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India and Walmart
Transcript of India and Walmart
The Power of a Single
Corporation and an
By: Anshul Agrawal
Kuber Dutt 2009 2011-2012 (cc) image by jantik on Flickr The story began when Walmart opened its first store in India A Bit of Background The story really began A few years back.... In 2007 Walmart announced an agreement with Bharti enterprises The international, Bharti enterprises is one of the largest Indian businesses that has ventures in telecom industries and most recently wishes to "reform," India's economy focusing on retail sectors and in specific "cash and carry stores" the vision was and continues to be as quoted by the Walmart website: "for wholesale cash-and-carry and back-end supply chain management operations in India. Our first BestPrice Modern Wholesale opened in May 2009."
As of the end of 2011 there are 14 retail stores located in India
the problem is the Indian merchants and local store owners feel threatened by this international powerhouse
this creates an unfolding poltical and economic situation
The hope was that there would be 15 stores opened in the next seven years with 5,000 workers Lets take a closer look at what unfolded with this partnership between company and country... The Journey Continues Retailing as a whole is one of the main pillars in the Indian economy (makes up 15% of it GDP)
The Indian market is host to 1.2 billion people and is estimated as exchanging almost $450 million
No wonder Walmart wanted a piece of this monetary pie
The creation of Walmart's initial stores were not sanctioned necessarily by the government
Until 2011 the Indian Government denied foreign direct investment (FDI) in multi-brand retail
This forbade foreign groups from majority ownership in supermarkets, retail outlets, and convenience stores
Single-brand retail was limited to 52% ownership which is the category that Walmart fell under
These sanctions were meant to keep local business thriving while ensuring huge multinational corporations did not take over and destroy the internal retail industry As time progressed the growing population showed interest in expanding their consuming to organized retail markets
For them, creating convenience, more choice, and better quality for products
Due to India’s poor infrastructure in terms of actually exporting and transporting foods from manufacturers to consumers this transition took time (especially because of the backlash from local store owners feeling threatened)
In November 2011 India’s government announced retail reforms across the board
This created the ideal opportunity for huge multinational corporations to take control
This caused activism to take place with public opposition and agreement forcing the government, in December, to put on hold these reforms until the situation could be agreed upon
In January 2012, India finally approved these reforms for single-brand stores coming into the India market with 100% ownership (yet holds back on the reforms for multi-brand stores at this moment) The Indian marketplace... was on its way to great change Above is a photo taken in 2009 when Wal-mart first opened its store in India, protests ensued as shown and Walmart ended up having to postpone the opening till a bit later when things died down. The question becomes: Where does Walmart fit into this? Walmart's Role When Wal-Mart first opened its doors in India there were definite hopes and dreams for the companies success
The hope was that due to India’s rapidly growing middle class the money being spent would exponentially increase
One magazine stated, “Wal-Mart's acres of low-cost merchandise from around the world, gathered under a single roof, will be like a carnival for a slice of Indian consumers.”
They wished to mirror the success they had in China where thousands flocked for just the opening of a Wal-Mart store
They hoped their arrival would be greeted with gratitude as it had been in the past due to the opening of jobs and monetary exchange alike that Wal-Mart brought about
Looking to make around 1 million to 2 million in a week the expectations were high, but some felt the superstore was unaware of the money that would take from local stores
Yet the cash and carry model that was outlined was meant to help local business people make money, stating more than 90% of the goods would be sourced locally (such things as textiles, apparel, and house ware)
Wal-Mart struggled those first few years when the government refused to make any reforms but in 2011 the game table changed
Raj Jain who is head of Wal-Mart India stated quite bravely what he felt the reforms made in November of last year meant: the decision will "redefine the way consumers shop in India, but more importantly, the way supply chains in India run."
For Wal-mart this meant their presence was politically welcomed and they could continue to thrive
The problem was and continues to remain that their presence is not welcomed by all, the opposition leader to the current party in government in India stated, "International retail does not create additional markets, it merely displaces (the) existing market."
