THE BHARTI WALMART JOINT VENTURE

The Bharti Group

History
The Bharti Group was built by the Mittal brothers – Sunil, Rakesh and Rajan. Bharti
Enterprises was established in 1986 when Sunil Bharti Mittal incorporated Bharti Telecom
Limited (BTL).i The companies included in Bharti Enterprises are Bharti Airtel, Bharti
Teletech Ltd, Telecom Seychelles Ltd, Bharti Telesoft Ltd, TeleTech Teleservices (India)
Ltd, FieldFresh Foods Pvt Ltd, Bharti Retail Pvt. Ltd, Bharti AXA General Insurance
Company etc.Bharti Enterprises is one of India’s leading business groups with interests in
telecom, agri business, insurance and retail. Bharti has been a pioneering force in the
telecom sector with many firsts and innovations to its credit. Bharti Airtel Limited, a group
company, is one of India’s leading private sector providers of telecommunications services
with an aggregate of 35.51 million customers as of end of January‘07, spanning mobile,
fixed line, broadband and enterprise services. Bharti Airtel was recently ranked amongst
the top 10 best performing companies in the world in the BusinessWeek IT 100 list. Bharti
is the country’s largest manufacturer and exporter of telephone terminals.

Bharti has a joint venture with ELRo Holdings India Ltd. –

‘FieldFresh Foods Pvt. Ltd’ - for global distribution of fresh fruits and vegetables. Bharti
also has a joint venture - ‘Bharti AXA Life Insurance Company Ltd.’ - with AXA, world leader
in financial protection and wealth management. Bharti has recently forayed into retail
business under a company called Bharti Retail Pvt. Ltd. It also has an MoU with Wal-Mart
for the cash & carry business.ii

Working Model
Bharti Retail Pvt. Ltd is a wholly owned subsidiary Of Bharti
Enterprises. Bharti Retail operates a chain of multiple format stores that offer consumers
affordable prices, great quality and wider choice. The company’s neighborhood format
stores operate under the "Easyday" brand and the compact hypermarket format under the
“Easyday market” brand. iii

On February 19, 2007 Bharti Retail announced the strategic roadmap for its retail
operations. As part of its plans to provide to provide world-class retailing experience to
consumers across India, Bharti Retail planned an investment of US$ 2 to 2.5 billion by
2015. Bharti Retail’s plans include pan-India operations and it was looking at
approximately 10 million square feet of retail experience across all cities of India with a
population of over one million. It planned to employ 60,000 employees.

The plan was to launch its retail outlets in multiple consumer friendly formats including
Hypermarkets and Supermarkets. For the small store format, Bharti Retail looked to
partner with existing local store owners across India through a franchise model. Bharti
Retail proposed to serve all regular shopping requirements of an average Indian household
including all food and grocery categories, fresh fruits and vegetables, meat and poultry,
dairy products, staples, FMCG and processed food, electronics and appliances, clothing and
footwear, furniture and furnishing and other household articles. iv

Wal-Mart

History
The history of Wal-Mart can be traced back to the 1940s when Sam Walton began his
career in retailing. After being interviewed by recruiters from both Sears Roebuck and J. C.
Penney just before graduating from the University of Missouri in Columbia, Sam accepted a
job offer from J. C. Penney. In September 1944, Walton acquired, from George Scharlott, the
franchise and lease on a Ben Franklin in Newport, Arkansas. The variety store was part of a
chain operated by the Butler Brothers, a regional retailer. After three years, Walton
increased annual sales from $80,000 to $225,000 by 1948. However, the landlord, P.Karli
Holmes, declined to renew the lease on favorable terms and Walton was forced to relocate
before the end of 1950. Walton was prepared to purchase a five-and-dime from Jim Dodson
in Siloam Springs, Arkansas, but the two were $7,000 apart on agreement on a purchase
price. On May 9, 1950, Walton purchased a store from Luther E. Harrison in Bentonville,
Arkansas, and opened Walton's 5 & 10. Thus, the Ozark Mountain town of 2,900 residents
would become the headquarters for the world's largest retailer. v

Working Model

Wal-Mart's business model is based on selling a wide variety of general merchandise at

"always low prices."The company refers to its employees as "associates". All Wal-Mart
stores in the US and Canada also have designated "greeters", who welcome shoppers at the
store entrance. In June 2007, Wal-Mart announced it was retiring the blue vest its 1.5
million associates wear, and replacing it with khakis and polos. The replacement was to
help Wal-Mart increase sales.Unlike many other retailers, Wal-Mart does not charge a
slotting fee to suppliers for their products to appear in the store.Instead, it focuses on
selling more popular products and often pressures store managers to drop unpopular
products, as well as asking manufacturers to supply more popular products.

