ASSIGNMENT ON: Case Study- 3: Walmart’s Sustainability 360. Case Study- 6: Retailing in India-Impact of Hypermarkets. (For covering the course Content) SUBMITTED TO: Professor Dr. Mohammad Amzad Hossain Sarker Professor Department of Marketing Comilla University. SUBMITTED BY: Group: The Strong Ties Department of Marketing Comilla University. GROUP MEMBERS: NO 01. 02. 03. 04. 05. 06. 07. NAME Yamin Chowdhury Md.Masum Hossain Newton Das Md.Masud Hossain Md.Monirul Islam Rafiqul Islam Shariare Rafy ID 116070 11607039 116070 116070 116070 116070 116070 Case Study: 3 Walmart’s Sustainability 360 SUMMARY: A sustainable company requires streamlined business practices and innovative technology, and it also requires a healthy and motivated workforce. Walmart’s reach is vast. Fortune magazine named it the “most admired company in America,” and the Financial Times included it on its “Most Respected in the World” list. The retail giant has received various honors and accolades, such as being selected as among the “Top 50 Companies for Executive Women” by the National Association for Female Executives and “Top 50 Companies for African American MBAs” by Black MBAs Magazine. As the world’s largest retailer, Walmart operates more than 8,400 retail units in 15 countries around the world, works with more than 100,000 suppliers, and employs more than 2 million people across the globe. Customer visits total more than 200 million each week, and the company posted sales of $405 billion for fiscal year 2010. A recessionary economy with high unemployment means Walmart’s traditional customers need to make their dollars stretch even further when they visit the store. It also means more customers may shop Walmart’s shelves as they try to make a diminished household income cover all of life’s necessities. In 2005, Walmart set three core goals for environmental sustainability: to be supplied 100 percent by renewable energy, to create zero waste, and to sell products that sustain resources and the environment. Since then, the company has defined baselines for its effort, identified metrics to help measure progress toward key initiatives and goals, and implemented new programs both in the United States and abroad. Selling sustainable products at competitive prices helps consumers reduce their own energy consumption, thus saving them money while they help protect the environment. A sustainable company requires streamlined business practices and innovative technology, and it also requires a healthy and motivated workforce. Sickness, injury, lack of motivation, stress, family concerns, and minimal education can all affect a company’s performance, so Walmart has committed to social sustainability along with its environmental sustainability goals. DISCUSSION QUESTIONS: 1. Is Walmart good for society? Would society be better off with or without Walmart? 2. Walmart says that it creates new markets for small and medium-size businesses and that it supports growth and innovation for these businesses. For some of these suppliers, Walmart is their primary customer and thus the business owners have little choice about adopting Walmart’s standards. Do you think this is fair? Do you think Walmart’s powerful position helps these business owners or hinders them? 3. Walmart’s sustainability program addresses each of the criticisms leveled against it. If a company is forced to launch an initiative to prevent falling sales or public relations problems, do you think the company is fully committed to those efforts? How could you tell if the company was making progress toward its stated goal? 4. Walmart’s Sustainable Product Index is intended to provide consumers with a ranking of a product’s sustainability across its life cycle. Would this ranking influence your buying decisions? Why or why not? ANSWERS: 1. Is Walmart good for society? Would society be better off with or without Walmart? The debate on whether Walmart has done more good or bad for society has been a longstanding one. Apologists of the world’s largest retailer defend its business strategies, touting it as the prime example of unfettered American capitalism, the epitome of free market efficiency with low costs and high quantities of production and consumption. Opponents argue that the retail behemoth has led to the transfer of millions of jobs to less-developed countries like China, the exit of many smallto-medium businesses, and also infringement of employee rights. There are two sides to this debate depending on the stance one takes, along with how “society” is defined. From an economic standpoint, society refers to, collectively, the common person; the consumer. Consumers would benefit from low prices and an increase in quantity of goods consumed. Walmart’s strategy of “everyday low prices” has certainly served society well in that respect. Due to its enormous economies of scale, notably its bargaining power with suppliers and the establishment of its own distribution centers, Walmart has managed to offer very competitive low prices to its consumers due to the low costs. This has resulted of millions of Americans – especially the low-to-medium income consumers it traditionally targets – being able to stretch their disposable income and lead a better quality of life, a testament to its “Saving money and improving lives” stance. Walmart has only resulted in immense job creation for millions of Americans; this is beneficial for those in depressed cities and towns who would otherwise not have jobs. In the laissez-faire environment, Walmart represents good resource allocation. Most recently, the launch of the Sustainability 360 effort by Walmart depicts how Walmart will continue to improve its business practices