#83 The Race is On
The race is on. India just announced that it will allow foreign majority ownership in its retail industry. This paves the way for global retailers such as Wal-Mart, Tesco, Carrefour, or Metro. And it’ll be a brutal race, too. One might think that a retail market that is estimated at around $ 400 bio this year and is expected to double within the next four to five years will have enough room for all players. However, with the retail industry being largely devoid of any significant national players, this will be all about first-mover advantage. Maybe it’ll even turn out okay for the second in the race, as sometimes it needs a trailblazer to deal with all the nitty gritty groundwork before someone else reaps the benefits from the efforts of others. But nos. 3 and 4 will certainly find entry a lot more difficult. Wal-Mart which already has a joint-venture with Indian conglomerate Bharti will definitely be a serious contender for the top spot in the race – if they manage to learn from some of the mistakes they have made in other markets such as Germany or Korea. As attractive as the Indian retail market is, it is certainly also a market that will have lots of surprises and difficulties for foreign retailers – from differences in consumer behavior to challenges in dealing with Indian employees.
December 21, 2011 @ 6:27 pm
The first western retailers that enter the Indian market will only be able to profit from the first-mover advantage if they understand and research their target customers, the culture and the environment in India. The manners and way how Indians communicate with each other are very important in the Indian culture. Even though they already accept the modern means of living and new lifestyles, their values and beliefs still remain unchanged. Therefore, it is necessary for western retailers to be informed about the values and beliefs of the Indians and consider these before entering the Indian market. Moreover, Indian grocery stores typically offer standard Indian products, such as rice and spices as well as fresh vegetables, meat and fish. Therefore, it will be a challenge for western retailers, such as Wal-Mart and Tesco to launch their whole concept into the Indian market. The western retailers often sell large amounts of completed food and offer everything in bulk packs (that was, among others, one of the reasons why Wal-Mart failed in Germany). This may also deter Indian people to buy their daily products in a typical western grocery store. In order to be successful, they will certainly have to adapt their offerings to the Indian market. However, as already mentioned at the beginning of my comment, the Indian people are open for modern means of living and lifestyles and therefore the first western retailers that enter the market may have chances to be successful. Moreover, the largest Indian hypermarket Hypercity is comparable with the western retailers. They offer foods, homeware, home entertainment, hi-tech, appliances, furniture, sports, toys and clothing. Therefore, Indians are already used to the western style of retailers and the first who enter the market in the right way have big chances to win the Indians as their customers.
December 29, 2011 @ 8:29 pm
In my opinion Wal-Mart provides an excellent example. I also think that grocery chains in India will only be able to profit from the first-mover advantage if they understand and research their target customers, the culture and the environment in a correct way.
That is not that easy. Wal-Mart once suffered hard because of cultural differences. The company tried to enter the german grocery market and failed very hard. The reason was poor preparation about the German culture.
German people do not like strangers to touch or pack their food. The company lost a lot of money and now the stores are owned by another grocery chain named METRO.
Therefore, I also think that it will be a challenge for western retailers, such as Wal-Mart and Tesco to launch their whole concept into the Indian market. And in my opinion the will have to adapt a lot. The most people living in India are vegeterian and all who are Hindus do not eat beef. Only these facts change the structure of a food business enormously.
December 30, 2011 @ 2:07 pm
Of course it is a big advantage for a company when it is the first who enter a new market. But in this case, not only the first-mover advantage will be responsible for the success. I think the big retail chains have to be very careful when they want to enter the Indian market. They are all very busy to be the first one in the market and in this stress there is the big threat to overlook the big cultural differences between the home market and India. I hope Wal-Mart learned from the mistakes they made in Germany. The cultures of Germany and the USA are quite more similar than the cultures of India and the USA. So Wal-Mart will have to consider much more details in cultural differences. They should not try to force the American way of shopping to Indians. I think Wal-Mart or whoever also will enter the Indian market has to consider the Indian shopping behavior and have to adapt the assortment policy in total. It is also important that they don´t just tolerate the Indian culture, they have to respect it. My opinion is that that retailer will be successful, who is the best in dealing and handling with the Indian culture. This can also be the 3rd or 4th mover.
December 30, 2011 @ 10:33 pm
Like the posts above say in order to have success it is more important to get to know the target market very carefully than to rush into entering the marketing. Without proper analyzing it may turn from a first mover advantage to a disadvantage and then competitors can learn from your mistakes. In this case your competitors have the right advantage, as they are saving costs and time.
