Case study Bharti & Walmart Essay

EXECUTIVE SUMMARYThe case study is conducted to dismember the sustain tycoon of the correlative conjecture of Wal-Mart and Bharti in disregard of the fact that the dickens companies bring on disunited apart in late 2013. Therefore, the paper will be conducted by using the study given in the case stuff and course materials, with extra information related to statistics and governance policies before the split up of the inter variegatecap up to(p)-bodied casualty. Through the SWOT analysis and pros & cons analysis of the vocalize ship, it is crystallized that the pin sham was facing obstacles coming from intrinsic factors such(prenominal) as the challenge to check blue bell leadership and the ability to adapt local anaesthetic commercialise for Wal-Mart and extrinsic factors such as administration policy, consumer expression and poor groundwork. The challenges Wal-Mart was facing couldnt all be resolved with the rendership. For instance, the commercialise s hare and overall profitability were low due to the open problems with Wal-Marts strategic penchant and the localization to the market, leaving uncertainty to the pronounce venture. Hence, among three alternatives of 1) Change strategic Orientation and re-positioning 2) Improve corporate form and social responsibility and 3) Call glum conjugation venture, its recommended for Wal-Mart and Bharti to suffer their partnership but to re-position the vocalize venture and localize themselves to the market. The recommendation would be further explained in the closing section of this paper.PROBLEM STATEMENT pr atomic number 53 the circumstance, the joint venture was facing challenges on the sustainability for different reasons. Wal-Mart has planned unshakably for the joint venture, however it failed to achieve the goals of opening sufficient amount of stores in order to gain the market share and break the margins due to the competency or willingness in localization, the government policies etcetera Measures are needed for the both entities to take inorder to achieve profit growth whether to vary the positioning/strategic orientation, improve the corporate image to achieve bulky name benefits or even to call off the joint venture since its no longer mandate for Wal-Mart to access the market done and through a partnership.ANALYSISIn order to tackle the most of import issues in Wal-Mart business journey in India, Id homogeneous to first conduct a SWOT analysis of Wal-Marts sell business in India as following. Strength1. Scale of operations. Wal-Mart is the largest seller in the being that no former(a) seller can match. Due to such large scale of operations, the corporate could exercise strong bargaining reason on suppliers to reduce the prices. 2. Competence in information systems. The success of Wal-Mart in 21st century is largely due to its competence in information systems and return grasp management. However Wal-Marts advantage in supply cha in management was shattered when it entered India. 3. Varity of products. Wal-Mart could offer wider range of products than local competitors. It has as well been proven that Indian consumer would embrace affordable products with an upper standard of spirit. 4. low-cost leadership strategy. This strategy has helped Wal-Mart to become the low cost leader in the retail market.Weakness1. Inexperience in localization. Even though Wal-Mart was expanding its worldwide appearance, it lacked experience in adapting its products and services to the specific demand of local market due to the domestic strategy. 2. Different shopping mentality. The Indian consumer mentality of dispense with and deprave was totally different from the Americans and Indian businesses were way more(prenominal) on B2B model, therefore the success of Wal-Marts B2C model was questionable. 3. dependence of logistic system. Wal-Mart and its low cost leadership strategy are largely depended on an effective and effi cient warehouse system which was not fully developed in India. 4. Lack of skilled employees. Wal-Mart would have to face the issues with illiterate employees enchantment doing business in India and would potentially affix the training cost of employees.Opportunities1. Emerging retail market. Indian retail market grew by 5% in 2006, opening huge opportunities for Wal-Marts revenue growth, and the market was open to Wal-Mart through joint venture. There was also existed an emerging demand of nonionic retailer. 2. Rising acceptance of immaterial products. The change magnitude acceptance of high quality and low price international products opened the opportunities for Wal-Mart as well. In addition, the consumer liquid income and purchasing power was increasing.Threats1. Increasing resistance from local communities and retailers. Wal-Mart had a shun impact on local retailers therefore it confront considerably the semipolitical pressures from local communities due to the aegi s of local retailers. On the other hand, Wal-Mart faced the direct challenges from organized local retailers such as Pantaloon, RPG group etc. 2. Challenges from other MNCs. Other multinational corporations, such as Spencers retail were also threatening Wal-Marts business in India. Given that about traditional advantages such as the efficient warehouse system were gelded in India, Wal-Marts domination in India would be shaken. Wal-Marts Challenges in IndiaThe opening of an emerging market with a rapidly growing centre class should create a promising future(a) for Wal-Mart. However along with the opportunity are also challenges. After analyzing the SWOT of Wal-Mart, its in truth clear that Wal-Mart was facing challenge from extrinsic environment and intrinsic plaza competitiveness. Traditionally, exotic investors fail mainly because of the incompetence of have