International Business Environment Project GROUP - 5

Project Methodology
Person Contacted from Wal-Mart: Vivek Bucha Questionnaire : https://docs.google.com/a/fms.edu/spreadsheet/viewfor m?formkey=dENOTWpkNWh4QWdEMzF4cUJ0bk5oS Hc6MQ

Core Strength
Business Model
Every day Low price Selling brand products at low price

IT Technology Operational Excellence

The IT capability of Walmart is best next to Pentagon in US WMS, TMS, RFID, SCEM , APS etc Best Satellite communication network

Maximum Number of Truck Fleets (6100) after US Army Maximum number of aircrafts than any other private non airline company Cross Docking facility at Distribution Centre

Strategic Decision

No more than 4 % of total product from a single supplier like P&G, Johnson & Johnson etc. Development of facility center (stores) at smaller location (First mover advantage)

Strong work Culture

Profit Sharing Policy based on number of hours worked Policy of 50 % of profit sharing from decreased pilferage to particular store 10 feet attitude Discount stock purchase , promotion from within

Motives for internationalization

Dominate the retail space across the world Cash on the retail boom in emerging economies and capture market share

Replicate the success achieved in the US markets and become the worlds largest retailer

India

Rated 5th most attractive retail market FDI Retail industry ($470 bn in 2011) to grow at CAGR 14.7% Fast urbanization and young demographics Changing preferences, Rising per capita income, Changing consumption pattern Large unorganized sector

Modes of internationalization
Develop common shared values

Training building international resources

Use of local expertise like Indian resource

Unique work culture and other aspects

Rated 5th most attractive retail market FDI Retail industry ($470 bn in 2011) to grow at CAGR 14.7%

Fit with Corporate Strategy

Wal-Mart's vision statement is, "To become the worldwide leader in retailing
Mission Statement Components:

Creating Strategic Fit

Advanced Data Mining: IT capabilities can be easily adapted Workforce Culture: Corporate culture is transferable but depends on the nation Distribution Capability: Neighborhood stores can benefit from existing distribution system. However the distribution system has to be built from scratch Partnership relationship with vendors: In order to get competitive cost advantage, volume is needed

Customers Products and services Markets and technology Concern for survival, profitability, growth Self-Concept Concern for public image and employees
Short term aim: Gain entry into selected cities[primarily metro and tier-1 cities],consolidate their presence

Corporate Governance structure in India:

India's federal cabinet approved a decision to appoint a retired judge to investigate whether Wal-Mart Stores Inc.'s lobbying activities in the U.S. violated any Indian laws. Lobbying of U.S. government representatives is permitted under U.S. law and the disclosure was required by rules designed to promote transparent governance. The Bentonville, Ark., retailer had disclosed that it spent $25 million on lobbying U.S. lawmakers over the past four years, including on issues related to "enhanced market access for investment in India."

Long term aim: Focus on strategic partnerships, tie-ups and further expansion

Why India & Hurdles in Growth

Industry Overview
Market Size 500 $ bn ( 1.3 $ bn by 2020, PWC) Organized Retail 5-8% Growth rate 15-20 % Attract 16 $ bn in next 3 yrs. 14 cr ppl are directly or indirectly earning from retail

Hurdles in Growth
Can only open store in cities with pop above 10 lakh ( 53 cities as per 2011 census) 30% sourcing from Local SMEs Min. 100 $ Mn investment, 50% of it in back end Sates final Authority ( only 10 in favor) Opp. From political parties- BJP , LEFT, SP, Trinmool Congress Fear of Change in Political regime Procurement of Agri & Dairy products Govt. First right, 7,000 APMC-approved markets Compliance of Over 30 regulations such as signboard & anti hoarding measures before opening store Taxes for moving goods Inter state & even within state Poor Infra- Roads & Storage (just 6,200 coldstorage facilities , enough for only 11% of total )

Why India?
Large market Size Low Org. retail penetration Strong GDP growth Rising Personal Income Large num. of aspirational consumer( middle class, young India, rural pop.)

References
http://online.wsj.com/article/SB10001424127887 323622904578129294224588914.html

http://timesofindia.indiatimes.com/business/indiabusiness/Walmart-Tesco-to-go-slow-onstores/articleshow/18176892.cms http://www.telegraph.co.uk/finance/newsbysector /retailandconsumer/9544107/Tesco-andWalmart-get-green-light-to-move-into-India.html