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CHALLENGES FACED BY HOMECENTRE IN MACROECONOMIC

ENVIRONMENT
RETAIL INDUSTRY

PRANAV JAIN
19RM931
FURNITURE SECTOR
The furniture sector in India makes a marginal contribution to the Gross Domestic
Product (GDP), representing about 0.5 per cent of the total GDP. The major part of this
industry, approximately 85 per cent is in the unorganized sector. The remaining 15 per cent
comprises of large manufacturers, such as, Godrej & Boyce Manufacturing Co. Ltd., BP
Ergo, Feather lite, Haworth, Style Spa, Yantra, Renaissance, Millennium Lifestyles, Durian,
Kian, Tangent, Furniture Concepts, Furniture Wala, Zuari, Truzo, N R Jasani & Company,
V3 Engineers, PSL Modular Furniture, etc. The range of indigenous furniture available in
India, includes both residential and contract system furniture. Manufacturers in India usually
use a three-tier selling and distribution structure, comprising of the distributor, wholesaler
and retailer. The market is mainly concentrated in A, B and C category cities (the top 589
cities). A and B type cities together constitute 33 per cent of the total market. With a healthy
economy and increased household and institutional spending, the market is growing steadily.
As with the global market, home furniture is the largest segment in the Indian
furniture market, accounting for about 65 per cent of furniture sales. This is followed by, the
office furniture segment with a 20 per cent share and the contract segment, accounting for the
remaining 15 per cent.
CHALLENGES FACED BY HOME CENTRE

Complying to lead time: lead time is the time taken by product in production process after
the order get placed. The one of the store managers of HOME CENTRE told me that the lead
time need to be reduced because customers demand the product at rapid speed. The store is
not properly following omnichannel but the store is very advanced. So now HOME CENTRE
lead time is minimum ten days and so on and it need to be reduced.

Quality checks: Quality control (QC) is a process by which entities review the quality of all
factors involved in production. ISO 9000 defines quality control as "A part of quality
management focused on fulfilling quality requirements.

The quality of some of the products as compared to prices are low. So they need to give
customer value for the products. They need to return the customer as much as they take from
them.

Change in delivery system: Previously they used to follow third party delivery system but
now they follow last mile delivery system.

Third-party logistics providers typically specialize in integrated operations


of warehousing and transportation services that can be scaled and customized to customers'
needs, based on market conditions, to meet the demands and delivery service requirements
for their products. Services often extend beyond logistics to include value-added services
related to the production or procurement of goods, such as services that integrate parts of the
supply chain.

Last mile delivery is defined as the movement of goods from a transportation hub to the
final delivery destination. The final delivery destination is typically a personal residence. The
focus of last mile logistics is to deliver items to the end user as fast as possible.

Price differentiation: The price differentiation of the product is very much because of the
demand variable effect the market and they can’t fixed any customer on price on one day may
not be the same on other day. So they can’t fix their customers on price which is one of the
most factor for doing the deal.

MAJOR CHALLENGES IN MACROECONOIC ENVIRONMENT


 OUTPUT

 INCOME

 INFLATION

 DEPRICIATION

 TAX

 LIBERLISATION

MACROECONOMIC FACTORS EFFECTING HOME CENTRE

OUTPUT: National output is the total amount of everything a country produces in a given


period of time. Everything that is produced and sold generates an equal amount of income.
The total output of the economy is measured GDP per person. The output and income are
usually considered equivalent and the two terms are often used interchangeably, output
changes into income. Output can be measured or it can be viewed from the production side
and measured as the total value of final goods and services or the sum of all value added in
the economy.

This is the total amount of production done by HOME CENTRE in the year. Production is
actually done on the basis of order placed by customers. The Home centre has intermediate
goods that are turned to finished when order is placed by customers. HOME CENTRE
pitches the customer to place the online order. So, that directly impacts the output of HOME
CENTRE. If the pitch is more the output is more and vice versa. The increase in conversion
out of the total pitches directly leads to increase in production.

INCOME: In simple sense, it means sum total of money income earned by all is the citizens
in a country during a particular year. However, in economics, national income defined as the
total money value of all the final goods and services produced within a domestic territory of a
country during a given financial year along with the net factor income from abroad minus
depreciation.

