Joint

Venture
Assignment 2

Submitted To: Ms Amisha

Mehta

Submitted by: Sushmita

Swati Bouddh
WAL-MART

It is the largest departmental store chain in the world and the 3rd largest employer in the world. It
follows a low pricing strategy and becoming a cost leader is its core competency. Another core
competency which Wal-Mart focuses on is the robust and efficient supply chain network which is
strengthened by its own transportation network.

Another reason which has helped WALMART to do well in most of the international locations in
which it has started business is GLOCALIZATION. It has involved itself in local communities and
adapted to their local culture. Also, on an average WALMART sources 90% products locally hence
it helps in improving the local economy.

BHARTI

Bharti enterprises, a leading group in India which has its business spread across different sectors
has been rightly shortlisted by Walmart to open up its joint venture in India. Bharti has attracted
US$ 1.2 Billion in foreign equity which is the highest in India and hence we can say that it has a
good history of partnering with overseas companies. It is rated No. 1 in telecom business in India
and has partnered with alcatel lucent to achieve this. Bharti has a deep knowledge of Indias fast
growing consumer market and hence can be a good partner to WALMART as they both
complement each other I terms of their strategies.

BHARTI- WALMART

Bharti- Walmart is a 50:50 joint venture between the two groups

Formed in 2007 for cash-and-carry and back-end infrastructure
Operates in India by the name Easyday
Presently has 220 stores across 13 states

THREE KINDS OF FORMAT STORES-

The standard neighbourhood stores are called Easyday, in over 190 locations
The compact hypermarkets are termed Easyday Market, function in 22 marts
Large hypermarket style stores are named Easyday Hyper, with just one store so far

TERMS OF THE VENTURE

Wal-Mart had proposed an initial investment of US$100 million

Manage the 5050 venture for back-end supply chain management and wholesale cash-
and-carry operations
Wal-Mart to franchise itself while sharing expertise and technology with Bharti to support
the retail stores that would be built by Bharti Retail Ltd, its wholly owned subsidiary.
WHY WAS THE JV MADE?

NEED FOR WALMART

Walmart had been expanding internationally for some time, but had never been able to
break into Indias market due to strict government regulations which limited foreign direct
investment (FDI) to 51%.
By developing a 50-50 venture for back-end supply chain management and wholesale
cash-and- carry Walmart was able to utilize Bhartis domestic corporate headquarters as a
doorway to this vastly expanding market.

NEED FOR BHARTI

From the other perspective, Walmart was a particularly attractive partner to Bharti for
several reasons. It was the technology and infrastructure that Bharti had its eye on.
Bharti saw an opportunity to turn around the infrastructure, supply-chain and IT through a
strategic alliance with retail-giant Walmart.

WHEN THEY WERE TOGETHER

Bharti Wal-Mart Private Limited brought modern supply chain and back-end logistics
expertise to India, bringing Wal-Marts global best practices in such areas as just-in- time
inventory, retail information systems, cold chain infrastructure, GPS for truck and trailer
tracking, and fuel management systems.
In addition, Bharti Enterprises 100% subsidiary Bharti Retail, that would own and manage
the retail stores, had entered into a franchise agreement with Wal-Mart which provide
technical support to Bharti Retail

WHY DID THE COMPANY CHOOSE JOINT VENTURE VERSUS SOME OTHER FORM OF
GROWTH?

Bharti &Walmart chooses joint venture versus other form of growth because joining hands
internationally -

allow for much faster and less costly access to foreign markets than can be
achieved by purchasing an existing company in the jurisdiction or starting a new
venture
provide quick access to channels of distribution
They provide access for the non-resident partner to knowledge and know-how of
the local marketplace, which substantially enhances the probability of success for
the venture.
The resident partner also often has existing relationships with key suppliers and
customers, and proficiency in the local language and customs.
Allow the partners to move quickly, cost effectively and with credibility (provided
by the reputation of the resident partner) in the local marketplace.
 also take advantage of complementary lines of business and synergies that may
exist between the two companies.
Minimize the risk that comes with an outright acquisition of a business.
Gives opportunities to increase profit margins, accelerate their revenue growth,
produce new products, expand to new domestic markets, gain financial support,
and share scientists or other professionals that have unique skills that will benefit
the companies.

