2013

University of Wollongong Dubai Submitted by Fatima Furniturewala - 3383192 Omar Najeeb Khan – 102879 Yelena Demyanova- 4311796 Ziyad Kazi- 3344976

[COUNTRY NOTE:UAE] This document cover the controllable and uncontrollable factors from an international marketing point of view, which are critically evaluated in context to UAE's market development and entry strategies.

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Contents

1. Executive summary .....................................................................................................................4

2. Introduction................................................................................................................................6

About Walmart........................................................................................................................6

About United Arab Emirates (UAE) ...........................................................................................6

About Dubai ............................................................................................................................7

About Retail industry in UAE ....................................................................................................7

UAE Specific Elements..............................................................................................................7

3. Cultural Forces ............................................................................................................................7

Geography and Infrastructure ..................................................................................................7

Political Forces ........................................................................................................................8

Legal Forces ............................................................................................................................8

Business customs and practices ................................................................................................8

Living Conditions .....................................................................................................................9

Economic Forces......................................................................................................................9

Income and Wealth .................................................................................................................9

Labor Force ........................................................................................................................... 10

Trade Restrictions.................................................................................................................. 10

Balance of Payment ............................................................................................................... 10

4. Market Audit and Competitive analysis....................................................................................... 11

Wal-Mart's Business Strategy in UAE ...................................................................................... 11

SWOT Analysis....................................................................................................................... 12

Products and Services ............................................................................................................ 12

Core Products .................................................................................................................... 12

Augmented Product: .......................................................................................................... 13

The final augmented product is the retail experience itself, which includes the Pre and post Purchase Services and any Ancillary services ............................................................................... 13

Packaging component ........................................................................................................ 13

The Market and The Competitive Analysis............................................................................... 13

Market size ........................................................................................................................... 15

5. Preliminary Marketing Plan ........................................................................................................ 15

Marketing Objectives ............................................................................................................. 15

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Promotional Mix.................................................................................................................... 16

People .................................................................................................................................. 18

Process ................................................................................................................................. 19

Distribution: From Origin to Destination ................................................................................. 20

Port selection .................................................................................................................... 20

Locations........................................................................................................................... 21

Distribution and Logistics ....................................................................................................... 22

Multichannel Distribution................................................................................................... 22

Fleet of Trucks ................................................................................................................... 23

Mode selection .................................................................................................................. 23

Forms of Transportation Available ...................................................................................... 23

Price Determination and Cost of the shipment of goods........................................................... 23

Total Cost till Distribution Center in Jebel Ali ........................................................................... 24

Important Considerations and Conclusion ............................................................................... 25

6. References ................................................................................................................................ 26

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1. Executive summary Walmart an American company with global operations focuses on low prices every day. In this

report we propose them to enter UAE, a fast growing economy which is one of the top 10 oil

reserve country in the world.

Primary Business Strategy at the operational level for Walmart is Every Day Low Prices Strategy

which mean it always emphasizes the need to reduce its purchasing costs and offer the best price

to its customers. Typically Walmart operation directly procures from the Manufacturers or the

Producers there by going away from the intermediaries which usually eats up around 5-10% of

margins therefore carry forwarding these margins to the customers and reduced prices. Therefore

the key value that Walmart looks at is the low price seekers how will be satisfied only when they

prices of the daily commodity items are the lowest. Making this a there operational mission

statement ensures that they whole organization strives for the same objective.

From the country specific advantages that can help the entry process we can observe the Integrated

Ports Free zones and Customs operation via Dubai Trade can help speed up the port handling

operations, while on the other hand Company Specific Advantages - Integrated Supply Chain

Network with IT enablement, is the most innovative and state or the art solutions which will help

decrease the total landed cost of the operations in turn bringing in more margins.

Identifying the correct mix is very important and pivotal for the success of the entering firm, the

only way to successfully suggest the Marketing mix is to understand and identify the Market. The

task on hand is to identify the Uncontrollable factors and the Controllable factors and come up

with the strategy to overcome the weaknesses with its strengths and energize with the

Opportunities with its strengths. Some uncontrollable elements of doing business in Dubai will

include Monarch government, geographical restrictions due to legal policy of 51% local’s

ownership in areas other than free zone and change in culture. The benefits Walmart will enjoy are

a strong infrastructure connecting entire Middle East through Dubai, high standard of living, no

language barrier, high economic growth further accelerated through expo2020 bid, multi-skil led

and talented work force and pegged currency to Dollar.

