The resource-Based view of DMart and Future Group[1][2][3]: DMart Future Group VRIO Comparison The essential resources that help DMart become a Focused Cost leadership are the Type/location of the stores, economics of scale, and high-velocity product assortment. Procuring only products with high sales velocity allows them to reduce the inventory turnover time. It enables them to pay back to the supplier within seven days, much lower than the industry average. Bulk buying and a 7-days payment period allow them to get a high discount from suppliers[2]. It creates a vicious cycle with positive cross-side network effect where more discount leads to more customers, which leads to more bulk buying & faster inventory turnover hence faster payment to suppliers. This will attract more suppliers, thus completing the cycles. DMart specifically targets tier-2 and tier-3 cities, they open stores at the outskirts of cities where real state cost is low[2]. It minimizes their fixed expenses. They also open their stores in clusters near each other. It reduces operational complexity and increases the focus to targeted regions (middle-class suburbs). Low fixed expenses and limited product offering allow them to operate with high cash efficiency, reducing the interest burden. Those resources mentioned above may not be perceived as a sustained competitive advantage on an individual basis. Still, over time, DMart has leveraged these resource bundles to create a brand image of a high discount retail chain for daily's need items among their targeted customers. That is the sustainable competitive advantage for the DMart. On the other hand, Future Retails tried to become a Cost Leadership but failed miserably as their resources are not aligned to their strategy. Store locations/types were one of those significant resources. The majority of Future retail's stores are located inside the mall in upper-middle-class regions. It increases their rent expenses due to high actual real state costs and shared fees for the common area. It also limits its target customer segment to the upper-middle class. Due to diverse products offerings, their inventory turnover ratio is low, and inventory holding cost is high, which blocks their precious capital resources. Future retail enjoys high bargaining power due to bulk buying, but they cannot get deep discounts due to high operating costs and an extensive credit cycle. Private labels can offer a temporary competitive advantage due to exclusivity. Still, due to the small proportion of their total revenue, high operational complexity, and high capital requirements, it cannot transform into a sustainable competitive advantage. They created a strong brand as an all-in-one retailer for the upper-middle class, but it is not aligned to their cost leadership strategy as they cannot develop a low-cost structure from their resource bundle. Strategy: DMart successfully implemented focused cost leadership, whereas Future Retail was not able to implement cost leadership. Strategies adopted by DMart: Limited high-velocity Product Offerings – DMart only offered restricted regular use items with high sales velocity, reducing inventory turnaround time significantly. Location of stores – DMart opens most of its stores at the outskirt of cities to reduce rent expenses. It also gives the additional advantage of targeting middle-class neighbourhoods as they are primarily located on the outskirts of cities. DMart also opens its stores in the cluster to reduce operational complexity and increase targeting of the given area. Low sourcing cost – Due to low inventory turnaround time, they can clear their supplier due in 7 days, which is quite low compared to the industry average of 30 days[2]. It allows them to get more cash discounts from the suppliers. Everyday Low Prices (ELDP) – By passing on the cost benefits to the customers on low footfall days, they can stabilize the demand and reduce the marketing expenses. Their middle-class suburbs store location also helps in high retention without extra marketing efforts. Strategies adopted by Future retail: High Bargaining power – Due to various products sourcing needs and bulk buying, they can get high discounts and extended payment terms from MNCs that offer multiple products. All-in-one under one roof – Future retail offers diverse product ranges and multiple private-label brands under one roof. It adds convenience to customers and offers more choices, but it increases inventory holding costs & reduces the inventory turnover ratio. Due to this, they are not able to avail cash discount. Store Location – The majority of the stores are located inside the malls to target upper-middle-class households. Due to high real state costs and shared expenses of the mall's common area increase their fixed expense. Rapid Diversification and Expansion - Future retail adopt credit fuels strategy of rapid product range diversification and store expansion to increase their market share. It added extra strain on their cash resources and made him more vulnerable to shock-like demonetization, GST, covid, etc. These extra-cost structures limit their ability to become cost leadership. References- [1] https://www.researchgate.net/publication/340081826_Strategy_and_Success_of_DMart_The_Cas e_of_Retail_Chain_in_India [2] https://www.acadpubl.eu/jsi/2018-118-14-15/articles/15/24.pdf [3] https://www.ibtimes.co.in/big-bazaar-imitates-walmarts-everyday-low-price-modelcompetition-heats-765646
