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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"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…
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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.
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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. |
Wal-Mart and the Indian Retail Sector
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