January 10th, 2018
Sociocultural and ethical implications of entry of big retailers in India
The entry of big retailers would affect the sociocultural status of the country by reducing the extent and nature of interactions that occur in the market place. The small retailers offer a place for customers and retailers to foster social interactions. This is for instance evident in a case study that highlights how shoppers visit the malls only to review the prices then proceed to purchase from the small retailers (Srivastava 2009). Such market places thus serve as a place to build social relationship and trust, which the retailers for instance use to offer goods on credit to their customers. However, with enhanced penetration into the market and implementation of home ordering and delivery services, advantages that small retailers offer over the large retailers decline. Accordingly, such efficiencies could facilitate cultural transformation that diminishes the extent of social interactions that occur in open markets.
The entry of large retailers also poses ethical challenges regarding their business practices. In pursuit of cost leadership strategy, big retailers have resisted aspects such as unionization of employees while failing to address workers’ concerns in some of their markets (Zellner 2002). Replication of such strategies in the Indian market would present challenges to the implementation of policies that seek to better employees’ working conditions.
Conclusion and Recommendations
The opening of the Indian retail market to foreign investment provides opportunities for large retailers to enter the market. This paper evaluated the benefits and disadvantages that follow such entry. Entry of the large retailers would improve the supply chain and enhance farmers’ incomes by providing a direct market that avoids middlemen. Such retailers would also enhance the quality that customers get by reducing wastage through their cold storage facilities. However, the big retailers could result into the exit of small retailers that are a core source of employment in the Indian retail sector.
The Indian government should allow entry of such retailers but restrict their expansion to large cities. This would help to streamline the supply chain while providing adequate opportunities for small retailers in locations away from the cities. It would also offer alternative markets for suppliers thus avoiding their exploitation by middlemen or large retailers who gain enormous purchasing power. By enhancing competition, such entry would also encourage all retailers to enhance the service they offer to the customer.
For big retailers, India offers a good opportunity for growth. They should thus enter the market but use modes such as joint ventures to minimize liabilities associated with a diverse culture. Restriction of their initial stores within large cities would also help the retailers since the cosmopolitan population in such areas would be more receptive to and have the resources that enable strategies such home ordering and delivery services.
Basker, E 2004, Job creation or destruction? Labor-market effects of Wal-Mart expansion. Viewed 8 March 2012 < http://188.8.131.52/eps/lab/papers/0303/0303002.pdf>.
Business Monitor International Ltd 2012a, ‘Market overview’, India Retail Report, vol. 3, no. 1, pp. 10 – 17.
Business Monitor International Ltd 2012b, ‘Political overview: domestic politics’, India Defence & Security Report, Q1, no. 1, pp. 76– 86.
Economist Intelligence Unit Limited 2011, ‘Opening up? India is once again toying with the idea of opening its retail market to foreigners. If it does, plenty of global retailers will be lining up’, Business India Intelligence, 27 July. viewed 9 March 2012 from Ebscohost.
Kumar, M 2012, ‘India opens door to foreign supermarket chains’, Reuters 24 Nov., viewed 08 March 2011 <http://www.reuters.com/article/2011/11/24/us-india-retail-idUSTRE7AN1V120111124>.
Neumark, D, Zhang, J & Ciccarella, S2008, ‘The effects of Wal-Mart on local labor markets’, Journal of Urban Economics, vol. 63, no. 2, pp. 405 – 430, doi:10.1016/j.jue.2007.07.004
Lapoule, P 2010, ‘Carrefour and its competitors in India’, Management Decision, vol. 48, no. 3, pp. 396 – 402, Emerald, doi: 10.1108/00251741011037765
Srivasta, M 2009, ‘Big retailers still struggle in India’, Bloomberg Businessweek, 16 October, viewed 9 March 2012 <http://www.businessweek.com/globalbiz/content/oct2009/gb20091016_385819.htm>.
Thenmozhi, SP & Dhanapal D 2011, ‘Unorganised retailing in India – A study on retail service quality’, European Journal of Social Sciences, vol. 23, no. 1, pp. 68 – 75.
Thriving in the shadow of big retail 2009, Business Today, 28 June, viewed 07 March 2012 from Ebscohost.
Zellner, W 2002, ‘How Wal-Mart keeps unions at bay’, Business Week, 28 Oct.