Big Bazar/Reliance Fresh competitive advantage, Strategy and its impact on capital budgeting decisions.

Scope Competitive Advantage: Competitive advantage is a relative advantage one

business has over another that is sustainable and translates into a benefit that is important to target customers. In last few years retail sector has hailed as a new future, taking place of the long existing grocery stores. For gaining competitive advantage of a retail store over the other, the store must be sustainable for a long time. Sustainability can be attained over short run, but advantages always evaporate over time. This evaporation is due to paradigm shifts and due to competitors gaining or overtaking the advantages. Sustainability depends upon durability, transparency, transferability, and replicability.

Strategy:
a. b. c. d. e. Reduce supply chain cost Improving the responsiveness of the supply chain. Managing demand volatility and variability. Customer: Predict customer behaviour based on demographics and purchasing habits. Product: Improves product, positioning, identify product associations for promotions and plans shelf positioning. f. Channel: campaign management, analysis and design for different channels. g. Conducting consumer surveys to limit their risk and overcome their concerns.

Impact on Capital Budgeting Decisions:

The Net Present Value (NPV) criterion of project evaluation has traditionally been accepted as the theoretically superior capital budgeting technique due to its concordance with the principal of value maximization. Several strategic decisions like: 1. Strategic growth opportunities, 2. the fact that management can discontinue the project before the end of its economic life, 3.the arrival of information throughout the life of the project, and 4. management's option to temporarily shut down the production process are the criteria behind calculation of NPV of a project which determines the levels of real investment and its effects on economic growth.