On September 14, 2006, the company announced that it would phase out its layaway
program, citing declining use and increased costs. Layaway ceased to be offered on
November 19, 2006, and required merchandise pickup by December 8, 2006. Wal-Mart
now focuses on other payment options, such as increased use of six- and twelve-month,
zero-interest financing. The layaway location in most stores is now used for Wal-Mart's
Site-To-Store program, which was introduced in March 2007. This enables walmart.com
customers to buy goods online with a free shipping option, and have goods shipped to the
nearest store for pickup.vi

Wal Mart International Ventures:

Although its major operations are in North America, Walmart has tried to establish its
presence over a number of countries worldwide. Wal-Mart's international operations
consists of 2,980 stores in 14 countries outside the United States. There are wholly owned
operations in Argentina, Brazil, Canada, Puerto Rico, and the UK. Apart from the wholly
owned international projects Walmart has joint ventures in China and several majority
owned subsidiaries. Walmart operates in Mexico as Walmex, in the United Kingdom
as Asda and in Japan as Seiyu.Wal-Mart's investments outside North America have had
mixed results: Its operations in the United Kingdom, South America and China are highly
successful. The ventures in Germany and South Korea being unsuccessful, WalMart had to
pull out of these countries.

Retail Scene in India

 The Indian retail industry accounts for 10% of the GDP and 8% of employment.
 India is being touted as the next big retail destination with an average CAGR of 40%
to 45%
 The sheer size of the population demands attention from retailers worldwide and
the potential for growth in this nascent industry is tremendous.
 As per AT Kearney’s GRDI for 2008, India ranks second to Vietnam. It topped the
list in 2007.
 India is the world’s 4th largest economy in terms of Purchasing Power Parity, after
USA, China and Japan; it is expected to move to the third position by 2010.
 India is rated ahead of China on the Foreign Direct Investment Confidence Index
(FDICI) making it an attractive retail market among other emerging economies in
the world.
 According to a study conducted by the Associated Chambers of Commerce and
Industry (ASSOCHAM), the annual retail sale that was close to US$ 6 billion in 2007,
is expected to reach USD 17 billion by 2010.
 The ICRIER study found that total Indian retail business would grow at 13%, from
US$ 322 billion in 2006-07 to US$ 590 billion in 2011-12. The unorganized retail
will grow 10% from US$ 309 billion 2006-07 to US$ 496 billion in 2011-12.
 India is rated in the highest category of the Aspirational Index in Asia as per the AC
Nielsen Online Omnibus Survey 2005
  According to NCAER, only 14% Indian households will have annual household
incomes less than US$ 921.66 by 2012.

Of late, there has been a lot of innovation seen in the retail format in India. One of the latest
retail formats making a grand entry in this game of guts and guile is ‘Wedding Malls’. An
unheard of entity in the advanced global retail markets like the United States and Europe; it
has become a big hit in India. These malls stock the whole list of items and products that
are required in a typical Indian wedding, ranging from jewelry to apparels. The ‘Khadi
Plazas’ are a retail project successfully rolled out by the Khadi and Village Industries
Commission. These outlets showcase the designs and patterns of traditional handloom and
handicraft products, manufactured in Indian villages in a trendy and chic package targeted
at young buyers.

‘Village Malls’ are another innovation. These are basically an extension of the fair price
shops revamped to cater to the larger needs of the local population. vii

The Bharti WalMart Joint Venture

Though India is the world's second-fastest growing major economy, organized retail
accounts for just 6 percent of industry sales. Although the trend is slowly changing, Indian
consumers have an inclination to make most of the retail purchases from small roadside
shops popularly known as ‘Kirana’ stores. This discourages global retail giants from setting
shop here.

Indian laws at that point of time of the joint venture (Nov 2006) did not allow 100 per cent
foreign direct investment (FDI) in retail. Foreign direct investment regulations did not
permit global multi-brand retailers to enter India directly. Thus in November 2006, Wal-
Mart announced a 50:50 joint venture with Bharti Enterprises to open retail stores in India.
As foreign corporations are not allowed to directly enter the retail sector in India, Wal-Mart
decided to operate through franchises and handle the wholesale end. Bharti handles the
front end involving opening of retail outlets, while Wal-Mart takes care of factors as, such
as cold chains and logistics. The joint venture planned to source 90 per cent of the goods
from India, while the rest was to be imported. In May 2009, the first Bharti Walmart store,
called Best Price Modern Wholesale was opened in Amritsar.

The joint venture of both the firms could be described as a horizontal alliance. It can also
be said to be a Synergistic Strategic Alliance. It is characterized by the following features:
Both the partners might combine resources and skills to create value in the same stage of
the value chain: Bharti may be looking at increasing its portfolio of products, WalMart may
be looking to establish enough credibility to procure a supply chain and a distribution
system. Such an alliance allows risk sharing by reducing financial investment due to
sharing between both the partners

International alliances can be difficult to manage due to differences in management styles,

cultures or regulatory constraints. The solution could be equal sharing of costs and profits
by both the companies. Otherwise a battle of one-upmanship will be inevitable in the long
run

Benefit to Wal Mart: Wal-Mart went ahead with its plans for India at a time when its
competitors Tesco and Carrefour decided to wait for FDI norms to be relaxed .Its decision
to enter India through the franchise route reflected its eagerness to capture a share of the
market when it is at a nascent stage. One of its major motives was to get its logistics and
supply chain in order before the industry opens up to foreign investment. Thus through an
alliance with Bharti WalMart wanted to gain the benefit of being the first mover (one of the
first foreign players) in the Indian retail market.

