Last week the Sensex increased 404 points in one day on the news that India was opening its doors to foreign companies. India is currently going through its industrial revolution as we have seen with developed countries such as the US and UK. The average age in India is 25 years old and has a population of 1.2 billion people. As more individuals enter the workforce and India becomes more urbanized individuals will be earning more and consuming products such as housing, cars televisions etc. for the first time. By allowing foreign retail firms into India will speed up the process in its development.
Wal-Mart was the first multinational company to jump on the news that India is opening up its doors to foreign retail markets. Wal-Mart plans to be operating in India within the next 12 -18 months. Last week there was an announcement that foreign firms will be allowed a “ majority stake in multi-brand store for the first time.” Prior companies such as Wal-Mart were only allowed to operate as wholesale outlets. Opponents are worried that this move will hurt India’s job market and mom/pop shops. Advocates believe this will open India’s doors and attract new business as well as decrease current food prices.
Following Wal-Mart, Starbucks announced it’s going to open its first outlet in India by the end of October. Starbucks has been looking to expand globally targeting Asia, particularly China. They expect China will become their largest consumer outside the US by 2014. In India “ coffee has changed from becoming a traditional beverage consumed mainly in South India, to a mainstream beverage nationally. (Panchal, 2012)” Part of the reason is due to the fact that there have been lifestyle changes and rising incomes. Taking into account the population size, growing popularity of coffee and rising incomes India is expected to be a large market for Starbucks in the long-run.
Kinetz, E. (2012, Sept 21). Wal-Mart to open retail outlets in India within 18 months after gov’t allows in foreign firms. Canadian Business. Retrieved September 24, 2012.
Panchal, S. (2012, September 28). Starbucks to Open its First Cafe in India Next Month. The Globe and Mail. Retrieved October 1, 2012.