Wal-Mart International Marketing Plan Sample

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UNIVERSITY | WORD LIMIT: 4176 WORDS

DATE : 3RD MAY, 2012

ASSIGNMENT TITLE: WAL-MART INTERNATIONAL MARKETING PLAN

STUDENT NAME:

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Contents Introduction ................................................................................................................................ 3

Company Background ............................................................................................................... 3

Product to be internationalized: ............................................................................................. 4

Current State of the Wal-Mart:............................................................................................... 4

Strengths: ............................................................................................................................ 4

Weaknesses: ........................................................................................................................ 4

Opportunities: ..................................................................................................................... 5

Threats: ............................................................................................................................... 5

Wal-Mart Motives to Internationalize: ................................................................................... 5

Wal-Mart Value Chain ............................................................................................................... 5

Host-Country Analysis............................................................................................................... 7

PESTLE Analysis:.................................................................................................................. 7

PORTER’s Five Force Analysis: ........................................................................................... 9

Location Specific Advantages of India: ............................................................................... 11

Cost and Risk Issues:............................................................................................................ 12

Selection of an Entry Mode ..................................................................................................... 12

Entry Mode for Wal-Mart: ................................................................................................... 14

Implementation of Marketing Mix........................................................................................... 15

References ................................................................................................................................ 18

Appendices ............................................................................................................................... 20

Appendix 1: Retail Sector Growth in India .......................................................................... 20

Appendix 2: Changing Paradigm ......................................................................................... 21

Appendix 3: Types of Retail Sectors.................................................................................... 22



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Introduction

With increasing globalization and related advantages, most of the present firms are

trying to go international. This is all due to maximizing the potential benefits available in

different countries. With this, firms are trying to increase their presence throughout the world.

Today, different countries have different advantages as some country is good in some specific

industries, whereas some in others. Therefore, firms operating in an industry look for other

nations doing well in the similar industries and have huge potential so that, they could take

advantage of it (Agarwal, 2010). Similar is the case with Wal-Mart, which is a leading

America’s multinational retail corporation.

established with a goal of saving people money and assist them in living a better life

(Wheelen, Hunger and Thomas, 2011). It serves them in a way they want to be serves like

through retail store, online, and on mobile. The company operates with 69 different banners

in about 27 countries. In present, it employs more than 2.2 million associates all over the

world.

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Product to be internationalized:

Wal-Mart’s success throughout the world had motivated it to enter Indian market and

in this regard it is planning from last several years. The company want to internationalize its

low cost, discount department stores in India with an aim to attain underlying advantages in

Indian retail industry (Wheelen, Hunger and Thomas, 2011). These low cost, discount

department stores of Wal-Mart in India would offer an extensive range of goods like grocery,

home appliances, furniture, apparels, cosmetics, toys, toiletries, etc.

Current State of the Wal-Mart:

In regard to expanding in a new market, it is essential to understand Wal-Mart’s

current situation that could be done through company’s SWOT analysis in the following way:

Strengths:

Wal-Mart is a powerful retail brand as it has a status for value for money, ease and an

extensive range of products all in one store.

It has grown significantly over current years, and has practised global expansion.

The company has a core competence in involving information technology to support

its global logistics system (Wheelen, Hunger and Thomas, 2011).

Wal-Mart operates with a focused strategy for human resource management and

development.

Weaknesses:

Being world’s largest grocery retailer, it is weak in some aspects because of huge

span of control.

Since Wal-Mart sell products although several sectors, sometimes it may not have the

flexibility of its more focussed competitors. Email : [email protected], Phone: (UK) +44 203 3555 345

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Opportunities:

To acquire, merge, or establish joint ventures and strategic alliances with other global

retailers, like Europe, India, or the Greater China Region (Kotler, 2002)

The company stores operate in small number of countries, so there are extensive

opportunities for future business in growing consumer markets, like India and China.

It could diversify from large super centres, to local and mall-based sites.

