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A JOINT VENTURE

CASE STUDY ON

WALLMART
AND

BHARTI
Made by: Ravi Kant Singh
Walmart

It is the largest departmental store chain in the world and the 3rd largest employer in the world. The
corporations philosophy is to strengthen its relationships with employers, customers and suppliers. It
follows a low pricing strategy and becoming a cost leader is its core competency. Another core

competency which walmart focuses on is the robust and efficient supply chain network which is
strengthened by its own transportation network. They have leveraged IT to enhance their supply chain

network and they have been very successful till date.

Another reason which has helped WALMART to do well in most of the international locations in which it
has started business is GLOCALIZATION. It has involved itself in local communities and adapted to their

local culture. Also, on an average WALMART sources 90% products locally hence it helps in improving the
local economy.
BHARTI

Bharti enterprises, a leading group in India which has its business spread across different sectors has
been rightly shortlisted by Walmart to open up its joint venture in India. Bharti has attracted US$ 1.2
Billon in foreign equity which is the highest in India and hence we can say that it has a good history of

partnering with overseas companies. It is rated No. 1 in telecom business in India and has partnered with
alcatel lucent to achieve this. Bharti has a deep knowledge of Indias fast growing consumer market and

hence can be a good partner to WALMART as they both complement each other I terms of their
strategies

BHARTI WALMART JV

Analyzing BHARTI WALMART JV by using the porters diamond model has led to the following results:

DEMAND

1. A basic difference which exists in the mindset of Indian and American people is that American

people focus more on BUY & PAY whereas Indian people focus on SAVE & BUY. This mentality

observed a change in the year 2000 as there was a steep increase in the consumer spending as the

youth population in India has seen a considerable growth in their disposable income. This increase
has led to opening of more and more outlets of global brands as the consumer today wants better

quality, variety and lifestyle products. This led to a demand in the organized retail sector.

2. With stiff competition from reliance, RPG, TATA, Aditya Birla group etc., Buyers have the ultimate

power to bargain and hence get the product at the cheapest price possible.

3. The FDI policy in India states that min 30% of the products are to be procured from Indian SMEs

hence it creates a demand for their products as well. Therefore it is a win-win situation for both

Walmart and the Indian small and micro industry.

4. Often this high consumer demand leads to innovation because ultimately Walmart and Bharti focus

on strong customer and supplier relationships and to maintain the relationships you have to be

innovative in your approach. The ever increasing competition makes this factor even more

important.

FACTOR ENDOWMENTS

factor endowments is defined as the amount of land, labor capital etc. that a country possesses and can
exploit them to its use. It is of two types, firstly the basic factor endowments which includes the natural
resources, the climate, the geographical condition etc. and the secondary factor endowments which
includes technology, infrastructure etc. or in simple words those resources which are obtained by the
investment of people, companies, government etc.
1. Walmart, a follower of localization focuses on the local area to improve its business rather than

replicating the same business plan in every country that it ventures into. It has a great ability to

apply its unique culture and successful retailing concept despite daunting business and cultural

challenges. India has the second largest population in the world and has a vast resource of skilled

labor which can be utilized by Bharti-Walmart JV to its best of use.

2. Cheap and good quality Agricultural products being another important contributor to the Indian

GDP and an important product to WALMART (if it wants to target small businesses such as fruit and

vegetable vendors and the kirana stores) can actually help Walmart to procure products direct

from the farmers at cheap rates and hence they will be able to retain their cost leadership status.

On the other hand it will be great for the farming industry as well because they will be able to sell

their produce at good rates to the distributor directly.

3. Another area which Walmart focuses on is the supply chain management and for that it has its own

transportation as well. Walmart invests heavily in IT and transportation infrastructure so as to

retain its core competency in the same area.

4. India with 2nd largest no. of mobile users and very cheap telecommunication prices can be a great

advantage for BHARTI-WALMART. Partnering with BHARTI, Indias major telecom operator and

telecom networks provider will be a great help to WALMART.


