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INTRODUCTION TO ENTREPRENEURSHIP
Concept of EntrepreneurHistorical perspective
ENTREPRENEUR - derived from French word Entreprendre which means
to undertake i.e. the person who undertakes the risk of new enterprise.
Early 16thcenturythose who undertook military operations i.e. leaders of
military expeditions were referred to as Entrepreneurs.
17thcenturyextended to cover civil engineering activities such asconstruction and fortification i.e. architects and contractors.
Early 18thcenturyR.Cantillon, an Irishman living in France was the first
person to use the term Entrepreneur as a person who buys factor services at
certain prices in order to produce a product, with a view to selling it at
uncertain prices.
J.B.Say expanded Cantillons ideas and developed the concept ofentrepreneur a little further. According to Say, an entrepreneur is one who
combines the land of one, labor of another and the capital of yet another and
thus produces a product. By selling the product in the market, he pays interest
on capital, rent on land, wages to laborers and what remains is his profit. This
concept of an entrepreneur survived for almost two centuries.
Joseph A.Schumpeter, in 1934, assigned a crucial role of innovation tothe
Entrepreneur in his magnum opus, Theory of Economic Development.
According to Schumpeter, an entrepreneur is one who innovates, raises
money, assembles inputs, chooses managers and sets the organization going
with his ability to identify them.
ENTREPRENEUR -- DEFINITIONS
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The true Entrepreneur is one who is endowed with more than average
capacities in the risk of organizing and coordinating the various other factors
of production
Francis A.Walker
An Entrepreneur is one who always searches for change, responds to it and
exploits it as an opportunity. Innovation is the central tool of entrepreneurs,
the means by which they exploit change as an opportunity for different
business or service.
Peter F.Drucker
ROLE OF ENTREPRENEUR IN ECONOMIC DEVELOPMENT
1. ENTREPRENEURSHIP promotes capital formation by mobilizing theidle saving of the public.
2. It provides employment opportunities.3. It promotes balanced regional development.4. It helps reduce concentration of economic power.5. It leads to equitable redistribution of wealth and income.6. It encourages effective resource mobilization of capital and skill which
might otherwise remain unutilized.
7. It promotes countrys export trade, an important ingredient ofeconomic development.
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QUALITIES OF AN ENTREPRENEUR:
1. Opportunity Explorer: An entrepreneur looks for an opportunity and
takes appropriate actions when he identifies the opportunity. Successful,
growth-minded entrepreneurs have a focus on opportunity. They start with
the opportunity and let their understanding of it guide other important
issues. They seize unusual opportunities to start a new business, obtain
financing, land, work space or assistance.
Sources of business opportunities arise just from an entrepreneur being alert
to possibilities. Consumers, business associates retailers, wholesalers,
manufacturers representatives are potential sources of business ideas.Technically oriented individuals also identify business opportunities when
working on other projects.
2. Calculated Risk Taker: Any venture is subject to some risk and the
entrepreneur needs to be an intelligent risk taker. A risk situation occurs
when the potential outcome of an action is not known. An entrepreneur will
face situations where he has to make a choice between two or morealternatives, each with its own risk elements. The ability to judge risks,
evaluate them, take risk mitigation measures as well as being ready for
course correction when the risk actually occurs are qualities which he should
possess. A higher degree of risk taken has the potential of yielding higher
returns or of resulting in higher losses.
Good entrepreneurs are not afraid of taking risks, whereas a person without
an entrepreneurial bent of mind will not take risks in order to avoid failure.
But taking moderate risks is almost always necessary for achieving success in
an entrepreneurial venture. A good entrepreneur also realizes that a risk
cannot be taken when the outcome of an action is entirely based on chance
and not on effort. Taking a risk which can be averted or minimized by taking
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actions in a planned manner and effort is a challenge which a good
entrepreneur enjoys.
3. Perseverance: This means the ability to work hard without getting
demotivated by intermediate setbacks, having patience to wait for the result
without being impulsive or hasty in giving up or not giving adequateattention to his venture. Persistency is required in solving problems or
obstacles that are impeding business operation. Although entrepreneurs are
extremely persistent, they are realistic in recognizing what they can and
cannot do and where they can get help in solving difficult but unavoidable
tasks.
4. Communication ability: Communication encompasses both communicator
and communicate i.e. sender and receiver. In effective communication, thecommunicator and the receiver understand each other and are being
understood. An entrepreneur communicates effectively with customers,
employees, suppliers, bankers and creditors.
5. Flexibility: Entrepreneurs are flexible in adapting to changes when it does
not help to adopt conventional and routine ways of doing things.
6. Innovator: Entrepreneurs are innovative in that they endeavor to develop
new products, processes or markets. If there is already a product in the
market, an entrepreneur succeeds in creating a differentiation in the product
to capture a market share.
7. Motivator: Success of an entrepreneurial venture also depends on the
activities carried out by the people deployed by the entrepreneur in his
business venture. The entrepreneur therefore needs to keep them motivated
to give their best. The term motivation is derived from the word motive
which means a need or an emotion that prompts an individual into action. Asa motivator, the entrepreneur needs to keep the motivation level of his
employees high. As a motivator, the entrepreneur understands that apart
from financial incentives like wages, non-financial incentives like recognition
of good work done, better working conditions, job security etc. play a role in
motivating the workers.
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8. Self confidence: A person has self confidence when his belief in his own
ability is high and seldom wavers. Even during down periods, such an
individual maintains his confidence and lets people around him know it. This
helps the others sustain their own self confidence and optimism necessary forefficient group effort. A successful entrepreneur has high self confidence.
9. Stress Taker: A person who succumbs to stress has a low tolerance
for failure. But entrepreneurs use failure as a learning experience.
Setbacks and disappointments are an integral part of the learning experience,
and most effective entrepreneurs are realistic enough to expect such
difficulties. Many of them believe that they learn more from their early
failures than from their early successes. Some of the methods they can adopt
for coping with stress are networking with other business owners for sharing
experiences, taking short holidays as an antidote to immersion in business,
good communication with employees, gain new perspectives on life apart from
the adopted business, delegate chosen tasks to others to gain time, physical
and exercises like walking, meditation etc.
10. Optimistic: Entrepreneurs approach the opportunity that they havechosen with a hope of success and an optimistic attitude. The optimistic
attitude reflects the confidence to achieve success rather than the fear of
failure. Optimism leads to positive thinking which can turn an adverse
situation into a favourable situation. Even when failure occurs, an optimist
persists with a positive outlook.
11. Using Feedback: Effective entrepreneurs also have a strong desire to
know how well they are doing, and how they might improve their
performance. In making such a determination, they actively seek out and use
feedback. Feedback is also central to their learning from their mistakes and
setbacks.
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12. Independence: The desire for independence is a driving force behind
contemporary entrepreneurs. An entrepreneur usually tries to accomplish
tasks in his or her own way instead of in a bureaucratic way, This is not to
say that entrepreneurs must make all the decisions; however, they do not
want the authority to make the important ones. This implies that they do notget controlled by others.
13. Planner: Planning is a managerial function and is an essential quality for
an entrepreneur. It implies determining the course of action to be followed
i.e. deciding what to do, when to do, how to do and who will do a particular
task. It is a process of looking ahead and is required to be done prior to other
managerial functions like organizing, staffing, directing, coordinating and
controlling.
14. Achievement Oriented: Entrepreneurs are self starters who appear to
others to be internally driven by a strong desire to compete, to excel against
self-imposed standards, and to pursue and attain challenging goals. They try
to accomplish challenging tasks. In doing so, they are aware of their own
strengths and weaknesses, the facilitating factors and constraints in the
environment and the resources needed to accomplish their tasks.
