Walmart’s Acquisition of Flipkart

Recently I came across the news that global retail company Walmart is going to buy India’s biggest retailer flipkart by paying $16 billion for a controlling stake of 77% (Pham, 2018). However, I also read about the flipkart that it widens up its losses to 68% in FY 2017 and its valuation fell to $11.6 billion. I observed that why an international retail company is going to buy a company which is recently suffered huge losses which led me to think that this acquisition can be part of Walmart’s global strategic move. Walmart is an American multinational retail corporation which operates a chain of hypermarket, discount department stores and grocery stores and it has 11,718 stores and clubs in 28 countries operating under different names ("Walmart", 2018). Whereas, Flipkart is an Indian electronic commerce company based in Bengaluru, India. It expanded its products from books to consumer electronics, fashion and lifestyle products and it held 39.5% market share of India’s e-commerce industry. Flipkart acquisition by Walmart would be country largest acquisition and world’s biggest purchase of an E-commerce company. This deal will include $ 2 billion fresh investment which will gear up flipkart’s value to $22 billion which could be Walmart’s strategy to take on its rival amazon global expansion ("Walmart acquires Flipkart for $16 billion in world’s largest ecommerce deal", 2018). However, it is assumed that Walmart is going to use flipkart expertise to strengthen its global expansion.

Course concepts

To start with Acquisition, which is an economic activity that creates synergies, economies of scale and increase market power and contributes to economic growth. It happens when an acquiring firm holds a significant ownership interest in the target firm by buying the target's assets or equity, which plays an important role in future growth. However, Flipkart acquisition by Walmart is consider as largest acquisition and biggest purchase which will provide access to Walmart to most attractive retail market in size and growth rate which Walmart was trying to crack down since long but was not able due to regulations. My personal learning is that I used to think that acquisitions are just collaboration of two organizations but in reality there are always strategic motives behind that which makes sure firm’s future growth and it can be entry method for the acquirer to get access to compete globally by shifting resources into higher potential markets.

Other concepts are Supply Chain Management system and Resources and capabilities variables. Supply Chain Management is an active supply chain of activities like product development, sourcing production and logistics as well efficient information system to co-ordinate these activities. Whereas resources are assets, firm’s attributes, information, knowledge etc. which helps to implement strategies that ability to integrate improve its efficiency and effectiveness and capabilities are firm’s different resources to provide valued products. While as an acquirer, Walmart is looking forward to implementing its superior supply chain management system to bring expertise in online groceries and a strong food supply chain to become best food retailer in the world as this big retail company operates 11,000 stores in 27 countries all over the world and manages an average of $32 billion in inventory. However, Walmart consider flipkart’s eco -system as a true advantage of its resources and capabilities due to its strong hold on Indian E-commerce. Which consists; General Merchandise as mainstream business, apparel business Jabong and Myntra as complimentary platform, its Unique logistic network as trading platform. As regard of my learning experience, I think concepts like supply chain management and Resources and capabilities variables were not clear to me and were new to me, but I got a clear picture of all these concepts during the class and discussions based on articles. All the concepts have interconnectivity with acquisition. Mergers and Acquisition decisions or entry modes for global expansion are always driven by the implementation and consideration process. An acquirer always considers resources and capabilities variables, Technological advancement of the target company because every acquisition or merger has strategic motive of future growth.

Sources of learning

I think, it is important to mention that I learnt most from Professor Bonita as she has vast Knowledge and experience in this area. The slides related to stories and incidents of her international research and the videos she uses to show in class always kept me interested to learn the concepts behind that. The class discussions and the articles I read, that encouraged me to learn all the concepts and positively contributed my interest towards this subject. Though, I was reluctant to participate in discussion but gradually I increased my knowledge and I started participating in discussions. I became familiar with the foundations of global strategic management through reading articles and case studies. Moreover, all the Course materials is comprehensive, informational, and practically driven by real-life case studies of international firms. The weekly IB question always challenged me to push my thinking beyond the wall though I couldn’t perform too good in those, but I learnt to see the global movements and international deals of multinational companies from an analytical perspective. For example, IB question related to Tencent holding limited, Disney and GitHub etc. compelled me to think critically and put a lot effort to understand the concepts. Most of the Basics concepts I understood in depth while doing IB question four, Tencent Holdings Ltd. I learnt PESTEL factors, Growth strategies, Porters five forces and firm’s core competencies, VRIO in this IB question. However, I got to learn about organizational restructure and acquisitions impact in Disney IB questions. Besides this, it also enhanced my research skill by researching the concepts and their implementation and impact as a global strategy which brainstormed my mind and improved my analytical skills.

Conclusion

However, I found this course highly informative and I believe that my knowledge and skills have increased while pursuing this course and doing all the assignments so far. I updated my knowledge about institutional and industrial factors that influence global strategies. I expanded my knowledge on the process of internationalization for a firm and role of subsidiaries in that using their core competencies and managing the supply chain management globally while implementation of knowledge management efficiently to become innovative. And for this purpose, how firms change their organizational structure and take decisions of mergers and acquisitions in terms of being global. I always wondered about how international firms like MacDonald’s, KFC Amazon, and Walmart etc. expand their business globally so easily whenever I heard about any big multinational deals or mergers, but I never had any idea that there are lots of concepts, strategies, and factors that is crucial for any multinational company for international expansion. However, I am surprised to realize that all these concepts are complicated to implement while internationalization of a firm. This is because when a company operates in home country it is easy to take decisions but on the other hand it is difficult to implement decision globally due to different institutional and industrial factors. Now I think that global market has become more competitive due to increase focus of globalization, advance technology, and internet. This has huge impact on the multinational companies for their international expansion. I believe the importance of creativeness and “out of box thinking” is very critical to understand and adapt necessary attributes of global strategy.