Q.

What are the issues and challenges that arose when JSW moved
away from a traditional distribution model (dealers) to an organized
retailing format of franchising? Also, discuss the organizations
response to these concerns and challenges?
A. JSW Steel has developed new DC for their own product that is core
competent of company which provides huge market coverage for JSW Steel.
There are some suggestions for better control of Distribution channel
management.
Suggestions
1 JSW need to establish their branding most powerful and
separated for effective supply chain management.
JSW created their own a new model in the steel industry that is
Shoppe. And its the core competent for JSW for better steel supply in
the market. And it is completely implemented in the market. But there
are new player came-up in the market with the strategy of same model
(Tata steel, Essar steel). As per same model competition, a (Tata steel)
reputed company gain the market share of steel Shoppe, due to their
market value raise-up.
JSW can target the dealers in the southern states where there market
share is more than 40 percent. Once the concept gets acceptance,
they will find it easy to setup outlets in the northern and eastern side
and can create their brand name.

2 JSWs challenge in incurring the cost by setting up the outlets

in different location of the country.
In establishing JSWs own outlets, they have to incur cost around Rs 75
lakhs to Rs 125 lakhs per outlet. Therefore JSW had decided to share
the cost with the dealers. They were going to bear the cost of the
infrastructure and elements within the outlets they going to establish.
3 As per the market survey of JSW, it has been found that most
of the dealers are not happy with the supply from steel
manufacturer.
The challenge for JSW is to have a steady supply of steel which will
ensure the dealers that the company is looking forward to build
customer relationship.

JSWs team has set up the target of supplying the 1000 tons per month
for each shoppe.

4 Skeptical concerning legal issues relating to the franchising

arrangements by some of the existing dealers.
If the number of existing agreeing to the model remained less than 50
the company would issue fresh tenders to new participants.
5 JSW need to implement system in place to measure the
performance of the dealers, and therefore no basis upon which
to determine their incentives.
In the JSW steel Shoppe model there are major lacks in dealer
performances measurement and the most critical issue was that there
was no system in place to measure the performance of the dealers,
and therefore no basis upon which to determine their incentives. This
lack of transparency was also felt by the dealers.