Day-8:Nirav Turned the Tables today......

The day started with Strategic Financial Management where we discussed Calpine Corporation. Calpine wanted to grow rapidly in the power sector by investing in new plants. It had 3 options for raising funds.

1.Project Finance(Making a special Purpose Vehicle for each project and borrowing from bank)

2.Corporate Finance(raising money from the bond market by issuing a fixed income bond)

3.Revolving Finance(Having a revolving finance arrangement with a bank)

We discussed the advantages and disadvantages with each of the options and also calculated the cost of borrowing in all the 3 options. We finally came to a conclusion that Revolving Finance option was the best option for Calpine at that point of time as the Project Finance had many restrictive covenants attached to it. This could hamper its strategic objective of rapidly growing in the power sector of US. Also as the Bond rating of Calpine Corporation was BB there was high risk of it being downgraded if it issued a bond. Revolving Finance was very attractive as it has the qualities of both Project Finance as well as Corporate Finance. Like Project Finance it can avail the loan from the bank for a portfolio of projects(rather than 1 project) and can re-borrow again once it had re-payed the previous loan to fund new projects. Also like Corporate Finance there are no restrictive covenants which allowed Calpine Corporation to continue with its strategy.

The next session was on Consumer Behavior and I was really engrossed in the discussion which we left yesterday on the Retail sector of India where the players were Subhiksha, Reliance Fresh, Future Group's Fair price stores, RPG Groups Spencer Retail. We discussed the positioning of each of these players in the retail sector and the strategy followed by them to support their positioning. We also concluded how Subhiksha and Spencer failed to achieve its objective as they did not target any particular Market segment and did not communicate any strong value proposition through which it can have loyal customers. A table to give you a brief idea about the course is shown below.

After the class I and Nirav decided to play TT. I am happy to share that Nirav turned the tables today and won 2 games (the final score was 4-2). However the most enjoyable moment for Nirav and disappointing for me is when I challenged Nirav and told him that I shall beat him under 10. I was doing very well in the first half of the game and was leading 11-3. But Nirav took away the match from there on to finally win it 21-17. He not only crossed the 10 mark but also beat me. I actually learnt a lesson that there is a thin line between attitude and arrogance which I crossed today and as a result paid the price. But this has also instigated me to play well as now I have a new challenge which was largely missing before. I would update you with the scores of our game at regular intervals. Nirav if you are reading this please prove to me it was not a flash in the pan.

Retail Store	Positioning	Strategy to support the Value Proposition
Subhiksha	“Shopping that allows the consukmers to save so that they can spend the savings elsewhere to improve quality of life”	· Prices that is lower than the Kirana stores with whom they were competing initially. · No frills shopping and distributing the margins to the consumers. · Comparision of prices and the final savings shown with every bill. · Store personnels helping consumers with their buying decisions that increase their savings.
Reliance Fresh	Positioned as a store primarily providing fresh vegetables at much lower prices as compared to the local hand-cart or small shop vendor.	· Buying vegetables directly from farmers and selling them in the retail store making the middlemen redundant. · Products limited only to food and convenience. · Only fresh vegetables and fruits kept. The rest of the vegetables were sold to vendors or consumers at a very low price at the end of the day. · Each store having catchment area of 2 kms thereby positioning itself as a substitute of hand-cart or small shop vendors.
Futures FP	Postitioned itself as a ‘frugal’ store that provided the best ‘value for money’	· Prices 10% lower than competitors in National brands and 20% lower in Private brand. · Shops size that were small and resemebled ration shops. · Merchandize stocked on the floor or on purely functional shelves in the same cartons in which they arrived. · Charging consumers for plastic bags . · Tagline”Saare Jahan se Saasta”. · Stocking only handful of brands.
Spencers	Positioned itself as an upscale Retail store catering towards the need of lifestyle oriented consumers who were wiling to pay extra for Superior quality.	· Having international brands with high quality. · Prices that are higher than other retail stores but are cheaper than small retail shops keeping the same brands. · Trendy and sophisticated stores with all the amenities like AC, Wash rooms, and Drinking water facillities. · Charging Parking fees that makes people from low income group reluctant to shop. · Having upscale eating and beverages joints that adds to the shopping experience of the consumer.