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8/12/2019 shubh jewellers

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INTRODUCTION TO ENTREPRENEURSHIP

Concept of EntrepreneurHistorical perspective

ENTREPRENEUR - derived from French word Entreprendre which means

to undertake i.e. the person who undertakes the risk of new enterprise.

Early 16thcenturythose who undertook military operations i.e. leaders of

military expeditions were referred to as Entrepreneurs.

17thcenturyextended to cover civil engineering activities such asconstruction and fortification i.e. architects and contractors.

Early 18thcenturyR.Cantillon, an Irishman living in France was the first

person to use the term Entrepreneur as a person who buys factor services at

certain prices in order to produce a product, with a view to selling it at

uncertain prices.

J.B.Say expanded Cantillons ideas and developed the concept ofentrepreneur a little further. According to Say, an entrepreneur is one who

combines the land of one, labor of another and the capital of yet another and

thus produces a product. By selling the product in the market, he pays interest

on capital, rent on land, wages to laborers and what remains is his profit. This

concept of an entrepreneur survived for almost two centuries.

Joseph A.Schumpeter, in 1934, assigned a crucial role of innovation tothe

Entrepreneur in his magnum opus, Theory of Economic Development.

According to Schumpeter, an entrepreneur is one who innovates, raises

money, assembles inputs, chooses managers and sets the organization going

with his ability to identify them.

ENTREPRENEUR -- DEFINITIONS


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The true Entrepreneur is one who is endowed with more than average

capacities in the risk of organizing and coordinating the various other factors

of production

Francis A.Walker

An Entrepreneur is one who always searches for change, responds to it and

exploits it as an opportunity. Innovation is the central tool of entrepreneurs,

the means by which they exploit change as an opportunity for different

business or service.

Peter F.Drucker

ROLE OF ENTREPRENEUR IN ECONOMIC DEVELOPMENT

1. ENTREPRENEURSHIP promotes capital formation by mobilizing theidle saving of the public.

2. It provides employment opportunities.3. It promotes balanced regional development.4. It helps reduce concentration of economic power.5. It leads to equitable redistribution of wealth and income.6. It encourages effective resource mobilization of capital and skill which

might otherwise remain unutilized.

7. It promotes countrys export trade, an important ingredient ofeconomic development.


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QUALITIES OF AN ENTREPRENEUR:

1. Opportunity Explorer: An entrepreneur looks for an opportunity and

takes appropriate actions when he identifies the opportunity. Successful,

growth-minded entrepreneurs have a focus on opportunity. They start with

the opportunity and let their understanding of it guide other important

issues. They seize unusual opportunities to start a new business, obtain

financing, land, work space or assistance.

Sources of business opportunities arise just from an entrepreneur being alert

to possibilities. Consumers, business associates retailers, wholesalers,

manufacturers representatives are potential sources of business ideas.Technically oriented individuals also identify business opportunities when

working on other projects.

2. Calculated Risk Taker: Any venture is subject to some risk and the

entrepreneur needs to be an intelligent risk taker. A risk situation occurs

when the potential outcome of an action is not known. An entrepreneur will

face situations where he has to make a choice between two or morealternatives, each with its own risk elements. The ability to judge risks,

evaluate them, take risk mitigation measures as well as being ready for

course correction when the risk actually occurs are qualities which he should

possess. A higher degree of risk taken has the potential of yielding higher

returns or of resulting in higher losses.

Good entrepreneurs are not afraid of taking risks, whereas a person without

an entrepreneurial bent of mind will not take risks in order to avoid failure.

But taking moderate risks is almost always necessary for achieving success in

an entrepreneurial venture. A good entrepreneur also realizes that a risk

cannot be taken when the outcome of an action is entirely based on chance

and not on effort. Taking a risk which can be averted or minimized by taking


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actions in a planned manner and effort is a challenge which a good

entrepreneur enjoys.

3. Perseverance: This means the ability to work hard without getting

demotivated by intermediate setbacks, having patience to wait for the result

without being impulsive or hasty in giving up or not giving adequateattention to his venture. Persistency is required in solving problems or

obstacles that are impeding business operation. Although entrepreneurs are

extremely persistent, they are realistic in recognizing what they can and

cannot do and where they can get help in solving difficult but unavoidable

tasks.

4. Communication ability: Communication encompasses both communicator

and communicate i.e. sender and receiver. In effective communication, thecommunicator and the receiver understand each other and are being

understood. An entrepreneur communicates effectively with customers,

employees, suppliers, bankers and creditors.

5. Flexibility: Entrepreneurs are flexible in adapting to changes when it does

not help to adopt conventional and routine ways of doing things.

6. Innovator: Entrepreneurs are innovative in that they endeavor to develop

new products, processes or markets. If there is already a product in the

market, an entrepreneur succeeds in creating a differentiation in the product

to capture a market share.

7. Motivator: Success of an entrepreneurial venture also depends on the

activities carried out by the people deployed by the entrepreneur in his

business venture. The entrepreneur therefore needs to keep them motivated

to give their best. The term motivation is derived from the word motive

which means a need or an emotion that prompts an individual into action. Asa motivator, the entrepreneur needs to keep the motivation level of his

employees high. As a motivator, the entrepreneur understands that apart

from financial incentives like wages, non-financial incentives like recognition

of good work done, better working conditions, job security etc. play a role in

motivating the workers.


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8. Self confidence: A person has self confidence when his belief in his own

ability is high and seldom wavers. Even during down periods, such an

individual maintains his confidence and lets people around him know it. This

helps the others sustain their own self confidence and optimism necessary forefficient group effort. A successful entrepreneur has high self confidence.

9. Stress Taker: A person who succumbs to stress has a low tolerance

for failure. But entrepreneurs use failure as a learning experience.

Setbacks and disappointments are an integral part of the learning experience,

and most effective entrepreneurs are realistic enough to expect such

difficulties. Many of them believe that they learn more from their early

failures than from their early successes. Some of the methods they can adopt

for coping with stress are networking with other business owners for sharing

experiences, taking short holidays as an antidote to immersion in business,

good communication with employees, gain new perspectives on life apart from

the adopted business, delegate chosen tasks to others to gain time, physical

and exercises like walking, meditation etc.

10. Optimistic: Entrepreneurs approach the opportunity that they havechosen with a hope of success and an optimistic attitude. The optimistic

attitude reflects the confidence to achieve success rather than the fear of

failure. Optimism leads to positive thinking which can turn an adverse

situation into a favourable situation. Even when failure occurs, an optimist

persists with a positive outlook.

11. Using Feedback: Effective entrepreneurs also have a strong desire to

know how well they are doing, and how they might improve their

performance. In making such a determination, they actively seek out and use

feedback. Feedback is also central to their learning from their mistakes and

setbacks.


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12. Independence: The desire for independence is a driving force behind

contemporary entrepreneurs. An entrepreneur usually tries to accomplish

tasks in his or her own way instead of in a bureaucratic way, This is not to

say that entrepreneurs must make all the decisions; however, they do not

want the authority to make the important ones. This implies that they do notget controlled by others.

13. Planner: Planning is a managerial function and is an essential quality for

an entrepreneur. It implies determining the course of action to be followed

i.e. deciding what to do, when to do, how to do and who will do a particular

task. It is a process of looking ahead and is required to be done prior to other

managerial functions like organizing, staffing, directing, coordinating and

controlling.

14. Achievement Oriented: Entrepreneurs are self starters who appear to

others to be internally driven by a strong desire to compete, to excel against

self-imposed standards, and to pursue and attain challenging goals. They try

to accomplish challenging tasks. In doing so, they are aware of their own

strengths and weaknesses, the facilitating factors and constraints in the

environment and the resources needed to accomplish their tasks.

