Introduction to Walmart

Discuss about the

Walmart is the brain child of Sam Walton who founded the company back in 1962 and incorporated in 1969. The American MNC operates a large chain of hypermarkets, discount departmental stores and grocery stores all across the globe. The giant retail corporation has around 11,718 stores and clubs operating in 28 countries. Walmart is the world’s largest company by revenue ($480 Billion) according to Fortune Global 500 list in the year 2016(Wynne, 2016). India is one of the fastest growing economies in the present day and Walmart never ceases to assess the opportunity for growth. The first store in India was opened way back in 2009 in joint collaboration with Bharti enterprises. Ever since, the company owns and operates around 21 best price Modern Wholesale stores with 5000 items as product offering in the format of cash & carry wholesale format for Indian mom and pop grocers(Greenspan,2015). Walmart solved the problem of around millions of such small retailers by being one stop solution for their grocery needs. The driving values for the Walmart stores are; best prices with unmatched convenience, choice, quality and hygiene (Lukic, 2016). However, due to onerous regulation, FDI regulation the company is unable to sell to big retailers and the consumers directly. This is affecting the company’s growth prospect significantly.

The purpose of the assignment here is to present a consultancy brief to the Board of directors. On Indian market analysis and recommend a suitable strategic and operational marketing programme for increased penetration. The brief will analyse the organization’s micro and macro environmental features and create a suitable entry mode for the company in the Indian market as a part of its international marketing strategy.

As the name suggest Macro environment is the condition which exist in the entire economy and is not subjected to a particular sector or a region. It encompasses the analysis of all the macro environment trends in the GDP, Inflation, Politics, employment, fiscal spending, monitory policy, technological advancement and socio –cultural factors which has an impact on the industry environment(Hu, Chopra & Chen,2017)

PESTLE analysis is a macro environmental analysis which focuses on analysis of the environment in terms of political, economic, social, technological, legal and environmental forces.

India is the largest democracy encompassing over 1.32 billion people. Indian political scenario is extremely stable, with two major political parties; the political parties have managed to keep the country united due to vast cultural and religion differences in the country. Walmart first forayed in the year 2009 in conglomeration with Bharti enterprises. Presently the American MNC has just 21 best prices stores which are selling to the members only. The political stability in the country is a positive factor for companies looking to make a dent in the Indian consumer market. However, the country is yet not fully open to brands like Walmart as it can hurt the sentiments of small retailers and Kirana stores of the country (Hu, Chopra, Chen, 2017). (Appendix 1)

Macro Environmental Analysis

The Indian economy has shown a lot of growth and strength post liberalization in 1991, the country ever since has opened up its borders to facilitate investment in different sectors and give impetus to the Indian economy. The present economy is growing at a rate of 7.3 % annually and the GDP stands at 2.26 lakh crore USD (2016). India is the fifth largest economy and the future prospects of the economy are extremely overwhelming. Over the last decade, the income of people has risen significantly which in turn has increased their purchasing power parity. Moreover with the penetration of digital media, people have become more and more aware of the changes in the retail sector.  The earning of the labour sector has also improved which means more disposable income in the hands of the people. Thus, the economic situation looks extremely favourable for Walmart (Frynas & Mellahi, 2015).

Social factors play an important role in the development and growth of retail sector. With the growth in technology and digital communication more and more people are getting aware of best prices, best companies to buy product from or the company. India is a young population, with the average age as 27 years; it is primarily one of the youngest nations in the world. Millennial are the key drivers of the industry, who are now focussed on value for money products. E-retail has grown by leaps and bounds in India, the opening of multiple e-stores like Flipkart, Big Basket, Grofers and Amazon retail possess trouble for Walmart which does not have an online presence in the country (Alon, Jaffe, Prange & Vianelli, 2016).

Development of technology in the last decade has given a big impetus to the retail industry. India has been at the front runner of technology implementation in the sector. Whether it is the online model of Brick and mortar model, technology plays a pivotal role in every business model. Marketing, customer service, billing, supply chain and all other department heavily use IT to improve customer service. Walmart has been highly effective in implementing technology in its stores, thus India and Walmart together can develop positive synergies to further boast the sector (Pereira & Kalakoti, 2014).

India is determined to protect its domestic economy and the local manufacturers, thus it has made strong laws to ensure the same. Every organization has to comply with CCI(Competition commission of India) in the business practices. India’s labour market is clouded by number of unions, which can potentially cause trouble for Walmart. Other policies like FDI regulation and many more makes legal force highly challenging for Walmart, who has not been able to make a difference in the Indian market as of no due to high regulations.

