WalMart and its Global Strategies

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WalMart's Global Strategies. This Power Point Presentation was prepared for MGT 340 Class at Pace University.
This Presentation will help you answer the following questions:
What was Walmart’s early global expansion strategy? Why did it choose to first enter Mexico and Canada rather expand into Europe and Asia?
What cultural problems did Walmart face in some of the international markets it entered? Which early strategies succeeded and which failed? Why? What lessons did it learn from its experience in Germany and Japan?
How would you characterize Walmart’s Latin American strategy? What countries were targeted as part of this strategy? What potential does this region brings to Walmart’s future global expansion? What cultural challenges and opportunities has Walmart faced in Latin America?
What group of countries will be targeted for Walmart’s future growth? What are the attractiveness and risk profiles of these countries? What regions of the world do you think will be vital for Walmart’s future global expansion?

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WalMart and its Global Strategies

  1. 1. Walmart’s Global Strategies Team 4 Brendan Zanetti Anna Zakrepine
  2. 2. Wal-Mart Stores, Inc., branded as Walmart, is an American multinational retail corporation that runs chains of large discount department stores and warehouse stores. The company is the world's secon d largest public corporation, according to the Fortune Global 500 list in 2013, the biggest private employer in the world with over two million employees, a nd is the largest retailer in the world. Walmart remains a family-owned business, as the company is controlled by the Walton family, who own a 48 percent stake in Walmart. It is also one of the world's most valuable companies. The company was founded by Sam Walton in 1962, incorporated on October 31, 1969, and publicly traded on the New York Stock Exchange in 1972. It is headquartered in Bentonville, Arkansas. Walmart is also the largest grocery retailer in the United States. In 2009, it generated 51 percent of its US$258 billion sales in the U.S. from grocery business. It also owns and operates the Sam's Club retail warehouses in North America. http://en.wikipedia.org/wiki/Walmart
  3. 3. Walmart Early Internationalization During 1991-1995 Walmart decides to concentrate on the following markets in the Americas: Mexico Brazil Argentina Canada - easiest entry because of the similar business environment European market imposed difficulties: Its Retail industry was mature which meant that a new entrant would have to take market share away from an existing player Competition (Metro A.G. in Germany, Carrefour in France...) Lack of strong local customer relationships Asian market difficulties: Logistically too far away from USA Different Culture Higher entrance costs 3 largest populations in Latin America
  4. 4. Success in Mexico 1991 - Walmart entered into a joint venture with Cifra and opened Sam’s Club in Mexico City. 1997 - Gained the majority position in Cifra. 2001 - Renamed the store to Walmart de mexico aka “Wal-Mex”. 2005 - Walmart opened 93 new stores and saw 13.7% increase in net sales overall. 2006 - Opened its own bank in Mexico 2007 - Walmart operated 889 stores and had plans to open another 125 same year. Opened first consumer bank. 2010 - 1,479 Retail outlets in Mexico
  5. 5. Success in China 1996 - Entered Chinese market by opening Sam’s Club and supercenter. 2006 - Opened 73 stores in 36 cities. Signed a deal with Bounteous in which Walmart would acquire 100 Trust-Mart’s stores. Introduced credit card with Bank of Communications Ltd. Highly competitive retail market - $841 billion Since 2009 - Walmart opened nearly 40 new outlets in various provinces in China, and hence its total number of stores exceeded the number of stores of its competitor Carrefour. 2010 - New wholly owned subsidiary in Hebei
  6. 6. Walmart in Europe Germany Germany 1998 - Entered European market through Germany by acquiring 21 Wertkauf hypermarkets with a similar operations like Walmart Struggles: Stores were situated in poor locations and geographically dispersed. Cultural differences Errors like hiring American managers who implemented the same strategies as they would at home Competitors like Aldi and Lidl - with lower prices. Losing profits of about 200 million euros a year 2006 - Walmart sold the stores to Metro and took a pre-tax loss of about $1 billion “germany is the home of the discounter”
  7. 7. United Kingdom 1999 - Entered UK market by acquiring ASDA Group PLC. 229 stores smaller in size than Walmart supercenters but this approach is more practical in Europe because of lack of space. More successful despite the fact that the competition is high in UK.