15. Human relation ability: Maintaining good relations with customers,
employees, suppliers, and creditors is an essential quality for entrepreneurial
success.
FUNCTIONS OF ENTREPRENEUR
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Entrepreneur performs various primary functions from the stage of starting
an enterprise to its success level.
PLANNING - Planning process involves the following steps:
a) Scanning of the best suitable ideab)Selection of product linec) Determination of type of business organization (Individual or
Partnership or Corporate)
d)Estimation of capital needede) Selection of capital resourcesf) Selection of raw materialsg) Studying the govt. rules, regulations and policiesh)Study of availability of labor forcei) Study of market and market strategy to be adopted
ORGANIZATION - An entrepreneur assembles, coordinates and supervises
land, labor and capital during the promotion stage and at the performance
stage for optimum utilization of resources. Efficient expansion and growth
depends on organizational network employed and monitored by the
entrepreneurs.
DECISION MAKING -
a) Determination of the business objectives of the enterpriseb)Decision regarding procurement of machine, material, labor and moneyc) Decision regarding development of a market for the productd)Maintenance of good relations with public authorities and with society
at large
MANAGEMENTrefers to the working of the venture and also managing
day to day problems. It includes future expansion, direction of men,
material, money etc.
INNOVATION
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a) Launching a new productb)Introduction of new technologyc) Creation of new marketd)Discovery of new and better source of raw materialse) Creation of monopoly or breaking up of monopoly
RISK BEARINGAn entrepreneur undertakes the responsibility for loss
that may arise due to unforeseen contingencies in future.
UNCERTAINTY BEARINGrefers to uncertain trends in the market
Other functions include diversification, expansion, maintaining cordial
relations, tackling labour problems etc.
CLASSIFICATION OF ENTREPRENEURS
Entrepreneurs can be classified according to
Types of business
Business entrepreneurs are those individuals who opt for a new product or
service and then translate the same into business reality; tap both production
and marketing resources to develop a new business opportunity; set up a bigestablishment or small unit e.g. printing press, textile processing house,
advertising agency, readymade garments, confectionary etc. In majority of
cases, entrepreneurs are found in small trading and manufacturing business.
Entrepreneurship flourishes when the size of business is small.
Industrial entrepreneurs are essentially a manufacturer who identifies
potential needs of customers and products or service to meet the marketing
needs. He should have the ability to convert economic resources and
technology into a profitable venture.
Corporate entrepreneur is an individual who demonstrates his innovative
skill in organizing and managing a corporate undertaking. He plans,
develops and manages a corporate body.
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Agricultural entrepreneurs are the ones who undertake agricultural activities
such as raising and marketing of crops, fertilizers and other inputs of
agriculture. They are motivated to improve agriculture through
mechanization, irrigation and application of technologies for dry land
agricultural products.
Use of professional skill.
Technical entrepreneur is one who is essentially a craftsman. He develops
improved quality of goods because of his craftsmanship. He concentrates
more on production than on marketing. He demonstrates his innovative
capabilities in the matter of production of goods and rendering of services.
Non-technical entrepreneurs are those who are not concerned with the
technical aspects of the product in which they deal. They are concerned
mainly with alternative marketing and distribution strategies to promote
their business.
Professional entrepreneur is interested in establishing a business but does
not have interest in managing or operating it once it is established. He sells
out the running business and starts another venture with the sales proceeds.
Motivation.
Pure entrepreneur is an individual who is motivated by psychological and
economic rewards. He undertakes entrepreneurial activity for his personal
satisfaction in work, ego and status.
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Induced entrepreneur is one who is induced to take up an entrepreneurial
task due to policy measures of the government that provides assistance,
incentives, and concessions and other facilities to start a venture, enter
business due to financial, technical and other facilities provided to them by
the state agencies to promote entrepreneurship.
Motivated entrepreneurs come into being entrepreneurs because of the
challenge involved in developing and marketing a new product for the
satisfaction of consumers. If the product succeeds, the entrepreneur is
further motivated for launching of newer products.
Growth entrepreneurs are those who take up a high growth industry which
has substantial growth prospects. Super growth entrepreneurs are those who
show enormous growth or performance in their venture.
Stages of development
First generation entrepreneur is the one who starts an industrial unit by his
innovative skill. He is the one who combines different technologies to
produce a marketable product or services.
Second generation entrepreneur is the one who takes over the business from
his preceding family member.
Modern entrepreneur is one who undertakes a venture which goes well with
the changing demand in the market. He undertakes a venture which suits the
current market needs.
Classic entrepreneur is one who is concerned with maximizing the economic
returns at consistent level. He is concerned more about the survival of the
firm with or without an element of growth.
Attitude
According to attitude, entrepreneurs can be classified into innovative and
imitative categories.
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Innovating entrepreneurs are generally aggressive in collecting information,
analyzing and experimenting attractive possibilities. They are quick to
convert old established products or services by changing their utility, value,
economic characteristics into something new, attractive and utilitarian. They
can see the opportunity for introducing a new technique of productionprocess or a new commodity or a new service or even the reorganization of
an existing enterprise. They are very commonly found in developed
countries, while there is dearth of such entrepreneurs in underdeveloped
countries. They are always creative and bring in innovation in their work.
Imitative entrepreneurs are ready to adopt and are more flexible in imitating
techniques developed by others. They exploit opportunities as they come and
are mostly on a small scale. He is more of an organizer of factors of
production than a creator. In the context of a poor country, he is definitely a
change agent and hence he is important in underdeveloped countries.
Fabian entrepreneurs are very cautious and skeptical while practicing any
change. They do not take risks and just follow predecessors. Their
entrepreneurial decision is determined by custom, religion, tradition and
past practices. They imitate only in situations when it becomes absolutely
necessary.
Drone entrepreneurs are those who never allow any change in their
production and style of functioning. They never explore anything. They are
laggards and get pushed out of the market when product loses its
marketability.
Situation based entrepreneur
Need based entrepreneur is a person who starts his venture with the thought
process of surviving i.e. to earn a living e.g. street vendors.
Opportunity based entrepreneur is a person who starts his venture with the
thought process of expansion or one with the zeal to create a niche for
himself.
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Gender based entrepreneur. Government of India has classified women
entrepreneurs by defining them as part of an enterprise owned and
controlled by women or a woman having a minimum financial interest of
51% of the capital in the enterprise.
Social entrepreneur. The Ashoka International Organization defines social
entrepreneurs as individuals with innovative solutions to societys most
pressing social problems. Bill Drayton, CEO and founder of Ashoka says
Social entrepreneurs are not content just to give fish, or teach how to fish.
They will not rest until they have revolutionized the fishing industry.
Rather than leaving societal needs to the government or business sectors,
social entrepreneurs find what is not working and solve the problem by
changing the system, spreading the solution and persuading entire societiesto take new leaps. Social entrepreneurs identify resources where people only
see problems. They view the villagers as the solution, not the passive
beneficiary. They recognize when a part of society is stuck and provide new
ways to get it unstuck. Unless traditional business entrepreneurs, social
entrepreneurs primarily seek to generate social value rather than profits.
Examples are Dr.Verghese Kurian, who set up the Anand model of
cooperative development and made India the largest milk producer in the
world. His model was adopted by the Govt. of India in setting up the NDDB
(National Dairy Development Board which replicated the model on a
nationwide basis. Vinobha Bhave conceived the idea of the land-gift
movement, which came to be known as Bhoodan. He made inspiring
appeals in several villages to prosperous people to donate land, and by 1954,
he and his co-workers had collected 2.5 million acres, far exceeding any land
reform achieved by the government for land to be given to poor farmers. The
Jaipur foot is another famous Indian invention which has given life to
thousands of amputees and is the best prosthetic feet for conditions in
developing countries.
