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Wal-Mart is the head, the executive, the manager, and the biggest family-owned business that handles chains of other brands and businesses. The company operates in many nations across the world. One of its operations is in India. However, lately, the company has been experiencing extreme difficulty particularly in obtaining licenses and permits. This paper presents a proposal for a mode of entry option that would best fit Wal-Mart`s business operation in India.
Wal-Mart is the head, the executive, the manager, and the biggest family-owned business that handles chains of other brands and businesses (Corporate.walmart.com, 2014). It is the director, the planner, and the master of all strategies to gain competitive advantage while at the same time earning high profits. It claims to be greatly concerned with the American consumers.
Wal-Mart is a retail giant with chains of products and services from almost all businesses – big and small. Companies aspire to be part of Wal-Mart for the reason that it covers the largest number of consumers. Wal-Mart does what it believes would be beneficial for the American consumers while at the same time advantageous for the business. It is a tough business with rigid policies and it also expects the rest of the vendors to adhere to what Wal-Mart desires or they will be completely expelled from doing business with the retail giant (Corporate.walmart.com, 2014). It threatens businesses that do not submit to their will by telling them that if they do not comply with what Wal-Mart proposes, the company will seek out other businesses that offer the same services but are willing to bend in to what Wal-Mart wishes.
Wal-Mart applies Darwinian Theory`s “Survival of the Fittest”. It takes advantage of its position in the market as well as its marketability to consumers. It squeezes out every strategy to get the cheapest value for the product they like to retail in their market. If business owners resist its negotiated price value, it tries to find other businesses that offer the same products. Wal-Mart applies selective distribution (Corporate.walmart.com, 2014). It caters only businesses that can provide the cheapest price for their products. This simply implies that if consumers want to buy affordable products, Wal-Mart`s retail stores have it all.
Wal-Mart in India
In 2010, Wal-Mart embarked to be India`s major retailer by 2015. However, at present, the company is not even progressing as planned. Initially, Wal-Mart planned to open 22 stores but since 2012, the company has just opened five (Bahree, 2014). The reason behind the slow growth is India`s procedure for establishing operating stores and commercial real estate. In addition, there is compliance crackdown at the company. Wal-Mart is suspected of violating the United States Foreign Corrupt Practices Act which is an anti-bribery law in Mexico, India, and other nations. However, the company states that its operation has been in line with the Indian and the U.S. laws.
The company`s operation is being driven by its total growth (Corporate.walmart.com, 2014). In India, the company is behind its expected profit since its opening. Wal-Mart wishes to open supermarkets soon after the Indian government opened up foreign investment in wholesale stores. Wal-Mart pledged dedication in “doing things the right way”. Hence, Wal-Mart enlisted lawyers from the United States form to establish compliance procedures as well as train workers in India. The company likewise started demanding its Indian landlords to confirm that they have not engaged in bribery to any members of the government. Launching and managing stores in India is difficult even for local businesses. Several licenses and permits are required from several agencies to municipal level, and businessmen usually pay bribes to have their projects moving along.
In 2011, Wal-Mart consulted a developer with a plan to build a wholesale store in Tamil Nadu (Bahree, 2014). In a matter of three months, the company was able to sign a contract stating that the developer would construct and then rent Wal-Mart a building for the store. However, the developer informed Wal-Mart that they still need the permit which will take nine months to process prior to starting the construction. The developer further stated that it would take about two years for Wal-Mart to completely begin its operation in the Southern state of India.
Licensing requirements get thorny for many companies across India which demands separate permission for individual forms of production. In Mysore and Bangalore, Wal-Mart was able to open retail stores even in the absence of licenses for lentils, rice, vegetables, and fruits. Nonetheless, the store had to discard the items and later on re-filed their license applications.
According to a World Bank report, conducting business in India is indeed a complex process (WSJ.com, 2014). In ranking nations in terms of ease in doing business, India ranked 134 out of 189 nations. In 2013, India garnered the 131[st] rank (WSJ.com, 2014). The World Bank ranks the nations in accordance to 10 indicators including permits needed to do business, electricity access, investor protection, tax payment, enforcing contracts as well as the cost, time, and result of insolvency proceedings. India did not excel in all these indicators other than tax payment burden as well as dealing with permits.
Modes of Entry in India
The mode of entry is a basic decision that a company creates when it wants to access to a new market since the selection entry impacts the production and marketing approaches of the company (Nagar & Enderwick, 2009). The mode of entry likewise impacts how a company confronts the challenges of gaining access to a new nation and organizing skills to be able to market its services and products. Mode of entry selection is contingent on various company-specific characteristics.
When a company attempts to gain market growth, modes of entry including alliance or joint venture may be preferable (Nagar & Enderwick, 2009). This is because these modes offer a deeper awareness of local market practices and requirements. On the contrary, when the company seeks to make use of factor endowment benefits, low commitment modes of entry including co-production, trade, sub-contracting, piggybacking, or cooperative arrangements may be more essential due to lower costs and lower risks. Host or international country encounter is likewise critical in identifying modal choice (Nagar & Enderwick, 2009). Firms with minimal or no experience in the global environment may opt for low control as well as resource commitment access modes including sub-contracting, export, countertrade or knowledge agreements.
For Wal-Mart, since obtaining permits and licenses has been a problem, the company may opt for a strategic alliance or joint venture (WSJ.com, 2014). In this form of entry mode, the advantages include sharing of costs, risks, and resources. The company will also gain access to local awareness. There is also an opportunity to establish close relationships thus reducing the problem of “foreignness”. On the downside, the company will need to share management, earnings, and control. There is also a need to ensure an equitable sharing of benefits and costs. Further, there is a danger of being hollowed out and the challenges of cross-cultural management.
Bahree, M. (2014). Wal-mart`s path to power in India hits its limits: the lawyers. [online] Retrieved from: http://online.wsj.com/news/articles/SB10001424127887324373204578373830411211410 [Accessed: 5 Jan 2014].
Corporate.walmart.com. (2014). Walmart corporate – experience Walmart`s history. [online] Retrieved from: http://corporate.walmart.com/our-story/heritage/history-timeline [Accessed: 5 Jan 2014].
Government of India (2008). Foreign Trade Policy. Retrieved 5 Jan 2014 from http://india.gov.in/business/trade/foreign_trade.php
Nagar, S. & Enderwick, P. (2009). India: the next big opportunity for New Zealand business?. Business review, 11 (1), pp. 1-10. [Accessed: 5 Jan 2014].
WSJ.com. (2014). Ease of doing business in India slips. [online] Retrieved from: http://blogs.wsj.com/indiarealtime/2013/10/29/ease-of-doing-business-in-india-slips/ [Accessed: 5 Jan 2014].
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