Case Study of Jsw Shoppe

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JSW SHOPPE — A UNIQUE DISTRIBUTION MODEL FOR BRANDED
STEEL
Brief of Case
JSW is a manufacturing plant producing steel pipes, bends and sockets and was one of many low-cost steel producers in the world and favored bulk buyers. In April 2007, at Jindal Steel Works Ltd.’s marketing headquarters in Mumbai, the sales and marketing team headed by Jayant Acharya (director marketing), Sharad Mahendra (vice-president) had a debate on how to boost the presence of Jindal Steel Works steel in the market. After much debate, the most promising idea was the development of an organized retail format. Steel was perceived as a business-to-business product. The company’s objective was to create a distinctive impression in the minds of end-users to ensure that they knew about various applications of the different steel products manufactured by JSW Steel so that its involvement in this category could be enhanced. The challenge was to brand the whole distribution channel and simultaneously increase the visibility of the brand manifold. At one point, Jindal had considered the idea of forming an organized retail chain through which the, this could eliminate the role of middlemen and directly reach end-user customers. Furthermore, it would be possible to monitor the sales and performance of dealers, enable better logistics and supply chain management and give a clearer understanding of consumer preferences. Question was: what kind of model should be adopted for such a project. Keeping the branding of Tata Steel and Essar Steel in mind Mahindra had two primary decisions to make: firstly, should the company venture into retail on its own or should it collaborate with the existing dealers? After the cost analysis he concluded that it would be extremely expensive for the company to venture into retailing on its own. With 160 dealers he needed to choose a model that would be suitable to all kinds of markets and could be easily replicated in all regions of the country. A six-member task force (TF) was constituted with Mahendra heading the team. The team unanimously agreed that all JSW retail outlets should have a uniform look and feel, so the architecture and designing had to be centralized. Three names were considered for the outlets: JSW Shoppe, JSW Steel Bazaar and JSW Steel Emporium. Out of JSW Shoppe was finalized. Mahindra got the model report approved by Aacharya and also got an Enthusiastic Response at Jindal Mansion .Apart from the current business model Jindal asked Mahindra to start their own outlets. Mahindra opposed it by saying that it would cost us around Rs.75 lakhs to Rs.125 lakhs which would not allow for the necessary penetration into the market that we require. As we propose to double our production we need an exclusive distribution network to reach the more remote areas. In the past we have relied heavily on original equipment manufacturers (OEMs), but during the recent economic downturn, many OEMs cancelled their orders and we had to look for alternative buyers through other distribution channels. Most of the dealers are not happy with the supply from steel manufacturers; if we promise them a steady supply of steel, then they would love to embrace this concept. Moreover, we will not have to offer the kind of discounts that we presently offer our OEM clientele. Through this model we are not targeting customers who will buy in tones; we are focusing on customers who buy in kilograms by assuring continuous supply of steel Execution of model was done in four phases. In the initial stage of execution, the company would aim for 50 outlets by making an initial offer to its existing dealers. It was anticipated that some dealers would be skeptical concerning legal issues while others would wish to continue with their existing business model. During the second phase a new target of 200 dealers while in the third and fourth stages the remaining 400 of the 600 total should be opened. After the meeting with Jindal, Mahendra and his...
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