Joint Venture

- Bharti Wal-Mart

Table of Contents
Executive Summary...................................................................................................................... 2

Key Issues .................................................................................................................................... 3

Literature Review ........................................................................................................................ 3

Introduction ................................................................................................................................ 4 Wal-Mart ................................................................................................................................................. 4 Bharti enterprise ..................................................................................................................................... 5 Indian Retail Industry .............................................................................................................................. 6

Analysis and Discussions ............................................................................................................. 7 Introduction of Bharti Wal-Mart ............................................................................................................. 7 SWOT ANALYSIS ...................................................................................................................................... 8 Strategies of Bharti Wal-Mart ................................................................................................................. 9 PROS And CONS .................................................................................................................................... 10 Stimulating factors ................................................................................................................................ 10

Limitations................................................................................................................................. 11

Conclusion ................................................................................................................................. 11

Recommendations ..................................................................................................................... 12

References................................................................................................................................. 12

I.

EXECUTIVE SUMMARY: This report is about the International Joint-Ventures that are happening at a fast pace now-a-days. And to analyse the effects of such venture on both the parties involved we have taken the example of the join-venture between Walmart- an American public MNC and Bharti- an Indian telecommunication company. Our studies reveals the process of the joint-venture and it after-effects on both the companies. We have used the secondary data available on this subject and studied it well, resulted we have come up with various facts about the Indian Retail Industry and the Wal-mart expansion strategy. During the research we have found out that although Indian Economy is second fastest growing economy but the retail in India is still dependent upon the road side shops, in short the mall-culture for shopping is still not accepted by the majority of the population over there which leaves the scope for the foreign Retail Giants to come up in India and capture the market size. Wal-Mart has done the same thing it has analysed the growth prospects in Indian Retail Sector and entered the Indian Market through Bharti Airtel because the direct entry in retail sector for a foreign company is not allowed and therefore Wal-Mart have used the strategy of starting business via franchisees. Our report also shows that it is not necessary that all the jointventure would end up with the positive impacts for both the parties, it may be possible that one or two of them have to face the losses. Although it was a good deal but Indian market have given Wal-Mart a big challenge in the form of competition and the rigid shopping attitude of the domestic people .There were strong competitors like Reliance and to compete with them was not an easy task in Indian market. Apart from the existing competition threat of the new entrants like Carrefour group was also there. In this report we have analysed the findings on how Wal-Mart and Bharti managed the deal and how the deal has effected their growth prospects and with this Joint-venture how the retail Industry in India have changed. If you are going to plan for an International Joint-Venture then definitely you have to face so many Government Interventions and we have discussed the policies of the Indian govt for the Foreign direct Investment and cash and carry business.

II.

KEY ISSUES: This report will analyse the solution of the following Key Issues1. How much successful was this Joint-venture?- In this head we will discuss the benefits and the losses both the companies have faced because of the integration in Indian Market. 2. What are the changes Indian retail Industry have observed after the joint-Venture?- We have discussed the retail scene of India before the Joint-venture now the main thing is to understand the major changes that occurred because of that collaboration in the buying habits of people and Indian economy.

III.

LITERATURE REVIEW: In the era of globalization Joint-Ventures, mergers and acquisition are taking place at a fast pace. To get global and spread business operation at the international level and to expand Wal-Mart and Bharti has also entered in a Joint-Venture. The question was whether Indian customer will value the new format of retail in India or not. Consumers are the main drivers of retail business in India (Piyush Kumar Sinha, Arindam Banerjee,2004). To make this joint-venture successful wal-mart has to establish productive and efficient partnership with Bharti because Bharti is a key to the door of success in India for Wal-Mart. Wal-Mart is famous for its supply chain system and it should protect its intellectual property right on its Supply chain management system but share good relations with Bharti (Jaya Halepete,2008). Bharti Wal-Mart has taken many innovative decisions with a good start from Amritsar and then covering North-Indian part. The challenges they are facing is the government restrictions and the opposition of the political parties moreover Bharti is a young company while Wal-Mart is an experienced giant but being in india requires a good understanding about the choices and taste of the consumers otherwise they will continue trusting upon their own mom and pop retail store i.e Kirana Stores and other super markets. But retail scenario is transforming in India and it has been predicted to be a Retail Power house in coming years therefore this is the right time to take a big slice in emerging Indian Market. (R K Shrivastava, 2008)

IV.

