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Subhiksha

1) Subhiksha was founded in 1997 and became one of the largest retail chains in India with over 1600 outlets. 2) It positioned itself as a low-price retailer and expanded rapidly across India between 1997-2008. 3) However, it failed due to over-expansion without sufficient funds, financial crisis, high rental costs, poor inventory management, and strong competition from other retailers. 4) Issues around rapid growth, funding, and operational management ultimately led to Subhiksha's collapse in 2008.

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group-4Dev prayaglavkumarshubhangikaushalswapneshjainmukeshsinghshivpalsinghITM- GLC-Navi Mumbai
why they failed!!!
Subhiksha means prosperity in Sanskrit.Founded by R. Subramanian, an IIT-IIM alumni in 1997 Wasone of the largest retail value chain in India.(in terms of no. of stores) 1600 outlets selling groceries, fruits, vegetables, medicines and mobile phones.
The People ASSOCIATED1) Chairman ‐R Subramanian (IIM‐A Alumnus)2) Ms.Rama Bijapurkar (IIM‐A Alumnus),Board of Director3) Mr. Kannan Srinivasan (a professor of marketing at Carnegie Mellon University’s TepperSchool of Business),Board of Director4) Mr. S.B. Mathur, former LIC Chairman,5) Ms. RenukaRamnath, Managing Director of ICICI Venture6) Ms. Rajeev Bakshi, Deputy Managing Director of ICICI Venture and a former CEO of PepsiCo India.7) Mr. AjemPremij as Board member
Major shareholdersICICI Venture-23%Ajempremji(wipro)-10%ICICI prudential-5%
The Positioning:Low Prices :Subhiksha Positioned itself as Value Retail Chain /Discount Retail Chain.Trust : Subhiksha’s name inspires trust and its consumers rely on it through all times to deliver.Savings : focuses on the concept of constantly sustainable low pricing .
STRATEGYCut price strategy.Focused on the lower & upper middle class.Wal-mart‐style- everyday‐low‐price (5‐10% less than MRP ) Shops are located not on the main road.The catchment area of customers.Informed customers about promotional offers.
The expansion:March 1997 -Opening of the first retail store in Chennai, with 5 lacs Initial investment.March 99‐14 stores in ChennaiJune 2000‐ 50 stores in Chennai&I CICI venture joinsJune 2002‐ 120 stores in whole of Tamil NaduJune 2006‐420 Stores in other big states in India namely Gujarat, Delhi, Mumbai, Andhra Pradesh and Karnataka.Feb 2007‐500 stores across countryDec 2007‐ 1000 stores across IndiaOctober 2008‐ 1600 stores across India
“We are a golden egg laying duck, we are in trouble. We need their (bankers and lenders) support and upon getting it we will restart operations and repay all debt. It is not easy, but we have to make it happen,” says R Subramanian
Reason For FailureBig mistake - Expanding rapidly without sufficient funds in handThought of raising equity during last September but were lateGlobal scenario went wrong October, 2008 the company ran out of enough funds to run the organizationThere after problems queued up at the doors
Financial CrisisAdvertising:Advertising dues not cleared Wages and Rent :Huge list of outstanding wages and rentDisruption in supplies by wholesale suppliers
Inadequate system control and IT Support: Caused huge audit & abnormal losses in systemGovernment Intervention : Maharashtra FDA,askedSubhiksha to suspend operations at its warehouse in Bhiwandi
Supplier Bargaining Power : Many wholesale suppliers in Azadpursubzimandi, have stopped supplying fruits and vegetables in NCR surrounding the national capital. Long credit periodsLack of strong HR policy and Staff‐ Was not able to retain the talent which he initially bring into Junior, Middle and high level management. Whatever was remaining with it is all family bound with no commitment policy.
Huge Rental and Lease Bills : There are huge frauds while entering in to rental agreements by their own management people. There was no proper check and control on this cost ,though this is a very crucial part to defeat competitors and to gain profitability in future. The wrong assumption-telecom segment profit making segment.The CEO never looked in to system losses arise from telecom. Subhiksha stores always sell handsets at below DP while its benchmarking is to match DP.No control on inventory of mobile accessories and there stock value and were unable to circulate the working capital.
Poor Inventory managementCredit defaults caused supply breakages-inventories going bad or lack of stockBecame re-sellers rather than retailerRe-selling to other retailers
Strong Competition : Thus sinking into unrepaired conditions Subhiksha has to compete with its high profile competitors like RPG, Reliance retail and Future group etc.Reliance Retail has set up 700‐odd stores in the past two years-Reliance FreshOn the other hand is high‐end in terms of display, ambiance and size.
Competitive Analysis Competitors at the National Level
Competitive Analysis Competitors at the Regional Level
Over confidence and Aggressiveness: The raise of the company thus gradually started sinking down step by step and now stands on the verge of collapse. The management admit that their over confidence and aggressiveness are the main reasons for their loss. They should have gone for an IPO when the things were well and good to prevent such downfall. If they had responded in right time they wouldn’t have been put through such bad phases.
References:http://www.indiaretailbiz.com/blog/category/indian-retalers/subhikshasubramanians/http://www.livemint.com/subhiksha.htmhttp://www.financialexpress.com/news/subhiksha-charts-rs-1-000-croreinvestment/373019/http://www.rediff.com/money/2007/feb/05bspec.htm
Subhiksha