1. SARAVANA STORES – COMPANY PROFILE
Saravana stores is a chain of retail stores located in the heart of Chennai, TamilNadu, India. It sells textiles, jewellery, vessels, leather goods and other wide range of products under one roof. It is the No.1 retailer in Chennai and is the leader in the sector.
The founder of Saravana Stores is Mr.Selvarathinam, died in 2003 following which his elder brothers namely Rajarathinam, Yogarathinam takes control of their different shops.
The company has started as a textile showroom in Ranganathan Street, T. Nagar, Chennai and later diversified into Apparels and Accessories, Perfumes, groceries, Restaurant, shoes and much more. The company’s tagline ‘Good Quality at Reasonable Cost” is much attractive that the customers in Chennai always prefer low price products which offers reasonable quality.
Saravana Stores assures the customers a wide range of products and collections in almost all categories of products it offers. It is the first of its kind in Chennai to start a multi-storeyed shopping mall spread over 100,000 Sq.ft with 5 floors.
It is now operating under 4 buildings in T. Nagar, Chennai including three in Ranganathan Street and one in Panagal Park, T. Nagar which is operating under the name ‘New Saravana Stores’ which is specially constructed to avoid overcrowding during festival seasons.
1.1 VISION AND MISSION STATEMENTS
The company’s vision and mission statement is mentioned in Tamil saying ‘Truth, Hard work and Growth’ (à®‰à®£à¯à®®à¯ˆ à®‰à®´à¯ˆà®ªà¯à®ªà¯ à®‰à®¯à®°à¯à®µà¯).
“Our objective is to provide customers with wide range of collections in almost all the categories at reasonable cost”.
Saravana Stores – The name Chennaites consider as the meaning of Good Quality at Reasonable Cost.
2. INDUSTRIAL ORGANISATION ENVIRONMENT
Any organisation stand on the environment and not by themselves. The company environment and external environment are connected with each other and has a close relationship. The main objectives of any organisation are profitability and sustainability. The optimal positioning of the company in the dynamic and complex environment is achieved through proper strategic planning. How to achieve optimal positioning? It is achieved by analysing all the environment factors – both internal and external environment.
The organisation’s environment is depicted as below.
SWOT is an essential and the most important method to analyse the overall position of an organisation. SWOT includes analysis of Strengths and weaknesses of the company within its internal environment and matching them with the opportunities and threats that exists in the external business environment. This analysis can be used as a benchmark to develop strategic alternatives and focus on planning for the time ahead.
Now let us analyse the strengths and weakness of Saravana Stores in the internal environment and the opportunities and threats it faces from its competitors and external environment.
3.1 INTERNAL ENVIRONMENT ANALYSIS
Saravana Stores has better understanding of the customers in Chennai and focuses on serving them better.
They provide wide range of services and products under one roof which helps in attracting customers who prefers shopping with their family together.
They have the First of its kind advantage as they are the first to provide such shopping experience in Chennai.
They offer low price and reasonable quality on products which is the main reason for the customers.
Diversified business in Chennai offering most of the consumer much needed products under one roof.
They offer variety of discounts and deals everyday providing value for money shopping to the customers.
The consumers in Chennai fall under serving class and they do not hesitate to shop even at crowded places. They expect good value for money even in a crowded environment and ready to compromise on quality to an extent. Saravana Stores has understood this and provides such products which the customer exactly wants. Understanding the customer preferences is considered as one of the major strength of Saravana Stores.
Saravana Stores follow tall organisation structure as this type of business needs the workers to be highly supervised. It has also lot of promotion opportunities for the employees.
Their simple philosophy is ‘Low Margin – High Turn Over’.
There is a very high attrition rate of employees in Saravana Stores.
The staffs are not well trained, not educated and not motivated. Most of the staff comes from rural areas and they are paid less. These people join the company because of poverty and compulsion that still exists in many rural parts of India.
