2.0 Situation Analysis

Westfieldistransformingthefaceofretail.Westfieldgrouphasoneoftheworld’slargestshoppingcenterportfolio.Companyhas99centersinAustralia,NewZealand,UKandUSA.AftersuccessinAustralia,NewZealand,USAandUK,companyisplanningtoenterIndia.Indiahasworld’ssecondlargestpopulation.Indiaisalsooneofthefastestgrowingdevelopingcountry.Inpurchasingpowerparityterm,Indiahada GDPof$4.761trillionin2012,whichis4thlargestinthe world.In2012,Indianeconomyachievedgrowthof6.5%.PercapitaincomeinIndiaisalsoonthe rise.In2012,inPPPtermspercapitaincomeinIndiawas$3,900.Themedianageofthe populationinIndiais26.7years,whichmakesIndiacountryofyouth.(CIAWorldFactbook,2013).

Higheconomicgrowth,risingpercapitaincome,largepopulation,growingmiddleclass,highyoungpopulation,andrisingconsumerspendingmakesIndiaanidealmarketforWestfield.Westfieldhasdecidedtobuildan ultimate shoppingandentertainmentcenterinGurgaonwherepeoplecanshop,dine,havefunandvacation.ItwillbeanextLasVegasinIndia.

2.1 Market Summary

GurgaonisacitywithinastateofHaryanalocatedinthe southeastern partofthestate.Gurgaonissituatedinthe National Capital Region(NCR),just15KMfromNewDelhi,capitalofIndia.In2013,Gurgaonhasapopulationof1,743,209.Outofwhich817,274aremaleand696,811arefemale.LiteracyrateinGurgaonismuchhigherthannationalaverage.Effectiveliteracyrateofin thiscityis84.4%outofwhichmaleliteracyrateis90%.(Source:indiaonlinepages.com,2013) Onceasleeping (use sleepy)town,Gurgaonhasbecomeahubofinternationalsoftwarecompanies,financial-servicescompanies,callcenters,skyscrapers,andshoppingmalls.Thiscityisasymbolofprosperity,globalization,outsourcing,andflashylifestyle.(MapsofIndia,2013)Almostallinternational(?)havingapresenceinIndiahasacenterinGurgaon.Outof500Fortune500companies,250companieshaveapresenceinGurgaon.ThishascreatedhugejobopportunitiesandattractedtalentfromdifferentpartsofIndia.Asaresult,Gurgaonhasthe third highestpercapitaincomeinIndia.ThiscityalsohasoneofthebestinfrastructureinIndia.GurgaonisconnectedwithDelhiandNoidawithmetrorailandroads.

GurgaonisanidealmarketforentryofaretailmalldeveloperinIndia.Largepopulation,highpercapitaincome,presenceoflargeinternationalcompanies,goodinfrastructure,andvibrantlifestylemakesitanidealdestinationforretailmalldevelopers.Gurgaonhasa huge populationofmenandwomenworkingforthesecompaniesandearninga good salary. Asbothhusbandandwifeinthe familyareworking,theyarewillingtospendmoreonshopping.SpectaculargrowthofrealestateinGurgaonalsoindicatesthattherearehugeopportunitiesforretailshoppingmalls.

TherearemanylargeshoppingmallsinGurgaon.Thereare40shoppingmallsinGurgaon.(MapsofIndia,2013).Someofthelargeshoppingmallsare Ambiencemall,DLFCityCenter,GoldSoukMall,SaharaMall,MGFMetropolitanMall,GurgaonCentral,GalaxyTowers,etc.AsGurgaonhasmetropolitanculture,shoppingmallsareattractinghugecrowds.Peoplehavemoney,andtheywanttospenditonluxury.Theyarelookingforashoppingexperience.Themallshousefamousinternationalbrands,restaurants,multiplexes,foodcourts,hookahbars,etc.PeoplearelookingforthesamekindofshoppingexperienceasUSA,UK,andotherdevelopingcountries.ThisprovidesopportunityforWestfield.WestfieldhasexperienceofdevelopingretailshoppingmallsinUSA,UK,AustraliaandUK.Companyisoneoftheleadingshoppingmalldeveloperswith99mallsinitsportfolio.Withitsgoodwillandexperience,companywillbeabletoofferitstargetcustomersthekindofshoppingexperienceandthefuntheyarelookingforatmalls.

