A REPORT ON COST REDUCTION ANALYSIS

By URMILA HINDUJA 12BSP1346 FUTURE RETAIL LTD. A report submitted in partial fulfilment of the requirements of PGPM Program of IBS Mumbai

Submitted to Prof. Rajini Anand

Date of submission 8th May 2013

ABSTRACT
My Project COST REDUCTION ANALYSIS at Future Retail Ltd. Works on different segment like Pantaloon Retail India Ltd., Big Baazar, Central, Ezone, Hometown. Currently we are working on communication segment in which company wants one common bill for all the segment by the service provider which will be easier for company to pay at a time and save time and resources. Cost reduction analysis, Focusing on operational cost of retail business in optimum utilization of resources and following different type of cost involved in it like Communication, Energy, House keeping and Logistic costs Firstly, Discovering cost reduction target, Measuring forward strategy to address long term target, Conducting review whether they offer cost cutting opportunities for given timelines and Finally Executing the changes and measuring the cost management solution.

Company Profile
Pantaloon Retail (India) Limited was incorporated as Mens Wear Private Limited by Mr. Kishore Biyani on 12 October 1987, converted into a public limited company in September1991, renamed as Pantaloon Fashions (India) Limited a year later and thereafter into Pantaloon Retail (India) Limited in July 1999. The company is headquartered in Mumbai. Mr. Kishore Biyani is the Managing Director. Pantaloon Retail forayed into modern retail in 1997 with the launching of fashion retail chain, Pantaloons in Kolkata. In 2001, it launched its first set of Big Bazaar stores in 2001 in Kolkata, Hyderabad and Bangalore, a hypermarket chain that combines the look and feel of Indian bazaars, with aspects of modern retail, like choice, convenience and hygiene. This was followed by Food Bazaar, food and

grocery chain and launch Central, a first of its kind seamless mall located in the heart of major Indian cities. Some of its other formats include collection I (home improvement products), E-Zone (consumer electronics), Depot(books, music, gifts and stationary), all(fashion apparel for plus-size individuals), Shoe Factory (footwear) and Blue Sky (fashion accessories). It has recently launched its eretailing venture, futurebazaar.com. Today Pantaloon Retail (India) Limited, is India's leading retail company with presence across multiple lines of businesses. The company owns and manages multiple retail formats that cater to a wide crosssection of the Indian society and is able to capture almost the entire consumption basket of the Indian consumer. The company operates through 12 million square feet of retail space, has over 1000 stores across 71

cities in India and employs over 30000 people. The USP is primarily on offering fresh fashion at affordable prices. Pantaloon Retail was awarded the International Retailer of the Year 2007 by the US based National Retail Federation (NRF) and the Emerging Market Retailer of the Year 2007 at the World Retail Congress held in Barcelona. Pantaloon Retail is the flagship company of Future Group, a business group catering to the entire Indian consumption space.

FUTURE GROUP
Future Group, led by its founder and Group CEO, Mr. Kishore Biyani, is one of Indias leading business houses with multiple businesses spanning across the consumption space. While retail forms the core business activity of Future Group, group subsidiaries are present in consumer finance, capital, insurance, leisure and entertainment, brand development, retail real estate development, retail media and logistics. Pantaloon Retail is the flagship enterprise of the Future Group, which is positioned to cater to the entire Indian consumption space. The company follows a multi-format retail strategy that captures almost the entire consumption basket of Indian customers. In the lifestyle segment, the group operates Pantaloons, a fashion retail chain and Central, a chain of seamless malls. In the value segment, its

marquee brand, Big Bazaar is a hypermarket format that combines the look ,touch and feel of Indian bazaars with the choice and convenience of modern retail. Future Capital Holdings, the groups financial arm provides investment advisory to assets worth over $1 billion that are being invested in consumer brands and companies, real estate, hotels and logistics. Other group companies include, Future Generali, the groups insurance venture in partnership with Italys Generali Group, Future Brands, a brand development and IPR company, Future Logistics, providing logistics and distribution solutions to group companies and business partners and Future Media, a retail media initiative. Future Groups joint venture partners include, US-based stationery products retailers, Staples and Middle Eastbased Axiom Communications The groups

