CHAPTER-I

INTRODUCTION

Business is an economic activity which is related with continues and regular production or purchase and sales of goods undertaken, with an objective of earning profit and acquiring wealth through the satisfaction of human want.The scope of Business is wider than of the terms Trade and commerce. The term trade and commerce are often used synonymously. This usage is not correct with exchange of goods and service. It performs the function of acting as an intermediary and thereby it transfers goods from the producer to the consumer. On the other hand, commerce is a wider term. It includes Trade as well as Aids to trade i.e. the various activities which facilitates trade.The term business may be classified into Industry and Trade and commerce. Industry is referred to as production of goods and materials while trade and commerce referred to distribution of goods and materials manufactured.1International Investment:The strategy of selecting globally-based investment instrument as part of an investment portfolio, International investing includes such investment vehicles as mutual funds, American Depository Receipts, Exchange-Traded Funds (ETFS) or direct investments in foreign markets. People often invest internationally for diversification, to spread the investment risk among foreign companies and markets and for growth, to take advantage of emerging markets. Here we are going to Study about FDI in retail market.2Meaning of FDIForeign direct investment (FDI) in India has played an important role in the development of the Indian economy. FDI in India has a lot of ways enabled India to achieve a certain degree of financial stability, growth and development. This money has allowed India to focus on the areas that needed a boost and economic attention, and address the various problems that continue to challenge the country.FDI stands for foreign direct investment is also referred to productive investment by any foreign investment actually means the flow of the total investment in any enterprise or ongoing business, which is operating for the growth of the country economy. The investment are the summation of long term money or capital, equity capital earnings and also short term money. The investment is incorporated in the various sectors like the infrastructure development projects. These kinds of projects include areas like flyovers, bridges, offices, industries and much more. The investments in other sectors include financial sectors that incorporate insurance services and banking and also retail sectors and other real estate development projects. India is a country that has been able to restore investor confidence in its markets, even during the toughest of times. Increase in capital inflows, foreign direct investments (FDI) and overseas entities participation reflect the fact that Indian markets have fared well in recent times. Moreover, foreign companies are viewing the South-Asian nation as a strategic hub for their operations and investments owing to investor-friendly policy environment, positive eco-system and huge potential for growth. India Incs increasing presence over the global canvas and Indian governments consistent support to the FDI space has facilitated remarkable developments and investments from overseas partners. MEANING OF RETAIL MARKETRetailing means a piece of or to cut up. This implies that retailers acquire large quantities of product and divide them up to smaller units to be sold to individual consumer. In the era of intense competition, most companies contemplate different forms of distribution. Companies are able to sell direct to consumers from their place of location. Stores combine direct marketing by use of advertisements, catalogues telephone sales or electronic media with their retail outlet. Tourism industry also makes use of these distribution channels in reaching out to its customers. 1.1 RATIONALE FOR SELECTING THE TOPICIn our day-to-day life we are engaged in several activities. In that, business is very important activity of selling goods or services to the final consumer. If goods are channelized to the consumers through foreign direct investment by the foreign investor in home country is known as FDI in retail sector. While selecting the topic for my project FDI in retail marketing is the hot topic. This issue was discussed even in the parliament for longer period. So I am interested to analyze the pros and cons of FDI in retail sector.1.2 SCOPE OF THE STUDYThe techniques used for data collection was one-on-one interviews individual responses to arrive at the opinion on various issues. The instrument for data collection in the form of structures questionnaire was designed to elicit information demographic aspects. This study is conducted from the period of Jan-march 2012. The survey is carried out in the semi-urban areas to the business people, professionals, and retailers with a sample size of 50.1.3 NEED AND IMPORTANCE OF THE STUDYConsumption of various kinds of goods and services is the part and parcel of human life. Almost every activity in which a human being may be engaged involves that consumption of goods and services. Marketing is an integral financial activity of the human being in their day-to-day. Presently marketing has occupied a predominant role in the process of industrialization which is turning emerged as a concept of economic development of traders. This study will explain the advantages and disadvantages of FDI in retail market. The study summarizes whether the FDI in retail market in boon or ban.1.4 STATEMENT OF THE STUDYThis study deals with the proposal announced by the United Progressive Alliance as 51% in FDI in multi-brand stores and 100% in single brand made by the central government on 14th Nov 2011. In this context, an attempt is made to collect the opinion of retailers in the Chennai city whether the proposed bill could be implemented by the central government or not.1.5 OBJECTIVES OF THE STUDYIn order to examine the FDI decision stated above the following are the specific objectives of the study. To collect the opinion from the retailers about the proposal made the government with regard to FDI in retail marketing. To identify the constraints which would be faced by the retailers if the proposal is implemented To analyze the positive and negative effects of FDI in retail marketing from the retailers perspective in Chennai1.6 LIMITATIONS OF THE STUDY Due to time and resources constraints, the sample size and restricted to 50 retailers, business people, professionals and so scientific method was used in arriving at it. The study is restricted to retailers in Chennai city only. The findings are based entirely upon the research conducted in Chennai and hence may not be applicable directly too other metropolitan areas on counts of socio-cultural diversity and contractual factors.1.7 RESEARCH METHODOLOGYDescriptive Study is used for the purpose of research. Descriptive research includes surveys and a fact finding enquires of different kinds. The major purpose of descriptive research is the description of the state of affairs as it exists at present. A descriptive study requires a clear specification of who, what, when, were, why and how aspects of the research. Convenience Sampling method is used in collecting the data in this study. The date collected were classifieds, tabulated, analyzed and interpreted. From analysis, conclusions are drawn and suggestions are also given.4

Data collection:The study is based on both primary and secondary data.Primary Data: The primary data was collected from the 50 retailers, business peoples and professionals with use of predetermined questionnaire directly and face to face interview was conducted to elicit opinion from academicians bureaucrat and general public. The details of questionnaire are given in the annexure. The survey was carried out between Jan to March 2012.Secondary Data: In additions to the field research, secondary data were collected from articles prescribed in dailies, magazines and through visits to libraries and also from the World Wide Web.Design of questionnaire:The main tool used for this study is structured questionnaire. The questionnaire contains different forms of question like Open ended questions Dichotomous form Multiple choice questions Open ended question i.e. inviting free response. Here the respondents are free to answer of their own words.Dichotomous form i.e. yes or no answer. Her the question will have only 2 choice yes or no and the respondent have to choose any one.Multiple choice questions will contain more choices from which the respondents can select any one of their own.

