Walmarts

Global Expansion
Case Study

By

Unbreacable Group - Commenter

International Business
Instructor: PhD. Tran Thi Phuong Thuy

Walmart Globals Expansion Case Study

TABLE OF CONTENTS
GROUP INTRODUCTION: UNBREACABLE ---------------------------------------- 2
WALMART INTRODUCTION ---------------------------------------------------------- 3
CASE STUDY SUMMARY: WALMARTS GLOBAL EXPANSION ------------ 4
CASE STUDY QUESTIONS ANSWERS --------------------------------------------- 5
QUESTIONS FOR PRESENTING GROUP AND ANSWERS ---------------------- 7
REFERENCES ---------------------------------------------------------------------------10

Unbreacable Group

Instructor: PhD. Tran Thi Phuong Thuy

Walmart Globals Expansion Case Study

GROUP INTRODUCTION: UNBREACABLE

Our group name is UnbreaCable. At first, you wouldnt see any linkage between
the name and the subject. So the group ourselves will break it down for you.
First, UnbreaCable has similar pronunciation with unbreakable,
which defines one of our teams characteristic. It means that nothing, no one could
separate us.
Second, UnbreaCable actually is the shortened combination of
Unbreakable and Cable. Unbreakable cable, which means that the cable
cannot be broken, relates to an incident in Vietnam recently. The Internet cable in
the sea was believed to be broken by the sharks, which has been causing chaos all
over Vietnam. That people can only connect to the Internet at extremely low speed
results in unfinished business and interrupted communication.
There is no doubt that the Internet constituting an easy-to-access, worldwide
network has already has a significant effect on the conduct of international
business. Not only has it enhanced firms ability to spot potential foreign partners
but it also help with the human resources and financial management of worldwide
corporations. Incapable Internet service would therefore turn an economy upside
down, especially in the current globalization situation. An unbreakable cable would
mean much to Vietnam and its international relations as it leads to a strong and
lasting communication among countries. The world economy, in general, and
Vietnams economy, in particular will be accelerated due to the promotion of multinational solidarity.

Unbreacable Group

Instructor: PhD. Tran Thi Phuong Thuy

Walmart Globals Expansion Case Study

WALMART INTRODUCTION
Wal-Mart Stores, Inc., branded as Walmart, is an American multinational
retail corporation that operates chains of large discount department
stores and warehouse stores. Headquartered in Bentonville, Arkansas, the company
was founded by Sam Walton in 1962 and incorporated on October 31, 1969. The
company operates under the Walmart name in the US and Puerto Rico. It operates
in Mexico as Walmart de Mxico y Centroamrica, in the United Kingdom as Asda,
in Japan as Seiyu, and in India as Best Price. It has wholly owned operations in
Argentina, Brazil, and Canada.
Walmart helps people around the world save money and live better -anytime and anywhere -- in retail stores, online and through their mobile devices.
Each week, more than 245 million customers and members visit our nearly 11,000
stores under 71 banners in 27 countries and e-commerce websites in 10 countries.
With fiscal year 2014 sales of approximately $473 billion, Walmart employs 2.2
million associates worldwide.
Walmart is the world's largest company by revenue, according to
the Fortune Global 500 list in 2014, the biggest private employer in the world with
over two million employees, and the largest retailer in the world.
The company was publicly listed on the New York Stock Exchange in 1972.
In the late 1980s and early 1990s, the company rose from a regional to national giant.
By 1988, Walmart was the most profitable retailer in the US and by October 1989 it
had become the largest in terms of revenue.

Unbreacable Group

Instructor: PhD. Tran Thi Phuong Thuy

Walmart Globals Expansion Case Study

CASE STUDY SUMMARY: WALMARTS GLOBAL EXPANSION

1962, Walmart was established in Arkansas by Sam Walton and has grown
rapidly to become the largest retailer in the world with 2002 sales of $218
million, 1.3 million associates, and some 4.500 stores.
1991, Walmarts operations were confined to the US.
In the US, Walmart established a competitive advantage based upon a combination
of efficient merchandising and progressive human relations policies.
Walmart was a leader in the implementation of information systems to track product
sales and inventory.
It developed one of the most efficient distribution systems and promotion of
widespread stock ownership among employees which led to high productivity
enabling it to decrease operating costs a strategy to gain market share first in
general merchandising.
By 1990, due to market saturation in US, Walmart decided to expand globally.
Walmart started to expand internationally in 1991 by opening its first stores in
Mexico, a joint venture with Cifera.
There were some initial problems: poor infrastructure, crowded roads, and a lack of
leverage with local suppliers, which resulted in stocking problems, raised costs and
prices, limited ability to gain market share and problems with merchandise selection.
By the mid-1990s, Walmart found ways to adapt to the local environment:
Partnership with a Mexican trucking company, more appealing merchandise,
suppliers built factories near its Mexican distribution centers which helped to drive
down inventory and logistics costs.
1998, acquiring a controlling interest in Cifera.
By 2002, Mexican operation with 600 stores generated more than $10 billion.
The company also expanded into Canada, Britain, Germany, Japan, S.Korea, Brazil,
Argentina and China and had over 1200 stores outside US, 303,000 associates, and
revenues of more than $35 billion.
Walmart was aided by 3 developments when expanding internationally:
Barriers to cross-border investment fell during the 1990s

Unbreacable Group

Instructor: PhD. Tran Thi Phuong Thuy

Walmart Globals Expansion Case Study

Ability to reap significant economies of scale from its global buying power due to
international expansion. (Walmart key suppliers have long been international
companies).
Advances in information systems, particularly the spread of Internet-based software.