The operational level people are being suppressed and sometimes being treated as slaves. It is a company following THROB model where a single person takes control over all his stores in Chennai. Due to this, the responsibilities and the freedom which should exist at least to some extent is restricted. Even though THROB model is considered as the perfect choice for this kind of store especially in India, the truth is Saravana Stores suppresses the operational level and dominates to exert its power and control on them.
The management does not care their employees at all.
Saravana stores does not want to sell most of the reputed brands. Nowadays the expectations of customers are changing and expect more quality. But Saravana Stores compromises on the quality aspect and just sell products that are of low quality at cheaper price.
The customers are increasing day by day and Saravana stores is not able to manage the crowds properly (especially during the festival times). There are not adequate staff to manage them.
Saravana Stores does not have many counters for cash and card payments. Due to this, Customers need to wait in a long queue for payments.
Most of the products are not properly organised and are not found in their respective place. Many products are found on the floor and the workers too does not care about it.
Customer Service and Customer Satisfaction are very less. This is due to the carelessness of the workers as they are not at all motivated and managed efficiently.
3.2 PORTER’S VALUE CHAIN ANALYSIS
This analysis is intended to analyse the internal strengths and weaknesses of the organisation i.e., the internal environment analysis. The role of any organisation is to add value to all its stakeholders. The more important stakeholders considered in the organisation are mentioned below.
Every organisation competes with its competitors with their unique resources and core competencies. It is these two capabilities that drives the organisation to sustain in the competitive market. The greatest advantage of being participating in the competition is gaining more margin than others in the specific segment and establish itself from others.
In order to compete successfully, analysis of the firm process and the work system of the firm is needed in time. An organisation is often viewed as a chain of value creating events. To analyse the firm’s activities which can create a competitive advantage, Michael Porter described a model called Value Chain in his book ‘Competitive Advantage: Creating and Sustaining Superior Performance’ published in 1985.
Porter classified the organisation’s activities into 2 types – Primary Activities and Support Activities.
3.2.1 PRIMARY ACTIVITIES
These activities are most important for any organisation and is the core activities. These activities cannot be outsourced. These activities includes the following in order they operate.
Inbound Logistics : This includes the received inventories, inventory control and storing of the input materials. Saravana Stores receive the fully made products and store them in their warehouse located underground of their main store.
Operations : This is concerned with the processing of the input materials received through inbound logistics. The operations part of Saravana Stores is service oriented. The activities include providing the products and services to the customers, maintaining the shelves and store with the products and stock management. To gain competitive advantage in this department, Saravana Stores has to closely monitor the maintenance and filling of stocks neatly. When customers arrive at the shop, they find most of the products found scattered in the premises and it is annoying. Saravana Stores could try focussing on this and can gain even more advantage over its competitors who provide excellent services in this department. However, rectifying this problem has to deal with the motivational factors of the employees.
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Outbound Logistics : It is related to delivering the services/products to the customer. Saravana Stores creates and adds more value to its customers through its Home Delivery system. However, it needs to improve on its parking facilities, shopping bag, security, bill counter staff and systems which if done efficiently, can save the customer’s time and earn their loyalty thereby gaining more competitive advantage.
Marketing and Sales : Saravana Stores attracts the customers through advertisements in Media, Newspaper and Radio channels. These advertising campaigns are carried out more perfectly as Saravana Stores has endorsed most of the leading top actors and actresses for its campaign to promote its current offers (Eg., Festival Discounts) . The advert in the TV appears once every 10 minutes and this is apparently one of its competitive advantage. This department works perfectly and this has helped Saravana Stores in tasting the success.
Service : It includes the service of the products after it has been sold and delivered. It means keeping the customer satisfied with his product and carrying on the activities to ensure his satisfaction. Saravana Stores does not provide after sales service for all the electrical and electronic items whereas it has exchange system for its textile section. Though they provide after sales service for few products which they offer at low cost (below market price), the service is not at all satisfactory among the customers because of the very poor service. If this area is improved, customer satisfaction which is one of the intangible resources can be gained which in turn can act as a very big competitive advantage. It can also help in increasing the profit margin.
