Wal mart 1


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  • Wal-Mart's overall business strategy is to provide Every Day Low Prices (EDLP) to customers. Aside from every day low prices, a complementary element to their strategy is the variety of product offerings at Wal-Mart retail outlets. a very important element to their business strategy is product availability when products are demanded by customers
  • Wal-Mart makes it a priority to give its vendors the tools and the incentives they need to continuously improve, through demanding more out of their suppliers than most retailers. Although Wal-Mart competitors have similar relationships with their vendors, the scale and the depth of Wal-Mart vendor collaboration is greater than the collaborative relationships that Wal-Mart competitors have with their vendors
  • Wal-mart has a cost advantage because 1. Having it’s own transportation system: which results in faster replenishment and lower costs. 2. Usage of IT in Supply Chain management ex: POS scanning, RFID tags
  • The case says 12 million retailers in 2006
  • Threat of Rivalry : High since all the Indian Players along with some foreign retailers such as Carrefour, Target, Tesco, etc. have ventured into India with huge expansion plans and financial backing. Threat of new entrants : High since all the major retailers from across the globe are venturing into India. Also, all major Indian conglomerates are opening up a variety of retail stores to tap the huge market potential. Threat of Suppliers : Low to medium since the shear economies of scale (demand) of these organized retailers will not allow any major supplier to dictate terms to the industry. Threat of Substitutes : Medium to High  This is high due to the protectionist policies of the government and limit on the FDI (currently 50%) and the unorganized sector still poses a threat to these chains. It will be very difficult for the organized retail sector to tap the rural market due to constraints such as poor infrastructure (both roads and internet penetrations). However, with improvement in infrastructure this will be minimized with due course of time. Threat of Buyers: Medium to High  The consumers will be spoilt for choice with so many options available (both in unorganized and organized space). They switching costs will be minimal (until there are v. good loyalty programs in place).
  • Political e.g. West Bengal, UP and Bihar witnessed huge resistance to chains such as Reliance Fresh. Metro Cash & Carry in Kolkata.
  • Wal mart 1

    1. 1. WAL-MART AND BHARTI: TRANSFORMING RETAIL IN INDIA Presented To: Prof. Presented By:
    2. 2. Q. 1 <ul><li>Describe how Wal-Mart’s supply chain works and comment on how it has helped create competitive advantages for the firm. Will Wal-Mart be able to generate the same advantages in India? Why or why not? </li></ul>
    3. 3. Wal-mart Supply Chain Flow Chat Manufacturer Manufacturer Manufacturer Retail Store Retail Store Retail Store Point of sale terminal Satellite system Bar code, RFID Radio, headphone Distribution center Company Headquarter
    4. 4. Wal-Mart’s Business Strategy
    5. 5. Business Strategy <ul><li>Through continuous supply chain cost control, Wal-Mart is able to maintain low prices for customers. </li></ul><ul><li>Asset utilization is another goal for Wal-Mart, but facility, private fleet, and information technology utilization are again primarily focused on lowering costs. </li></ul><ul><li>Information technology investments are directed towards improving efficiencies across the extended supply chain from vendors to stores, and thus the use of information technology supports the EDLP business strategy </li></ul>
    6. 6. Vendor Collaboration <ul><li>Level of collaboration depends upon </li></ul><ul><ul><li>Investment Capabilities </li></ul></ul><ul><ul><li>Product Volume </li></ul></ul><ul><ul><li>Value to Wal-Mart </li></ul></ul><ul><li>Vendor Managed Inventory (VMI) </li></ul>
    7. 7. IT Capabilities <ul><li>BarCode </li></ul><ul><li>Satellite Communication System </li></ul><ul><li>RFID </li></ul><ul><li>Point of Sale Scanning System </li></ul><ul><li>Retail Link </li></ul><ul><ul><li>Information available to vendors on time </li></ul></ul><ul><ul><li>Vendors can thus improve supply chain and lower costs </li></ul></ul>
    8. 8. Process Differentiation <ul><li>Two types of products (Fisher, 1997) </li></ul><ul><ul><li>Functional: </li></ul></ul><ul><ul><ul><li>Predictable Demand </li></ul></ul></ul><ul><ul><ul><li>Low Margin </li></ul></ul></ul><ul><ul><ul><li>Supply Chain is efficient and low cost </li></ul></ul></ul><ul><ul><li>Innovative </li></ul></ul><ul><ul><ul><li>Unpredictable Demand </li></ul></ul></ul><ul><ul><ul><li>High Margin </li></ul></ul></ul><ul><ul><ul><li>Cost and probability of stocking out are higher </li></ul></ul></ul><ul><ul><ul><li>Supply chain should be flexible and responsive </li></ul></ul></ul>
    9. 9. Sources of Cost advantages <ul><li>Own transportation system: </li></ul><ul><ul><li>Resulted in cost savings and ability to deliver products in to various stores within 48 hours </li></ul></ul><ul><li>Usage of IT in Supply Chain management </li></ul><ul><ul><li>Inventory tracking using information available in barcode. </li></ul></ul><ul><ul><li>POS scanning: Which helped in managing the products at supplier’s end. </li></ul></ul><ul><ul><li>RFID tags: Enabled to keep track of the inventory throughout the supply chain. </li></ul></ul>
