Wal Mart Global Expansion Strategy Management Essay

Wal Mart Global Expansion Strategy Management Essay Wal-Mart is the largest retail chain in the world and also the worlds largest corporation. The company started its globalization in the year 1991 when it opened a Sams club near the Mexico City. In the year 1993 the company did set up the Wal-Mart International which was to oversee the growing opportunities of the company worldwide. Consequently, the company has enjoyed the overseas operation growth and also consumer acceptance. Wal-Mart has never changed its brand names, the every day low price and high ethical standards although its approach to competing in the overseas has evolved over time. Due to its entry into the foreign markets it changed its local regulatory frame work and customer tastes. Wal-Mart global expansion strategy The global expansion strategy of Wal-Mart is provision of goods at low prices that could raise the living standards of people around the world. This strategy involves globalization efforts of the company to enter into the overseas markets. According to Troy (1), the bottom line for the Wal-Marts company is bigger and cheaper. This is because the company intends to maintain its low price kind of leadership while at the same time pursuing the aggressive store expansion worldwide. This expansion is facilitated by opening of new stores and clubs world wide. How do they enter into the markets? Wal-Mart realized that if they took too long to enter into the foreign countries they would be allowing the competitors a lead that is too difficult to close. To avoid this end, they ventured into foreign countries to concentrate on their expansion efforts. This means that the main method used by the Wal-Mart Company in entering into new markets is by venturing into foreign countries. This is ensured by either selling the products in other retail stores which in turn distribute to the customers or by opening up its own store which will be used in the distribution of its products. For example as mentioned earlier, by the year 1993 Wal-Mart international operation had only one Sams club in Mexico but it ventured fast into the neighboring counties like Argentina, brazil, Indonesia china and Japan. This countries where perceived to be unique in the retail market in terms of the logistical systems, consumers and relationship between the suppliers and retailers. How do they expand while in the market? While in the market, Wal-Mart Company opened (build) more new stores in the countries it had ventured into thus replicating the domestic operation abroad. The company also expanded its markets by acquiring potential companies. It also picked up new ideas from other countries which helped greatly in the expansion of its markets. This included the gravity wall from Brazil, selling shoes from Canada, selling bike racks from Canada and many more (Deresky 455). Markets where Wal-Mart has been successful and the reasons for the success Wal-Mart Company has been most successful in countries (markets) like Canada, Mexico and the UK. In Canada the company purchased all the 122 Canadian woolco discount stores thus becoming the Canada highest volume discount retailer. The main proponent for the companys success is the low prices of the products and the ability to strip costs from the supply chain which impresses the analysts. The suppliers are strictly authorized to distribute goods at the Wal-Marts center within 15-30 minutes of the stipulated schedules failure to which they would be fined. Again it has a lot of bargaining power to extract price concession from the suppliers. In UK Wal-Mart acquired ASDA stores which were 232 in number thus becoming the biggest retailer in that country (Wal-Mart.com 1). ASDA warded of price competitions which overtook all the other companies in the UK. In Mexico, Wal-Mart Company acquired the controlling interest of the Mexican largest retailer (Cifra) which operated stores through the county. It modified the products so that they could meet the expectations of its Mexican users (Tilly 1). There is one common theme for the success of these three countries. For example they have acquired some of the strongest companies in this countries thus becoming the leading large scale retailers and they have also modified their products to meet the needs of their immediate clients. Markets where the Wal-Mart company has been unsuccessful and the reasons of the failure. Wal-Mart has failed in Germany and South Korea markets in particular. In Germany, the company found it difficult to adapt to the German ways and it therefore exited selling off its store (Knorr and Arndt 23). In South Korea, the Wal-Mart company also exited selling off its store because it also could not localize its operations (Awbi 1). There is a common theme as to why these two countries failed and it was because the two couldnt adapt to the needs of the various citizens (South Koreans and Germany). These failures are specific or relevant in each country and also similar. For example as mentioned above they have failed because they didnt localize their operations. To be specific the reason as to why it failed in Germany is because the Germany customers did not show much concern for the EDLP approach and many people also disliked its relatively low pay and ultra-frugal policy on managers business expenses. In South Korea it experienced operation difficulties due to its merchandise mix and the stores which were too far from the city centers. Another problem was high food prices and lack of food freshness (Deresky 458). How does culture hinder the expansion of Wal-Mart in other countries? Wal-Marts culture is a hindrance to the companys expansion. This is because some of their practices do not go well with some people in some countries (Kitlerphiroj 1). For example in Germany the Wal-Marts expatriate managers were faced with massive cultures clashes which were helped by the refusal to learn the German language. Its culture which involved merchandise departments, supercenters far from town centers and low pries did not go down with the South Koreans who disliked the companies merchandise, the locations and high prices of commodities which led to their closure. The companys culture of acquiring building and companies and low prices helped the company in nations like Mexico, Canada and the UK for they became the largest retailers in these countries. Has Wal-Mart had to change their level and method of political interaction with governments as they have expanded internationally? Wal-Mart had to change the level and method of interaction with some governments in the process of their international expansion. For example the Chinas finance, banking, taxation and insurance organizations were bureaucratic and burdensome because the regional division of finance guidelines and tax rules created problems. For example a corporation with joint ventures in numerous locations served by a single supplier had to make separate payment for each venture to the supplier. Wal-Mart Company worked together with the Chinese administration to put up a holding corporation that could consolidate joint venture distribution and finance. How effective has Wal-Mart been at maintaining their business model as they have expanded internationally? Wal-Mart has been effective in the maintenance of its business model during the international expansion because it has maintained its low price culture towards its customers. Again, it has managed to be the largest retailer in some countries like Canada, United Kingdom and Mexico. The four most important lessons There are some lessons which can be learned from this case. One of them is that companies should target to satisfy their customers so that they can get the opportunity to expand. For example most of the Wal-Marts customers are satisfied with the low prices of commodities. This has not only increased sales but also profits. Another lesson is that companies should consider the opinions, tastes and preferences of the people in a particular country before setting up a company in a foreign country to avoid massive losses. The other lesson is that a company should try to localize or understand the peoples preferences and tastes after a careful study have been carried out to avoid misconceptions that can bring losses. Another lesson is that the companies that have the interest of venturing into business in foreign countries should change and even negotiate with the various governments concerned such that they may have a favorable condition to thrive in businesswise.