15. Human relation ability: Maintaining good relations with customers,

employees, suppliers, and creditors is an essential quality for entrepreneurial

success.

FUNCTIONS OF ENTREPRENEUR


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Entrepreneur performs various primary functions from the stage of starting

an enterprise to its success level.

PLANNING - Planning process involves the following steps:

a) Scanning of the best suitable ideab)Selection of product linec) Determination of type of business organization (Individual or

Partnership or Corporate)

d)Estimation of capital needede) Selection of capital resourcesf) Selection of raw materialsg) Studying the govt. rules, regulations and policiesh)Study of availability of labor forcei) Study of market and market strategy to be adopted

ORGANIZATION - An entrepreneur assembles, coordinates and supervises

land, labor and capital during the promotion stage and at the performance

stage for optimum utilization of resources. Efficient expansion and growth

depends on organizational network employed and monitored by the

entrepreneurs.

DECISION MAKING -

a) Determination of the business objectives of the enterpriseb)Decision regarding procurement of machine, material, labor and moneyc) Decision regarding development of a market for the productd)Maintenance of good relations with public authorities and with society

at large

MANAGEMENTrefers to the working of the venture and also managing

day to day problems. It includes future expansion, direction of men,

material, money etc.

INNOVATION


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a) Launching a new productb)Introduction of new technologyc) Creation of new marketd)Discovery of new and better source of raw materialse) Creation of monopoly or breaking up of monopoly

RISK BEARINGAn entrepreneur undertakes the responsibility for loss

that may arise due to unforeseen contingencies in future.

UNCERTAINTY BEARINGrefers to uncertain trends in the market

Other functions include diversification, expansion, maintaining cordial

relations, tackling labour problems etc.

CLASSIFICATION OF ENTREPRENEURS

Entrepreneurs can be classified according to

Types of business

Business entrepreneurs are those individuals who opt for a new product or

service and then translate the same into business reality; tap both production

and marketing resources to develop a new business opportunity; set up a bigestablishment or small unit e.g. printing press, textile processing house,

advertising agency, readymade garments, confectionary etc. In majority of

cases, entrepreneurs are found in small trading and manufacturing business.

Entrepreneurship flourishes when the size of business is small.

Industrial entrepreneurs are essentially a manufacturer who identifies

potential needs of customers and products or service to meet the marketing

needs. He should have the ability to convert economic resources and

technology into a profitable venture.

Corporate entrepreneur is an individual who demonstrates his innovative

skill in organizing and managing a corporate undertaking. He plans,

develops and manages a corporate body.


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Agricultural entrepreneurs are the ones who undertake agricultural activities

such as raising and marketing of crops, fertilizers and other inputs of

agriculture. They are motivated to improve agriculture through

mechanization, irrigation and application of technologies for dry land

agricultural products.

Use of professional skill.

Technical entrepreneur is one who is essentially a craftsman. He develops

improved quality of goods because of his craftsmanship. He concentrates

more on production than on marketing. He demonstrates his innovative

capabilities in the matter of production of goods and rendering of services.

Non-technical entrepreneurs are those who are not concerned with the

technical aspects of the product in which they deal. They are concerned

mainly with alternative marketing and distribution strategies to promote

their business.

Professional entrepreneur is interested in establishing a business but does

not have interest in managing or operating it once it is established. He sells

out the running business and starts another venture with the sales proceeds.

Motivation.

Pure entrepreneur is an individual who is motivated by psychological and

economic rewards. He undertakes entrepreneurial activity for his personal

satisfaction in work, ego and status.


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Induced entrepreneur is one who is induced to take up an entrepreneurial

task due to policy measures of the government that provides assistance,

incentives, and concessions and other facilities to start a venture, enter

business due to financial, technical and other facilities provided to them by

the state agencies to promote entrepreneurship.

Motivated entrepreneurs come into being entrepreneurs because of the

challenge involved in developing and marketing a new product for the

satisfaction of consumers. If the product succeeds, the entrepreneur is

further motivated for launching of newer products.

Growth entrepreneurs are those who take up a high growth industry which

has substantial growth prospects. Super growth entrepreneurs are those who

show enormous growth or performance in their venture.

Stages of development

First generation entrepreneur is the one who starts an industrial unit by his

innovative skill. He is the one who combines different technologies to

produce a marketable product or services.

Second generation entrepreneur is the one who takes over the business from

his preceding family member.

Modern entrepreneur is one who undertakes a venture which goes well with

the changing demand in the market. He undertakes a venture which suits the

current market needs.

Classic entrepreneur is one who is concerned with maximizing the economic

returns at consistent level. He is concerned more about the survival of the

firm with or without an element of growth.

Attitude

According to attitude, entrepreneurs can be classified into innovative and

imitative categories.


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Innovating entrepreneurs are generally aggressive in collecting information,

analyzing and experimenting attractive possibilities. They are quick to

convert old established products or services by changing their utility, value,

economic characteristics into something new, attractive and utilitarian. They

can see the opportunity for introducing a new technique of productionprocess or a new commodity or a new service or even the reorganization of

an existing enterprise. They are very commonly found in developed

countries, while there is dearth of such entrepreneurs in underdeveloped

countries. They are always creative and bring in innovation in their work.

Imitative entrepreneurs are ready to adopt and are more flexible in imitating

techniques developed by others. They exploit opportunities as they come and

are mostly on a small scale. He is more of an organizer of factors of

production than a creator. In the context of a poor country, he is definitely a

change agent and hence he is important in underdeveloped countries.

Fabian entrepreneurs are very cautious and skeptical while practicing any

change. They do not take risks and just follow predecessors. Their

entrepreneurial decision is determined by custom, religion, tradition and

past practices. They imitate only in situations when it becomes absolutely

necessary.

Drone entrepreneurs are those who never allow any change in their

production and style of functioning. They never explore anything. They are

laggards and get pushed out of the market when product loses its

marketability.

Situation based entrepreneur

Need based entrepreneur is a person who starts his venture with the thought

process of surviving i.e. to earn a living e.g. street vendors.

Opportunity based entrepreneur is a person who starts his venture with the

thought process of expansion or one with the zeal to create a niche for

himself.


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Gender based entrepreneur. Government of India has classified women

entrepreneurs by defining them as part of an enterprise owned and

controlled by women or a woman having a minimum financial interest of

51% of the capital in the enterprise.

Social entrepreneur. The Ashoka International Organization defines social

entrepreneurs as individuals with innovative solutions to societys most

pressing social problems. Bill Drayton, CEO and founder of Ashoka says

Social entrepreneurs are not content just to give fish, or teach how to fish.

They will not rest until they have revolutionized the fishing industry.

Rather than leaving societal needs to the government or business sectors,

social entrepreneurs find what is not working and solve the problem by

changing the system, spreading the solution and persuading entire societiesto take new leaps. Social entrepreneurs identify resources where people only

see problems. They view the villagers as the solution, not the passive

beneficiary. They recognize when a part of society is stuck and provide new

ways to get it unstuck. Unless traditional business entrepreneurs, social

entrepreneurs primarily seek to generate social value rather than profits.

Examples are Dr.Verghese Kurian, who set up the Anand model of

cooperative development and made India the largest milk producer in the

world. His model was adopted by the Govt. of India in setting up the NDDB

(National Dairy Development Board which replicated the model on a

nationwide basis. Vinobha Bhave conceived the idea of the land-gift

movement, which came to be known as Bhoodan. He made inspiring

appeals in several villages to prosperous people to donate land, and by 1954,

he and his co-workers had collected 2.5 million acres, far exceeding any land

reform achieved by the government for land to be given to poor farmers. The

Jaipur foot is another famous Indian invention which has given life to

thousands of amputees and is the best prosthetic feet for conditions in

developing countries.

