Abstract International Retail industry has got a tremendous consumer pull since globalization.

Many Retail Stores evolved in a very different way from the traditional Stores. Many multinational companies are transforming themselves to become global companies. When it comes to selling in foreign lands, the strategies of retailers don't always simply translate from one country to another. This research discusses about whether the efforts of Retail Stores can hold the customers and which factor will influence customer by Retail strategies.

CONTENT
Chapter 1 Introduction Chapter 2 Industry Profile Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Company Profile Literature Review Objectives Research Methodology Analysis Part Interpretation & Findings Limitations

Chapter 10 Suggestions & Recommendation Chapter 11 Conclusion Chapter 12 References

Industry Profile

Concept of RETAIL

The distribution of consumer products begins with the producer and ends at the ultimate consumer. Between the producer and the consumer there is a middleman the retailer,who links the producers and the ultimate consumers? Retailing is defined as a conclusive set of activities or steps used to sell a product or a service to consumers for their personal or family use. It is responsible for matching individual demands of the consumer with supplies of all the manufacturers. The word retail is derived from the French work retailer, meaning to cut a piece off or to break bulk. It is defined as all activities involved in selling goods or services directly to the final consumer for their personal, non-business use via shops, market, door-to-door selling, and mail-order or over the internet where the buyer intends to consume the product. The retail industry can be divided into 1. organized large, 2. unorganized and 3. Informal sector enterprises. The first category retailers comprise traders who possess legal permissions or licenses to undertake the activity, are registered with sales tax/VAT etc. Such enterprises are supermarkets, hypermarkets, retail chains, and also the privately-owned large retail businesses. Their presence on scene, though of a recent origin, is gradually gaining in importance, and slowly eating into the business of second category of retailers. By unorganized retail trade enterprises, we mean all those local kirana &general shops, family managed Own Account trade enterprises (Mom-Pop shops), registered under the Shops and Establishment Act (s), administered by the local authorities.
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The third category of retailers include small shops such as tiny grocery and vegetable shops run from a room of a house, paan/beedi kiosks (often selling a variety of items, like small toothpaste tubes, tooth brushes, soaps, pouches of shampoo, etc.), way-side vendors, and hand carts operating without any licenses.

Indian retail sector

The retailing sector in India has undergone a significant transformation. Traditionally, Indian retail sector has been characterized by the presence of a large number of small unorganized retailers. However, in the past decade there has been development of organized retailing, which has encouraged large private sector players to invest in this sector. The Indian trading sector, as it has developed over centuries, is very different from that of the developed countries. In the developed countries, products and services normally reach consumers from the manufacturer/producers through two different channels: (a) via independent retailers (vertical separation) and (b) directly from the producer. In India, however, the above two modes of operation are not very common. Small and medium enterprises dominate the Indian retail scene. The trading sector is highly fragmented, with a large number of intermediaries. So also, wholesale trade in India is marked by the presence of thousands of small commission agents, stockiest and distributors who operate at a strictly local level. Most Indian shopping takes place in open markets or millions of small, independent grocery and retail shops. Shoppers typically stand outside the retail shop, ask for what they want, and cannot pick or examine a product from the shelf. Access to the shelf or product storage area is limited. Once the shopper requests the food staple or household product they are looking for, the shopkeeper goes to the container or
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shelf or to the back of the store, brings it out and offers it for sale to the shopper. Often the shopkeeper may substitute the product, claiming that it is similar or equivalent to the product the consumer is asking for. The product typically has no price label in these small retail shops; although some products do have a manufactured suggested retail price (MSRP) pre-printed on the packaging. The shopkeeper prices the food staple and household products arbitrarily, and two consumers may pay different prices for the same product on the same day. Price is sometimes negotiated between the shopper and shopkeeper. The shoppers do not have time to examine the product label, and do not have a choice to make an informed decision between competitive products. Indian market has high complexities in terms of a wide geographic spread and distinct consumer preferences varying by each region necessitating a need for localization even within the geographic zones. India has highest number of outlets per person (7 per thousand) Indian retail space per capita at 2 sq ft (0.19 m2)/ person is lowest in the world Indian retail density of 6 percent is highest in the world.1.8 million households in India have an annual income of over 45 lakh (US$81,900). For Indian retailing, things started to change slowly in the 1980s, when India first began opening its economy. Textiles sector (which companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim) was the first to see the emergence of retail chains. India is a land of retail democracy- hundreds of thousands of weekly haats and bazaars are located across the length and breadth of our country by peoples own selforganizational capacities and interests. India has the shop density of 11 outlets per 1000 people and number around 15 million, giving India the highest retail outlet density in the world. But only four per cent of them have larger than 500 square feet area. India is one of the fastest growing retail markets in the world, with 1.2 billion people.

Our retail democracy is characterized by 1. High levels of livelihood in retail with nearly 40 million employed which accounts for 8% of the employment and 4% of the entire population. 2. High levels of self - organization. 3. Low capital input 4. High levels of decentralization The most noteworthy phase of the growth of the sector was between 2000-2006, when the revenues increased by about 93.5 per cent. The estimated size of the retail industry in our nation is approximately $470 billion with an annual compounded growth rate of 11 per cent. Incidentally, the share of organized retail is relatively small at $26 billion which is just 6 per cent of the total market compared to a typical share of 70-80 per cent in North America and Western Europe and 20-30 per cent in the Far-East Asian Markets. AT Kearney, a global management consulting firm, rates India as the most attractive nation for retail investment. The study, presented in the Global Retail Development Index of 2009, is carried out annually for 30 emerging markets, and has rated India highest four times in the last five years. This report expresses even more optimism, and estimates that suggest that India's retail market is expected to be about US$535 billion by 2013, with around 10 per cent coming from organized retail. Other estimates are more conservative, though still impressive. According to McKinsey, a research and consulting firm, organized retail in India is expected to increase from 5 per cent of the total market in 2008 to 14-18 per cent of the total retail market and reach US$ 450 billion by 2015. Even if growth is more conservative than estimated, the spill-over effects of this rapid expansion could be felt by many other sectors of the economy. A report published by Knight Frank India in May 2010 looks at the question of land and available retail space. It estimates that, during 2010-12, around 55 million square feet of retail space
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will be ready in the major cities like Mumbai, the national capital region (NCR), Bengaluru, Kolkata, Chennai, Hyderabad and Pune. Furthermore, between 2010 and 2012, the organized retail real estate stock is expected to grow from the existing 41 million square feet to 95 million square feet. Arguably, this could drive up real estate prices, with consequent knock-on effects. India is the second largest producer of fruits and vegetables in the world, but almost 30 per cent of these go waste for want of storage and processing facilities.It is generally agreed that the bulk of the Indian economy would gain, significantly, from the emergence of a well-capitalized retail industry. The organized retail industry is one of the sunrise sectors with huge growth potential. Total retail market in India which currently stood at USD 400 billion in 2009-10, is estimated to attain USD 573 billion by 2012-13. Organized retail industry accounts for only 5% of total retail industry but is expected to reach 10% by 2012. An ASSOCHAM report states that India's overall retail sector is expected to rise to USD 833 billion by 2013 and to USD 1.3 trillion by 2018, at a compounded annual growth rate of 10% driven by the emergence of shopping centers and malls, and a middle class of close to 300 million people that is growing at nearly 2% a year.The share of organized retailing in India, at around 2%, is too low, compared to 80% in the USA, 40% in Thailand, or 20% in China, thus leaving the huge market potential largely unexploited. Mounting earning levels, education and an international revelation have contributed to the progression of the Indian middle class purchasing and shopping practices are burgeoning as an outcome. However, retailing through formats such as supermarkets, hypermarkets, department stores and other forte chains are escalating.Top business houses in the country are investing in the sector. This includes Food World, Shoppers Stop, Crossroads, Globas, Pyramid and other such outlets.

