Question

A South India based food retailer, with no experience of retailing in North Indian market, is contemplating on expanding into the North Indian market. The retailer has 15% market share in South India, with three major competitors having 10-12% shares each and the rest of industry being fragmented amongst smaller players. Two of the competitors already have operations in North India. As the Head of this food retail chain company, how would you navigate through decision-making process involved in finding a best solution for your expansion plans? With adequate justification, examine whether it is better to open more stores in South India vis-à-vis going in for a North Indian expansion.

Answer 1

Answer:

A South India based food retailer, with no experience of retailing in North Indian market, is contemplating on expanding into the North Indian market. The retailer has 15% market share in South India, with three major competitors having 10-12% shares each and the rest of industry being fragmented amongst smaller players. Two of the competitors already have operations in North India. As the Head of this food retail chain company, how would you navigate through decision-making process involved in finding a best solution for your expansion plans? With adequate justification, examine whether it is better to open more stores in South India vis-à-vis going in for a North Indian expansion

Answer 2

It would be beneficial to open more stores in South India than opening a new store in North India for the following reasons:

• Market Knowledge - Since the company is already operating in South India, it has a keen knowledge of the market and knows how to generate the most profits.
• Goodwill and Brand Value - Since the company has a maximum share in the market it has a high brand value in South India which is not there in the North Indian markets.
• Loyal Consumer Base - With a high market share it proves that there is a loyal customer base for his food. This is not present in the North Indian markets.