Bharti Walmart Break up (1705785)
While reviewing the case study, it is found that there are various reasons for breaking up Bharti and Walmart Joint Venture. At the same time, the major reason is the Indian retail business required high cost Investment with fewer profit margins.
Therefore, big retail companies lost their money. In addition to this, Bharti-Walmart suffered huge loss in retail business amounted 59.5M and it increased by 34% from 2011 to 2012 (Rai et al., 2012).
However, there are certain legal regulatory changes to allowing the foreign companies to enter into Indian retail business by giving majority of the ownership to local operation in market of 1.2 Billion people and value of $500 Billions.
In the other hand, uncertain market regularities also affected the Bharti-Walmart joint venture. At the same time, some of the retail business line is doing well however, it is not profitable in some retail segments. The policy of sourcing the 30 % products locally limits the investment of multi brand foreign companies in Indian retail sector (Gopalakrishna et al.,2016).
In context to Walmart, it multiband clause can go well likewise textile and handicrafts but it is difficult for electronics. Apart from that, there protest against Walmart is also one the reasons for effecting the business of this joint venture.
Furthermore, the involvement of this joint venture in bribery scams had led the joint venture separation. The loan amounted $100 M also subjected to government investigation and alleged to break the foreign investments rules that 50% of investment must be back end infrastructure. However, Walmart is already involved in World review of corruption.
At the same time Bharti company is facing the $2 Billion of debt after the declining of trends in profit from last 14 years (Baron, M.L. and Capo,2017). All these factors lead to termination of Bharti and Walmart Joint Venture. Lastly, these factors hold the further expansion of retail business in India.
Majorly the high cost investment and fewer profit margins is the reason for not survival of this joint venture in Indian retail market. On the other hand, the cut throat competition in retail market and similar pricing stately leads to breaking of Bharti and Walmart Joint Venture.
In order to survive in the Indian retail market, Walmart has to prepare strong marketing strategies. As to why the termination of Bharti and Walmart joint venture has been considered as victory of small traders.
In addition to this, company must be extra alert towards the foreign market investments rules. There are several issues that arise during the joint venture period such as high cost investment, less profit margin, protect of local traders etc (Rao and Dhar, 2013).
Apart from that bribery is also one of the concerns that Walmart now take into account its Indian strategy.
Apart from that, while expanding the business in Indian retail market Walmart may face the application of appropriate model of superstores. As now Walmart independently operates its business need to provide the wise range of products and services to Indian public. It is also considerable fact that government has relaxed the foreign investments rules unto some extent.
The previous rules made it mandatory for foreign supermarkets to source 30 per cent of their products from small Indian firms (Bh, 2017). Whilst this rule is still in place, the government has now given foreign firms five years to reach this target, thus easing the pressure. Thus, the relaxation of rules may help the Walmart in setting up the business again.
On the other hand, the previous bribery cases also need to consider while formulating the Indian strategy. Such kind of incidents affects the hamper the company’s brand image and also cause to decline in company’s share price (Siti Daulah Khoiriati, 2017).
Thus, it impacts the investor’s decision. Further, another challenge is to deal the protest of local traders. Thus, the higher involvement local firm can be In retail business can be helping hand for Walmart.
Baron, M.L. and Capo, C., 2017. The Impact of Proximity on Resistance to Foreign Ventures: The Cases of India and Japan. The Copenhagen Journal of Asian Studies, 34(2), pp.77-107.
Bh, N.C., 2017. Walmart-Bharti Joint Venture: Formation, Breakup & Strategies. Academy of Strategic Management Journal.
Gopalakrishna, P., Subramanian, R. and Fleischmann, D., 2016. Walmart in India. Journal of the International Academy for Case Studies, 22(3), p.99.
Rai, S., Singh, V. and Vaish, A., 2012. Retail Ownership Influences on Consumer Buying Prefrencec an Emperical Study of Indian Consumer. Kuwait Chapter of Arabian Journal of Business and Management Review, 33(845), pp.1-10.
Rao, K.C. and Dhar, B., 2012. Vaulting over India’s Retail FDI Policy Wall. Economic and Political Weekly, pp.10-13.
Siti Daulah Khoiriati, M.A., 2015. WALMART IN INDIA: FACING THE CHALLENGES OF dissertation, Universitas Gadjah Mada).
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