A

PROJECT REPORT
ON

MARKETING STRATEGY FOR

PRODUCT DISTRIBUTION IN
MARKET

Submitted to:
Gaurav Mishra
Marketing Manager
Vital Gaer
(Esskay Globalization)

Submitted by:
Ankit Kumar Singh
PGDM
GNIT Group of Institution
(Vinayak Management School, Greater Noida)

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 CONTENTS

• Acknowledgement
• Preface
• Objective of the project
• .Literature Review
• Developing Competitive Strategy
• Indian Retail Industry
• Company Profile, VitalGear at a Glimpse
• Research Methodology
• Findings and Analysis
• Suggestions
• Limitation
• Bibliography
• Questionnaire

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 ACKNOWLEDGEMENT

A work is never a work of an individual. I owe a sense of gratitude to the

intelligence and co-operation of those people who had been so easy to let me
understand what I needed from time to time for completion of this exclusive
project.I want to express my gratitude towards Gaurav Mishra Marketing
Manager Vital Gaer for giving me an opportunity to do this project.

Last but not the least, I would like to forward my gratitude to my friends & other
faculty members who always endured me and stood by me and without whom i
could not have envisaged the completion of our project.

Ankit Kumar
P
GDM
3
 PREFACE

Curriculum for management studies includes training activities like

group discussions, problem solving case studies, projects industrial
tours, role play exercise etc. aimed to impart practical training &
develop pragmatic thinking .Research Project Report is one of activities
designed to ensure that students are well acquainted to all legal functions
when step out of the institute. It is said that without practice theory is
meaningless. Hence practical training has been made an integral part of
the management education in India. It provides an around knowledge
about the organization with specialization in assigned topic. Practical
training gives an opportunity to work with highly experienced people in
their field which makes the student bold and smart. I had the privilege to
service such research in Vital Gaer (Esskay Globalization.

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• Forging major retail tie-ups in 2010 Singapore,
OBJECTIVE OF RESEARCH
India,an

PROJECT
•

• To understand the nature of different Marketing

Strategy.
• To identify the problems faced by the company
in the area of Marketing.
• To identify the best strategy for product
distribution in the market.
• To study the Marketing distribution.
• To know the prospect of Marketing industry.

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 LITERATURE REVIEW

Marketing

Marketing is a societal process by which individuals and groups obtain what they
need and want through creating, offering and freely exchanging products and
services of value with others or other wise it is the process of planning and
executing the conception, pricing, promotion and distribution of ideas, goods,
services to create exchanges that satisfy individual and organizational goals.

Marketing Strategy

Marketing strategy is a set of objectives, policies and rules that leads the
company's marketing efforts. It is the marketing approach to accomplish the bread
objective of the marketing approach to accomplish the bread objective of the
marketing plan. The various process of marketing strategy are given below.

1. Selecting largest markets segmentation

2. Positioning

3. Product

4. Price

5. Place
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6. Promotion

7. Research and development

8. Marketing research

Market segmentation and selecting target market

It is an effort to increase a company's precision marketing. The starting point of

any segmentation discussion is mass marketing. In mass marketing, the seller
engaged in the mass production, mass distribution and mass promotion of one
product for all buyers. Market segment consists of a large identifiable group within
a market with similar wants, purchasing power geographical location, buying
attitudes or buying habita. It is an approach midway between mass marketing and
individual marketing. Through this the choice of distribution channels, and
communicaton channels become much easier. The researchers try to form
segments by looking at consumer characteristics; geographic, demographic, and
psychographic. After segmenting the market then target market selected.

2. Positioning:- The positioning is a creative exercise donw with an existing

product. the well known products generally hold a distinctive position in
consumer's minds. The positioning requires that every tangible aspect of product,
price, place and promotion must support the chosen positioning strategy. Company
should develop a unique selling proposition (USP) for each brand and stick to it,
PPL consistently promotes its DAP fertilizer by Higher yield at lower cost. As
companies increase the number of claims for their brand, they risk disbelief and a
loss of clear positioning. In general a company must avoid four major positioning
errors. Those are under positioning over positioning, confused positioning and
doubtful positioning.

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3. Product:- A product is any offering that can satisfy a need or want. The major
types of basic offerings are goods, services, experiences, events, places, properties,
organizations, information and ideas. The company gives more importance in
quality, packaging, services etc. to satisfy the customers. The products has it's life
cycle. The product strategies are modified in different stages of product life cycle.

4. Price:- It is the most important aspect in company's point of view. Price of the
product will be decided by the company according to the competitor's price.

5. Place:- This plays a major role in the entire marketing system. the company
emphasis on it's distribution network. Proper distribution network gives proper
availability of the product.

6. Promotion:- Promotion is the one of the major aspects in marketing strategies.

By adopting various promotional activities the company create strong brand image.
It also helps in increasing the brand awareness. It includes advertising, sales
promotioins and public relations etc.

7. Research and Development:- after testing, the new product manager must
develop a preliminary marketing strategy plan for introducing the new product in
to the market. The plan consists of three parts. The first part describes the target
market's size, structure and behavior. The second part out lines the planned price,
distribution strategy and marketing budget for the first year. The third part of the
development describes the long run sales and profit goals and marketing mix
strategy over time.

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 MARKETING MIX

Target Market

Product Price Promotion Place

Product variety List price Sales promotion Channels

Quality Discounts Advertising Coverage

Design Allowances Sales forces Assortments

Features Payment period Public relation Locations

Brand name Credit terms Direct marketing Inventory

Packaging Transport

Sizes

Services

Warranties

Returns

While all marketers do not agree on a common definition of marketing strategy,

the term generally refers to a company plan that allocates resources in ways to
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generate profits by positioning products or services and targeting specific
consumer groups. Marketing strategy focuses on long-term company objectives
and involves planning marketing programs so that they help a company realize its
goals. Companies rely on marketing strategies for established product lines or
services as well as for new products and services.

While marketing practices no doubt have existed as long as commerce has,

marketing did not become a formal discipline until the 1950s. At this point,
businesses began to investigate how to better serve and satisfy their customers and
deal with competition. Consequently, marketing became the process of focusing
business on the customer in order to continue providing goods or services valued
by consumers. Marketing includes a plethora of decisions that affect consumer
interest in a company: advertising, pricing, location, product line, promotions, and
so forth. The majors concerns of marketing are usually referred to as the "four Ps"
or the "marketing mix": product, price, place, and promotion.

Hence, marketing involves establishing a company vision and definition and

implementing policies that will enable a company to live up to its vision or
maintain its vision. Marketing strategy is the process of planning and
implementing company policies towards realizing company goals in accordance
with the company vision. Marketing strategies include general ones such as price
reduction for market share growth, product differentiation, and market segmentat
ion, as well as numerous specific strategies for specific areas of marketing.

Competition is the primary motivation for adopting a marketing strategy. In

industries monopolized by one company, marketing need only be minimal to spur
on increased consumption. Utilities long enjoyed monopolized markets, allowing
them to rely on general mass marketing programs to maintain and increase their
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sales levels. Utility companies had rather fixed market positions and steady
demand, which rendered advanced concern for marketing unnecessary. Now,
however, most companies face some form of competition, no matter what the
industry, because of deregulation and because of the globalization of many
industries. Consequently, marketing strategy has become all the more important for
companies to continue being profitable.

ORIGIN OF THE MARKETING STRATEGY CONCEPT

MARKETING AND STRATEGY.

Marketing strategy has its roots in the basic concepts of marketing

and strategy. Marketing strategy was probably used the first time that two humans
engaged in trade, i.e., an "arm's-length" transaction. Certainly, early civilizations,
such as the Babylonians, the Chinese, the Egyptians, the Greeks, the Romans, and
the Venetians, had developed marketing strategies for their trading activities. They
probably discussed appropriate strategies for given situations, and even taught
these strategies to friends, family members, and subordinates. The actual function
of marketing, i.e., the distribution function, was performed whenever exchange
occurred.

STRATEGY IS A MEANS TO AN END.

Marketing strategy is a conscious approach to accomplishing something. Strategy

precedes marketing and marketing strategy. The first time a human planned an
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approach for achieving a desired end—a goal or objective—he or she was
developing strategy. Strategy can be formulated by individuals, groups, and
organizations. The organizations can be families, corporations, nations, or groups
of nations. In modem times, strategy can be formulated by complicated and
sophisticated programmed software operating on computerized systems,
personal computers, or computer networks.

Original, formalized discussions of strategy or strategy theory are associated with

politics, war, and the military. The term "strategy" comes from the Greek
word stratigiki, meaning generalship. It also can mean approach, scheme, design,
and system, and is associated with terms such as intrigue, cunning, craft, and
artifice.

BUSINESS STRATEGY.

Business strategy is usually discussed and developed in the context of competition.

