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Annexure-V- Cover Page for Academic Tasks

Course Code:ECO515 Course Title: Managerial Economics

Course Instructor: Dr. Tushinder Preet Kaur, Akriti Gupta

Academic Task No.: 3 Academic Task Title: Walmart entry in India: Decoding the
business strategies
Date of Allotment: 03-09-2018 Date of submission: 15-10-2018

Student’s Roll no: RQ1841B41, RQ1841B42, RQ1841B43, RQ1841B44

Student’s Reg. no: 11804279, 11808205,11810654, 11805987
Evaluation Parameters: (Parameters on which student is to be evaluated- To be mentioned by students as
specified at the time of assigning the task by the instructor)

Learning Outcomes: To analyze and determine the various business strategies of an International
Retail Venture. Also to understand the Retail Management System.

Declaration:

I declare that this Assignment is my individual work. I have not copied it from any other student’s
work or from any other source except where due acknowledgement is made explicitly in the text,
nor has any part been written for me by any other person.

Student’s Signature: Pronoy Jyoti Rajkhowa, Simran Kaur, Smruti Ray, Priyanka

Evaluator’scomments (For Instructor’s use only)

General Observations Suggestions for Improvement Best part of assignment

Evaluator’s Signature and Date:

Marks Obtained: Max. Marks: …………………………

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Index Page No.

Introduction 6-7
SWOT Analysis 8
Entry of Walmart in India 9
Overview of Indian Retail Industry 10
Walmart and Flipkart deal 11
Review of Literature 12
Controversies 13
Strategies 14
Conclusion 15
References 16
Peer Rating 17
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Walmart Entry in India:

Decoding the Business
Strategies
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INTRODUCTION

Walmart (NYSE WMT) is a retail company founded by Sam Walton in 1962 headquartered in
Bentonville, Arkansas. It is one of the world's largest companies, following Exxon Mobil.
Current CEO and president of the company is Doug McMillon and of international division is
Judith McKenna. Wal-Mart stores are large departmental stores that sell many different things.
There are more than 8,000 Wal-Mart stores around the world, and over 2 million people work
for Wal-Mart. Walmart has 11,718 stores and clubs in 28 countries, working with 59 different
names as of January 31, 2018 .The company operates under the name Walmart in the United
States and Canada and as Best Price in India. Walmart was the largest U.S. grocery retailer in
2016, and 62.3 percent of Walmart's sales of US$478.614 billion came from U.S. operations. It
is a family-owned business, provides services to public. Over 50 percent of Walmart is owned
by heirs of Sam Walton through their holding company, Walton Enterprises, and also through
their individual holdings.

Walmart's operations are organized into four divisions:

➢ Walmart U.S.
➢ Walmart International
➢ Sam's Club
➢ Global E-Commerce

The company provides services of retail formats throughout these divisions including
supercenters, supermarkets, hypermarkets, warehouse clubs, cash-and-carry stores, furnishing
home, specialty electronics, restaurants, apparel stores, drugstores, convenience stores, and
digital retail. As of January 31, 2018, Walmart's international operations comprised 6,360 stores
and 800,000 workers in 26 countries outside the United States. There are wholly owned
operations in Argentina, Brazil, Canada, and the UK. With 2.2 million employees throughout
the world, this company is the largest private employer in the U.S. and Mexico, and one of the
largest in Canada. In fiscal 2016, Walmart's international division sales were US$123.408
billion, or 25.8 percent of total sales. Walmart's investments outside North America have
accorded with mixed results: its ventures in the United Kingdom, South America, and China are
highly successful, whereas in Germany and South Korea it failed.
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Vision of the company -

"Our vision is to provide good quality and services to our customers, while remaining the market
leader and striving daily to be the most admired company".

