PROJECT REPORT

on

MARKETING

Chapter 1

Introduction

1.1 Introduction to Problem

This thesis work introduces the bigger challenge of opening a wine retail outlet in Delhi. This chapter discusses the basic nature of product ,the complexities in the retail of specific product and the related aspects of successful implementation of such an outlet in Indian Context .

This chapter defines the liquor and the place of wines in liquor hierarchy .Then it elaborates on the retail and import of such products to a protected nascent market like India. It furthers the focus on the retail aspects of wine marketing in India . The report contains the relationship between the changing consumer prospects and the emerging option of opening up a wine retail in India with focus on Imported wines .

1.2 The Product - Wine

The wikipedia defines liqueur is an alcoholic beverage that has been flavored with fruit, herbs, nuts, spices, flowers, or cream and bottled with added sugar. Liqueurs are typically quite sweet; they are usually not aged for long but may have resting periods during their production to allow flavors to marry. Liqueurs are mixtures of spirits, sweeteners, and flavorings like herbs, fruits, nuts, and flowers. They're sometimes served as after-dinner drinks, but they're more often poured on desserts or mixed into cocktails, milk, or coffee.

According to foodsubs. com, Wine is an alcoholic beverage made from the fermented juice of fruit, usually grapes. There are four broad categories: table wines, sparkling wines, fortified wines, and fruit wines. Table wines are the most common, and they're grouped by color--red, white, and blush, which is sometimes called rosé. A red wine should be served at room temperature, and it goes well with hearty, meat-based dishes like steak and spaghetti. White and blush wines should be served chilled, and they go best with lighter fare, like fish and chicken. Many wines, called varietals, are named after the variety of grape used to make them. Cabernet Sauvignon, Zinfandel, and Pinot Noir are popular red varietals, while Chardonnay, Chenin Blanc, and Johannisberg Riesling are popular white ones.

1.3 Background

The Indian retail sector is experiencing fastest growth than any other sector in Indian Economy. Globally , India and China are among the fastest growing economies in the aftermath of the global financial recession. Since 1992, when Indian government liberalized Indian economy ,the passage for integration of Indian economy into world economy got clear. The major macro economic reforms and export import de controls along with changes in exchange rate determination mechanism has created opportunities for the Indians and the world community to prosper together.

The organized retail still constitute a marginal segment of larger retail sector here in India. The un organized retail has been a result of political bargaining as well as economic compulsions. The changing Indian consumer with surging purchasing power is knocking at the doors of change. Market deregulation and surging purchasing power of Indian consumers has made India the darling of foreign direct investments in processing as well as retail sectors of economy.

The upbeat national economy is attracting substantial investments in the value addition networks as well as supply chains. The increasing awareness, influx of western culture and media is constantly shaping the consumer’s behavior and lifestyle practices . The consumer’s surplus and lifestyle expenditures are on the rise.

This research seeks to discover the scope for retail of imported wine products here in Delhi region –one of the most competitive markets for wines and related products.

This research focuses on the feasibility of opening a wine retail with strategies to drive and benefit from the changing market trends and expectations.

1.4 Research Objectives and Methods

The major research questions are :

What are the prospects for the retail of imported wines in National Capital Region of Delhi ?

What can be the major challenges before the import and marketing of wines products?

How the possible solutions can be devised for the successful implementation of such a retail venture in this part of India?

What can be the obvious strategies to maneuver the business in current business environments?

Sub questions are :

How the consumer behavior is undergoing transformation and how can we be in competition and even ahead of it?

How the markets can saturate and how to re invent product life cycle ?

What can be the short and long term consequences and trends affecting the market?

How the strategies can be blended in local flavor to successfully benefit from on going consumer revolution in India ?

The focus of this work is on the evaluation of various direct and lateral factors behind the success of imported wines retail in Delhi . This elaborates on the business feasibility evaluation of opening up such a venture in Delhi

This research was carried out by collecting data from secondary data sources, such as the Internet, articles, publications, etc., and conducting a survey of people in Delhi and regions of Gurgaon and Noida-in vicinity of Delhi .

Since the retail itself is a vast sector and lots of research has been conducted on these aspect , we choose to focus and drive our research only in tune with our objectives as determined previously .

The research work has its limitations:

The small shop owners, food retail outlets ,Canteen Stores Department –where subsidized good are available ; have been kept out of the research.

