Market Analysis for Wal-Mart India
The objective of the report is to suggest suitable strategic and operational international marketing program for the Wal-Mart India. The report includes the thorough analysis of the market which is essential for the company before proceeding with the future strategies of the company. The analysis includes both external and internal study along with the competitive factors analysis that might create the impact on the working of the company in the Indian market. Moreover, the report also includes the details related to the obstacles faced by the Wal-Mart India and the lessons that the company learned from these obstacles. In the end, the report includes the details related to the mode of entry for the company in Indian Market. Along with this, it includes the proposed marketing strategy.
Wal-Mart India owns and operates around 21 Best Price modern wholesale stores in India. These stores offer approximately 5,000 items in Cash & Carry format. The stores of best price ensure that they are offering the unmatched convenience, choice, quality along with hygiene. The company came into existence in India in the year 2009 in Punjab. Currently, the company is present in approx. 9 states out of 28 Indian States (Wal-Mart India, 2018).
It is a process to determine all the external and internal elements that can create the effect on the organization performance (Chernev, 2018). Below given is the macro and competitive forces analysis of the Wal-Mart India.
This analysis helps the company in understanding the external factor that influences the business. Wal-Mart India also faced some issues because of these factors (Grant, 2016). Please refer Appendix 1.1 for the further analysis of the Wal-Mart India.
Political factors: – The political factors include the influence of the government on the particular industry. India is one of the largest democracies in the world and it runs on a federal form of the government along with this the government is unstable (Pratap, 2017). Indian government’s regulations say that all the foreign wholesalers should be able to source at 30% of products from small and medium Indian businesses. Similarly, they want Wal-Mart to source 30% of products (Lutz, 2013).
Economic factors: – The economic factors include GDP, inflation rate, unemployment and many other aspects. GDP of the country is improving year by year after the liberalization of the foreign capital which is attracting foreign investors. The company registered a GDP of $5.07 trillion in the year 2013 following a further improvement GDP growth rate of 5% in the year 2014. Similarly, Wal-Mart opened their stores in India with the partner Bharti Enterprises with the motive to generate profit by offering customers products of different choice with quality.
Competitive Factors Analysis for Wal-Mart India
Social factors: – The social factors include the beliefs and values of the citizen of India. Most of the people in India don’t like to visit stores for purchasing products as they generally visit the nearby Kirana stores from where they can purchase the essential products. This affected Wal-Mart India as they were not able to generate the sales and revenue. Moreover, in India, there are 6, 49,481 villages so these people don’t visit the place to buy the products and generally prefer kiranas.
Technological factors: – The technology factor includes the use of the advanced technology in the business. The availability of the software and the use of 3G and 4G are available which is one of the benefits for the company as they can offer the products through online medium. The best price store offers online services but before browsing the customer has to prepare the account which was one of the issues as most of the people don’t want to prepare the account before browsing the sites (Best Price, 2018).
Legal factors: – The legal factors include the strict rules and regulations introduced by the government that can affect the foreign investors. Wal-Mart got affected because of the policy of foreign direct investment rules of India. The Indian government didn’t give permission for the FDI in the multi-brand retail (Bengali, 2015). Moreover, the company faced the allegations related to the violation of rules and bribery in India.
Environmental factors: – The environmental factors include the concern related to the waste management, energy consumption, packaging and many others. In India, the company faced obligations related to the minimum wage increase, disability discrimination, recycling which created the impact as the company was not able to generate the profit out of Indian stores then they have to pay high wages to the workers.
Porter’s five forces is a tool that is used for the analysis of the competitors of the business in the market (Hollensen, 2015). Below given is the analysis of the Wal-Mart competitor’s forces in the Indian Market. Please refer Appendix 1.2 for the further analysis of the Wal-Mart India.
Bargaining power of suppliers- HIGH
Wal-Mart exported all the products from their manufacturing units because the company is a well-known wholesaler. Moreover, they also formed tie-ups with the companies who can offer them other products considering the requirement of the Indian people (Lovelock, 2011). But they have to pay a high amount for same because suppliers in India generally charge from new companies. Though, the company believes in forming the sustainable relationships with the suppliers.