INTRODUCTION: Following is the Introduction and SWOT Analysis of both the companiesWal-MartThe enterprise that belongs to Sam Walton, is one of the major Retail Giant in US, that operates majorly in North America, which is trying to make its mark all over the world through its expansion programs via organised retail, supply chain management and its pricing strategies. And therefore its business operation includes 14 countries with 2980 stores outside America. The most popular fact about Wal-Mart is that it sells its merchandise Always at low prices. Wal-Mart has already into joint-venture with China and its operations are in several countries which are listed below Wal-Mex in Mexico Asda in UK Seiyu in Japan Although its operations in South-Korea and Germany have failed but it has some good responses from countries like China, we can say its International expansion Program is getting mixed responses. Now, when the retail giant has planned to enter in Indian Market the situation was critical because Indian Economy is not a normal one apart from its growing scenario the country lacks development in many areas like in Retail Industry, and that was the challenge for Wal-Mart to cope up with this situation. SWOT ANALYSIS of Wal-Mart as an individual enterprise that shows its eligibility to come under the contract of International Joint-ventureSTRENGTH: 1. Known as the worlds largest retailer 2. Uses the latest technologies for inventory for e.g use of UPC coding (RF Tracking) 3. A proper supply chain management system which is the main source of its profit. 4. Experience in retail sector because of existence in major parts of the world. WEAKNESS: 1. Its failure in the markets of Germany and South-Korea 2. Its span of control in foreign markets.

3. Lack of acquaintance with the foreign markets. OPPORTUNITIES: 1. To expand in major part of the world with its brand name. 2. Under-developed and developing countries have lots of opportunities for Wal-Mart. 3. With the other retail giant of foreign countries it could increase its growth prospects. THREATS: 1. The complex government rules and regulations to enter in foreign countries. 2. Its success in US is not a guarantee of the same in other countries. 3. Other countries have different logistics and supply chain management systems. 4. Huge competition in the retail industry to gain the market share.

Bharti EnterpriseThis enterprise is owned by Mittal Brothers and the leading enterprise of India in various sectors because of its conglomeratic expansion strategies it has its successful business in the field of telecom, food, Retail and Insurance. Among its all businesses Bharti is a pioneering company in telecom sector which provide services of telecommunication, fixed line, mobile and broadband connections. It was also ranked among top-10 best performing companies throughout the world according to Business Week IT-100. Bharti also has already in joint-venture with many companies and these are listed belowELRO Holding India ltd in food sector as Field Fresh Food Pvt Ltd AXA for financial management as Bharti AXA life insurance. The company has announced its business plan for the retail Outlets in 2007 with huge investment and providing employment opportunities. To expand as an international brand Bharti Retail Pvt Ltd has decided to come up with the Joint-Venture with Wal-Mart. SWOT ANALYSIS of Bharti enterprise as an individual enterprise that shows its eligibility to come under the contract of International JointventureSTRENGTH : 1. A brand name in India 2. Large customer base because of it successful telecom sector.

WEAKNESS: 1. It is a young company which has a lack of experience in retail sector 2. It has outsourced the expertise from different countries which may lose confidence of other firms in Bharti. OPPORTUNITIES: Can grow well in joint-venture with other company as it has expertise in many areas and it is already in several joint-ventures. THREAT: Its young image may put a question mark for any experienced giant to think before the joint-collaboration.

SCENARIO OF INDIAN RETAIL INDUSTRY BEFORE THE JOINTVENTURE1. Being worlds second-fasted growing economy, India still lacks in organized retail sector which just gathers 6% of Industry Sales. 2. Now the trend is changing but slowly and consumers still rely on Kirana stores for retail purchases which deter global giants in pursuing their business setting here. 3. The retail sector of India contributes just 10% to GDP with providing 8% employment opportunities. 4. Second largest populated country where there is a scope of making a strong customer base but the thing require is the customers attention. 5. It is projected to be the Big retail destination with the Cumulative Average Growth Rate(CAGR) between 40-45% 6. Khadi Plazas, Village Malls and the Wedding Malls are several Innovation in India retail industry and people rely on them for their purchases. 7. Handicrafts and Handlooms are popular in Indian Market. . 8. Street markets, Kiranas, Kiosks and multiple brand outlets are prevailing in India. Departmental store, speciality shops, company owned outlets and super markets are some kind of retail service providers which are based on modern format.

V.