It is associated with a struggle for scarce resources. The aim of the "aggressor"
organization is to improve its position vis-à-vis "competitors." The competitors,
i.e., "defenders," can be other organizations, suppliers, distributors, or customers.
The competition is the enemy. Words such as "campaign," "attack," "battle," and
"defeat" are frequently used. There is an "I win, you lose"—sometimes called a
"zero-sum game"—mentality. This, of course, is also the operating framework for
individuals, families, groups, countries, and alliances when formulating political or
military strategy. Hence, business and marketing strategy is frequently associated
with political and military strategy.

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THE DEVELOPMENT OF MARKETING STRATEGY.

Modem discussion of marketing strategy can be traced back to a discussion of

marketing management by Leverett S. Lyon (1885-1959) in 1926. Marketing
management was perceived as the business function that developed marketing
strategy. Lyon argued that marketing management involves ongoing planning of a
company's marketing activities in response to the constantly changing internal and
external conditions. In the 1950s Peter Drucker (1909-) and others advanced
theories of management that emphasized a customer-centered business strategy.
They held that this orientation should be long term, not temporary.

Since World War II, marketing strategy has developed from four approaches to
strategic thinking in business: budgeting, long-term planning, formula planning,
and strategic thinking. During the 1950s, budgeting—the accounting task of
distributing funds within a company—began to take on a strategic component.
Budgets strategically assigned company projects specific amounts of funds in order
to control spending on an annual basis. In the 1960s, however, budgeting began to
focus on long-term planning: allocating funds to achieve financial goals according
to a specific schedule, e.g. to achieve results from a project within five to ten years.

By the middle part of the 1970s, long-range planning had lost its prominence
because of problems with long-range forecasting and resource allocation.
Companies found it difficult to predict how much money to assign various units
and when to expect results from research projects. Instead, businesses in the 1970s
relied on formulas for planning as part of their company strategies. Because of the
conglomeration wave of the 1960s, many managers found themselves with diverse
companies and they did not know how to allocate resources prudently to the
multifarious units. Instead, they turned to consultants to provide advice based on
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various formulas for planning. The formulas, however, tended to stem from
business theory and not from practice. Hence, they largely proved to be ineffectual.

Consequently, strategic thinking grew in the 1980s and 1990s in response to the
formulaic, theoretical approach to marketing theory in the 1970s. Strategic
thinking focuses on competitive advantage, consumer needs and wants, creativity,
and flexibility. Competitive advantage refers to gaining a superior market position
and therefore higher profits by offering better products, prices, promotions,
convenience, or service than competing companies. In a sense, competitive
advantage includes all the other elements of strategic thinking—customer
satisfaction, creativity, and flexibility—in that each of them can provide a
company with a competitive advantage.

THE NATURE OF MARKETING STRATEGY

DECISION MAKING.

Marketing strategy is the result of decision making by corporate executives,

marketing managers, and other decision makers. In general, the formal
organizational titles or jobs of decision makers, or the nature or purpose of the
organization, are irrelevant to the formulation of marketing strategy. When the
decisions concern products or markets, the results—i.e., the decisions—are all
considered marketing strategy.

NARROW PERSPECTIVE.

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In a narrow sense, marketing strategy is a specified set of ways developed by
marketers to achieve desired market ends. E. Jerome McCarthy and William D.
Perreault Jr., authors of Basic Marketing, stated that a marketing strategy defines a
target market as well as an appropriate marketing mix and an overview of what a
company will exploit a given market. In a marketing planning context, where
marketing strategy tends to be developed, McCarthy and Perreault indicated that
marketing strategy planning means finding attractive opportunities and planning
ways to capitalize on such opportunities.

BROAD PERSPECTIVE.

In a broad sense, marketing strategy is composed of objectives, strategies, and

tactics. Objectives are ends sought. Strategies are means to attain ends, and tactics
are specific actions—i.e., implementation acts. A marketing objective of increasing
market share is linked to the marketing strategy of altering the product line in order
to reach new market segments and to the marketing tactic of introducing a new
brand name and various promotions for a targeted portion of the market.

STRATEGY LEVELS.

Marketing strategy is developed at different levels of an organization (the

hierarchical dimension), across core marketing functions (the horizontal
dimension), and for marketing execution and control functions (the implementation
dimension). Strategy is usually developed in a hierarchical fashion from top to
bottom; for example, there could be several layers of objectives where each
objective is a function of a superstructure of superior objectives, and a determinant
of subordinate objectives (except for the highest and lowest levels of objectives).
Higher-level decisions—the superstructure—act as constraints on the one hand,

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and guides or aids for decision making on the other. The organization levels could
include the overall corporate level, strategic business units, product markets, target
markets, and marketing units, depending on the complexity of the organization.

MARKETING MIX STRATEGY.

Strategy is also developed across the core functional areas of marketing: product,
price, place/distribution, and promotion strategies. Any functional level of
marketing, in turn, can have additional levels of marketing strategy decisions
where refinement of the strategy might take place. For example, in the advertising
component of the promotion function, the organization might develop marketing
strategy consisting of advertising objectives, advertising strategies, advertising
themes, advertising copy, and media schedules. In addition, because of the growing
customer emphasis of marketing, marketers have added new customer-oriented
components to the marketing mix: customer sensitivity, customer convenience, and
service.

MARKETING STRATEGY TYPES

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ORIENTATIONS.

Contemporary approaches to marketing often fall into two general but not mutually
exclusive categories: customer-oriented marketing strategies and competitor-
oriented marketing strategies. Since many marketers believe that striving to satisfy
customers can benefit both consumers and businesses, they contend that marketing
strategy should focus on customers. This strategy assumes that customers tend to
make more purchases and remain loyal to specific brands when they are satisfied,
rather than dissatisfied, with a company. Hence, customer-oriented marketing
strategies try to help establish long-term relationships between customers and
businesses.

Competitor-oriented marketing strategy, on the other hand, focuses on outdoing

competitors by strategically manipulating the marketing mix: product, price, place,
and promotion. Competitor-oriented strategies will lead companies to imitate
competitor products, match prices, and offer similar promotions. This kind of
marketing strategy parallels military strategy. For example, this approach to
marketing strategy leads to price wars among competitors. Successful marketing
strategies, however, usually incorporate elements from both of these orientations,
because focusing on customer satisfaction alone will not help a company if its
competitors already have high levels of customer satisfaction and because trying to
outdo a competitor will not help a company if it provides inferior products and
customer service.

GENERAL STRATEGIES.

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Marketing strategies can be identified by the goals they attempt to accomplish in
order to boost company profits. The three basic marketing strategies include price
reduction (for market share growth), product differentiation, and market
segmentation. The market share strategy calls for reducing production costs in
order to reduce consumer prices. Via this strategy, companies strive to manufacture
products inexpensively and efficiently and thereby capture a greater share of the
market. According to this strategy, companies avoid diverse products lines and
marginally successful products and allocate minimal funds to product development
and advertising. The competitive advantage this strategy offers is the ability to
provide products at a lower price than competing companies. Companies
implementing this strategy cut their profit margins and rely on sales volume to
generate profits. The price reduction strategy, however, has three drawbacks:
finding markets without or with few low-cost retailers, losing flexibility because of
limited product line and limited market, competing with other companies using the
same strategy.

The product differentiation strategy involves distinguishing a company's products

from its competitors' by modifying the image or the physical characteristics of the
products. Unlike the market share strategy, product differentiation requires raising
product prices to increase profit margins. Companies adopting this strategy hope
that consumers will pay higher prices for superior products (or products perceived
as superior). As a result of this strategy, companies usually either achieve high
profit margins and a low market share (such as luxury car manufacturers) or they
achieve slightly higher profit margins and a moderate to large market share (such
as popular food brands such as Kraft and Heinz). This strategy depends on the
production of quality goods, brand loyalty, consumer preference for quality over
cost, and ongoing product innovation. Nevertheless, product differentiation has a
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couple of disadvantages. First, competing companies often can easily imitate
products thereby undercutting product differentiation efforts. Second, companies
cannot raise their prices too high without losing customers, even if they provide
better products.

Market segmentation refers to the process of breaking the entire market into a
series of smaller markets based on common characteristics related to consumer
behavior. Once the market is divided into smaller segments, companies can launch
marketing programs to cater to the needs and preferences of the individual
segments. Moreover, companies can choose to court all the segments of the market
through "differentiated marketing," to concentrate on one or two of the smaller
segments overlooked by other companies through concentrated marketing (niche
marketing), or to focus on very small markets or even individual customers
through atomized marketing. Market segmentation also can involve the other two
strategies, because marketers can target various segments using a price reduction
strategy or a product differentiation strategy. If a segment grows, however, large
competitors can begin targeting it as well. Companies that focus on one or two
segments also are vulnerable to changes in the segment's size and preferences.
Hence, if the segment dwindles or its tastes no longer correspond to a company's
offerings, a company's revenues can fall precipitously.

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SPECIFIC STRATEGIES.