Obstacles Faced by Wal-Mart India
The bargaining power of the customers is high in the market because they can switch to other customers easily. The price is the only factor that is the concern of the most of the people in India. Wal-Mart tried to offer the best price in the market but through the customer can find the product at the low price in small retail shops they bargain.
The threat of substitutes of products or services- HIGH
Wal-Mart faced the high threat because the grocery items were easily available at Kiranas and small retail shops (Chernev, 2018). Apart from it, there are some reliance stores who offer all the products in one place. Indians mainly rely on Kirana store because they get daily wages from which they daily purchase the products from the nearest store.
The threat of New entrants- Medium
Most of the companies are getting attracted towards Asia region considering the growth in the economy of the regions due to which the companies face the threat of new entrants. Though, on the other hand, while evaluating the market of India they found that many international companies are facing issues in the market of India which might make them move towards the other markets.
Industry rivalry- High
There are numerous department stores, grocery stores available in the market that might make the competition intensive. The major competitors of the Wal-Mart include Big Bazaar, D-Mart, Reliance fresh and many others. The industry rivalry is high because these companies are offering the best price to their customers with the best quality and along with this these companies are well-known in the Indian Market.
The internal environment is composed of the elements within the organization that include employees, management, culture, and many others (Lamb, Hair & McDaniel, 2011). The proper management of Wal-Mart India is essential for the success of the business in the Indian market. Below given is the porter’s value chain analysis of the Wal-Mart India.
The porter’s value chain is an analytical framework that provides the assistance to the company in identifying the activities that can create competitive advantage and value for the business (Armstrong, Adam, Denize and Kotler, 2014). Please refer Appendix 2.1 for the further analysis of the Wal-Mart India.
Primary activities
The main component of the primary activity is inbound logistics- Wal-Mart inbound objectives include the supply chain (David, 2011). There is very less number of traders involved in the supply chain of the company as the company believes in dealing with manufacturers directly due to which the company believes in saving the cost of distribution (Dudovskiy, 2016).
Mode of Entry for Wal-Mart India
Another component of these activities is operations; Wal-Mart Company has its operations at different locations in the form of their stores with the name Best Price which state that they offer the product at best price. Outbound logistics; In the Indian market, the company opened stores in different states so they have to ensure that they are effectively able to maintain the stock in every store.
Along with this, the marketing and sales component is also included in the primary activities of the company. Wal-Mart marketing and sales strategy were not so effective for the market of India due to which they were not able to grab the attention of the customers (Ho, 2014).
Service is one of the crucial elements in each and every market. Wal-Mart believes in providing effective services to improve the customer service. Best price stores of the company were able to provide the effective prices to the customers but there is a need for the improvement.
Support activities
The components that are included in the support activities are Firm infrastructure, human resource, technology development and procurement. Firm infrastructure; In Best price stores the company tried to manage the products in their stores so that it will become convenient for the customers.
Human resource; In India there are many people who are skilled but many are unskilled labors due to poverty. The effective human resource can contribute to the helping the organization to establish a strong customers base. Though, Wal-Mart Company was not able to attract the talented employees who can actually work for the company.
Technology development; the company can make use of effective technology in their products and services with the help of which they can grab the attention of the customers. Moreover, to conduct the primary activities effectively there is a need for the technology development (Frynas and Mellahi, 2015). Procurement of the goods is one of the essential components that are essential for every company as this is one of the ways through which the company can easily make the goods available at its stores.
The company faced many issues due to which they were not able to cope up in the market of India. Initially, the major issue was the policy of the government which is needed to be fulfilled by the company. This policy states that the company has to source at least 30% of the products from small and medium Indian businesses (Lutz, 2013). Apart from it, the culture and social influence of the people on the purchase decision was one of the factors due to which they were not able to establish a strong customer base. Most of the villagers were not able to visit the best price stores as the villagers generally work on the daily paid wages and they make a purchase of necessity products from the nearest stores. Apart from this, the people who live in the urban areas prefer different stores to make a purchase (Heimken, 2014). These stores include Reliance fresh, big bazaar and any small retail outlets nearby home. These were the major problems which were faced by the company in the Indian market. Please refer Appendix 3 for the further analysis of the Wal-Mart India.