The consumer behavior on its part is ever evolving and is subject to change every time. The existing and future research about the consumer perceptions always focus on one aspect of the issue and even neglects the other half.

The other limitations are the genuineness of the data provided by the respondents

1.5 Structure of the Report

Chapter two focuses on the theoretical aspects of the issue .The chapter involves cross examination of market forces with emphasis on the Michael Porter’s five forces model. Further porter’s industry analysis techniques would be utilized for evaluating the strengths ,weakness , options as well as threats to launch of such a venture in Delhi region .Various aspects regarding the consumer decision making ,consumer behavior management would be incorporated here. Literature review will be carried out to cross examine some of relevant existing research publications regarding this field.

Chapter three details regarding the research methodology and the related aspects of data collection and compilation

Chapter four incorporates the data analysis ,which is infact the situation analysis component of this research thesis.

Chapter five concludes with the findings and the recommendations

Chapter2

Theoretical Framework

This chapter discusses the theoretical context of our exercise and intentions to open up the wine retail shop / outlet in Delhi. The chapter discusses the Michael Porter’s five forces and various other models to evaluate the current and probable industry structure in the context of wine marketing and wine retail industry. Porter’s five forces develops the foundation for industry analysis .It leads the way in developing insights into how the interplay between the buyers and the sellers as well as the barriers ,together distinctively shape the industry.

2.1 Porter’s Five Forces Model and Competitive Positioning Rationale

Porter, M.E. (1979) illustrated the presence of five forces that drive the industry structure through the various stages.

The threat of the entry of new competitors

Profitable markets that yield high returns will certainly attract new firms. This results in many new entrants, which eventually will decrease profitability for all firms in the industry. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards zero .

The existence of barriers to entry The most attractive segment is one in which entry barriers are high and exit barriers are low. Few new firms can enter and non-performing firms can exit easily.

Economies of product differences

Brand equity

Switching costs or sunk costs

Capital requirements

Access to distribution

Customer loyalty to established brands

Absolute cost advantages

Learning curve advantages

Expected retaliation by incumbents

Government policies

Industry profitability; the more profitable the industry the more attractive it will be to new competitors

The intensity of competitive rivalry

For most industries, the intensity of competitive rivalry is the major determinant of the competitiveness of the industry.

Sustainable competitive advantage through innovation.

Competition between online and offline companies;

Level of advertising expense.

Powerful competitive strategy

How will competition react to a certain behavior by another firm? Competitive rivalry is likely to be based on dimensions such as price, quality, and innovation. Technological advances protect companies from competition. This applies to products and services. Companies that are successful with introducing new technology, are able to charge higher prices and achieve higher profits, until competitors imitate them. Vertical integration is a strategy to reduce a business' own cost and thereby intensify pressure on its rival.

The bargaining power of customers (buyers)

The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes.

Buyer concentration to firm concentration ratio

Degree of dependency upon existing channels of distribution

Bargaining leverage, particularly in industries with high fixed costs

Buyer volume

Buyer switching costs relative to firm switching costs

Buyer information availability

Ability to backward integrate

Availability of existing substitute products

Buyer price sensitivity

Differential advantage (uniqueness) of industry products

The bargaining power of suppliers

The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm, when there are few substitutes. Suppliers may refuse to work with the firm, or, e.g., charge excessively high prices for unique resources.

Supplier switching costs relative to firm switching costs

Degree of differentiation of inputs

Impact of inputs on cost or differentiation

Presence of substitute inputs

Supplier concentration to firm concentration ratio

Employee solidarity (e.g. labor unions)

Supplier competition - ability to forward vertically integrate and cut out the buyer

The threat of substitute products or services

The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives:

Buyer propensity to substitute

Relative price performance of substitute

Buyer switching costs

Perceived level of product differentiation

Number of substitute products available in the market

Ease of substitution. Information-based products are more prone to substitution, as online product can easily replace material product.

Substandard product

Quality depreciation

2.2 Delta Model and Significance of Customer Bonding

Delta Model is a customer-based approach to Strategic management. Compared to a philosophical focus on the characteristics of a product (product economics), the model is based on customer economics.

