CHAPTER 1
INTRODUCTION
c. Vertical FDI takes place when a firm through FDI moves upstream or
downstream in different value chains i.e., when firms perform value-
adding activities stage by stage in a vertical fashion in a host country.
The initial entry of FDI in India can be loosely considered from the time of
establishment of East India Company of Britain during the colonial era in the 17th
century when the British merchants approached the Mughal Emperor for
establishing factory in Surat city of India. Along with them the British brought on
the Industrial revolution to India which led to development of transportation
(Railways and Roadways) and communication systems albeit for their benefits. The
new innovations and inventions happening around the European countries got
introduced to the Indian subcontinent too.
After the Second World War, many Japanese companies entered the Indian
market and enhanced their trade with India. After our Independence the policy
makers of new India realized the need of foreign investment for development and
3
With time, economic situations in the country and the outlook of government
in power, the attitudes of the policy makers kept changing towards foreign
companies investing in India.
FDI was introduced in the year 1991 under Foreign Exchange Management
Act (FEMA), by then finance minister Dr. Manmohan Singh. It started with a
baseline of $1 billion in 1990. India is considered as second important destination
for foreign investment. The major sectors that attracted FDI are services,
telecommunication, construction activities and computer software and hardware.
India in 1997 allowed foreign direct investment (FDI) in cash and carry
wholesale. Then, it required government approval. The approval requirement was
relaxed, and automatic permission was granted in 2006. From 2000 to 2010, Indian
retail has attracted about $1.8 billion in foreign direct investment, representing a
very small 1.5% of total investment flow into India.
India has received till now a total foreign investment of US $ 306.88 billion
since 2000 with 94 per cent of the amount coming during the last nine years. In the
period 1999–2004, India received US $ 19.52 billion of foreign investment. In the
period 2004–09, foreign investment in the country touched US$ 114.55 billion,
further increasing to US$ 172.82 billion between 2009–Sept 2013. During FY 2012–
4
13, India attracted FDI worth US$ 22.42 billion. Tourism, pharmaceuticals, services,
chemicals and construction were among the biggest beneficiaries.
b. Foreign equity up to 24%, 50%, 51%, 74% and 100% depending on industry
category and sector caps.
List of activities or items for which automatic route for foreign investment is
not available, include the following:
a. Banking
b. NBFC's Activities in Financial Services Sector
c. Civil Aviation
d. Petroleum Including Exploration/Refinery/Marketing
e. Housing & Real Estate Development Sector for Investment from Persons
other than NRIs/OCBs.
5
Table 1.1 Automatic route for specified activities subject to Sectoral cap and
Conditions.
Sectors Cap
Airports
Existing 74%
Greenfie 100%
Air Transport Services
Non Resident Indians 100%
Other 49%
Alcohol distillation and brewing 100%
Banking (Private Sector) 74%
Coal and Lignite mining (specified) 100%
Coffee, Rubber processing and warehousing 100%
Construction and Development (Specified projects) 100%
Floriculture, Horticulture and Animal Husbandry 100%
Specified Hazardous chemicals 100%
Industrial Explosives Manufacturing 100%
Insurance 26%
Mining (Precious metals, Diamonds and stones) 100%
Non-banking finance companies ( conditional) 100%
Petroleum and Natural gas
Refining (private companies) 100%
Other areas 100%
6
Sectors Cap
Petroleum and Natural gas
Refining (private companies) 100%
Other areas 100%
Power generation, transmission, distribution 100%
Trading
Wholesale cash and carry 100%
Trading of Exports 100%
SEZ’s and Free Trade Warehousing Zones 100%
Telecommunication
Basic and cellular services 49%
ISP with gateways, radio paging, end-end bandwidth 49%
ISP without gateway (specified) 49%
Manufacture of telecom equipment 100%
FDI in activities not covered under the automatic route, requires prior
Government approval and are considered by the Foreign Investment Promotion
Board (FIPB). Approvals of composite proposals involving foreign
investment/foreign technical collaboration are also granted on the recommendations
of the FIPB. Application for all FDI cases, except Non-Resident Indian (NRI)
investments and 100% Export Oriented Units (EOUs), should be submitted to the
FIPB Unit, Department of Economic Affairs (DEA), Ministry of Finance.
Application for NRI and 100% EOU cases should be presented to SIA in
Department of Industrial Policy & Promotion.
A small-scale unit cannot have more than 24 per cent equity in its paid up
capital from any industrial undertaking, either foreign or domestic. If the equity
from another company (including foreign equity) exceeds 24 per cent, even if the
investment in plant and machinery in the unit does not exceed Rs 10 million, the
unit loses its small-scale status and shall require an industrial license to manufacture
items reserved for small-scale sector.
Table 1.2 Table presenting the Prior Approval from FIPB where investment is
above Sectoral caps for activities listed below.
Sectors Cap
Existing Airports 74% to 100%
Asset reconstruction companies 49%
Atomic Minerals 74%
Broadcasting
FM Radio 20%
Cable network 49%
Direct-To-Home (DTH) 49%
Setting up hardware facilities 49%
Uplinking news and current affairs 26%
Uplinking non-news, current affairs TV channel 100%
Cigarette manufacturing 100 %
Courier services other than those under the ambit of Indian 100 %
Post Office Act, 1898
Defense production 26 %
Investment companies in infrastructure / service sector (except 49 %
telecom)
Petroleum and natural gas refining (PSU) 26 %
Tea Sector – including Tea plantation 100 %
Trading items sourced from Small scale sector 100 %
Test marketing for equipment for which company has approval 100 %
for manufacture
Single brand retailing 51 %
Satellite establishment and operations 74 %
Print Media
Newspapers and periodicals dealing with news and current 26 %
affairs
Publishing of scientific magazines / specialty journals 100 %
periodicals
Telecommunication
Basic and unified access services 49 % to 74 %
ISP with gateways, radio paging, end to end bandwidth 49 % to 74 %
ISP with gateway (specified) 49 % to 100%
10
Table 1.3 FDI inflows from foreign countries within period 2000-2014
Source: dipp.nic.in
15
Source: dipp.nic.in
Table 1.5: Total FDI inflows (from April, 2000 to September, 2014):
CUMULATIVE
1 AMOUNT OF FDI - US$ 345,073
1 INFLOWS (Equity inflows + ‘Re-invested Million
earnings’ +‘Other capital’)
CUMULATIVE
2 AMOUNT OF FDI Rs.1,130,837 US$ 232,054
2 EQUITY INFLOWS (excluding, amount crore Million
remitted through RBI’s-+NRI Schemes)
Source: dipp.nic.in
China, one of the developing country in the world has a major share of
FDI for the past 30 years. China initially utilized the official borrowing from the
World Bank, Asian Development bank and through bilateral development. However,
in 1990 it started FDI with a base of less than $19 billion. China’s major two ways
of FDI was in the form of Foreign Sole ownership and by joint ventures. The
Government passed the Joint venture law in 1979 and establishment of Special
Economic Zones (SEZ’s) in 1980. The main role of FDI has been its involvement in
production by means of foreign invested firms. It helped to develop the domestic
industries, re-organize capital and labour within factories, improve the quality of
18
existing products and the export factors. However, the investment policy was biased
towards southeast coastal region – Hong Kong and Macau.
When the American and European countries decided to invest their funds in
developing countries mostly the Asian countries, China attracted the most with its
factors. In General, China had a huge manufacturing base which helped to improve
their markets. The major factors are as follows:
Huge markets
Internationalization
Factors favoured FDI Competitive spirit
In China Production cycle model
Cheap and well educated labour
Economic & Government policies.
The other important factors that attracted China was the preferential tax
treatments, flexible contractual forms and establishment of Special Economic Zones
(SEZ’s) created by the Chinese Government.
19
Fig 1.1 explains that China attracted $105.7 billion through FDI in 2010. This is the
first time FDI in China crossed the $100 billion mark
The Chinese government allowed FDI in retail sector in the year 1992 with a
cap of 26%. After a gap of 10 years the cap was raised to 49% and in the year 2004
it was raised to 100%. The main motive of this gap was primarily to protect the local
retailers and at the same time to enjoy the benefits out of the foreign markets and
technology without harming the former. They allowed FDI only in selected cities
20
like Beijing, Shanghai, and Shenzhen. Again it was permitted only in those places in
these cities, where there will be no competition to the local retailers from them. In
this way they achieved the success of protecting and establishing the local retailers
also.
Table 1.6 explains the list of provinces with their retail sales and growth rate for
2011.
Farmers
Impact of FDI in Local Retailers
China Technology
Export Market
1.6.3.1 FARMERS
consumers which is absent in the former market. But with this step from the
Government, the organized retail shops were able to understand and adapt the
strategies from the foreign markets without hurry. Since 1992, retail sector has
attracted huge investments, but without affecting the unorganized retail shops. In
fact, number of small Chinese outlets has increased to around 2.5 million from 1.9
million. Today the major share of the retail market are enjoyed by the local retail
companies and no more they consider the foreign investment as threat.
Fig 1.2 explains about the retail market share of China which comprises of 80%
unorganized market and 20% of organized market.
1.6.3.3 TECHNOLOGY
The main foreign retail giants in China are Tesco (U.K.), Walmart (U.S.),
Carrefour (France) and Metro (Germany). All these retail giants opened their
hypermarkets which is a large store that combines a traditional discount store and
supermarket. These hypermarkets attracted the Chinese as they provide food and
general merchandise at low prices and under one roof.
Among these, Walmart and Carrefour are the two largest retailers in the
world and pioneers in the globalization of the retail industry. Carrefour first opened
its hypermarket in mainland China in the year 1995, and Walmart followed in 1996.
By 2010, Carrefour operated 157 stores and Walmart 178 stores.
Mr. Shi and most Chinese economists welcomed the reorganisation in the
sector, seeing it as employing too many people and too inefficient. In 2011, China’s
urban population exceeded its rural population for the first time.
Fig 1.3 explains that according to National Bureau of statistics of China, the retail
sales in China increased to 13.70% in November 2013. Whereas, the retail sales in
China year-over-year averaged to 15.15% from 2010 until 2013, with the all-time
high of 19.90% in January 2011 and a record low of 11.60% in February 2011. In
China, the year-over-year change in Retail sales compares the aggregated sales of
retail goods and services during a certain month to the same month a year ago.
25
Similar to India and China, Indonesia has a huge population (fourth largest in
the world) with a large number of middle-income consumers and is considered to be
an attractive retail market. Indonesians are known to have a healthy appetite for
imported goods and this sector has seen rapid growth and modernisation.
The above fig 1.4 explains that mining and quarrying is the most attractive sector for
foreign investors followed by transport and manufacturing
are the net inflows of investment to acquire a lasting management interest (10
percent or more of voting stock) in an enterprise operating in an economy other than
that of the investor. It is the sum of equity capital, reinvestment of earnings, other
long-term capital, and short-term capital as shown in the balance of payments.
Source: www.tradingeconomics.com
This fig 1.5 shows net inflows (new investment inflows less disinvestment) in the
reporting economy from foreign investors, and is divided by GDP.
28
Source: www.tradingeconomics.com
The table 1.7 explains the balance of payments of Indonesia from 1990 to 2010.
29
The above fig 1.6 explains about the major foreign investors to Indonesia.
1.8 RETAILING
Retail is the sale of goods and services from individuals or businesses to the
end-user. Retailers are a part of an integrated system called the supply chain. A
retailer purchases goods or products in large quantities from manufacturers directly
or through a wholesale, and then sells smaller quantities to the consumer for a profit.