Retail Market Categories (2011) Category Estimates (in US $Bn)

Food and Grocery Apparel Jewelry and Watches Consumer Electronics & IT Pharmacy

325 35 25.6 22.7 13.9

Furnishings and Furniture Restaurants & Food Joints Footwear Beauty Services

9.1 8.8 4.5 1.3

Health/Fitness Services

Others

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Total (US $ Bn)

470

Major Indian Retailers

The low-intensity entry of the diversified Mahindra Group into retail is unique because it plans to focus on lifestyle products. The Mahindra Group is the fourth largest Indian business group to enter the business of retail after Reliance Industries Ltd, the Aditya Birla Group, and Bharti Enterprises Ltd. The other three groups are focusing either on perishables and groceries, or a range of products, or both.

Top 10 Retailers in India Pantaloon Retail

It is headquartered in Mumbai with 450 stores across the country employing more than 18,000 people. It can boast of launching the first hypermarket Big Bazaar in India in 2001. An all-India retail space of 5 million sq. ft. which is expected to reach 30 MN by 2010. It is not only the largest retailer in India with a turnover of over Rs. 20 billion but is present across most retail segments - Food & grocery (Big bazaar, Food bazaar), Home solutions (Hometown, furniture bazaar, collection-i), consumer electronics (e-zone), shoes (shoe factory), Books: music & gifts (Depot), Health & Beauty care services ,entertainment (Bowling co.)

K Raheja Group

They forayed into retail with Shoppers Stop, Indias first departmental store in 2001. It is the only retailer from India to become a member of the prestigious Intercontinental Group of Departmental Stores (IGDS). They have signed a 50:50 joint venture with the Nuance Group for Airport Retailing. Shoppers Stop has 7, 52, 00 sq.ft. of retail space with a turnover of Rs 6.75 billion.The first Hypercity opened in Mumbai in 2006 with an area of 1, 20,000 sq. ft. clocking gross sales of Rs. 1 bn in its first year.

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Tata group

Established in 1998, Trent - one of the subsidiaries of Tata Group - operates Westside, a lifestyle retail chain and Star India Bazaar - a hypermarket with a large assortment of products at the lowest prices. In 2005, it acquired Landmark, India's largest book and music retailer. Trent has more than 4 lakh sq. ft. space across the country. Westside registered a turnover of Rs 3.58 mn in 2006. Tatas has also formed a subsidiary named Infiniti retail which consists of Croma, a consumer electronics chain. It is a 15000-17000 sq. ft. format with 8 stores as of September 2007.Another subsidiary, Titan Industries, owns brands like Titan, the watch of India has 200 exclusive outlets the country and Tanishq, the jewellery brand, has 87 exclusive outlets. Their combined turnover is Rs 6.55 billion. Trent plans to open 27 more stores across its retail formats adding 1.5 mn sq ft of space in the next 12 DLF malls.

RPG group

One of the first entrants into organised food & grocery retail with Foodworld stores in 1996 and then formed an alliance with Dairy farm International and launched health & glow (pharmacy & beauty care) outlets. Now the alliance has dissolved and RPG has Spencers Hyper, Super, Daily and Express formats and Music World stores across the country.RPG has 6 lakh sq. ft. of retail space and has registered a turnover of Rs 4.5 billion in 2006. It is planning to venture into books retail, with the launch of its own bookstores Books and Beyond by the end of 2007. An IPO is also in the offering, with expansion to 450+ MusicWorld, 50+ Spencer's hyper outlets covering 4 million sq. ft. by 2010.

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Landmark group

were launched in 1998 in India. Lifestyle is spread across six cities, covering 4.6 lakh sq. ft. with a turnover of Rs 3.5 billion in 2005. A new division named Lifestyle International has emerged for their international brands business comprising Bossino, Kappa and Springfield in their portfolio. Their retail mix includes Home solutions (Home centre), fashion (lifestyle, landmark International), value retailing (max retail), hypermarkets & supermarkets (Max), kids entertainment (Funcity). They plan to invest Rs. 300 crores in the next two years to expand on Max chain, and Rs 100 crores on Citymax 3 star hotel chain. They have already instituted a separate company christened Citymax Hotels (India).

Piramal Group

In September 1999, Piramal Enterprises announced their arrival into retail with the launch of three retail concepts: India's first true shopping mall of international standards, called Crossroads; a lifestyle department store named Piramyd Megastore; and a family entertainment centre known as Jammin. Piramyd Megastore and Jammin were anchor tenants for Crossroads (recently sold to Pantaloon for Rs 4 billion). In 2001, the group entered the business of food & grocery retail with the launch of TruMart supermarkets in Pune. They have around 18 TruMart stores covering 1.90 lakh sq. ft. registering a turnover of Rs 37.6 mn in 2005. Piraymd Megatsores contributes more than 70 % to their retail mix with a turnover of Rs 112.8 mn. They plan to open 150 stores covering 75 mn sq ft of retail space in the next 5 years.
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Subhiksha

Subhiksha is a Chennai-based, decade old, no frills, food, grocery, pharma and telecom, discount retail chain. ICICI Venture Capital holds 24% in the equity capital of Subhiksha. It has more than 500 stores across the country covering a retail space of more than 1 million sq ft with a registered turnover of Rs 3.34 bn in 2006. It has a planned investment of Rs.300 crores to ramp up its operations to 1200 stores by 2008.

Bharti-Wal-Mart

Their plans include US$ 7 bn investment in creating retail network in the country including 100 hypermarkets and several hundred small stores. They have signed a 50:50 percent joint venture agreement with Wal-Mart. Wal-Mart will do the cash & carry while Bharti will do the front-end.

Reliance

Indias most ambitious retail plans are by reliance, with investments to the tune of Rs. 30,000 cr ($ 6.67 bn) to set up multiple formats with expected sales of Rs 90,000 crores ($20 bn) by 2009-10. There are already more than 300 Reliance Fresh stores and the first Reliance Mart Hypermart has opened in Ahmedabad. The next ones are slated to open at Jamnagar, followed by marts in Delhi / NCR, Hyderabad, Vijaywada, Pune and Ludhiana.

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AV Birla Group

They have a strong presence in apparel retailing through Madura garments which is subsidiary of Aditya Birla Nuvo Ltd. They own brands like Louis Phillipe, Van Heusen, Allen Solly, Peter England, Trouser town. In other segments of retail, AV Birla Group has announced investment plans of Rs 8000 9000 crores in the first 3 years till 2010. The acquisition of Trinethra (food & grocery) chain in the south has moved their tally to 400 stores in the country. Their More range of 15 supermarkets are slated to open at Nashik, Pune and other tier II cities in Western India in 2007. Foreign Direct Investment (FDI)