Furthermore, marketers also have developed specific strategies for specific kinds
of marketing obstacles, which may serve as part of a general marketing strategy.
Moreover, parts of general marketing strategies can be implemented for narrower
ends. For example, in Marketing Strategy, Orville C. Walker, Harper W. Boyd Jr.,
and Jean-Claude Larreche identified marketing strategies for various marketing
problems and activities such as new markets, growth markets, mature and
declining markets, and international markets. Their marketing strategies included a
plethora of specific marketing strategies for a host of situations: pioneer strategy,
follower strategy, fortress strategy, flanker strategy, confrontation strategy, market
expansion strategy, withdrawal strategy, frontal attack strategy, leapfrog attack
strategy, encirclement strategy, guerrilla attack strategy, divestment strategy,
global strategy, national strategy, exporting strategy, pricing strategy, channels
strategy, and promotion strategy.

In addition, Joseph P. Guiltinan and Gordon W. Paul, authors of Marketing

Management, outlined primary demand strategies and selective demand strategies.
They also developed product-line marketing strategies, including strategies for
substitutes (line extension strategies and flanker strategies) and strategies for
complements (leader strategies, bundling strategies, and systems strategies). The
primary demand strategies included user strategies (increasing the number of
users) and rate of use strategies (increasing the purchase quantities). User strategies
were, in turn, divided into willingness strategies (emphasis on willingness to buy)
and ability strategies (emphasis on ability to buy). The rate of use strategies were
divided into usage strategies (increasing the rate of usage—such as brushing your

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teeth after each meal) and replacement strategies (increasing the rate of use by
replacement—such as replacing your toothbrush every month).

The selective demand strategies included retention strategies (retaining the

organization's existing customers) and acquisition strategies (acquiring customers
from the competition). Retention strategies were divided into:

1. Satisfaction strategies, which include ways to maintain or improve customer

satisfaction levels, such as reducing delivery time from three days to 24
hours.
2. Meeting competition strategies, which include matching or "bettering"
competitive approaches, such as charging the same price or a price stipulated
at a percentage lower than the competition.
3. Relationship marketing strategies, which include establishing enduring
relationships with customers, such as developing a computer-based
automatic inventory replenishment system.

On the other hand, acquisition strategies were divided into:

1. Head-to-head strategies, which include direct, aggressive competitive

tactics, such as using comparative advertising copy.
2. Differentiated strategies, which include making an organization's offering
different from the competition, such as being the only firm to have a
wireless feature on a notebook computer.
3. Niche marketing strategies, which include concentrating on narrow markets
—such as a direct-marketing mail catalog of premium priced female
clothing targeted at large females in the upper-middle and upper classes.

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These marketing strategies are not mutually exclusive. They can be used in
combination. They also are not exhaustive. In general, additional dimensions and
levels can be generated. In other words, other levels and types of strategies at any
level can be developed. The actual wording of the final and most refined level of
strategy will probably be unique in each situation for each organization for each
decision maker. Marketing strategy development is a creative act, requiring an
application of science and art.

The decision maker should eventually arrive at a specific stratagem or set of

strategies designed to achieve the stated objective. The entire articulated set of
decisions (selected strategies) is called the marketing strategy. If the marketing
strategy is part of a marketing plan, some or all of the strategy decisions could be
formally stated. In some cases, only the lowest level of strategy is indicated. The
formal articulation of marketing strategy is a function of the decision maker's
preferences, the organization's policy, user needs, and resources available.

PRINCIPLES.

The basic principles or theories of marketing appropriate to the successful

development of marketing strategy are universal. They can be applied by anyone at
any time in any kind of organization to any type of marketing problem in any part
of the world. They are relevant to international marketing strategy as well as
domestic marketing policy. They are useful in both profit-oriented organizations
and nonprofit institutions, and are appropriate for both services and products.

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MARKETING STRATEGY PROCESS

Marketing strategy is produced by the following basic decision process: (1)

defining the marketing problem (or opportunity); (2) gathering the facts relevant to
the problem (this includes defining the appropriate sources of useful facts or
information); (3) analyzing the facts (perhaps with the aid of decision models and
computer software); (4) determining the alternatives or choices to solve the
problem; and (5) selecting an alternative—i.e., making the decision.

DETERMINANTS.

Marketing strategy is determined by internal and external uncontrollable

environmental forces. The internal environment (the environment within the
organization) includes previous and higher-level strategies as well as resources
(such as products, processes, patents, trademarks, trademark personnel, and
capital). An example of an internal environmental influence on marketing strategy
is when a previous strategic decision (such as the choice of a product market for a
strategic business unit of an organization) affects current marketing decisions (such
as market segmentation and target market selection). Likewise, an organization's
financial strength (such as current cash flow) influences its formulation of
marketing strategies (such as target market selection, positioning choices, and
marketing mix decisions).

The external environment has domestic and global dimensions. The domestic
dimension contains home country environments (such as a country's cultural

23
environment). The global dimension consists of international forces (such as global
demand and competition) affecting home country environments. The external
environment includes the immediate task environment as well as legal and political
environments, economic environments, infrastructures, cultural and social
environments, and technological environments. An example of an external
environmental influence on marketing strategy is when advertising strategy
development is affected by such variables as customer media habits and
governmental regulations.

TOOLS AND TECHNOLOGY.

Marketing strategy can be developed with the aid of such tools as marketing
concepts, marketing models, and computers. A marketer uses these tools to
facilitate decision making. The computer-based method of marketing strategy
generation, for example, is usually a quantitative approach starting with marketing
theory and ending with the processing of data through a specialized computer
program that analyzes variables and relationships.

The computer-based method begins with a segment of marketing theory.

Marketing theory can be broken down into concepts and subconcepts. A concept is
a set of related ideas or variables. For example, the product life cycle is a major
concept in marketing. It describes market response (in terms of sales or revenues)
to a product over the product's commercial life. It depicts four life stages of the
product, namely: introduction (or commercialization), growth, maturity, and
decline. Each stage of the product life cycle corresponds to the degree of
competition it faces and the maturation of the market. Marketing strategy changes
over the life of the product. In general, there is an appropriate set of marketing
strategies or alternatives for each phase of the product life cycle. Market response,
24
stages of the product life cycle, and other ideas constituting the concept are all
variables that can assume different values and represent different relationships
across the variable set. A marketing model articulates and quantifies the variables
and variable relationships of a marketing concept. The marketing model also has
inputs, processes, and outputs, which allow marketers to determine the effects of
their strategies and decisions on both consumers and competitors.

Prepackaged marketing and spreadsheet software can facilitate the production of

marketing models. A marketer needs only to change the values of the variables
based on the facts that have been gathered in the situation analysis in order to use
the output to arrive at a decision. When necessary, the decision maker can add or
delete variables and change the functional relationships of the marketing model. Of
course, it is also quite easy to assume different situational facts and consider the
net impacts on the marketing strategy, or the results of implementing the marketing
strategy. Thus, it is relatively easy, using computer software, to develop a
marketing strategy and to perform sensitivity (degree of impact of changes) and
contingency analyses (alternative scenarios).

For product-focused companies, establishing the most appropriate distribution

strategies is a major key to success, defined as maximizing sales and profits.
Unfortunately, many of these companies often fail to establish or maintain the
most effective distribution strategies. Problems that we have identified include:

• Unwillingness to establish different distribution channels for different

products
• Fear of utilizing multiple channels, especially including direct or semi-direct
sales, due to concerns about erosion of distributor loyalty or inter-channel
cannibalization
25
 • Failure to periodically re-visit and update distribution strategies
• Lack of creativity and resistance to change

To be fair, there can be sound reasons for these perceived weaknesses. More
typically, however, they are due to failings such as simple inertia, lack of
understanding of the ultimate customers and their preferences, or a failure to
acknowledge the importance of a distribution strategy and invest sufficient
resources in understanding it.

“Now” is absolutely NOT the time to blindly continue the status quo with your
distribution strategies. The Internet is creating sea-changes in terms of
traditional manufacturer-distributor relations. It has seen significant waves of
disintermediation in multiple product lines, and can facilitate cost-effective
broadening of distribution channels. Meanwhile, improvements in supply chain
management technologies must also be factored into choice of distribution
partners.

InfoTrends can help your company improve its distribution strategies by:

• Mapping your products to the end-user

• Determining customers’ channel preferences and comparing these
preferences with actual availability
• Recommending new channels, and why
• Examining competitors’ strategies and comparing them and their
effectiveness with
your own
• Confidential interviews with your distribution partners to identify areas for
improvement, as well as existing strengths to be encouraged

26
Contact InfoTrends to discuss how we can we help you better understand and
improve your distribution strategies.

Physical distribution (or place) is one of the four elements of the marketing mix.
An organization or set of organizations (go-betweens) involved in the process of
making a product or service available for use or consumption by a consumer or
business user.

The other three parts of the marketing mix are product, pricing, and promotion.

