Can Walmart Break the Retail Code in India?
Due to the fact that India is a growing economy, this state can become an essential destination for Walmart. India’s political environment is complex, with a large number of regulations obstructing large multinational companies from entering this market. Until recently, global retailers that sold goods from a variety of brands could not legally enter the Indian market, which changed in 2012 (Keegan & Green, 2017).
The changes that the government makes to the regulations applicable to retailers and the reform of the organized retail can help Walmart enter the market using a strategy that is already tested in other states. One threat, however, is that the Indian government will be fearful of the consequences that a decision to allow the large business to operate in the country will have on small businesses, which is why Walmart has to invest at least $100 million to create jobs for locals.
The economic position of India has two dimensions, one one hand, the country’s retail market is large, on the other, the infrastructure needed to open Walmart’s stores is outdated and requires a substantial investment. When considering the market opportunity, one can argue that Walmart’s commitment to having low prices is compatible with the economic state of India’s population. Currently, the sales in the retail industry of India are estimated at $500 billion annually (Keegan & Green, 2017).
From the perspective of Walmart as an investor, the poor infrastructure and inefficient supply chains hinder the market opportunity, there ar least seven intermediaries needed to transport the good to a store and much of the produce arrives spoiled, putting Walmart at risk of significant losses.
The cultural environment of India is an important factor for Walmart’s expansion because of the major differences between the Western and Asian cultures that affect the customs and day to day life of the people. Another aspect of India’s environment is the way the local retailers currently operate, since the majority of shops are small stalls or stores that are 50 square feet in size, making them cramped and crowded (Keegan & Green, 2017).
The type of shops is an important factor because it reflects the kind of shopping experience that the people in India are accustomed to today. These factors can impact the market opportunity because they shape the legal requirements for Walmart, in terms of the market entrance strategy, partnerships, ability to sell different brands.
Some of the obstacles faced by Walmart and other retailers are connected to the specifics of the local market. India’s government aims to regulate the entrance of foreign companies, for example, by not allowing multi-brand stores to operate in the state. Apart from that, brands such as Nike and others had to use the franchise model.
Moreover, Walmart may face problems when opening its stores because people in India are used to small and chaotic retail markets and even the local retail chains, for example, Pantaloon, operate in bazaars rather than in their own retail spaces. The final obstacle is arranging the supplies management from the local farmers, which is both a problem of infrastructure and food safety standards.
The quadrant of the matrix that applies most directly to India is a joint venture or licensing. In fact, Walmart has already used this strategy in India to invest in farming facilities and work on opening stores with a local business (Keegan & Green, 2017). India is a culturally distant country when comparing it to Walmart’s home market in the United States. Moreover, it is difficult to enter because of the large number of regulations and legal obstacles.
Walmart in New Zeland
This section will aim to explain the Place strategy for Walmart’s global expansion, using the example of New Zeland’s market. Firstly, it is necessary to review the economic, political, and cultural factors that can either help Walmart’s market entry or hinder it. The political factors that can impact Walmart’s market opportunity are the openness of the government to support the international corporations in entering the market.
This state is a democracy, despite the fact that formally Queen Elisabeth is the head of it, meaning that the political environment is similar to that of America (Legal Tema New Zeland, 2019). There are no regulations or special requirements that Walmart would have to adhere to since the state supports and encourages foreign investment.
The economic factors that impact Walmart’s market opportunity are the overall state of the economy, economic growth, and wealth of the nation. New Zeland’s economy developed through the free-market strategy, which suggests that if Walmart enters the market as is a viable competitor to the existing retailers, it can succeed in this market.
According to the World Bank’s 2018 Doing Business Report, it is number one in the ranking (Legal Tema New Zeland, 2019). One issue is that New Zeland’s market is relatively small, mainly because of the population size, which means that Walmart cannot expect to gain massive profits in this state.
The cultural factors should not become a barrier to Walmart. This state is a Western culture, partially influenced by the unique location of the country and its climate (“Customs & culture in New Zeland,” 2020). GLOBE’s nine dimensions of culture analysis applied to New Zeland suggests that the state has high levels of power distance, assertiveness, future orientation, and other elements. Mainly, the state was influenced by the British culture and the indigenous Maori culture, combined with others, making it multi-dimensional.
The market expansion strategy is the organic strategy because New Zeland’s culture is similar to that of Walmart’s domestic market and because the market entrance, based on the political analysis should not be an issue. With this approach, Walmart will use its own resources to establish a retail chain and partnerships with suppliers without a need to cooperate with local retailers or use franchising. This strategy is also the best choice because NEw Zeland’s market is small but well-developed, with good infrastructure and customer preferences similar to those in other Western markets.
In terms of place utility, Walmart has a successful strategy for choosing the offline store location and has an online website. Walmart’s form utility is the strategy to sell a large variety of brands and goods at low prices, which meets the needs of the consumers. This can be its competitive advantage service the need of customers to choose from a variety of options at a need for a low cost, and customers want to buy everything they need in one trip, which is often impossible with smaller stores.
Time utility is leveraged by using advanced systems such as RFID tags, allowing Walmart to track the availability of items and manage its supply chain in a way that presents customers with an opportunity of purchasing everything they need in one trip to the store. Information utility is not a strong side of Walmart’s stores, because online retailers such as Amazon, eBay, or Aliexpress allow customers to conduct more in-depth research on the product, however, because of the item availability.
The main issue with Walmart is that unlike the online-based giants, including Aliexpress, Amazon and others, it does not have a strong online presence. Table 1 is the SWOT analysis for Walmart, considering the retailer’s intentions to enter this market. Some issues with market entrance can be due to some parties in New Zeland advocating against foreigners purchasing local land (Legal Team New Zeland, 2019). For a small state such as New Zeland, this is especially important because the delivery of goods ordered online does not require complex logistics when compared to the United States.
Table 1. SWOT for Walmart in New Zeland (created by the author).
References
Customs & social culture in New Zealand. (2020). Web.
Keegan, W. & Green, M. C. (2017). Global marketing. Pearson.
Legal Team New Zeland. (2019). Politics and business: What does it mean for New Zeland? BizLatinHub. Web.