The Delta Model is a strategy (organizing) framework that was developed by Dean Wilde, along with other members of Dean & Company, and Arnoldo Hax of the MIT/Sloan School of Management. It is aimed at assisting managers in the articulation and implementation of effective corporate and business strategies.

The emergence of the Internet, with the previously unimagined potentials for communication, and the technologies surrounding e-business and e-commerce, made available some new options tools that allowed the feasibility of new business approaches. Hax and Wilde II integrate the Competitive Advantage and Value Chain frameworks from Porter with the Resource-Based View on the Firm and complement those with new Extended Enterprise perspectives and with offering Total Customer Solutions.

The Delta Model contains the following elements:

1. Strategic Triangle: used for defining strategic positions that reflect fundamentally new sources of profitability (three strategic options: best product, customer solutions, and system lock-in),

2. Aligning these strategic options with a firm's activities and provides congruency between strategic direction and execution (three fundamental processes are always present and are the repository of key strategic tasks: operational effectiveness, customer targeting, and innovation), and

3. Adaptive processes: core processes of the company must be aligned to the chosen strategy in order to make progress against the strategic agenda and avoid a commodity-like outcome. The Delta Model identifies the core processes of the business and provides a guide for how they need to function differently to achieve different strategic positions capable of continually responding to an uncertain environment.

4. Metrics (Aggregate Metrics that should be supplemented with Granular Metrics).

Hax and Wilde believe a firm owes itself to its customers. They are the ultimate repository of all the firm’s activities. At the heart of management and, certainly, at the heart of strategy, resides the customer. We have to serve the customer in a distinctive way if we expect to enjoy superior performance. The name of the game is to attract, to satisfy, and to retain the customer.

The intimacy and connectivity of the networked economy offer opportunities to create competitive positions based upon the structure of the customer relationship.

A business can establish an unbreakable link, deep knowledge, and close relationship that we refer to as customer bonding. These bonds can be directly formed with the customer, or indirectly formed through the complementors that the customer wishes to access.

Both are powerful sources of margin and sustainability. The bonds represent investments made by customers and complementors in and around the business’ product.

2.3 Six Forces Model

The Six Forces Model is a market opportunities analysis model, as an extension to Porter's Five Forces Model and is more robust than a standard SWOT analysis.

The following forces are identified:

Competition

New entrants

End users/Buyers

Suppliers

Substitutes

Complementary products/ The government/ The public

2.4 National Diamond

Strategic analysis typically focuses on two views of organization. The industry-view and The Resource-Based View (RBV). These views analyse the organisation without taking into consideration relationship between the organizations strategic choice (i.e. Porter generic strategies) and institutional frameworks. The National Diamond' is a tool for analyzing the organizations task environment. The National Diamond highlights that strategic choices should not only be a function of industry structure and a firms resources, it should also be a function of the constraints of the institutional framework. Institutional analysis (such as the National Diamond) becomes increasingly important as firms enter new operating environments and operate within new institutional frameworks.

Michael Porter's National Diamond framework resulted from a study of patterns of comparative advantage among industrialized nations. It works to integrate much of Porter's previous work in his competitive five forces theory, his value chain framework as well as his theory of competitive advantage into a consolidated framework that looks at the sources of competitive advantage sour cable from the national context. It can be used both to analyze a firms ability to function in a national market, as well as analyze a national markets ability to compete in an international market.

It recognizes four pillars of research (factor conditions, demand conditions, related and supporting industries, firm structure, strategy and rivalry) that one must undertake in analyzing the viability of a nation competing in a particular international market, but it also can be used as a comparative analysis tool in recognizing which country a particular firm is suited to expanding into.

Two of the aforementioned pillars focus on the (national) macroeconomics environment to determine if the demand is present along with the factors needed for production (i.e. both extreme ends of the value chain). Another pillar is focused the specific related an supporting industries to the particular firm/nation/industry being studied. The last pillar it looks at the firm's strategic response (microeconomics) i.e. its strategy, taking into account the industry structure and rivalry (see five forces). In this way it tries to highlight areas of competitive advantage as well as competitive weakness, by looking at a companies/nations suitability to the particular conditions of a particular market.

Principles

For analyzing national competitiveness, we need to focus upon firm performance. The role of the national environment is providing a context within which firms develop their identity, resources, capabilities, and managerial styles.

