Wal-Mart Sets India Plans, Aims to Back Local Players
Gaurav Raghuvanshi and Eric Bellman. Wall Street Journal. (Eastern edition). New York, N.Y.: Feb 21, 2008. pg. B.4
Wal-Mart Stores Inc. plans to open 10 to 15 large cash-and-carry stores in India in the next seven years, hoping to crack the booming retail market without angering the tiny mom-and-pop retailers and small middlemen that dominate the industry.
The world's largest retailer by sales says its wholesale joint venture with India's Bharti Enterprises Ltd. will employ about 5,000 people over that period after opening its first store this year. The stores will be 50,000 to 100,000 square feet and offer items ranging from fruit to footwear for sale to retailers, hotels, hospital and other businesses. Indian rules don't allow foreign retailers such as Wal-Mart to sell directly to consumers. They are, however, allowed to run wholesale operations and provide back-end support to Indian retailers.
Meanwhile, Wal-Mart's wholly owned subsidiary, British retailer Asda Group Ltd., unveiled a GBP 400 million ($779 million) expansion program that will involve opening as many as 22 stories and extending 12 existing outlets. The expansion will create more than 9,000 jobs this year, the company said.
In India, Wal-Mart is one of many international and local retailers with plans to invest billions to modernize India's retail industry and supply chains. They are hoping to carve out their own share of India's retail market, which is already valued at more than $300 billion but has until recently been dominated by millions of small family-run stores. German retailer Metro AG, the world's fourth-largest retailer in terms of sales, already has wholesale stores in Bangalore and Hyderabad and plans to open more in India. India's Reliance Industries Ltd. has opened more than 100 grocery stores in the past year. It plans to open thousands more, hoping to get the jump on the international competition.
The surge in interest in the sector has sparked protests by mom-and- pop store owners and the middlemen that supply them across the country. As it announced the outlines of its India plans yesterday, Wal-Mart said its arrival wouldn't hurt the small players in the industry. "Our goal is to work with India's existing supply-chain infrastructure and improve efficiency to minimize wastage and maximize value for farmers and manufacturers as well as retailers," Wal-Mart Vice Chairman Michael Duke said. "We can help cut the waste, not the middlemen who can play a very important part in the entire supply chain."
As it increases its ties with India, Wal-Mart said it is also looking to outsource some of its information-technology work to Indian companies. It didn't say which companies it plans to use. "As we deepen our relationship with India, it only made sense that we take advantage of the 24-hour development cycle that India offers," Mr. Duke said.
Separately, Bharti Enterprises Joint Managing Director Rajan Mittal told reporters the cash-and-carry joint venture with Wal-Mart hopes to open its first wholesale store by December, followed by a couple of more stores next year.
Comments
As Wal-mart continues to pursue their growth strategy and entry into the global market - the question of corporate responsibility comes into play. We have all heard the stories of Wal-Mart entering rural America and the impact they have had on the local communities forcing the small mom and pop shops out of business, due to the fact the local small shops can not compete on price due to the economies of scale that Wal-Mart can achieve. As Wal-Mart enters India the same question and concern is being brought to the table by the local mom and pop stores and middlemen in India. However, it appears that the Indian government has put into place rules in order to help ensure that Wal-Mart doesn’t completely ruin the local small trade.
Wal-Mart sees opportunities for growth and the ability to outsource information-technology to Indian companies, ultimately creating more jobs for the local communities. Maybe instead of focusing on stopping Wal-Mart from destroying the mom and pop shops – maybe the Indian government should also be looking to ensure that they have the talent and education within the communities to support the growth. This is simply another example of how the external environment (ie. Government) has an impact on organizations and their decisions and plans to grow and how they have a choice to embrace the changes in a global economy or how they can continue to fight change.
Posted by: Angela Wagner | February 26, 2008 9:12 PM
As Wal-mart continues to pursue their growth strategy and entry into the global market - the question of corporate responsibility comes into play. We have all heard the stories of Wal-Mart entering rural America and the impact they have had on the local communities forcing the small mom and pop shops out of business, due to the fact the local small shops can not compete on price due to the economies of scale that Wal-Mart can achieve. As Wal-Mart enters India the same question and concern is being brought to the table by the local mom and pop stores and middlemen in India. However, it appears that the Indian government has put into place rules in order to help ensure that Wal-Mart doesn’t completely ruin the local small trade.
Wal-Mart sees opportunities for growth and the ability to outsource information-technology to Indian companies, ultimately creating more jobs for the local communities. Maybe instead of focusing on stopping Wal-Mart from destroying the mom and pop shops – maybe the Indian government should also be looking to ensure that they have the talent and education within the communities to support the growth. This is simply another example of how the external environment (ie. Government) has an impact on organizations and their decisions and plans to grow and how they have a choice to embrace the changes in a global economy or how they can continue to fight change.
Posted by: Angela Wagner | February 26, 2008 9:13 PM