Retail Theories

Retail theories encompass a wide range of concepts and models that help explain the dynamics, strategies, and challenges within the retail industry. These theories are developed to provide insights into consumer behavior, market trends, and effective retail management.

Retail theories provide valuable frameworks for understanding and navigating the complex dynamics of the retail industry. From consumer behavior and store location to marketing strategies and the impact of technology, these theories guide retailers in making informed decisions and staying competitive in an ever-evolving marketplace. The retail landscape continues to transform, and the application of these theories allows retailers to adapt, innovate, and meet the evolving needs of consumers.

This session deals with the following theories namely:

  • Wheel of Retailing
  • Retail Accordian Theory
  • Theory of Natural Selection
  • Retail life cycle
  1. Wheel of Retailing

This theory talks about the structural changes in retailing. The theory was proposed by Malcomb McNair and according to this theory it describes how retail institutions change during their life cycle. In the first stage when new retail institutions start business they enter as low status, low price and low margin operations. As the retail firms achieve success they look in for increasing their customer base.

They begin to upgrade their stores, add merchandise and new services are introduced. Prices are increased and margins are raised to support the higher costs. New retailers enter the market place to fill the vacuum, while this continues to move ahead as a result of the success. A new format emerges when the store reaches the final stage of the life cycle. When the retail store started it started low but when markets grew their margins and price changed. The theory has been criticized because they do not advocate all the changes that happen in the retail sector and in the present scenario not all firms start low to enter the market

  1. Retail Accordian Theory

This theory describes how general stores move to specialized stores and then again become more of a general store. Hollander borrowed the analogy ‘accordian’ from the orchestra. He suggested that players either have open accordion representing the general stores or closed accordions representing narrow range of products focusing on specialized products. This theory was also known as the general-specific-general theory. The wheel of retailing and the accordion theory are known as the cyclical theories of retail revolution

  1. Theory of Natural selection

According to this theory retail stores evolve to meet change in the microenvironment. The retailers that successfully adapt to the technological, economic, demographic and political and legal changes are the ones who are more likely to grow and prosper. This theory is considered as a better one to wheel of retailing because it talks about the macro environmental variables as well, but the drawback of this theory is that if fails to address the issues of customer taste, expectations and desires

  1. Retail Life cycle

Like products, brands retail organizations pass through identifiable stages of innovation, accelerated development, maturity and decline. This is commonly known as the retail life cycle. Any organization when in the innovation stage is nascent and has few competitors. They try to create a distinctive advantage to the final customers. Since the concepts are new at this stage organizations try to grow rapidly and the management tries to experiment. Profits will be moderate and the stage may last for a couple of years. When we talk about our country e-buying or online shopping is in the innovation stage.

In the accelerated growth phase the organizations face rapid increase in sales, competitors begin to emerge and the organizations begin to use leadership and their presence as a tool in stabilizing their position. The investment level will be high as there are others who will be creating a lot of competition. This level may go up to eight years. Hypermarkets, Dollar stores are in this stage. In the maturity stage as competition intensifies newer forms of retailing begin to emerge, the growth rate starts to decline. At this stage firms should start work on strategies and reposition techniques to be in the market place. Supermarkets, cooperative stores are in this stage. In the final stage of the retail life cycle is the declining phase where firms begin to loose their competitive advantage. Profitability starts to decline further and the overheads starts to rise. Thus we see that organizations needs to adopt different strategies at each level in order to sustain in the marketplace.

  1. Consumer Behavior Theories:

  • Wheel of Retailing:

The Wheel of Retailing theory, proposed by Malcolm P. McNair in the 1950s, suggests that retail firms evolve through predictable stages. Retailers initially enter the market with low-status, low-margin operations and gradually add services and amenities as they succeed. Over time, this process may lead to higher prices and increased competition, eventually prompting the entry of new low-status retailers. The cycle continues.

  • Retail Life Cycle:

Building on the Wheel of Retailing, the Retail Life Cycle theory posits that retail formats go through distinct life stages, including introduction, growth, maturity, and decline. Each stage is associated with specific challenges and opportunities. Understanding the life cycle helps retailers adapt strategies based on their position in the market.

  • Customer Decision-Making Process:

The Consumer Decision-Making Process theory outlines the steps consumers go through when making purchasing decisions. These steps include problem recognition, information search, evaluation of alternatives, purchase decision, and post-purchase evaluation. Retailers use this theory to tailor marketing strategies to influence consumers at each stage.

  1. Store Location Theories:

  • Central Place Theory:

The Central Place Theory, developed by Walter Christaller, explores the optimal spatial arrangement of retail centers within a geographic area. It posits that consumers will travel to the nearest central place (retail center) to fulfill their shopping needs. Larger retail centers offering a broader range of goods and services are located less frequently but serve a larger population.

  • Huff’s Gravity Model:

The Huff’s Gravity Model predicts the probability of a consumer choosing a particular store based on its attractiveness (size, offerings) and distance. This model is valuable for retailers in understanding consumer behavior related to store choice and optimizing their location strategies.

  1. Retail Marketing Theories:

  • Retail Mix:

The Retail Mix theory, also known as the 6 Ps of retailing (Product, Price, Place, Promotion, Presentation, and Personnel), emphasizes the interconnected elements that retailers must consider when creating a marketing strategy. Balancing these elements is essential for a cohesive and effective retail marketing approach.

  • STP Marketing:

STP stands for Segmentation, Targeting, and Positioning. In retail, this theory involves identifying market segments, selecting target segments that align with the retailer’s strengths, and positioning the store to meet the specific needs and preferences of those target customers.

  • Retail Atmospherics:

Retail Atmospherics theory explores how the physical environment of a store, including lighting, colors, scents, and layout, affects consumer perceptions and behavior. Creating a pleasant and engaging atmosphere enhances the overall shopping experience and influences purchasing decisions.

  1. Retail Evolution Theories:

  • Wheel of Retailing Evolution:

The Wheel of Retailing Evolution theory builds on the Wheel of Retailing, proposing that retailers evolve through stages of innovation, growth, maturity, and decline. New retailers often introduce innovative formats, challenging existing structures and leading to a continuous cycle of evolution in the retail industry.