for the better – in terms of environmental and social impact. Its three goals for environmental sustainability – 1) to be supplied 100% by renewable energy, 2) to create zero waste and 3) to sell products that sustain resources and the environment – can have positive ripple effects in its entire supply chain, along with other retail competitors. Suppliers that still want to be in business with Walmart now have to produce through environmentally sustainable means; other retailers will have to start moving towards green methods too if consumers now choose Walmart due to its green image besides the low prices. Walmart’s move towards stocking Fair Trade Certified foodstuff also indicates a positive ripple effect for farmers, culminating in increased incomes for the low and middle-class, resulting in a better standard of living for society. However, amidst all the positives that Walmart has brought about, opponents of the company’s business strategy argue that it has led to adverse effects on small businesses, urban sprawl and suppressed employee wages and benefits. Walmart’s ability to offer consumers low prices has driven out retailers who do not have the sufficient economies of scale to compete on the same level. The low wages it offers have also drawn the ire of many employee rights groups. However, from an economic standpoint, Walmart has just managed to expand and outdo its competitors through innovative business strategies like integrating its distribution systems. Ideally, competitors should be forced to innovate to create more business strategies and their own competitive advantage. Ideally, this should result in lower prices for consumers, which has been the case. Some argue that this has been at the expense of the relatively low wages its employees receive. But from a utilitarian standpoint, it is now able to offer a great variety of products at a very low price to millions of everyday consumers. This is especially relevant to the millions of low-tomiddle income families it traditionally targets. This increases the overall utility of society. One of the main aims of businesses is to maximize returns to its shareholders; Walmart has managed to do this and thereafter give back to the community. It donates huge amounts of money to support children, women, and the underprivileged. In 2013 alone, Walmart and Walmart Foundation surpassed more than $1billion in giving. It has also been active in terms of emergency relief. For e.g. it gave out more than $2.7million in cash and in-kind donations during the Hurricane Sandy disaster. It is only because the company reaps such huge profits that it is able to give back to the community on such a large scale. I believe from a societal and economic standpoint, Walmart has been beneficial. It has certainly resulted in many businesses winding up and probably the loss of jobs to less-developed countries, but these are hardly avoidable corollaries of the free market. Walmart has resulted in the creation of millions of jobs and low prices for all consumers. With its new focus on sustainability, in the long run, it can use its position to further effect meaningful changes in retail practices. On the whole, society is better off with Walmart. 2. Walmart says that it creates new markets for small-and-medium-sized businesses and that it supports growth and innovation for these businesses. a) For some of these suppliers, Walmart is their primary customer, which means the business owners have little choice about adopting Walmart’s standards. Do you think this is fair? Walmart’s influence on its suppliers is one of the contributing factors to its immense success as the world’s top retailer. The question of whether this is fair can be viewed from an ethical or economic standpoint. Ethically, this can be deemed unfair because these businesses have to operate under the whim and fancy of Walmart. In order to keep prices low, Walmart has to ensure that buying costs from these suppliers are at a minimum. In some cases, these suppliers are not able to minimize their costs of production enough to remain profitable and have to wind up. The huge barriers to entry prevent small-to-medium businesses from being able to set their own standards freely because the monopolistic power of their primary customer, Walmart, prevents them from competing on a level playing field. However, from an economic standpoint, this is merely the effects of the free market economy. These suppliers are in a position whereby they are forced to find more efficient methods of production or wind up. Ideally, they should innovate to find more efficient production methods to decrease their cost of production, or find ways to increase their bargaining power with Walmart e.g. Producing products that will be widely demanded by consumers such that Walmart would want to stock these products. Hence, the issue of fairness is a subjective one. But from an economic standpoint, Walmart is merely competing through effective corporate strategies, which is fair. b) Do you think Walmart’s powerful position helps these business owners or hinders them? Walmart, due to its immense business operations, works with numerous suppliers across various product categories. It has helped create and open up new markets for businesses in various areas. For example, it is now beginning to offer more Fair Trade Certified produce like bananas; profits will return to these communities in the form of funding for education and development projects. The profit repatriation will be beneficial for these farmers in the long run; they may expand their supply businesses and innovate to increase productivity and efficiency. However, the reality is that many of these small-to-medium-sized businesses have very little negotiation leverage with Walmart. Walmart uses its position to purchase from suppliers at low prices and for many of these businesses who cannot afford to lower their cost of production that much, they have to wind up. As for retail competitors, it is very difficult for them to compete with Walmart in terms of prices. This is especially relevant in this case as Walmart traditionally targets the price-conscious consumer. As such, consumers would still choose to go to Walmart to shop even if it means having to drive out a few miles more. Many of these small-to-medium businesses are not able to find a competitive advantage to make them the choice retailer and are thus heavily hindered by Walmart. 