Walmart’s International Strategy to Move into India: Implications for the Host Country

STRATEGIC MANAGEMENT
ASSIGNMENT- 1
Critically evaluate Walmart’s international strategy to move into India
and the implications of this to the host country.
Module code:
Module Tutor: Victoria Jackson
University of Central Lancashire
Number: 20786191
Word Count: 2480
Assignment type: Essay

The paper is prepared with the motive to determine and critically assesses the major features related to the Global
economy, Triad economies, and FDI trends. Along with this, it employs comparative advantage with the related
trade models that are essential for analysing the role of the country in the world economy. This has been found
that rapid GDP growth of India is possible by record levels of FDI that is flowing into the country. The major
example of the flow of FDI has been witnessed with the example that Walmart acquired Indian e-commerce
company Flipkart for more than $16 billion and a 77% stake (Dhillon, 2018). This paper majorly includes critical
evaluation of Walmart’s international strategy with the motive to move into India and its implication to the host
country.
India is one of the most attractive retail marketplaces across the world as it has emerged as one of the dynamic
and fast-paced industries that are possible with the entry of new players. The total consumption expenditure of
the customers for retail products has been reached nearly US$ 3,600 billion by the year 2020 from US$ 1,824
billion in the year 2017 (Economic Times, 2018). Thus, this is the reason due to which the country is considered as
the world’s 5th largest worldwide destination for the multinational companies in the retail space. It has been found
that India's retail market is predicted to reach 60% and to reach US$1.1 trillion by the year 2020 (IBEF, 2018).
Further, this rise and attractiveness of the retail industry are largely because of the initiatives and policy formed by
the government related to the FDI. In the initial of 2018, the administration of India has permitted 100% of the FDI
(Foreign Direct Investment) in the single-brand retail. This has brought the rise in the FDI by the companies across
the world economy. The world economy is considered as the international exchange of goods and services that are
majorly expressed in terms of monetary units. This has been found that India’s retail stocks like V-Mart, Shopper’s
stop, Future lifestyle and many others have given returns in between 80% and 250% in past one year comparing it
with Nifty’s 30% returns. Indian retail industry effective plays a vital role in the world economy as the demand for
the products are predicted to upsurge with the degree of 81% to 7.8 million sq. ft. in the year 2018. Along with
this, the rise in demand is not the only factor as opportunities for effective employees with a high customer base
that attracts FDI and contributes to the world economy (Molle, 2017).
This is witnessed that the reforms of 2018 are based on the previous 1991 regulatory changes that are related to
the globalisation, privatisation, and other liberalization policy. Globalisation is the process through which the
business and many other organisation develop international factors that influence the operations on international
scale (Krugman, 2017).
FDI is one of the most critical factors in the economic health of the developing as well as emerging markets like
India. This has been found that the government of Indian had undertaken the major reforms in the country’s FDI
policies in the year 1991. The major polices that are allowed for enhancing the FDI limit. The regulatory changes for
globalisation, privatisation, and liberalisation of 1991 reforms formed by the government have contributed
effectively in enhancing the India economy. The government has reduced the restriction on the operations of
business. From 2019 to 2004, the FDI India inflow increased manifold. Further, after the year 2005, India witnessed
different measures with the motive to enhance the FDI inflow. For instance, in 2014 the limit in insurance sector
which was 26% and increased to 48% (Basu, Choudhary and Chetty, 2016).
Comparative advantage is economic trade theory that major occur when a country is not able to produce a product
in effective manner than the other country (Van den Berg and Lewer, 2015). This has been found that the
advantage majorly focuses on the relative different in productivity. This theory is applied to India, as the country is
able to maintain the comparative advantage then other countries. The county has foreign direct investment in
retail sectors and analyse worldwide retail market opportunities (Pawar and Veer, 2013). Moreover, the market is

emerging in terms of the population and also in terms of e-commerce due to which the companies can easily attain
high profit.
In addition, India is emerging developing country and it is part of BRICS. BRICS is acronym coined for an association
of the five major emerging economies in nation. The term BRICS stands for Brazil, Russia, India, China, and South
Africa (Nordenstreng and Thussu, 2015). E-commerce is the place where the emergence of online retail is on the
big way that is clear with the forecasting of online retail that is expected to produce at the rate of 31% to reach the
US $32.70 billion in the year 2018 (IBEF, 2019). This shows the role of India as it is probable to become the world’s
third largest customer economy that is going to reach US$ 400 billion in terms of consumption by the year 2025.
Thus, this has been found that Global retailers like Walmart, GAP and Tesco are sourcing from Indian and investing
the amount in India.
Walmart got motivated to acquire Flipkart Company due to different reasons and one of the reasons is cultural
consideration. Work culture is one of the major matters of concern when it comes to deal. This has been found
that Walmart Company is eager to share its processes with Flipkart, but the company is aware that the culture of
India and other Asian markets is different. This is true that Asian countries are different from Triad economies in
many ways (Lavania and Dixit, 2017).
Considering the report of ICRIER, the younger population of developing countries like India is considered as the
prime consumers for the structured retail possible for Walmart to achieve success. The expectations of foreign
retail success continue with westernization often through western branded products like Walmart. The company
can create an impact on the culture of Indian consumerism. The customers of India belong to Upper-middle class
who make ready-made clothes with other department store products like a status symbol. The culture of people in
India is different as people visits to boutique and tailors for the trendy outfits (Padmanabhan, 2012). Thus, it
becomes essential for Walmart to understand the culture of a company that can easily be done with the help of
filpkart who is able to maintain the position in the market. It can be said that Walmart motivates to deal with
Indian company as it is an emerging country with many opportunities and along with this to earn better result
Walmart was willing to know about the culture followed by India.
In India, FDI (Foreign Direct Investment) is multi-brand physical retail is limited and there are worries that Walmart
is avoiding Indian FDI rules by taking over an online retail company (Venkatesan, 2018). Further, the
confederations of All India Traders (CAIT) is considered as the leading advocate majorly for the small business in
the market of India, who called for the intervention from the government side in the deal over the concerns nearly
the destructive pricing as well the possible for malpractice. AIOVA (All India Online Vendors association) has
determined thousand number of vendors that are in tie-up with Flipkart showed their concern that Walmart will
bring its own labels to the Indian market by making the use of Flipkart.
In addition, some of the business leaders present in India like K. Vaitheeswaran, a person who established India’s
first e-commerce company with the name of FabMart (that is later got famous with the name of IndiaPlaza) found
that the deal overvalues Flipkart Company. However, on the other hand, contradicting this, Sarbvir Singh who is VC
at WaterBridge Ventures found it as a reasonable price. Moreover, this was found that the deal is more related to
Walmart than about Flipkart as the company resolved their difficulties few years ago when SoftBank and Tencent
capitalized the amount in the company. Walmart Company requires bulking up or improving their e-commerce
business due to which they selected India as the place (Harldas, 2018). The deal is considered as one of the best
deal for Wal-Mart as this deal can offer different benefits to the company. Furthermore, this has been found that
Flipkart acquisition was a strategic move of Walmart Company as it was like killing two birds with a single stone.