Proposed Marketing Strategy for Wal-Mart India
The partnership of the company was not so effective due to which the company had finished its partnership with the Bharti Enterprises as the company was Conglomerate Company who offers the products and services related to the telecommunication. It is suggested to the company to get involved with the company who deals in the same industry because Wal-Mart might be able to grab the details related to the suppliers and investors of the company.
Another important decision which was made by the company was suspending the chief financial officer and the other executives in the year 2013-2014. The company brought their new chief executive Krish Iyer (Thomas, 2017). He shifted its focus from retail outlets to the wholesale industry. The company learned that their target is wholesaler buyers instead of the retail consumer. The motive of the company is to get involved in the wholesale industry where they can provide their products directly to the wholesale buyers.
Initial mode of entry
The company initially made use of joint venture in which the company formed the partnership with the Bharti Enterprise which was not successful as both the company belongs to the different industry so Wal-Mart was not able to take the advantage of the benefit of a joint venture (Yan, and Luo, 2016). The company was not able to share any details related to suppliers, technology, products, customer preference or choice and many others. Though, both the companies shared the loss or profit made during the partnership.
An alternative mode of entry
It is suggested to the company to make use of the franchising mode of entry. This mode of entry is defined as a semi-independent business in which the owner pay fees and royalties to a parent company in return they get the right to become the identifies with its trademark to sell the products and services (Nielsen and Nielsen, 2011). The reason behind the franchising mode of entry is done after analyzing the market entry mode of company’s like McDonald, Pizza Hut, and many others.
This is an effective way to make the presence in the market of India along with this the owner who will take the franchise is aware of the culture and the trend of the market of India due to which they can easily make the business successful. Please refer Appendix 4 for the further analysis of the Wal-Mart India.
Considering the analysis of the company in the Indian market the strategies below strategies are recommended. Please refer Appendix 5 for the further analysis of the Wal-Mart India.
Overview of Wal-Mart India Operations
Product
The products include groceries, entertainment, hardware, apparel, home furnishings, and other appliances. The company ensures that along with the price they are offering quality. It is recommended to the company to allow the customer to browse the website first before making the account for the purchase as this is the way they can attract the customers towards their product (Wal-Mart India, 2018).
Price
Wal-Mart keeps the name of the stores as the best price which shows that the company has faith in providing the products at best price. Along with this, it is recommended to the company to bring the discount and offers on the products (Dudovskiy, 2016). Most of the Indian don’t see the price but they observe the discount which they are getting. Therefore, the company should keep the high discounts at the affordable prices.
Place
The best price stores are available in India with the concept of cash and carry store spans more than 50,000 square feet offering over than 5,000 items across the product categories as consumer packaged goods, general merchandise, appliances and many others (Wal-Mart India, 2018). It is recommended to the brand to open the outlets at prime locations so they can grab the attention of the customer. Moreover, the brand should open their small stores in India at those places where customers are not able to get the products easily because of long distance.
Promotion
Currently, the company is making use of promotion for their products which is not enough considering the Indian Market. The company should make use of print media which include the advertisement in a newspaper, pamphlets, hoardings and many others (Rowley, 2016). More they should form tie-ups with an online vendor who can display the products and forward the customer to the Wal-Mart website. In addition, the effective source is an advertisement on television across India which makes the people visit the stores once.
Conclusion
The report shows that how external and internal forces affect the working of the Wal-Mart in the Indian market. The analyses of the external and internal factors are discussed with the help of PESTLE, Porter’s five forces and porter’s value chain. The company faced numerous issues which are discussed in the report along with the lessons which were learned from the company. Further, the paper reflects the market mode of entry and the marketing mix strategies related to the company.
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