India's retail market has grown tremendously in the past few years According to AT
Kearney, The Windows of Opportunity shows that Retailing in India was at opening
stage in 1995 and now it peaked in 2006. The origins of retailing in India can be
traced back to the emergence of Kirana stores and mom-and-pop stores. These stores
used to cater to the local people. Eventually the government supported the rural
retail and many indigenous franchise stores came up with the help of Khadi &
Village Industries Commission. The economy began to open up in the 1980s
resulting in the change of retailing. The first few companies to come up with retail
chains were in textile sector, for example, Bombay Dyeing, S Kumar's, Raymond’s,
etc. Later Titan launched retail showrooms in the organized retail sector. With the
passage of time new entrants moved on from manufacturing to pure retailing.
The size of Indian retail market in 2010 was estimated at US$ 353 billion and
by 2014, it is expected to increase up to US$ 543 billion. Further, the estimated
value of current size of Indian retail market is about 500 billion USD and by 2020 its
31
value is pegged to be at 1.3 trillion USD. Over 20 per cent of India's gross domestic
product (GDP) is contributed by retail sector and in total employment it contributes
eight percent. India is Home to one of the top five retail markets in the world and in
retail, India offers immense scope of growth and opportunities. According to A T
Kearney’s Global Retail Development Index (GRDI) 2013, the global slowdown has
impacted India’s growth also and as a result India’s growth rate fell from a 10 year
average of 7.8 percent to 5 percent and in GRDI ranking India slipped to 14th.
India’s previous low ranking was 6th place in the inaugural Index in 2002 but in
2009 it stood first. However the GRDI report points out some positive factors
leading to optimistic expectations. These factors are: strong long-term fundamentals
and young increasingly brand and fashion conscious population. The report projects
14 to 15 percent growth per year in retail sector through 2015 and due to more
urbanization and more potential new investment by retailers, expects a higher
proportion of modern retail which is 7 percent in 2012.
Source: AT Kearney
The above table 1.8 explains about the share of retail trade towards country’s GDP.
32
Source: IBEF
Fig 1.7 explains the market size of Indian retail industry. The total market size was
US$ 490 billion in 2013, registering a CAGR of 6.1 per cent since 1998.
The total retail sector in India can be divided into organized and
unorganized sectors. The trading activities undertaken by licensed retailers are
categorized as organized retailing. Licensed retailers are those who are registered for
sales tax, income tax, etc. These include the corporate backed hyper markets and
retail chains, and also the privately owned large retail businesses. Unorganized retail
or traditional retail on the other hand, include a large number of small retailers that
consists of local kirana shops, owner manned general stores, chemists, footwear
33
shops, apparel shops, paan and beedi (local betel leaf and tobacco) shops, hand cart
hawkers, pavement vendors, etc.
The table 1.9 explains about the share of organized retail sector in the retail sector.
There are 7 main types of retailers which can be defined by the size of their
business and the way they in which they sell their products.
This type of retailer is often the most complex offering a wide range of
products and can appear as a collection of smaller retail stores managed by one
company. The department store retailers offer products at various pricing levels.
This type of retailer adds high levels of customer service by adding convenience
enabling a large variety of products to be purchased from one retailer.
1.11.2 SUPERMARKETS
This type of retailer is usually situated in retail or Business Park and where
premises rents are lower. This enables this type of retailer to stock, display and retail
a large variety of good at very competitive prices.
1.11.5 E-TAILER
This type of retailer enables customers to shop on-line via the internet and
buy products which are then delivered. This type of retailer is highly convenient and
is able to supply a wider geographic customer base. E-tailers often have lower rent
and overheads so offer very competitive pricing.
Usually located in residential areas this type of retailer offers a limited range
of products at premium prices due to the added value of convenience.
This type of retailer offers a variety of discounted products. They offer low
prices on less fashionable branded products from a range of suppliers by reselling
end of line and returned goods at discounted prices.
Fig 1.8: Indian Retail market share and Indian Retail Market Segment
Source: IBEF
37
The above fig 1.8 explains the Indian retail market share and the market segments in
retail sector.
Source: IBEF
The above fig 1.9 explains that Real estate's retail component is an attractive
opportunity, which is currently attracting 29 per cent of total investment in real
estate.
38
Source: IBEF
The fig1.10 explains the space break up in mall. Hypermarkets would be the largest
retail segment, accounting for 21 per cent of total retail space by 2013-14.
Source: IBEF
39
The Fig 1.11 explains the revenue break up from each market. In 2013, food &
grocery accounted for nearly 69 per cent of total revenues in the retail sector, followed by
apparel (8 per cent).
The Indian retail industry has seen tremendous growth in the past ten years.
The growth has been so phenomenal that many big players in India (like Tata group,
Reliance and Mahindra) have entered this segment. This kind of growth is mainly
attributed to the increase in the buying power of the end consumer who now have
more expendable money at their disposal. India has seen emergence of nuclear
family structure (deviating from the traditional joint family structure) with increase
in double-income in the households. People have now exposure to foreign trends
and many travel frequently to other developed countries. With the Government
policies also encouraging women to contribute to the development of the country
during the 80s and 90s, India has seen significant raise in the working population.
Hence the demand as well as expenditure on luxury items has seen an unprecedented
increase. Many of the current youth are brand conscious and are willing to spend
more on imported branded goods. Supporting the trend, the Government policies
have also been inclined towards globalization and Indian has slowly opened its
doors to foreign companies for investment and to set up factories. The real estate has
also benefited with the advent of foreign companies setting up factories in India with
Government allocating SEZs for such purposes where both local people and the
investing companies have benefitted. This has led to settlements of people and
urbanization of many cities and towns at an accelerated pace.
40
1.15 BOTTLENECKS
The above contributing factors being said, it is also to be noted that India is
not fully prepared for the investment by foreign companies. The main problem areas
have been lack of efficient supply-chain management system, shortage of trained
manpower and lack of proper storage infrastructure. Due these factors India is still a
long way in meeting international standards. The Government hopes that
encouraging FDI will slowly and steadily improve and plug the gaps in our retailing
system. In the long term it is expected that both people and the foreign companies
will benefit.
1.16 CHAPTERISATION:
Chapter II deals with the literature review collected on FDI, FDI in other
countries, Retailing, FDI in retail and review from other similar studies.
Chapter III is about the background history of FDI in Retail sector in India
by giving brief explanation about single brand and multi brand retailing, scenarios
from consumer, small medium and large scale industries and consumers. An
overview about FDI in retail sector in Tamil Nadu is also discussed with a case
study.
Chapter V focuses on about the data analysis and interpretation for the
collected data using various statistical techniques.
41
Chapter VI deals with the findings of the data and the conclusions to be
drawn based on it.
42
CHAPTER II
LITERATURE REVIEW
2.1 INTRODUCTION
The FDI in retail is creating quite a stir across the various sections of the
society. Though an investment from a foreign country will help to develop the growth
43
of the economy, unless a proper analysis is done a complete picture cannot be framed.
So this present review is an attempt to synthesize the previous work done by others
on foreign direct investment in retail to enhance the study in a prospective way by
classifying it in broader categories.
It is beyond the scope of the thesis to descriptively report all the papers listed
under various categories. An attempt is made to portray the entire literature in a
condensed frame work.
Kamlesh Gakhar (2006) explained about the FDI policies from 1947 to 2007
covering the basic understanding about the introduction of foreign direct investment
in India. He has explained about the how the FDI was initiated in the year 1991 by
then finance minister Dr. Manmohan Singh and about the foreign equity partition
allowance up to 51% in high priority areas. The book studies the various aspects of
how the investing party retained the control over the investment and the various forms
of FDI which are equity capital, technical and managerial services, capital equipment
and intermediate inputs and legal rights to patented or secret products, processes or
trademark. He studied that developing countries liberalized their foreign investment
regimes and seek FDI not only as a source of capital funds and foreign exchange but
also as a dynamic and efficient vehicle to secure much needed industrial technology,
managerial expertise, marketing know-how and networks to improve on growth,
employment, productivity and export performance.
Park Jongsoo, (2004), in his article has found out that there are two principal
deterrents to FDI investment in India that is bureaucracy and slowing pace of reforms.
He has studied this flow of FDI in India through industrial cluster: with special
reference to Hyundai Motors. He has mentioned that there is change in outlook of
44
Government attitude towards FDI post 1991 and also the growth of India has increased
by means of joint ventures and Greenfield investments.
Bose Kanti Tarun, (2012), in his article has compared India and China with its
strengths such as cheap labour, huge markets, literacy, resource by taking the case of
two major companies: Wal-Mart operations in China and Hyundai operations in India.
He states that both China and India has been a hotspot for foreign investment because
of the availability of all form of resources.
Chakraborty Chandana and Basu Parantap, (2002), in their study has explained
about two way link between FDI by using the Indian sample from period 1974 to 1996
and found that there is long run relationship existing between FDI and GDP which is
unit labour cost and import duty in total tax revenue.
Dr. S N Babar and Dr. B V Khandare, (2012) in their article focused mainly
about the structure and direction of India’s FDI during globalization period. An
analysis is been made on the benefits of FDI towards economic growth. The sectoral
wise analysis was studied till 2010 and India accounted 2,525 millions of US Dollars
in 1996 to 34,613 million of US Dollars in 2009.
Ralph Paprzycki & Kyoji Fukao (2008) in his book have explored about the
how FDI helped Japan, an island nation to acquire opportunities with the help of
access to the world markets. They explained how the exports helped them to raise the
economy in 1990’s as the Japanese firms actively invested overseas including real
estates and movie studios in the United States and setting up their production facilities
in United States, and Europe. They further added that the early postwar period faced
informal obstacles that limited the presence of foreign firms in the Japanese market
and slowly important sectors such as finance and telecommunications have been
45
improve the quality of existing products and extend the export markets. The domestic
firms were allowed either to follow or imitate the foreign investor firms.
Borensztein et al., (1998) in his paper studied that the effect of FDI on
economic growth is mainly dependent on the human capital available in the host
country and FDI is a vehicle for the adoption of new technologies. FDI would result
from a combination of advanced management skills and more modern technology;
FDI may be the main channel through which advanced technology is transferred to
developing countries in a framework of cross- country regressions for 69 developing
countries over the last decade.
Wang (2002) in his study conducted similar study on FDI inflows and
economic growth by using data from 12 Asian economies over the period of 1987-
1997 and found that total FDI inflows in manufacturing sectors significantly affects
the economic growth.
47
Dr. Swapna Pradhan (2009) has given a brief introduction about the concept
of merchandising in this book. The key points she has mentioned in this book are as
follows: the process of merchandising starts with a strategy of what to be produced,
the sources, pricing strategy, the terms and condition and method of packaging and
presentation to the end consumer and the merchandise plan play an important role
where the key factors are Planned Sales, Planned Purchases, Reductions, Markdowns,
Discounts, Shrinkage, Planned Mark-up, Gross Margin. The decision on whether to
make or buy the product becomes the first decision in sourcing. The two factors
involved in sourcing are cost and the availability of production capacity. The
evolution of the concept of category management is closely linked to the
developments in the field of supply chain management and technology. The whole
process is aimed at providing customer satisfaction and at the same time maximizing
returns for the organization.
K.Vijaya Chitra (2009) explains in her book that Retail business is the largest
private industry contributing around 9 percentage of GDP in the west. In developed
countries, retail business houses have share as large as 40 percentage of the market.