Mission of the company -

"To provide quality products at an everyday low price and with extended customer service...
always"

Slogan of Walmart:

"Save money, live better"

Culture of Walmart company:

➢ Good quality of product at low prices on everyday basis

➢ Maintain the esteem for each and every individual
➢ Services to their customers
➢ Endeavour for excellence

Facts of retail in India:

➢ Total retail RS 20 lakh crore that is Rs 20000 billion

➢ Modern retail size Rs164000 crore i.e. Rs 1640 billion constitutes to 8.2 % of total retail.
➢ Employment in modern retail- 10 direct employment in retail and 100 indirect
employment per Rs 1 crore i.e. Rs 10 million sales
➢ total employment in modern retail - 1.65 million
➢ dependence on modern retail - over 1.8 crore people
➢ estimated indirect employment in modern retail- 1.65 crore
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SWOT ANALYSIS:

It is anticipated by researchers that Retail Industry in India is going to be twice in worth from
US dollar 330 billion to US dollar 640 billion by 2015. Also India has topped as the most
attractive market for retail investment in the annual Global retail Development Index (GRDI)
for the third year in a row. Walmart being the retail company is trying to expand business in
Asian continent and the most special target is India. Recently Walmart had also acquired
McLean.

In 2007 Walmart announced its first entry in India, although it had magnificent moto to have its
stores all over across the country, but it seemed totally different after a decade later.

In 2018, Walmart acquired India's largest e-Commerce firm Flipkart for $16 billion (Rs 1.06lakh
crore). Due to this deal American retailer now will have direct approach to the market that is
expected to be worth dollar 200 billion by 2026.

Walmart’s president said India is one of the most attractive retail markets in the world given its
size and growth rate in their investment is an opportunity to partner with a company that is
leading the transformation of e-commerce in the market.
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HOW DID WALMART ENTER INIDIA?

Policy says Indian government cannot allow foreign multi-plant monopoly mammoth just like
Walmart to open stores in the country on their own which is why the American retailer was
involved in joint venture with Telecom major Bharti Enterprises to create Bharti- Walmart in
2007. Walmart had a simple plan that it's cash and carry stores would supply to Bharti retail
which would be handling consumers. Infrastructure and Technical Support was also provided
by Walmart at least till the time India allows foreign retailer to setup fully-owned retail stores.
Kirana stores, Pantaloons, Trent, Landmark, AV Birla Group etc. are the retail competitors in
India. The merger Bharti- Walmart's first Store came in Amritsar in 2009 and within the next 8
years 20 more stores were added by Walmart there. But still foreign retailers are not allowed to
invest fully in opening supermarkets in India. However they are allowed to invest in e-commerce
marketplaces which can sell goods from various sellers to consumers.

THE DOWNFALL

In 2010 the company disclosed saying that it has spent $25 million by influencing the Indian
authorities to get open for Investments in retail sector which caused much disturbance in the
market. Also back in 2012 there was a bribery scandal in Mexico. Walmart had extended the
investigation of the scandal to India, China and Brazil. But these allegations cum controversies
did not help any retailer's image. In 2013, the probe led to the suspension of top officials in
Indian company, which also included its chief financial officer. Not only this, it also led to
cleave ties with its local partner, Bharti group.

But in defense of this, Walmart didn't lose hope. "They had already invested way too much to
just pack up and leave". They knew "India was the next Big market for the company and they
wanted to participate in a big way" - shared by former anonymous employee of the company.
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OVERVIEW OF THE INDIAN RETAIL INDUSTRY

The retail industry in India is divided into two sectors:

❖ Unorganized sectors
❖ Organized sectors

Organized retailing is the trading activities that are being tackled by the retailers - licensed and
are liable to pay taxes, like the sales and income tax. The organized retailing is inclusive of the
hypermarkets that are retreated by the corporate and the retail chains that are privately owned.
Retailing which is unorganized includes formats of retailing that is of low cost. That compiles
of the kirana shops, located in the local areas, general stores that are handled by the owners and
the cigarette or paan shops, convenience stores and the carts pulled by hand, the vendors on the
pavement etc. there are new drifts coming up in the retail sector of India and this sector has
growth rate of over 45 percent which amounts to the three year rate of growth and therefore it
is one of the sectors with swift growth among all the other sectors (India Retail, 2008). There
are new and innovative designs like the departmental stores that are coming into existence and
replacing the specialty stores, supermarkets, hypermarkets etc. Particularly in the metros, malls
in the western style are opening and these malls are now extending to cities in the second chime
and promise the Indian consumers a shopping experience that is unmatchable (Johnson & Tellis
2007). There is a high degree of decentralization in the retail sector of India as over 97 percent
of the businesses is being run in the country by the retailers who are unorganized. Hence
organized retailing in India is still at its inception even though there are lot of trials that are
being made to maximise to its relative proportion to over 10 percent by the end of the year 2010.
This would also bring about astounding opportunities for the aspiring young players. This sector
also serves as the largest resource for employment next only to the agricultural sector and also
is drilled deeply into the rural parts of India. This sector is also convoluted in the generation of
over 10 percent of the total GDP of India (Das, 2006).
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WALMART AND FLIPKART DEAL