Serial Entrepreneur. A serial entrepreneur is one who continuously comes

up with new ideas and invests in new businesses. While some believe that a

more vibrant and mature venture capital eco-system in India is contributing


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to the trend, others say interesting business models that have developed over

time has made the difference. Internet is one such area that has seen a spurt

in activity from entrepreneurs to repeat their success. Serial entrepreneurs

are repeat business starters who in the past have sold or closed down a

business which they at least partly ran and owned and who currently runanother, possibly new business which they at least partly own. Estimates of

the scale of serial entrepreneurship are relatively scant. In India, a well

known example of Capt.Gopinath can be cited, who started and ran the low

cost airline Air Deccan, then sold his business to Kingfisher and later started

Deccan 360,which is a logistics company aimed at commenting 17 airports

and 24 cities in India. The Information Technology area in the U.S cites a

number of serial entrepreneurs.

Franchise in India

Franchise in India is relatively a new model for businesses; though it has

gained suffice accolades among entrepreneurs across Indian territories. No

doubt, the concept has to have a reason to cheer with Indian laws becoming

more liberated over globalization. The mindset has opened many doors formajor companies to enter India through franchising, making the nation a

fertile destination for businesses to grow. Even the analytical reports, over

franchise India growth, seem to praise its pace of development in India.

Expert approaches claim a bright future for franchise industry with a


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promising growth of more than 30 per cent, contributing a major part to the

boosting economy of India.

By observing the uphill slope of franchise in India, many sectors are emerging

out to gather as well as to contribute opportunities, by the route of franchisingbusiness. With the progressive stories of companies via franchise India,

several other companies, especially of small background, are getting confident

to subscribe to this route for improved approach towards customers.

Franchising - The fastest Growing and ever changing Industry in India

Though at a nascent stage the industry has witnessed 30 to 35 per cent growth

in the last 4-5 years

Home to over a billion people, including a flourishing class of urban

consumers possessing considerable amounts of disposable income together

with the continued growth of the economy have strengthened Indias claim to

be a viable and beneficial destination for a foreign franchisor. In the USA,

almost a third of the retail sales come from franchised outlets, with sales of

trillion of dollars while in India, the industry is few million.

An important aspect which determines the feasibility of any franchisingbusiness in a country relates to the class of consumers it caters to. India is a

multi ethnic country with the second largest population in the world. Indian

consumers have experienced the standard of services offered overseas and

have sufficient exposure through media, which has further fuelled their

expectations.

There are approximately 1150 national and international business format

franchise systems in India in 2007.

Around 8 to 10 per cent Indian franchise systems have entered international

markets.

There are an estimated 70, 000 units operating in business format franchises.


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The growth rate in franchised units from 2005-06 to 2006-07 was 30 to 35 per

cent for the last 4-5 years.

Some 500000 persons are employed in business format franchise

organizations.

Franchising contributed less than 4 per cent to Indias Gross Domestic

Product (GDP) in 2007.

Annual turnover is approximately us$ 4 billion.

Almost every product or service has a market in India but sometimes,

innovative strategies like Indianisation of its products and marketing

techniques must be employed by a foreign franchisor to further access the

sizable market of India. In a franchised business, over 90 per cent succeed.This success rate usually lures entrepreneurs with no experience but with a

surplus capital and a will to succeed towards franchising. The franchisee

benefits from a tried tested and proven business concept, which can

dramatically reduce the chances of failure.

Franchising as a concept has beenprevalent in India since a long time.

However, shifting consumer trendsincluding growing preference forbranded

products, global exposure and use of international brands is driving adoptionof the franchising route to growth. According to KPMG in India estimates,

the franchising industry is expected to quadruple between 2012 and 2017

There is scope for the franchising industry to contribute to almost 4 percent of

Indias GDP in 2017 (assuming 6 percent Y-o-Y GDP growth between 2012

and 2017), growing from a current estimated contribution of 1.4 percent of

GDP This is also expected to create job opportunities (including both direct

and indirect) for an additional 11 million people by 2017.


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Franchising Opportunity: Sector Overview

As per KPMG in India analysis, retail and consumer services sectors areexpected to emerge as high potential service sectors within franchising to cater

to the prevailing consumption boom. Non-traditional segments such as food

service, jewellery, pre-schools etc. also present a huge opportunity for growth

in franchising.

Despite the challenges the country presents, there have been many successful


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case studies of franchising in India. From franchisors such as Aptech and

NIIT which have pioneered the franchising model in India to new age

franchisors such as Gitanjali and VLCC who are adopting innovative

expansion models within franchising, many brands/companies are adopting

the franchising model to expand and provide a consistent and quality

experience to its end customers.

Franchise Business Models

Firms that have created an easily replicable business model, often choose

franchising as their preferred route to expand their operations and scale their

brand. However, within the realm of franchising, there are several franchising

models that differ significantly in terms of operation, control and legal scope.While certain operating models within franchisingsuch asarea development

and regional master franchiseeappearmore attractive than others, diversity

in Indian consumerpreferences and degree of localization impact the choice

ofthe final model to be adopted.


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Attractiveness of India in Global Franchising

Many international brands have already entered India and areadopting the

Franchise route to growth. Global brands such asDominos, KFC, and Baskin

Robbins have adopted variations of thefranchise models to grow in India.

Many other internationalbrands are contemplating entry plans into India.

However, Indias growing but fragmented market can seemchaotic and

difficult to deal with. The international franchisorsconsider the following

factors as challenges while entering intoIndia:

Transparent Legislative framework: Due to no specific rules not one

market: Entering a new market India is becomes more complicated in case ofIndia where consumers hail from diverse cultural backgrounds. Several

cultures, languages and socio-economic diversities make it a set of multiple

markets. It becomes a challenge for an international franchisor to understand

all diversified tastes and preferences, to establish and expand business in

India.

Corruption: International franchisors remain Bribe and or laws promulgated

in India to address the functioning of franchisors and franchisees,

international players perceive a higher risk to business continuity threatened

with the bribe and corruption cases in India. Due to no legislation aroundanti-bribe in India, as in the US; it not only discourages the expansion

strategies of many brands, but also impacts Indias credibility in the

international market.


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Franchise Industry SurveyKey Highlights

While the survey carried out by KPMG in India corroborated the above key

reasons for growth in franchising and operating models, it also brought out

certain key findings as mentioned:

Franchisors believe that they are providing adequate support to their

franchisees; however the latter are expecting more support particularly in the

post launch phase of operations.

Response to another related question in the survey suggested that almost half

of those interviewed were not willing to take up additional franchisees with

the existing franchisors suggesting certain level of dissatisfaction. While

franchisors adopt franchising model for growth, many primarily offers a safe

and relatively easy way of establishing business and is expected to offer higher

than market levels of profitability. This trend necessitates the need for

franchisors to educate the franchisees on potential profitability andinvestment returns from the business. Sectors such as jewellery where

payback periods could range between a minimum of four to five years are

particularly vulnerable to such mismatch in outlook.

Real estate rentals are posing a major challenge for the entrepreneurs are

opting for the franchising route as it success of franchising. Collaborative

efforts between franchisors and franchisees in structuring business models

that are sustainable even under such conditions could address this concern.

FranchisingPushing India ahead

With a potential to push the Indian economy forward, franchising has

been playing a significant role in generating new employment (both in terms

of numbers and job quality), provide revenue options for the government in

the form of taxes, duties etc. Along with its contribution to the country's gross

domestic product (GDP), it has also helped many national and international

brands to spread their presence in the country.


