Essay: Flipkart Acquisition By Wal-Mart - Event Analysis And Evaluation.

Discuss about the Regional Integration And Sustainable Development.

Wal-Mart Stores, Inc. is an American communal organization that operates a chain of warehouse supplies and a vast discount retail stores. In 2010, it was the world's biggest public corporation by revenue, according to the Forbes worldwide 2000 for that year. Sam Walton founded the company in 1962, amalgamated on October 31, 1969, and operated on an open market on the New York Stock Exchange in 1972. It headquartered in Bentonville, Arkansas, is the leading majority private employer and the biggest supply retailer in the United States (Deresky, 2017).

It also possesses and controls the Sam's Club retail distribution centres in North America. It had turned out to be one of the biggest grocers in the United States. They give prominence on cost controls (e.g. Low-cost imports), customer consideration (e.g. Direct mail advertising), and efficacies in its distribution system (e.g. provincial warehousing) assisted to turn into the main retailer in the United States in 1990 (Bureau, 2018). It relocated into international markets with the opening of a hoard in Mexico, and development sustained, through either new stores or the attainment of established retailers, in countries, for example, the United Kingdom, China, Canada, and Germany (Kaelberer, 2017.).

In the following, an effort has been made to describe the event/action related concepts, shareholders involved and critical analysis to relate it to international business practice.

US retail huge Wal-Mart Inc. will pick up a 77% stake in largest online retailer Flipkart for $16 billion, effectively analysing  which is the country’s biggest acquisition and the world’s major acquisition of an e-commerce organization. It will incorporate $2 billion of a renewed venture as looks to take on rival worldwide development, securing the worth of Flipkart at $22 billion. Plans to use Flipkart’s capability to develop internationally and assured personnel that its start-up philosophy will be strengthened (Bloom and Hinrichs, 2017).
It presently holds approximately 77 per cent of a Flipkart, while other stakeholders, comprising co-founder Binny Bansal, Microsoft Corporation, Tencent, and Tiger Global, hold the rest of the business. Wal-Mart’s investment incorporates $2 billion of new equity funding to aid in accelerating the development of the Flipkart business and both the two organization will hold their unique brands and working structures. Both the companies will accomplish the objective by working together than separately to contribute effectively to the economic growth and creating a strong framework. It will benefit by providing quality, reasonable goods for customers while creating new talent and prospects for suppliers. As an organization, they are changing globally to make life considerably less demanding for customers (Spicer and Hyatt, 2017).

Stakeholders involved

One of our commitment series of forums are devoted to progressing our stakeholder engagement, which includes-

• Employees- The first group to contemplate relates to the impacted personnel, as even the best approach will fail if it does not reflect the people needed to perform it. Flipkart personnel have a purpose to applaud as they can now assume enormous expenses in the form of employee stock options because of the organization assessment growing from $11 billion to $20 billion. There is also the possibility of better career progression for employees. Employee commitment to an amalgamated firm is lowest following an acquisition and enlarged employee turnover, which is an essential suspect in deprived acquisition act. In other words, they have to take the necessary steps to address the distresses of their personnel so that they will likely to discover the associated issues(Dorobantu and Odziemkowska, 2017).
• Competitors- Often competitors are the main stakeholders that treat the inevitable distraction of joining firms as a prospect. Wal-Mart’s biggest opponent and one of the market leaders is Amazon, which offered a rival deal to FlipKart. Accordingly, competitors also effectively recruit from the personnel and customers of firms associated with a merger when those organizations are most vulnerable(Martínez, Galván and Alam, 2017).
• Customers- The firms often give attention to internal issues during incorporation at the expense of peripheral market issues, and customers of both target and acquirer firms are sometimes disregarded. The consequences could be beneficial to the consumer; superior improvements and philosophies will lead to enhanced products and services. Wal-Mart power will help to moderate costs and therefore get down the expenses of products. They may also capitalize in infrastructure like warehouses, expertise and delivery solutions that will give benefit to customer satisfaction, faster delivery of goods and reach to the customer.
• Advisors- Advisors are also an important stakeholder, which incorporates an external viewpoint, can empower better acquisition decisions. This turns into a significant consideration as the primary advantage involves faster access and speed to needed assets than internal development. A group of specialists can enhance this move(Chidananda, Sagnika and Sahoo, 2017).
• Associates- It will provide better opportunities and build a strong business with a committed and experienced management team having a strong market and e-commerce proficiency. It may essentially open up a very viable path for Wal-Mart to develop its business in the nation and to become a leading player in the retail business.
• Communities- It will enhanced Job-creation and support farmers and advance supply chains. They will now presently support women entrepreneurs and reinforces global portfolio. It will also produce long-term value and attractive development market, which performs on committed global strategy.
• Government Regulators- Global retail giant Wal-Mart has approached them for approval of its proposed acquisition.  As the proposed transaction will be affected, so the pursuant to the share acquisition agreement, the share issuance, and attainment agreement will be done by both the subsidiaries(Cravino and Levchenko, 2017).