    10. 10. Advantage in the Cost performance matrix         Wal-Mart's Perceived Value w.r.t. to competitors Lower Almost the same Higher Wal-Mart's Input costs w.r.t. to competitors Higer Disadvantage Disadvantage Depends Almost the same Disadvantage Parity Advantage Lower Depends Advantage Advantage
    11. 11. CL strategies of Wal-Mart in Indian context <ul><li>Having it’s own transportation system: </li></ul><ul><li>Valuable </li></ul><ul><ul><li>Yes </li></ul></ul><ul><ul><li>Helps to reduce the costs and generate profits </li></ul></ul><ul><li>Rare </li></ul><ul><ul><li>No </li></ul></ul><ul><ul><li>Other domestic players like Reliance also have their own transportation system </li></ul></ul><ul><li>Inimitable </li></ul><ul><ul><li>No </li></ul></ul><ul><li>Exploitation by the Organization </li></ul><ul><ul><li>Yes </li></ul></ul><ul><ul><li>In West this is the major differentiating factor </li></ul></ul>
    12. 12. CL strategies of Wal-Mart in Indian context <ul><li>Usage of IT in Supply Chain management: </li></ul><ul><li>Valuable </li></ul><ul><ul><li>Yes </li></ul></ul><ul><ul><li>Helps to reduce the costs and generate profits, ease in operations </li></ul></ul><ul><li>Rare </li></ul><ul><ul><li>No </li></ul></ul><ul><ul><li>IT is no longer a differentiating factor </li></ul></ul><ul><li>Inimitable </li></ul><ul><ul><li>No </li></ul></ul><ul><li>Exploitation by Organization </li></ul><ul><ul><li>Yes </li></ul></ul><ul><ul><li>Had short lived First mover advantage in the west </li></ul></ul>
    13. 13. Conclusion <ul><li>Wal-Mart might not be able to generate the same advantages in India </li></ul>
    14. 14. Q. 2 <ul><li>Analyze the structure of the retail sector in India at the time of the case </li></ul>
    15. 15. Potential of Retail Sector in India <ul><li>Repeatedly named amongst Asia’s most promising sectors. </li></ul>
    16. 16. Key Highlights <ul><li>Contributing 14% to India’s NGDP. </li></ul><ul><li>Providing employment to 7% of its workforce. </li></ul><ul><li>Crucial mainstay of Indian economy </li></ul><ul><li>Highly regulated Indian Retail Market </li></ul>
    17. 17. Fragmentation <ul><li>Highly fragmented sector </li></ul><ul><li>Unorganized Retail: 98% of India’s Total Trade. </li></ul><ul><li>Organized Retail: 2% </li></ul><ul><li>Labeled as “A Nation of Shopkeepers” </li></ul>
    18. 18. Structure: Unorganized Retail <ul><li>Referred to more traditional, small scale and low-cost 11 million retailers*. These include: - </li></ul><ul><li>Pavement & Hand-cart vendors </li></ul><ul><li>Convenience Stores </li></ul><ul><li>Paan/Beedi Stores </li></ul><ul><li>Owner-manned general stores </li></ul><ul><li>Local Kirana shops </li></ul><ul><li>*Source: Datamonitor report, 2006: Retailing in India </li></ul>
    19. 19. Structure: Organized Retail <ul><li>Refers to officially licensed retailers. These include: </li></ul><ul><li>Large, privately owned retail companies </li></ul><ul><li>Retail Chains </li></ul><ul><li>Corporate-backed Hypermarkets </li></ul>
    20. 20. Retail: Segmental Performance
    21. 21. Retail: Porter’s Five Force Analysis Threat of Entry High both in unorganized and organized space Threat of Rivalry High Threat of Substitutes Medium to High Threat of Suppliers Low Threat of Buyers Medium to High Level of Threat in the Industry
    22. 22. PESTEL Analysis <ul><li>Retail industry is operating in a highly protectionist environment - government is limiting the FDI into the retail segment </li></ul><ul><li>Increase in consumer spending </li></ul><ul><li>Demographic change ( 67 % < 35 years of age) </li></ul><ul><li>Large number of working men and women </li></ul><ul><li>Paradigm shift in consumer mindset, Changing consumer preferences  variety seeking buying behaviour. </li></ul><ul><li>Burgeoning Middle Class </li></ul>
    23. 24. Q.3 <ul><li>Analyze the merits and demerits of the Walmart – Bharti JV in India from different perspectives. You can use a SWOT framework. What is its current positions (July 2010). Comment on its future. </li></ul>
    24. 25. SWOT Analysis <ul><li>Strengths </li></ul><ul><ul><li>Walmart’s supply chain capabilities </li></ul></ul><ul><ul><li>Bharti experienced in local markets </li></ul></ul><ul><ul><li>Bharti brand in India </li></ul></ul><ul><li>Weaknesses </li></ul><ul><li>Opportunities </li></ul><ul><ul><li>Booming retail sector with increased consumption </li></ul></ul><ul><li>Threats </li></ul><ul><ul><li>Competition from other Indian groups </li></ul></ul><ul><ul><li>Government policy may slow down growth </li></ul></ul>
    25. 26. Current Scenario <ul><li>Bharti Wal-Mart operates wholesale stores under the Best Price Modern Wholesale brand – 2 stores </li></ul><ul><li>10-12 cash-and-carry stores in the next 12 months </li></ul><ul><li>The company now operates around 80 stores </li></ul><ul><li>Slowed down by policy uncertainty and downturn </li></ul><ul><li>Planning to open 140 retail stores by year end </li></ul><ul><li>Cap of 25% on sales of cash-and-carry players to front-end retail companies owned by their Indian joint venture partners – Change in JV agreement ; Reduced Investment </li></ul>
    26. 27. Future Position <ul><li>New policy may limit investment from Walmart in wholesale cash and carry </li></ul><ul><li>Optimism on relaxation of FDI norms in retail </li></ul><ul><li>Government Policy dependent </li></ul><ul><li>Aggressive Push for expansion in retail by Bharti </li></ul><ul><li>Walmart – Wait and Watch </li></ul><ul><li>Long term – Beneficial with rapid expansion </li></ul><ul><li>Short Term – Reduced investments </li></ul>