DMART IN 2023: FROM OFFLINE TRIUMPHS TO ONLINE TRIALS
CASE STUDY SOLUTION
e
pl
SYNOPSIS
m
Sa
In December 2023, the top management of Avenue Supermarts Limited (doing business as DMart) could
be justifiably pleased with their company’s performance. Since its founding in 2002, the company had built
up a large network of offline stores. It also stood out in the highly competitive retail industry because it was
consistently profitable, attributable to its efficient operations. But unlike the offline operations of the
n
company, which had industry-leading metrics, the online subsidiary Avenue E-Commerce Limited (doing
business as DMart Ready) was incurring losses. DMart’s management team was faced with three critical
tio
choices for its future expansion. Should they continue to expand the number of physical stores? If yes, what
should their strategy be in terms of breadth across geographies versus depth (making existing clusters
denser)? Another issue related to future resource allocation to the online business, in view of the intense
lu
competition it faced and the losses it had incurred in the past few years.
So
OBJECTIVES
• Understand how successful competitive positions are built in emerging economies.
• Appreciate the importance of effectively implementing a business strategy through consistent and
coordinated sub-strategies.
• Understand the trade-offs between various strategies, and recommend a strategic alternative based on
evaluation of the pros and cons of the various alternatives.
The Case Solution Starts From page 5
, e
pl
m
Sa
ASSIGNMENT QUESTIONS
1. What factors explain DMart’s excellent performance in the highly competitive retail industry in India?
n
2. How sustainable is DMart’s competitive advantage?
tio
3. What actionable steps should DMart take to improve DMart Ready’s profitability in online grocery
retail? Outline your recommendation below.
a) Should DMart expand its offline store network? If yes, specify the states or cities—considering
lu
current presence and potential—for optimal strategic growth.
b) Determine the strategic course for DMart Ready’s online operations: should the company sustain
aggressive investment or explore alternative approaches for profitability and market viability?
So
The Case Solution Starts From page 5
, e
ANALYSIS
pl
m
1. What factors explain DMart’s excellent performance in the highly competitive retail industry in India?
In “The Value Chain and Competitive Advantage,” Porter argues that there are two key ways to succeed:
Sa
firms can either have low costs or achieve differentiation (see Relevant Readings). DMart clearly pursues
low costs in multiple aspects of its operations.
To illustrate DMart’s pursuit of low costs, refer to Porter’s value chain framework. Below,
n
we have identified the key aspects of DMart’s strategy for key value-creation activities.
tio
Human resources: While the case touches on this briefly, DMart has a no-frills culture. The offices of senior
management are relatively modest, and the salaries of both the management and staff are not particularly
high (although they are compensated to some extent by stock options, which has worked well because the
lu
stock price has grown manifold).4
So
Inbound logistics and Procurement: DMart is able to get good discounts from suppliers because of four
The Case Solution Starts From page 5
, e
pl
m
EXHIBIT -2: PORTER’S FIVE FORCES ANALYSIS
Sa
Force Strength Rationale
In a typical emerging economy like India, there will be many small
suppliers that will not command much power over chain stores like
DMart. But there may also be large suppliers like Unilever PLC, the
Supplier power Moderate Procter & Gamble Company, and Johnson & Johnson that have some
n
bargaining power because of their wide product lines and strong
brands. Averaged over the different types of suppliers, the power may
tio
be moderate at best.
Buyer power Low
lu
So
Rivalry High
Threat of entry Low
Substitutes Moderate
The Case Solution Starts From page 5
CASE STUDY SOLUTION
e
pl
SYNOPSIS
m
Sa
In December 2023, the top management of Avenue Supermarts Limited (doing business as DMart) could
be justifiably pleased with their company’s performance. Since its founding in 2002, the company had built
up a large network of offline stores. It also stood out in the highly competitive retail industry because it was
consistently profitable, attributable to its efficient operations. But unlike the offline operations of the
n
company, which had industry-leading metrics, the online subsidiary Avenue E-Commerce Limited (doing
business as DMart Ready) was incurring losses. DMart’s management team was faced with three critical
tio
choices for its future expansion. Should they continue to expand the number of physical stores? If yes, what
should their strategy be in terms of breadth across geographies versus depth (making existing clusters
denser)? Another issue related to future resource allocation to the online business, in view of the intense
lu
competition it faced and the losses it had incurred in the past few years.
So
OBJECTIVES
• Understand how successful competitive positions are built in emerging economies.
• Appreciate the importance of effectively implementing a business strategy through consistent and
coordinated sub-strategies.
• Understand the trade-offs between various strategies, and recommend a strategic alternative based on
evaluation of the pros and cons of the various alternatives.
The Case Solution Starts From page 5
, e
pl
m
Sa
ASSIGNMENT QUESTIONS
1. What factors explain DMart’s excellent performance in the highly competitive retail industry in India?
n
2. How sustainable is DMart’s competitive advantage?
tio
3. What actionable steps should DMart take to improve DMart Ready’s profitability in online grocery
retail? Outline your recommendation below.
a) Should DMart expand its offline store network? If yes, specify the states or cities—considering
lu
current presence and potential—for optimal strategic growth.
b) Determine the strategic course for DMart Ready’s online operations: should the company sustain
aggressive investment or explore alternative approaches for profitability and market viability?
So
The Case Solution Starts From page 5
, e
ANALYSIS
pl
m
1. What factors explain DMart’s excellent performance in the highly competitive retail industry in India?
In “The Value Chain and Competitive Advantage,” Porter argues that there are two key ways to succeed:
Sa
firms can either have low costs or achieve differentiation (see Relevant Readings). DMart clearly pursues
low costs in multiple aspects of its operations.
To illustrate DMart’s pursuit of low costs, refer to Porter’s value chain framework. Below,
n
we have identified the key aspects of DMart’s strategy for key value-creation activities.
tio
Human resources: While the case touches on this briefly, DMart has a no-frills culture. The offices of senior
management are relatively modest, and the salaries of both the management and staff are not particularly
high (although they are compensated to some extent by stock options, which has worked well because the
lu
stock price has grown manifold).4
So
Inbound logistics and Procurement: DMart is able to get good discounts from suppliers because of four
The Case Solution Starts From page 5
, e
pl
m
EXHIBIT -2: PORTER’S FIVE FORCES ANALYSIS
Sa
Force Strength Rationale
In a typical emerging economy like India, there will be many small
suppliers that will not command much power over chain stores like
DMart. But there may also be large suppliers like Unilever PLC, the
Supplier power Moderate Procter & Gamble Company, and Johnson & Johnson that have some
n
bargaining power because of their wide product lines and strong
brands. Averaged over the different types of suppliers, the power may
tio
be moderate at best.
Buyer power Low
lu
So
Rivalry High
Threat of entry Low
Substitutes Moderate
The Case Solution Starts From page 5
