Fruits and Vegetables Sourcing at SMHC: Benefiting from Perfect Competition?
On August 24th 2015, Seetha Sivakumar (Seetha) and Malini Raj (Malini) – friends, ex-colleagues and partners in their new entrepreneurial venture – were sitting at Seetha’s residence in Hyderabad, discussing the plans of their upcoming food outlet – SeeMa’s Home Cuisine (SMHC). They had plans of launching their food joint on October 1st 2015. In the run up to the launch of their new venture, the two partners held meetings every day, discussing and debating on the various aspects of their business.
They visited several restaurants, met the restaurant owners and found out the business dynamics of restaurant business along with Critical Success Factors (CSF). The CSF on the cost side were the raw materials (fruits, vegetables, cereals, spices, oils, chicken, mutton, etc.) and the cost of chefs. The revenue side CSFs, they identified, were the quality of food and service and the wholesome experience. Accordingly, they planned out their investments and lined up people and resources.
While there was an agreement on everything else, they could not reach a consensus on procuring fresh and cost-effective fruits and vegetables. During their meeting on August 24th, the two business partners had an interesting discussion on the Rythu Bazars1, the source of fruits and vegetables........
Seetha and Malini’s Entrepreneurial Venture
Seetha and Malini had been colleagues at one of leading private sector banks for nearly 15 years. All these years, one thought had constantly surfaced in their discussions – the desire to start their own entrepreneurial venture. Being enthusiastic about cooking and connoisseurs of fine dining, they often ideated they could set up their own kitchen or a restaurant. By March 2015, the idea had matured enough for the duo to take the entrepreneurial plunge.............
Sourcing Fresh Fruits and Vegetables
Seetha had been shopping from bigbasket.com (bigbasket) for her personal requirements for more than a year. Having had a good experience with bigbasket, she thought that SMHC could purchase groceries from there. Malini on the other hand sourced fresh fruits and vegetables for personal requirements from myhomefarm.in (myhomefarm)..............
Rythu Bazar: Perfectly Competitive Market?
Seetha and Malini liked the idea of sourcing their stock of fruits and vegetables for SMHC from one of the Rythu Bazars in Hyderabad.
Rythu Bazars were started in 1999 with the aim of facilitating the sale of farm produce by the farmers directly to the consumers at reasonable rates fixed every day, thereby eliminating the role of the middle men.............
Assignment Questions
I. What do you understand by perfect competition? What are the distinguishing characteristics of a perfect competition? Illustrate the same with Rythu Bazar’s vegetable market.
II. Why do you think a seller in a perfect competition is called a price taker? Can the seller make normal profits or abnormal profits?
III..........................
Exhibits
Exhibit I: Large Number of Buyers and Sellers Selling Homogenous Products in a Rythu Bazar
Exhibit II: Prices of Fruits and Vegetables in Rythu Bazar
1 Rythu Bazars are farmers’ market run by the State Governments of Telangana and Andhra Pradesh for small farmers with small landholdings.