Serial Entrepreneur. A serial entrepreneur is one who continuously comes
up with new ideas and invests in new businesses. While some believe that a
more vibrant and mature venture capital eco-system in India is contributing
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to the trend, others say interesting business models that have developed over
time has made the difference. Internet is one such area that has seen a spurt
in activity from entrepreneurs to repeat their success. Serial entrepreneurs
are repeat business starters who in the past have sold or closed down a
business which they at least partly ran and owned and who currently runanother, possibly new business which they at least partly own. Estimates of
the scale of serial entrepreneurship are relatively scant. In India, a well
known example of Capt.Gopinath can be cited, who started and ran the low
cost airline Air Deccan, then sold his business to Kingfisher and later started
Deccan 360,which is a logistics company aimed at commenting 17 airports
and 24 cities in India. The Information Technology area in the U.S cites a
number of serial entrepreneurs.
Franchise in India
Franchise in India is relatively a new model for businesses; though it has
gained suffice accolades among entrepreneurs across Indian territories. No
doubt, the concept has to have a reason to cheer with Indian laws becoming
more liberated over globalization. The mindset has opened many doors formajor companies to enter India through franchising, making the nation a
fertile destination for businesses to grow. Even the analytical reports, over
franchise India growth, seem to praise its pace of development in India.
Expert approaches claim a bright future for franchise industry with a
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promising growth of more than 30 per cent, contributing a major part to the
boosting economy of India.
By observing the uphill slope of franchise in India, many sectors are emerging
out to gather as well as to contribute opportunities, by the route of franchisingbusiness. With the progressive stories of companies via franchise India,
several other companies, especially of small background, are getting confident
to subscribe to this route for improved approach towards customers.
Franchising - The fastest Growing and ever changing Industry in India
Though at a nascent stage the industry has witnessed 30 to 35 per cent growth
in the last 4-5 years
Home to over a billion people, including a flourishing class of urban
consumers possessing considerable amounts of disposable income together
with the continued growth of the economy have strengthened Indias claim to
be a viable and beneficial destination for a foreign franchisor. In the USA,
almost a third of the retail sales come from franchised outlets, with sales of
trillion of dollars while in India, the industry is few million.
An important aspect which determines the feasibility of any franchisingbusiness in a country relates to the class of consumers it caters to. India is a
multi ethnic country with the second largest population in the world. Indian
consumers have experienced the standard of services offered overseas and
have sufficient exposure through media, which has further fuelled their
expectations.
There are approximately 1150 national and international business format
franchise systems in India in 2007.
Around 8 to 10 per cent Indian franchise systems have entered international
markets.
There are an estimated 70, 000 units operating in business format franchises.
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The growth rate in franchised units from 2005-06 to 2006-07 was 30 to 35 per
cent for the last 4-5 years.
Some 500000 persons are employed in business format franchise
organizations.
Franchising contributed less than 4 per cent to Indias Gross Domestic
Product (GDP) in 2007.
Annual turnover is approximately us$ 4 billion.
Almost every product or service has a market in India but sometimes,
innovative strategies like Indianisation of its products and marketing
techniques must be employed by a foreign franchisor to further access the
sizable market of India. In a franchised business, over 90 per cent succeed.This success rate usually lures entrepreneurs with no experience but with a
surplus capital and a will to succeed towards franchising. The franchisee
benefits from a tried tested and proven business concept, which can
dramatically reduce the chances of failure.
Franchising as a concept has beenprevalent in India since a long time.
However, shifting consumer trendsincluding growing preference forbranded
products, global exposure and use of international brands is driving adoptionof the franchising route to growth. According to KPMG in India estimates,
the franchising industry is expected to quadruple between 2012 and 2017
There is scope for the franchising industry to contribute to almost 4 percent of
Indias GDP in 2017 (assuming 6 percent Y-o-Y GDP growth between 2012
and 2017), growing from a current estimated contribution of 1.4 percent of
GDP This is also expected to create job opportunities (including both direct
and indirect) for an additional 11 million people by 2017.
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Franchising Opportunity: Sector Overview
As per KPMG in India analysis, retail and consumer services sectors areexpected to emerge as high potential service sectors within franchising to cater
to the prevailing consumption boom. Non-traditional segments such as food
service, jewellery, pre-schools etc. also present a huge opportunity for growth
in franchising.
Despite the challenges the country presents, there have been many successful
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case studies of franchising in India. From franchisors such as Aptech and
NIIT which have pioneered the franchising model in India to new age
franchisors such as Gitanjali and VLCC who are adopting innovative
expansion models within franchising, many brands/companies are adopting
the franchising model to expand and provide a consistent and quality
experience to its end customers.
Franchise Business Models
Firms that have created an easily replicable business model, often choose
franchising as their preferred route to expand their operations and scale their
brand. However, within the realm of franchising, there are several franchising
models that differ significantly in terms of operation, control and legal scope.While certain operating models within franchisingsuch asarea development
and regional master franchiseeappearmore attractive than others, diversity
in Indian consumerpreferences and degree of localization impact the choice
ofthe final model to be adopted.
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Attractiveness of India in Global Franchising
Many international brands have already entered India and areadopting the
Franchise route to growth. Global brands such asDominos, KFC, and Baskin
Robbins have adopted variations of thefranchise models to grow in India.
Many other internationalbrands are contemplating entry plans into India.
However, Indias growing but fragmented market can seemchaotic and
difficult to deal with. The international franchisorsconsider the following
factors as challenges while entering intoIndia:
Transparent Legislative framework: Due to no specific rules not one
market: Entering a new market India is becomes more complicated in case ofIndia where consumers hail from diverse cultural backgrounds. Several
cultures, languages and socio-economic diversities make it a set of multiple
markets. It becomes a challenge for an international franchisor to understand
all diversified tastes and preferences, to establish and expand business in
India.
Corruption: International franchisors remain Bribe and or laws promulgated
in India to address the functioning of franchisors and franchisees,
international players perceive a higher risk to business continuity threatened
with the bribe and corruption cases in India. Due to no legislation aroundanti-bribe in India, as in the US; it not only discourages the expansion
strategies of many brands, but also impacts Indias credibility in the
international market.
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Franchise Industry SurveyKey Highlights
While the survey carried out by KPMG in India corroborated the above key
reasons for growth in franchising and operating models, it also brought out
certain key findings as mentioned:
Franchisors believe that they are providing adequate support to their
franchisees; however the latter are expecting more support particularly in the
post launch phase of operations.
Response to another related question in the survey suggested that almost half
of those interviewed were not willing to take up additional franchisees with
the existing franchisors suggesting certain level of dissatisfaction. While
franchisors adopt franchising model for growth, many primarily offers a safe
and relatively easy way of establishing business and is expected to offer higher
than market levels of profitability. This trend necessitates the need for
franchisors to educate the franchisees on potential profitability andinvestment returns from the business. Sectors such as jewellery where
payback periods could range between a minimum of four to five years are
particularly vulnerable to such mismatch in outlook.
Real estate rentals are posing a major challenge for the entrepreneurs are
opting for the franchising route as it success of franchising. Collaborative
efforts between franchisors and franchisees in structuring business models
that are sustainable even under such conditions could address this concern.
FranchisingPushing India ahead
With a potential to push the Indian economy forward, franchising has
been playing a significant role in generating new employment (both in terms
of numbers and job quality), provide revenue options for the government in
the form of taxes, duties etc. Along with its contribution to the country's gross
domestic product (GDP), it has also helped many national and international
brands to spread their presence in the country.
