Analysis Of The Walmart Flipkart Deal

Running head: WALMART ACQUIRES FLIPKART
Walmart Acquires 77 % Percent of Flipkart
Name of the Student:
Name of the University:
Author Note:

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WALMART ACQUIRES FLIPKART
Executive summary:
Multinational companies use acquisition as strategic management tool to counteract challenges
they face from stronger competitors. The paper would explore the fact using Walmart’s
acquisition of Flipkart as an example. It would show how these two companies would use
acquisition as a tool to compete against Amazon, their biggest competitor.

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Table of Contents
Introduction:....................................................................................................................................3
Acquisition of Flipkart by Walmart:................................................................................................3
The challenge:..................................................................................................................................3
Solution:...........................................................................................................................................4
Global and multinational strategy:...................................................................................................4
Diversification and analysis of Multi-business Corporation:..........................................................5
Conclusion and Recommendations:................................................................................................7
Expand its product line through acquisitions:.............................................................................7
Acquire companies across in new countries:...............................................................................8
References:......................................................................................................................................9

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Introduction:
The intense challenges compel companies to adopt strategies to counteract them.
Acquisition and merger have emerged into formidable strategies which companies adopt to
emerge as more formidable in the global market place. Multinational companies often acquire
companies across industries to strengthen their positions. The paper would take into account the
acquisition of Flipkart by Walmart in May 2018 which turned out to be the most expensive
acquisition in the ecommerce industry (walmart.com 2018). The paper would show how the
acquisition would enable both the companies to compete against their competitor, Amazon. The
outcome of the acquisition would be analysed from three angles namely, global and
multinational strategy, diversification strategies and analysis of multi-business Corporation
and financial conditions and financial analysis. This would be followed by recommendations
Walmart.
Acquisition of Flipkart by Walmart:
Walmart, the American retail giant acquired Flipkart, the leading Indian ecommerce
company in May 2018. It acquired a 77 percent stake in Flipkart for $ 16 billion and the value of
Flipkart stands at $22 billion after this investment by the American retail company. The
acquisition is being touted as the biggest acquisition of an ecommerce company till date
(stories.flipkart.com 2018). The acquisition was the outcome of competitive and sustenance
struggle both the companies were carrying against their biggest competitor, Amazon
(seattletimes.com 2018).

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The challenge:
The above discussion clearly shows that Walmart acquired Flipkart in order to gain
greater competitive advantage over Amazon. Amazon is the largest ecommerce company in the
world and is based on the United States of America. The company being the world’s leading
ecommerce company has established itself as the leading ecommerce player in both matured and
emerging markets. The company has presence in retail store format as well. Thus, it posed
challenge to both the retail chains and the ecommerce companies. Its presence in the US and the
host countries posed challenge to both international companies and local companies functioning
in the retail and ecommerce sector (aboutamazon.com 2018). This analysis shows that Amazon
posed threat to Walmart in the global market including their home market, the US and Flipkart in
India. (economictimes.indiatimes.com 2018). Amazon holds a stronger position in the American
market and its subsidiary gives stiff competition to Flipkart in India. This analysis shows that
Amazon posed several challenges or threats to Walmart and Flipkart. First, it challenged their
market capitalisation and revenue generation. Secondly, it competed with both the
companies for acapital generation in the stock market. These two threats culminated in the
third threat, risks of financial earnings and goodwill risks. Thus, Walmart’s acquisition of
Flipkart meant to boost competitiveness against Amazon (walmart.com 2018). This
competitive and financial challenge which Amazon poses to Walmart and Flipkart would lead to
three solutions based on strategic management namely, global and multinational strategy,
diversification strategies and analysis of multi-business Corporation and financial
conditions and financial analysis.

