STUDY ON BHARTI-WALMART IN INDIA & its COMPETITORS

Submitted in Partial Fulfillment of the Award of Degree of Bachelor of Business Studies

Project Guide Mr. Heshamuddin

Submitted By Ali Mohd. Khan Roll No:- 11-HONS-6007 B.B.S IIIrd Year

CERTIFICATE
This is to certify that the project work done on STUDY ON BHARTI-WALMART IN INDIA AND ITS COMPETITORS submitted by ALI MOHAMMAD KHAN in partial fulfilment of the award of degree of Bachelor of Business Studies is a bonafide work carried out by them under my supervision and guidance. The project work is the original one and has not been submitted anywhere else for any degree /diploma.

Md. Heshamuddin

Date :

ACKNOWLEDGEMENT
I take the opportunity to express my gratitude to all of them who in some or the other way help me to accomplish this project. The project cannot be completed without your guidance, assistance, inspiration, and co-operation. I am immensely thankful to Mr. Heshamuddin who gave me the opportunity and guidance in completing the project. I particularly owe my gratitude to my supervisor who gave me his in depth views and guidance. I take this opportunity to express our sincere gratitude to my friend MOHAMMAD SHOAIB who has guided me all the way during this project. I express my gratitude to our Parents who have financed this project.

Ali Mohammad Khan

DECLARATION
The final project on STUDY ON WALMART IN INDIA AND ITS COMPETITORS under the guidance of Mr. Heshamuddin is the original work done by me. This is the property of the institute and use of this report without prior permission of the institute will be considered as illegal and actionable.

Date :

Name : ALI MOHAMMAD KHAN Signature : Roll. No. :

TABLE OF CONTENTS

S. NO. 1)

PARTICULARS
INTRODUCTION

P NO.
7-21

2)

Incorporation & Growth Recent Initiatives

CURRENT SCENARIO OF RETAIL SECTOR IN INDIA

Growth of Organized Retail India : Top emerging Market for Retailers

22-85

3)

REASON WHY WALMART SELECTED INDIAS BHARTI FOR RETAIL CHAIN

86-98

4)

Bharti-Walmart joint venture in India Cash and Carry Format

COMPETITORS
Comparative Study Comparison with Tesco & Carrefour

99-171

5)

MARKETING AND PRICING STRATEGIES OF WALMART & ITS COMPARATIVE STUDY WALMART STRATEGIES FOR GROWTH (FUTURE PLANS)

172-196

6)

197-214

7)

OPERATIONAL DIVISIONS
Walmart Stores U.S Walmart discount stores Walmart Supercenters Walmart Neighbourhood Market Private Label Brands

215-225

Market Side Sams Club

8)

WALMART & ITS IMPACT ON UNORGANIZED RETAIL SECTOR

226-264

9)

WALMART & ITS STRATEGIES TO UNDERSTAND INDIAN CONSUMERS

265-319

10) 11)

SWOT ANALYSIS OF WALMART LEARNINGS AND FINDINGS

Experience Conclusion Bibliography

310-314 315-326

12)

BIBLIOGRAPHY

327

Wal-mart Wal-mart was founded by Sam Walton and his brother, James Bud Walton, in 1962. The Walton boys revolutionized discount retailing, with the result that by 1989 Walmart was the worlds largest retailer. The Waltons proposition was simple, deliver a wide array of merchandise at discount prices topped up by a friendly service. By 2010, it was servicing more than 500 million customers weekly and had a sales volume of US$638 billion with an overall operating margin of 15.8 percent

The Walton brothers opened their first Wal-mart Discount City store in Rogers, Arkansas, after Ben Franklin managementthe Waltons operated a number of franchised stores from the chainrejected a suggestion to open discount stores in small towns. The Discount City store concept consisted of servicing small and middle sized towns at prices equal to or lower than prices in nearby cities. In 1972 Sam Walton took the 30 existing stores public using the proceeds of the offering to build a warehouse that allowed him to buy large volumes of merchandise at lower prices. Due to the strategy of covering small towns, virtually ignored by other competitors, the expansion progressed rapidly without any substantive direct competition until the mid 1980s. However, by 1993, Wal-mart was in 47 states and its expansion led to competition with Kmart, Target, Sears and J.C. Penney, for which the established players were ill prepared. In the 1990s the company moved beyond its rural expansion strategy and began diversifying into grocery operations (Wal-Mart Supercenters), membership warehouse clubs (SAMS Clubs) and deep discount warehouse

outlets (Buds Discount City). By this time the company also felt it was now prepared for forays outside the United States. Sam Walton led the company until 1988, being a powerful CEO whose philosophy drove every aspect of the business. He believed in empowering yet controlling employees, maintaining Wal-marts costs and prices below everybody elses, and aimed at logistics excellence by maintaining technological superiority.

Empowering Employees By 2010, Wal-mart was the largest private employer in the US, employing 910,000 associates (employees in Wal-mart terminology). Associates were given responsibility, recognition and a share of the profits and were expected to be totally committed to the company and its success. As Wal-mart associates we know it is not good enough to simply be grateful to our customers for shopping in our storeswe want to demonstrate our gratitude in every way we can! We believe that doing so is what keeps our customers coming back to Wal-mart again and again. Wal-mart associates strove to provide exceptional customer service and everything possible was done to make shopping at Wal-mart a friendly experience. Associates were well rewarded for their commitment and dedication. Sam Walton believed that taking care of his associatesin terms of moral and motivational boosts in addition to financial rewardswas the first and most fundamental step to taking care of his customers. Wal-mart was the living embodiment of Sam Waltonit operated in a fun, unpredictable and interesting sort of way. Financially, managers, supervisors and store personnel

with over one year of employment had incentive compensations or bonuses based on store profits and were offered stock ownership. To give associates at all levels a perspective of the total business, training was extensive and located away from the home office. New associates shared in the experience and culture of Wal-mart by being trained by assistant managers from other stores, and store managers received training in the distribution centers to get an understanding of the internal workings of the distribution network. Suggestion programs were taken seriously and were not only a good way to involve associates in the business but were also estimated to be responsible for an annual savings of up to 2 percent of net sales. The typical management team member was a middle-aged executive who worked in Walmart since high school or college.

In 1988, David Glass was named CEO and President. Glass started as executive VP of finance in 1976 and was known to be as frugal as Sam Walton himself. Like all the regional VPs, buyers and corporate officers, he spent two to three days a week visiting stores. Wal-mart did not operate regional offices; instead it owned a fleet of aircraft and centralized regional VP weekly meetings in the main headquarters. Every Friday morning, at the weekly merchandise meeting, store and individual product sales were discussed and, on Saturday morning, management, associates, friends and relatives participated in an informal information-sharing motivation session. By Monday decisions taken over the weekend were implemented throughout the stores.

Everyday-Low-Prices Sam Waltons obsession with keeping prices below competitors led him to check his and the competitions stores thoroughly, counting the number of cars in the car park and going so far as to taking a tape measure and evaluating shelf space. He looked out for good ideas and was not afraid to copy them. This attitude assured that Everyday low- prices was a genuine strategy and not just a slogan. Wal-mart offered brand name products at prices consistently lowerapproximately 24 percentthan those found at department or specialty stores. The everyday-low-price strategy implied that there were few promotions. Although other major competitors, including Carrefour, typically ran 50 to 100 advertised circulars per yearspending 6.1 percent of discount store sales on advertisingWalMart produced only 1213 major circulars per year spending 1.5 percent of sales. Because retail competition was mainly local, the everyday-low-price guarantee required that each store manager set his/her own prices. They also were responsible for product offerings and shelf space allocation decisions, all of which were based on market specific inventory and sales data supplied by advanced information systems. A study done in the mid 1980s showed that Wal-marts prices were 1 percent lower than Kmarts when the two stores were located next to each other and were 6 percent higher when Wal-mart operated with no Kmart nearby.

Technological Superiority Technological superiority was seen as a competitive advantage by Wal-mart. Technology was used not only in setting price and product offerings, but also in areas such as communication, distribution and the control of supplier relations. Wal-marts information systems expense was estimated to be 1.5 percent of sales compared with 1.3 percent for its direct US competitors. Wal-mart operated a satellite system that enabled communication and electronic scanning throughout the store, supplier and distributor networks. The satellite system allowed requests for merchandise at the point of sale to be transmitted to the headquarters or to a suppliers distribution centers instantly. For the most part, distribution was centralized in Wal-marts distribution centers and a system known as cross-docking4 was used to reduce handling and inventory costs. A study in 1993 estimated Wal-marts inbound logistic costs at 3.7 percent of store sales compared with 4.8 percent for its direct US competitors. Wal-marts truck fleet delivered to stores 24 hours a day and picked up merchandise from suppliers on return trips running at a sixty percent capacity on backhaul. To even better manage the supply chain, Wal-marts relation with its 6,600 suppliers was enhanced by an Electronic Data Interchange (EDI) system. By the late 1980s key suppliers were already directly managing Wal-marts merchandise inventory. All Walmarts suppliers received a planning packet with information about the specific department with which the vendor was dealing as well as Wal-marts expectations from the relationship. Vendor negotiations were centralized and were done in undecorated standard interviewing rooms. Wal-mart restricted its suppliers to companies who limited the workweek to sixty hours, provided safe working conditions and did

not employ child labour. No single supplier was expected to account for more than three percent of the companys purchases.

Wal-mart was organized into three operating divisions: Wal-mart store division, SAMs Club (membership warehouse club), and the international division. The Walmart store division included discount stores (the initial Walmart format selling general merchandise) and supercenters (a combination discount store and supermarket).

Discount Stores The discount store phenomenon emerged in the 1950s as the low price alternative to supermarkets. In order to survive on gross margins that were 1015 percent below standard retailers, discount stores cut all possible costs. Frills were non-existent, ancillary services were unknown and in-store selling was limited. Wal-marts discount stores were no exception in this area. To assure customer satisfaction Wal-mart relied on the human touch in caring for the customer, like having people greeters welcome customers into the shop. Wal-Mart stores offered shopping in several departments including family apparel, health and beauty aids, household needs, electronics, toys, fabrics and crafts, lawn and garden, jewellery and shoes. Although Wal-mart bet on offering brand name products it also sold private labels in apparel (25 percent of the product offerings were private labeled), health and beauty care, dog food, among others. The company also offered a premium quality private label line under the Sams Choice brand with a 26 percent price advantage over comparable branded products. Inventory in stores was kept at a minimum

representing ten percent of store space; the traditional US retailers used 25 percent of their space for inventory. A typical facility covered 100,000 sq. ft. of floor space and, from the 1980s, stores were constructed only in areas where they could be expanded (after 2009 nearly 90 percent of the expanded discount stores were transformed into super-centers).

Super-centers In 1987, the first Wal-mart Supercenter was opened. Interestingly, Wal-mart, watching the entry of French companies into the US, also tested its own variant of the hypermarket concept. Later, as the French threat waned and they exited the market, this was abandoned in favour of smaller supercenters. A Wal-mart Supercenter provided one-stop family shopping convenience. The store combined a full line of groceries and a general merchandise department store under one roof. Supercenters were designed to save customers time and money by joining grocery shopping with specialty services like bakeries, delis, photo labs and hair salons everything a shopper could dream of in 120,000 to 130,000 sq. ft. These specialty and convenience shops had two great advantages: they attracted customers and offered margins of 35 to 45 percentquite a benefit when basic food retailing was known to give very low margins (the industry average in 2009 was 2 percent). Kmart bought into the concept in the early 1990s and Target in 2010.

SAMs Clubs In 1983, Wal-mart opened three Sams Warehouse Clubs. Warehouse clubs supplied members with brand name merchandise at warehouse prices for personal use or resale. Being dependent on high volume to compensate for the narrow profit margins, they limited the number of SKUs sold and offered institutional or multi pack sizes. SAMs Clubs were not felt to be competing with Wal-marts discount stores directly and were run by a completely different management group.

In the early 1990s, as SAMs Clubs competitors chose to grow by filling in the gaps in their existing markets rather then by entering new ones, its management chose a bold defensive move. Rather than giving competitors any openings into the concept space, SAMs Clubs management purposely chose to cannibalize their own sales by opening additional SAMs Clubs in many markets. This situation created over capacity in the market triggering consolidation and a decrease of comparable stores sales for the first time. But the strategy appeared to have the desired effect. In 1993 SAMs Clubs acquired The Wholesale Club and Kmarts Pace Clubs, managing to keep its dominant position in the warehouse segment of the industry.

International Expansion Although the early 1990s saw Wal-mart operating more than 2,000 stores worth more than US$73 billion, the stagnant American economy was making it difficult to sustain the companys historic double-digit comparable store sales growth. With limited domestic options, Wal-mart, for the first time, began to

consider expansion outside the US seriously. Wal-marts first external foray was into Mexico where, in 1991, it formed a partnership with CIFRA, Mexicos most successful retailer (CIFRAs 1997 sales were US$5,267million). The success of Wal-marts Mexican expansion was seen by several analysts as the result of an improved economic landscape; the promise associated with the North American Free Trade Agreement (NAFTA); and familiarity and demand for US products, as many of the middle class population had relatives living in the US or were under the influence of the American-way-of-life. Wal-marts external efforts in Mexico and the move into Puerto Rico and Argentina in 2009 did little to bolster the companys fortunes. Sales growth was down again in 2010 and the firms stock plummeted 22 percent, destroying nearly US$17 billion of value. For the first time, the giants performance was being doubted. However, the company continued moving offshore. In 2010 it purchased 122 Woolco stores in Canada and quickly converted their operations to the Walmart format. However, to assuage local fears, the company moved carefully, giving Canadian vendors equal opportunity to supply their stores. In 1995, Wal-mart acquired Lojas Americanas in Brazil. Although success in Canada was expected and predictable, South America was the biggest challenge to date for Wal-mart. It was the first region where cultural habits were different from those of the US and where it faced highly competitive and well established competitors, such as Carrefour. In Argentina, for instance, sales stumbled at first, as Wal-mart was selling cuts of meat and cosmetics preferred in the US. In Brazil it was selling golf clubs in a country were golf is an elite game and few consumers have money to care for and purchase the equipment. However, four years after entering Argentina, Wal-mart seemed to have learned its lesson as Donald C. Bland, president and CEO of Wal-mart Argentina suggested, following our blueprint too closely wasnt a good idea.