  • Retail Life Cycle Evolution:

Similar to the Retail Life Cycle, this theory suggests that retail formats evolve through stages of introduction, growth, maturity, and decline. The evolution may involve changes in format, strategies, and consumer offerings to adapt to market conditions and competition.

  1. Technology and Omnichannel Retailing Theories:

  • Technology Adoption Curve:

The Technology Adoption Curve, developed by Everett Rogers, categorizes consumers into innovators, early adopters, early majority, late majority, and laggards based on their readiness to adopt new technologies. Retailers use this theory to guide their adoption of technology and innovation strategies.

  • Omnichannel Retailing:

Omnichannel Retailing theory emphasizes the integration of various channels (online, offline, mobile, etc.) to provide a seamless and unified shopping experience for consumers. It recognizes that consumers may engage with retailers through multiple channels and aims to create a cohesive brand experience across all touchpoints.

  1. Retail Strategy Theories:

  • Porter’s Generic Strategies:

Developed by Michael Porter, this theory outlines three generic strategies for competitive advantage: cost leadership, differentiation, and focus. Retailers can pursue one of these strategies to position themselves in the market and gain a competitive edge.

  • Wheel of Retailing Strategy:

The Wheel of Retailing Strategy theory suggests that retailers should strategically choose their positioning within the Wheel’s evolution stages. For example, a retailer may opt for a low-cost strategy as a low-status entrant or differentiate through innovation as a higher-status player.

  1. Sustainability in Retailing:

  • Green Retailing:

With a growing emphasis on sustainability, Green Retailing theory focuses on environmentally friendly retail practices. This includes sustainable sourcing, energy-efficient operations, waste reduction, and efforts to appeal to environmentally conscious consumers.

  • Circular Economy in Retailing:

The Circular Economy theory promotes a regenerative approach where products, materials, and resources are kept in use for as long as possible. Retailers adopting circular economy principles aim to reduce waste, recycle materials, and create more sustainable product life cycles.

Retailing: Meaning and Role, Significance, Scope

Retailing is a distribution process, in which all the activities involved in selling the merchandise directly to the final consumer (i.e. the one who intends to use the product) are included. It encompasses sale of goods and services from a point of purchase to the end user, who is going to use that product.

Any business entity which sells goods to the end user and not for business use or for resale, whether it is a manufacturer, wholesaler or retailer, are said to be engaged in the process of retailing, irrespective of the manner in which goods are sold.

Retailer implies any organization, whose maximum part of revenue comes from retailing. In the supply chain, retailers are the final link between the manufacturers and ultimate consumer.

Role of Retailing

Retail trade performs many valuable role for the trade and commerce as a whole. Some of them are as follows:-

  1. Delivery of the goods to the end consumer

This makes shopping for all requirements quite hassle-free for the consumers. This also facilitates consumption and maximizes consumer satisfaction. Because the company cannot take responsibility of delivery to every single customer, it appoints retailers. One of the functions of retailing is immediate delivery.

  1. Is an essential part of the distribution chain

Because the retailer takes over the cumbersome task of distribution of goods manufactured to the target market, the manufacturer is relieved of this responsibility and can divert his resources to manufacturing activities.

  1. Finances the wholesaler

While booking his order of goods with the wholesaler, the retailer pays some percentage or the whole of the order price in advance. This helps the wholesaler to carry on with his operations seamlessly. In some industries, it is the retailer who pays cash to maintain stock and in others the wholesaler has to carry the stock as paid capital. Nonetheless, financing is one of the major functions of retailing. A retailer who does not contribute to financing will bring down the effectiveness of the supply chain.

  1. Stores the goods according to market requirement

The retailer invests his working capital in building a gamut of inventory reflecting market requirements. He also sells the requisite quantity, however small or big, to the final consumers satisfying their needs. The retailers know the complete demand and supply potential due to their years of experience. Hence it is one of the functions of retailing to balance the demand and supply as per external market conditions.

  1. Lends a hand in manufacturer’s marketing initiative

Retailer plans and executes many advertising and promotion activities at the point of purchase i.e. right in his store. This leads to gain in popularity of and favorable market conditions for the product of the manufacturer.

  1. Assumes storage and credit risks

When the retailer orders and stores a large quantity of goods from the manufacturer, he makes sufficient provisions to store it safely for some days. This involves costs. Also, there is also a risk of loss of these goods on account of destruction, theft, spoilage etc. The retailer assumes these risks while storing goods.

  1. Extends credit facilities to the consumers and assumes credit risk

The retailer does so to encourage shopping. This adds to the vigor of commercial activities in the economy. But there is also a risk that the customers won’t pay for the goods bought or may return damaged goods to the retailer. This inherent risk in trade is assumed by the retailer.

  1. Offers wide variety of customers and enticing price range in a product line

In order to attract more customers, a retailer offers a wide range of merchandise at attractive prices. This results in higher consumer satisfaction and higher standards of living in any economy.

  1. Provides convenience in shopping

Retailers try to set up their shops nearby housing areas or near parks, schools the areas where the customer finds it very convenient to shop. This enhances the consumer welfare.

  1. Offers after sale services, differentiated packaging, giving more information about the use of the product

All these activities add value to the retail transaction and cater to various requirements of the consumers suitably.

  1. Hears the voice of the market

The retailer measures the pulse of the market by listening to the consumer feedback, expectations, complaints, and by observing a shift in the tastes and preferences of the consumers. This arms him with very critical market intelligence enabling the entire commercial fraternity to gear up for the changing economic scenario.

  1. Generating employment for masses

Retail trade, especially the brick-and-mortar models, are human resource-centric establishments. They require many employees for numerous functions such as stock taking, over the counter selling, packaging, after sales services, floor management etc. Thus, retail sector thrives with lots of lucrative employment opportunities for all the talented job aspirants.

Significance:

Economic Significance

The retailers play the role of sales specialists and also as agents of purchase for their customers and suppliers respectively. Retailers handle the entire gamut of roles and functions aiming at understanding customer requirements and anticipating the demand, gathering information about the market trends through strong market intelligence and making product related assortments and discovering financing opportunities.

It is relatively easier to become a retailer, as large investment is not required, procurement of production equipment is not required, and a retailer can procure merchandise on the basis of credit.