Tools for data analysis: Percentage analysis Charts Chi-square This analysis shows the entire respondents in terms of percentage. It is used to make comparison between two or more series of data.Percentage = No of respondents x 100 Total respondentCharts:A chart is a visual representation of data, in which the data are represented by symbols such as bars in a bar char and lines in the line chart. A bar chart uses bar to show frequencies or value for different categories A pie chart shows percentage values as a slice of pie.Chi-square: Chi-square symbolically written as an x2 (pronounced as ki square) is a statistical measure with the help of which it is possible to assess the significance of different between the observed frequency and the expected frequency obtained from some hypothetical universe. Chi- square test enables us to test whether more than two population proportion can be considered equal. In this test, assuming null hypothesis (ho), the expected frequencies should be calculated. Then comparing the calculated x2 value with tabulated x2 value, we can conclude the test of goodness. The formula for computing chi-square is X2 = {(oi EI) 2 / EI}Oi- observed frequencyEI-Expected frequencyHYPOTHESIS:It is an assumption to be proved or disproved. A research hypothesis is a predictive statement capable of being tested by scientific methods that relates an independent variable.1.8 REVIEW OF LITERATUREForeign direct investment (FDI) in India has played an important role in the development of the Indian economy. FDI n India has a lot of ways enabled India to achieve a certain degree of financial stability, growth and development. This money had allowed India to focus on the areas that added a boost and economies attention, and address the various problems that continue to challenge the country.India has continually sought to attract FDI from the worlds major investors. In 1998 & 1999 the Indian national government announced a number of reforms designed to encourage and promote a favorable business environment of investors.A number of projects have been implanted in areas such as electricity generations, distribution and transmission, as well as the development of roads and highways, with opportunities for foreign investors.The Indian national government also granted permission for FDI to provide up to 100% of the financing required for construction of bridges and tunnels, but with a limit to foreign equity of INR 1, 5000 crores approximately $352.5 million.Currently; FDI is allowed in financial services; including the growing credit card business. There also include the non-banking financial services sector. Foreign investors can buy up to 40% of the equity in private banks, although there is conditioned that these banksMust be multilateral financial organization up to 45% of the shares of companies in the global mobile personal communication by satellite services (GMPCSS) sectors can above purchased.5What is foreign direct investment (FDI)? Instead of investing in local business, putting money in the company functioning or incorporated in another country in foreign direct investment for the country which is attracting the investment. The investor is a considered a foreign direct investor. The foreign direct investor can have influence in the management of the companies invested in. The foreign direct investor may have a varying amount of stake in the invested company. Stakes can be as low as 10% or may also cross 49% of the stacks or stock ownership. Some countries may have caps on the amount of equity a foreign direct investor may hold. For e.g. The RBI allows foreign equity only unto 505 in investment in specific mining sector in India. It totally forbids FDI in mining of iron and manganese. The flow of capital from the foreign investor to the company invested in becomes an FDI inflow. FDI has three equity capital investment, reinvested earnings and intra company loans.Retailing means a piece of or to cut up. This implies that retailers acquire large quantities of product and divide them up to smaller units to be sold to individual consumer. The definition of retailing emphasis the business activity of selling goods or services to the final consumer.From the above paragraph we can clearly understand the meaning for FDI in Indian retail market. It is nothing but investment of foreign countries like USA, UK etc in our Indian Retail market.L. Natarajan in his book Retail Marketing discussed about organized and unorganized retail sector. Organized retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered foe sales tax, income tax, etc. these include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganized retailing, on the other hand, refers to the traditional formats of law-cost retailing, for example, the local kirana shops, owner manned general stores, paan/beedi, convenience stores, hand cart and pavement vendors, etc. The Indian retail sector is highly fragmented with 97 per cent of its business being run by the unorganized retailers. The organized retail however is at a very nascent stage. The sector is the largest source of employment after agriculture, and has deep penetration into rural India generating more than 10 per cent of Indias GDP.6FDI policy in India FDI as defined in dictionary of economics is investment in a foreign country through the acquisition of a local company or the establishment there of an operation on a new (Greenfield) site. To put in simple work, FDI refers to capital inflow abroad that is invested in or to enhance the production capacity of the economy. Foreign Investment in India is governed by the FDI policy announced by the government if India and the provision of the Foreign Exchange Management Act (FEMA) 1999. The Reserve Bank of India (RBI) in this regard had issued a notification which contains the foreign exchange management (transfer or issue of security by a person resident outside India) regulations, 2000. This notification has been amended from time to time.The ministry of commerce and industry, government of India is the nodal agency for motoring and reviewing the FDI policy on continued basis and changes in sectoral policy/sectoral equity cap. The FDI policy is notified through press notes by the Secretariat for Industrial Assistance (SIA). Department of Industrial Policy and Promotion (DIPP).The foreign investors are free to invest in India, except few sectors/activities, where prior approval from the RBI or Foreign Investment Promotion Board (FIPB) would be required. FDI policy with regard to retailing in India It will be prudent to look into press note 4 of 2006 issued by DIPP and consolidated FDI policy issued in October 2010 which provide the sector specific guidelines for FDI with regard to the conduct of trading activities.a) FDI up to 100% for cash and carry wholesale trading and export trading allowed under the automatic route.b) FDI up to 51% with prior government approval (i.e.FIPB) for retail trade of single brand product. Subject to press note 3 (2006 series)c) FDI is not permitted in multi brand retailing in India.7

Times of India issues that the government feces a fierce political backlash over its decision to allow FDI in multi-brand retail with traders. And also issued whats attractive about Indian retail? Current size of Indian market is $28b and estimated size in 2020 will be $260b.8The Hindu issued that according to the 2011 data on the census of India websites, there are 46 cities that had a population of 10lakhs of which 25 are unlikely to allow the likes of Wal-Mart, Carrefour and Tesco to open stores since the political leadership in these states have gone on the offensive against the governments move. Slamming the center for its decision to allow FDI in multi-brand retail sector without consulting the states chief minister and AIADMK chief J Jayalalithaa demanded immediate rollback. She charged the Manmohan Singh government with taking a wrong decision taken pressure from a few retail giants who are starved for capital infusion for their future survival.9Times of India issued that FDI in multi-brand retail will help revive the cash strapped domestic retail industry by attracting funds; feels India Inc. with FDI in multi-brand sector expected to generate three to four million direct jobs and four to six million jobs by 2020, most industry leaders are convinced that the move will ensure parallel growth for both large retail chain as well as small Kirana stores. They also allayed fear of exploitation by international retail chains.101.9 CHAPTERISATION: The study report is presented in the five chapters.Chapter I of this study will provide introduction, rational for selecting the topic, scope of the study, need and importance of the study, statement of the study objectives of the study, limitation of the study, research methodology, review of literature and chapeterisation.

Chapter II: Retail marketing in India. This chapter is about organized retailing in India, Function of retailing, Characteristic of retailing, classification of retailing, types of retailing and branding in retailing.Chapter III: FDI in India This chapter is about Trend and pattern of FDI inflow, trends and pattern of FDI inflow in the world, most attractive location of global FDI, Trends and pattern of FDI flow in India, source of FDI in India and distribution of FDI in India.Chapter IV: Analysis and interpretation. The primary data was collected tabulated and interpreted in this chapter. And some statistical techniques are also used.Chapter V: Summary of findings, suggestion and conclusion. Findings of the study will be presented in this chapter. And on the basis of findings, suggestions and recommendations are made.

Foot Notes:1. Dr. Radha, 2005 Business Environment, first edition. Prasanna & co, Chennai.2. Gilberto juentes. International investment theory. Www. Ehow.com. 3. Dr. L. Natarajan, 2010 Retail Marketing, second edition, Margham publication, Chennai. 4. C.R.Kothari, 2001 Research Methodology methods and Techniques, Wiswa prakasham, New Delhi.5. Singhal Arvind, A strong pillar of Indian Economy, www.ksa.techno park .in.6. Dr. L. Natarajan, 2010 Retail Marketing, second edition, Margham publication, Chennai7. Press information officer, press information bureau for uploading the press note on DIPS websites.8. Times of India, Nov 25, volume- 4, issue-2799. Hindu, Nov 28, volume- 5, issue-291.10. Times of India Nov 29, volume-4, issue-282.

CHAPTER- II RETAIL MARKETING IN INDIAMeaning:Marketing is a managerial process of providing the right product, in the right place, at the right time and at the right price. Kotler defines marketing as a social and managerial process by which individuals and groups obtain what they need and want by creating and exchanging products and value with others.Retailing is the interface between the producer and the individual consumer buying for personal consumption. This excludes direct interface between the manufacturer and institutional buyers such as the government and other bulk customers. A retailer is one who stocks the producers goods and is involved in the act of selling it to the individual consumer, at a margin of profit. As such, retailing is the last link that connects the individual consumer with the manufacturing and distribution chain. The retail industry in India is of late often being hailed as one of the sunrise sectors in the economy. AT Kearney, the well-known international management consultancy, recently identified India as the second most attractive retail destination globally from among thirty emergent markets. It has made India the cause of a good deal of excitement and the cynosure of many foreign eyes. With a contribution of 14% to the national GDP and employing 7% of the total workforce (only agriculture employs more) in the country, the retail industry is definitely one of the pillars of the Indian economy.