ANALYSIS AND DISCUSSION: Introduction to Walmart-Bharti Joint-Venture:

At the time of Walmart-Bharti joint venture, it was a law for Global Retail Giants that they cant invest 100% in India stopping brand retailers to start business in India directly. In November 06, Wal-Mart joined hands with Bharti Enterprises on 50:50 basis to open their stores across India. Due to regulationary restrictions, Walmart decided to handle the wholesale end and operate via franchises. Bharti Enterprise handles at face that includes opening outlets whilst Walmart handles logistics and cold chains. 90% of the good were planned to resource from India and 10% from overseas. They opened their first retail store in May 2009 in Amritsar as Best Price Modern Wholesale. It can be called a Horizontal Alliance as well as Synergistic Strategic Alliance. The venture is an example of how to combine skills and resources to create a value. Bharti Enterprises has resources and venture will increase products portfolio and Walmart will establish credibility to procure a distribution system and a supply chain. Equal share of costs/profits will ensure less friction between this international alliance. The venture with Bharti Enterprise ensures them as first players of retail organization in India. When others waited for FDI regulations to change, Wal-Mart went ahead through franchise route eager to capture a good share in market at parturient stage. Objective of company was to get its supply chain and logistics in order before overseas investment becomes easy. To counter its competing corporate houses such as Reliance and Aditya Birla Group in retail market, Bharti Enterprises needed a strong financial partner with an experience in the organised retail industry and Wal-Mart came to them at right time. At that time Wal-Mart and Bharti have faced strong opposition from the political parties (Left) as they called it as a backdoor entry of Wal-Mart in Indian retail Industry as the prevailing norms were not allowing it to enter directly. They were advocating the fact that this joint-venture would adversely affect the business of farmers and domestic retailers and manufacturers. Both the companies was looking for their joint benefits, if Wal-Mart is a retail industry expert giant then Bharti is a popular brand in India which was expecting its business expansion across the International boundaries after getting its roots into the retail sector. Similarly for Wal-Mart this joint-venture will ought to be the one more addition in its strategy of expanding in all over the world .

SWOT ANALYSIS OF BHARTI WAL-MART TO UNDERSTAND THE CHALLENGES IT HAS FACED:

This analysis is based on the SWOT of both the companies with reference to the Indian Retail Industry. STRENGTH1. Wal-Mart is famous for its well-organised structure and for Indian market which was unorganised at that time wal-Mart will give a good shopping experience. 2. With its customer base and brand name Bharti will benefit the Jointventure because the customer will trust wal-mart by relating it with Bharti their domestic brand. 3. Bharti has very good public relations in India which will help the supply chain management of the venture. 4. Wal-Mart has the best HR management system it provides timely training and development services to the staff. 5. Cash and carry business will be the strength. WEAKNESS1. Bharti is a young company and it has to deal with the retail expert WalMart. 2. Hard Entry for foreign companies. 3. Wal-Mart will have to face the difficulty in understanding the consumers buying and consuming patterns as the preferences varies from country to country. 4. Wal-Mart may have to modify its existing logistic and supply chain management system. 5. Legal regulations of Indian government will be the challenge for this alliance. 6. India is a land of cultural diversities in spite of the fact that Wal-mart will offer thousands of items in its store, if it failed to fulfil what exactly the customer of the particular area or region want, it would failed totally. OPPORTUNITIES1. The new locations and infrastructure provides a great opportunity for the venture to get popular. 2. India have 98% unorganised market which can be captured through mergers and take over because these are the small stores. 3. With Bharti the company will also enter into the rural market 4. Both the companies have equal opportunities to learn from each other. 5. Indian Retail Market is new with the enormous potential growth.

THREATS1. Political Oppositions and the laws related to the Foreign direct Investment in India. 2. Competition from the existing brands in India like- Tata , Future Group, Carrefour, Metro, Tesco, Aditya Birla Group etc because these are the popular brands of India through which Indians relates themselves. 3. Threat of new entrants 4. Available substitutes of Indian market like the traditional outlets. Some facts and changes about the Indian Market after the Joint-Venture1. Indian retail market is changing because of the increasing per capita income and the changing consuming patterns. 2. The market should not underestimate the buyers power in India. There would be no bargaining chances in retail outlets moreover of consumer are provided with the access of wide variety of products and services with better quality, they will be more than satisfied. 3. In India the power of buyers is moderate. 4. As the market is growing the thrust of the industries to capture the market share is also growing which is giving too much of competition . 5. With the buyers power the unorganised sectors are transforming into organised ones. 6. Retail industry provides the value-added goods and services which are favoured by the customers. 7. Increasing percentage of women in the population is the positive point for retail industry in India because they like shopping in organised culture where they could find everything under one roof and can compare. STRATEGIES ADOPTED BY BHARTI WAL-MART AFTER THE VENTURE1. After joining hands with Bharti, Wal-Mart has opened its first store in Amritsar with the expansion program strating from North-India. 2. To get the support from rural market and to advertise itself Bharti-WalMart has distributed its Pushcarts to the unemployed population over there and launched seven Best Price Modern Wholesale Cash-AndCarry stores across India 3. Besides, Bharti Wal-Mart started volunteer program with Cadbury India and also started Bharti-Wal-Mart training centre as we have already discussed that India lacks skilled manpower. These were their several initiatives to develop public relations and to get the image of a socially responsible enterprise.

