Professional Documents
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Global Expansion
Case Study
By
TABLE OF CONTENTS
GROUP INTRODUCTION: UNBREACABLE ---------------------------------------- 2
WALMART INTRODUCTION ---------------------------------------------------------- 3
CASE STUDY SUMMARY: WALMARTS GLOBAL EXPANSION ------------ 4
CASE STUDY QUESTIONS ANSWERS --------------------------------------------- 5
QUESTIONS FOR PRESENTING GROUP AND ANSWERS ---------------------- 7
REFERENCES ---------------------------------------------------------------------------10
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WALMART INTRODUCTION
Wal-Mart Stores, Inc., branded as Walmart, is an American multinational
retail corporation that operates chains of large discount department
stores and warehouse stores. Headquartered in Bentonville, Arkansas, the company
was founded by Sam Walton in 1962 and incorporated on October 31, 1969. The
company operates under the Walmart name in the US and Puerto Rico. It operates
in Mexico as Walmart de Mxico y Centroamrica, in the United Kingdom as Asda,
in Japan as Seiyu, and in India as Best Price. It has wholly owned operations in
Argentina, Brazil, and Canada.
Walmart helps people around the world save money and live better -anytime and anywhere -- in retail stores, online and through their mobile devices.
Each week, more than 245 million customers and members visit our nearly 11,000
stores under 71 banners in 27 countries and e-commerce websites in 10 countries.
With fiscal year 2014 sales of approximately $473 billion, Walmart employs 2.2
million associates worldwide.
Walmart is the world's largest company by revenue, according to
the Fortune Global 500 list in 2014, the biggest private employer in the world with
over two million employees, and the largest retailer in the world.
The company was publicly listed on the New York Stock Exchange in 1972.
In the late 1980s and early 1990s, the company rose from a regional to national giant.
By 1988, Walmart was the most profitable retailer in the US and by October 1989 it
had become the largest in terms of revenue.
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Ability to reap significant economies of scale from its global buying power due to
international expansion. (Walmart key suppliers have long been international
companies).
Advances in information systems, particularly the spread of Internet-based software.
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government or the economy is not stable it is favorable to stay out of the market
since the own rights are low protected and the overall performance is hard to predict.
3. Why do you think that Walmart first entered Mexico via a joint venture?
Why did it purchase its Mexican joint venture partner in 1997?
This was the first time that Walmart operated internationally under a CEO who spent
most of his life in the United States. Sam Walton was known as an indigenous
business man who wanted all of his employees to think how to improve and develop
the company. There was no reason to change this mind set and go arrogantly into a
new market not paying attention to the Mexican customers needs and preferences.
Henry Davis, the CEO of Cifra, was a born Mexican who was sent by Cifra to study
at Harvard University. Therefore he knew both life styles: the US and the Mexican.
In 1991 when Walmart negotiated with Mexicans biggest retail market Cifra there
where political negotiations ongoing weather there will be a free-trade agreement
between the United States. Cifras president, Henry Davis, said that the prospect of
free trade between the two countries helped make the deal attractive. By founding
the joint venture Walmart avoided to compete against an already established local
company that had highest market shares. Walmart now had a local guide who
showed them how to sell products in Mexico and a direct reach to Cifras costumers.
After the initial joint venture Walmart had set up several other joint ventures with
its Mexican partner []. In 1997 all these joint ventures merged with Cifra. WalMart then took a controlling, 51 percent stake in Cifra for $1.2 billion. The company
thereby held a majority stake in the largest retailer in Mexico [] and the name
changed to Wal-Mart de Mxico y Centroamrica which can be seen as an
expansion into the whole Central American region.
4. What strategy is Walmart - a global strategy, localization strategy,
international strategy, or strategy? Does this strategic choice make sense? Why?
As stated earlier the core competency of Walmart is the low price of the offered
products. Therefore there is a strong cost pressure. Focusing on the offered products
you can see that Walmart is a store where one buys daily used products. Cultural
differences and preferences are mainly shown in the daily life, which is lived with
daily life products bought from Walmart. Derived from that Walmarts strategy
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As Walmarts presence grew, many of Walmarts suppliers built factories near its
distribution centers, which helped further reduce inventory and logistics costs.
Using its enhanced size to demand deeper discounts from the local operations of its
global suppliers.
