Purpose Throughout our time doing business has advance from small companies selling to consumers on their region to small, medium, and big companies selling worldwide. This is due to globalization and all the improvements in technology that had helped for this internationalization movement. In order to understand the effects of globalization and the importance of doing business internationally, the correct way, we examine this case about what started off as a small company from Arkansas and became what is now known as one of the biggest retail stores worldwide. Questions
Case Discussion Questions: 1) How does expanding internationally benefit Wal-Mart? Profitability always comes into mind when talking about a company that decides to expand internationally. In my opinion, Wal-Mart management people were smart enough to recognize and accept the fact that in the near future they would be facing two major problems: they would be left out of market sooner or later by other newcomers and they would have no more centralized market due to the excessive concentration of retailers that would make it impossible to compete on prices.
Therefore by deciding to go internationally they could approach another markets and likewise reduce costs due to major consuming from their suppliers.
Also, they were able to make-a-name of their own brand globally, recognizing the brand quality and making it instantly more profitable. They took advantage of the opportunity globalization gave them and they implemented new ways of doing business depending on the country they’re entering. Furthermore, profitability to a global range is dimensionally different than a company that only operates national. 2) What are the risks that Wal-Mart faces when entering other retail markets? How can these risks be mitigated?
As any other type of business, cultural differences are really important when entering a market; they define everything (the way of doing business to the products you will be offering). Wal-Mart needs to study a country before entering it, therefore when the company enters the country completely it would do it on a timely manner and appropriately selling what the consumers are looking for on any other type of retailing store.
One of the main risks that comes with this is competition among the already established retail stores on the country, but being Wal-Mart so big it can study the competition and define a strategy towards its movement; like either making a partnership with a local retail store or introducing its brand by buying an already existing retail store.
I believe everything is about analyzing every country’s situation and defining a very specific way of entering that market, because not all of the strategies would apply to different countries; every country is unique. 3) Why do you think that Wal-Mat first entered Mexico via joint venture? Why did it purchase its Mexican joint venture partner in 1998? As we already studied on our course, Joint Venture is a “new firm formed to achieve specific objective of a partnership like a temporary arrangement between two or more firms.”
(Business Dictionary, 2013, ¶ 1); meaning that a company merges into some kind of agreement with an existing company to minimize its risks of investment. What Wal-Mart did was exactly this, they didn’t wanted to take every bit of responsibility when introducing its stores to another country so they decided to share the risk with another already existing company in Mexico in an agreement that would protect the company assuring the brand would be introduced and accepted smoothly. Also if it didn’t worked-out the loss wouldn’t have been that much as if it had decided to enter the market by itself.
Finally, they decided to buyout its partner in 1998 because by that time there were proficiently capable of handling business on their own and that way they were already established on Mexico and the profits would go all to their pocket. 4) With respect to our textbook Chapter 13 on The Strategy of International Business, what strategy is Wal-Mart pursuing-a global standardization strategy, localization strategy, international strategy, or transnational strategy? Does this strategic choice make sense? Why?
After analyzing the textbook, I’ve come to the conclusion that Wal-Mart used a transnational strategy, which is basically a big company that has its main headquarters and general management centralized but also operates on different countries adjusting to its needs by generating different levels of management that would direct operations depending on the market that they are managing. This sounds very logical to me because Wal-Mart is a big company but even though they offer a broad variety of products they cannot sell the same, nor do business the same way as they do on their main country. Every Wal-Mart has to adjust to its area of operations and to what consumers on that area require.
Student Assignment Questions: A. To explore Wal-Mart’s international business in greater detail, go to www.walmartstores.com and click on “Our Story” then click on “Our Business”. From this website, search “Wal-Mart International”. Using information from the website and additional websites, if necessary, describe how Wal-Mart expanded into China, Brazil, and the UK. China: In order to enter China rapidly with a great success, Wal-Mart used a similar strategy to when entering Mexico: Joint Venture. This time they joint venture with an already existing company owned by the son of at the time Chinese vice president.
There were many speculations about how did it had entered so quickly into the market and also a bit of a comparison by some people to Mexico, claiming that in both places they had used bribes to enter both markets. Although nothing was surely confirmed, the question still remains. I believe whether they used this type of measurements to get it they did used joint venture strategy because it was a more safe way of investing in countries with so different culture from the United States. Brazil: Referring about how Wal-Mart entered Brazil, it started to buyout some already recognized companies and started introducing its products making it of its own.