Walmart caught up with local competitors, not only by catering to the demand for locally preferred items, but also by changing its store layout to integrate French touches, such as wide aisles. Wal-mart also discovered that Carrefour was a nimble competitor. Theyre just relentless, the toughest competitor Ive ever seen anywhere, said a retail executive who watched Carrefour ward off Wal-mart in Brazil and Argentina in the mid-1990s. To counter Wal-mart, Carrefour slashed prices, remodeled, and even relocated stores. When a planned Wal-mart store opening in one Argentine city was delayed by construction problems for four months, Carrefour seized the opportunity to renovate its closest store. Wal-mart was aware that a Carrefour shopper who stopped to buy groceries or a pair of tennis shoes could also get a watch repaired, order mobile telephone service, rent a car, or book plane tickets and hotel rooms for a vacation. Wal-mart offered few such services. Carrefour had been an innovator in store design, softening the look of its warehouse-size buildings by installing wood floors and nonfluorescent lights in some departments and putting service counters in the food department, where shoppers can get meat, cheese, and bread sliced to order. In 1996, Wal-mart made its first attempt at selling in Asia by entering China with a subsequent entry into Korea in 1998. It entered the European market by acquiring the German retailer Werkauft in 1997 and followed this up two years later as it went on to acquire another German chain, InterSpar, and ASDA, a British retailer. By the end of 1998, with three continents covered and 3,599 stores (715 of them outside the US) generating sales of US$138,000 million, Wal-mart was closer than ever to achieving Sam Waltons dream of lowering the cost of living for everyone, not just in America. Well give the world an

opportunity to see what its like to save and have a better lifestyle, a better life for all. Nevertheless, when compared with Carrefour, Wal-mart took a cautious approach to foreign expansion, with foreign sales in 2011 accounting for only nine percent of Walmart revenues, against the 44 percent for Carrefour.

Promodes Promodes was founded by Paul-Auguste Halley and Leonor Duval Lemonnier in Normandy, France, in 1961. From the very beginning the company diversified into different concepts within France. The first supermarket opened in Mantes-la-Ville in 1962 and the first cash & carry outlet opened in 1964. Following in the footsteps of Carrefours hypermarket success, Promodes opened its first hypermarket in 1970 in Mondeville, the present location of its headquarters. As the competitiveness and construction restriction laws in France tightened, Promodes further diversified into convenience stores in 1972 and into hard discount in 1979.5 The 1970s also saw Promodes expanding into new geographic markets. The firm developed in European operations by entering Germany and Spain in 1976, Portugal in 1985, Italy in 1987, Greece in 1990, Turkey in 1996 and the Belgian market in 1998. The first transcontinental move happened when it purchased Southeastern US-based Red Food Stores chain in 1980. Through its Dia hard discount chain, Promodes entered Argentina in 1997. The first venture in Asia was in Taiwan in 1996, but in 1998, Promodes decided to sell its position in the Taiwanese joint venture to invest in a store in Indonesia instead.

Although the bulk of its international investments were successful, Promodes faced major setbacks in the US and Germany. In the US, Promodes attempt to sell both food and non-food products at its Red Food Stores was unsuccessful and the chain was sold to Dutch retailer Royal Ahold in 1994. After several years of accumulated losses, Promodes decided to sell its German hypermarket subsidiary in 2012. At the time of the merger with Carrefour, Promodes had 62 percent of its sales in France, 29 percent in Spain and the rest in other countries. Globally it operated about 175 hypermarkets, 535 supermarkets, 2,185 hard discounters and 1,763 convenience stores. It also supplied institutions and restaurants through its 201 cash & carries. Hypermarkets accounted for 62 percent of the sales, supermarkets accounted for ten percent, hard discounters for twelve percent, cash & carries for eight percent and convenience stores and others for 28 percent. To manage this diversified portfolio of business, Promodes management structure was organized differently from Carrefour or Wal-mart (which are organized by geographic areas and store concepts respectively). Instead, Promodes management structure was organized by a symbiosis of both. Under CEO Paul-Louis Halleys (Paul-Augustes son that took over as CEO in 1971) there were four operational divisions: France, hypermarket Spain, discount international, and Hard discount international. Until the marriage, Promodes was considered Carrefours major retail rival but its performance was nowhere near as good. Its diversification into different concepts translated into lower operational margins3.5 percent against Carrefours 4.5 percentand lower return on the assets in

The Deal Wal-mart Takes Europe by Storm With the purchase of 21 warehouse-sized stores from the German chain Wertkauf GmbH in 1997, Wal-marts entry into the European retail scene was anything but quiet. German consumers, the most price sensitive in Europe, quickly warmed to the Every-day-low-[rice slogan as well as the customer service often lacking at domestic retailers stores, much to the consternation of the staid and established German retail sector. In 2011, Wal-mart acquired a further 74 warehouses from Hamburg-based Spar Handels AG, a company that posted a pre-tax loss on ordinary activities in 2011 and predicted no real recovery in 2012 because of increased price competition. As Wal-marts presence in Germany increased, Metro AGGermany and Europes largest retailer at the timesped up the takeover of control of its franchised wholesaling businesses, liquidating businesses totalling one-third of its sales to fund it the reorganization. Although Wal-marts initial moves were restricted to Germany, the continents largest economy, two acquisitions in slightly over a year caught the attention of other European retailers as they speculated about Wal-marts future moves. If Wal-mart was to buy a large competitor, it would create a snowball effect and lead to a more rapid concentration than what is economically justified [However,] we see the future with serenity despite the arrival of big monsters like Wal-mart said Luc Vandevelde, Promodes CEO, at a breakfast meeting of Belgian company executives. In June 14, 2011, Wal-mart announced the acquisition of English retailer Asda Group for 6.7 billion. Its going to be a shock to the system, said a retail analyst. But it also suggests that Wal-mart is very serious about Europe. They will go for well established major players

that they can turn to their way of operating while preserving the best of their successes. European retailers had long feared the arrival of the worlds largest retailer, whose name was synonymous with low prices. With margins averaging double those of continental European food chains, they had a lot to lose. With the purchase of Asda, Wal-marts biggest to date, the company doubled its international sales to more that US$25 billion. Even though Asdas acquisition was a colossal investment and dwarfed earlier moves in Germany, analysts believed Wal-mart would further build its presence in Europe within the year. As an analyst at HypoVereinsbank AG in Munich put it, Wal-mart is a latent danger, it will continue to seek take-over candidates in the next few months and could weaken the position of current market leaders. A number of British retailers share prices fell in the days following the Asda acquisition announcement as analysts predicted that Wal-mart could offer retail prices as much as 7 percent below those being offered by its competitors. Kingfisher, whose plan to acquire Asda was ruined by the Wal-mart acquisition, saw its share price fall 2.5 percent. Sainsburys shares fell 2.2 percent. Boots, the UKs largest drug retailer, experienced a 1.6 percent decline in market value. Safeway, whose share price shrunk 32 percent in 2008, was seen as particularly vulnerable to predators and the countrys two largest supermarket chains, Tesco and Sainsbury, were expected to seek a merger. Meanwhile, Frances Carrefour, the worlds eighth-biggest grocery retailer and Netherlands Ahold, the number seven worldwide, were expected to accelerate their global expansion plans.

On June 20, 1999, the edition of the Financial Mail On Sunday noted that if Wal-mart were serious about entering Europes second largest market, it could no doubt do so by bidding for Carrefour, then valued at 16 billion, Promodes or Auchan. When contacted about such speculation Carrefour reiterated its previous declarations. According to Daniel Bernard, Carrefour has the means to remain independent and to develop itself. Promodes CEO Paul-Lois Halley, whose family controls the Promodes Group, said his company was not interested in selling to anyone. Auchan, also family-controlled, said it did not want to be acquired by Wal-mart, which had initiated take-over talks with the company approximately two years before. The Promodes move was seen as the first shot in a battle for consolidation of the European retail sector. Carrefour would probably prefer to buy Promodes than have it snatched up by Wal-mart, giving the US group a big chunk of its market, noted an analyst at Paris-based CCR Actions. Furthermore, the marriage would give the joint company a chance to dominate Frances retail market where laws limiting the building new large stores had long given favour to small shopkeepers.

Promodes operations were expected to strengthen Carrefours position in many ways. Firstly, as Europe would account for over 85 percent of the joint groups revenues it would lessen the volatility of Carrefours extensive and growing investments in emerging markets, providing more long-term stability in operating performance. Secondly, a wider presence in the low growth but stable European markets would provide a stronger cash-flow base on which Carrefour could continue its international expansion. Thirdly, food would account for over 75 percent of the new groups revenues, up from 60 percent before, smoothing the cyclicality of Carrefours non-food business.

Analysts believed that the operating strengths of the proposed merger would be offset by significant risks, particularly on Carrefours financial structure. Coming just one year after the debt funded acquisition of Comptoirs Modernes, the taking on of Promodes with its weaker financial structure would stretch Carrefours financial structure further, even if the transaction was going to be entirely financed with new equity. Additionally, much of Promodes international expansion was built up through a series of joint venture agreements that gave it options on control (e.g., in Italy, Argentina, Belgium and Greece), which, if Carrefour sought to exercise them, would mean a further large cash outlay with consequences for the groups financial position. Analysts believed in the strong market position of the new Carrefour. With stores on three continents it had the potential to manage its global supply chain and negate Wal-marts near legendary cost advantage. In one swoop, Carrefour not only became Europes largest retailer but surpassed Wal-mart in two critical South American markets that where the key to Wal-Marts global expansion, Brazil and Argentina. As consequence of this string of moves and countermoves, retail stocks were on edge across the continent. Analysts and investors clearly expected the latest merger to precipitate a rash of other deals. As one analyst remarked Wal-mart [given its US$242 billion market value] could still easily come in and buy the enlarged group if it wanted to. However a hostile bid for either Carrefour or Promodes was looked on as difficult as both had family shareholders that controlled a significant amount of the stock.

The Regulatory Approval Process By mid October, most analysts viewed the Carrefour-Promodes merge as a done deal. The Halley family and their allies had already offered more than 50 percent of their shares and no news of any counter offer had emerged by 6 October, the final due date of counter offer submittance under the terms of the deal. Nevertheless the need for European Union (EU) approval for the merger to be effective was an ongoing issue. Analysts were confident of the approval, as one analyst said, *f+or me there is a one percent chance that Brussels stops the deal, while Paris, zero percent. They would prefer to have a group called Carrefour that is second in the world rather than see Carrefour taken over by Wal-mart and Promodes by Ahold. Under EU merger and acquisition rules companies had to make a regulatory filling with all the necessary information within seven days of announcing their plan to merge. Although it is rare for companies to respect the seven-day deadline and the Commission seldom bothers to call them to order, the Carrefour-Promodes deal filing took an exceptionally long time. They announced their marriage at the end of August and the merger notification was filed with the EUs competition watchdog on 5 October, but was declared incomplete twice on grounds of insufficient information. The companies failure to meet EU information requirements was seen as a signal of disagreement with regulators about how the purchase should be reviewed. The European Commission stated that it would not start its formal investigation of the acquisition until it considered the application complete. A probe could then take between one and five months, depending on the seriousness of the antitrust concerns.

Further, following the merge announcement several unexpected problems arose within the Carrefour-Promodes universe. Both France and the Catalan regional governments expressed concerns that the merged company would have a virtual food market monopoly. In France, the combined company would control more than half the supermarket and hypermarket shopping space in Bourges, Calais, Chateauroux and Caen; and, in Spain, the regional government of Catalonia stated that the new group would have a 30 percent market share in the region when compared to the 20 percent average in the rest of Spain, and within some towns that figure would be as high as 70 percent. Internally, the merger created some collateral casualties. In Spain, George Plassat, Prycas CEO,6 announced his resignation after learning he was not expected to lead the merged company. In Portugal, Belmiro de Azevedo announced he was looking out for a partner to acquire Promodes 22 percent stake in ModeloContinente after no agreement was reached on the price Carrefour would pay for Belmiros 70 percent stake. As Belmiro kept control of the joint venture, the entrance of a new partner was critical because, as he noted, *the merger between Carrefour and Promodes] could create a strange partner/competition situation because Carrefour was Modelo- Continentes main competitor in Portugal.

In the beginning of January 2000, just after the millennium parties, the European Commission announced the deadline for ruling on the merger between the two companies was extended by two weeks to 25 January because France and Spain had sought referral of parts of the case. The twoweek extension was mandatory when national authorities ask to rule on a merger themselves. Aware that these issues could delay the Commissions

decision, Carrefour, early on in the Commissions one-month routine investigation of the merger, made concessions to satisfy EU worries about upstream activities.

