Wal-Mart Core Competencies: Challenges & Ventures in India

Walmart Operational Dilemma

Walmart is one of the world’s leading multinational retail corporations, which was founded in the United States by Sam Walton on October 31, 1969. Markedly, Fortune Global 500 magazine named Walmart as the world’s largest company by revenue, which accumulated to over $500 billion in 2018 listing. In addition, the firm also received other accolades, such as being the world’s largest private employer, with around 2.3 employees worldwide.

The firm has managed to acquire consistent and sustainable market success through metrics such as price leadership, market diversification, provision of a wide range of products, and enhancement of operational efficiency.

Around 75% of the firm’s revenue is accrued from the retail business, with only 20% coming from the wholesale trade. The company has also faced mixed results in its market diversification process, where it has managed to succeed in economies such as South America, the U.K., and China.

However, the company’s operational model has failed to realize positive results in Germany and South Korea. Evidently, Walmart also faces an operational dilemma in the Indian market, where it has been operating as a wholesale firm. Given that Walmart depends largely on retail business, the firm should pursue another joint venture with an Indian partner to enable it to establish more sustainable and efficient operations. By securing a joint venture with a reliable, sustainable, and well-established local company, Walmart will manage to maximize its sales revenue in the Indian market, which will, in turn, warrant high-profit margins in the long term.

Reputation with Consumers

Undeniably, Walmart’s low prices enable it to develop a close and healthy relationship with its consumers. The rationality nature of retail market consumers makes consumers opt for products with relatively higher utility value. In this case, Walmart’s price leadership strategy not only enables it to acquire a higher competitive advantage but also aids in developing and sustaining consumer loyalty and trust.

Core Competency

As of July 2018, most sales of more than 30,000 global suppliers were done through Walmart. This enables Walmart to acquire a higher bargaining power in the market. Furthermore, advancement in technology has enabled it to develop a sufficient and reliable virtual market. In this regard, Walmart’s visionary and revolutionary strategies will enable it to enhance and sustain global market dominance in the retail industry.

Capabilities

Through its close interaction and relation with the consumers, Walmart is equipped with firsthand information about customer concerns, preferences, tastes, and needs. In addition, the firm requires its suppliers to attach remote frequency devices (RFID) gadgets to track their individual items that are sold in its stores. The suppliers also install electronic data interchange (EDI) software to enhance operational efficiency.

Governmental Regulations

Evidently, the Indian market has a considerably high growth potential due to its ready market, high consumer demand, growing economy, and vast emerging markets. However, government policies regarding foreign investments in the economy require retail companies to partner with local ones, with the objective of maximizing the trickledown effect. Indian government seeks to use FDI (foreign direct investment) to not only maximize its GDP volume but also transform and revolutionize its economy. As a result, the profit margins of foreign companies such as Walmart, which are interested in venturing into the country, are minimized. Without taking precautionary measures, Walmart may even accumulate losses in the long term.

Sociological Factors

One of the sociological constraints facing the U.S. giant retailer is low wage rates. Given the Indian government’s reservations about maximizing the trickledown effect, Walmart may be forced to incur higher operating costs in the country. Making the workforce work overtime without pay can spark controversy and damage the company’s reputation in India, among other adversities.

Economic Factors

Irrefutably, the Indian market possesses a high market potential, which will not only enable Walmart to maximize its sales volume and acquire high profit margins but also enhance operational sustainability and sufficiency due to the consistently growing consumer economy. The 1.295 billion population consists of various market segments, which are not exploited. In this case, venturing into the unexploited market segments will warrant the firm of a steady and consistent economic growth rate.

Evaluating Walmart’s International Business Risk

With respect to the Indian economy, Walmart faces market entry constraints. Unlike free market economies such as the U.K., Canada, and South America, India’s economy is highly regulated by trade policies. In this case, the firm needs to evaluate and understand these policies for it to make insightful decisions. Apart from the high trade regulations, there is still hope that India will adopt a free market economy. Free market trade was one of the main factors in Prime Minister Modi’s manifestos. Although India has managed to attain a 7.5% annual GDP growth under Modi’s leadership, their trade regulations concerning the retail industry have not changed. In this case, Walmart still operates as a wholesale firm in India. The trade regulation subjects Walmart to not only operational constraints but also sustainability defects if it ventures into the Indian economy.

Markedly, Walmart has also tried to engage in a joint venture with Bharti Enterprises, which fell apart because of continued limitations of what joint ventures are permitted to do. In this case, Walmart’s growth capacity in the Indian market is contained by these limitations. Another risk that is still associated with the joint venture metric is the imbalance levels of expertise, investments, or assets bought by the business integration. Evidently, none of the Indian enterprises have the same level of expertise, assets, and investment capacity as Walmart.

Choosing the Right Partner and Planning the Joint Venture Relationship

Although the Indian joint venture platform seems impregnable, other companies, such as Starbucks, have managed to establish an efficient and sustainable relationship with reputable Indian brands such as Tata. In this case, Starbucks did choose to partner with a resourceful, influential, and sustainable partner. The 50-50 joint venture between Tata and Starbucks is regarded as the largest conglomerate in Indian history and the most successful partnership in the country. One of the main lessons Walmart can learn from this case is that the choice of the right partner is the key to establishing sustainable and efficient retail operations in the economy.

Some of the qualities that Walmart should consider when choosing the right business to partner with are the organization’s assets, market dominance, market positioning, influence in the retail industry, and operational sustainability. In this regard, a reliable business partner should be highly positioned in the Indian retail market industry. Furthermore, the partner should have a skilled and competent workforce, high-value assets, extensive market experience, and considerably high influence in the Indian market. Two of the most reliable partners that Walmart should consider in this case are Reliance Industries and Rajesh Exports.

After choosing the right partner, Walmart should then plan the joint venture relationship. Undeniably, Walmart is the global market leader in the retail market segment; hence, it has a high bargaining power, which, in this case, will enable it to secure a profitable operational deal. However, the firm should not overexploit the local business for it to receive positive market, political, and social perceptions. For instance, Walmart should venture into a 50-50 retail trade venture with the identified partner. However, the firm should act as the sole product supplier to the joint venture store. In this case, the firm will manage to secure two contracts through the Joint venture.

Maximizing the Supply Dealership

Although Walmart does not specialize in wholesale trade, its core competencies and capabilities in the global market give it a higher potential of succeeding in wholesale trade. Given that wholesale trade operations are not highly restricted in the Indian economy, Walmart can decide to maximize the wholesale dealership. Some of the avenues the firm should, therefore, bargain for contacts with major retail firms in the country.

Conclusion and Recommendations

Evidently, among the two alternatives, the joint venture platform is the most sustainable and reliable one. In this case, Walmart will manage to operate as both a retail and wholesale firm in the country. By partnering with either reliance industries or Rajesh Exports, Walmart will manage to acquire a large market share and enhance market dominance.

References

1. Shin, S., & Tucci, J. E. (2015). Wal-Mart’s dilemma in the 21st century: Sales growth vs. inventory growth. Journal of Applied Business Research, 31(1), 37.
2. Crosston, M. (2017). The Millenials’ war: dilemmas of network dependency in today’s military. Defense & Security Analysis, 33(2), 94-105.
3. Dhir, S. (2017). Flexibility in modification and termination of cross-border joint ventures. Global Journal of Flexible Systems Management, 18(2), 139-151.

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