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EDLP will be a new concept in Dubai, which will be a bit difficult to achieve Sourcing can be

achieved from Pakistan, India and China for cheap food items they cannot be 100% competitive

so there is a tradeoff that needs to be done between fully discount store format or to take EDLP. It

is a difficult mix to achieve although the main emphasis in Wal-Mart is on physical retail outlets,

Wal-Mart also operates internet sites where customers can buy Wal-Mart products. Other retailers

can attempt to copy Wal-Mart's distribution processes to achieve supply chain cost reductions and

service improvements, however, Wal-Mart's distribution processes have evolved over time

through leveraging their IT capabilities to support vendor collaboration, and building scale to

support asset utilization.

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2. Introduction When a firm decides to set up its operations in a foreign country, it has to analyze the economic,

cultural and other uncontrollable country specific factors that might impact its success during the

move. It must also do a SWOT analysis to understand its position internally and scan for

opportunities in the external environment.

This report will focus on the market forces shaping UAE’s environment and a marketing plan that

Walmart must use in order to have a successful entry into UAE; beginning with the city of Dubai.

The report will look at uncontrollable elements Walmart must be aware of, followed by SWOT

analysis for the situation and then a plan focusing on the 7Ps of marketing.

About Walmart

Walmart is an American-based company that started in 1962 and now has more than 11,700 stores

across 27 countries, operating their stores under 69 different banners globally. Regardless of the

market or channel of sales, their aim is to help people save money.

Walmart employs 2.2 million associates, out of which 160,000 people get promoted every year.

For the fiscal year ended January 2013, Walmart increased net sales by 5% to $466.1 billion and

returned $60 billion to shareholders through dividends and share repurchases. (Walmart facts,

2013)

Walmart growth is built on the unique culture Sam Walton envisioned:

About United Arab Emirates (UAE)

UAE is an Arab country in the Persian Gulf consisting of seven Emirates each governed by a

hereditary emir. The country is ranked among top 10 oil reserves in the world with one of the

highest GDP per capita across the globe. Abu Dhabi is the capital city of UAE.

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About Dubai

Dubai is the second largest Emirate but has the largest population of 2.1 million inhabitants. It has

extravagantly moved from an oil producing economy into an economy of skyscrapers, abundant

wealth and booming free markets. The success of Dubai relies on central location between

continents, vigorous infrastructure, high standard of living, stable political situation, business -

friendly environment and a highly optimistic outlook; making it the business hub for re-exporting

and big investments. (Dubai.ae, 2013)

About Retail industry in UAE

The overall UAE’s retail sales were estimated to grow upto 7% from 2011 to 2015, according to

Khaleej Times. This is a due to strong growth of 33% jump in four years underlying economic

growth, increasing household consumption, growing acceptance of modern retailing concepts and

expatriate wealth. (2012) However, with Dubai winning the expo2020 bid, the retail sector is

expected to grow even faster due to 500,000 exhibitors setting up to display their business in 2020.

UAE Specific Elements

We will now focus on the uncontrollable elements including cultural, political, economic, and

competitive forces; geographical and infrastructural layout; and the structure of distribution and

technological advancements in Dubai/ UAE which can impact Walmart’s overall strategy to enter

the UAE market.

