Walmart market entry strategy

Executive Summary In today’s business world many multi-national corporations are focused on expanding their business internationally. This is due to the fact that around the world, there has been much uncertainty with regards to economic and financial conditions which warrants diversification amongst a corporations business practices.

If a corporation focuses and practices its business in a single country they are subject to much volatility with profits on a yearly basis and are extremely sensitive to risk. In order to limit this risk sensitivity these companies have set out to expand among different regions in the world, making sure that if one section of their business fails or sees a sharp decline in revenue they will be able to continue forward. T

hese corporations are making sure they are positioned to recuperate in a timely matter in order to remain competitive and not lose a significant market share within their industry. One specific region in the world that multi-national corporations have viewed as opportunistic is Latin America.

Much of Latin America is unsaturated with high populations making it very appealing to large multi-national corporations such as Walmart. After doing much research we have concluded that although Latin America has been considered an emerging market for some time; it still has an under-penetrated formal retail market, particularly in the food retail segment. Our study consists of three country profiles which Walmart has yet to penetrate within Latin America. These countries are Paraguay, Uruguay and Peru.

There are pros and cons when entering any country and after a close analysis of each, Peru is the best fit for Walmart. Conducting international business in Peru from the standpoint of a manager working at Walmart has considerable advantages and favorable conditions in its economy, relations with the United States, natural resources, incorporation and construction, and national corporate and family values. With a large presence in Chile and Brazil, Walmart’s entry into Peru can allow them to be an unmatched force in the retail sector of the entire continent of South America. Strong relations between the United States and Peru have made considerable change to the ways in which a foreign business would enter the Peruvian markets.

Fighting for a mutual cause, the United States has continued its war on drugs by entering Peru and providing resources to abolish illegal coca production. This relationship led to the United States-Peru Trade Promotion Agreement that eliminated trade tariffs, removed barriers of entry by US services, provided a stable framework of legalities for investors, and increased the protection of intellectual property, workers rights, and the environment, all of which, encourage US foreign investment in Peru.

Through analyzing many factors listed in this paper the coastal region, namely the densely populated capital Lima and major inland cities would seem to be the best point of market entry for a US company such as Walmart to expand. Its economic growth and monetary stability will give investors peace of mind, and the United States good relations with Peru will only attract more business with its diplomats so intertwined creating a safeguard against any radical government change.

Peru’s retail industry includes three major supermarket chains, Cencosud, Supermercados Peruanos and Tottus, who have a total of 152 stores nationwide. Since 2010, 25 new stores have opened throughout the country. Increasing income amongst people residing in Peru has boosted consumption and supermarket sales. These three chains comprise the whole market for the supermarket industry with Cencosud having 45percent, Supermercados Peruanos with 34 percent and Tottus with 21 percent market shares respectively.

The low penetration levels in Latin America have been mentioned but to get a better idea it is important to highlight Peru’s food retail potential do to its lower penetration level which is 30 percent in the capital Lima and 15 percent in the rest of Peru. Our strategy consists of Walmart acquiring Tottus hypermarkets. This move is justified by Walmarts already established and flourishing business in Latin America and the fact that Tottus has been the best performing chain in the past few years. Tottus is compatible with Walmart as it was voted the best place to work in Peru in 2011.

Also, the chain energetically launched the “Cheaper Impossible” campaign that’s has positioned them as the best price on the market much like Walmart is viewed to be. The second part of our strategy will be too buy a 50 percent share in the Peruvian owned Supermercados Peruanos. This move makes sense because Peru is open to foreign investment, especially with a financially stable and well run multinational corporation like Walmart. In Peru, the law for joint ventures such as this one leaves for much flexibility for the parties involved.

The law allows for the parties to mutually agree on all major decisions which should not pose a problem because of the great relations between the United States and Peru which were previously stated. These moves will allow Walmart to solely own a 38 percent market share within Peru but have an interest of 55 percent due to the joint venture with Supermercados Peruanos. These percentages should not cause fear of unfair business practices to the government of Peru and will provide for a firm start in Walmart’s expansion into the country.

Walmart Company Profile Business Description: Walmart Stores, Inc. is a company that operates retail stores in various formats worldwide ("Yahoo! Finance"). The primary, and first, retail store that Walmart Stores, Inc. focuses on is Walmart. This is a company that has been around for the past 50 years and has based their business model on a concept of always having competitive, low prices. Wal-Mart's mission statement is basic and to the point with it essentially being "We save people money so they can live better" (FAQs). As of September 13, 2012, Walmart operated approximately 10,130 retail units in 27 countries ("Yahoo! Finance") and there are no signs showing that they will be slowing down any time soon.

Sam Walton:

Image Source: "Sam Walton" If it weren't for a man named Sam Walton the world would be without Walmart stores today. The Walmart of today evolved from Walton's goals for great value and great customer service ("Sam Walton"). The idea of everyday low prices was one that Walton firmly believed in and made the number one priority of his stores.

Walton first got experience in the world of retail at the age of 27 after he completed his military service and eventually worked his way to owning his own variety store. The first store that Walton opened on his own was call Walton's 5&10. This store had early success and led Walton to want to create even greater opportunity and value to his customers and in order to do this he opened his first Walmart at the age of 44 ("Sam Walton").

The success of Walmart surpassed what Walton had ever expected and allowed him to consistently expand his business. He knew that the low prices played into the success of the Walmart stores but also to the associates of the stores that he considered more like partners than employees. When President George H. W. Bush awarded Walton with the Presidential Medal of Freedom, Walton described the backbone behind Walmart,

"If we work together we'll lower the cost of living for everyone...we'll give the world and opportunity to see what it's like to save and have a better life" ("Sam Walton"). Unfortunately shortly after Sam Walton gave this speech that perfectly described Walmart he passed away but because of what he built and the legacy he left behind he will live on for as long as Walmart exists. Walmart stores of today are still focused on expanding, serving customers, and doing business in a way that honors Sam Walton ("Sam Walton").