An acquisition is considered a friendly acquisition in which this deal brings with it the much desirable capital investment into the country, which would enhance the investment prospects. They notified its investors that the acquisition would decrease its net income as a minimum rate of $750 million this year and double the sum next year. It has frequently lost balance in its e-commerce attempts in the United States (Clougherty, Kim, Skousen and Szücs, 2017). The organization will shed its start-up tag and turn out to be part of an international giant. It will enhance to the business of Flipkart as Wal-Mart has the expertise to control over its competition. It is probable to gain access to fresh markets incorporating into advanced economies. Therefore, acquisition becomes the giant step for businesses when they propose to enter into the international market. In order to occupy the market directly, it is required for the companies to acquire a firm, which has previously entered the market (Baylis, Smith and Owens, 2017).

• Globalisation-This is the greatest deal in start-up history, globally. In one swoop, the $16 billion arrangement has wiped out all the misfortunes of investors in the start-up framework. This establishes the accreditations of the entrepreneur and the market to handles the globalization of commerce by the company‘s growth to foreign markets. It is the most significant factor in a firm‘s international development. It mainly states how companies get access to new geographical markets, and how they initiate their trades and eventually sustain their position in foreign markets (Haynes, Hough, Malik and Pettiford, 2017).
• Market Integration- Market integration for businesses has become significant for their success. In order to attain acquisition‘s cause, acquiring companies have to contemplate the element of the global marketing environment.As a business, they are transforming internationally to encounter and exceed the wants of customers and look forward to developing in this critical market. It will benefit them by giving quality, reasonable goods for clients while enhancing new skilled jobs and fresh prospects for women entrepreneurs, providers, and farmers. One of the main challenges for the organization is to develop an integrated strategy across worldwide markets. They should understand the divergent levels of development so that they can fulfil the demand, competing with firms, and obtain benefits (Bende-Nabende, 2017).
• Technological factors- Factors also influence international business practice, which involves technology, is a macro-environmental factor that affects business in international development. It also influences the advancement of products to explore. The capability to accumulate a collection of data on business sectors, control the management adequacy and carry out the business function universally and can be enhanced with the advancement of electronic communications(Tang and Girotra, 2017).

These are the theories that suggest that it achieves levels of activities and enhance economies of scale. It incorporates the concept of complementary abilities. It would result in operating synergy and can effectively spread their venture and risk among industries. It will influence a company’s future progress of internationalization. Among the diverse entry methodologies of internationalization, to implement the economies of scale in internationalization, various multinational firms are increasingly embracing the mode of acquisition.

It gives a detailed discussion on the acquisition of Flipkart by Wal-Mart that seems equitable and contributes to the global economy. Wal-Mart’s stake in Flipkart will assist the organization in bolstering its presence in the quickly developing e-commerce market. However, stakeholders seem nervous as the huge investment in a Flipkart is estimated to weigh on Wal-Mart’s profits for quite a while. Subsequently, Wal-Mart’s dividends lost 3.1%, reflecting stakeholders’ concerns over the sustainability of the deal (Kamble and Walvekar, 2017).

Wal-Mart intends to channelize ventures towards leveraging the favourable circumstances offered, including an entirely of USD 2 billion in new equity to quicken Flipkart’s growth. As Wal-Mart scales in India, the organization will continue to collaborate to generate sustained financial development across food, agriculture, and retail. On the forefront, the organization is looking at widespread job creation through the advancement of supply chains, business opportunity, and direct employment. The company foresees these losses to narrow and comes back to be better in the mid to long-term when efficiencies and scales are realized. Particularly, the move is probably going to enable Wal-Mart to expand its presence amongst the most promising retail markets in the world, while it will likewise enable Flipkart to enhance customer service and increase its business. In fact, Wal-Mart’s support may also help Flipkart to change into “publicly-listed subsidiary” in the end.

Concepts and theories

Wal-Mart is certain to tap the long-targeted market, where it presently operates on an inadequate scale. Despite the fact that Wal-Mart already activates under 21 wholesale stores, its capability to establish its own stores gets confined by the huge costs related with setting up stores in a nation alongside certain limitations on foreign possession for multi-brand retailers. Therefore, Flipkart seems to be the correct alternative for the retail giant to reinforce its international presence, expand its e-commerce business and enhance its position (Sarkar, 2018).

While it also recently decides to shut its first-party e-commerce company in Brazil. These moves imitate the company’s venture to shift focus from failing to meet expectations areas to markets with high development potential. Evidently, the U.S. enormous retailer has been expanding in China, as clear from its alliance with other companies as well as its moves to strengthen in Asia’s biggest country.

Moving back to Wal-Mart’s attention, the takeover of the popular stake in Flipkart will also support by boosting its staple business. Flipkart, which offers nearly everything extending from cosmetics to electronics, has been focusing on the nourishment and basic supply space. At such a point, investment from Wal-Mart is probably to be a perfect decision, given its vast involvement in the space. It will create jobs, support agriculturalists, enhance supply-chain network and back small industries (Chan and Fung, 2017).

