MMUBS ELECTRONIC SUBMISSION ASSESSMENT COVER SHEET

Student Name: Piyush Goyal Programme Title: MSC INTERNATIONAL BUSINESS MANAGEMENT Registration Number:12107092 Year/Stage: 2013 2012Due Date: 19 Nov 2012 Agreed mark Late penalty Final mark

Unit Title: INTERNATIONAL STRATEGIC ALLIANCE(INTERNATIONAL BUSINESS MANAGEMENT) Assessment Title/Number: 5E4090_1213_9 Unit Leader/Dissertation Supervisor/Subject Tutor: Prof. Heinz Tuselman

Declaration: I/We declare that this assignment is all my/our own work, that it has not been copied from elsewhere and that any extracts from books, papers or other sources have been properly acknowledged as references or quotations. In addition I/we agree that this assignment may be subject to electronic analysis for the detection of collusion, plagiarism and other forms of unfair advantage. Please tick the box to confirm acceptance of the above declaration. Date: 19 NOV. 2012

PIYUSH GOYAL 12107092

Assignment on Bharti Wal-Mart Alliance

Table of Content:

1. Executive Summary 2. Introduction 3. Indian Retail Scenario 4. Wal-Mart over view 5. Bharti overview 6. Bharti Wal-Mart Corporate 7. Reason behind the Wal-Mart and Bharti Alliance 8. Alliance agreement 9. Benefits to Wal-Mart with this alliance 10. Benefits to Bharti with this alliance 11. Challenges 12. Success 13. Recommendation 14. References

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1.Executive Summary: Pape will be evaluating about the Joint venture activity of Wal-Mart and Bharti in the retail industry of India. With slight introduction of what are strategic alliance about and a look into India retail scenario. It contains details about how both the company started their business and how they both grown as one of the biggest player in there own field, what all alliances they are into and the advantages of both the company. Further it will evaluate what was the reason behind both the company shaking hand together and carrying out a wholesale cash and carry store even though there where legal restriction to enter India in past. These papers will also highlights the types of alliance and agreement done between them to carry on the wholesale store. Paper will also shows the benefit that both the company will be getting by venturing together. And the challenges, which they may face in India to carry on their store and supply chain management, this paper also highlight the success of the alliance. The reason behind choosing these companies is that they have been well known company in world. 2.Introdution Strategic alliance is agreement between the two or more companies to work together for achieving a common goal. A firm can enter into alliance with other company in basically 4 different ways as listed below: Contract Limited partnerships General partnerships Joint venture (American business, 2012) Multinational companies for their international expansion are carrying out alliances activities (Corporate strategy board 2000). Therefore, this paper is mainly focusing on the alliance activity of Wal-Mart and American based Retail Company and Bharti an Indian based telecommunication/financial service/Retail company.(Bharti Wal-Mart,2011)
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3.Indian Retail Industry scenario Indian Government has opened the FDI in Multi-brand retail up to 51% and in single brand retail up to 100% (Govt. of India ministry and commerce, 2012) Indian organized retail sector compromise of 3% of the total retail industry Indian retail industry is expected to be around US$ 600billion by the end of 2015 Major problem in Indian retail industry is of higher shrinkage rate which rate top in the world its due to the theft, unskilled labors, power shortage and etc. (frost and sulivin 2008) Rise in franchising, joint ventures, licensing activities through which global brands are entering India. Increase in per capita income of the India has doubled and consumers are shifting to branded products slowly. Banking facility has also increase the retail sector through there loan and credit card facility. (big strategic management consultant 2012)