History: Walmart was started in the early 1960s by Sam Walton, a man who believed the way to run a successful store was to offer "The Lowest Prices Anytime, Anywhere". On July 2, 1962 Sam Walton opened his first Walmart store in Rogers, Arkansas and by 1967 he had already expanded to 24 stores and was making $12.7 million in sales ("Walmart"). It is evident from the quick increase in stores in the first five years of business that Sam Walton intended Walmart to be a business that stressed to importance of consistent expansion. This desire for expansion continued throughout the 1970s. Walmart first became a publicly traded company in 1970 and sold for an initial price of $16.50 a share. In 1971 Walmart opened its first distribution center and by the next year sales had reach $78 million among its 51 stores ("Walmart).

Image Source: "Walmart" During the 1980s Walmart continued to expand by opening more stores and creating new stores under the Walmart Company brand. One sign that expansion was beneficial for Walton and the Walmart brand was the fact that, with 276 Walmart stores, the company managed to reach $1 billion in annual sales faster than any other company at that time. During the 1980s Walmart first introduced Sam's Wholesale Club stores and Walmart Supercenters. All of the expansion and smart business decisions of Sam Walton led Walmart to being the United States number-one retailer by 1990 ("Walmart").

The 1990s saw Walmart first expanding into the global market and continuing to do so. Through a joint venture with Cifra, a Mexican retail company, Walmart company opened a Sam's Club in Mexico City. In the year after Sam Walton passed away, 1993, Walmart had its first $1 billion sales week and in 1997 had its first $100 billion sales week. Throughout the rest of the 1990s Walmart expanded into Canada, China, and the United Kingdom. These expansions were primarily done by acquiring already established stores in these various countries ("Walmart").

As Walmart entered the 2000s there was no sign of slowing down in sight. At the start of the new millennium Walmart employed more than 1.1 associates in 3,989 stores and clubs worldwide. This number of associates continued to expand throughout the 2000s as Walmart entered the Japanese market, Chile, and India. By 2009 Walmart was exceeding $400 billion in annual sales and by 2011 Walmart surpassed 10,000 retail units around the world. As of this year Walmart has had 50 years of successful business with more than 2.2 million associates worldwide that has its foundation in an always low price business plan and a method of consistent expansion ("Walmart").

Major Products and Services: The main focus of Walmart Stores Inc. are retail stores, restaurants, discount stores, supermarkets, supercenters, hypermarkets, warehouse clubs, apparel stores, Sam's Clubs, and neighborhood markets, as well as walmart.com and samsclub.com ("Yahoo! Finance). Anyone who has ever shopped at a Walmart location knows that the variety of options that is offered is seemingly endless.

Image Source: Walmart.com The company's stores offer various food items such as meat, produce, dairy and frozen foods, as well as health and beauty items, baby products, household items, pet supplies, electronics, toys, photo processing services, and apparel for every member of the family. In addition to the variety of products that Walmart offers under name brands there are also many private-label items under the Members Mark, Artisan Fresh, Daily Chef, and Simply Right brands ("Yahoo! Finance).

Overview of Financial and Operational Indicators: Key Statistics: (All numbers in USD) Valuation Measures| Market Cap (intraday)| 239.99B| Enterprise Value (Dec 4, 2012)| 291.09B| Trailing P/E (ttm, intraday)| 14.68| Forward P/E (fye Jan 31, 2014)| 13.26| PEG Ratio (5 year expected)| 1.57| Price/Sales (ttm)| 0.52| Price/Book| 3.28| Enterprise Value/Revenue (ttm)| 0.63| Enterprise Value/EBITDA (ttm)| 8.09| (Table from Yahoo! Finance)

Financial Highlights| | Fiscal Year| Fiscal Year Ends:| Jan 30| Most Recent Quarter (mrq)| Oct 31, 2012| Profitability| Profit Margin (ttm)| 3.57%|

Operating Margin (ttm)| 5.94%| Management Effectiveness| Return on Assets (ttm)| 8.61%| Return on Equity (ttm)| 22.96%| Income Statement| Revenue (ttm)| 464.41B| Revenue Per Share (ttm)| 136.83| Qtrly Revenue Growth (yoy)| 3.40%| Gross Profit (ttm)| 111.82B| EBITDA (ttm)| 35.99B| Net Income Avl. to Common (ttm)| 16.59B| Diluted EPS (ttm)| 4.86| Qtrly Earnings Growth (yoy)| 9.00%| Balance Sheet| Total Cash (mrq)| 8.64B| Total Cash Per Share| 2.57| Total Debt (mrq)| 57.46B| Total Debt/Equity| 72.65| Current Ratio (mrq)| 0.83| Book Value Per Share (mrq)| 21.97| Cash Flow Statement| Operating Cash Flow (ttm)| 27.25B| Levered Free Cash Flow (ttm)| 14.37B| (Table from Yahoo! Finance) Abbreviation guide: mrq=Most Recent Quarter, ttm=Trailing Twelve Months, yoy=Year Over Year, lfy=Last Fiscal Year, fye=Fiscal Year Ending The numbers above are meant as more of a snapshot of how Walmart is currently doing. The numbers will be further evaluated in the following sections.

Key Financial Performance Indicators: Cash Flow: (All numbers in USD) Period Ending| Jan 30, 2012| Jan 30, 2011| Jan 30, 2010| Net Income| 15,699,000| 16,389,000| 14,370,000| Operating Activities, Cash Flows Provided by or Used In| | | | Depreciation| 8,130,000| 7,641,000| 7,157,000| Adjustments to Net Income| 1,117,000| (383,000)| (425,000)| Changes in Accounts Receivable| (796,000)| (733,000)| (297,000)| Changes in Liabilities| 2,746,000| 2,243,000| 2,400,000| Changes in Inventories| (3,727,000)| (3,025,000)| 2,213,000| Changes in Other Operating Activities| 398,000| 1,087,000| 318,000| Total Cash Flow From Operating Activities| 24,255,000| 23,643,000| 26,249,000| Investing Activities, Cash Flows Provided By or Used In| | | | Capital Expenditures| (13,510,000)| (12,699,000)| (12,184,000)| Investments| (3,548,000)| (202,000)| -|

Other Cash flows From Investing Activities| 449,000| 708,000| 564,000| Total Cash Flows From Investing Activities| (16,609,000)| (12,193,000)| (11,620,000)| Financing Activities, Cash Flows Provided By or Used In| | | | Dividends Paid| (5,048,000)| (4,437,000)| (4,217,000)|

Sales Purchase of Stock| (6,298,000)| (14,776,000)| (7,712,000)| Net Borrowings| 3,130,000| 7,456,000| (1,186,000)| Other Cash Flows from Financing Activities| (242,000)| (271,000)| (396,000)| Total Cash Flows from Financing Activities| (8,458,000)| (12,028,000)| (14,191,000)| Effect of Exchange Rate Changes| (33,000)| 66,000| 194,000| Change In Cash and Cash Equivalents| (845,000)| (512,000)| 632,000| (Table from Yahoo! Finance)

The cash flow data for Walmart is a good chart to look at in determining the financial performance of the company. Based on this we can see that Walmart has made less in net income this year than in the previous year so it would be important to do the research before any new business ventures to determine what the reason is behind this. The operations segment gives us a sense of whether or not the current business model is making money and we can see that it is in fact making money. The total cash flow from operating has increased over the last year showing that the business model has become increasingly successful over the last year.

