CASAS BAHIA Summary of Case Study

Summary of CASA BAHIA Case Study

Institute Of Management Sciences | Peshawar.

BACKGROUND: In 1952, after serving Nazi concentration camp, Samuel Klein left his homeland to start a new life in Brazil. Samuel Klein was basically a Polish immigrant who supported his family. Klein started his career as a peddler selling products to the immigrants from the Brazilian southeast. He started selling blankets, bed linens and bath towels. And with the passage of time, in 1958, Samuel Klein founded Casa Bahia in Sau Caeteno do Sul Sao Paulo. Nowadays, Casa Bahia is the mega retail chain all over Brazil. It deals in furniture , appliances and electronics. The company owns more than 500 stores all over the country. Employees range to 20,000 and serve more than 31 million customers.

MOTIVES TO PENETRATE BOP: In 1952, Brazil’s population was divided into affluent class and lower income group. Out of which 84% was considered as the lower income class and consequently they were in the Bottom of Pyramid. Samuel started his career to serve that portion of lower class, by providing them credit purchase with lower interest rates. At the level of BOP in Brazil, main customers of Sameul were maidservants, cleaners, cooks, independent street hawkers and the construction workers. Samuel klein entered into the BOP market with such a smart strategy that huge stores like Wall Mart and Sears failed to do so. Samuel has built Casa Bahia such successful and sustainable business serving lower income Brazilians. Today, Casa Bahia is leveraging Samuel Klein’s traditional idea with modern concepts. Fully focusing on the customer satisfaction. Casa Bahia is not only selling products, but it provides value, the satisfaction and consequently leading to fulfilling of dreams of poor Brazilians.

SALES SRUCTURE & MARKET : Casas Bahia enjoying the retail market share of 45%, 25% to furniture, 70% goes to home appliances, and 5% to miscellaneous goods. The miscellaneous goods comprises of clothing, bicycles, etc. In the line of competitors, Casa Bahia is holding 21% of market share which is huge one so far.

CASAS BAHIA BUSINESS MODEL : THE CREDIT FINANCE DEALING: The main smart idea to run the business of Casa Bahia was the concept of credit financing to the less income holder. Consequently, 90% of revenue was generated from the credit sales. Whereas 10% was from the on the spot cash sales. 90% refers to the C, D & E portion of the BOP and 10% refers to the A & B portion. The Credit Analysts: The credit analysts plays an important role in analyzing the credit worthiness of its customers. The client receives a credit limit according to his total income. Whereas all the information collected from customer is kept confidential. It also maintains records on the personality traits of its customers for the future references. The information evaluates the customer credit worthiness to them. Rate of interest is varied to different periods with the time being. If SPC show the positive response, the customer is then allow to go for purchases, and if it gives negative response then, no transaction is made. A proof of income is required if purchases are over $600. Leading to Cross Selling: The sales to the C,D & E are mainly through installments. The Cross Selling Method is adopted by Casas Bahia to boost the sales as well as to facilitate the poor more and more, so that they can find their dreams to be fulfilled in their affordable range. Style of Marketing: The marketing style of Casa Bahia is fabulous one. Casa Bahia entered in a new market having a sense of market leader. The company invests 3% of its total revenues on advertisement. The suppliers supply commodities on lower prices, as a result, Casa Bahia introduce its merchandise on lower prices to its customers. The strategic location also plays an important role regarding marketing. Human Resource management: Casa Bahia approximately having 20,000 employees. Up to 1996 human resource activities such as hiring, firing, training, etc were done by the corporate level. But know onwards, according to the expansion business, these activities are been done by the stores level handlers, except for the special training. However all the policies are still made and centralized at headquarter.

All of the employees are well trained, well groomed, well dressed and motivated. They have a high dedication towards customer satisfaction backed by a high degree of ethics and values.

THE 4 Ps OF CASAS BAHIA: Production: Durable quality items are exhibited such as home appliances, furniture and electric appliances, etc. Price: The reasonable prices are offered. That is how, the pricing of Casa Bahia leads to aggressive marketing and large market share which ultimately leads them to market leaders. Placement: Casa Bahia has taken the ownership of the retail stores in country. These are at easy excess to the customers as well as to their employees working with them. The strategies of placement of Casa Bahia give it a unique strategic position in market. Promotion: The promotion is done by endorsement of the products of Casa Bahia. The television adds, word of mouth, posters exhibition at stores, cross selling all are included in promotion. About 3% of total revenues are being invested on advertisements.

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Timely finance terms are being changed. Sales on installment that motivates BOP for more purchasing. Unemployment insurance introduction. Debts pardoned for millions of customers. Cross selling is the premier smart tool. The company has low interest rates. The strategic locations of stores are convenient. Ultimately targeting lower income group. Having strong relationships with customers. Exposing positively lower income group towards luxury items and given equal opportunity.

 The idea of credit financing among lower income holder.

CRITICISM AGAINST CASAS BAHIA:  The price fluctuation gives wrong image.  Casa Bahia faced criticism by exploiting lower income group through the branded products in easy installments.  Casa Bahia exploiting the people of Brazil ultimately involving them to purchases more and by putting the desire for luxury items in their minds.  Just another way of taking out money from the poor people.  It is cheating poor by involving deeper in interest, being perceived lower by poor  An expression of wrong image of the path “fulfilling dreams of poor” by putting more and more burden of interest on them.  Playing with the poor people’s feelings and psychology indirectly.

CONCLUSION: In my view this company is doing great job because whatever a person feels and thinks and try to facilitate others just because they gone through by themselves. They are in a way trying to decrease the level of frustration and devaluing poor people. It is only Casa Bahia that facilitates poor by providing products in installments, and they boost their purchasing power through this great strategy. Casa Bahia even pardoned the credits given to its millions of customers and included them again in this great retail chain. This company indirectly kept the consumer rate highly active, spending even when economy face slump.