Indian retail industry contributes around 10-11 percentage of GDP to the country and
has largest number of retailers, about 12 million, though they are mostly small. The
basics of retail marketing concepts like the retail store types, branding, sales
promotion, supply chain management, international retailing are explained in detail.
Aggarwal (2007) in his book has highlighted the various important factors
which will help in the emergence of organized retailing in India and their effect on
the economy. He has mentioned that Employment generation, Growth of real estate,
Increase in disposable income and Development of retail ancillary market are some
of the various catalytic effects on Indian economy.
48
Gibson G. Vedamani (2004) in the book has explored about the retail industry
in India where scenario is unique. The book emphasize about the changing trends in
retail industry. Because of the increase in number of nuclear families with working
women, the work pressure is higher and commuting time, convenience has become a
priority for Indian consumers. Over the years, international brands like Marks &
Spencer, Samsonite, McDonald’s, and Domino’s have come into India through the
Franchise route following the relaxation of FDI restrictions. Buying behaviour and
lifestyle in India too are changing and the concept of “Value for Money” is fast
catching up in Indian retailing. This is evident from the expansion of the Pantaloons
chain into a large value format, Big Bazaar and the entry of new discount stores in
food retailing in the south namely Subhiksha and Margin Free.
Barry Berman and Joel R Evans (2007) explained about the concept of
strategic planning in retailing that provides an overview on the impact of Retailing on
the economy .They stated that retailing is a major part of U.S. and world commerce.
According to them Retail sales and employment are vital economic contributors and
retail trends often mirror trends in a nation‘s overall economy. Retailing according to
them can be viewed in multiple perspectives like tangible and intangible items.
Retailers are viewed at two capacities, one as a part of distribution channel to
consumer and other one as customer to supplier. The main focus of this study is to
interpret a strategic planning with retail format to adapt to changing environment.
Hino (2010) in his paper has dealt with the diffusion, adoption and usage of
supermarket formats over the traditional retail formats based on Muslim-Arab
customers. He has explained in his study with the help of hypothesis of how the
emergence of super markets will lead to decrease in market share of traditional
formats.
49
Nair Suja (2008) in her book has explained the growth of retailing in Indian
context with respect to factors like new economic policy, global economic
development, changes in the marketing and economic system as well as changing
pattern and classification of economic activity. There is a significant effect of
liberalization and privatization policies on development of retail format which is
based on the basic 4 tier component i.e. consumer behaviour, trade structure, retailer-
distributer-manufacturer relationship and the competition. According to her, the
profile of today‘s customer can be easily described as an affluent one with a higher
and most disposable income, frequent visits & makes a longer and investment and
time to explore a detailed shopping experience. However the consumers have also
revealed a willingness to pay a premium provided they are offered better service
quality at a retail counter. In addition to these, modern consumers will also appreciate
additional facilities such as ATM, parking and in-store attendance.
Mishra (2007) on her article has studied that organizational retail has started
gaining popularity among consumers which can change the way of consumer
behaviour towards traditional formats. A survey was conducted to know about the
consumer behaviour towards both the formats and the consumers prefer shopping
malls and other organized retail format over traditional format due to convenience and
variety of choices.
Goyal and Aggarwal (2009) in their article, has analyzed the growing changes
in the retail sector and about the consumer purchasing behaviour in organized retail
formats. They have studied that most of the consumers visit the shops for happiness
and to deprive their depression and hence these kinds of organized retail formats helps
them to have a casual shopping with variety of choices or to do window shopping just
for fun.
50
small and medium enterprises (SMEs)? And two, how will it ensure that the SMEs
are not a front for a larger enterprise?
India Info line News Service (2012) published an article where it has
mentioned that Government had instituted a study, on the subject of “Impact of
Organized Retailing on the Unorganized Sector”, through the Indian Council for
Research on International Economic Relations (ICRIER), which was submitted to
Government in 2008. Based on the study it is sure that the FDI will lead to better
markets, innovative technologies, and exposure to global markets. The idea of 30
percentage of raw materials to be outsourced from the small and medium industries
will increase the revenue. It is likely to create more employment opportunities for the
youth and better remuneration to the producers and farmers.
Labelux owns Jimmy Choo and Belle. The government raised the FDI limit in single-
brand retail to 100 percentage in January 2012.
In Money Control (2012) an article was published, where it has stated that
India's foreign direct investment (FDI) inflows grew by over 65 per cent year-on-year
to USD 1.94 billion in October, according to the Department of Industrial Policy and
Promotion (DIPP). In October 2011, the country had attracted FDI worth USD 1.16
billion. For the April-October period of this fiscal, however, FDI inflows have
declined by about 27 per cent to USD 14.78 billion, from USD 20.29 billion in the
year-ago period as overseas investment inflows were small in the initial months.
Sectors which received large FDI inflows in September include services (USD 3.6
billion), hotel and tourism (USD 3.11 billion), metallurgical (USD 1.21 billion),
construction (USD 691 million) and automobile (USD 743 million). For the first
seven months of the fiscal, India received maximum FDI from Mauritius (USD 6.75
billion), Japan (USD 1.52 billion), Singapore (USD 1.24 billion) the Netherlands
(USD 1.05 billion) and the UK (USD 611 million), the DIPP said. The October figure
is lower than the previous month when the country received highest FDI for a month
in this fiscal.
55
The Economic Times (2013) published an article where it has mentioned that
a France based hypermarket retail chain Auchan is investing in India to open around
60 stores in the country. At present, Auchan has 13 hypermarkets in India operating
under a franchise agreement with Max Hypermarket India. As per the regulations,
foreign retailers planning to enter the multi-brand segment would have to invest a
minimum of $ 100 million, with 50 per cent of it in the back-end infrastructure.
Dr. Ashish Chatterjee (2012) from Noida presented an article where he has
stated alternative ways to protect farmers from FDI in retail- Collective marketing
where group of farmers agree to work together over an extended period of time on
critical aspects across the value chain to market their produce profitably and by
development of Haat (Weekly Market – the rural mall) where about 60% of the farm
produce does not enter the commercial stream. The government owned haats help the
farmers to share the information and their products and goods. It helps to reduce
overhead costs due to the exclusion of middlemen. The transactions are through cash.
A.Noorul Ameen (2012) in his article has expressed the following views that
Government and RBI must lend suitable policies that will enable organized and un-
organized sectors to expand and improve efficiencies. A national commission must
be established and a proper conditionalities on giant foreign retailers must be framed.
The Government must set up co-operative stores to protect the local and small
producers and an Agricultural Perishable Produce Commission must be established.
V. Kamal Nasir and M. Suhail Sinnalebbe (Feb 2012) have explained that
even though Wal-Mart will give a better deal to the farmers as middlemen and agents
will be eliminated, it will lead to monopoly and oligopoly conditions in the market.
The farmers will be dictated by Wal-Mart as it will be the only major purchaser of the
produce. Similarly, consumers will also have to pay the price fixed by them. Policy
makers should focus on farmers rather than seeds and fertilizer corporations.
56
Government should set up a commission with statutory powers that take decisions on
issues such as agricultural pricing policy and cropping pattern.
J. Starlin Georgina (Feb 2012) in her article discussed the following points:
Players need to increase their investments in retail ancillaries and retail logistics to
ensure sustained benefits. In recent times the consumer are showing greater
confidence and in a due response the retail players in the market are veering towards
aggressive expansion plan. These developments are clearly signaling an affluent time
for retail sector.
Singh Kr. Arun and Agarwal P.K., (2012) in their article has explained the
various concepts like organized and Un- organized retailing, single and multi-brand
retailing. He states that the opening up of retail to FDI should be designed in a such
as way that many sectors - including agriculture, food processing, manufacturing,
packaging and logistics must reap benefits. By looking at FDI investments in other
countries they state that inflation will be definitely reduced and scale of operation and
technology will help organized retailers to provide products at low cost.
Dr. Mamata Jain and Mrs. Meenal Lodhana Sukhlecha, (2012), studies about
the retail sector in general and what is the need of FDI in retailing by means of various
arguments for and against the same. A comparison with China is also made with
respect to retail sector.
The CII Survey conducted during December 2011 January 2012 on the
impact of FDI on SMEs is based on a large sample size of 250 companies covering
different categories of SMEs according to sales turnover including SMEs with a
turnover of Rs.25 lakhs to 1 crores, between Rs. 1 crore to Rs 5 crore, Rs 5 crore to
25 crore and SMEs having turnover between Rs 25 crore and 100 crore and above,
from different regions of the country. The survey has turned out to be a positive view
as the majority of the respondents feels FDI will improve their growth and revenue.
large retailers with small suppliers and for strengthening the competitive response of
the traditional retailers.
Das (2000) revealed that the Indian situation is rather paradoxical. At $180
billion, the Indian retail business contributes 10-12 percent of the GDP higher than
the some western economies, where it averages 8 percent. It revealed that India have
the world’s thickest density of outlets at 5.5 percent for every 1000 people between
12 million retail stores, India’s per capita retail space is dismissal 2 square feet per
person.
Poviah and Shirali (2001) were of the viewpoint that shopping malls are
classic self service 4000- 20000 square feet. Stores with shopping carts, as
popularized in India by crazy boys film, with typical focus on regular groceries,
household goods and personal care products. Tesco and Nilgris. India is namely a
groceries market and here, shopping malls have not been able to eat into the business
of kirana shops. While the housewife might pick up her shampoo at a shopping mall,
she continues to use her local cart pusher for daily needs such as fresh vegetables. In
fact, so far organized Indian retailing has enveloped only the middle section (self-
esteem, social recognition) of Maslow’s pyramid.
is on to please the Indian customer and it’s time for the Indian customer sits back and
enjoys the hospitality to be integrated like a king.
Dr. Biradar et.al. (2008) in their article pointed out that the organized retail
sector is registering tremendous growth fuelled by the unleashed spending power of
new age customers who have considerable disposable income and willingness to have
new shopping experience. It is emphasized that India’s top retailers are largely
lifestyle, clothing and apparel stores followed by grocery stores. The paper further
mentions that increasing number of nuclear families, workingwomen, greater work
pressure and increased commuting time; convenience has become a priority for Indian
consumers. All these aspects offer an excellent business opportunity for organized
retailers in the country.
S. Koktanur (2010), tried to find out the various factors driving customers
towards shopping malls and consumer buying response for promotional tools. They
found four major factors that drive the customers towards the shopping malls. Those
factors are product mix, ambience, services and promotional strategies. Customers
consider fast billing, parking facility and long hours of operations as prime services.
60
2.8.1 OBSERVATIONS
The above literature reviews gives a clear picture about Foreign Direct
Investment in retail, Single brand retailing and Multi brand retailing. The authors had
expressed their views and opinions on the same by analyzing the concepts. Some of
the major observations from the literature review are
b. CII survey states that small medium industries wants FDI to enter in retail
sector due to 30 percent source of raw materials from them.
d. FDI will help to improve the supply chain, reduce food inflation,
remunerate prices for farmers and improve employment opportunities.
e. But the negative effects of FDI are: small retailers might be wiped out,
may lead to monopoly or oligopoly of investors, and job losses.
All sections of players in FDI in retail sector have been analyzed by the authors
in the above reviews except the retailers who are the major players of FDI. It is indeed
61
most important to understand from their point of view on what they know about FDI
and their expectations on the same. This will help the researchers to analyze properly
and make the picture perfect for further study. This study is to understand the retailer’s
perception about the introduction of FDI in retail sector.