As far as investing goes this table shows us that Walmart has been investing an increasing amount over the last year. This amount has increased steadily over the past three years. This number is a positive thing because it shows that Walmart is dedicating itself to making internal investments and expanding the business further.

This cash flow statement tells us that Walmart is currently buying stock back considering their "Sales Purchase of Stocks" is a negative number and because of this reason it shows that Walmart is actually losing money for the past few years from stocks.

Revenue and Operating Profit: Income Statement: (All numbers in USD) Period Ending| Jan 30, 2012| Jan 30, 2011| Jan 30, 2010| Total Revenue| 446,950,000| 421,849,000| 408,085,000| Cost of Revenue| 335,127,000| 314,946,000| 304,106,000| Gross Profit| 111,823,000| 106,903,000| 103,979,000| Operating Expenses| | | | Research Development| -| -| -| Selling General and Administrative| 85,265,000| 81,361,000| 79,977,000| Non Recurring| -| -| -| Others| -| -| -| Total Operating Expenses| -| -| -| Operating Income or Loss| 26,558,000| 25,542,000| 24,002,000| Income from Continuing Operations| | | | Total Other Income/Expenses Net| 162,000| 201,000| 181,000| Earnings Before Interest and Taxes| 26,720,000| 25,743,000| 24,183,000| Interest Expenses| 2,322,000| 2,205,000| 2,065,000|

Income Before Tax| 24,398,000| 23,538,000| 22,118,000| Income Tax Expense| 7,944,000| 7,579,000| 7,156,000| Minority Interest| (688,000)| (604,000)| (513,000)| Net Income From Continuing Ops| 16,454,000| 15,959,000| 14,962,000| Non-recurring Events| | | | Discontinued Operations| (67,000)| 1,034,000| (79,000)| Extraordinary Items| -| -| -|

Effect of Accounting Changes| -| -| -| Other Items| -| -| -| Net Income| 15,699,000| 16,389,000| 14,370,000| Preferred Stock and Other Adjustments| -| -| -| Net Income Applicable to Common Shares| 15,699,000| 16,389,000| 14,370,000| (Table from Yahoo! Finance) The income statement is another important financial worksheet to look at particularly when looking to evaluate a company's revenue and operating profit. The three main things that are important to look at particularly for Walmart are the gross profit, operating profit, and net income.

The gross profit in the past year has increased which means that Walmart was able to sell more or were able to cut the cost of selling. Based on the numbers listed about it seems that both revenue and cost of revenue and cost of revenue had increased but the difference between them (gross profit) managed to be higher than in the previous years which is a positive thing for Walmart.

The operating profit tells us the profit once we take into account operating expenses. This number has also increase over the past few years. Ultimately, the most important number that we are able to get from this particular chart is the net income because this is the number that tells us the profit we have made once deducting interest expenses and taxed from the operating income. While the increase in gross profit and operating profit has increased over the last year the net income has decreased by close to 1 million..

In order to determine why this is it is necessary to evaluate the income statement to find the areas that Walmart has control over and make changes to those areas. Some of the areas that would be smart to look into are the interest expense, income tax expense, minority interest, and discontinued operations.

Asset and Liabilities: Balance Sheet: (All numbers in USD) Period Ending| Jan 31, 2012| Jan 31, 2011| Jan 31, 2010| Assets| | | | Current Assets| | | |

Cash and Cash Equivalents| 6,550,000| 7,395,000| 7,907,000| Short Term Investments| -| -| -| Net Receivables| 5,937,000| 5,089,000| 4,144,000| Inventory| 40,714,000| 36,437,000| 32,713,000| Other Current Assets| 1,774,000| 3,091,000| 3,268,000| Total Current Assets| 54,975,000| 52,012,000| 48,032,000| Long Term Investments| -| -| -| Property Plant and Equipment| 112,324,000| 107,878,000| 102,307,000| Goodwill| 20,651,000| 16,763,000| 16,126,000| Intangible Assets| -| -| -| Accumulated Authorization| -| -| -| Other Assets| 5,456,000| 4,129,000| 3,942,000| Deferred Long Term Asset Charges| -| -| -| Total Assets| 193,406,000| 180,782,000| 170,407,000| Liabilities| | | | Current Liabilities| | | | Accounts Payable| 55,926,000| 52,534,000| 50,532,000| Short/Current Long Term Debt| 6,348,000| 6,022,000| 4,919,000| Other Current Liabilities| 26,000| 47,000| 92,000| Total Current Liabilities| 62,300,000| 58,603,000| 55,543,000| Long Term Debt| 47,079,000| 43,842,000| 36,401,000| Other Liabilities| -| -| -| Deferred Long Term Liability Charges| 7,862,000| 6,682,000| 5,508,000| Minority Interest| 4,446,000| 2,705,000| 2,180,000| Negative Goodwill| -| -| -| Total Liabilities| 121,687,000| 111,832,000| 99,632,000| Stockholders' Equity| | | | Misc Stocks Options Warrants| 404,000| 408,000| 307,000| Redeemable Preferred Stock| -| -| -| Preferred Stock| -| -| -| Common Stock| 342,000| 352,000| 378,000| Retained Earnings| 68,691,000| 63,967,000| 66,357,000| Treasury Stock| -| -| -| Capital Surplus| 3,692,000| 3,577,000| 3,803,000| Other Stockholder Equity| (1,410,000)| 646,000| (70,000)| Total Stockholder Equity| 71,315,000| 68,542,000| 70,468,000| Net Tangible Assets| 50,664,000| 54,779,000| 54,342,000| (Table from Yahoo! Finance)

The final important table to look at for any company is the balance sheet. The balance sheet can tell us if the assets is equal to the liability plus stockholders' equity. In the case of Walmart for the past year this equation does not balance out which means that the numbers should be reevaluated to determine where that difference lies.