Only time will tell how well Wal-Mart’s success will be in India Above is a photo taken From Wal-mart's India "Fact Sheet," outlining the business model they feel represents how their stores will be represented in the Indian economy. Here is a short video outlining the journey of Walmart in India and the "Retail Revolution," when the reforms were made also highlighting the impacts Walmart will have on the economy (this is a more in depth description of what I summarized previously) International Trends In Action: How Wal-mart and India's relationship will impact the world. An Emerging Economy A Domestic Market- Gone Global How does this partnership create global change? India is part of the group known as "BRIC,"
BRIC is a group of countries which are emerging as strong players in the world economic market
They consist of 40% of the worlds population offering consumers and innovative thinkers
The power of BRIC is projected to increase and that by 2050 their combined economies could eclipse the combined economies of the current richest countries of the world
India is one of the leading members of this group and is projected as being the third most powerful economy by 2050
Through India opening its doors to international corporations it continues to grow as an economy, opening connections to different companies while growing the domestic market
Wal-mart is one of the more internationally recognized companies in the world and with this new found relationship it is said that the middle class will continue to develop and India as whole can increase in economic growth
It was these international trading and connections that made China such a powerful player- now that India has this opportunity it can pass the United States - emerging from a once slowly developing country to a developed economy and motivating force Environmental Innovation India’s supermarket industry creates copious amounts of waste due to the lack of storage capabilities and quality of the goods
Wal-mart in particular is world renowned for its high quality food, storage programs, and transportation
With India accepting Wal-mart – it is said that large foreign retailers like this one will reduce waste by creation of more modern cold storage as well as “supply chains,” for fruits and vegetables
This will cut down on waste for India and create less of an environmental footprint What was once a retail market of small individual stores and local marketplaces has become a globalized industry
India allowing for more global retailers to come into the country creates the opportunity to strengthen foreign markets and help build their own
Labour markets are created in India due to the millions of jobs that will be associated with the Wal-mart stores – more employees will be hired in store and in corporate
There could even be an opportunity for people already involved in Wal-mart to come work in India as an expatriate
By creating these stores it isn’t necessarily “outsourcing,” rather there is a foundation being built in a separate country and the products sold and used will be majorly within this single state
Capital markets specifically for Wal-mart will increase because stock marketers and the like will see their involvement with an emerging country and the opportunity for wealth that is in store (literally)! Wal-Mart the Corporation India- The Country India - The People How do these factors and this story affect the people involved? There is always two sides to a story... This story and issue is one that is extremely recent and thus only time will tell what will happen in the future for India and Wal-mart
Ensure to keep updated on this issue - as even though it is taking place in India it gives light into how our own government takes control over the retail sector and may affect other companies wishing to do work in India!
Thank you for taking the time to read my presentation Works Cited
"Bharti Wal-Mart to Open Stores in India by June 2009." Induslatin. 14 Nov. 2008. Web. Jan. 2012. <http://induslatin.com/2008/11/14/bharti-wal-mart-to-open-stores-in-india-by-june-2009/>.
"CNBC INDIA BUSINESS HOUR RAJ JAIN, BHARTI WALMART, ON FDI IN MULTI-BRAND & SINGLE BRAND RETAIL." YouTube. 24 Nov. 2011. Web. Jan. 2012. <http://www.youtube.com/watch?v=Fx0wsSr6v94>.
Dume, Sadahnand. "India Goes Wild Over Wal-Mart." Business News & Financial News - The Wall Street Journal - Wsj.com. The Wall Street Journal, 29 Nov. 2011. Web. Jan. 2012. <http://online.wsj.com/article/SB10001424052970203802204577066501218085104.html?mod=opinion_newsreel>.
Evans, Bob. "How India and Wal-Mart Will Create 10 Million Jobs." Forbes.com. Forbes Magazine. Web. Jan. 2012. <http://www.forbes.com/sites/sap/2011/12/02/how-india-and-wal-mart-will-create-10-million-jobs/>.
Giridharadas, Anand, and Saritha Rai. "Wal-Mart’s Superstores Gain Entry Into India." The New York Times - Breaking News, World News & Multimedia. NY Times, 22 Jan. 2012. Web. Jan. 2012. <http://www.nytimes.com/2006/11/28/business/worldbusiness/28walmart.html>.