Benefit to Bharti : At the time of the joint venture, Indian corporate houses as Reliance
had already ventured in the attractive organized retail market. The Aditya Birla group had
also made clear of its intentions of becoming a major player in this sector. In order to
counter these two major competetitors Bharti needed a partner with strong financial
strength. This, along with its relative inexperience could have been a reason why it chose to
enter the industry through a tie-up with a foreign retailer, rather than go alone.

In the short term, the Bharti-Wal-Mart joint venture was confronted with problems due to
the opposition by the Left parties as they insisted that the government should look into the
matter to stop the "backdoor entry"of Wal-Mart into India. These parties opposed the joint
venture stating that foreign direct investment in retail trade was not allowed under the
existing policy and that it would impact the vast number of unorganized retailers, domestic
manufacturers, and farmers in India. 
 Competitor Analysis
RELIANCE
Reliance Retail Limited (RRL), a subsidiary of Reliance Industries Limited (RIL), was set up
to lead Reliance Group’s foray into organized retail. Since its inception in 2006, Reliance
Retail Limited (RRL) has grown rapidly and has catered to millions of customers,
thousands of farmers and vendors. Based on its core growth strategy of backward
integration, Backed by the Reliance group, one of the most successful corporate groups in
India, RRL has made rapid progress towards building an entire value chain starting from
the farmers to the end consumers.

RRL has increased its footprint to more than 900 stores in 80 cities across 14 states in
India. Keeping in sync with its multi-format store strategy, RRL added new formats to its
spectrum. RRL operates in formats such as Reliance Fresh (neighbourhood store), Reliance
Mart (all under one roof supermarket) & Reliance Super (mini-mart), which offer a range of
products for daily household usage. They also have specialty formats, such as Reliance
Digital (consumer durables & information technology), Reliance Trends (apparel &
accessories), Reliance Wellness (health, wellness & beauty), iStore (Apple products),
Reliance Footprint (footwear), Reliance Jewels (jewellery), Reliance TimeOut (books, music
& entertainment), Reliance AutoZone (automotive products & services) and Reliance Living
(homeware, furniture, modular kitchens, furnishings).

RRL has entered into strategic partnerships with reputed companies such as Marks and
Spencer (apparel and accessories), Office Depot (office stationery), Pearle Europe (optical
products) and Hamleys (toys).

ADITYA BIRLA GROUP

The Aditya Birla group bought regional supermarket chain Trinetra..In june 2007 the
Aditya Birla group launched its first retail store under the brand name More in Pune . The
stores offer a wide range of product categories including fruits and vegetables, staples,
personal care, home care, household general merchandise, poultry, dairy products, a
pharmacy and a well-stocked bakery.

METRO
With a global turnover of 33.1 billion euro, Metro is present in 30 countries with over 650
stores. Metro which is headquartered in Germany and has entered India in 2003, has so far
opened five outlets across Bangalore, Mumbai, Hyderabad and Kolkata. Looking for
expansion opportunities, Metro has recently signed a Memorandum of Understanding
(MoU) of Rs 900 crore with the Punjab Government to open six more centers in Punjab.

TESCO
Tesco Plc from UK has 814 stores in other Asian countries (China, Japan, Malaysia, South
Korea and Thailand). Tesco has announced plans to set up a wholesale cash & carry
business in India. Tesco is also planning a deal with Tata Group’s retailing subsidiary
Trent. For the development of the cash & carry business, Tesco is planning to invest around
£60 million (Rs 480 crore) in the first two years. The first cash & carry outlet would be set
up in Mumbai, at the end of 2011.  The deal with Tata, Tesco will provide retail expertise
and technical capability to support the development of Trent’s hypermarket ‘Star
Bazaar’. Tesco wants to set up a 100% subsidiary, and to get access to the retail business
through Trent.

CARREFOUR

The Carrefour group has over 15,000 stores, either company-operated or franchises.
Carrefour has presence in countries like Colombia, Thailand, Taiwan, Poland, Spain and
Romania. Carrefour offers shopping online in several countries (France, Turkey , Spain,
Belgium and others). A wide selection of services, such as home delivery and in-store or in-
warehouse collections, are available to customers, varying from country to country.
Carrefour itself owns over 3000 brands across all the income segments.

In 1989, Carrefour became the first international retailer to venture in Asia when it entered
Taiwan through a joint venture with Uni President Enterprises. Corporation. After Taiwan,
it leveraged the experience it gathered in Taiwan to move into other Asian markets.
Carrefour also operates in the United Arab Emirates and Jordan in a joint venture with
Majid al Futtaim. Carrefour also has 11 franchise operated hypermarkets in Saudi Arabia.
Carrefour has also opened a franchise owned branch in the Bahrain City Centre in 2008.

Carrefour has set up two entities in India: Carrefour WC&C India Pvt Ltd to run cash-and-
carry businesses and Carrefour Master Franchise Company Pvt Ltd for its retail business.
However as of now, neither firm has any outlets as of now. Carrefour has announced its
intentions of entering of entering in the Indian Market by end of 2010 by entering into an
alliance with Future group, a major player in the Indian retail industry.
 ANALYSIS USING PORTER’S FIVE FORCES

THREAT OF NEW ENTRANTS

BARGAINING POWER OF INTENSITY OF RIVALRY BARGAINING POWER OF

BUYERS SUPPLIERS

THREAT OF PRODUCT
SUBSTITUTES

THREAT OF NEW ENTRANTS :

Although the organized retail sector of India is very small, the growth potential of
this market has made it attractive for foreign players. As already mentioned players like
Carrefour and Tesco are planning to enter into this market by getting into alliances with
already established Indian corporate.