2.1 Organized Retailing in IndiaThe retail industry in India is today transformed into a well developed retail hub. The Indian retailing scenario has dual aspects- a large number of small retailers on the one hand and a small number of large retail outlets on the other.Unorganized retail sector comprises 98 per cent while the organized retail trade is only two percent of the total trade. Super markets and hypermarkets fuel the growth of retail trade in India. Food and grocery items account for 76 per cent of the total consumer expenditure in the country.Shoppers stop is a part of K. Rahejas Group. It forayed into the retail industry. The company operates more than 13 department stores across the country. It is the most recognized brand in the retailing sector. The stores established in Mumbai and Bangalore became successful. These stores turned into cash cow due to first mover advantage. Subsequently, store expansion in other markets like, Jaipur, Chennai and Hyderabad resulted in accumulated losses. Then the company took some corrective measures and reported modest profit. 2.2 Functions of retailing:Generally, retailers are involved in the following functions:1. Functions of breaking bulk.2. Functions of creating place utility.3. Stocking varieties of goods.4. Providing credit facilities to customers.5. Providing information to customers and wholesalers.6. Estimating the demand and arranging the purchase of the product7. Acting as consumers agent.8. Marketing functions.9. Connecting link. 2.3 Characteristics of Retailing1. Marketing orientation.2. Multi-channel retailing.3. Innovative method of thinking and planning.4. Right environment.5. Unique characteristics of a retailer.2.4 Classifications of retailers by Philip Kotler1. Store retailers The important types of retail stores are:1. Specialty store2. Department store3. Super markets4. Convenience store5. Off-price retailer6. Discount store7. Super store8. Hyper markets9. Catalogue showroom.Non-store retailers1. Direct selling2. Direct marketing3. Automatic vending buying servicesRetail organizations1. Corporate chain store2. Voluntary chain3. Retailer cooperative consumer cooperative4. Franchise organizations5. Merchandising conglomerate. 2.5 Types of retailersRetailing ranges from hawkers and pedlars to hyper markets. While we have seen the classification of retailers by Philip kolter earlier, there is yet another classification on traditional lines on the types of retailers which are given below:I. Itinerant retailersa) Pedlars and hawkers b) Cheap jacks c) Market traders d) street traders.II. Fixed shop retailersa) Street stall holders b) Second-hand gods dealers c) Specialty goods shop d) General shops. III. Small-scale retailersa) Independent stores b) Automatic vending c) Discount houses d) syndicate stores.IV. Large scale retailersa) Department stores b) Multiple shops c) Mail order shops d) Hire purchase and installment e) Cooperative stores f) super markets g) hyper markets h) franchisingg) Shopping malls. I. Itinerant retailers Itinerant means travelling from place to place. Itinerant retailers have no fixed place of business. They move from place to place for selling their selling their goods to the consumers.1. Pedlars and hawkers: Pedlars are those retailers who carry goods in hand cart to sell them at the doors of consumers. To hawk means to sell goods in the streets by knocking on peoples doors.2. Cheap jacks: They have an independent shop. But, the shop is not a permanent one. If business at one place is not profitable, cheap jacks will choose some other location.3. Market traders: They open their shops at different places, on different days whenever the market is open. For example, Sunday market in Pondicherry is very popular among shoppers.4. Street traders: Aiming at the floating population, they choose bus stops, railway stations, government and commercial offices and educational institutions to do business.II. Fixed shop retailers Fixed shop retailers have a permanent place of business.1. Street stall holders: Street stall holders put up their stalls where there is heavy pedestrian movement. Having selected a location with utmost care, they retain that place of business.2. Second hand goods dealers: these retailers sell second hand goods such as book, furniture, television sets, radios, cloth, etc. Customers who cannot afford to buy new goods at market price buy second hand goods at cheaper prices.3. Specialty shops: Specialty shops deals in a particular variety of goods. They sell only line of goods-books, leather goods, toys, watches, electronic goods, furniture, kitchen articles, etc.4. General shops: General shops sell goods that are required for day-to-day use. General shops deal in a wide assortment of goods such as gift articles, biscuits, plastics, foot wear, flasks soap, oil, etc.III. Small scale retailers1. Independent stores: Independent stores are non-integrated retail establishment. They are small in size and have lesser degree of specialization in their management.2. Automatic vending: Sale through vending machines has become the order of the day in advanced countries. Vending machines automatically vend a particular variety of merchandise.3. Discount houses: These retail shops offer large discounts to customers on certain types of merchandise. Goods like jeweler, household appliances, furniture which carry a higher margin are offered at discounted prices. Discount houses do not give importance to customer services. 4. Syndicate stores: syndicate stores are the extended forms of chain and mail order houses. They operate on a small scale. They do not deal in national brands of merchandise.V. Large scale retailersThe large shop which operate on large scale include (i) Department stores (ii) Chain or multiple stores (iii) Mail order shops (iv) Hire Purchase and installment (v) Co-operative stores (vi) Supermarkets (vii) Hyper markets; and (viii) Shopping malls. 1. DEPARTMENTAL STORES Departmental stores are of French origin. Departmental stores came into existence in 19th century. Department stores are large scale retail stores selling less than one roof under one roof under a single control. They deal in a variety of goods2. CHAIN OR MULTIPLE STORES Under this type, similar shops are established in many places by a same management. Chain stores originated in America, it is known as multiple shops in Europe and other western countries. It is a network of a number of branches situated at different localities in the city or in different parts of the country. It is a group of retail stores which are of similar kind.3. MAIL ORDER SHOPS Under mail order methods, products are sold through mail. So, in mail order business, post office plays an important role. This system is also referred to as shopping by post.4. HIRE PURCHASE AND INSTALLMENTS Under hire purchase system, the seller agrees to sell the article on the condition that the buyer shall pay the purchase price through installments. Ownership in the goods is transferred from seller to the buyer only on the payment of last installment. So, if the buyer defaults to pay the installment amount, the goods will be repossessed by the seller.5. CO-OPERATIVE STORES A consumers cooperative store is a retail unit owned and controlled by consumers .Any consumer can join the consumer cooperative store by buying its shares. Each member has only one vote irrespective of his share holding. Members get dividend in proportion to their shares held in the cooperative store. Cooperative stores are run by the consumers themselves for their mutual benefits.6. SUPER MARKETS A super market is a large retailing ship where goods are displayed in such a way that buyers select products for themselves. Buyers collect their product off the shelves invariably in a trolley and get them billed by the counter clerk.7. HYPER MARKETS Hyper market combines the features of a supermarket and a general merchandise store. The self service basis is followed. A spacious building is required for a hypermarket. A hypermarket deals in large varieties of merchandise. Hypermarkets originated in France. 8. FRANCHISING Franchise means privilege. A franchise is a conditional right given to a retailer to market the companys products and services under the banner of the franchiser. In franchising, the franchiser licenses his brand name, business process or format, product, service or reputation to the franchisee in return for fees and royalties.9. SHOPPING MALLSThey sell a large variety of merchandise to customers. Spencer plaza in Chennai, crossroads in Mumbai, Anzal plaza in Delhi, shoppers city. Calcutta , and the Sahara mall, Gurgaon are some important shopping mall established in retail business.

2.6 BRANDING IN RETAILINGDefinition of a brand Kotler defines a brand as: A name, term, sign, symbol or design or a combination of them to identity the goods or services of one seller or a group so sellers and to differentiate them from those of competitors.THE ROLE OF BRAND IN RETAIL TRADE Brand is considered a pertinent marketing tool for retail companies in highly competitive markets. The marketplace becomes mature. So, there is a need to rise above the mass competing offers. The brand confers individuality on the product. In a mature market, retailers experiences slow growth and declining returns. Each retail organizations, will therefore attempt to defend its market share. It has to encourage consumers purchase loyalty and differentiate its outlets and offers.Brand name The brand name is the pronounceable part of a brand. Brand name consists of a word, letter, and group of words, letters, comprising a name which is intendment to identify the goods or services of a seller or which is intended to distinctly identify the goods from those of the competitors. In the other words, a brand name is that part of the brand that can be vocalized.RETAIL COMMUNICATION AND PROMOTIONDefinition of retail promotion Retail promotion is the descriptive tern for the mix of communication activities which retail companies carry out in order to influence those publics on whom their sales depend.1. Window display(outside display)Window display induces persons to enter into the shop. It arouses the interest of passers-by and kindles a desire to buy the product on display. 2. Interior display While window display is arranged outside, interior display is done inside the shop. Products placed in interior display are often kept within the easy reach of the buyers.3. Show roomsShow rooms play a crucial role in selling products like books, cars, two wheelers, washing machines, refrigerators, air conditioners, etc. showroom exhibit the products meant for sale.1 SALES PROMOTIONThe most important tool used in promotion is sales promotion. Most consumers relate ideas of marketing to the use of sales promotion techniques. The other main forms are advertising and personal selling.Kinds of sales promotion Sales promotion can be divided as follows:1. Consumers sales promotion 2. Dealers sales promotion and 3. Sales force promotion Consumer sales promotions are divided into i) samples ii) coupons iii) Demonstration iv) contests v) cash refund offer vi) Premium vii) price off offer viii) consumer sweepstakes ix) buy back allowances.Dealer sales promotion are divided into i) buying allowances ii) merchandise allowance iii) price deals iv) push money or premium v) cooperative advertising vi)dealers sales contests viii) point of purchase.Sales force promotion are divided into i) bonus ii) sales force contests iii) salesmen meetings and conferences.2 SUPPLY CHAIN MANAGEMENTThe retail product passes from the retailer to consumers. The retail product should reach the consumers at the right time, in right quality and at the right place. This needs an efficient supply chain distribution system. A distribution system is a channel which brings products to the place of sale.The supply channel and channel flowsRetail operations are growing in size. Controlling merchandise has become an indispensable part of store operations. This goes beyond an administration system. It is the total process by which retail offer reaches the end consumers for their consumption. The supply chain structures from retailing point of view may be divided into (1) extended channel, (2) limited channel; and (3) direct channel.1. Extended channel: An extended channel is one where the manufacturer, wholesaler and retailer provide a chain of facilitation services in order to sell the right product to the final customers.2. The limited channel: In the limited channel, the retailer works directly with the producer. The retailer eliminates the wholesaler and the extra costs that go with it.3. Direct channel: The final option is the direct channel. The product is sold directly either by the producer or retailer. There are different direct sales marketing promotion methods such as (1) face to face selling, (2) direct mail, (3) catalogue marketing, (4) telemarketing: and (5) Kiosk marketing.The supply channel The supply channel is defined as The total process by which a product reaches the end consumer as goods and services. It consists of a sequence of events which involves strategic decisions over different resources. Relationships are focused on delivering optimum value to the end consumer.RETAIL LOGISTICS The word logistics is derived from the French word loger which means to quarter and supply troops. When large number of troops and their equipment move, meticulous planning is required to move volumes of goods and ammunition in that direction. From a marketing point of view, customers are satisfied when they get right product at the right place, at the right time and in the right quantity. Retail logistics system ensure smooth flow of goods to consumers though efficient movement of logistics

FOOT NOTES:

1. Dr. L. Natarajan, 2010 Retail Marketing, second edition, Margham publication, Chennai.2. SM. Jaw, 2010 Marketing management, first edition, Margham publication, Chennai.3. Dr. L. Natarajan, 2010 Service Marketing, second edition, Margham publication, Chennai.