Making bulk purchases from vendors to enjoy volume discounts, and paying low
wages.
Maintain low cost by having efficient and effective operations.
Its marketing strategy relies on word-of-mouth communication and focuses on
everyday low prices, which means that customers can buy the products at the lowest
price all the time.
3. What were some entry modes Walmart use when entering new
markets? What are the benefits in each way?
Entry mode 1: through joint venture with its local player.
Help gain better knowledge of the new market.
Help Walmart to work with local authorities.
Entry mode 2: entry mode of acquisition.
Avoid time-consuming problem of building up stores.
Entry mode 3: offshore-sourcing strategy.
Use the new market as a major production or assembly source country for their
products in the US increase profit in motherland.
Entry mode 4: Building its own store.
Gain complete control of the new facilities.
4. In some different foreign markets, Walmart operates under different
names1. Explain this occurrence. Does it have anything to do with Walmarts
strategy when expanding internationally?
The company operates under the Walmart name in the US and Puerto Rico. It operates in Mexico as Walmart
de Mxico y Centroamrica, in the United Kingdom as Asda, in Japan as Seiyu, and in India as Best Price.
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Walmart entered many foreign markets either through a joint venture2 with its
local player or through acquisition3 of an existing firms. It then proceeded to
expand its share and take over the main administration. With this strategy,
Walmart can keep the old brand names of companies once it cooperated.
Keeping the existing brand names benefits Walmart in various ways.
First, it can avoid prejudice from local people toward a foreign cooperation.
Walmart is famous for its dominant position in the US, which means wherever it
goes, smaller business retailers would have higher chance of going bankrupt. Local
habitants of course would pose a negative attitudes toward the upcoming of an
unwanted investment likewise.
However, when Walmart buys out and restructures a local stores chain, people
would still think of it as a national business or simply a venture. Even if they heard
the local stores was wholly sold to a foreign group, the established loyalty toward
a familiar brand would still keep them buying products from that store.
Since Walmart was already one of the possessors of the local brand, it doesnt
have to change anything about itself but to take the step to affect the business style
of that trademark. Improvement on existing products will just become more
appealing to people, let alone boycott it because of its foreign origin.
This strategy also saves Walmart a great amount of time getting adapt to the local
taste and preferences since the everything was already in the database of the old
companies.
A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new
entity and new assets by contributing equity. They exercise control over the enterprise and consequently share
revenues, expenses and assets.
3
Business acquisition is the process of acquiring a company to build on strengths or weaknesses of the
acquiring company. A merger is similar to an acquisition but refers more strictly to combining all of the
interests of both companies into a stronger single company. The end result is to grow the business in a quicker
and more profitable manner than normal organic growth would allow.
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REFERENCES
WALMART SUCCESS IN MEXICO, CANADA AND CHINA: GLOBAL
EXPANSION, STRATEGIES, ENTRY MODES, THREATS AND
OPPORTUNITIES by Lee Yee Mun
Wal-Mart: Staying on Top of the Fortune 500 A Case Study on Wal-Mart Stores
Inc. by Patrick Hayden, Seung Lee, Kate McMahon, Mike Pereira
Walmarts official website: corporate.walmart.com
"Walmart Corporate: Locations". Walmart. Retrieved 19 January 2014.
"WAL MART STORES INC 2014 Annual Report Form (10-K)" (XBRL). United
States Securities and Exchange Commission. March 21, 2014.
"2012 Form 10-K, Wal-Mart Stores, Inc.". Google.
"Wal-Mart Form 10K: Portions of Annual Report to Shareholders". United States
Securities and Exchange Commission. Retrieved June 28, 2011.
"Walmart Corporate: Our Business". Walmart. Retrieved 19 January 2014.
"Walmart Corporate: United Kingdom". Walmart. Retrieved 19 January 2014.
"Market Cap Rankings". Ycharts. Zacks Investment Research. April 8, 2012.
Retrieved April 9, 2012.
Ann Zimmerman (June 7, 2010). "Rival Chains Secretly Fund Opposition to
Walmart".The Wall Street Journal. Retrieved June 8, 2010.
"Walmart 2010 Annual Report PDF (13.4 MB)." Walmart. 2010. Retrieved
October 22, 2010.
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