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Walmart and Bharti - An International Partnership – Part One
Stuart Haack, Kristy Junio, Zeyad Maasarani, Kim Tabaretz
The formation and dissolution of corporate partnerships is nothing new,
particularly in the global marketplace. Venturing into a partnership is always spurred by
some objective. In the case of Bharti and Walmart, it was due to the untapped riches of
the emerging Indian retail marketplace.
Walmart had been expanding internationally for some time, but had never been able
to break into India’s market due to strict government regulations which limited foreign
direct investment (“FDI”) to 51% (Bose, p. 3, 2012).
By developing a “50-50 venture for back-end supply chain management and
wholesale cash-and-carry operations,” (Bose, p. 9, 2012) Walmart was able to utilize
Bharti’s domestic corporate headquarters as a doorway to this vastly expanding market.
On the other side of business development, Walmart was allowed to franchise itself
“while sharing expertise and technology with Bharti to support the retail stores that
would be built by Bharti Retail Ltd, its wholly owned subsidiary.” (Bose, p. 9, 2012).
Foreign multi-brand retailers, in lieu of sharing ownership, were also allowed entry into
the India retail market by sharing information and technology with Indian domestic
partners (Bose, 2012). Another reason for the partnership as stated by Sunil B. Mittal,
chief executive of Bharti in The Economic Times article Walmart Says ‘Namaste India’,
with Bharti, “Bharti, with its deep knowledge of India’s fast-growing consumer market
and Walmart, with its extensive global retail experience, share the same commitment to
building relationships with producers.” (2006) And finally, what made Bharti an even
better partner for Walmart was Bharti’s prior experience in dealing with foreign direct
investment (FDI) and international businesses. In fact, “Over the years, Bharti had
attracted a total of US$1.2 billion in foreign equity – more than any other Indian telecom
firm.” (Bose, p. 8, 2012)
From the other perspective, Walmart was a particularly attractive partner to Bharti
for several reasons. It was the technology and infrastructure that Mittal, chief executive
of Bharti had his eye on. (Bose, 2012). Bharti saw an opportunity to turn around the
infrastructure, supply-chain and IT through a strategic alliance with retail-giant Walmart.
A SWOT analysis is attached as Table 1.0.
Benjamin Gomes-Casseras notes in Managing International Alliances: Conceptual
Framework (1993) that “to maximize the benefits of collaboration, the partners [in an
alliance] need to have complementary needs and assets.” In the rapidly growing
organized retail market in India, Walmart and Bharti were able to leverage the strength of
Walmart’s supply chain operations to build a backend framework for the planned retail
establishments. This expertise enabled the alliance to quickly implement best practices
for retail operations, thus furthering their current early-mover advantage.
In a market where the retail industry was known to be “inefficient and scattered”
(Bose, 2012), by using Walmart’s Information Technology (IT) framework, the alliance
created inventory control systems to track and manage inventory throughout the new
retail outlets ran by Bharti Retail Ltd. The alliance’s ability to effectively forecast
demands along with Bharti’s knowledge of the local market, enabled both companies to
“beat global rivals” (Bose 2012). Market knowledge and established processes seem to
have played a major hand in the success of this alliance.
Since the company already had established buying relationships, the alliance can
further leverage these relationships for inventory for the India retail and wholesale
establishments. The added benefit is that local sourcing could also possibly help Walmart
overcome its reputation of being socially irresponsible, which was one of its key
weaknesses coming into the alliance (Bose, 2012). By increasing inventory purchased
within India and by partnering with a reputable Indian company, Walmart may be able to
positively influence consumer perception. Furthermore, since Walmart already was able
to maintain lower prices on merchandise sold throughout its network of stores, Walmart
should also able to bring competitive pricing to India that has been negotiated throughout
its international infrastructure.
The alliance had the advantage of knowing what was allowable in the highly
regulated retail market. Walmart was able to bypass many restrictions that would have
hindered its ability to enter the market. By cannibalizing on Bharti’s local retailer status
and running their retail operations under this entity, Walmart bypassed restrictions
normally placed on international players.
Both companies had complementary strengths they were able to utilize to quickly
expand in India. This enabled the alliance to maintain its early mover advantage.