 Product differentiation: These new players own a large number of firm brands
most of which are successfully sold throughout its stores. The product
differentiation they bring to the table is enormous

 Capital requirements: Although entering an alliance with a major Indian corporate

and establishing new stores through the country may require sufficient capital
investments, these players have deep pockets and have previously also established
their presence in a number of countries.

 Access to distribution channels: A joint venture or a partnership with retail giants

as the Future Group in case of Carrefour or a reputed corporate house as the Tata
Group will give these companies a very strong supply chain capacity. Carrefour
understands the distribution business better than most, and Future Group is a
leader in India
 Government policy: A policy released recently states that, “companies cannot sell
more than 25% of their cash and carry business to ‘Group’ Companies and that too
the use should be internal. This will prove a major discouragement to the foreign
entrants as they will have to reduce their 100% stakes in Indian companies. This
will reduce their control over the retail model followed

BARGAINING POWER OF SUPPLIERS

 Historically, suppliers enjoy a strong position of control in the retail industry.

However with the growth of organized retail, many large retail players are going for
vertical integration and manufacturing products under the firm brand. Since these
products also give them more margin they are more inclined to promote these firm
brands. This recent trend has somewhat decreased the bargaining power of
suppliers in the recent past.

BARGAINING POWER OF BUYERS

 In retail, consumer loyalty is the most important ingredient for success. But the
industry is so characterized that there are very few switching costs. Also, documented
transactions in retail are very less, and hence even proper data is not available. Thus
repurchase is not predictable

 Price of competitor products can be lowered all too easily in this industry, leading to a
price war. Since both the companies being analyzed specialize in discount and bargain
selling, a price war is inevitable. Unless the discount selling is utilized to lock customers
in loyalty programs etc, the customers would just buy from where it is cheaper

THREAT OF PRODUCT SUBSTITUTES

Since the retail industry is considered over here the threat of product substitutes does not
essentially come into the picture.

INTENSITY OF RIVALRY AMONG COMPETITION

 This may be a lesser deterrent for new entrants as the industry of organized retail
itself is growing, even though actual existing figures are very low

 The number of firms competing for a share of the pie is also low. Apart from Indian
firms, there are very few foreign players large enough to maintain sustainability
over some years, that have chosen India’s dense and fast growing Retail industry
  However with more number of foreign as well as domestic players trying to venture
into the sector this scenario might change very quickly and the industry may
become very competitive.

ENTRY OF FOREIGN COMPETITORS AS CARREFOUR

The entry of major foreign players as Carrefour will have substantial impact on Bharti-
WalMart joint venture.

DRIVERS OF COMPETITIVE ABILITY

Shaded Area = Market commonality between firms.

The rectangle = Resource endowment A.

The triangle = Resource endowment B.

Walmart and Carrefour both specialize in cost saving shopping for daily needs. Both are
cost leaders in their respective geographies. They both are strong distribution system
leaders. In India, both the firms will be facing the same fast growing middle class with
increasing disposable incomes. The supplier market and procurement channels may
overlap to a large extent.

AWARENESS

The information available in the industry is symmetric to both the firms. The government
impositions are the same, the native retail players are themselves competing for the same
resources. The question to be asked is this: Will demand drive the growth story of such
joint ventures by foreign conglomerates with Indian Business houses.

MOTIVATION

Carrefour, when the joint venture with Indian firm Future Group becomes a reality, is going
to compete on the same national level almost on the same geographical, cultural and ethnic
demographics as Walmart. There is more than enough motivation for Walmart to predict
and prevent future bad performance brought about by a competitor as strong as Carrefour.

ABILITY

Carrefour has the sourcing for whatever resources it requires. It already has a very good
relationship with suppliers in the countries it is present in. if it decides to source materials
from India as well, it needs to establish its credibility and build relations with suppliers
from scratch. Instead, if it sells its existing portfolio of products after determining
suitability to Indian markets, it will have to utilize Future Group’s existing logistics network
which itself is very strong. Although WalMart has been present in the Indian market, It has
not been able to develop a huge first movers advantage which would keep it far ahead of
the competition.

MARKET COMMONALITY

Since Carrefour and Walmart will be competing for the same resources and courting the
same customers, Carrefour may be looking at newer markets where its competitor is not
present yet. It may be the rural grocery format that it has successfully implemented in
France and other parts where it sells dairy, meat and other products on a daily basis to its
rural customers. This is one market that is potentially huge in India, whose population lives
mostly in villages. However along with this Carrefour will also scavenge WalMart’s current
market.
RESOURCE DISSIMILARITY

Walmart may face certain issues with the suppliers in the Indian context as relationships
should be built with them. Bharti is strong with its logistics, so that will not be a major
concern. Carrefour enjoys the advantage of having a partner who is respected both for its
supplier relations and its distribution channel. So it is difficult to say which firm will be the
weaker when it comes to obtaining resources as of now, though there are indications that it
could be Walmart.