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Current market landscape for franchising in India
Since liberalization, the Indian economy has witnessed steady evolution.Consumerism has risen on account of a growing young population, high
disposable income and growing urbanization.
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Consequently, retail and service sectors are expected to play a major role in
this consumption boom. The macro statistics reveal that agriculture is no
longer the chief contributor to the Indian economy.
The country is gradually moving towards being a manufacturing and service-
based economy in last the two decades.
Today India is home to more than 3000 brands which adopt the franchising
model. Bata, one of the leading footwear companies, was among the first
franchisors in India.
Other pioneers of Indian franchising were NIIT, Apollo Hospitals and Titan
Watches. In addition, today several leading global franchise companies, such
as Dominos, McDonald's, Yum Brands, Baskin Robbins and Subway, have
already established a presence in India. The franchise industry is expected to
continue to benefit greatly from government support across various sectors
through various measures including allowing foreign direct investments (FDI)
in single brand and multi-brand retail.
This growth has also given impetus to a huge entrepreneurial appetite.Over the last decade, franchising has surfaced as one of the most prolific and
feasible ways of expanding businesses in India.
Several industry verticals such as food and beverage, education, fashion,
tourism and hospitality are leveraging their growth by franchising their
products under various formats.
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The economic significance of franchising market in India
Franchising contributes to the economic growth of a nation in multiple ways
such as job creation, access to necessary goods and services and expansion of a
country's tax base. The concept of franchising in India has been growing at an
impressive rate since
KPMG in India estimates suggest that the Franchising business in
India was worth USD 13.4 billion in 2008, as risk-averse Indian entrepreneurs
consider it as the most viable option to tap the nation's vast consumer market.
2012 and is expected to witness CAGR of 30 percent over the next 5 years.
This amounts to about 1.4 percent of the country's GDP in 2012.
KPMG in India expects both demand and supply side factors to contribute to
this growth.
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Franchise: Sector watch
The franchise business in India is increasingly getting popular amongdomestic and international players across various sectors. Several major
industries credit successful franchisees for their rapid progress.
The key industries that possess high prospects for the successful franchise
opportunities in India are following:
Retail franchising
Food and beverages
Health, beauty and wellness
Consumer services
Education and training
The individual growth and potential of these industries are driving the growthof the overall franchise sector in India.
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Recent FDI reforms in single brand and multi- brand retail are likely to lure
more global retailers to participate in India. Existing retail majors are under
pressure to consolidate and increase their franchise network reach.
Meanwhile, several multinationals such as
IKEA, Wal-Mart is looking to establish their brands in India. Franchising is
expected to continue to be one of the most popular business formats among
organized retailers to tap the emerging consumption boom, specifically in the
tier 2, tier 3 and smaller cities.
However recent clarifications issued by the Indian government on FDI
regulations in multi- brand retail allowing foreign retailers to only open
company owned company operated outlets could be a big blow to growth in
Retail franchising in India.
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Innovation driven consumer services companies/ brands are also resorting to
Franchising as the route to growth
Following are the few case studies highlighting 'innovation' as one of the key
success factors in franchising in the consumer services sector in India:
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However market potential in absolute terms is highest for sectors with-in
retail. Revenue per square feet of area in this sector could range anywhere
between INR 20000 to INR 50000.
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Overview of Jewellery industry of India
India's centuries-old gold industry is the world's biggest market for the metal,
with imports meeting almost all the country's requirements for jewellery and
investment.
Gems and jewellery are being used by the Indians since ages, for both
aesthetic, as well as investment purposes. India has the distinction of being
one of the first countries to introduce diamonds to the world. The country was
also one of the first countries to mine, cut & polish, and trade in diamonds.
The Indian jewellery market is dominated by gold, which consists of almost 80
per cent of the market share, followed by fabricated studded jewellery
including diamond and gemstone studded jewellery.
Industry Structure
The sector accounted for India's 14 per cent of the total merchandise exports.
On the contrary, the imports of raw materials for making gems and jewellery
stood at 32 per cent at Rs 721.60 billion (US$ 35.20 billion) in 2011-12 over Rs
545.64 billion (US$ 9.84 billion) in 2010-11.
The jewellery industry in India is estimated at Rs 1,500 billion (US$ 27.07
billion), of which only 5 per cent is organised, thus creating opportunity for
the foreign players to enter the Indian market.
India in 2009 faced its weakest year since gold trade was freed up in 1997.
Record high prices and a failed monsoon cut imports by 33 percent from the
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previous year to 480 tonnes, against an annual range between 600 and 800
tonnes in the previous five years
- Imports are high partly because of the large population of about 1.2 billion.
Per capita gold consumption is only 0.7 grams, half that of the United States
and one-third of the Middle East according to World Gold Council (WGC)
India's gold market is estimated to have more than 300,000 jewellers, mostly
small, family-run businesses, a WGC study showed.
- Only 23 banks and some private and government trading agencies have
licences to import gold because of its implications for foreign exchange flows.
- India's 2010/11 budget raised the import duty on gold and platinum to 300
rupees ($6.65) per 10 grams from 200 rupees earlier, with the duty on silver
raised to 1,500 rupees per kg from 1,000 rupees earlier.
- Investment purchases of gold have been rising faster than jewellery
purchases. WGC's latest data shows the investment to jewellery ratio wasapproximately 15:85 in 2009.
- Gold in the form of exchange-traded funds is rising. Launched in 2007, the
total collection among seven fund houses is more than 11 tonnes, nearly
double from a year ago.
- In urban areas, gold faces competition from diamonds as incomes have risen,
but the higher purchasing power of the lower and middle income sections of
the population has brought new customers into the market.
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In the recent years a large number of players have been attracted to the
Indian gems and jewellery retail sector:
Reliance Retail is planning an aggressive entry into the jewellery retail
market through its about 400 to 500 jewellery retail outlets across the
country.
The gems and diamonds industry contributes over 15 per cent of India's total
exports. The industry is jewellery industry is predominantly divided into twosegments: Gold jewellery and fabricated studded jewellery (diamonds as well
as gemstone studded jewellery)
India consumes nearly 800 tonnes of gold accounting for about 20 per cent
of the world gold consumption of which nearly 600 tonnes goes into making
jewellery.
According to The World Gold Council (WGC) total gold supply in the
second quarter this year stood (Q2FY08) at 840 tonnes, whereas the demand
was 944 tonnes.
A study by KPMG reveals the Indian jewellery market to be US$ 13.5
billion in fiscal 2006-07, accounting for 8.3 per cent of world jewellery sales.
Retail sector - Jewellery
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The jewellery and watch retail market in India is worth Rs1,80,000 crore, of
which the organised sector accounts for Rs76,800 crore, or about 42.5%.
The overall consumption of jewellery, including gold, is much higher at
Rs2,78,000 crore and represents almost 6% of private consumption in India -
with the difference between the consumption and the retail market size being
accounted for by gold or custom-made jewellery not sold in retail outlets.
There are some 80 jewellery and watch retailers in the organised space, with
3,150 outlets. Players with a minimum of 10 outlets or minimum annual
turnover of `50 crore are considered as organised.
The top 20, with 2,250+ outlets, account for `56,700 crore in sales, which
translates into almost three-fourths of the organised sector market and almost
one-third of the total pie.
Branded jewellery is the new mantra in the market, having rapidly acquired a
niche over the past few years. Increasing purchasing power and disposable
incomes of Indias middle class has resulted in consumption growth of this
industry by about 11 per cent in the five-year period preceding 2006-07. Add
to that the insatiable Indian craving for gems and jewellery, and the demand
will skyrocket to US$ 20 billion by 2010 and US$ 30 billion in 2015, according
to industry experts. Focused marketing creating awareness and demand for
the products, innovative product range creating excitement and expanding the
category as well as transparency and adherence to best practices will help
build consumer confidence.