• Walmart, the largest e-commerce giant acquired a controlling stake of 77% in Flipkart
(India’s largest e-commerce company by market share) by investing $16 Billion.
• With this deal India will now have Walmart, Amazon and Paytm Mall as the key players to
compete in the Indian e-commerce market
• This deal will help Flipkart leverage Walmart’s omni-channel retail expertise and general
supply chain knowledge. Walmart aims to extend their B2B sales across India through this
acquisition.
• Walmart has a strong global physical presence in retail space but lacks in e-commerce. This
deal can spur their online presence in Indian markets.
• Both Flipkart and Walmart shall maintain separate brands and operating structures.

Why did Walmart acquire Flipkart?

• As per Morgan Stanley, India’s online retail is set to grow by 1,200% to $200 billion (30%
CAGR) by 2026 from $15 billion in 2016. Average wages are rising by 2% annually and
internet penetration is also growing as data costs are becoming more competitive. This
makes Indian e-commerce space lucrative.
• Flipkart has the largest market share in e-commerce, so with this acquisition Walmart can
achieve next leg of growth in India with Flipkart’s 175 million registered user base.
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REVIEW OF LITERATURE
The small towns can lose almost half of their retail trade within ten years of a Walmart store
opening. He compared the changes to previous competitor’s small town shops have faced in the
past – from the development of the railroads and the Sears Roebuck catalog to shopping malls.
He concludes that small towns are more affected by "discount mass merchandiser stores" than
larger towns and that shop owners who adapt to the ever-changing retail market can "co-exist
and even thrive in this type of environment." (K.Stone, 1997)

The impacts of Walmart in Chicago. The study draws from three annual surveys of enterprises
within a four-mile radius of a new Chicago Walmart and it "shows that the probability of going
out of business was significantly higher for establishments close to that store". The study
illustrated how approximately 300 jobs were lost due to the opening of the store, which is about
equivalent to Walmart's employment in the area. The overall findings of this study reinforce the
"contention that large-city Walmarts, like those in small towns, absorb retail sales from nearby
stores without significantly expanding the market" as this is one of the first studies of Walmarts
economic impacts on local economies.(Merriman, Persky,Davis and Baiman)

"Wal-Mart's discounting on food alone boosts the welfare of American shoppers by at least
US$50 billion per year. A study in 2005 at the Massachusetts Institute of Technology (MIT)
measured the effect on consumer welfare and found that the poorest segment of the population
benefits the most from the existence of discount retailers.

Wal-Mart Foundation was boosting its efforts to work with U.S. manufacturers. In February
2014, the Walmart Foundation pledged US$10 billion to support domestic manufacturers and
announced plans to buy US$250 billion worth of American-made products in the next decade.
(The Guardian,2014)
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CONTROVERSIES OF WALMART

Walmart has been subject to criticism from various groups and individuals, including labor
union, community groups, grassroots organizations, religious organizations, environmental
groups, and the company's own customers and employees. They have protested against the
company's policies and business practices, including charges of racial and gender discrimination
Other areas of criticism include the company's foreign product practices the use of public the
company’s security policies and Walmart denies doing anything wrong and maintains that low
prices are the result of efficiency.

