Table of Contents
1. Is there a bright future in the retail sector of India?
2. Why does Wal-Mart have to enter India with a JV strategy?
3. What are some factors that make it difficult for Wal-Mart to do business in India?
Conclusion and Recommendations
1. Market Segmentation
2. Marketing Mix
3. Management Policies
Wal-Mart is trying to enter the Indian market where there are a lot of market potentials. Wall-Mart is not entering the market alone. It is planning to set up shops in India in partnership with Bharti, a leading telecom services provider. Although Wal-Mart is getting assistance from Bharti, it has to overcome many obstacles. India is a very diverse country. India has 6,000 castes and sub-castes in 28 states. In India every community has its own tastes. So in India it is very difficult to meet needs of Indians who are from very diverse backgrounds. Also in India it has very different transportation, warehousing and distribution infrastructure from Americans’ point of view.
When Wal-Mart decided to enter Indian market it faced very harsh opposition from Indian retail chains. So to ease up the opposition Wal-Mart sought another way to enter the Indian market. Wal-Mart found an open backdoor forming a joint venture with Bharti to supply back-end supply chain technology and related processes. Bharti will handle the front-end of owning and running the stores, which are likely to be co-branded. Media reports put Wal-Mart’s initial investment in the venture at $100 million rising to $450 million in a few years.
According to a report titled, “Retail in India: Getting Organized to Drive Growth,” India’s retail industry is growing very rapidly with a 5% compounded annual growth rate and has $320 billion in annual revenues in 2006. The report says that rising incomes and increased consumerism in urban areas along with an upswing in rural consumption will further fuel this growth to around 7%~8%.
In the U.S., when people think of a big warehouse store, they think of lower prices and small boutique stores have higher prices. However in India, the perception is exactly the opposite – the bigger store has higher prices; smaller shops can offer lower prices because their overheads are lower. Wal-Mart has to think whether its positioning of lower prices in the Indian market can succeed or not.
Hill, Charles W. L. Global Business Today (5th edition, McGraw-Hill, 2008)
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