So Bharti Enterprise Ltd. and Wal-Mart form joint venture in August 2007 , Bharti Wal-Mart
Private Limited was made. Both the companies had complement strengths that were able to
utilise to expand in India for long term.

WHY DID THE COMPANIES AGREE TO JV?

Both the parties in the venture had their own strengths and would complement each
other.
It was a great fit for Wal-Mart as Bharti knows the rules of the game and will save Wal-
Mart a lot of time and energy to overcome the system.
For Bharti, Wal-Mart was a great partner in retail. This joint venture was a winning
combination. Wal-Marts logistics skill and Bhartis execution capability would have
created a potent force in the Indian market.
This franchise strategy with Bharti was a deviation from Wal-Marts usual way of entering
countries. This was because the policy restrictions on foreign direct investment (FDI) in the
Indian retail sector.
As part of the agreement, Bharti was expected to pay a royalty between 2 percent and 3
percent of sales to Wal-Mart for using the latters brand name. The Bharti-Wal-Mart joint
venture was expected to open its stores in India from August 2007.
Though the parties did not disclose the financials of the deal, according to retail industry
sources, the Bharti-Wal- Mart venture would make an initial investment of US$ 100
million, which could further increase to US$ 1.46 billion.
WHY IS THIS JV INTERESTING TO STUDY?

Since Wal-Mart is the largest retailer in the world, having strong bargaining power ,
information technology, supply chain management etc.
But faces many challenges and also main reasons of failure of Wal-Mart in India

SUPPLY CHAIN MANAGEMENT

Wal-Mart was losing its traditional advantages, due to national differences Wal-Mart
was not adapting itself to the market as it was less experience in foreign market. As
road infrastructure and modern supply chain system were not fully developed in India,
Walmart was facing inefficient transportation in its supply chain.

LOW PRICING STRATEGYS BARGAINING POWER

According to Indian government require foreign retailer to source 30% of its goods
from small supplier with objective to discourage imports by foreign retailers from their
few large dedicated suppliers and weakens Wal-Mart

CULTURAL ASPECT

As Indian consumers have a different mentality of save and buy whereas Indian
business were focusing on B2B model. While dealing with foreign authorities require
fineness and charm, and given that lobbying was forbidden in India , There Wal-Mart
did not able to influence the govt. policies in an official way and Wal-Mart seeking
inappropriate channel to reach the local authority such as Bride.

LOW-COST LEADERSHIP

Due to lack of skilled labour , labour productivity is lower in India and so Wal-Mart
had to increase its spending in employee training .This made challenge for Wal-Mart
to maintain its advantages in low cost leaderships.

WHAT IS THE POTENTIAL VALUE CREATION AND/OR VALUE DESTRUCTION IN THIS

DEAL?

Potential value creation was $312 million and value destruction was $332 million.
OVERALL, WHAT IS YOUR ASSESSMENT OF THIS JV?

From Bharti and Wal-Mart joint venture , we have studied about

1. the process involved in forming joint venture internationally.

2. What are the agreements involved in forming joint venture.

3. How company expands its business overseas

4. Role of FDI in forming and braking a joint venture.

5. What are polices of FDI for foreign company to invest in India.

6. Advantages of International joint venture

7. Benefits gain by both (resident and international)company from this venture

8. What are reasons for failure of joint venture and what can done to resolve it.

9. We also learned that company should update their strategy according to gov.t policy

10. Improving corporate image and social responsibility also play role in running a business.
BIBLIOGRAPHY

Bharti WalmartJV. (n.d.). school of management.

case study on Bharti and walmart. (n.d.). Retrieved from https://studymoose.com: https://studymoose.com/case-
study-bharti-walmart-essay

Wal-mart case study. (n.d.). Retrieved from http://www.casestudyinc.com: http://www.casestudyinc.com/wal-mart-

india-case-study

Walmart and BhartiJV. (n.d.). Retrieved from http://embanet.vo.llnwd.net :

http://embanet.vo.llnwd.net/o18/USC/CMGT500/Week4/docs/CMGT500_w04_Walmart_and_Bharti_JV_Ca
se.pdf

Walmart India -the strategy for growth. (n.d.). Retrieved from

https://www.researchgate.net/publication/281747159_Wal-Mart_India_The_Strategy_for_Growth:
https://www.researchgate.net/publication/281747159_Wal-Mart_India_The_Strategy_for_Growth