The distribution channel

Chain of intermediaries,each passing the product down the chain to the next
organization, before it finally reaches the consumer or end-user.... This process is
known as the 'distribution chain' or the 'channel.' Each of the elements in these
chains will have their own specific needs, which the producer must take into
account, along with those of the all-important end-user.

Channels

A number of alternate 'channels' of distribution may be available:

 Distributor, who sells to retailers,

 Retailer (also called dealer or reseller), who sells to end customers
 Advertisement typically used for consumption goods

Distribution channels may not be restricted to physical products alone. They may
be just as important for moving a service from producer to consumer in certain
sectors, since both direct and indirect channels may be used. Hotels, for example,
27
may sell their services (typically rooms) directly or through travel agents, tour
operators, airlines, tourist boards, centralized reservation systems, etc.

If we mention in a single sentence the distribution channel is nothing but it is a

process of transfer the products or services from Producer to Customer or end user.

There have also been some innovations in the distribution of services. For
example, there has been an increase in franchising and in rental services - the latter
offering anything from televisions through tools. There has also been some
evidence of service integration, with services linking together, particularly in the
travel and tourism sectors. For example, links now exist between airlines, hotels
and car rental services. In addition, there has been a significant increase in retail
outlets for the service sector. Outlets such as estate agencies and building society
offices are crowding out traditional grocers from major shopping areas.

Channel decisions

 Channel strategy
 Gravity & Gravity
 Push and Pull strategy
 Product (or service)
 Cost
 Consumer location

Managerial concerns

The channel decision is very important. In theory at least, there is a form of trade-
off: the cost of using intermediaries to achieve wider distribution is supposedly
lower. Indeed, most consumer goods manufacturers could never justify the cost of
28
selling direct to their consumers, except by mail order. Many suppliers seem to
assume that once their product has been sold into the channel, into the beginning of
the distribution chain, their job is finished. Yet that distribution chain is merely
assuming a part of the supplier's responsibility; and, if they have any aspirations to
be market-oriented, their job should really be extended to managing all the
processes involved in that chain, until the product or service arrives with the end-
user. This may involve a number of decisions on the part of the supplier:

 Channel membership
 Channel motivation
 Monitoring and managing channels

Type of marketing channel

1. Intensive distribution - Where the majority of resellers stock the

'product' (with convenience products, for example, and particularly the
brand leaders in consumer goods markets) price competition may be
evident.
2. Selective distribution - This is the normal pattern (in both consumer
and industrial markets) where 'suitable' resellers stock the product.
3. Exclusive distribution - Only specially selected resellers or authorized
dealers (typically only one per geographical area) are allowed to sell the
'product'.
4. Channel motivation

It is difficult enough to motivate direct employees to provide the necessary sales

and service support. Motivating the owners and employees of the independent
organizations in a distribution chain requires even greater effort. There are many
29
devices for achieving such motivation. Perhaps the most usual is `incentive': the
supplier offers a better margin, to tempt the owners in the channel to push the
product rather than its competitors; or a compensation is offered to the distributors'
sales personnel, so that they are tempted to push the product. defines this incentive

as a Channel Value Proposition or business case, with which the supplier sells the
channel member on the commercial merits of doing business together. He
describes this as selling business models not product.

Monitoring and managing channels

In much the same way that the organization's own sales and distribution activities
need to be monitored and managed, so will those of the distribution chain.

In practice, many organizations use a mix of different channels; in particular, they

may complement a direct salesforce, calling on the larger accounts, with agents,
covering the smaller customers and prospects. these channels show marketing
strategies of an organisation. Effective management of distribution channel
requires making and implementing decision in these areas.

30
 DEVELOPING COMPETITIVE STRATEGY

Competitive strategies. All companies have one (or more). Sometimes they are
clear and well understood throughout the organization. Sometimes they are rather
muddy. Sometimes they have been deliberately established; sometimes they have
simply evolved. For our purposes here, we are assuming that it is better if the
strategies are deliberately established, clear, and well understood. (This is an
assumption we could test, but let's leave that for another day.)

"'Customer focus' is knowing what customers want and fulfilling their expectations
with innovative products and quality services. To accomplish this, Ameritech
focuses its operations squarely on specific customer markets: Residential Services,
Business Services, Long-Distance Companies, Public Telephone, Mobile
Communications, Directory publishing and Information Services." (Ameritech
Annual Report, 1989)

That's a brief statement of Ameritech' s competitive strategy. It tells us that

Ameritech will compete in some segments of the telecommunications industry but
not in others. They will provide residential telephone service, for example, but will
not manufacture and wholesale telephone equipment. It also says that they will
attempt to attract and retain customers by providing high-quality service and
innovative products. They are not trying to be the lowest-priced competitor.

31
The statement thus demonstrates the two questions that form the basis for any
competitive strategy:

(1) In which industry/segments will the firm compete?

(2) On what basis will the firm build a meaningful competitive advantage?

In this module, we will focus on the development of competitive strategy. We will

examine some common strategies utilized by organizations. We will learn about
environmental scanning and driving forces, learn how to do strategic analysis, and
determine how to maintain competitive advantage.

STRATEGY IN ACTION

When Ray Kroch started McDonald's, he started with small, walk-up stores located
in suburban areas. The stores, staffed by 3-4 people and open from 11:00 AM to
11:00 PM, offered only a very limited menu (hamburgers, cheeseburgers, french
fries, shakes, and soft drinks). His target customers were primarily young people
and young families. To attract customers, McDonald's offered low prices. Their
hamburgers cost 10 cents. At that time, a hamburger in most restaurants cost
between 25 and 50 cents. They also differentiated themselves by offering fast
service (immediate availability of product). Rather than having customers wait
while the food was prepared, it was always ready at McDonald's. Once you placed
your order, there was almost zero wait-time. This in contrast to their competition,
where you had to place an order, wait while the food was prepared, wait to be
served, and wait for your check. Thus McDonald's used a classic strategy. They
32
focused on a specific type of customer, in a specific type of location, with a limited
product line, minimizing their costs, and competing on the bases of price and fast
service.

"It offered a limited selection of clothes --- so he called it the Limited." ("Leslie
Wexner knows what women want," Fortune, August 1985) Since opening his first
Limited in Columbus, Ohio in 1963, Les Wexner has refined the concept of
identifying niche markets and serving them with differentiated products.

The primary target customer for the Limited has been a fashion-conscious woman
(frequently a business woman) who has a variety of needs in her wardrobe. She
likes play clothes, dress-up clothes, wear-to-work clothes, great looking lingerie,
and international looking accessories. The key term is fashion-conscious. The
Limited has targeted women who want the latest designer looks, but at a price the
working woman can afford. The Limited sells private label clothes with the most
contemporary look (Wexner dislikes the term knock-offs) at a fraction of the prices
charged by the designer shops.

Speed is the critical element in Wexner's strategy. The limited searches the world
for fashion ideas and plugs dozens of knocked-off looks into their stores. They
quickly drop the dogs and ride the winners, replenishing the supply of popular
looks. The Limited has trimmed the design-order cycle to 60 days, in contrast to
the six months to one year required by most of their competitors. This is facilitated
by an information system with point-of-sale computers that track daily sales on a
store-by-store basis, pre-arranged manufacturing contracts with numerous plants,
primarily located in the Far East, and an incredibly efficient distribution system
centered in Columbus, Ohio.

33
Thus, it is not just having the right look for the target customers. It is having it
more quickly, being able to replenish it more rapidly, and having it at a reasonable
cost.

Do strategies ever change? Of course. As the environment changes, as industry

segments and competitive conditions change, strategies must change. McDonald's
is a good example. McDonald's today differs dramatically from the low priced,
focused chain established by Ray Kroch in the 1950s. Now there are Big Mac's,
Happy meals, Egg McMuffins, Chef Salads, Ronald McDonald's, and even pizza!
As the industry matured and demographics changed, McDonald's broadened their
scope. To maintain growth, they targeted children and then the elderly as
customers. They offered an expanded line of foods to attract a greater variety of
customers. Perhaps most significantly, McDonald's moved away from being the
low price competitor. They no longer use price as the competitive advantage.
Consistency of product and service, community involvement, and convenience
provided by a multitude of locations are now the primary competitive advantages
they capitalize on.

SCANNING THE ENVIRONMENT FOR DRIVING FORCES

Companies do not exist in isolation. They are part of an industry or industries and
function within a competitive environment. They are also, however, impacted by
even broader environmental factors. They may be constrained by regulations
promulgated by the political/legal system. Changing social values or changing
demographic patterns may alter consumers' tastes. A recession or an economic
boom will probably impact on profitability. Technological developments may open
the door to new products and allow for innovation in process that may affect costs
or quality.
34
All of these environmental systems (political/legal, social/demographic, economic,
and technological) are as important to the company as their industry/competitive
environment.