  8. 8. Walmart in Japan 2002 - Entered Japanese market by purchasing 6% stake in the 371-store Seiyu chain. 2008 - made Seiyu a wholly owned subsidiary Struggles: Resistance from Japanese managers Tendency among Japanese shoppers to associate low prices with low quality products. Small living space of consumers prevented them from shopping in large quantities. Corrupted grocery distribution system in Japan. Edward J. Kolodzieski reformed the Seiyu by firing 29% of corporate staff, removed in-store butchers, boosted the direct import of products from manufacturers, promoted its own private-label brands. 2010 - stabilized situation in Japan with bright future for expansion through acquisitions.
  9. 9. Refocusing on Latin America 2004 - 118 Bompreco stores were bought in Brazil 2005 - Walmart bought 331/3 % interest in Central American Retail Holding Company (CARHCO) with 363 stores in Guatemala (120) El Salvador (57) Honduras (32) Nicaragua (30) Costa Rica (124) 2006 - additional 140 stores - Sonae chain - were purchased from Portugal-based company. 2009 - Expansion into Chile by acquiring 224 store chain D&S (Distribucion y Servicio). 2010 - increased budget from $150 to $250 million in order to open another 70 stores.
  10. 10. Walmart’s Plans for 2010- 2011 FY - Fiscal year
  11. 11. Walmart and BRIC Brazil Brazil Walmart is only 3rd in Brazilian market after its 2 major competitors Companhia Brasileira de Distribuicao Grupo Pao de Acucar and France’s Carrefour. Walmart plans to invest more in this market because of great potential of increased profits and less barriers to business than other BRIC countries. Walmart plans to become #1 in this market and it has all the possibilities. For example, its advantage before Carrefour is that it doesn’t have to battle the economic recession because its major profits are not coming from Europe.
  12. 12. India Walmart has 1 Wholesale outlet in India. Teamed up with Bharti Enterprises in order to open cash-and-carry operations (Best Price Modern Wholesale) in the city of Amritsar because alone it is hard to bypass government restrictions. Planning to open 10-15 stores through the partnership. India has overall great potential because of high level of educated workers
  13. 13. Russia Walmart only has 30-person development administrative office in Moscow. Corruption is #1 problem that prevents Walmart from entering the market. The way Walmart is planning to enter the market is by acquiring local retailers. Some of the retailers Walmart had in mind is Lenta and Kopeika. Competition from Metro and Carrefour who already established their presence in Russia.
  14. 14. Walmart in Canada 1994 - Walmart Canada established its first store and now has 317 outlets 2010 - The company announced it would open another 35-40 stores . Investing in its first sustainable refrigerated distribution center. Walmart is ranked 3rd largest employer in Canada generating great number of jobs.
  15. 15. Walmart in South Africa 2010 - Walmart was doing a research about Massmart which has 288 stores in 14 African countries Negotiations - $4.63 billion was suggested to own Massmart outright. If Walmart establishes its presence in South Africa, it would be ahead of its European competitors. 2012 - Walmart closed the deal at roughly $2.4 billion with Massmart buying 51% of shares. 2013 - Walmart is already in African market. It plans to open 90 new stores. “Walmart to Open more Stores in Africa” Devon Maylie http://online.wsj.com/article/SB10001424127887324619504579028572693052040.html
  16. 16. Walmart’s Global.com Challenge to Amazon.com 2010 - Walmart created new unit Global.com to establish its online presence - E-commerce. Large Project Investment - “multi-billion dollar opportunity” Main competitor Amazon.com. The major advantage that Walmart has over Amazon is the strong association of the e-commerce/website with actual Walmart stores.
  17. 17. Questions for Review What was Walmart’s early global expansion strategy? Why did it choose to first enter Mexico and Canada rather expand into Europe and Asia? What cultural problems did Walmart face in some of the international markets it entered? Which early strategies succeeded and which failed? Why? What lessons did it learn from its experience in Germany and Japan? How would you characterize Walmart’s Latin American strategy? What countries were targeted as part of this strategy? What potential does this region brings to Walmart’s future global expansion? What cultural challenges and opportunities has Walmart faced in Latin America? What group of countries will be targeted for Walmart’s future growth? What are the attractiveness and risk profiles of these countries? What regions of the world do you think will be vital for Walmart’s future global expansion?

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