On 25 January the Commission was supposed to rule on whether the concessions went far enough or on whether to open a full four-month investigation, thereby perhaps fatally delaying the deal.

On 24 January Carrefour named Leon Salto to succeed Luc Vandevelde as Chief Executive of Promodes after Vandevelde left to join Marks & Spencer. Vandeveldes expected role following the consummation of the merger was as second in command at the new Carrefour, under Chairman Daniel Bernard. The post would no longer be, said a spokesman. Vandevelde had global ambitions, said an analyst at Williams de Broe in London. Im not sure it was ever expected hed be around for long. Salto, previously a Managing Director for Promodes French operations, would head Carrefour France once the acquisition took effect.

On 25 January at 16:00 GMT the European Commission issued a press release conditionally clearing Carrefours purchase of Promodes, referring the rest of the deal to the French and Spanish authorities. However, neither of those reviews would have the power to stop the merger going ahead. An adapted version of that press release is reproduced in Appendix B. The Brussels decision is good news for the group, for our collaborators, for our partners and

suppliers and for our shareholders, stated Daniel Bernard, the new group CEO after the EU announcement.

The New Challenge: A Global Market Means Global Competition

At the time the deal between Carrefour and Promodes was cleared by the EU analysts recognized that Wal-mart was under the threat of being left without the critical mass of stores in key markets to become a major European player. Its biggest Europeanholding, Britains Asda, was only one-fifth the size of the bulked up Carrefour. Equally, the merger highlighted Wal-marts need to counter Carrefours expansion in emerging markets. Only hours after unveiling the Promodes deal, Carrefour announced the acquisition of three Brazilian chains, boosting its market share in the country to over 20 percent, against only 1.4 percent for Wal-mart. The new Carrefour was now the number one retailer in Brazil, Argentina, and Taiwan, as well in France, Spain, Portugal, Greece, and Belgium Although Carrefour and Wal-mart had clashed head on in Mexico, Brazil, Argentina and Korea, they had respectfully stayed out of each others key markets. Carrefour withdrew from the United States after a first unsuccessful attempt in the 1980s and had stayed out of Britain and Germany, the two European countries Wal-mart had recently entered. Likewise, Walmart had stayed away from Carrefours strongholds in France and Southern Europe. However that situation was expected to change as European governments moved to protect small merchants through the control of large new store openings. The only way to grow in Europe seemed to be through acquisition.

After Germany and UK, Wal-mart was clearly expected to target France. On the other hand, Carrefour lacked a presence in three key mature markets: the UK, Germany, and the United States, which would balance the risk of its investments in emerging markets. In fact, Daniel Bernard announced to a New York meeting of the National Retail Federation in January 2000 that when one is the number two in the world, one cannot exclude a presence in the United States, nor remain indifferent to the changes in such a dynamic market that has grown 10 percent in volume. Carrefour was watching the progress of Wal-Marts Supercenters closely, suggesting that the United States may be ready for French hypermarkets. But you cannot start from zero. You have to get there via an acquisition, Bernard coyly concluded. As the two chains were quickly moving toward a frontal clash, questions arose in observers minds regarding which chain was better prepared to win in an increasing global marketplace.

MARKETING AND PRICING STRATEGIES OF WALMART AND ITS COMPARATIVE STUDY Porter (2002) states that root of the problem lies in the lack of distinguishing between operation effectiveness and strategy. The expedition for productivity, quality and speed has resulted in management tools and techniques, total quality management benchmarking, time based competition, outsourcing, partnering, reengineering, change management. In any organization, strategy management is the key to its success. There are many theories based on this assumption that without a proper strategy and planning, it is difficult for any industry to survive irrespective of its size. It is necessary to understand here that all the major corporate organizations have established themselves, thanks to superior strategic planning and implementation. The retail industry is making news everywhere with not only the traditional industries increasing their outlets but some major corporate industries also intruding into this industry like Fresh @ Reliance of Reliance Industries, More of Aditya Birla Group in India. Wal-Mart, a US based retail industry, which is known as the giant in the retail industry has survived and is still the huge enterprise in the world which deals with almost all the F&B products, apparels, etc. It is not only the largest company in world but also the largest company in the history of world.(Fishman, 2006) The present paper is divided into four sections to understand and answer as what makes Wal-Mart the best in the industry, 1) retailing industry at the time of Wal-Marts innings, 2) Wal-Marts Competitive advantage and key components, 3) Wal-Marts Strategy and 4) Sustainable growth of Wal-Mart.

I. Retail Industry Wal-Mart says Hello! Strategic decisions are ones that are aimed at differentiating an organization from its competitors in a way that is sustainable in the future. (Porter, 2002) Porter strongly advocates that decisions in business can be classified as strategic if they involve some innovation and difference that results in sustainable advantage. According to Patrick Hayden et al (2002) the retailing industry adopted the style of discounting on its merchandise after the Second World War. It is learnt that discount retailing was not the strategy at the time Kmart, Target and Wal-Mart first started operating their business. Frank (2006) states that when Sam Walton was franchising for Ben Franklins variety store, invented an idea of passing on the savings to his customers and earning his profits through volume. Prior to Wal-Marts entry into the market, Sidney and Hebert from Harrison founded Two Guys discount store in the year 1946 which dealt in hardware, automotive parts and later on groceries. Two Guys was the forerunner as compared to todays retailers like Super Target, Wal-Mart which succumbed to the economic recession. Another discount store set up by Eugene as E.J. Korvette, which is often cited as first discount store which did not raise from 5 & 10 cents roots and eventually declared bankruptcy due to inability to compete with the new entrants. Porter (2002) states that combination of operational effectiveness and strategy is essential for superior performance which is the primary goal of any organization. He also says that a company can perform its rivals only if it can operate in different ways which are not in practice. Much emphasis had been laid on strategic positioning like variety based positioning, needs based positioning and access based positioning.

Along with Wal-Mart, other stores that started operating were Target, Woolworth (Woolco) and K-Mart. However, Target has been functioning successfully, courtesy Wal-Mart, but other two failed in their operations and filed bankruptcy.( Michael Bergdahl, 2004) Porters five forces model explains what strategic decisions should be made and on what basis. The model explains the basic strategies to be considered while starting a business like bargaining power of suppliers. While franchising of Franklin he always looked for cheaper deals and thought of passing his savings to the customers and earning through the margin on volume of bulk purchases. Through the way of discount stores, shoppers were given the cheapest price as compared to any other store. In regard to threats of new entrants, Wal-Mart has been constantly in the news for acquisition of other small retail shops in view of its expansion. But nevertheless it has stiff competition from likes of Super Target, Tesco, etc. it is the worlds biggest retail industry. II. Key Components of Wal-Mart Business Model Wal-Mart is the leader in retailing industry with fiscal revenue of $244.52 billion in 2003 making it the worlds largest corporation. Mike reports that Wal-Mart as of 2002 had 1,283,000 employees growing at 11.2%. The above data explains that strategy of Wal-Mart is extraordinary which manages and operates over 4150 retail facilities globally. The key components of WalMart (The Value Chain), which offers cheap prices than its competitors includes firm infrastructure like frugal culture, no regional offices and pleasant environment to work. Managements take lots of visits and it is learnt there are no rehearsals before any meeting which is usually scheduled on every Saturday. In any organization, human resource is the key to development and Wal-Mart efficiently manages its sources. Wal-Mart terms its employees as

associates. Manager compensation is linked to the profit of store operated by him, within promotions, compensation offered to associates depending on companys profits and also offered some incentives on their performances. The workforce at Wal-Mart is not unionized as the company takes all the measures of their benefits and provides them training on related issues. Technology plays a vital role in development of the organization and Wal-Mart is well equipped with technological innovations like POS, store performance tracking, real time market research, satellite system and UPC. Wal-Mart procurement measures like hard-nosed negotiations, partnerships with some vendors, centralized buying, planning packets, etc. helps at large the cause of providing the goods and services on cheap prices. The other factors that increase the margin of profit for Wal-Mart are inbound logistics with frequent replenishment, automated DCs cross docking, pick to flight, EDI, hub and spoke system. Wal-Mart strategy of operation is innovative with big stores in small towns with monopoly in the market at low rental costs, local prices, concentric expansion, merchandising in brand name, private labels, little space for inventory, store within store, etc. In relation to marketing and sales, merchandising is tailored from locals, spent less on advertising and the prices are fixed low and it depends on the store manager to fix the latitude of pricing. All the above factors combined together form the key components of WalMart which not only increase the margin of profits through bulk sales but also boost the confidence of the customers with services like point of sale information system and everyday low prices.

III. Wal-Mart Strategy Wal-Mart dominates the American retailing industry due to number of factors like its business model which is still a mystery and its effectiveness in not letting the rivals let know about the weaknesses. Wal-Mart made strategic attempts in the its formulation to dominate the retail market where it has its presence, growth by expansion in the US and Internationally, create widespread name recognition and customer satisfaction in relation to brand name Wal-Mart and branching into new sectors of retailing. It is learnt that Wal-Mart strives on three generic strategies consisting of Focus Strategy, the Differentiation Strategy and overall cost leadership. Managers strive hard to make their organizations unique, distinctive and identify key success factors that will drive the customers to buy their products.Thus, firm specific resources and capabilities are crucial in explaining the firms performance. The Resource Based View (RBV) explains competitive heterogeneity based on the premise that close competitors differ in their resources and capabilities in important and durable ways. The companys capability can be found through its functionality, reliable performance, like Wal-Mart superior logistics. (Helfat, 2002) Wal-Mart has firm infrastructure, well equipped in human resource with management professionals and technologically too. Any organizations thrive hard to be successful for which it needs to have better resources and superior capabilities. Wal-Mart has strong RBV with economically and financially very strong enough to stand still in the time of crisis. Pereira states that dominating the retail market is its key strategy.

Wal-Mart operates on low price strategy which is operated as every day low prices (EDLP) which builds trust among the customers.(Brunn, 2006)The strategy lies in purchasing the goods at lower prices and selling the goods to customer at much lower prices, cutting the price as far as possible and increasing the profit by increasing the number of sales. This ferociously increases the competition in the market and Wal-Mart competes with all its competitors till it is dominant it the market. Wal-Mart is expanding seriously and rapidly which is also its strategic goal. Wal-Mart employs over 1.3 associates, owns over 4000 stores out of which 3000 are in US and serves around 100 million customers weekly. Wal-Mart has acquired many international stores and merged with some super stores like ASDA in UK. Wal-Mart far flung network of retail outlets has ensured that WalMart interacts with and has impact on virtually every locality within US. (Helfat, 2002) The expanded strategy has led the hunger of Wal-Mart to many European Countries. It is learnt that three countries with no Wal-Mart stores became part of corporations international presence wherein the domestic retail chains were taken over by Wal-Mart including 122 Woolco stores in Canada, 21 Wertkauf stores in Germany and 229 ASDA units in United Kingdom. The takeover strategy by Wal-Mart keeps the company at forefront when entering into the new market and the number of competitors is also minimized. The strategies have helped the Wal-Mart to rein in number one position in international countries making it the largest retailer in the world.

It is seen that Wal-Mart has significantly the Porters five force model wherein through proper strategic planning and strategic implementation has led to removal of barrier entry, rivalry from competitors and pricing norms. In regard to substitutes, Wal-Mart in order to achieve its aim of customer satisfaction has selling goods under its own legal brand. Wal-Marts big box phenomenon has changed the retailing industry in the United States which is often considered as discount stores and makes profit through high volume of purchases and low markup on profits.(Parnell, 2008. Wal-Mart with its low cost and ever expanding strategy has made a dramatic impact since 1962 when Sam Walton first started his business. With this strategy, Wal-Mart has now over 4000 stores and outlets in US and other countries through acquisition and mergers.