CHAPTER III TRENDS AND PATTERNS OF FDI INFLOWS

INTRODUCTION:

One of the most prominent and striking feature of todays globalised world is the exponential growth of FDI in both developed and developing countries. In the last two decades the pace of FDI flows are rising faster than almost all other indicators of economic activity worldwide. Developing countries, in particular, considered FDI as the safest type of external finance as it not only supplement domestic savings, foreign reserves but promotes growth even more through spillovers of technology, skills, increased innovative capacity, and domestic competition. Now a day, FDI has become an instrument of international economic integration.

Located in South Asia, India is the 7th largest, and the 2nd most populated country in the world. India has long been known for the diversity of its culture, for the inclusiveness of its people and for the convergence of geography. Today, the worlds largest democracy has come to the forefront as a global resource for industry in manufacturing and services. Its pool of technical skills, its base of an English speaking populace with an increasing disposable income and its burgeoning market has all combined to enable India emerge as a viable partner to global industry. Recently, investment opportunities in India are at a peak.This chapter covers the trends and patterns of FDI inflows at World, Asian andIndian level during 1991-2008. 1

TRENDS AND PATTERNS OF FDI FLOW IN THE WORLD

The liberalization of trade, capital markets, breaking of business barriers, technological advancements, and the growing internationalization of goods, services, or ideas over the past two decades makes the world economies the globalised one. Consequently, with large domestic market, low labour costs, cheap and skilled labour, high returns to investment, developing countries now have a significant impact on the global economy, particularly in the economics of the industrialized states. Trends in World FDI flows depict that developing countries makes their presence felt by receiving a considerable chunk of FDI inflows. Developing economies share in total FDI inflows rose from 26% in 1980 to 40% in 1997. However, the share during 1998 to 2003 fell considerably but rose in 2004, again in 2006 and 2007 it reduces to 29% to 27% due to global economic meltdown. Specifically, developing Asia received 16 %, Latin America and the Caribbean 8.7 %, and Africa 2 %. On the other hand, developed economies show an increasing upward trend of FDI inflows, while developing economies show a downward trend of FDI inflows after 1995.2

MOST ATTRACTIVE LOCATION OF GLOBAL FDI

It is a well-known fact that due to infrastructural facilities, less bureaucratic structure and conducive business environment China tops the chart of major emerging destination of global FDI inflows. The other most preferred destinations of global FDI flows apart from China are Brazil, Mexico, Russia, and India. The annual growth rate registered by China was 15%, Brazil was 84%, Mexico was 28%, Russia was 62%, and India was 17% in 2007 over 2006. During 1991-2007 the compound annual growth rate registered by China was 20%, Brazil was 24%, Mexico was 11%, Russia was 41% (from 1994), and India was 41%. Indias FDI need is stood at US$ 15 bn per year in order to make the country on a 9% growth trajectory (as projected by the Finance Minister of India in the current Budget74). Such massive FDI is needed by India in order to achieve the objectives of its second generation economic reforms and to maintain the present growth rate of theeconomy. Although, Indias share in world FDI inflows has increased from 0.3% to 1.3% from 1990-95 to 2007. Though, this is not an attractive share when it is compared with China and other major emerging destinations of global FDIinflows. TRENDS AND PATTERNS OF FDI FLOW IN ASIA

In the South, East, and South East Asia block India is at 3rd place after China and Singapore. South, East, South East Asia block registered an annual growth rate of 19% in 2007 over 2006 and compound annual growth rate of 17% on an annualized basis during 1991-2007. Indias share has increased from 1.5% in 1990- 95 to 9.2% in 2007 while Chinas share was decreased to 33 per cent in 2007 from 43.4 per cent in 1990-95. It is found that there is an increment of 5.8% in case of India while there is a decrement of 9.8% in case of China. It is evident from that Indias share among developing countries in FDI inflow was 1.4% in the last decade and 2.8% in 2000-2007 while Chinas share was 22.6% in 1991-99 and 21.7 per cent in 2000-07. When the shares of these two countries are compared it is found that Chinas share is 21.7% in the present decade while Indias share is miniscule (i.e. 2.8%).The doing business conducted by World Bank put forward certain indicators where China beats India in attracting high FDI inflows. High trade and transaction costs are mainly due to the countrys lack of quality infrastructure. This lack of infrastructure discourages resource seeking and export oriented investment. The reason for the low level of FDI in India as compared to China could be any but the fact is that China opened its door to foreign investment in 1978 while India in 1991.There is an appreciable increase in the level of FDI inflows in the South Asian Region. Asia registered an annual growth rate of 17% in 2007 over 2006 and compound annual growth rate of 18% on an annualized basis during 1991-2007. India, Pakistan, Bangladesh are receiving higher volume of inflows since 1990. According to World Investment Report77 2007 (WIR), India has emerged as major recipient of FDI in South Asia. Its share is nearly 75% of total FDI flow to South Asia. In fact, the Comprehensive Economic Cooperation Agreement (CECA) withSingapore, Free Trade Agreements (FTAs) with Singapore and Thailand and by becoming the member of ASEAN Regional Forum India has made its presence felt in East Asia region. India, is trying hard so that the largest free Trade Area, even larger than the existing EU-NAFTA combined area, could come up in the East Asia region. This suggested largest FTA would make the bilateral trade to the new heights in the coming years. Due to CECA and FTAs with Singapore, it emerged as the third biggest investing country in India. Its ranking improved by 4th place, and if this pace of investment continued from Singapore it is hoped that it will become the largest investing country in India in the coming years and Singapore may prove to be a Hong Kong or Taiwan to India3.

TRENDS AND PATTERNS OF FDI FLOW IN INDIA

Economic reforms taken by Indian government in 1991 makes the country as one of the prominent performer of global economies by placing the country as the 4th largest and the 2nd fastest growing economy in the world. India also ranks as the 11th largest economy in terms of industrial output and has the 3rd largest pool of scientific and technical manpower. Continued economic liberalization since 1991 and its overall direction remained the same over the years irrespective of the ruling party moved the economy towards a market based system from a closed economy characterized by extensive regulation, protectionism, public ownership which leads to pervasive corruption and slow growth from 1950s until 1990s.In fact, Indias economy has been growing at a rate of more than 9% for three running years and has seen a decade of 7 plus per cent growth. The exports in 2008 were $175.7 bn and imports were $287.5 bn. Indias export has been consistently rising,covering 81.3% of its imports in 2008, up from 66.2% in 1990-91. Since independence, Indias BOP on its current account has been negative. Since 1996-97, its overall BOP has been positive, largely on account of increased FDI and deposits from Non Resident Indians (NRIs), and commercial borrowings. The fiscal deficit has come down from 4.5 per cent in 2003-04 to 2.7 per cent in 2007-08 and revenue deficit from 3.6 per cent to 1.1 per cent in 2007-08. As a result, Indias foreign exchange reserves shot up 55 per cent in 2007-08 to close at US $309.16 billion an increase of nearly US $110 billion from US $199.18 billion atthe end of 2006-07. Domestic saving ratio to GDP shot up from 29.8% in 2004-05 to 37.7% in 2007-08. For the first time Indias GDP crossed one trillion dollars mark in 2007. As a consequence of policy measures (taken way back in 1991) FDI in India has increased manifold since 1991 irrespective of the ruling party over the years, as there is a growing consensus and commitments among political parties to follow liberal foreign investment policy that invite steady flow of FDI in India so that sustained economic growth can be achieved. Further, in order to study the impact of economic reforms and FDI policy on the magnitude of FDI inflows, quantitative information is needed on broad dimensions of FDI and its distribution across sectors and regions.

The actual FDI inflows in India is welcomed under five broad heads: ( i ) Foreign Investment Promotion Boards (FIPB) discretionary approval route for larger projects, (ii) Reserve Bank of Indias (RBI) automatic approval route, (iii) acquisition of shares route (since 1996), (iv) RBIs non resident Indian (NRIs) scheme, and (v) external commercial borrowings (ADR/GDR) route. An analysis of the last eighteen years of trends in FDI inflows shows that there has been a steady flow of FDI in the country up to 2004, but there is an exponential rise in the FDI inflows from 2005 onwards.

