Business Model Innovation Big Bazaar Case Final Presentation

1. BIG BAZAAR
Group B
Robert Field, Allan Ganness, Zhaodi Liu, Pei-Ping Mo, Keith Otto

2. Background: Kirana Stores
Small and Intimate
500 sq. ft Avg.
Family Owned
Personal Service
Easy Credit Terms
https://www.youtube.com/watch?v=HWxVP4DwZng

3. Background: Hypermarket Concept
Blended fusion of tradition Indian Bazaar & Organized Retail
50,000 sq. ft Average
Huge Selections
Parking, Air Conditioning
Bargain Prices
https://www.youtube.com/watch?v=n0bdD17mW5c

4. Question 1: Business Model
Canvases
Q1. Use the Template - Business Model Canvas to compare and contrast the
business models of:
(a) the highly fragmented traditional retailing industry
(b) Big Bazaar
What are the key differences? Which aspects of the traditional model represent barriers to entry
for modern “organized” retailers?

5. Business Model Canvas: Traditional Retailers
Key Partners
• Distributors
• C&F agent
• Wholesalers
• Local farmers
•
Key Activities
• Customer support
• Sell products
• Manage competitor pricing
• Negotiate terms with suppliers
• Manage relationship
w/suppliers and manufacturers
• Acquisitions and Mergers
• Price adjustments flow
rapidly
Value Proposition
• Low price
• Choice of “loose” self
serve products
• Touch & Feel for the
quality of product
• Convenient proximity
• Long standing credit
Customer Segments
• Mass market
• Shopper Centric
• No Distinction
• Cost Oriented
Key Resources
• Real estate
• Product
• Families
Customer Relationships
• Personal assistance
• Long standing tradition of
offering credit
Channels
• Traditional Retailers
• (Kirana stores);
• Stalls
• Push Carts
Cost Structure
• SG&A
• Operation Costs
• product purchase
• Wages(large retailers)
Revenue Streams
• Product sales
5

6. Business Model Canvas: Big Bazaar
Key Partners
• Real estate team
• C&F Agents
• Distributors
• Government
• Local farmers
• Legal firms
• Engineering firms
• Construction firms
Key Activities
• Product sales
• Customer Service
• Marketing & advertising
• Innovative promotions
• Operation management
• Real estate planning
(location strategy-urban)
• New Construction
Value Proposition
• Low price (fixed price)
• Wide selection of product
under one roof
• Choice “loose” self serve
products and packaged
products for convenience
and preferences
• No hassle purchasing
experience
• Comparable quality
products
• Convenience (under 1
roof)
• Easy parking
• More comfortable
environment (A/C)
• Customer return
privileges
• Ability to recycle old
products for store credit
Customer Segments
• Mass market(fashion,
food, general
merchandise, leisure and
entertainment)
• Middle and upper class
consumers (pantaloons-formal
trousers to family
fashions, private label
programs)
• Young working
generation
• Working women who
are primary the decision
maker in family
Key Resources
• Real estate Planning
• Product
• Management/Sales/Mkt/
Operations
• Human resource
• IT infrastructure
• Legal teams
• Engineering teams
• Construction teams
Customer
Relationships
• Personal assistance
• Long standing tradition of
offering credit
• Merchandise return
privileges
• Recycling Buyback store
credit program
Channels
• Pantaloons
• Central Mall
• Big Bazaar
• Food Bazaar
• Fashion Station Stores
• All stores(plus sized
women’s clothing)
Cost Structure
• SG&A
• Operation Costs
• product purchase
• Wages(large retailers)
Revenue Streams
• Product Sales (traditional 8% gross margin)
• fixed rate(rent)and % of Concessionaire sales/Manufacturers
sales(private label sales)
• Additional discounts(1% display income, 4% manufacture discount,
3% distributor discount)

7. Key Differences: Value Proposition
Big Bazaar Traditional Retailer
Fixed Low pricing Everything Negotiable
Personal Assistance/ Self Serve Merchant recommended and selected – Kirana
stores
“Touch and Feel “ a must!!
Multiple Selections Limited selections
Hassle free return policy No return policy
• Conveniences (all under 1 roof) Fragmented stores
Comforts (AC); Pleasant Environment No AC (stores and open-air stalls/carts)
• Family Oriented
(activities for all ages)
Purchase only (no entertainment)
Recyling Credits No recycling
Dedicated Parking No dedicated parking

8. Key Differences: Customer Segments
Big Bazaar Traditional Retailer
• Middle and Upper Class • Mass market
• Family Oriented • Shopper Centric
• Young, Educated, Active
Lifestyle
• No Distinction
• Value Oriented • Cost Oriented
• Favor female shoppers for
Consumer goods (foods)

