Foreign direct investment (FDI) is a major pillar of enhancing sustainable economic development and it offers financial and non-financial benefits to the host countries and to the foreign countries as well (Omar, 2009). Non-financial benefits that come along with FDI are knowledge transfers and gains in productivity. To the host country India that the company, Walmart wishes to expand into, it can serve to reduce the rates of unemployment, poverty and social inequality. The probable organisation based in India that the organisation can successfully partner with in a bid to enhance her expansion into the Indian market is HyperCITY. The paper shall describe the business profile of the Indian based organisation. It will incorporate an in-depth analysis of the approaches that Walmart can use to expand her business to the Indian market through partnership with the Indian firm. The paper will also capture the possible ways that can be employed by the firm to edge against politics and foreign laws. The commitments that could be put in place for prospective growth will also be captured.
HyperCITY is an Indian retail firm that is mainly focused in providing an international or global shopping experience, where consumers can get the opportunity to shop in a comfortable environment. It strives to enhance the shopping environment to be more spacious, exciting and modern. HyperCITY has the widest range of products that are outsourced from various parts around the globe. It has been the most favourite hypermarket in India for a long time.
Products and Brands
HyperCITY offers a wide array of brands that cut across all categories. The brands offered to the customers ensure provision of increased value to the esteemed customers by offering them superior products of high uniqueness and quality at affordable costs. It deals in a variety of foods and groceries and home products which include furniture, utensils, cutlery, crockery, glassware, bedding and many more. The home appliances are of great designs and colours. The hypermarket is also not left behind in the provision of quality products in the world of fashion, electronic appliances and sportswear. It keeps the existing stocks updated with the current products, the fact that gives the customers another reason to prefer shopping in their outlets.
Vision and Mission
The hypermarket aims to be an integral part in the lives of their customers through offering them a shopping experience of high quality through great merchandises at ever better costs.
Partnering for success
The organisation harbours the best designs globally, safety features, infrastructure through engaging in partnerships with the best talents and retail stores around the world. The organisation also partners with other environmental conservation organisation to ensure the production of environmentally friendly designs that can fully satisfy the needs of the customers while preventing possible environmental pollution.
Approaches that can be employed
The strategy of indirect exportation is a market entry technique that has been associated with low risks (Omar 2009). In this strategy, the products of a given company are carried to the foreign market by others. The foreign firm, in this case, Walmart will not engage in marketing her products in the international market and the company does not make any changes in her structure to respond to the international marketing and sales. The indirect exporting strategy helps to enhance the opening of new markets in the foreign countries without requiring a lot of special investment or expertise. The commitment to the international market is, however, very weak and the profit margins obtained while employing this strategy are low as the company has little control of the foreign market.
The strategy involves direct involvement of a foreign company in marketing activities, in a foreign market. The company does not delegate the duties of exportation. The firm has the duty to set the prices, to perform market research, to physically distribute products and to document the exports appropriately. Though, greater risks are involved in the strategy, it offers appreciable number of benefits. The firm is able to enjoy increased sales, the firm has greater control in the market, the foreign firm has better information about the market and the firm has a better opportunity to develop expertise for international markets (Omar, 2009). The strategy is, however, is not advised because the foreign firms are exposed to financial risk, administration bureaucracies and strict foreign laws.
Licensing is a better strategy to use in penetrating foreign markets while avoiding risks. A greater responsibility is bestowed in the local firm. The international licensing firm is bound to give the local firm in this case, HyperCITY, the trademark rights, the copyrights, the patent rights or the skills and know-how on that processes of production and products. The licensee in return, performs the production, does the marketing of the products and rewards that licensor in terms of royalties that are agreed upon by the partnering firms. The strategy reduces risks but has a main drawback to the licensor. The licensor cannot be able to exercise good control of the licensee firm due to lack of direct commitment. The strategy has the disadvantage of transferring useful knowledge to the local firm, hence the firm can commence production after the licensing period has elapsed. Therefore, it is not advised to be embraced by the foreign firms while expanding their markets to the foreign firms.
This strategy bears a lot of similarity to the licensing strategy, but differs slightly in the sense that the foreign firms have a voice of management and equity position in the local organisation that it has partnered with. In some cases, the partnership between the two firms usually leads to the formation of a third firm that is different form the two firms. Joint ventures as a strategy, provide a better opportunity for a foreign firm to exercise control on the operations and in the control of the foreign market. The international firm is in a better position, as it is shielded by the local firm from the risks that may arise from expropriation.