The surprising thing about retail investment is that about 20 per cent of retail
effortin a planned manneris targeted at rural areas, which is defined as
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towns with a population of less than a million. India has seen a significant
growth in disposable incomes as a result of the economic growth that it has
been enjoying. This income is spread in the rural areas also. According to the
Tata Statistical Outline of India2005-06, around 60 per cent of the rural
income is from north and east. Depending on the size of the market, retailers
work with multiple formatscurrently they are partnering with local
jewellers and these jewellers retail their brands, commonly known as the
shop in shop. These stores would carry a merchandise mix and are in the
range from 600- to 1,000 square feet.
Retailers are also looking at mobile store concepts and thinking of innovative
ways to connect to the consumer. Brand building, and creating brand identity
is the focus of every retailer in India at present. Indian retailers see a huge
jewellery consumer market in India but there is a slight speculation that they
might soon face stiff competition from within as well as from international
brands who are rapidly setting up chain stores.
India consumes nearly 800 tonnes of gold accounting for about 20 per cent of
the world gold consumption. Out of which nearly 600 tonnes goes into making
jewellery. According to The World Gold Council (WGC) total gold supply in
the second quarter this year stood (Q2FY08) at 840 tonnes, whereas the
demand was 944 tonnes. A study by KPMG reveals the Indian jewellery
market to be US$ 13.5 billion in fiscal 2006-07, accounting for 8.3 per cent of
world jewellery sales. However the export of diamond-studded jewellery from
India is merely 4 per cent of the total export of gems and jewellery worth US$
18.06 billion. Since the demand of diamond-studded jewellery among Indian
consumers has risen sharply, the industry should focus on the domestic
market. Diamantaires, in Surat's US$ 11.29 billion diamond industry, are
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eyeing jewellery manufacturing in a major way, after DTC has decided to
prune supply of rough diamonds to India. If India becomes a manufacturing
hub for jewellery as well as a consumption market it will just prove Indias
strength in both sectors.
The government has offered some concession to the industry by lowering
import duty on platinum from US$ 13.82 per 10 gms to US$ 5.03 exempting
rough coloured precious gems stones from customs duty at the first stage
itself, instead of claiming reimbursements later. Rough, semi-precious stones
are already exempt, a move aimed at further promoting the exports of
studded jewellery and platinum jewellery. Duty-free import of consumables
for metals other than gold and platinum up to 2 per cent of f.o.b. value of
exports and duty-free import entitlement for rejected jewellery up to 2 per
cent of f.o.b. value of exports. There is increased duty-free import of
commercial samples of jewellery to US$ 2.50 and import of gold of 18 carat
and above under the replenishment scheme.
The Indian retail scene is set to flourish and there is no looking back for those
who know how to sell jewellery to a Indian women, since jewellery is a part of
Indian tradition and customs.
Jewellery franchising
A peek into the Indian jewellery industry reveals that the global market for
jewellery is expected to surpass USD 257 billion in 2017. The market is
predominantly driven by the Asia Pacific and The Middle Eastern markets,
but U.S. continues to remain the dominant player in the industry. Indians no
longer prefer buying jewellery from the traditional family jeweler. Because of
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the readily available designs and huge variety, people are giving preference to
organized retailers.
Chapter 2
Research methodology
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2.1 TITLE OF THE STUDY:
Franchise opportunities in Jewellery sector with reference to Gitanjali and
Shubh Jewellers
Statement of the problem
Jewellery in India is a multi-billion dollar industry, with franchise business
model expected to play a very big role, thus we must evaluate the
opportunities in the sector.
2.2 Scope of the study
By conducting this study we can understand the opportunities in Jewellery
sector with specific reference to Shubh Jewellers and Gitanjali Jewels in
relation to franchise business model
2.3 Objective
To understand growth and prospects of franchise industry in India
To assess the scope and future trends in jewellery retailing
To compare, analyse and evaluate the franchise business model offered
by Shubh and Gitanjali jewels
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Sample size of the study
1 The owner of Shubh Jewellers franchise
METHODOLOGY
Research Design is the conceptual structure within which research is
conducted; it constitutes
The blueprint for the collection, measurement and analysis of data. It specifies
the objective of the study, the methodology & technique to be adopted for
achieving the objective.
TYPE OF RESEARCHDescriptive research
Descriptive research is also called Statistical Research. The main goal of this
type of research is to describe the data and characteristics about what is being
studied. The idea behind this type of research is to study frequencies,
averages, and other statistical calculations. Although this research is highly
accurate, it does not gather the causes behind a situation. Descriptive research
is mainly done when a researcher wants to gain a better understanding of a
topic for example, a frozen ready meals company learns that there is a
growing demand for fresh ready meals but doesnt know much about the area
of fresh food and so has to carry out research in order to gain a better
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The primary data predominantly has been collected through the interview
method.
SECONDARY DATA
Also to provide a much keener insight into the study, data which is secondary
in nature also been utilized. This data has been collected from the following
sources.
Online research papers
Company website
Various other online forums
PLAN OF STUDY
The data collected from the above mentioned primary and secondary sources
were completely analyzed in to understand the functioning of franchise
business model Where ever possible, facts and graphical diagrams have been
used. Such data has been interpreted and recommendations have been
developed.
GEOGRAPHICAL LOCATION
The entire study has been done in Doddaballapur
AreaMain road, near market school
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REFERENCE PERIOD:
The study was conducted in January
TOOLS OF ANALYSIS and DATA COLLECTION:
The tool for collecting data is questionnaires.
There are 20 close ended questions
The tools used for analysis are percentage etc, and to present the data through
bar graphs, tables, pie charts, etc. These tools will ensure proper
understanding, analysis and interpretation of the data collected.
Limitations of study:
Biased response: The owner of the franchise were not much interested
in answering the questions.
Lack of information: some of the information that was required for this
study was difficult to obtain. Eg some books and internet sites were
inaccessible.#
Incomplete information provided: There are chances of respondents
providing incomplete information.
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CHAPTER SCHEME
Chapter 1: Introduction
This chapter talks about the theoretical background of the study.
Part A: About entrepreneurship, Industry Profile- about gold, usage of gold,
background of gold and Indian society and major players in the field.
Part B: Topic of the study- Business Opportunities- definition, concept, types
of business opportunities, advantages and disadvantages of business
opportunities and evaluation of potential business opportunity.
Chapter 2: Research Design
This chapter includes title of the study, statement of the problem, objective of
the study, scope of the study, data collection, sampling method, sample size,
statiscal tools, plan of analysis, reference period and limitations of the study.
Chapter 3: Company Profile
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Company profile:
Rajesh Exports Limited (REL) headquartered in Bangalore, India
manufactures gold & diamond jewellery. REL exports its products world
wide and distributes them within India to the wholesale jewellery market.
REL also retails its products through its own network of retail jewellery
showrooms Shubh Jewellers spread across India.
"Rajesh Export Ltd's (REL) objective is to establish itself firmly as a leader in
the global jewellery market by manufacturing and marketing the finest
quality jewellery to consumers across the world. To achieve this objective
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gram of gold by the jeweller, but invariably you would have noticed that when
you make the payment, you end up paying much more than the price per
gram quoted to you. The difference in most cases is as high as 20% resulting
in the gold prices quoted to you becoming meaningless and an eye wash. The
excess payment to be made by you is explained as wastage, value addition,
making charges etc. Now for the first time in the world all this confusion
comes to an end. At SHUBH 22ct(916) BIS Hallmarked Jewellery from out of
the 10,000 exclusive designs would be available to you without any extra
charges. Just select the Jewellery multiply the actual weight of the Jewellery
by the Real Rate Per Gram and that is what you pay, nothing extra.
