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walmart case analysis

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Suryakant Ojha
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Case Analysis: Walmart's Acquisition of Flipkart

In May 2018, Walmart acquired a 77% stake in Flipkart for $16 billion, marking the largest
acquisition of an Indian company and the largest global e-commerce deal. This strategic move
signaled Walmart’s intent to compete with Amazon in India, a burgeoning e-commerce market
expected to grow significantly. The acquisition aimed to leverage Walmart's retail expertise and
Flipkart's technological prowess, positioning both to expand market share.

Key Strengths of the Deal

1. Access to Indian Market:


India’s e-commerce market offered immense growth potential, projected to double from $20
billion in 2017 to $40-$45 billion by 2020. Flipkart, with a 31.9% market share, provided Walmart
with a strong foothold in a country where regulatory restrictions on foreign investment in retail
made standalone operations difficult.

2. Technological Synergy:
Flipkart brought deep expertise in logistics, payment systems, and last-mile delivery,
complementing Walmart’s global supply chain capabilities. Walmart sought to use Flipkart as a
"key center of learning" to enhance its global e-commerce operations.

3. Strategic Competition with Amazon:


By acquiring Flipkart, Walmart directly challenged Amazon, which had invested heavily in India
since 2013. Flipkart’s established brand and diversified business units, including Myntra and
Jabong, offered competitive advantages.

4. Financial and Structural Integration:


Walmart retained Flipkart's brand and operating structure, mitigating risks of disrupting its
entrepreneurial culture while ensuring operational continuity.

Challenges and Risks

1. Cultural Clashes:
Walmart’s cost-conscious, hierarchical culture contrasted sharply with Flipkart’s dynamic,
entrepreneurial ethos. Managing these cultural differences without demotivating employees was
crucial to ensuring integration success.

2. Financial Viability:
Despite Flipkart’s leading position, it incurred significant losses, with consolidated losses
increasing from ₹52.16 billion in FY 2015/16 to ₹87.7 billion in FY 2016/17. Achieving
profitability in a highly competitive and price-sensitive market posed a challenge.

3. Leadership and HR Concerns:


The exit of co-founder Sachin Bansal and anxieties among Flipkart employees over Walmart's
reputation for layoffs and cost-cutting created unrest. Effective communication and integration
were critical to maintaining morale and productivity.

4. Competitive Pressure:
Amazon's aggressive investments in India necessitated continuous innovation and competitive
pricing by Walmart-Flipkart. Retaining market leadership required heavy capital infusion and
strategic agility.

5. Regulatory and Operational Challenges:


India’s regulatory framework for foreign entities and high real estate costs for physical retail
expansion added complexity. Walmart needed to navigate these challenges carefully to avoid
past missteps in markets like Germany and Korea.

Strategic Recommendations

1. Cultural Integration: Establish mechanisms for cultural blending by retaining Flipkart’s


entrepreneurial practices while introducing Walmart's operational discipline. Encouraging
mutual respect between teams is essential.

2. Talent Retention: Address employee concerns by offering competitive compensation


and growth opportunities, especially through employee stock options and training.

3. Investment in Innovation: Prioritize technological and logistical innovations to enhance


customer experience and sustain competitiveness.

4. Regulatory Compliance: Work closely with policymakers to navigate India’s complex


regulatory environment, ensuring long-term operational viability.

5. Sustainability and ESG Initiatives: Position Flipkart as a leader in sustainability,


leveraging growing consumer interest in eco-friendly practices.

Conclusion

The Walmart-Flipkart acquisition was a high-stakes, strategic move to dominate India’s


e-commerce market and counter Amazon’s global growth. While the deal aligned with Walmart’s
globalization goals, its success hinged on adeptly managing cultural integration, financial
performance, and operational challenges. Through collaborative efforts, Walmart and Flipkart
could redefine the e-commerce landscape in India, setting benchmarks for cross-border
acquisitions.

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