The most important channel through which foreign capital flows into the country is Foreign Direct Investment (FDI). FDI as defined in Dictionary of Economics (Graham Bannock et.al) is investment in a foreign country through the acquisition of a local company or the establishment there of an operation on a new (Greenfield) site. International Monetary Organization (IMF) and Organization for Economic Cooperation and Development (OECD) define FDI as a category of cross border investment made by a resident in one economy (the direct investor) with the objective of establishing a lasting interest in an enterprise (the direct investment enterprise) that is resident in an economy other than that of the direct investor. The motive of the direct investor is a strategic long term relationship with the direct investment enterprise to ensure significant degree of influence in the management of the direct investment enterprise .Besides, International Bank for Reconstruction and Development (IBRD) and United Nations Conference on Trade and Development (UNCTAD) also provide definition of Foreign Direct Investment. To put in simple words, FDI refers to capital inflows from
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abroad that is invested in or to enhance the production capacity of the economy. It is preferred over other source of foreign capital because it is non-volatile, non-debt creating and results in economic development, modernization and employment generation in the economy. Foreign Direct Investment under the Industrial Policy 1991 and thereafter under different Foreign Trade Policies is being allowed in different sectors of the economy in different proportion under either the Government route or Automatic Route. In Retailing, presently 51 per cent FDI is allowed in single brand retail through the Government Approval route while 100 per cent FDI is allowed in the cash-and-carry (wholesale) formats under the Automatic route. Under the Government Approval route, proposal for FDI in Single Brand Product Retailing are received in the Department of Industrial Policy and Promotion, Ministry of Commerce & Industry. Automatic route dispenses with the need of multiple approvals from Government and/or regulatory agencies (Government of India or the RBI). Investors are required only to notify the concerned Regional offices of RBI within 30 days of receipt of inward remittances and file required documents with that office within 30 days of the issue of shares to foreign investors. The legal regimes that controls FDI in India and to that extent FDI in retailing includes Press Notes by Department of Industrial Policy and Promotion, Foreign Exchange Management Act 1999, Guidelines of Reserve Bank of India(RBI) and Security and Exchange Board of India, besides, of course, the Constitution of India. One needs to be holistic in his assessment of the outcome of introducing FDI in Retailing. One of the reasons as to why a vast swath of Indias population is suffering poverty and depravation is that Agricultural sector of the country has not developed appropriately, and the main stumbling block in this regard has been that of inadequate
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logistics and direct access for farmers to vast markets. FDI in retailing can to a large extent ameliorate these deficiencies. If FDI in front end retailing is allowed, the international retailing giants will be motivated to invest capital, bring in knowhow and global capacity on a colossal scale and as a result a world class back end infrastructure would be built the like of which may take the government years to make (Though FDI is permitted in backend infrastructure to the extent of 100% through the automatic route, in the absence of FDI in retailing, investment in backend infrastructure has not been so forthcoming) . The foremost beneficiary of such a development would be the farmers, especially those engaged in Horticulture. Though India is the second largest producer of fruits and vegetables, lack of storage facilities cause heavy losses to farmers. Availability of adequate post-harvest and cold chain infrastructure would enable the farmers to avoid wastage and distress sales. The retailers would engage the farmers directly through the contract farming programmers as also resort to direct buying from the farmers which will dilute the role of profit siphoning intermediaries, enhance the income of the farmers and give them direct access to markets. The resultant rural prosperity may open up market for other industrial goods and help bring about a more balanced regional development. The Medium and Small Enterprise that plays a critical role in countrys overall manufacturing scenario has lagged and suffered due to lack of branding and avenues to reach out to the vast world market. The international retailers can buy from them not only for the domestic market but for their stores outside the country also and in the process provide the small and medium enterprises of the country a brand name and a window to the international market. In fact, it is estimated that FDI in retailing can significantly increase export from the country. If the domestic organized retailers are allowed to grow to the exclusion of FDI, it may bring about other above mentioned developments but not increase the exports.FDI can, in fact, spur competition among the

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organized retailers. The ultimate beneficiary of these competitions would be the consumers. An example of how the consumer benefit from the competition is the automobile industry in India. The intense competition among the automobile industries has resulted in a situation where the consumer has been able to purchase cars for as low a price as rupees one lakh. CRIER in its research has found that all income groups save through organized retail purchase, but the lower income groups save more. Thus, organized retail is relatively more beneficial to the less well-off consumers. A growing and mushrooming retail sector means that its contribution to GDP would grow. It would thus help in expanding the economy, generate employment and result in more tax income. In the light of all that have been discussed above it can be said without any dispute that the time for allowing FDI in Multi Brand Retailing has come and as Victor Hugo has said Nothing can stop an idea whose time has come. FDI in Retailing started with FDI in cash and carry wholesale trading first permitted in 1997 to the extent of 100% under the Government approval route and thereafter in 2006 brought under the automatic route. In 2006 again FDI in Single Brand Retailing was permitted to the extent of 51%. From here it is but natural and logical that FDI would now proliferate to multi-brand retailing. But the progression to FDI in multi-brand retailing cannot take place at the cost of vital concerns raised in connection with this possible change by different groups; viz, the question of adaptability of the retailers in the unorganized sector, the question as to how the FDI in retailing can be harnessed for the benefits of Indian agriculture and Medium and Small Enterprise and above all how to impart into the economy a degree of resilience to withstand the changes that would be ushered in the wake of introduction of FDI in retailing. All these concerns have to be addressed not because the Left wing political parties and the media through their campaign have necessitated such attention but because we are constitutionally bound to do so .The Preamble of the Constitution
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resolves to constitute India into a Sovereign, Socialist, Secular, Democratic, Republic and to secure to all its citizens JUSTICE, social, economic and political EQUALITY of status and opportunity.Directive Principles ofState Policy similarly exhorts the state to establish just, equitable and fair order. Article 39(c) states that the state should ensure that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment. Though both these features are not enforceable, the Executive and the Apex Court in particular have time and again reiterated the sacrosanct nature of these features. Unlike FDI in single brand retailing which pertains to brand loyal and a relatively small high income clientele, FDI in multi-brand retailing would have direct impact on a vast spectrum of population and thus a sensitive issue. Left alone foreign capital will seek ways through which it can only multiply itself, and unthinking application of capital for profit, given our peculiar socio-economic conditions, may spell doom and deepen the hiatus between the rich and the poor. Thus the proliferation of foreign capital into multi-brand retailing needs to be anchored in such a way that it results in a win-win situation for India. This can be done by integrating into the rules and regulations for FDI in multi-brand retailing certain inbuilt safety valves. For example FDI in multi brand retailing can be allowed in a calibrated manner with social safeguards so that the effect of possible labor dislocation can be analyzed and policy fine tuned accordingly. To ensure that the foreign investors make a genuine contribution to the development of infrastructure and logistics, it can be stipulated that a percentage of FDI should be spent towards building up of back end infrastructure, logistics or agro processing units. One of the justifications for introducing FDI in multi-brand retailing is to transform the poverty stricken and stagnating rural sphere into a forward moving and prosperous rural sphere. To actualize this goal it can be stipulated that at least 50% of the jobs in the retail outlet should be reserved for rural youth and that a certain amount of farm produce be

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procured from the poor farmers. Similarly to develop our small and medium enterprise, it can also be stipulated that a minimum percentage of manufactured products be sourced from the SME sector in India. Public Distribution System is still in many ways the life line of the people living below the poverty line. To ensure that the system is not weakened the government may reserve the right to procure a certain amount of food grains for replenishing the buffer. The government may also put in place an exclusive regulatory framework to protect the interest of small retailers. It will ensure that the retailing giants do resort to predatory pricing or acquire monopolistic tendencies. Besides, the government and RBI need to evolve suitable policies to enable the retailers in the unorganized sector to expand and improve their efficiencies The Industrial policy 1991 had crafted a trajectory of change whereby every sectors of Indian economy at one point of time or the other would be embraced by liberalization, privatization and globalization.FDI in multi-brand retailing is in that sense a steady progression of that trajectory. But the government has by far cushioned the adverse impact of the change that has ensued in the wake of the implementation of Industrial Policy 1991 through safety nets and social safeguards. But the change that the movement of retailing sector into the FDI regime would bring about will require more involved and informed support from the government. One hopes that the government would stand up to its responsibility, because what is at stake is the stability of the vital pillars of the economy- retailing, agriculture, and manufacturing. In short, the socio economic equilibrium of the entire country. The Initial research revealed four major bodies that have been constituted and could provide data pertaining to FDI

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1991 Foreign Investment Promotion Board FIPB consider and recommend Foreign Direct Investment (FDI) proposals, which do not come under the automatic route. It is chaired by Secretary Industry (Department of Industrial Policy & Promotion).

1996 Foreign Investment Promotion Council FIPC constituted under the chairmanship of Chairman ICICI, to undertake vigorous investment promotion and marketing activities. The Presidents of the three apex business associations such as ASSOCHAM, CII and FICCI are members of the Council . 1999 Foreign Investment Implementation Authority FIIA

Functions for assisting the FDI approval holders in obtaining various approvals and resolving their operational difficulties. FIIA has been interacting periodically with the FDI approval holders and following up their difficulties for resolution with the concerned Administrative Ministries and State Governments.