goting their core competitiveness. But in India, Wal-Mart magnate be facing more of the external environment challe nges. To baffle with, retail industry was one of the few sectors where FDI was not allowed due to the protection of small and medium sized local retailers before 2012, forcing multinational corporations to research a joint venture with a local partner kinda than wholly-owned model as in other countries. Local communities worried that Wal-Mart would cash in ones chips small retailers and intermediates who played important roles in supporting local economy. In addition, Wal-Mart couldnt cover the job loss since the main strategy of the fellowship was low-cost leadership which suggested that Wal-Mart would hire just-enough employees to maintain its operations and would cut themiddle-man in the process of procurement in its supply chain. The Indian government requires foreign retailer to source 30 per cent of its pricys from small supplier with objectives to discourage imports by foreign retailers from their few large dedicated suppliers and to weaken Wal-Marts bargaining power a nd make economic growth becomes sustainable1. Moreover, with an aggregate come to of 2.5, India ranks 64th in market openness and is largely due to the fast real import growth, according to International Chamber of Commerce (2013). India has its weakest score in trade policy (2.0) which is also the second to last score among G20 nations (see table1). From a cultural aspect, the Indian consumers have a different mentality of go along and buy thus traditionally Indian businesses were focusing more on B2B model. Dealing with foreign authorities requires finesse and charm, and given that lobbying was forbidden in India, Wal-Mart might not be able to influence the government policies in an official way and Wal-Mart should avoid seeking inappropriate channel to chance on the local authority such as bride. As for intrinsic competitiveness, Wal-Mart was facing problem with losing its traditional advantages. To begin with, the national differences would continually question Wal-Marts abil ity to adapt itself to the market since Wal-Mart had less experience in foreign market. Given that the road infrastructure and the modern supply chain system were not fully developed in India (see table 2), Wal-Mart would face the wasteful transportation in its supply chain. In addition, Wal-Mart would need to associate with local partners in order to solve the warehouse poorage and poor infrastructure. As a result of the lack of skilled labor, labor productivity in Indian retail market should be lower and Wal-Mart would have to increase its spending on employees training and therefore it would be challenging for Wal-Mart to maintain its advantages in low-cost leadership in India. Finally, Wal-Mart stores were competing with entrenched local everyday merchandise and food merchants, potentially preeminent to unprofitable for the attach to. give voice venture with BhartiGiven the circumstances, its logically for Wal-Mart and Bharti to form a joint venture. In the rapidly growing organized retail market in India, Wal-Mart and Bharti were able to leverage the needs and assets of each others (see table 3). For Bharti, one advantage of this joint venture isthat since the management of Wal-Mart promised to lead the liberation of retail market, it would be beneficial for both devil parties and India as well. From the same perspective, Wal-Mart was a particularly attractive partner to Bharti for the strength of Wal-Mart in information engine room and supply chain management knowledge that could turn around the infrastructure, supply-chain and IT through a strategic alliance (Bose, 2012). As for Wal-Mart, through the 50/50 venture for backend supply chain management and wholesale cash-and- bestow operations, (Bose , 2012) Wal-Mart was able to utilize Bhartis domestic facilities as a jump mesa to the emerging market and it was able to bypass some restrictions that were harmful to its business. With Bhartis deep knowledge of Indias fast-growing market and its prio r foreign experience of cooperate with other foreign firms (Bose, 2012), Wal-Mart would have a equable start in the early stages of the joint venture (Luo, 1998). By increasing its purchase from local suppliers and associating with prestige local firm, Wal-Mart could also possibly change positively the consumer perception on itself. However, there were also galore(postnominal) disadvantages brought by the joint venture. First, it took time and efforts for both parties to form the joint venture, meaning Wal-Mart might take longer time to expand compared with using wholly-own model. In this joint venture, Wal-Mart and Bharti would deliver a mixture of brand image which might becloud the consumers, and the local partner might take advantage from this mixed substance and knowledge transfer as mentioned before. As a result, this joint venture had the possibility of creating a new competitor for Wal-Mart. As mentioned before, one of the biggest problems Wal-Mart had was from the gover nment regulation which either of the two parties could lobby the government. In addition, the financial site of Bharti Enterprises was not a positive factor in their joint venture, for its debt was at a high level and affected negatively the cash flows of the joint venture. Both companies had complementary strengths they were able to utilize to expand in India in a long term. By leveraging each others expertise, both entities were able to use and build upon best practices that had proven thriving for both companies in their individual ventures, performing better than either company could do alone in the growing Indian retail market. However, since many disadvantages remained for Wal-Mart and Bharti and the fact that they havent acquired