PESTLE Analysis

Environmental sustainability has become an important business concern globally. Retail sector has to focus on waste management, energy consumption, packaging and recycling. Walmart has been a very cordial citizen for India. The company has been very cautious in its business practices and ensures that it does not harm the environment. Thus, environmental forces are conducive for the company (Javaid, 2014).

Porter 5 force model was first introduced by Michael E Porter in the year 1979; the model helps to ascertain the competitive force and the attractiveness of the industry In terms of market profitability (Dobbs, 2014).(Appendix 2)

The competitive rivalry in the Indian retail sector is massive. The sector is dominated by millions of mom and pop stores, big retail stores, super markets, hyper markets, online stores and so on. The Indian retail industry has an estimated market size of 672 billion USD, thus one can imagine the extent of competition in the industry(Appendix 3). The factors significant for Walmart are:

Huge number of forces in the retail market (A strong force for Walmart)

Large variety of retail firms in India (Strong force)

High aggressiveness of the firms (Strong force) (Dobbs, 2014).

Thus, it can be seen that all the forces are strong in respect to Walmart, thus the company has to come up with a resolute strategy to stay ahead of the competition curve.

Walmart and Indian retail sector has overall a high bargaining power. The country as vast and diverse as India gives power in the hands of consumers to switch from one player to another, thus giving the control in their hands (Rothaermel, 2015). The factors affecting Walmart thus are:

Huge population of Buyers (Strong Force)

Higher density of Buyers (Weak Force)

Small size of Individual Purchase (Weak force)

India with a population of over 1.32 billion people have plethora of suppliers in the ecosystem. These suppliers in large number try hard to take advantage of the growing sector thus focussing on the maintaining relationship with the big players (Prasad & Warrier, 2016). Walmart being the Retail giant can significantly influence suppliers and exert strong force on them. Supplier thus has a weak bargaining power. The factors responsible are:

Big population of suppliers (Strong force)

Tough competition among suppliers (Weak force)

High availability of supply (Weak force)

The threat of substitution is for Walmart in the retail sector is absolutely weak. The company has the widest range of products offering in the Indian market. Moreover, some of the products are highly exclusive and limited to Walmart inventory. Thus, it can be easily said that the threat of substitute is a weak force in the Indian market for Walmart (Ghosh, 2015).

Porter 5 Forces Analysis

Availability of substitutes (Moderate force)

Low variety of substitutes (Weak force)

Higher cost of substitutes (Weak force)

Threat of new entrant in the Indian retail sector is high; this is primarily due to the size and complexity of the stores. In India it is real easy to open up a convenient or a retail store, thus catering to a small community or a market segment. Furthermore, the growth and penetration of digital media has pushed Indian consumers to buy groceries online (Baral, 2017).

Low cost of doing business (Strong force)

Moderate capital cost (Strong force)

Moderate cost of Brand development (moderate force)

Internal business environment analysis helps the company to identify its position of strength and work towards the weakness. It also helps the company to understand its primary and secondary activities and improve on the business operation for increased efficiency

Value chain analysis is a strategic framework which helps in identifying the business activities which can create value and competitive advantage for the business.

Walmart has its own warehouse to store the goods which they buy in volume at a very low price. Walmart uses “cross platform” technique to transfer goods from vehicle to vehicle entrance to the store. The company has electronic data exchange for all of its suppliers (Christopher, 2016).

The company uses handheld unit scan bar code for the prices of the goods. The company is covering over 80,000 square feet of space with new feet’s of about 100,000 square feet. In most of its business operation the company uses a blueprint followed by carefully calculated SLA’s with the vendors and retailers (Stadtler, 2015).

The outbound logistic starts from truck bringing in the goods to a distribution centre.  The system is comprised of two steps; concentrate and distribute. More than 2000 trucks are in the company’s fleet. The stores have option of choosing from four delivery slots (Ghosh & Shah, 2015).

Walmart believes in offering “Everyday low prices” for its customers. The company does no advertise much to promote it, as the people are already aware of its low prices. Walmart has long working hours for high sales of its product offering (Johnson, 2016).

Walmart focuses on its customer service, being customer centric company works for it big time. Majorly almost all the stores at Walmart are self-service; however, the service staffs are always ready to help the customers (Mudambi & Puck, 2016).

Support activities

Value Chain Analysis

The management team is fairly experienced at Walmart who have previous experience in the retail industry. All the departments have a fairly advanced infrastructure to support the activities of the company.

The company is one of the largest employers, employing over 700,000 people at Walmart stores. Walmart calls all its employees as partners to give them a sense of ownership with the company. All the new joinees receive training and induction to make them adapt to the culture of the organization.

