Wal-Mart takes on the World Mini-case
Just like China, India also host for cheaper laborers in the international market (O’Meara, 2003). Actually, labor cost of Asian countries is relatively cheaper as compared to other regions. Given the nature of Wal-Mart for giving premium on strategies that would further minimize its operational costs, India would serve as a great choice from the list of potential host countries for the Giant Retailer. Although for the past few years, the wage rate of Indian workers have increased, but relatively to other countries, Indian workers still one of the cheapest laborers around the globe.
This cheap labor cost of Indian workers will provide enough room for Wal-Mart to further increase their profit. Another good thing on the condition of the Indian market for the entry of Wal-Mart would be the large potential market that waits for Wal-Mart which nearly reaches 1. 2 billion. There is a great possibility of making tremendous amount of profit if Wal-Mart will be able to penetrate this said potential volume of customers. The number of customer is directly proportional to the total revenue of a given company; therefore, profitability of Wal-Mart will surely improve after successfully penetrating the Indian market.
It was also identified that India ranked 3rd on the list of countries in terms of purchasing power of consumers. Therefore, this only guarantee the success of Wal-Mart since people have enough money to buy products to Wal-Mart on a larger scale as compared to other countries wherein consumer spending is limited due to low purchasing power of consumers in the market. Interest rate on borrowing in India is currently low as compared to other nations. This is one way of the Indian government to attract more foreign investors to invest into their economy in the early 2000s.
In this regard, financial problems would not hinder Wal-Mart from successfully penetrating the Indian market since they can easily borrow funds to financial institutions in India. On the other hand, some economists says that the policy of the Indian government for requiring foreign investors to make partnership first to Indian companies before they can enter into their economy would just cut the potential profit of Wal-Mart since the latter would have to share its total profit to an Indian-based firm (O’Connor, 2007). It’s like, using an Indian-based firm as a passport for Wal-Mart to make business in India.
Well, to some extent I agree to that statement of economists regarding the possible depreciation of Wal-Mart’s potential profit in India with the presence of such policy from the India government. But Wal-Mart can still utilize the said government policy to their own advantage since the Giant retailer would have an easy access on market information of India through the guidance of their domestic partner. Moreover, the resources of their domestic partner will further improve the scope of Wal-Mart’s operation and they do not have to spend much in establishing new stores since Wal-Mart can just use the existing stores of their domestic partner.
In the long run, both Wal-Mart and its domestic partner will benefit to the said collaboration since they will integrate all the resources that they have which eventually boost the performance of their respective companies. Based from this benefit, I believe that the said policy of the Indian government will only provide sustainable development not only to foreign investors like Wal-Mart but also to Indian-based companies that will make partnership with foreign-based companies.