Wal-Mart Value Chain

For successfully operating in Indian retail industry it is essential for the company to

consider its value chain as without this it would not be possible for the company to have a

clear idea of its subsystems each with inputs, transformation procedures, and outputs. For


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operating at global level, it is essential to make changes in some of its sub-systems or all sub-

systems (Broadbridge, 2008). The change is all due to the acquisition and consumption of

resources in a different way. In India, the company would need to have a different approach

to acquire and consume resources in comparison to America. Carrying all value chain

activities in effective manner would affect its cost and profits.

All activities of the company in India would be classified into primary or support

activities that would differ in some or other way from its value chain in different nations. The

key primary activity that would be affected while operating in India is:

Inbound Logistics: Suppliers in Indian market would be new, so relationships need to

be formed along with determination of activities to receive, store, and distribute inputs

(Bhatia, 2008).

Operations: The Company also need to determine its operations in India required

running a low cost, discount department store.

Outbound Logistics: It involves different activities requisite to collect, store, and

distribute the products throughout Wal-Mart stores in India.

Marketing and Sales: The Company would also need to make determination regarding

its marketing sales activities in India as per the needs of customers and underlying

market trends (Lancaster and Reynolds, 2005).

Service – It would include post purchase activities like customer queries and return

policies etc that would be change as per underlying trends in the industry.

In addition to the above discussed primary activities, Wal-Mart executive in Indian

market would also need to make changes in support activities that are procurement, HRM,

development of technology, and infrastructure as without these support activities, it is not

possible for a firm to operate effectively specially in a global market (Kotler, 2002). All



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support activities in India would be different from what it is in America as Indian suppliers

have different terms and conditions. In India employees’ base is different from America and

they need more training. Technological development is also essential for it to integrate IT in

its India’s operations along with the development of specific infrastructure.

PESTLE Analysis:

Political

Indian retail market is still protected from the FDI (Foreign Direct Investments). As

well, there have been pressures on the local state governments from the trade unions

contrasting the entry of retailers as well as from Central Ministers who prefer to bring more

foreign investments so that more job opportunities could be creates. Till now, only single

brand retailer Marks and Spencer Plc. is allowed to open store and multi brand retailers are

yet to take advantage allowed through partnerships. Overall politically the environment is in

the favour of the retailing industry (Dabas, Sternquist and Mahi, 2012).

Economical


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The income in India is concentrated to large cities as here more opportunities are

available and youth migrate to cities after completing their education for jobs. The educated

youth prefer to buy through retail stores instead from Kirana stores or from road-side (Bhatia,

2008). The industry high growth rates and increasing profits, evidences the future potential of

India’s retail industry. The industry is largest in India and holds 10% in country’s GDP.

Social

There is cultural diversity in India that need to be understood by retailers coming in

this industry. Every state in India has its own specific food and purchase habits. For instance,

in Punjab consumers consume lot of wheat and potato whereas in Bengal consumers prefer

rice. In India, women play a key role in purchasing decision, as they always like to touch and

feel grocery or anything else before buying (Lancaster and Reynolds, 2005). These social

factors need to be considered effectively for starting retail stores in India.

Technology

India is emerging in regard to technological advancements as all industries are making

use of information and communication technology that present several advantages for the

country industries and the country (Dabas, Sternquist and Mahi, 2012). Technological

environment is much better than before, so this is also a reason of fastest growth of its retail

industry. Industry players now make use of online shopping, ERP systems, CRM systems,

retail media networks etc.

Legal:

The legal framework regarding retail industry in India is appropriate but confronting

significant opposition from trade union. The FDI policy of India is still not appropriate for

foreign retailers and they are confronting difficulties’ in this market (Broadbridge, 2008).

Environmental:



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Concern related to maintaining environment is on heights and all foreign retailers are

bound to behave in socially responsible manner, so that India’s people don’t suffer. More

focus in given on environmental initiatives.