2004 Investment Commission Headed by Ratan Tata, this commission seeks meetings and visits industrial groups and houses in India and large companies abroad in sectors where there was dire need for investment. Attempting to research directives and results of the above bodies resulted in no direct contact but instead a list of various other sub bodies.

Project Approval Board (PAB) for approving foreign technology transfer proposals not falling under the automatic route.
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 Licensing Committee (LC) for considering and recommending proposals for grant of industrial license.

In addition, concerned Ministries/ Departments issue various approvals as per the allocation of business and various Acts being administered by them.

At the State level, State Investment Promotion Agency and, at the district level,

District Industries Centers generally look after projects.

Concerned departments of the State Government handle sectoral projects.

Fast Track Committees (FTCs) have been set up in 30 Ministries/Departments for close monitoring of projects with estimated investment of Rs. 100 crores and above and for resolution of issues hampering implementation. Investment Promotion and Infrastructure Development Cell gives further impetus to facilitation and monitoring of investment, as well as for better coordination of infrastructural requirements for industry

SIA has been set up by the Government of India in the Department of Industrial Policy and Promotion in the Ministry of Commerce and Industry to provide a single window for entrepreneurial assistance, investor facilitation, receiving and processing all applications which require Government approval, conveying Government decisions on applications filed, assisting entrepreneurs and investors in setting up projects, (including liaison with other organizations and State Governments) and in monitoring implementation of projects.
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 CCFI Cabinet Committee on Foreign Investment- meets at the ministerial level and is guided by the prime Minister, considers foreign investment exceeding Rs 3 billion as requiring special political attention.

Indian Missions Abroad- can also receive project proposal and will forward tem to the institutions in New Delhi.

Indian Investment Centre- (This was supposed to be closed after the Planning Commission was established but still continues to operate) established as an autonomous organization in 1960 with the objective of doing promotional work abroad to attract foreign private investment into India and establishment of joint ventures, technical collaborations and third country ventures between Indian and foreign entrepreneurs. The major competitors of Wal-Mart include Costco, Target Corp., and K-Mart. Wal-Mart leads the industry and sector in market cap, employees, revenue, EBITDA, net income, and earnings per share. Target and Costco have surpassed Wal-Mart in Revenue Growth by quite a margin. Target also leads Wal-Mart in gross margin. K-Mart has shown a decline over the past years and is dropping out of the major competitor category.

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Company profile

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Impact of Wal-Mart on Small retailer In global business world, only larger size cannot imply that Wal-Mart is better and successful. In fact, Wal-Mart also came under criticism for its impact on small retail businesses. Independent small shops have to went out of business after this giant chain stores come into play. Some research said that after Wal-Mart has been in town for eight to ten years, that town is just a ghost town. This phenomenon is not happening only in the United States, but it also has the same consequence in everywhere that this giant chain store comes into play. In some countries, Wal-Mart has banned from local communities because it obliterates local business. In short run Wal-Mart is like a custodian but when look cautiously, it is a killer. Though Wal-Mart is the world's largest retailer and consumer center and a principle source in boosting up the American economy but it is resulting into negative impacts over the local small business economies. The very policies of Wal-Mart from controlling their suppliers to managing the working environment and low wages strategy along a policy to provide products related to every filed of life under one single roof with a cheaper rate then any other shopping center. This is affecting the local market tremendously. Basically Wal-Mart is a very large business company, which primarily focuses on developing and expanding Wal-Mart while maintaining its standard of products and presenting a healthy shopping environment. Therefore, it offers incentives like partnership to the suppliers, sharing profits with the staff as well as assuring a friendly customer care service with everyday low prices. However, the small local business companies cannot earn a large amount of profit from a minimum cost of production as compared to big shopping centers and specifically Wal-Mart, which is the world's largest chain of shopping centers. Another
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aspect that affects the small town business companies is the low wages labors with extra facilities. Since small town business companies do not have ample potential and capacity to earn maximum profits with minimum cost production and minimum lose, workers are also not interested to work with these companies as they find no charm and attraction in the working environment. The small local business merchants lose economic strength and diversity ofvarious products, as they do not have the potential to compete the giant retailers like Wal-Mart.

Nature of retailing in china

Chinas retail industry has extensive room for market growth. Favorable macro conditions, changes in consumption patterns and the new demographic structure will be the driving forces of the growth of the retail industry. Favorable macro conditions to the retail industry include Chinas relatively low percentage of consumption / GDP compared with other developed countries, rapid urbanization, a bigger middle class, supportive government policies and inflation pressures. Micro changes include the teens and 20s become the dominant group in the retail markets. These consumers have higher tendency for consumption and more aggressive consumption patterns. Chinas retail market is more fragmented than that of other developed countries or other industries in China. There will be more opportunities for investors to look for future leaders with strong growth potential in the retail industry. Sales channel plays a significant role in the selling process of the retail industries. It also has a big impact on the investment returns of consumer products manufacturers. However, sales channel resources (such as supermarketsand department stores) are scarce and scattered in China. The characteristics of sales channels also bring risks andlimitations to the development of the retail industry. The risks and limitations brought by different sales channels to the consumer goods manufacturers explain the fragmented nature of Chinas retail industry.
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The growth rate of consumption ofChina is 6.9% from 19982006 which is the highest in the world. The following factors will continue to contribute to the growth of the retail industry in China: 1.) Rapid urbanization and increasing disposable income 2.) A bigger middleclass and an improving social security system 3.) Inflation pressure is beneficial to retail sales growth 4.) Supportive government policies to boost internal consumption

Wal-Mart in china Local adaption is a key reason for Carrefours success, and Wal-Mart has also adapted its modal to the Chinese Market. In the grocery section of its stores, Wal-Mart originally offered meat and seafood American-style, in plastic wrapped, freshness-dated containers. To Chinese consumers, however, fresh means that you can pick it out yourself and watch it wriggle so they took a pass. In response, Wal-Mart brought Chinese wet markets indoors, allowing consumer to pick out their own dinner. Now when opening stores in a new city, Wal-Mart teams arrive five months early in order to research local consumption habits and to fine-tune store merchandise. In China, Wal-Mart executives have their eyes squarely on the growing middle class, not on Chinas large poor population who cannot afford Wal-Mart good As a result, WalMart merchandise is more upscale and aligned with middle class materialism then in the United States. Prices in China are high, in part, because there is a VAT of 13% on most things. More important, retailing in China is not nearly as efficient as it is in the US. While WalMart is successful in China, it doesnt enjoy anything like the market share it does in the US. Smaller, but my guess is, far more profitable. Wal-Mart faces very limited low-price competition in China. Most stores are of the Mom-and-Pop variety, which keeps overall
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prices high. Urban real estate is also expensive, and that also has an underlying impact on consumer prices. According to a recent McKinsey study, China currently boasts more than one million wealthy urban households and more ten 42 million middle class households are expected by 2015,which will give China a more sizeable middle class than found in either America or Europe. China remains a crucial location for sourcing the good that Wal-Mart sells worldwide. Wal-Mart Global procurement Center moved from Hong Kong to Shenzhen in 2002, and the retailers supplier networks are heavily concentrated in China. WalMarts global sourcing strategies are forcing changes in the way that Chines suppliers operate. Logistics and distribution are serious problems for Wal-Mart too. In China, however, Wal-Mart faces several difficulties. The first is Chinas infrastructure while more efficient than most developing countries; there are still plenty of bottlenecks. Some of these are physical, relating to roads, ports, and so on. Wal-Mart operations in China are not yet large enough to reap efficiencies from its logistics system. In China, however, labor unions are vastly different from their western counterparts, both in structure and in practice. Unions are officially run by the Government and tend to be more pro management than in other country, while financially supporting the community party structure and helping to secure social order.

27

Factor Affecting FDI In Retailing (CHINA)

factor Culture Impact To Chinese Advantage consumers, It cerate customer believe Disadvantage

however, fresh means on store. that you can pick it out yourself and watch it
faces very it cant like enjoy the

wriggle so they took a pass Price policy

Prices in China are high, in Wal-Mart part, because there is a VAT limited of 13% on most things.
low-price anything

competition in China.

market share.