The FIPB route represents larger projects which require bulk of inflows and account for governments discretionary approval. Although, the share of FIPB route is declining somewhat as compared to RBIs automatic route and acquisition of existing shares route. Automatic approval route via RBI shows an upward trend of FDI inflows since 1995. This route is meant for smaller sized investment projects. Acquisition of existing shares route and external commercial borrowing route gained prominence (in 1999 and 2003) and shows an upward increasing trend. However, FDI inflows through NRIs route show a sharp declining trend. It is found that India was not able to attract substantial amount of FDI inflow from 1991-99. FDI inflows were US$ 144.45 million in 1991 after that the inflows reached to its peak to US$ 3621.34 million in 1997.Subsequently, these inflows touched a low of US $2205.64 million in 1999 but then shot up in 2001. Except in 2003, which shows a slight decline in FDI inflows, FDI has been picking up since 2004 and rose to an appreciable level of US$ 33029.32 million in 2008. The annual growth rate was 107% in 2008 over 2007, and compound annual growth rate registered was 40% on an annualized basis during 1991-2008. The increase in FDI inflows during 2008 is due to increased economic growth and sustained developmental process of the country which restore foreign investors confidence in Indian economy despite global economic crisis. However, the pace of FDI inflows in India has definitely been slower than China, Singapore, Russian Federation, and Brazil.A comparative analysis of FDI approvals and inflows reveals that there is a huge gap between the amount of FDI approved and its realization into actual disbursements. A difference of almost 40 per cent is observed between investment committed and actual inflows during the year 2005-06. All this depends on various factors, namely regulatory, procedural, government clearances, lack of sufficientinfrastructural facilities, delay in implementation of projects, and non- cooperation from the state government etc.4

DISTRIBUTION OF FDI WITHIN INDIA

FDI inflows in India are heavily concentrated around two cities, Mumbai (US$ 26899.57 million) and Delhi (US$ 12683.24 million). Bangalore, Ahmedabad and Chennai are also receiving significant amount of FDI inflows. These five cities together account for 69 per cent of total FDI inflows to India. Mumbai and Delhi together received 50 per cent of total FDI inflows to India during 2000 to 2008.

Mumbai received heavy investment from Mauritius (29%), apart from U.K. (17%), USA (10%), Singapore (9%) and Germany (4%).The key sectors attracting FDI inflows to Mumbai are services (30%), computer software and hardware (12%), power (7%), metallurgical industry (5%) and automobile industry (4%). Mumbai received 1371 numbers of technical collaborations during 1991-2008. Delhi received maximum investment from Mauritius (58%), apart from Japan (10%), Netherlands (9%), and UK (3%).While the key industries attracting FDI inflows to Delhi region are telecommunications (19%), services (18%), housing and real estate (11%), automobile industry (8%) and computer software and hardware (6%). As far as technical collaborations are concerned Delhi received 315 numbers of technical collaborations during 1991- 2008. Heavy investment in Bangalore came from Mauritius (40%) alone. The other major investing countries in Bangalore are USA (15%), Netherlands (10%), Germany (6%), and UK (5%). Top sectors reported the FDI inflows are computer software and hardware (22%), services (11%), housing and real estate (10%), telecommunications (5%), and fermentation industries (4%). Bangalore received 516 numbers of technical collaborations during 1991-2008. Chennai received FDI inflows from Mauritius (37%), Bermuda (14%), USA (13%), Singapore (9%) and Germany (4%). The key sectors attracting FDI inflows are construction activities (21%), telecommunications (10%), services (10%), computer software and hardware (7%), automobile industry (7%), As far as technical collaborations are concerned, Chennai received 660 numbers of technicalCollaborations during 1991-2008.5

FOOT NOTES:

1. http://www.realtyplusmag.com/rpnewsletter/Fullstory_Newsletter.asp?news_id=17729&cat_id=12. http://economictimes.indiatimes.com/opinion/policy-focus-should-be-on-fdi/articleshow/11347045.cms3. http://profit.ndtv.com/News/Article/fdi-in-pension-funds-to-source-infra-requirements-assocham-2951904. :http://www.realtyplusmag.com/rpnewsletter/Fullstory_Newsletter.asp?news_id=18086&cat_id=15. compiled & computed from the various issues of Economic Survey, RBI Bulletin, Ministry of Commerce

CHAPTER-IV ANALYSIS AND INTERPRETATION

FDI IN RETAIL MARKETING IS BANE The following are the arguments made by the people while taking survey It is a basic principle that creating competition in general is good for the market. But we have a doubt that since proper procurement and distribution system is not yet fixed, how will the rest fall in the place when the giant retailers enter our market. Back-end procurement will still remain a big problem. The debate that by introducing 51% FDI, a lot of money will flow out of our country is an old school of thought. Lot of our Indian companies is operating aboard and has successfully contributed to our economy. The bigger issue is that with benefit we might end up paying a price hence we must work on a reasonable solution. Customers feel that retail shares offer better deals but they sent realize that they end up buying more. If 51% FDI is allowed in retail market, it will be a big trouble for the small shopkeepers. The big giants entering the market will surely impact the small stores owners. The government says that the farmers will benefit but I feel it will just be a temporary benefit. Once these giant foreign retails have monopoly, they will start exploiting the market. In the long run it is not benefited to our economy. For e.g. in a country like France, walmark was not permitted to set up its stores whereas in Germany, FDI is not allowed. If the US is not allowing India goods to be sold in their market, why should then we give them a chance to set up bare here. This discounts that there big retail stores offer in order to cure customer are also now being offered by our kirana stores. I feel that people should not fall prey to big retail stores because it is a trap where in consumers end up buying more than what is required. Customers feel that they are getting between deals, but they are at the same time enticed to buy more.1 Suryakant Pathak; MD, Grahakpeth & secretary, grabak panchyat. The Government must discuss property about 51% FDI and have a law in place to control unfair competition. We strongly oppose the government allowing 51% FDI as it will surely have a negative impact on the small retailers in the market. There big companies with huge investment capacity will buy goods at lesser rates and pass on big documents to customer, wherein small local retailers will not be able to stand against the competition by attracting customers and manufactures, they will create their own monopoly in the market, which will not be good for the retail market in the long run. We already have big malls then why do we want foreign retail chains. Today the government intention is to remove middlemen and give better price to farmers but why doesnt it help in bring down transport cost which is increasing due to rising full prices. The government must properly discuss the pros and cons of allowing 51% FDI and have a law in place to control unfair competition when foreign countries dont allow important of food products from India, then why should we allow them in our country.2-Ajit setiya, president, porna merchant chamber Once monopoly set in market, small-time retailers, consumers and farmers get exploited. I think that by allowing 51% FDI, it will have a negative impact on our retail market monopoly; which is not good for economic growth. Brining in big foreign players will, no doubt, give direct competition to big domestic retail chains but small retailers will eventually get eliminated. Though farmers get good rate for their produce and storage facilities will improve, there are only temporary benefits, in the history of capitalization, the beginning, consumers and farmers get exploited.FDI IN RETAIL MARKETING IS BOONSome people are favoring to the FDI. The following points are made by them. The 51% of FDI will obviously have a negative impact on small retailers, but it will benefit the consumers as they will have wider choices at competitive prices. It will accelerate the retail market growth and provide more employment opportunities. Farmers will benefits from FDI us they will able to get better prices for their produce. The FDI bill will definitely have appositive impact on the retail industry and the country by attracting more foreign investment. With big retail giants coming to India, it will surely improve our back-end storage and procurement process. Once these multi-chain retailers establish themselves, they will create infrastructure facilities, which will also propel the existing infrastructure. The farmer will benefit from FDI as they will be able to get better prices for their produce. The elimination of the intermediate channels in the procurement process will bad to reduction of process for consumers. The regulation in the FDI bill that 30% of the total procurement has to come from small and medium enterprises will benefit the domestic business off course a policy is needed to protect the small and medium market channels from Chinese invasion. The fear that FDI will have a negative impact on the small retailers is completely wrong. It is not that everyone will run to their giant stores. Foreign brands will promote healthy competition in market every time the government brings up the subject of FDI the domestic retailers with the support of some politician jump to lobby against the bill. As we are initiating the FDI there is bound to be some problems, which can definitely removed. The government is near future can appoint a regular body to monitor the retail sector just like other sector. By allowing 51% FDI in the Indian market, it will teach the local retailers about the real competition and help in insuring that they give better service to Indian consumers. It is obviously good for local competition and I dont see as a consequence, our local kirana stores disappearing. The kirana shops operate in a different environment catering to a certain set of customers and they will continue to find new ways to retain them. I dont see a problem with FDI as it will boost our economy.3ADVANTAGES OF FDI IN RETAIL MARKETING Consumers to save 5-10%. Farmers to get 10-30% higher remuneration. Potential to add 3-4m new jobs, another 4-6m jobs in logistic, contract labor, security etc. To help develop logistic and cold chains Government revenues to go up by $25-30 billion through various taxes. Huge investment in the retail sector will see gainful employment opportunities in agro-processing, sorting, marketing, logistic management and front-end retail. At least 10 million jobs will be created in the next three years in the retail sector. FDI in retail will help farmers secure remunerative prices by eliminating exploitative middleman. Policy mandates a minimum investment of $100 million with at at least half the amount to be invested in base-end infrastructure, including gold chains, refrigeration, transportation packing, sorting and processing. This is expected to considerably reduce pose-harvest loosed. This will have a salutary impact on food inflation from efficiencies in supply chain. This is also because food, which perishes due to inadequate infrastructure, will not be wasted. Sourcing of a minimum of 30% from Indian micro small industry is mandatory. This will provide the scales to encourage domestic value for employment, technology up gradation and income generation. A strong legal framework in the form of the competition commission is available to deal with any anti-competitive, practices predatory pricing. There has been impressive growth in retail and wholesale trade offer china approved 100% FDI in retail. Thailand has experienced tremendous growth in the agro-processing industry. In Indonesia, even after several years of emergency of supermarket, 90% of fresh food and 70% of all food still controlled by traditional retailers. In any case, organized retail through Indian corporate in permissible. Experience of the last decade show small retailers has flourished in harmony with large outlet4.

