1. WAL-MART AND BHARTI : TRANSFORMING RETAIL IN INDIA Submitted by : Abhishek Srivastava(S-2) Amit Belapurkar(S-4) Hitesh Arora(S-26) Ravi Shankar Rai(S-46) Sanjeev Vyas(S-54) Shreya Das(S-58) Sunal Kumar(S-62) Uttam Chand(S-65) MBA(PT) -3 RD Year – Group #1
2. OBJECTIVES OF THE CASE The case is about one of the most lucrative, high growth and promising business sectors in India: Retail. Retail has largely been unorganized in the country; dominated by small local businesses or kirana stores. This case analyses & outlines the current status and the way forward wherein exciting new initiatives such as joint ventures and improvements in operational processes have been discussed. The case is also a good strategic study of the various macro environmental factors (PESTEL) that play a role in the setting up of a business in India both from an Indian & International firm perspective
7. Retail Industry – Threat of Substitutes Unorganized retailing is the substitute for the organized format. It is impossible for the organized retailers to be present and operate as the Kirana stores are. Due to the economies of scale, organized retailers are able to provide better quality products at lower prices than their unorganized peers. Due to the reasons like proximity, credit facility, home delivery and personal attention, buyers might still want to shop at the nearby Kirana store rather than going to a far-off supermarket.
8. Retail Industry – Bargaining power of supplier In unorganized retailing, suppliers have an upper hand in the bargaining power, whereas in organized format, retailers dominate the terms primarily due to the economies of scale. There are instances where suppliers have integrated forward by launching their own stores and the future possibilities of this nature can’t be ruled out. As many a product are outsourced for manufacturing by the retailers rather than producing them in-house, the quality and service of the supplier plays an important role. The switching cost for suppliers is not very high. As all the verticals of retailing are growing rapidly, it is easy for suppliers to find new customers.
9. Retail Industry – Bargaining power of customer Buyers do have some bargaining power in unorganized format but due to product standardization and fixed pricing, buyers virtually have no bargaining power in organized format retailing. Wholesale buyers and bulk buyers may directly buy from the supplier or farmer. This can be a threat. Buyers virtually enjoy nil switching cost and thus the role of quality and service is immense to retain the customer.
10. Growth across different segments of retail Source: www.retailmantra.com . Size of Various Retail Markets in India for the last 5 Financial Years in Crores including Food, Beverages, Apparels, Medicare, Furniture etc. Item 2004-05 (1) 2005-06 (2) 2006-07 (3) 2007-08 (4) 2008-09 (5) Growth % ((5-1)/1)*100 Food and Beverages 7633.45 8207.02 8516.3 9128.07 9370.64 22.7 Clothing and Footwear 1276.08 1582.49 1949.22 2107.2 2093.61 64 Rent, Fuel and Power 2509.86 2596.24 2700.39 2830.4 2927.71 16.64 Furniture and Appliances 649.44 741.33 859.17 984.74 1021.48 57.28 Medical Care 955.6 1011.01 1056.57 1082.78 1170.67 22 Transport and Communication 3782.17 3971.48 4273.32 4647.94 5219.57 38 Recreation, Education and Culture 653.27 711.28 760.85 861.59 907.8 38 Miscellaneous Private consumption Expenditure 1808.71 2095.54 2540.83 3190.85 3806.38 110 Total Private Consumption Expenditure 19268.58 20916.39 22656.65 24833.57 26517.86 37.6
17. Why is it lucrative for Wal-Mart and Bharti to engage in a partnership to offer cash and carry services? Market Leader: Bharti is market leader in India’s telecom market and is one of India’s 10 biggest companies. Its market capitalization is more than $25 billion. It has a long history of partnering with foreign companies. Big Retail Market: Retailing in India is emerging as one of the largest industries, with a total market size of $700 billion in 2010 and growing at a healthy Cumulative Annual Growth Rate (CAGR) of 5%. Changing Demographics: Shift in demographics led to an increase in consumer purchasing power and higher consumption spending in India’s retail market. Information Technology: Bharti being a strong telecom player has the complete understanding and expertise of Information Technology (IT).
18. Why is it lucrative for Wal-Mart and Bharti to engage in a partnership to offer cash and carry services? Early-Mover Advantage: Wal-Mart became the first retailing giant to enter India’s market and beat major global rivals Carrefour SA of France and Tesco Plc of UK. Efficient Utilization of Resources: Wal-Mart’s solid back-end infrastructure and expertise to use the resources in a best possible way was viewed as a crucial element for developing advanced retailing in the Indian market.
19.
20.
21.
22. Updates on Bharti Wal-Mart Joint Venture Government Policy in FDI: The present policy allows 100 per cent FDI only in cash-and-carry or wholesale trading. The government launched a debate on FDI in multi-brand retail, releasing a discussion paper which does not suggest an upper limit on foreign investment in multi-brand retail on 10 July’2010. Wholesale (cash and carry stores): The first wholesale store opened in Amritsar in May 2009. Second store was started in Zirakpur near Chandigarh in April 2010. Third store was opened in Jalandhar in August 2010. Bharti Wal-Mart plans to open 15 cash and carry stores in India. Supply Chain Management: The JV has also invested in establishing an efficient back-end supply chain management operation & infrastructure to maximize value for farmers, manufacturers, retailers, and consumers.
23. Updates on Bharti Wal-Mart Joint Venture Technical Collaboration: Wal-Mart provides technical support to Bharti Retail. Since April 2008, Bharti Retail has opened 83 small format stores (Easy Day stores) and two medium format stores in India. It plans to increase the number to 150 by end of 2010. Sourcing from India: Wal-Mart has been sourcing a variety of products from suppliers in India for more than 20 years. Wal-Mart’s office in Bangalore serves as Wal-Mart’s Global Procurement (GP) hub for the sourcing of merchandise from India and Sri Lanka. Competition: The Metro cash and carry operates five wholesale stores in India and is doing a brisk business. French retailer Carrefour has tied up with India’s largest retailer Future Group and is planning to open cash and carry outlets in New Delhi, Bangalore, Chennai, Hyderabad and Mumbai. British firm Tesco has partnered with Tata Groups retail firm Trent and plans to open cash and carry store outlet in India next year.