Government and Labor Unions are officially Wal-Mart tread unions Government labor issue run by the Government compete with interfere

can in

government trade union.

management practices

Supply chain and Chinas infrastructure while It can provide competitive It creates new and distribution more efficient than most and long term advantage costly developing countries; there in market. are still plenty of systems distribution Which

influence to price of product.

bottlenecks. Income group China a more sizeable Demand and Sale will be with the

middle class than found in improved

either America or Europe growth of middle class. and its par capita income of person will be grow in a future

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Nature of U S A Retail Industry

The retail industry business has been around for centuries in the United States. It allstarted with a community general shop where people of the community would shop foritems of necessity. Single general stores by local residents were the most common because specialty stores were not really necessary due to limited population within the city and dissconnectivity of people. As societies advanced with population increase leading to expanded cities, and new advanced technologies gave rise to interconnectivity as well easy communication between distanced cities or societies, opportunity for specialty stores was formed. But before the specialty stores formed into a business the function of the general store was most essential because they provided the varied needs of the local community. Also the reason for the striving success of these general stores then was "necessity". People around had no other options but to go for the general store. In the current scenario, the US retail industry is thriving and booming. With the exponential growth of the retail business across the whole of the United States, it is more likely to predict that this industry will very soon come in to the category of the infrastructure industry. Managing customer relations and attending their needs is a very important issue in business-to-business markets Customer is the prime focus in retail business and only they matter because they are the ones who buy the retailer products. Retail chainsin the U.S. are publicly traded on the stock exchange and privately owned. An estimatedtwo-thirds of the U.S. gross domestic product (GDP) comes from retail consumption.Retail industry is a good indicator of the well-being of the U.S. economy. According to thelatest annual report from the U.S. Census Bureau (2009), the total amount of sales for theU.S. Retail Industry (including food service and automotive) was $4.13 trillion. Of theworlds 10 largest retail companies in the world, five of them are from the US and five are from Europe. The top ten global retailers had combined sales of $1.15 trillion in 2008,according to international consulting group, Deloitte. According to the U.S. Bureau ofLabor Statistics, around 14.4 million people were employed in the U.S. Retail Industry asof April, 2010. Although retail employment was increasing every month at the beginningof 2010, due to the recent recession of the economy, the retail employment numbers werestill the lowest they've been for
29

the past decade. Due to the decline in retail jobs and theincrease in overall unemployment, the retail job market in 2010 is extremely competitive atall levels.

Wal-Mart in U S A Wal-Mart is primarily a discount retailer because they sell their products at the lowest possible prices.Byselling at the lowest price.The essence of successful discount retailing to cut the price on an item as much as possible, lowering the markup, and earn profit on the increased volume of sales.Wal-Marts key slogan was around offering the lowest prices in the market all year around, making an emphasis on cutting down any competitors offer, averaging around 20% less than their competition. The company has three "Basic Beliefs" or core philosophies Sam Walton built the company on. Those beliefs are: (1) Respect for the Individual, (2) Service to Our Customers, and (3) to Strive for Excellence. Other beliefs include, exceeding customer expectations with "aggressive hospitality" such as using door greeters. The store also features patriotic display and themes in its US stores. Another goal for the company is to support efforts in the local community via charitable contributions. Wal-Mart identifies several affiliations with charities such as the United Way and the Children's Miracle Network. In all, the company strategy is that of growth, expansion, and diversification by finding new areas to expand into within retail and the service industry. It is the number one retailer in the US and in the World as a result. There have been several disagreements between the Union and Wal-Mart, as Wal-Mart will not allow its workers to unionize. Several battles have been fought in court and in the U.S. Congress over Wal-Mart's questionable labor practices. WalMart's policy has been one of delay and "terror" in the words of one union representative who has accused the company of old-fashioned union-busting tactics. All
30

of Wal-Mart's competitors are unionized. They simply decided to avoid all the trouble. Wal-Mart has decided to go up against labor laws to keep its overhead lower (Bernstein). Wal-Mart awarded its employees differently, shifting the focus from salaries and into profit-sharing stock based rewards, working to improve the employees skills, trust and involvement by doing constant job shifts and sharing the corporate information with them. The reputation of companies is not driven just by customer experience. Highly public events can have a significant impact on customer and stakeholder perceptions. Such events might be a corporate crisis or a natural disaster, but either can be opportunities for companies to leave a positive lasting impression. Reputation management requires a tight connection with the core identity and strategy of a company. It also requires an ability to think strategically from the point of view of an increasingly skeptical public. Wal-Mart embraced its success in responding to the Katrina challenge as an opportunity to demonstrate the positive social value of its core business model. Other retailers have a stake in how well Wal-Mart is doing and how much they are expanding. If a Wal-Mart moves into a community, changes are the other retailers in that community, especially if they are privately owned are going to lose money and may even be forced to close down. Because Wal-Mart is the largest retailer in the United States and number 1 on the Fortune 500 list, they have the ability to lower their prices and therefore can force other retailers out of business because they cannot match Wal-Mart's low prices. Wal-Marts technological edge is in its logistics, distribution, and inventory control having installed a computer in its first distribution center in 1969, it had, by the
31

late 1970s, connected all Wal-Mart stores and distribution centers, along with company headquarters, to a computer network. Wal-Mart was an early adopter of bar-code technology. Wal-Mart is currently at the forefront of efforts to integrate Radio Frequency Identification a technology in which each individual item receives a tag that can be read by a radio signal, thus facilitating tracking shipments, inventory, and sales. Wal-Marts investment in information technology does appear to have increased its own productivity over the last several decades. Computations from Basker and Van (2007) indicate that improvement in Wal-Marts technology have reduced its cost of operating alarge chain. Wal-Mart has managed to build one of the most efficient distribution systems in the US. Distribution centers were constructed so that any Wal-Marts stores will always have a distribution center less than a days drive away and operating its own truck fleet has led to 99.5% on time delivery record.Wal-Mart was able to build a win-win partnership with their suppliers while still acting as a very strong negotiator. Insisting on lower prices, Wal-Mart was also working with suppliers to help them achieve those prices by providing them with support and consultancy and going into details to achieve efficiency for their businesses. The United States has well-established distribution channels for all types of retail companies. The retail services industry provides an openly competitive environment that fosters strong business operations and spurs innovations that increase efficiency and reliability. Numerous opportunities for growth exist in the U.S. retail market for retail providers of all sizes, including individual direct marketers or direct sellers, small- to medium-sized franchise unit owners, and large big-box store operators. New distribution companies are opening stores and units daily to serve a large, affluent consumer base.

32

FACTOR AFFECTING FDI IN RETAILING (U S A) Factor Impact Advantage Disadvantage Several battles have been fought in court and in the U.S. Congress over WalMart's questionable labor practices.

Employment Improve the employees skills, trust Allow employees and involvement. ability to grow with the company and be promoted into higher positions.

Price policy

However, as the economy faced a It fulfills budgetary These price segments downturn, people wanted low needs of their target do not target all price stores. customers. population of that area. Flexible systems provide retailers with a competitive advantage that can improve shopping experience and increase profitability. While this industry is Technology change is very technical, one dynamic process. thing that has not, and will not ever change is that consumers want and demand superb customer service.

Technology

Companies Services

Significant impact on customer and stakeholder perceptions.

Supply chain Wal-Marts stores will always have and a distribution center less than a distribution days drive away and operating its own truck fleet has led to 99.5% on time delivery record.

