Walmart - Case Study

Introduction:

Today, Walmart International is a fast-growing part of Walmart’s overall operations despite all these challenges. Walmart has 4,081 stores and more than 664,000 associates in 14 countries outside the U.S. with high hopes that the company grows into becoming a global company instead of a domestic one with an international division.

Walmart started its huge success when it became an international company that started after the opening of Sam’s Club near Mexico City in 1991. Except Walmart wasn’t satisfied with just that soit decided t o expand and grow using its famous strategy of providing big boxed, low-priced products thinking it was the most successful strategy worldwide just like in the U.S. While Walmart continues to grow internationally, experts have constantly questioned the consumer’s perception and response about the company’s low-price model in these markets.

If Walmart had it been a stand- alone company, it would have ranked among the top five global retailers with revenues of $405 billion for the fiscal year 2010. Walmarts worth is measured as much as the gross domestic product of Nigeria. The four members of the Walton family, which still owns a 40 percent controlling stake, are included in the list of America’s top 10 richest individuals. The company has a wide range of superstores in the U.S., neighborhood markets in Brazil, bodegas in Mexico, the ASDA supermarket chain in the U.K., and the Seiyu shops in Japan’s. Walmart now has over 4,081 stores and 664,00 associates in 14 countries worldwide.

We can see how successful Walmart is now, but the world is so big and there are so many opportunities out there. Now, the question is, should Walmart keep expanding globally? Should they keep using the same strategies or should they change them? This report will explain Walmarts past global expansion strategies, the success and the failures, and a few recommendations for future global expansions.

Walmart’s Global Expansion Strategy

(Country, cultural difference, Strategy, success?)

0388620(Mexico, China, Japan, Germany, UK)

Companies nowadays are interested in global expansion despite their size, so what about a successful company like Walmart? Walmart decided to set ambitious goals in expand its retail throughout the world in order to generate the highest of revenues. Walmarts success in Mexico started in 1991 when it opened a Sam’s club warehouse by entering into a joint venture with a local retailer Cifra. By 2007, Walmart had gotten a majority position in the company, changed the store name to Walmart de Mexico, or more commonly known as “Wal-Mex.”, opened over 900 stores throughout Mexico and saw a 13.7 percent increase in net sales. By 2010 it ranked as Mexico’s number one international destination with 1,479 retail units.

When profits grew, Walmart decided to continue expanding. The smart move was to start in a country similar to the U.S., Canada. In 1994, Walmart established a retail store in Canada expanding to 317 stores by 2010. They serve more than a million customers all around Canada everyday. In addition, it ranked the third largest employer in Canada providing jobs to many people.

Nonetheless, these strategies weren’t the only problem for Walmart. Labor advocates and environmentalists have created difficulties for the U.S. behemoth, creating constant growth both unwieldy and expensive. For example, Walmart faced a strong public relations campaign from the All-China Federation of Trade Unions (ACFTU) in 2006. They campaigned because of Walmart’s rejection for China’s workers to unionize. Despite what happened, Walmart China was voted as the “Top 10 Best Companies to Work for” in 2005 by Fortune China.

Due to the fact that Walmart was lacking the essential financial, organizational, and managerial resources to pursue several countries simultaneously it instead chose a logical method that would let it apply the knowledge gained from its initial entries to following ones. Therefore, Walmart decided to focus greatly on establishing a presence in the Americas specifically, Mexico, Brazil, Argentina, and Canada. Evidently, Canada has a similar business environment to the U.S. and seems the easiest for market entry. However, Mexico was another first global point of entry for Walmart because it is one of the three largest populations in Latin America.

In 2005, Wlamart successfully entered the Latin American countries by purchasing interest in Central American Retail Holding Company. By 2010 it had 3,148 stores all over Latin America. 1474469282575On the other hand, when Walmart thought of entering the European market, the fact that it already had a mature retail industry, which infers that new entrants must take market share away from an existing player, was a feature that made it less appealing. Furthermore, there were well-established competitors already existing and ready to hit the newcomer such as Carrefour in France and Metro A.G. in Germany.

Walmart also lacked a strong local costumer relationship. Finally, compared to Latin American and Asian markets that have higher growth rates than European markets a delayed entry will be much more costly in terms of lost opportunities. Nevertheless the Asian markets are the most distant geographically and distinctive culturally and

logistically compared to the U.S. It would still cost more financially as well as loss of managerial resources. In 1996, Walmart felt like it can enter the Asian market starting with China, since it has lower purchasing power consumers that align with Walmarts low-price retailing strategy.

Yet it still suffered with China’s cultural, linguistic, and geographical distance from the U.S. So it had to take on a different approach to enter the Asian market by entering the Japanese market and purchasing 6 percent stake in the retail Seiyu chain of stores.

Recommendation

Focus on developing countries, mainly Brazil. Brazil has been an adequate country to open Walmart because according to Hofstede's theory and dimensions, has a high mark for Power Distance and a low Individualism, it would be easy for US managers to implement rules and regulations in aspects of how to deal with customers all the while not have to worry about conflict regarding aspects that are crucial to main a well-functioning store. On the other hand China and Mexico both have high Power Distance and Masculinity marks and therefor Walmart should find it beneficial to focus on investing in these countries. (BRIC, MINT)

Proper staffing and employee training program especially for managers. Having a training system to help employees get associated with the manners of dealing with customers (Smiling, helping to find items, bagging items..etc) Improve R&D for foreign countries industries. Without a well rounded R&D department, moving into new and developing countries would be a bigger risk than it has to be. Having the correct information in regards to cultural and governmental differences is crucial to succeeding in those countries.

Develop intercultural awareness and skills to enable managers and employees to work effectively with costumers from different cultures.

Conclusion:

After actually implementing the strategies and expanding in countries like Mexico, China, U.K., Germany and Japan, Walmart realized that there are so many problems with the strategy because of multiple factors like differences in culture, geography and logistics. The strategy of proposing customers with low-priced products failed mainly because of the conflict from already well-known and established retailers whom the costumers were very loyal too. The local consumer taste and preferences were different in Germany. While in Japan, the strategy of using a joint venture was also failing due to the buying habits of consumers that didn’t align with Walmart.

Moreover, in Mexico, competitors teamed up just to take away the costumers. Due to this failure, Walmart was put in a position where it had to sell many of these operations in 2006. These were the challenges Walmart faced. Yet Walmart continued to find ways to be successful and maintain its high reputation in the business world. Walmart was able to survive these challenges successfully while being under the pressure of the hard recession times where so many businesses .

failed. They also found ways to satisfy their diverse costumers base by offering a wide variety of products with a very low price. Walmarts strategies and entry models became profitable in the long run. It was able to prove its decision for global expansion was a successful one.

References:

http://www.cf-sn.ca/business/business_expansion/expansion.phphttp://conferinta.management.ase.r

o/archives/2013/pdf/11.pdfhttp://geert-hofstede.com/index.php

http://home.sandiego.edu/~dimon/CulturalFrameworks.pdfhttp://www.guptaconsulting.com/docs/Cro

ssCulturalSamplePage.pdf POWERED BY TCPDF (WWW.TCPDF.ORG)