Case Study on Music World

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It’s a classic case of a company who has proved itself since inception that it was built to last and how long term planning of a company can help it sustain against all odds. Music World is a part of the Rs. 65 billion Rama Prasad Goenka [RPG] group of companies. In a very short span of time after its launch in the 1990s, Music World had reportedly become a major factor that changed the way music was sold in India. In setting up of Music World a lot of planning and strategic thinking was used like conducting a survey for the ambience of the store, selection of location, suitable mix of music, tie ups with music companies as well as promotional companies. QUESTION FOR DISCUSSIONS:

*Q1. Critically comment on RPG group’s decision to focus on the retailing business in the 1990s. Would you agree that the decision to set up Music World was mainly due to the existence of Saregama* and its existing product portfolio? Give reasons to support your stand. THE MAJOR REASONS FOR RPG GROUP TO FOCUS ON RETAILING BUSINESS IN THE 1990 WERE: Change in Strategic focus: With liberalization & the global companies knocking at the doorsteps of the Indian market, It was the right time for RPG to enter retailing. RPG was able to develop a strategy which made them diversify into Retailing in Grocery & Food Items

Retailing in Drugs, Cosmetics & Health Products
Retailing in Music
They realized promising growth prospects in organized retailing industry in India. They were right in realizing this. We can see the growth rate in Indian retail from 1998 in the following graph. {draw:frame}

By slowly phasing out the under-performing and the loss-making divisions from the main Retail business they wanted to concentrate on certain core competencies. Moreover, Spencer which was faring badly was attractive in terms of An Undervalued Real Estate

Distribution Infrastructure
Profitable Travel Agency
Diversification of Business:
RPG (Rama Prasad Goenka) Group of Companies had a portfolio of highly diversified businesses. RPG group has a history in the retail business dating back to early 1865 when it entered the retail business through a company named Spencer’s selling imported specialty items to the British & military population. Having lost focus in the mid 1970’s having to sell off Spencer’s, RPG re-entered the retail market at the right time in 1989 by buying back Spencer from an entrepreneur. *Advantage of Distribution and Combating Piracy*: Distribution was the most profitable part of the music business. The average price of a cassette for the distributor was Rs. 19 which was sold to the customer at Rs. 50 to Rs. 60. Another point which came into consideration for the setting up of MusicWorld was the problem of piracy. Direct Distribution & Retailing by the music companies enabled them to combat the nexus of music pirates head-on Existing Product Portfolio: One cannot agree that the establishment of MusicWorld was due to the existence of Saregama, as MusicWorld was established in the 1990’s much later & therefore it was HMV which made first transition into Saregama India Ltd. But one cannot discount the fact that it was the diverse product portfolio held by GCIL which gave them confidence to enter the Music Retailing business. SCENARIO THAT LED TO MUSIC WORLD –

In the mid 1990s, the Indian music industry was not faring well with regards to volume off-take. While a majority of Hindi film tracks were flopping, the business in the non-movie music area had fallen below expectations. The company realized that the intellectual property base under the HMV brand could be leveraged for great advantages. Gramophone Company of India Ltd. or GCIL (a wholly owned subsidiary of Electric and Musical Industries or EMI earlier and now known as Saregama India Ltd., since November, 2000) owned almost 50% of all...
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