Why has Wal-Mart viewed international expansion as a critical part of its strategy?

Running head: WAL-MART 1

 

Wal-Mart Globalization 7

 

 

 

 

 

 

 

 

 

WAL-MART:

Ellington, David

Park university

 

 

Concepts in the case study

The concepts within the case study include globalization, strategic management, and competitive advantage. Globalization is the process by which the world becomes connected as a result of increased trading activities and the cultural exchanges (Noe, 2017). Through economic globalization, different countries have managed to come together as one economy thus making the international trade much more comfortable. It is through the concept that Wal-Mart managed to expand its operations to other countries in the continent, thereby increasing the level of trade and cultural exchange.

Strategic management is the company’s continuous planning, analysis, monitoring, and assessment of all the requirements of the company to meet its goals and objectives (Freeman, 2010). In analyzing the strategic management, the company needs to factor the porters’ five forces emanating from the horizontal competition, threat of the company substitutes and the established rivals as well as the possible entrants. The company also needs to consider the vertical competition, which includes the bargaining power of both the customers and suppliers. Strategic management is relevant to Walmart’s planning since the business will have to plan on how to manage the external forces to enable it to penetrate the market.

Competitive advantage is a set of unique features of business and its products that are believed by the intended market as superior to the competition (Noe et al., 2017). The primary competitive advantages that the company may work towards include differentiation, cost, product or service, and the niche strategies. The competitive strategies are relevant to Walmart since it will enable the business to increase the sale of its products and also identify the potential areas to perform marketing.

 

1. Why has Wal-Mart viewed international expansion as a critical part of its strategy?

Wal-Mart is subject to Uncontrollable forces emanating outside the company trying to influence its growth and performance. The company started showing signs of expansion between the 1980s and 1990s of which by the 1990s, it began its operations in Canada (“Walmart.US,” 2015). It later opened more branches in other countries like Germany, China, South Korea, United Kingdom, and Japan, all of which formed the business potential market for growth. The limitations that were there in the home country enabled Walmart to develop another vision on the company success thereby allowing it to open more branches in other countries thus pushing for the company success in the United States. China and other overseas offices also formed part of the potential markets where the company saw as the possible targets for success. The foreign countries in Asia contributed to the bulk of business success, where Wal-Mart derived the majority of its revenue. However, the major part of the company focus remained in Mexico, which lies in Latin America. Walmart established its first international stores in Europe, Canada, Argentina, and Brazil, which later enabled it to penetrate more potential markets and thus to give it easily reach to the customer destinations. Consumers preferred to purchase from the neighborhood stores that they were familiar with thus pushing for the company’s desire to open up more stores. The consumers’ wants, therefore, increased the willingness of the company to expand into broader markets overseas.

2. What did Wal-Mart do to enable the company to achieve success in Canada and Latin America? Why did Wal-Mart fail to achieve similar success in Europe?

Success factors

Under the leadership of Sam Walton, the company allowed more of instant discount, thus enabling it to win more consumers in the regions that it had opened up stores like Canada and Latin America. The retail sales factor and the increased discounts catalyzed the firm’s growth in sales by increasing the staggering product sales and also raising the bar in the industry as the world’s leading retail outlet. Latin America, with a focus on Argentina, Mexico, and Brazil formed the first targets for the business due to the large population, thus creating potential markets. Mexico, for instance, the people preferred the use of buses in moving to various locations within the town. The company saw it as an opportunity then procuring bus shuttles then secured parking lots such that the customers would be picked and dropped quickly from their residence to the business premises. The way the business also focused on the international market. Notably, America also contributed to the company’s growth and success. The firm handled the roadmaps for its trade zones with much interest since it considered the foreign trade as part of the company’s great success strategy. The strategy enabled Walmart to expand its territories within Canada and Latin America, thereby resulting in more sales.

Failure factors.

Walmart also failed to attain its success goals in the Europe and America regions. The international market required the managers to focus their attention on the interaction between the home market, and global forces which proved to be a tall order for the Walmart team based on the rate of expansion is experienced. The managers in Walmart never paid enough attention to the cultural environment within the global market, especially in the areas of operation, thereby resulting in an inadequate response by the customers. The managers intended to impose to the customers in the new regions their preferences, culture, and actions, which resulted in self-reference criterion, which is among the biggest challenges that today’s businesses experience. The cultures in the new markets were utterly different from that of the United States, thus making it difficult for the company to pick up as intended. A good example was the stores in German, of which the managers who had no knowledge of the country’s culture and the German language tried to impose different schedules which went against the country’s laws. The actual retail prices for the local companies were low and also discounted, thereby hindering the profitability of Wal-Mart. The environment in German was not favorable to Walmart global expansion plans, but the company managers treated the region as a priority, thereby failing its strategy. The Europe market had most of the products selling at low prices, which became a problem for Wal-Mart to adjust, thus hindering its success strategy. Walmart also encountered difficulty among its competitors since they shared the same market, thereby reducing the level of sales and profitability. In German, the business environment was already established, thus making it difficult to penetrate and influence. The region had most of the products discounted, whereas Walmart used the discounting strategy to enter the market which would not work as expected.

3. What should Wal-Mart do or not do to help ensure that the company achieves success in China and India?

In China, the government was entirely in support of the local business, thereby making foreign companies’ entrant a challenge. The government viewed the local territories as a political matter, thus creating difficulty for international companies to join the market. Walmart, on the other hand, followed the globalization strategy to attain its expansion goals. The merchandising strategy that the business follows is that of the international business strategy of which it capitalizes on given opportunities as seen in the case of Latin America and Canada. Walmart should try to focus more on the areas that the consumers are more active to ensure that they sell effectively in the competitive environment. The company needs to identify the market niche and specialize in the products that are likely to sell more within the market segment. In the Indian market, Walmart needs to improve on the technology used to enable it to maintain product quality and customer satisfaction level (Bellman and Hudson, 2006). The company will need its managers to learn the local language and also employ more managers from India who are familiar with the culture of the area. Adopting the global culture will enable the business to understand consumer demands, thereby resulting in more sales while trying to fulfill the market gap (“Walmart blog,” 2015). The company needs to seek political goodwill from the authorities in India to enable it to operate without much interruption. Since there is already intense competition in the local market, Walmart needs to differentiate its products to increase its competitive advantage in India. Differentiation will enable the customers to identify the company’s products easily, thereby increasing the level of sales.

 

 

References

Bellman, E., and Hudson, K. (2006).The Wall Street Journal (2015). “Wal-Mart Trains Sights on India’s Retail Market,” January 18, 2006, retrieved from https://www.wsj.com/articles/SB113753852793448955

Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge university press.

Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. (2017). Human resource management: Gaining a competitive advantage. New York, NY: McGraw-Hill Education.

Walmart blog (2015). What should Walmart do—or not do—to help ensure that the company achieves success in India? Sources: Walmart 2013 Annual Report. Retrieved from http://stock.walmart.com/ microsites/annual-report-2013/.

Walmart.US. (2015). Walmart Reports FY15Q3 EPS of $1.15; Walmart U.S. Delivers Positive Comp Sales. Retrieved from: https://corporate.walmart.com/our-story/our-business.