3. Cultural Forces

Geography and Infrastructure

Dubai has an urban area of 3885 sq km and the city is about 35sq m. This will become twice the

size with addition of man-made islands; the Waterfront, the three Palms, the World, the Universe,

Dubailand, also development in desert will increase. Due to its unique location it enjoys benefits

of connecting all local Gulf states as well as East Africa and South Asia which makes this location

ideal business hub. (Dubai.ae, 2013)

To attract foreign trade, Dubai invests heavily in infrastructure for transportation,

telecommunication, and industrial set up that can facilitate business not only within Dubai but also

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attract businesses across the globe to connect via Dubai. Examples include 7 industrial areas, 3

free zones, 2 seaports, 3 international airports in addition to many others. Strong services

infrastructure can be seen through several freight forwarders, shipping companies, banks, financ ia l

service firms, lawyers, accountants, consultants and agencies. Furthermore, a rare scenario in most

countries, but common for UAE is full coverage of power and utilities in the rural and urban areas

which is an added benefit for companies trading in Dubai. (Dubai.ae, 2013)

Political Forces

The form of government in Dubai is a federal presidential elected monarchy. Currently, the

monarch facilitates international business and therefore is an advantage for foreign firms, however,

due to the monarchy, there is fear of political unrest and international lobbying against the same.

This issue does not exist currently, but it does impose a threat. Abu Dhabi is a key player in Dubai

due to the bailout during crisis of $10b in Nov 2009 for Burj Khalifa. The region imposes

instability including disputes in Iran and war in Syria. However, UAE itself remains stable for

now. Political parties are forbidden in UAE and therefore fear of election issues are minimal.

Legal Forces

It is important to note that government interference in private businesses can be witnessed in

situations that can affect the country or economy. (Business monitor, 2013)

There are very well defined laws for businesses wanting to set up in UAE. A local sponsor is

required to own 51% of your business. The partner can be paid in form of a negotiable annual fee.

This makes business more affordable and strategic locations are open for the business. The local

sponsor can help with cultural know-how and sorting out problems with legal entities. In case a

company does not want a local partner, the only option is to set up in the free zone areas which are

expensive and not suited for businesses that must be located in the city.

Business customs and practices

Entrepreneurs in this region prefer to deal with people they know at a more personal level and have

trust relationship as the most important criteria. This Arabic culture is very different from the

Western Europe or American culture. (Ziegler, 2013)

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From a religious outlook, Islam is rooted in Dubai’s culture and is the way everyday life is

operated. All neighborhood have a mosque where conglomerates to go pray 5 times a day even if

it is during working hours.

Arabic is the official language of UAE, however English is widely used across the country

therefore removing language barrier for foreign businesses.

Living Conditions

Dubai’s standard of living is very high compared to other developing nations. Luxury spending

and recreational activities are the normal trends found among residents. Furthermore, Dubai has

one of the lowest crime rates in the world, which is very optimal for a retail industry setting up in

a foreign market.

Economic Forces

Dubai has a stellar record of high economic growth over the past 3 decades and the trend will

continue with the expo2020 bid that Dubai has won recently. This new opportunity will allow

25million tourists and thousands of business to set up in Dubai in the next seven years, opening

doors of opportunities for the retail and other sectors. (Gulf news, 2013)

Income and Wealth

Government control and regulation on private sector activities has been kept to a minimum to

ensure freedom in business practices. A rare situation across the globe but an advantage of being

in Dubai is: there are no direct taxes on corporate profits or personal income (except for oil

companies that pay a flat rate of 55% and branches of foreign banks that pay a flat rate of 20% on

net profit generated within Dubai). Customs duties are low at 4% with many exemptions, 100%

repatriation of capital and profits is permitted, there are no foreign exchange controls, trade quotas

or barriers and a pegged exchange rate exists between the US Dollar and the UAE Dirham

(US$1.00=AED 3.678). Liberal visa policies permit easy importation of expatriate labor of various

skill levels from almost all over the world.

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Labor Force

Citizens of UAE work in the government or semi-government sector with only a small portion

working for private sector enforced through government laws of minimum percentage of local

employees in each company. Most of the working population in private industries are professiona ls

from 200 countries across the globe with dense crowds coming in from Arabic countries,

Philippines, China, Indonesia and Malaysia. Highest contribution to the blue collar jobs is from

the Indian nationals. (World data bank, 2013)

Trade Restrictions

Another important factor when setting up in international markets is trade barriers. Dubai is seen

as a strategic location in this element due to its competitive elements unavailable in most countries.

These include no foreign exchange controls, minimal trade barriers or quotas, competitive import

duties (5% with many exemptions), competitive labor force costs available with multi skills and

languages. Furthermore, no corporate profit (except for oil companies and branches of foreign

banks) and personal income taxes is added benefit.