62
CHAPTER III
3.1 INTRODUCTION:
India is the most populous democracy in the world and has a largely young
population. More than 60% of the population is estimated to make-up the working
class group which translates into an attractive consumer base for the global retail
players
India has one of the fastest growing retail sector in the world which
contributes around 14 percent - 15 percent of GDP to the economy. The retail sector
contributes around 40 million employment opportunities in India. The Indian retail
market is estimated to be US$ 450 billion.
Indian retail market comprises of two sections namely organized markets and
un-organized markets. Organized markets are the registered license traders who
comply under sales tax, income tax, etc. Eg: Spencer’s, Nilgris. Un-organized markets
are the small owner shops, pavement shops and handcart shops, etc. In India, the un-
63
organized retail markets contribute around 95 percent of service share to the retail
sector. The organized sector are mostly located in urban cities.
Table 3.1 explains that food and grocery has the highest share of 34 percent
followed by apparel, jewelry & watches, IT & electronics items which contributes to
the remaining shares in retail sector.
Source: www.wikepedia.com
c. Single brand retail would cover products which are branded during
manufacturing
The Government initially approved only 51 percent ownership for single brand
products but in 2012 it permitted 100 percent ownership with 30 percent of raw
materials to be sourced from local markets. From 2006-2010, 94 proposals have been
received out of which only 57 were approved and implemented.
Table 3.2 explains about the list of total number of stores of single brand
companies and their percentage of company owned stores and franchised stores.
Marketing of similar and competing products by the same firm under different
and unrelated brands. For example: Walmart
Until 2011, FDI in Multi Brand was not allowed. However in late 2011, FDI
was permitted by Government in Multi Brand market with a cap of 51 percentage
ownership. Some of other conditions include:
b. Blanket ban on large domestic corporate houses and foreign retailers from
entering retail trade in grocery, foods and vegetables and restrictions on
69
h. Providing a level playing field for small retailers; Analysis of traffic and
economic impacts before a store is given permission to open
Some of the perceived benefits with the introduction of FDI in retail are as
follows:
The main motive of FDI is to provide more cold storage facilities in India.
These facilities will help to store the excess food harvest and release the same during
the time required. This will help to balance the demand and supply function and also
reduces the price gap.
Since the investors will the main manufacturers, they will have direct contact
with the farmers and hence the chances of middleman is eliminated from the picture.
They will be in a position to afford the proper margin to the farmers who in turn will
deliver them goods on time. This will be a win-win situation for both the parties.
With the help of FDI there are more chances of development in retail sector by
means of introduction of new technology and innovation. The system will become
more computerized and all information can be viewed by everyone at the same time.
The new electronic products and technologies available in foreign countries will be
open to home market too. Thus the retailers will have access to all new technologies.
71
3.6.4 EMPLOYMENT
India is one of largest producers of major crops, fresh vegetable and fruits and
other food staples like rice and wheat, and it ranks among the top five producers of
the world. It is also the world’s second largest populous country and hence has as
many consumers.
Below are some of the selling methods adopted by the farmers to sell their
produces:
In this method the farmers set up small temporary stalls to market their
produces like vegetables and fruits. The farmers directly sell their products to the
consumers. In this way both farmer and the consumer are benefitted as farmers get
the desired price for the product without middlemen eating into their profit.
Consumers get fresh products at a cheaper price than buying from a retailer.
72
The traders are the middlemen or the wholesalers who buy the farm produces
in bulk from the farmers and resell it to other wholesalers, exporters or retailers at a
higher price (with their own profit margins). This happens for major crops like rice
and wheat as the production of these is in very large quantities and is dependent on
crop season.
In this system, it is observed that the farmers are at the mercy of the middlemen
as they determine the price of the harvest. The farmers end up complying with the
demands of the traders as they are forced to dispose of the harvest as quickly as
possible to cut down losses due to spoilage.
When the farmers get a good harvest season, their happiness gets cut short due
to plummeting of food price due to supply exceeding demand for the produce. The
farmer has to sell the produce at a throw away price just to dispose of the product and
thus has to incur losses. To protect the farmers from such events, the Government
introduced the system of Minimum Support Price (MSP). Minimum Support Price is
the price at which the Government purchases crops from the farmers whatever may
be the price for the crops. This ensures that the market price of the crop cannot go
below the MSP. In this case the Government takes care of storage and export of the
surplus produce thus relieving the farmer from this burden.
India also experiences one of the highest food losses in the world due to the
following reasons:
It is observed that almost one third of the farm produce does not reach the
consumers due to the inefficiency of existing supply chain system. In the traditional
method of transporting the produce to sales counter, the food travels through a slow
chain of local traders (middlemen) to finally reach the consumers
India lacks the proper logistics and storage systems for preserving the crop
harvest from spoilage. In 2010, the Government faced controversy and criticism for
having to dump the stored grains from its warehouses due to rotting of the grains. This
was caused due to improper storage and lack of sufficient storage facilities.
80% 68%
60%
40% 28%
20% 4%
0%
Will benefit Will not benefit Can't say
As evident from the above fig 3.2, 68 percent of the survey respondents believe
that farmers will benefit from FDI in Retail sector while only 28 percent of the
respondents think that farmers will not be benefited.
While this is the view of the farmers from Lucknow, India’s largest dairy
cooperative and food brand Amul feels that allowing FDI will hurt the milk producers
and retailers. The managing director of Gujarat Co-operative Milk Marketing
Federation Ltd. Mr. Sodhi says that farmers get the least returns from the modern trade
practices and benefits only the large retailers as they constantly drive the prices down
to have competitive advantage in the market.
Quoting from the International Farm Comparison Network (IFCN) data, Mr.
Sodhi presents following observations in the form of chart (Fig 3.3)
75
70%
80%
60%
38% 36%
40%
20%
0%
United States United Kingdom India
Fig 3.3 explains the dairy farmer’s share of the end consumer price in the
United States is only 38 percent while it is only 36 percent in United Kingdom. But
in India, Mr. Sodhi states, that the dairy farmer’s share of the consumer price is 70
percent which is really good for the milk producer.
As per the latest reforms announced by the Government, 100 per cent FDI has
been allowed in single-brand retailing where 30 percent of the raw materials must be
sourced from local producers or manufacturers.
A survey was conducted on Dec 2011 and Jan 2012 by CII to understand the
perspective of FDI in Retail from MSME’s point of view.
76
30 27.1
25
25 22.9 22.9
20
15
10
5 2.1
0
Excellent Higher (10 to Moderate (5 - Low (1 to 5%) Negative
(>20%) 20%) 10%) (<10%)
Chart 3.4 represents the views of respondents on how FDI in retail sector will
affect the growth of SMEs. Around 22.9 per cent of respondents perceived that their
industry would grow at excellent rate (of more than 20 per cent). 25 per cent of the
respondents expect the impact on the size or capacity addition to be in the high range
of 10-20 per cent while 33 per cent expect the growth to be in the moderate range of
5-10 per cent and 22 per cent perceive the growth to be in the low range (0-5 per cent)
category. A significantly negligible 2 per cent of the respondents feel that the decision
would have a negative impact on the growth of size of the industry and business.
77
Negative
17%
No Change
35%
Positive
48%
As represented in the above given Chart 3.5, based on the survey conducted by
CII on employment opportunities in SME’s, 48 percent of the people have a positive
outlook towards it and feel that employment opportunities will increase whereas
35percent feel that FDI in single brand and multi-brand will have no impact on
employment and 17 percent of the respondents feel that it will have negative impact
on employment opportunities.
Consumers are the considered as God for the retail industry. The consumer
base in India has currently widened with the inclusion of a large number of youngsters.
With opening of markets to foreign brands by India, many global players have entered
the retail market in the past few years. This has changed the way people shop today.
78
The Indian urban consumer has become more brand-conscious and is spoilt for choice.
The retailers too are innovative and come up with new ideas to attract more
consumers. The shopping style of consumers has moved from traditional “mom and
pop” store to new organized retail outlets
Table 3.4: Research methods and techniques used for the study on
consumer behaviour in Chennai and Bangalore
79
Table 3.4 explains the research methods and techniques adopted by the
research scholar to conduct the study in Chennai and Bangalore based on consumer
buying behaviour towards FDI in retail. This survey will help to understand better
about the consumer perception of FDI in retail.
From the above table 3.5 we can perceive that there is wide change in
behaviour of consumers comparatively as now they give importance to the quality of
the product and value for money. Most of the consumers are open to branded products
and they are also aware about the knowledge of the products they buy unlike in the
past. Majority of the respondents in both the cities support FDI in retail sector as they
want more buying choices and brands in India.
One of the greatest barriers to the growth of modern retail formats are the
supply chain management issues. No major changes are needed in the supply chain
for FMCG products; these are well developed and efficient. For perishables, the
system is too complex. Government regulations, lack of adequate infrastructure and
inadequate investment are the possible bottlenecks for retail companies. The supply
chain for staples is less complicated than the net groceries. But staples have a unique
problem of non-standardization.
d. Labour rules and regulation are also not followed in the organized retails.
The
e. Lack of uniform tax system for organized retailing is also one of the
obstacles. Inadequate infrastructure is likely to be an obstacle in the
growth of organized retails.
82
i. The unorganized sector has dominance over the organized sector in India
because of low investment needs.
j. Will mainly cater to high-end consumers placed in metros and will not
deliver mass consumption goods for customers in villages and small
towns.
k. Retail chains are yet to settle down with proper merchandise mix for the
mall outlets. Retailing today is not about selling at the shop, but also
about researching and surveying the market, offering choice, competitive
prices and retailing consumers as well.
l. Small size outlets are also one of the weaknesses in the Indian retailing.
96% of the outlets are lesser than 500 square feet. The retail chains are
also smaller than those in the developed countries for instance, the
superstore food chain, food world is having only 52 outlets whereas
Carrefour promotes has 8800 stores in 26 countries.
n. The volume of sales in Indian retailing is also very low. India has largest
population in the world and a fast growing economy.
3.11.1 INTRODUCTION
Tamil Nadu is the fourth largest state of India, and contributed 8.1 per cent to
India's gross domestic product (GDP) in 2013-14. Gross state domestic product
(GSDP) of Tamil Nadu grew at a compound annual growth rate (CAGR) of 16.3 per
cent between 2004-05 and 2013-14, reaching US$ 141.1 billion in 2013-14. Per capita
GSDP of US$ 2,059.3 (at current prices) is nearly 48.2 per cent higher than the
national average of US$ 1,389.6.
Source: www.ibef.org
84
The above fig 3.6, explains the Tamil Nadu's gross state domestic product
(GSDP) at current prices, which is about US$ 141.1 billion in 2013-14.
Source: www.ibef.org
The above fig 3.7 explains that in 2013-14, the state had a total outstanding
investments of US$ 159.5 billion. Electricity contributes a major share of investment
with 48.5 percent followed by service sector (29.5 percent) and then comes
manufacturing sector with the contribution of 10.7 percent to the investments. Real
estate contributes around 9.9 percent and mining around 0.7 percent and finally comes
irrigation which contributes around 0.8 percent to the total investments.
85
Tamil Nadu has become one of the favourite investment decision for
foreign investors due to the following reasons:
b. The State Government is quite friendly and open to the investors and the
climatic condition of the state is also apt for industrial developments.
c. The literacy rate in Tamil Nadu accounts for 80.25 percent which ensures
great number of workforce in the state.
Foreign Direct Investment Inflows on Tamil Nadu and Pondicherry has been
accounted for 8,485.38 crores which comes to around USD 1,876.1 million from
January 2000 to October 2006. Tamil Nadu ranks third in terms of FDI Inflows in
India.