IV. Sustainability in Discount Retailing Wal-Mart According to Porter, (2002) operational effectiveness and efficiency are the key elements of success in any organization. A company can outperform its rivals or competitors in the market only with superior management and efficient control creating a difference from the others which eventually attracts customers. Porter defines operational effectiveness as performance of similar activities as its rivals but better than them. In a study, it is stated the Wal-Mart is expert in manipulating perceptions. It is termed that low price is not the strategy of Wal-Mart but the advertisement manipulates the consumer perceptions by making them think that its prices are lower than its competitors price using price spin. Wal-Mart makes the consumer addicted coming to its stores by convincing them the prices are lower than in the other

stores by selling itself cheaper by advertising that we have lower prices than anyone else and placing a opening price point. The opening price point is the lowest price in the store which is kept at high visibility which makes consumer believes that the products in this store are really cheaper. (Race Cowgill, 2005) The SWOT analysis of Wal-Mart reveals that it is most powerful retail brand, reputation for money, value, commitment, and provides wide range of products. It is growing at a brisk pace with expanding its horizon to other parts of world through acquisition and merger. Wal-Mart has good opportunities in markets of Europe and China and focuses on acquiring the market through acquisition of smaller stores and merger with leaders in the specific markets. Wal-Mart is always under threat to sustain its top position in market nationally and internationally. Global leader in the industry leaves the organization vulnerable to many socioeconomic and political problems of the country. Sustainability at the top place is the most important job that makes its managers strives hard to frame the policies and strategy to compete with its rivals in the market. Slack, Imitation, Substitution and Hold-up are some of the threats to any organization in retail industry. However, Wal-Mart with its visionary goal of attaining zero waste status and reaching 100% renewable energy has planned to launch number of sustainability initiatives. (GreenBiz, 2008) Imitation increase profits by increasing the supply. But imitation puts reputation, relationship at stake. James Hall reports that Wal-Mart is planning to open convenience stores as Tesco has started and operating in US called Fresh & Easy Neighbourhood Markets. (James, 2008) Such tactics will create mixed response among the consumers while degrading the reputation of the leader in market. Substitution reduces the demand for what a firm uniquely

provides by shifting the demand elsewhere due to changes in technology. The threats of substitution can be subtle and unexpected like minimizing expenses through videoconferencing instead of air flights to long distance meetings with its managers of other stores, etc. Therefore, substation is an especially effective way of attacking dominant rivals in the market. Substitution offers mixed responses after identifying and understanding the threats. The organization should fight the threat and merging with them, switching to different options of substitution to be in the market. Hold-up diverts the value to customers, suppliers or complementors who have some bargaining leverage which results in tough negotiations, contractual agreements and vertical integration. Wal-Mart is having great network with almost over 7800 stores and Sams Club locations in 16 markets worldwide. It employs more than 2 million associates and serves more than 100 million customers every year. According to Fishman (2006) Americans spend $26 million every hour at Wal-Mart which makes it believable that Wal-Mart is financially very strong and is capable of combating any threat from its rivals in the market. Wal-Mart is ever expanding its boundaries by way of acquisition and mergers. Thus Wal-Mart with such a vast network of stores and alliances in the forms of ASDA, Target and many other stores is well protected enough to sustain its top position in the retail industry. Todays modern retailer of fast-moving consumer goods faces more pressure than ever to compete and succeed. Understanding the impact of an optimization-enabled price strategy and the powerful options that this strategy can unleash empower retailers to achieve new levels of business success.

This paper addresses the critical role pricing strategy should play for retailers of all sizes. As advances in science and technology allow retailers to integrate real-time consumer demand data, competitive activity, along with pricing rules, creating and implementing a sophisticated price strategy is emerging as a powerful opportunity for retailers to increase revenue and profit. By leveraging the intelligence and discipline of the latest price optimization tools, along with the insights of a qualified price strategist who is responsible for the design and management of the strategy, retailers can find real opportunities in at least five areas of practice.

Why Is a Modern Price Strategy So Important?

To survive and thrive in the highly competitive retail world, retailers must become more attentive and meticulous with their pricing. More than ever before, the financial success of companies selling retail goods depends on their price strategy. Consumers demand fair prices in exchange for their business and are constantly comparison shopping. With the ever-present pressures from shrinking margins, rising costs, and competition, winning in the retail arena today demands price strategies that reliably and frequently guide retailers decision-making.

New advances in price optimization science and technology offer retailers an unprecedented opportunity to align pricing policy with strategic business objectives. Aligning business goals and pricing policy seems common sense, but too often retailers lack the insight and technical ability to plan and price

strategically. Instead, retailers too often rely on a basic costplus strategy to maintain margins, follow their competition, or adopt wholesale-supplied pricing. Smart retailers know they should set prices in line with their own business objectives instead of simply reacting to competitors, cost changes, and margin objectives.

Competition is by no means removed from the equation in a modern, optimization-based price strategy. But modern price strategies reflect an analytical, big-picture approach. They include a far wider variety of factors such as pricing gaps, ending number psychology, brand sensitivity, and product movement. These factors enable retailers to manipulate pricing to align with their broader strategic business objectives. These options were previously not available in traditional pricing systems.

When competitors introduce a new product or slash prices, retailers who have developed a strategic-level pricing regime can respond with a multitude of options. The first and most typical option might be to respond immediately with similar changes. However, an optimization-based strategy can introduce additional options for retailers, providing them a deeper understanding of the long-term financial impacts of reactionary changes. Optimization

environments can suggest alternative actions to make up for those losses caused by fierce competition. The ability to accurately predict consumer responses to certain changes enables this new strategic thinking.

This typical situation is one of many constants in the retail environment. Will there always be loss leaders? Probably. Will there always be profit sacrifices on certain items? Most likely. Will shrink and other cost issues erode margin? Again, probably. None of these, however, should deter retailers from adhering to their pricing strategy to minimize these short term negative effects over the long-term.

A solid strategy factors these elements into the equation and still delivers value to the customer. In the end, price strategy must accomplish its objectives without negatively impacting customer expectation and perception. AMRs Research Director Mike Griswold recently wrote, Retailers need to articulate (internally and externally) their price message and position. These statements provide the guardrails that guide pricing tactics across the organization. Without these guidelines, organizations can get into

schizophrenic pricing practices that confuse the customer.

A modern pricing policy must vigilantly protect the consumers perception that they are choosing the best place to shop for their families. Consumers who are confused by non-palatable prices tend to shop elsewhere. Many retailers inadvertently confuse customers by setting prices without a comprehensive policy, by being reactionary to competition or pricing strictly on margin goals. Although few customers may be able to articulate why they feel confused in a given retail environment, research from the Wharton Business School indicates that consumers typically rely on three reference points when determining what they think is a fair retail price:

1) How much an item cost in the past; 2) How much competitors charge for the same item 3) Their perception of the associated costs of selling an item. Relative to other areas of business improvement, creating and deploying a strategic pricing regime can produce higher returns compared to other losscontrol efforts. Wharton Professors Z. John Zhang and Jagmohan S. Raju documented an important statistic in a recent research paper: A one-percent reduction in fixed costs boosts profits 2.3 percent; a one percent increase in volume will result in 3.3 percent increase in profits; a one-percent reduction in variable costs can produce a 7.8-percent rise in profit; but a 1percent improvement in pricing will boost profits by a whopping 11 percent.

The Wharton research validates what new-era price optimization strategists have asserted since 2005: pricing is one of last retail frontiers where significant gains can be immediately realized with proper strategy, technology, and support.

WALMARTS STRATEGIES FOR GROWTH

Walmart has made its way into the Indian market with the opening of its first retail outlet in Amritsar, Punjab. Walmart has a tremendous success story all across the world. Its low pricing strategy has yielded unbelievable results all across the world. Walmarts success is governed by its understanding of the market it enters into. Before India, Walmart has had a tremendous success in China. All its policies created wonders for the management and since most of the characteristics between India and China are almost the same, it may enter into the Indian market with similar strategies. Founded by Sam Walton, the first Wal-Mart store opened in Rogers, Arkansas, in 1962. Seventeen years later, annual sales topped $1 billion. By the end of January 2002, Wal-Mart Stores, Inc. (Wal-Mart) , was the worlds largest retailer, with $218 billion in sales. Wal-Marts winning strategy in the U.S. was based on selling branded products at low cost. Each week, about 100 million customers visited a Wal-Mart store somewhere in the world. By 2004, WalMart, the world's largest company operated discount stores, neighborhood stores, hypermarkets (Wal-Mart Super centers) and membership warehouses (Sam's Club). In the 1990s Wal-Mart started to expand abroad. It entered China in 1996, Korea in 1997, and Japan in 2002. In China, Wal-Mart operated and aggressively expanded its retail business in partnerships, joint venture partners and suppliers. In Japan, Wal-Mart invested in 2002 in Seiyu, a prominent Japanese retailing chain. In Asia Wal-Mart is engaged in tough competition with other global and domestic retailers. The authors intention of writing this case study is to explore into the complexities of Wal-Marts Chinese venture. China poses a huge challenge for Walmart as there exist cross cultural diversities among the Chinese population. Walmarts needs to

understand the Chinese market first and then think of a business model that can fit the country. Thus the case aims to explore into the topic to understand the adaptability of its business model to international environments. We are collecting data from secondary sources and resorting to some focus groups and about 7-8 in-depth interviews with Industry experts to understand the situation in a better way. The objective of taking up this research work is to comprehend the strategic challenges that the world number one Retailer Walmart faces whenever it attempts to enter international markets so that it can leverage on the untapped potential. Thus China is a very lucrative destination for any retailer in the world due to its huge growing population. Thus our study revolves around Wal-Marts competitive strategy in China and how it is adopting its business model in China.

Basic History Overview Wal-Mart's history is one of innovation, leadership and success. It started with a single store in Rogers, Arkansas in 1962 and has grown to what is now the world's largest and arguably, the most emulated - retailer. Some researchers refer to Wal-Mart as the industry trendsetter. Today, this retailing pioneer has annual revenues of over $100 billion, 3,000 stores and more than 750,000 employees worldwide. Founded by Sam Walton, the first Wal-Mart store opened in Rogers, Arkansas, in 1962. Seventeen years later, annual sales topped $1 billion. By the end of January 2002, Wal-Mart Stores, Inc. (WalMart), was the worlds largest retailer, with $218 billion in sales. Wal-Marts winning strategy in the U.S. was based on selling branded products at low cost.

Each week, about 100 million customers visited a Wal-Mart store somewhere in the world. By 2004, Wal-Mart, the world's largest company operated discount stores, neighborhood stores, hypermarkets (Wal-Mart Supercenters) and membership warehouses (Sam's Club). In the 1990s Wal-Mart started to expand abroad. It entered China in 1996, Korea in 1997, and Japan in 2002. In China, Wal-Mart operated and aggressively expanded its retail business in partnerships, joint venture partners and suppliers. In Japan, Wal-Mart invested in 2002 in Seiyu, a prominent Japanese retailing chain. In Asia Wal-Mart is engaged in tough competition with other global and domestic retailers. The authors intention of writing this case study is to explore into the complexities of Walmart's Chinese venture. China poses a huge challenge for Walmart as there exist cross cultural diversities among the Chinese population. Wal-marts competitive strategy needs to understand the Chinese market first and then think of a business model that can fit the country.

Walmarts unbeatable strategy The company employed more than 1.3 million associates (Wal-Marts term for employees) worldwide through more than 3,200 stores in the United States and more than 1,100 units in Mexico, Puerto Rico, Canada, Argentina, Brazil, China, Korea, Germany, and the United Kingdom. (The first international store opened in Mexico City in 1991.) In 2001, Fortune magazine named Wal-Mart the third most admired company in America, and the Financial Times and PricewaterhouseCoopers ranked it as the eighth most admired company in the world. The following year, Wal-Mart was named number one on the Fortune 500 list and was presented with the Ron Brown Award for Corporate

Leadership, a presidential award that recognized companies for outstanding achievement in employee and community relations. Wal-Mart operates each store, from the products it stocks, to the front-end equipment that helps speed checkout, with the same philosophy: provide everyday low prices and superior customer service. Lower prices also eliminate the expense of frequent sales promotions and sales are more predictable. WalMart has invested heavily in its unique cross-docking inventory system. Cross docking has enabled Wal-Mart to achieve economies of scale which reduce its costs of sales. With this system, goods are continuously delivered to stores within 48 hours and often without having to inventory them. This allows WalMart to replenish the shelves 4 times faster than its competition. Wal-Mart's ability to replenish their shelves four times faster than its competition is just another advantage they have over competition. Wal-Mart leverages its buying power through purchasing in bulks and distributing the goods on it's own. Wal-Mart guarantees everyday low prices and considers them the one stop shop. Wal-Mart has taken their mind and cash over the last 20 years to become the world's largest retailer. Wal-Mart had a base of 2,200 stores in the 80's, closing out of the 90's with a bang of 3,600 stores and $4.4 billion in net income. Spurred by NAFTA, Wal-Mart took advantage foreseeing potential growth in the foreign markets. Currently they have stories in the following countries: Mexico, Puerto Rico, Canada, Argentina, Brazil, China, Korea, United Kingdom, and in 1998 a controversial Germany. Most analysts believed Wal-Mart would move into eastern European countries however Wal-Mart confounded the analysts when they purchased a 21-unit Werkauf chain in Germany. Why Germany they ask?

The Germany countryside was littered with carcasses of other retailers, therefore Wal-Mart new that its non-brand name items, service, and low prices would succeed. Analysts believed that Wal-Mart would not buy in Germany for many reasons: first, zoning laws, scarcity of land, and high real estate prices make it almost impossible to find affordable space for new supercenters, second, the domination of other major retail stores. Next, due to German unions, the workers are very highly paid and unemployment being high. Last, Wal-Mart low price strategy could be hindered due to other manufacturers' marketing strategies of selling brand name goods. Of course, Wal-Mart has succeeded in Germany with a "smile". I as always advertised. Wal-Mart pushes the limit of hours being opened despite the government regulated operating times. Wal-Mart has also renovated many German stores, restocking them with common shopping practices, wider aisles, and renaming the stores Wal-Mart. Most importantly in a land of pfenning pinchers, WalMart has introduced EDLP ("Every Day Low Prices "). The new low prices have caused many competitors to lower their prices, in turn reducing income. After the completion of the move to Germany, analysts now started predicting Wal-Mart's next threat to retailers was going to happen. Wal-Mart landed in Europe, causing many retailers to merge in order to survive. One of Wal-Mart's main competitors was Franklin, which is currently struggling at this time. Many of the Australian retailers such as Aldi, Tesco, and Ahold, who previously relied on specials, would be forced to reduce their daily prices to compete with WalMart's everyday low price strategy. Low-Prices are the foundation of WalMart's ideas and strategy and could surely beat out Australia's smaller end retailers. Another are in which Wal-Mart would prosper is with tourists,. WalMart is well known and trusted, and in high tourism cities such as Sydney, travellers would be more likely to shop at a place they know and trust. Its

inevitable that while on vacation for example, people forget to pack or run out of necessities such as toothpaste, shampoo, and deodorant, etc. Why not go to Wal-Mart and get all these things and pick up the few extra goodies you didn't realize you needed. Wal-Marts global strategy? What tactics has it used to become a major global retailer? Wal-Mart's success is mainly based on its concentration of a single-business strategy. This strategy has achieved enviable success over the last three decades without relying upon diversification to sustain its growth and competitive advantages. In a sense, Wal-Marts low prices, service, and smile are their leading marketing strategies. However, there is risk in this strategy, because concentration on a single-business strategy is similar to "putting all of a firm's eggs in one industry basket". On the business side, Wal-Mart is the countrys most sophisticated retailer in terms of using information systems. Their crossdocking inventory and transportation services able them to have the goods needed by the consumer at all times. In order for Wal-Mart to become a major global retailer, they have closely examined and utilized tactics to profit from their many stores. One great tactic is starting free-trade-zone distribution centers, in turn, saving almost $500,000 annually. Another tactic includes their service from when you walk in the store to when you leave. Also, their bread and butter is again the technology they utilize. They can track how much of one item has been sold on any giving day, and if not a hot commodity at one store, they will ship it out to another where it is being sold much faster.