"India Finally Opens Door to Supermarket Giants; May Boost Investment." International Business Times. IB times, 24 Nov. 2011. Web. <http://ca.ibtimes.com/articles/255820/20111124/india-global-supermarket-giants-boost-investment-chains.htm>.
Jagow, Scott. "No Welcome Mat for Wal-Mart in India | Marketplace from American Public Media." Marketplace from American Public Media: Business, The Economy, Personal Finance, Wall Street and World News. Web. Jan. 2012. <http://www.marketplace.org/topics/world/no-welcome-mat-wal-mart-india>.
"Reform in India: Let Walmart in." The Economist - World News, Politics, Economics, Business & Finance. The Economist, 3 Dec. 2011. Web. Jan. 2012. <http://www.economist.com/node/21541024>.
"Retailing in India." Wikipedia, the Free Encyclopedia. Web. Jan. 2012. <http://en.wikipedia.org/wiki/Retailing_in_India>.
Singh, Madhur. "Walmart Makes Inroads into India with Joint Venture." Breaking News, Analysis, Politics, Blogs, News Photos, Video, Tech Reviews - TIME.com. Time. Web. Jan. 2012. <http://www.time.com/time/world/article/0,8599,1915353,00.html>.
"Walmart in India." YouTube. Ndtv, 1 June 2009. Web. Jan. 2012. <http://www.youtube.com/watch?v=40ovnOByRbk>.
"Wal-Mart’s World: Passage to India." BusinessWeek Slide Shows and Multimedia. Web. Jan. 2012. <http://images.businessweek.com/ss/09/06/0603_walmart/30.htm>.
"Walmartstores.com: India." Walmart Stores. Walmart. Web. Jan. 2012. <http://walmartstores.com/AboutUs/276.aspx>. The "Players," Story A recent post came in from the wall street journal explaining the positives of Wal-Mart and India’s collaboration: “They will increase choice and lower prices by cutting out middlemen. Commerce and Industry Minister Anand Sharma expects fresh investment to generate 10 million new jobs over three years, about five to six million of them in logistics alone.”
The opposition says that this new superstore will be harmful to small businesses
The longer hours, variety of products, and mass amount of available jobs creates worry that even before the government can put sanctions on these stores it will be too late
The local markets feel it’s a step away from traditional Indian commerce
Now there is much debate about the honesty of wal-mart some people feel that it showcases child labour, poor wages, and lack of human rights
Parts of the Indian population are worried about the potential affects it can have on the culture
Some politicians are worried that: "foreign players with deep pockets" would bring job losses in both the manufacturing and service sectors.
Certain trade unions and parties have stated they will torch walmart stores and refuse the reforms in their cities
Its this fear that a “faceless,” giant will crush the millions of family-owned kirana stores that make up the Indian retail that drives this anger.
But one must look on the other side – that for decades these shops have been sheltered by the government from foreign investment but have done little to improve it, therefore they need the change.
walmart gave an interesting video showing the positive impact their jobs create - what's your standpoint on the issue?: It must be noted that in a global economy that puts speed and efficiency at high importance only countries that are capable of rapidly transporting goods and services will be successful
India has lacked this due to the poor infrastructure and have focused more on their technological industries, creating a powerful middle class but they need proper logistics to continue growing
this is one of Wal-marts key strengths that it can bring to India due to their widespread knowledge on the retail industry – creating an easier flow for supply chain
this would allow India to grow economically and socially becoming a more industry diverse country
huge political move that came from the reforms creating a divide within the government which can potentially impact the current/future government
the reform was more forced than mutually agreed upon creating potential problems in the future – some experts saying the process was “done incorrectly”
The opposition feels that these reforms were necessary due to India’s lack of profit in the past few months since the GDP dropped 7%
It’s a double edged sword and it’s difficult to see how India will fare – but hopefully their government will not be negatively impact and their economy will continue to grow! 90% of Americans live within 15 miles of a walmart and the US counts for almost 70% of Walmart’s sales
Walmart needs to continue to grow for profit and thus need to tap into markets like India’s
There’s 1.2 billion people in India and thus it becomes an essential market for consumers
Others feel Wal-mart is too much of a "superstore,"
with many debates over its morals some feel its a step towards disaster for the coporation
either way with these stores in place, the profit is projected to be huge benefitting the company in a monetary sense