CASE STUDY QUESTIONS ANSWERS

1. How does expanding internationally benefit Walmart?
After its beginning in 1962 Walmart ever since had constant growth rates and
successfully gained market share in the merchandise and food retailing markets. By
1990, however, Walmart realized that its opportunities for growth in the United
States were becoming more limited. To keep steady growth rates and profits the
company decided to expand globally. The core competency of Walmart is the price.
Selling merchandise and food for low prices made them earn market shares and
continue the growth rates. Going global gives companies the opportunity of using
location economies to secure the quality, use economy of scale to lower the
productions costs per unit and benefit from learning effects. A global supply chain
and global markets will lower the production costs since more volume is ordered
following a higher demand trough international markets. Especially for Walmart
expanding internationally supports and secures their core competency: Selling
everyday life goods at a low price.
2. What are the risks that Walmart faces when entering other retail
markets? How can these risks be mitigated?
The strategy for success worked very well in the United States. That does not mean
that it works very well in other countries. There are different preferences and
consumer patterns in different countries. Adding to that Walmart may face strong
competition from already established retailers that have a better understanding in
local needs and demands of the customers. Another thread could be a strict
government that protects the local economy or an instable government/economy.
Through strong market research or co-operation/acquisition of local retailer
companies Walmart could gain critical knowledge of the local market and its
consumers. Especially a co-operation with an established company could lower the
barriers from a strict government since both companies could gain from such a tradeoff, increase revenue and eventually pay more tax. In a situation where the

Unbreacable Group

Instructor: PhD. Tran Thi Phuong Thuy

Walmart Globals Expansion Case Study

government or the economy is not stable it is favorable to stay out of the market
since the own rights are low protected and the overall performance is hard to predict.
3. Why do you think that Walmart first entered Mexico via a joint venture?
Why did it purchase its Mexican joint venture partner in 1997?
This was the first time that Walmart operated internationally under a CEO who spent
most of his life in the United States. Sam Walton was known as an indigenous
business man who wanted all of his employees to think how to improve and develop
the company. There was no reason to change this mind set and go arrogantly into a
new market not paying attention to the Mexican customers needs and preferences.
Henry Davis, the CEO of Cifra, was a born Mexican who was sent by Cifra to study
at Harvard University. Therefore he knew both life styles: the US and the Mexican.
In 1991 when Walmart negotiated with Mexicans biggest retail market Cifra there
where political negotiations ongoing weather there will be a free-trade agreement
between the United States. Cifras president, Henry Davis, said that the prospect of
free trade between the two countries helped make the deal attractive. By founding
the joint venture Walmart avoided to compete against an already established local
company that had highest market shares. Walmart now had a local guide who
showed them how to sell products in Mexico and a direct reach to Cifras costumers.
After the initial joint venture Walmart had set up several other joint ventures with
its Mexican partner []. In 1997 all these joint ventures merged with Cifra. WalMart then took a controlling, 51 percent stake in Cifra for $1.2 billion. The company
thereby held a majority stake in the largest retailer in Mexico [] and the name
changed to Wal-Mart de Mxico y Centroamrica which can be seen as an
expansion into the whole Central American region.
4. What strategy is Walmart - a global strategy, localization strategy,
international strategy, or strategy? Does this strategic choice make sense? Why?
As stated earlier the core competency of Walmart is the low price of the offered
products. Therefore there is a strong cost pressure. Focusing on the offered products
you can see that Walmart is a store where one buys daily used products. Cultural
differences and preferences are mainly shown in the daily life, which is lived with
daily life products bought from Walmart. Derived from that Walmarts strategy

Unbreacable Group

Instructor: PhD. Tran Thi Phuong Thuy

Walmart Globals Expansion Case Study

for internationalization is a Transnational Strategy: High Pressures for Cost High

Pressures for Local Responsiveness.
Does this strategic choice make sense? Of course it does. In fact it is the only
possible strategy for a retailer as Walmart. When people buy there they are in their
cultural comfort zone and not willing to try exotic products on a daily basis.