Can Wal-Mart sustain its competitive advantage in global retailing? Domestically, Wal-Mart is growing through its Superstores. Traditionally, this business is a very low-margin space, but with Wal-Mart's competitive advantages in distribution and leverage over suppliers, they can make it a big winner. International expansion has been robust and will continue to be an important part of Wal-Mart's future growth opportunities. Certainly the Internet provides a growth avenue as well that will open a new faucet for them to potentially take over an upcoming market. Importance of selling only brand-name merchandise to the Wal-Mart strategy. The focus that Wal-Mart shares in all advertisements is service, low prices, and quality of goods. WalMart is not a specialty shop focusing on one good, they are innovative offering a selection based on consumers overall needs. They do have some brand name merchandise however do not have a specific section set aside for Polo Shirts. Unlike Wal-Mart, brand name stores in most circumstances, only offer their product at a price that is normally above affordable. These retailers rely on their name to sell; Wal-Mart relies on their convenience and low prices.

Choosing markets to enter is of major importance in global expansion. Although Wal-Mart, the world's largest company by revenue, was into its ninth year of operations in China, its stores were still losing money. It created a miracle in the US retail industry by revolutionising the sector's business model and successfully implementing its model through innovative practices that enabled it to sell national brands at "Every Day Low Prices".

The challenge Wal-Mart faced was whether it could transport its successful model to win a market with many differing characteristics which threatened its low cost structure and which could nullify its competitive advantage. This is a management strategy case primarily concerned with the application of established domestic business models in international expansion. It also sheds light on other globalisation issues such as market entry strategy, localisation vs. standardisation, the effect of regulation changes on the competitive landscape and firm performance. Competitive advantage lies in systems efficiencies and primarily the efficient Supply Chain ,Wal-Mart owes much of its past success and expectations for future growth to an ability to self-distribute merchandise from a vast network of modern distribution centers served by a private truck fleet. It is a capability that has enabled Wal-Mart to restrict inventory growth, while maintaining a strong in-stock position and filling the shelves of hundreds of new stores each year. For example, Wal-Mart's sales during the past two years increased 32% from $165 billion to $217.8 billion, but the value of its inventory at replacement cost increased by just 12.8% during the same time frame. The trend of leveraging an efficient supply chain to restrict inventory growth continued during the first quarter as sales increased 14% to $55 billion, but inventories only increased 3%. Much of the success has to do with Wal-Mart's ability to invest in new distribution capacity, especially as it relates to food, an area responsible for much of the company's growth. Wal-Mart's first food distribution center in Clarksville, Ark., is less than 10 years old and 12 of the 21 food distribution centers in operation today were opened during the past two years. Four more food distribution centers are slated to open during June and July.

The feat of restricting inventory growth, while simultaneously opening new stores and staying in stock has a lot to do with distribution centers and a private truck fleet, but equally important is the company's knowledge management system known as Retail Link. In existence for more than a decade, Wal-Mart has made consistent upgrades to the system that now provides suppliers with up to two years of sales history to analyze their business and spot new opportunities. While Retail Link is a powerful tool, one of the challenges Wal-Mart has faced is convincing suppliers to take full advantage of the opportunities it believes can be extracted from a thorough mining of the data.

Toward that end, a key emphasis has been to simplify the system to promote greater involvement of senior-level supplier executives with the ability to identify and execute untapped opportunities. Wal-Mart last year produced a brief video featuring many of its top executives reemphasizing the importance of Retail Link to the success of Wal-Mart and its suppliers.

"Early on, far too many companies designated somebody at a low rank to be responsible for the coordination of retail link and we both missed far too many opportunities," Tom Goughlin, president and CEO of the Wal-Mart Stores Division, said at the beginning of the talk, According to Coughlin, it is "extremely important" to have people of a high enough rank within a supplier's organization devoted to Retail Link so as to have an impact. Because senior executives may be less technologically savvy than analysts who require

special training to use Retail Link, Wal-Mart introduced a new tool for making quick, fact-based decisions called Business-at-a-Glance. "It is really is a tool for business leaders to use," according to Doug McMillon, senior VP and GM. And since Wal-Mart uses Retail Link to analyze suppliers' performance, McMillon added, I would encourage to use Business-at-a Glance to beat us to the punch to know how you are doing."

Charles Holley, CFO of Wal-Mart's International Division, sums up the Retail Link system as a tool that "lets suppliers leverage Wal-Mart's technology to improve their business and also to satisfy both of our customers."

In addition to promoting usage of Retail Link at a senior level within supplier organizations, Walmart also solicits input from suppliers on how to improve the system. Wal-Mart sponsored Retail Link User Groups to meet regularly around the country where participating suppliers can share tips and strategies for increasing the effectiveness of the system. Wal-Mart also has a Retail Link steering committee comprised of members of the supplier community that meets quarterly and is able to share suggestions on how to improve the functionality of the system. It is up to me and my team to continue to simplify and make Retail Link better and faster to continue to drive the business results," said David Porter, director of information systems.

There are many ways to compete, yet most companies tend to focus their strategies on only a few of the many ways to gain a competitive advantage. This limits their ability to create and sustain true competitive advantages. In

order to have a lasting competitive advantage, it is important to develop a competitive strategy that includes a wide spectrum of techniques to gain advantage. One can compete on price, but can also compete on time, reputation, values, technology, image, experience, service, design, innovation, quality, information, knowledge, consultative value, loyalty, and process.

Price-Based

The most popular technique is to focus on price. Having the lowest price has always provided a great advantage, but having the lowest price also means low margins, which means one needs a high volume to make it a profitable strategy. It is interesting, and somewhat amusing, to see the large number of competitors selling the same thing, all claiming to have the lowest price, yet none of them charge the same price. Obviously, someone is lying. The Internet makes price-based competition even more difficult because it is so easy to compare prices and find the true lowest price. When we think of price-based competition, we cant skip JetBlue Airlines, Dell Computers, Amazon.com, or we can think of anything made in China. Yet, if we look closer,we can see that companies that are great at price-based competition are using more than one competitive strategy. Wal-Mart competes on price, but they also compete on time and convenience because they offer so many products customers dont have to drive to multiple stores to get what they need. They also compete on location and reputation.

As a nation, its hard to compete with China on price and win. China is best known for its low-cost manufacturing, thanks to low wages; however, its manufacturers are starting to focus on quality as a means of increasing their competitive advantage. The best never focus their competitive strategy on price alone. They combine multiple competitive strategies to create a lasting advantage and continue to innovate as they use technology to raise the bar with each method.

WALMART REGIONAL STORES Bharti-Walmart has already introduced eight of Wal-Marts private labels in India, which it sells at the companys sole wholesale retail outlet in Amritsar and at about six dozen Easy Day stores owned by Bharti Retail Ltd, which directly cater to retail customers Several global companies from whom Wal-Mart Stores Inc., the worlds biggest retailer, sources consumer goods for its private labels business are seeking an entry into India to profit from the growing importance of organized retailing in one of the worlds fastest growing economies. We have a lot of international private label suppliers who are interested in setting up shop in India to create private labels, not just for Bharti Retail and Bharti-Walmart stores, but for the entire industry. We are working on those suppliers to come to India, a spokesperson for Bharti-Walmart Pvt. Ltd told Mint in an email interview.

Bharti-Walmart is a 50:50 joint venture between the US retailing powerhouse and Bharti Enterprises Ltd. The spokesperson declined to name the companies interested in coming to India or the kind of opportunities they were exploring. Bharti-Walmart has already introduced eight of Wal-Marts private labels in India, which it sells at the companys sole wholesale retail outlet in Amritsar and at about six dozen Easy Day stores owned by Bharti Retail Ltd, which directly cater to retail customers. The private labels on offer in India include the popular Great Value brand, which offers tea, local snacks, ketchup, dishwashing bars, and toilet and glass cleaners. Private labels are brands owned by large retailers that can be sold at lower prices without harming profit margins because they do not entail large marketing and advertising costs. Most large retailers in India such as Pantaloon Retail (India) Ltd, Aditya Birla Retail Ltd, Spencers Retail Ltd and Reliance Retail Ltd are pushing private labels to capture a larger share of consumer spending in their stores. Smart sourcing is one of the key factors in retailing successand Wal-Mart is widely regarded to have one of the best-oiled supply chains in the world, with 61,000 suppliers in 50 countries, including India. The suppliers to the worlds largest retailer by sales arent small either. For instance, its cereal and snacks private label supplier Ralcorp Holding Inc. has an annual revenue of around $3.9 billion (around Rs17,980 crore). New York Stock Exchange-listed Cott Corp., which supplies private label beverages to

Wal-Mart and other retailers, including Britains Tesco Plc. and Germanys Metro AG, has annual revenue of $1.7 billion. Other global suppliers to Wal-Mart include billion-dollar companies such as baby food maker PBM Products Llc, and pickles and soup supplier TreeHouse Foods Inc. As a global sourcing organization, we are always looking for emerging opportunities to get the best products for our customers, on an ongoing basis, the spokesperson said. India allows fully owned foreign subsidiaries in most of the manufacturing businesses unless they operate in sectors reserved for small-scale industries, such as pickles, mustard oil, wax candles and safety matches, among others. Its natural for these companies to come here and its natural for Wal-Mart to bring people it is already familiar with and who understand its needs, said Jayant Kochar, managing director of New Delhi-based retail consultancy firm Go Fish Retail Solutions. Kochar said the arrival of such vendors would be good for the Indian economy as they would source most of their raw materials from within the country and generate employment. Indian market is huge and there is option for everyone. If good companies with proven expertise come in, they raise the bar and they improve standards, he added. Bharti-Walmart currently sources its private labels from 120 Indian companies.

Wal-Mart has been sourcing products from suppliers in India for at least 20 years for its global operations. Major categories sourced from Indian suppliers include home textiles (including towels, shower curtains, bath mats, accessories, bedding sheets, kitchen linens), apparel (including wovens, knitwear and leather footwear), fine jewellery, tableware and home decor products. We are also partnering SMEs (small and medium enterprises) in India to grow their businesses by upgrading their processes, developing new products and leveraging Wal-Marts global sourcing network, the spokesperson said.

WALMARTS STRATEGY TO UNDERSTAND INDIAN CONSUMERS Walmarts entry into the Indian market is not going to be easy because of the diverse nature of buyers in India. India is called a land of diverse cultures which is divided into 35 states and union territories. These states further consist of different cities and villages and the intensity of diversity goes on increasing as we go into smaller segments. Making successful entry in such a market is not a childs play even for worlds largest retailer. Walmart has tied up with Indias biggest telecom company Bharti, which of-course has a deep understanding of customer needs and expectations. Walmarts joint venture with Bharti will definitely help Walmart understand Indian customers in a better manner. It will not only increase Walmarts reach into Indian market but will also generate more trust among Indian consumers.

Understanding of consumer behaviour of a countries consumer is very necessary for a company to make a successful entry and its survival in due course. The study of consumers helps firms and organizations improve their marketing strategies by understanding issues such as how

The psychology of how consumers think, feel, reason, and select between different alternatives (e.g., brands, products);

The psychology of how the consumer is influenced by his or her environment (e.g., culture, family, signs, media);

The behaviour of consumers while shopping or making other marketing decisions;

Limitations in consumer knowledge or information processing abilities influence decisions and marketing outcome;

How consumer motivation and decision strategies differ between products that differ in their level of importance or interest that they entail for the consumer; and

How marketers can adapt and improve their marketing campaigns and marketing strategies to more effectively reach the consumer.

One "official" definition of consumer behavior is "The study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society." Although it is not necessary to memorize this definition, it brings up some useful points:

Behaviour occurs either for the individual, or in the context of a group (e.g., friends influence what kinds of clothes a person wears) or an organization

(people on the job make decisions as to which products the firm should use).

Consumer behaviour involves the use and disposal of products as well as the study of how they are purchased. Product use is often of great interest to the marketer, because this may influence how a product is best positioned or how we can encourage increased consumption. Since many environmental problems result from product disposal (e.g., motor oil being sent into sewage systems to save the recycling fee, or garbage piling up at landfills) this is also an area of interest.

Consumer behaviour involves services and ideas as well as tangible products.

The impact of consumer behaviour on society is also of relevance. For example, aggressive marketing of high fat foods, or aggressive marketing of easy credit, may have serious repercussions for the national health and economy.