Another think that we can derive from the balance sheet it the debt-to-asset ratio which can tell us how risky Walmart is. In order to do this we need to use the equation: Debt ratio=Total LiabilityTotal Assets

Debt ratio=121,687,000193,406,000 Debt ratio=0.629 Debt ratio=63% This percentage is fairly high which shows that Walmart is a risky company. This simply means that there is greater risk associate with operations and there is not a significant number of assets to cover the liabilities that the company has.

Competitive Benchmarking: Direct Competitor Comparison| | Walmart| Costco| Target| Industry| Market Cap| 239.99B| 45.23B| 40.54B| 9.48B| Employees| 2,000,000| 96,000| 365,000| 29.64K| Qrtly Rev Growth| 0.03| 0.14| 0.03| 0.07| Revenue| 464.41B| 99.14B| 71.68B| 9.33B| Gross Margin| 0.25| .012| 0.30| 0.30| EBITDA| 35.99B| 3.67B| 7.41B| 1.03B| Operating Margin| 0.06| 0.03| 0.07| 0.06| Net Income| 16.59B| 1.71B| 3.02B| N/A| EPS| 4.86| 3.89| 4.51| 2.62| P/E| 14.68| 26.87| 13.81| 23.21| PEG (5 year expected)| 1.57| 1.82| 1.20| 1.29|

P/S| 0.52| 0.45| 0.57| 0.96| (Table from Yahoo! Finance) When people initially think of a competitor for Walmart most people would assume that Target would be the primary competitor. However when comparing the actual numbers associated with the competitive comparison it is easy to see that Walmart's main competitor is, in fact, Costco Wholesale Corporation.

Regardless of the competitor that is compared it is evident that Walmart surpasses each one by a significant portion for each category. The total values of the issued shares of Walmart is nearly six times that value for both Costco and Target and over 25 times that of the industry average. Looking at the number of employees alone it is safe to assume that the number of stores that Walmart has far exceeds that of its competitors.

Other factors that show that Walmart is superior in many aspects to its competitors is the revenue. People often associate the amount of money that a company earns to how successful that company is and Walmart makes a significant amount more than their competitors; 365.27B more than Costco and 392.73B more than Target. Another factor that people, particularly investors, look at when judging how successful a business has been is the earnings per share (EPS) which is also higher for Walmart than it is for its competitors.

This difference is not as severe as some of the other factors but if it comes down to someone decided to invest in Walmart or in Target that 0.35 difference in EPS may be enough to make that decision. The last major factor that shows that Walmart is often better, financially, than its competitors is the net income. The net income for Walmart is 16.59B which is nearly six times that of Target ad nearly ten times that of Costco.

These vast differences in factors for Walmart versus their competitors can be attributed to various things. One thing that likely plays into these high amounts of profits is the fact that Walmart Stores, Inc. is not just Walmart Stores. Walmart earns revenue from the Walmart Stores, supercenters, walmart.com and Sam's Wholesale Clubs. There are over 10,000 of these stores in countries all over the world.

Target Corporation is currently only Target stores and target.com and they have not yet developed as many stores in as many countries. Costco Wholesale Corporation also does not have the development yet that Walmart has had as it is also only the Costco stores.

Of course the number of Walmart stores and other stores under the Walmart Stores, Inc. brand is not the only factor that plays into Walmart's success. Walmart is very smart in the way that it does business in that they offer what many customers want which is low cost items. In order to achieve their consistently low prices they keep their inventory process very efficient through a disintermediation inventory system.

While Walmart does surpass its competitors in many aspects there are some other, also important, categories that Walmart's competitors are currently succeeding in. Costco currently has a higher quarterly revenue growth than that of Walmart, which has a quarterly revenue growth below even that of the industry average. One likely cause for this is that Costco is still in its expansion stage whereas Walmart already has a global presence and is no longer expanding at such an extensive rate. Target surpasses Walmart on two important margins: the gross margin and the operating margin. Gross margin measures the company's total sales revenue ("Gross Margin") and operating margin measures a company's pricing strategy and operating efficiency ("Operating Margin").

These are two important factors because it tells stock holders and investors how efficiently and effectively the company is running each quarter. Currently the areas that Costco and Target are exceeding Walmart are not at severe differences so there is likely no need to worry but it is always important for Walmart executives to look at the things that its competitors are doing and look at the numbers to ensure that Walmart stays the leading competitor.

Efficiency: One of the things that Walmart is well known for doing better than almost any other company on the market is controlling every aspect of inventory. They understand that in order to have full control over your costs you need to have full control over as many aspects of obtaining products as possible. In order to establish the most efficient distribution process Walmart utilizes a method of disintermediation. What disintermediation emphasizes is the removal of intermediaries from distribution channels, which if carried to the ultimate meaning of the term would result in the total elimination of middlemen from the channel (Rosenbloom). The easiest example of disintermediation is online shopping. When an item is purchased online from a company website, such as Walmart.com, there is need to have that item in stock in a store but can instead go directly from warehouse to customer. The intermediaries involved in distribution channels, such as wholesalers, are eliminated through disintermediation (Rosenbloom).

Walmart.com

The reason that Walmart is able to do this is that they put the pressure on the suppliers on the items to ensure that the inventory that Walmart has in its warehouse is the correct amount. For most stores this burden would be on the retailer but Walmart shifts that. The company receives favorable pricing from and systematic integration with most of its suppliers which is a large part of Walmart's crucial low-cost advantage. The company generally requires suppliers to tire in to its own inventory management system and to deliver goods in the manner and timing Walmart dictates, leading to impressive inventory turns. Another key thing about

Walmart's efficient distribution process is the sheer size of this network. Each of the 42 Regional Distribution Center is over 1 million square feet and serves between 75 and 100 stores within a 250-mile radius ("Distribution/Transportation"). The size of the distribution centers and their distance to the stores they serve is important because it allows Walmart to cut costs. By having everything that they need in one location and by saving on fuel costs Walmart cuts shipping costs and is able to transfer that savings to the end customer.