Walmart has installed a satellite which tracks sales from all its stores. An electronic barcode system is used to mark all the goods. Walmart invests heavily in technology infrastructure to expedite its business process.

Walmart procures its goods form a large number of suppliers which have been associated with the company for long. The company has opened plethora of distribution centres to meet the need of the local stores.

Walmart’s journey since the year 2009 until now can be seen as moderate as compared to other markets or USA. The company opened its 1^st store in the year 2009 and now it has 21 cash and carry stores. This can be not termed as a success, and more of a failure. Some of the reasons for its failure in the Indian market are:

• Not thorough understanding of the Indian market.
• Inability to take the leverage of cheap labour.
• Inability to work in accordance with the FDI rules.
• Absence of e-commerce website.
• Government of India not allowing 100% FDI in retail
• Inability to sell directly to retail consumerism
• Weak marketing and promotions
• Inability to develop the Indian Kirana stores

India with a spawning population of 1.32 billion is one of the largest markets for Walmart, having said that it becomes extremely important to understand the business model which works in India. Every MNC operating in India adopts the strategy of “Go global and think Local”, Walmart failed to do so. Moreover, the company completely failed to ascertain the lost opportunity cost by not selling to retailers directly, this was the major flaw. Futher, Walmart’s poor analysis of the FDI regulation in India are some of the lesson the company should learn from.

Walmart entered the Indian subcontinent in the year 2007 and opened its first store in the year 2009 with joint partnership with Bharti. Bharti which was in telecom was not a good partner, despite have tremendous assets in the telecom industry. The company broke its partnership with Bharti in the year 2013. At present it holds around 21 cash and carry stores in India. The strategy to move in India was slightly distorted, the company should have gone into a joint venture with an already established big player or a small player, or could have gone for acquisition. Further, Walmart completely failed to acknowledge the fact that small grocery stores are the ones which supply 98% of grocesry in the Indian market. Thus, it can be seemed that Walmart’s intial strategy to enter into the market was terribly wrong.

India was a growing economy during 2009 when the company opened its first cash and carry store in India. The company should have focussed on the model of Amazon, enter the Indian e-commerce market and create number of distribution centres to distribute products all over the country. The same could have been done easily by acquiring any small internet company and thus taking advantage of the growing digital landscape in India. Further, the company could have easily opened brick and mortar stores after 5-10 years to cover the entire Indian sub-continent. Another thing, Walmart could have done is by providing free trainings and workshops to smaller kirana stores and retail stores to help them in optimum utilization of space and inventory, thus winning their support and confidence. A large number of fulfilment centres and warehouse all across the country can continuously cater to the rising demand of consumer goods.

Marketing mix can be understood as the set of marketing tools which the firm uses to pursue its marketing objectives in the Target market.

Product	Indian consumers likes to shop consumer goods, grocery, everyday products they use, toys, outdoor living, home appliances, jewellery, home decor, video games, grocery and many more.
Price	Walmart’s strategy of Everyday best prices works absolutely fine with the price sensitive Indian market. The company can also offer lowest prices by using its economies of scale and put to its leverage. Further, large number of distribution and fulfilment centres around the country can bring the costs down.
Place	Launch the company’s outlet in tier 1 & 2 cities and eventually move to tier 3 cities as well. The stores should be in a location which is easily accessible to the population.
Promotion	Walmart has spent very little towards its marketing budget. The company has to use both traditional and web 2.0 tools of marketing to promote its exclusive range and huge discount offering to the wholesalers and retailers. The company should also promote its training workshop programme for small scale retail shops and kirana stores.
Physical Evidence	Walmart’s physical evidence can be drawn from its Logo, which should be across all the high streets, the employee’s uniform and the packaging of its material should demonstrate its physical evidence.
Process	The company has great operational process and uses 6 sigma in its operation process to achieve high operational efficiency. The company can further use big data analytics to get more information in the consumers spending pattern to boast its product offering in the Indian market.
People	People are the most valuable asset of any organization. Walmart has to co-ordinate with the existing union in Indian market and provide quality training for its employees. These employees represent the company, thus making the training highly relevant and important.

Conclusion

Walmart began its journey in the year 2009 in the Indian market in conglomeration with Bharti. However, the company got a lukewarm response due to number of FDI regulation and other legal norms. The company has the opportunity to re-evaluate its marketing strategy, in order to do so; an e-commerce business model is advised to the company. The model will focus on low price, wide range of product offering, excellent customer’s service and extensive sales promotion to increase the brand penetration in the Indian Market.

References

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