presence in Leisure & Entertainment segment is led through, Mumbai-based listed company Galaxy Entertainment Limited. Galaxy leading leisure chains, Sports Bar and Bowling Co. and family entertainment centres, F123. Through its partner company, Blue Foods the group operates around 100 restaurants and food courts through brands like Bombay Blues, Spaghetti Kitchen, Noodle Bar, The Spoon, Copper Chimney and Gelato. Group vision Deliver Everything, Everywhere, Every time to Every Indian Consumer in the most profitable manner. Group Mission We share the vision and belief that our customers and stakeholders shall be served only by creating and executing

future scenarios in the consumption space leading to economic development. We will be the trendsetters in evolving delivery formats, creating retail realty, making consumption affordable for all customer segments for classes and for masses. We shall infuse Indian brands with confidence and renewed ambition. We shall be efficient, cost- conscious and committed to quality in whatever we do. We shall ensure that our positive attitude, sincerity, humility and united determination shall be the driving force to make us successful. Core Values Indianness : confidence in ourselves. Leadership: to be a leader, both in thought and business.

 Respect & Humility : to respect every individual and be humble in our conduct. Introspection : leading to purposeful thinking. Openness : to be open and receptive to new ideas, knowledge and information. Valuing and Nurturing Relationships : to build long term relationships. Simplicity & Positivity : Simplicity and positivity in our thought, business and action. Adaptability : to be flexible and adaptable, to meet challenges. Flow : to respect and understand the universal laws of nature.

Cost reduction
Cost reduction possibilities come in many forms, and focusing the company's efforts on the most value-yielding targets is often the biggest challenge for management. Rooting out non-value added costs begins with an understanding of the underlying cost structure of a company and its competition. The cost analysis can focus on many aspects of a company's operations, including manufacturing, operations, distribution and selling, marketing, and R & D How to Reduce Cost: The Cost Reduction Process Compile Business Expense Statements Simple identifies your business operating expenses and gathers information required to

complete a comprehensive cost reduction analysis. Analyse Operating Expenses To maximize cost savings, Simple Business Solutions analyzes all aspects of your business overhead, including, but not limited to: Marketing + Advertising Expenses Telecommunications Expenses Merchant Services Fees Office Machine Expenses (Printers, Copiers, etc.) Insurance Costs Human Resources Administration Costs Retirement Plan Administration Expenses Finance + Accounting Costs Commercial Property and Leaseholder Improvement Costs

Waste & Recycling Costs Freight Costs

Present Identified Cost Savings and Expense Reduction Recommendations Upon completion of the cost reduction analysis, Simple Business Solutions will meet with you to review the identified cost savings and provide a plan for implementing the cost reduction recommendations. Implement Cost Reduction Analysis Recommendations Simple will assist you in acting on these cost savings opportunities. In many cases, you can appoint Simple Business Solutions to act on your behalf to implement them. All these years, Pantaloon has been focusing on growth, reckoning that if it occupied prime space in the best retail developments, it will

get a significant edge. This strategy involved being constantly in the investment mode, setting up new stores even as existing ones trudged towards break-even Now, Pantaloon is changing focus from rapid sales growth to profitable growth. It expects its retail space to increase to 25 million sq. ft from 13 million sq. ft at present by around FY14 and revenues to grow at a more sedate pace of 25% annually. That is a big step down from its compound annual growth rate of 76% in space and 54% in sales, since 1999. Its new focus areas are efficiencies, cost reduction and margin improvement. It expects to achieve these by getting more favourable terms from real estate developers, leading to lower rentals. It expects employee costs to be more manageable as the mad rush for retail talent has abated. In FY09, its consolidated employee costs jumped 29%

though it was flat on a stand-alone basis. Rising demand from a growing number of retailers had also affected its purchasing power, which it expects to regain as a number of fringe players have exited the market. That will be good news for investors as the main drawback in Pantaloons performance is not at the operating level. On a stand-alone basis, in FY09, its operating profit margin has risen by 143 basis points. On a consolidated basis, by 148 basis points. One basis point is a hundredth of a percentage point. However, net profit growth was hit by a sharp rise in depreciation and interest costs, of 75% and 87%, respectively, on a consolidated basis. Pantaloons current strategy will mean that it will sweat its existing assets, improve operating margins; and the cash flows from its profitable stores can be used to pay down debt. In addition, a slower pace of expansion

also means that Pantaloon will dilute equity at less frequent intervals. All of that translates into faster earnings expansion in the future, which is good news for shareholders. There is likely to be a time lag before Pantaloons new strategy shows up in its results. That may explain why its share price did not rise more sharply.

