GEOGRAPHY

WALMART
Study Case
 Notions and vocabulary

- Globalization
- Capitalism
- A firm / a factory / a company
- For-profit company
- GDP: PIB
- Research & Development
- Developed countries
- Manufacturing
- Developing/ emerging countries
- Sales
- LEDC: Less developed countries
- International Division of Labour
- Labor cost
- Fairtrade
- Raw materials: matières premières
- Retailer
 Session 1 – Study case: Wal-Mart, a worldwide company

How big is Walmart

Preliminary question: do you know what a TNC is ? Think about companies like Apple,
McDonald’s, Ikea, Nestlé. Using the words in the vocabulary, try to define what a TNC is.

Using this photography,

explain what you thinkWal-
Mart is.
Introduction
Globalisation (the process by which regional economies, societies, and cultures have
become integrated through communication, transportation, and trade) has resulted in
many businesses setting up or buying operations in other countries. When a foreign
company invests in a country, perhaps by building a factory or a shop, this is called inward
investment.
Companies that operate in several countries are called multinational corporations (MNCs)
or transnational corporations (TNCs). ATNCis a for-profit enterprise which engages in
enough business activities - including sales, distribution, extraction, manufacturing, and
research and development - outside the country of origin so that it is dependent financially
on operations in at least two different countries. ATransnational Corporation operates
worldwide; it is said to operate on a borderlessbasis.
Wal-Mart is the biggest retailer (supermarket) in the world.

How is Wal-Mart’s strategy taking advantage of the difference between territories

and the international division oflabor?
I. Wal-Mart: a powerfulTNC

Underline the facts

and statistics which
show thatWal-Mart
is a TNC.
Describe Wal-Mart’s
worldwide influence.
According to those pictures and logos, what is
Wal-Mart main marketing strategy ? Think of
ways it can achieve thisstrategy.
Wal-mart is an American retail company founded in 1962. It openedits
first store abroad in 1991. Today, it is the biggest TNC in the world by
revenue (over 500 million dollars) and it is also the largest employer
(2,3 million employees all over the world).
2/3rd of its stores are situated in North America (United States, Mexico
and Canada). The American continent represents 80% of the total, as
the United States always had a special bond with South America. Other
important markets are the United Kingdom and Japan, i.e. developed
countries.
Wal-Mart is also famous for its marketing strategy which is built around
offering the lowest pricespossible.
II. How is Wal-Mart participating to the shaping of a
globalized world? Using this document, explain why Wal-Mart chose to
Outsourcing strategies for Wal-Mart’s suppliers outsource its production inChina.

Defensor in the 1980’s of the famous slogan “Buy American”, today, the firm owns his wealth to the importation of
manufactured products from countries where the labour force’s cost is more competitive. Wal-Mart buys the products he
distributes to close to 65,000 suppliers dispatched in approximatively 60 countries – only a thousand of them are in the USA.
In 2006, his central purchasing departments were implemented in 22 countries [...]. China is the space of supplying privileged
by the company. A team of 400 people coordinates production and purchases for an amount of 20 billions of dollar a year at
about 20,000 suppliers. [...]
Shenzhen becomes the Wal-Mart’s headquarters for South-Asia then, in 2002, his central purchasing department for the
entire world lands in here. [...] China, as the world workshop, wouldn’t have worked correctly without the container
revolution in maritime transportation. At the end, it’s about 230,000 TEU1 that Wal-Mart makes cross the Pacific Ocean each
year. [...]
To maintain discount prices everyday as their slogan says “Everyday, low prices”, the company imports 60% of the products
sold in his stores, contrary to 6 % in 1995. His policy of discount prices was a fantastic accelerator for the effects of
globalisation in the USA, but there is an ongoing debate about the responsibility of the firm in the huge growing commercial
deficit of the USA.
R.-P.Desse,Wal-Mart territories, 2011
1. Twenty feet Equivalent Unit = Equivalent Vingt Pieds. It’s the measure of cargo containers.
 Using these documents, explain what is Wal-Mart’s other
strategy with China. Who does the retailer cater for ?

HOW WALMART IS CHANGING CHINA, FROM THE

ATLANTIC, OCTOBER 26TH,2011

Although Walmart’s $7.5 billion in Chinese

sales receipts account for only 2 percent of the
company’s annual revenues, its sales in China
have risen substantially over the past decade.
Sales in the United States, by contrast, have
been shrinking. And as China’s retail market –
the world’s fastest-growing – expands by 18
percent a year, Walmart’s executives smell the
intoxicating scent of more growth to come. […]
China is the first supplier for Wal-Mart, with 20 000 suppliers, way
ahead its home country, the United States. Wal-Mart imports 60% of
its products, mainly from China, and has installed its global sourcing
headquarters in the city of Shenzhen (which is also where theIPhone is
built).
Wal-Mart is one of the many TNCs which uses China as a production
factory because of the low cost of its labour force. But China is not only
a centre for outsourcing ; it is also an emerging country, thus an
important client with a great potential for growth thanks to the
development of its middle class. There are already 370 Wal-Mart stores
in China. Other developing countries which host Wal-Mart stores are
Mexico, Brazil and India.
III. Critics against Wal-Martworldwide strategy

How does this cartoon

criticize Wal-Mart strategy?
HOW WALMART SHAPES THE WORLD, FROM THE AMERICAN PROSPECT, APRIL 19TH, 2011
Consider Ana Sanchez, a 45-year-old immigrant to Southern California from Mexico. […] She […] started at $6.75 an hour,
then rose to $8, with no benefits. She retrieved cartons, put labels on products, then shrink-wrapped plastic around
pallets to ship. Mainly, she shipped children’s clothing made in China to Wal-Mart. The work was hard, fast, and stressful,
with “constant pressure,” she says. “If I killed myself to make 2,000 labels one day, the next day, they’d give me 200 more.
They kept raising the quota. […] Rushing to wrap a pallet in April 2009, Sanchez fell and injured herself. Despite an
unblemished work record, the agency fired her, supposedly for a paperwork error, but more likely—she believes—because
she was hurt. […]
Zahir Chowdury (he asked not to use his real name) manages factories in Dhaka, Bangladesh, for an Asian multinational
apparel manufacturer whose clients prominently include Wal-Mart. He admires Wal-Mart for setting “very structured,
systematic” guidelines for everything from energy efficiency to treatment of workers. But now he worries that his prices
are rising for inputs, such as cotton. His selling price has changed little over five years, but he hopes Wal-Mart will agree to
pay more for finished garments, which is usually about 5 percent less than anyone else pays but forlonger production
runs. […]“Expectations on quality are up, also on managing logistics,” Chowdury says. “The lead time is squeezed. Getting
fabric is difficult. Everything is getting squeezed,” including his workers. Though the new minimum wage is about $42 a
month, he claims his company pays $90 a month because at anything much lower, workers “can’t survive.” […]
Such stories illustrate a few dimensions of “The Wal-Mart Effect,” […] The net effect of Wal-Mart entering a local market is
to reduce local employment, reduce area wage rates […] eliminate other businesses (especially small shops and small
chain stores that directly compete with Wal-Mart), and raise povertyrates.

According to this text, how is Wal-Mart capable of maintaining low prices on its products?
Conclusion
Using what you’ve learnt, think about how Wal-Mart transforms and
shapes the territories with its worldwide strategies. Draw a table
explaining what are the advantages and the disadvantages for the
home country (United States) and the host countries (such as China).