Companies need thus to be continually involved in environmental scanning. They

need to be constantly analyzing their environment, searching for changes which
may have an impact on their operations. These changes, frequently called driving
forces, may present either threats or opportunities to the company.

Relevant driving forces change over time. Likewise, relevance of driving forces
differs from industry to industry and company to company. Currently, however,
some or all of the following are generally recognized as relevant driving forces by
many organizations.

* Instantaneous communication The information revolution has significantly

impacted on our concept of time and place. Electronic mail, teleconferencing, fax-
- these and other technologies allow us to communicate with one another
instantaneously, regardless of where we are located. Using electronic data bases,
we are able to obtain information in real-time, regardless of the location where that
information was originally housed. This revolution has had, and will continue to
have, a major impact on the way we do business. It has facilitated a global
marketplace. It enables just-in-time inventory systems. It is the backbone of
nicheing and micro-marketing. Presently, we have seen only the tip of the iceberg.
Instantaneous communication will be a necessity for success in the increasingly
tumultuous competitive world.

* Advances in manufacturing technology Computer Integrated Manufacturing,

Flexible Manufacturing Systems, Concurrent Engineering, Just-In-Time. Advances

35
in manufacturing technology, such as those noted, have dramatically changed the
factory floor. Dirty, greasy, labor-intensive manufacturing may soon become part
of a disappearing era. In its place will be the highly automated factory, operated by
fewer but more highly skilled workers utilizing the most advanced information
technology. These advances, pioneered by the Japanese but increasingly
incorporated by US and European companies, permanently lower the cost structure
of the products produced, increase quality (defined as consistent conformance to
established engineering standards), decrease turnaround time and make the
manufacturing system more responsive to customer demand.

* The physical environment of the world The hole in the ozone layer, acid rain, the
crisis in solid waste disposal, hazardous waste, smog, global warming, the
disappearing rain forests - these are examples of the concerns of an increasingly
environmentally aware public. Firms that through their operations pose a threat to
the environment may expect to come under increasing social pressure and possibly
increasing government regulations. Conversely, firms that produce products and/or
provide services that are environmentally neutral or positive can expect to be
looked upon more favorably by the consuming public.

* The development of a global community We are far from being one world. But,
increasingly we are separated less and less on the basis of political or economic
systems. The greater differences will tend to be between the haves and the have-
nots, regardless of geographic region. Facilitated by transportation and
communication technology, business perspectives have also changed. We have
moved from the national firm to the national firm with some international
manufacturing and sales and then to the multinational firm with major autonomous
operations in numerous countries. We now face the advent of the "stateless"

36
corporation with a totally global perspective.

* Diversity of the workforce As we move toward the year 2000, the population of
the U. S. and to a lesser extent some other developed countries will become
increasingly diverse. This will have significant impact on the available workforce.
The available workforce will consist of a greater proportion of Blacks, of
Hispanics, of Vietnamese, and of women, for example. These diverse populations
will bring their diverse cultures into the workplace with them. How will
organizations develop unity among these diverse cultures?

* The depletion of human resources Winning against global competition requires

skilled people utilizing advanced technology, functioning cooperatively and
making decisions relatively autonomously. The declining pool of high-school
graduates - further reduced by the increasing proportion that are functionally
illiterate, numerically incapable, and/or lack basic work values, and the proportion
disabled by drug and alcohol addiction - may make critical human skills a scarce
resource. Firms with long-term perspectives that want to build their competitive
advantage should be developing plans and building coalitions now to impact on the
availability of future human resources.

INDUSTRY ANALYSIS

The normal starting point for strategy development is industry analysis. Through
industry analysis, we attempt to determine the relative attractiveness of the
industry (generally the long-term profit potential of the industry) and identify areas
of opportunity within the industry.

37
It is useful to start with an analysis of industry characteristics. These may include
market size of the industry, the competitive scope, the market growth rate, industry
profitability, stage in the industry life cycle, the degree of fragmentation, industry
capacity utilization, and typical capital requirements. An examination of these
characteristics gives us an understanding of the basic structure of the industry.

A complementary approach to industry analysis has been proposed by Michael

Porter. He proposed a five forces model of industry analysis based on what he calls
competitive forces. The forces he identifies are rivalry among existing competitors,
the potential entry of new competitors, the threat of substitute products, the power
of suppliers, and the power of buyers. In Porter's model, the most attractive
industries are those where there is less rivalry among competitors, where there are
few substitute products, where entry into the industry by new competitors is
difficult and where suppliers and buyers have little power.

While we talk of industry analysis, you should recognize that industries are
composed of numerous segments, and much of the analysis is done at the segment
level. A segment is a coherent subset of an industry. Segments can be defined
around product lines, customer groups, geographic regions, channels of
distribution, operational processes, among other options. For example, the
computer industry can be segmented along product lines, ranging from micro
computers, to minis, to mainframes, to supercomputers. It can also be segmented
on the basis of customer groups. DEC, for example, has segmented the industry
into 18 segments based around customer groups. These ranged from health care to
manufacturing.

We judge the attractiveness of an industry on the basis of its long term financial
and strategic strength. Generally, industries, or segments, that have larger market
38
size, greater growth rate and higher industry profitability, and that are at an earlier
stage in the life-cycle are judged to be more attractive.

We must be cautious, however, to focus on the future, not on the past. We are
attempting to determine the long term profit potential (future) of the industry. We
are concerned with the future growth rate, for example, not just the historic growth
rate. We scan the environment, looking for driving forces that might change the
structure or functioning of the industries.

In addition to examining overall attractiveness, we search for areas of opportunity

within the industry or segment. For example, will there be opportunities for:

*New products or services

*Extensions of products or services
*New customers
*New technologies
*New processes to serve customers
*Ways to improve products or services

Our final conclusion regarding industry attractiveness, thus, is a subjective

judgment based upon financial and strategic attractiveness and the available
opportunities.

(See Exhibit 2 for a set of Standard Analytic Questions that provide guidance for
an industry analysis)

COMPETITIVE INTELLIGENCE

39
How are your competitors approaching the industry? What are each of their
competitive advantages? What are their unique competencies? Where are they
focusing their attention?

Competitive intelligence is one of a company's most important assets. It is

important to know your competitors, hopefully to know them better than they
know themselves. You buy your competitors' products and dissect them to
determine their technology and cost structure. You comparison-shop their services
to determine their unique features. You study their advertisements, you read trade
journals that talk of their plans and achievements, you scrutinize their annual
reports for hints of their strategy and plans and assess their financial strength.

For each competitor, we need to know their competitive strategy, their strengths
and weaknesses, from both a financial and a strategic perspective, and any likely
moves they might make to improve their competitive position.

In addition to analyzing the internal strength of each competitor, we need to

anticipate how they might react to any external environmental changes. Are there
driving forces that might improve the competitive position of any of the
competitors? Might the driving forces have a negative impact on any of them? Are
they likely to move to take advantage of industry opportunities? How will they
respond to threats?

On the basis of our analysis, we draw conclusions regarding the future actions and
future effectiveness of each competitor. What are they likely to do, and how strong
are they likely to be?

(Exhibit 3 provides a set of Standard Analytic Questions to help gather competitive

intelligence.)
40
COMPANY STRENGTHS AND STRATEGIC HEALTH

Know Thyself! Just as strategy development starts with an analysis of the external
competitive environment, it concludes with an internal analysis of the company.
What is the company and what can it be?

Starting with the identification of any current strategies, we need to analyze the
historic performance of the company and the strategic strength of the company. We
consider sales volume and trends in sales volume. We compare financial ratios
with others in the industry to determine relative strength and compare the ratios
over time to determine trends. We evaluate the technological strength of the
company, considering both technologies related to service or product development
and technologies related to process development.

In addition to analysis of the company as a whole, the company's relative strengths

and weaknesses in each relevant segment are analyzed. We identify share of
market and level of profitability in each segment and note changes or trends. We
compare our cost position and our quality position to our competitors and note any
changes or trends. We assess our customers' satisfaction with our products or
services and note changes or trends.

41
It is also critical to identify what Prahalad and Hamel call the "core competencies
of the corporation." (The Core Competence of the Corporation, Harvard Business
Review, May 1990.) For example, Cooper Industries, as noted in the following
quote, has clearly identified their core competence.

"We come from as long line of people who forge, cast, drill, bore, grind, heat treat,
and fabricate things out of metal. Now we use other materials and processes as
well. But it all boils down to manufacturing. We know a lot about that. And we
know that our future depends on doing it better than anybody else." (Cooper
Industries, promotional brochure, 1989)

What is it that the company can do, and do very well? Like Cooper, it may be
manufacturing. Or it may be product development, or customer service, or
selecting sites, or responding quickly to customer needs. - the possibilities are
limitless. The key thing is that it be what you do best - hopefully better than
anyone else.

As we analyze the company, we are searching for areas where we have the
strengths and competencies to build on, and areas where we have weaknesses that
may create problems for us. Comparing our strengths and our core competencies
with the areas of attractive opportunity within the industry helps us define our
answer to the first question, "In what segments of the industry will we compete?"