DISADVANTAGES OF FDI IN RETAIL MARKETING Could drive kirana shops, local retailers out of business. Job may shrink or at best move from unorganized sector. Farmer will be at mercy of big chains, having burnt boats with mandis. Flood of cheap imports as retailers hunt best bargains. Companies have to invest $100 or more Company has to open stores only in towns with the population of 1 million or more i.e. they can top 53 urban centers. Companies have to make 50% investment to be in back-end infrastructure like warehouses, cold chains. More will lead to large-scale job losses. International experience shows supermarkets invariably displace small retailers small retail has virtually keen wiped out in developed countries like the US and in Europe. South East Asian countries had to impose stringent joining and licensing regulations to restrict growth of supermarkets after small retailers were getting displaced. India has the highest shopping density in world with 11 shops per 1000 people. It has 1.2 crore shops employing over 4 crore people. 95% of there are small shops run by self-employee people. Global retail giants will resort to predatory pricing to create monopoly/oligopoly. This can result is essentials, including food supplies, being controlled by foreign organizations. Fragmented markets give larger options to consumers consolidation markets make the consumer captive. Allowing foreign players with deep pockets lead to consolidation. International retail does not create additional markets, it merely displaces existing markets. Jobs in the manufacturing sector will be last because structures international retail makes purchases international and not from domestic sources. This has been the experience of most countries which have allowed FDI in retail. Arguments that only foreign players can create the supply chain for farm produce in bogus. International retail makers have no role in building roads or generating power. They are only required to create storage facilities and cold chains. This could be done by government in India. Comparison between India and china is misplaced. China is predominantly a manufacturing economy. It is the largest supplier to Wal-Mart and other international majors. It obviously cannot say no to their chains opening stores in china when it is a global supplier to them. India in contract will lose both manufacturing and service job. 51. FDI in retail is a non-critical area of intervention. Nobody in urban India is suffering for lack of accesses to food or grocery items. If at all it is the public distribution system that is diseased with corruption and needs to be replaced or removed. Access to food is an issue in the remote and rural impoverished areas of the country, where as the fine print tells you, FDI in retail will not be implemented. Comparative examples that try and portray an opposition to FDI in retail as regressive are not only misplaced, they are patently suspected. [Montek Singh Ahluwalia of the Planning Commission included, who suggested that arguing against FDI in retail was like complaining that the taxis would dislodge the Tonga]. To imagine that FDI in retail exemplifies a progressive mindset shames us into thinking that an ability to buy in the comfort of a twenty thousand square feet air conditioned space is more indicative of progress than providing similar quality housing for its citizen or schools for our children. The taxi took over the Tonga for reasons of speed and protection from the elements. FDI in retail projects no such benefit. We already get what we need for our daily needs through local general stores and local big format stores. The gloss of a shiny international brand name atop a store is not enough of a differential.2. Middlemen are key to the distribution. The myth about farm-to-store supply chain should end with the simple fact that middlemen will not be removed from the operation but that existing middle men will be replaced by bigger, more organized, more prosperous middlemen. Anyone who knows the business of distribution knows that there is nothing called a direct sale from farmer to retail, unless it is self-owned farm by the retailer. The process requires a minimum of three transactions. From the farmer to the transporter, to the distributor and to the end supplier. There are middlemen even if you make a direct purchase and underwrite the farmers produce and each point of contact costs something to keep his or her services going. The middleman is not an enemy of the state. The middleman is being paid for services rendered; his is not a free lunch. He is the conduit that makes delivery possible. Removing middle men, as is being claimed by votaries of FDI in Retail does nothing for the families of those who will be obliterated by the new model that will take over: the retailer will have his own middle men in the system, and that is all the difference there will be. The argument advanced by many including some farmer lobby groups that there are 4 to 10 layers of middle men between producer and retail are not only humbugging they are undermining free market movements where nobody can get in line unless he performs a function. The other charge, that a policy failure produced such layers of middlemen can be countered with a simple answer FDI in Retail cannot remedy a policy failure. It is the governments job to fix that, not Walmarts.3. Farmers will not get better prices. The idea that the farmer will get a better price for his produce if FDI in Retail is allowed is a baseless suggestion. The open market does not work on altruism and social service. It negotiates the best for itself so it can corner the most for itself. Farmer suicides are not because they cannot sell, as is being written about by irresponsible columnists and business leaders but because they are unable to get remunerative prices for their produce wing to poor quality produce due to lack of proper crop management or crop failure, an inability to pay back their loans or make ends meet and lose their land. To suggest that foreign retailers would be so teary eyed at the plight of farmers that they would offer a premium on produce which is available at less is plain childish. Fact is that the markets, if allowed to function without controls, will take their own route to price discovery. And remember, the more clout a buyer has, the lesser the seller gets per capita. That is a law of the free market. FDI in retail cannot do any more than local big format retailers are already doing. Those that argue that FDI in retail will bring succor to farmers and reduce prices for consumers need to explain why, when there are home grown large format retailers, that is not already the case. How can you expand on a theme when you admit that it is not working? The farmer is only an emotional hook in the pro FDI lobbyists scheme. The truth is that more than 70% of revenues of large format stores come from non-food items where the farmer does not even figure. All the stories in media about farmer unions supporting the move are motivated through two straight facts: lobbying with a generous dose of cash infusion into these unions by food majors and retail chains and the other more important fact they are right about some farmers in their areas, specially Punjab getting a better deal. But the cost of that is this: big retail and food processors alter crop selection to have farmers produce to order. So, because Pepsi needs potatoes for their chips, farmers skip the Dal season and other such produce in favor of extensive cultivation and specialization towards potato cultivation. Now they are right that particular farmer is doing well contract farming is profitable, but in effect an entire range of products are now in short supply. Precisely why Dal and cereals and vegetables are becoming costlier by the day. This is apart from the other real problem corporate do not like dealing with a dozen small producers. So they focus on one or two large producers and create conditions for the rest to either submit to a larger contractor or just sell the land and move out of business.4. Brands compete to secure market share. Market share can only be secured at the cost of another existing competitor. It is equally naive to imagine that the anomalies of predatory pricing will be taken care of once the sector is open to competition. Let us understand the idea of competition. All competition starts from a baseline price point. The base line price already exists with the current prices the farmer gets. All competition is normally over and above that base line. Nobody sells below his purchase price. But what is being debated here is the ability of the big retailer to sustain losses for a long period of time by selling under cost to dismantle competition owing to deep pockets. Brands will go on a losing spree to corner market share. That is an old principle. Walmart will sustain losses to counter Carrefour and a Carrefour will do the same to contain another competitor. In a fight of such giants, the small retailer and the kirana shop owner of today stand no chance. As a caveat, one should be wondering what the local large format stores would face and why they are supporting a policy shift that could hurt them. After all, Spencer and a number of smaller retailers hardly stand a chance in the face of a Walmart. Well the reason is simple: The only reason you hear some of them support the idea is because [a] some want to raise money from markets abroad to run their unprofitable enterprises for a little longer until they hope to break even [b] access cheaper funds which the Government and its fiscal laws have made almost non remunerative or [c] hope to be taken over and bought out. Note that the retail business is cut throat and many large-format or branded stores have already folded. Subhiksha in South India and Vishal and Sabka Bazaar in the North come to mind immediately. Most of the existing local large format retailers who support the idea are folks who are looking for a bail out or hoping to sell their operations on the back of decent valuations.5. Big Retail cannot co-exist with small retail. That big retail can coexist with kirana is a flat impossibility. It cant because big retail alters the playing field permanently. The instruments of small retail are redundant in the schema of big retail. The grammar of big format selling influences the buying habits of people. The kirana sells on the basis of daily consumables of a middle class. The big-format pushes for bulk sales, weekly big purchases where you buy four when you need one simply because it is priced in an attractive deal for the day. The kirana and the small retailer cannot bundle promo packs because it cant deal directly with producers. Big retail is habit altering. It is not an alternate, not an expansion of choice but a modification of the manner of consumption and sale. Big retail does not encourage balanced consumption but exists on the principle of overuse, and excess. Big retail altered the psyche of an entire generation of Americans consumers, producers and manufacturers alike. The idea that shopping can be a weekend activity, where you load up on supplies for a week comes from a country where joint families are not known, buying fresh vegetables daily is unknown, where women dont cook and burgers are staple diet. Weekend buying leads to storage. Which leads to oversized freezers; which lead to more frozen food, and to more heat-and-eat dishes, and the spiral of the other problems of plenty? Indians dont consume like that and there is much to be said about buying fresh and local, as the world is now discovering.6. Big Retail is one big cause of food inflation. That food inflation will be curtailed with FDI in Retail is a plain lie. Food inflation has to do with supply side shortages and distribution bottlenecks that have mostly to do with government policy in each case. The advent of big retail will not induce any farmer to grow more food or make any dent in the fossilized mechanisms of food procurement and distribution policies of Government. The truth remains that agriculture has suffered for long, that farmers do not get remunerative prices and that they are unable to pay back what they have borrowed. Food inflation is a derivative of the paralysis of government and states and nothing to do with FDI in retail. Were talking about FDI in retail for Gods sake, not FDI in agriculture. The other startling aspect of FDI in retail is that it is being sold as the answer to Indias farming woes. Congress MP Jyoti Mirdha has pointed out that the FDI introduced in the agriculture sector in 2006 is yet to show any progress, so where is the basis for moving on to FDI in retail. What FDI could not do for agriculture directly, it will do through FDI in retail is a bit of a big joke.7. Consumers do not get better prices. Consumers will get lower prices is another figment of the lobbyists fertile imagination. Prices never come down. Big bazaar or Walmart, prices never come down. The argument is a facetious assault on the principle of growth and inflation. Big retail can at best sell you cheaper potatoes or five such items carefully selected on seasonal variations or bulk deals with producers cheap for only a week and no more. For everything else you buy from them, you will pay more. That is how big retail works. To qualify this, read this comment from a KPMG expert who was arguing for FDI in retail: To draw consumers, [big] retailers squeeze suppliers and ensure efficiencies in categories that drive foot falls. They balance it out by enjoying higher margins in categories where impulse buying is high [Anand Ramanathan quoted in Economic Times,1st Dec 2011] The reason there is no data on this is because it is not in the interest of big retail or big media to support the idea. Think about infrastructure and overheads. A large format retailer, if it is not within an existing mall and aims to be the size of Walmart stores will have to put up its own air-conditioning plant, parking, galleys, staff, vans, transport, machinery and processes that simply cannot offset any purchasing bulk deals to support the idea of cheaper prices. That prices of food items are cheaper at big retail outlets is also not without a serious caveat. Comparing prices is not the only criterion: you have to compare quality as well. Has anyone ever bought fresh vegetable produce from a big retailer nobody will accept that quality from a local vendor. The jargon about cereals and selected stuff being cheaper is sketchy at best and the reason there is no data on this is because nobody wants to reveal the modus operandi of selective discounting by big retailers as a marketing tool rather than any real principle of lower pricing. The survey published in a newspaper is an in-house attempt which does not answer to the most fundamental discrepancy why does every survey attempt at comparing prices of chosen commodities at kirana stores with big retail outlets: how about comparing one big retail outlet with another and explain why they do not conform to the same price principle across the board?8. Big Retail kills small jobs. More jobs will be created when big retail comes in is a fallacy and a purposeful falsehood. For an economy where 80% of the population engaged in trade and local retailing is self employed, how do the numbers stack up if you dislodge even 20% of that population? Does any math support the theory that any number of big retailers in a city likeDelhi will be able to support 5 lakh people who will progressively be thrown out of business due to their advent? For a government that is unable to provide employment in big cities with reasonable opportunities, the impact in smaller ones will be unmanageable. The 30% caveat that is being bandied about as a bulwark against large scale displacement of local producers is also a charade because it does not concern itself with produce but infrastructure investments that big retailers must make, [as a safeguard, in the Governments weak words] without explaining that these could be the plywood and the roofing they use to set up their retail stores or the marble tiling and the bathroom fixtures or even the trucks they buy. So what protection is this worth? Then again, even if this were to be reworded to ensure that the 30% limit pertained to produce and not infrastructure, which gigantic micro management agency would pore over their account books to determine this on a daily or monthly basis?9. Big Retail is relative to Real Estate. Retail is a first cousin of the real estate industry. Already the calculators are out fantasizing about the acreage these new big format retail marts will need and the newer malls that will be coming by design around such anchor stores. Big Retail loves Big Development and vice versa. The upshot is that the already skewed real estate market will only get more out of control and housing for middle classes and the ordinary folks that much farther. Big retail creates the grounds for large scale property price hike throwing up a new spiral of inflation in real estate space a totally unregulated, unbridled, black money haven. Another reason why the smaller retailer will have to pack up and move cant afford the real estate.10. FDI in Retail is a political hot-potato and a non-issue. The political expediency attributed to the opposition on the issue of FDI in Retail is actually misdirected and it is the government of the day which should be under a cloud of suspicion for the timing of this move. If this is about proving that there is no paralysis in governance, it is plainly a bravura act which should be set aside for the moment. On the other hand, if this passes for reform, how about we discuss instead FDI in education, a sector that holds the key to prosperity for this country and its future generations. If this is a sop for thus and the rest of the west, let us learn from their mistakes profligacy in consumer spend and consolidation of business are dangerous instruments in the economic life of a country. Let us not bail out those who would take us down the precise route that landed them in hell. India must decide if it wishes to trade its cultural, dietary and social habits for the old western paradigm of conspicuous consumption and whether it can stave off the easy charm of easy money and draw a new plan where the farmers are attended to immediately, incentives woven into their crop cultivation habits, offer remunerative prices which keep him engaged and allows him to prosper. This pandering to the urban consumer with the idea that he will have more choice and better pricing is a charade and its bluff must be called. The urban consumer they are talking about probably earns Rs 5 Lacs annually on average and is already spoiled for choice. If it is all about saving a few rupees per kilo on a packet of Ariel detergent, is it worth sending a man out of work for that? Can a Government which cannot provide jobs afford to argue with that? All the media support for FDI in retail is connected to their advertising potential and business cross holdings. Media houses are naturally not saddled with the responsibility of finding employment for the burgeoning population of the country and they must be excused their fit of greed. The best way to test their integrity is to ask if they are okay with FDI in media.6

