Wal-Mart and the Indian Retail Sector

            
 
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Case Details:

Case Code : BSTR257
Case Length : 15 Pages
Period : 2006
Pub Date : 2007
Teaching Note : Available
Organization : Wal-Mart Stores Inc., Bharti Enterprises
Industry : Retail
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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"It's a perfect match; Bharti excels at meeting customer needs in India, while Wal-Mart excels in logistics, sourcing, and supply-chain management."

- Elizabeth Keck, a Wal-Mart spokesperson, in 2007.1

"Bharti, with its deep knowledge of India's fast-growing consumer market and Wal-Mart, with its extensive global retail experience, share the same commitment to building relationships with producers in order to provide great quality at reasonable prices to consumers' everyday."

- Sunil Bharti Mittal, CEO of Bharti Enterprises, in 2006.2

Will It, Won't It…

In November 2006, Wal-Mart Stores Inc. (Wal-Mart), the biggest retail chain and the second largest company in the world in terms of revenues (behind Exxon Mobil Corp.)3, announced that it had tied up with Bharti Enterprises Ltd. (Bharti) to make its long expected foray into the Indian retail sector. Bharti was a diversified company, and one of the biggest mobile telephony service providers in India. Wal-Mart and Bharti announced that they would operate stores under two formats - a joint venture wholesale cash and carry operation4 and a franchised retail operation. As of early 2007, the Government of India permitted 51 percent foreign direct investment (FDI) in single brand retailing, and 100 percent FDI in the wholesale cash and carry format and back-end logistics.

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It did not allow FDI in multi-brand retailing (the category Wal-Mart would fall into). Other foreign multi-brand retailers like Metro AG (Metro), Shoprite Holdings (Shoprite) and Marks & Spencer Plc had started operations in India either as cash and carry outlets or with franchisees.

The Indian government was reportedly considering allowing FDI in multi-brand retail in sectors like electronic goods, office equipment and stationery, sports goods, and building equipment, but till early 2007, no official announcements to this effect had been made.

Although Wal-Mart could have set up wholesale cash and carry operations in India independently, the company chose to partner with Bharti, as a local partnership would give it access to the consumer retail segment also. Besides, the expertise and knowledge of a local partner was expected to prove useful to the company.

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1] Clay Chandler, "Wireless wonder: India's Sunil Mittal,"Fortune, January 17, 2007.

2] "Wal-Mart says 'Namaste India', with Bharti,"The Economic Times, November 28, 2006.

3] "Fortune 500 2006,"http://money.cnn.com/magazines/fortune/fortune500/full_list/ (accessed on March 27, 2007).

4] Wholesale cash and carry is a form of trade where goods are sold to small retailers and other establishments like hotels, restaurants, offices, etc. The buyers select their merchandise at the distribution centers, pay in cash, and transport the goods themselves rather than procure the products on credit.

 

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