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Current market landscape for franchising in India

Since liberalization, the Indian economy has witnessed steady evolution.Consumerism has risen on account of a growing young population, high

disposable income and growing urbanization.


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Consequently, retail and service sectors are expected to play a major role in

this consumption boom. The macro statistics reveal that agriculture is no

longer the chief contributor to the Indian economy.

The country is gradually moving towards being a manufacturing and service-

based economy in last the two decades.

Today India is home to more than 3000 brands which adopt the franchising

model. Bata, one of the leading footwear companies, was among the first

franchisors in India.

Other pioneers of Indian franchising were NIIT, Apollo Hospitals and Titan

Watches. In addition, today several leading global franchise companies, such

as Dominos, McDonald's, Yum Brands, Baskin Robbins and Subway, have

already established a presence in India. The franchise industry is expected to

continue to benefit greatly from government support across various sectors

through various measures including allowing foreign direct investments (FDI)

in single brand and multi-brand retail.

This growth has also given impetus to a huge entrepreneurial appetite.Over the last decade, franchising has surfaced as one of the most prolific and

feasible ways of expanding businesses in India.

Several industry verticals such as food and beverage, education, fashion,

tourism and hospitality are leveraging their growth by franchising their

products under various formats.


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The economic significance of franchising market in India

Franchising contributes to the economic growth of a nation in multiple ways

such as job creation, access to necessary goods and services and expansion of a

country's tax base. The concept of franchising in India has been growing at an

impressive rate since

KPMG in India estimates suggest that the Franchising business in

India was worth USD 13.4 billion in 2008, as risk-averse Indian entrepreneurs

consider it as the most viable option to tap the nation's vast consumer market.

2012 and is expected to witness CAGR of 30 percent over the next 5 years.

This amounts to about 1.4 percent of the country's GDP in 2012.

KPMG in India expects both demand and supply side factors to contribute to

this growth.


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Franchise: Sector watch

The franchise business in India is increasingly getting popular amongdomestic and international players across various sectors. Several major

industries credit successful franchisees for their rapid progress.

The key industries that possess high prospects for the successful franchise

opportunities in India are following:

Retail franchising

Food and beverages

Health, beauty and wellness

Consumer services

Education and training

The individual growth and potential of these industries are driving the growthof the overall franchise sector in India.


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Recent FDI reforms in single brand and multi- brand retail are likely to lure

more global retailers to participate in India. Existing retail majors are under

pressure to consolidate and increase their franchise network reach.

Meanwhile, several multinationals such as

IKEA, Wal-Mart is looking to establish their brands in India. Franchising is

expected to continue to be one of the most popular business formats among

organized retailers to tap the emerging consumption boom, specifically in the

tier 2, tier 3 and smaller cities.

However recent clarifications issued by the Indian government on FDI

regulations in multi- brand retail allowing foreign retailers to only open

company owned company operated outlets could be a big blow to growth in

Retail franchising in India.


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Innovation driven consumer services companies/ brands are also resorting to

Franchising as the route to growth

Following are the few case studies highlighting 'innovation' as one of the key

success factors in franchising in the consumer services sector in India:


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However market potential in absolute terms is highest for sectors with-in

retail. Revenue per square feet of area in this sector could range anywhere

between INR 20000 to INR 50000.


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Overview of Jewellery industry of India

India's centuries-old gold industry is the world's biggest market for the metal,

with imports meeting almost all the country's requirements for jewellery and

investment.

Gems and jewellery are being used by the Indians since ages, for both

aesthetic, as well as investment purposes. India has the distinction of being

one of the first countries to introduce diamonds to the world. The country was

also one of the first countries to mine, cut & polish, and trade in diamonds.

The Indian jewellery market is dominated by gold, which consists of almost 80

per cent of the market share, followed by fabricated studded jewellery

including diamond and gemstone studded jewellery.

Industry Structure

The sector accounted for India's 14 per cent of the total merchandise exports.

On the contrary, the imports of raw materials for making gems and jewellery

stood at 32 per cent at Rs 721.60 billion (US$ 35.20 billion) in 2011-12 over Rs

545.64 billion (US$ 9.84 billion) in 2010-11.

The jewellery industry in India is estimated at Rs 1,500 billion (US$ 27.07

billion), of which only 5 per cent is organised, thus creating opportunity for

the foreign players to enter the Indian market.

India in 2009 faced its weakest year since gold trade was freed up in 1997.

Record high prices and a failed monsoon cut imports by 33 percent from the


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previous year to 480 tonnes, against an annual range between 600 and 800

tonnes in the previous five years

- Imports are high partly because of the large population of about 1.2 billion.

Per capita gold consumption is only 0.7 grams, half that of the United States

and one-third of the Middle East according to World Gold Council (WGC)

India's gold market is estimated to have more than 300,000 jewellers, mostly

small, family-run businesses, a WGC study showed.

- Only 23 banks and some private and government trading agencies have

licences to import gold because of its implications for foreign exchange flows.

- India's 2010/11 budget raised the import duty on gold and platinum to 300

rupees ($6.65) per 10 grams from 200 rupees earlier, with the duty on silver

raised to 1,500 rupees per kg from 1,000 rupees earlier.

- Investment purchases of gold have been rising faster than jewellery

purchases. WGC's latest data shows the investment to jewellery ratio wasapproximately 15:85 in 2009.

- Gold in the form of exchange-traded funds is rising. Launched in 2007, the

total collection among seven fund houses is more than 11 tonnes, nearly

double from a year ago.

- In urban areas, gold faces competition from diamonds as incomes have risen,

but the higher purchasing power of the lower and middle income sections of

the population has brought new customers into the market.


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In the recent years a large number of players have been attracted to the

Indian gems and jewellery retail sector:

Reliance Retail is planning an aggressive entry into the jewellery retail

market through its about 400 to 500 jewellery retail outlets across the

country.

The gems and diamonds industry contributes over 15 per cent of India's total

exports. The industry is jewellery industry is predominantly divided into twosegments: Gold jewellery and fabricated studded jewellery (diamonds as well

as gemstone studded jewellery)

India consumes nearly 800 tonnes of gold accounting for about 20 per cent

of the world gold consumption of which nearly 600 tonnes goes into making

jewellery.

According to The World Gold Council (WGC) total gold supply in the

second quarter this year stood (Q2FY08) at 840 tonnes, whereas the demand

was 944 tonnes.

A study by KPMG reveals the Indian jewellery market to be US$ 13.5

billion in fiscal 2006-07, accounting for 8.3 per cent of world jewellery sales.

Retail sector - Jewellery


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The jewellery and watch retail market in India is worth Rs1,80,000 crore, of

which the organised sector accounts for Rs76,800 crore, or about 42.5%.

The overall consumption of jewellery, including gold, is much higher at

Rs2,78,000 crore and represents almost 6% of private consumption in India -

with the difference between the consumption and the retail market size being

accounted for by gold or custom-made jewellery not sold in retail outlets.

There are some 80 jewellery and watch retailers in the organised space, with

3,150 outlets. Players with a minimum of 10 outlets or minimum annual

turnover of `50 crore are considered as organised.

The top 20, with 2,250+ outlets, account for `56,700 crore in sales, which

translates into almost three-fourths of the organised sector market and almost

one-third of the total pie.

Branded jewellery is the new mantra in the market, having rapidly acquired a

niche over the past few years. Increasing purchasing power and disposable

incomes of Indias middle class has resulted in consumption growth of this

industry by about 11 per cent in the five-year period preceding 2006-07. Add

to that the insatiable Indian craving for gems and jewellery, and the demand

will skyrocket to US$ 20 billion by 2010 and US$ 30 billion in 2015, according

to industry experts. Focused marketing creating awareness and demand for

the products, innovative product range creating excitement and expanding the

category as well as transparency and adherence to best practices will help

build consumer confidence.