ANALYSIS OF RESULTS TABLE 4.1 AWARENESS TOWARDS FDI IN RETAIL MARKETING

No. of respondentsPercentage of respondents

Aware 45 90%

Un aware 5 10%

Total 50 100%

Source: Primary Data

INFERENCE: From the data collected, it was found that almost all of them, except very few who are aware of FDI in retail marketing. Nearly 90% of total sample respondents aware of FDI. Only 10% of total sample respondents were unaware of FDI in retail marketing. This reveals that FDI proposal grasp the attention of all the people.

FIGURE 4.1

AWARENESS TOWARDS FDI IN RETAIL MARKETING

TABLE: 4.2

PERCENTAGE OF FDI PREVAILING IN INDIA

Percentage of FDI In IndiaNo. of respondentsPercentage of respondents

Less3672%

More1428%

Total50100%

Sources: Primary Data.

INFERENCE: From the above table 72% of the respondents said that FDI is prevailing less in India. Only 28% of the respondents said that FDI is prevailing more in India. This table implies that FDI is prevailing less in India.

FIGURE: 4.2

PERCENTAGE OF FDI PREVALING IN INDIA

TABLE: 4.3

HOW MUCH SHARE OF FDI COULD BE ALLOWABLE PERCENTAGE OF SHARE NO.OF RESPONDENTSPERCENTEGE OF RESPONDENTS

< 25%1734%

< 50%3264%

< 75%12%

TOTAL50100%

Sources: Primary Data

INFERENCE: From the above table we came to know that 34% of the respondents are of opinion that < 25% of share is allowable in FDI. Nearly 64% of respondents opinion is < 50% of shares could be allowable in FDI. Only 2% of respondents prefer < 75% of shares. The above table reveals that only < 50% of shares could be allowable in FDI of India.

FIGURE: 4.3 HOW MUCH SHARE OF FDI COULD BE ALLOWABLE

TABLE: 4.4 WHICH SECTION OF ENTERPRENEURES WILL BE AFFECTED BY FDI

EntrepreneursNo. of respondentsPercentage of respondents

Itinerants retailers3060%

Fixed shop retailers510%

Small-scale retailers1020%

Large-scale retailers510%

Total 50100%

Source: Primary Data

INFERENCE: This table implies that about 60% of itinerants retailers will be affected by FDI proposal. 10% of fixed shop retailers will be affected by FDI proposal. Nearly 20% of respondents said that small scale retailers will be affected. Only 10% of respondents opinion is large-scale retailers will be affected. From this table we came to a conclusion that mostly itinerant retailers will be affected by the FDI proposal.

