India, US and the story of Wal-Mart By Dr. Bobby Srinivasan and Dr. Sudhakar Balachandran

May 28, 2015 | Posted by bobbysrinivasan << back to blog

The Indian government is currently contemplating allowing overseas single company carrying multi brand items to open up multiple shops in India, under the foreign direct investments liberalization scheme. The opinions among the politicians and the citizens are divided. The author himself has participated in many TV deliberations on this subject. I am presenting here a set of facts which will throw more light on this subject and will also help our country to make the right decision namely whether to allow such companies to invest and do business in India. Let us look at the facts. These are facts of one such company namely the Wal-Mart of USA.

At Wal-Mart, Americans spend US $ 36 million every day.
They make $ 20928 profit per minute.
Wal-Mart is bigger than home depot + Kroger + Target + Sears + Costco + K-inart combined.
Wal-Mart employs 1.6 million people and is the largest private employer.
Wal-Mart now sells more food than any other store in the world.
Wal-Mart has approximately 3900 stores in USA of which 1906 are super centers.
This year, 7.2 billion different purchasing experiences will occur at Wal-Mart stores (Earth’s population is approximately 7 billion).
The value of product for Wal-Mart passing through the port of San Diego each year is a larger sum than 93% of all countries GNP.
Of the 1.6 million employees, only 1.2 percent makes a living above the poverty level.
Wal-Mart now averages a profit (not sales) of $ 36 billion per year.
92% of everything Wal-Mart sells comes from China, another 4% comes from Chinese-owned companies in the US or 3^rd world countries.
Wal-Mart is one the biggest contributors to China’s foreign reserves.

The concern about letting companies of this size is well placed. Wal-Mart can for example wipe out 100s of small and medium sized departmental stores because of their pricing, strength, product range and quality. It is a well-known fact that the FIIs have invested (market value of their share holdings) 306 billion US dollars and hence are the biggest stock price movers. If for example, FIIs leave enbloc dumping our stocks; our reserves of US $ 350 billion will be completely wiped out. Even in the US, because of Wal-Mart expansion 31 supermarkets have declared bankrupted. Initially Wal-Mart may start small and will eventually grow very huge and this will wipe out hundreds of medium and small sized department stores.

On the other hand, it is clear that if Wal-Mart is allowed to set up business in India, the price discovery process will be completely under their control. Through efficiencies in procurement across the world their product pricing will pull most of the customers to them. Then other competitive companies will need to lower their prices which may not be viable for them to do business. By offering a little better salary they will attract all work forces from their competitors. Wal-Mart will literally eliminate thousands of middle-man who are making a living as a procurer of goods. Of course the winners will be the consumers through lower prices and the producers because they will get a better price for their product directly from the company and so need not go through middle-man.

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