Wal-Mart and Bharti: Transforming Retail in India Harvard Case Solution & Analysis

WAL-MART AND BHARTI: TRANSFORMING RETAIL IN INDIA

Introduction

The Indian retail sectors are the one of the fastest developing sectors in the world. The retail industry is the most booming industry in the Indian economy with the changing demographics and a growth in the excellence of the lifestyle of the urban people. The India is on its way to convert into one of the most potential markets of the domestic as well as for the global retailers with the growing economy, rising awareness and improving income dynamics.

The Indian retail sector is distributed into two groups organized and unorganized. The unorganized includes the traditional and low cost retailer while organized includes officially licensed retailers. It was forecasted that the Indian retail sector will be expanded to US$637 billion. The customers in India are starting to demand the organized retail experiences similar to those in the developed countries, created opportunities for a number of different players to enter the retail market.

In order to enter the Indian retail market Wall Mart did a joint venture with the Bharti, which was a market leader in the Indian telecom market. As the foreign players with the several brands are not allowed by the regulatory environment to direct sale to the customers. A joint venture between Bharti Enterprises and Wal-Mart include two agreements that are wholesale cash-and-carry and back-end supply chain management operations in India.

Within the joint venture agreement, the Bharti will operate the stores whereas the procurement, inventory management, marketing and logistics The Wall-Mart has faced several challenges after entered into the Indian Retail sector that created difficulties. The new foreign players in order to enter the market need a local partner, according to the regulations of the government.

Literature Review

There were many studies were conducted on the retailing and foreign direct investment in India. The retailing industry in the India is growing largely with the escalation in the number of the retail companies and numerous foreign companies are willing to invest in this sector. The retail sector of India is on the high growth route and is anticipated to increase by more than 27 percent over the following five to six years. The revolution is taking place in the Indian retail market. The increase in the demographic, fast expansion of shopping malls, increase in brand conscious customers and the other inspirations from the western countries are shifting the face of the retail industry of the India. The gross domestic product (GDP) is one of the main indicators that is used to measure the health of the economy of the county. The GDP growth of the India in the year 2006-2007 was 9.4 percent that was the highest over the period of 18 years showing the growing economy of the country (Chopra, 2006).

The international retail companies such as Wal-Mart entered into the emerging market of the India due to the growing economic conditions of the country. The increasing buying power of the middle class attracts many foreign investors to finance in the country. AS the increase in the flow of information, the people of India are becoming more westernized. Furthermore, as of the year 2006 the Wal-Mart contributed to only 4% of the total gross domestic market of $322 billion in Indian retail market. The Wal-Mart struggled in the Indian retail market due to the regulations by the government on the foreign direct investment. The legislations upon the market entrance of the foreign entity create complexities for the Wal-Mart to come into the Indian industry. In the year 2007 Wal-Mart recognized the partnership with the Bharti to support its “cash-and-carry and supply-chain management”. The partnership suffered from many problems in order to stay in the retail market in India. These risks include the continuous changing political environment, completion from the local firms and cultural issues that created different experiments for the Wal-Mart in the retail industry (Gupta, 2012).

The lack of the distribution networks in India make it difficult for the Wal-Mart to reach the buyer and to distribute the products locally. India has the one of the largest network of the roads, but still under development. These poor road conditions affect the efficiency of the company and increases the production cost. Similarly, the country has limited physical infrastructure system and also the port system that does not utilize well by the country. The Wal-Mart suffered challenges in the Indian retail market, but still the Partnership amongst Bharti and Wal-Mart is one of the prosperous developments of the international retail market in India (Dipankar, 2007).

The shifting competition from the unorganized retail companies in India and the shortage of the infrastructure created the challenges for the foreign direct investment. The foreign companies operated in India, including Wal-Mart faced these types of various challenges in order to expand their operation in the retail industry of India...........

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November 27, 2006, Bharti Enterprises Ltd ("Bharti"), one of the major business groups in India, and the U.S. retail giant Wal-Mart Stores Inc ("Wal-Mart"), entered into a joint venture with equal partnership for both companies . This partnership will give Wal-Mart access to the highly regulated Indian retail market, which is estimated at U.S. $ 320 billion. Bharti will own the retail stores under the Wal-Mart franchise and the companies will work together on the Indian retailers that are available to foreign investors, such as logistics and accounting-carry. It is a partnership between the U.S. retail giant and one of the most successful corporate houses in India, is expected to bring a dose of modernity in the Indian retail landscape. This may be questioned, however, Wal-Mart would have to deal with the opposition it faces with local shop owners and civil rights groups given its poor record in relation to social responsibility. In addition, the transport network of the country was very poor, and the question remained as Wal-Mart plans to implement its supply chain management model in India. "Hide
by Indranil Bose, Shilpi Banerjee, Edo de Vries Robbe Source: University of Hong Kong, 18 pages. Publication Date: August 27, 2009. Prod. #: HKU845-PDF-ENG

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