The relationship between Italian automotive major Fiat SpA and India’s Tata Motors to tap the Indian market started with a distribution and service alliance in 2005. This later went on to become a 50:50 industrial Joint Venture (named Fiat India Automobiles Limited) in 2007. Both the companies agreed to a joint distribution network, a back-end support system, and co-manufacturing of products including engine and technology sharing at Fiat’s facility at Ranjangaon in Maharashtra.
While the industrial JV was yet to break even by 2012, the distribution arrangement too failed to live up to expectations and both Fiat and Tata Motors suffered losses. After witnessing a fall in the sales of Fiat branded cars and accumulating huge losses in the JV, Fiat announced that it would exit the joint-branded dealership agreement with Tata Motors. The company decided to go it alone after it sensed the step-motherly treatment faced by prospective Fiat car buyers at the Tata-Fiat showrooms. However, the break up of the JV was only at the dealership level.
‘In most countries, supermarket chains create and manage well-oiled supply chains to offer consumers lower prices and dampen inflationary trends. Inflation in India is touching decade-highs. But then it’s a fallacy that in India it is always about low price’. Companies like Tata, Birla and Reliance have all attempted to enter food-and-grocery retailing in India with mixed success. Will Wal-Mart’s supply chain work in India?
- Introduction – Wal-Mart’s first store in India
- Joint venture with Bharti Enterprises
- About Wal-Mart
- Wal-Mart – Background Note
- Wal-Mart – Timeline
- Wal-Mart – Quick Facts
- The world’s largest retailer isn’t new to India
- India’s first special skills training centre
- Exhibit – Wal-Mart’s business model in India
- Mera Kirana programme
- Exhibit – Foreign hypermarket chains in India
- Wal-Mart Internationally
- Exhibit – Wal-Mart and Expansion into International Markets
- Wal-Mart’s imperfect success record in a foreign country
- Cost-Leadership Strategy- Wal-Mart’s core philosophy – EDLP (every day low prices)
- Will Wal-Mart succeed in expanding outside the U.S.?
- Best Practices and lessons from the International Markets
- Wal-Mart India – Plans and Challenges
- Wal-Mart’s Strategy and Supply Chain tuning for India
- Physical and Regulatory Challenges
- The Indian Consumer
- Bringing private label suppliers to India
- Will the kirana store go out of business?
- Advantages of a small Indian shopkeeper – The Kirana store
- Exhibit: Wal-Mart – Store Formats
- Exhibit: Wal-Mart – International operating formats
- Questions for Discussion
"India is a price sensitive market and therefore we will be devising our strategy for her very carefully…Retailing is like a game of three dimensional chess where we operate as a local, regional and global player, so depending on the needs of the market we shall change our format and adapt." – John B Menzer, President and CEO, Wal-Mart International.
"India is not a homogeneous market, so ours is not a cookie-cutter approach from the U.S. …Wal-Mart is in no hurry to unfurl the Wal-Mart flag nationally. The easiest thing is to roll out stores, but the most difficult is to sustain and feed them." –Raj Jain, President of Wal-Mart India in May 2009.
"Wal-Mart operates with multiple private brands around the world. In each market that we operate, we look to be local. We treat each market as unique and India, in this respect, is no different." –Arti Singh, vice-president of Corporate Affairs at Bharti Wal-Mart.
1. Introduction – Wal-Mart’s first store in India
In December 2006, Wal-Mart Inc. believed that by the year 2015, 35% of India’s retail sales could be from chain stores . This was a radical increase from the prevailing 2%. In May 2009, Wal-Mart was ready to open its first store in India. The reason for Wal-Mart’s entry in India was clear – The Indian middle class . The world’s biggest retailer had been silently working on its strategy for India for around two years. Mom-and-pop stores and traditional distribution networks dominated the $375 billion Indian retail market. Wal-Mart’s first outlet was set to launch in the city of Amritsar, Punjab in North India. The first store air-conditioned and built over 50,000 sq. ft. was on the outskirts of the city, Amritsar. The store employed 200 locals and was likely create 500 indirect jobs. In the first few weeks itself, the company had managed to sign on close to 35,000 members. However, the debut outlet was not to carry the familiar Wal-Mart brand. Did this mean Indian consumers could not benefit from Wal-Mart’s everyday low prices?
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- 50:50 joint venture: In India, Wal-Mart has a 50:50 joint venture with Bharti Enterprises in the wholesale cash-and-carry segment.
- Direct Farm Program: Multinational retail giant, Wal-Mart’s Direct Farm Program in India is a partnership with 110 small and marginal farmers near Ludhiana in Punjab where it encourages cultivation of safe, high-quality, seasonal vegetables. Farmers are advised at every stage of cultivation by field agronomists. Farmers learn about nursery management, transplanting, nutrient management, as well as harvest and post-harvest practices.
- Wal-Mart India in 2010: In 2010, Bharti-Wal-Mart plans to launch seven Best Price Modern Wholesale Cash-And-Carry stores across India. These stores will be 100,000 sq ft in size and each store will involve an investment of $6-7 million.
- Sourcing from India: Wal-Mart has a large sourcing business in India. The retail major sources goods worth $125 million a year from Punjab. In 2010, Wal-Mart is planning to increase sourcing from India to strengthen its global business.
- Preference for Kirana/local retailers: According to a survey by ASSOCHAM in early 2010 in which it interviewed 5000 shoppers in various cities in India, kirana stores (mom and pop stores) and local retailers were the preferred destination for shoppers as compared to shopping malls. The survey found that goods were less expensive (as much as 25%) in local kirana stores as compared to big shopping malls. Smaller stores also offered more variety and affordable options with sustainable quality at a negotiable price (reduced margins).
- Training centers: Inheriting a model from its U.S. parent, Bharti-WalMart (Best Price Modern Wholesale) intends to set up its own training centers to train less-privileged youth to work in retail stores.
- FDI in retail in India: In India, the Government did not allow foreign investment in multi-brand retail. It allows 51% FDI in single-brand retail and 100% in wholesale venture. (Update: The Indian Govt. has changed its policy towards multi-brand retail in Nov 2011) In 2007, Walmart Stores and Bharti Enterprises entered into a joint venture and began cash & carry stores under the brand Best Price Modern Wholesale.
- Carrefour in India – Carrefour Wholesale Cash & Carry: In December 2010, Carrefour, the French international chain, launched its first cash & carry store in India (in the capital in New Delhi). The store with an area of 5200 square meters offers about 10,000 SKUs in food and non-food to local businesses, restaurants and local mom and pop stores.
- METRO Cash & Carry in India: In 2003, METRO Cash & Carry entered the Indian market in the self-service wholesale category. By early 2011, it had six wholesale distribution centers in four major cities (Bangalore, Hyderabad, Mumbai and Kolkata). The company caters to business customers (hotels, offices and small retailers) and sources a large part of its products locally from local suppliers, co-operatives and self-help groups.
- WalmartLabs in Bangalore : In addition to its R&D centre in the Silicon Valley, Wal-Mart plans to set up another facility in Bangalore, India (expected to be set up by Dec 2011) with about 100 developers to work on technologies and solutions for Wal-Mart’s global e-commerce business.
- Wal-Mart’s business plan in India is called “Project Jai Ho.” It means “let there be victory” in Hindi after a popular film song. As per the plan, Wal-Mart aims to be India’s top retailer by 2015.