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2006-11-29
New Delhi, India. Wal-Mart Finds A Partner to Break Into India

A telecommunications company in India has announced a partnership with Wal-Mart that will unleash the giant retailer throughout the Indian economy. Bharti Enterprises has signed a deal with Wal-Mart to open a chain of retail stores in India, according to the Associated Press. The deal will result in hundreds of stores in one of the world's fastest growing retail markets. Bharti Enterprises Ltd. is a business conglomerate with a core focus on telecommunications -- but this is the kind of indigenous company Wal-Mart needs to get around Indian law, which restricts foreign companies from directly operating multi-product retail chains in India. Bharti owns a cell phone company with 30 million users in India, but this retail deal is an entirely new line of business for the Indian company. Wal-Mart and Bharti Enterprises have created a joint venture in which the stores will be set up locally like a franchise. Political groups and domestic businesses have thus far prevented the Indian government from allowing foreign companies to operate multi-product retail chains. "It is going to be a large investment," the head of Bharti told the AP. "We are going to be a big player in this market." Bharti said the first stores are slated to open by the end of summer, 2007, and that there will be several hundred stores, which will be branded with Bharti's and Wal-Mart's names. The Indian retail market is estimated at $200 billion a year, and is characterized by million of small merchants. Only a small percentage of this market is controlled by "organized retailing," or larger chain stores. The Indian company Reliance Industries, has also announced that it will open large chain stores, and claims that the Indian economy can handle six to eight large players. Wal-Mart already operates a "procurement center" in Bangalore, from which they import Indian products into the U.S. Wal-Mart will import $2 billion in Indian products to the U.S. this year, thus worsening our trade deficit. Wal-Mart also imports $18 billion from China, so a significant level of sales at Wal-Mart stores in America come from countries like China and India.

What you can do: Joint ventures are how Wal-Mart entered markets in England, Germany, and Japan. Wal-Mart would partner with, or buy out a local company, and gain entrance by taking over Asda (England) Wertkof (Germany) or Seiyu (Japan). "Organized retailing" will bring little added value to the Indian economy, because larger chain stores simply displace sales at smaller merchants, who make up the dominant share of retailers in India today. So the displacement factor will be similar to what smaller merchants in places like Puerto Rico experienced, when Wal-Mart took over the market there. Except that Indian domination will be on a much grander scale than most other economies, with the exception of China. India and China are the twin pillars of Wal-Mart's international division, which now makes up more than one-fifth of the company's overall sales. As Wal-Mart cannibalizes its own stores in America, it hungrily looks to foreign sales to keep its spiral of growth projecting upwards. But the company has had its share of failures in the global market in Indonesia, Korea, Germany and elsewhere. If the Ghandi tradition of local self-reliance still means anything in India, the Wal-Mart invasion may not prove to be the cash cow that Wal-Mart so intently needs.










 
 
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