According to a latest study by Frost & Sullivan and the Associated Chambers
of Commerce and Industry of India (Asshocham), the FDI equity inflows in Tamil
Nadu increased from Rs 3,653 crore in 2009-10 to Rs 6,711 crore in 2011-12. The
FDI inflow to the state increased by around 10 per cent during the fiscal, compared to
Rs 6,115 crore during 2010-11.
The above table clearly shows that only 15 percent of respondents gave green
signal (accepts) for FDI in Retail sector. And 85 percent respondents strictly gives red
signal (not accepts) to FDI in Retail.
In the above table 3.7, 56 percent respondents said that there is no possibility
for purchasing goods by Indian manufacturers from foreign companies after FDI in
retail, 24 percent respondents said it is possible to purchase goods and rest 20 percent
respondents gave no opinion about this.
The above table 3.8 clearly shows us that 76 percent respondents said that there
is no possibility for the survival of Indian manufacturers in the market competition
with foreign companies after FDI in Retail sector. And only 10 percent polled that is
possible. Rest 14 percent polled no opinion in this competition survive.
The present study infers the clear details about FDI in retail sector in India and
reflects the common peoples’ opinion as a mirror. In our study area majority
respondents strongly oppose these investment methods directly from foreign
countries. They feel that it will affect the domestic retail business and so India’s
economy more. Our country has 90% of unorganized retail sector this FDI slowly
abolishing the retail sector of India. Although they lack in knowledge about FDI, they
are very strong in opposing it inside India. In this trend it is not safe to allow this
corporate sector in India. So it’s duty of Government to make them clear about FDI’s
two sides and at the same time they should respect the feelings of common people by
taking good decision which favors our soil and its innocent retailers.
89
Retail sector in India started to develop slowly and steadily with the new
reforms and regulations. The market started developing in form of super markets,
department stores, convenience markets with variety of products to cater the needs of
customer’s requirements. Systemized billing system and sign boards were adopted.
But most of the practices were limited to urban cities alone. The rural areas mostly
adopted the same general stores but with a little availability of new products that are
affordable to them.
The buzz FDI is gaining more importance because of the speculations about its
aftermath, before a proper analysis been done on the same.
The major reasons for bringing FDI as proposed by the Government in India
are for better cold storage facilities, increase in revenue of farmers, explorations of
new and quality products.
a. Is it possible for the local retailers to practice the strategies adopted by the
foreign firms?
CHAPTER IV
RESEARCH METHODOLOGY
4.1 INTRODUCTION
Research is the way to probe the unknown facts which is confronting us and
to attain the understanding of the same. Research is the process of defining and
redefining the problems, framing objectives based on it, followed by formulation of
hypothesis, then collecting and evaluating the reliable data, testing of hypothesis with
the evaluated data, and then finally drawing the findings and conclusions. Technically
research is the systematic investigation into and study of materials and sources in
order to establish facts and reach new conclusions. Research approaches the study in
two ways either quantitative or qualitative. Quantitative means the data are
measurable based on some units. Qualitative signifies the subjective assessment of the
data like opinions, attitudes.
Research can be broadly classified into three types, based on its application
in the study, the objectives for which the study is undertaken and depending on the
inquiry mode employed.
Research methods are the techniques used by the researcher for the process
of conduction of research. Basically the research methods comprises of three
questions namely,
a. What are the methods used to collect data from the respondents?
b. What are the statistical techniques used to relate the collected data with
the research study?
91
In this chapter we are going to discuss about the objective, need and scope
the study, he basic research design of the study, the sampling data types and
techniques used, about the Structural Equation model and the various statistical
techniques used in the study.
Retail sector is one of the major sector in India which provides more
employment opportunities and revenue to the Government. It has attracted more
markets globally in recent times which resulted in Foreign Direct Investment in this
sector. But it also stirred major arguments among various sector of people across the
country. The main affecters that is the Retailers were not given much awareness about
it and their point of view from various level was not taken into consideration. This
research is basically to understand from the retailer’s point of view about how they
foresee the FDI in retail sector in Tamil Nadu and their expectations from the same.
92
a. To study the retailer’s profile with respect to the FDI in retail sector
towards financial impact.
c. To find out the most important factor that contributes towards the
financial impact.
With the growing demand for variety and innovativeness the investment in
retail sector plays a vital role. But we tend to ignore the fact that the people involved
in retail sector i.e. retailers must also be considered while deciding whether FDI is
necessary or not. So this study is conducted within state of Tamil Nadu to identify
from retailer’s point of view what they actually expect from FDI and also will it pave
a way for their further growth and development.
d. In case of secondary data collection, then what are the books, journals
or publications to be referred for review.
So unless we have a clear vision of the research process it may not be possible
for us to understand the study and to proceed in the proper direction. Hence research
design plays an important role in research study.
The below SEM explains the various factors related to FDI in retail and how it
leads to the final output that is the financial impact for retailer’s.
4.7 POPULATION
b. The organized and un-organized retail sector in Tamil Nadu form the
population for this study.
95
4.8 SAMPLE
b. The sample size selected for this study is 516 based on the below formula,
n = (ZS/E)2
Where
= (1.96*0.5795/0.05)2
= 516.034
= 516
96
Sampling methods are the methods used to collect data from the target
respondents. It can be classified into probability or non-probability sampling. The
sampling methods adopted to find the data from the retailers are as follow:
In this technique, each member of the population has an equal chance of being
selected as subject. Once the convenience sampling is done, then the random pick of
retail outlets within cities is done to give equal chance to all cities.
a. Data collected by someone else for some other purpose (but being
utilized by the investigator for another purpose)
b. Friedman test
c. Correlation Analysis
98
CHAPTER V
5.1 INTRODUCTION
In this chapter a detailed analysis of the collected data are analyzed with
various statistical techniques to test whether the data is collected as per objectives
stated earlier. Hypothesis are tested on the basis of findings of the study based on
which interpretations and conclusions are drawn. The main two analysis used for the
present study are Descriptive analysis and Inferential Analysis.
One of the commonly used analysis to find the descriptive relationship of the
given data is percentage analysis. Percentage analysis helps to compare two or more
series of data in totality as the percentage reduces everything to a common base.
100
Rural 79 15.3
80
Percentage
60
40
20
0
Within city Suburban Rural
From the above table 5.1, 60.1 percentage of the retailers are located within
city in Tamil Nadu, whereas 24.6 percentage of the retailers are located in the
suburban area and the remaining 15.3 percentage in the rural area.
Based on the survey, the retailers are more within city than suburban and rural
areas in Tamil Nadu.
101
Table 5.2 Frequency distribution of the Size of the outlet in square feet
2001-3000 91 17.6
Fig 5.2: Bar diagram representing the size of the outlet in square feet
50
40
Percentage
30
20
10
0
Below 1000 1001-2000 2001-3000 Above 3000
Size of the outlet in Square feet
In the table 5.2, the retailers in Tamil Nadu having size of the outlet below
1000 square feet are around 28.3 percentage, and size of the outlet between 1001 to
2000 square feet are around 40.3 percentage. The percentage of retailers having square
feet between 2001 to 3000 are 17.6 and above 3000 square feet are 13.8 percentage.
This indicates that majority of the retailers own an outlet between 1001 to 2000
square feet in Tamil Nadu.
102
Above 15 85 16.5
Fig 5.3 Bar Diagram representing the Existence of retail outlet in years
40
35
30
Percentage
25
20
15
10
5
0
Below 5 6-10 11-15 Above 15
Existence of retail outlet in years
From the above table 5.3, the percentage of existence of retail outlets below 5
years in Tamil Nadu are around 26.7, whereas 35.1 percentage of retail outlets has
existence between 6 to 10 years. Around 21.7 percentage of retail outlets have
existence between 11-15 years and 16.5 percentage of retail outlets have an existence
of above 15 years.
Hence concluded that the majority of the retail outlets exist between 6 to 10 years.
103
Fig 5.4 Bar Diagram representing the number of customer’s service per day
40
Percentage
30
20
10
0
Below 50 51-100 101-200 Above 200
Number of customers service per day
From the above table 5.4, 30.8 percentage of retail outlets have customers less
than 50 per day, whereas 34.5 percentage have customers around 51 to 100 per day in
their outlets. 20.7 percentage of retail outlets have 101 to 200 customers per day and
14 percentage have above 200 customers visiting them per day. Hence most of the
retail outlets in Tamil Nadu have customers around 51 to 100 customers per day.
104
Above 10 69 13.4
Fig 5.5 Bar Diagram representing Amount of sales in lakhs per month
40
30
Percentage
20
10
0
Below 1 1-5 6-10 Above 10
Amount of sales in lakhs per month
From above table 5.5, the retail outlets having a sales turn over below one lakh
per month are around 29.5 percentage. Around 35.1 percentage of retail outlets have
a sales of about 1 to 5 lakhs, whereas 22.1 percentage of retail outlet have a sales of 6
to 10 lakhs per month. 13.4 percent of retail outlets have a sales of above 10 lakhs in
Tamil Nadu. Hence based on the findings, majority of retail outlets in Tamil Nadu
have a sales of around 1 to 5 lakhs per month.
105
Number of employee in
the store Frequency Percentage
Above 20 85 16.5
40
30
Percentage
20
10
0
Below 5 6-10 11-20 Above 20
Number of employees in the store
From the above table 5.6, the percentage 30.2 percentage of retail outlets have
employed less than 5 employees in their outlets whereas 31.6 percentage of retail
outlets have around 6 to 10 employees. 21.7 percentage have employed around 11 to
20 employees in their outlets and 16.5 percentage employed above 20 employees in
their outlets.
Std.
A. FDI In Retail Mean
Deviation
Allowing FDI in retail will be a good step that
will benefit Tamil Nadu and bring in progress 4.52 0.80
for the state.
The proposed retail format of allowing only 51
percent stake in the business will protect the
4.01 0.85
domestic player from being overtaken by the
foreign company.
FDI in Retail will lead to creation of SEZs
(Special Economic Zones) which will help in
3.77 1.07
development of rural areas and promote the real
estate market.
FDI in retail will bring in wide range of
products for the consumers who have become 3.55 1.20
brand-conscious and are willing to spend.
FDI in Retail will eliminate the role of the
middlemen currently existing and will directly 3.61 1.24
benefit the producers / farmers.
From above table 5.7, allowing FDI in retail in Tamil Nadu has the highest
mean of 4.52 as most of the retailers believe it to be a good step for progress of state.
They feel 51 percent stake will protect them from being overtaken from foreign
players. Hence it has second highest mean of 4.01. As the introduction of FDI will
create SEZs, the chances of development of rural areas and real estate market are on
high. So, it has third highest mean of 3.77.
107
Std.
B. Supply Chain Mean
Deviation
From above table 5.8, the retailers feel the existing supply chain system is
insufficient and there is gap between demand and supply. So it has a highest mean of
4.00. They feel FDI will help for better and efficient supply chain system and the
newer one will ensure timely replenishment of stock at the retail outlet for sale and
hence it has received second and third highest mean of 3.57 and 3.38.
108
Std.
C. Storage Facility Mean
Deviation
The observation for the above table 5.9 are that retailers believe that FDI will
help for better storage of perishable goods and hence it has highest mean of 4.04. With
the second highest mean of 3.71, the retailers feel there is no adequate storage
facilities in Tamil Nadu and better storage facilities helps to reduce wastage and
transportation costs and in turn reduces the losses incurred by it and so, it has received
third highest mean of 3.57.
109
Std.