Entry of big retailers, who are capable to absorb early losses, will be an apparent

threat to small retailers in the industry serving in cities as well as towns. The size of

unorganized retail in India is about 95% (Appendix 3). Initially, till the time new entrants

have developed an effective experience, they would be forced to make sales at higher costs.

Retaliation in opposition to organized retailers by trade unions have directed towards closing

down of stores, burning the stores, violence etc. In states run by communists there is a strong

resistance.

Supplier Power

Supplier power in the industry is low as previously retailers used to purchase from

rural farmers in Mandis, but now the business is transformed under modern warehouse.


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Farmers’ supplier power is quite low now due to the introduction of cash and carry formats

(Mehrotra, 2007). Products supplied from different FMCG companies like P&G, Unilever,

and Colgate Palmolive offer modern retailers with bundled price offers, whereas small retail

traders are not able to access these offers.

Threat of Substitutes:

Threat of substitutes is low in this industry as switching costs for customers are very

less. Most of the retail supermarket and departmental stores operates in large malls that

provide all additional facilities like parking, recreation, and entertainment (Mehrotra, 2007).

It provides a new shopping experience and customers prefer to make large purchases with a

belief to get more benefits. With this kind of environment small retail stores are neglected.

Some of the traditional retailers also enjoy comfort of their locality or busy marketplace that

could be a substitute constraint and entry barrier (Srivastava, 2008).

Buyer Power:

The buyer power is strong in Indian retail industry. Several organized retailers are

coming, and the choice for the retail buyer has increased. This in turn also increased buyers’

power.

Competitive Rivalry:

The level of competition in the industry is moderate as all retailers are operating with

different size. Some are small size retailers, whereas some are large size retailers. In present,

the number of small-size retailers is high as middle class and group below middle class prefer

to shop in small quantities on credit from their nearby store (Indian Retail Industry, 2005).

Though traditional retailers are there in the industry, but it is predicted that in future large

size retailers will gain momentum and industry competition will become intense.



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Location Specific Advantages of India:

With the help of PESTLE and Porter’s Five Force Analysis, it could be said that Wal-

Mart entry into India would be quite significant as it has several location specific advantages

that are:

India in present is the second most attractive evolving market for investment

subsequent to Vietnam in regard to retail sector.

Demographically and economically too the Indian environment prefer the retail

industry (Baker and Hart, 2007)

India’s growth rates are high and consumer spending has increased speedily as

disposable income of youth population has increased significantly.

In last four years only consumer spending has increased 75%.

Use of latest technologies in the industry is also directing retail firms towards

operational efficiencies and cost effectiveness (Broadbridge, 2008).

With the discussion of LSAs of India, it becomes evident that Wal-Mart would be

effectively able to attain its motives for internationalising. It would be able to make use of


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available potential in this sector and work as an attractive firm. It would also help it in its

global expansion.

Cost and Risk Issues:

Although, LSAs of India evidences that it is an appropriate country for retailers but

still there are several challenges and issues in this sector like skilled human resource,

regulatory framework, infrastructure, privatization and logistics, FDI policy and supply chain

management. It is a cost-driven sector therefore; retailers need to bring cost-efficiency by

improving their processes in order to attain maximum market shares (Bhatia, 2008). All these

aspects if not handled could increase Wal-Mart costs in India that in turn would make a

negative effect on its prices that need to be low to serve this market in an effective manner. In

addition to this there is risk of opposition from trade unions as they don’t want multi-brand

retailers to come in India. This could also result in violence so, it is important for Wal-Mart

to enter with all-inclusive preparation (Retail Industry in India, n.d).

Selection of an Entry Mode

The mode of entry is a basic decision for a company, whenever it plans to enter a new

market as the selection of automatic entry constrains its marketing and production strategy.