Leveraging each other’s expertise, both entities were able to use and build upon best
practices that had proven successful for both companies in their individual ventures,
performing better than either company could do alone in the growing Indian retail
market.
Table 1.0
Strengths:
Walmart
Supply chain expertise
International infrastructure
Leverage with producers
Bharti
Existing presence in India
Experienced with Indian culture
Strong reputation
Track record of retail/working
with FDI
Weaknesses:
Walmart
No access to Indian market without
partner
Inability to establish presence outside
Americas
Cultural challenges in S. Korea and
Germany
Gender discrimination/predatory
pricing lawsuits
Bharti
Needs multi-brand experience
Supply chain inexperience
Opportunities:
Emerging Indian retail market
Favorable demographics
Early mover advantage
Shifting Indian mindset on retail
and brands
Walmart has large supply base in
India
Threats:
Cultural diversity
Strong political opposition
Governmental regulation
India’s underdeveloped infrastructure
Hostility from unorganized retail and
middlemen
Walmart and Bharti - An International Partnership – Part Two
This is Group 3's stakeholder analysis of Walmart and Bharti’s strategic partnership in
India. This is a primary stakeholder analysis of influence and support based on the
introduction of this new business venture in India, but does not necessarily represent the
evolving stakeholder analysis as relationships and regulations change. Now, we will
divulge why we placed each stakeholder on the chart where we did.
1. Shareholders: (High Influence, High Support) Walmart and Bharti shareholders are a
very high priority for us because their trust in our vision/strategy is one of the most
critical deciding factors in our ability to execute this partnership effectively. A negative
reaction from our stockholders could send our corporation into disarray. Thus, they have
a high level of influence and support for this venture.
2. Government Agencies / Regulators: (High Influence, Mid-Low Support ) The Indian
government and its regulators are the gatekeeper for this partnership, hence their high
influence designation. They are slightly supportive of the partnership because they passed
legislation that allows it, and they also are likely to benefit from the resulting economic
stimulation that will come to fruition if Walmart and Bharti’s partnership proves
successful.
3. General Public in India: (High Influence, Mid-High Support) The public of India’s
acceptance of the partnership, and their ensuing shopping habits will be the ultimate
deciding factor to the success of this partnership. The Indian market is trending towards
organized retail, and the consumer base is growing more and more professional, so there
is a level of support from the public, but we’d like to see that level go higher as a result of
this communication campaign.
4. Media: (High Influence, Low Support) There is no question that the media plays a
crucial role in our ability to communicate effectively. The Indian media’s quest to
connect with its viewers, however, may force Indian outlets to take a negative stance
towards the partnership (because of the negative impact it may have on retailers). It will
be up to our communication messages to try to have the media portray Walmart in a
positive light.
5. Employees: (Low Influence, High Support) Although Walmart’s rank-and-file
employees won’t be playing a highly critical role in our ability to strategically
communicate this venture, their support level to the project is a key to success. We need
to have them buy in to the vision, so they can then move in-line with it, and help us
execute it.
6. Suppliers: (High Influence, High Support) Our relationships with our suppliers is quite
critical in our ability to make a smooth transition into the Indian market. They are highly
supportive of the venture because of the monetary benefits it offers them, but we need to
effectively communicate this partnership to make sure we get the best value and
commitment from our suppliers.
7. U.S. and Indian Analyst Community / Potential Investors: (High Influence, Neutral
Support) As publicly-traded companies, Walmart and Bharti need investment bankers
and potential investors to be sold on their ability to manage this partnership - hence their
high influence. Since their loyalty is to their employer, they have no vested interest either
way, which is why their support is neutral.
8. Competitors: (Neutral Influence, Lowest Support) Although competitors us ually won’t
have very much influence, due to India’s retail landscape and possible hostile
marketplace, they do wield more influence than usual. Also, just because of the nature of
competition, they’re at the lowest possible support level. They want to see Walmart’s
partnership fail, but there are some benefits they may experience, like improved
infrastructure.
9. Labor Unions / Trade Unions: (Low Support, Low Influence) Labor Unions and Trade
Unions won’t be the biggest fans of the partnership, but they won’t have substantial
influence either, at least from the primary perspective. Once employees are in place, that
could change. It would be in our best interest to monitor and these groups, because, even
with their low level of support ad influence, they will eventually have indirect influence
via our employees.
