Monday, August 6, 2007

Wal-Mart Enters into JV In India

It seems that JV's are really gaining popularity for US companies as a way to establish themselves in a new region at a minimal cost while gaining immediate acceptance as a "partner" in the new country. Wal-Mart (WMT), the world's largest retailer, said today it's establishing a 50% held joint venture with Bharti Enterprises for a wholesale cash-and-carry back-end suppy chain management operation in India. The first wholesale cash-and-carry facility is targeted to open by the end of next year and over the next seven years they expect to open 10 to 15 facilities and employ approximately 5,000. A typical location will stand between 50,000 and 100,000 square feet and sell a wide range of fruits and vegetables, groceries and staples, stationery, footwear, clothing, consumer durables and other general merchandise items.

The venture will invest in setting up an efficient supply chain by linking farmers and small manufacturers directly to retailers, maximizing value for farmers and manufacturers on the one end and retailers and consumers on the other. It will support farmers and small manufacturers who have limited infrastructure and distribution strength, and the supply chain will enable minimum wastage, particularly of fresh foods and vegetables.

“We are delighted to partner with Wal-Mart for wholesale cash-and-carry and back-end supply chain management operations in India,” said Sunil Bharti Mittal, Chairman and Group CEO, Bharti Enterprises. “Wal-Mart’s global expertise in supply chain and logistics will bring enhanced efficiencies across the retail ecosystem. This venture promises to bring great value to millions of farmers, artisans, small manufacturers and retailers across India. We are pleased to be a partner in developing this sector which is set to become a significant engine of India’s economic growth.”

Bharti Wal-Mart Private Limited will bring modern supply chain and back-end logistics to India, bringing Wal-Mart’s practices in such areas as just-in-time inventory, retail information systems, cold chain infrastructure, GPS for truck and trailer tracking, and fuel management systems. Additionally, Bharti Enterprises’ 100% subsidiary Bharti Retail, who will own and manage the retail stores, has entered into a franchise agreement with Wal-Mart which will provide technical support to Bharti Retail.

Wal-Mart is entering the Indian market through the back door so to speak. By partnering with a local ownership they are establishing themselves not as a foreign intruder looking to take business from locals, but as a well financed partner helping those locals improve their business and provide residents better services. The positive reception they will get cannot be understated. When Wal-Mart eventually opens retail location in India, they will already have years of positive exposure to the market. India is a massive market and success there will be very good for shareholders indeed.


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