The retail sector in the present scenario is witnessing a fierce competition as a large number of retail players have entered in the same market segment with similar product offerings. The only differentiating factor which may provide a winning edge in the competitive race is by providing better value to the consumers and satisfying the consumers with their offerings. Besides this, a retailer should also be providing justice to the producers and also to the wholesalers by ensuring that their products are sold to the ultimate consumers.

For expansion of business opportunities globally and tapping larger business prospects, large retailers have been diversifying their business formats by way of mergers or acquisitions to cater to the growing needs of a diverse and a larger customer segment. Moreover, the retail industry has been impressive regarding generating large-scale employment opportunities worldwide which is expected to grow at a much faster rate in comparison with the other sectors performance in future as well.

The retail sector has opened newer job avenues for people having different areas of specialization with diverse skills and qualification backgrounds. These opportunities could be in the areas of Finance & Accounting, Retail Operations, Commercial Operations, Inventory & Warehousing, SCM & Logistics, HRM, Distribution Systems, Marketing & Brand Management, IT, New Products Development & Market Research/Business Analysis.

Retailing career can be quite rewarding right from the start of the career for a person as it may require bearing a handling a lot of challenges and responsibilities right from the beginning. Moreover, retailing has given rise to entrepreneurial opportunities, and few of the wealthiest entrepreneurs are involved in the retail business.

Social Significance

In the present business scenario, social responsibility and increasing importance are being given to driving the functions of marketing functions with a sense of social responsibility. This has resulted in retail organizations paying a great deal of attention towards the social responsibilities which they have towards their customers.

Regulation and control from various pressure groups such as social activists, social workers, and consumer activists compel the retailers in implementing their marketing programmes restrictively and communicating the true picture about the benefits or harms of using a product.

The retail fraternity should give importance to the cultural differences and also the differences in the values, beliefs, and faith of people while formulating their marketing strategies and business development plans. This will be helpful in meeting the demands of the consumers by understanding their expectations. The marketing department of retail companies is engaged in identifying the opportunities and threats to the business of the company by analyzing the socio-cultural trends and the buying preferences of the consumers.

Scope:

  1. Retailer’s Perspective:

From the retailer’s perspective, retailing can include anything that the retailer wishes to sell. It may be goods or services. These may include goods such as mobiles, computers, electronics, readymade garments, textiles and clothing, jewellery, books, paintings, medicines, stationery, watches, or may include services such as catering, hospitality, hospitals etc.

However, in certain cases permission in form of license is required to be obtained from the government. In such cases the retailer will have to comply with all the legal formalities before starting a business. For example, a license is required to operate a chemist’s shop. Hence, the retailer must possess the required qualifications and hence may apply for the license.

  1. Employee’s Perspective:

Retailing has provided tremendous opportunities of employment. The retailers operating at a small level required small number of employees to help them in business. These employees were appointed as salesmen, cleaners, cashiers, etc. by the retailers. But with the increase in the scope of operations and the growth of retailing, there has been tremendous change in the industry.

Now the retailers operate at bigger levels having separate departments for everything such as finance, marketing, advertising and sales, human resource development, etc. Hence, the retailers provide enormous opportunities to the employees.

The following are the areas where the scope of retailing can be seen from the point of view of the employee:

  • Purchase Department:

The purchase department is responsible for making all the purchases for the business. It includes the selection of the merchandise to be sold to the customers, their price range, the selection of the vendor from whom the purchases are to be made, etc.

This department requires vast amount of efforts and includes a lot of paper work, telephonic conversation and travelling. The employees working with this department should be well conversed having good amount of knowledge about the industry as well as the vendors. They must be able to take quick decisions.

  • Finance Department:

The finance is the life blood of any organization. The finance department performs the functions such as making and compiling the financial records, allocation of finance to various departments, management of finance, arrangement of finance, controlling the cash flow, managing the banking as well as investments, deciding the credit allocation, etc. Sometimes a retail audit may also be conducted by the finance department.

  • Marketing and Sales:

The marketing department includes various activities such as sales promotion, advertising, public relations, etc. These activities are extremely important from the view point of reaching the customers. The marketing department is responsible for conducting extensive market research and understanding customer requirements.

The people required in marketing department should be well conversant, having proper knowledge about the product, any they must be able to convince the customer to buy the products. They should also be capable of understanding the customer’s requirements and act accordingly.

  • Stores:

The stores department is responsible for storing the goods. The store’s manager should ensure that at every time the inventory is maintained at proper levels so that there is no shortage of goods. At the same time the department should ensure that too much inventory may cause problems of storage, obsolescence, wear and tear, etc. So the store’s manager must always keep an up to date record of the inventory and ensure uninterrupted supply of materials.

  • Human Resource:

The human resource department is responsible for the recruitment, selection, training, induction etc. of the employees. Human resource is a human centric industry. The people required in this department must be able enough to understand the requirements of the people in the organization and must be able to stop the efficient employees from leaving the organization.

  • Technology in Retailing:

Retail industry in India is in a mature stage and is a very confident user or information technology. The industry is using technologies such as Electronic Data Interchange (EDI) which is used to electronically transfer the information through computers. Database Management, Data Warehousing and Data Mining are the techniques that are used to gather information about the customers and store them for future use.

Data Mining helps in customer relationship management. Radio Frequency Identification System (RFID) is used for supply chain management. The concept of e-tailing is continuously gaining ground in retailing. It includes the use of internet for selling the goods.

  • Supply Chain Management:

Supply Chain Management means managing the supply of materials, services and information along the supply chain. Managing the resources efficiently and effectively increases profitability of the business. Supply chain is managed by using information systems.

Thus, there are many areas where retailing can provide employment to the people. Therefore, it can be concluded that the scope of retailing is very wide. One can engage himself as an entrepreneur or can join the sector as an employee depending upon his skills and finance, etc.