3.2.2 SUPPORT ACTIVITIES
The support activities are the functions that supports the primary/core activities within an organisation. These activities are as follows.
Infrastructure : This is concerned on the departments including accounting, finance, planning, controlling, quality assurance and generic management. The planning and control functions ensure the company’s cash and cost control with a strong and continuous focus. Saravana Stores has emphasized on the security to avoid the internal and external theft by installing more security cameras and experienced staff.
Human Resource Management : HRM consists of the activities starting from the recruitment to dismissal or lay-offs. It takes care of activities like hiring, training, developing, compensating.. etc. Saravana Stores is good in terms of its recruitment but fails in providing proper training and motivation. The staffs of Saravana Stores are not at all motivated and encouraged. The service is also not linked to their wages. They pay very low wage and extract more work from the employees which is unfair. Hence the HRM part is really poor in Saravana Stores. Most of the customers in Chennai knew about the staff treatment by Saravana Stores management and they feel it is highly unethical and unfair. Due to this, the reputation of Saravana Stores, an intangible resource is deteriorating nowadays.
Technology Development : It is concerned with the innovation, technical knowledge, hardware and software which is important for the companies today to survive in the market. As mentioned earlier, Saravana Stores is still lagging behind the technology and a strong focus is needed in this department to add more value to the customers and the company.
Procurement : This department is responsible for purchasing the essential materials to be used by the operations department. In Saravana Stores, procurement department is operates well as it buys the materials at very low cost and sells it a moderate price with moderate quality.
4. MARKET ANALYSIS – STP
Market segmentation is the process of segregating the market into groups of customers with specific needs and requirements, specific characteristics and behaviours. This process is useful in identifying the potential competitors, segments, the power of the competitors based on which a suitable segment is selected to attract the customers. Segmentation of a market is important because the market is heterogeneous. Segmentation can be based on several ways. Some them are lifestyle segmentation, Psychographic segmentation, Age & Lifecycle segmentation, Behavioural Segmentation, Geo-demographic segmentation.
Saravana Stores targets the lower middle class and the lower class customers. This segmentation is based on the behaviours of the customers. It is now targeting the upper middle class segment in order to gain market share. Customers under the above categories prefer to buy products with low cost and reasonable quality offered by Saravana Stores. Moreover, these customers serve the highest population in the city. The perceived quality and the cost of the product helps Saravana Stores to taste the success further when introducing a new product or service. This is very well notable in their stores such as Saravana Stores Jewellery and Saravana Stores utensils section.
After the most appropriate market segments are being selected, the company starts targeting those selected segments. Certain other factors are also to be considered such as competitive analysis and internal analysis. The internal analysis include activities such as analysing company’s ability to outperform its competitors in the segment.
As in the case of Saravana Stores, family and youths are being targeted. In recent times, youths who work in corporate prefer to shop most of the time whenever they get off. A typical family shopping is being found only during the festival days. Saravana Stores offers more deals and discounts in the textiles segment to family shoppers during festive days whereas it raises its prices marginally during other days when the young people shop.
When the targets are being targeted, the company decides on the marketing mix or strategy to position itself to that targeted segment. Saravana Stores has positioned itself as a store offering low cost and good quality product among the middle and lower class customers successfully. This can also be considered as one of their competitive advantages over its competitors like ‘The Chennai Silks’, ‘Pothys’, ‘RMKV’ etc. Now Saravana Stores is well established in the city.
5. EXTERNAL ENVIRONMENT ANALYSIS
They have many opportunities to expand their market in other cities including Madurai, Trichy, Salem, Coimbatore and so on.
Since Saravana Stores has understood the needs of many customers who mostly fall under lower middle class categories, it can offer more products and services.
