Reference no: EM133344773

Case Study: Walmart The term regulated retail is used to describe activity by large brand retail chains such as Carrefour and Walmart. This type of store has recently turned its sights to India, where they face many challenges. Although these chains are global and intercontinental, they currently only represent a small percentage of India's annual retail sales of approximately $500 billion. The reason for this is that the vast majority of Indian retail activity takes place in small stalls of about 50 square feet. Recently, many reform calls have been made to improve the regulated retail sector in India, which some observers believe will grow at a rate of 30% to 35% in the next few years. But for now, the Indian government fears the impact of regulated retail on millions of small shops. The modernization of the regulated retail sector is inevitable, although the process of its modernization is very slow. For example, foreign retail chains such as Tesco and Walmart were unable to enter the Indian market until 2012 when laws were changed that prevent such chains from selling within India. In 2006, Bharti, a local business group that operates India's largest cellular network, announced a joint venture partnership with Walmart. However, due to restrictions at the time, the partnership was restricted to wholesale sales only and retail sales were prohibited. Also, brand names competing in the retail sector such as Benetton, Nike, Pizza Hut, Reebok and Subway were only allowed to enter India through licensing and franchising and were not allowed to enter through direct investment (i.e. owning their own stores). . Recent law changes will make it easier for foreign brands competing in the retail sector to own stores in India or allow them to own high stakes in these stores. However, there remain other limitations. For example, the Indian government required that foreign retailers invest $100 million in India, with at least half of the money going towards improving infrastructure including storage and transportation facilities. For its part, the government has pledged more than $4 billion to improve infrastructure. In addition, each of the 28 states in India reserves the right to approve or ban foreign-owned stores. Foreign retailers are often required to work with local sellers to help them improve their quality. For example, when a Bharti-Walmart wholesale venture that sold to small retailers opened, it had to help improve India's weak infrastructure and inefficient supply chains and get rid of outdated sales techniques. For example, agricultural products are usually transported by open trucks and carts (tractors) or carts pulled by animals to wholesale markets in large cities. And then it is approved by the licensed dealers and agents by the Agricultural Products Marketing Committee. The products are then moved to markets or smaller warehouses which are difficult to control the temperature due to poor infrastructure. Therefore, before the products reach the final consumer, they have to go through seven middlemen. This leads to damage to a large number of products. According to government estimates, a third of the country's $10 billion-worth of production goes bad every year. With foreign organized retailers expected to increasingly enter India, local retail chains are investing heavily in retail activities and infrastructure to improve their competitiveness in the future. For example, India's Pantaloon Retail, which operates India's largest retail chain, has succeeded in giving low-income and lower-middle-income consumers the familiar and unique experience of buying from kiosks, which are small, cramped retail shops. Such an environment, enjoyed by a large portion of Indian consumers, may be chaotic and unfamiliar to foreign retailers. In addition, major Indian companies such as Reliance, an oil refiner, and the Pearl Group, have recently entered the retail business. Meanwhile, Hindustan Lever, one of India's largest consumer goods retailers, has launched advisory services to help small Indian retailers become more competitive.

Questions:

1. Based on the information provided in the above text, what are the two most important external environments in India that can most influence the success of foreign retailers in the Indian market? Justify your answer.

2. Based on the information given in the above text, a very large portion of Indian consumers enjoy buying from small kiosks and convenience stores. Do you think Walmart should adapt its business model, ie moving from supermarkets to convenience stores and kiosks, to suit the Indian market? Justify your answer.

3. Based on the information in the above text, how do you think Walmart can succeed in the Indian market?