The surprising thing about retail investment is that about 20 per cent of retail

effortin a planned manneris targeted at rural areas, which is defined as


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towns with a population of less than a million. India has seen a significant

growth in disposable incomes as a result of the economic growth that it has

been enjoying. This income is spread in the rural areas also. According to the

Tata Statistical Outline of India2005-06, around 60 per cent of the rural

income is from north and east. Depending on the size of the market, retailers

work with multiple formatscurrently they are partnering with local

jewellers and these jewellers retail their brands, commonly known as the

shop in shop. These stores would carry a merchandise mix and are in the

range from 600- to 1,000 square feet.

Retailers are also looking at mobile store concepts and thinking of innovative

ways to connect to the consumer. Brand building, and creating brand identity

is the focus of every retailer in India at present. Indian retailers see a huge

jewellery consumer market in India but there is a slight speculation that they

might soon face stiff competition from within as well as from international

brands who are rapidly setting up chain stores.

India consumes nearly 800 tonnes of gold accounting for about 20 per cent of

the world gold consumption. Out of which nearly 600 tonnes goes into making

jewellery. According to The World Gold Council (WGC) total gold supply in

the second quarter this year stood (Q2FY08) at 840 tonnes, whereas the

demand was 944 tonnes. A study by KPMG reveals the Indian jewellery

market to be US$ 13.5 billion in fiscal 2006-07, accounting for 8.3 per cent of

world jewellery sales. However the export of diamond-studded jewellery from

India is merely 4 per cent of the total export of gems and jewellery worth US$

18.06 billion. Since the demand of diamond-studded jewellery among Indian

consumers has risen sharply, the industry should focus on the domestic

market. Diamantaires, in Surat's US$ 11.29 billion diamond industry, are


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eyeing jewellery manufacturing in a major way, after DTC has decided to

prune supply of rough diamonds to India. If India becomes a manufacturing

hub for jewellery as well as a consumption market it will just prove Indias

strength in both sectors.

The government has offered some concession to the industry by lowering

import duty on platinum from US$ 13.82 per 10 gms to US$ 5.03 exempting

rough coloured precious gems stones from customs duty at the first stage

itself, instead of claiming reimbursements later. Rough, semi-precious stones

are already exempt, a move aimed at further promoting the exports of

studded jewellery and platinum jewellery. Duty-free import of consumables

for metals other than gold and platinum up to 2 per cent of f.o.b. value of

exports and duty-free import entitlement for rejected jewellery up to 2 per

cent of f.o.b. value of exports. There is increased duty-free import of

commercial samples of jewellery to US$ 2.50 and import of gold of 18 carat

and above under the replenishment scheme.

The Indian retail scene is set to flourish and there is no looking back for those

who know how to sell jewellery to a Indian women, since jewellery is a part of

Indian tradition and customs.

Jewellery franchising

A peek into the Indian jewellery industry reveals that the global market for

jewellery is expected to surpass USD 257 billion in 2017. The market is

predominantly driven by the Asia Pacific and The Middle Eastern markets,

but U.S. continues to remain the dominant player in the industry. Indians no

longer prefer buying jewellery from the traditional family jeweler. Because of


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the readily available designs and huge variety, people are giving preference to

organized retailers.

Chapter 2

Research methodology


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2.1 TITLE OF THE STUDY:

Franchise opportunities in Jewellery sector with reference to Gitanjali and

Shubh Jewellers

Statement of the problem

Jewellery in India is a multi-billion dollar industry, with franchise business

model expected to play a very big role, thus we must evaluate the

opportunities in the sector.

2.2 Scope of the study

By conducting this study we can understand the opportunities in Jewellery

sector with specific reference to Shubh Jewellers and Gitanjali Jewels in

relation to franchise business model

2.3 Objective

To understand growth and prospects of franchise industry in India

To assess the scope and future trends in jewellery retailing

To compare, analyse and evaluate the franchise business model offered

by Shubh and Gitanjali jewels


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Sample size of the study

1 The owner of Shubh Jewellers franchise

METHODOLOGY

Research Design is the conceptual structure within which research is

conducted; it constitutes

The blueprint for the collection, measurement and analysis of data. It specifies

the objective of the study, the methodology & technique to be adopted for

achieving the objective.

TYPE OF RESEARCHDescriptive research

Descriptive research is also called Statistical Research. The main goal of this

type of research is to describe the data and characteristics about what is being

studied. The idea behind this type of research is to study frequencies,

averages, and other statistical calculations. Although this research is highly

accurate, it does not gather the causes behind a situation. Descriptive research

is mainly done when a researcher wants to gain a better understanding of a

topic for example, a frozen ready meals company learns that there is a

growing demand for fresh ready meals but doesnt know much about the area

of fresh food and so has to carry out research in order to gain a better


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The primary data predominantly has been collected through the interview

method.

SECONDARY DATA

Also to provide a much keener insight into the study, data which is secondary

in nature also been utilized. This data has been collected from the following

sources.

Online research papers

Company website

Various other online forums

PLAN OF STUDY

The data collected from the above mentioned primary and secondary sources

were completely analyzed in to understand the functioning of franchise

business model Where ever possible, facts and graphical diagrams have been

used. Such data has been interpreted and recommendations have been

developed.

GEOGRAPHICAL LOCATION

The entire study has been done in Doddaballapur

AreaMain road, near market school


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REFERENCE PERIOD:

The study was conducted in January

TOOLS OF ANALYSIS and DATA COLLECTION:

The tool for collecting data is questionnaires.

There are 20 close ended questions

The tools used for analysis are percentage etc, and to present the data through

bar graphs, tables, pie charts, etc. These tools will ensure proper

understanding, analysis and interpretation of the data collected.

Limitations of study:

Biased response: The owner of the franchise were not much interested

in answering the questions.

Lack of information: some of the information that was required for this

study was difficult to obtain. Eg some books and internet sites were

inaccessible.#

Incomplete information provided: There are chances of respondents

providing incomplete information.


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CHAPTER SCHEME

Chapter 1: Introduction

This chapter talks about the theoretical background of the study.

Part A: About entrepreneurship, Industry Profile- about gold, usage of gold,

background of gold and Indian society and major players in the field.

Part B: Topic of the study- Business Opportunities- definition, concept, types

of business opportunities, advantages and disadvantages of business

opportunities and evaluation of potential business opportunity.

Chapter 2: Research Design

This chapter includes title of the study, statement of the problem, objective of

the study, scope of the study, data collection, sampling method, sample size,

statiscal tools, plan of analysis, reference period and limitations of the study.

Chapter 3: Company Profile


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Company profile:

Rajesh Exports Limited (REL) headquartered in Bangalore, India

manufactures gold & diamond jewellery. REL exports its products world

wide and distributes them within India to the wholesale jewellery market.

REL also retails its products through its own network of retail jewellery

showrooms Shubh Jewellers spread across India.

"Rajesh Export Ltd's (REL) objective is to establish itself firmly as a leader in

the global jewellery market by manufacturing and marketing the finest

quality jewellery to consumers across the world. To achieve this objective


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gram of gold by the jeweller, but invariably you would have noticed that when

you make the payment, you end up paying much more than the price per

gram quoted to you. The difference in most cases is as high as 20% resulting

in the gold prices quoted to you becoming meaningless and an eye wash. The

excess payment to be made by you is explained as wastage, value addition,

making charges etc. Now for the first time in the world all this confusion

comes to an end. At SHUBH 22ct(916) BIS Hallmarked Jewellery from out of

the 10,000 exclusive designs would be available to you without any extra

charges. Just select the Jewellery multiply the actual weight of the Jewellery

by the Real Rate Per Gram and that is what you pay, nothing extra.