What is Wal-Mart?
Established in 1962 by Sam Walton
Worlds largest public corporation by revenue
Mission: Saving people money so they can live better

If we work together, well lower the cost of living for


everyonewell give the world an opportunity to see what its
like to save and have a better life.
SWOT Analysis
Strengths
Scale of operations; the major market player
Low pricing strategy (discounts)
Wide range of products
Leader in technological development
Employs IT for supply chain management
Weaknesses
Labor lawsuits over gender-discrimination
Reliant on price changes for differentiation
Negative publicity over predatory pricing
SWOT Analysis

Opportunities

A global strategy, with local focus


Previous experience entering foreign markets
Obvious efforts to become involved in local communities
and adapt to local cultures

Wal-Mart has become the most powerful, most influential


company in the world
SWOT Analysis
Threats
Problems in adjusting to local cultures
(e.g. South Korea and Germany)
Difficulties in dealing with different countries
economic policies and regulations
Resistance from local communities
Faced with protest from locals put out of work
Global Supply Chain

Whole configuration of Wal-Mart all over the world; the network linking the
activities of the value chain until the
Final consumer:

Own transportation systems:


- Enjoys transportation cost savings
- Helps to deliver products to its various stores within
48 hours
- 4 times faster than competition in replenishing its merchandise

Gained competitive advantage:


- Economical pricing of its products - Prices
allowed to vary daily
- Offered better discounts
- Strong bargaining power due to huge volume of purchases
Global Supply Chain

Logistics Wal-Mart is effective in the way it transfers its products and


in the flow of information between the units integrating the supply
chain.

Image 4 - Movement of the materials and information


through the supply chain
Global Sourcing

Wal-Mart chose to:


Purchase its products from suppliers and sell them in its stores
Instead of producing its own goods
Seek local sourcing of goods in addition to sourcing globally through
International operations
Integrate and coordinate worldwide sourcing

Local sourcing avoids language differences, distance, currency, tariffs and


politics problems.

Why Global Sourcing?


- Reduce costs and improve quality
- Increase exposure to worldwide technology
- Improve delivery-of-supplies process
- Establish presence in foreign markets
- Satisfy offset requirements
Global Supply Chain
How does Wal-Mart use technology?

Information Technology in Supply Chain Management


- Bar codes for inventory tracking
- Satellite communication system to coordinate supply chain activities
- Electronic Data Interchange (EDI) to place orders electronically to suppliers
- Microchips used for radio-frequency identification (RFID) put in the
products to identify individual items

E-Commerce
- Customers have access to great products at low prices, anytime,
anywhere - personalized shopping experience
- Website Walmart.com
- Mobile apps
- Moved its EDI-based infrastructure from traditional (and expensive) value-
added networks (VANs) to the Internet.
Global Supply Chain
How does Wal-Mart use technology?

Wal-Mart is a leader in employing information

technology (IT)
- Leaner supply chain
- improved planning and enhanced customer experience
- efficient inventory management
- Accurate merchandising
- Improved workforce management and store Operations
- low inventories, high inventory turnover ratios, reduced costs
- increased profitability
Global Strategies

Value of Knowledge in Global Supply Chains

Characteristics of top-performing supply chains:


- AGILITY: React readily to sudden changes in demand or supply
- ADAPTABILITY: Adapt over time as market structures and environmental
conditions change
- ALIGNMENT: Align the interests of all members of the supply chain to
optimize performance

These networks focus on understanding customer needs (present and future)

and building supply chains based on actual demand levels.


