Post on 20-Jan-2015
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Wal-Mart and Bharti: Transforming Retail in India
By A.Arputha Selvaraj APMP IIM Calcutta
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
Manufacturer
Manufacturer
Manufacturer
Retail Store
Retail Store
Retail Store
Point of sale terminal
Satellite system
Bar code, RFID
Radio, headphone
Distribution center
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
Information available 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 costs
w.r.t. to competitors
Higer Disadvantage Disadvantage Depends
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: -
Pavement & Hand-cart vendorsConvenience StoresPaan/Beedi StoresOwner-manned general storesLocal Kirana shops
*Source: Datamonitor report, 2006: Retailing in India
Structure: Organized Retail
Refers to officially licensed retailers. These include:
Large, privately owned retail companies
Retail Chains
Corporate-backed Hypermarkets
Retail: Segmental Performance
Retail: Porter’s Five Force Analysis
Threat of EntryHigh both in unorganized
and organized space
Threat of RivalryHigh
Threat of Substitutes
Medium to High
Threat of SuppliersLow
Threat of BuyersMedium to High
Level of Threat in
the Industry
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
Competition from 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
Cap of 25% on sales of cash-and-carry players to front-end retail companies owned by their Indian joint venture partners – Change in JV agreement ; Reduced Investment
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
Thank You