(Exhibit 4 a set of Standard Analytic Questions to help assess strategic health)

SELECTING THE BASIS FOR COMPETITION

42
On what basis can we build a meaningful competitive advantage? Why will
customers chose to use our product or service rather than that of our competitors?
How will we compete for business? These questions must be clearly answered in
any competitive strategy.

McDonald's, for example, in their original strategy said that people would buy their
hamburgers because they were cheaper and because of the quick service. The
Limited provided designer fashion at a price the working woman could afford -
quickly. This was their competitive advantage.

Anything that adds value which is important to the customer can be used as a basis
for competitive advantage. In his classic book, Competitive Strategy, Michael
Porter (Competitive Strategy, Free Press, 1980) talks of two potential bases for
competition: (1) being the lowest cost provider (price) or (2) differentiating the
product or service in some way. Actually, this dichotomy is probably a bit too
simplistic and not terribly practical. A company can differentiate itself in many
ways. The durability of the product, the speed of response to customer wants,
customer service, convenience, consistency of performance, community
involvement, and environmental consciousness are just a few of the more common.

While the term quality is often used when discussing differentiation, we need to be
cautious. Quality has different meanings to different people. Sometimes it is
durability. Sometimes it is unique features. Sometimes it means conformance to
standards, or "fit and finish" as it is called in the automotive industry.

The root for our competitive advantage is in our core competencies. It must be
something that we can do very well. But it must also be consistent with our
competitive environment. It must be valued by a significant proportion of the

43
customers in the industry segments we are targeting. Further, it should not
duplicate a competitive advantage of a significant competitor. We need to provide
something that is of value to customers and do it better than competitors. That is
how we gain competitive advantage.

IMPLEMENTING STRATEGY

Strategy without action has no value. As noted in the Performance Criteria for
Developing Competitive Strategy (Exhibit 5) the outcome of strategy development
is an action plan based firmly on and designed to implement the strategy of the
company.

In the past, strategic plans were often developed by staff specialists, utilizing
sophisticated analytical techniques. Too frequently, this resulted in attractive,
bound volumes that sat on the shelves of line managers gathering dust. The
strategies, while they might have been ingenious, were not executed.

This is less prevalent today. More organizations are recognizing that the
information necessary for developing strategy is equally vital for effectively
running a business. Thus, strategy development has become the job of line
managers. Frequently, strategy is developed by a team of line managers from
different functions, directed by the general manager. In addition to insuring that
functional conflicts are minimized, this maximizes the likelihood that the strategy
will be effectively implemented. Since they have been involved in its development,
participants will be more highly committed to its implementation.

44
To assist in implementation, the strategy should be incorporated as an integral part
of the company's mission statement and clearly communicated, both internally and
externally.

From an internal perspective, a clear understanding of the strategy helps to provide

a unity of direction. All members of the business need to have a sense of where the
organization is going. Particularly as organizations become flatter, as they become
more decentralized, as more people have authority to act for the company, an
understanding of the future of the business is necessary -- otherwise, how can
people throughout the organization make reasonable decisions?

In addition, a clear understanding of strategy has a major impact on the

commitment of people in the organization. People cannot be motivated, they
cannot be committed to an organization unless they understand the organization.
People cannot be committed to a program or plan, a direction, unless they know
about the program or direction. Thus, a clear statement of strategy, continually
reiterated (not just written down in some dusty volume) will build commitment to
the organization and its future.
45
An understanding of the strategy is also important to external constituencies. For
example, customers and suppliers cannot be partners in accomplishment unless
they understand what you are trying to accomplish.

MAINTAINING COMPETITIVE ADVANTAGE

In a recent conversation on corporate leadership, Ralph Schey, CEO of Scott

Fetzer noted that it is more difficult to stay a leader than to become one. The same
is probably true about businesses; it is probably more difficult for a firm to
maintain a competitive advantage than to gain one in the first place. There are
probably many reasons. One major reason is the financial reporting system. The
typical financial reporting system focuses on the past, rather than the future and on
operations, rather than on strategy. Thus, it is very easy for a firm that is watching
its numbers to feel a sense of security at the very time its competitive advantage is
eroding.

There is also a natural human tendency to be satisfied with success, to worry a

little less about the future, and to develop a feeling of invincibility. Think of all the
old phrases: "If it ain't broke, don't fix it." "Don't mess with success." "Fat and
happy." These reflect a contentment that discourages innovation and gives
competitors the opportunity to overturn our advantage.

In fact, innovation is the key to maintaining competitive advantage. Any advantage

can be imitated; none last forever. The environment is continually changing.
Competitors are continually developing. Thus, any company that stops scanning
the environment and analyzing driving forces, any company that stops looking for

46
opportunities in its competitive environment, any company that stops innovating
will inevitably lose its competitive advantage.

This does not mean that a company must continually make wholesale changes. It
does not, regardless of the title of Tom Peters book, Thriving on Chaos, mean that
chaos is necessary. In contrast, there needs to be a stability of direction. But, most
innovation is not tumultuous, but rather incremental. It is the accumulation of
many small insights, many small advances that lead to continual improvement.
And it is that continual improvement, the continual evolution and development of
the competitive advantage, that leads to long-term success.

Copyright 1990 by J. E. Stinson and W. A. Day

Exhibit 1
Learning Objectives

After completing this module, you should be able to:

Describe the concept of competitive strategy.

Identify an industry.

Identify a firm's competitive strategy.

Describe environmental scanning.

Define driving forces.

Identify significant driving forces that might impact on an industry or business.

Describe the purpose of industry analysis.

47
Describe the process of industry analysis.

Identify factors to be included in an industry analysis.

Identify an industry segment.

Describe three bases for segmenting an industry.

Explain how industry analysis is used in strategy development.

Describe the purpose of competitive intelligence.

Describe the process of competitive intelligence.

Identify factors to be included in competitive intelligence.

Explain how competitive intelligence is used in strategy development.

Describe the purpose of company analysis.

Describe the process of company analysis.

Identify factors to be included in company analysis.

Explain how company analysis is used in strategy development.

Define core competencies.

Explain how core competencies are used in strategy development.

Describe the concept of competitive advantage.

Identify five potential bases of competitive advantage.

48
Explain how firms develop competitive advantage.

Describe three factors which influence the implementation of strategy.

Identify two reasons why firms lose their competitive advantage.

Explain what firms should do to maintain competitive advantage.

Indian Retail Industry

The India Retail Industry is the largest among all the industries, accounting for
over 10 per cent of the country�s GDP and around 8 per cent of the employment.
The Retail Industry in India has come forth as one of the most dynamic and fast
paced industries with several players entering the market. But all of them have not
yet tasted success because of the heavy initial investments that are required to
break even with other companies and compete with them. The India Retail Industry
is gradually inching its way towards becoming the next boom industry.

The total concept and idea of shopping has undergone an attention drawing change
in terms of format and consumer buying behavior, ushering in a revolution in
shopping in India. Modern retailing has entered into the Retail market in India as is
observed in the form of bustling shopping centers, multi-storied malls and the huge
complexes that offer shopping, entertainment and food all under one roof.

A large young working population with median age of 24 years, nuclear families in
urban areas, along with increasing workingwomen population and emerging
opportunities in the services sector are going to be the key factors in the growth of
49
the organized Retail sector in India. The growth pattern in organized retailing and
in the consumption made by the Indian population will follow a rising graph
helping the newer businessmen to enter the India Retail Industry.

In India the vast middle class and its almost untapped retail industry are the key
attractive forces for global retail giants wanting to enter into newer markets, which
in turn will help the India Retail Industry to grow faster. Indian retail is expected to
grow 25 per cent annually. Modern retail in India could be worth US$ 175-200
billion by 2016. The Food Retail Industry in India dominates the shopping basket.
The Mobile phone Retail Industry in India is already a US$ 16.7 billion business,
growing at over 20 per cent per year. The future of the India Retail Industry looks
promising with the growing of the market, with the government policies becoming
more favorable and the emerging technologies facilitating operations.

THE INDIAN RETAIL SCENE

India is the country having the most unorganized retail market. Traditionally it is a
family�s livelihood, with their shop in the front and house at the back, while
they run the retail business. More than 99% retailer�s function in less than 500
square feet of shopping space. Global retail consultants KSA Technopak have
estimated that organized retailing in India is expected to touch Rs 35,000 crore in
the year 2005-06. The Indian retail sector is estimated at around Rs 900,000 crore,
of which the organized sector accounts for a mere 2 per cent indicating a huge
potential market opportunity that is lying in the waiting for the consumer-savvy
organized retailer.