For a country to sustain a competitive advantage in a particular industry sector requires dynamic advantage: firms must broaden and extend the basis of their competitive advantage by innovation and upgrading. The dynamic conditions that influence innovation and the upgrading are far more important than initial resource endowments in determining national patterns of competitiveness.

Components

The four different components of the framework are:

Factor Conditions

Related And Supporting Industries

Demand Conditions

Strategy, Structure, And Rivalry

Factor Conditions

Factor conditions can be categorized into two forms:

"Home-Grown" resources

Highly specialized resources

Related and Supporting Industries

For many firms, the presence of related and supporting industries is of critical importance to the growth of that particular industry. A critical concept here is that national competitive strengths tend to be associated with "clusters" of industries.

Demand Conditions

Demand conditions in the domestic market provide the primary driver of growth, innovation and quality improvement. The premise is that a strong domestic market stimulates the firm from being a startup to a slightly expanded and bigger organization.

Strategy, Structure and Rivalry

National performance in particular sectors is inevitably related to the strategies and the structure of the firms in that sector. Competition plays a big role in driving innovation and the subsequent upgradation of competitive advantage. Since domestic competition is more direct and impacts earlier than steps taken by foreign competitors, the stimulus provided by them is higher in terms of innovation and efficiency..

The role of government

The role of government in Porter's Diamond Model is "acting as a catalyst and challenger; it is to encourage - or even push - companies to raise their aspirations and move to higher levels of competitive performance …" . They must encourage companies to raise their performance, stimulate early demand for advanced products, focus on specialized factor creation and to stimulate local rivalry by limiting direct cooperation and enforcing anti-trust regulations.

2.5 Value chain and Weaving of Value

The value chain, also known as value chain analysis, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.

Concept

A value chain is a chain of activities for a firm operating in a specific industry. The business unit is the appropriate level for construction of a value chain, not the divisional level or corporate level. Products pass through all activities of the chain in order, and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of added values of all activities. It is important not to mix the concept of the value chain with the costs occurring throughout the activities. A diamond cutter can be used as an example of the difference. The cutting activity may have a low cost, but the activity adds much of the value to the end product, since a rough diamond is significantly less valuable than a cut diamond. Typically, the described value chain and the documentation of processes, assessment and auditing of adherence to the process routines are at the core of the quality certification of the business

Activities

The value chain categorizes the generic value-adding activities of an organization. The "primary activities" include: inbound logistics, operations (production), outbound logistics, marketing and sales (demand), and services (maintenance). The "support activities" include: administrative

infrastructure management, human resource management, technology (R&D), and procurement. The costs and value drivers are identified for each value activity.

Significance

The value chain framework quickly made its way to the forefront of management thought as a powerful analysis tool for strategic planning. The simpler concept of value streams, a cross-functional process which was developed over the next decade, had some success in the early 1990s

The value-chain concept has been extended beyond individual firms. It can apply to whole supply chains and distribution networks. The delivery of a mix of products and services to the end customer will mobilize different economic factors, each managing its own value chain. The industry wide synchronized interactions of those local value chains create an extended value chain, sometimes global in extent. Porter terms this larger interconnected system of value chains the "value system." A value system includes the value chains of a firm's supplier (and their suppliers all the way back), the firm itself, the firm distribution channels, and the firm's buyers (and presumably extended to the buyers of their products, and so on).

Capturing the value generated along the chain is the new approach taken by many management strategists. For example, a manufacturer might require its parts suppliers to be located nearby its assembly plant to minimize the cost of transportation. By exploiting the upstream and downstream information flowing along the value chain, the firms may try to bypass the intermediaries creating new business models, or in other ways create improvements in its value system.

Value chain analysis has also been successfully used in large Petrochemical Plant Maintenance Organizations to show how Work Selection, Work Planning, Work Scheduling and finally Work Execution can (when considered as elements of chains) help drive Lean approaches to Maintenance. The Maintenance Value Chain approach is particularly successful when used as a tool for helping Change Management as it is seen as more user friendly than other business process tools.

Value chain analysis has also been employed in the development sector as a means of identifying poverty reduction strategies by upgrading along the value chain. Although commonly associated with export-oriented trade, development practitioners have begun to highlight the importance of developing national and intra-regional chains in addition to international ones

Six business functions of the Value Chain:

Research and Development

Design of Products, Services, or Processes

Production

Marketing & Sales

Distribution

Customer Service