Focusing on telecom segment:

Most of the telecommunications forms in India are as prevalent or as advanced as those in modern Western countries, and the system includes some of the most sophisticated technology in the world and constitutes a foundation for further development of a modern network. Telecom Regularity Authority of India (TRAI) is the sole authority empowered to take binding decisions on fixation of tariffs for provision of telecommunication services.

India has the world's second largest mobile phone users with over 903 million as of January 2012. It has the world's third largest Internet users with over 121 million as of December 2011. India has become the world's most competitive and one of the fastest growing telecom markets. Key developments Telecom Regulatory Authority of India (TRAI) has revealed that the country's mobile subscriber base has increased from 893.84 million in December 2011 to 903.73 million in January 2012. Telecom operators added 9.88 million mobile subscribers in January 2012.The overall teledensity reached 77.57 per cent. Broadband subscriber base increased from 13.30 million at the end of December 2011 to 13.42 million at the end of January 2012.

Telecom users in rural areas have grown at a faster pace compared to their urban counterparts in the last five years, a CAG report said. India added around 20 million subscriptions of the estimated 140 million net additions in mobile subscriptions across the world during the April-June quarter in 2012, said a report by Ericsson. The telecom sector is a very capital intensive sector and involves high value investments. Correspondingly, the mobile phone industry is also experiencing a parallel upward surge, and a parallel enhancement in technologies used. With the liberalization of the Indian economy, the telecom sector has become very attractive for mergers and acquisitions latest being SingTel increasing its stake in Bharti telecom.

Employment Opportunities According to analysts, the sector would generate employment opportunities for about 10 million people direct employment for 2.8 million people and indirect employment for about 7 million. The total revenue of the Indian telecom sector grew by 7% to 283,207crore (US$ 56. 5 billion) in 2011, while revenues from telecom equipment segment stood at 117,039 crore (US$ 23. 35 billion). Energy saving initiatives With an ambition to be diesel free by 2020, telecom companies are retrofitting their towers every year. Many telecom tower companies currently use renewable energy sources such as solar, biogas and wind besides hydroelectric power, for individual towers. Bharti Airtel, one of the largest

telecom service providers in India, has been testing and implementing various energy saving options for the last two-three years. Additionally, the e-bill initiative is estimated to save as many as 24,000 trees a year. Value addition by VAS Some of the recent developments in this area are M-Commerce, focus on localization, availability of content in vernacular languages and availability of mobile TV. The expected revenue from VAS will be around US$ 4.0 billion by 2015. Some of the major growth drivers of the sector are: Two major factors responsible for the growth of telecommunications industry are use of modern technology and market competition. The growth of Indian telecommunication sector is highly driven by supportive

government policies, emerging new technologies and changing consumer behaviour. Drastically reduced call rates and mind-blowing technologies like 3G, Android and advent of innovative products like iPhone, Galaxy tab, it is natural to expect further developments in this space in the coming years. Undoubtedly, smartphones are going to rule the future handset market and is forecasted to achieve a shipment of 77.5 million by 2015 in the Indian market. Challenges ahead The metro cities and the urban markets are quite saturated in terms of tele-density and thus, leaving very little scope in terms of new customer acquisition. Lack of proper telecom infrastructure, power shortage and lack of

trained manpower are some of the challenges which telecom companies have to cope with. To conclude Telecom Industry in India is out of its nascent stage and the government together with the private sector initiatives is on the path of making India the electronics manufacturing hub of the world. 10 years ago subscribers were made to pay for an incoming call; today they have the liberty to pay for per second of their usage. We, definitely, have come a long way!

REFERENCES
Past records given by the Future Retail Ltd. Mr. Ramesh Maheshwari , Company guide helped with the information. Websites :
www.futuregroup.in , www.futuregroup ,

Pantaloons Retail(India)Limited-Company Information