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  1. 1. Retail Management, 2/E Bajaj, Tuli & Srivastava CHAPTER 2 RETAIL ORGANIZATIONHints to Concept Review Question: 1. What do you understand by classification of retail unit and outline the importance of classifying retail units?The strategic intent of each retailer is identified from is classification. A Specific retailformat analysis is important in 3 phases of strategic planning: • selecting an organizational mission, • choosing an ownership alternative, • defining the goods/services category, and • Setting objectives. 2. List all possible basis of classifying the retail businesses.The instructor can elaborately explain the bases of classifying retail units, starting with a) Retail format as per Nature of ownership: i. Sole proprietorship, ii. Partnership and iii. Limited Liability Company (Private L.L.C &Public L.L.C). b) Retail format as per Operational structure: i. The independent trader (one retail outlet operation); ii. The multiple or chain store; iii. Franchising and the iv. Consumer co-operative. c) Length & depth of Merchandise. i. Offer a wide range of goods ii. Dealing in specific product category d) Nature of service: For eg: Self-service, and providing following services such a delivery, credit, gift wrapping, repairs, etc. e) Type of pricing Policy: Some retail businesses choose, i. Low price emphasis, while some offer ii. Attractive attribute such as convenient location, premium merchandise mix or distinctive image. f) Type of retail location: classified according to their store’s geographic location. i. Out-of-town locations, whilst others ii. Locate in ‘cluster’ locations in downtown centers. g) Method of customer interaction: i. Retail stores facilitating face-to-face contacts. ii. Non-store retailing operations (mail order catalogues, telephone selling, vending machines, door-to-door selling or mobile vendors.) Copyright © Oxford University Press, 2010
  2. 2. Retail Management, 2/E Bajaj, Tuli & Srivastava 3. Discuss the types of retail units and their respective characteristics on the basis of ownership.Now as answered in the previous question the different basis of classifying retailformats, but based on the nature of ownership pattern, a retail format can be classifiedSOLE PROPRIETORSHIP: The characteristics of this retail format are-- It’s easy to form, less expensive to organize and the proprietors have full control.- The income generated reaches the proprietor and he can make the ultimate decision to keep it or reinvest in business.- The business is easy to dissolve, if desired, yet other characteristics also do exist like:- Their business and personal assets are at risk; due to unlimited liability, they are also legally responsible for all the debts.- Often limited to using funds from personal savings or consumer loans, and- May have a hard time attracting high-caliber employeesPARTNERSHIP: The characteristics of this retail format are- • Partnerships are relatively easy to establish and with more than one owner, the ability to raise funds may be increased. • Prospective employees may be attracted to the business if given the incentive to become a partner and the business usually will benefit from partners who have complementary skills. Yet, • Partners are jointly and individually liable for the actions of the other partners. • Since decisions and profits are shared, disagreements can occur.LIMITED LIABITLITY (PVT&PUBLIC): LLC’s must not have more than two of the fourcharacteristics that define corporations i.e. • Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests. • It is designed to provide the limited liability features of a corporation, tax efficiencies and operational flexibility of a partnership. Yet formation is more complex and formal than that of a general partnership. 4. What are the differences among retail units operated under following type of ownership structure namely retail chain, franchising and joint venture.The main differences among the following retail units are: -Retail Chain (Barista Coffee Company Ltd – Coffee retail chain; Pizza Hut- Fast Foodretail chain)- • The retail chain has a higher bargaining power with suppliers due to their volume of purchases. • They receive new items as soon as they are introduced, obtain the best prices and achieve cost efficiencies. • Large chains may also gain exclusive rights to selling certain items and may have suppliers make goods under their own brands. (For e.g.: Sears) • Can take advantage of a variety of media and thereby large revenues are generated aided by this geographic coverage .Yet, Copyright © Oxford University Press, 2010
