INSTITUTE FOR INTERGRATED LEARNING IN MANAGEMENT
Competitor Analysis Report on Wal-Mart
and Bharti: Transforming Retail in India
By: Mikail Mohammed Salim
Roll no. FT-12-160
Wal-Mart and Bharti’s Joint Venture
India being one of the emerging economies is at the very center of global economic
activities. The Indian Retail industry is a promising sector and has caught the
attention of many of the major international retail giants. The Indian Retail
industry is valued at $320 billion dollars and is expected to grow to $637 dollars by
2015. India has strong growth opportunities in the retail industry but it is
dominated by small independent local retail stores which amount to 98% of all
trade with 2% being only organized retail. The Indian industry is a complex
industry as it is spread over different geographies and the consumer preferences
also vary from one area with another. Bharti has a strong presence in the country
and has a deep understanding of the Indian consumer behavior while Wal-Mart has
superior supply chain management and as such it was an obvious step to start a
joint venture by Wal-Mart with Bharti to tap into the growing Indian retail industry
through its cash and carry business. It was a 50-50 joint venture which included
management of back end supply management and management of cash and carry
operations and also included a contract between the two that included Wal-Mart of
franchising itself in return of sharing of technology and expertise by Wal-Mart
with Bharti to manage its stores. The entrance of Wal-Mart in India marked the
first entrance of a retail giant in the country beating rivals Tesco PLC and
Carrefour SA. Wal-Mart’s joint venture with Bharti enabled it to bypass the strict
Indian laws towards foreign businesses setting up in India. The Joint venture would
have to change the nation’s unorganized and inefficient retail industry and one of
the critical components involved was to develop India’s back end infrastructure.
Wal-Mart’s competitive advantage
Wal-Mart expertise in supply chain management had helped it in becoming a
major retail player in the North America and in many other parts of the world
providing superior service to its customers with minimum expenses. Wal-Mart has
been strong in implementing every cost saving and efficient supply chain strategy
and this has provided Wal-Mart unparalleled competitive advantage in the retail
industry. Some of the strong points of Wal-Mart supply chain management
Procurement where it was able to provide the best price to its customers by
procuring goods directly straight from the manufacturers and had removed
all the intermediaries thereby driving down costs. Its bulk purchases also
involved low costs and high volume sales by giving huge discounts to its
customers which gave it a strong competitive advantage over its competitors
such as Target and K-Mart.
Transportation where it was able to reduce costs by having its own
transportation fleet and not did it only reduce costs but it was able to
replenish its stock four times than its competitors by delivering goods within
48 hours. The pricing of its product would vary on a daily basis offering
great prices to its customers.
Wal-Mart’s huge success was also because of its very competitive pricing strategy
over its competition. Its low cost strategy enabled it to have a slogan of “Everyday
lowest prices” although as competitors grew, it eventually came to the slogan of
“Always low prices”. A part of its low pricing strategy involved in offering 10%
discount on four key items per category for a period of 75 days. This strategy
resulted in a huge $10 billion in sales for Wal-Mart. Another part of its low pricing
strategy involved pricing its general products by first carefully observing what the
competition such as K-Mart and Target were offering on the same products. Wal-
Mart would then analyze their offerings and would come to decide that it can offer
discounts ranging from 4% to 10% on those products. Concerning edible products,
Wal-Mart would price it as per the different distribution centers in different zones.
Its store managers were allowed to offer up to 5% discounts over what its
competitors would provide.
Wal-Mart’s competitive advantage in terms of IT technology
Wal-Mart had a major competitive advantage with its extensive use of IT tools in
its supply chain management.
It had implemented a bar code technology where it would be able to keep
track of its inventory. It adopted the usage of satellite technology to keep
better track of its supply chain. The bar code technology enabled it to keep
track of sales of any goods sold in its stores and this helped it by making it
easy to restock its shelves at a much faster pace than its competitors. This
had led a push in an industry to adopt this technology by the suppliers to
common labeling and gradually shifted the power from the suppliers to the
retailers. Implementation of strong IT technology internally and externally
had improved planning, accurate merchandising, better customer experience,
improvement in supply chain, strengthened store operations and in turn
returned high profits.
It later on moved to implement electronic purchase management system
which enabled its associated to scan shelve labels which resulted in better
and efficient inventory management system.
Wal-Mart had moved on from Bar code technology to more advanced
technology, RFID or Radio Frequency Identification. Wal-Mart made it
mandatory for customers to implement chips in their products which could
be read by nearby radio frequency readers. The improvement of RFID over
bar codes was that they were able to offer more information about the
product such as the sales pattern of the product. The adoption of such a
technology boosted Wal-Mart by having the knowledge about which product
to order from its suppliers. The RFID tags also allowed it to not know the
stock of each product in a store but also across its stores. Wal-Mart was
gradually implementing sophisticated technology to further better its supply
chain and overall business.
Challenges faced by Bharti - Wal-Mart Joint Venture in India
The joint venture of Bharti- Wal-Mart included,
1. The diverse choice of products bought by Indian consumers varies from one
geography landscape with another. To increase efficiency in this
environment would involve comprehending what individual consumer wants
which would be a challenging task for Bharti - Wal-Mart.
2. They would have to face the social challenges in order to change the Indian
retail industry landscape and tackle aggressive local mom and pop stores
which were actively protesting against the presence of Wal-Mart in their
localities. Wal-Mart would have to get a deep understanding of the Indian
business and consumer environment and show a degree of humbleness
before the people
3. The transportation system of India is very poor and would pose a major
challenge for Wal-Mart to implement its superior and internationally
successful supply chain method in India.
4. Political challenges lie ahead as refusal of individual states to allow Wal-
Mart to operate in their areas and organization of strikes by political parties
and local people.
5. Challenges would also be from domestic competition, for example The
Future Group, Spencer, etc have a major share of the organized Indian retail
industry and do not face challenges from political and social problems.