WAL-MART AND BHARTI:

TRANSFORMING RETAIL IN
INDIA

Presented To: Prof. Ajith Kumar

Presented By: Group 7
Q. 1

 Describe how Wal-Mart’s supply chain

works and comment on how it has
helped create competitive advantages
for the firm. Will Wal-Mart be able to
generate the same advantages in India?
Why or why not?
Wal-mart Supply Chain Flow Chat
Radio,
headphone
Retail
Manufacture Store
r

Distribution Retail Store

Manufacturer center
Bar code, RFID
Point of
sale
terminal

Retail Store
Manufacturer Satellite system

Company Headquarter
Wal-Mart’s Business
Strategy
Business Strategy
 Through continuous supply chain cost
control, Wal-Mart is able to maintain low
prices for customers.
 Asset utilization is another goal for Wal-Mart,
but facility, private fleet, and information
technology utilization are again primarily
focused on lowering costs.
 Information technology investments are
directed towards improving efficiencies
across the extended supply chain from
vendors to stores, and thus the use of
information technology supports the EDLP
business strategy

Vendor Collaboration
 Level of collaboration depends upon
 Investment Capabilities
 Product Volume
 Value to Wal-Mart

 Vendor Managed Inventory (VMI)


IT Capabilities
 BarCode
 Satellite Communication System
 RFID
 Point of Sale Scanning System
 Retail Link
 Informationavailable to vendors on time
 Vendors can thus improve supply chain
and lower costs

Process Differentiation
 Two types of products (Fisher, 1997)
 Functional:
 Predictable Demand
 Low Margin
 Supply Chain is efficient and low cost
 Innovative
 Unpredictable Demand
 High Margin
 Cost and probability of stocking out are
higher
 Supply chain should be flexible and
responsive

 Sources of Cost advantages

 Own transportation system:
 Resulted in cost savings and ability to deliver
products in to various stores within 48 hours

 Usage of IT in Supply Chain
management
 Inventory tracking using information available
in barcode.
 POS scanning: Which helped in managing the
products at supplier’s end.
 RFID tags: Enabled to keep track of the
inventory throughout the supply chain.

Advantage in the Cost
performance matrix
 
  Wal-Mart's Perceived Value
 
 
 w.r.t. to competitors

Lower Almost the same Higher

Wal-Mart's Input  Higer Disadvantage Disadvantage Depends

costs
 w.r.t. to 
competitors Almost the same Disadvantage Parity Advantage

Lower Depends Advantage Advantage

CL strategies of Wal-Mart in
Indian context
 Having it’s own transportation
system:


 Valuable
 Yes
 Helps to reduce the costs and generate profits
 Rare
 No
 Other domestic players like Reliance also have their own
transportation system
 Inimitable
 No
 Exploitation by the Organization
 Yes
 In West this is the major differentiating factor
CL strategies of Wal-Mart in
Indian context
 Usage of IT in Supply Chain
management:


 Valuable
 Yes
 Helps to reduce the costs and generate profits, ease in
operations
 Rare
 No
 IT is no longer a differentiating factor
 Inimitable
 No
 Exploitation by Organization
 Yes
 Had short lived First mover advantage in the west
Conclusion

 Wal-Mart might not be able to generate

the same advantages in India
Q. 2

 Analyze the structure of the retail sector

in India at the time of the case
Potential of Retail Sector in
India
 Repeatedly named amongst Asia’s most
promising sectors.



Key Highlights
 Contributing 14% to India’s NGDP.

 Providing employment to 7% of its

workforce.

 Crucial mainstay of Indian economy

 Highly regulated Indian Retail Market


Fragmentation
 Highly fragmented sector

 Unorganized Retail: 98% of India’s Total

Trade.

 Organized Retail: 2%

 Labeled as “A Nation of Shopkeepers”


Structure: Unorganized
Retail
 Referred to more traditional, small scale
and low-cost 11 million retailers*. These
include: -


àPavement & Hand-cart vendors

àConvenience Stores
àPaan/Beedi Stores
àOwner-manned general stores
àLocal Kirana shops


*Source: Datamonitor report, 2006:


Structure: Organized Retail

 Refers to officially licensed retailers.

These include:


àLarge, privately owned retail companies

àRetail Chains
àCorporate-backed Hypermarkets
 Retail: Segmental
Performance
Performance 2006
Segment Unorganized Organized Total worth in
Billion USD
Food & Organized 99% 1% 144.8
Clothing, Textiles, & 81% 19% 22.1
Fashion Accessories
Consumer Durables & 90% 10% 9.36
Home Appliances
Pharma 97% 3% 8.2
Retail: Porter’s Five Force
Analysis
Threat of Entry
High both in unorganized and organized space
1.

Level of Threat in the Industry

Threat of Rivalry Threat of Suppliers
High Low

Threat of Buyers
Threat of Substitutes Medium to High
Medium to High
 PESTEL Analysis
 Retail industry is operating in a highly
protectionist environment - government is
limiting the FDI into the retail segment
 Increase in consumer spending
 Demographic change ( 67 % < 35 years of
age)
 Large number of working men and women
 Paradigm shift in consumer mindset,
Changing consumer preferences  variety
seeking buying behaviour.
 Burgeoning Middle Class
Q.3

 Analyze the merits and demerits of the

Walmart – Bharti JV in India from
different perspectives. You can use a
SWOT framework. What is its current
positions (July 2010). Comment on its
future.
SWOT Analysis
 Strengths
 Walmart’s supply chain capabilities
 Bharti experienced in local markets
 Bharti brand in India

 Weaknesses
 Opportunities
 Booming retail sector with increased
consumption
 Threats
 Competitionfrom other Indian groups
 Government policy may slow down growth
 Current Scenario
 Bharti Wal-Mart operates wholesale stores
under the Best Price Modern Wholesale
brand – 2 stores
 10-12 cash-and-carry stores in the next 12
months
 The company now operates around 80
stores
 Slowed down by policy uncertainty and
downturn
 Planning to open 140 retail stores by year
end
Future Position
 New policy may limit investment from
Walmart in wholesale cash and carry
 Optimism on relaxation of FDI norms in
retail
 Government Policy dependent
 Aggressive Push for expansion in retail by
Bharti
 Walmart – Wait and Watch
 Long term – Beneficial with rapid
expansion
 Short Term – Reduced investments