It is expected that both businesses are ultimately profiting from each other’s assets. Despite the fact that Wal-Mart may confront a few hurdles in the short-term, the long-term visions from this contract are quite encouraging. In addition, Wal-Mart’s strong financial position keeps it stimulated about enduring with its share repurchase proposal and holding its solid credit status. Wal-Mart would give them not just more resources for the battle as well as formidable with extraordinary involvement in retailing and logistics. The transaction is set to achieve a big variation in the retail sector. While Wal-Mart is certain to convey its cut-price diversion, as that may counter, push and confirm that merchandise costs are even lower. This has been a great move taken by them to focussing on strengthening its business to generate success and growth in the overall market which not only boost up customers’ satisfaction but also deliver efficient product and services. It will shake up one of the most prosperous and exciting e-commerce markets in the world (Palit and Choudhury, 2018).

Conclusion

It may be concluded with crucial deviations and expansions in the acquisition, it is hoped that it will be magnificently and efficiently achieved and executed to solve the basic concerns associated with the monetary uncertainty in the world. Wal-Mart is ventured to be in development with Flipkart around a potential acquisition of a major stake in India’s prominent online retailer. It has been understood that it could be an articulation point for the e-commerce market. It is believed that once a customer has been online for over five consecutive years, they are more expected to buy online. However, the combining together of the two will probably face inspection from the Competition Commission of India (CCI) since the mutual entity will be a dominant participant in the market.

Critical analysis

It will unlock the booming E-commerce market for the world’s biggest offline retailer. It is locked on an intense battle for authority in the market and have directed in billions of dollar towards advertising and setting up infrastructure in the nation. They both have competitors in the international market and remain the largest retailer in the world; it has struggled to replicate the success in the online retailer market and international business. As it, not only add substantial financial benefit but also able to influence Wal-Mart’s famed worldwide supply chain and improve efficiency in the product variety.

References

Baylis, J., Smith, S. and Owens, P. eds. (2017) The globalization of world politics: an introduction to international relations. 7^th Ed. U.K: Oxford University Press.

Bende-Nabende, A. (2017) Globalisation, FDI, regional integration and sustainable development: theory, evidence and policy. 2^nd Ed. London: Routledge.

Bloom, J.D. and Hinrichs, C.C. (2017) The long reach of lean retailing: Firm embeddedness and Wal-Mart’s implementation of local produce sourcing in the US. Environment and Planning A: Economy and Space, 49(1), pp.168-185.

Bureau, E.T. (2018). Walmart acquires Flipkart for $16 billion in world’s largest ecommerce deal. [online] Available from: https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/walmart-acquires-flipkart-for-16-bn-worlds-largest-ecommercedeal/articleshow/64095145.cms [Accessed 23/08/2018]

Chan, J. and Fung, H. (2017) Rebalancing competition policy to stimulate innovation and sustain growth. Asian Journal of Law and Economics, 8(1).

Chidananda, H.T., Sagnika, S. and Sahoo, L. (2017) Survey on Sentiment Analysis: A Comparative Study. International Journal of Computer Applications, 159(6).

Clougherty, J.A., Kim, J.U., Skousen, B.R. and Szücs, F. (2017) The foundations of international business: Cross?border investment activity and the balance between market?power and efficiency effects. Journal of Management Studies, 54(3), pp.340-365.

Cravino, J. and Levchenko, A.A. (2017) Multinational firms and international business cycle transmission. The Quarterly Journal of Economics, 132(2), pp.921-962.

Deresky, H. (2017) International management: Managing across borders and cultures. 6^th Ed. New York: Pearson Education.

Dorobantu, S. and Odziemkowska, K. (2017) Valuing stakeholder governance: Property rights, community mobilization, and firm value. Strategic Management Journal, 38(13), pp.2682-2703.

Haynes, J., Hough, P., Malik, S. and Pettiford, L. (2017) World politics: International relations and globalisation in the 21st century. 2^nd Ed. London: Sage.

Kaelberer, M. (2017) Wal-Mart goes to Germany: Culture, institutions, and the limits of globalization. German Politics and Society, 35(1), pp.1-18.

Kamble, A.A. and Walvekar, S. (2017) Policy Regulations in E-Commerce Sector-Critical Analysis of FDI Guidelines for Market Place Model. Journal of Commerce and Management Thought, 8(3), p.409.

Martínez, A.B., Galván, R.S. and Alam, S. (2017) Financial Analysis of Retail Business Organization: A Case of Wal-Mart Stores, Inc. Nile Journal of Business and Economics, 3(5), pp.67-89.

Palit, A. and Choudhury, R. (2018). Walmart’s Buyout of Flipkart: Implications for Indian E-commerce Landscape. National University of Singapore,572, pp. 29.

Sarkar, A. (2018). Acquisition of Flipkart by Wal-Mart. Economic & Political Weekly, 53, pp.26-27.

Spicer, A. and Hyatt, D. (2017) Walmart’s emergent low-cost sustainable product strategy. California Management Review, 59(2), pp.116-141.

Tang, W. and Girotra, K. (2017) Using Advance Purchase Discount Contracts under Uncertain Information Acquisition Cost. Production and Operations Management, 26(8), pp.1553-1567.