ESOP, Features, Benefits, Considerations, Types, Challenges

An Employee Stock Ownership Plan (ESOP) is a unique and powerful employee benefit plan that provides workers with an ownership stake in the company they work for. Through ESOPs, employees become beneficial owners of shares in the company, aligning their interests with those of shareholders and fostering a sense of commitment and engagement. Employee Stock Ownership Plans (ESOPs) are powerful tools that promote a culture of ownership, engagement, and long-term success within organizations. By providing employees with a direct stake in the company’s performance, ESOPs contribute to a positive workplace environment, increased productivity, and enhanced employee satisfaction. However, the successful implementation and management of ESOPs require careful planning, effective communication, and compliance with regulatory standards. Companies considering the adoption of an ESOP should work closely with legal, financial, and valuation experts to design a plan that aligns with their specific goals and circumstances. Additionally, ongoing communication and education are vital to ensure that employees fully understand the benefits and responsibilities associated with their ownership stakes. When executed thoughtfully, ESOPs have the potential to drive not only individual financial well-being but also the overall success and sustainability of the organization.

Features of ESOPs:

  • Ownership Structure:

ESOPs create a trust that holds shares on behalf of employees. As employees accumulate tenure or meet other criteria, they become entitled to an allocation of shares.

  • Contributions:

Companies contribute to the ESOP either by directly contributing shares or by contributing cash to the trust, which is then used to purchase shares. Contributions are typically tied to company profits.

  • Vesting:

Employees gain ownership rights (vesting) over their allocated shares over a specified period. Vesting schedules can be time-based or performance-based.

  • Distribution:

Upon retirement, termination, disability, or other triggering events, employees receive the value of their vested ESOP shares. Distribution can be in the form of company stock or cash.

  • Borrowing Capacity:

ESOPs have the ability to borrow funds to acquire shares, allowing companies to use the plan as a mechanism for business succession or financing.

  • Employee Participation:

All eligible employees are generally allowed to participate in the ESOP, creating a broad-based ownership structure. However, eligibility criteria can vary.

Benefits of ESOPs:

  1. Ownership Culture:

ESOPs create a culture of ownership, where employees view themselves as partners in the company’s success. This can lead to increased commitment, productivity, and a focus on long-term goals.

  1. Employee Engagement:

With a direct financial stake in the company’s performance, employees are motivated to contribute to its success. This sense of engagement can positively impact innovation, collaboration, and overall workplace satisfaction.

  1. Retirement Benefits:

ESOPs serve as a retirement benefit, providing employees with a source of income when they retire. The value of their ESOP shares at retirement can significantly contribute to their financial well-being.

  1. Tax Advantages:

Contributions made by the company to the ESOP are tax-deductible, providing a financial incentive for companies to establish and maintain ESOPs.

  1. Succession Planning:

ESOPs offer a mechanism for business owners to transition ownership to employees, ensuring continuity and providing an exit strategy for founders looking to retire or sell their business.

  1. Improved Performance:

Studies have shown that ESOP companies tend to outperform non-ESOP companies in terms of sales, employment growth, and overall financial performance.

Considerations in Implementing ESOPs:

  • Plan Design:

Companies should carefully design their ESOPs, considering factors such as eligibility, vesting schedules, contribution levels, and distribution options. A well-designed plan aligns with the company’s goals and values.

  • Communication:

Clear communication is essential to ensure that employees understand the benefits and mechanics of the ESOP. Regular communication helps build trust and ensures that employees are well-informed about their ownership stakes.

  • Valuation Method:

The valuation of company stock is a critical aspect of ESOPs. Companies often engage independent appraisers to determine the fair market value of the shares, especially in the case of closely held or private companies.

  • Regulatory Compliance:

ESOPs are subject to various regulatory requirements, including those outlined in the Employee Retirement Income Security Act (ERISA), which sets standards for plan fiduciaries, participant disclosures, and other protections.

  • Leverage and Risk:

If the ESOP borrows funds to acquire shares, the company takes on debt. Managing leverage and associated risks is crucial to the long-term success of the ESOP.

  • Diversification:

As employees’ retirement benefits are tied to the performance of the company’s stock, it’s important to provide mechanisms for employees to diversify their investment portfolios, especially as they approach retirement.

Types of ESOPs:

  1. Leveraged ESOP:

The ESOP borrows funds to acquire shares, and the company makes tax-deductible contributions to the ESOP to repay the debt.

  1. NonLeveraged ESOP:

The company contributes shares directly to the ESOP without the need for borrowing. Contributions are typically based on profits.

  1. Combined ESOP:

A combination of leveraged and non-leveraged elements, allowing companies to balance debt levels and cash flow considerations.

  1. S Corporation ESOP:

An ESOP can own shares in an S Corporation, with certain tax advantages for both the company and participants.

Regulatory and Legal Considerations:

  1. ERISA Compliance:

ESOPs are subject to ERISA regulations, which outline fiduciary responsibilities, participant disclosure requirements, and standards for plan management.

  1. Valuation Standards:

Companies must adhere to valuation standards set forth by ERISA and other regulatory bodies to ensure the fair market value of ESOP shares.

  1. AntiAbuse Rules:

To prevent abuse or misuse of ESOPs, there are rules in place to ensure that transactions are conducted at arm’s length, and participants are treated fairly.

  1. Prohibited Transactions:

ERISA prohibits certain transactions between the ESOP and “disqualified persons” to protect the interests of plan participants.

  1. Fiduciary Responsibilities:

Fiduciaries responsible for managing the ESOP must act prudently, diversify plan assets, and follow established fiduciary duties outlined in ERISA.

Challenges and Criticisms:

  1. Lack of Diversification:

As employees’ retirement benefits are tied to the company’s stock, there is a lack of diversification, which may expose employees to undue risk.

  1. Valuation Complexity:

Determining the fair market value of closely held or private company stock can be complex and may require external expertise.

  1. Leverage Risks:

Leveraged ESOPs carry debt, and if the company’s performance declines, repaying the debt becomes challenging, posing financial risks.

  1. Communication Challenges:

Ensuring that employees understand the mechanics of the ESOP, including valuation, vesting, and distribution, can be a communication challenge for some companies.

Banking System in India

In India the banks and banking have been divided in different groups. Each group has their own benefits and limitations in their operations. They have their own dedicated target market. Some are concentrated their work in rural sector while others in both rural as well as urban. Most of them are only catering in cities and major towns.

Indian Banking System: Structure

Bank is an institution that accepts deposits of money from the public.

Anybody who has account in the bank can withdraw money. Bank also lends money.

Indigenous Banking

The exact date of existence of indigenous bank is not known. But, it is certain that the old banking system has been functioning for centuries. Some people trace the presence of indigenous banks to the Vedic times of 2000-1400 BC. It has admirably fulfilled the needs of the country in the past.