33

Nature of retailing in Brazil Despite its wealth Brazil is a country in which 26% of the population lives below the poverty line. The good news for businesses, however, is that this percentage is shrinking, meaning that more and more people have disposable income. The emerging middle class a significant proportion of a total population of more than 190 million presents a wealth of opportunity to potential retail entrepreneurs. Indeed, Brazil has just overtaken the UK as the sixth-largest economy in the world and is expected to carry on growing at a healthy rate for the foreseeable future. Brazil has falling unemployment (very rare in the current economic climate), falling inflation, and a rising population of working women just a few of the positive attributes that bode well for a robust and fertile retail economy. Brazils consumers are classed into four main categories: A, B, C and D. Classes A and B occupy the higher end of the personal income scale. Class C, containing those with low to middleincomes, is growing the fastest. New opportunities are constantly arising for astute retailbusinesses as Brazil takes on characteristics usually associated only with the most advanced western economies: More working women Growing class of Double Income No Kids couples (DINKS) Longer life expectancy Greater consumption of health related products As a result of these developments the consumer market in Brazil is evolving. Although still a relatively young population, the average age is set to rise, which along with the general increase in affluence will create new desires for consumer goods.

34

Among the distinctive traits highlighted during the seminar was the concentration of wealth in a few regions of Brazil, 18 in total, which together account for approximately 48% of all retail trade. Of these regions, the Northeast, with the largest proportion of people below the poverty line, is also changing quickly, with the fastest growth in class C consumers. Interestingly, 70% of point of sale stores, around 400,000, are small independent stores, not large chains, and in geographical terms are spread out thinly. This clearly presents a challenge to retailers attempting to reach the consumers. Important considerations for businesses when planning on entering the Brazilian retail market include Identifying the consumer Understanding their unique desires How to communicate with the consumer to meet these desires How to meet the geographical challenges of the Brazilian landscape Even in the late 1990s, Brazil was just like any other emerging economy, characterized by extremes of wealth and abject poverty with no social class dividing the bridge between. A decade and more down the line, the effervescence in the middle cannot be missed. Yes, the great Brazilian middle class defined as those who earn between $690 and $2,970 a month has arrived and is here to stay. If Brazil has made a name in the global retail sector, it had better thank these late comers, empowered with good purchasing power and access to credit. For the eighth consecutive year, the Brazilian retail industry has grown. While Brazils GDP increased 2.7 percent in 2011, the retail sector expanded 4.4 percent, demonstrating resilience against an economic downturn. According to the Brazilian Supermarket Association (ABRAS), the retail industry was estimated to be worth about R$224.3 billion (approximately US$119.31 billion) in 2011. Ongoing macroeconomic
35

stability and social inclusion policies that have put more credit in the hands of consumers have played an important role in maintaining this positive result. The industry has also adopted aggressive strategies as the market becomes more competitive. These are all factors impacting the sectors improved profile compared to 2010: the number of stores increased from 81,100 to 82,000 (1.1 percent); the number of employees also went up from 919,900 to 967,700 (5.2 percent); sales floor size expanded from 19,700 thousand square meters to 20,600 square meters (4.4 percent); and the number of check-outs increased from 199,300 to 206,600 thousand (3.6 percent). Brazils retail market is estimated to be worth about $230 billion, driven mostly by domestic demand. Besides the 40% growth in GDP per capita during the last eight years or so, population distribution also plays a vital role in encouraging the growth of sectors such as retail. About 30% of the countrys population lives in the 10 principal metropolitan cities. Sao Paulo brims over with a population of 18 million, while Rio de Janeiro has 10 million. Still, the consumption habits of this predominantly urban population are diverse. As a PwC report points out, the lower income sections tend to spend more on essentials such as food and beverages, while those in the upper income bracket splurge on leisure, durable goods, as well as luxury items. The Brazilian market is also perhaps the most internationalized among the BRICs, as the top 10 retailers corner almost 60% market share among themselves. Food retailers, apparel retailers, consumer goods makers, appliance retailers, and consumer staples companies form the backbone of the sector.

36

Wal-Mart in Brazil The original intention of Wal-Mart was to achieve the number one retailer position in the Brazilian retail market through a partnership with a local player in a very short period of time. In order to achieve this ambitious goal, Bentonville headquarters planned a logistics and communication infrastructure capable of supporting no less than 80 stores in the Brazilian market. In addition, the headquarters intention was to export its expertise and practices in the form of an extensive set of operational manuals that proved successful in the United States, including product assortment and internal space utilization as well as its product mix. Wal-Mart began its operation in Brazil in an absolutely fantastic way. The initial five stores were opened in a few months and, through a very aggressive pricing strategy, attracted thousands of enthusiastic consumers ready to empty the shelves. Another attraction was employees' disposition to help consumers, as well as wide product offering. Overall, during its initial periods of operation in the Brazilian market, Wal-Mart had captured a very favorable image from consumers and, subsequently, had painted a dark picture for its competitors' future. The initially aggressive and promising entry strategy came to a halt after WalMart immediately encountered severe unexpected operational problems. Long checkout lines, high stockout rate (40%), unreliable supply lines, faulty managementperformance measures, traffic congestion, competitors reactions, and governmental forces were responsible for Wal-Marts initial failure in the Brazilian retail market. Following Wal-Marts disappointing performance in the Brazilian retail market, the company had to revise its originally aggressive strategy. To accomplish this, some valuable lessons learned from Wal-Marts international expansion into Mexico and Canada had to be incorporated into the redesigned strategy for Brazil. Consequently, Wal-Marts strategy revision planned for adoption of a more conservative and
37

controlled expansion, consolidation of distribution lines, and improved assimilation into the Brazilian culture. An example of Wal-Marts revised strategy included for the opening of only 10 stores from 1995 to 1997, down from the initial 80 plus stores. Furthermore, Wal-Mart intended to acquire an existing retail chain instead of exploring other partnerships, as was originally planned. In addition, the company wanted to acquire experienced managers from other competitors. The challenges that Wal-Mart has experienced in Brazil may be grouped into six categories: state of the economy, cultural differences, management, advertising, logistics & distribution, and competition. Since Wal-Marts entry into the Brazilian retail market in 1994 until the end of 2001, Brazils economy has been all but stable. The Real Plan, implemented in 1994 to curb the currency hyperinflation, brought the inflation from 40% in the year it was instituted, to 3% in 1999. Thanks to appreciation of the U.S. dollar, the Asian financial crisis, and a resulting global economic slowdown, Brazil floated its currency in 1999, as was the case prior to the Real Plan of 1994. This caused the inflation to moderately increase to 8.9% in 1999, but was brought down to 5.3% at the end of 2001. However, triggered by national currency depreciation, inflation increased again in 2002 and was expected to cross 8%. The Brazilian economy was recently struck with the energy crisis. The crisis was caused by electricity consumption in Brazil being greater than its production, thus forcing the import of electricity from Paraguay. Although the current state of the Brazilian economy could be characterized as somewhat stable as compared to that before 1994, the future outlook of the economy does not provide any guaranties on a long-term basis. Cultural Differences
38

Brazilian retail consumers consider product quality the most important factor in the decision-making process of purchasing, followed by product price, customer service, store cleanliness, and store distance.

Most Brazilians prefer shopping in small- to medium-size neighborhood stores. Nevertheless, they also enjoy the occasional shopping trip to a big discount supercenter. This trip, however, occurs only once a month, and thus making so-called monthly purchases, instead of once a week as in the United States. Yet the current energy crisis has forced most Brazilians to turn off their freezers and to adjust their shopping habits accordingly. Namely, food-related trips to the store in Brazil have increased in frequency, but decreased in the quantity of food purchased, especially in perishable goods. Despite the unbelievably bad traffic jams, the average Sao Paulo resident is willing to take the long lasting trip to a specific supercenter if he/she perceives it as cost efficient and need satisfying. Similarly, the notion of having to pay a membership fee in order to shop at Sams Club is not greatly appreciated by Brazilian consumers, especially when shopping at buyers club is not perceived as providing greater savings and overall extra benefit to the end-consumer. The product mix in Wal-Marts supercenters should be as close to reflecting the needs of Brazilian consumers as possible. Offering products popular in the United States such as golf equipment, vacuum cleaners for garden leaves, American footballs, and food grinders shows complete ignorance to Brazilian consumers since they have little or no use for these items. Likewise, assigning 25% of supercenter space for food in a country where food represents 60% of supermarket sales is another example of WalMarts cultural ignorance.