As mentioned in a Case Study called “Wal-mart’s German Misadventure” Wal-mart clearly failed to be aware of the differences of a German to an American customer. I liked best the example with the greeters who are employed in the US at all stores at the entrance. The Americans appreciate a friendly greeting person but in Germany the customers just thought that the prices could be lower if the company wouldn’t have to pay a greeter.
In my opinion such mistakes can be avoided by doing a little bit of research in advance. For example just taking the 4 Dimensions of Hofstede: Power Distance, Individualism, Uncertainty Avoidance and Masculinity.
I compared the degree of power distance of India and the USA on Hofstede’s chart. India is placed 10th out of 53 which is a quite high level while the USA is placed 38th. It seems that there a big differences concerning Power Distance in India and the USA, so here is a first point where American companies considering entering the Indian market have to look at deeply.
As well the degree of individualism in the USA and India differs a lot. The USA is situated at the first place which means a high degree of individualism, while India has just an average degree with place 21 out of 53 on Hofstede’s table. In my opinion in addition to the power distance, individualism is another point to take a closer look at.
Uncertainty avoidance as well as masculinity, the USA and India are at quite the same level. At uncertainty avoidance the USA is ranked 43th and India 45th which means for both countries quite low. The degree of Masculinity is in both countries quite high, the USA is ranked 15th and close behind India with place 20.
To avoid surprises and difficulties using Hofstede’s dimensions may help Wal-mart a lot to focus on existing differences between the cultures. I am convinced that this will help them not doing such mistakes like the greeting person again and they will have a real first-mover advantage.
December 3, 2012 @ 11:53 pm
I think Wallmart already learned from the mistakes they made in markets like Germany and Korea as they have decided to made a joint-venture in India. Threw the joint-venture they got a partner in the new market India and may benefit from synegy effects and the know how and information of the local partner. But precisely for this reason they should take care if they want to enter this new market which is very different from their home market USA. One point, which should be taken into consideration, is the power distance. India has a high index 77, which is very high but USA just have a 40. This could cause problems in areas like corporate philosophy or management styles. Another important point is that Americans are individualists and Indian people are collectivists which means that Indian people do have other life issues and targets like in India the family or a group is the most important thing, but in USA the individuality stands in the foreground. Furthermore there are lot`s of further topics (like uncertainty avoidance or masculinity versus feminity) which could cause problems. I can totaly agree with the comment from Verena that to avoid surprises and difficulties using Hofstede’s dimensions may help Wal-mart a lot to focus on existing differences between these cultures.
In conclusion I like to clear that wallmart`s sucess in USA, do not guarantee for being successful in India.
November 15, 2013 @ 3:04 pm
First of all I’d like to agree with the comments before. Walmart failed in Germany because they didn’t consider every aspect of the cultural differences. Let me brief analyse the mistakes Walmart made in Germany in order to see what Walmart has to consider in India.
An Analyse with Hofstedes four dimensions will show the biggest problems.
Let me start with the Power Distance. The United States have a PDI of 40, Germany has 35. This means, that in both countries is no high power distance, they are nearly on the same level. Nevertheless they had a problem on this issue. Americans are used to Walmarts Philosophy, “be happy!, “smile”, “have fun”, but for the German employees was it weird. This behaviour is not common in Germany, but due to the higher power distance in the United States, the German employees couldn’t convince the management to adapt the behaviour to Germany.
This could be also matched with the individualism (91 US, 67 GER), the Americans think they are right, and can do it on their one. Here the Germans are more willing to do things collectivistic to get successful. There was also very often a Management exchange, with the hope that the next CEO is more successful, instead of solving the problem collectivistic. They blamed just one person for the failure.
I feel that the Masculinity was no topic in the German market, because here are both countries on nearly the same level. But there is a big difference in uncertainty avoidance. From my point of view this was the biggest problem, and the reason for failure. Whereas the United states have a uncertainty avoidance of 46, Germany has a UAI of 65. So Americans are more willing to try new things, and they expected that the Germans are the same. But in Germany the uncertainty avoidance is very high, they don’t welcome new unknown things.
From my point of view Walmart should have started with nearly the same concept as German retailers. Maybe they would have been successful if they would have implement their concept and philosophy just step by step, to help the Germans get used to it.
So what has Walmart (hopefully) learned out of it?