However, with the coming of the British, its decline started. Despite the fast growth of modern commercial banks, however, the indigenous banks continue to hold a prominent position in the Indian money market even in the present times. It includes shroffs, seths, mahajans, chettis, etc. The indigenous bankers lend money; act as money changers and finance internal trade of India by means of hundis or internal bills of exchange.

Disvantages

(i) They are unorganized and do not have any contact with other sections of the banking world.

(ii) They combine banking with trading and commission business and thus have introduced trade risks into their banking business.

(iii) They do not distinguish between short term and long term finance and also between the purpose of finance.

(iv) They follow vernacular methods of keeping accounts. They do not give receipts in most cases and interest which they charge is out of proportion to the rate of interest charged by other banking institutions in the country.

Suggestions for Improvements

(i) The banking practices need to be upgraded.

(ii) Encouraging them to avail of certain facilities from the banking system, including the RBI.

(iii) These banks should be linked with commercial banks on the basis of certain understanding in the respect of interest charged from the borrowers, the verification of the same by the commercial banks and the passing of the concessions to the priority sectors etc.

(iv) These banks should be encouraged to become corporate bodies rather than continuing as family based enterprises.

Structure of Organized Indian Banking System

The organized banking system in India can be classified as given below:

Reserve Bank of India (RBI)

The country had no central bank prior to the establishment of the RBI. The RBI is the supreme monetary and banking authority in the country and controls the banking system in India. It is called the Reserve Bank’ as it keeps the reserves of all commercial banks.

Commercial Banks

Commercial banks mobilise savings of general public and make them available to large and small industrial and trading units mainly for working capital requirements.

Commercial banks in India are largely Indian-public sector and private sector with a few foreign banks. The public sector banks account for more than 92 percent of the entire banking business in India—occupying a dominant position in the commercial banking. The State Bank of India and its 7 associate banks along with another 19 banks are the public sector banks.

Scheduled and Non-Scheduled Banks

The scheduled banks are those which are enshrined in the second schedule of the RBI Act, 1934. These banks have a paid-up capital and reserves of an aggregate value of not less than Rs. 5 lakhs, hey have to satisfy the RBI that their affairs are carried out in the interest of their depositors.

All commercial banks (Indian and foreign), regional rural banks, and state cooperative banks are scheduled banks. Non- scheduled banks are those which are not included in the second schedule of the RBI Act, 1934. At present these are only three such banks in the country.

Regional Rural Banks

The Regional Rural Banks (RRBs) the newest form of banks, came into existence in the middle of 1970s (sponsored by individual nationalized commercial banks) with the objective of developing rural economy by providing credit and deposit facilities for agriculture and other productive activities of al kinds in rural areas.

The emphasis is on providing such facilities to small and marginal farmers, agricultural labourers, rural artisans and other small entrepreneurs in rural areas.

Other special features of these banks are

(i) Their area of operation is limited to a specified region, comprising one or more districts in any state.

(ii) Their lending rates cannot be higher than the prevailing lending rates of cooperative credit societies in any particular state.

(iii) The paid-up capital of each rural bank is Rs. 25 lakh, 50 percent of which has been contributed by the Central Government, 15 percent by State Government and 35 percent by sponsoring public sector commercial banks which are also responsible for actual setting up of the RRBs.

These banks are helped by higher-level agencies: the sponsoring banks lend them funds and advise and train their senior staff, the NABARD (National Bank for Agriculture and Rural Development) gives them short-term and medium, term loans: the RBI has kept CRR (Cash Reserve Requirements) of them at 3% and SLR (Statutory Liquidity Requirement) at 25% of their total net liabilities, whereas for other commercial banks the required minimum ratios have been varied over time.

Cooperative Banks

Cooperative banks are so-called because they are organized under the provisions of the Cooperative Credit Societies Act of the states. The major beneficiary of the Cooperative Banking is the agricultural sector in particular and the rural sector in general.

The cooperative credit institutions operating in the country are mainly of two kinds: agricultural (dominant) and non-agricultural. There are two separate cooperative agencies for the provision of agricultural credit: one for short and medium-term credit, and the other for long-term credit. The former has three tier and federal structure.

At the apex is the State Co-operative Bank (SCB) (cooperation being a state subject in India), at the intermediate (district) level are the Central Cooperative Banks (CCBs) and at the village level are Primary Agricultural Credit Societies (PACs).

Long-term agriculture credit is provided by the Land Development Banks. The funds of the RBI meant for the agriculture sector actually pass through SCBs and CCBs. Originally based in rural sector, the cooperative credit movement has now spread to urban areas also and there are many urban cooperative banks coming under SCBs.

Types of Securities in Banks

Security is what the borrower puts up to guarantee payment of the loan. Moreover security means immovable & chattel or personal asset or assets to which a lender can have recourse if the borrower defaults in the loan payment. Bankers, whenever advancing loans, first ask for the security to be put for the loans requested. Different types of securities are used depending upon the nature of the advances issued by the banks. A good security must be enough to cover the risk, highly liquid, free from any encumbrance, clean in ownership and easy to handle.

There are two types of banks security.

  • Personal Security
  • Non-personal security

  1. Personal security

If any banks client himself or third party is considered as security is called personal security. without receiving the immovable & chattel assets as security, if bank can receive any client himself or any person own self on be half of that client as security is considered as personal security. Bank will consider the person or third party only for then when he has enough social dignity and goodwill or a scope of applying law against himself in future or he is engaged in renowned business, government or recognized non government organization.

  1. Non-personal security

without receiving any client himself or any person own self on be half of that client as security , if bank can receive the immovable & chattel assets as security is considered as non-personal security. There are four types of non-personal security. such as-

  • Lien
  • Pledge
  • Mortgage
  • Hypothecation

The above four categories of non-personal security are given below with detail.

