Question

Subhiksha was founded in 1997 by R. Subramanian, an IIT-IIM graduate. It operated over 1600 outlets selling groceries, fruits, vegetables, medicines and mobile phones and positioned itself as value retail chain. It adopted strategy to cut price, focus on lower and upper middle class, and opened shops near catchment area of customers. It started with one store in Chennai and within a short span the count reached to 1600 outlets (2008). Still Subhiksha was a **. Describe the possible reasons behind the ** of Subhiksha.

Answer 1

Following are the reasons behind the **** of Subhiksha:*

1. Rapid store expansion in various formats like groceries, medicines, mobiles, electronics, consumer durables and IT without sufficient fund in hand.

2. Operated on very **** or zero margins resulting in higher cash outflow whereas inflows were almost nil.

3. Not much attention to customer service resulted in bad quality service at store level.

4. Downstream supply chain was not integrated resulting in lower fill rates and customer dissatisfaction.

5. Expanded business through debt.

6. The company did not have enough funds to manage its operations.

7. Poor inventory management resulted in defective inventory, breakages, lower fill days and pile up inventory.