50
Purchasing power of Indian urban consumer is growing and branded merchandise
in categories like Apparels, Cosmetics, Shoes, Watches, Beverages, Food and even
Jewellery, are slowly becoming lifestyle products that are widely accepted by the
urban Indian consumer. Indian retailers need to advantage of this growth and
aiming to grow, diversify and introduce new formats have to pay more attention to
the brand building process. The emphasis here is on retail as a brand rather than
retailers selling brands. The focus should be on branding the retail business itself.
In their preparation to face fierce competitive pressure, Indian retailers must come
to recognize the value of building their own stores as brands to reinforce their
marketing positioning, to communicate quality as well as value for money.
Sustainable competitive advantage will be dependent on translating core values
combining products, image and reputation into a coherent retail brand strategy.

There is no doubt that the Indian retail scene is booming. A number of large
corporate houses � Tata�s, Raheja�s, Piramals�s, Goenka�s � have
already made their foray into this arena, with beauty and health stores,
supermarkets, self-service music stores, newage book stores, every-day-low-price
stores, computers and peripherals stores, office equipment stores and
home/building construction stores. Today the organized players have attacked
every retail category. The Indian retail scene has witnessed too many players in too
short a time, crowding several categories without looking at their core
competencies, or having a well thought out branding strategy.

STRATEGIES, TRENDS AND OPPORTUNITIES 2007

Retailing in India is gradually inching its way toward becoming the next boom
industry. The whole concept of shopping has altered in terms of format and
51
consumer buying behavior, ushering in a revolution in shopping in India. Modern
retail has entered India as seen in sprawling shopping centres, multi-storied malls
and huge complexes offer shopping, entertainment and food all under one roof.
The Indian retailing sector is at an inflexion point where the growth of organized
retailing and growth in the consumption by the Indian population is going to take a
higher growth trajectory. The Indian population is witnessing a significant change
in its demographics. A large young working population with median age of 24
years, nuclear families in urban areas, along with increasing workingwomen
population and emerging opportunities in the services sector are going to be the
key growth drivers of the organized retail sector in India.

GROWTH OF RETAIL SECTOR IN INDIA

Retail and real estate are the two booming sectors of India in the present times.
And if industry experts are to be believed, the prospects of both the sectors are
mutually dependent on each other. Retail, one of India�s largest industries, has
presently emerged as one of the most dynamic and fast paced industries of our
times with several players entering the market. Accounting for over 10 per cent of
the country�s GDP and around eight per cent of the employment retailing in
India is gradually inching its way toward becoming the next boom industry.

As the contemporary retail sector in India is reflected in sprawling shopping

centers, multiplex- malls and huge complexes offer shopping, entertainment and
food all under one roof, the concept of shopping has altered in terms of format
and consumer buying behavior, ushering in a revolution in shopping in India.
This has also contributed to large-scale investments in the real estate sector with
major national and global players investing in developing the infrastructure and
52
construction of the retailing business. The trends that are driving the growth of
the retail sector in India are

• Low share of organized retailing

• Falling real estate prices
• Increase in disposable income and customer aspiration
• Increase in expenditure for luxury items (CHART)

Another credible factor in the prospects of the retail sector in India is the
increase in the young working population. In India, hefty pay packets, nuclear
families in urban areas, along with increasing working-women population and
emerging opportunities in the services sector. These key factors have been the
growth drivers of the organized retail sector in India which now boast of
retailing almost all the preferences of life - Apparel & Accessories, Appliances,
Electronics, Cosmetics and Toiletries, Home & Office Products, Travel and
Leisure and many more. With this the retail sector in India is witnessing
rejuvenation as traditional markets make way for new formats such as
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departmental stores, hypermarkets, supermarkets and specialty stores.

The retailing configuration in India is fast developing as shopping malls are

increasingly becoming familiar in large cities. When it comes to development of
retail space specially the malls, the Tier II cities are no longer behind in the race.
If development plans till 2007 is studied it shows the projection of 220 shopping
malls, with 139 malls in metros and the remaining 81 in the Tier II cities. The
government of states like Delhi and National Capital Region (NCR) are very
upbeat about permitting the use of land for commercial development thus
increasing the availability of land for retail space; thus making NCR render to
50% of the malls in India.

India is being seen as a potential goldmine for retail investors from over the
world and latest research has rated India as the top destination for retailers for an
attractive emerging retail market. India�s vast middle class and its almost
untapped retail industry are key attractions for global retail giants wanting to
enter newer markets. Even though India has well over 5 million retail outlets,
the country sorely lacks anything that can resemble a retailing industry in the
modern sense of the term. This presents international retailing specialists with a

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great opportunity. The organized retail sector is expected to grow stronger than
GDP growth in the next five years driven by changing lifestyles, burgeoning
income and favorable demographic outline.

INDUSTRY EVOLUTION

• Traditionally retailing in India can be traced to

• The emergence of the neighborhood �Kirana� stores catering to the
convenience of the consumers
• Era of government support for rural retail: Indigenous franchise model of
store chains run by Khadi & Village Industries Commission
• 1980s experienced slow change as India began to open up economy.
• Textiles sector with companies like Bombay Dyeing, Raymond's, S Kumar's
and Grasim first saw the emergence of retail chains
• Later Titan successfully created an organized retailing concept and
established a series of showrooms for its premium watches
• The latter half of the 1990s saw a fresh wave of entrants with a shift from
Manufactures to Pure Retailers.
• For e.g. Food World, Subhiksha and Nilgiris in food and FMCG; Planet M
and Music World in music; Crossword and Fountainhead in books.
• Post 1995 onwards saw an emergence of shopping centers
• Mainly in urban areas, with facilities like car parking
• Targeted to provide a complete destination experience for all segments of
society

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• Emergence of hyper and super markets trying to provide customer with 3
V�s - Value, Variety and Volume

• Expanding target consumer segment: The Sachet revolution - example of

reaching to the bottom of the pyramid.
• At year end of 2000 the size of the Indian organized retail industry is
estimated at Rs. 13,000 crore

RETAILING FORMAT IN INDIA

Malls:
The largest form of organized retailing today. Located mainly in metro
cities, in proximity to urban outskirts. Ranges from 60,000 sq ft to 7,00,000
sq ft and above. They lend an ideal shopping experience with an
amalgamation of product, service and entertainment, all under a common
roof. Examples include Shoppers Stop, Piramyd, and Pantaloon.
Specialty Stores:

Chains such as the Bangalore based Kids Kemp, the Mumbai books retailer
Crossword, RPG's Music World and the Times Group's music chain Planet
M, are focusing on specific market segments and have established
themselves strongly in their sectors.

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 Discount Stores:

As the name suggests, discount stores or factory outlets, offer discounts on

the MRP through selling in bulk reaching economies of scale or excess stock
left over at the season. The product category can range from a variety of
perishable/ non-perishable goods.

Department Stores:

Large stores ranging from 20000-50000 sq. ft, catering to a variety of consumer
needs. Further classified into localized departments such as clothing, toys,
home, groceries, etc.

Departmental Stores are expected to take over the apparel business from
exclusive brand showrooms. Among these, the biggest success is K Raheja's
Shoppers Stop, which started in Mumbai and now has more than seven large
stores (over 30,000 sq. ft) across India and even has its own in store brand for
clothes called Stop.

Hyper marts/Supermarkets:

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Large self-service outlets, catering to varied shopper needs are termed as
Supermarkets. These are located in or near residential high streets. These stores
today contribute to 30% of all food & grocery organized retail sales. Super
Markets can further be classified in to mini supermarkets typically 1,000 sq ft to
2,000 sq ft and large supermarkets ranging from of 3,500 sq ft to 5,000 sq ft.
having a strong focus on food & grocery and personal sales.

Convenience Stores:

These are relatively small stores 400-2,000 sq. feet located near residential
areas. They stock a limited range of high-turnover convenience products and are
usually open for extended periods during the day, seven days a week. Prices are
slightly higher due to the convenience premium

MBO�s:

Multi Brand outlets, also known as Category Killers, offer several brands across
a single product category. These usually do well in busy market places and
Metros.

INDIA�S NUMBER OF DOMESTIC GROCERY CHAINS AND

EARLY FOREIGN ENTRANTS

58
RECENT TRENDS

• Retailing in India is witnessing a huge revamping exercise as can be seen in

the graph
• India is rated the fifth most attractive emerging retail market: a potential
goldmine.
• Estimated to be US$ 200 billion, of which organized retailing (i.e. modern
trade) makes up 3 percent or US$ 6.4 billion
• As per a report by KPMG the annual growth of department stores is
estimated at 24%
• Ranked second in a Global Retail Development Index of 30 developing
countries drawn up by AT Kearney.
• Multiple drivers leading to a consumption boom:
o Favorable demographics
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 o Growth in income
o Increasing population of women
o Raising aspirations: Value added goods sales
• Food and apparel retailing key drivers of growth
• Organized retailing in India has been largely an urban
• Phenomenon with affluent classes and growing number of double-income
households.
• More successful in cities in the south and west of India. Reasons range from
differences in consumer buying behavior to cost of real estate and taxation
laws.
• Rural markets emerging as a huge opportunity for retailers reflected in the
share of the rural market across most categories of consumption
o ITC is experimenting with retailing through its e-Choupal and
Choupal Sagar � rural hypermarkets.
o HLL is using its Project Shakti initiative � leveraging women self-
help groups � to explore the rural market.
o Mahamaza is leveraging technology and network marketing concepts
to act as an aggregator and serve the rural markets.
• IT is a tool that has been used by retailers ranging from Amazon.com to
eBay to radically change buying behavior across the globe.
• �E-tailing� slowly making its presence felt.