10. Indian Real Estate: (High Support, Low Influence) Indian Real Estate market is going
to receive stimulation with this partnership, as facilities need to be acquired. Hence they
will support the partnership, but will hopefully wield little influence, which will give the
company leverage.
The implication of these positions is the diverse and varied interests of the
stakeholders, and the subsequent processes in which communication must be handled by
Walmart. Although each stakeholder has a vested interest in the success or failure of this
partnership, each stakeholder sees a different aspect of the partnership through their
viewfinder. Walmart must keep these varied perspectives in mind when developing a
communications campaign that delivers an aligned, overall strategic message, but makes
each constituent feel their questions are answered and portrays Walmart and Bharti in the
best possible light.
The bottom line for most constituents is, “What’s in it for me?” They want to
know how the information being communicated will impact them, their families, their
businesses and their communities. So a clear and concise message is crucial to avoid
miscommunication or misinterpretation by constituents (Argenti, Howell & Beck, 2005).
As Dell’s CEO suggested, modifying a message to fit the different constituents is
valuable and important to address their unique concerns. However, it should be
considered that the message will likely move beyond the targeted group. So as Cendant
learned, when growth is involved, Walmart must create a clear, controlled and consistent
message to be followed strictly to ensure various constituents don’t perceive the company
as too complex (Argenti, Howell & Beck, 2005).
Having a unified brand message, such as “Improvement” and then looking at that
message from the perspective of each constituent will allow Walmart to “speak in
harmony”(Argenti, Howell & Beck, 2005) but still allow each stakeholder to feel aware
of how the partnership will impact their life, ideally phrased to sound as though it is for
the better.
In examining the four quadrants of the stakeholder analysis, Walmart must
consider the levels of influence and support that apply to each stakeholder when
formulating the specific message for each.
Stakeholders in the Empower quadrant offer high support but low influence. In
this case, Walmart should consider setting expectations for performance but work
diligently to maintain open channels of two-way communication.
The constituents in the Monitor quadrant, with low support and low influence,
must be treated with respect but also acknowledged as a “need to know” circumstance.
Stakeholders with high influence but low support are in the Engage quadrant.
must be persuaded to buy in to the campaign. These constituents have a significant
opportunity to damage Walmart’s reputation and even its level of success if they do not
agree with its actions,
The final quadrant, Partner, represents stakeholders who have both high influence
and high support of the Walmart partnership. These parties are in a decision-making
position and their reaction could heavily influence the other constituents. With that in
mind, Walmart must now create some primary strategic communications.
Although, there is a vast range of constituents to communicate with regarding the
joint venture, the primary messaging coalesces around four key themes that Walmart can
leverage to reinforce its decision to enter the Indian organized retail market. Focus on
these primary themes can drive financial confidence and market support from various
stakeholder groups, if the messages are customized to be relevant to all audiences
(Argenti, Howell & Beck, 2005).
The first messaging opportunity for Walmart is to take advantage of its ability to bring
affordable products to the Indian market (Bose, 2012). By leveraging the strength of its
current sourcing model, Walmart can bring new merchandise to India at price advantages
that competitors unlikely have the resources to mimic due to the sheer volume Walmart
purchases to supply its global retail network (Bose, 2012). For Walmart, this advantage
will likely further improve its pricing advantage; higher volume should equate to
best/lowest wholesale pricing from suppliers. To bring this message to market, Walmart
should consider creating a marketing communications plan targeted at the general public
to promote products offered by the company. Through mass marketing communications
and advertising, Walmart can set the expectation that it offers competitive pricing and
access to products that other retailers may not be able to mirror. For the wholesale
division, Walmart has the opportunity to frame its communications to local retailers to
reinforce competitive pricing through its cash-and-carry business. Similar to the message
for the general public, Walmart should also leverage its ability to supply a vast number of
products, some of which may not have been readily available through other wholesalers.
The second messaging opportunity that Walmart should focus on is the
contributions that the company will make to the retail infrastructure in India (Bose,
2012). Although this will be the crux of Walmarts distribution strategy in this new
market, it will also create benchmark practices within the country, which in turn may
force competition to raise standards in the marketplace in order to compete. This work
will be contingent on Walmart setting clear expectations with suppliers, regulators and
industry coalitions looking to advance the infrastructure for Indian organized retail sector.