2.2 SWOT Analysis

SWOT analysis is an important tool widely used to do environmental analysis. The environmental analysis is of two types: internal environmental analysis, and external environmental analysis. Environmental factors internal to the firm usually are strengths (S) or weaknesses (W). The environmental factors external to the firm are opportunities (O) or threats (T). The analysis of strengths, weaknesses, opportunities, and threats of a firm is called SWOT analysis. (Source: quickmba.com)

The SWOT analysis of Westfield LLC is as follows:

Strengths

  1. Experience: Westfield LLC operates one of the largest shopping center portfolio which includes 99 centers in Australia, New Zealand, UK and USA. These centers are located in prime trade areas and house around 22,000 retailers in 9.6 million square meters of retail space. (Westfield Corporate Website, 2013) Westfield’s shopping malls have strong positions in local markets.
  2. Strong financial position: The shopping center portfolio of Westfield is valued at $67.8 billion. In 2012, company earned EBIT of $2.118 billion, up to 3% from previous year. The company is generating a return of 11.4% of equity. Company has available liquidity of $6 billion and interest coverage of 4.1 times. Westfield is a profitable company with a strong financial position. (Westfield Group Financial Result, 2012)
  3. Presence in diverse markets: Westfield operates shopping malls in Australia, New Zealand, UK, and USA. Presence in diverse markets not only enriches experience but also mitigates risk.

Weaknesses

  1. Non-diversified portfolio: Westfield LLC has business interest in retail shopping malls only. Non-diversified portfolio increases risk.
  2. Experience in developed markets only: Westfieldisoperatingshoppingmallsindevelopedcountriesonly.Thisexperiencemaynotbeveryhelpfulindevelopingcountrieswherepeoplehavelowerpercapitaincome,differentculture,anddifferentconsumertaste.Consumer’s expectationinSydneymaynotbesameasconsumer’sexpectationsinGurgaon.
  3. Investment: Developingshoppingmallsneedahugeinvestment.Thiskindofenormousinvestmenthasa riskassociatedwithit.

Opportunities

  1. Opportunitiesinemergingmarkets:TheemergingmarketssuchasChina,India,Russia,and Brazilaregrowingatthe highestrate.Percapitaincomeisontherise.Inemergingmarket'speoplewhoearngoodmoneyarelookingforthevariousplaceswheretheycanspendmoneyandenjoy.Theshoppingmallsthathouseluxury,entertainment,bigbrands,lifestyle,eateries,etc.underasameroofwillattractthesepeople.Westfieldcanexploreopportunitiesinemergingmarketsandachievehighgrowth.
  2. Diversificationinahousingsector:Inemergingmarkets,thereishugedemandforhousing.Realestatebusinessisthrivinginthesemarkets.Westfieldcanbeleverageits (grammar error)expertiseanddiversifyinahousingmarket,especiallyinemergingmarkets.
  3. Runningownstores:Westfieldhasaportfolioof99malls.Companycanchoosetosatisfyaspecificneedofconsumersandconsideropeningtheirownstores.

Threats

1.Macroeconomic outlook:Shoppingmalldevelopmentbusinessishighlydependentonthe macroeconomic outlookIfthe economyisdoingwell,incomeinthehandsofconsumersalsorisesandconsumersspendmore.Thisisgoodforshoppingmalls.But,duringeconomicslowdown,consumerspendinggoesdown,whichisnegativeforshoppingmalls.Duringan economic slowdown,shoppingmalldevelopersfacedifficultiesinarrangingloans.Thebusinesseswhichcouldbuy/leaseretailspacealsopostponetheir decision as thebusinessisalsoaffectedbyan economicslowdown.

2.Highinterestrate:Shoppingmalldevelopersrelyheavilyondebt.Iftheinterestrategoesup,thecostofshoppingmalldevelopmentgoesup.Businessesalsopurchaseorleaselessspaceastheircostalsogoesup.