39

Due to dissimilarities in income and culture between U.S. and Brazilian markets, a greater degree of managerial autonomy may be desirable for Wal-Mart in Brazil. In addition, getting back to the basics, or in other words, implementing Sam Waltons management by walking around concept has not been used to its fullest extent by Wal-Mart in Brazil.A faulty product mix and store-space misallocation present examples of bad management policies. Moreover, the overall corporate grip that Wal-Mart has on its subsidiary in Brazil can best be exemplified by the fact that performance of the local managers in Brazil was based primarily on store sales volume. Thus, mangers set prices below cost to artificially stimulate demand and inflate sales volume numbers. Managers should have greater freedom in managing on a micro level. Wal-Mart has recognized the need to hire professionals, and has recently started a head-hunting campaign to acquire proven professionals from local competitors. This move should reduce Wal-Marts need to micromanage the Brazilian effort. Many Brazilian consumers, and housewives in particular, have the habit of listening to the radio during the day, while cooking and/or cleaning the house. Radio advertisements, therefore, should be used to reach and attract potential shoppers. Contrary to logic, Wal-Mart did not use radio as a medium for communicating to its customers. Some television and newspaper advertising is used by the company, but the resources allocated to the overall advertising campaign amount roughly to only 2% of Wal-Marts revenues. Although Wal-Mart has hired a Brazilian advertising agency, the lack of autonomy given to the agency defeats the whole purpose of going local through advertising. Initially, Wal-Mart experienced an alarming 40% stock out rate in Brazil, as compared to 5% in the United States. Although the stockout rate has decreased since, the problem is far from being completely eliminated. Namely, Brazilian suppliers are lagging behind their U.S. counterparts in logistics technology, thus making computerized
40

inventory management systems useless. Additionally, constant traffic jams present another major obstacle to consistency and predictability in supply of both Wal-Mart stores and distribution center(s). Since Wal-Mart entered the Brazilian retail market in 1994, competition has been ever increasing, and all to the benefit of end-consumers. Many retailers are focused on expansion into different retail formats with the purpose of targeting different customer segments. Increasing the number of stores across the country is another way retailers compete in Brazil. Thanks to Wal-Mart, price wars are the most visible effects of fierce competition. The 1995 data state that Brazils entire retail industry accounts for 6.6% of GNP, with total consolidated sales of U.S. $43.7 billion. The top 5 retailers in the Brazilian retail market account for roughly U.S. $11.2 billion. The 1997 data show that Wal-Marts major competitors are Carrefour, CompanhaBrasileira de Distrubuio, Royal Ahold, and MakroAtacadista. In addition, some smaller retail chains and a large number of individually owned stores account for the remaining portion of the Brazilian retail market. Wal-Mart Now Since originally entering the Brazilian retail market in 1995, Wal-Mart has revised its strategy and consequently gained a substantial share of the marketplace. Although WalMart is currently the 6th largest retailer in Brazil, it still holds a relatively small share of the retail market, which is dominated by the French retailer Carrefour. Still, future prospects are looking good for Wal-Mart in Brazil. As of 2002, Wal-Mart has a total of 22 stores in operation and has 2% of the market. Out of 22 Wal-Mart stores in Brazil at the moment, it operates under three different formats, 12 Supercenters, 8 Sams Clubs, and 2 Wal-Mart TodoDia stores in the states of Sao Paulo, Rio de Janeiro, Minas Gerais and Parana (AOL Latin America
41

Announces Marketing Alliance With Wal-Mart Brazil, 2001).As previously stated, WalMarts first revised strategy called for the opening of only 10 stores from 1995 to 1997, down from initial plans of over 80 stores. Looking back, Wal-Mart actually opened only 3 stores over that same time period. Most of the expansion occurred within the past two years until 2001 Wal-Mart revealed its revised plan for expansion in Brazil in July 2002. According to the plan, the company would inaugurate 5 stores in Brazil. However, by the end of 2002, the total number of stores in operation continued to be 22. In May of 2001, Wal-Mart opened the Barueri distribution center in So Paulo. Wal-Mart previously had three rented, limited-capacity distribution centers. The new distribution center has 35,000 square meters of storage space and is built on a 200,000 square meter lot owned by Wal-Mart. This new facility is designed to easily supply 20 local stores at its current size, gives Wal-Mart better control over supply lines, and allows for future building expansion. In May of 2001, Wal-Mart opened its first TodoDia store in the eastern Sao Paulo section, Sapopemba. Since the Sapopemba section of So Paulo is mostly inhabited by a lower income segment of the population, this move signals that WalMart is looking to increase its market share through catering to different market segments. Another TodoDia store opened on October 10th, 2001 in Taboao de Serra region of Sao Paulo, with a third store scheduled for opening by the end of the fiscal year 2001. As opposed to Wal-Mart Supercenter that carries 60,000 items, Wal-Marts TodoDia carries only 12,000 items. Besides being a smaller format store, TodoDias inventory is stored directly above display shelves. It is reasonable to suspect that WalMarts introduction of the TodoDia store format is used to test the market in Brazil for future expansion into local, and extremely value-conscious neighborhoods. This strategy is similar to that of Wal-Mart de Mexico where the company currently dominates the retail market with six retail formats.
42

In line with Wal-Marts revised strategy that called for improved assimilation into Brazilian culture, the company is currently involved with local communities, supporting social programs such as Special Olympics Brazil and Mesa Sao Paulo. Wal-Marts latest move is the announcement of the marketing alliance with AOL Latin America whereby AOL Brazil will be promoted in all Wal-Mart and Sams Club units in Brazil. This marketing partnership is a logical strategic response to a current growth of the e-commerce sector. The value of business-to-consumer (B2C) e-commerce sales is forecasted to reach $4.3 billion in 2005. The number of Internet users in Brazil is expected to jump to 29 million in 2005.

43

FACTOR AFFECTING FDI IN RETAILING(Brazil)

Factor
Cultural Differences

Impact

Advantage

Disadvantage

Involved with many social Identify to consumer. programs.

Price policy / Income Start Everyday low price Attract middle and This strategy does not group strategy. lower class segment improve market share. consumer.

Competition

To targeting consumer Open It fulfills demand of Existing competitor also different retail format store. different costumer follow thats idea. segment.

Marketing

Alliance with America Open policy. new

AOL

Latin Generate marketing It affect organization low wealth for Organization. price strategy.

Distribution

distribution Better control on Wal- This policy handle only Mart supply chian. few number of store.

44

Literature Review
Literature review is a study involving a collection of literatures in the selected area of research in which the researcher has limited experience, and critical examination and comparison of them to have better understanding. It also helps the researchers to update with the past data, data sources and results and identify the gap for further research, if any. Wal-Mart Wal-Mart is the largest Discount Store in the United States. Its magnitude is not only recognized domestically but also expanded to International Market. The company believes that one day this one will replace the United States position when the trend down (Molin, 2004). With this goal Wal-mart is encouraged to expanding stores into nine countries around the world and more in its plans (About Wal-Mart, 2001). Being number one in the United States does not always guarantee for being number one elsewhere in the world. There are many problems that Wal-Mart is now facing in this highly competitive business world. Finally, many references illustrate various problems and causes Wal-Mart faced while expanding into International market. The three basic belief and two keys rules that differentiated Wal-Mart from the rivals were proposed in The Wal-Mart Culture (2004). Gilman, 2004; Jones, 1998 and Menzer, 2001 describe the reason why Wal-Mart expand its intensity to international market. They believe that in the future this division will replace the US market. However, expansion through world market does not seem easy to Wal-Mart, it also faced some problems both from external and internal. Sources tend to agree that WalMart itself has less consideration in international market when compare with competitors (Groeber, 2002; Wal around, 2001).