The mode of entry selected also make an affect that how a company deals with challenges

while entering a new country and developing new skills required to successfully market its

products (Indian Retail Industry, 2005). There are various forms of entering a new country’s

but the most common and effective modes of entry that could also be used by Wal-Mart to

enter India and increase its control are:

Export:

It is the conventional method of entering into a new market that could be direct or

indirect. It is a significant method as it doesn’t require any infrastructure facility in the Email : [email protected], Phone: (UK) +44 203 3555 345



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foreign country. It does not involved intermediaries, which in turn help in increasing

company profitability. It pertains to marketing and direct sale of domestically produced

products in another country.

Strategic Alliance:

It is the most cost effective entry mode one can use. In this firm could make alliances

in with some large players’ foreign market and take the advantage of the large size and the

large customer base to the corporation (Lancaster and Reynolds, 2005).

Another most effective entry mode is joint venture that helps a firm in entering a

market, risk/reward sharing, sharing technology, joint product development, and adhering to

government regulations. It also helps a foreign firm to develop political connection and

accessing distributional channel on the basis of relationships.

Franchising

In this mode the franchiser corresponds to transfer a package of products, systems and

services that it had explicated to a franchisee for a fee. The franchisee allows for local market

knowledge and entrepreneurship (Bhatia, 2008).


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Entry Mode for Wal-Mart:

With the discussion of different entry modes usually used by firms, it becomes

apparent that the most significant mode for Wal-Mart to enter Indian retail sector is joint

venture as it gives it an advantage of highest control. As well as the country government has

also allowed multi-brand retailers to invest in India through alliances or joint-ventures. It is

essential to comply with given regulatory framework in India so, it would be better for Wal-

Mart to go for joint ventures (Pradhan, 2006).

Although, the Indian economy is growing significantly in regard to deregulation, but

still the Indian retail economy remains protected from foreign competition through rules that

usually limit direct investment by foreigners. In present, multi-brand retailers are not allowed

to do direct investment in Indian retail sector as well as are not allowed to own and operate

their own stores (Bhatia, 2008). To deal with this regulation and constraints, it is better for

Wal-mart to make an alliance with some Indian business like Bharti Enterprises, and Indian

business group. The company developed partnership with this Indian mobile company in

2007, but still it is not able to enter India due to opposition from trade unions. In addition to

this, the company could also make partnership with other Indian companies to enter Indian

retail sector.

The implementation of this entry mode could be done in the following manner:

Wal-Mart and other firm with which partnership would be done like Bharti Enterprise would

manage the supply chain together while Bharti Enterprise will be franchised to run the retail

operations. With this operating model, Wal-Mart would be exposed to probable challenges

regarding ownership and internalization dimensions of the eclectic mode. For successful

implementation of this selected entry mode, it is essential for Wal-Mart to make use of

operating model that is effectively defined and able to closely handle the venture.



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The company need to be patience in regard to how it works with an Indian firm. Wal-

Mart would bring great amount of supply chain and IT intellectual property to the decided

joint venture, which Indian company need to protect. In addition to this, it is also required at

the part of Wal-Mart to carefully understand the management of different relationships from

above discussed dimensions (Paul, 2010).

Implementation of Marketing Mix

Wal-Mart in India would offer a wide range of products which range from grocery,

home appliances, furniture, apparels, cosmetics, toys, toiletries, etc. Products of all major

brands would be available at this low price discount department store of Wal-Mart with its

brand name “Wal-Mart”. The stores would sell different range of specific product categories

as per the needs of Indian customers. Initially key focus would be given on grocery, toiletries,


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and cosmetics, and then later on the store would expand in different product categories

(Pradhan, 2006).

Price:

As company attained success throughout the world by serving consumers at low price

would also be maintained in India. In India, also it would operate with low pricing strategy

with an aim to attain an effective position in the Indian retail industry. The different pricing

strategies that would be used are:

Value Pricing: The stores in India would operate with a concept of “Every Day Low

Pricing” so that consumers do not have to wait for discount promotions.