3. Walmart’s sustainability program addresses each of the criticisms leveled against it. a) If a company is forced to launch an initiative to prevent falling sales or public relations problems, do you think the company is fully committed to those efforts? It is indeed a little questionable that Walmart launched its Sustainability 360 initiative after a slew of public relations debacles that involved human rights, environmental sustainability, and social responsibility. It can be seen that the initiative was launched to remedy the situation as the company’s reputation was taking a hit. I think the company could be fully committed to its sustainability program as it has officially announced it in its annual report and thus has a duty of responsibility to its shareholders and investors. Furthermore, Walmart started its sustainability program with the belief that a commitment to sustainability can save the company money by reducing waste, increasing productivity etc. Hence, I believe Walmart would be committed to its efforts because it would benefit the company in both ways. If employing sustainable business practices means it could save cost and also improve its corporate image, it would most likely be committed to these efforts. b) How could you tell if the company was making progress towards its stated goal? Walmart has a “Commitments and Progress” page in its Global Responsibility Report. We could monitor the company’s progress on certain commitments to see if they have been met. The company reports one of the three statuses – met, in progress, unmet – for each said goal. Many of the stated goals are long-term goals, so from the report we would be able to tell if the company is still on track to meet that goal year on year. However, if we wish to find out exactly how far the goal is in progress, we would probably need to enlist the help of relevant consumer watchdog groups to elicit numbers and data from the company. There are also some goals which we can easily tell if they have been met or not. For example, it aims to retrofit more refrigerated display cases in US stores with energy-saving LED lighting, and stock more energy-saving compact fluorescent light bulbs. Progress on such goals can be charted through observation year-on-year. 4. Walmart’s Sustainability Index is intended to provide a consumer-facing ranking of a product’s sustainability across its production life cycle. a) Would this ranking influence your buying decisions? Yes, but there are other factors involved. It will have to depend on the price and my current loyalty towards certain brands. b) Why or why not? I would personally go for a product if I know it employs sustainable business practices – whether it is environmental or social. However, if that means the product is going to cost significantly more than what I am used to paying, I would probably think twice. For example, if a pack of coffee powder usually costs $10, I would probably not make the switch to a Fair Trade Certified one which costs $15. Also, if I am already very loyal to particular brands of products, it would be hard for me to switch to another brand just because it utilizes sustainable production methods. For me, price and brand loyalty are big considerations when it comes to buying decisions. Case Study: 6 Retailing in India-Impact of Hypermarkets SUMMARY: International retailers are slowly making their way into India. India’s government allows foreign companies to open only single-brand stores. Walmart, Tesco, and Carrefour have opened hypermarkets in India, but doing so was not an easy process. The history of India contains a wealth of change and alteration, and the modern era is no different as the country blossoms into a major player in the global economy. Sizable economic growth during the past decade, particularly in the retail sector, has changed the way consumers behave. Although the size of the current Indian retail sector is impressive, its potential really speaks to what retailing will mean in the future. The retail market in India was approximately $353 billion in 2010, and by 2014 it will reach $543 billion in total sales, of which modern retailing accounts for 27 percent. Before 2000, Indian consumers generally purchased many of their retail goods from local momand-pop stores called kiranas, which sold mainly provisions and groceries. Shopping at kiranas is easy and convenient, because the small stores serve specific neighborhoods and establish personal relationships with their customers. There are over 300 hypermarkets and 6,800 supermarkets in India. India has been experiencing 20 percent annual growth in retail markets. Most kiranas cannot compete with hypermarkets, because these larger retail outlets create more efficiency within the supply chain. Much local produce in India currently gets wasted, because the country lacks sufficient infrastructure. The lack of infrastructure underlies a related issue facing hypermarkets. Unlike in Western nations, India’s rather poor roads and transportation systems do not allow retailers to locate on large plots of land on the outskirts of town, since fewer consumers can reach them. Furthermore, because hypermarkets offer potential benefits for both the economy and the national infrastructure, local governments generally support the arrival of a hypermarket. The ultimate target market, however, is not the government but the consumers, and just as in any country at any time, the challenge lies in understanding what those consumers want and how to get it to them. DISCUSSION QUESTIONS 1. How might a hypermarket located in India appeal to consumers and orient them to shopping in larger stores? 