Wal-Mart is the world’s largest retailer, however there are more than 6,500 stores worldwide. However, more than 70 percent of Wal-Mart merchandise comes from China although the bulk of sales come from the United States. Before opening Wal-Mart, Sam (owner) traveled the country studying everything he could about discount retailing.
He became convinced American consumers wanted a new type of store. Trusting his vision, Sam and his wife Helen put up 95 percent of the money for the first Walmart store in Rogers, Ark.Moreover, Discounters such as Kmart quickly expanded in the 1960s, while Sam only had enough money to build 15 Walmart stores. In 1972, Walmart stock was offered for the first time on the New York Stock Exchange.
With this infusion of capital, our company grew to 276 stores in 11 states by the end of the decade. Today, Walmart International is a fast-growing part of Walmart's overall operations, with 4,573 stores and more than 730,000 associates in 14 countries outside the continental U. S. In fact, on November 29, Walmart confirmed an offer to acquire 51 percent of Massmart in South Africa.
Question for discussion1. In what countries has Wal-Mart done well? Can you identify any common consumer, market retailer, or entry strategy traits across these countries that might account for Wal-Mart’s success? Wal-Mart has done well in the United States, Canada, Mexico, Puerto Rico, Hong Kong, China, and England. The United States, Canada, Hong Kong, and England are rather well off markets. Meanwhile, Mexico is in-between and China and Brazil lag behind Mexico in prosperity. Therefore, Wal-Mart success might start with countries along with healthy economies.
Healthy enough that customers have some disposable income. Another characteristic is that these markets may not be as demanding as the Germans and Japanese. Perhaps they are more interested in lower price (the British seem to be like the United States in this regard). Obviously price would be important in Mexico and China, where incomes are lower.
Canada and the United States are considered predominantly Anglo countries, so perhaps the success of Wal-Mart in these countries along with the United Kingdom is not surprising as these consumers share a similar heritage and even a common retailing approach.In all of these countries, Wal-Mart has either had good partners (Hong Kong, Mexico, and China) or bought successful store chains (Canada and Puerto Rico). Thus, access to local market knowledge is an important factor in successful entry. This is especially true of the United Kingdom, where ASDA had already adopted and adapted the Wal-Mart philosophy for their market.
Where Wal-Mart has not used existing expertise (Germany), they have not been successful.2. In what countries has Wal-Mart done poorly?Can you identify any common consumer market, retailer traits, or entry strategies across these countries that might account for Wal-Mart’s lack of success? Germany, Japan, Brazil, and Argentina have not been good entries for Wal-Mart. In Germany and Japan, consumers are more demanding and more quality conscious.
In Germany Business is not successful and the relationship with its own workers is strained. Apparently, Wal-Mart's concept has not travelled well to the largest European Union market. Both Germany and Japan seem to be less interested in the type of goods that Wal-Mart sells.Moreover, In both locations, real estate and market conditions stymie Wal-Mart’s growth—whether this is unions or convoluted distribution systems.
In both Japan and Germany, Wal-Mart bought existing chains with shabby stores and poor sales. Perhaps the lack of success of their acquired firms accounts for why Wal-Mart management did not utilize the expertise of those managers. Another possibility is that Wal-Mart had such good success in Mexico and Canada that it was overconfident of its approach when it entered the German market. Since then, it seems to be more willing to listen to local partners.In Brazil and Argentina, there are many factors against successful economic factors, real estate, and crowded cities demanding different store formats.
Also, Wal-Mart found it hard to compete with Carrefour, which is the second largest discount chain in the world. Although Carrefour has some stores in Mexico, Wal-Mart had not previously entered a country where Carrefour was entrenched because it stays away from the German market; and is an alarming foe. So, in these markets, Wal-Mart encountered more competition than it produced anywhere else except in the United States.3. In your opinion, will Wal-Mart be successful in Japan? In Germany Why or why not?The Japanese distribution system has two distinct characteristics: too many very small retailers and multiple layers of wholesalers. Japanese consumers prefer to buy fresh, high quality food and have the tendency to purchase goods in small amounts and at frequent intervals.
Since real estate is very expensive in Japan, people live in very small apartments and they are not used to doing big shopping, because there is not much space to store things.The majority of small-sized retail stores are run as family businesses, and there are preferential tax treatments granted to these retail stores. In addition, there are regulations placed on large-scale retail stores. Japan’s current distribution system is a huge barrier to Wal-Mart’s traditional way of doing business. However, in Germany there is a shortage of land and stores tend to be smaller. Competition in Germany is much greater because of the worlds five top 25 global retailers are German and two of them in the top 10.
German consumers are among the most demanding in the world.They are extremely quality conscious and are les price conscious. Moreover, Wal-Mart had purchased two chains with declining sales, poor locations, and dirty stores. Wal-Mart in Germany fails to take advantage of the managerial expertise in their acquisitions. To avoid this, Wal-Mart would have to improve the quality of their assortment, possibly change store formats, and give themselves a more upscale look. They would be force to change their pricing strategy and promotional policies in order to cater to the Japanese consumer.
Nevertheless, Japan is difficult to market because of their protectiveness of their markets and the closed nature of their distribution system. One thing that Wal-Mart has in their favor is that they are American and the Japanese seem interested in American products. Retailers, on the other hand, in Japan have learned the hard way that they must adapt very carefully to the Japanese market. Given that Wal-Mart still has not cracked the market in Germany, one has to wonder about Wal-Mart’s ability to do this.
They might consider that some countries are just not amenable to the standard Wal-Mart image and approach. Their slow approach to entry is giving Japanese chains time to change their strategies to counter Wal-Mart.4. In your opinion, should Wal-Mart enter India? If so, how should it go about this?Yes, I think Wal-Mart should enter India. However if Wal-Mart decides to enter the India market and if Wal-Mart wants to make a success of its Indian adventure and avoid the kind of mistakes it made in Germany and Japan, where it was forced to pull out, it should send its top managers to Design With India conference in New Delhi to learn about local culture, branding, design and products.Organized by the Confederation of Indian Industry and the National Institute of Design, the summit will bring together hundreds of business people, scholars, designers, and government bureaucrats to discuss innovation and design in India.
Entire sections of the conference will be focused on European, American and other foreign companies seeking to strike partnerships with Indian corporations and enter India. This is one must-go conference. Also it would be a good idea for Wal-mart to consider doing the opposite they did when entering the Germany and Japan market.5. Beyond India, what countries do you think Wal-Mart should consider entering? What factors are important in making this decision? Be prepared to defend the countries that you choose. Some possible choices are Australia, which has the same Anglo heritage other Southeast Asian countries such as Thailand; other European countries such as France, Italy, and Spain (a very likely market); the Scandinavian countries; Holland; Belgium, etc.
Most of the Middle Eastern and African countries are not viable candidates at the time, with the exception of South Africa (which s not particularly large or rich). Neither are the South American countries, with the exception of Chile. Most of them have economies and governments that are highly volatile and are in the economic doldrums. If countries are not large or do not have a significant population, Wal-Mart’s bottom line will be better enriched by opening another store in the United States.
It takes a lot of population to justify the high costs of entry by Wal-Mart.