Challenge from Kirana Stores

Apart from the major players like Reliance, More, Carrefour (in future) Bharti WalMart face
the major challenge the traditional Kinara stores in India.The following table shows a
comparative analysis of advantages and disadvantages which each face.

BHARTI WALMART KINARA

A minimum of 2000 sq. ft. would be Kirana stores are owned and operated on a
required. With the high price of real estate small scale, usually in a space of 500sq.ft. or
this is often a serious handicap in achieving less. These places are easily available within
higher profits residential localities.

Benefits of economies of scale. Capable of Does not benefit from economies of scale
eliminating the wholesalers from the chain
and can provide benefits of saved margins.

Operational costs are much higher Kirana stores are operated by the owners
themselves and thus provide the benefit of
low operational costs.

offer more variety to customers. Moreover,
it is likely to receive the newly launched
products earlier than kirana stores.
Kirana stores target a much smaller market.
likely to be in the immediate locality and
thus have a better understanding of
customer preferences. can be more
responsive in terms of their exclusive
demands
Caters to more number of customers and More familiarity with customer. This is a
hence not so familiar. huge benefit specially in FMCG products

FUTURE OF RETAIL

 It is one of the fastest growing industries in India. The change in preference and
habits of customers is leading to an evolved organized retail format. Industry is
expected to grow at a pace of 25-30% annually as per several growth predictions. It
has been ranked second in a Global Retail Development Index of 30 developing
countries drawn up by AT Kearney. According to the 8th Annual Global Retail
Development Index (GRDI) of AT Kearney, India retail industry is the most
promising emerging market for investment. In 2009, the retail trade in India had a
share of 8-12% in the GDP (Gross Domestic Product) of the country. The retail
industry in India is currently growing at a great pace and is expected to go up to US$
833 billion by the year 2013. It is further expected to reach US$ 1.3 trillion by the
year 2018 at a CAGR of 10%. By the year 2013, the organized sector is also expected
to grow at a CAGR of 40%. The retail sector would generate employment for more
than 2.5 million people by the year 2010, says an analysis by Ma Foi Management
Consultants Ltd.

 The upward plunge has been predicted since quite a few years now and the growth
is still going exponential. Here is a graph depicting current and predicted retail
sales as per 2006 estimates
 The emerging trends could be a large chunk of unorganized getting converted into
organized format with stores being designed to create footfalls – generating
‘customer pull’

Multiple drivers will lead to a consumption boom on a sustainable basis:

– Favorable demographics

– Growth in income

– Increasing population of women

– Raising aspirations : Value added goods sales

Challenges facing Indian retail industry

 The tax structure in India favors small retail business

 Lack of adequate infrastructure facilities
 High cost of real estate
 Dissimilarity in consumer groups
 Restrictions in Foreign Direct Investment
 Shortage of retail study options
 Shortage of trained manpower
 Low retail management skill
Trends Affecting Indian Retail Industry

 Changing age profile & Disintegration of joint family

India is believed to have an average age of 24 years for its population as against 36
years for the USA and 30 years for China. A younger population tends to have higher
aspirations and spends more as it enters the earning phase. Also, nuclearization of
families has led to enhanced demand.

 Growing disposable income

More Indian households are getting added to the consuming class with the growth
in income levels. Also, with declining interest rates, the aversion of domestic
consumers to taking loans is also fast disappearing.

 Globalization
Growing media penetration is leading to a convergence of aspirations of various
classes of consumers, bridging the rural-urban divide. The modern consumer cannot
be satisfied by any product or service that is lesser in quality than the best offered in
any other place on the globe

 Rural markets emerging as a huge opportunity for retailers reflected in the share
of the rural market across most categories of consumption
o ITC is experimenting with retailing through its e-Choupal and Choupal Sagar
– rural hypermarkets

o HLL is using its Project Shakti initiative – leveraging women self-help groups
– to explore the rural market

The last few years have seen rapid transformation in many areas like: -

 Scalable and profitable retail models are well established for most of the categories 
Indian consumers are rapidly evolving and accepting modern formats
overwhelmingly

 Retail space is no more a constraint for growth

 India is on the radar of global retailers

 Suppliers / brands are willing to partner with retailers

Retail Formats in India

Indian retail formats can be classified into two distinct categories: traditional and modern.

Traditional Formats include: -

 Kiranas: Traditional Mom and Pop Stores

 Kiosks

 Street Markets

 Exclusive / Multiple Brand Outlets

Modern Formats include: -

 Supermarkets such as Foodworld

 Hypermarkets such as Big Bazar, Giant, Shoprite, Star

 Department Stores such as Shoppers Stop, Lifestyle, Pantaloons, Piramyds, Trent

 Speciality Chains such as Ikea

 Company Owned / Operated such as Bata, Sony

Forecourt Retailing
This concept recently shot into limelight with oil companies trying to milk this revenue
stream for more moolah. Apart from dispensing fuel, the stores offer value added services
to busy consumers. This strategy is currently aggressively being pursued by IOC, BPCL,
HPCL and Reliance.

