Question

International Business Management

Critical Thinking Exercise

Should be at least 250 words. Total word count must be 250 to 300 words in your posting. (20 points) Please also respond to at least two of your classmates with a meaningful reply of 150 words or greater each

What explains the fragmented nature of India’s retail sector? What are the benefits of this system? What are the costs? Given the political and economic realities in India, what is the best entry strategy for a foreign retailer?

Answer 1

The fragmented nature of india's retail sector is explained by its immense diversity of people and culture present in the country. India's Demography is very vast and complex with changing preferences in various regions.This means tha people needs and demands are different in each regions.Therefore, local retailers are dominant in these regions rather than big retailers.Big retailers have a complex task of satisfying customers from various regions and catering to their preferences.Local retailers reach the nooks and corners of small towns and villages and they source locally also.Therefore, they have products which suit their local markets and tastes. Big retailers are unable to reach these customers and therefore,the major part of this sector is unorganized and fragmented.

The costs of this system is that due to fragmentation, economies of scale are difficult to achieve.This increases the price of product. Therefore, consumers in india miss out on having low cost products due to fragmentation. Fragmentation also does not carry all the goods at one place and consumers have to visit various shops for this.

The best entry strategy for retailer in india is either buy the local operations of a small company or to set up their wholly owned subsidary since alliance and joint ventures in retail sector don't work. It will also be prudent for companies to integrate their own supply chains with their stores in india. This allows them to develop their own strategy for growth.