SWOT Analysis: Strengths- A market leader with unprecedented scale gives a competitive advantage.- Low cost leadership enabling Walmart to offer products at low price points.- Internationalization strategy -- a strong foundation for growth as the US market matures.| Weaknesses- Big box retailing format led to low penetration into urban areas.- Litigations affect labor relations adversely- Target's superior merchandising capabilities to appeal more to the customers as the US economy revives| Opportunities- Outperformance of the retail sectors in the emerging markets- Concentration on grocery and food will benefit as eating at home, health, and wellness trends continue to emerge- Growth in internet retailing to serve larger market| Threats- Two million employees increases exposure to increasing wages and high healthcare costs- Volatility in commodity prices and cost inflation will pressurize margins- Increasing resistance to expansion from local organizations and authorities.| Table Source: "Data Monitor"

Strengths: A market leader with unprecedented scale gives a competitive advantage. As the numbers above show, Walmart is the largest retailer in the world. There are some competitors that have developed in the market that Walmart is in but none of these competitors is comparable in the scale of operations or physical size. This competitive advantage expands worldwide as international operations contribute to one fourth and one half of the size of Walmart's income, stores, and number of employees. The main advantage that Walmart has in this realm is that they are able to duplicate the best practices each time they expand ("Data Monitor").

The fact that Walmart is so large and such a strong force in the global market has enabled them to have further competitive advantages. This has led to favorable terms on everything from products on its shelves to store leases and distribution agreements. The size of Walmart stores means that Walmart offers a wide range of products that can easily be shifted in each store to meet demand and allow Walmart to benefit from increased sales. This level of flexibility and clout in the market will enable Walmart to hold its market position and possibly strengthen their various competitive advantages ("Data Monitor").

Low cost leadership enabling Walmart to offer products at low price points. Walmart is known for having low prices and is always looking to further this. The company offers its grocery products at prices about 12% lower than the market. It isn't just grocery items, however, and this has made Walmart synonymous with inexpensive and has kept constant pressure on competitors to either lower their prices or try to develop a competitive advantage that trumps this. Walmart has been one of the few companies that may have actually benefited somewhat from the recession.

Walmart primarily serves less-affluent consumers, but the recession has put more people in that bucket, and many are drawn to Walmart's low-cost leadership ("Data Monitor").

Internationalization strategy -- a strong foundation for growth as the US market matures. Walmart is strengthening its presence in the international arena with 4,068 units in 14 countries. Not all of the units around the world are big-box stores as they are in the U.S.

but rather nine international store formats ranging from relatively tiny Bodega Aurrera Express stores in Mexico to a cash-and-carry warehouse in India to the traditional box in Canada ("Data Monitor"). Walmart executives have always realized that what works in the U.S. is not necessarily going to fit perfectly in other countries in the world and sometimes adjustments need to be made in order to be successful. Walmart's international division is its fastest growing segment and this is expected to continue at an aggressive pace through strong organic growth and acquisition ("Data Monitor").

Weaknesses: Big box retailing format led to low penetration into urban areas. Walmart stores in the U.S. are primarily big box store and supercenters that require large space for every new store. In urban areas there is limited space available and limited commercial spaces which can provide such large spaces so there is limitations to expand to these areas. With the latest urban focus of baby boomers looking to scale back and move into smaller homes closer to urban areas, retailers are expected to invent formats that differ dramatically from current ones ("Data Monitor").

When society changes it is important for businesses to also adjust to ensure that they are still relevant to what people want.

Litigations affect labor relations adversely. Walmart faces several charges and law suits with respect to labor relations that has led to nearly $400 million in lawsuit settlement in previous years. In one particularly damaging case, as many as 1.5 million women who have worked at Walmart's U.S. stores anytime since December 26, 1998 will be represented and compensated if it is proven that female retail employees were paid less and promoted less often than male employees. These lawsuits are counterproductive for Walmart and take away a lot of money that could be better used in other areas ("Data Monitor").

Target's superior merchandising capabilities to appeal more to the customers as the U.S. economy revives. Target has benefited from the image of being a purveyor of affordable, yet stylish products. It has made deals with well-known designers who made frugal, fashionable items for the company, which were viewed as a little bit more upscale than that of Walmart's.

This strong merchandising may be a key differentiator as consumer spending starts increasing. Walmart has increased efforts to compete with Target on merchandising but Target still leads and Walmart's product assortment although available at lower prices might be less appealing to the customers once the economy recovers and consumers start spending again ("Data Monitor").

Opportunities: Outperformance of retail sectors in emerging markets. Walmart has a presence in several emerging economics that will positively impact revenue growth. Walmart has a strong and further increasing presence in Asia and Asia's sales are expected to increase with China at the lead of this. Economists have long predicted that consumers in emerging economies would not only manufacture most of the world's goods but also buy them. By 2014, the IMF forecasts, emerging economies will contribute more to the world economy than developed counties and Walmart's bigger focus during the downturn has been wringing out costs to drive down prices. In contrast to the uncertainty in the U.S., growth in emerging economies indicate strong returns ("Data Monitor").

Concentration on grocery and food will benefit as eating at home, health and wellness trends continue to emerge. The number of Americans that prepare and consume their meals at home has been increasing for the past few years that that trend is likely to increase. Considering the current economy, people are looking to save money on food costs while still eating health and Walmart offers a variety of low priced grocery items for these consumers. Additionally, the food and grocery segment will increase the guest traffic into the stores converting into higher sales ("Data Monitor").

Growth in internet retailing to serve larger market. The online channel has several counter recessionary characteristics like low infrastructure costs which can be passed on to consumers, and convenience. Walmart.com's traffic exceeded one billion visits in 2009, growing more than 15% over the previous year through Site-to-Store and home delivery. Walmart aims at achieving its long-term target of serving over a billion customers in a week in the coming 20 years, compared with the 200 million customers it now serves every week ("Data Monitor").

Threats: Two million employees increases exposure to increasing wages and high healthcare costs. Tight labor markets, increased overtime, government mandated increases in minimum wages and a higher proportion of full-time employees are resulting in an increase in labor costs, which could materially impact the company's results of operations ("Data Monitor"). This is likely to be even more true with new Obamacare regulations that will soon be put into place that will likely have an impact on Walmart stores that have many part-time employees currently not receiving benefits.