Saravana Stores has a first-mover advantage.
They have a reputation.
Customer preferences are evolving. Most of the customers prefer to visit stores that provide wide range of products under one roof.
The buildings of Saravana Stores are constructed by violating most of the security regulations. It may have to face legal threats by the concerned authorities.
There was a fire accident inside the building on 2 September, 2008. It has resulted in the death of two employees and more than 10 million worth of products damaged. The main reason considered for this incident is ignoring the safety measures.
The perception of the customers towards Saravana Stores is changing and many customers are switching to their rival stores.
The competitors of Saravana Stores provide a pleasant shopping experience which attracts customers towards them. Saravana Stores may lose most of their upper middle class customers.
Rising number of competitors pose threat to Saravana Stores.
The cleanliness and hygiene factor is missing in the premises of Saravana Stores. This may act as one of the factors to lose the customers.
Saravana Stores faces many legal complications that affects its reputation.
The customers feel that the products are over-priced for their quality. Initially, they offered low price and reasonable quality. But now Saravana Stores has increased its price on all its commodities. Customers also recognised the increase in price.
The Government policies are changing and the company would face more and more problems.
Other International competitors look forward to enter Indian retail industry.
5.3 PEST ANALYSIS
PEST analysis is used to analyse the external macro environment in which the company operates. Several factors are considered to find the opportunities and the threats that exists in the macro environment. PEST is an acronym of 4 factors which includes as follows
Social Factors and
5.3.1 POLITICAL FACTORS
Political factors should be considered for the smooth flow of business. It has a high influence on the business regulations and spending power of the customers. There are not many factors to be considered for Saravana Stores as the top management has fixed everything using its influence over the ruling party. To say literally, Saravana Stores has taken advantage of the bribery that prevails in the State Government.
The stability of the political environment also influences the industry. In TamilNadu, the forthcoming state assembly elections play a vital role for all the sectors. The winning party’s policy towards businesses and taxation schemes is expected to create an impact on retail industry.
5.3.2 ECONOMIC FACTORS
The economic factors are considered the most important aspect for any industry in any area. A company’s growth depends on the economy of the country in which it operates. The financial system of India is good and so the GDP is also good. The growth rate of GDP is approximately 6-6.5%. The Indian retail industry is expected to grow by 25% annually and its worth is expected to be $175-200 billion by the year 2016.
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All major economic factors such as inflation rate, exchange rate, interest rate considerably affects the buying power of the customers as well as the organisation’s capital cost. These factors also decide the price of the product. People in Chennai begin to shop at the start of every month and most of the time their shopping place is T.Nagar. The inflation rate is becoming high nowadays and this has led Saravana Stores to increase their prices.
5.3.3 SOCIAL FACTORS
The cultural and social factors differs from one country to another. In India, these factors vary from one state to other. It is often said about India as “Unity in Diversity”. In TamilNadu, the social and cultural aspects are more traditional than the other states. These aspects directly affects customer needs. Though Western fashions are introduced in TamilNadu, people still prefer traditional garments and other products. For example, in cosmetics department ayurvedic and natural products are preferred by the customers more than the other International branded products such as Lo`real, Neutrogena.
Saravana stores is facing many complaints regarding the social issues such as ignoring the safety regulations and polluting the environment. Other factors also include heavy traffic in the area all the time which creates a discomfort for the customers to shop peacefully. Moreover, customers are not preferring T.Nagar as their shopping spot due to high traffic and the inconveniences that prevails. Saravana Stores does not have a special parking area for its customers and so the customers have to find the spot by themselves. This even worsens the reputation of Saravana Stores as it is in the verge of losing most of its customers.
People nowadays prefer to shop in the local stores nearby that are within their reach at an acceptable price. The customers are shifting their preferences in product and services. Saravana Stores should act immediately before the situation worsens.