Only SHUBH is capable of delivering to you BIS Hallmarked 22ct(916) Gold

Jewellery of actual physical weight at Real Rate Per Gram because :-

REL is a Rs. 20,000 crore company and the largest importer of gold in India

and also the largest jewellery company in the world.

REL is a nominated agency by the Government of India for Direct import of

gold into India from mines.

REL has set up the world's largest state of the art gold jewellery

manufacturing facility at Bangalore.

REL has strategic tieup with some of the world's largest gold mines. REL

imports gold directly from the mines, manufactures jewellery at its own

world's largest jewellery manufacturing plant and retails 22ct(916)


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Hallmarked Jewellery at its own retail store SHUBH Jewellers. The entire

process is fully integrated, there are no middle men in the process, which is

the reason due ro which SHUBH Jewellers is able to offer 22ct(916)

hallmarked Gold Jewellery at un-believable prices.

REL has set up one of the largest research and development unit for

developing new manufacturing techniques, which ensure excellent finish,

unique designs, guaranteed purity and lower processing cost.

HISTORY OF SHUBH JEWELLERS

REL is headquartered in Bangalore, India

1988 - Brothers Rajesh Mehta and Prashant Mehta joined family retail

jewellery business.

1990 - Rajesh Exports established the first organized gold jewellery

manufacturing facility in India.

1991 - Rajesh Exports established India's first R&D facility in the jeweller

sector..

1994 - Rajesh Exports emerged as the largest exporter of jewellery from

India.

1995 - Initial Public Offer (IPO) of securities to fund expansion of

manufacturing facility

1995 - IPO overwhelmingly subscribed and REL securities listed and

traded on the BSE and NSE


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1996 - REL successfully implemented the expansion plan.

1999 - REL plans to set up world's largest manufacturing facility

2002 - REL completes the construction of the World's Largest

manufacturing facility.

2003 - REL begins commercial production in the new manufacturing

facility

2006 - REL achieves a sales of USD 1.5 billion.

2008 - REL establishes branded retail chain stores under the name of

"Shubh Jewellers"

2009 - REL launches the Gold Revolution in the state of Karnataka through

Shubh Jewellers.

2011 - REL has launched 73 Shubh Showrooms in the state of Karnataka.

REL has set up one of the largest research and development unit for

developing new manufacturing techniques, which ensure excellent finish,

unique designs, guaranteed purity and lower processing cost.

3.4 VISION AND MISSION STATEMENT:

VISION:

Our vision is to make Shubh Jewellers

A leading trendsetting jewellery brand

A brand that customers respect and demand


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A brand recognised for practicing fair trade practices and ethical

norms.

MISSION:

Our mission is to create unique high quality jewellery that will be used by

our customers for a long time without being affected by fashion trends.

Through constant innovation, we seek to delight and surprise our customers

with products of superior design and quality.

MANAGEMENT

REL is managed by a Board of Directors comprising of experienced people

in the jewellery trade and also professionals from other relevant areas. The

Board of Directors are responsible for all major decisions. The Board of

Directors are assisted by a well defined hierarchy comprising of some of the

most experienced Professionals in the jewellery field. The Directors have

ultimate responsibility for the management and administration of the affairs

of the company. The Articles of Association of the Company provide that,

the number of Directors shall not be less than three and not more than

twelve. The company may, subject to the provisions of the Articles of

Association and the Companies act, alter the minimum or maximum

number of Directors by approval of its Shareholders.

The Board of Directors

NAME POSITION


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Mr. Rajesh Mehta Executive Chairman

Mr. Prashant Mehta Managing Director

Mr.VenuMadhav Reddy Non Executive& Independent Director

Mr. P Shivashanker Non Executive& Independent Director

Mr. Shankar Prasad Non Executive& Independent Director

The business addresses of all the Directors in Rajesh Exports Ltd: Batavia

chambers, No 4, Kumara Krupa road, Kumara Park East, Bangalore -

560001, India. None of the promoter directors have any activity outside of

the company that is significant with respect to the company.

Profile of Directors

Mr. Rajesh Mehta:

Mr. Rajesh Mehta The executive chairman of

REL is responsible for the overall functioning of

the company, in addition to being specifically in-

charge of the finance and marketing functions.

Mr. Rajesh Mehta has an experience of over twenty years in the functioning

and management of the jewellery trade and has travelled extensively within

India and overseas for establishing a strong network in the industry. In

addition to his post as Executive Chairman of REL he is a member of the

export trade advisory committee of the Bangalore Jewellers Association. He


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is also the president of the Karnataka Jewellery Exports Association and the

Director of Handloom and Handicrafts Export Corporation of India.

Mr. Prashant Mehta:

Mr. Prashant Mehta Managing Director of the

company is in charge of the day to day functioning

and holds specific charge of the production unit of

REL. He has over twenty years of experience in

the jewellery business and is recognized as an authority in the production of

Gold jewellery.

Mr.Venu Madhav Reddy:

Non executive and independent Director in REL. He looks after and advices

on the statutory requirements division of the company.

Mr.P.Shivashankar:

Non executive and independent Director in REL, is a tax consultant by

profession and advises the company on taxation matters. He is an

experienced person with thorough knowledge of the subject.

Mr. Shankar Prasad

Non executive and independent Director in REL is an established and well

known company secretary who advices REL on Company Law related

matters.


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Gitanjali Jewels is the flagship concept of Gitanjali Group, the only Multi

Branded Lifestyle Jewellery Store in India. We offer the bouquet of Worlds

Leading Jewellery Brands including Asmi, Ddamas, Diya, Gili, Nakshatra,

Maya Gold, Sangini, and Parineeta all under one roof.

We are a One Stop Destinationof branded jewellery, spanning over 65

retail outlets across 40 cities in India with 25 more stores in the pipeline. Our

products are a personification of elegance and grandeur designed to celebrate

the enigma of a woman. Our focus is on Quality, Purity, Variety &

Exceptional Customer Service which enhances the Jewellery buying

experience for the customers.

Jewels showcases exquisite Jewellery line that includes ethnic and casual

designs under multiple brands and collections, artistically crafted so as to add

a true essence to the beauty that a women adorns. Our product category

includes everything from earrings, necklaces, rings, pendants, nose pins to

tanmanias for mangalsutra, designed to cater the needs of the modern

customer under various price segments.

Gitanjali Jewels was awarded The Best Jewellery Retail Chain of the Year in

Multi brand category by Retail Jewelers India Award 2009 andFashion


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Retailer of the year 2010and Franchiser of the year 2010by Franchise

India Holdings Ltd and Star Retailer Awards.

Values

Integrity, Solidarity, Credibility and Perfectionthese are the fundamentals

of Gitanjali's working philosophy as it impacts business and employee

relations, transparency of operations and quality assurance, on the way to

creating a globally valued organization.

These are values painstakingly nurtured and demonstrably proven over 40

years. We live and breathe them.

Vision

To be the worlds leading manufacturer of diamonds and retailer of branded

jewellery, with a strong, globally diversified infrastructure and integrated

operations efficiently linking diamonds from rough to retail.

Mission

To develop, produce and sell high quality jewellery and accessories

worldwide and help our customers to

get the maximum value for money.

To create incremental demand for diamonds through marketing and

promotion strategies.

To create incremental enterprise and brand value to increase the net worth

of the group

To build in-house resources of unsurpassable skill in design, manufacture

and customer response.

To protect worker interest and nurture professional growth.