(a) Lien

The right of retain foods is known as lien. The lawful right of a lender to offer the guarantee property of an account holder who neglects to meet the commitments of an advance contract. A lien exists, for instance, when an individual takes out a vehicles advance. The lien holder is the bank that allows the advance, and the lien is discharged when the credit is forked over the required funds. Another kind of lien is a repairman’s lien, which can be appended to genuine property if the property proprietor neglects to pay a foreman for administrations rendered. In the event that the account holder never pays, the property can be sold to pay the lien holder. There are two types of lien:-

  • General lien: Here, Bank has the possess of the assets have been kept as security and bank can’t transfer the possession to another until the loan amount is being paid.
  • Special lien: Here, Bank has the possess of the assets have been kept as security and bank can transfer the possession to another on conditions is called special lien.

(b) Pledge

Here the possess of assets is to bank or loan provider, but the ownership is to borrower. After payment, bank transfers the possession of security assets to borrower. When a customer takes loan against jewels he pledges the jewel to the bank.  Similarly a customer availing loan on key cash credit basis pledges the  goods to the banker by keeping them in a godown under lock and key  control of the bank. Pledged goods are to be insured and the pledgee (banker) has to take reasonable care to protect the property pledged.

3. Mortgage

It is an interest in property created as security for a loan or payment of debt and terminated on payment of the loan or debt. A mortgage is a contract that permits a loan provider partially or fully to foreclose that security when a borrower is unable to pay the loan amount. Mortgage is applicable only for immovable assets and this is why it is called immovable property mortgage. There are many types of mortgage have been described below.

  • Simple mortgage: If the loan amount isn’t paid by borrower and legal step is taken against him or lender can purchase which security assets on the opinion of borrower is called simple mortgage.
  • Fixed mortgage: The borrower gives which property in black & white or in registering to the lender and if the loan is not paid in time, then legal possession of that security is gained by lender is called fixed mortgage.
  • Conditional mortgage: If the loan amount isn’t paid in time and without fulfilling the determined conditions, the which security is not sold or transfered is called conditional mortgage.
  • Floating mortgage: The possession right of which mortgage properly is belonged to borrower and only documents are submitted to loan provider is called floating mortgage.
  • Equitable mortgage: The documents of which mortgage property is kept to bank for a specific time period and possession is belonged to borrower and after exceeding the payment period bank try to gain the legal possession is called equitable mortgage.
  • Registered equitable mortgage: The ownership documents of which mortgage property is kept to lone provider with registration for a specific time period and possession is belonged to borrower is called registered equitable mortgage.
  • Use fructuary mortgage: The possession & consumption of which mortgage property is given to loan provider as loan providing till a specific time period and after exceeding that time period the belongingness of that property is leaved to borrower is called use fructuary mortgage.
  • English mortgage: The ownership of which mortgage property is to loan provider and possession or belongingness of that property is to borrower is called English mortgage. If borrower is fail to pay the loan amount then the possession power is automatically gone to loan provider.
  1. Hypothecation

It is pledge to secure an obligation without delivery of title or possession.

At last we can say that, at the modern banking sectors a great changes has been occurred in the categories of categories of mortgage.

Corporate Restructuring University of Mumbai BMS 4th Sem Notes

Unit 1 Corporate Restructuring: Introduction and Concepts {Book}

Corporate Restructuring, Historical Background, Meaning of Corporate Restructuring, Corporate Restructuring as a Business Strategy VIEW
Need and Scope of Corporate Restructuring VIEW
Planning, Formulation and Execution of Various Restructuring Strategies VIEW
Important Aspects to be considered while Planning or Implementing Corporate Restructuring Strategies VIEW
Forms of Restructuring:
Merger VIEW VIEW
Demerger, Reverse merger VIEW
Disinvestment VIEW
Merger Takeover/acquisition VIEW VIEW
Joint Venture (JV) VIEW VIEW
Strategic Alliance VIEW
Franchising and Slump sale VIEW
Unit 2 Accounting of Internal Reconstruction (Practical and theory) {Book}
Accounting of Internal Reconstruction VIEW VIEW
Need for Reconstruction and Company Law provisions VIEW
Distinction between Internal and External Reconstructions VIEW
Methods including alteration of Share capital, Variation of share-holder rights, Sub division, Consolidation, Surrender and reissue/Cancellation, Reduction of Share Capital, with relevant Legal provisions and Accounting treatments for same VIEW
Unit 3 Accounting of External Reconstruction (Amalgamation/ Mergers/ Takeovers and Absorption) (Practical and theory) {Book}
Accounting of External Reconstruction (Amalgamation/ Mergers/ Takeovers and Absorption) VIEW
In the nature of merger and purchase with corresponding accounting treatments of pooling of interests and purchase methods respectively VIEW
Computation and meaning of Purchase consideration and Problems based on Purchase method VIEW VIEW
Unit 4 Impact of Reorganization on the Company: An Introduction (Only Theory) {Book}
Change in the Internal Aspects on Reorganization: Change of Name and Logo, Revised Organization Chart, Communication, Employee Compensation, Benefits and Welfare Activities, Aligning Company Policies, Aligning Accounting and Internal Database Management Systems, Re-Visiting Internal Processes and Re-Allocation of People VIEW
Change in External Aspects on Reorganization: Engagement with Statutory Authorities, Revised ISO Certification and Similar Other Certifications, Revisiting past Government approvals, decisions and other contracts VIEW
Impact of Reorganization: Gain or Loss to Stakeholders, Implementation of Objectives, Integration of Businesses and Operations, Post Merger Success and Valuation and Impact on Human and Cultural Aspects VIEW