Cultural differences are always a very important topic, even if there is just a small difference between the countries.
So let me compare the United States Hofstede index with the Indian:
United States: PDI – 40, IDV – 91, MAS – 62, UAI – 46
India: PDI – 77, IDV – 48, MAS – 56, UAI – 40
In comparison to Germany, there are bigger differences to the Indian market, so much more aspects have to be considered in India. In India is no middle class, there’s just a high and a low class. So Walmart has to decide which target group they have, because both (high and low class) wouldn’t be possible, not only because of the money, but also because of the very high power distance. Furthermore the Individualism is a topic; the Indians are more collectivistic than the Americans. This should be especially considered in the communication, family and friends are very important.
On the issue of Masculinity is no big difference, but the uncertainty avoidance is also an important topic. Here has Walmart a better position in India than in Germany, because the uncertainty avoidance is lower in India than in Germany and the United States. So Walmart has good chances that the Indians try new unknown things, in this dimension Walmart is better situated in India than in Germany.
From my point of view Walmart could succeed in India, because of the fact that the Indians are very open minded to new things.
September 11, 2017 @ 5:34 am
This is fascinating to me because I worked for Wal-Mart in 2000 up to 2010 and before the Walton’s family left the business, there was only talk of growing the business in North America and in some South American countries. This blog talks about Wal-Mart trying to get into India. Now in 2017, Wal-Mart still has difficulties getting into India due to the governments restrictions and wanting to allow the consumer to buy goods from mom and pop shops instead of big chain stores. One of the smart moves that Wal-Mart has accomplished is expanding a cash and carry model by creating a subsidiary called “Walmart India Private Limited”. One of the issues with this is that the Indian government requires foreign supermarkets to provide 30% of their products from small Indian firms. Wal-Mart has a bunch of set rules that makes it difficult for success for any foreign supermarket. The advantage that they do have is that they have the means to continue to pursue policy changes, brand recognition, and potential success with time. Currently Wal-Mart India has 21 cash-and-carry stores and is planning to have 71 by the end of the 2018.
Reference:
http://www.forbes.com/sites/timworstall/2017/04/30/walmart-expands-again-in-india-but-still-not-able-to-open-consumer-stores-to-consumer-detriment/
January 21, 2022 @ 8:38 pm
As India allows foreign companies to enter their market, it’ll be a race for the first company to enter the market and build the customer loyalty needed to gain market share from domestic and international competitors. A company like Walmart entering India will be able to succeed if they enter first to market. Walmart has an advantage over their competition due to their joint venture with Indian conglomerate Bharti. Walmart should enter India by acquiring warehouses with a future vision of building from the ground up (green fielding) a new state of the art Walmart, near train stations in Mumbai, Delhi and Bangalore. By acquiring warehouses and constructing their stores in condense cities near or on the train tracks, will allow Walmart to engage with clients coming and going from the train, locals and manufactures. This will allow their merchandise to be delivered faster and having a structure already built will allow Walmart to quickly begin operations and gain/ win market share. Once Walmart has purchased the warehouses, they would need to hold a press conference in India with the Prime Minister and other local leaders to state how they will help the local economy by creating jobs, giving back to the community and environmental clean up. From their joint venture, Walmart will need to hire management that’s allowed the joint venture to be successful along with local talent to make decisions on products and prices to stay competitive with domestic companies.
February 19, 2022 @ 8:14 am
India just announced that it will allow foreign majority ownership in its retail industry. This offered a big opportunity to global retailers. However, with opening the new markets, global retailers should consider a lot of elements, such as, where to enter, when to enter, and how to enter. First, they should consider the locations for their stores. They should make sure that they open stores on all cities or only big cities. In addition, the global retailers should choose one between first-mover advantages and late-mover advantages. Both first-mover advantages and late-mover advantages have their own advantages. For example, first-mover advantages could be pre-emption of scarce resources, establishment of entry barriers for late entrants, and relationships with key stakeholders such as governments. Late-mover advantages could be opportunity to free ride on first-mover investments, and first movers’ difficulty to adapt to market changes. Finally, global retailer companies should consider how to enter, joint ventures or wholly owned subsidiaries. Joint venture could share cost, risk, and profits, access to partners’ assets, and politically acceptable, but subsidiaries could complete equity and operational control, protection of know-how, and ability to coordinate globally. Based on where, when, and how to enter, Indian markets would be a great markets for global retailers, but they should do a lot of research before they enter.