Monday, October 21, 2013

India's Closed Shop.


http://online.wsj.com/news/articles/SB10001424052702304410204579140913454243696

Wal-Mart has decided to close all retail stores in India last week. This decision was made after the company decided that it can’t make a profit, due to a government rule that 30% of the inventory to be from local channels. This rule does not apply to Indian companies. Prime Minister Singh proposed to let foreign multi-brand companies own 51% of stakes in 2011. Although in opposition, the Bharatiya Janata Party and Communist Party of India mounted a strong attack, which hushed down Mr. Singhs ruling. Later in 2012, Mr. Singh proposed a law that was passed by congress ruling in favor of permitting foreign investors to hold the majority of stake in supermarkets. However, this law passed came along with many barriers. Including of which 30% of products needed to be of local source requirement, also a minimal $100 million dollar investment by foreign companies, with half the investment going to infrastructure. These laws only discourage global international marketing in India, which is unbeneficial the Indian market from expanding. Wal-Mart will continue to operate 20 wholesale stores but, because they are not allow to open supermarkets or open wholesale stores in cities with a population less than a million, the poor households in rural areas will not be able to benefit from Wal-Mart’s better prices on competitive products. Also India’s market is acclaimed for its dismal farm-to-table transportation, having a high 40 percent of food rotting before even reaching the consumers homes due to the corruption. Though elections are coming up it is unlikely that politicians will fight for more liberalization of the retail trade, giving a larger burden on Global investors. 

5 comments:

  1. There are a good opportunity in other countries for large firms such as wal mart, why they did not get it? Several years I had asked my self. The answer is simple, they are so heavy, it is high risk if they not agile.

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  2. It is normal in the business specifically for big company like Walmart to fail in one country while it is successful in others.

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  3. Walmart is a big name in the market even if they fail to open stores in India. Meanwhile, India is the important place for companies such as Walmart to have business.

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  4. Walmart is a big name in the market even if they fail to open stores in India. Meanwhile, India is the important place for companies such as Walmart to have business.

    ReplyDelete