4.Wal-Mart Overview: Founded by Sam Walton. It started its company by opening the first Wal-Mart store at Rogers in 1962. It has completed its 50 years of establishment and has employed millions of associates all over the world. In Sam Walton vision and leadership today, Wal-Mart is one of the biggest retailers in the world and has the best supply chain, which help them in cutting down the cost. It operates its stores in more than 27 countries with more than 10000 stores all over the world. They transformed into an international co. by opening store in Mexico in 1992 and from that day there has been no looking back.(Wal-Mart, 2012) Its operation is being carried out in several countries as listed below: Wal-Mex in Mexico Asda in UK Seiyu in Japan Wal-Mart net sales for the FY account to US$443.9 billion, which shows a rise of 5.9%compared to there last year sales worth US$418.9.Operating income of the company rise by 4% by making an income of US$26.6 billion. In the FY 2012, Wal-Mart has been successful in opening 1160 additional stores in FY 2012. (Wal-Mart annual report,2012) Wal-Mart entering India was a tough decision since the market situation is quit critical over there and
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PIYUSH GOYAL 12107092 they lack development in retail sector. There peoples are more prone to buy products from mom and pop shops i.e. kirana stores and small retail shops and thus it was a big challenge for Wal-Mart to cope up with it Competitive advantage to Wal-Mart: A efficient working of supply chain, which is the main source of profit World largest retailer Use of latest technology for inventory Experience in retail sector 5.Bharti Overview: Sunil Bharti Mittal founded a Bharti enterprise in 1966. Mr. Mittal started the enterprise as manufacturer of bicycle and now its emerged as one of the top most telecom companies in the world. Bharti groups operate its operation under the Airtel brand and it has provided its services in 20 countries around the world with more than 30000 employees working under them. It is also under the top 100 most valuable global brands according to marketing week. Bharti enterprises have diversified a lot due to its conglomeratic expansion strategies. They have grown in other areas apart from telecom sector like real estate, financial service, telecom software and retail sector. (Bharti, 2012) Bharti has a large customer base of 251.65 million and has an annual revenue of RS 714.5 billion in financial year 2012.Its market covers mainly developing countries. They have been into Several alliances as listed below: Bharti AXA life insurance a joint venture between Bharti Group and AXA group Indus tower a joint venture between Bharti Group, Vodafone Essar and Aditya Birla Telecom limited. Bharti Softbank Holdings a joint venture between Bharti Enterprises and Softbank Corp (Bharti, 2012) Seeing the growth prospectus in retail sector Bharti Group also entered in the retail market and runs its supermarket and hypermarket store named as Easy day in India with more than 186 stores. To known as a international brand Bharti retail Pvt. Ltd. Has come up with the joint venture with WalMart in retail industry. Which is a big move for both of them. Competitive advantage of Bharti:
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 A large customer base in India due to its telecom sector A brand name which will help in scaling up the operation quickly A large advertising campaign

6. Bharti Wal-Mart Corporate A Pvt. Ltd. Company, which is formed by Bharti enterprise and Wal-Mart under the guideline of Indian government both the company, will have 50:50 stakes, In Bharti Wal-Mart Pvt. Ltd. They will be opening wholesale cash and carry store in the name off Best price modern wholesale and Back end sourcing and supply chain management all over the India. They supply over 5000 item in each of their shops(Bharti walmart,2011).They started their first wholesale cash and carry store at Amritsar in 2009 and by the present time they have been able to open 20 stores all over India. The shops are being opened at suburbs of the city due to high cost of real estate and infrastructure.

7. Reason behind the Wal-Mart and Bharti Alliance: Wal-Mart came in alliance with Bharti due to govt. rules and norms in FDI. Previously in India multi-brand retail was not entertained but recently they have allowed the FDI in multi-brand retail till 51% and 100% in single brand retail (Govt. of India ministry and commerce, 2012). The failure of Wal-Mart in Germany and South Korea was also one of the Reason behind Wal-Mart venturing with Bharti since they have the deep knowledge about the fast growing Indian consumer market and had a long list of partnering history. Bharti came in alliance with Wal-Mart since they have largest share in retail market and are one of the biggest and experienced player of it with best supplying chain thus which will help them in competing their rival reliance and future group. Secondly Wal-Mart ability to set a successful retails concept and getting easily adapted to local cultural values of the country for setting set up a strong supply chain. 8. Alliance Agreement:
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PIYUSH GOYAL 12107092 They entered into alliance to share 50:50 ratio in wholesale cash and carry store and for back end supply chain management Also different contract of sharing technology and expertise to support Bharti retail. Bharti will be operating the retail unit and back end sourcing and supply will be handled by Wal-Mart (Prasad, gunjan , 2010) Stores will be opened in the area of 50,000Sq. Ft. and 1,00,000 Sq. Ft They will b supplying the Goods to Business enterprises like small retail shops, Restaurants, hotels

9. Benefits to Wal-Mart with this Alliance: Their entry into one of the largest growing retail industry is almost over worth $500Billion( malavika, 2012). Wal-Mart sources goods worth over $600 million from India thus its venturing in India will help in source more amounts of goods from India by setting up a good supply chain, which will lead to cutting down of cost and increase in profit margin of Wal-Mart. (Rediff business, 2010)

10. Benefits to Bharti with this Alliance: Bharti will able to get experience from them, which will help them in competing with big players. It will also able to take the advantage of biggest sourcing and supply chain and will share there IT technology and expertise in Bharti retail.(Bhupesh,amit,2009)

11. Challenges Lack of skilled and trained labor Rise in the cost of real estates (ET bureau,2012) Inappropriate supply chain i.e. lack of physical infrastructure, bad transport system, poor quality of road and lack of cold chain transport Protest by the small and medium enterprise (i.e. kirana stores)
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 High ratio of theft and shop lifting(frost and sulivin, 2008) India unique culture of buying products from mom and pop shops and credit facility given by the small store Presence of big names in the sector i.e. Reliance, future group, Tata, spencer, RPG Lack of technology in Rural areas Rigid Government policies and Tax structure (Indian express, 2012) High consumption of FMCG(fast moveable consumer goods)