Trade Parks
A new emerging concept in retailing is the establishment of business complexes
particularly for international trade. Some of the examples are India Exposition Mart set up
by Handicraft Export Promotion Council in Greater Noida, International Home Deco Park
(IHDP) set up by a group of private investors in Noida and World Trade Park coming up in
Jaipur. IHDP will provide International buyers ready access to 60 world class exporters
from India in the Home Furnishings category. This would be beneficial to buyers as they
would not have to go to remote. Exporters apart from getting increased visibility

PEST framework
 Political/Legal:

 FDI - in retail has been a topic for discussion for quite some time now. Some of the
areas in retailing that will be affected by FDI are as follows: -
o Creating Additional Jobs
o Diminution of Kirana Shops and Retail Stores
o Access to Larger Financial Resources
o Benefit to Consumers
o Supplier Quality Enhancements
o Enhanced Supply Chain
o Increased Exports
o WTOs Cross Retaliation

Verdict on FDI
Market is an important asset. It needs to be protected the way other assets are
protected. However, it is clear that FDI in retail trade will lead to incremental
economic benefits and not substitute on-going activities. Any strategy in the
direction of FDI should ensure that domestic players are not unduly displaced
and sufficient opportunities are available for the growth of domestic players.
Therefore, the strategy should be controlled release of restrictions on FDI.
Percentage of FDI allowed should be increased in small amounts and for specific
commodities at every step. Constructive suggestions and inputs from all
stakeholders should be taken in shaping the policy.

 Land and property Laws

There is a shortage of good quality retail space, and rents are high for what is
available. Compounding these shortages are the following problems: -

 Only Indians can own property in India, which complimenting the

restrictions placed on FDI, restrict the entry of foreign players. 
 Stamp duties on property deals are significant. The lease alone can
cost up to 6-10 per cent of sales while it's just 3-5 per cent globally
 The initial urban planning of cities was done with smaller plots in
mind which along with rigid building and zoning laws make it difficult
for procurement of retail space
 The urban land ceiling act and rent control acts have distorted
property markets in cities, leading to exceptionally high property
prices
  Labour Laws

 The labour laws instituted to protect store workers are not flexible
enough to support the modern formats of retailing. These rigidities in
the law constrain the operations of modern retail outlets. Working
hours are restricted, with shops required to close one day of the week
and the hiring of part-time employees is difficult

 Taxes

 Effective corporate tax rate is 36.59% for a local company and 41.82%
for a foreign company. Even essential basic foodstuffs are taxed.The
varying sales tax rate across states makes supply chain management
an even more difficult task for retailers. However, with the
introduction of Value Added Tax (VAT) across all states, some of the
sales tax anomalies in the supply chain could get correct over a period
of time

 The taxation system still favours small retail business, even as there is
differential sales tax across the length and breadth of the country.

Economic:

Industry trends for retail sector indicate that organized retailing has major impact in
controlling inflation because large organized retailers are able to buy directly from
producers at most competitive prices. World Bank attributes the opening of the retail
sector to FDI to be beneficial for India in terms of price and availability of products as it
would give a boost to food products, textiles and garments, leather products, etc., to benefit
from large-scale procurement by international chains; in turn, creating jobs opportunities
at various levels.

As foreign investors exploring their potentials in the retail sector, are keen on developing
malls in India, the size of organized retailing is expected to touch $30 billion by 2010 or
approximately 10 per cent of the total. This has initiated market-entry announcement from
some retailers and has signaled to international retailers about India’s seriousness in
promoting the sector. While there are reports of international retailers like Wal-Mart
analyzing business opportunities in India; Reliance, the largest Indian conglomerate is
investing $3.4 billion to become India’s largest contemporary retailer. There are also
reports of investments for ‘Hypercity Retail’ by K.Raheja Group to establish 55
hypermarkets by 2015. All these factors will contribute in taking Indian retail business to
unexpected growth based on the consumer preference for shopping in congenial environs
and also availability of quality real estate.

According to a recent fast-track A. C. Nielsen study, the informal eating out (IEO) market in
India is undersized as against Asian markets. When compared on a scale of visits per 100
population, Mumbai and Delhi score 638 and 1,015 visits respectively, as against 3,371 in
Manila and over 4,000 in Jakarta. "Affordability is the key to grow the IEO market. Food
retailers have to make their offerings affordable, on par with the crowd-pulling joints like
Udipi Hotels and roadside stalls," says Amit Jatiya, Managing Director, McDonald's India
(Western Region).

The international food retail chain introduced the Happy Meal offer priced at Rs 20
previously. This affordability plank significantly improved the bottom line in the following
quarter. Against the current rate of development of malls in India, he cites the example of
Wal-Mart, which opens a new store every three days.

While discussing the opportunities of retail in India, B. S. Nagesh, MD & CEO, Shoppers'
Stop, points out that total spend by SEC B has surpassed that of SEC A and small towns are
ready for change and growth

Social:

The Indian retail sector is ready to take on challenges from global retail players such as
Wal-mart and Carrefour because unlike them, they have a better understanding of the
Indian consumer’s psyche. Ultimately, a successful retailer is one who understands his
customer. The Indian customer is looking for an emotional connection, a sense of
belonging. Hence, to be successful any retail outlet has to be localized. The customer should
feel that it is a part of his culture, his perceived values, and does not try to impose alien
values or concepts on him. Indian customer is not keen to buy something just because it is
sold by an international company

Technological:

The retail industry is employing the state of art technology. The entire process is
automated. Supply chain is technically coded right till the end. This helps in eliminating
bullwhip effect while avoiding stock outs and creating customer confidence in the end. Wal
Mart employs RFID in tagging of products which helps it track the movement of products
across divisions. Increased adoption of IT and shrinkage management will be a critical area.