Best strategy and Justification
Joint venture is the best strategy that can be used by the two firms. HyperCITY and Walmart can for a joint venture. Forming a joint venture is good as it will help minimise the risks involved in dealing with the foreign exchange markets. HyperCITY being well versed with the fiscal policies and systems in India, is in at better position to avoid certain avoidable financial risks that could not have been avoided by Walmart independently. HyperCITY can easily monitor the trends of inflation, deflation and Indian government instruments for regulating the monetary system. With a wealth of knowledge gathered by HyperCITY through its familiarity and experience in the fiscal market in India, the partnership can be beneficial to Walmart as it will help in preventing possible losses associated with the fluctuation in the foreign exchange rates. Joint ventures can also assist Walmart in acquiring loans cheaply in India without incurring high rates of interests that are usually charged to foreign firms in India, as HyperCITY is at a better position to advocate for loans from the local banks in India at a lower interest rates.
Ways of leveraging against politics and laws
The risks associated with politics and regulatory laws are very significant and cannot be ignored while purposing to make a healthy joint venture with a foreign firm. India is a county that is governed by laws and that has restrictions that regulate the mode of expansion of market of the foreign firms into her borders. The taxes that are relaxed, as stipulated by the environmental research could be a welcoming aspect, but it cannot be used as a major factor to avoid instating mitigation factors to guard against political and regulatory risks.
One of the ways of leveraging politics and laws to enhance the chances of forming a successful deal is through the taking of political risk insurance cover (Blaine, 2008). Political instability that may necessitate amendment of regulations that could affect the operations of Walmart in India can be covered through the subscription to a political insurance cover. A political insurance cover helps provide compensation for any losses incurred that arises from an unstable political atmosphere and an unfavourable amendment of the laws. If the cover is taken by the joint venture or by Walmart independently, it will foster the agreement by ensuring that Walmart does not worry about the effects of political instability on her operations. The two companies will, therefore, make decisions that are based on similar aspects of politics and regulations. The decisions made shall, hence be appreciated by both ends considering the fact that all the political risks that the two companies are exposed to are guarded against irrespective of the origin of the individual companies. Taking a political insurance cover is advised because political instability is rampant in very many countries in the world and laws of the land governing the business environment are subject to change.
The two firms united in a joint venture should also consider setting up their enterprises in a region that is politically stable and that has predictable regulations concerning fiscal policies such as taxation. Considering such factors will help enhance the chances of the venture of avoiding possible interruption of the activities. The predictability of the tax regulation can also serve to maximise the profitability of the joint venture as it lowers the selling price of the goods in the market. The venture, therefore, must be able to be in a position of being acquainted with every law within the foreign market that could impact of the activities to the venture and instate the possible mitigation factors of guarding against the risk that it may cause. With the consistent consideration of the two measures, leveraging on politics and law can be simple, hence strengthening the bond between the two firms.
Commitments of the Company
For a company to successfully thrive in partnership with the Indian firm in a foreign market, it must be able to integrate the present systems and structures in the company to meet specific target levels that are able to offer sustainable growth in the foreign market. The financial policies and departments must undergo changes to be able to combat the risks offered by the foreign exchange markets. The risks of conversion of currency must effectively be edged against. Proper market research must be conducted by the marketing department to ensure that the company can be able to establish the needs of the customers in the ground (Blaine, 2008). The human resources of the company cannot move into the international market without undergoing effective training on how to handle customers in a foreign market. The company, therefore, needs to elevate the personnel to a standard where they can be able to handle the foreign customers with care so as to enhance the provision of services that can attract customers in a foreign market.
Strategy for Fulfilling Commitments
The company should embrace certain strategies so as to ensure that the commitments listed above are implemented. The strategy for imparting the necessary international skills to the human resources can be achieved through training activities. The types of training to be offered to the human resources can take different perspectives. The workers of Walmart can undergo training on cultural aspects of Indian people. As it had been mention in the survey of India, Indian people are multicultural and have complicated cultural orientations. The interaction of the marketing team of Walmart and the customers from India will be greatly enhanced if the workforce can be able to understand the cultural orientation of the Indian customers. Cultural training is very important, as culture is a strong aspect that determines the demand of products. The employees can also be trained on language. Being multilingual is a good gesture in an international market set-up and can serve to engage the promotional activities of the firm in India.
The profile of HyperCITY as a leading retail firm in India makes it a suitable firm for forming a partnership with Walmart. The best strategy for entering into a partnership with HyperCITY is through joint venture as encouraged by the business regulations in India. The strategy has the advantage of edging against risks while giving Walmart an increased opportunity to have a voice in the venture. Walmart, however, needs to implement commitments in her financial sector, human resource sector and the market operations so as to effectively integrate into the Indian market.
Blaine, H. G. (2008). Foreign direct investment. New York: Nova Science Publishers.
Omar, O. (2009). International marketing. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan.