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.