5.3.4 TECHNOLOGICAL FACTORS
The technology is considered as the important factor for competitive advantage. These factors can minimise the barriers of entry, aids in efficiency and can even influence the decisions.
Saravana stores has not concentrated till now on the technology department. They still use the old system for billing and services.
The supply chain management, customer relationship management, store management is not yet computerised.
Card payment counters are relatively very less in the store. Most of the customers would wish to pay by card and there exists a long queue for card payment.
There is no online service such as online shopping till now. Though online shopping is not suitable for garments and clothing department which is the main department of Saravana Stores, it can still provide that facility to other sections like Consumer Electrical and Electronics. But Saravana Stores is not willing to offer online shopping at all.
Since Saravana Stores lack in technology aspects, it is difficult to maintain the Customer Relationship Management (CRM) and communication with the customers (Feedback). These are missing with which business can be improved by analysing the customers more perfectly.
Saravana Stores can concentrate on its technological factors which may increase the quality of the products and services they offer at a low cost. These developments benefits customers and the company as well.
5.4. PORTER’S FIVE FORCES ANALYSIS
Porter’s five force analysis is a simple but effective tool to figure out the potentiality of the organisation in a given business scenario. It is very useful to find out the strengths of the current position and the position where the company is intending to get into. This is considered as an important tool for planning as it helps in taking advantage of the strengths and avoid the mistakes by recognising the weaknesses. It is an internal micro environment analysis.
However, the analysis is generally static. The competitive environment is dynamic and is changing constantly. There is a high chance of these forces changing at any time more rapidly. Though it is considered as an internal environment analysis, this framework ignores the human resource aspects for strategic analysis. But this model serves as a starting point for environment analysis.
According to Porter, there are five different forces determining the competitive advantage of a company in a business scenario. They are
Bargaining power of suppliers
Bargaining power of customers
Competitive rivalry within an industry
Threat of the substitutes
Threat of new entrants
5.4.1 BARGAINING POWER OF SUPPLIERS
Here, we can assess the bargaining power of the suppliers that determine the prices of the product they supply to the company. It is often described as market inputs. The factors responsible for increasing the supplier power is contrary to that of the buyer power.
Saravana Stores’ supplier power is low as they deal with huge amount of stocks. And moreover, those brands are not recognised by the customers often. Customers just buy them for their low price alone. In the current scenario, the suppliers find it difficult to sell their stocks by setting up a new store. Their entry cost is too high that they cannot afford. They run their businesses by supplying huge volume of stocks to Saravana Stores and gain profit.
There are many suppliers and there are many substitutes for them. So it is highly likely to have less bargaining power of the suppliers of Saravana Stores. The cost of switching the suppliers for Saravana Stores is not too high as they are well balanced and managed in these aspects. Since the retail industry in India is unorganised, this has dominant position over the suppliers.
5.4.2 BARGAINING POWER OF CUSTOMERS
The buyers are called customers who exerts more power under many conditions. Some of them are mentioned below.
If the customers are focussed and there are few of them
Vulnerability of Backward-Integration
The customers are always price-sensitive. The perceived value by the customers is the strong advantage for Saravana Stores. The customers are also not focused and prefers unbranded products rather than the branded items. So the threat of backward-integration (influencing the power of suppliers) is also low. The availability of many alternatives is the main issue to be considered in the case of Saravana Stores.
5.4.3 THREAT OF NEW ENTRANTS
New entrants foray into the market if the profit margins are highly attractive and their barriers of entry is low. According to Porter, there are seven sources of barriers to enter the market.
Economies of scale
Access to distribution channels
Cost disadvantages independent of scale
In the case of Saravana stores, Government policy acts as a high barrier for the International companies. FDI policy of the Government is unfavourable for the International companies.
The local domestic companies such as Wipro and other conglomerates are planning to start the retail chains in India. This is really a threat for Saravana Stores as it has to devise a new strategy and plan to minimise these threats.
