Wal-Mart and the Indian Retail Sector
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Case Code: BSTR257 Case Length: 15 Pages Period: 2006 Pub Date: 2007 Teaching Note: Available |
Price: Rs.300 Organization: Wal-Mart Stores Inc., Bharti Enterprises Industry: Retail Countries: India Themes: Mergers, Acquisitions, Strategic Alliances |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Bharti Enterprises
Bharti Enterprises was set up in 1976 by Sunil Mittal (Mittal), son of an Indian politician. Initially, the company manufactured crankshafts for bicycles. By the end of the 1970s, the company had set up two more plants - one to manufacture yarn and the other to make stainless steel sheets for surgical utensils. In the early 1980s, Mittal sold two of his plants and set up a new company in Mumbai dealing with imported stainless steel, brass, plastics, and zip fasteners. Although his business was doing well, Mittal was not satisfied. In 1982, he ventured into another business, becoming the Indian agent for a Japanese manufacturer of electric power generators...
The Proposed Wal-Mart- Bharti Deal
Wal-Mart, which operated in most of the major markets around the world with considerable success, had been looking to enter the Indian market for a long time, but had been thwarted by the FDI rules relating to the retail sector in the country. In 2005-2006, India ranked among Wal-Mart's top ten suppliers. From its successful experience in China, Wal-Mart felt that having a retailing presence in India would provide the company access to a market with huge potential, as well as allow it to improve its sourcing function there...
The Indian Retail Scenario
The retail segment in India was estimated to be worth $200 billion in 2005. Organized retail accounted for around three percent of this market. Organized retail was expected to be worth $23 billion by 2010. The entire retail sector was expected to be as large as around $300 billion by 2010. India was also ranked as the retail market with the greatest potential by the AT Kearney Global Retail Development Index of 2006 (Refer to Exhibit II for a partial list of the AT Kearney rankings of 2006)...
The Pros and Cons of Wal-Mart in India
From the time Wal-Mart's proposed entry into India came into the news, there were widespread protests from small retailers' groups and the Left parties against allowing the company into India. Opposition also came from business groups and companies which were already operating in the organized retail sector. All of them, perhaps rightly, feared Wal-Mart's formidable competitive strengths. The protesters argued that Wal-Mart was notorious in all its markets for trying to monopolize the retail sector. The company would sell products at such low prices that it would put the small retailers and the kirana stores out of business...
Exhibits
Exhibit I: Wal-Mart's Annual Income Statement
Exhibit II: A.T Kearney's Global Retail Development Index 2006 - RANKS
Exhibit III: Major Food and Grocery Retail Formats in India 2005-2006
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