WAL-MART AND BHARTI: TRANSFORMING RETAIL IN INDIA

Presented To: Prof.

Presented By:

Q. 1

Describe how Wal-Mart’s supply chain works and comment on how it has helped create competitive advantages for the firm. Will Wal-Mart be able to generate the same advantages in India? Why or why not?

Wal-mart Supply Chain Flow Chat

Manufacturer

Manufacturer

Manufacturer

Retail Store

Retail Store

Retail Store

Point of sale terminal

Satellite system

Bar code, RFID

Radio, headphone

Distribution center

Company Headquarter

Wal-Mart’s Business Strategy

Business Strategy

Through continuous supply chain cost control, Wal-Mart is able to maintain low prices for customers.

Asset utilization is another goal for Wal-Mart, but facility, private fleet, and information technology utilization are again primarily focused on lowering costs.

Information technology investments are directed towards improving efficiencies across the extended supply chain from vendors to stores, and thus the use of information technology supports the EDLP business strategy

Vendor Collaboration

Level of collaboration depends upon Investment Capabilities Product Volume Value to Wal-Mart

Vendor Managed Inventory (VMI)

IT Capabilities

BarCode Satellite Communication System RFID Point of Sale Scanning System Retail Link

Information available to vendors on time Vendors can thus improve supply chain and

lower costs

Process Differentiation

Two types of products (Fisher, 1997) Functional:

Predictable Demand Low Margin Supply Chain is efficient and low cost

Innovative Unpredictable Demand High Margin Cost and probability of stocking out are higher Supply chain should be flexible and responsive

Sources of Cost advantages

Own transportation system: Resulted in cost savings and ability to deliver

products in to various stores within 48 hours

Usage of IT in Supply Chain management Inventory tracking using information available in

barcode. POS scanning: Which helped in managing the

products at supplier’s end. RFID tags: Enabled to keep track of the inventory

throughout the supply chain.

Advantage in the Cost performance matrix

    

Wal-Mart's Perceived Value w.r.t. to competitors

Lower Almost the same Higher

Wal-Mart's Input costs

w.r.t. to competitors

Higer Disadvantage Disadvantage Depends

Almost the same Disadvantage Parity Advantage

Lower Depends Advantage Advantage

CL strategies of Wal-Mart in Indian context Having it’s own transportation

system:

Valuable Yes Helps to reduce the costs and generate profits

Rare No Other domestic players like Reliance also have their own

transportation system Inimitable

No Exploitation by the Organization

Yes In West this is the major differentiating factor

CL strategies of Wal-Mart in Indian context Usage of IT in Supply Chain

management:

Valuable Yes Helps to reduce the costs and generate profits, ease in

operations Rare

No IT is no longer a differentiating factor

Inimitable No

Exploitation by Organization Yes Had short lived First mover advantage in the west

Conclusion

Wal-Mart might not be able to generate the same advantages in India

Q. 2

Analyze the structure of the retail sector in India at the time of the case

Potential of Retail Sector in India Repeatedly named amongst Asia’s most

promising sectors.

Key Highlights

Contributing 14% to India’s NGDP.

Providing employment to 7% of its

workforce.

Crucial mainstay of Indian economy

Highly regulated Indian Retail Market

Fragmentation

Highly fragmented sector

Unorganized Retail: 98% of India’s Total

Trade.

Organized Retail: 2%

Labeled as “A Nation of Shopkeepers”

Structure: Unorganized Retail Referred to more traditional, small scale and

low-cost 11 million retailers*. These include: -

Pavement & Hand-cart vendors Convenience Stores Paan/Beedi Stores Owner-manned general stores Local Kirana shops

*Source: Datamonitor report, 2006: Retailing in India

Structure: Organized Retail

Refers to officially licensed retailers. These include:

Large, privately owned retail companies Retail Chains Corporate-backed Hypermarkets

Retail: Segmental Performance

Retail: Porter’s Five Force Analysis

Threat of EntryHigh both in unorganized

and organized space

Threat of RivalryHigh

Threat of Substitutes

Medium to High

Threat of SuppliersLow

Threat of BuyersMedium to High

Level of Threat in

the Industry

PESTEL Analysis

Retail industry is operating in a highly protectionist environment - government is limiting the FDI into the retail segment

Increase in consumer spending Demographic change ( 67 % < 35 years of

age) Large number of working men and women Paradigm shift in consumer mindset,

Changing consumer preferences variety seeking buying behaviour.

Burgeoning Middle Class

Q.3

Analyze the merits and demerits of the Walmart – Bharti JV in India from different perspectives. You can use a SWOT framework. What is its current positions (July 2010). Comment on its future.

SWOT Analysis

Strengths Walmart’s supply chain capabilities Bharti experienced in local markets Bharti brand in India

Weaknesses Opportunities

Booming retail sector with increased consumption

Threats Competition from other Indian groups Government policy may slow down growth

Current Scenario

Bharti Wal-Mart operates wholesale stores under the Best Price Modern Wholesale brand – 2 stores

10-12 cash-and-carry stores in the next 12 months The company now operates around 80 stores Slowed down by policy uncertainty and downturn Planning to open 140 retail stores by year end Cap of 25% on sales of cash-and-carry players to

front-end retail companies owned by their Indian joint venture partners – Change in JV agreement ; Reduced Investment

Future Position

New policy may limit investment from Walmart in wholesale cash and carry

Optimism on relaxation of FDI norms in retail

Government Policy dependent Aggressive Push for expansion in retail by

Bharti Walmart – Wait and Watch Long term – Beneficial with rapid expansion Short Term – Reduced investments