FIGURE: 4.4

WHICH SECTION OF ENTERPRENEURES WILL BE AFFECTED BY FDI

TABLE: 4.5

PERCENTAGE OF FAVOURINGS TOWARDS THE FDI PROPOSAL

Favoring of proposalNo. of respondentsPercentage of respondents

Favorable1224%

Unfavorable3876%

Total 50100%

Sources: Primary Data

INFERENCE: From the above table only 24% of the respondents are favorable towards the proposal of FDI in retail marketing made by the central government. Nearly 76% of the respondents are unfavorable to proposal made by the central government. This table clearly implies that most of respondents opposing the FDI proposal made by the central government.

FIGURE: 4.5

PERCENTAGE OF FAVOURINGS TOWARDS THE FDI PROPOSAL

TABLE: 4.6

WHO WILL GET BENEFIT BY FDI PROPOSAL

ParticularsNo. of respondentsPercentage of respondents

Consumer510%

Farmer816%

Government3264%

Retailers510%

TOTAL50100%

Source: Primary Data

INFERENCE: This table implies that 10% of the respondents said that consumer will get benefit by FDI proposal. 16% of respondents have an opinion on farmer will get benefit by FDI. Nearly 64% of the respondents said that government will get benefit by FDI proposal. Only 10% of the respondents have the opinion of retailers will get benefit. From this table we came to know that majority of the respondent have the opinion that government will get benefit by the FDI proposal.

FIGURE: 4.6

WHO WILL GET BENEFIT BY FDI DECISION

TABLE: 4.7 RESULT OF EMPLOYMENT OPPORTUNITIES BY FDI PROPOSAL

Employment opportunitiesNo. of respondentsPercentage of respondents

Shrink3876%

Expand1224%

Total50100%

INFERENCE: From the above table nearly 76% of samples said that employment opportunities will shrink. Only 24% of samples prefer the opinion that employment opportunities will get expand. This implies that employment opportunities will get shrink by the FDI proposal.

FIGURE: 4.7 RESULT OF EMPLOYMENT OPPORTUNITIES BY FDI PROPOSAL

TABLE: 4.8 EFFECTIVENESS OF THE SUPPLY CHAIN BY THE RETAILER

ParticularsNo. of respondentsPercentage of respondents

Less effective1224%

Moderate effective2856%

More effective1020%

Total50100%

Sources: Primary Data

INFERENCE: This table implies that 24% of the sample respondents have an opinion that the supply chain is less effective. Nearly 56% of the respondents said that the supply chain will be moderately effective. Only 20% of the respondents said that the supply chain will be more effective. From this we came to know that majority of the respondents have the opinion that the supply chain will be moderate effective.

FIGURE: 4.8 EFFECTIVENESS OF THE SUPPLY CHAIN BY THE RETAILER

TABLE: 4.9

FDI POLICY PROPOSAL AND ECONOMIC GROWTH

ParticularsNo. of respondentsPercentage of respondents

Yes3774%

No1326%

Total50100%

Sources: Primary Data.INFERENCE: This table implies that 74% of the respondents have an opinion that FDI dont not help for the growth of our economy. Only 24% of the respondents told that FDI will help for our economic growth. By this we came to a conclusion that FDI policy doesnt help for our economic growth.

FIGURE: 4.9 FDI POLICY PROPOSAL AND ECONOMIC GROWTH

TABLE: 4.10Promotional toolsNo. of respondentsPercentage of respondents

Credit sales48%

Providing gifts1530%

Facilities for their shopping2652%

More advertisement510%

Total50100%

PROMOTIONAL TOOLS TO RETAIN THE CUSTOMERS Source: Primary DataINFERENCE: This table shows that 8% of respondents idea is credit sales will help to retain their customer. 30% of the respondents idea is providing gift is tool to retain the customer. Nearly 52% of the respondents advice is by providing facilities for shopping will help to retain their customer. Only 10% of the respondents idea is by more advertisement, the retailer can retain their customer. From this table we can come to a conclusion that by providing facilities for their shopping the retailer can retain their customer.

FIGURE: 4.10 PROMOTIONAL TOOLS TO RETAIN THE CUSTOMERS

TABLE: 4.11 FDI PROPOSAL IS BOON OR BANEParticularsNo. of respondentsPercentage of respondents

Boon1122%

Ban3978%

Total50100%

Sources: Primary Data

INFERENCE: The above table refer that only 22% of the respondent is favor to the FDI in retail marketing proposal. Nearly 78% of the respondents are opposing the proposal of FDI in retail marketing. This table clearly shows that most of the people not ready to accept the FDI in retail marketing.

FIGURE: 4.11 FDI PROPOSAL IS BOON OR BANE

TABLE: 4.12 SUGGESTIONS

ParticularsNo. of respondents Percentage of respondents

By strict rules1122%

Reducing the percentage of FDI3978%

Total50100%

Source: Primary Data INFERENCE: This table implies that only 22% of respondents told that by strict rules we can overcome the FDI proposal. Most of the respondent that is nearly 78% of the respondent reported that by reducing the percentage of the FDI we can overcome this problem. This implies that by reducing the percentage of the FDI in retail marketing we can overcome this problem.

FIGURE: 4.12 SUGGESTIONS

HYPOTHESIS CHI SQUARE TEST- IPERCENTAGE OF FDI vs. EDUCATIONAL QUALIFICATION

Educational Qualification No. of respondents Total

LessMore

Under graduate10515

post graduate20525

professionals6410

Total361450

Step: 1 Let us take that null hypothesis (H0) is no significant difference between the factor percentage of FDI and educational qualification.

Step: 2 Level of significance=5%Degree of freedom=(C-1) x (R-1) = (2-1) x (3-1) =2 Tabulated value at 5% level of significance and degree of freedom 2 is =5.991

Step: 3 Calculation of expected frequency and x2 value. O E (O-E) (O-E)2 (O-E)2/E

1010.8-0.80.640.059

2018240.222

67.2-1.21.440.2

54.20.80.640.152

57-240.571

42.81.21.440.514

501.718

Step: 4 Calculated value Table value1.718 < 5.991 Since calculated value is less than table value, so our hypothesis is accepted.

Therefore it can be concluded that there is no significant difference between the factor, percentage of FDI and educational qualification.

CHI SQUARE TEST-II FAVORING OF FDI POLICY vs. SEX

Sex No. of respondents Total

favorableunfavorable

Male82735

Female41115

Total123850

Step: 1 Let us take that null hypothesis (H0) is no significant difference between the factor favoring of FDI policy and sex.Step: 2 Level of significance=5%Degree of freedom=(C-1) x (R-1) = (2-1) x (2-1) =1 Tabulated value at 5% level of significance and degree of freedom 1 is =3.84

Step: 3 Calculation of expected frequency and x2 value. O E (O-E) (O-E)2 (O-E)2/E

88.4-0.40.160.019

43.60.40.160.044

2726.60.40.160.006

1111.4-0.40.160.014

500.083

Step: 4 Calculated value Table value0.083 < 3.84 Since calculated value is less than table value, so our hypothesis is accepted.

Therefore it can be concluded that there is no significant difference between the factor, Favoring of FDI policy and sex.7

FOOT NOTES:

1. Suryakant Pathak; MD, Grahakpeth & secretary, grabak panchyat2. Ajit setiya, president, porna merchant chamber3. Hemant Batra, Retailing Sector In India Pros Cons (Nov 30, 2010)http://www.legallyindia.com/1468-fdi-in-retailing-sector-in-india-pros-cons-by-hemant-batra4. Discussion Paper on FDI in Multi Brand Retail Trading, http://dipp.nic.in/DiscussionPapers/DP_FDI_Multi-BrandRetailTrading_06July2010.pdf5. Sarthak Sarin, (Nov 23, 2010) Foreign Direct Investment in Retail Sector http://www.legalindia.in/foreign-direct-investment-in-retail-sector-others-surmounting-india-napping6. Economic Times Retail News, FDI in retail to contain inflation (Dec 31, 2010) walmart http://retail-guru.com/allow-100-fdi-in-retail-to-contain-inflation-walmart7. Primary Data

CHAPTER-V FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS:On the basis of the above study carried out in preceding chapter, the relevant findings are as follows. The research has been carried out in the selected towns of north Tamilnadu comprising of urban and semi-urban areas. From the analysis carried out, 90% of the respondents are aware about FDI and only 10 % of the respondents are unaware. FDI policy is very much less, prevailing in India i.e. 72% of the respondents view about FDI in our country. It is interesting to note that 64% of the respondents opinion is only < 50 % of share could be allowable in India. Itinerant retailers i.e. street traders cheap jacks will be affected by allowing 51% in multi-brand and 100% in single brand FDI in retail marketing. Nearly 76% of the respondents are opposing the FDI proposal made by the central government. By allowing FDI in our retail marketing government will get benefit. If the government allowed FDI in our country the employment opportunities will get shrink. By launching the FDI policy in retail marketing the supply chain will be moderately effective. If the government took any decision means it should develop our economy. But the FDI proposal doesnt help for the growth of our economy. Respondents suggestion to retailers to retain their customers is by providing facilities for their shoppi