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Wal-Mart in India?

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October 15, 2010 – Comments (5)

It could happen...

Investors and prospective investors in Wal-Mart (NYSE: WMT) shouldn't be blamed if they don't pay much attention to what's happening in the world of Indian politics. After all, the country is half a world away, and Wal-Mart currently has just two stores in the country. Yet the reason Wal-Mart has not made more significant in-roads into India is because current Indian government policy prohibits foreign companies from operating independent retail stores -- a policy that aims to protect small-scale Indian business owners.

Recent rumors out of New Delhi, however, have the government there considering changing that policy due to food inflation of more than 16% this year. It's been exacerbating India's poverty problems and undermining popular satisfaction with the government. The hypothesis is that by allowing efficient, price-focused retailers such as Wal-Mart to enter the market, those retailers can help force prices down and still provide employment for Indians.

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5 Comments – Post Your Own

#1) On October 15, 2010 at 3:58 PM, vriguy (76.30) wrote:

Forget it.  Walmart has not shown much clutural savvy when penetrating foreign markets in Europe, and given their complete cluelessness about India and Indian cultural attitudes towards shopping - they have essentially no chance. There is no shortage of deep pocketed Indian retailers itching to expand in India, who've been hamstrung thus far by the Indian Government's entrenched anti-capitalist policies. Any policy changes that help Walmart will also help those groups eat Walmart's lunch imho.

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#2) On October 15, 2010 at 4:05 PM, SkepticalOx (99.44) wrote:

You know how TMF has the whole Fool in China thing going on? Maybe trips to India would be great? Especially in light of the Economist declaring that India will grow faster than China, and Larry Summers giving that speech there claiming the same.

It's been in the news. It has demographics on its side.  

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#3) On October 15, 2010 at 6:01 PM, JakilaTheHun (99.94) wrote:

IKEA has been trying to pursuade the Indian government to try to change these rules, as well.  IKEA would be great in India!  It would definitely lower costs for Indian consumers purchasing furniture. 

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#4) On October 17, 2010 at 11:17 AM, TMFHelical (98.71) wrote:

Tim,

I find some irony in the use of the term 'in-roads' in India.   What would Wal-Mart India look like after all?  Not at all like US Wal-mart I would suspect.  Wal-Mart's US growth was driven by impressive innovations in supply chain management that enabled effective lower margin operations (thus lower prices). 

But another side of the growth was the advatage provided (and taken) by the impressive US infrastructure in existence coupled with low cost fuel.These enable the remote 'big box store' (and mall) model.  This kind of infrastructure isn't present in much of India, or other emerging markets.  Wal-Marts model should still be able to provide some advantages, but not to the degree that they did here in the US in my opinion.

TMFHelical

Home Coverage Fool

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#5) On October 18, 2010 at 11:28 AM, ikkyu2 (99.36) wrote:

I doubt a civilized country would permit some of Wal-Mart's vaunted price-sensitive practices: such as locking wage slaves into buildings overnight, running their suppliers into bankruptcy, and contributing to urban-blight with their automobile-oriented giant parking lots.

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