12. Success: There success can be highly seen by the way they are capturing the market. In the 3 years time span they have been able to open 20 stores all over the India and are forecasting to open 10 more store by the end of 2013. They have Came with Bharti foundation to improve the quality of education in India specially focusing on girl child. They have been successful in opening 4 training Centres in India so that they can bridge the shortage of skilled labours by training the youths. (Bharti Wal-Mart, 2011) Their direct farm initiative is helping them getting the fresh produced goods, Local Source, better quality of food and cutting down the cost by removing middleman between them. Till date they have been able to include 7000 farmers under them, which produce 12-16 local grown vegetable. Their Initiative towards woman empowerment had helped them in sourcing cashews by managing cashew processing unit and setting up of 3 women owned unit. (Bharti walmart,2011) 13.Recommendation: Both the companies should try to capture the market as they have competitors like Reliance, Tata and all other big players are already playing in the market. They should establish there stores in the metro city rather then investing in less developed city since there is a more presence of organized retail industry. Opening up of stores near to the city will help them attracting more small business houses. There is lack of advertising of Bharti Wal-Mart, they should advertise more so that common people
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PIYUSH GOYAL 12107092 get to know about the benefits of there wholesale cash and carry store and thus by this they wont oppose them and it will strengthen their place in the retail market. Wal-Mart should be fast in establishing their relationship to farmers so that they can strengthen their supply source management by ultimately removing the middleman from between. At last I will like to recommend that they should work under the govt. rules and regulation of India since there is a presence of many political opposing parties who can become hurdle to them if they break the laws set up by the India Government.

14.References: 1.American business, Feb, 2010 Strategic Alliance (online) Available at http://americanbusiness.org/772-strategic-alliances.html 2.Bharti Wal-Mart corporate,2011 Overview (online) available at http://www.bhartiwalmart.in/AboutUs.aspx?id=113 3.Bharti, 2012 Group Over view (online) available at http://www.bharti.com/home/about_us

4..Bharti Wal-Mart corporate,2011 top stories (online) available at http://www.bhartiwalmart.in/detail.aspx?id=645 5. Bharti walmart corporate,2011 direct farm (online) available at http://www.bhartiwalmart.in/DirectFarm-Overview.aspx 6. bharti walmart corporate 2011 women empowerment (online) available at http://www.bhartiwalmart.in/Community.aspx?id=508 wal
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7. Bhupesh bhandari & Amit Ranjan rai, 10 nov 2009 inside Bharti Wal-Mart (online) available at http://business.rediff.com/report/2010/apr/13/walmart-set-to-boost-sourcing-from-india.htm 8..Corporate Strategy board, Aug 2000 Institutionalizing alliance Capabilities http://www.partneringintelligence.com/documents/5.02_InstitutionalizingAllianceCapabilities.pdf 9...Et Bureu sep26, 2012, Bharti Walmart finds real estate costs a challenge for retail business foray economic times. (online) available at http://articles.economictimes.indiatimes.com/2012-0926/news/34102264_1_bharti-walmart-md-mnc-retailers-retail-sector> 10.. Frost and Sulivin, 2008 overview of the indian retail market(online) Available at -www.sensormatic.com/SensormaticGetDoc.aspx?FileID=22138 11. Govt. of India ministry and commerce, 2012 Department of Industrial policy and promotion (online) Available at http://dipp.gov.in/English/acts_rules/Press_Notes/pn5_2012.pdf 12.Gunjan prasad, 6 jun 2007 Bharti open creative pitch for Wal-Mart JVarticle accession no. 32519984 business source premier, available at http://web.ebscohost.com/ehost/detail?sid=e29eec7424ae-44ef-b114754de34ef845%40sessionmgr112&vid=1&hid=123&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d %3d#db=buh&AN=32519984 13. malavika sharma, sep 14 2012 India Eases Rule for Retailers, Walmart to Benefit(online) available at http://www.bloomberg.com/news/2012-09-14/india-eases-rules-for-foreign-retailers-walmart-to-benefit.html 14. Rediff business, April 13 2010, Walmart set to boost sourcing from India (online) available athttp://business.rediff.com/report/2010/apr/13/walmart-set-to-boost-sourcing-from-india.htm

15. The Indian express, jul 11 2012 FDI violation by bharti walmart, others(online) available at. http://www.indianexpress.com/news/fdi-violations-by-bharti-walmart-others/973139/2 16.Wal-Mart ,2012 our story(online) available at http://corporate.walmart.com/our-story/
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PIYUSH GOYAL 12107092 17.Wal-Mart, 2012 annual report (online) available at http://www.walmartstores.com/sites/annualreport/2012/WalMart_AR.pdf

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