2. Is the Indian government’s willingness to spend $500 billion to improve the nation’s infrastructure good news for international retailers? Why or why not? 3. Identify the main changes that mark Indian consumers. How can international retailers learn more about India’s youthful demographic? ANSWERS: 1. How might a Hypermarket located in India appeal to consumers and orient them to shopping in larger stores? Despite the economic growth that the hypermarkets are expecting to benefit from, they still have to plan the strategy to increase the sales and deal with all the cultural and ideological issues they have started among the Indian people. But to catalogue all your customers as equal is such a mistake in a very different demographic market, that’s why my view of making the hypermarkets appeal to customers is separating my costumers in two major groups, youngsters and adult people. As written in the case study, half the population of India is younger than 25, this should definitely be a consideration in planning my strategy. Due to the increasing spending of this segment, hypermarkets should study the buying behavior and offer what youngsters consume, for example offer a good assortment of office/school supplies for India has the third largest educational system in the world, or initiate a student discount. By knowing this segment hypermarkets can gain loyal consumers, that want to be treated as young adults. Finally for this segment we can orient them to stay longer and buy more from us by adding popular amenities that young people are attracted. Food and technology are the categories that youngsters spend more of their allowance each month. Adding food/cafes within the hypermarkets can make them stay longer in our stores, and offer technological devises can redirect their expenses to our pockets. In the other part we have the adults to appeal and orient them to our cash registers. So we want them to spend a lot of their time in our stores, but they are busy people too. Hypermarkets have to reduce their chores for them to stay longer. First of all Indian families can go from 3 members to 10, this is a big problem when they have to leave home to get their groceries. A service of childcare or a secure playground can be offered for them to experience a long stay in our store Another appeal we must communicate to this adult segment is that inside our hypermarket they will find everything they need for their homes. As time is one of their big concerns, they will have to go only to one place to buy all they want. Finally a way that always work for youngsters and adults is to have a free wifi service. Young people can’t live without their cellphones, they even would buy something to be in the wifi zone. Adults can benefit from this by being connected to their important mails or messages they can receive inside the store. 2. Is the Indian government willingness to pay $500 billion to improve the nation infrastructure good news for international retailers? Why or why not? Well yes and no, it depends on where is the government planning in getting the money. If the government will totally assume the cost of the infrastructure improvements it would be spectacular news for retailers. All the problems cause by this factor such as produce waste, high operational cost, transportation, local stores displacements, and even refrigeration will be solve by the improvement in the system. When international retailers enter the market there will no longer be any surprises of granted amenities missing for them to operate as planned. But if the government is planning in get the $500 billions taxing the retailers for the improvements, it can be a serious problem if they are not previous informed, or if that money is not well spend. 3. Identify the main changes that mark Indian consumers. How can international retailers learn more about India’s youthful demographics? India consumption is highly changing. With the young generation conforming half of the total population, consumer habits and preference are going to make a 360 degrees turn. As they are so much open to new innovations and ideas, thank to globalization and trends, retailers will have the hard task to satisfy them by offering fashioned, trendy, and high design products in their perches. The Indian consumers are opting for a more organize stores with broad assortment and variety, although they acknowledge that kiranas are important part of their culture, they realize that this kind of store can no longer satisfy them in the best way. International retailers must find a way to know how the young people of India consumes. Youngsters in this country commonly receive an allowance from their parents each week, that’s the key to know what they buy and how they buy. Retailers can also get information from the Indian Census information that contains the history of demographics of the country. Also a market research can be done as questionnaires and surveys are highly recommended in demographic studies.