Only SHUBH is capable of delivering to you BIS Hallmarked 22ct(916) Gold
Jewellery of actual physical weight at Real Rate Per Gram because :-
REL is a Rs. 20,000 crore company and the largest importer of gold in India
and also the largest jewellery company in the world.
REL is a nominated agency by the Government of India for Direct import of
gold into India from mines.
REL has set up the world's largest state of the art gold jewellery
manufacturing facility at Bangalore.
REL has strategic tieup with some of the world's largest gold mines. REL
imports gold directly from the mines, manufactures jewellery at its own
world's largest jewellery manufacturing plant and retails 22ct(916)
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Hallmarked Jewellery at its own retail store SHUBH Jewellers. The entire
process is fully integrated, there are no middle men in the process, which is
the reason due ro which SHUBH Jewellers is able to offer 22ct(916)
hallmarked Gold Jewellery at un-believable prices.
REL has set up one of the largest research and development unit for
developing new manufacturing techniques, which ensure excellent finish,
unique designs, guaranteed purity and lower processing cost.
HISTORY OF SHUBH JEWELLERS
REL is headquartered in Bangalore, India
1988 - Brothers Rajesh Mehta and Prashant Mehta joined family retail
jewellery business.
1990 - Rajesh Exports established the first organized gold jewellery
manufacturing facility in India.
1991 - Rajesh Exports established India's first R&D facility in the jeweller
sector..
1994 - Rajesh Exports emerged as the largest exporter of jewellery from
India.
1995 - Initial Public Offer (IPO) of securities to fund expansion of
manufacturing facility
1995 - IPO overwhelmingly subscribed and REL securities listed and
traded on the BSE and NSE
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1996 - REL successfully implemented the expansion plan.
1999 - REL plans to set up world's largest manufacturing facility
2002 - REL completes the construction of the World's Largest
manufacturing facility.
2003 - REL begins commercial production in the new manufacturing
facility
2006 - REL achieves a sales of USD 1.5 billion.
2008 - REL establishes branded retail chain stores under the name of
"Shubh Jewellers"
2009 - REL launches the Gold Revolution in the state of Karnataka through
Shubh Jewellers.
2011 - REL has launched 73 Shubh Showrooms in the state of Karnataka.
REL has set up one of the largest research and development unit for
developing new manufacturing techniques, which ensure excellent finish,
unique designs, guaranteed purity and lower processing cost.
3.4 VISION AND MISSION STATEMENT:
VISION:
Our vision is to make Shubh Jewellers
A leading trendsetting jewellery brand
A brand that customers respect and demand
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A brand recognised for practicing fair trade practices and ethical
norms.
MISSION:
Our mission is to create unique high quality jewellery that will be used by
our customers for a long time without being affected by fashion trends.
Through constant innovation, we seek to delight and surprise our customers
with products of superior design and quality.
MANAGEMENT
REL is managed by a Board of Directors comprising of experienced people
in the jewellery trade and also professionals from other relevant areas. The
Board of Directors are responsible for all major decisions. The Board of
Directors are assisted by a well defined hierarchy comprising of some of the
most experienced Professionals in the jewellery field. The Directors have
ultimate responsibility for the management and administration of the affairs
of the company. The Articles of Association of the Company provide that,
the number of Directors shall not be less than three and not more than
twelve. The company may, subject to the provisions of the Articles of
Association and the Companies act, alter the minimum or maximum
number of Directors by approval of its Shareholders.
The Board of Directors
NAME POSITION
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Mr. Rajesh Mehta Executive Chairman
Mr. Prashant Mehta Managing Director
Mr.VenuMadhav Reddy Non Executive& Independent Director
Mr. P Shivashanker Non Executive& Independent Director
Mr. Shankar Prasad Non Executive& Independent Director
The business addresses of all the Directors in Rajesh Exports Ltd: Batavia
chambers, No 4, Kumara Krupa road, Kumara Park East, Bangalore -
560001, India. None of the promoter directors have any activity outside of
the company that is significant with respect to the company.
Profile of Directors
Mr. Rajesh Mehta:
Mr. Rajesh Mehta The executive chairman of
REL is responsible for the overall functioning of
the company, in addition to being specifically in-
charge of the finance and marketing functions.
Mr. Rajesh Mehta has an experience of over twenty years in the functioning
and management of the jewellery trade and has travelled extensively within
India and overseas for establishing a strong network in the industry. In
addition to his post as Executive Chairman of REL he is a member of the
export trade advisory committee of the Bangalore Jewellers Association. He
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is also the president of the Karnataka Jewellery Exports Association and the
Director of Handloom and Handicrafts Export Corporation of India.
Mr. Prashant Mehta:
Mr. Prashant Mehta Managing Director of the
company is in charge of the day to day functioning
and holds specific charge of the production unit of
REL. He has over twenty years of experience in
the jewellery business and is recognized as an authority in the production of
Gold jewellery.
Mr.Venu Madhav Reddy:
Non executive and independent Director in REL. He looks after and advices
on the statutory requirements division of the company.
Mr.P.Shivashankar:
Non executive and independent Director in REL, is a tax consultant by
profession and advises the company on taxation matters. He is an
experienced person with thorough knowledge of the subject.
Mr. Shankar Prasad
Non executive and independent Director in REL is an established and well
known company secretary who advices REL on Company Law related
matters.
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Gitanjali Jewels is the flagship concept of Gitanjali Group, the only Multi
Branded Lifestyle Jewellery Store in India. We offer the bouquet of Worlds
Leading Jewellery Brands including Asmi, Ddamas, Diya, Gili, Nakshatra,
Maya Gold, Sangini, and Parineeta all under one roof.
We are a One Stop Destinationof branded jewellery, spanning over 65
retail outlets across 40 cities in India with 25 more stores in the pipeline. Our
products are a personification of elegance and grandeur designed to celebrate
the enigma of a woman. Our focus is on Quality, Purity, Variety &
Exceptional Customer Service which enhances the Jewellery buying
experience for the customers.
Jewels showcases exquisite Jewellery line that includes ethnic and casual
designs under multiple brands and collections, artistically crafted so as to add
a true essence to the beauty that a women adorns. Our product category
includes everything from earrings, necklaces, rings, pendants, nose pins to
tanmanias for mangalsutra, designed to cater the needs of the modern
customer under various price segments.
Gitanjali Jewels was awarded The Best Jewellery Retail Chain of the Year in
Multi brand category by Retail Jewelers India Award 2009 andFashion
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Retailer of the year 2010and Franchiser of the year 2010by Franchise
India Holdings Ltd and Star Retailer Awards.
Values
Integrity, Solidarity, Credibility and Perfectionthese are the fundamentals
of Gitanjali's working philosophy as it impacts business and employee
relations, transparency of operations and quality assurance, on the way to
creating a globally valued organization.
These are values painstakingly nurtured and demonstrably proven over 40
years. We live and breathe them.
Vision
To be the worlds leading manufacturer of diamonds and retailer of branded
jewellery, with a strong, globally diversified infrastructure and integrated
operations efficiently linking diamonds from rough to retail.
Mission
To develop, produce and sell high quality jewellery and accessories
worldwide and help our customers to
get the maximum value for money.
To create incremental demand for diamonds through marketing and
promotion strategies.
To create incremental enterprise and brand value to increase the net worth
of the group
To build in-house resources of unsurpassable skill in design, manufacture
and customer response.
To protect worker interest and nurture professional growth.