Financial Accounting University of Mumbai BMS 5th Sem Notes

Unit 1 Preparation of Final Accounts of Companies {Book}

Relevant provision of Companies Act related to preparation of Final Accounts VIEW
Preparation of Financial statements as per Companies Act VIEW VIEW
AS1 in relation to final accounts of companies VIEW VIEW
Unit 2 Underwriting of Shares and Debentures{Book}
Underwriting VIEW VIEW
Underwriting of Shares, Debentures VIEW
Underwriting Commission, Provision of companies Act. with respect to Payment of underwriting commission VIEW
Underwriters, Sub-underwrites, Brokers and Managers to issues VIEW
Types of Underwriting, Abatement Clause VIEW
Market, Unmarked and Firm-underwriting applications VIEW
Liability of the underwriters in respect of underwriting contract VIEW
Unit 3 Accounting of Transactions of Foreign Currency {Book}
In Relation to purchase and Sale of goods, Services, assets loan and Credit transactions VIEW
Computation and Treatment of exchange rate Differences VIEW
Unit 4 Investment Accounting (w.r.t Accounting Standard-13) {Book}
Investment Accounting for Shares (Variable income bearing securities) VIEW
Investment Accounting for Debentures/Preference Shares (fixed income bearing securities) VIEW
Accounting for transactions of purchase and Sale of investments with ex and cum interest prices VIEW
Finding cost of investment sold and carrying cost as per weighted average method VIEW
Columnar format for investment Account VIEW
Unit 5 Ethical Behaviour and Implications for Accounts {Book}
Introduction, Meaning of Ethical Behaviour in Accounts VIEW
Financial Reports: Link between law, corporate governance, CSR and ethics VIEW
Need of ethical behavior in accounting profession VIEW
Implication of ethical values for the principles versus rule-based approaches to accounting Standards VIEW
The principle-based approach and ethics VIEW
The accounting standard setting process and ethics VIEW VIEW VIEW
The IFAC code of ethics for Professional Accountants VIEW
Contents of Research report in Ethical Practices VIEW
Implications of unethical behavior for financial reports VIEW
Company code of ethics VIEW VIEW VIEW
The increasing role of Whistle-Blowing VIEW

 

Read More: https://indiafreenotes.com/oubcom-accounting-standards/

Strategic Marketing Management University of Mumbai BMS 5th Sem Notes

Unit 1 Introduction to Strategic Marketing Management {Book}
Marketing: Nature of Marketing, marketing as an art, Science and Business discipline VIEW
Marketing as a Value Creation process VIEW
Strategic Decisions: Nature of Strategy, The Marketing Strategy interface VIEW
Difference between Marketing planning and Strategic planning VIEW
Identifying the market: The five C Framework: Customer, Company, Collaborator, Competitor, Context VIEW
The 7 tactics of Marketing mix: Product, Service, Brand, Price, Incentives, Communication and Distribution VIEW
Business Model and Strategic Marketing Planning VIEW
Role of Business models in marketing management VIEW
Strategies for Developing a Business Model: Top-down Business Model generation, Bottom-up Business Model Generation VIEW
The G-STIC frame work for marketing planning: Goal-Strategy-Tactics-Implementation-control VIEW

 

Unit 2 Segmenting, Targeting, Positioning and Creation of Value in the context of Strategic Marketing: {Book}
Segmentation: Essence of segmentation VIEW
Factors to be considered while Segmenting VIEW VIEW
Key Segmenting Principles: Relevance, Similarity, Exclusivity VIEW
Identifying Target Customers VIEW VIEW
Factors to be Considered while Targeting VIEW
Targeting Strategies: One for all strategy, one for each strategy VIEW
Strategic Targeting Criteria: Target Attractiveness, Target Compatibility VIEW
Essential Strategic assets for Target compatibility: Business infrastructure, Collaborator networks, Human capital, intellectual property, Strong brands, established customer base, synergistic offerings, access to scarce resources and capital VIEW
Creating Customer Value through Positioning VIEW
Role of Strategic positioning VIEW
Strategic Positioning options: The Quality option, Value option, The Pioneer, A Narrow Product focus, Target Segment Focus VIEW
Strategies for Creating Superior customer value VIEW
Creating Company Value: Understanding Company Value: Monetary, functional and psychological value VIEW
Strategically managing profits: Increasing sales revenue-through volume, optimizing price, Lowering costs VIEW
Creating Collaboration Value: Meaning of Collaborators, Collaboration as Business process, Advantages and Drawbacks of Collaboration VIEW
Levels of Strategic Collaboration: Explicit, Implicit VIEW
Alternatives to Collaboration: Horizontal and Vertical integration, Managing collaborator relations VIEW
Gaining Collaborator power: Offering Differentiation; Collaborator size, Strategic importance, Switching costs VIEW

International Finance University of Mumbai BMS 6th Sem Notes

Unit 1 Fundamentals of International Finance {Book}
a) Introduction to International Finance:
Meaning/ Importance of International Finance, Scope of International Finance VIEW
Globalization of the World Economy, Goals of International Finance, The Emerging Challenges in International Finance VIEW
b) Balance of Payment:
Introduction to Balance of Payment, Accounting Principles in Balance of Payment VIEW
Components of Balance of Payments, Balance of Payment Identity VIEW
Indian Heritage in Business, Management, Production and Consumption VIEW
c) International Monetary Systems:
Evolution of International Monetary System, Gold Standard System, Bretton Woods System VIEW
Flexible Exchange Rate Regimes; 1973 to Present VIEW VIEW
Current Exchange Rate Arrangements VIEW
European Monetary System VIEW
Fixed & Flexible Exchange Rate System VIEW
d) An introduction to Exchange Rates: Foreign Bank Note Market VIEW
Spot Foreign Exchange Market VIEW
Exchange Rate Quotations, Direct & Indirect Rates, Spread & Spread VIEW
Cross Currency Rates VIEW
Factors Affecting Exchange Rates VIEW

 

Unit 2 Foreign Exchange Markets, Exchange Rate Determination & Currency Derivatives {Book}
a) Foreign Exchange Markets:
Introduction to Foreign Exchange Markets VIEW
Structure of Foreign Exchange Markets, Types of Transactions & Settlement Date VIEW
Exchange Rate Quotations & VIEW
Exchange Rate Arbitrage VIEW VIEW
Forward Quotations (Annualized Forward Margin) VIEW
b) International Parity Relationships & Foreign Exchange Rate:
Interest Rate Parity VIEW
Purchasing Power Parity VIEW
Fishers Parity VIEW VIEW
Forecasting Exchange Rates (Efficient Market Approach, Fundamental Approach, Technical Approach, Performance of the Forecasters) VIEW
Global Financial Markets & Interest Rates VIEW
Domestic & Offshore Markets VIEW
Money Market Instruments VIEW VIEW
c) Currency & Interest Rate Futures:
Introduction to Currency Options (Option on Spot, Futures & Futures Style Options) VIEW
Futures Contracts, Markets & the Trading Process VIEW VIEW
Hedging & Speculation with Interest Rate Futures VIEW VIEW
Currency Options in India VIEW

 