Balance of Payment

Current account balance of UAE is 244416 Million Dollars and the current Balance of Trade and

Payments is 470939.00. The trade surplus shows a strong financial and economic position.

(Trading Economics, 2013)

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4. Market Audit and Competitive analysis Every Day Low Prices or EDLP is the business strategy which Walmart has successfully

implemented and is being followed by its operations around the world. All operational strategies

are primarily based on the Primary Business Strategy (Wal-Mart Annual Report, 2013). Wal-

Mart's 2013 Annual Report defines this business strategy as a

Walmart achieves their EDLP strategy by doing extensive negotiations with their primary

suppliers and by managing the supply base in an efficient manner. (Chiles and Dau, 2005)

Wal-Mart's Business Strategy in UAE

We will now adapt global strategy of Walmart to for UAE. According to the Ansoff’s strategic

point of view we will be entering or creating a new market for the organization we will be primarily

providing existing products and services, this combination creates a Market Development Strategy.

This strategy directs the company to invest both financial and non-financial resources to enter new

market (in this case UAE).

After winning the World Expo 2020 bid, increased economic activity will lead to high growth rates

and consequently high inflation. High prices will encourage residents to move towards our

suggested customer value which is low prices every day.

Fig:1: Business Direction (Ansoff's Matrix)

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SWOT Analysis

Walmart is an international store that uses its strengths to offer working people with affordable

products. They meet the consumers’ needs differently in different markets.

Products and Services

Core Products

Walmart is a mass merchandiser and holds a wide variety of products. Typically there are 63

product departments within each Walmart store. Below are the list of products categories from

Walmart. (Walmart, 2013)

Grocery

Entertainment

Health and Wellness

Hardliners

Apparel

Home

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These products are not considered to be fashion-oriented or high-end therefore the value

proposition delivered will be EDLP. As an augmented service their supercenters have McDonalds,

a vision center and a photo processing center (Chiles and Dau, 2005) which is a common trend in

UAE.

Augmented Product:

The final augmented product is the retail experience itself, which includes the Pre and post

Purchase Services and any Ancillary services

Packaging component

All Packaging needs to be in Arabic and English and as per UAE laws. Suppliers must be aware

of the same.

The Market and The Competitive Analysis

As Dubai is selected to be first and the main location of Wal-Mart it need to be considered that

Dubai has very strong mall culture due to the harsh climate. Mall have become city in the city

providing entertainment experience beyond the shopping. During the workdays resident

housewives usually going with their kids to the malls to socialize with their friends, bring young

children to play with each other while the men are at work. During the weekends resident families

spend many hours shopping, entertaining kids at arcades, eating at restaurants, staying in the mall

hotels, walking around the malls.

Dubai's most prominent Malls are Dubai Mall (The largest Mall in the world), Mall of the

Emirates, Festival City Center, Ibn-Batuta Mall, Wafi Mall. These malls keep highest turnovers

and also are entertainment hubs for large number of tourists and residents of UAE. Typically most

of these Malls contain a hypermarket usually Carrefour (18 locations across the UAE) (Carrefour

UAE Corporate Website, 2013) and Lulu (43 locations across the UAE) (Lulu Corporate Website,

2013).Carrefour locates its stores only in the malls or has smaller size hypermarket stores in

populated blocks of the cities. Lulu has Hypermarkets apart from the Malls and includes food

courts, Play Areas, exchange offices in it; smaller size hypermarkets located in populated areas, as

well as hypermarkets in the Malls.

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UAE has all forms of advertising either ATL (Above the line) and BTL (Below the line), such as

high way big signboards, bridges signs, top and side of building signs, taxi and bus ads, magazines

and newspapers, radio and television, sales promotions, fliers and brochures.

ATL advertising still takes not more than 15%-20% of their marketing activities. Both Carrefour

and Lulu prefers loyalty cards, direct mail, seasonal discounts, product category discounts,

bundles, samples and other (BTL). In order to understand pricing policy of main grocery players

in the country was made a research that combined main eight inferior goods pricing in five

hypermarkets.

