Walmart Business Model

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With the idea of selling more products for less, Walmart has grown into the largest retailer in the world, only having started as a single discount store. Walmart continues to prosper as a company, committing themselves to creating opportunities and bringing value to customers and different communities around the world (About Us). However, while Walmart had established an effective business model for competing in the United States, they could not afford to limit their operations within this area as they have already taken control of most of their domestic markets (Govindarajan, Vijay, and Anil K Gupta). Moreover, the United States accounts for only 4% of the world population; If Walmart continued to limit themselves within this market, they were allowing their company to miss out on the other 96% of potential world customers (Govindarajan, Vijay, and Anil K Gupta.). In order for Walmart to contend with other business competitors and generate a surplus of revenue, they needed to pursue global markets by increasing their international presence.

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With India being one of the world’s most attractive retail markets and fastest growing major economies, Walmart believed this market had potential to substantially grow their global footprint. India’s retail demand has increasingly been driven by their urbanization trends and expanding middle class. As India’s population rose from 340 million in 2008 to a projected 590 million by 2030, the trend in urbanization was anticipated to rise (Kohli, Rajeev, and Alonso Martinez). India’s middle class and urban populations had been rising out of poverty and emerging quickly. More than 50% of the population was under the age of 25, which Walmart saw this niche age group to be beneficial, as it would create a demand for jobs, translating into a larger workforce for their company (Kohli, Rajeev, and Alonso Martinez). The Indian retailing industry consisted of mainly small shops, owned and operated by their owners and family members. They included grocery stores, mom-and-pop shops (kiranas), vegetable and fruit stands, paan shops, convenience stores, hand carts, and street vendors (Bhandari, Narendra C.). Each store does not have many differentiated products as they focused on selling a limited number of specialized items. This resulted in shoppers having to go to multiple stores to purchase certain goods. Overall, India’s small shop retail industry lacked the convenience and quality in products, all of which Walmart was a major leader in, prompting them to expand into this market.

While the Indian retail industry may look very profitable for Walmart, the company will be faced with a number of challenges when trying to implement their business practices into a nation that has many difficult barriers of entry. The first variable is the difference in retail cultures between the United States and India. India’s $350 billion-dollar retail sector is composed of small family-run businesses. Walmart needs to penetrate from this unorganized sector of India and influence shoppers to seek the convenience of their one-stop-shopping. Another challenge imposed on Walmart is based on products they offer since they vary due to different cultural backgrounds, religions, food habits, traditions, and textiles. Walmart must decide how much they want their company to localize and standardize their products. While localizing products comes naturally and is appealing to consumers, it is very expensive. However, Walmart can have products that they offer appear to be locally adapted while deriving as much synergy as possible in ways that shoppers cannot easily recognize (Chapter 14- Competing on Marketing and Supply Chain Management). Walmart must also choose whether to market global brands or local brands by selecting their market segmentation- identifying segments of consumers who differ from one another in purchasing behaviors. Walmart must categorize Indian shoppers to see which groups they must segment too- global citizens who are in favor of buying global brands, global dreamers who may not be able to afford, but nonetheless admire global brands, anti-globals who are skeptical about whether global brands deliver higher-quality goods, or global agnostics who are most likely to lead anti-globalization demonstrations (Chapter 14- Competing on Marketing and Supply Chain Management ). The price of goods is an additional challenge for Walmart.

Indian customers have different buying and consumption patterns, and being that India is a poor country, the consumers are very price sensitive. The lower the income level of the consumers, the more price sensitive they are. For example, a normal bottle of shampoo in the United States is sold in a bottle, However, in India, shampoo is often sold in single-use sachets, each costing around $.01- $.10, with most consumers finding the cost to be prohibitive (Chapter 14- Competing on Marketing and Supply Chain Management). For Walmart to attract Indian consumers, they must be aware of the prices they charge for products. The most aggressive challenge Walmart faces is government restrictions in India. India has separate laws regarding their Foreign Direct Investment (FDI)- allowing 100% foreign ownership for single brand stores and 51% or more ownership for multinational retailers, having the foreign investors source 30% or more of their goods from local small/medium firms (Bhandari, Narendra C). Many Indian opposition parties had strong disapproval over this law, claiming that stores such as Walmart would kill off their neighborhood kiranas and harm their domestic manufacturing systems with cheap imports (Kohli, Rajeev, and Alonso Martinez). The last challenge Walmart will face when entering India is adaptability. Due to India’s poor infrastructure including road, port, and freight standards, Walmart is going to have to change their supply chain configurations in response to longer-term differences in India’s environment (Chapter 14- Competing on Marketing and Supply Chain Management). Walmart is going to have to redesign their logistics accordingly so that there won’t be any inefficiencies within their value chain.

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