Market Selection Cultural Analysis There are several cultural factors that will be affected by Wal-Mart’s entrance into India. If a giant corporate retail company, such as Wal-Mart, enters India it will have a direct impact on millions of farmers and people employed in small businesses. India is a land of retail democracy with hundreds of thousands of bazaars located across the country. In India, main streets are called bazaars as they are lively, vibrant and a source of livelihood for millions of people.
Many citizens believe it is part of Indian culture to have crowded lanes with people selling shoes, toys, clothes, and much more. There are cafe owners making coffee and frying potatoes for people on the road sides. Moreover, organized retail shops are often run by the same family for generations and Wal-Mart’s entrance into India may affect welfare of these small family-owned businesses. The tradition of these bazaars and small businesses may be affected by the entrance of Wal-Mart into India. Wal-Mart has already experienced resistance in the form of demonstrations and protests in regards to it entering the Indian market.
According to the February 23, 2007 issue of The New York Times, there were over 100 protestors in New Delhi shouting things such as “Go back Wal-Mart” and waving placards reading “Save Small Retailers. ” This is an example of the resistance Wal-Mart is receiving from farmers and small business owners. Wal-Mart’s entrance into India, although facing some resistance, would actually be able to help small farmers and business owners. According to the article, “Wal-Mart enters India”, on average 30 to 60...
percent of produce spoils before it even reaches the farms.With Wal-Mart’s superior knowledge of distribution, they may actually be able to prevent some of the food from spoiling by speeding up the shipping process.
This will help improve Wal-Mart’s reputation with the lower class. Although India is deeply rooted in the tradition of street markets, consumer behavior is slowly changing. With discretionary spending increasing, India is projected to surpass Germany as the world’s fifth largest consumer market in less than two decades (“Next Big Spenders”). With the average income growing in India, consumer habits are evolving.For instance, the number of Indians who use credit cards has quadrupled since 2001 (“Next Big Spenders”). As India’s economy continues to progress, consumer culture will continue to adapt to large retailers such as Wal-Mart.
Political and Legal Analysis India is presently the largest democracy in the world. India has the largest number of people and the largest number of political parties, which take part in election campaigns. Elections are held at different levels. The two major election levels are at national level, after which the national government is established and at state level after which the state government is established.Elections are also held for city, town and village councils. The international trade in India is largely impacted by politics.
The Indian budget and especially its foreign policies affect the way international trade is done in India. One of the big political issues India faces is the large deviation among income levels. There are high class, middle class and low clas
people. One of the concerns about the entrance of Wal-Mart is whether low class people will be able to shop at the single price of Wal-Mart as they are used to bargaining before their purchases.
In order to be successful, Wal-Mart’s pricing must be low enough to attract the low class market, but also high enough to remain in competition with other businesses. After decades of strain political relations between India and the United States, the two governments are pursuing a “strategic partnership”, based on several shared economic interests. In order to continue improving trade relations, India is continuing economic reforms aimed at transforming their previous quasi-social economy into a more free market. Many U. S.
companies view India as a lucrative investment, including Wal-Mart.Wal-Mart will have to wait for some time before the Indian government is able to change the law that does not allow foreign, multi-brand retail stores to set up shop. These large retailers are seen as a threat to the small retailers dispersed amongst the country’s retail scene. These small retailers provide employment to tens of thousands of people which may become unemployed in the case that India allowed the entrance of large multi-brand companies. These rules don’t apply to the wholesale sector creating a loophole through which Wal-Mart may set up a joint venture with local companies such as Bharti Enterprises.
The government allows 100 percent FDI in cash-and-carry operations and 51 percent in single brand operations. Wal-Mart would therefore have the opportunity to enter a cash-and-carry operation with a 50 percent stake. Financial and Economic There are several key reasons why India is a prime market for Wal-Mart to pursue at this time. Several financial and economic opportunities will allow Wal-Mart to be successful in this market. India is the second most populated country in the world with an approximate 1.
3 billion people, and boasts an exponentially growing middle income consumer.Currently, the middle class numbers are around 50 million people, but by the year 2025 this is expected to expand dramatically to around 583 million people, 41% of the Indian population (“Next Big Spenders”). These middle class households will see their incomes expand over 11 times the current level today (“Next Big Spenders”). Also, the households that can afford discretionary spending and consumption will grow from $8 million to $94 million by 2025 (“Next Big Spenders”). Wal-Mart’s target-market is low and middle income consumers, making this growth crucial to Wal-Mart’s success.By making an investment into India now, Wal-Mart will have a strong foundation in the country and will benefit from the exponential growth India is experiencing.
It is also important that Wal-Mart enters this market soon due to rising rent prices. Due to the dramatic growth India is experiencing in the retail sector, real estate and rent prices are increasing at a spectacular rate. Presently, India boasts a growing $330 billion retail industry that is estimated to be $427 billion by 2010 and $637 billion by 2015 (“Next Big Spenders”).By entering the market now, Wal-Mart can obtain the initial real estate needed at a lower cost, and secure its spot in this expanding retail industry.