JSW SHOPPE- A UNIQUE DISTRIBUTION MODEL FOR BRANDED STEEL
Q. What are the issues and challenges that arose when JSW moved away from a traditional distribution model (dealers) to an organized retailing format of franchising? Also, discuss the organization’s response to these concerns and challenges?
A. JSW Steel has developed new DC for their own product that is core competent of company which provides huge market coverage for JSW Steel. There are some suggestions for better control of Distribution channel management. Suggestions 1) JSW need to establish their branding most powerful and separated for effective supply chain management. JSW created their own a new model in the steel industry that is Shoppe. And it’s the core competent for JSW for better steel supply in the market. And it is completely implemented in the market. But there are new player came-up in the market with the strategy of same model (Tata steel, Essar steel). As per same model competition, a (Tata steel) reputed company gain the market share of steel Shoppe, due to their market value raise-up. JSW can target the dealers in the southern states where there market share is more than 40 percent. Once the concept gets acceptance, they will find it easy to setup outlets in the northern and eastern side and can create their brand name.
2) JSW’s challenge in incurring the cost by setting up the outlets in different location of the country. In establishing JSW’s own outlets, they have to incur cost around Rs 75 lakhs to Rs 125
lakhs per outlet. Therefore JSW had decided to share the cost with the dealers. They were going to bear the cost of the infrastructure and elements within the outlets they going to establish. 3) As per the market survey of JSW, it has been found that most of the dealers are not happy with the supply from steel manufacturer. The challenge for JSW is to have a steady supply of steel which will ensure the dealers that the company is looking forward to build customer relationship. JSW’s team has set up the target of supplying the 1000 tons per month for each shoppe.
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JSW SHOPPE- A UNIQUE DISTRIBUTION MODEL FOR BRANDED STEEL 4) Skeptical concerning legal issues relating to the franchising arrangements by some of the existing dealers. If the number of existing agreeing to the model remained less than 50 the company would issue fresh tenders to new participants. 5) JSW need to implement system in place to measure the performance of the dealers, and therefore no basis upon which to determine their incentives. In the JSW steel Shoppe model there are major lacks in dealer performances measurement and the most critical issue was that there was no system in place to measure the performance of the dealers, and therefore no basis upon which to determine their incentives. This lack of transparency was also felt by the dealers. 6) JSW need to make proper balance between OEM distribution supply and Shoppe distribution supply. A major contribution in JSW steel supply by OEM customer for B2B model. The approach of shopper was necessary to reach end user and become a powerful brand in steel industry. But in the steel industry the major business have done concerned B2B. So for better distribution chain JSW have to maintain proper balance between both models.
7) JSW needs to implement a strong distribution network in Tier II and III cities. As per today’s scenario The real estate sector in India assumed greater prominence with
the liberalization of the economy, as the consequent increase in business opportunities and labor migration led to rising demand for commercial and housing space. Because every small cities are going to become metro cities in near future in India, so in this sector not only there are much chance of growth but also JSW can improve their distribution network applying this strategy towards to real estate sector.
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JSW SHOPPE- A UNIQUE DISTRIBUTION MODEL FOR BRANDED STEEL
BONUS QUESTIONS Q. What is “BALANCED SCORE-CARD”? Can it be used as a criterion to measure performance in order to evaluate the dealers, considering that it would be employed to decide on incentives, etc.? A. The balanced scorecard is a strategic planning and management system that is used extensively in business and industry, government, and nonprofit organizations worldwide to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. The Balanced Scorecard is based on performance measurement and derives its objectives from vision and strategy. It enables shared understanding of the links between strategy, critical success factors and actions while establishing accountability The Balanced Scorecard focuses on creating and communicating a total comprehensive picture to all members of the organization from the top down, taking a long-term view of what the company's strategic objectives really are, making good use of knowledge gained through experience and maintaining the required flexibility of such a system to cope with the fast-changing business environment.
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JSW SHOPPE- A UNIQUE DISTRIBUTION MODEL FOR BRANDED STEEL
Four Perspectives those managers gather information on important perspectives:
The customer's perspective. Managers must know if their organization is satisfying customer needs. They must determine the answer to the question, how do customers see us?
The internal business perspective. Managers need to focus on those critical internal operations that enable them to satisfy customer needs. They must answer the question, what must we excel at?
The innovation and learning perspective. An organization's ability to innovate, improves, and learns ties directly to its value as an organization. Managers must answer the question, Can we continue to improve and create value for our services?
The financial perspective. In the private sector, these measures have typically focused on profit and market share. For the public sector, financial measures could include the results oriented measures required by the Government Performance and Results Act of 1993 (GPRA). Managers must answer the question, how do we look to Congress, the President, and other stakeholders?
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