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Wal mart in spain


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Published in: Marketing, Business
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Wal mart in spain

  1. 1. Global Expansion: WalMart in Spain International Trade and Commerce
  2. 2. Agenda Status Quo • Current business model • Lessons from the past The Spanish retail market • The environment: PESTEL • The company: SWOT • The market: Porter‟s 5 Forces Entering the Spanish market International Trade and Commerce • Mode of entry • The adapted business model • Strategy
  3. 3. Status Quo International Trade and Commerce
  4. 4. Current Business Model Decisions Policies Consequences Assets Governance Low wage, non-union workers Autonomous store operation Customer priority, friendliness 1 Information systems Specialty and regular formats Flexible Bulk purchase, power over suppliers Low costs, low prices International Trade and Commerce Rigid A fast and efficient system Supplier relationships, brand equity
  5. 5. Successes and Failures The virtuous cycle of Wal-Mart‟s success stories Lack of adaptability and foresight in new markets?   Attractiveness to Customer and Brand Value Local Culture International Expansion Supplier Relationships Available Infrastructure Laws of the Land 2 Customer Service + Low Cost Contingent success may Large Sales not materialize Information Exchange + + Compliant Labour Good Logistics International Trade and Commerce
  6. 6. Case in Point: Failure in Germany  Labour issues  Non-strategic acquisitions (Wertkauf & Interspar) 3 International Trade and Commerce
  7. 7. Case in Point: Failure in Germany    Global expansion driven by country‟s market size alone Little attention to required business model adaptations No real market penetration:    Lack of strong buyer / supplier relationships Huge competition in a “price-sensitive market” No cultural adaptation:   English the official language Oblivious of shopping habits, work habits Problems with German authorities (pricing, wages etc.) 4 International Trade and Commerce  Efficient centralized distribution system but hard to 
  8. 8. Spanish retail market International Trade and Commerce
  9. 9. PESTEL analysis Political Economic • • • • • • • • • Government wants to deepen relationships with USA Moderate political risk VAT recently hiked (18% to 21%) 5% lower income tax than neighbours Economic crisis High unemployment rate (24.6%) Entrenched market, few global players Expected downturn till at least 2013 Retail spending down 11% y-o-y in Q3-12 Social Technological • • • • • • • Price sensitive market Easy terms, post-sales services important Food & beverage: 2nd highest family expense Fastest population growth during 2005-10 Closely controlled family based companies Spanish language: different languages The adoption of Electronic Point of Sale (EPoS), Electronic Funds Transfer Systems (EFTPoS) and electronic scanners have greatly improved the efficiency of distribution and stocking activities, with needs being communicated almost in real time to the supplier Ecological Legal • • • • • Important in the country : the energy consumption decreased by 5.2% in 2012 5 Hypermarket size > 4000 m2 Competition and anti-trust laws strict Selling below cost forbidden Minimum salary: 748 € International Trade and Commerce
  10. 10. Strengths Weaknesses • Automated distribution system • Low prices • Wide range of products • Growth/ Global Expansion • Customer concern due to low prices • Low wages • Large inventories SWOT Opportunities Threats • Growth, global expansion (+ Mercadona‟s own expansion plans) • Drive down costs by combining own technological expertise and local partner‟s knowledge • Government wants to deepen relationship to USA • Currency risks for profit expatriation • Political and Economic risks amid EuroZone crisis • Antitrust regulations against big-tickets joint ventures • Unemployment rate 24.6% (2012) • Declining economy due to crisis 2011 • Bureaucracy 6 International Trade and Commerce
  11. 11. Porter’s 5 Forces (Spanish retail industry) ENTRANTS (1) Governmental framework, decentralization (2) Entry barriers: retail regulations (3) EU Service Directive SUPPLIERS (1) Walmart may dictate (2) Mercadona„s strong relationship to suppliers (3) Favoring infrastructure of suppliers near cities INDUSTRY RIVALRY (1) Medium-sized supermarkets (2) Mercadona (3) Wide range of supermarkets SUBSTITUTES (1) Large distribution chains (2) Wholesalers (3) Middle-sized supermarkets 7 International Trade and Commerce BUYERS (1) Unemployment (2) Tourism (3) Variation
  12. 12. Entering Spain International Trade and Commerce
  13. 13. Mode of Entry  Organic growth obstacles:     Need local expertise, established supply chain and cultural knowledge Land regulations make new development expensive and time-taking Barely enough surplus demand to support another big player Motivations for Joint Venture:    8 Acquisition may be too expensive, may create hostilities Spanish IPOs improbable due to increasingly illiquid markets Twin benefits: combine own technological advances and supply chain expertise with local knowledge and relationships Avoid short term market risks, medium term Eurozone International Trade and Commerce risks and gain on long term partner expertise and brand
  14. 14. Mercadona     Turnover: EUR15,267mn, No of stores: 1,311 (in Spain) 9th most reputable company in the world in 2009 by the Reputation Institute as listed in Forbes Magazine Expansion plans into Italy, France, Belgium, Portugal; Wal-Mart‟s gateway to continental Europe Orientation towards Mercadona’s secret to success         10 high productivity flexible working conditions employee training performance-linked bonuses permanent, full-time working contracts above average wages, no mass layoffs employees„ dedication watching costs, passing savings to customers International Trade and Commerce A rare mix, even among its Spanish peers
  15. 15. Recommendations Leading European retail format = discounters (low priced stores with limited assortment but good quality for certain target groups) [Pfohl and Roth, 2008] Market stagnant: aim to grab competitors‟ market share Capitalize on the downturn sentiment      Participate in social causes for community benefit and visibility Crisis => lower ability to pay => prices a critical factor => EDLP rules Population density rising, improved accessibility more important than new establishments Target new formats (eg. neighbourhood stores) at untapped areas Place supermarkets in areas more accessible to tourists Experiment with Marcedona„s employment practices in other EU markets     9 International Trade and Commerce
  16. 16. The ‘adapted’ Business Model Higher productivity and better service Attractiveness to Customer Large Sales + expansion opportunities Marcedona‟s local cultural knowledge Marcedona ‟s employme nt practices WalMart‟s innovative supply and distribution technologies 11 Marcedona‟s Supplier Relationships Low Cost and Low Prices Better bargaining and good quality International Trade and Commerce
  17. 17. Features of the Model Aligned • Highest cost savings realized across geographies • Continuous expansion of the everyday low price system 12 Self-Reinforcing Robust • Once positive synergies from the joint venture, the growth trajectory would be steeper than possible for either retailer alone • As also shown by the feedback loop • Imitation would require huge resources and established presence in the entrenched market • The combination of inimitable consequence of WalMart and Marcedona‟s business model should be strong against competitors • Substitution by small retailers is a negligible threat in Spanish market International Trade and Commerce
  18. 18. Case in Point: Tackling the labour issue Intangible benefits Job security Low compensation High Productivity 13 Happy Employees International Trade and Commerce
  19. 19. Thank You for your Attention Elodie Lichtenberger Harshit Krishna Lara Aschenbrenner Louise Roche Marie Nauméa