Mnc Initiatives in the Retail Sector: a Study of the Indian Scenario

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MNC INITIATIVES IN THE RETAIL SECTOR: A STUDY OF THE INDIAN SCENARIO

Authors: AMITABH SHARMA(1), P J PHILIP(2), R C BHATTACHARJEE(3) aaam@bellsouth.net (1), pjphilipnitk@gmail.com (2) (1) President, Asterix Consulting, Inc. Atlanta, GA, USA (2) & (3) Professor with NIT Kurukshetra, Haryana, INDIA

ABSTRACT India with its burgeoning middle class, escalating purchasing power, growing economy, favorable demographics, urbanization, changing tastes and raised aspirations presents a golden opportunity for multinational corporations to participate in the lucrative retail trade. The promise is to usher in sizable foreign investment, job growth, better pricing and profits for farmers, improved infrastructure, spruced-up supply chain and reduced wastage. But other global failures, secondary and primary data based empirical research over appreciable sample of professionals, employees, farmers and traders reveals just the contrary. Restrained governmental regulation and non-adherence to policy framework may yield to corrupt practices, siphoning of profit, flight of capital, paradigm shift in the national culture, wiping away small retailers, unfair competition, increased overall employment and unreasonable financial and political clout. It’s therefore imperative that firm regulatory norms are implemented to control the potentially inappropriate advances of MNCs and to ensure that their role benefits the country. Key words: retail, MNC, consumer, farmer, infrastructure, FDI, logistics

INTRODUCTION As defined by the International Labor Organization (ILO), a multi-national corporation (MNC) is one which has its operational headquarters based in one country with several operating branches in different other countries engaging in foreign direct investment, owning and controlling value added activities in more than one country. Apart from playing an important role in globalization and international relations, these multinational companies may even have notable influence in a country's economy as well as the world economy.

Objectives of the study a. To study the MNC initiatives in India’s retail sector b. To assess the impact of MNCs on India’s retail business & economy

Advent of MNCs in India MNC have existed in India since 1602 when The Dutch East India Company was established followed by British East India Company. Such companies came for trade but eventually taking advantage of Indian political conditions they gained power and ruled India until 1947. Postindependence, India restrictively allowed MNCs But not in multi-brand retail until an open door policy announced in recent past. There are a number of reasons why the multinational companies would want to enter India. Besides India’s huge market, a burgeoning middle class, India presents one of the fastest growing economies in the world. Other reasons: *1.2 billion population *Ranked 10th largest economy (4th largest in terms of purchasing power parity) *About 350 million middle class *GDP growth 7-8%: amongst the fastest growing economies in the world *Lucrative and diverse opportunities *Easier access to capital

GDP growth
CAGR 8% CAGR 5.5%

Retail spend
CAGR 8.6% CAGR 5.8%

1150 284

440

780

215

590

FY00

FY05

FY10

FY00 (numbers in USD billions)

FY05

FY10

Evolution of Indian retail and Present Status Indian retail started with weekly markets and village fairs, traversed through convenience stores and mom/pop stores, cooperatives and public distribution outlets finally evolving into hyper/super markets, department stores, shopping malls and brand outlets.

Evolution of Indian Retail
Historical/rural reach Traditional reach Government supported Modern formats/ International

Exclusive brand outlets Hyper/super markets Department stores Shopping Malls PDS outlets Khaadi stores Cooperatives Convenience stores Mom & Pop Kiranas Weekly markets Village Fairs Melas

Source of entertainment

Neighborhood stores/Convenience...
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