To remain a loyal business partner to DTC.
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History of Gitanjali group
Incorporated as a limited company 'Gitanjali Gems Private Limited' 1986
Started jewellery operations at the manufacturing units in SEEPZ, Mumbai 1991
Converted into a public limited company 'Gitanjali Gems Limited' 1994
Launched India's first branded jewellery, GILI, through Gili India 1994
Started operations at the manufacturing unit in Borivali, Munbai 1996
Started operations at the manufacturing unit in Surat SEZ 2003
Formed the D'damas Joint Venture company 2003
Formed JV Brightest Cricle Jewellery Private Limited to promote Brand
'Nakshtra'2004
Hyderabad Gems SEZ Limited become Wholly owned subsidiary of the
company2006
Initial Public Offering (IPO) of Gitanjali Gems Limited 2006
Acquired Samuel Jewelers Inc, USA 2006
Acquired Asmi from DTC 2006
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Table 4.1:
Table showing investment required for the franchise
Investment
required
25-50lakhs 50-75lakhs 75-100lakhs 1-5cr
Shubh
jewellers
Gitanjali
Analysis: From the above table it can be found that Gitanjali jewels requires
investment of 2-5 crores. Shubh jewellers requires investment of 40-60lakhs
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Chart 4.1:
Chart showing investment required for the franchise
Inference: Jewellery is a capital intensive business thus it requires large sums
of investment. Gitanjali being a large store format and premium retailer
requires the franchisor to invest upto 5 crores and Shubh jewellers being a
small store format and low margin retailer requires investment of 60 lakhs
0
50
100
150
200
250
300
GITANJALI SHUBH
2-5 crores
40-60 lakhs
Investment required in lakhs
SHUBH
GITANJALI
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Table 4.2:
Table showing other investments required
Other investments
required
Yes No
GITANJALI
SHUBH
Analysis: From the above table it can be seen that both Shubh jewellers and
Gitanjali jewels require investment
Inference: From the above table it can be seen that both Shubh jewellers and
Gitanjali jewels require other investment like furniture of store, legal
formalities, lightning and fixtures.
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Table 4.3:
Table showing duration of the franchise
Duration of
franchise
1year 3years 5years Perpetuity
Shubh
jewellers
Gitanjali
Analysis: From the above table it was found that Gitanjali offers franchise up
to 3 years, whereas Shubh offers up to 5 years
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Table 4.4:
Table showing returns on investment made in the business
Returns on
investment
10-15% 15-25% 25-30% 30-50%
Shubh
jewellers
Gitanjali
Analysis: From the above table it can be seen that Gitanjali offers return upto
26% while Shubh jewellers give returns upto 20 %
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Table 4.5:
Time duration taken to break even in the business
Time to break
even
2years 3years 4years 5 years
Gitanjali
Shubh
Analysis: From the above table it can be seen that Gitanjali takes 4 years to
break even. Shubh jeweller takes 5 years to break even.
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Table 4.6:
Table showing margins on sale for the franchise
Margin on
sale for the
franchise
1-2% 2-3% 3-5% 5-10%
Shubh
jewellers
Gitanjali
Analysis : Shubh jewellers offers margin of 2-3% on sale where as Gitanjali
jewels offers margin of upto 14%
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Chart 4.6
Chart showing margin on sale
Inference : shubh jewellers being a low margin retailer offers only 2-3%
margin on sale to the franchisor whereas Gitanjali jewels offers margin of
14% as it deals in diamond jewellery
0
2
4
6
8
10
12
shubh gitanjali
margin on sale
margin on sale
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7.Type of jewellery the franchisor deals in?
Gold
Silver
Platinum
Diamond
Type of
jewellery
Gold Silver Platinum Diamond
Shubh
Gitanjali
Analysis: Shubh jewelers deal only in gold. Gitanjali deals in platinum, gold
silver and diamonds
Inference: Gitanjali offers wide variety of jewellery like gold, platinum, silver
and diamond. Shubh jewellers deals only in gold.
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8. No. of stores under franchise format currently?
10-20
20-40
40-60
60 & above
Analysis : shubh jewellers has 82 stores and Gitanjali jewels has 215 stores
under franchise
Inference: Gitanjali jewels being a old player in the market has 215 stores
across the world but shubh jewellers has only 82 stores
0
50
100
150
200
250
shubh gitanjali
No. of stores under franchise model
no. Of franchises
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9. Future plans for expansion of stores under franchise format (next 5 years) ?
10-50
50-100
100-150
150& above
Analysis : shubh jewellers plans to expand to 500 stores in next 5 years
whereas Gitanjali plans to expand to 400 stores
Inference : shubh jewelers has chalked out more aggressive plan to expand
across India to increase the no. of stores to 500 and Gitanjali has plan toexpand to 400
0
100
200
300
400
500
600
shubh gitanjali
Future expansion
Future expansion
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10. Region wise presence of the company?
North South
East
West
Table showing region wise presence of the companies
Region of
presence
North South East West
Gitanjali
Shubh
0
10
20
30
40
50
60
70
80
90
gitanjali shubh
north
east
west
south
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11. Criteria for selection of the franchise
Financial strength of the franchise Experience
Area
All of the above
CRITERIA FOR
SELCETION
Finance Experience Area available
SHUBH
GITANJALI
Analysis: Criteria for selection for franchise of Shubh jewelers are experience
as well as the financial ability of the owner. Gitanjali jewels requires the
franchisor to have financial ability as well as required area for the store
Inference: Shubh jewellers require the franchisor to have prior experience in
jewellery industry so that he can run the store well and Gitanjali requires the
franchisor to have adequate financial ability as well as large area for the store
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12. Prefereed area of operation?
Tier I cities
Tier II cities
Tier III cities
Preferred area Tier I Tier II Tier III
Gitanjali
Shubh
Analysis : shubh jewellers franchsie can be set up in tier 1 2 3 cities whereas
Gitanjali jewels can be set upm oly in tier 1 & 2
Inference : shubh jewelers being a small retailer can be set up in small to big
cities but Gitanjali jewels have to set up in tier 1 & 2 cities, as it is a premium
and large retailer
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13. Size of the store required?
100-200sqft
200-400sqft
400-800sqft
800& above
Table showing size of the store required
Size of the
store
required
100-200 200-400 400-800 800&above
Shubh
jewellers
Gitanjali
Analysis: Shubh jewelers require 400 sqft of space where as Gitanjali requires
space 1100 sqft
Inference: Gitanjali being a large store format and premium retailer requires
large space to operate where as Shubh requires a smaller area with lesser
investment
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Chart showing area required in sqft
0
200
400
600
800
1000
1200
GITANJALI SHUBH
AREA REQUIRED IN SQFT
AREA REQUIRED IN SQFT
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14. Franchise training program?
Yes, training is available
No, itsnot available
FRANCHISE TRAINING
PROGRAM
YES NO
GITANJALI
SHUBH
Analysis: Both the franchisors provide training
Inference: Shubh jewelers as well as Gitanjali provide training to the
franchisors
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15. Type of support provided by the franchise
SUPPORT
PROVIDED
MARKETING STAFF
TRAINING
TECHINICAL MANAGEMENT
TRAINING
GITANJALI
SHUBH
Analysis: Shubh jewellers provide marketing as well as management technical
training. Gitanjali provides marketing, technical as well management training
Inference: Shubh jewellers only provide training related to technicalities and
marketing support to the franchisees, it doesntprovide training to staff and
management. Gitanjali jewels provides training to management, technical
support and marketing.