45

Another reference states that it was misreading the competitors (Molin, 2004). In addition, other sources state that culture difference is another problem that WalMart was overlooked (Lewis, 1998; Anderson, 1994). Even though Wal-Mart has close relationships with American suppliers, it fails to make connection with local suppliers (Bianco & Zellner, 2003; Lohr, 2003). Wal-Mart tried to use the same standard and concept as in United States but unfortunately one concept does not fit all. Moreover, Gilman (2004) and Zellner, Schmidt, et al. (2001) agree that Wal-Mart is too concentrated in expanding their concept. Another external factor that comes into play is government regulations. Both Groeber (2002) and Molin (2004) agree that these restrict regulations lead monopoly market in some countries. Although some source states that one of the biggest problems of Wal-Mart is Human Resource Management (HRM) (Biddle, 2004), sex discrimination is the most controversy topic not only in the United States but also in the international market as well (Rock, 2001). FDI There are many studies which have identified technology, labor skills and infrastructure as the major determinants of foreign investment. These factors are very important to explain the patterns and trends in the geographical structure of FDI at the world capita income, in relation to outbound as well as inbound FDI (Hummels and Stern, 1994). The incentives announced by the exchequer is also very important in formulating and analyzing the corporate strategies of international location, also institutional, historical and cultural factors should be embedded in overall analyzing and framing of policies ,as these factors should not be ignored as they influence the investors location related decisions (Martin and Velazquez, 1997).
46

Whether tariff rate, exchange rate and tax rate are significant for FDI was tested in a study by Aqeel and Nishat (2004). Some studies have also analyzed the variables like market size and differences in factor costs and were also found to be significant in determining the FDI location as these are very important in determining the market economies and they cannot be achieved and exploited till the time market achieves a certain size. (Markusen and Maskus, 1999).

47

Objective of the study

Strategies to follow by the Retail Market for overcoming the effects of FDI.

48

Research methodology
Research in common parlance refers to a search for knowledge. Once can also define research as a scientific and systematic search for pertinent information on a specific topic. In fact, Research is an art of scientific investigation. The Advance learner Dictionary of current English laysdown the meaning of research as A careful investigation or inquiry especially through search for new facts in any branch of knowledge According to Cliffort and Woody Research comprises defining and redefining problems, formulating hypothesis or suggested solution, collecting, organizing and evaluating data , making deductions and reaching conclusions and testing conclusions whether they fit the formulating hypothesis. Research Designing Aresearch design is master plan or modal for conduct formal investigation. Once the formal investigation is decided, the researcher must formulate the formal plan of investigation. A research design is the specification of method and procedure for acquiring the information needed for solving the problem. the information needed for solving the problem. The information needed for solving the problem. The formal investigation plan will concentrate on the three selection source of method and procedures for gathering the data. Data gathering forms are prepared. There are three basic type of research: Exploratory Descriptive Casual

49

Exploratory:Designed to generate basic knowledge, clarify relevant issues, uncover variables associated with a problem, uncover information needs, and/or define alternatives for addressing research objectives. Type of Exploratory studies Literature Search Analysis of Selected Cases Experience Surveys Descriptive: The Descriptive study Designed to provide further insight into the research problem by describing the variables of interest. It can be used for profiling, defining, segmentation, estimating, predicting, and examining associative relationships. Type of Descriptive studies Cross-Sectional Study Longitudinal Study Causal:This type of research Designed to provide information on potential cause-andeffect relationships.Most practical in marketing to talk about associations or impact of one variable on another.

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Nature of Indian retailing Before the decade of eighties, India with hundreds of towns and cities was a nation striving for development. The evolution was being witnessed at various levels and the people of India were learning to play different roles as businessmen and consumers. Retailing in India at this stage was completely unorganized and it thrived as separate entities operated by small and medium entrepreneurs in their own territories. There was lack of international exposure and only a few Indian companies explored the retail platform on a larger scale. From overseas only companies like Levi's, Pepe, Marks and Spencer etc. had entered targeting upper middle and rich classes of Indians. However as more than 50 % population was formed by lower and lower middle class people, the market was not completely captured. At present the Retail industry in India is accelerating. Though India is still not at an equal pace with other Asian counterparts, Indian is geared to become a major player in the Retail Market. The fact that most of the developed nations are saturated and the developing ones still not prepared, India secures a great position in the international market. Also with a highly diverse demography, India provides immense scope for companies brining in different products targeting different consumers. The factor that is presently playing a significant role here is the fact that a large section of Indian population is in the age group of 20-34 with a considerably high purchasing power; this has caused the increase in the demand in the urban market resulting in consistent growth in the Retail business. However there are a few precautions for every brand that explores Indian market. As Indian consumers are very curious and have a broad perspective, they respond well to a new product or concept and there are very fair chances of a brand surviving well, but every Indian consumer be it an urbanite or a small town dweller needs a feeling of value for money. Although labeled as tight fisted, Indian consumers
51

are great spenders once they realize that they are getting value for their money. Also new product /service concepts from the western world are better adopted first by the urban Indians, the smaller markets respond well to the need based retailing rather than luxury concepts. As the Indian retailing is getting more and more organized various retail formats are emerging to capture the potential of the market.

Mega Malls Multiplexes Large and small supermarkets Hypermarkets Departmental stores are a few formats which flourishing in the both big and small regional markets

Growth in India Real estate sector is also complementing the Retail sector and thus it becomes a strong feature for the future trend. Over a period of next 4 years there will be a retail space demand of 40 million sq. ft. However with growing real estate sector space constraint will not be there to meet this demand. The growth in the retail sector is also caused by the development of retail specific properties like malls and multiplexes. The Retail sector in the small towns and cities will increase by 50 to 60 % pertaining to easy and inexpensive availability of land and demand among consumers the organized retail which currently has only 3% of the total market share will acquire 15-20 % of the market share by the year 2010. India is a large and fragmented country and the absence of strong infrastructure and logistics systems make it challenging to reach consumers located across vast distances. With the Indian government making investments into state highways, an overall decline

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of logistics costs is bound to occur. Studies suggest that logistics costs are between 10 to 12% of total GDP. The major constraint of the organized retail market in India is the competition from the un-organized sector. Traditional retailing has been deep rooted in India for the past few centuries and enjoys the benefits of low cost structure, mostly owner-operated, therein resulting in less labor costs and little or no taxes to pay. Consumer familiarity with the traditional formats for generations is the greatest advantage to the unorganized sector. On the contrary, organized sector have big expenses like higher labor costs, social security to employees, bigger premises, and taxes to meet. Proper training facilities for meeting the increase sing requirements of workers in the sector would need the attention of both Government and the industry. Competition for experienced personnel would lead to belligerence between retailers and higher rates of attrition, especially during the phase of accelerate d growth of the retail industry. The process of avoiding middlemen and providing increased income to farmers through direct procurement by retail chains need the attention of policy makers. Taking care of supply chain management, mass procurement arrangements and inventory

management are areas that need the focus of entrepreneurs. One of the key reasons for the increased consumption is the impressive growth of the middle class. Around 70 per cent of the total households in India reside in the rural areas. The total number of rural household is expected to rise from 135 million in 200102 to 153 million in 2009-10. This presents the largest potential market in the world. Indian consumer buying behavior to a large extent has a western influence. Foreign brands have gained wide consumer acceptance in India and they are much more open for experimentation. Beauty parlors in cities, eateries, designer wear, watches, hi-tech products are a few instances which reflect these changes.

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There is still no consensus made by government .In a politically and culturally diverse country like India, within no time every economic issues turns out to become a political issue and there is a persistence of inconclusiveness on the issue. There are strong apprehensive comments and action seen by the proliferation of these stores. A Wall Street Journal article reports that in Uttar Pradesh, Uma Bharti, a senior leader of the opposition Bharatiya Janata Party (BJP), threatened to "set fire to the first Wal-Mart store whenever it opens;" with her colleague Sushma Swaraj busy tweeting up a storm of misinformation about how Wal-Mart allegedly ruined the U.S. economy. With these offensive comments to develop a consensus is a most challenging job by government of India.

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