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Case Study

Wal-Mart and Bharti: Transforming Retail in India

Indian Retail Market

India has become epicenter of economic activities in todays global world. Indian retail is the most promising sector in the world and it has caught the attention of players across globe. .Indias retail market is valued around $590 billion dollars and is expect to become $637 billion by the year 2015. The immense growth opportunities coupled with lack of organized retail makes it attractive further more. While India presents a large market opportunity given the number and increasing purchasing power of consumers, there are significant challenges as well given that over 90% of trade is conducted through independent local stores. Indian retail market is highly complex interms of a geographic spread and consumer preferences which varies by each region requiring strong need for localization across the length and breadth of India.In order to capture Indian market Wall-Mart entered in 50:50 venture with Bharti for cash-and-carry retail business. Wal-Mart and Bharti need to tackle huge challenges to be successful. It ranges from huge cultural diversity, lack of infrastructure, political resistance, social resistance, lack of use of technology, to supply chain management. The analysis that follows in the document identifies various challenges faced by the joint venture along with answers to questions asked in the assignment

Bharti Enterprises It is Indias leading business conglomerate with interests in telecom, agri-business and infrastructure projects, operating primarily across India and in the Seychelles. It was established in 1976 and it's primary industry is in the field of telecommunications via its subsidiary companies Bharti Airtel (mobile telecommunications) and Bharti Teletech (wired telecommunication services and telephone handsets). Bharti also has a joint venture with Field Fresh Foods Pvt. Ltd, for the global distribution of fresh fruits and vegetables. Its approximate market capitalization is US $ 26 billion. Recently, the company has tied-up with Wal-Mart for opening a chain of retail stores all over India. Wal-Mart Wal-Mart Stores Inc. is not only the largest retailer in the world, it now also ranks as the largest corporation in the world. Wal-Mart was founded in July 1962 and has about 6,400 stores, including some 1,200 discount stores, 2,000 discount and grocery stores and 565 warehouse stores. Its Sales Revenue for the fiscal year ending January 31, 2006 was US$ 316 billion.

Question 1. Analyse the retail scenario in India and investigate the growth across different segment of retailing.

Question 2. Why is it lucrative for Wal-Mart and Bharti to engage in a partnership

to offer cash-and-carry services?

Indian agricultural sourcing is highly fragmented with mandis being the only consolidated market for farmers, sourcing food products and agricultural produce from such a fragmented market requires keen local market knowledge which is available with Bharti with their experiencing in penetrating far flung areas for their telecom networks. Cash and Carry business would provide access to huge market to the join venture. Wall-Marts expertise coupled with Supply chain networks, storage technology for large wholesale warehouses and use of technology for optimizing the supply chain would be a huge advantage for both. As retail sector is not open it Cash and carry would give the JV a chance to see and test the business model.

Cash and Carry business can help the JV to understand the Indian retail market and make changes in model based on the learning and experience so that when the retail sector finally opens the joint venture is in a position to scale up and capture the largest retail market of world. This way Wal-mart will gain the market access and Bharti will gain retail experience which will catapult both the companies to become leading retail and wholesale service providers in the country thereby laying the foundation for a retail transformation of India

Question 3. What are the challenges that will be faced by

Bharti and Wal-Mart in their partnership?

Cultural differences in Indian retail way and the wall-mart way, while unorganized retailer in India build a long lasting relationship with their customer, Wall-Marts relationship is mainly transactional.2. The diversity of products bought by Indian consumers varies significantly in length and breadth of India and optimizing operation while ensuring that consumer get what they want in Wall stores would be a daunting task.3. Wal-Mart will have to make sure it has its logistics functions up-to-date with the diverse demands the market will pose.4. Wal-Mart has so far had most of its experience in countries with minimal diversity and handling operation in one of the most diverse country would be very difficult for Bharti Wall-Mart venture

o The booming infrastructure sector in India has already sent the prices for land and rental to skyhigh coupled.6. Unlike US or Europe Indian prefer to buy from nearest retailers Wall-marts strategy of having outlets in outskirts of cities will not work and the cost of land and rentals in prime place in Indian cities have sky rocketed.7. Wall-Mart need to understand the local environment, both corporate and consumer, and come with a certain amount of humility or humbleness and not an attitude of "we will show you how this is done. Infrastructure in India is still developing and managing supply chain in India would be for more challenging due to lack of proper infrastructure, socio political activities like bandh, strikes and resistance against organized retails etc.

Question 4. How can they overcome the challenges going forward?