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ANALYSES OF SUBHIKSHA CASE

FACTORS FOR RISE OF SUBHIKSHA

1. The expansion of storesBy March 1999, Subhiksha started expanding rapidly. From 14 stores, it

was expanded to 50 stores by June 2000. In the next two years, it had

120-130 stores across Tamil Nadu.They decided to look at every part of

India which is significantly literate and is a significant consumption

market. Telecom companies are their role model. They employed capable

regional managers and expanded. In 2004-05, they decided to have 420

stores in places like Gujarat, Delhi, Mumbai, Andhra and Karnataka by2006. In 2005, Subhiksha started recruiting people in various regions.

2. Cut price strategyOpening a chain of no-frills stores-no air-conditioning, no fancy lighting,

and no touch- and-feel experience (customers have to ask for products at

Subhiksha stores)-was a deliberate strategy. Shops are located not on the

main road, but just off it, to take advantage of vastly lower rentals. Thecatchment area of customers is rarely beyond a two-km radius, since its

customers usually come on two-wheelers or on foot.

FACTORS FOR FALL OF SUBHIKSHA

1. Risk in retailing and expansionAs it happens with many growth stories, the retailer could not keep pacewith its growth and got into liquidity trap as in the hope increasing its

valuations, it kept postponing infusion of equity funds

2. Need for an IT SolutionThe company needed a solution to manage the payroll system. Although

it didn't have any HR issues at the ground level, sending the payroll to

employees on time was getting difficult. The system workedmanually, with a central team taking care of running 2-3 payroll systems

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in a month depending on the availability of the bandwidth and the entire

process.

3. High debtCompany was not able to raise funds through equity as there was global

slowdown and also investors were loosing confidence in the company

due to its deteriorating situation.

4. Deteriorating relations with suppliersMany wholesale suppliers in Azadpur subzi mandi, or vegetables market,

have stopped supplying fruits and vegetables to Subhikshas outlets in theNational Capital Region (NCR) surrounding the national capital.This comes

in the wake of the company holding up payments for two to six months

against normal credit period of one month.

5. Inefficient inventory managementCredit default by subhiksha was causing supply breakages which resulted

in the low inventory in few outlets which further resulted in customer

dissatisfaction.