There are four main applications of consumer behavior:

The most obvious is for marketing strategyi.e., for making better marketing campaigns. For example, by understanding that consumers are more receptive to food advertising when they are hungry, we learn to schedule snack advertisements late in the afternoon. By understanding that new products are usually initially adopted by a few consumers and only spread later, and then only gradually, to the rest of the population, we learn that (1) companies that introduce new products must be well financed so that they can stay afloat until their products become a commercial success and

(2) it is important to please initial customers, since they will in turn influence many subsequent customers brand choices.

A second application is public policy. In the 1980s, Accutane, a near miracle cure for acne, was introduced. Unfortunately, Accutane resulted in severe birth defects if taken by pregnant women. Although physicians were instructed to warn their female patients of this, a number still became pregnant while taking the drug. To get consumers attention, the Federal Drug Administration (FDA) took the step of requiring that very graphic pictures of deformed babies be shown on the medicine containers.

Social marketing involves getting ideas across to consumers rather than selling something. Marty Fishbein, a marketing professor, went on sabbatical to work for the Centers for Disease Control trying to reduce the incidence of transmission of diseases through illegal drug use. The best solution, obviously, would be if we could get illegal drug users to stop. This, however, was deemed to be infeasible. It was also determined that the practice of sharing needles was too ingrained in the drug culture to be stopped. As a result, using knowledge of consumer attitudes, Dr. Fishbein created a campaign that encouraged the cleaning of needles in bleach before sharing them, a goal that was believed to be more realistic.

As a final benefit, studying consumer behaviour should make us better consumers. Common sense suggests, for example, that if you buy a 64 liquid ounce bottle of laundry detergent, you should pay less per ounce than if you bought two 32 ounce bottles. In practice, however, you often pay a size premium by buying the larger quantity. In other words, in this case, knowing this fact will sensitize you to the need to check the unit cost labels to determine if you are really getting a bargain.

There are several units in the market that can be analyzed. Our main thrust in this course is the consumer. However, we will also need to analyze our own firms strengths and weaknesses and those of competing firms. Suppose, for example, that we make a product aimed at older consumers, a growing segment. A competing firm that targets babies, a shrinking market, is likely to consider repositioning toward our market. To assess a competing firms potential threat, we need to examine its assets (e.g., technology, patents, market knowledge, and awareness of its brands) against pressures it faces from the market. Finally, we need to assess conditions (the marketing environment). For example, although we may have developed a product that offers great appeal for consumers, a recession may cut demand dramatically. Market research is often needed to ensure that we produce what customers really want and not what we think they want. Primary v/s Secondary Research Methods There are two main approaches to marketing. Secondary research involves using information that others have already put together. For example, if you are thinking about starting a business making clothes for tall people, you dont need to question people about how tall they are to find out how many tall people existthat information has already been published by the U.S.

Government. Primary research, in contrast, is research that you design and conduct yourself. For example, you may need to find out whether consumers would prefer that your soft drinks be sweater or tarter. Research will often help us reduce risks associated with a new product, but it cannot take the risk away entirely. It is also important to ascertain whether the research has been complete. For example, Coca Cola did a great deal of research

prior to releasing the New Coke, and consumers seemed to prefer the taste. However, consumers were not prepared to have this drink replace traditional Coke. Understanding of Consumer Behavior Walmart must develop an understanding of its customers in India. Various studies have been conducted in India which may help Walmart in understanding Indian consumer and customizes its products accordingly. Surveys are useful for getting a great deal of specific information. Surveys can contain open-ended questions (e.g., In which city and state were you born?) or closed-ended, where the respondent is asked to select answers from a brief list (e.g., __Male ___ Female.) Open ended questions have the advantage that the respondent is not limited to the options listed, and that the respondent is not being influenced by seeing a list of responses. However, open-ended questions are often skipped by respondents, and coding them can be quite a challenge. In general, for surveys to yield meaningful responses, sample sizes of over 100 are usually required because precision is essential. For example, if a market share of twenty percent would result in a loss while thirty percent would be profitable, a confidence interval of 20-35% is too wide to be useful. Surveys come in several different forms. Mail surveys are relatively inexpensive, but response rates are typically quite lowtypically from 5-20%. Phone-surveys get somewhat higher response rates, but not many questions can be asked because many answer options have to be repeated and few people are willing to stay on the phone for more than five minutes. Mall intercepts are a convenient way to reach consumers, but respondents may be reluctant to discuss anything sensitive face-to-face with an interviewer.

Surveys, as any kind of research, are vulnerable to bias. The wording of a question can influence the outcome a great deal. For example, more people answered no to the question Should speeches against democracy be allowed? than answered yes to Should speeches against democracy be forbidden? For face-to-face interviews, interviewer bias is a danger, too. Interviewer bias occurs when the interviewer influences the way the respondent answers. For example, unconsciously an interviewer that works for the firm manufacturing the product in question may smile a little when something good is being said about the product and frown a little when something negative is being said. The respondent may catch on and say something more positive than his or her real opinion. Finally, a response bias may occurif only part of the sample responds to a survey, the respondents answers may not be representative of the population. Focus groups are useful when the marketer wants to launch a new product or modify an existing one. A focus group usually involves having some 8-12 people come together in a room to discuss their consumption preferences and experiences. The group is usually led by a moderator, who will start out talking broadly about topics related broadly to the product without mentioning the product itself. For example, a focus group aimed at sugar-free cookies might first address consumers snacking preferences, only gradually moving toward the specific product of sugar-free cookies. By not mentioning the product up front, we avoid biasing the participants into thinking only in terms of the specific product brought out. Thus, instead of having consumers think primarily in terms of what might be good or bad about the product, we can ask them to discuss more broadly the ultimate benefits they really seek.

For example, instead of having consumers merely discuss what they think about some sugar-free cookies that we are considering releasing to the market, we can have consumers speak about their motivations for using snacks and what general kinds of benefits they seek. Such a discussion might reveal a concern about healthfulness and a desire for wholesome foods. Probing on the meaning of wholesomeness, consumers might indicate a desire to avoid artificial ingredients. This would be an important concern in the marketing of sugar-free cookies, but might not have come up if consumers were asked to comment directly on the product where the use of artificial ingredients is, by virtue of the nature of the product, necessary. Focus groups are well suited for some purposes, but poorly suited for others. In general, focus groups are very good for getting breadthi.e., finding out what kinds of issues are important for consumers in a given product category. Here, it is helpful that focus groups are completely open-ended: The consumer mentions his or her preferences and opinions, and the focus group moderator can ask the consumer to elaborate. In a questionnaire, if one did not think to ask about something, chances are that few consumers would take the time to write out an elaborate answer. Focus groups also have some drawbacks, for example:

They represent small sample sizes. Because of the cost of running focus groups, only a few groups can be run. Suppose you run four focus groups with ten members each. This will result in an n of 4(10)=40, which is too small to generalize from. Therefore, focus groups cannot give us a good idea of:

What proportion of the population is likely to buy the product. What price consumers are willing to pay. The groups are inherently social. This means that:

Consumers will often say things that may make them look good (i.e., they watch public television rather than soap operas or cook fresh meals for their families daily) even if that is not true.

Consumers may be reluctant to speak about embarrassing issues (e.g., weight control, birth control).

Personal interviews involve in-depth questioning of an individual about his or her interest in or experiences with a product. The benefit here is that we can get really into depth (when the respondent says something interesting, we can ask him or her to elaborate), but this method of research is costly and can be extremely vulnerable to interviewer bias. To get a person to elaborate, it may help to try a common tool of psychologists and psychiatristssimply repeating what the person said. He or she will often become uncomfortable with the silence that follows and will then tend to elaborate. This approach has the benefit that it minimizes the interference with the respondents own ideas and thoughts. He or she is not influenced by a new question but will, instead, go more in depth on what he or she was saying. Personal interviews are highly susceptible to inadvertent signaling to the respondent. Although an interviewer is looking to get at the truth, he or she may have a significant interest in a positive consumer response. Unconsciously, then, he or she may inadvertently smile a little when something positive is said and frown a little when something negative is said. Consciously, this will often not be noticeable, and the respondent often will not consciously be aware that he or she is being reinforced and punished for saying positive or negative things, but at an unconscious level, the cumulative effect of several facial expressions are likely to be felt. Although this type of conditioning will not get a completely negative respondent to say all positive things, it may swing the balance a bit so that

respondents are more likely to say positive thoughts and withhold, or limit the duration of, negative thoughts. Projective techniques are used when a consumer may feel embarrassed to admit to certain opinions, feelings, or preferences. For example, many older executives may not be comfortable admitting to being intimidated by computers. It has been found that in such cases, people will tend to respond more openly about someone else. Thus, we may ask them to explain reasons why a friend has not yet bought a computer, or to tell a story about a person in a picture who is or is not using a product. The main problem with this method is that it is difficult to analyze responses. Projective techniques are inherently inefficient to use. The elaborate context that has to be put into place takes time and energy away from the main question. There may also be real differences between the respondent and the third party. Saying or thinking about something that hits too close to home may also influence the respondent, who may or may not be able to see through the ruse.

WALMART AND ITS IMPACT ON UNORGANIZED RETAIL

Impact on Shopkeepers, Traders and Hawkers After farming, retailing is Indias major occupation. Census 2001 provides us the most authentic data on people involved in retail. According to it, there were 269 lakh main and 24 lakh marginal workers in wholesale and retail trade. That is, nearly three crore people depend on trade, 1.1 crore in the urban and 1.9 crore in the rural areas. Of the total, nearly 1.7 crore are not even matriculates. Thus, the livelihood of more than 30 million is involved and if we count the dependents, in the form of children and others, at least 120

million will be impacted by the retail revolution created by the large corporations. The growth of corporate retail will take place by destroying the self-organized small retail in India.

In past researches have shown us that a growth in unemployment leads to a series of social problems, like rise in poverty, alcoholism, domestic violence, indebt ness, suicides, crime and have major implications by even making the political situation unstable. If we are following the American model of Walmart where the store employee gets a salary is below the poverty line and the top management gets millions of dollars every year. We are following a trend that increases the divide between rich and the poor and history has shown us that these divide have always led to social unrest and political turmoil of a nation.

Reliance and Walmart are presenting themselves as friends and liberators of farmers and they refer to small traders as middleman, as if they are not giant middleman. Atleast in case of small traders, farmers have a choice in terms of whom to sell. The APMC Acts also ensures that farmers would get a fair price and there would be no single buyer. In contrast, Reliance and Walmart are monopnistic (a situation when there is one buyer and too many sellers) buyers who in due course of time will drive down procurement prices of agricultural and manufactured products. They claim that they are paying more to the farmers, but the truth is that they are at present procuring from the existing mandis all across the nation, and not straight from the farmers, so there is no question of paying better returns to the farmers.

We have seen the dismantling of mandis in last couple of years in various parts of the country. The primary force behind this was the corporate entry into the supply chain management of food. It is true that this year they have paid better prices to the farmers than the mandis, what is threatening is the reduction in the number of options the farmer is left with to sell his/her crop. Similarly for the manufactured goods, the prices paid by the retails giants might be more competitive than others, but after other retails are wiped out, how many options will the producer have to sell his/her products. Farmers will be bound to produce as per the will of these corporations and have to sell at cheaper prices as decided by them. The experience of farmers of west has been the like this. If we also keep moving in the same fashion and there is no doubt that our farmers will also have to face such situation.

Impact on Workers, Suppliers & Existing Industries Another threat that we will be facing is the opening of a giant pipeline of cheaply sourced goods from China, Thailand, ASEAN, etc., which could lead to unfair competition and livelihood losses on a massive scale in India. Currently if Wal-Mart were a country they would rank as Chinas 6th largest trading partner. As they and others seek to enter India, there are no regulations insisting that products are Indian made. However, on the other hand, as corporate retailboth domestic and foreigngrows in India they have more power over local manufacturers. Because large corporations like Wal-Mart and Reliance are able to buy in such bulk they contract with only a selected list of manufacturers, and are then able to exert pressure on them over time to cut costs. This directly translates to workers working longer hours for less pay and the closing of factories that cannot keep up with the competition.

Environmental And Health Impact

Climate change

Climate change due to air pollution is already becoming a threat to human life. Temperatures are rising, sea level is rising and glaciers are melting. The imperative in the context of climate change is to prevent increase of use of fossil fuel. Our hawker, redi wala and kirana store is the solution to climate change. The Reliance, Bharti-Walmart model will increase fossil fuel use and carbon emissions. Further destabilizing the climate the super market Lorries will consume huge amount of fuel and lead to enormous pollution.

Even if we go by conservative estimates the super market Lorries in India will generate more than 7 million tonnes of carbon dioxide per year, adding more problems to the already fragile environment of the country. When petroleum is becoming more and scarcer, the Lorries of these supermarkets will consume more than 1 billion litre of petroleum per year. For refrigeration of the vegetables and fruits, and for air-conditioning the retail outlets at-least 20,000 megawatt of additional electricity will be needed. We need to burn millions of

tonnes of coal everyday to get this energy; the carbon-dioxide released from burning this coal will substantially affect the climate patterns of the country. We are already in a stage where the present levels of pollution, and carbondioxide emissions is going to wipe out the human existence out of world in a few years, at this point creating any model that increases carbon-dioxide in the environment will be disastrous to all of us, even the propagators of this model.