By leading structural contributions to the retail industry, Walmart has an opportunity to
emerge as a market leader and to set standards that it already has in place for other
markets, thus supporting the development of a more efficient and innovative marketplace.
This message should primarily be targeted at competitors, suppliers, regulators and
government agencies.
The third area of opportunity for Walmart is to communicate the positive impacts
Walmart can have on the Indian economy through job creation in the Indian market
place. With plans to expand its back-end infrastructure along with wholesale cash-and-
carry operations and franchised retail operations, Walmart will likely hire local resources
for this work. Additionally, the construction industry as well as trucking industry in India
will benefit from the increased need for their services if Walmart is successful in building
out the back-end infrastructure. Primary audience for these messages would include:
regulators/government agencies, labour unions/trade organizations, prospective
employees, media and shareholders.
And the fourth theme for our primary strategic communication would be to create
discussions, partnerships and initiatives in the sociopolitical environment of India.
Walmart’s reputation for corporate and environmental responsibility is not enviable by
any company in the world. In When Social Issues Become Strategic, Bonini, Mendonca
and Oppenheim tell us that companies not only need to understand the sociopolitical
landscape that surround an organization, but also need to step up and take leadership in
the conversation and its development. It can no longer be a reactionary situation, but
rather should be at the core of the business strategy (2006). By getting involved in the
betterment of India, with regards to the environment, employee welfare or any other
sociopolitical concerns, Walmart can potentially shirk the inevitable backlash from
activist agencies who see Walmart as an unnecessary evil. Rather than being viewed as a
foreign invader, creating havoc in India only for monetary gain, it might be able to
change opinions instantly by doing good works in the community. These communications
would largely go to media outlets, government agencies and regulators, shareholders and
the general public of India.
Furthermore, we would be remiss if secondary messages were not taken into
consideration for future communications. As the partnership advances, Walmart will need
to do ongoing communications with key stakeholder groups in order to maintain market
and consumer confidence.
As competitors emerge or grow, marketing communications should be constantly
looked at to ensure that the general public maintains a positive view of the company and
is reminded of the value delivered through Walmart retail and wholesale outlets.
Suppliers must be kept in the loop regarding market demands and shifts. Government
agencies/regulators may have a need for ongoing reporting of the partnership. Investors
and the analyst community will require regular updates of financial performance in the
form of quarterly earnings calls and annual reports. Environmental agencies and other
stakeholder groups such as labour unions and advocacy groups will be interested in
developments that may impact their own stakeholder. The real estate industry will be
interested in growth plans. Walmart will also want to continue to monitor media portrayal
of the partnership in order to manage and curb any possible public relations concerns.
Competitors should be monitored but also approached if opportunities arise to further
build alliances to ensure the continued growth of the Indian organized retail industry.
And of course, ongoing communications with employees within the company is critical
to maintaining morale and corporate stewardship.
Throughout the lifecycle of the partnership, leaders should continue to monitor
and assess communications needs and match them to the changing needs of the business
(Arengti, Howell & Beck, 2005). Communications supporting this partnership, will
require vigilant monitoring of many constituents and should be part of the overall
corporate strategy (Arengti, Howell & Beck, 2005). Beyond the tactical elements of the
communications plan, serious consideration should also be made as to how both Bharti
and Walmart leaders interact and communicate with each other and about the partnership.
By leveraging strategic communications, leaders of both companies can shape public
opinion and support of the partnership.
References
Argenti, P., Howell, R., Beck, K. (2005) The strategic communication imperative. MIT
Sloan Management Review, 46(3), 83-89
Bonini, S. M. J., Mendonca, L., and Oppenheim, J. (2006) When social issues become
strategic, The McKinsey Quarterly, 2, 19-31
Bose, I. (2012). Wal-Mart and Bharti: Transforming retail in India. Asia Case Research
Centre. pp. 1-18.Retrieved from:
http://embanet.vo.llnwd.net/o18/USC/CMGT500/Week4/docs/CMGT500_w04_
Walmart_and_Bharti_JV_Case.pdf
Gomes-Casseres, (1993). Managing international alliances: A conceptual framework.
Harvard Business Review, 1-20.