To remain a loyal business partner to DTC.


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History of Gitanjali group

Incorporated as a limited company 'Gitanjali Gems Private Limited' 1986

Started jewellery operations at the manufacturing units in SEEPZ, Mumbai 1991

Converted into a public limited company 'Gitanjali Gems Limited' 1994

Launched India's first branded jewellery, GILI, through Gili India 1994

Started operations at the manufacturing unit in Borivali, Munbai 1996

Started operations at the manufacturing unit in Surat SEZ 2003

Formed the D'damas Joint Venture company 2003

Formed JV Brightest Cricle Jewellery Private Limited to promote Brand

'Nakshtra'2004

Hyderabad Gems SEZ Limited become Wholly owned subsidiary of the

company2006

Initial Public Offering (IPO) of Gitanjali Gems Limited 2006

Acquired Samuel Jewelers Inc, USA 2006

Acquired Asmi from DTC 2006


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Table 4.1:

Table showing investment required for the franchise

Investment

required

25-50lakhs 50-75lakhs 75-100lakhs 1-5cr

Shubh

jewellers

Gitanjali

Analysis: From the above table it can be found that Gitanjali jewels requires

investment of 2-5 crores. Shubh jewellers requires investment of 40-60lakhs


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Chart 4.1:

Chart showing investment required for the franchise

Inference: Jewellery is a capital intensive business thus it requires large sums

of investment. Gitanjali being a large store format and premium retailer

requires the franchisor to invest upto 5 crores and Shubh jewellers being a

small store format and low margin retailer requires investment of 60 lakhs

0

50

100

150

200

250

300

GITANJALI SHUBH

2-5 crores

40-60 lakhs

Investment required in lakhs

SHUBH

GITANJALI


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Table 4.2:

Table showing other investments required

Other investments

required

Yes No

GITANJALI

SHUBH

Analysis: From the above table it can be seen that both Shubh jewellers and

Gitanjali jewels require investment

Inference: From the above table it can be seen that both Shubh jewellers and

Gitanjali jewels require other investment like furniture of store, legal

formalities, lightning and fixtures.


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Table 4.3:

Table showing duration of the franchise

Duration of

franchise

1year 3years 5years Perpetuity

Shubh

jewellers

Gitanjali

Analysis: From the above table it was found that Gitanjali offers franchise up

to 3 years, whereas Shubh offers up to 5 years


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Table 4.4:

Table showing returns on investment made in the business

Returns on

investment

10-15% 15-25% 25-30% 30-50%

Shubh

jewellers

Gitanjali

Analysis: From the above table it can be seen that Gitanjali offers return upto

26% while Shubh jewellers give returns upto 20 %


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Table 4.5:

Time duration taken to break even in the business

Time to break

even

2years 3years 4years 5 years

Gitanjali

Shubh

Analysis: From the above table it can be seen that Gitanjali takes 4 years to

break even. Shubh jeweller takes 5 years to break even.


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Table 4.6:

Table showing margins on sale for the franchise

Margin on

sale for the

franchise

1-2% 2-3% 3-5% 5-10%

Shubh

jewellers

Gitanjali

Analysis : Shubh jewellers offers margin of 2-3% on sale where as Gitanjali

jewels offers margin of upto 14%


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Chart 4.6

Chart showing margin on sale

Inference : shubh jewellers being a low margin retailer offers only 2-3%

margin on sale to the franchisor whereas Gitanjali jewels offers margin of

14% as it deals in diamond jewellery

0

2

4

6

8

10

12

shubh gitanjali

margin on sale

margin on sale


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7.Type of jewellery the franchisor deals in?

Gold

Silver

Platinum

Diamond

Type of

jewellery

Gold Silver Platinum Diamond

Shubh

Gitanjali

Analysis: Shubh jewelers deal only in gold. Gitanjali deals in platinum, gold

silver and diamonds

Inference: Gitanjali offers wide variety of jewellery like gold, platinum, silver

and diamond. Shubh jewellers deals only in gold.


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8. No. of stores under franchise format currently?

10-20

20-40

40-60

60 & above

Analysis : shubh jewellers has 82 stores and Gitanjali jewels has 215 stores

under franchise

Inference: Gitanjali jewels being a old player in the market has 215 stores

across the world but shubh jewellers has only 82 stores

0

50

100

150

200

250

shubh gitanjali

No. of stores under franchise model

no. Of franchises


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9. Future plans for expansion of stores under franchise format (next 5 years) ?

10-50

50-100

100-150

150& above

Analysis : shubh jewellers plans to expand to 500 stores in next 5 years

whereas Gitanjali plans to expand to 400 stores

Inference : shubh jewelers has chalked out more aggressive plan to expand

across India to increase the no. of stores to 500 and Gitanjali has plan toexpand to 400

0

100

200

300

400

500

600

shubh gitanjali

Future expansion

Future expansion


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10. Region wise presence of the company?

North South

East

West

Table showing region wise presence of the companies

Region of

presence

North South East West

Gitanjali

Shubh

0

10

20

30

40

50

60

70

80

90

gitanjali shubh

north

east

west

south


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11. Criteria for selection of the franchise

Financial strength of the franchise Experience

Area

All of the above

CRITERIA FOR

SELCETION

Finance Experience Area available

SHUBH

GITANJALI

Analysis: Criteria for selection for franchise of Shubh jewelers are experience

as well as the financial ability of the owner. Gitanjali jewels requires the

franchisor to have financial ability as well as required area for the store

Inference: Shubh jewellers require the franchisor to have prior experience in

jewellery industry so that he can run the store well and Gitanjali requires the

franchisor to have adequate financial ability as well as large area for the store


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12. Prefereed area of operation?

Tier I cities

Tier II cities

Tier III cities

Preferred area Tier I Tier II Tier III

Gitanjali

Shubh

Analysis : shubh jewellers franchsie can be set up in tier 1 2 3 cities whereas

Gitanjali jewels can be set upm oly in tier 1 & 2

Inference : shubh jewelers being a small retailer can be set up in small to big

cities but Gitanjali jewels have to set up in tier 1 & 2 cities, as it is a premium

and large retailer


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13. Size of the store required?

100-200sqft

200-400sqft

400-800sqft

800& above

Table showing size of the store required

Size of the

store

required

100-200 200-400 400-800 800&above

Shubh

jewellers

Gitanjali

Analysis: Shubh jewelers require 400 sqft of space where as Gitanjali requires

space 1100 sqft

Inference: Gitanjali being a large store format and premium retailer requires

large space to operate where as Shubh requires a smaller area with lesser

investment


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Chart showing area required in sqft

0

200

400

600

800

1000

1200

GITANJALI SHUBH

AREA REQUIRED IN SQFT

AREA REQUIRED IN SQFT


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14. Franchise training program?

Yes, training is available

No, itsnot available

FRANCHISE TRAINING

PROGRAM

YES NO

GITANJALI

SHUBH

Analysis: Both the franchisors provide training

Inference: Shubh jewelers as well as Gitanjali provide training to the

franchisors


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15. Type of support provided by the franchise

SUPPORT

PROVIDED

MARKETING STAFF

TRAINING

TECHINICAL MANAGEMENT

TRAINING

GITANJALI

SHUBH

Analysis: Shubh jewellers provide marketing as well as management technical

training. Gitanjali provides marketing, technical as well management training

Inference: Shubh jewellers only provide training related to technicalities and

marketing support to the franchisees, it doesntprovide training to staff and

management. Gitanjali jewels provides training to management, technical

support and marketing.