Excessive Pesticides

The giant retail chains have their own standards of buying farm produce, without using excessive pesticides its very difficult for a farmer to produce fruits and vegetable which fits into the standards, so they are forced to use excessive insecticides and pesticides.

Once these farm produce come to the retail giants, they sell it throughout the year, by preserving them in cold storage, but in the process a lot of preservatives are also added to the food. So at the end when a consumer gets a preserved vegetable from these giant stores, it is full of toxic material harmful for consumption.

Packaging

Packaging of food creates a huge amount of waste in the already polluted cities. At a time when every city in the country is struggling to solve the problem of solid waste, increase in the packaging waste due to the mall culture will add to their woes. The existing land fills are getting filled and then more land of the poor farmers will be acquired to make landfills for reliances and Walmarts packaging waste.

Research Findings on Wal-Mart

Wal-Mart is the largest corporation in the world. Their annual revenue of over 350 billion is larger than the entire Indian retail market. They are currently banned from entering into India, but are trying to come in through the backdoor by signing a Joint Venture with Bharti Enterprises (AirTel). They have not yet signed the deal. They must be stopped

A study by Kenneth Stone of Iowa State University found that some rural towns in the USA lost 47% of their retail trade after the opening up of a WalMart. A study by Stephan J. Goetz of the Pennsylvania State University and Hema Swaminathan of the International Center for Research on Women found that counties in the USA where Wal-Marts located experienced increases in family poverty as compared to similar counties where there was no Wal-Mart. The Congressional Research Department of the Representative George Miller in the USA put together a compendium of Wal-Marts labour abuses in that country.

 Another study by David Neumark, Junfu Zhang, and Stephen Ciccarella found that Wal-Mart decreased employment by 2-4%, and reduced wages by 5%. An article in Workforce Management describes how Wal-Mart has turnover of 600,000 associates per year, accusations of wholesale discrimination against women, and violations of overtime laws. An article in Main Street News describes how the addition of retail space overwhelms police, costing more in calls and improvements than is generated in extra tax revenue.

Fact Sheet Against Wal-Mart in India

Wal-Mart recently had to close down its business in Germany and Korea as it was found indulged in Predatory Pricing (selling at lower price than its cost price) which is not allowed in these countries.

Wal-Mart is facing a class lawsuit for pay discrimination against 1.5 million female US employees after a court approved the action. A federal appeals court upheld a 2004 ruling giving the lawsuit class action status, sanctioning claims from up to 1.5 million current and former staff. The original lawsuit was filed in 2001 by six women who either worked for Wal-Mart or had done so in the past. The San Francisco court ruled that the countrys largest class action lawsuit against a private employer could proceed. Judge Martin Jenkins said sufficient evidence existed of discriminatory practices dating back to 1998 to

support the case going to trial. Factual evidence, statistical evidence and anecdotal evidence present significant proof of a corporate policy of discrimination and support plaintiffs contention that female employees nationwide were subjected to a common pattern and practice of discrimination, he said.

Wal-Mart ordered to pay millions as compensation to workers

The worlds largest retailer, Wal-Mart, was ordered to pay at least $78m (42m) in compensation to workers who were forced to work during breaks.

A jury in a Pennsylvania court decided that Wal-Mart broke a state law by refusing to pay staff for the extra work they did. The class action was brought by about 187,000 staff who worked for Wal-Mart between March 1997 and May 2006.

Notorious for anti labour practices

Wal-Mart is notorious for its anti union practices and does not allow union right to workers ll over the world. Only recently, they have been forced by the Chinese Government to llow union in China where workers are sweating day in and out to produce goods for al-Mart at low cost. Ernest Duran, of the United Food and Commercial Workers Union, ays efforts at collective bargaining have met opposition from Wal-Mart.

Human Rights Watch report against Wal-Mart

International organization Human Rights Watch on May 1, International Workers ay, 2007 which documents the U.S.-based retail giant Wal-Marts anti-union ractices in the United States. In the report entitled, Discounting Rights: Wal-marts Violation of US Workers Right to Freedom of Association, Human Rights Watch found that while many American companies use weak US laws to stop workers from organizing, the retail giant aggressiveness of its anti-union apparatus stands out for the sheer magnitude and power. The Human Rights Watch investigation reveals that Wal-Mart begins to indoctrinate workers and managers to oppose unions from the moment they are hired. Managers receive explicit instructions on keeping out unions, many of which are found in the companys Managers Toolbox, a self-described guide to managers on how to remain union free in the event union organizers choose your facility as their next target.

Impact on Suppliers Main supplying factories feel the pressure of

shrinking profit margins with Wal-Mart and pass on that pressure to the unorganized labour in the factories who earn a very low wage and can be made to do unpaid overtime work. Average wages of workers in Bangalore supplier factories supplying to Wal-Mart, are lower then in factories not supplying to Wal-Mart. Global retail sales are estimated to cross US$12 trillion in 2007.1 Almost reflecting the growth in the world economy, global retail sales grew strongly in the last five years (2001-06) at an average nominal growth of about 8 per cent per annum in dollar terms This is in contrast to near stagnant global retail sales

during the previous five years, 1996-01. Grocery dominates retail sales with a share of approximately 40 per cent which varies from about 30 per cent in rich Japan to an average of 60 per cent in poor Africa. Retail sales through modern formats have been rising faster than total retail sales; the share of modern retail has risen from about 45 per cent in 1996 to over 52 per cent in 2006.

1996

2001

2002

2003

2004

2005

2006

CAGR (199 6-01)

CAGR (2001-06)

Total Retail Sales1 (US$ bn) Total Grocery Sales1 (US$ bn) Modern Retail Sales2 (US$ bn) Modern Grocery Sales2 (US$ bn) Nominal

7682

7833

7987

8827

9833

10657

11375

0.4

7.7

3284

3161

3213

3571

3970

4308

4611

-0.8

7.8

3478

3916

4149

4672

5246

5633

5969

2.4

8.8

2577

2816

2979

3378

3800

4074

4325

1.8

9.0

30055

31889

32888

36904

41470

44713

48141

1.2

8.6

GDP (US$ bn)

1 Excluding VAT or sales tax; 2 Including VAT or sales tax; 3 Compound annual growth rate. Source: Planet Retail Database.

Organized v/s Unorganized Retail

In the developed economies, organized retail is in the range of 75-80 per cent of total retail, whereas in developing economies, the unorganized sector dominates the retail business. The share of organized retail varies widely from just one per cent in Pakistan and 4 per cent in India to 36 per cent in Brazil and 55 per cent in Malaysia (Table 2.2). Modern retail formats, such as hypermarkets, superstores, supermarkets, discount and convenience stores are widely present in the developed world, whereas such forms of retail outlets have only just begun to spread to developing countries in recent years. In developing countries, the retailing business continues to be dominated by family-run neighbourhood shops and open markets. As a consequence, wholesalers and distributors who carry products from industrial suppliers and agricultural producers to the independent family-owned shops and open markets remain a critical part of the supply chain in these countries.

COUNTRY

TOTAL RETAIL SALES (US$ Bn)

SHARE OF ORGANIZED RETAIL (%) Source: Planet Retail and

USA JAPAN CHINA UK FRANCE GERMANY INDIA BRAZIL RUSSIA SOUTH KOREA INDONESIA POLAND THAILAND PAKISTAN URGENTINA PHILIPPINES MALAYSIA CZECH REPUBLIC VIETNAM HUNGARY

2983 1182 785 475 436 421 322 284 276 201 150 120 68 67 53 51 34 34 26 24

85 66 20 80 80 80 4 36 33 15 30 20 40 1 40 35 55 30 22 30

Technop ak Advisers Pvt. Ltd.

Indian Retail

The growth of the retail trade in India is associated with the growth in the Indian economy. Gross domestic product (GDP) grew by an annual rate of 6.6 per cent during 1994-00 but the growth slackened to 4.7 per cent per annum during the next three years before the growth remarkably rose to 8.7 per cent per annum in the last four years (Table 2.3). This meant a substantial rise in disposable income of Indian households since the mid-1990s. Based on the Market Information Survey of Households (MISH) of the National Council of Applied Economic Research (NCAER), the number of people in the income groups of aspirers and the middle class with annual income ranging from Rs. 90,000 to one million, more than doubled from 157 million to 327 million during the last decade 1995-96 to 2005-06.3 The data from the Central Statistical Organization (CSO) indicate that the growth of real private final consumption expenditure, which dipped from an average of 5.7 per cent per annum during 1994-00 to 4 per cent per annum during 2000-03, shot up to 6.7 per cent per annum during 2003-07. Retail sales (in nominal terms) in the country also followed a similar pattern: a high annual growth of 13.6 per cent during 1994-00, a low growth of 4.8 per cent during 2000-03 and a smart pick up in the last four years, 2003-07 at around 11 per cent.

The international consulting firm, A.T. Kearney, annually ranks emerging market economies based on more than 25 macroeconomic and retail-specific variables through their Global Retail Development Index (GRDI).

For the last three years (2005, 2006, and 2007) India has been ranked as number one indicating that the country is the most attractive market for global retailers to enter. The high economic growth during the last few years raising disposable incomes rapidly, favourable demographics placing incomes on younger population with less dependency, and urbanization are some of the major factors fueling the Indian retail market.

Employment and Output in the Retail Sector Retail is a labour-intensive economic activity. According to the Economic Census carried out by the CSO in 1998, the country had a total of 10.69 million enterprises engaged in retail trade, of which 5.23 million were in the rural areas and 5.46 million in the urban areas. The total employment in these enterprises in 1998 was 18.54 million of which 7.88 million was in the rural sector and 10.65 million in the urban sector. Economic Census has been carried out for 2005 but its detailed results are yet to be released. However, according to NSSOs Employment and Unemployment Survey for 2004-05, employment in the retail trade has been 35.06 million, divided between rural (16.08 million) and urban (18.98 million) sectors.4 This constituted about 7.3 per cent of the workforce in the country (459 million). Wholesale trade, on the other hand, contributed to an employment of 5.48 million, of which only 1.71 million was in the rural sector and 3.77 million in the urban sector.

The NSSO data also indicated that retail employment was about 30.62 million in 1999-00 with 12.15 million in rural areas and much higher at 18.47 million in the urban areas. This means that an additional employment of 4.44 million

was added in this sector during the five-year period, 2000-05, showing an annual employment growth of 2.7 per cent per annum. However, it is interesting to note that the retail employment growth has been quite large in the rural sector there has been a massive rise in employment in rural retailing of 3.93 million during 2000-05 and the urban sector has also shown an employment growth, but only of 0.51 million during this period. Taking into account the fact that retail trade is more labour intensive than wholesale trade, the contribution of retail trade alone to GDP can be estimated to be around 11-12 per cent in 2006-12.

Indian retail is dominated by a large number of small retailers consisting of the local kirana shops, owner-manned general stores, chemists, footwear shops, apparel shops, paan and beedi shops, hand-cart hawkers, pavement vendors, etc. which together make up the so-called unorganized retail or traditional retail.

GROWTH OF INDIAN RETAIL : TOTAL v/s ORGANIZED

CAGR 20042003-04 05 200506 200607 (200407 %)

INDIA RETAIL (Rs. Bn)

FOOD & GROCERY BEWERAGES CLOTHING & FOOTWEAR FURNITURE, FURNISHING, APPLIANCES & SERVICES NON INSTITUTIONAL HEALTHCARE SPORTS GOODS, ENTERTAINMENT EQUIPMENTS & BOOKS PERSONAL CARE JEWELLERY, WATCHES etc. TOTAL RETAIL

7,028 212 777

7,064 309 993

7,418 373 1,036

8,680 518 1,356

7.3 34.7 20.4

512 950

656 972

746 1,022

986 1,159

24.4 6.9

212 371 530 10,591

272 433 610 11,308

308 465 655 12,023

395 617 863 14,574

23 18.5 17.7 11.2

ORGANIZED RETAIL (Rs. Bn)

FOOD & GROCERY BEWERAGES CLOTHING & FOOTWEAR

39 11 168 67

44 12 189 75

50 13 212 85

61 16 251 101

16.5 14.7 14.3 14.8

FURNITURE, FURNISHING,

APPLIANCES & SERVICES NON INSTITUTIONAL HEALTHCARE SPORTS GOODS, ENTERTAINMENT EQUIPMENTS & BOOKS PERSONAL CARE JEWELLERY, WATCHES etc. TOTAL ORGANIZED RETAIL 25 11 18 350 33 15 24 408 44 22 33 479 63 33 49 598 37 46.9 40.5 19.5 14 16 19 24 20

SHARE OF ORGANIZED RETAIL IN TOTAL RETAIL (%) 3.3 3.6 4 4.1

Source: CSO, NSSO, and Technopak Advisers Pvt. Ltd.

India Retail - Share of Categories (per cent)

2003-04 FOOD & GROCERY BEWERAGES CLOTHING & FOOTWEAR FURNITURE, FURNISHING, APPLIANCES & SERVICES NON INSTITUTIONAL HEALTHCARE SPORTS GOODS, ENTERTAINMENT EQUIPMENTS & BOOKS PERSONAL CARE JEWELLERY, WATCHES etc. TOTAL RETAIL 2 3.5 5 100 4.8 9 66.4 2 7.3

2004-05 62.5 2.7 8.8

2005-06 61.7 3.1 8.6

2006-07 59.6 3.6 9.3

5.8 8.6

6.2 8.5

6.8 8

2.4 3.8 5.4 100

2.6 3.9 5.4 100

2.7 4.2 5.9 100

Source: Computed from Technopak Advisers Pvt. Ltd. data.