So this factor also directly impacts the growth and sale of HOME CENTRE. If the income in
hands of person will increase than consumption power of the customer increases and if the
consumption power of customer increases than the spending power increases and if spending
increases they will place more order and the sale will also be increased. So, there will be
more growth to the company. The decline in the income will impact this industry but not that
badly. Because if the person is planning to buy furniture, he will definitely buy the product.
However, the one can compromise on Décor but the furniture that in basic necessity of
oneself the person will definitely buy it.

INFLATION: Inflation is a quantitative measure of the rate at which the average price


level of a basket of selected goods and services in an economy increases over a period of
time. It is the constant rise in the general level of prices where a unit of currency buys less
than it did in prior periods. Often expressed as a percentage, inflation indicates a decrease in
the purchasing power of a nation’s currency.

This factor indirectly impacts the industry and HOME CENTRE. If the cost to the company
of goods and services will rise than the final products price will hike and this situation lead to
decrease in sale because products are of high price than earlier. The person thought that to not
buy the product because of high price. So due to high price the customer kept on hold for
some time and this situation is bad because there is much competition in the market. The
vendors are such that they will sell the products even at loss to have a customer.

Depreciation: Economic depreciation is a measure of the decrease in the market value of


an asset over time from influential economic factors. This form of depreciation usually
pertains to real estate, which can lose value for several reasons such as the addition of
unfavourable construction in close proximity to a property, road closures, a decline in the
quality of a neighbourhood, or other negative influences. 

Economic depreciation is different than accounting depreciation. In accounting depreciation,


an asset is expensed over a specific amount of time, based on a set schedule.

Depreciation also plays a huge role in HOME CENTRE. When the items in get depreciated
they got sold to employees or businessman at much low value than their market price. So
otherwise wood is also asset with go to depreciation by time. So by depreciation the value of
the asset get lower and they need to be sold off as early as possible.
TAX: Taxation is the method by which a government gains revenue to spend on things
like public services and welfare benefits. There are many methods by which tax revenue can
be gained, and different definitions and structures to taxation which are outlined below. Also,
conflicts in choosing methods and forms of taxation occur, pitting priorities such as reducing
iniquity of income against maximising incentive for economic growth.

Taxation is the direct factor which impact the price at which customer purchases final good.
Because if the tax is more the customer have to pay more for final product and if the tax is
less customer had to pay less for the final product. So currently the tax on furniture is 18% i.e
(9%+9%) centre and state GST. So, if price of the good rises tax also rises and this factor
cannot be controlled or diminished because it is under Government. HOME CENTRE is
charging 18% tax on furniture.

LIBERALIZATION: Economic liberalization (or economic liberalisation) is the lessening


of government regulations and restrictions in an economy in exchange for greater
participation by private entities; the doctrine is associated with classical liberalism. Thus,
liberalization in short is "the removal of controls" in order to encourage economic
development.  It is also closely associated with neoliberalism.

Liberalisation is also impacting furniture retail business because big giants like IKEA has
entered the Indian economy and impacting Indian market and industry. In short term the
results are positive but in long term the results could be negative. The income of the other
countries are also increasing because IKEA is MNC and most of profit is going beyond
national boundaries.

Feasible solutions to tackle challenges

 Introduce new methods and techniques that could reduce lead time. So that products
would be available to customers at faster pace.

 The quality control team should do quality check at regular intervals.

 There must be a change in supply chain. So, to enhance the pace in delivery system.
 The HOME CENTRE should do some analysis of the product whose sale is more than
the other products and try to produce them more and this will give them edge in their
output.

 So, HOME CENTRE should change their selling style. So, when the income with less
earning come in, they try to forecast customer and show them products which can
fulfil their demand and utility.

 At the time of inflation there should be a discount on the products. So to balance out
the affect of inflation on the customer and their money.

 They should try to change the story of the store in every six months and sell the
products to their regular at discounted rates.

 The government expenditure is external factor which is in the hands of government


and industry have no control over this.

 The government should adopt these types of policies that the earning of the MNC’S
will be spent in India only and should not go out of the boundaries.

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