, so our hypothesis is
accepted.
Therefore it can be concluded that there is no significant
difference between the factor, percentage of FDI and educational
qualification.
CHI SQUARE TEST-II FAVORING OF FDI POLICY vs. SEX
Sex No. of respondents Total
favorableunfavorable
Male82735
Female41115
Total123850
Step: 1 Let us take that null hypothesis (H0) is no significant
difference between the factor favoring of FDI policy and sex.Step:
2 Level of significance=5%Degree of freedom=(C-1) x (R-1) = (2-1) x
(2-1) =1 Tabulated value at 5% level of significance and degree of
freedom 1 is =3.84
Step: 3 Calculation of expected frequency and x2 value. O E
(O-E) (O-E)2 (O-E)2/E
88.4-0.40.160.019
43.60.40.160.044
2726.60.40.160.006
1111.4-0.40.160.014
500.083
Step: 4 Calculated value Table value0.083 < 3.84 Since
calculated value is less than table value, so our hypothesis is
accepted.
Therefore it can be concluded that there is no significant
difference between the factor, Favoring of FDI policy and sex.7
FOOT NOTES:
1. Suryakant Pathak; MD, Grahakpeth & secretary, grabak
panchyat2. Ajit setiya, president, porna merchant chamber3. Hemant
Batra, Retailing Sector In India Pros Cons (Nov 30,
2010)http://www.legallyindia.com/1468-fdi-in-retailing-sector-in-india-pros-cons-by-hemant-batra4.
Discussion Paper on FDI in Multi Brand Retail Trading,
http://dipp.nic.in/DiscussionPapers/DP_FDI_Multi-BrandRetailTrading_06July2010.pdf5.
Sarthak Sarin, (Nov 23, 2010) Foreign Direct Investment in Retail
Sector
http://www.legalindia.in/foreign-direct-investment-in-retail-sector-others-surmounting-india-napping6.
Economic Times Retail News, FDI in retail to contain inflation (Dec
31, 2010) walmart
http://retail-guru.com/allow-100-fdi-in-retail-to-contain-inflation-walmart7.
Primary Data
CHAPTER-V FINDINGS, SUGGESTIONS AND CONCLUSION
FINDINGS:On the basis of the above study carried out in
preceding chapter, the relevant findings are as follows. The
research has been carried out in the selected towns of north
Tamilnadu comprising of urban and semi-urban areas. From the
analysis carried out, 90% of the respondents are aware about FDI
and only 10 % of the respondents are unaware. FDI policy is very
much less, prevailing in India i.e. 72% of the respondents view
about FDI in our country. It is interesting to note that 64% of the
respondents opinion is only < 50 % of share could be allowable
in India. Itinerant retailers i.e. street traders cheap jacks will
be affected by allowing 51% in multi-brand and 100% in single brand
FDI in retail marketing. Nearly 76% of the respondents are opposing
the FDI proposal made by the central government. By allowing FDI in
our retail marketing government will get benefit. If the government
allowed FDI in our country the employment opportunities will get
shrink. By launching the FDI policy in retail marketing the supply
chain will be moderately effective. If the government took any
decision means it should develop our economy. But the FDI proposal
doesnt help for the growth of our economy. Respondents suggestion
to retailers to retain their customers is by providing facilities
for their shoppi