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Solution:
Global and multinational strategy:
The acquisition of 77 percent stake of Flipkart was a part of the global and multinational
strategy of Walmart. Walmart is a multinational retail chain operating through hypermarkets,
discount departmental stores and grocery stores based in the United States of America. The
supermarket chain had to leave the profitable German market having a potential of generating
more than $ 370 billion (huffingtonpost.com 2018). Moreover, Walmart badly failed in Mexico,
Brazil and China which had caused immense financial losses (forbes.com 2018). One can
analyse that leading companies like Amazon have already turned their focus towards the
emerging markets like South America and Asia. Failure of Walmart in Mexico and Brazil on one
hand and China on the other showed its failure to cement its position in South America and Asia
respectively. Thus, acquisition of Flipkart is expected to provide the American retail chain the
base to strengthen its position in Asia since India is one of the most profitable market in the
region.
Flipkart is the leading Indian ecommerce company which acquired Myntra and
Jabong.com. However, the company faced stiff competition from Amazon India which had its
business strategies tailor-made to suit the Indian customer preferences. Amazon sought to
acquire Flipkart to gain absolute dominance over the Indian ecommerce market. Thus,
acquisition by Walmart, a retail chain enabled Flipkart to maintain its market position and from
being engulfed by its strong competitor. Moreover, it would be able to use the brand value of
Walmart to tap the hugely profitable American market, thus, giving Amazon a run for market
even in its own home country. This analysis shows that acquisition of Flipkart by Walmart was

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an outcome of the global and multinational strategies of both the companies (Buckley, et al.
2016).
Diversification and analysis of Multi-business Corporation:
Kotabe and Kothari (2016) mentions that diversification strategies enable multinational
companies enter new markets and emerge into multi-business corporations which have
significant implications for them. Diversification take the form of entering new markets or
marketing new products. The multinational companies enter new host countries with their
products to cater to a new customer base. They can also opt for acquiring new firms to get access
to their customer base. These two strategies enable the multinational corporations to diversify
their losses and risks which they encounter while operating in the international market. The
acquisition of Flipjkart by Walmart exemplifies this diversification of market and market risks.
Walmart suffered losses in China, Germany, Brazil and Mexico which did cost it very much.
Moreover, it was a retail company and was facing stiff competition from ecommerce giant
Amazon which has already cemented its base in the retail segment as well. Acquiring Flipkart
allowed Walmart to enter the ecommerce market. The company also got access to three product
umbrellas of Flipkart to strengthen its own product offering. First, it could use Phonepe, the
online payment system of Flipkart. Secondly, it could enter the fashion market through Myntra
and Jabong, which are in turn owned by Flipkart (Kotabe and Kothari 2016). This
diversification would help Walmart, the world’s largest retail chain to break away from the B2B
tag which was adhered to it. Moreover, by it would be able to use the brand owned by Flipkart in
the US market to gain more revenue (bloomberg.com 2018). Walmart by this acquisition
cemented its position in the global market as a multi-business organisation. This analysis clearly

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shows that diversification strategy enables business organisations to diversify their business risks
(Kim, Hoskisson and Lee 2015).
Flipkart in its turn, got to strengthen its diversification strategy by obtaining support of
Walmart. First, it would get access to the matured market of the United States of America.
Secondly, the financial support of Walmart would enable it to compete with Amazon on global
basis (bloomberg.com 2018). This analysis once gain points out to the fact acquisitions paves
way for diversification among business organisations.
Financial conditions and financial analysis:
Acquisitions and mergers have serious implications on the financial conditions on both
the companies concerned, the holding company as well as the subsidiary company. As far as the
acquisition of Flipkart by Walmart is concerned, the latter got access to Flipkart’s online
payment system, PHonepe app and fashion brands Myntra and Jabong. This would enable it
serve new customer bases and earn more revenue (Menz, Kunisch and Collis 2015). The
company would be able to provide its shareholders with more returns on their investment, thus
attracting more investments in in return. Financial analysis of the acquisition shows that Flipkart
is expected to earn less revenue in the initial years before emerging as a very profitable company
in its new market, the US. The investors expect to hold the shares of the company till its price
rises high enough to bring in positive returns (bloomberg.com 2018).
As far as Flipkart is concerned, the company belonged to the ecommerce market while
Walmart belong to the retail market. This clearly means that Flipkart would be able to get
financial support from Walmart and retain its brand name at the same time, which was expressly
announced during the acquisition press conference. The company in turn would be able to enter

