Wal-Mart : International Strategy: Case Study

Brief History

Wal-Mart is the biggest chain of retailer and consumer, which provides a large number of quality products under one roof. These include grocery clothing, pharmacy, toys, hardware and various CDs, DVD Musical instruments, consumer electronics, books etc. etc. Moreover, every Wal-Mart possesses McDonalds where people can eat and have a break while shopping. It also contains a photo shop so people can do shopping while their photos get ready.

Wal-Mart is basically an innovative creation of Sam Walton who opened the first Wal-Mart store during 1962. It is publicly traded under the New York stock exchange and recognize by the symbol WMT. The secret of the international economic aspect of Wal-Mart is hidden in the number of shareholders associated to it, which are from many economically developed countries of the globe. These shareholders till the end of this year are estimated to be around 333,604 as a common stock of Wal-Mart. So Wal-Mart basically works in economic collaboration with other states where consumers get a large range of discounted products that include mostly stocks and a small percentage of premium products.

1962: Sam Walton opened his first Wal-Mart in Rogers, Arkansas. His low price approach to retail soon became a model that all Wal-Mart stores would follow.

1980:  Wal-Mart had over 300 stores and had accumulated over 1 billion dollars in sales.

2006:  Wal-Mart the world’s largest retailer in 2006, next to only Exxon Mobil, with an 8.9% retail store market share in the US and a global turnover of $312 billion, is the most famous example of a successful retail strategy.

Business Model

Wal-Mart operates under nine different retail formats through primarily three retailing subsidiaries: Wal-Mart Stores Division U.S., Sam’s Club, and Wal-Mart International.

Wal-Mart has adopted a strategy somewhere between “Focused Low-Cost” positioning and “Cost Leadership” where-in,

• Market scope— Global operations cater to a diverse customer base. In the US price conscious low and middle income consumers with a focus on smaller towns.
• Source of competitive advantage—consistently low prices with high customer service and stringent cost control measures.

Global Strategic Intent:

• Dominate the retail space across the world
• Cash on the retail boom in emerging economies and capture market share
• Replicate the success achieved in the US markets and become the world’s largest retailer

Features of Wal-Mart

The retail giant has a several attributes which are tabulated below:

Features of Wal-Mart

Strength and Weaknesses

 The SWOT analysis of Wal-Mart is enunciated below:

SWOT Analysis

Financial data for the past five years

    Strategy in the United States

In the United States, Wal-Mart’s chief competitors in low-end general merchandise include Home Depot, Sears Holdings Corporation’s Kmart chain and Target. The following are its strategy highlights:

• Related Diversification
• Wal-Mart’s move into the grocery business has also positioned it against major grocery chains
• Subsection of some stores known as “Pennies-n-Cents” in response to the dollar store retailers.
• Venturing into web-based retailing through http://www.walmartstores.com
• Cost and Quality Emphasis
• Private Brand Labels which enjoy the average US consumer’s mind share
• Focus on popular brands i.e. fast moving goods
• “Everyday Low Prices” strategy
• High labor productivity and low labor costs
• Superiors bargaining power vis-à-vis suppliers
• Recognizing Complementary Competitors
• Understanding that manufacturer / supplier is an economic partner
• Power brands like P&G working closely with Wal-Mart and reduce costs in its supply chain

    International Business Strategy

Wal-Mart International     2,718 total units

Country             Retail Units             Date of Entry
Mexico                     874                   November 1991
Puerto Rico               54                    August 1992
Canada                     282                   November 1994
Argentina                 13                     November 1995
Brazil                       301                   May 1995
China                        68                    August 1996
United Kingdom      335                   July 1999
Japan                        391                   March 2002
Costa Rica               136                    September 2005
El Salvador               60                     September 2005
Guatemala                127                   September 2005
Honduras                   39                    September 2005
Nicaragua                  38                    September 2005

Trade Territory     Wal-Mart serves more than 49 million international customers weekly in 13 markets outside the U.S.

Total International Associates     More than 500,000

Total International Sales     FYE 1/31/06: 62.7 billion – 11.4 percent increase over the previous year.

Operating profit was $3.3 billion, an increase of 26.1 percent
compared to the previous fiscal year.

For the month of November, $6.4 billion – 32.7% increase over the
same period last year.

For the third quarter ending 10/31/06: $19.1 billion – 33.7 percent
increase over the same period last year. Operating income was
$997 million for the quarter, an increase of 18.1 percent over
the same period last year.

The comparative analysis of the top four global retailers is done below:

	Wal-Mart	Carrefour	Tesco	Home Depot
Sales(USD million)	316,427	106,603	71,862.20	81,500
Net Profit(USD million)	11,213	1,831.90	2957	5,800
No. of employees	1,600,000	436,000	389,258	325,000
Foreign Countries represented	14	19	13	3
Home Country Outlets	1664	1664	1000	2048
Foreign Country Outlets	1840	4098	500	—

Vulnerabilities in International Strategy

Wal-Mart has exhibited a failure to capture any foreign market. Attempts to enter new economies and cash on opportunities have been a tall order for Wal-Mart despite its superior operations, marketing strategies and other competitive advantages.

• Late entry into foreign markets thus losing first mover advantage
• Flawed entry strategies in mature European markets like unsuitable store formats
• Rashly made acquisitions without judgment (e.g. acquisition of 85 small stores in Germany with did not even account for 3% of market share)
• Poor understanding of foreign customer psyche (e.g. in Japan the Seiyu stores are suffering losses because Japanese customers are less price sensitive and associate low prices with low quality)
• Anti-union stance leading to union battles and workers’ lawsuits
• Poor relations with the local community mention citizens’ groups who bemoan the retailer’s impact on local culture and mom-and-pop businesses (e.g. clearly cited in wide protests against Wal-Mart opening in Mexico in 1992)
• Imposition of previously prelevant ways in US on new consumers

Agents of Change

The industry is being challenged on many fronts, including catalog sales, home shopping by Internet and television, and the growth of electronic commerce. The growing purchasing power of the Asian economies is a strong signal for change. Increasingly Asian consumers are seeking wider product range, quality products and better lifestyles in general. The current Wal-Mart strategy focuses on providing fast moving goods. Product selection is based largely on procurement price from suppliers. From here it needs to move to a more consumer driven approach.

Sustainability Strategies of Wal-Mart in the international market

Conclusion

Globalization has not only marked a change in the traditional trends of international relations with an increase in international political economy. It has also forced the world to be fast and spontaneous to achieve an easy and luxurious life style while saving time and money. Wal-Mart is a live world wide spreading example. Side by side the internet revolution has also made it easy for local as well as international consumers to purchase a large variety of products just sitting at home connecting to a dial up and ordering via credit cards. So with the introduction of a chain of stores that provides every human need, under one single roof with a low price rate. This has also forced the economically developed as well as developing countries to integrate economically benefiting each other while keeping the national interest of their own states. At the same time, Wal-Mart is tremendously improving the international economy of this global village.