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Table 4.16:
Table showing the main competitors to the franchisees
COMPETITION LOCAL/SMALL
PLAYERS
BIG/ORGANISED
PLAYERS
GITANJALI
SHUBH
Analysis: Shubh jewellers have competition from local players where as
Gitanjali has competition from big players in the market
Inference: Shubh jewellers being a small player has competition from
local/unorganized sector whereas Gitanjali being an organized player has
competition from big/organized players in the markets
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Table 4.17:
Table showing if any performance guarantees are given to unit franchisees
Performance guarantees Yes No
Gitanjali
Shubh
Analysis: From the above table it can be seen that Shubh jewellers and
Gitanjali jewels do not give any performance guarantees
Inference: From the above table it was found that the franchisors do not give
any sort of performance guarantees to the franchisees. It is upto the
franchisees to perform and make sure they get their desired returns.
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Table 4.18
Table showing if exclusive territorial rights given to a unit franchise
Territorial rights YES NO
GITANJALI
SHUBH
Analysis: From the above table it can be seen that Gitanjali doesntprovide
any territorial rights to the franchisor where as Shubh provides territorial
rights to the franchisee
Inference: From the above table it can be seen that Shubh jewellers provides
exclusive territorial rights to its franchisees, where as Gitanjali does not
provide any territorial rights to its franchisees.
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Table 4.19:
Table showing if any deposit or upfront payment to be made as security
Upfront deposit Yes no
Gitanjali
Shubh
Analysis: From the above table it can be seen that Shubh jewellers requiresthe franchisee to make a upfront payment, where as Gitanjali jewels doesnt
require any upfront payment
Inference: From the above table it can be seen that Shubh jeweller requires
the franchisee to provide collateral to the company like property papers etc
where as Gitanjali only requires the franchisee fees which is included in the
initial investment made.
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Table 4.20:
Table showing if jewellery of other brands can be sold within the same store
JEWELLERY OF
OTHER BRANDS
YES NO
GITANJALI
SHUBH
Analysis: From the above table it can be seen that both Shubh jewellers and
Gitanjali jewels do not allow jewellery of other brands to be sold with that of
theirs in the same store.
Inference: From the above table it can be seen that under no circumstances
the franchisee is allowed to sell jewellery of other brands in the same store as
it is against the policies of the companies.
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5.1 SUMMARY OF FINDINGS.
It was found that jewellery is a capital intensive business thus it requires
large sums of investment. Gitanjali being a large store format and premium
retailer requires the franchisor to invest up to 5 crores and Shubh jewelers
being a small store format and low margin retailer requires investment of 60
lakhs
Gitanjali and Shubh jewellers offer franchisee upto 3 & 5 yearsrespectively after which it can be renewed, depending upon terms and
conditions.
Gitanjali offers higher return on investment with returns upto 26% annually,
whereas Shubh jewellers 20% return
It can be seen that Shubh jewellers being a low margin retailer offers only
2-3% margin on sale to the franchisor whereas Gitanjali jewels offers margin of
10- 14% as it deals in diamond jewellery
It was found that Gitanjali offers jewellery in gold, platinum, silver and
diamond. Shubh jewellers deal only in gold.
It can be seen that Gitanjali is a bigger player than Shubh jeweller. Gitanjali
has over 200 stores across the country and Shubh jewellers has only 80+
stores in South India
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It was found that Shubh jewellers require the franchisee to have prior
experience in jewellery industry so that he can run the store well and Gitanjali
requires the franchisee to have adequate financial ability as well as large area
for the store.
A Shubh jeweller store can be set up in small to big cities as it is a small
and low margin retailer but Gitanjali jewels have to set up in tier 1 & 2 cities, as
it is a premium and large retailer.
Both Shubh jewellers and Gitanjali jewels do not offer any performance
guarantees to their franchisees
Shubh jewellers provide territorial rights to its franchisors where as Gitanjali
does not provide any rights to its franchisors
It was found that under no circumstances the franchisee is allowed to sell
jewellery of other brands in the same store.
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Recommendations
Gitanjali jewels require very high investment to start the business; hence
many potential franchisees may not be able to afford it. Shubh jewellers offer jewellery in gold only thus customers who are looking
for platinum, silver and diamond may choose other retailers
Gitanjali jewels do not operate in tier 3 cities, thus they are missing on the
large chunk of semi urban and rural population
Shubh jewellers doesntoffer high end products for the upper class
customers, thus it can create a separate sub brand for the niche market
Both the franchisors do not offer any performance guarantees to the
franchisees, which may deter potential franchisees may taking up the
business.
Gitanjali jewels must offer territorial rights to its franchisees as it avoids
competition from same brand
Shubh jewellers must increase their presence in other parts of the country
too, as it has presence only in southern part of the country
Shubh jewellers offer very low margin to the franchisees in the investment
intensive business, thus it must increase the margins steadily.
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Conclusion
Both Shubh jewellers and Gitanjali jewellers target different segment ofcustomers of
same industry. Shubh jewellers targeting low to medium income group where asGitanjali jewels targets the upper class people. Any person looking to take up the
franchisee of either of the two businesses must first of all decide the location,
investment and target market. If a person is looking to set up the business in a rural
place, then he must choose Shubh jewellers as it offers value to the buyer, who is cost
conscious vice versa any person looking to set up in urban area must decide upon the
target group of customers and jewellery he wants to sell. Both the companies have its
pros and cons, it is upto us to decide depending upon the location, investment and
customers.
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BIBILIOGRAPHY
http://www.way2franchise.com/resource/article/shubh_jewellers_aims_to_be_
the_no_1_jewelry_franchise_in_india
http://www.franchiseindia.org/news/Shubh-Jewellers-plans-on-an-expansion-
spree-106/
http://www.franchiseindia.net/gitanjali.php
http://www.franchiseindia.com/business-opportunities/precious-
jewellery/gitanjali/
http://www.franchiseindia.org/news/Shubh-Jewellers-plans-on-an-expansion-spree-106/http://www.franchiseindia.org/news/Shubh-Jewellers-plans-on-an-expansion-spree-106/http://www.franchiseindia.net/gitanjali.phphttp://www.franchiseindia.com/business-opportunities/precious-jewellery/gitanjali/http://www.franchiseindia.com/business-opportunities/precious-jewellery/gitanjali/http://www.franchiseindia.com/business-opportunities/precious-jewellery/gitanjali/http://www.franchiseindia.com/business-opportunities/precious-jewellery/gitanjali/http://www.franchiseindia.net/gitanjali.phphttp://www.franchiseindia.org/news/Shubh-Jewellers-plans-on-an-expansion-spree-106/http://www.franchiseindia.org/news/Shubh-Jewellers-plans-on-an-expansion-spree-106/8/12/2019 shubh jewellers
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ANNEXXURE
Questionnaire
1. Investment required for the franchise 25-50 lakhs
50-75 lakhs
75-100 lakhs
1 -5cr
2. Are there other investments required?
Yes
No
3. How long is franchise term for?
1 year
3 years
5 years
Perpetuity
4. Is the term renewable?
Yes
No
5. Returns on investment in the business annually?
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10-15%
15-25%
25-30%
30-50%
6. Time duration taken to break even in the business
2 year
3years
3years
4 years
7. Margins on sale for the franchise?
1-2%
2-3%
3-5%
5-10%
8. No. of stores under franchise format currently?
10-20
20-40
40-60
60 & above
9. Future plans for expansion of stores under franchise format (next 5 years) ?
10-50
50-100
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100-150
150& above
10. Region wise presence of the company?
North
South
East
West
11. Criteria for selection of the franchise
Financial strength of the franchise
Experience
Area
All of the above
15. Size of the store required?
100-200sqft
200-400sqft
400-800sqft
800& above
12. Franchise training program?
Yes, training is available
No, itsnot available
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