Volatility in commodity prices and cost inflation will pressurize margins. The inflation for producers has been increasing at a faster pace than consumer's inflation leading to higher costs for producers. The cost inflation retuned and the food and grocery industry has little pricing power, the factors which have been pressurizing margins ("Data Monitor").

Increasing resistance to expansion from local organizations and authorities. A review and analysis by an industry related report suggested that on average, a Walmart store gets 84% of its business from existing stores. Another report documented that Walmart received more than $1 billion in subsidies from state and local governments through tax breaks and paying for roads and utility connections at many of its new stores.

A market analysis report estimated that for every new Walmart supercenter that opens, two local supermarkets will close. For this reason any many more Walmart has been facing severe resistance from several groups when it plans to open new stores ("Data Monitor").

Key Employees: Particularly when evaluating how to expand a company it is important to look at the current key employees that a company has to see if any of these people might be fit to work in this new environment. Some of the key employees are of source those associates that have Chief at the beginning of their title such as the Chief Executive Officer (also the president) Michael Duke, the Chief Financial officer Charles Holley, and the Chief Administrative Office Rollin Ford. However it is important to look at the other people who will have an effect on the expansion of Walmart, particularly into other countries.

These people include Neil Ashe, the President and Chief Executive Officer of Global e-commerce, M. Susan Chambers the Executive Vice President of Global people, and C. Douglas McMillon the President and Chief Executive Officer of Walmart International ("People"). There is absolutely other employees that will play an integral role in the successful implementation of Walmart in foreign countries but these are the executives that will likely spearhead the effort.

Paraguay Country Profile Introduction: Paraguay is a country of rural plains and muddy rivers, bordered by out of control jungles and dotted with lichen-stained towns and cities. Tucked away in the tropical belly of South America, landlocked and dwarfed by Bolivia, Brazil, and Argentina, most travelers take its anonymity as a cue to skip it and continue on to more exotic places. If you do decide to go, you will be surprised to find a beautiful, humid, strikingly green countryside best explored by boat or on horseback.

The indigenous Guaraní people play sentimental European songs on giant harps. Huge Ciudad del Este shopping malls stand next to thundering, tropical waterfalls. Unpaved roads lead to a multibillion-dollar dam called Itaipú. Architectural jewels punctuate Asunción’s squalor, while German Mennonite colonies scratch out a good living on the inhospitable Chaco.

In the south, majestic Jesuit ruins in Encarnación hint at a lost utopia. Paraguay's history is brutal and sad. Everywhere you go you will find references to the 19th-century War of the Triple Alliance, a lonely, ill-advised conflict against the combined might of Brazil, Argentina, and Uruguay that almost wiped out Paraguay's male population. Paraguay's isolation was compounded by a 20th century marked by military coups and long dictatorships. It is only recently that the country has opened up. Today, Paraguay is a destination for those who want the new and colorful and can tolerate the occasional discomfort. Its greatest assets are unexplored national parks with excellent wildlife, bird watching, and unlimited potential for ecotourism.

Executive Summary: This report serves to inform the reading of the history, physical setting, financial structure, governmental structure, as well as other features pertaining to Paraguay. A large portion of this paper is dedicated to the history of Paraguay, both early and as of late. From early conquistadors such as Juan Díaz de Solís, to late dictators such as President Estigarribia, Paraguay’s history is covered. The tropical physical settings, as well as its climate, are also enclosed in the report.

Population statistics are given to provide a quick overview of how Paraguayans live. Their governmental structure, consisting of the executive, legislative, and judicial, is all reported. The economy of Paraguay, as well as how it relates to the United States, is shown. Business profiles and etiquette are analyzed to be compared between that of Paraguay’s, and that of the United States.

By the end of this report, the reader should inherit a decent understand of how Paraguay was formed, what it's like today, how the government is run, the economy of Paraguay, and how Paraguay acts in a business setting.

Physical Setting: Overview: Although landlocked, Paraguay is bordered by navigable rivers. The Río Paraguay divides the country into different eastern and western regions. Both the eastern region officially called Eastern Paraguay (Paraguay Oriental) and known as the Paraneña region, and the western region, officially Western Paraguay (Paraguay Occidental) and known as the Chaco, gently slope toward and are drained into the Río Paraguay, which thus not only separates the two regions but unifies them. With the Paraneña region reaching southward and the Chaco extending to the north, Paraguay straddles the Tropic of Capricorn and experiences both subtropical and tropical climates.

Features: The two main natural regions in Paraguay are the Paraneña region (a mixture of plateaus, rolling hills, and valleys) and the Chaco region (an immense piedmont plain). The Paraneña region has all the significant orographic features and the more predictable climate. The Paraneña region can be generally described as consisting of an area of highlands in the east that slopes toward the Río Paraguay and becomes an area of lowlands, subject to floods, along the river. The Chaco is predominantly lowlands, also inclined toward the Río Paraguay, that are alternately flooded and parched

Climate: Paraguay experiences a subtropical climate in the Paraneña region and a tropical climate in the Chaco. The Paraneña region is humid, with abundant precipitation throughout the year and only moderate seasonal changes in temperature. During the Southern Hemisphere's summer, which corresponds to the northern winter, the “dominant influence on the climate is the warm sirocco winds blowing out of the northeast” (Mora).

During the winter, the dominant wind is the cold pampero from the South Atlantic, which blows across Argentina and is deflected northeastward by the Andes in the southern part of that country. Because of the lack of topographic barriers within Paraguay, “these opposite prevailing winds bring about abrupt and irregular changes in the usually moderate weather” (Mora). Winds are generally brisk. Velocities of 160 kilometers per hour have been reported in southern locations, with some tornados.

The sierra region’s high altitude produces temperatures only varying from 54OF to 48OF and receives the majority of its rain and snow from October to April. The Amazonian region has a year round temperature averaging 90OF with heavy precipitation that occurs almost constantly from October to April. Tectonic activity is presently a threat to the country, as Peru is located near the intersection of the South American and Nazca Plates, which have recently shifted in June of 2001 that caused a tsunami and caused more than 100 casualties.