Evolution of International Retail: Implications for India The focus of this chapter is the retail dimension of the profound and rapid transformation of the food industry in developing countriesa key element of globalizationand its relevance to India.8 A supermarket revolution has indeed occurred in developing countries since the early-to-mid-1990s. In many countries, supermarkets have gone well beyond the initial middle-class clientele to penetrate the food markets of the poor.

This shock downstream in the food system has made an impact on traditional retailers; has set off ripple effects upstream in the food system, on the wholesale, processing, and farm sectors; and has incipient effects on trade. This chapter reports on the experiences of developing countries mainly elsewhere in Asia and in Latin America and Eastern Europe with respect to the supermarket revolution and strategic policy approaches taken in developing countries. We also touch on the most relevant experiences of developed countries. Section 3.2 discusses trends in the spread of supermarkets, with a brief comparative look at the US experience (interestingly, in many ways the most relevant of the developed-country experiences for India) and then in developing countries. Section 3.3 analyzes the determinants of the diffusion of supermarkets in developing countries. Section 3.4 examines emerging evidence of the impacts on consumers and traditional retailers (downstream in the agrifood system) and on processors, wholesalers, and farmers (upstream in the system). Section 3.5 discusses policy and programme measures taken by government and non-government entities to promote competitiveness with inclusiveness among the various actors in the food system confronting the opportunities and challenges of the supermarket revolution. Section 3.6 concludes with lessons for India. Throughout the chapter, the authors use the term supermarkets as shorthand for the various segments of modern retail, and we distinguish the segments (hypermarkets and superstores,

supermarkets and neighbourhood stores, convenience and forecourt stores, and discount and club stores) only when necessary.

CONCLUSION

"India is a very diverse country -- we have 6,000 castes and sub-castes in 28 states, and every community has its own tastes; every state has its own nuances,". "To manage the diversity and the heterogeneity will be one of the biggest challenges for anybody who comes to this market." Enigmatic India and its challenges in transportation, warehousing and distribution

infrastructure haven't deterred the world's biggest organized retailers that have lobbied -- unsuccessfully so far -- with the Indian government to permit foreign direct investment in the retail industry. Wal-Mart battled stiff opposition from Indian retail chains and found an open backdoor, forming a joint venture with Bharti to supply back-end supply chain technology and related processes; Bharti will handle the front-end of owning and running the stores, which are likely to be co-branded. The terms of the deal haven't been disclosed, but media reports put Wal-Mart's proposed investment in the venture at $100 million initially, rising to $450 million in a few years.

Cash and Carry

Waiting in the wings and actively negotiating with several Indian companies as potential partners are Tesco of the U.K. and Carrefour of France. Some, like Germany's Metro and South Africa's Shoprite, have already entered India with a cash and-carry business that supplies only retailers, restaurants and business houses where the Indian government permits FDI. Wal-Mart is also entering the cash-and-carry business, with Bharti supplying Wal-Mart's stores in India.

Moreover, many large Indian companies -- including Reliance Industries, the Aditya Birla group, and other regional firms -- have recently announced ambitious plans in retailing.

India's retail industry is one of its fastest growing (with a 5% compounded annual growth rate) and has $320 billion in annual revenues this year, according to a report titled, "Retail in India: Getting Organized to Drive Growth," released recently byconsulting firm A.T. Kearney and the Confederation of Indian Industry (CII). Never mind that Wal-Mart's $315.6 billion in global sales last year is about the size of the entire Indian retail industry. "Rising incomes and increased consumerism in urban areas along with an upswing in rural consumption will further fuel this growth to around 7%-8%," the authors say, pegging India's consumer class with rising disposable income at 400 million people. But now that Wal-Mart plans to enter India, attention is focused on the retail giant's India strategy. Wharton professor of marketing Jagmohan Raju says one big challenge Wal-Mart will face in India has to do with how sit is perceived by consumers. "In the U.S., when you think of a big warehouse store, you think of lower prices, and small, boutique stores have higher prices," he says. "In India, the perception is exactly the opposite -- the bigger store has higher prices; smaller shops can offer lower prices because their overheads are lower. How will Wal-Mart's positioning of lower prices carry forward in a mindset where customer perceptions of big versus small are so different?"

Consumer Behavior Wal-Mart's business model is founded on "everyday low prices for consumers and squeezing costs out of the system, and customer service with friendly people who greet you." But those, do not guarantee shopper traffic, as consumer behavior is dramatically different across global markets. Coca-Cola might adjust to people's preferences in different markets by making its drink sweeter or more effervescent. Or McDonalds could allow people to consume alcohol at its restaurants in France and make hamburgers with rice patties in Japan. "But there's considerably more variation in the way people shop for products than their underlying preference for the products themselves," Bell says. "This is what makes it more difficult -- not just for Wal-Mart in particular, but for any retailer -- to be truly global." Changes in consumer preferences that Wal-Mart will encounter have to do with simple things like how often people like to go to a store or what motivates them to choose one store over another. "In local markets, you have dynamics of retail competition, variations in the frequency with which people like to shop, variation in the kind of products that drive people to the store, variation in the importance of the retail assortment." It is too early to tell if some of the controversies Wal-Mart has faced in the U.S. will crop up in India, too. "In the U.S., a number of small towns did not like Wal-Mart for a couple of different reasons," says Bell. "One is purely aesthetic -- these big boxes look pretty ugly and the practice of having huge buying power can be detrimental to the local economy -- people who try and compete on price. Thirdly, they are criticized for their employment practices, such as their benefits, and ethnic and gender discrimination in hiring."

Wal-Mart's most immediate challenge could be finding real estate at preferred locations and financing it at the prevailing prices.. "The Wal-Mart model is very real estate hungry,". "They need a lot of real estate, close to where people live, and have easy access to them. The Wal-Mart model also relies on the fact that everything is on display, which requires lots of space." Raju notes that if, as many industry watchers expect, Wal-Mart sets up its stores on the outskirts of urban centers, other challenges could emerge. "If you are going to travel by train, you'll have to carry your purchases in a bag, and then you'll buy less," he says. "If you drive your car there and load it up, Wal-Mart should have a place to park all those cars." Some industry experts have argued that the typical Indian consumer does not travel more than 6 km (3.75 miles) or 7 km to shop, and that few suburbanites own cars. Raju says he expects Wal-Mart to adopt a blended model of its traditional format tweaked to fit the reality of Indian real estate. "It would bestores where you have all the products on display, but you don't pick it up and put it in your cart yourself." This would involve something like a handheld computerized device, he says, into which customers enter information about the products they want to buy. They would then collect their purchases at a checkout point at street level and drive away, or have them delivered to their homes. More blending might be on the way, especially in cultural nuances. Wal-Mart's recent debacles in Germany and Korea, where it sold out to local retail players and exited, could be wake-up calls. In Germany, Wal-Mart's low price strategy failed to win it a distinctive market position simply because two other well-entrenched retailers -- Aldi and Lidl -- have been following that strategy for years, says Bell. He notes that Wal-Mart was also faulted for relying too heavily on a U.S.-driven view of how Germans shop, made worse by

populating its top management in the country with U.S. expatriate executives, many of whom couldn't speak German. Thirdly, the Wal-Mart strategy of a price-service combination with friendly greeters and so forth backfired. "Culturally, greetings and friendliness in stores are viewed by the Germans with a lot of suspicion," says Bell.

Rites of Passage Wal-Mart also had some lessons to learn in South America a couple of years ago, when it discovered that the design and layout of its stores did not match shopper preferences. "In South America, shopping for some families is a social or an entertainment-driven event," says Bell. "You have the whole family or the extended family shopping together, so you need much wider aisles." That, he says, is unlike what Wal-Mart is used to in the U.S., where a single person typically shops for the entire household, while other family members are looking after the children or at work. "It seems like a fundamental thing, but you could never predict that coming from the outside unless you have a local partner." Chastened by these experiences, Wal-Mart may not face the same problems in India. Bharti, its local partner, is a leader in the mobile phone services industry and must have deep insights into Indian consumer behavior patterns. Even so, there could be surprises, as Biyani's Big Bazaar store chain learned the hard way a couple of years ago. The chain had bought 100,000 white cotton shirts, expecting good demand. But sales were slow, and promotional campaigns fell flat. It soon figured out why: The demographic profile of Big Bazaar's middle-class shoppers meant people who commute in crowded trains and buses and not in air-conditioned cars. For them, white shirts are high-maintenance hassles, needing frequent laundering. The group

eventually liquidated its unsold inventory of white shirts through heavily discounted sales.

Wal-Mart's legendary success at procuring its supplies at extremely competitive prices has no doubt pleased its customers to whom those savings are passed on, but critics have accused it of compelling its suppliers to survive on very thin margins. Here, Biyani says he works differently. "We are not like Wal-Mart; we believe in a situation of win, win and win," he says. "The supplier should win, we should win and the customer should win. In WalMart's strategy, and maybe that of other international retailers, the company wins and the customer wins. Somebody has to lose for those two to win." Future Capital Holdings, a Biyani-run private equity firm, last month raised $830 million that it has begun investing as vendor financing in manufacturers of foods, garments and fashion jewelry, among others. Products of these companies get captive shelf space at the Future Group stores. Raju says existing national brands will need to plan their response to Wal-Mart very carefully to ensure that while they get to supply the retail giant, they also don't alienate their smaller store buyers. "They are used to it in the U.S.," he says. "Right now, Hindustan Lever deals with a lot of small stores. Tomorrow they will be dealing with large buyers like a Wal-Mart or Reliance Retail, so the relative power structure of buyers and who is supplying will change. This is a challenge they have faced in developed markets where they deal with the Tescos and Safeways." He expects the national brands in India, such as Hindustan Lever and Procter & Gamble, to figure out ways to help small stores with specially tailored services "to ensure they also thrive and do well."

Raju sees bigger benefits flowing to other players in the retail supply chain, such as farmers. "Companies like Wal-Mart coming to India, I hope, will help farmers because there will be fewer players in the chain," he says. "Farmers could form cooperatives to supply directly to Wal-Mart rather than have to deal with multiple intermediaries."

Party Spoilers

India's retail promise must seem tempting, but that outlook "is tempered by the fact that the country is grappling with severe infrastructure and policy issues," says the CII in the report it produced with A. T. Kearney. "Cold chains [distribution chains for perishable items], warehousing and logistics infrastructure will fast become unmanageable challenges for India if proactive action is not taken." It points to policy regimes that vary across states, "inadequate quality control and the lack of a skilled workforce." Biyani doesn't buy all that, arguing that "India is a nation of dukaandars (shopkeepers) and that enough retail talent is available. He also dismisses concerns about distribution and logistics infrastructure with a simple, rhetorical question: "Have you [in the recent past] faced a shortage of anything you wanted to buy?" Biyani scoffs at Wal-Mart's logistics and supply-chain strengths. "Where will they run their Volvo trucks here?" he asks, adding in a lighter vein, "They will probably have to have bullock carts and handcarts in their supply chain."

Raju points out that Wal-Mart's efficiencies stem from the scale of its purchases, which determines what prices it pays suppliers. "Suppliers are willing to work with them because if they don't work with them they lose a big part of the market," he says. The Wal-Mart buying center at its Bentonville, Arkansas, headquarters "is huge, and that's why most of the companies' vendors have their branch offices in the city where Wal-Mart's headquarters are located," adds Raju.

Coping with Oversupply Organized retail is just beginning in India, but plans call for some 600 malls to be built over the next decade across the country. The nascent industry in India could learn valuable lessons about what went wrong with retailers in the U.S., leading to bankruptcies, closures and sell-offs at companies like K-Mart, Caldor and Bradlees. "What went wrong [in the U.S. market] is oversupply," says Martyn Chase, chairman of Donaldson, a London-based company that manages 350 retail malls across Europe. "One mall gets built, and somebody builds a new and bigger mall nearby, so the previous one is killed." He doesn't see an immediate threat of that happening in India, but says "you will get casualties in 10 years when you have too many of them." He attended a CIIorganized two-day conference on the retail industry in Mumbai in late November, and is trying to persuade his European retail mall clients to invest in India.

Chase says the way to prevent haemorrhaging and consolidation in the industry is to bring regulatory oversight. "You need proper regulations governing mall locations, mall size and the like," he says. "Before you are allowed to build a mall in the U.K., you have to demonstrate there is a need for it, by proving that there is enough demand from people who live in that area to make the mall work." Biyani argues that the underlying dynamics of standalone retail are not attractive. (Pantaloon's urban locations put it in a different market segment from that of the big box centers Wal-Mart might put up on city outskirts.) "In India, no retailer has made big money so far," says Biyani. (Pantaloon's profits last year were 3% of revenues.) "The money is in the peripheral activities; it's never in the retail itself. It's the power of retail that gets you the money; it's never the transaction that gets you the money."

BIBLIOGRAPHY 1) Retail in India : Getting Organized to Drive Growth A CII & A.T. Kearney Report 2) 3) 4) 5) Indian Retail Story : Indian Retail forum by Arvind Singhal Banking in India Banking on Retail by Suchintan Chatterjee Manual on FDI in India : Dept. of Industrial Policy & Promotion FDI in Indias Retail Sector : Centre for Policy Alternatives

Websites Referred

1) Walmart.com 2) Wikepedia.com 3) Timesofindia.com 4) Businesstimes.com 5) Economictimes.com 6) Livemint.com