WAL-MART AND BHARTI: TRANSFORMING RETAIL IN INDIA

Presented To: Prof. Presented By:

Q. 1

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

Wal-mart Supply Chain Flow Chat

Radio, headphone Retail Store Manufacturer

Manufacturer

Distribution center Bar code, RFID

Retail Store

Point of sale terminal

Retail Store Manufacturer Satellite system

Company Headquarter

Wal-Marts 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 Low

Demand

Margin Supply Chain is efficient and low cost

Innovative
Unpredictable High

Demand

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 suppliers 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

Higer

Disadvantage

Disadvantage

Depends

Wal-Mart's Input costs w.r.t. to competitors

Almost the same Disadvantage

Parity

Advantage

Lower

Depends

Advantage

Advantage

CL strategies of Wal-Mart in Indian context

Having its 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
No Yes In West this is the major differentiating factor

Inimitable

Exploitation by the Organization

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 No IT is no longer a differentiating factor No Yes Had short lived First mover advantage in the west

Rare

Inimitable

Exploitation by Organization

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 promising sectors.

800 In USD 600 400 200 0 2006 320

amongst

Asias

most

637 427

2010 2015 Year

Key Highlights

Contributing 14% to Indias 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 Indias 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

Structure: Organized Retail

Refers to officially licensed retailers. These include:

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

Retail: Segmental Performance

Performance 2006
Segment Food & Organized Clothing, Textiles, & Fashion Accessories Consumer Durables & Home Appliances Pharma Unorganized Organized 99% 81% 90% 97% 1% 19% 10% 3% Total worth in Billion USD 144.8 22.1 9.36 8.2

Retail: Porters Five Force Analysis

Threat of Entry
High both in unorganized and organized space

Threat of Rivalry
High

Level of Threat in the Industry

Threat of Suppliers
Low

Threat of Substitutes
Medium to High

Threat of Buyers
Medium to High

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
Walmarts

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

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