5.4.4 THREAT OF SUBSTITUTES
In the business scenario, substitutes are often considered as the most important threat to any company. If the company offers products, it can be easily replicated in the industry. More often, substitutes introduce new technologies or reduce the prices of the same product but do not replace the existing products in the market. To be precise, the profit gained from the substitutes is kept low by the followers.
Unorganised retail industry is the main threat for Saravana Stores. As there are more substitutes for the unbranded products, customers are more likely to switch where the prices are very low than Saravana stores offers. This threat is relatively less in grocery department as there are not much substitutes for the branded products. Though some substitutes are available for the groceries, customers prefer branded in this department. All the other departments like textile, jewellery has more substitutes and Saravana Stores is pushed to keep its prices low to attract customers.
5.4.5 COMPETITIVE RIVALRY
Some of the competitors for Saravana Stores are ‘The Chennai Silks’, ‘Pothys’,’Big Bazaar’,’Kumaran Stores’, ‘RMKV’ and few others. These stores are located in and around T. Nagar shopping area. The rivalry is high between these companies as each fights to gain the market share. Because of this extent of rivalry, the profits fall. But Saravana Stores is the larger company amongst the rivals and is able to interrupt any actions taken by its small competitors.
The emerging ‘Big Bazaar’ poses a high threat to Saravana Stores as it gaining its market share significantly over the years within a short span of time. The competition is price-based and hence it is very hard to gain the customer loyalty. In a recent study, middle class customers are switching from Saravana Stores to Big Bazaar as both the companies offer same products and services. Saravana Stores is losing its middle class customers and should act immediately.
6. MARKETING MIX
This is also called as the 4 P’s of marketing. The decisions for marketing a product or service can be made considering the 4 P’s as follows.
Just like cooking where all the ingredients are to be included in the right amount and at the right time to get the tasty food, these 4 P’s are considered at the right time to taste the success of a product or service. Note that the internal and external constraints of the marketing environment is to be considered while making marketing decisions. The objective of right marketing mix is to create a positive value and positive response from the customers in the targeted market segment.
Saravana Stores offers wide range of products that ranges from Apparels, Accessories, Food, Furniture, Groceries, Utensils, Textiles, Toys, Electricals & Electronics, Stationary items, Jewellery etc.
Apparels – Casuals, Formals, Jeans, T shirts, Party wear, Under garments, Night wear, Sarees, Silk Sarees, Ladies wear, etc.
Home & Personal Care products – Utensils, Shampoos, Detergents, Soaps, Creams, Plastics, Cookery, etc.
Electrical & Electronics – Mobile phones, TV, Radio, Speakers, Computers, Peripherals, Watches, Hair trimmers, shavers, etc.
Saravana Stores’ objective of pricing is to gain more market share thereby sustaining its position as a leader in the segment. The pricing strategy of Saravana Stores lies balanced between penetration pricing and economy pricing but it is more inclined towards penetration pricing.
Saravana Stores adopts Value pricing, promotional pricing and Bundling. They assures consumers low prices everyday without any coupons. They also caters special event pricing on special occasions such as Diwali and Pongal. Bundling is also done by combining related products and selling it as a single package to increase the sales. Due to the perceived value of the customers, Saravana Stores has slightly increased its prices on most of the products it offers.
Place is concerned with the distribution of the products or services to the customers. Saravana Stores has opened 4 new separate outlets for Jewellery, Electronics, Furniture & Utensils and Textiles in the busiest area of T. Nagar. It is the heart of Chennai and is reachable. Saravana Stores is also planning to open new stores in other cities including Madurai, Salem and Coimbatore. It has also opened a new store in Purasaivalkam, Chennai. Saravana Stores has also launched its online shopping portal where customers can order the products and get it delivered through their door. It has received a great response from the customers. This also aids in saving the time of the customers.
Promotion deals with the communicating the information with the customers about the products. Some of the
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