9. Key Differences: Customer Relationships
Big Bazaar Traditional Retailer
No Hassle Return Policy No Return Policy
Personal Assistance or Self-
Service
Personal Assistance
Merchant Choice
(Kirana – 100sq-ft stores)
Everything Under 1 Roof Fragmented Stores
•Credit card & Cash
•Cash only
•Merchandise return privileges
•Recycling Buyback store credit
program
•Credit offered – usually interest
free

10. Key Differences: Channels
Big Bazaar Traditional Retailer
•Pantaloons
•Local retailers
•Central Mall
•Kirana (~ 100 sq-ft)
•Big Bazaar
•Stalls
•Food Bazaar
•Push Carts
•Fashion Station Stores
•All stores(plus sized
women’s clothing)

11. Key Differences: Key Partnerships
Big Bazaar Traditional Retailer
•Real estate research team
• Distributors
•C&F Agents
•C&F agent
• Distributors
•Wholesalers
•Government
•Local farmers
•Local farmers
•Engineering firms
• Construction firms
•Legal team

12. Key Differences: Key Activities
Big Bazaar Traditional Retailer
•Product sales
•Marketing
•Advertising
•Innovative promotions
•Operation management
•Real estate planning(location
strategy-urban)
•New Construction
•Customer support
• Sell products
•Manage competitor pricing
•Negotiate terms with suppliers
•Manage relationship w/suppliers
and manufacturers

13. Key Differences: Key Resources
Big Bazaar Traditional Retailer
•Real estate
•Real estate
•Product
•Product
•Management/Sales/Mkt/Operations
•Families
•Human resource
•IT infrastructure
•Legal
•Engineering
•Construction

14. Key Differences: Key Partnerships
Big Bazaar Traditional Retailer
•Real estate
• Distributors
•C&F Agents
•C&F agent
•Distributors
•Wholesalers
•Government
•Local farmers
•Local farmers
•Legal
•Engineering
•Construction

15. Key Differences: Revenue Streams
Big Bazaar Traditional Retailer
• Product Sales (traditional 8% gross
margin)
• Fixed rate (rent) and % of concessionaire
sales & manufacturers’ sales (private
label sales)
• Additional discounts(1% display income,
4% manufacture discount, 3% distributor
discount)
Product sales

16. Key Differences: Cost Structure
Big Bazaar Traditional Retailer
•SG&A
•Operation Costs
•Product purchases
•Wages (large retailers)
Product sales

17. Barriers to Entry for Modern Retailers
 Modern “organized” retailers would need large real estates in proximities to existing traditional and
Big Bazaar outlets
 difficult, expensive and acquiring could be a lengthy proposition.
 Poor infrastructure in transportation, service sector, and supply chain to support large scale
“organized” operations.
 Government favoring domestic retailers (traditional retailers and currently organized – 2005 to
2009 “window of opportunity”)
 further limit the real-estate availability, commanding real estate higher prices, more competition on established
“organized”, and their brand creation and loyalty.
 Customers tactile (touch and feel)
 Require increased floor space (real-estate) to support open bins or product layout (e:g grains and apparel).
 Require additional personnel to assist customers as well as in packaging product for quick, convenient purchasing.

18. Question 2: Indian Retail Environment
Q2. Analyze the environment of the Indian retail industry in late 2005. What
are the major trends and external forces that will impact Big Bazaar’s
business over the next decade? What are the key challenges to their
continued growth?

19. Major Retail Trends
Indian retail market has been growing at near double digit rate for years
Greater disposable incoming due to growing middle class makes for greater
expectations in the retail experience
i.e. Improved decor and ambience, more streamlined facilities, improved product packaging, etc.
Western cultures influenced greater consumption rates (20-49 year old demographics)
Indian retail market represents a huge portion of India’s GDP (~15%)

20. Major Retail Trends (cont.)
Huge increase in home purchasing opens doors in new markets (i.e. home furnishings)
New retail experiences being offered
i.e. Supermarkets, hypermarkets, department stores

21. External Forces
Severely limited real estate in India, particularly retail malls, restrict Big Bazaar’s ability
to expand its locations to keep up with its frenzied growth
Increased competition, not only by established foreign firms (i.e. Wal-Mart), but also by
increasingly developed domestic firms (i.e. Reliance)
Government easing of restrictions and tariffs on imported goods allow Big Bazaar to
explore new, foreign items to add to their product mix

22. Challenges to Continued
Growth
Lower gross margins due to increased competition with other organized retailers (i.e. Reliance)
Employee turnover in a rapidly growing economy (including key executives)
Supply chain burdens; distribution must keep up with inventory demands
Poor infrastructure i.e. Roads, transportation, retail locations
Government regulations on inter-state sales (i.e. Sales taxes not being reimbursed)

23. Question 3: Barriers to Entry
Q3. The case suggests that there was “a window of opportunity from 2005-2009 for
domestic retailers to acquire real estate and roll out stores in a protected
environment”. Assuming that foreign retailers such as Marks & Spencer and Wal-
Mart were allowed to enter the Indian market by 2009, what challenges and barriers to
entry would they face in establishing a viable competitive position in the country?

24. Window of Opportunity 2005 - 2009
 Q3. The case suggests that there was “a window of opportunity from 2005-
2009 for domestic retailers to acquire real estate and roll out stores in a
protected environment”.
 Ans.
 Yes – this time period will allow attententive retailers (Big Bazaar) to
work on their business model, scale their operations, become capital
efficient and further develop infrastructure and increase operational
efficiencies.

25. Window of Opportunity 2005 - 2009
 Q. Assuming that foreign retailers such as Marks & Spencer and Wal-Mart were
allowed to enter the Indian market by 2009, what challenges and barriers to
entry would they face in establishing a viable competitive position in the
country?
 Ans.
 FDI limitations on how to enter market
 Single Store Format, Franchise Model, JV or Partnership Model
 Inadequate infrastructure to support scaling efficient operations
 Home country disadvantage

26. Window of Opportunity 2005 - 2009
 Q. What others did you identify?
 Compare and Contrast FDI Strategy in China vs.
India
 How was it different between the Gome and Big Bazaar Cases?
 Why was the Strategy Different?
 What were the Motivations?

27. Question 4: Charting the Future
Q4. The final section of the case ( Charting the Future ) raises a number of issues and
opportunities for Pantaloon. What would you recommend with respect to
(a) expansion and increased market penetration with existing concepts vs. the development of new
concepts;
(b) infrastructure development (supply chain and management systems);
(c) local vs. global sourcing;
(d) availability of qualified labor and management skills;
(e) real estate acquisition; and
(f) pace of growth? Which issues and constraints will be most critical?

28. Existing Concepts vs. New
Expansion and increased market
penetration with existing concepts:
Development of new concepts:
Introducing more value-add services :
○ Merchandise return privilege
○ Low price guarantee
○ Online opinion-sharing community
○ Customer Satisfaction Guarantee
○ Marketing and advertising campaign
Home furnishing - increasing new homes annually
Acquire real estate for new malls
Expand into Tier 2 or 3 cities
Embarking collaboration with different companies
“Republic Day”- lots of opportunity for growth.
• Develop a new supply chain system and IT
infrastructure
• Increasing the number of stores strategically
• Working with local polices

29. Infrastructure Development
● Existing supply chain system may be inadequate and unable to keep up with
demand for these specific items with the current system.
○ Investing in a modern supply chain system
○ Integrating advanced IT system
○ Collaboration with supply partners
○ Choosing optimum merchandise mix and lower merchandise/overhead costs
○ Invest in a solid, robust Customer Relationship Management (CRM) system

30. Local vs. Global Sourcing
Local sourcing Gobal sourcing
● Local sourcing makes it convenient
and easier to access to products in
smaller volume.
● Work with manufacturers and C&F
agents to make souring of the product
more efficient and effective
● Internal State Tariff/tax is a problem for
global sourcing and would recommend
working with government.
● Central distribution center could limit
product availability in stores due to
erratic and unpredictable demand.

31. Qualified Labor & Management Skills
● Cooperate with colleges/ universities in training next generation or
college students on retailing, IT, and supply chain management to
replenish human capital to fuel future growth
● Put in place an employee retention program to keep talents stay with the
company
● Performance and Reward System
● Employee Training Program

32. Real Estate Acquisitions
Lack of Malls is a major constraint for organized retail growths
Real estate acquisition is required to sustain the rapid growth of the retail
stores.
Raised funds with other investors other than PRIL
launch 55 new malls across the country
Cooperate with the government in establishing rules that would make it
easier to acquire real estate necessary for their growth/expansion.

33. Pace of Growth
• Increases their pace of growth to take advantage of protected period
between 2005-2009 to secure their market share and position.
• Align their growth pace with their need for building the infrastructure and
trained personnel necessary to sustain their growth.
• Significant investment must be made in the short term in order to enable
the company to grow to their full potential.