Promotional Pricing: The Wal-Mart department stores in India would also offer

financing at low interest rate. The conception of psychological discounting like Rs.

99, Rs. 49, etc. would also be used a key promotional tool. As well, Special Event

Pricing would also be used such as nearby Diwali, Gudi Padva, and Durga Pooja.

Differentiated Pricing: Time pricing would also be used that pertains to difference in

rates on the basis of peak and non-peak hours or shopping days.

Bundling: Another pricing strategy that would be used is bundling that pertains to

selling combo-packs and providing discount to customers. The combo-packs are like

adding value for customers in Indian retail sector (Mehrotra, 2007).

Place

Initially, the Wal-Mart stores would operate in India’s large cities like Bombay, Pune,

Ahemdabad, Jaipur, Calcutta, Chennai, Surat, Banglore etc with around 15 outlets. Slowly

after starting its operations, it will expand aggressively in major cities of India.

Promotion:

The company stores would promote its products through several new and innovative

cross-sell and up-sell strategies generally used in Indian retail market. In addition to this, the Email : [email protected], Phone: (UK) +44 203 3555 345

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different promotion techniques that could be used by Wal-Mart are “At Lowest Price”, “With

utmost value”, Smart Card (offering discount) etc. As well, it could also use brand

endorsement that most popular promotion technique in India. Exchange offers, point of

purchase promotions, advertising etc. would also play a significant role in building brand

(Bhatia, 2008)

Conclusion

With the help of above discussion, it becomes evident that the success of a

multinational company in a new foreign market depends on its all-essential considerations

and analysis. With an analysis of location specific advantage, cost and risk issues, value

chain, entry mode, marketing mix, it would become easy for Wal-Mart to enter India and

operate effectively.


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References

Agarwal, D.K., 2010. Supply Chain Management: Strategy, Cases and Best Practices. India:

Macmillan.

Baker, M.J. and Hart, S., 2007. The Marketing Book. 6 th Ed. UK: Butterworth-Heinemann.

Broadbridge, A., 2008. Retail insights. International Journal of Retail & Distribution

Management, 36 (9).

Bhatia, S.C., 2008. Retail Management. India: Atlantic Publishers & Dist.

Bhatia, B.S., 2008. Management of Service Sector. India: Deep and Deep Publications.

Dabas, C.S., Sternquist, B. and Mahi, H., 2012. Organized retailing in India: upstream

channel structure and management. Journal of Business & Industrial Marketing, 27

(3), pp.176-195.

Kotler, P., 2002. Marketing Management. 11th Ed. USA: Prentice Hall.

Kurtz, D.L., MacKenzie, H.F. and Snow, K., 2009. Contemporary Marketing. 2 nd Ed. India:

Cengage Learning.

Lancaster, G. and Reynolds, P., 2005. Management of Marketing. Burlington: Butterworth-

Heinemann.

Mehrotra, N., 2007. Indian Retail Sector - A Primer. India: ICFAI Books.

Indian Retail Industry, 2005. RocSerach Ltd [Online]. Available at

<http://www.studentsmart.in/Documents/Case%20Studies/Indian%20Retail%20Indu

stry.pdf> [Accessed 1May 2012]

Paul, J., 2010. Business Environment. 3rd ed. New York: Tata McGraw-Hill Education.

Pradhan, S., 2006. Retailing Management. 2nd ed. New York: Tata McGraw-Hill Education.



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Retail Industry in India, n.d. Retail Industry [Online]. Available at:

<http://www.cci.in/pdf/surveys_reports/indias_retail_sector.pdf> [Accessed 1 May

2012]

Srivastava, R.K., 2008. Changing retail scene in India. International Journal of Retail &

Distribution Management, 36 (9). pp.714 – 721.

Wheelen, T.L., Hunger, J.D. and Thomas, L.W., 2011. Concepts in Strategic Management

and Business Policy. 12th ed. India: Pearson Education India.


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