Corporate Strategy Report: Walmart's Strategic Flipkart Acquisition

This report analyzes the acquisition of Flipkart by Walmart, examining the strategic rationale behind the deal and its implications for the e-commerce market in India. The paper details the background of both companies, Flipkart's e-commerce operations in India, and Walmart's strategic objectives in entering the Indian market to compete with Amazon. It explores the motivations for the acquisition, including Walmart's desire to gain a leading position in the rapidly growing Indian market. The report discusses the financial aspects of the acquisition, including the $16 billion deal value and its impact on Walmart's earnings per share. Furthermore, the paper references various sources to provide insights into the deal's impact on the Indian market, including the reactions from Indian traders. The report also examines the competitive landscape, highlighting Amazon's presence in India and the strategic challenges Walmart faced. In conclusion, the acquisition is seen as a strategic move by Walmart to strengthen its position in the Indian e-commerce market.

Running head: CORPORATE STRATEGY
Corporate Strategy
September 12
2019

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Table of Contents
Introduction................................................................................................................................2
Flipkart and Walmart Acquisition..........................................................................................2
Conclusion..................................................................................................................................4
References..................................................................................................................................5

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Introduction
The intent of this paper is to discuss about an acquisition that has taken place and the
motive behind it. The paper is highlighting the acquisition that took place between Walmart
and Flipkart.
Flipkart and Walmart Acquisition
Acquisition is something when one business purchases maximum of the shares of any
other business in order to get the control of that business. Buying more than 50% of the stock
of the target company and other assets enable the acquirer to take important decisions about
that newly acquired assets without taking any type of approval from the shareholder of that
business (Snow, 2018). Considering the case of Flipkart and Walmart is said to be one of the
major news as well as decision of the retail giant which impacted the Indian venture. Flipkart
is the e-commerce with headquarter in the Bengaluru, India. The company was established by
the Binny Bansal and Sachin Bansal in the year 2007 (India Brand Equity Foundation, 2019).
In the initial phase the company concentrated on the selling of books before the expansion in
any other category of the product like fashion, lifestyle, and electronics products. On the
other side, Walmart is the well-known American multinational business that run chain of
discount department stores, grocery stores, and hypermarkets with headquarter in
Bentonville, Arkansa. The business was established by Sam Walton in the year 1962 and
incorporated in 1969 (Amazon, 2019).
The United States retail giant Walmart Inc. will purchase the 77% ownership in the
largest online retailer of Indian that is Flipkart for $16 billion successfully (Sen, 2018). The
talks related to the acquisition took more than 20 months, in order to execute the largest
acquisition of the country and biggest purchase of the world of an ecommerce business. This

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decision of acquisition was taken by Walmart in order to give strong competition to its online
rival that is Amazon. Amazon is raising intense competition for Walmart through its
reasonable and quick services in the Indian market due to which Walmart has to go through
huge losses (Economic Times, 2018). Therefore, to cover the Indian market, the company
planned to purchase the Indian online retailer only that can support it in becoming the largest
and leading retailer.
Walmart as well as Amazon were involved in the bidding system for the acquisition
of Flipkart. At the end, Walmart won this bid war with the Amazon. Following the proposed
purchase, the co-founder of Flipkart that is Sachin Bansal left the organization, whereas the
rest of the staff will now operate under Marc Lore, the Walmart’s U.S ecommerce business
CEO. The president of Walmart that is Doug McMillon highlighted that the Indian market is
attractive and this purchase is the major opportunity for the company’s existing partners as it
is the leading and biggest transformation of the e-commerce in the industry. The traders in the
Indian market protested against this acquisition because they consider this deal with major
threat to the domestic business of the country (Saraswathy, 2018). Besides this, in the same
year, the CEO of the Flipkart Company that is Binny Bansal dropped his resignation, after
dealing with the claim of major personal misconduct.
At the time of acquisition announcement, the American retail giant Walmart has
assessed an adverse influence of $0.25-$0.30 on the earning per share for the fiscal year
2019. But, the coming future, this acquisition deal is anticipated to offer a bigger play to the
retailing gaiant of the United States in the Indian market of around $680 (Tandon, 2018).
Indian market is considered to be the most attractive and money making market for retailing
across the world, in terms of its growth rate and size of the market and the investment of the
Walmart is considered to be the company’s partners who are leading this transformation in
the e-commerce industry. This has been said by the CEO of Walmart because the e-

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commerce industry of India has the approx. turnover of around $27 billion that is anticipated
to cross over $73 billion by 2022, highlighting closely 5.7% of the entire sales of the retail
segment (Tandon, 2018). Walmart has already established its place in the Indian market of
Rs6,800 crore in the wholesale market (Tandon, 2018).
Conclusion
The above paper has discussed regarding the recent acquisition that took place
between Flipkart the Indian e-commerce business and Walmart the United States retailing
giant. From the analysis, it has been identified that this acquisition took place between both
the companies, because Walmart wanted to gain the leading position in the Indian market and
giving strong competition to Amazon the e-commerce business giant.

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References
Amazon. (2019). Who we are. Retrieved from https://www.aboutamazon.com/
Economic Times. (2018). Walmart acquires Flipkart for $16 billion in world’s largest
ecommerce deal. Retrieved from
https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/walmart-acquires-
flipkart-for-16-bn-worlds-largest-ecommerce-deal/articleshow/64095145.cms
India Brand Equity Foundation. (2019). Flipkart Internet Pvt Ltd. Retrieved from
https://www.ibef.org/industry/ecommerce/showcase/flipkart-internet-pvt-ltd
Saraswathy, B. (2018). The Flipkart-Walmart Deal: A Look into Competition and Other
Related Issues. Retrieved from http://isid.org.in/pdf/DN1807.pdf
Sen, A. (2018). Walmart completes deal to buy Flipkart for $16 billion. Retrieved from
https://www.livemint.com/Companies/qOBduC3OBVpKTv9CpCYayH/Walmart-
completes-16billion-buyout-of-Flipkart.html
Snow, B. (2018). Mergers & Acquisitions For Dummies 2nd ed. U.K: John Wiley & Sons.
Tandon, S. (2018). Flipkart’s impact on Walmart’s bottom line is worse than initially
thought. Retrieved from https://qz.com/india/1425772/walmarts-flipkart-buy-in-india-
may-prove-to-be-costlier-than-estimated/

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