Influence of Western Culture, Article Writing Example

India is growing fast, luring international companies to venture out in the expanding Indian market. Hefty pockets of Indian disposable income have made the spurge even faster, not to mention the race of Wal-Mart, Starbucks, IKEA, Tesco and others to pilferage their foothold in the retail sector.

According to the Associated Chambers of Commerce and Industry of India (ASSOCHAM), the retail sector of India is growing by the extent of 28% a year. In 2007, the industry was worth US$300 billion, and it is expected to reach US$440 billion by 2010. However, 95% of India’s retail sector comprises of small, neighborhood shops, street vendors, unorganized units that are not even registered for sales and income taxes.

A liberalized policy and with involvement of big corporate houses (Big Bazaar, Pantaloons, Shoppers Stop, Spencer’s, etc) this sector is being gradually organized; therefore, setting the plinth for lucrative investment possibility for foreign companies. Now, India’s retail industry is very complex and is very different from the retail market anywhere else in the world and is still a brave new world for most multinationals says Anthony Root, head of Milbank Tweed Hadley & McCloy’s corporate practice in Asia. He emphasizes the need for in-depth local knowledge, adding that “using western standards and western techniques just makes no sense” (India Business Law Journal, 2008).

We know that India maintains a cosmopolitan infrastructure, with diverse cultures and interests at its brethren. Indians had always admired the West, in spite of some very bitter experience with British colonization. East India Company had first landed in India as traders only to transform themselves as leaders. Thus, no matter how much they love the McDonald and admire Tom Cruise- they are always nervous and apprehensive about Western institutions. It has developed into a natural acronym – to be aware of the intentions of Foreign Investors. Leading to complex import restrictions and governmental red tapes which delays and mount to monumental losses of companies wishing to indulge in investment. “Until just a couple of years ago, foreign direct investment (FDI) in retail was essentially prohibited in India. It remains an extremely controversial issue, but a major policy change in February 2006 allowed FDI of up to 51% in single-brand retail” (Indian Business Law Journal, 2008, p.13)

Indian retail market is unique and erratic. One can say it is fickle to a great extent. Obliquities retail shops spread out like tiny insects all throughout the villages and cities. Individuals open stores adjacent to their house, shelter, and garage; or may be temporary units called pheriwalas which come to every home in the locality (Imagine the convenience of buying grocery from your window).  It is difficult for the Western financiers to gauge and understand their relevance. Moreover, Indians have a tendency to buy in small quantities at cheap prices.

Now, there is a retail revolution spreading in India- introduction of BPO and IT sectors have created a section of people with high disposable income. They like the grandeur of the big shopping malls, packaged goods and convenience of shopping in air conditioned stores. These privileges are drawing the metro crowd to come to the superstores in large numbers.

Problems faced by international companies to open shops in India

India is based on the agricultural economy. Farmers, shop owners and arbitrary outlets fear stiff competition and anxious about market sharing from the international outlets. Example is the controversy of opening Metro Cash and Carry (German company) in India. The Communist government in the state of West Bengal though that it was a big blow to the individual farmer and agriculture. The company claimed to sell all goods and produce at highly competitive prices. This led to strikes and temporary closure of the project.  The international companies fail to evaluate the actual statistics and when companies come to launch themselves without proper research – it turns into a strategy.

Case Study: Opening of Wal-Mart Retail Stores in India

Wal-Mart is coming to India. But the retail giant is prepared and is backed with extensive research of the Indian laws and conditions. They have noticed that glare, glitter and publicity instigates massive protest from the general public and political parties. So instead of setting up air-conditioned, consumer friendly superstores, Wal-Mart has decided to open stores in silence and ambivalence.

Wal-Mart is establishing 50-50 joint venture between Bharti Enterprises- a business-to business wholesale retailing company called Bharti Wal-Mart. Wal-mart initiated such a step as it recognized the importance of having a local partner and support with a strong understanding of the Indian market. Moreover, it is in sync with the Indian law by ensuring that the Indian partner does the frontend retailing.

Another problem facing Wal-Mart is the retail outlets and the Kirana shops. It is usually seen that the giant companies use the predatory strategy to drive the small ones out of competition. This leads to job and income loss to millions. The penetration of large companies seems to disrupt the balance of the economy and close the small slit of opportunity available.

However, Wal-Mart claims that it has taken care of this problem and their venture will in fact benefit Kirana by giving them the quality merchandise at competitive wholesale prices, while increasing the supply-chain efficiency and minimizing waste. The venture will help the farmers and small manufacturers who lack distribution and infrastructure strength. Moreover, the supply chain will ensure minimum wastage, especially of fresh foods and vegetables. Their objective is to reduce the waste, and not to cut the middlemen who are an important entity in the entire supply chain (Indian Business Law Journal, 2008, p.18)

Reference

India Business Law Journal, 2008, last retrieved from http://walmartwatch.com/img/blog/setting_up_shop.pdf