34. Critical Issues & Constraints
Which issues and constraints will be most critical? Why?
● Supply Chain management: Many of the potential problems and
limitations that the firm will run into in the future can be tied back to
weaknesses in the supply chain management system.
○ IT infrastructure need to support the supply chain management system are
not in place which may impact their expansion as mentioned earlier.
○ Constraints in global and Local sourcing problems ties to supply chain
management where they will affect their management of getting the products
to meet the demand of the consumers.

35. Critical Issues & Constraints
Supply Chain management:
Inter-state tax problems: If they were not able to resolve this issue, they will not
have enough margin to sustain their business as they only have 15% margin
and the sales tax for products going between 2 states will be 13% plus the
other expenses that associated with transporting the goods to other state as
mentioned in global and local sourcing.
Not able to go around the supply chain (C&F/Distributors) to reduce the cost of
obtaining the consumer goods are big inhibitors for their growth and need to
be addressed.
Implementation of their own supply chain management is very expensive and
they need to justify the benefits that it will bring to Pantaloon.

36. Critical Issues & Constraints
Increasing competition (both domestic and global):
The ability for multinationals like Wal-Mart and major Indian business house like
Reliance that were likely to enter the market investing in creating their own
supply chain system.
Reliance, India largest business house, planned to invest huge capital in 1,500-
1,800 hypermarkets and employing 400,000 - 500,000 employees with 60
supply centers, and even one of the senior PRIL executive had moved to
Reliance. Operating a similar growth strategy as Reliance, Big Bazaar need to
figure out the differentiated strategy to go to the huge potential retail market in
India.

37. Critical Issues & Constraints
Increasing competition (both domestic and global):
Foreign competitor like Walmart and Marks & Spencer had planned to enter the
India retail market once the government unleashed their FDI restriction.
Though the limit of understand the india culture, Walmart sophisticated supply
chain management system, warehouse management system and
comprehensive operation system would be a good threat for Big Bazaar retail
business.
To accomplish the target for obtaining high market share and premium gross
competing the domestic and global foreigners,Big Bazaar need to
differenciate their corporation strategy and position to better suit the need for
the comprehensive customers.

38. Charting the Future
What changes to the business model would be required?
(Business Model Canvas Whiteboard)

39. Key Partners
• Real estate
• C&F Agents
• Distributors
• Government
• Local farmers
• Legal firms
• Engineering firms
• Construction firms
• University/Colleges
• Construction/Engineering
• Shop Owner
Key Activities
• Product sales
• Marketing/Advertising
• Innovative promotions
• Operation management
• Real estate planning(location
strategy-urban)
• New Construction
• Redesign Supply Chain
management System:
warehouse, inventory
management, SAP
Value Proposition
• Low price (fixed price)
• Wide selection of product
under one roof
• Choice “loose” self serve
products and packaged
products for convenience and
preferences
• No hassle purchasing
experience
• Comparable quality products
• Convenience (familiarity ); 24
hour ; wider isles; financing)
• Easy parking
• More comfortable
environment(AC),
• Customer return privileges
• Ability to recycle old products
for store credit
• Extend product mix: provide
new furniture bazaar, fashion
bazaar etc
• Private labels products
Customer Segments
• Mass market(fashion, food,
general merchandise, leisure
and entertainment)
• Middle and upper class
consumers (pantaloons-formal
trousers to family
fashions, private label
programs)
• Young working generation
• Working women who are
primary the decision maker
in family
Key Resources
• Real estate Planning
• Product
•Management/Sales/Mkt/
Operations
• Human resource
• IT infrastructure
• Legal teams
• Engineering teams
• Construction teams
• Supply Chain System
• Training employees
Customer Relationships
• Personal assistance
• Long standing tradition of
offering credit
• Merchandise return privileges
• Recycling Buyback store
credit program
• Low price guarantee
• Customer satisfaction
guarantee
• Call center
Channels
• Pantaloons
• Central Mall
• Big Bazaar
• Food Bazaar
• Fashion Station Stores
• All stores(plus sized women’s
clothing)
• Furniture department
• Different function department
• Online stores
Cost Structure
• SG&A
• Operation Costs/ Wages(large retailers)
• Product purchase
• Real estates and Building Constructions
• Infrastructure
• Training Employees
• Building Supply Chain System
Revenue Streams
• Product Sales (traditional 8% gross margin)
• fixed rate(rent)and % of Concessionaire sales/Manufacturers sales(private
label sales)
• Additional discounts(1% display income, 4% manufacture discount, 3%
distributor discount)
• Concessionaire revenue(ROI from Mall; interest from financing)

40. Kishore Biyani Speaks
 https://www.youtube.com/watch?v=E9am3ySQoJ0