 
Importance of Supply Chain in the Retail industry in the Indian context
One of the major requisites for success in retail industry is an efficient Supply Chain . In the
Indian context, a shelf-centric partnership between the retailer and the producer is ideal
especially for creating a loss-free supply chain. An efficient and integrated supply chain
helps to provide fresh supply to the consumer at affordable prices. The supply chain should
be responsive and adaptive to the consumers’ demand.

Traditionally in India, the agriculture related supply chain segment has suffered from
maximum inefficiency. Cumulative wastage in the supply chain is estimated to be about $11
billion which is about 9.8% of the agricultural component of GDP. With the change in
government’s outlook and private sector participation in direct purchase of farm produce
getting permitted, farmers will be more willing to adopt new techniques to improve
efficiency. With an increase in commercial opportunities, larger retail players are likely to
enter the agricultural logistics management, thus reducing the number of intermediaries. 1

WalMart is reputed for being the harbinger and for applying new concepts in supply
change management . The application of RFID or that of cross docking have significantly
contributed to the company’s success. It has also adopted concepts as vendor managed
inventory. As mentioned before in the joint venture WalMart is responsible for logistics and
cold chains. If WalMart can successfully adopt its best practices into the joint venture it
would definitely benefit the alliance. However as the transportation infrastructure in India
is insufficient, it may not be possible for Wal Mart to leverage its best practices in Logistics.
Warehousing has an important part to play in the supply chain management.

Organizational culture issues

 
One of the major concerns in the success or failure of any alliance specially in case of cross
border alliances is the difference in culture between the two organizations. In case of
culturally diverse country like India, it is even more important that the two partners in the
alliance adapt quickly to one another’s organizational culture.

1
 ORGANIZATIONAL CULTURE

POWER ROLE TASK PEOPLE

As shown above in an organization the emphasis may be on the power structure, or on the
role, the task to be performed or on the people. The closer two organizations are on the
above line the better chances of adopting to one another’s culture in the alliance. This
would also determine the smooth functioning of the Bharti WalMart alliance in future.

Bharti Wal-Mart’s CSR initiatives

Along with business expansion the alliance has also concentrated on social initiatives.
There are two fold benefits to adopting these. On one hand while this might help to make
the company improve its image among consumers, on the other hand it will help to reduce
opposition from political parties as the Left who objected against the entry of foreign
players in the Indian retail market and said that this would adversely affect unorganized
retailers and domestic manufacturers in India.

In September 2009, Bharti Wal-Mart provided 10 pushcarts to the unemployed and

economically disadvantaged from the rural areas located near its cash-and-carry store, Best
Price Modern Wholesale. The pushcart owners, now holding legitimate businesses, have
been signed up as members of Best Price Modern Wholesale. viii This benefitted Bharti Wal-
Mart as it earned advertisement space on the pushcarts.

In April 2009, Bharti Wal-Mart announced the launch of their associate volunteer program
in India. In partnership with Cadbury India, Bharti Wal-Mart would participate in
improving the infrastructure of a government school for underprivileged children in
Gurgaon and would provide safe and clean facilities to create an environment conducive to
learning for the 80 children enrolled in the school, according to a company press release. ix

In December 2008, The Bharti Wal-Mart Training Centre, India's first special skills training
centre aimed at bridging the shortage of skilled workers for cash-and-carry and organized
retail formats was inaugurated in Amritsar, Punjab. This is targeted to enhance the
employability of the youth in the cash-and-carry and retail sector. The skills training centre,
christened the 'Bharti Wal-Mart Training Centre', will initially offer short-term vocational
certification courses that will equip candidates to become Floor and Sales Assistants or
Supervisors through a special curriculum developed by Wal-Mart, along with Bharti
Learning Systems, who will also manage and run the Centre.

Joint Venture Mortality

As illustrated by Bruce Kogut in “ A Study of the Life Cycle of Joint Ventures”, joint ventures
like any other organization undergo a cycle of creation, institutionalization and often
termination. If partners have non conflicting goals the lifecycle of a joint venture becomes
much longer. The motivation of the partners to cooperate mold the institutional structure
of the joint venture and influence their future behavior. As per a study carried out the
maximum instability is between the 5 -6 years and this even more applicable in case of
international joint ventures. Joint venture stability depends on the cooperative and
competitive nature of the alliance and the incentives among partners. Ventures motivated
on the basis of competition are vulnerable to changes in the bargaining power of the
partners and in the competitive structure of the market. It was found that whereas
ventures belonging to a growing industry had more chances of survival , those in
concentrated industries and to which both partners belong are more likely to terminate.

