Walmart in the Indian Market
Introduction to International Business
November 11, 2012
This research looks at the challenges and possible solutions of globalizing a large-scale retail company. It considers the foreign investment strategies of the retail titan Walmart, how it has succeeded in 27 countries and how it plans to succeed in India as well. First is an analysis of Walmart’s current global presence, followed by a critical look at its foreign investment failures in Germany and South Korea, the challenges Walmart faces by adapting its inventory and supply chain strategy to the Indian market, what it has learned from the research of current business practices in India, and what the future climate of India offers Walmart. The accomplishments of companies like Walmart mean a freer and more open market for developing nations like India and the globe, and directly and indirectly progresses consumers and firms worldwide toward a mutually beneficial global marketplace.
Using the CAGE model, we identified problems company may face in the Indian market. There will be a cultural difference because the religious sectors that exist in India limits the types of products that can be sold and marketed effectively in Walmart stores. For example, the main religion in India is Hinduism which does not allow the consumption of beef. The second biggest religion is Muslims which does not allow the consumption of pork and alcohol. So, Walmart will need change what it puts on its shelves. Also, a big part of the India’s culture is consumers in India enjoy the utility of convenience and often have deep rooted connections with the local mom and pop stores. The mom and pop stores allow them to have credit and goods can be send to the consumers home regardless of the amount bought. Administrative distance wise, India does operate the same way US does so Walmart will need to come up with a way that is effective in India. They can establish a top down corporate culture that can effectively handle administration and management functions in India. And, there limits to FDI that attempt to facilitate the established local businesses. FDI is also still a sensitive topic in India with it being a center topic in political races. Geographic distance will also pose a problem. The different regions of India geographically present challenges in how to organize stores and the products. There are more that 20 officially recognized languages, 3 main religions and countless religious and ethnic festivals. Also, there many problems that can arise from acquiring and developing of land; price, vagueness of land titles and restrictions from the local government. There is also the problem of economic distance. Since Wal-Mart’s business in India will not be a stand-alone operation, they must deal with the obligations of transferring investment capital internationally. There also extreme difference in wealth according to India’s caste system. India is also a developing country with infrastructure problems. Walmart will need to figure out how to manage an efficient supply chain management system.
FDI IN THE RETAIL MARKET
FDI in India soared from less than US $2 billion in 1991, when the country undertook major reforms to open up the economy to the world markets to about US $45 billion in 2005. (Chakraborty & Nunnenkamp, 2008) According to the Global Retail Index (an annual study that ranks the top 30 developing countries for retail expansion worldwide), India is currently ranked 5th behind Brazil, Chile, China and Uruguay. (Kearney, 2012) According to the index, India’s GDP is expected to grow 8.7% through 2016. Although the Indian market looks promising, there have been many troubles with this market. Many experts have been saying that this market is one to enter. However, it is important to note that even...