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the market of the US and exploit it to generate more revenue. Thus, the acquisition would
provide strong financial base to both Walmart and Flipkart (Buckley et al. 2016).
Conclusion and Recommendations:
One can conclude from the discussion that acquisition of established companies across
industries and nations has emerged into a powerful strategy to gain competitive advantage. The
following are the recommendations which one can propose for Walmart on the grounds of the
above discussion:
Expand its product line through acquisitions:
Walmart should expand its product line through acquiring more companies across
industries. One can point out that Amazon, its competitor has presence in more diverse industries
like books, video streaming and cloud computing. Walmart, in comparison to it has very limited
presence in the retail and ecommerce sector (through Flipkart). Hence, the ecommerce giant
should expand into other sectors by acquiring more companies.
Acquire companies across in new countries:
The company should acquire new companies in other countries similar to its acquisition
of Flipkart in India. This would enable it to strengthen itself financially and gain more
competitive advantage in the local markets. This local market dominance would contribute to its
high global market position.

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References:
Boyle, M. and Rai, S. 2018. Walmart Falls After $16 Billion Flipkart Deal. [online]
Bloomberg.com. Available at: https://www.bloomberg.com/news/articles/2018-05-09/walmart-
to-buy-77-percent-of-india-s-flipkart-for-16-billion [Accessed 14 May 2018].
Buckley, P.J., Munjal, S., Enderwick, P. and Forsans, N., 2016. Cross-border acquisitions by
Indian multinationals: Asset exploitation or asset augmentation?.
Flipkart Stories. 2018. Walmart to invest in Flipkart Group. [online] Available at:
https://stories.flipkart.com/walmart-flipkart-investment/ [Accessed 14 May 2018].
Forbes.com. 2018. Forbes Welcome. [online] Available at:
https://www.forbes.com/sites/greatspeculations/2014/04/02/challenges-wal-mart-faces-in-
mexico-and-china/#54ea568817d4 [Accessed 14 May 2018].
HuffPost. 2018. Why Did Walmart Leave Germany?. [online] Available at:
https://www.huffingtonpost.com/david-macaray/why-did-walmart-leave-ger_b_940542.html
[Accessed 14 May 2018]
Kim, H., Hoskisson, R.E. and Lee, S.H., 2015. Why strategic factor markets matter:“New”
multinationals' geographic diversification and firm profitability. Strategic Management
Journal, 36(4), pp.518-536.
Kotabe, M. and Kothari, T., 2016. Emerging market multinational companies’ evolutionary paths
to building a competitive advantage from emerging markets to developed countries. Journal of
World Business, 51(5), pp.729-743..

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Kotabe, M. and Kothari, T., 2016. Emerging market multinational companies’ evolutionary paths
to building a competitive advantage from emerging markets to developed countries. Journal of
World Business, 51(5), pp.729-743.
Menz, M., Kunisch, S. and Collis, D.J., 2015. The corporate headquarters in the contemporary
corporation: Advancing a multimarket firm perspective. The Academy of Management
Annals, 9(1), pp.633-714.
Rai, S. 2018. Flipkart CEO steered around Amazon to deliver Indian consumers to Walmart.
[online] The Seattle Times. Available at: https://www.seattletimes.com/business/flipkart-ceo-
steered-around-amazon-to-deliver-indian-consumers-to-walmart/ [Accessed 14 May 2018]..
The Economic Times. 2018. Walmart acquires Flipkart for $16 billion in world’s largest
ecommerce deal. [online] Available at:
https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/walmart-acquires-flipkart-
for-16-bn-worlds-largest-ecommerce-deal/articleshow/64095145.cms [Accessed 14 May 2018].
U.S. About Amazon. 2018. About Amazon. [online] Available at:
https://www.aboutamazon.com/?utm_source=gateway&utm_medium=footer [Accessed 14 May
2018].
Walmart.com. 2018. grocery. [online] Available at: https://www.walmart.com/ [Accessed 14
May 2018].