Walmart in europe


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Walmart in europe

  1. 1. Wal-Martin Europe <br />Presented by: BakulSanakal<br />Fenella Andrade<br /> Sarah Choudhary<br />Masters in European Studies and Management (MESM) 2010-2012<br />Manipal Centre for European Studies<br />Manipal University, Karnataka, India <br />
  2. 2. Wal-Mart: Background<br />Founded by Sam Walton in 1962 in Bentonville, USA<br />1970s marked the beginning of significant growth-opening of the first Wal-Mart distribution centre<br />1980s- transformed from regional to national discount retailer-aggressive diversification<br />Late 1990s Wal-Mart became the largest private employer in the world<br />Entered German market in 1997,followed by UK -acquiring ASDA in 1999<br />Present:8,986 retail units under 55 different banners in 15 countries<br />
  3. 3. Culture<br />Followed 3 key principles: <br /><ul><li>respect the individual
  4. 4. provide superior customer service
  5. 5. strive for excellence</li></ul>Sundown rule<br /><ul><li>In Sam Walton’s words -“never put off till tomorrow what you can do today”
  6. 6. company’s dedication to customer service
  7. 7. products should be available to the customer whenever they want</li></ul>Ten Foot rule<br /><ul><li>Sam Walton encouraged associates to take this pledge with him"I promise that whenever I come within 10 feet of a customer, I will look him in the eye, greet him, and ask if I can help him.“
  8. 8. Staffs offered assistance to customers within the radius</li></li></ul><li>Strategies adopted <br />Everyday Low Price Guarantee, inventory control, efficient distribution strategy<br />Aggressive bargaining with suppliers <br />Unique culture<br />Stores located within a day’s drive from distribution centre<br />Adopted Radio Frequency Identification Technology (RFIT) - able to track inventory as it moved through distribution centers to store<br />Efficient supply chain management<br />Overall cost leadership<br />
  9. 9. Consequences <br />US economy experienced boost in productivity (late 1990’s)<br />Increased employment<br />Growth in labor productivity<br />Technological innovations<br />Raised the standard of living of average Americans<br />
  10. 10. Criticisms faced by Wal-Mart<br />Low salaries to its employees<br />Legal suits regarding hiring practices<br /><ul><li>failing to pay overtime
  11. 11. underpaying hourly workers
  12. 12. sexual discrimination
  13. 13. non-compliance with the Americans with Disabilities Act
  14. 14. Underpaying immigrant workers
  15. 15. ‘locking in’ overnight workers</li></ul>Strike by the unions for better health benefits (2003)<br />
  16. 16. Globalization of Retail<br />Early 1990s - rapid global expansion in retail sector<br />Expansion became crucial for Wal-Mart<br />Players in international retailing in Europe:<br /><ul><li>Woolworths, USA ( Canada+ UK+ Germany)
  17. 17. Sears Roebuck, USA (Cuba+ Mexico)
  18. 18. Metro group, Germany
  19. 19. Royal Ahold, Dutch
  20. 20. K-mart, USA (Czech Republic+ Slovakia)
  21. 21. Costco, USA (UK+ Mexico+ Korea +Japan)</li></ul>Refer Exhibit 10<br />
  22. 22. Wal- Mart into Europe<br />Britain: <br />Entered in 1999 by acquiring U.K ASDA retail chain<br />8.4% market share at the time of acquisition<br />3 supercentres and 247 stores<br />Introduced Wal-Mart IT systems, investment resources, buying power, low prices<br />Price margin increased 13% over competitors<br />Introduced low-cost George apparel line<br />
  23. 23. Wal-Mart in Germany<br />Entered by acquiring Wertkauf chain (24 stores) + Interspar chain (74 stores) in 1998<br />Established players: Metro Group, Rewe Group<br />Strategy: <br /><ul><li>Price leadership (by low cost)
  24. 24. Centralized distribution
  25. 25. High quality customer service
  26. 26. Inventory control system</li></ul>Consequences: Price war <br />
  27. 27. 1) Wal-Mart not successful in Germany<br />Stringent regulatory Environmental law<br />Zoning Regulations<br /><ul><li>Prohibited the construction of stores with more than 800 sales area
  28. 28. Large-store development was hampered
  29. 29. Objective: to protect traditional retailers </li></ul>Pricing policy<br />Strict labor laws<br />Store hours<br />Customer service culture <br />Suppliers<br />Competitors<br />
  30. 30. Porter’s 5 forces analysis<br />
  31. 31. Bargaining Power of Supplier<br />Very high<br />Poor suppliers network<br />German suppliers were slow to adjust to Wal-Mart system- centralized distribution centre<br />Strong connection with already established players<br />Low switching cost since abundance of retail companies<br />
  32. 32. Bargaining power of Customers<br />Very high<br />German customers not accustomed to friendly atmosphere<br />American culture imposed on them<br />Presence of strong German competitors<br />Switching cost low<br />
  33. 33. Competitive Rivalry<br />Huge competition from Metro, Aldi, Lidl, Rewe<br />Established in European market in many years<br />Loyal customer base<br />Strong suppliers and distribution network<br />Hard-discounters<br />Same strategies as Wal-Mart “low cost”<br />
  34. 34. Low threat of new entrants <br /><ul><li> New firms would face task of beating the prices of wholesale giants
  35. 35. Cost of entry is high
  36. 36. resources, competencies and competitive capabilities are needed to enter the market </li></ul>High threat of potential substitutes<br />
  37. 37. 2) Benefits for Germany:<br /><ul><li>Employment opportunities
  38. 38. Technological innovations
  39. 39. Efforts to motivate employees
  40. 40. Hire temporary workers or shifts</li></li></ul><li>3) Mistakes:<br />German market had head-on competition<br /> Imposing American business approach<br />Overlooked the local needs<br />Wal-Mart can use Germany as base for expansion in Europe <br />Can use trade harmonization to develop suppliers relationship in European market<br />Need to create goodwill <br />Adapt to European standards of business <br />
  41. 41. THANK YOU<br />