D. Government Policies Mean
Deviation
From the table 5.10 the observations are, retailers feel that there are adequate
Government policies for retail sector and so it has received highest mean of 3.64
which is followed by, second highest mean of 3.70 where the retailers feel more
reforms are required for Government policies related to FDI in retail and finally they
want Government to revise their policies towards FDI regarding profit sharing as they
feel entire percent will be earned by them and hence it has received the third highest
mean of 3.29.
110
Std.
E. Competition Mean
Deviation
From the above table 5.11, the highest mean value is 3.78 where the retailers
believe that FDI in retail will bring monopoly in the market. Secondly they also think,
competition is already high among themselves in Tamil Nadu and so it has received
the second highest mean value of 3.41. The third highest mean is 3.26 where the FDI
in retail market think FDI will affect the local retailers in Tamil Nadu.
111
Std.
F. Employment Mean
Deviation
The table 5.12 explains that majority of the retailers expect FDI in retail will
bring more employment opportunities and hence it has received highest mean of 4.35,
followed by second highest mean of 3.75 where they think more employment
opportunities will increase their individual and economy’s revenue. The third highest
mean is 3.64 which explains that the employment opportunities are more in service
sector.
112
Std.
G. Joint Ventures Mean
Deviation
The observations from the above table 5.13 are, the retailers welcome FDI in
retail by means of joint ventures in Tamil Nadu and hence it has received highest
mean value of 3.38. By means of joint ventures the optimum resources of both the
firms will be utilized and hence it has second highest mean value of 3.38. Thirdly
there is a tie in mean of 3.09 where the retailers feel by collaborating with foreign
firm their brand name will increase and hence it will be a win-win situation for both.
113
Std.
H. Inflation Mean
Deviation
From the above table 5.14, the highest mean value is 3.86 where the retailers
feel FDI in retail will help in curbing inflation by means of transportation and storage
and it is followed by second highest mean value of 3.24 in which they expect that FDI
will promote free and fair competition by lowering inflation. The chances of reduction
in budget deficit is possible because of the earnings from foreign firms in forms of tax
revenues and so it has third highest mean value of 3.08.
114
Std.
I. Exchange Rate Mean
Deviation
The above observation from the table 5.15 are, the retailers think that the value
in foreign exchange reserves will improve due to the cash inflow from the foreign
company and hence it has highest mean of 4.02. This improved cash flow will stabilize
the Indian rupee value globally and thus it has second highest value of 3.48 and finally
the mean of 3.07 explains improved exchange rate will reduce the foreign debt burden
of India.
115
Std.
J. Systemized Retail Mean
Deviation
The above table 5.16 explains that the highest mean is 3.59 where the retailers
expect FDI in retail sector will promote systemized retail outlets. The second highest
mean is 3.36 which explains that there is more need of systemized retail outlets to
cater consumer needs. Systemized retailing will help the consumers to get information
about various products before buying and hence it has received the third highest mean
with value of 3.16.
116
Std.
K. Financial Impact Mean
Deviation
The table 5.17 explains that, the retailers perceive FDI will improve their
market value of the retail market and hence it has received highest mean value of 3.75.
The second highest mean value is 3.28 because they feel FDI in retail once stabilized
will improve their profit margin. The third highest mean value is 3.07 since it helps
all classes of people to improve their growth financially.
117
HYPOTHESIS I
Table 5.18: ANOVA for significant difference between location of the outlet
with respect to the factors of FDI in retail towards financial impact
Location
of the
Factors of FDI outlet F value P value
Within
Suburban Rural
city
19.85b 18.46a 19.52b
FDI In Retail 5.352 0.005**
(4.12) (3.73) (4.18)
17.79 17.06 17.32
Supply Chain 1.839 0.160
(3.80) (3.69) (4.09)
Storage 18.23b 17.95ab 17.23a
2.970 0.050*
Facility (3.17) (3.10) (3.88)
Government 16.92 16.27 15.86
2.159 0.117
Policies (4.34) (4.83) (4.78)
16.97 16.6 16.61
Competition 0.418 0.659
(4.38) (4.62) (4.97)
18.18 18.17 18.41
Employment 0.126 0.882
(3.81) (3.44) (3.72)
16.59 16.1 16.7
Joint Ventures 0.866 0.421
(4.01) (3.45) (3.86)
13.22 12.82 12.89
Inflation 0.560 0.572
(4.06) (3.89) (3.90)
10.70 10.09 10.18
Exchange Rate 2.281 0.103
(2.99) (3.06) (3.06)
Systemized 16.45 15.95 15.58
0.957 0.385
Retail (5.39) (5.59) (5.35)
Financial 16.35 15.76 15.37
1.444 0.237
Impact (5.22) (4.92) (4.98)
Since P value is less than 0.01, the null hypothesis is rejected at 1 percent level
with regard to the FDI in retail. Hence there is significant difference between location
of the outlet with respect to the FDI in retail.
Based on Duncan multiple test, the suburban significantly differs within city
and rural at 5 percent level, but there is no significant difference between within city
and rural with respect to the FDI in retail.
Since P value is less than 0.05, the null hypothesis is rejected at 5 percent level
with regard to storage facility. Hence there is significant difference between location
of the outlet with respect to the storage facility.
Based on DMRT, the within city significantly differs with rural at 5 percent
level, but there is no significant difference between within city and suburban with
respect to storage facility.
HYPOTHESIS II
Since P value is less than 0.01, the null hypothesis is rejected at 1 percent of
level with regards to all factors of FDI except FDI in retail and supply chain. Hence
there is significant difference between existence of the retail outlet with respect to all
factors of FDI except FDI in retail and supply chain.
Based on DMRT, the below 5 years significantly differs with 11-15 years and
above 15 years at 5 percent level, but there is no significant difference between 6-10
years and 11-15 years with respect to storage facility, competition, and employment.
The retail outlets with existence of below 5 years may not be in position to
have separate storage facility, and it will be difficult for them to compete with
experienced retail outlets and similarly the number of employees employed will also
be less than compared to retail outlets with existence of 11-15 years and above 15
years and hence there is significant difference between them.
Based on DMRT, the below 5 years and 6-10 years significantly differs with
11-15 years and above 15 years at 5 percent level with respect to joint ventures,
inflation, exchange rate, systemized retail, financial impact but there is no significant
difference between them. Below 5 years significantly differs with 6-10 years, 11-15
years and above 15 years with respect to government policies at 5 percent level.
122
Since P value is less than 0.05, the null hypothesis is rejected at 5 percent of
level with regards to FDI in retail and supply chain. Hence there is significant
difference between existence of the retail outlet with respect to FDI in retail and
supply chain.
Based on DMRT, the below 5 years, 6-10 years and 11-15 years significantly
differs with above 15 years at 5 percent level with respect to FDI in retail and supply
chain.
.
123
HYPOTHESIS III
Since P value is less than 0.01, the null hypothesis is rejected at 1 percent level
with regards to all factors of FDI in retail, except storage facility, employment, and
joint ventures. Hence there is significant difference between number of customer
service per day with regard to all factors of FDI except storage facility, employment,
and joint ventures.
Based on DMRT, below 50 significantly differs with 101-200 and above 200
customer service per day at 5 percent level, whereas there is no significant difference
between below 50 and 51-100 customer service with respect to exchange rate.
Below 50 customer service per day significantly differs with 51-100 and above
200 at 5 percent level, but there is no significant difference between below 50 and
101-200 customer service per day with respect to government policies.
Below 50 customer service per day significantly differs with above 200
customer service per day at 5 percent level but there is no significant difference
between below 50, 51-100,101-200 customer service per day for FDI in retail, supply
chain, competition, inflation, systemized retail and financial impact.
Since P value is less than 0.05, the null hypothesis is rejected at 5 percent level
with regards to employment. Hence there is significant difference between number of
customer service per day with regards to employment.
125
Based on DMRT, Below 50 customer service per day significantly differs with
above 200 customer service per day at 5 percent level but there is no significant
difference between below 50, 51-100,101-200 customer service per day for
employment.
HYPOTHESIS IV
Null Hypothesis: There is no significant difference between size of the outlet with
respect to factors of FDI in retail towards financial impact
Table 5.21: ANOVA for significant difference between size of the outlet
with respect to factors of FDI in retail towards financial impact
Since P value is less than 0.01, the null hypothesis is rejected at 1 percent level
with respect to all factors of FDI except FDI in retail and storage facility. Hence there
is significant difference between size of the outlet with regards to all factors of FDI
except FDI in retail and storage facility.
Based on DMRT, Below 1000 square feet significantly differs with above 3000
square feet at 5 percent for supply chain, government policies, competition,
employment, joint ventures, inflation, exchange rate, systemized retail, and financial
impact whereas there is no significant difference between below 1000, 1001-2000 and
2001-3000 square feet.
Since P value is less than 0.05, the null hypothesis is rejected at 5 percent level
with respect to FDI in retail and storage facility. Hence there is significant difference
between size of the outlet with regard to FDI in retail and storage facility.
Based on DMRT, Below 1000 square feet significantly differs with above 3000
square feet at 5 percent for FDI in retail and storage facility whereas there is no
significant difference between below 1000, 1001-2000 and 2001-3000 square feet.
128
HYPOTHESIS V:
Since P value is less than 0.01, the null hypothesis is rejected at 1 percent level
with regards to supply chain, competition, employment, inflation and exchange rate.
Hence there is significant difference between amount of sales per month with regards
to supply chain, competition, employment, inflation and exchange rate.
Based on DMRT, 1-5 lakhs significantly differs with 6-10 and above 10 lakhs
at 5 percent, whereas there is no significant difference between below 5 lakhs, above
5 and 10 lakhs with respect to supply chain.
Below 1 lakh significantly differs with 6-10 and above 10 lakhs at 5 percent,
but there is no significant difference between below 1 and 1-5 lakhs with regard to
exchange rate.
Since P value is less than 0.05, the null hypothesis is rejected at 5 percent level
with regards to FDI in retail, joint venture, Systemized retail and financial impact.
Hence there is significant difference between amount of sales per month with regards
to FDI in retail, joint venture, Systemized retail and financial impact.
Below 1 lakh significantly differs with above 10 lakhs at 5 percent, but there
is no significant difference between Below 1 lakh, 1-5 lakhs and 5-10 lakhs for
financial impact.
HYPOTHESIS VI
Since P value is less than 0.01, the null hypothesis is rejected at 1 percent level
with regards to all factors of FDI except FDI in retail, storage facility, and joint
ventures. Hence there is significant difference between number of employees in the
store with respect to all factors of FDI except FDI in retail, storage facility, and joint
ventures.
Since P value is less than 0.05, the null hypothesis is rejected at 5 percent level
with regard to FDI in retail and joint ventures. Hence there is significant difference
between the number of employees in the store with respect to FDI in retail and joint
ventures.
Below 5 significantly differs with above 20 at 5 percent for FDI in retail but
there is no significant difference between below 5, 6-10, and 11-20.
HYPOTHESIS VII
Table 5.24: Friedman test for significant difference between mean ranks
towards factors of FDI on Financial Impact
Fig 5.7: Friedman test for significant difference between mean ranks
towards factors of FDI on Financial Impact
Mean Rank
7
6 5.81 6.12 5.6
5 5.19 4.7 4.69
4 4.27 4.48 4.13
3
2
1
0 Mean Rank
135
Since P value is less than 0.01, the null hypothesis is rejected at 1 percent level
of significance. Hence concluded that there is significant difference between mean
ranks towards factors of FDI on Financial Impact. Based on mean ranks, Employment
(6.12) is the most important factor towards financial impact followed by Storage
facility (5.81), Exchange rate (5.60), supply chain (5.19), Competition (4.69),
Government policies (4.70), inflation (4.48), joint ventures (4.27) and Systemized
retail (4.13).