  3. 3. Retail Management, 2/E Bajaj, Tuli & Srivastava • The flexibility may be limited and consistent strategies must be maintained. • Managerial control can be hard for geographically dispersed branches of chain causing Lack of communication and time delays in decision-making. Franchising Individual franchisees can own retail enterprises with relatively small capital investments. Franchisees acquire well-known names and goods/service lines. Standard operating procedures and management skills may be taught to the franchisees. A national or global presence can be developed quickly and with less franchisor investment. Joint Venture Understood as technical and financial collaboration either in the form of green-field projects, take-overs or alliances with existing companies. Usually comprise two or more individuals/companies, one of whom may be non-resident, who come together to form an Indian private/public limited company, holding agreed portions of its share capital. primarily provides for the manner in which the shareholders of the joint venture company may transfer or dispose of their shares. It is also commonly referred to as a shareholders agreemente.g.: India Satcom Ltd (supplying satellite terminals for data communication) Bangalore,FIBCOM India Ltd etc. 5. What do you understand by co-operative retail format and enlist its state of operation in the Indian retail Industry?Co-operative outlets are generally owned and managed by co-operative societies likewelfare projects of the government for employee and its family’s benefits. KendriyaBhandar is the largest operating consumer co-operative society. It operates by followingobjectives like:- Providing essential commodities of daily needs to the customers at reasonable price - representing assured standards of quality and value for money.- To play an effective role in the public distribution system and to become a pacesetter in retail market.- To assist the Government in holding the price line and ensure distribution of scarce commodities at controlled prices.- To create an attractive and congenial shopping environment for customers.- Other examples of co-operative societies in India are HOPCOM-horticultural co- operative marketing and Co-optex – Tamil Nadu handloom Weavers co-operative society (State Government undertaking ) 6. What are the types of retail formats on the basis of their location and merchandise variety they are offerings and discuss each classification with the help of example (retail store) from your city?Classification of retailers on the basis of location is discussed below: Copyright © Oxford University Press, 2010
  4. 4. Retail Management, 2/E Bajaj, Tuli & Srivastava1) Retailers at Freestanding location: Retailers located at site, which is not connected to other retailers and therefore they depends on its own drawing power and promotion to attract customers, classified as neighbourhood or highway stores. For eg : McDonalds outlet in Delhi- Ludhiana highway .2) Retailers in Business Associated location: who located their store where a group of retail outlets offering a variety of merchandise, work together to attract customers to their retail area, but also compete against each other for the same customers, classified as unplanned business districts and planned shopping centres. For e.g. : Trichur Round Market Place in Kerala covering garments, grocery, jewelry, shoes, home products, confectioneries etc can describe a planned business district .3) Retailers in specialized market: traditional independent retailers or chain stores particularly prefer specialized markets .For e.g.: the Chowk area in Lucknow famous for its food and cotton embroidery cloth materials.4) Retailers at airports: mostly comprising of duty-free shops, newsstands, souvenir and book stores but now also seen opening food retail chains like café coffee day etc.As for retail units on account of variety of merchandise mix can be classified as follows: • Departmental stores: a large retail store organized into number of departments offering a broad variety and depth of merchandise; commonly part of a retail chain Ebony, Globus, Lifestyle, Pantaloon, Shoppers Stop and Westside • Discount Stores: Retailers offering a broad variety of merchandise mix, limited or no service, and low prices. Subhiksha, Margin Free market and outside India, Wal-Mart is a classic example of the most successful retailer operating as a discount centre. • Specialty Stores: complementary product categories and extend a high level of service to their customers. For e.g.: Vivek’s retailing consumer durables in Chennai, shopper’s store housing planet m. • Supermarket and Hypermarkets: Hypermarkets are characterized by large store size, low operating costs and margins, low prices and comprehensive range of merchandise. For eg : Big Bazaar ,RPG owned Giant Hypermarket. Successful international hypermarket chains include Carrefour of France and Continent of South Africa. 7. What are the different types of retail units on the basis of method of customer interaction? Retail units can be classified into two groups on the basis of the nature of interaction between retailer and customers namely store retailers and non- store retailers. Copyright © Oxford University Press, 2010