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 RETAIL SALES IN INDIA

CHALLENGES & OPPORTUNITIES

Retailing has seen such a transformation over the past decade that its very
definition has undergone a sea change. No longer can a manufacturer rely on sales
to take place by ensuring mere availability of his product. Today, retailing is about
so much more than mere merchandising. It�s about casting customers in a story,
reflecting their desires and aspirations, and forging long-lasting relationships. As
the Indian consumer evolves they expects more and more at each and every time
when they steps into a store. Retail today has changed from selling a product or a
service to selling a hope, an aspiration and above all an experience that a consumer
would like to repeat.

For manufacturers and service providers the emerging opportunities in urban

61
markets seem to lie in capturing and delivering better value to the customers
through retail. For instance, in Chennai CavinKare�s LimeLite, Marico�s
Kaya Skin Clinic and Apollo Hospital�s Apollo Pharmacies are examples, to
name a few, where manufacturers/service providers combine their own
manufactured products and services with those of others to generate value hitherto
unknown. The last mile connect seems to be increasingly lively and experiential.
Also, manufacturers and service providers face an exploding rural market yet only
marginally tapped due to difficulties in rural retailing. Only innovative concepts
and models may survive the test of time and investments.
However, manufacturers and service providers will also increasingly face a host of
specialist retailers, who are characterized by use of modern management
techniques, backed with seemingly unlimited financial resources. Organized retail
appears inevitable.

Retailing in India is currently estimated to be a US$ 200 billion industry, of which

organized retailing makes up a paltry 3 percent or US$ 6.4 billion. By 2010,
organized retail is projected to reach US$ 23 billion. For retail industry in India,
things have never looked better and brighter. Challenges to the manufacturers and
service providers would abound when market power shifts to organized retail.

The retail sector has played a phenomenal role throughout the world in increasing
productivity of consumer goods and services. It is also the second largest industry
in US in terms of numbers of employees and establishments. There is no denying
the fact that most of the developed economies are very much relying on their retail
sector as a locomotive of growth. The India Retail Industry is the largest among all
the industries, accounting for over 10 per cent of the country�s GDP and around
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8 per cent of the employment. The Retail Industry in India has come forth as one of
the most dynamic and fast paced industries with several players entering the
market. But all of them have not yet tasted success because of the heavy initial
investments that are required to break even with other companies and compete
with them. The India Retail Industry is gradually inching its way towards
becoming the next boom industry.

VitalGear at a glimpse.

VITALGear was conceived as an OUTDOOR brand way back in back in 2001.

The initial idea was to provide defense related Organizations like Army, Navy, Air
Force, Special Forces and Para Military with world class products at a localized
Competitive price. Getting strength from the response the brand got for its
introduction of rucksacks manufactured using CORDURA fabric in 2002,
VITALGear introduced high quality Rucksacks, sleeping Bags, Rain wear, Winter
Wear etc. to the defense organizations in South Asia, South East Asia and part of
Africa.

In its second phase of growth VITALGear has now been introduced in retail
market of Singapore, India and other parts of South and South East Asia. The
products are conceived by our In-house concept called “Vital research” where-in
feedback From Institutions as well as retail markets are converted into consumer
friendly products.

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 1. RESEARCH AND HYPOTHESIS/PROBLEM
DEFINITION

Marketing is the process by which companies create customer interest in products

or services. It generates the strategy that underlies sales techniques, business
communication, and business development.[1] It is an integrated process through
which companies build strong customer relationships and create value for their
customers and for themselves.[1]

Marketing is used to identify the customer, to keep the customer, and to satisfy the
customer. With the customer as the focus of its activities, it can be concluded
that marketing management is one of the major components of business
management. Marketing evolved to meet the stasis in developing new markets
caused by mature markets and overcapacities in the last 2-3 centuries. The
adoption of marketing strategies requires businesses to shift their focus
from production to the perceived needs and wants of their customers as the means
of staying profitable.

The term marketing concept holds that achieving organizational goals depends on
knowing the needs and wants of target markets and delivering the desired
satisfactions. It proposes that in order to satisfy its organizational objectives, an
organization should anticipate the needs and wants of consumers and satisfy these
more effectively than competitors.

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The marketing concept advocates the identification of specific customer needs and
then responds to those specific needs by focusing available resource to uniquely
satisfy those customer requirements.

Key Achievements

• First brand to introduce high quality CORDURA rucksacks in Indian d Forces, in 2002.
• First brand to introduce breathable Nylon Rainwear to various institutions in South Asia, in 2003.
• Equipping Indian Army Contingent for UN Peacekeeping Missions since 2004, with wide range of products
like Rucksacks, Backpacks,
Rain Suits, Sleeping Bags, Combat Jackets, Duffle Bags, Air Mattress, Hydration Pack, Passport Pouches,
etc.

65
 • Designed and produced products for India Para Military forces with specific needs.
• Have entucational institution market in 2009 through prestigious schools like Raffles Secondary school,
Singapore and Blue Bells, Ind
1. RESEARCH DESIGN

• Data sources

• Primary data

Primary data have been collected by the help of personal interaction with the
customers. Customer has been asked the questions related to product and
services provided by the company. They have been questioned with keeping in
the mind the objective of the project, so that the real data can be obtained and
the finding of the project can be real and beneficial for the company.

Secondary data

Secondary data will be collected from business publications, periodicals,

newspapers, magazines, the internet.

2. Research Approach

• Personal visits have been made to the retail store of the company where I
have got the feedback about the products of the company from the customer
as well as from the employees working on the stores.

66
Findings and Analysis

67
As per the data collected from the customers at different retail store of the
company it has been found that maximum number of the customers are satisfied
with the products and services of the company. The numeric data which has been
put into the chart shows the positive length of the excellence of the product which
has been chosen by the maximum number of the customers. From the sample of
the 150, excellent has been chosen from the 50 customer and 40 customers have
rated as good and 30 have rated very good and only 10 have rated average.

So this is showing how company is so strong in the area of quality and delivering
the best product in the market place. As we know today it is essential to provide
the best product and services to customer at the rate which is cheaper than your
competitor to be successful at the market place.

ABOUT THE BRAND OF THE COMPANY

68
As per data collected from the customers we came to know that this company has

It is recognized as a premier company at the market place. There is a very good

brand image in the mind of the customer.

Suggestions

1. The company should increase its market

share by entering in the retail sector.

69
2. The company should open its own outlet in
the different-different location.

3. By hoarding, print media, and electronic

media it must promote its product.

4. Company should tie-up with the travel

agency so that it can increase its sale of some
particular products.

5. It must give some discount to the consumer.

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 Limitation

As there are so many finding and suggestion it

has some limitation too. The major are following.
1. Time constraints
2. Money constraints
3. All primary data may not be accurate and some of it
misleading due to hesitation on the part of the company people
to reveal information.
4. People response might fluctuate due to circumstances.
5. The area of retail is very vast to study.
6. Availability and willingness of the respondents is also a
constraint for the study.

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 Bibliography

• Company Website
• Government Journals’
• Management Journals’
• Encyclopedia
• Marketing Management Kottler.

72
 Questionnaire

Dear Sir/Madam,

We are thankful to you for your support. We hope that you are satisfied

with the product and quality of the services offered by the Vital Gear. As there is

always scope for improvement, we would like to get your opinion in these areas.

I would, therefore, request you to kindly assist us in our efforts by

sparing a little time to give us your valuable feedback and suggestions in the

feedback form below. Please do not hesitate to inform us of any observation that

73
you think may be relevant. We assure you that we would try to come up to your

expectations.

Name:

………………………………………………………………………………………

Occupation: ..

………………………………………………………………………………

Address:

………………………………………………………………………………………

Contact Number: …………………………..

1. Do you satisfied with the product and services of the VitalGear?

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 ________________________________________________________________

________________________________________________________________

_________________________________________________

2. Do have any problem with using the product of the VitalGear.

________________________________________________________________

________________________________________________________________

_________________________________________________

3. What are the Difficulties faced during buying the products.

________________________________________________________________

________________________________________________________________

_________________________________________________

4. Would give some suggestion to improve the services of the company.

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 ________________________________________________________________

________________________________________________________________

_________________________________________________

5. What do you think about the Brand of the company.

________________________________________________________________

________________________________________________________________

_________________________________________________

---------Thanks--------
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