THE PROS AND CONS:

If the companies exits from the Joint-Venture: PROS: 1. Wal-Mart will continue its growth strategies in US markets and Bharti will stick to its conglomeratic expansions in India with its Brand Name. 2. The risk for both the companies would be low in their own domestic markets. 3. Wal-Mart could enter as a sole owner in Indian Market with specialised sector. 4. Wal-Mart can come in Joint-Venture with other experienced and profit earning partner. 5. Bharti could also join hands with the other company and can escape from the opposition of the political parties on the back-door entry on Wal-Mart. CONS: 1. Indian retail market is new and anyone else other then Bharti and WalMart could easily exploit this opportunity and get the advantage of growing market. 2. This stage is the best to capture the Indian Market if wal-mart would try to enter later it would get difficult. 3. Bharti can come in joint-venture with wal-marts competitor. 4. Other companies will get the large share of the market.

STIMULATING FACTORS-

Following are the stimulating factors which could contribute to the long term success of this Joint-venture: 1. Growing Indian economy with Increasing disposable income 2. Young Population of India with the emergence of Nuclear Families 3. Positive impacts of globalisation on Indian industry that contributes to the urbanisation. 4. Positive attitude of Indian consumers in accepting the modern format of retailing 5. India has been declared as the best upcoming hub for retail giants.

VI.

LIMITATIONS- Following are the limitations for the Bharti wal-Mart joint venture: 1. 2. 3. 4. 5. The legal structure regarding tax are not favourable for foreign companies There are restrictions on Foreign Direct Investments after certain limit. There is a restriction on Cash and Carry business as well. The manpower of India is unskilled there is a need to provide training. Wide variety of consumer groups will be the problem for targeting the markets 6. Real estate is expensive and Infrastructure is not supportive. 7. Majority of the people are more familiar and attached to the traditional format of stores.

VII.

CONCLUSION: The over all study and analysis shows that entering in Indian retail Market is not an easy task. However, Indian Market is a growing one and it has been predicted over the next 5-10 years it will become a huge market for foreign ventures and the retail sector will also transformed. Hence the threat of new entrants will always be there as every marketer would like to have a piece of cake. Indian market is consumer based and therefore if we talk about the growth perspective of this venture taking consumer market as a criteria we can say that the consumer would like to have better quality products in good prices with wide variety and there Bharti Wal-Mart can get the benefit. If Bharti Wal-Mart will take care of the better supply chain management then the suppliers would like to work with them because there is already a growing demand in consumer market. If Wal-Mart will apply its best practices for supply chain management and logistics it would benefit the alliance.But the competitive scenario will be the same, the traditional market will stil give the direct competition because majority of the Indian population are still attached to them and the political parties are also possessive about the rights of domestic retailers. Indian consumers want emotional touch and to attract and retain them it is necessary to get localised otherwise the domestic retailers will take all the benefit as they know the nerves of Indian consumer. Last thing is the survival of the Joint-venture, the reason behind the venture is government restriction on the foreign companies in India , it may be possible that after performing very well and after developing good logistic and supply chain system Wal-Mart can emerge as a major player on its own without the support of Bharti. Therefore healthy relation between the partners are must.

VIII.

RECOMMENDATIONTo be successful in the Indian Market Bharti Wal-Mart should do the following things: 1. Consumers are the main power in India and hence to gain their attention and loyalty it should provide high quality services and products with reasonable prices to fulfil their desires. 2. Wal-marts strength is its supply chain management system, now to gain suppliers support Bharti Wal-Mart should develop a strong supply chain network. 3. It should continue its expanding programs to cover the important part of the growing Indian Market. 4. The most important thing is both the enterprises should maintain healthy relations to avoid conflicts in future because both of them are capable of doing things alone after creating its identity. Bharti could join hands with other company or Wal-Mart would alone become the empire of retail sector after spreading its network in India.

IX. 1.

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6.

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