With the introduction of FDI in retail sector, the retailers expect the
employment opportunities to increase the most as the chances of direct and indirect
logistics and infrastructure will be on rise. Next to employment opportunities, comes
storage facilities as in India as we are in need of adequate storage facilities to stock
the perishable goods and the surplus production of goods here.
Retailers have ranked the factor, Exchange rate on third as it plays a major role
in the growth of the economy. With FDI in retail, the retailers expect a stabilization
in the exchange rates which can increase their revenue through exports and reduce
costs incurred by imports. Then comes supply chain as for any retailer a proper supply
chain helps to maintain the demand and supply curve. A delay in the distribution of
goods can lead to loss for them.
The Correlation coefficient between the FDI in Retail and Inflation is 0.356
which indicates 36 percentage positive relationship between FDI in Retail and
Inflation and is significant at 1 percent level. The Correlation coefficient between the
FDI in Retail and Exchange Rate is 0.275 which indicates 28 percentage positive
relationship between FDI in Retail and Exchange Rate and is significant at 1 percent
level. The Correlation coefficient between the FDI in Retail and Systemized Retail is
0.297 which indicates 30 percentage positive relationship between FDI in Retail and
Systemized Retail and is significant at 1 percent level. The Correlation coefficient
between the FDI in Retail and Financial Impact is 0.383 which indicates 38 percentage
positive relationship between FDI in Retail and Financial Impact and is significant at
1 percent level.
137
The Correlation coefficient between the Inflation and Exchange Rate is 0.697
which indicates 70 percentage positive relationship between Inflation and Exchange
Rate and is significant at 1 percent level. The Correlation coefficient between the
Inflation and Systemized Retail is 0.708 which indicates 71 percentage positive
relationship between Inflation and Systemized Retail and is significant at 1 percent
level. The Correlation coefficient between the Inflation and Financial Impact is
0.0.729 which indicates 73 percentage positive relationship between Inflation and
Financial Impact and is significant at 1 percent level.
The Correlation coefficient between the Exchange Rate and Systemized Retail
is 0.714 which indicates 71 percentage positive relationship between Exchange Rate
and Systemized Retail and is significant at 1percent level. The Correlation coefficient
between the Exchange Rate and Financial Impact is 0.694 which indicates 69
percentage positive relationship between Exchange Rate and Financial Impact and is
significant at 1 percent level.
The correlation coefficient between supply chain and FDI in retail is 0.480
which indicates there is positive relationship of 48 percent and is significant at 1
percent level. The correlation coefficient between storage facility and FDI in retail is
0.256 which indicates 25 percent of positive relationship and is significant at 1
percent. The correlation coefficient between government policies and FDI in retail is
0.136 which indicates 13 percent of positive relationship and is significant at 1
percent. The correlation coefficient between competition and FDI in retail is 0.273
where there is 27 percent of positive relationship between them and is significant at 1
percent. The correlation coefficient between employment and FDI in retail is 0.250
which indicates there is 25 percent of positive relationship and is significant at 1
percent. The correlation coefficient between joint ventures and FDI in retail is 0.228
which indicates 22 percent of positive relationship and is significant at 1 percent.
139
The correlation coefficient between supply chain and inflation is 0.466 which
explains that there is 46 percent positive relationship between supply chain and
inflation and is significant at 1 percent. The correlation coefficient between supply
chain and exchange rate is 0.394 which indicates 39 percent positive relationship
between them and is significant at 1 percent. The correlation coefficient between
supply chain and systemized retail is 0.514 and has a positive relationship of 48
percent between them and is significant at 1 percent. The correlation coefficient
between supply chain and financial impact is 0.514 that indicates there is positive
relationship of 51 percent and is significant at 1 percent.
between employment and systemized retail is 0.513 and has a positive relationship of
51 percent between them and is significant at 1 percent. The correlation coefficient
between employment and financial impact is 0.538 that indicates there is positive
relationship of 54 percent and is significant at 1 percent.
The correlation coefficient between joint ventures and inflation is 0.626 which
explains that there is 63 percent positive relationship between joint ventures and
inflation and is significant at 1 percent. The correlation coefficient between joint
ventures and exchange rate is 0.399 which indicates 40 percent positive relationship
between them and is significant at 1 percent. The correlation coefficient between joint
ventures and systemized retail is 0.532 and has a positive relationship of 53 percent
between them and is significant at 1 percent. The correlation coefficient between joint
ventures and financial impact is 0.539 that indicates there is positive relationship of
54 percent and is significant at 1 percent.
The correlation coefficient between FDI in retail and inflation is 0.356 which
explains that there is 36 percent positive relationship between FDI in retail and
inflation and is significant at 1 percent. The correlation coefficient between FDI in
retail and exchange rate is 0.275 which indicates 28 percent positive relationship
between them and is significant at 1 percent. The correlation coefficient between FDI
in retail and systemized retail is 0.297 and has a positive relationship of 30 percent
between them and is significant at 1 percent. The correlation coefficient between FDI
in retail and financial impact is 0.383 that indicates there is positive relationship of 38
percent and is significant at 1 percent.
142
Y=b1X1+b2X2+………..+bnXn+b0
X1, X2…… and Xn are independent variables and b1, b2… and bn are
coefficient of the variables.
In this study, the dependent variable is Financial impact and the independent
variables are FDI in retail, Supply Chain, Storage Facility, Government Policies,
Competition, Employment, Joint Ventures, Inflation, Exchange Rate and Systemized
Retail.
2. Supply Chain(X2)
3. Storage Facility(X3)
143
4. Government Policies(X4)
5. Competition(X5)
6. Employment(X6)
7. Joint Ventures(X7)
8. Inflation(X8)
9. Exchange Rate(X9)
F Value : 174.924
P Value : <0.001**
144
Std.
Unstandardized Standardized t
Error P value
Variables Coefficients Coefficients value
of B
in the dependent variables explained by the fitted sample regression equation. The
value of R square is 0.776, which means that about 77.6 percentage of the variation
in factors of FDI in retail towards financial impact is explained by the estimated SRP
which uses Systemized retail, Inflation and Competition as the independent variables
and R square is significant at 1percent level.
Y=n7.301+0.101X1+0.100X2+0.031X3+0.040X4+0.139X5+0.082X6+0.097X7+0.
193X8+0.165X9+0.507X10
sign implies that the effect is positive and the financial impact will increase by 0.040
for every unit of increase in government policies and this coefficient value is not
significant at 5 percent level.
The coefficient of X10 is 0.507 represents the partial effect of Systemized retail
on financial impact holding the remaining factors as constant. The positive sign
implies that the effect is positive and the financial impact will increase by 0.507 for
every unit of increase in systemized retail and this coefficient is significant at 1
percent
148
1. Supply chain
2. Storage Facility
3. Government Policies
4. Competition
5. Employment
6. Joint Ventures
7. Inflation
8. Exchange Rate
9. Systemized Retail
149
1. FDI in Retail
Unstanda
Standardize
rdized
Variables S.E. d t value P value
Coefficie
coefficient
nt
Supply <-- FDI in
0.452 0.036 0.480 12.430 <0.001**
chain - Retail
Storage <-- FDI in
0.206 0.034 0.256 5.998 <0.001**
Facility - Retail
Govern FDI in
<--
ment Retail 0.152 0.049 0.136 3.112 0.002**
-
Policies
Compet <-- FDI in
0.304 0.047 0.273 6.438 <0.001**
ition - Retail
Employ <-- FDI in
0.228 0.039 0.250 5.864 <0.001**
ment - Retail
Joint FDI in
<--
Venture Retail 0.217 0.041 0.228 5.326 <0.001**
-
s
Inflatio <-- Supply
0.167 0.034 0.175 4.906 <0.001**
n - chain
Inflatio <-- Storage
0.177 0.039 0.160 4.517 <0.001**
n - Facility
Inflatio <-- Governme
0.117 0.029 0.146 3.991 <0.001**
n - nt Policies
Inflatio <-- Competiti
0.122 0.030 0.152 4.096 <0.001**
n - on
Inflatio <-- Employme
0.087 0.035 0.088 2.444 0.015*
n - nt
Inflatio <-- Joint
0.453 0.034 0.481 13.317 <0.001**
n - Ventures
Exchan <-- Supply
0.091 0.029 0.129 3.162 0.002*
ge Rate - chain
Exchan <-- Storage <0.001**
0.147 0.033 0.179 4.425
ge Rate - Facility
Exchan <-- Governme <0.001**
ge Rate 00 0.025 0.194 4.612
- nt Policies .115
153
Unstanda
Standardize
rdized
Variables S.E. d t value P value
Coefficie
coefficient
nt
Exchan <-- Competiti <0.001**
ge Rate - on 00 0.025 0.221 5.219
.132
Exchan <-- Employme <0.001**
ge Rate - nt 00 0.030 0.157 3.808
.115
Exchan <-- Joint <0.001**
ge Rate - Ventures 00 0.029 0.186 4.496
.130
Systemi <0.001**
<-- Supply 00
zed 0.044 0.158 4.548
- chain .198
Retail
Systemi Storage <0.001**
<-- 00
zed Facility 0.050 0.201 5.863
- .294
Retail
Systemi Governme <0.001**
<-- 00
zed nt Policies 0.038 0.202 5.681
- .214
Retail
Systemi Competiti <0.001**
<-- 00
zed on 0.038 0.316 8.796
- .336
Retail
Systemi Employme
<-- 00
zed nt 0.046 0.085 2.411 0.016*
- .110
Retail
Systemi Joint
<-- 00
zed Ventures 0.044 0.335 9.576 <0.001**
- .418
Retail
Financi
<-- 00
al Inflation 0.051 0.122 3.058 0.002**
- .157
Impact
Financi <0.001**
<-- Exchange 00
al 0.076 0.203 4.637
- Rate .352
Impact
Financi <0.001**
<-- Systemize 00
al 0.039 0.478 11.863
- d Retail .465
Impact
154
Here the coefficient of FDI in Retail is 0.452 represents the partial effect of
FDI in Retail towards supply chain, holding the other variables as constant. The
estimated positive sign implies that such effect is positive that supply chain would
increase by 0.452 for every unit increase in FDI in retail and this coefficient value is
significant at 1 percent level.
The coefficient of FDI in Retail is 0.206 represents the partial effect of FDI in
Retail towards storage facility, holding the other variables as constant. The estimated
positive sign implies that such effect is positive that storage facility would increase
by 0.206 for every unit increase in FDI in retail and this coefficient value is significant
at 1 percent level.
The coefficient of FDI in Retail is 0.152 represents the partial effect of FDI in
Retail towards government policies, holding the other variables as constant. The
estimated positive sign implies that such effect is positive that government policies
would increase by 0.152 for every unit increase in FDI in retail and this coefficient
value is significant at 1 percent level.
The coefficient of FDI in Retail is 0.304 represents the partial effect of FDI in
Retail towards competition, holding the other variables as constant. The estimated
positive sign implies that such effect is positive that competition would increase by
0.304 for every unit increase in FDI in retail and this coefficient value is significant
at 1 percent level.
The coefficient of FDI in Retail is 0.228 represents the partial effect of FDI in
Retail towards employment, holding the other variables as constant. The estimated
155
positive sign implies that such effect is positive that employment would increase by
0.228 for every unit increase in FDI in retail and this coefficient value is significant
at 1 percent level.