A critical analysis of Bharti Airtel merger in the above light reveals some interesting
aspects. A major reason behind the alliance was the government restriction in the retail
sector by the foreign players. If there is any change in these rules , then WalMart who have
gained substantial experience in the market would no longer be depend on Bharti and if by
that time it has developed proper distribution channels can emerge as a major player in the
Indian market on its own. The Indian organized retail sector is still in the nascent stage
and is growing. This is one of the major reasons for the till date success and stability of the
Bharti WalMart venture. However in distant future with the entry of more foreign and
domestic competitors if the market becomes more concentrated and thus less profitable,
the venture may terminate.

References :

1.http://www.pluggd.in/india-business/bharti-changes-brand-identity-to-focus-on-retail-
financial-agricultural-busines-3031/

2.http://www.indianground.com/retail/fdi-in-retail.aspx
3.http://www.thehindubusinessline.com/catalyst/2004/12/09/stories/20041209001903
00.htm

4.http://3isite.com/articles/Bharti_Retail_Investment.htm

5.http://retailnu.wordpress.com/2007/12/14/the-future-of-organized-retail-in-india/

6.http://www.indiaretailbiz.com/blog/category/indian-retailers/bhartis/

7.http://www.labnol.org/india/corporate/first-blueprint-of-bharti-walmart-retail-
store/2402/

8.Retail in the Era of Globalization- by Harmesh Mehrotra & Manu Arora *

9.http://www.coolavenues.com/know/mktg/harmesh_manu_14.php3

10.http://www.livemint.com/2008/12/18221749/Bharti-Retail-plans-30-stores.html

11.http://toostep.com/trends/retail-future-in-india

12.http://www.indianrealtynews.com/real-estate-india/bharti-retail-expands-operation-
in-north-india.html

13.http://www.financialexpress.com/news/mittals-name-retail-stores-bharti-
easyday/282409/

11.http://www.thehindubusinessline.com/2009/09/23/stories/2009092350170300.htm
12.http://www.indiaretailing.com/news.aspx?Id=3628
13.http://www.csrwire.com/press/press_release/24231-Bharti-Wal-Mart-joins-hands-
with-Government-of-Punjab-to-launch-Training-Institute-in-Punjab

14.http://economictimes.indiatimes.com/opinion/The-retail-supply-chain-
revolution/articleshow/733368.cms

15.http://www.thehindubusinessline.com/2006/11/28/stories/2006112802330300.htm

16.http://www.business-standard.com/india/storypage.php?autono=293643

17.http://www.foodindustryindia.com:9080/newfood/detailnews.jsp?n=Tesco%20to
%20enter%20India%20with%20cash%20&%20carry%20and%20Tata%20retail
%20deal&id=564

18.http://www.ril.com/html/business/business_retail.html

19.http://192.168.183.200/bsp/startportal.do?CPURL=http://www.google.co.in/
20.http://economictimes.indiatimes.com/news/news-by-
industry/services/retailing/Carrefour-sees-Future-in-India-may-ink-JV-
soon/articleshow/5474616.cms

21.http://www.iloveindia.com/economy-of-india/top-50-companies/bharti-
enterprises.html

22.http://www.bharti.com/129.html?
&tx_ttnews[tt_news]=203&tx_ttnews[backPid]=128&cHash=61a6210dc5

23.http://www.bharti.com/ourcompanies.html

24.http://www.bharti.com/129.html?
&tx_ttnews[tt_news]=203&tx_ttnews[backPid]=128&cHash=61a6210dc5

25.http://en.wikipedia.org/wiki/History_of_Wal-Mart

26.http://en.wikipedia.org/wiki/Wal-Mart

27.http://www.india-reports.com/summary/Snapshot_Retail_industry.aspx

28. http://www.articlesbase.com/business-opportunities-articles/innovative-retail-
formats-in-india-1384854.html

29. http://economictimes.indiatimes.com/opinion/The-retail-supply-chain-
revolution/articleshow/733368.cms

30.http://www.thehindubusinessline.com/2009/09/23/stories/2009092350170300.htm

31.http://books.google.co.in/books?
id=BwfRrH5jEKgC&dq=framework+for+Analyzing+joint+ventures&printsec=frontcover&source=i
n&hl=en&ei=dPK9S-
O2KtCzrAfnsfm1CQ&sa=X&oi=book_result&ct=result&resnum=12&ved=0CDgQ6AEwCw#v=onepa
ge&q=framework%20for%20Analyzing%20joint%20ventures&f=false
i
http://www.iloveindia.com/economy-of-india/top-50-companies/bharti-enterprises.html
ii
http://www.bharti.com/129.html?&tx_ttnews[tt_news]=203&tx_ttnews[backPid]=128&cHash=61a6210dc5
iii
http://www.bharti.com/ourcompanies.html
iv
http://www.bharti.com/129.html?&tx_ttnews[tt_news]=203&tx_ttnews[backPid]=128&cHash=61a6210dc5
v
http://en.wikipedia.org/wiki/History_of_Wal-Mart
vi
http://en.wikipedia.org/wiki/Wal-Mart
vii8
http://www.articlesbase.com/business-opportunities-articles/innovative-retail-formats-in-india-1384854.html
viii
http://www.thehindubusinessline.com/2009/09/23/stories/2009092350170300.htm
ix
http://www.indiaretailing.com/news.aspx?Id=3628