As per the above descriptive analysis Lulu is the most expensive while Union Coop being the

cheapest from the list a daily consumable items. (The Emirates 24/7, 2013). Wal-Mart still expect

to be with higher pricing than Union Coop. Union Coop is not direct competitor is subsidized by

local government for Emiratis. Therefore Wal-Mart will focus on Expat population as a discount

store and still will be cheaper than Carrefour having Every Day Low Price Policy (EDLP).

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Market size

The UAE retail sales showed over Dh113.87bn ($31.01bn) in 2011. According to Business

Monitor International (BMI) it is forecasted to grow up to Dh151.36bn ($42.22bn) by 2015,

according to Q311 UAE Retail Report. UAE economic growth is back on track after recovering

from the global economic crisis of 2009 and 2010 that declined the country economic activity.

Even BMI showing significant growth Economic Intelligence Research (EIR) and forecast for the

period 2013-2017 is more optimistic. Growth in retail volumes is expected to be moderate over

the period 2013-2017; in the second half of the period it is forecasted to be stronger. (EIR,2013)

Though it will increase due to the Expo 2020, as more consumers will be pouring in the region

from other countries as UAE has a low national population.

5. Preliminary Marketing Plan

Marketing Objectives

Market Development strategy of the Wal-Mart is reasonable to extend for 4 years starting with

Dubai as the largest emirate of UAE with further expansion to Abu-Dhabi and other emirates.

2014 year – Start with Dubai emirate; establishing one warehouse in Jebel Ali free zone,

building 1 Wal-Mart Supercenters

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2015 year - to launch 3 Supercenters 1 in Dubai and 2 Abu-Dhabi

2016 year – to launch online order and delivery system

2017 – Expected pay off period of the investments

We suggest a two pronged entry strategy 1) to create a fully owned entity via Foreign Direct

Investment in the Free Zones for having more control over the Process and Supply chain. 2) To

have a Joint Venture with Al-Habtoor group or any other local partner will bring several benefits.

Joint venture with Al Habtoor will provide entry to its Retail Malls.

Promotional Mix

Market Development strategy is divided into four years 2014-2017. In 2014 we plan to open

superstores in three blocks of Dubai for serving Dubai and Northern Emirates areas. In 2015 we

plan to open Superstore in Abu Dhabi. In 2016, we expect to make online delivery system covering

all main emirates of UAE. All these activities require intensive promotional support.

Promotional mix is divided to ATL and BTL (above the line and below the line) activities.

Year 2014 require the most intensive promotional mix support as here Wal-Mart needs to

announce it’s entry to the market and attract customers to make the purchase.

Table below shows promotional support of 2 Supercenters in Dubai area.

Promotional mix for the Dubai Supercenters is based on three objectives:

1. Attract Customers and increase awareness

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2. Global concept adaptation and localization activities directed to attract customers and

initiate trial purchase experience.

3. Loyalty development programs.

Primary medium for promotion is radio which will start one month prior with radio jingle launch

announcement. “Celebrities in the mall” promotion is expected at year end 2014; with celebrities

showing up at the Walmart super centers, which has to be publicized on all media-channe ls.

Another Promotion “I am a Star” is that every day during year end and Mid-year one randomly

chosen person from the store gets all grocery that he has at the moment in his trolley for free.

“Travel to USA” – loyalty development program supposed to be for a year September 2014 –

September 2015. Customers will be given the loyalty cards where loyalty point can be earned by

purchases. In Every quarter person with the highest amount of points will win a trip for 2 to USA.

In September 2015 will be launched Wal-Mart in Abu-Dhabi Table Below promotional mix for

the launch and after launce periods.

Overall all promotional activities will remain the same and it is going to be less intensive for the

second year. In February 2016, we are going multichannel with online order channel for the main

cities of UAE, which will be supported by radio jingle announcements, internet advertising, and

POSM support.

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Expenses for marketing activities for 3 years is expected to be approximately 1,400,000 AED.

That include launching support and after launch activities, as well as for online channel

(ezinearticles.com, Advertising in Dubai, 2013).