In April 2016, Walmart announced that it plans to eliminate eggs from battery cages from its
supply chain by 2025.] The decision was particularly important because of Walmart's largest
market share and influence on the rest of the industry. The move was praised by major animal
welfare groups]and heralded as an "end of an era" by humane society of the united states
President Wayne Pacelle but a poultry trade group representative expressed skepticism about
the decision's impact. Walmart's cage-free eggs will not come from free range producers, but
rather industrial-scale farms where the birds will be allotted between 1 and 1.5 square feet each,
a stressful arrangement which can cause cannibalism Unlike battery cages, the systems
Walmart's suppliers will use allow the hens to move around, but relative to battery cages they
have higher hen mortality rates and present distinct environmental and worker health problems.

In March 2018, Walmart was sued by former Director of Business Development Tri Huynh for
claims of reporting misleading e-commerce performance results in favor of the company. Huynh
stated the company's move was an attempt to regain lost ground to competitor Amazon.
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WALMART BUSINESS STRATEGIES TO OVERCOME ITS

CHALLENGES

• Low cost leadership strategy: Walmart’s value proposition is based on offering Everyday
low price (EDLP). This is the core of Walmart's business model and the rest of the key
feature of Walmart's business model are aligned to keep the everyday low price.
• Pressure Over Vendors: To deliver low price, Walmart exchange information on sales and
inventory levels based on “Vendor Partnerships” concept it has its own distribution
channel which is a major distribution channel for many vendors.
• Investment in Technology: Walmart invested heavily on technology to help enhance
communication between headquarters, stores and vendor As a result inventory costs
decreased and inbound logistics became more efficient.
• Location Selection: Walmart focused on rural sub-urban areas rather than urban areas. They
established stores close to distribution centre, it developed a dense distribution network that
allowed the firm to cut the cost and exploit economies of density.

• Product Selection: Walmart gives their customers a wide variety of consumer goods. It has
various sections in grocery items that are very much consumable by the consumers.

• Cost Consciousness: Walmart have a culture of being very cost consciousness. They used
to reduce cost as must as possible. It also controlled cost by eliminating excess expenses.

• Customer Service: Walmart created friendly shopping environment for customers. It started
its aggressive hospitality program in 1984 where customers receive greetings and enjoy
benefits such as extended opening hours parking free, hassle free refunds and exchange
policies.
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CONCLUSION:

All in all, by implementing these three important strategies successfully, Wal-Mart has become
from a single store to the biggest retailer in the US and to the biggest company in the world. The
cost management strategy of Wal-Mart wills create an operational model with the lowest cost
which will increase the margin of profit on the financial statements. Moreover, the growth
management strategy had dragged Wal-Mart into the right direction of investment and expanded
radically around the distribution center. Lastly, the people management strategy inspires all
associates to work more efficiency and creates a great workplace environment which full of
self-improvement, competition, and respects. It also provides an opportunity for people to build-
up experience from the low-rank position to the high-rank position. Therefore, strong
management in these three strategies had transformed Wal-Mart into the biggest company in
the world with the highest number of employees worldwide and had also provided benefits to
millions of people around the world by transferring unnecessary cost into low-cost products.
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References-

Kenneth Stone, Professor of Economics at Iowa State University, in a paper

published in Farm Foundation in 1997

David Merriman, Joseph Persky, Julie Davis and Ron Baiman did a study in
Economic Development quarterly outlining the impacts of Walmart in Chicago

A 2005 story in The Washington Post on Walmart

A 2014 story in The Guardian report on Walmart

https://www.slideshare.net/shrishailya2500/walmart-entry-strategy-for-
india

http://knowledge.wharton.upenn.edu/article/wal-mart-indias-raj-jain-the-biggest-challenge-is-
there-is-no-organized-supply-chain/

https://retail.economictimes.indiatimes.com/polls/64104850

https://www.thehindubusinessline.com/companies/this-diwali-season-will-help-us-overcome-
a-lot/article9878463.ece

http://www.mbauniverse.com/group-discussion/topic/business-economy/walmart-and-flipkart-
deal

https://www.forbes.com/sites/walterloeb/2013/10/16/walmart-what-happened-in-
india/#2888c3677d1c

https://www.researchgate.net/publication/299446592_Emergence_of_Wal-
Mart_and_its_Challenges_in_Indian_Retail_Sector
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