3.Threat from standalone stores: The shopping malls offer luxury, food, lifestyle, entertainment everything under a same roof. If standalone stores offer better deals to consumers, they can prefer to go to standalone stores than coming to shopping malls.

2.3 Competition

InGurgaonmarket,WestfieldisfacingcompetitionfromlocalshoppingmalldeveloperssuchasDLF,Sahara,etc.andinternationalshoppingmalldeveloperssuchasMGF.LocalplayerslikeDLFhasextensiveexperienceindevelopingshoppingmallsacrossIndia.DLFenjoysa good reputationandhighbrandvalue.Localplayersalsounderstandthe marketbetterthanforeignplayers.InIndia,relationshipsandpoliticalcontactsplaya veryimportantroleinsuccessofrealestate.DLF,Sahara,andAnshalandotherlocalplayershavebuiltgoodcontactsoveraperiodoftime.InternationalplayerslikeMGFalsoareinIndiafora long time,andtheyunderstandthemarket,andbuiltpoliticalcontacts.

Westfieldwillfacestiffcompetitionfromexistingplayers.Companywillneedtooffersomethingthatothersdonotoffer.Itslongexperienceindevelopedcountrieswillhelpitinidentifyingunsatisfiedneedsofconsumers[G1].The companywillneedtodoa market surveyandidentifywhatconsumerswant.Companymayalsoenterintojointventurewitha localplayerswhohasunderstandingofthe market,consumertastes,lawsandregulations,andpoliticalcontacts.

2.4 Product/Service offering

Theshoppingmallsofferfashion,food,footwearandaccessories,jewelry,leisure,retailservice,entertainment,etc.undera sameroof.Allbigmallsoffermoreorlesssimilarservices.Westfieldwillneedtooffersomethingthatothersarenotoffering.
Westfieldwilllease/sellstorestointernationalbrandssuchasLevi’s,Adidas,Nike,and premiumbrandssuchasArmani,Zara,HugoBoss,etc.;localbrandssuchasWoodland,Prapti,etc.CompanywillalsoofferstorestoelectronicsgiantssuchasSony,Samsung,Panasonic,etc.;computermanufacturerssuchasApple,HP,Acer;mobilephonesellers,andothergoods/services.

Theshoppingmallwillhouse15-20screenmultiplexofInoxorAdlab.Noothermallisofferingsomanyscreens.TheshoppingmallwillhousepremiumrestaurantssuchasMainLandChina,Oh!Calcutta,Machan,and aswellasan affordablefoodcourt.
Apartfromusualofferings,Westfieldwillofferswimmingpool,hookahbar,andcasino.Torunacasino,manylicenseswillberequired.IfWestfield’smallcanofferacasino,itwillbefirstinIndia,andithas been potential (grammar)toattractcustomersfromacrossIndiaaswellasfromneighboringcountrieslikeBangladesh,Myanmar,Nepal,SriLanka,Pakistan,etc.,ThisshoppingmallmayalsoofferAyurvedicmassagetoattractoverworkedcustomers.

2.5 Keys to Success

Westfield’s key to success in Gurgaon are:

  1. Understanding the consumer’s needs and expectations and which needs are unsatisfied[G2].
  2. Choosing the right location for developing shopping mall.
  3. Getting required regulatory approvals and licenses.
  4. Building political contacts.
  5. Arranging low cost financing.
  6. Tie up with big brands to open stores in the mall.

2.6 Critical Issues

Westfield is facing following critical issues:

  1. Company has no experience in developing markets.
  2. The regulatory environment in India is very complex. India ranks low in corruption index. Company does not have experience of dealing with such kind of red tape.
  3. Gurgaon already has 40 malls. Some of the existing malls are very large. How large retail space Westfield should develop in Gurgaon is a critical issue[G3].

GRADE: 97% of 70 points = 67 of 70 points.

References

CIA The World Factbook. (2013). India. Retrieved From:

Maps of India. (2013). Gurgaon. Retrieved From:

No Author Anonymous, (2013). Gurgaon Population 2013. Retrieved F from:

No Author. (n.d.). SWOT Analysis. Retrieved From:

Westfield Corporate Website. (2013). Retrieved From:

Westfield Group Financial Result. (2012). Westfield Group 2012 Full Year Results. Retrieved From:

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