This essay will explore how successful Wal-Mart's (supermarket company) globalization process has been. In doing so the following areas need to be focused upon: – where they began, where they operate now, to what extent they have grown, the adopted strategies and the effectiveness of those strategies.
Firstly we shall start by outlining the definition of globalization, it refers to when the world market of goods and services, and integration in world capital markets is increasing or growing. (Source: Complete A-Z Economics and Business Handbook). However it's also 'an umbrella word which includes a whole range of trends. Part of the process involves greatly increased trade flows' (Nuffield – Economics and Business). For the purpose of this essay we shall go with the first definition.
Globalization occurs when countries exchange goods and services, capital is moved freely from one country to another and economies become more integrated, this is why countries are very dependant on each other. The key to a company growing is communication, as people become more connected and this allows information and money to flow quicker, due to new technology such as newsgroups and internet meetings, so goods in one part of the world will become available in all parts of the world.
Globalization is the reason behind the growth of world trade and it has encouraged economic growth. It improves standards of living, and increases the power of multi-nationals. When a company grows, the growth may be either organic or inorganic. Organic growth means that the company itself has grown from its own business activity without taking over or merging with other companies, while inorganic growth means that the company has grown by mergers or take-overs.
Middle Walmart was established in 1962, by 1967 the company had expanded, opening 24 stores totalling $12.6 million in sales, with stores being in the middle of America. In 1970's, the company had a total of 38 stores making $44.2 million in sales. Thus outlining expansion has always been a part of the Wal-mart ethos and its continued through the 1980's, 1990's and 2000's (entering local stores like Minnesota to countries like United Kingdom). Undergoing rapid growth as almost every year expansion has taken place (see item 5).
Wal-Mart operates within 4 segments of the market and these are discount stores, superstores, SAM'S clubs and neighbourhood markets (turn to appendix, item 1). Wal-Mart trades a large quantity of goods and services in many different countries therefore it is a multinational. It has stores in these countries, Argentina, Brazil, Canada, China, Germany, Korea, Mexico, Puerto Rico, United Kingdom and the United States of America.
The highlighted areas in the picture indicate where Wal-Mart operates. Walmart started making revenues of $12.6 million (1967) this has now reached $191 billion (see appendix item 6). From 1967 to present, the amount of stores under Walmart has increased from 24 up to more than 4,600. Wal-Mart has taken over some businesses that are successful within their own markets e.g. Asda, therefore their philosophy is not just to be successful, but how to expand on that success. By increasing the size of its stores this has lead to the generation of more sales and higher profitability (please refer to item 4 in the appendix).
Walmart sell a variety of goods and services, both essential and luxury. This means that they are able to make profit from their basic goods as well as looking at selling different optional goods. With basic goods being milk and luxury goods being chocolate milk. Another reason for Walmart's success is their ethos for continuous growth of productivity. As there goal is to succeed at everything, this comes from them aiming to offer all goods under one roof, and from this gaining a great competitive advantage.
A company's size means that it can benefit from economies of scale. The average cost of any product will fall if a company is to sell more of it, therefore businesses such as Walmart have recognized this incentive and have been able to sell more with the opening of more and more stores. The process has also involved selling quality goods, thus meaning there is an increased likeliness of goods to sell.
One of the main reasons for Walmart's success is due to the fact that they have accessed a large number of markets. This success has come from expansion as the potential market size was large enough along with the competitive advantage, which was strong and other companies weren't able to copy this. Going into a variety of different countries that they have succeeded to grow in (see item 1).
We must now look to how affective the adopted strategies are: Walmart's growth has lead to an increased number of jobs amongst the worlds most biggest and powerful countries, offering these has favoured them also as they have more employees within their stores (meaning customers are seen to much quicker) they are also local (which means they are able to communicate with customers better) and not just this but their reputation for being a big company and solid provider of goods is improved.
Wal-Mart has experienced globalization in a number of ways. In 1991, Wal-Mart had opened their first international store, this has grown to more than 1,500 stores in nine countries. Additionally, the company also owns 37.8% interest in Seiyu Ltd (a leading Japanese retailer).