Tectonic activity within Peru had also caused an earthquake in May of 1970 that killed 66,000 people. Peru is also susceptible to active volcanic activity, in which Mount Ubinas had last erupted in 2009 and is currently the countries most active volcano. While these are not frequent events that happen to Peru, it could definitely have an impact on an international business constructing and running a firm both near the coast and inland in the long run (Peru – Worldmark). Environmental problems:

Peru has experienced problems with controlling air, water, and soil pollution, soil erosion, deforestation, and the endangerment and extinction of species. Air pollution attributed to vehicles and industrial processes, particularly in the larger cities, have seen an increase by millions of metric tons of carbon dioxide emissions almost every year. Water and soil pollution are a concern to the Peruvian Government caused by improper disposal of industrial waste, sewage, and oil products.

Soil erosion has occurred specifically on the coast and sierra regions from an increased population of animals that have overgrazed the land. To address these environmental issues, Peru has its National Office for the Evaluation of Natural Resources, which creates national policy on pollution, while its Ministry of Agriculture creates policies on water, forest, and wildlife preservation. These policy makers have put in place many up to date standards for preserving Peru’s natural resources, but have been unable to enforce them with mismanagement and a lack of funding (Peru – Worldmark).

History Peruvian history begins with the original indigenous people, the Incas, who were defeated by Spanish conquistadores in 1532. This reign of Spanish power is challenged in 1780 by a failed attempt of the Incas to reclaim power, and is followed by the capture of Peru’s capital Lima by General Jose de San Martin, who claimed as Peru independent of Spain in the 1820’s. By 1827, the United States had opened diplomatic relations with Peru, which has evolved into the strong bilateral agreements both countries participate in currently.

20th century Peru had experienced much instability through border disputes with neighboring countries, forceful change in political parties, and an overpowered shady military. This state of instability had started with Victor Raul Haya de le Torre, an exile from Peru living in Mexico, who created the American Revolutionary Popular Alliance in 1924 that was a centre-left political party, and was not voted into power until 1945 with a civilian government.

Shortly after in 1948, General Manuel Odria coordinated a coup of the former government and created a militaristic government in its place. Continuing this pattern the government see change back to civilian rule, then back to militaristic rule with populist land reform and nationalization, then back to civilian rule from 1963 to 1980.

The period between 1980 and 1990, under civilian rule of Fernando Belaunde starting in 1980 and subsequent election of the APRA leader Alan Garcia Perez, brought about internal social armed conflict between “Shining Path” civilian guerrillas, drug traffickers, and the national army over political party rule, in which by 1990 more than 3,000 political based murders had been reported, and 1,000 more by 2000.

Once elected, Perez began a campaign to remove the “old guard” military and police forces that have caused much of Peru’s political instability. Fiscal instability in the late 1980’s, started in 1987 with a political movement to nationalize banks, caused by Peru facing possible bankruptcy. Peru had then called for help from the International Monetary Fund in 1988 to bail out its currency and economy to quell inflation

. This did not help them as two years later in 1990, Peru faced increasing economic inflation up to 400 percent that had forced the government to launch austerity and privatization programs. Less radical but stabilizing political change occurred in the 1990’s with the election of president Alberto Fujimori in 1990, who was an independent center-right candidate that spearheaded a campaign against corruption, through which he removed and adopted a new constitution and legislature in 1992. Fujimori had also caught and imprisoned the Shining Path guerrilla leader for life, with his army of 6,000 surrendering two years after.

In 2000 and 2001 the government was again shaken up by a string political and financial scandals surrounding the ex-Peruvian intelligence chief Vladimiro Montesinos who was caught bribing an opposing political figure. This led to the resignation of Fujimori, the deputy treasury minister, and the leaders of the Peruvian army, navy, and air force as they had given or received bribes from Montesinos. He is subsequently caught in Venezuela by authorities, brought back to Peru, and then sentenced in July of 2002 to 9 years in prison. Alejandro Toledo was then elected president, and noted as the first to be of native Indian origin.

In March of 2002, a prominent event in Peruvian-US relations occurred, with the bombing of the US embassy in the capital city of Lima that killed nine. It was interpreted as a scare tactic to disrupt the future visit of George W Bush. But they rekindled their relationship in 2005 with the construction of the Peru-US free trade agreement.

In late 2002 and 2003, the Truth and Reconciliation Commission held public hearings over the civil wars of the 1980’s through the 1990’s. The commission concluded that over 69,000 people were killed by Shining Path rebels and in 2005 reserves $800 million for victim’s compensation.

The years of 2006 through 2012 were mostly led by events pertaining to the continuing trials of former political leaders, drug trafficking, organized crime, clashes between indigenous people and security forces over opening of oil and gas resources to foreign companies and opposition of free trade agreements and disastrous gold mining in the conga region (Timeline:Peru). To sum it up Peruvian history has been relatively unstable, both socially and politically, until the past decade in which the government has been fighting to bring justice to those whose corrupt actions have hurt the nation and to balance the actions of business and the effects on its citizens. Population

(Peru - Population by Region) Peru is inhabited by 29,549,517 people in 2012 estimate with the mix of nationality consisting of 45 percent Amerindian, 37 percent Mestizo, 15 percent white, and 3 percent African, Japanese, Chinese, and other. The Chinese population within Peru is associated with their government importing Chinese laborers in the late 1800’s for mining, farming, and railroad expansion.

More than 99 percent of the Peruvian population primarily speaks the official languages of Spanish, Quechua, or Aymara, while approximately 1 percent speaks Ashaninka, minor native and Amazonian dialects, and other languages. Its population mostly practices the Roman Catholic, Evangelical, and smaller groups of multiple other faiths. The population density of Peru, as seen in the map above, is in total 56 people per square mile, mostly congregated in its costal regions near its capital city of Lima shown in dark purple with 53 percent of its total population. The other 36 percent of its population is located in its sierra region, and another 11 percent populating its eastern rain forest.

Its population breakdown by age is comprised of 28.1 percent inhabitants under the age of 15, 65.4 percent people that are 15 to 64 years old, and only 6.5 percent of people 65 years or older, with the median age of its population at 26.5 years old. Its male to female ratios by age are pointing to an increase in the future male population over the female population.