the expected market share, the future of this jointventure was in vague. Hence, the two companies should focus on the sustainability of the joint venture. In this regard, both two parties should take measures to reassure the sustainability of their joint venture and improve its performance accordingly. According to Dr. M.N.H. Mazumder, there are three traits that MNC should consider when selecting local partner, strategic traits, organizational traits and financial traits. Therefore, the sustainability of the joint venture would also be dependent on the fits of these traits. For instance, in terms of strategic fits, by establishing a mutually satisfied, efficient, and productive trustful partnership with Bharti, Wal-Mart would be very believably to maintain a common goal so that the joint venture could avoid the risk of being sabotaged by the dysfunctional conflicts between the two partners. In the following section, well be discussing the details of alternatives that could help in the sustainability.ALTERNATIVESchoice 1- Change the strategic orientation and re-positioning In 2007, Wal-Mart announced with ambitious that partner with Bharti, it planned to open hundreds of stores, it has quietly shelved its expansion plans aft er complex market conditions. In 2012, Wal-Mart opened just five wholesale stores in India last year while it planned to open 22 stores. In addition, while Bharti wished to open more small traditional stores or cash and carry business due to the fragmented market and consumer behavior, Wal-Mart was pushing its large retail stores which usually take 24 months to open. Therefore, since Wal-Mart struggled to gain market share, it should be guardedly examine its expansion plan and consider Bhartis perception on the market. Alternative 2- Improve corporate image and social responsibility As stated, Wal-Mart was facing obstacles brought by its corporate image and it has been criticized for eliminating local business and leading to higher unemployment. By operating a public relation ladder and fulfilling its social responsibility in education, agriculture (assisting local farms) etc, Wal-Mart should be able to change the stereo suit perception of foreign investors and establish a good fo undation for less challenges from the local society. However, this alternative wouldnt enable Wal-Mart and the joint venture to expand its market share in a short term. Therefore itll require both two parties to have coherence on campaign cost and long term revenue.Alternative 3- Call off joint ventureBharti Enterprise has been struggling under a debt of USD 12 billion of its mobile business. Bhartis liquidity would directly affect the joint ventures ability to pay off short term financial obligations. Also considering that Wal-Mart is allowed to the 100% ownership in a retail company in India, itd also be an alternative for two parties to split and do business alone. Its possible that Wal-Mart will recidivate its market share in a very short future due to the losses of information and suppliers in this split up.RECOMMENDATIONSIts recommended to maintain the joint venture, but changes are needed in the strategic orientation and the positioning. For the joint venture and mostly for Wal-Mart, building convenient stores and therefore establishing a larger movement in the Indian market are significant to the sustainability and profitability. In order to solve extrinsic problems such as the consumer behavior of purchasing on a daily basis rather than buy a weekly portion, its more flexible for Wal-Mart if it could have small stores covering more locations and it would be positive to consumer loyalty with larger presence in different regions, though thorough research on the rank consumer markets would be needed in order to offer Indian consumers the type of products they desire at the appropriate quantity and location. In addition, opening smaller stores would require two parties to work collectively and more productively on their supply chain management due to the complexity brought by more stores.REFERENCESEdwards, Ron Adlina Ahmand and Simon Moss (2002) Subsidiary Autonomy The Case of ICC (2014) unfastened securities industrys Index 2013 (05.03.2014) URL Klaus Schwab, World stinting Forum (2013) The Global Competitiveness Report 20122013 Indranil Bose (2013) Wal-Mart and Bharti Transforming retail in India Yadong Luo (1998) Joint Venture Success in China How Should We Select a true Partner?APPENDIXTable 1 fixs on the Open Markets Index 2013G20 RankCountryOverall OMI 2013 RankAggregate ScoreTrade OpennessTrade PolicyFDI opennessTrade enable Infrastructure18thIndia64th2.52.92.02.52.8Source ICC 2013Table 2 Ranking of India in infrastructureIndiaQuality of overall infrastructure86thQuality of roadseighty-fifthQuality of railroad infrastructure24thQuality of port infrastructure82thQuality of air transport infrastructure67rdAvailable airline privy kilometers12thQuality of electricity supply112thMobile telephone subscriptions113th restore telephone lines117thSource World Economic Forum 2013Table 3 pauperisations and capabilities of both parties before and after their joint venture to begin with joint ventureNeedsCapabilitiesWal-Mart1. Entry to the Indian Retail Market2. Governmental lobbying Skills3. Knowledge of local market1. Largest retailer in the world with low cost leadership and a focus of Always low price 2. Known for its information management and supply chain management.Bharti1. Need retailing experience2. Need information technology and supply chain management skills 1. Known for its brand and execution capabilities2. Known for its experience in collaboration with foreign companies 3. Strong Consumer Marketing and distribution capabilities due to other business 4. Bhartis Agriculture programs with local farmers