Unit 3 World Financial Markets & Institutions & Risks {Book}
a) Euro Currency Bond Markets:
Introduction to Euro Currency Market, Origin of Euro Currency Market, VIEW
Euro Bond Market (Deposit, Loan, Notes Market), Types of Euro Bonds VIEW
Innovation in the Euro Bond Markets, Competitive Advantages of Euro Banks VIEW
Control & Regulation of Euro Bond Market VIEW
b) International Equity Markets & Investments:
Introduction to International Equity Market, International Equity Market Benchmarks VIEW
Risk & Return from Foreign Equity Investments VIEW
Equity Financing in the International Markets, Depository Receipts; ADR, GDR, IDR VIEW
c) International Foreign Exchange Markets:
Meaning of International Foreign Exchange Market VIEW
FERA v/s FEMA VIEW
Scope & Significance of Foreign Exchange Markets VIEW
Role of Forex Manager, FDI v/s FPI, Role of FEDAI in Foreign Exchange Market VIEW
d) International Capital Budgeting:
Meaning of International Capital Budgeting, Capital Budgeting Decisions, VIEW
Incremental Cash Flows VIEW
Cash Flows at Subsidiary and Parent Company VIEW VIEW
Repatriation of Profits VIEW
Capital Budgeting Techniques:
Payback Period VIEW
Accounting Rate of Return VIEW
Internal Rate of Return VIEW
NPV VIEW

 

Unit 4 Foreign Exchange Risk, Appraisal & Tax Management {Book}
a) Foreign Exchange Risk Management:
Introduction to Foreign Exchange Risk Management, Types of Risk, Trade & Exchange Risk VIEW
Portfolio Management in Foreign Assets VIEW
Arbitrage VIEW VIEW VIEW
Speculation VIEW VIEW VIEW
b) International Tax Environment:
Meaning of International Tax Environment, Objectives of Taxation, Types of Taxation VIEW
Benefits towards Parties doing Business Internationally VIEW
Tax Havens, Tax Liabilities VIEW
c) International Project Appraisal:
Meaning of International Project Appraisal VIEW
Review of Net Present Value Approach (NPV) VIEW
Option Approach to Project Appraisal VIEW
Project Appraisal in the International Context VIEW
Practice of Investment Appraisal VIEW

 

Innovative Financial Services University of Mumbai BMS 6th Sem Notes

Unit 1 Introduction to Traditional Financial Services {Book}
a) Financial Services: Concept, Objectives/Functions, Characteristics, VIEW
Financial Service Market VIEW
Financial Service Market Constituents VIEW VIEW
Growth of Financial Services in India VIEW
Problems in Financial Services Sector VIEW
Banking VIEW
Non-Banking Companies VIEW
Regulatory Framework VIEW VIEW VIEW
b) Factoring: Introduction, Types of Factoring, Advantages and Disadvantages of Factoring VIEW
Factoring Theoretical Framework, Factoring Cost VIEW
Factoring in India VIEW
Factoring v/s Forfaiting VIEW
Working of Forfaiting, Benefits and Drawbacks of Forfaiting, Practical Problems VIEW VIEW
c) Bill Discounting Introduction, Bill Discounting Framework VIEW VIEW
Bill Market Schemes VIEW
Factoring V/s Bill Discounting in Receivable Management VIEW

 

Unit 2 Issue Management and Securitization {Book}
a) Issue Management Introduction VIEW
Intermediaries Introduction VIEW VIEW
Merchant Bankers/ Lead Managers VIEW VIEW
Underwriters VIEW VIEW VIEW
Bankers to an Issue, Brokers to an Issue VIEW
b) Stock Broking: Introduction, Stock Brokers, SubBrokers, Foreign Brokers VIEW
Trading and Clearing/Self Clearing Members VIEW
Stock Trading (Cash and Normal) VIEW
Derivative Trading VIEW
c) Securitization: Definition, Securitization v/s Factoring, Features of Securitization, Pass Through Certificates VIEW
Securitization Mechanism VIEW
Special Purpose Vehicle, Securitisable Assets, Benefits of Securitization, New Guidelines on Securitization VIEW

 

Unit 3 Financial Services and its Mechanism {Book}
a) Lease and Hire-Purchase:
Leases Meaning, Types of Leases: Finance Lease, Operating Lease VIEW
Advantages and Disadvantages of Leasing VIEW
Leasing in India, Legal Aspects of Leasing VIEW
Definition of Hire Purchase VIEW VIEW
Hire Purchase and Installment Sale Characteristics, Advantages of Hire Purchase, Problems of Hire Purchase VIEW
Hire Purchase and Leasing VIEW
b) Housing Finance: Introduction, Housing Finance Industry, Housing Finance Policy Aspect, Sources of Funds VIEW
Market of Housing Finance, Housing Finance in India; Major Issues VIEW
Housing Finance in India; Growth Factors, Housing Finance Institutions in India VIEW
National Housing Bank (NHB) VIEW
Guidelines for Asset Liability Management System in HFC, Fair Trade Practice Code for HFC’s, Housing Finance Agencies VIEW
Venture Capital: Introduction, Features of Venture Capital, Types of Venture Capital Financing Stages VIEW
Disinvestment mechanisms, Venture Capital Investment process, Indian Scenario VIEW

 

Unit 4 Consumer Finance and Credit Rating {Book}
a) Consumer Finance: Introduction, Sources, Types of Products, Case for and against Consumer Finance VIEW
Consumer Finance Practice in India, Mechanics of Consumer Finance, Terms, Pricing VIEW
Marketing and Insurance of Consumer Finance VIEW
Consumer Credit Scoring VIEW
b) Plastic Money: Growth of Plastic Money Services in India VIEW
Types of Plastic Cards:
Credit card, Debit Card VIEW VIEW
Smart card VIEW
Add-on Cards VIEW
Performance of Credit Cards and Debit Cards VIEW
Benefits of Credit Cards, Dangers of Debit Cards VIEW
Prevention of Frauds and Misuse, Consumer Protection. Indian Scenario VIEW
Smart Cards: Features, Types, Security Features and Financial Applications VIEW
c) Credit Rating Meaning, Origin, Features, Advantages of Rating, Regulatory Framework, VIEW
Credit Rating Agencies, Credit Rating Process, Credit Rating Symbols VIEW
Credit Rating Agencies in India, Limitations of Rating VIEW

 

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