India: Anticipating the Opening Up of a Billion-Person Market Although it is the world's eighth-largest retail...

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India: Anticipating the Opening Up of a Billion-Person Market Although it is the world's eighth-largest retail market at more than $350 billion and has 400 million people with disposable income, the inefficiency of the Indian retail sector is well known. More than 95 percent of retail sales are made through nearly 15 million tea stands, newspaper stalls, and mom-and- pop stores. Strict government barriers have prevented foreign- owned retail businesses, although that situation is changing. "Many smart people-much smarter than 1-believe that India could be the next China," said John Menzer, the former head of Walmart's international operations and current vice chair of the company's U.S. stores. "So, certainly, as a retailer it's a place where we'd like to be." However, exploiting the potential of India could be a major challenge, particularly given the country's notoriously frustrating bureaucracy and poor infrastructure. Walmart will have to learn to manage highly protectionist and anti-capital- ist political parties, a bad road system, frequent power out- ages, difficulties acquiring appropriate plots of land, and lack of adequate distribution and cold-storage systems, among other concerns. One industry participant said, "Where will they run their Volvo trucks here? They will probably have to have bullock carts and handcarts in their supply chain. The diversity of the country could also prove problematic, with 18 official languages, 6,000 castes and subcastes, and widely varying regional consumer cultures. Savvy new Indian chains, such as Provogue and Shoppers' Stop, are starting to emerge, and nationalistic sentiments may produce much con- sternation for expansion efforts of foreign companies such as Walmart. In preparation for an eventual opening of the market, Walmart began building a foundation by establishing rela- tionships with Indian suppliers, distributors, and consumers. "What we found in China as we get stores on the ground and get more mass, we get to know a lot more of the suppliers. And when we know the suppliers, it gives us the opportu- nity to learn the product of the suppliers and actually export them," said Mr. Menzer in 2007, Walmart established Bharti Walmart, a 50-50 joint venture with Bharti Enterprises, a leader in mobile telecommunications. The venture's first store opened in 2009. Due to the constraints on retailing, this i venture is technically focused on the wholesale market, sell- ing only to large institutional or wholesale buyers while the company builds up its infrastructure and skills for an even- tual liberalization of the retail market. However, due to limited restrictions, more than 30,000 members joined this first sto to shop from the broad selection of products. By mid-2011, the venture had opened six Best Price Modern Wholesale stores, and it planned to open another 20 stores in the subsequent two years. As stated by Raj Jain, Bharti Walmart's chief executive, "In the next one or two years we do anticipate we will be in a market leadership position." Clearly, Walmart will need to understand the political and market dynamics and exploit the lessons it has learned from entering other emerg- ing markets in order to achieve success when the Indian market finally opens up. Questions: 1. Why has Walmart viewed international expansion as a critical part of its strategy? 2. What did Walmart do to enable the company to achieve success in Canada and Latin America? Why did Walmart fail to achieve similar success in Europe? 3. What should Walmart do-or not do to help ensure that the company achieves success in China and India? India: Anticipating the Opening Up of a Billion-Person Market Although it is the world's eighth-largest retail market at more than $350 billion and has 400 million people with disposable income, the inefficiency of the Indian retail sector is well known. More than 95 percent of retail sales are made through nearly 15 million tea stands, newspaper stalls, and mom-and- pop stores. Strict government barriers have prevented foreign- owned retail businesses, although that situation is changing. "Many smart people-much smarter than 1-believe that India could be the next China," said John Menzer, the former head of Walmart's international operations and current vice chair of the company's U.S. stores. "So, certainly, as a retailer it's a place where we'd like to be." However, exploiting the potential of India could be a major challenge, particularly given the country's notoriously frustrating bureaucracy and poor infrastructure. Walmart will have to learn to manage highly protectionist and anti-capital- ist political parties, a bad road system, frequent power out- ages, difficulties acquiring appropriate plots of land, and lack of adequate distribution and cold-storage systems, among other concerns. One industry participant said, "Where will they run their Volvo trucks here? They will probably have to have bullock carts and handcarts in their supply chain. The diversity of the country could also prove problematic, with 18 official languages, 6,000 castes and subcastes, and widely varying regional consumer cultures. Savvy new Indian chains, such as Provogue and Shoppers' Stop, are starting to emerge, and nationalistic sentiments may produce much con- sternation for expansion efforts of foreign companies such as Walmart. In preparation for an eventual opening of the market, Walmart began building a foundation by establishing rela- tionships with Indian suppliers, distributors, and consumers. "What we found in China as we get stores on the ground and get more mass, we get to know a lot more of the suppliers. And when we know the suppliers, it gives us the opportu- nity to learn the product of the suppliers and actually export them," said Mr. Menzer in 2007, Walmart established Bharti Walmart, a 50-50 joint venture with Bharti Enterprises, a leader in mobile telecommunications. The venture's first store opened in 2009. Due to the constraints on retailing, this i venture is technically focused on the wholesale market, sell- ing only to large institutional or wholesale buyers while the company builds up its infrastructure and skills for an even- tual liberalization of the retail market. However, due to limited restrictions, more than 30,000 members joined this first sto to shop from the broad selection of products. By mid-2011, the venture had opened six Best Price Modern Wholesale stores, and it planned to open another 20 stores in the subsequent two years. As stated by Raj Jain, Bharti Walmart's chief executive, "In the next one or two years we do anticipate we will be in a market leadership position." Clearly, Walmart will need to understand the political and market dynamics and exploit the lessons it has learned from entering other emerg- ing markets in order to achieve success when the Indian market finally opens up. Questions: 1. Why has Walmart viewed international expansion as a critical part of its strategy? 2. What did Walmart do to enable the company to achieve success in Canada and Latin America? Why did Walmart fail to achieve similar success in Europe? 3. What should Walmart do-or not do to help ensure that the company achieves success in China and India?

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