Wal-Mart and India - an ideal couple! But what about branding?
When India opened its economy to foreign competition in the early 1990s, it was termed a phased liberalization. Government decided to retain full control over certain sectors deemed sensitive by not allowing any foreign investment. Insurance, retail, domestic airlines and telecommunications were some of those sensitive industries that were protected for a long time. Telecommunications and insurance were the first of these sectors that were gradually opened to foreign direct investment (FDI).
Domestic airlines followed suit in the last two years and the resulting boom is proof enough of the future potential of that industry. The retail sector is protected against any FDI. But a couple of developments recently have created a lot of buzz in the Indian business community.
A quick look at the Indian retail sector gives reason for such buzz. The Indian retail market is valued at US$200 billion and is projected to increase substantially in size over the 10-15 years. Organized retail - or well established retail chains - accounts for only a meager US$8 billion. The rest of the bulk is accounted for by the more than 12 million neighborhood outlets and mom and pop shops. Given the huge current market and the future potential, it is only natural for the retail biggies such as Wal-Mart, Carrefour and others to look for entry modes into the Indian market.
Recently the Indian government allowed joint ventures (JV) in the retail sector where by a foreign company can set up a JV with an Indian company, with the Indian company being the majority shareholder in the venture.
India's leading mobile phone company which has many diversified interests, Bharti Enterprises, has entered into a joint venture the biggest retailer of the world Wal-Mart. The venture is still in its early stages. It is reported that Bharti plans to invest up to US$2.5 billion in setting up organized retail outlets across the Indian landscape. As per the government policy any such foreign company in a JV with an Indian company cannot retain its name for its operations. The current arrangement seems to be that the front end, customer interaction and branding of the stores will be the prerogative of the Indian company and the back end procurement, logistics, and inventories will be Wal-Mart's. As such, even though the Indian market may have a Wal-Mart, the Indian masses may never get to see the Wal-Mart name on any of the retail outlets.
This venture, if it takes off the ground will have some very interesting business and branding implications for Wal-Mart. Much has been talked about the need for companies to adopt their strategies and communications to the local culture of foreign companies. Many examples - Nike's decision to hire Asian celebrities for the first time, Disney's inclusion of Chinese cuisines in its Hong Kong Disney Land's menu - have proven this point.
As such glocalization has become a corporate buzz word in international business. But is all such cases, the brands have been careful to project a unified brand image with its brand identity and brand personality intact. After all that is the underlying logic of globalization - standardize the brand identity and experiences across markets so as to offer customers the overall brand experience but customize the brand communications, points of contact and personal interaction to suit the tastes and preferences of local cultures. But in the case of Wal-Mart, due to regulatory restrictions and the sheer market potential of India, the retail giant will take glocalization to a further extent.
Wal-Mart is struggling in its home market in US. Even though it still is the largest of all retail chains, off late, the company is trying hard to cultivate an upscale image to attract the more affluent customers. K-Mart, Target and others have been successful in luring those customers away from Wal-Mart. Given these scenarios, the company is desperate to enter emerging markets with huge potential. Given these hard realities, Wal-Mart may prefer growth and profitability over brand image in India. Further, Wal-Mart's brand is known for everyday low prices, which it ensures through cutting edge inventory management and logistical capabilities.
Even in its Indian adventure, Wal-Mart will still be in control of those two crucial aspects. As such, even though the visible brand elements may me missing, but the venture may make sure to let the masses know that the driving force behind the retail stores is still the prowess of Wal-Mart.
As the joint venture takes off the ground, it will be interesting to study the impact of the lack of Wal-Mart's brand name on the success of the JV and on the perceptions of the masses towards the many retail outlets.
Domestic airlines followed suit in the last two years and the resulting boom is proof enough of the future potential of that industry. The retail sector is protected against any FDI. But a couple of developments recently have created a lot of buzz in the Indian business community.
A quick look at the Indian retail sector gives reason for such buzz. The Indian retail market is valued at US$200 billion and is projected to increase substantially in size over the 10-15 years. Organized retail - or well established retail chains - accounts for only a meager US$8 billion. The rest of the bulk is accounted for by the more than 12 million neighborhood outlets and mom and pop shops. Given the huge current market and the future potential, it is only natural for the retail biggies such as Wal-Mart, Carrefour and others to look for entry modes into the Indian market.
Recently the Indian government allowed joint ventures (JV) in the retail sector where by a foreign company can set up a JV with an Indian company, with the Indian company being the majority shareholder in the venture.
India's leading mobile phone company which has many diversified interests, Bharti Enterprises, has entered into a joint venture the biggest retailer of the world Wal-Mart. The venture is still in its early stages. It is reported that Bharti plans to invest up to US$2.5 billion in setting up organized retail outlets across the Indian landscape. As per the government policy any such foreign company in a JV with an Indian company cannot retain its name for its operations. The current arrangement seems to be that the front end, customer interaction and branding of the stores will be the prerogative of the Indian company and the back end procurement, logistics, and inventories will be Wal-Mart's. As such, even though the Indian market may have a Wal-Mart, the Indian masses may never get to see the Wal-Mart name on any of the retail outlets.
This venture, if it takes off the ground will have some very interesting business and branding implications for Wal-Mart. Much has been talked about the need for companies to adopt their strategies and communications to the local culture of foreign companies. Many examples - Nike's decision to hire Asian celebrities for the first time, Disney's inclusion of Chinese cuisines in its Hong Kong Disney Land's menu - have proven this point.
As such glocalization has become a corporate buzz word in international business. But is all such cases, the brands have been careful to project a unified brand image with its brand identity and brand personality intact. After all that is the underlying logic of globalization - standardize the brand identity and experiences across markets so as to offer customers the overall brand experience but customize the brand communications, points of contact and personal interaction to suit the tastes and preferences of local cultures. But in the case of Wal-Mart, due to regulatory restrictions and the sheer market potential of India, the retail giant will take glocalization to a further extent.
Wal-Mart is struggling in its home market in US. Even though it still is the largest of all retail chains, off late, the company is trying hard to cultivate an upscale image to attract the more affluent customers. K-Mart, Target and others have been successful in luring those customers away from Wal-Mart. Given these scenarios, the company is desperate to enter emerging markets with huge potential. Given these hard realities, Wal-Mart may prefer growth and profitability over brand image in India. Further, Wal-Mart's brand is known for everyday low prices, which it ensures through cutting edge inventory management and logistical capabilities.
Even in its Indian adventure, Wal-Mart will still be in control of those two crucial aspects. As such, even though the visible brand elements may me missing, but the venture may make sure to let the masses know that the driving force behind the retail stores is still the prowess of Wal-Mart.
As the joint venture takes off the ground, it will be interesting to study the impact of the lack of Wal-Mart's brand name on the success of the JV and on the perceptions of the masses towards the many retail outlets.
