The Break-Up of the RPG-DFI Joint Venture
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Case Code: BSTR229 Case Length: 15 Pages Period: 1999-2006 Pub Date: 2006 Teaching Note: Not Available |
Price: Rs.300 Organization: RPG, Dairy Farm International Industry: Retail Countries: India Themes: Mergers, Acquisitions, Strategic Alliances |
Abstract Case Intro 1 Case Intro 2 Excerpts
Background Note
Background-RPG
In the 1820s, Ram Dutt Goenka, a businessman from Rajasthan, traveled to Kolkata in search of new business opportunities. In Kolkata, he entered into business with the East India Company. As the business grew, more people from the Goenka family joined him. Over the years, the Goenka family business diversified into various fields such as textiles, jute, tea, and banking. RPG Enterprises was incorporated in 1979 by Rama Prasad Goenka to consolidate the family's diversified business interests under one company.
RPG forayed into the retail business in 1989 when it acquired Spencer's & Co.(Spencer's), a loss-making retail chain store, and set it up as a separate division within the Group. RPG was reportedly interested in the distribution infrastructure and undervalued real estate of Spencer's.
Post acquisition, RPG closed several loss-making divisions and renovated and refurbished the Spencer's store located in Bangalore, Karnataka, before reopening it in 1991. This store sold a variety of items including eatables, kitchen appliances, hardware, and clothing. The store was an immediate success and sales were so good that the store broke-even in the first month. Encouraged by this success, RPG decided to expand its presence in organized retailing, which appeared to have huge potential as there was a near absence of such a retailing format in India at that time. Initially, the company considered two retail businesses - clothing and supermarkets.
However, the idea of a clothing business was eventually dropped as it was felt that this segment required considerable expertise and investment in designing and branding, and managing independent manufacturers. At the time, the retail industry in India was largely dominated by unorganized retailers who stocked only a limited range and quality of products. Not surprisingly, Indian consumers looked on shopping more as a chore. RPG decided to change all that. It aimed to make shopping an enjoyable experience for the consumer. A major challenge for the company was the Indian consumers' perception that products sold at large supermarkets were priced higher than at smaller shops. RPG intended to change this perception and create a 'convenient and comfortable shopping environment'. Achieving operating and logistics efficiencies was critical to the success of a retail venture and these efficiencies could be attained only through the use of superior technology...
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