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Table 4.16:

Table showing the main competitors to the franchisees

COMPETITION LOCAL/SMALL

PLAYERS

BIG/ORGANISED

PLAYERS

GITANJALI

SHUBH

Analysis: Shubh jewellers have competition from local players where as

Gitanjali has competition from big players in the market

Inference: Shubh jewellers being a small player has competition from

local/unorganized sector whereas Gitanjali being an organized player has

competition from big/organized players in the markets


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Table 4.17:

Table showing if any performance guarantees are given to unit franchisees

Performance guarantees Yes No

Gitanjali

Shubh

Analysis: From the above table it can be seen that Shubh jewellers and

Gitanjali jewels do not give any performance guarantees

Inference: From the above table it was found that the franchisors do not give

any sort of performance guarantees to the franchisees. It is upto the

franchisees to perform and make sure they get their desired returns.


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Table 4.18

Table showing if exclusive territorial rights given to a unit franchise

Territorial rights YES NO

GITANJALI

SHUBH

Analysis: From the above table it can be seen that Gitanjali doesntprovide

any territorial rights to the franchisor where as Shubh provides territorial

rights to the franchisee

Inference: From the above table it can be seen that Shubh jewellers provides

exclusive territorial rights to its franchisees, where as Gitanjali does not

provide any territorial rights to its franchisees.


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Table 4.19:

Table showing if any deposit or upfront payment to be made as security

Upfront deposit Yes no

Gitanjali

Shubh

Analysis: From the above table it can be seen that Shubh jewellers requiresthe franchisee to make a upfront payment, where as Gitanjali jewels doesnt

require any upfront payment

Inference: From the above table it can be seen that Shubh jeweller requires

the franchisee to provide collateral to the company like property papers etc

where as Gitanjali only requires the franchisee fees which is included in the

initial investment made.


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Table 4.20:

Table showing if jewellery of other brands can be sold within the same store

JEWELLERY OF

OTHER BRANDS

YES NO

GITANJALI

SHUBH

Analysis: From the above table it can be seen that both Shubh jewellers and

Gitanjali jewels do not allow jewellery of other brands to be sold with that of

theirs in the same store.

Inference: From the above table it can be seen that under no circumstances

the franchisee is allowed to sell jewellery of other brands in the same store as

it is against the policies of the companies.


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5.1 SUMMARY OF FINDINGS.

It was found that jewellery is a capital intensive business thus it requires

large sums of investment. Gitanjali being a large store format and premium

retailer requires the franchisor to invest up to 5 crores and Shubh jewelers

being a small store format and low margin retailer requires investment of 60

lakhs

Gitanjali and Shubh jewellers offer franchisee upto 3 & 5 yearsrespectively after which it can be renewed, depending upon terms and

conditions.

Gitanjali offers higher return on investment with returns upto 26% annually,

whereas Shubh jewellers 20% return

It can be seen that Shubh jewellers being a low margin retailer offers only

2-3% margin on sale to the franchisor whereas Gitanjali jewels offers margin of

10- 14% as it deals in diamond jewellery

It was found that Gitanjali offers jewellery in gold, platinum, silver and

diamond. Shubh jewellers deal only in gold.

It can be seen that Gitanjali is a bigger player than Shubh jeweller. Gitanjali

has over 200 stores across the country and Shubh jewellers has only 80+

stores in South India


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It was found that Shubh jewellers require the franchisee to have prior

experience in jewellery industry so that he can run the store well and Gitanjali

requires the franchisee to have adequate financial ability as well as large area

for the store.

A Shubh jeweller store can be set up in small to big cities as it is a small

and low margin retailer but Gitanjali jewels have to set up in tier 1 & 2 cities, as

it is a premium and large retailer.

Both Shubh jewellers and Gitanjali jewels do not offer any performance

guarantees to their franchisees

Shubh jewellers provide territorial rights to its franchisors where as Gitanjali

does not provide any rights to its franchisors

It was found that under no circumstances the franchisee is allowed to sell

jewellery of other brands in the same store.


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Recommendations

Gitanjali jewels require very high investment to start the business; hence

many potential franchisees may not be able to afford it. Shubh jewellers offer jewellery in gold only thus customers who are looking

for platinum, silver and diamond may choose other retailers

Gitanjali jewels do not operate in tier 3 cities, thus they are missing on the

large chunk of semi urban and rural population

Shubh jewellers doesntoffer high end products for the upper class

customers, thus it can create a separate sub brand for the niche market

Both the franchisors do not offer any performance guarantees to the

franchisees, which may deter potential franchisees may taking up the

business.

Gitanjali jewels must offer territorial rights to its franchisees as it avoids

competition from same brand

Shubh jewellers must increase their presence in other parts of the country

too, as it has presence only in southern part of the country

Shubh jewellers offer very low margin to the franchisees in the investment

intensive business, thus it must increase the margins steadily.


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Conclusion

Both Shubh jewellers and Gitanjali jewellers target different segment ofcustomers of

same industry. Shubh jewellers targeting low to medium income group where asGitanjali jewels targets the upper class people. Any person looking to take up the

franchisee of either of the two businesses must first of all decide the location,

investment and target market. If a person is looking to set up the business in a rural

place, then he must choose Shubh jewellers as it offers value to the buyer, who is cost

conscious vice versa any person looking to set up in urban area must decide upon the

target group of customers and jewellery he wants to sell. Both the companies have its

pros and cons, it is upto us to decide depending upon the location, investment and

customers.


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BIBILIOGRAPHY

http://www.way2franchise.com/resource/article/shubh_jewellers_aims_to_be_

the_no_1_jewelry_franchise_in_india

http://www.franchiseindia.org/news/Shubh-Jewellers-plans-on-an-expansion-

spree-106/

http://www.franchiseindia.net/gitanjali.php

http://www.franchiseindia.com/business-opportunities/precious-

jewellery/gitanjali/
http://www.franchiseindia.org/news/Shubh-Jewellers-plans-on-an-expansion-spree-106/http://www.franchiseindia.org/news/Shubh-Jewellers-plans-on-an-expansion-spree-106/http://www.franchiseindia.net/gitanjali.phphttp://www.franchiseindia.com/business-opportunities/precious-jewellery/gitanjali/http://www.franchiseindia.com/business-opportunities/precious-jewellery/gitanjali/http://www.franchiseindia.com/business-opportunities/precious-jewellery/gitanjali/http://www.franchiseindia.com/business-opportunities/precious-jewellery/gitanjali/http://www.franchiseindia.net/gitanjali.phphttp://www.franchiseindia.org/news/Shubh-Jewellers-plans-on-an-expansion-spree-106/http://www.franchiseindia.org/news/Shubh-Jewellers-plans-on-an-expansion-spree-106/


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ANNEXXURE

Questionnaire

1. Investment required for the franchise 25-50 lakhs

50-75 lakhs

75-100 lakhs

1 -5cr

2. Are there other investments required?

Yes

No

3. How long is franchise term for?

1 year

3 years

5 years

Perpetuity

4. Is the term renewable?

Yes

No

5. Returns on investment in the business annually?


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10-15%

15-25%

25-30%

30-50%

6. Time duration taken to break even in the business

2 year

3years

3years

4 years

7. Margins on sale for the franchise?

1-2%

2-3%

3-5%

5-10%

8. No. of stores under franchise format currently?

10-20

20-40

40-60

60 & above

9. Future plans for expansion of stores under franchise format (next 5 years) ?

10-50

50-100


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100-150

150& above

10. Region wise presence of the company?

North

South

East

West

11. Criteria for selection of the franchise

Financial strength of the franchise

Experience

Area

All of the above

15. Size of the store required?

100-200sqft

200-400sqft

400-800sqft

800& above

12. Franchise training program?

Yes, training is available

No, itsnot available


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shubh jewellers

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