Provide Analysis: Statement of problem, Summary of facts, Analysis, Recommendation, Conclusion.

Case 12-1 Can Walmart Crack the Retail Code in India? Global retailers that have set their sights on India face special challenges. As noted pre- viously in this chapter, the term organized retail is used to describe activity by large branded retail chains such as Woolworths, Tesco, and Walmart. Such stores currently account for only a small percentage of In- dia's nearly $500 billion in annual retail sales. The vast majority of Indian retail activity is conducted in cramped stalls with about 50 square feet of floor space. There have been many calls for regulatory reform, and some observers believe organized retailing will grow at a rate of 30 to 35 percent in the next few years. For now, however, some members of the ruling National Congress Party are concerned about the impact of organized retail on the millions of small- scale, “mom-and-pop” stores. Modernization of the sector is inevitable, lthou min Lnt: it beo boon olew in Modernization of the sector is inevitable, although it has been slow in coming. Until the law was changed in 2012, Walmart and V other global retailers that sell multiple brands were barred from participating di rectly in the Indian market. In 2006, Bharti Enterprises, a local business group that op- erates India's largest cellular network, an- nounced a joint venture partnership with Walmart. However, because of restrictions in place at the time, the venture consisted of wholesale stores. When single-brand re- tailers such as Benetton, Nike, Pizza Hut, Reebok, and Subway first came to India, they were required to use franchising W as a market-entry strategy. The recent regulatory changes will make it easier for such companies to have a majori- ty stake in Indian operations. However, there are strings attached: The government has demanded that foreign retailers invest $100 million in India, with at least half the money going to so-called “back end” oper- ations and infrastructure including cold storage facilities and transportation in- frastructure. For its part, the government The recent regulatory changes will make it easier for such companies to have a majori ty stake in Indian operations. However, there are strings attached: The government has demanded that foreign retailers invest $100 million in India, with at least half the money going to so-called “back end” oper- ations and infrastructure including cold storage facilities and transportation in- frastructure. For its part, the government has pledged more than $4 billion in in- frastructure improvements between now and 2018. In addition, each of India's 28 states retains the right to approve or ban foreign-owned stores. Western retailers often have to work with local vendors to help them improve their quality. For example, as the Bharti-Walmart venture opened its wholesale cash-and-car- ry supercenters that serve small retailers, it had to contend with India's poor in- frastructure and inefficient supply chains, which stem from producers using outdated techniques. Produce is typically transported on open trucks, horse-drawn carts, and tractors to wholesale markets in large cities Western retailers often have to work with local vendors to help them improve their quality. For example, as the Bharti-Walmart venture opened its wholesale cash-and-car- ry supercenters that serve small retailers, it had to contend with India's poor in- frastructure and inefficient supply chains, which stem from producers using outdated techniques. Produce is typically transported on open trucks, horse-drawn carts, and tractors to wholesale markets in large cities. There, it passes through the hands of traders and agents licensed by the Agricul- ture Produce Marketing Committee. It is then transferred to smaller markets or ware- houses that are not temperature-controlled. By the time it gets to consumers, the pro- duce has passed through as many as seven intermediaries; much of it is spoiled. In fact, according to government estimates, one- third of the country's produce-worth $10 billion-spoils each year. In India, Walmart must do much more than just set up wholesale and retail stores. It is trying to tranform India's agriculture sector by using its hyperefficient practices to im- In India, Walmart must do much more than just set up wholesale and retail stores. It is trying to tranform India's agriculture sector by using its hyperefficient practices to im prove productivity and speed the flow of produce and other goods. Walmart and a partner, Bayer Cropscience, work with farmers to improve yields and quality. In ad- dition, Walmart has begun bypassing tradi- tional middlemen by signing up farmers and refrigerated trucks to the sending its own farms. One reason farmers like working with Walmart: The global giant pays the farmers promptly. Meanwhile, anticipating the arrival of the global retailers, local operators in India are investing for the future. For example, Pan- taloon Retail Ltd., India's largest retailer, op- erates the Central and Big Bazaar depart- ment store chains and Food Bazaar, a su- permarket chain. Ironically, Kishore Biyani, Pantaloon's chief executive, has succeeded by giving lower-middle-class shoppers a fa miliar retail experience: cramped stores with an environment that Western shoppers Wuld find abootio During his tenure as Walmart's CEO, Mike Duke was undaunted by the challenges his company faced. “The people of India are missing out on the opportunity right now because of the inefficiency of the supply chain. But I am patient, and I believe that over time the process will get worked out,” he said. Meanwhile, Duke moved ahead in other key emerging markets. In Africa, for example, Walmart spent $2.4 billion to ac- quire a stake in Massmart, a chain with 288 stores in South Africa and 13 other African countries. Although South Africa's popula- tion is only 50 million people, the population has embraced shopping, and the trans- portation infrastructure and banking and telecommunications systems are well de- veloped. A successful market entry in South Africa will serve as a springboard for Wal- mart to expand throughout the continent. Needless to say, managers at local compa- nies that win contracts to supply the global giant are hoping that they and join the global supply chain. tag along can Discussion Questions

 

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