The Indian Market
Indian Attitude
Traditional: Save and Buy deeply rooted in culture

Time of Significant Change


Increasing number of working youth, median age 24
Growing percentage of working women
Boom in opportunities in the service sector

Result:

Increased consumer purchasing power


7.1% yearly growth of consumption spending
The Indian Market
Changing attitude in consumer buying behavior

The New Millennium (2000)


Global brands flood the marketplace
Provide more organized retail experience
Able to offer quality and provide variety
Retail in India
Retail Sector is the largest industry in India
Market size US$320 billion (2006)
Compound annual growth, 5%

Provides stability
21% of GDP
7% of labor force
Retail in India

Change of industry dynamic


From: unorganized, family owned retail
To: organized, foreign owned retail

Large scale investments in retail infrastructure


Real estate
Transportation networks

Change in the marketplace format


Specialty stores, hypermarkets, supermarkets

An Indian Mall culture


Food, entertainment, shopping all in one
location
The Indian Market
Regulation: Foreign Direct Investment
FDI only permitted on wholesale
Goal: Protect the 15 million small-store owners

2006: Change
Allowance of up to 51% FDI in multi-brand retailers
INDI
A Impact: Immediate revenue growth increases

MARK
ET
Why choose Bharti?
2007: Wal-Mart needs to form a joint venture
In reaction to 2006 FDI legislation
Begin search for an Indian partner to own other 49%

Bharti Enterprises
Founded in 1976, Indian business
conglomerate
Market leader in telecom
Top 10 Biggest Indian companies
Experience in international
partnerships
Del Monte (United States)
Axa Financial (France)
Have necessary liquid capital to invest
CEO Sunil Mittal worth US$6.6 billion
Why choose Bharti?

August 2007, two separate partnership agreements:


- 50:50 venture for back-end supply chain
Management and wholesale cash-and-
Carry operations
- Share expertise and technology with Bharti

Information sharing and knowledge integration between Wal-Mart and


Bharti.
Bharti-Walmart

Opportunities
1. Wal-Mart Stores Inc. gains exclusive first-mover
advantage into India
2. Ability to transform the industry, low prices and increased
quality
3. Fast-growing economy, 2nd largest population base

How it worked?
1. Wal-Mart brought in global supply chain capabilities and
expertise
2. Customization to the unique requirements of the Indian
market
3. Bharti responsible for managing the retail store
operations
4. Wal-Mart focused on logistics capabilities and building the supply
chain
Bharti-Walmart
Establishing the Supply Chain

Channel Structures before Wal-Mart operations in India:

Image 7 Channel Structures for Consumer Goods


Bharti-Walmart
New Supply Chain (cutting out the middleman)

INDI Supply Walmart Distributor Customer


A final
Local Retailers Transportation consumer
Producers System

Image 8 Wal-Mart Supply Chain in India


Bharti-Walmart
New Supply Chain (cutting out the middleman)

Benefits:
- More control over packaging and quality management
- Enhance productivity
INDIA
- Reduce inefficiency of the industrys traditional supply chain

Problems:
- Increased pressure from local civil right groups
- Aggressive demonstrations and protest of traditional
Owners
- Low quality of Indias transportation network
- Uncertainty on how to implement the supply chain
Bharti-Walmart
Challenges
1. Adapting to Indian cultures
Inability to meet Indian needs will result in protest, riots

2. Supply Chain management


Current poor roadway infrastructure, quality of trucking
3. Strict government legislation
Minimum 30% domestic suppliers
4. Partnership agreement
Bharti will play a role in decisions
5. Threat to small-businesses
Reality is Wal-Mart will displace millions of business
owners
6. Establish a solid supply chain
Suggestions to overcome the challenges
1. Empower franchisees
Create community feeling
Develop local leaders who believe in Wal-Mart
2. Improve supply chains
Use of inventory management
Work with Indian government
3. Understand the consumer needs
Work with locals to meet cultural expectations
Provide products that are desired
4. Reinvest in India
In the short-term, ensure profits are developing for the future
Bibliography

http://www.walmart.com/
http://www.forbes.com/sites/walterloeb/2013/10/16/walmart-what-
happened-in-india/
http://www.strategicmanagementinsight.com/swot-
analyses/walmart-swot-analysis.html
http://www.sensormatic.com/instore/2009_Q1/fands.asp
http://timesofindia.indiatimes.com/business/india-business/Wal-Mart-