In 2012, its population has an estimated growth rate of 1.016, which is very low globally comparative, which can be directly attributed to Peru’s statistics in 2012 of 19.13 births, 5.95 deaths, and -3.03 migrants per 1,000 population. Urban cities play a large part in Peru as 77 percent of the population resides in an urban area and this number is growing at an estimated annual rate of 1.6 percent.

Peru’s total health expenditures are at a relative low 4.6 percent of their GDP, which can be attributing to the low life expectancy of 72 years, high maternal infant and maternal mortality rates, and high risk of contracting an infectious disease (World Factbook).

Social Strata Division: Social classes in Peru are divided into the upper, middle, and lower class. Those of the upper class make up 3 percent of the total population that is comprised of business owners and politicians, most of which are located in the capital city of Lima. The middle class citizens are salaried workers and business professionals throughout the country that make up 60 percent of the population. The lower class accounts for the remaining 37 percent of the population, as low wage workers and rural farmers dwelling in urban areas and rural shanty towns.

These workers are found to place more emphasis on practicing historic culture values and the Incan religion. Under the lower class are also the native tribes located in Peru’s jungles that have limited contact with the developed culture of the coastal areas (Peru- Culture & Society). Cultural Values:

(Hofstede) Geert Hofstede’s five-dimension model details the power distance, individualism, masculinity, uncertainty avoidance, and long-term orientation of a nation’s culture in order to rank it relative to others. As seen in the above graph, which compares Peru, in blue, to the United States, in red, depicts a much stronger power distance and uncertainty avoidance. The United States shows a much stronger stress on individualism, masculinity, and long-term orientation. Geert Hofstede defines culture as “…the collective mental programming of the human mind which distinguishes one group of people from another.”(Hofstede).

Geert Hofstede created his study based on how basic cultural values effect of organizational behavior based on data taken from 116,000 people in 50 countries (Deresky, p99). Peru’s power distance score of 64 points to the societal structure found in business and government, where tall, centralized organizational environments can be found versus a wide horizontal structure found elsewhere. Power distance specifically measures a subordinates acceptance of an unequal power distribution.

This tall organizational element has been said to be traced back to the centralization found in the Incan empire, or due to authoritarian and religious influence over Peruvian history. Those at the bottom of the structure find authoritative figures hard to communicate with, leaving a lack of trust. They also find that those considered superior expect to be respected by subordinates, especially by those considered minorities of indigenous or African origin. Individualism is very low with a score of 16, showing that Peruvian society considers itself a collectivist society. This individualism score measures the value of interdependence self-image of a society. This low score indicates that the

Peruvian population finds large corporations attractive for employment. Employees place an emphasis on conforming to corporate culture with their involvement based on a moral relationship, not based on their payment. Peru’s masculinity score of 42 points Peru’s more feminine societal values. The masculinity score places a value on motivation, whether a society embraces competitiveness in the workplace versus increasing the overall quality of life. Peru’s masculinity score has attributed to problems with international corporations entering the business markets in Peru as expatriates, such as those from the United States, find local workers to have a low motivation due to their preference of building human relationships over workplace achievement or gaining wealth.

Peru’s uncertainty avoidance score of 87 shows the need for laws applied by the centralized governmental structure found in its power distance score. Uncertainty avoidance places a measure on a societies reaction to situations that they have not yet dealt with. Peru’s high score is attributed to the increasing enactment of laws to structure a societies life due to the unnecessary need to follow these laws because of widespread corruption and a large black market.

Peruvian society sees the increase in laws and regulations as an increasing justification to disobey it or to find a legal loophole around the law. Long-term orientation is a measure of the societies future versus short-term perspective. No long-term orientation data is made available on Peru. (Hofstede)

Education: Peru’s education system provides 12 years of compulsory education, spread over one year of preschool, 6 years of primary schooling, 2 years of secondary schooling, and either a 3-year general academic education in arts or science, or a 3-year technical school. After which, students may apply for studies at the university level. University level educations are available in most major cities, but as Peru has a relatively small amount of universities and a large number of applicants, only a small fraction can be accepted. In 2005 the government had constructed plans for university schooling of its Northern Amazonian indigenous people, providing education on forestry management and medicinal plants.

Following their customary business vacation schedule, detailed under business etiquette, and experiencing their summer solstice in December to March, the academic year runs from April to December (Peru –Worldmark).

Peru’s education expenditures in 2008 totaled 2.7 percent of their gross domestic product and accounts for 17.1 percent of total government expenditures, providing national literacy rates of 92.9 percent of its population. Males have a larger literacy rate of 96.4 percent versus females, who have only an 89.4 percent literacy rate. The average time a student attends school in Peru from primary to university levels is 14 years (World Factbook)

Government Government Breakdown: Peru’s government is based upon a constitutional assembly that was rewritten in 1992 based on its previous constitution of 1979. Notable facts about its government are that it has in the past committed human rights violations and continues to restrict the right to free speech and press. More specifically it is a unitary presidential constitutional republic, under which an elected president may hold office for five years and be immediately reelected for another five-year term. Its president must receive the popular vote of 50 percent or more, or win a runoff election. Currently the executive branch is headed by president and chief of state Ollanta Humala and Prime Minister Juan Jimenez Mayor.

Its legislative branch, the National Congress is comprised of 180 members in its Chamber of Deputies and 60 senate members, of which both groups may hold a maximum term of five years alongside the president elected by citizens ages 18 and over. The seats of congress are divided up by each political party, governing seats to each by their percentage popular vote.

The Peruvian judicial system is based upon the Napoleonic Code of law, which is enforced by its 16 member Supreme Court based in the capital city of Lima, its most powerful judicial body. The 9 members of its Court of Constitutional Guarantees perform judicial procedures in human rights cases. Its Superior Courts of each of the departmental capitals perform the first instances of judicial hearings for civil, penal and special cases. Peru’s Justices of the Peace court perform hearing on minor and misdemeanor cases. Currently, the judicial system consists of over complex judicial procedures and is experiencing overcrowding in its jails, leading to those accused waiting months or years in jail until their trial (Peru –Worldmark).

Political Parties: Throughout the history of Peru, as seen in the historical section, its political parties have been overshadowed by the power of its political figures that have held the most control through their personalities and governing tactics between military and citizen control. Though overshadowed, there have been political parties backing most g