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reasons for the failure of subhiksha

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  1. 1. <ul><li>group-4Dev prayaglavkumarshubhangikaushalswapneshjainmukeshsinghshivpalsingh</li></ul>ITM- GLC-Navi Mumbai<br />
  2. 2. why they failed!!!<br />
  3. 3. Subhiksha means prosperity in Sanskrit.<br />Founded by R. Subramanian, an IIT-IIM alumni in 1997<br /> Wasone of the largest retail value chain in India.(in terms of no. of stores) <br />1600 outlets selling groceries, fruits, vegetables, medicines and mobile phones.<br />
  4. 4. The People ASSOCIATED<br />1) Chairman ‐R Subramanian (IIM‐A Alumnus)<br />2) Ms.Rama Bijapurkar (IIM‐A Alumnus),Board of Director<br />3) Mr. Kannan Srinivasan (a professor of marketing at Carnegie Mellon University’s TepperSchool of Business),Board of Director<br />4) Mr. S.B. Mathur, former LIC Chairman,<br />5) Ms. RenukaRamnath, Managing Director of ICICI Venture<br />6) Ms. Rajeev Bakshi, Deputy Managing Director of ICICI Venture and a former CEO of PepsiCo India.<br />7) Mr. AjemPremij as Board member<br />
  5. 5. Major shareholders<br />ICICI Venture-23%<br />Ajempremji(wipro)-10%<br />ICICI prudential-5%<br />
  6. 6. The Positioning:<br />Low Prices :Subhiksha Positioned itself as Value Retail Chain /Discount Retail Chain.<br />Trust : Subhiksha’s name inspires trust and its consumers rely on it through all times to deliver.<br />Savings : focuses on the concept of constantly sustainable low pricing .<br />
  7. 7. STRATEGY<br />Cut price strategy.<br />Focused on the lower & upper middle class.<br />Wal-mart‐style- everyday‐low‐price (5‐10% less than MRP )<br /> Shops are located not on the main road.<br />The catchment area of customers.<br />Informed customers about promotional offers.<br />
  8. 8. The expansion:<br />March 1997 -Opening of the first retail store in Chennai, with 5 lacs Initial investment.<br />March 99‐14 stores in Chennai<br />June 2000‐ 50 stores in Chennai&I CICI venture joins<br />June 2002‐ 120 stores in whole of Tamil Nadu<br />June 2006‐420 Stores in other big states in India namely Gujarat, Delhi, Mumbai, Andhra<br /> Pradesh and Karnataka.<br />Feb 2007‐500 stores across country<br />Dec 2007‐ 1000 stores across India<br />October 2008‐ 1600 stores across India<br />
  9. 9.
  10. 10. “We are a golden egg laying duck, we are in trouble. We need their (bankers and lenders) support and upon getting it we will restart operations and repay all debt. It is not easy, but we have to make it happen,” says R Subramanian<br />
  11. 11. Reason For Failure<br />Big mistake - Expanding rapidly without sufficient funds in hand<br />Thought of raising equity during last September but were late<br />Global scenario went wrong <br />October, 2008 the company ran out of enough funds to run the organization<br />There after problems queued up at the doors<br />
  12. 12. Financial Crisis<br />Advertising:Advertising dues not cleared <br />Wages and Rent :Huge list of outstanding wages and rent<br />Disruption in supplies by wholesale suppliers <br />
  13. 13. Inadequate system control and IT Support: Caused huge audit & abnormal losses in system<br />Government Intervention :<br /> Maharashtra FDA,askedSubhiksha to suspend operations at its warehouse in Bhiwandi<br />
  14. 14. Supplier Bargaining Power : <br />Many wholesale suppliers in Azadpursubzimandi, have stopped supplying fruits and vegetables in NCR surrounding the national capital. <br />Long credit periods<br />Lack of strong HR policy and Staff‐ <br />Was not able to retain the talent which he initially bring into Junior, Middle and high level management. Whatever was remaining with it is all family bound with no commitment policy.<br />
  15. 15. Huge Rental and Lease Bills : <br />There are huge frauds while entering in to rental agreements by their own management people. There was no proper check and control on this cost ,though this is a very crucial part to defeat competitors and to gain profitability in future. <br />The wrong assumption-telecom segment profit making segment.<br />The CEO never looked in to system losses arise from telecom. Subhiksha stores always sell handsets at below DP while its benchmarking is to match DP.<br />No control on inventory of mobile accessories and there stock value and were unable to circulate the working capital.<br />
  16. 16. Poor Inventory management<br />Credit defaults caused supply breakages-inventories going bad or lack of stock<br />Became re-sellers rather than retailer<br />Re-selling to other retailers<br />
  17. 17. Strong Competition : <br /> Thus sinking into unrepaired conditions Subhiksha has to compete with its high profile competitors like RPG, Reliance retail and Future group etc.<br />Reliance Retail has set up 700‐odd stores in the past two years-Reliance Fresh<br />On the other hand is high‐end in terms of display, ambiance and size.<br />
  18. 18. Competitive Analysis<br /> Competitors at the National Level <br />
  19. 19. Competitive Analysis<br /> Competitors at the Regional Level<br />
  20. 20. Over confidence and Aggressiveness: <br />The raise of the company thus gradually started sinking down step by step and now stands on the verge of collapse. <br />The management admit that their over confidence and aggressiveness are the main reasons for their loss. <br />They should have gone for an IPO when the things were well and good to prevent such downfall. <br />If they had responded in right time they wouldn’t have been put through such bad phases.<br />
  21. 21. References:<br /><br /><br /><br /><br />