The coefficient of FDI in Retail is 0.217 represents the partial effect of FDI in
Retail towards joint ventures, holding the other variables as constant. The estimated
positive sign implies that such effect is positive that joint ventures would increase by
0.217 for every unit increase in FDI in retail and this coefficient value is significant
at 1 percent level.
The coefficient of Supply chain is 0.167 represents the partial effect of supply
chain towards inflation, holding the other variables as constant. The estimated positive
sign implies that such effect is positive that inflation would increase by 0.167 for every
unit increase in supply chain and this coefficient value is significant at 1 percent level.
for every unit increase in competition and this coefficient value is significant at 1
percent level.
The coefficient of Joint Ventures is 0.453 represents the partial effect of joint
ventures towards inflation, holding the other variables as constant. The estimated
positive sign implies that such effect is positive that inflation would increase by 0.453
for every unit increase in joint ventures and this coefficient value is significant at 1
percent level.
The coefficient of Supply chain is 0.091 represents the partial effect of supply
chain towards Exchange rate, holding the other variables as constant. The estimated
positive sign implies that such effect is positive that exchange rate would increase by
0.091 for every unit increase in supply chain and this coefficient value is significant
at 5 percent level.
would increase by 0.115 for every unit increase in government policies and this
coefficient value is significant at 1 percent level.
The coefficient of Joint Ventures is 0.130 represents the partial effect of joint
ventures towards Exchange rate, holding the other variables as constant. The
estimated positive sign implies that such effect is positive that exchange rate would
increase by 0.130 for every unit increase in joint ventures and this coefficient value is
significant at 1 percent level.
The coefficient of Supply chain is 0.198 represents the partial effect of supply
chain towards Systemized Retail, holding the other variables as constant. The
estimated positive sign implies that such effect is positive that systemized retail would
increase by 0.198 for every unit increase in supply chain and this coefficient value is
significant at 1 percent level.
increase by 0.336 for every unit increase in competition and this coefficient value is
significant at 1 percent level.
The coefficient of Joint Ventures is 0.418 represents the partial effect of joint
ventures towards Systemized Retail, holding the other variables as constant. The
estimated positive sign implies that such effect is positive that systemized retail would
increase by 0.418 for every unit increase in joint ventures and this coefficient value is
significant at 1 percent level.
would increase by 0.465 for every unit increase in systemized retail and this
coefficient value is significant at 1 percent level.
NOTE
From the above table 5.30, the calculated chi–square/df value is 3.753 which
is less than 5 that indicates it is perfectly fit as suggested by hair et al.,1998. The GFI
( Goodness of Fit Index) value and AGFI ( Adjusted Goodness of Fit Index ) value is
greater than 0.9 which represent it as a good fit suggested by Hair et al .,1998 and
Daire et al., 2008 . The calculated CFI (Comparative Fit Index) value 0.945 is greater
than 0.90 which means it is perfectly fit as suggested by Hu and Bentler., 1999 and
also the RMR (Root Mean Square Residuals) value is 0.056 which is less than 0.08 as
suggested by Hair et al., 2006 and RMSEA (Root Mean Square Error of
Approximation) value is 0.065 which is less than 0.08 which indicates it is perfectly
fit as suggested by Hair et al., 2006.
160
CHAPTER VI
6.1 INTRODUCTION
The conclusion is the main part in the research work which is intended to
help the reader in understanding the crust of the research work after they have finished
reading the paper. A conclusion is not merely a summary or a re-statement of the
research problem but a synthesis of key points.
6.2 SUMMARY
The literature reviews are collected based on the concepts of FDI in India,
retail marketing concepts and FDI in Retail and a research gap has been identified
163
Based on the gap this study is titled as, “A Study on retailer’s perception about the
financial impact of Foreign Direct Investment in retail sector in Tamil Nadu”
The research design is based on - the primary data, collected with the help
of questionnaire and secondary data - journals, articles, and other publications relating
to FDI in retail. Sample size was determined and the survey was conducted on 516
organized and un-organized retail outlets within Tamil Nadu using the questionnaire
based on ten factors such as Supply Chain, Storage Facility, Government Policies,
Competition, Employment, Joint Ventures, Inflation, Exchange Rate, Systemized
Retail and Financial impact. Convenience Sampling method and random sampling
method was used to conduct the survey.
After the data was collected, various statistical tools were used to study the
descriptive and inferential analysis regarding the factors of FDI in retail affecting
financial impact. The factors of FDI were tested using ANOVA test, Friedman test,
correlation co-efficient and Multiple Regression Analysis and SEM analysis. Finally,
CFA confirmatory analysis was applied and found goodness of fit for this study. Some
of the important findings are that, there is a significant difference between all factors
of FDI in retail except location of the outlet. There is a positive relationship between
systemized retail and financial impact followed by inflation towards financial impact.
Employment is the most important factor for FDI in retail. Systemized retail is most
influencing factor for financial impact.
(Table 5.3) - Based on this study, 35 percentage of the retail outlets have an
existence of around 6 to 10 years in Tamil Nadu.
(Table 5.5) - Based on this study, 35 percentage of the retail outlets in Tamil
Nadu have a sales around Rs. 1 to 5 lakhs per month.
(Table 5.6) - Based on this study, 32 percentage of the retail outlets has
employed around 6 to 10 employees.
(Table 5.7) - Based on this study, retailers in Tamil Nadu feel allowing FDI
in retail will be appreciable step for the progress of retail sector and the economy and
hence it has highest mean value of 4.52.
(Table 5.8) - Based on this study, with highest mean value of 4.00, the
retailers feel the existing supply chain system is inefficient to deliver the goods on
time to the consumer and hence there is gap in demand and supply.
(Table 5.9) - Based on this study, the retailers with highest mean rank of 4.04
feel that FDI will help in better stocking of perishable goods in Tamil Nadu.
165
(Table 5.10) - Based on this study, the government policies are ample in
Tamil Nadu for retail sector and hence it has received highest mean value of 3.64
(Table 5.11) - Based on this study, with the highest mean value of 3.78, the
retailers fear that there will be chances of monopoly due to induction FDI in retail
sector
(Table 5.12) - Based on this study, the retailers feel that there will more
employment generation directly and indirectly in Tamil Nadu because of FDI in retail
hence it has highest mean value of 4.35.
(Table 5.13) – Based on this study, most of the retailers feel Joint venture will
be a welcome change in Tamil Nadu with a highest mean value of 3.91
(Table 5.14) - Based on this study, the retailers feel that with the help of FDI
in retail the inflation will be controlled due to the efficient transportation and storage
facilities and it has received highest mean value of 3.86.
(Table 5.15) - Based on this study, the fluctuations in the foreign exchange
reserves will be improved due to the cash flow from the foreign company and hence
it has highest mean value of 4.02
(Table 5.16) - Based on this study, the FDI in retail sector will help in
systemized form of retailing and hence it has received mean value of 3.59
(Table 5.17) - Based on the study, most of the retailers feel the market value
of retail outlet will be enhanced after FDI, so it has a mean value of 3.75
location of outlet with respect to storage facility at 5 percent level. Based on DMRT
test there is significant difference between location of the outlet with respect to the
storage facility. Hence concluded that FDI in retail will be more effective in within
city (19.85b) followed by rural (19.52b)
(Table 5.21) - There is significant difference between size of the outlet with
regards to all factors of FDI except FDI in retail and storage facility at 1 percent level.
Based on DMRT test below 1000 square feet significantly differs with above 3000
square feet. There is significant difference between size of the outlet with regard to
167
FDI in retail and storage facility at 5 percent level. Based on DMRT test below 1000
square feet significantly differs with above 3000 square feet. Hence concluded size of
retail outlet with more than 3000 square feet will be most effective for FDI in retail
(20.69b) followed by outlets with 1001-2000 square feet (19.39a)
Competition (4.69), Government policies (4.70), inflation (4.48), joint ventures (4.27)
and Systemized retail (4.13).
(Table 5.26) - There is significant difference between factors of FDI and FDI
in retail at 1 percent where the correlation between supply chain and FDI in retail is
0.480, followed by correlation between competition and FDI in retail which is 0.273.
This indicates strong relationship between supply chain and competition with respect
to FDI in retail.
(Table 5.30) - From the above table, the calculated chi–square/df value is
3.753 which is less than 5 indicates that it is perfectly fit as suggested by hair et al.,
1998. The GFI ( Goodness of Fit Index) value and AGFI ( Adjusted Goodness of Fit
Index ) value is greater than 0.9 which represent it as a good fit suggested by Hair et
al .,1998 and Daire et al., 2008 . The calculated CFI (Comparative Fit Index) value
0.945 is greater than 0.90 which means it is perfectly fit as suggested by Hu and
Bentler., 1999 and also the RMR (Root Mean Square Residuals) value is 0.056 which
is less than 0.08 as suggested by Hair et al., 2006 and RMSEA (Root Mean Square
Error of Approximation) value is 0.065 which is less than 0.08 which indicates it is
perfectly fit as suggested by Hair et al., 2006
6.4 SUGGESTIONS
c. As most of the retailers feel that FDI in retail will promote systemized
retailing, the government must take some measures regarding relaxation
of local taxes since majority of retail shops are without proper inventory
and bill books due to cumbersome tax process and heavy tax charges
including sales tax, service tax, VAT.
e. Government can collectively buy all farm produce from the farmers and in
turn on basis of percentage agreed with both the parties (foreign and
domestic retailers) it can distribute products evenly. By this way both
farmers and local markets will be safe guarded as farmers will earn their
reward without hindrance of middlemen and local retail markets will be
getting their produce continuously.
6.5 LIMITATIONS
b) The study is basically about the perception from the retailer’s point of
view about FDI in retail sector in Tamilnadu.
6.7 CONCLUSION
Based on the study, Retailers feel that supply chain and storage facility
will help to reduce the food inflation and control the rate of rupee in foreign markets
and hence systemized retail and inflation has a positive relationship towards financial
impact. They perceive that the employment opportunities will increase directly and
indirectly and it is concluded as the most important factor for FDI in retail. Of all the
factors, Systemized Retail is derived as the most influencing factor towards financial
impact. All the factors are positive and as per Goodness to fit test the study indicates
a perfect fit technically.
Finally, the consumers are considered as God for retail sector so ultimately
it is in the hands of the cosumers to decide from whom they want to purchase from.
So the retailers who are competitive enough can to understand the need of consumer
perfectly can always survive in the market.
173
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APPENDICES
Annexure I: Questionnaire
Below 1000 sq. Ft. 1000 – 2000 sq. Ft. 2000 – 3000 sq. Ft. Above 3000 sq.
Ft.
S.
A. FDI In Retail SA A NDA DA SDA
No.
Allowing FDI in retail will be a good
1 step that will benefit Tamilnadu and
bring in progress for the state.
The proposed retail format of allowing
only 51% stake in the business will
2
protect the domestic player from being
overtaken by the foreign company.
FDI in Retail will lead to creation of
SEZs (Special Economic Zones) which
3
will help in development of rural areas
and promote the real estate market.
FDI in retail will bring in wide range of
products for the consumers who have
4
become brand-conscious and are
willing to spend.
FDI in Retail will eliminate the role of
the middlemen currently existing and
5
will directly benefit the producers /
farmers.
B. Supply Chain SA A NDA DA SDA
The existing supply chain system is
insufficient to make consumer products
6
available on time. Hence there is a gap
in demand and supply.
FDI in retail sector will help in
7 establishing better and efficient supply
chain system
191
VITAE