JSW Steel is an integrated steel manufacturer. It is the largest private sector steel manufacturer in terms of installed capacity. In an effort to expand it’s retail base and to give better service to end customers, JSW Steel has set up 380 exclusive JSW Shoppes across the length and breadth of the country (JSW 2013). Vice-Chairman cum MD of the group has entrusted the task of enhancing brand, penetrating deep into the market and increasing dealers loyalty towards JSW to a team. Thus, took birth the concept of JSW Shoppe which was a name give to the organised retail format of JSW.
They wanted it as a medium for end users to experience, understand and appreciate the quality of JSW steel and also to build a robust distribution network capable of bolstering JSW as a premium brand, resulting in its products becoming customer’s preferred choice. Thus by taking a decision to create a organised retail format, JSW apart from creating a more efficient supply chain also thought on rebranding its image in the minds of end users. Question 1: Differentiate between the previous and new business models. What are the advantages of new model?
Steel industry in India had always favoured bulk buyers (Dealers, Construction companies) who placed orders directly with steel mills. Smaller buyers (fabrication units, home users, end users) are dependent on dealers to procure steel supplies. It was more of a Business to Business (B2B) product as opposed to Business to Customers (B2C). In the older model, dealers were free to keep products from several manufacturers in their stores and sell them. Also, no surety of supply of steel was ascertained from the companies. They had no choice but to exist in a difficult and fluctuating market situation.
JSW Shoppe was the new and organised retail format which will display all the products of JSW Steel. The objective is to attract end users to the stores and to help them understand the applications of the products. The outlets would offer customers the unique experience of buying steel products through a branded distribution channel. Also, the company promised to dealers that there would be regular and uninterrupted supply of material. The stores would bear the same look and feel everywhere across the country and will be standardized to create a uniform experience across all stores.
The table below shows some of the differences between the old and new business model: S. No. Old Business ModelNew Business Model 1Generic Distribution ChannelBranded Distribution Channel 2Business to Business approachBusiness to Customers approach 3Manual RecordkeepingIT Enabled systems (MIS) 4Cost to be borne by dealers / shop ownersCost sharing basis 5Workforce – not educated and not trainedTrained and educated workforce / executives Advantages of new model: As noted by Mahendra, in order to make JSW a favourable brand in the eyes of end-users, rebranding and positioning of JSW was necessary.
The new business model in the form of Exclusive JSW Shoppe will help JSW to rebrand its image by creating a unique experience that display the versatility of steel – from its functionality to its aesthetics. The advantages of new business model would be that it will be an extended arm of the company. JSW will be partnering with dealers not just give franchisee and share some of the cost that will be incurred towards implementing this model. This model will also ensure to standardize the look and feel of all the shoppe and impart uniformity.
Trained personnel are being employed at the JSW Shoppes which gives a sense of corporate culture to the end users visiting these shoppes. Through these shoppes, JSW targeted the end users those are buying in small quantities along with the large / bulk buyers. Question 2. What are the issues & challenges that arose when JSW moved away from a traditional distribution model (dealers) to an organised retailing format of franchising? Discuss the organisation’s response. Are the marketing initiatives introduced by JSW sufficient to achieve the desired objectives?
The task force team had anticipated two core issues while making the move from traditional business model to an organised retailing format. Before this organised retail format, the Sales and Marketing personnel were dealing directly with the dealers taking orders from them, passing orders to production department and then following the dealers for payments. Under this new format, they are required to spend time at dealer’s outlets (JSW Shoppes) to coordinate sales and generate leads through field visits.
This new model increased their workload and they are most likely to be the one who are resistant to change (Ulle and Ruth 2012). Also, since the dealers are more inclined to sell one variety of product, they may not be ready to sell a basket of products as proposed by new model. The second core issue was to obtain dealer’s acceptance of model because in India, steel businesses were primarily based on relationship between manufactures and dealers. Although, these were the anticipated issues, the real issues came up after pilot implementation of a few Shoppes.
The issues which arose from dealer’s perspective are that they begin to think that company wants to remove them from supply chain. The big issue was that after implementation of new model, company started giving them standardized products and they were not getting customized products as quickly as earlier. Because of their generic way of doing business, they were not comfortable with updating MIS on a day to day basis. Also, company wants to them all the products under one roof which was not possible because low cost substitutes of those products were available in market.
They were also concerned that how will the number of footfalls be increased. The issues which arose from company’s perspective were that dealers have not diverted all their attention to JSW Shoppe but they are selling other manufacturer products from different outlet. Non adherence to the Shoppe discipline was also a issue at hand. Dealers were not interested to invest in IT infrastructure. The staffs hired by JSW Shoppe owners were not of prescribed standard. Also, they do not send their personnel to training as they think of training as a waste of time.
Key challenges were to design a sophisticated ordering process, branding the suppy chain, create a cost and revenue sharing model with the dealers and deigning the standard floor layout. The organization responded to these issues and challenges by providing a solution to each of them. They spent time sensitizing the workforce to the advantages and benefits of concept. They conducted meeting and provided trainings to the executives of the pro and cons of this model. The marketing initiative taken by JSW was called “JSW on Wheels”.
It was a vehicle with name and address of the Shoppe, Audio Visual aid to show the concept in action, executives with the vehicle to help people understand the concept, distributing flyers etc. JSW could have done more than hiring a vehicle showcasing the concept. Study shows that individuals’ attitudes toward the advertisements are important when building brand equity. Findings show that by using an original, creative and different advertising strategies, companies can develop higher brand awareness and positive perceptions of their brands (Buil, de Chernatony, and Martinez 2013).
Question 3:What additional measures can be considered for the short as well as the long term? Short term measures should be to educate the local population by focusing on advertising and to start attracting people by creating JSW Shoppe a home brand. Also, guidelines and monitoring mechanism for dealers should be in place. To get involved in the hiring of JSW Shoppe executives and training them on regular basis should be a priority. Long term measure is to create an efficient supply chain with value additions. Question 4:How would you respond to the note Mahendra scribbled on his notepad…. Road ahead – Way forward”? By scribbling “Road ahead – Way forward”, we can see that Mahendra is foresighted and his willingness to take challenge because major players like Tata Steel and Essar Steel have joined the race and they are also opening outlets on the same lines as JSW Shoppe. Being a pioneer in this space, Mahendra had firsthand experience of the challenges and issues faced during implementation, so to stay ahead in the race, JSW has to keep its promise of steady supply of material and keep on innovating new techniques to make the business model more profitable.
To ensure this, company was contemplating a hub and spoke distribution model. Conclusion In order to achieve the desired results, company should increase the advertising efforts. Hoardings, consumer schemes, dealers meet to up the morale of dealers and television advertising on the local cable network can be some ideas to start with. JSW should also make its Sales and distribution department as separate business unit so that it can run more efficiently. Also, setting goals for sales team is one of the main processes for effective management of sales forces (Morelli and Braganza 2011).