People

Walmart offer jobs from the senior management posts to the entry-level jobs. Usually at Walmart

you enter with lower post job and climb the ladder from a cashier or a store keeper to a

department manager, store manager, or even beyond. In general when Walmart opens a

Supercenter in the U.S., they provide around 300. This means opening the stores in Dubai will

create employment to hundreds of people in Dubai and from people all around the world since

Dubai has a diverse population. Walmart offers marginal pay scales.

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Process

Below is a summary of the high-level value chain activities for Walmart stores, extracted from

annual report and other reference material.

Abstracted from (Chiles and Dau, 2005)

The core operations are Supply Chain and Warehouse Management. Logistics and Distribution

Management are key where the Fleet of Freight truck needs to be managed and tracked to

efficiently route cargos when required. Walmart’s value delivery process is a typical retailing

operation but with some exceptions. 80% of all products are delivered from the Central

Distribution Center where the suppliers actually deliver the products. Below is the Walmart’s

unique distribution process which incorporates cross docking technique. (Chiles and Dau, 2005)

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Distribution: From Origin to Destination

According to Philip and John (2010), to achieve a competitive cost advantage Walmart has to

manage importing from source country to UAE directly by skipping all the intermediaries and

increasing its own margins. The below section will cover the sourcing of the products.

Port selection

Ports are selected based on the type of

product being shipped. For Food and

Grain items the south Asian ports of

Karachi, Bombay and Cochin are

used. For appliances and other items

Chinese and other far Asian ports are

selected. These will comprise of

around 80% of all goods sold in

Walmart UAE.

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Local Sourcing will be required for

certain foods and dairy items. Below

illustration shows possible local

sources of food products from other

cities of UAE.

Locations

100% owned subsidiary is recommended. Therefore the Jebel Ali Free zone will be ideal. This

location will serve as a logistical hub as well as a regional head office for UAE. The locations for

the Central Distribution Center can either be in the Free Zone Extension or the Dubai Logistics

City.

Facility: Jebel

Ali Free Zone

Extension or

Dubai

Logistics City.

It has been researched with different brokers that an estimated cost or facility per year is

AED900,000 /year for 100,000 Sq ft in this location. This location will be receiving bulk shipments

from the globally sourced products. The port of Destination is Jebel Ali.

Retail Outlets is suggested on E311 between AlWarqa and Silicon Oasis. The retail operation is

suggested to be a joint venture with local partner due to UAE law.

Suggested

Locati

Dubai

Sea

To Al

To Adu

Proposed

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Selection of location is as per below:

Ease of reach from Old Dubai i.e.

Rashidiya and Al Ras

Ease of access from Sharjah and

Northern Emirates.

Ease of access from New Dubai

via Business Bay and Hatta-

Oman and Al Ain Roads.

Close proximity to the new

developments that will be

finishing in 2-3 years’ time along

the Old Emirates road all the way

to the Dubai World Central

Airport around 20 kilo meters .

Distribution and Logistics

Walmart will continue to use RFIDs for all products that are in storage or in route from Distribution

centers, Vendor Managed Inventory (VMI) helps reduce cost of storage. All these needs to be

associated with the distribution channels and help reduce cost of products before being shelved.

Walmart introduced new concept of demand chain and based on customer demands the products

are being routed in near real time to reduce the Bull Whip Effects.

Multichannel Distribution

Typically Walmart follows a Multi-channel marketing strategy and sells products through its retail

outlets including the three different store types and SAM'S CLUB. Wholesale distribution which

is called the Sam's Club. This is limited service for wholesalers with a single wholesale point near

the Central Distribution Center and the order processing can be linked with their internationa l

online web site for wholesaling which is www.samsclub.com. Stock levels needs to be optimized

by using the advance IT systems which Walmart International has. Walmart UAE will also have

online stores, where customers can order for home delivery or collect themselves at collection

center.

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Fleet of Trucks

Initially 5 trucks will be sufficed for 2-3 years of operations. Each additional facility will need 2

trucks added to the fleet for every 100Km. (This assumption is a qualitative assumption on the

basis of expert opinion.) Each truck will be tracked with SKUs via GPS. 80% of all products are

distributed by Walmart’s internal fleet.

