wal mart entering india

7/31/2019 Wal Mart Entering India

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Wal mart Entering India Presentation Transcript

1. Theme: New Market Entry Wal-Mart Entering India Presentedby Group 5 (Section: B)Akash Jauhari; Raghav Agarwal; Karan

Verma; Alok Mishra; Lokesh Chaudhari; Varun Sehgal

2. Key FindingsWith the opening up of Indian Retail sector forFDI up to 51% in multi-brand retail, India isset to become hub of

Multinational Retailers from across the Globe. Increasing per

capita income and changing consumption pattern are the key

drivers of fastgrowing Retail sector in India. Organized retail are

expected to increase its market share from 5.7% in 2011 to about

12%by 2016. Major gainers are expected to be the new entrants

like Wal-Mart and Carrefour. Recommendations Wal-Mart

should apply its Repeatable formula of Lowest price - supported

with efficientsupply chain and Information technology for Indian

markets as well. Given the compliance with Regulatory norms

and fast market penetration, Wal-Mart to gofor strategic alliance

joint venture. Success depends on implementation within time-

limits.Wal-Mart should focus on local customer preferences,

strategic locations, regionaldiversity & incorporating Indian values

for building a sustainable business model for India.

3. The Corporate Level Decision: Entering India Should WalmartEnter India? No Yes More Downside Risk Growth Opportunities

Acquiring a local Player Joint Venture Organic Start Growth

Greenfield Operational & Cultural Issues - Not Recommended

Recommended Regulation Issues Too risky Not Not

Recommended Recommended Considering various Regulatory &

Risk vs. Return aspects, it is recommended that Walmart should

enter India with a strategic Joint Venture, at least to start with.


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4. Indian Retail Market - Growth & Opportunities Indian RetailFood Industry Market Value Indian Retail Industry had total

Revenues (Billion USD)of $470 bn in 2011. 500 400 300 CACG

between 2007-11 stands at 10.7%. 200 100 Data Monitor

Research estimates a 0 2005 2006 2007 2008 2009 2010 2011

2012 2013 2014Industry size of $675 bn between 2010- Source

Datamonitor India Food Retail Industry Retail report dated June

20102014 with a CAGR of 14.7%. Indian Food Retail

Segmentation 2009 (% by Value) Fast Urbanization & Young

demographics 1.3% 0.1% 0.3% Convenience Stores &are key

drivers. Gas Stations 32.9% Food and Drinks Changingpreference will boost 65.4% Hypermart, Supermarhypermarket &

super markets in India. t & Discounters Cash & Carries &

Warehouse Clubs With rising per capita income & changing

consumption pattern, retail industry to become massive in next 5

years. Organized retail & hypermarkets to have a even higher

proportionate growth.

5. Profitability Analysis: Porters 5 Forces Threat of New Entrants Carrefour to enter market. Walmart has first mover

advantageBargaining Power of Suppliers Competitive Rivalry

Bargaining Power of Customers With high volume model of

Large unorganized sector Present Organized/ Walmart,

suppliers have low Moderate to high organized Unorganized

sector unable to bargaining power sector e.g. Big Bazaar give low

price deals Threat of substitute products No immediatesubstitutes possible to Retail With fast increasing demand &

proposed model of cost leadership, Indian Retail Industry looks

substantially PROFITABLE.

6. SWOT Analysis: Wal-Mart Strengths Weakness1. Deal withSuppliers - Cost Leadership 1. Unable to adapt to different

cultures/2. Efficient Supply Chain countries e.g. Germany3.

Strategic Location/ Facilities at Stores 2. Heavily dependent on


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bulk sales4. Strong IT backup 3. Late entrants5. New Technology

Implementation 4. No success beyond Americas Opportunities

Threats1. New Economies - India/ China/ Brazil 1. Restriction on

FDI e.g. India2. Rising disposable incomes 2. International law

against dumping3. New channels Marketing/ Internet 3.

Regional competitors based models 4. Law against Monopoly

Anti-thrust4. J.V. with some leading players policies Opportunities

look impressive. The key to success lies in how Walmart tackles

local laws/ regulations & makes its repeatable formulas work in

new markets.

7. Key Success Factors for Indian Markets1. Cost LeadershipAttracting Masses2. Strategic Retail Outlet Location3. Wide

Range of Goods/ Variety - keeping ethnic & economic diversity in

mind4. Sales Promotion/ Marketing Campaigns in Festive

SeasonsStrategic Gaps in Indian Retail Sector1. Limited mainly to

Metros, Tier-I cities. Huge potential lies in sub-urban, rural

markets, Tier-II & Tier-III cities2. Geographical Gaps Markets

like North East are yet to be explored3. Truly Global Shopping

Experience missing in Indian Retail Stores Wal-Mart has to

incorporate Indian Values & preferences while designing the

business model. Focus on strategic gaps critical for its eventual

success.

8. Competitors in India Name Category Target SegmentsComments Rating Big Bazaar Merchandize Diversified Middle

Class(Future Group) The main competitors Pantaloons Apparels,

Accessories Upper Middle Class +(Future Group) Lower Upper

Class Star Bazaar Merchandize Upper Middle Class + String

Backing by Tata, (Tata Group) (Diversified) Lower Upper Class

Limited Reach Spencers Smaller outlets, Limited More

Merchandize Middle/Upper Middle Growth D.Mart ClassShoppers

Stop Apparels, Accessories Mostly Upper Class Strong hold in

Metros. Good (Corporate) presence in Target Segment


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LifeStyleGiven bargaining power (with FMCG companies) along

with its Logistic& IT support, Walmart is expected to tackle its

competitors. Key lies in capturing new geographies & finding

strategic locations

9. Walmart Expansion: Past Track RecordCountry Mode StrategyResultsCanada Acquired a Weak Player Operating in markets

which Very Successful required minimum adaptation High Brand

Recognition Segment UK Acquired ASDA M&A Synergies

Successful- Competition from TescoGermany Acquired a Big

Player Leveraged Acquired Network FailedWerkauf cultural &

operational issues China Greenfield Operations Sourced from

Chinese suppliers; Neutral- focused on need gaps Labour Union

and Law Suit issuesSuccess & Failure mainly driven by adapting

to local culture, consumer need gaps and tackling Government

issues.

10. Key Challenges in India1. FDI Restrictions - FDI Restrictionsof 51% on Multi-brand Retail. Proposal for increasing the cap to

be discussed in winter session, but chances are low.2. Social &

Political Resistance - A strong opposition from certain political

parties is certainly expected in some pockets of society local

retailers, dealers would protest3. Countering deep penetration of

Mom & Pop Stores - Especially in Tier-II & III cities, the network

of Kirana Stores is extensive. Also sales on credit facility is

available which Walmart cannot do.4. Poor Infrastructure will

cause friction - Indian standards of roads, ports & freight facilities

are way below global benchmark. It will lead to inefficiency in the

value chain.5. Regional Diversity - Challenge to have tactics

according to regional/ ethical requirements Wal-Mart need to

appreciate & accommodate each of the above challenges into its

strategy- in order to reap Benefits from the Indian Retail Growth

Story.

wal mart entering india

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