Therefore they operate different brands on Brazil like: BIG, Bompreco, Magazine, Mercadorama, Sam’s Club, TodoDia, Wal-Mart, Supermercado Todo Dia, Wal-Mart Posto, Hiper Bompreco, Maxxi and Nacional. If they used this type of strategy it could be that these brands where already very well-recognized on the country so they would eliminate any possible competitor. UK: To enter the United Kingdom Wal-Mart recognized that ASDA, a main retail store was very well established and if they entered the market they wouldn’t be able to take down the loyalty of the people towards ASDA and the other retail stores.
That’s why on 1999 they decided to buy ASDA and they are now the second largest supermarket chain on the United Kingdom. B. Describe how Wal-Mart is doing internationally (you may wish to check Wal-Mart’s Annual Report accessed via the “Investors” website). According to Wal-Mart’s own records (Wal-Mart International, 2013 ¶ 1) they have grown to serve about 105 million customers during a week throughout their subsidiaries on 26 countries.
They hold a total of 8.3 percent of operating income growth in comparison to last year, and they increased sales a 7.4 percent (with 30 percent of the net sales being from international sales). Also, to top it off they open 497 new stores during this past fiscal year. C. Find something of interesting in “Wal-Mart International News” on the Wal-Mart website and describe why it is of interest to you. Visiting Wal-Mart news I found out that on October 15, 2013 they declared their goals, objectives and strategies towards conquering any kind of environment they get involved. Their words were “Wal-Mart will win no matter what environment we’re in” (Rogers, A., 2013, ¶1).
I found this important because they recognize the fact that the economy at this time is very unpredictable due to all the advances in technology but they will use combined strategies of e-commerce and disciplined-labor force to be successful on every environment meaning country. To me it is great that they are setting this goal for themselves because they are compromising to examine every possible market and make a specific strategy to enter it. It is certainly very ambitious but I believe our world is not so globalized that we are moving into somehow of a mixed culture that would sooner or later become a unique culture to do business. D.
Wal-Mart has not always succeeded in their international expansion. In your opinion, why did Wal-Mart fail in South Korea and Germany? Talking about countries where Wal-Mart was not able to establish itself we find South Korea and Germany. Researching about it I believe the economic structure and the surrounding were ideal for it to work, but as I stated on the beginning on the paper, culture is very important.
There countries are very cold in manners; they also don’t go for “save money, live better” they like to enjoy a certain quality to what they are spending. Also I found really interesting that in Germany people thought the cashiers or salespeople at Wal-Mart were flirting with them because of smiling. It is just based on cultural differences, the ideal market towards Wal-Mart planned to opened in these countries was misunderstood therefore in order to enter it correctly they have to analyze if it is profitable to create another strategy that Korean and German people would accept, otherwise it would be a loss of money again. Conclusion
After analyzing the case and furthermore investigating about Wal-Mart international strategy I can conclude that Wal-Mart sets its mind onto do big things and because they set this goals from the beginning and make every movement in order to fulfill this goals they are being successful. I have always liked a quote that says “Thing Big, Aim Higher”, I honestly believe that when dealing with international affairs you have to aim high in order to get results out of it.
Internationalization is happening and the only way to deal with it and not get stuck on the past is creating reforms that protect our government systems and promoting intellectual property so that our countries can also have a chance against this bigger companies. Some people might not agree at all with reforms such as NAFTA, but I think is totally normal and understandable for economies to go broader and grow looking for more profitable markets.
References Basu, C. (2013). What Is a Traditional Business Strategy. Retrieved from http://smallbusiness.chron.com/transnational-business-strategy-20950.html Berfield, S. (2013). Where Wal-Mart Istn’t: Four Countries the Retailer Can’t Conquer. Retrieved from http://www.businessweek.com/articles/2013-10-10/where-walmart-isnt-four-countries-the-retailer-cant-conquer Business Dictionary. (2013). Retrieved from http://www.businessdictionary.com/definition/joint-venture-JV.html Cohan, P. (2012). How Did Wal-Mart Crack Open China?
Retrieved from http://www.forbes.com/sites/petercohan/2012/05/18/how-did-wal-mart-crack-open-china/ Rogers, A. (2013). Walmart News: Walmart CEO Reports Substantial Progress on Key Strategies and Focul on Near-Term Execution to Deliver Results. Retrieved from http://news.walmart.com/news-archive/2013/10/15/walmart-ceo-reports-substantial-progress-on-key-strategies-focus-on-near-term-execution-to-deliver-results Wal-Mart International. (2013).
A global portfolio that drives growth and returns. Retrieved from http://webcache.googleusercontent.com/search?