Mode selection

We are suggesting to use an intermodal transportation strategy for sourcing and delivering products

to the retail outlets which means using multiple modes of transportation. (Chopra, Meindl, 2013).

Total distance estimated from the Distribution Center in Jebel Ali to retail outlet is 42km and

would take around 30mins to reach from pick up to drop shipment at retail outlet via road.

Forms of Transportation Available

1. Sea Freight (Mena Jebel Ali) (Global Inbound)

2. Air Freight (Maktoom International, DWC)

3. Road Freight (E11,E311,E77,E44) (Local Inbound)

4. Railway – Etihad Rail (by 2016)

Price Determination and Cost of the shipment of goods

Since Walmart uses EDLP which makes then typically 15% lowers in price than their competitors.

This is achieved by identifying a stable demand over the year and reducing the inventory though

put from the supply chain, which greatly increases the efficiency. The Suppliers can plan their

products due to the stable demand and Walmart can bargain on a longer run over sales agreements.

The supplier make stable margins throughout the year due to consistent demand. This is contrary

to the High Low model where the Demand is inconsistent, which can add back order or

overstocking costs. Below is a sample price determination for grained products imported from

Pakistan, using a sea freight, since it determination of all 67 major categories of products is out of

scope of the current project.

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Total Cost till Distribution Center in Jebel Ali

Invoice Cost 85,943.7 AED

+Port Handling Karachi (dawn.com ,2013) 1228.07 AED

+Sea Freight (World Freight Rates .com,2013) 6748.898625 AED

+Port Handling Jebel Ali 5.7.7876 AED

Total till Distribution Center in Jebel Ali 99479.783 AED

Cost per KG 99479.783 / 41700 = 2.2685 AED/KG---(A)

Distributing Facility Cost per unit utilization @

900,000/1,000,000 = .111 AED 1960*.111 = 217.77756 AED

Cost component per unit KG 217.778/41700 0.0052AED per KG ---(B)

Total Cost post Distribution Center (A)+(B) 2.2685 + 0.0052 = 2.2737AED/KG (C)

+ Gross Margin vis 24.5% (Walmart,2013) 0.5570565

Total Per KG price of rice 2.976795

For 4KG pack will be 11.90718AED

For 10KG pack will be 29.76795AED

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*Note:

AED to PKR rates = 28.5

USD to AED = 3.675

Important Considerations and Conclusion

UAE has a lot of potential looking at its PESTEL, It does shows a margin for entry to the market

and develop it using its developing infrastructure, economy and stable political system. Her

capability of filling its Human Capital Gap from the cheaper South Asian Economies. Though it

is going to be difficult to break the market of current dominators of the market, creating a new

segment for purely cost focused customers by changing the perspective that prices can be low all

around the year rather than in seasons. According the survey attached in the appendix, People are

willing to opt for Walmart but then there primarily concern is the channels should be nearer to

their residence rather than in far of suburbs, therefore suggesting us to be more aggressive in have

more neighborhood markets, rather than having large number of suburban Supercenters.

Walmart’s core competency is to directly negotiate with the supplier to save on the intermed iary

margins and cascading the saving down to customer. Therefore from logistical point of view some

of Walmart’s global suppliers will not be in the Gulf region so we have to find alternate suppliers

who can supply competitive products from India and Pakistan typically for Grain-Based Food

Products. And from Oman, Saudi Arabia and Egypt for other F&B items. The challenge is to

manage the fast moving consumer goods properly since the local industry only caters to 52% of

consumables and the agriculture sector it is only 0.8% (CIA Fact Book, 2013). Walmart must plan

this thoroughly since they usually develop in those markets where the country is self-sufficient in

local produce for agriculture and majority of FMCG items, due to the nature and risk of short life

cycles. UAE is not self-sufficient in most of the Consumer Goods sector. Nevertheless UAE

tend to have intensive economic growth and higher population in closest 5 years forecast according

to The Economist intelligence Unit, 2013 research. Expected retail growth in these years expected

to be over US$87B to current US$61B retail sector sales. That will give opportunity Wal-Mart to

expand market share not only with taking from competitors but also with natural market growth.

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6. References