Walmart around the World Globalization Strategy

Question 1.

We assume you have already been familiar with Walmart‘s sources of competitive advantage in other classes or references. Could you summarize Walmart’s competitive advantages in U.S. and its business model? We have studied before the supply chain of Walmart and how it led the success in America. We believe Walmart’s success accounts its greatest portion for its excellent operational management, which is in other sense its competitive advantage.

First of all, the business strategy of Walmart is “Every Day Low Price (EDLP strategy)”, which attracts customers by offering the products with the lowest price. Its fuctional strategies are exceptionally well-aligned to EDLP. Thus their strategies are strategically fit.

In terms of the supply chain, Walmart shows an efficient supply chain. It has relatively little variety of products (less customized), longer production lead-times, high set-up costs, and larger batch sizes that allow the firms to supply at a low unit cost. The six major drivers (facility, inventory, transportation, information, sourcing, and pricing) and their roles are also critical in creating this characteristic. For instance, Walmart has purchased and been operating its own logistics system (transportation driver), and could take advantages in terms of inventory costs. All the supply chain factors of Walmart mesh perfectly well together to lower its supply costs and thus enable the EDLP strategy.

Question 2.

Evaluate Walmart’s globalization strategy over the last two decades. Where did Walmart struggle? Where did it do well? Can location characteristics explain the differences in Walmart performance? What are the location characteristics that affect its performance? Our team has summarized whether Walmart has struggled or succeeded in different countries (we scored them in a 5 points scale), and the characteristics of these locations on the table below. Some explanations are also followed by.

Country

/Region

Success

Score

Location Characteristics

/Walmart’s strategies

Mexico 5 Used Mexican center and brought EDLP strategy into the country

NAFTA helped the extension

Cheap labor force was available

Qucikly changed mistake

Canada 5

Retained former employees

Acquired poorly managed company

Similar to Walmart’s US stores but differentiated

Argentina 2

W/O local partner

Expanded using smaller stores; similar with Mexico and

Brazil

Brazil 3

Used US-based format

Slow to adapt to local tastes in Brazil

Covered up both northeastern and southern part

Launched middle market targeted middle class

China 3

Competitive Market

Urban intensive life

Missed target positioning

Germany 1

Acquired poor chains

Price oriented tough competition and customers’ high

loyalty on existing market

Suppliers’ strong loyalty on existing competitors

Strict regulation on pricing and location

Strong influential labor union

Cultural difference in consumers opposed to U.S.

South

Korea 1

Service-oriented

Valued luxurious image

Customer focused on different values

UK 5 Acquired retailers that had similar business model to U.S.

Japan 2

Competitive Market

Unsuitable starategy (Low Price with Low Quality)

Central

America 5

Acquired major retailer

Allowing store’s local identity

Chile 4

Acquired successful domestic payer

Local partner has similar customer and operations to U.S.

Local partner’s other business entice customers

Africa 3

Operated under Massmart

Loose competition

Lack of infrastructure

Corrupted governmentHence, we believe the locations’ distinctive social cultures (market, orgnizational,consuming behaviors), geographical features (residential), political factors (regulations, trading barriers), and other retail industry status all affected the performance of Walmart.

Question 3.

What are your team’s recommendation to a company which is researching any global operations in the retail industry?

Our recommendations to global operations in the retail industry are shown below in regarding to the four location characteristics that affected the performance of Walmart.

Characteristic

sDetailed recommendations

Social

Cultures

Consuming and organizational behaviors differ greatly. It is hence highly recommended to deploy a thorough research on the consumption patterns, and hire local employees. (ref. German case) Geographical

Features

Population density and accessibility must all be considered.Industries should be located in the areas within the local customers interest, and with high accessibility to distribution systems and infrastructure.

Political

Factors

Local regulations and international agreements affect operation and management. It must be checked whether international treaties and local regulation are favorable to entry and operation. (ref. Mexico case)

Industry

Status

If the industry status is similar to that of domestic market, it could possibly retain its core competencies by acquiring similar companies. (ref. UK case) If not, the best option seems to be acquiring a local network or company with high performance records.