QUESTIONS FOR PRESENTING GROUP AND ANSWERS

1. Analyze Walmart when first expanding to the Mexican market using
the SWOT model?
Strengths
Weaknesses
Large capital
Retailing market practices were
well-suited to America
Have experience in American
Lack of knowledge about Mexican
market as a dominant retailer
market consumer tastes and
Have efficient merchandising and
preferences.
progressive
human
relations
policies
Lack leverage with local suppliers
Have relations with international
suppliers
Opportunities
Threats
Barriers
to
cross-border Poor infrastructure, crowded roads
investment fell during the 1990s
in Mexico
Many Walmart suppliers have long Existing dominant retailers in
been international companies
Mexico
Advances in information systems, Significant global competition
particularly the spread of Internet- Law and regulations in Mexico
based system
which protect local retailers and
limit Walmart expansion
Slow growth in Mexican economy
2. Walmarts motto is Saving people money so they can live better.
When expanding their market, what did Walmart do to keep their low-cost
leadership?
Establishing partnership with trucking company to improve distribution system.

Unbreacable Group

Instructor: PhD. Tran Thi Phuong Thuy

Walmart Globals Expansion Case Study

As Walmarts presence grew, many of Walmarts suppliers built factories near its
distribution centers, which helped further reduce inventory and logistics costs.
Using its enhanced size to demand deeper discounts from the local operations of its
global suppliers.
Making bulk purchases from vendors to enjoy volume discounts, and paying low
wages.
Maintain low cost by having efficient and effective operations.
Its marketing strategy relies on word-of-mouth communication and focuses on
everyday low prices, which means that customers can buy the products at the lowest
price all the time.
3. What were some entry modes Walmart use when entering new
markets? What are the benefits in each way?
Entry mode 1: through joint venture with its local player.
Help gain better knowledge of the new market.
Help Walmart to work with local authorities.
Entry mode 2: entry mode of acquisition.
Avoid time-consuming problem of building up stores.
Entry mode 3: offshore-sourcing strategy.
Use the new market as a major production or assembly source country for their
products in the US increase profit in motherland.
Entry mode 4: Building its own store.
Gain complete control of the new facilities.
4. In some different foreign markets, Walmart operates under different
names1. Explain this occurrence. Does it have anything to do with Walmarts
strategy when expanding internationally?

The company operates under the Walmart name in the US and Puerto Rico. It operates in Mexico as Walmart
de Mxico y Centroamrica, in the United Kingdom as Asda, in Japan as Seiyu, and in India as Best Price.

Unbreacable Group

Instructor: PhD. Tran Thi Phuong Thuy

Walmart Globals Expansion Case Study

Walmart entered many foreign markets either through a joint venture2 with its
local player or through acquisition3 of an existing firms. It then proceeded to
expand its share and take over the main administration. With this strategy,
Walmart can keep the old brand names of companies once it cooperated.
Keeping the existing brand names benefits Walmart in various ways.
First, it can avoid prejudice from local people toward a foreign cooperation.
Walmart is famous for its dominant position in the US, which means wherever it
goes, smaller business retailers would have higher chance of going bankrupt. Local
habitants of course would pose a negative attitudes toward the upcoming of an
unwanted investment likewise.
However, when Walmart buys out and restructures a local stores chain, people
would still think of it as a national business or simply a venture. Even if they heard
the local stores was wholly sold to a foreign group, the established loyalty toward
a familiar brand would still keep them buying products from that store.
Since Walmart was already one of the possessors of the local brand, it doesnt
have to change anything about itself but to take the step to affect the business style
of that trademark. Improvement on existing products will just become more
appealing to people, let alone boycott it because of its foreign origin.
This strategy also saves Walmart a great amount of time getting adapt to the local
taste and preferences since the everything was already in the database of the old
companies.

A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new
entity and new assets by contributing equity. They exercise control over the enterprise and consequently share
revenues, expenses and assets.
3
Business acquisition is the process of acquiring a company to build on strengths or weaknesses of the
acquiring company. A merger is similar to an acquisition but refers more strictly to combining all of the
interests of both companies into a stronger single company. The end result is to grow the business in a quicker
and more profitable manner than normal organic growth would allow.

Unbreacable Group

Instructor: PhD. Tran Thi Phuong Thuy

Walmart Globals Expansion Case Study

REFERENCES
WALMART SUCCESS IN MEXICO, CANADA AND CHINA: GLOBAL
EXPANSION, STRATEGIES, ENTRY MODES, THREATS AND
OPPORTUNITIES by Lee Yee Mun
Wal-Mart: Staying on Top of the Fortune 500 A Case Study on Wal-Mart Stores
Inc. by Patrick Hayden, Seung Lee, Kate McMahon, Mike Pereira
Walmarts official website: corporate.walmart.com
"Walmart Corporate: Locations". Walmart. Retrieved 19 January 2014.
"WAL MART STORES INC 2014 Annual Report Form (10-K)" (XBRL). United
States Securities and Exchange Commission. March 21, 2014.
"2012 Form 10-K, Wal-Mart Stores, Inc.". Google.
"Wal-Mart Form 10K: Portions of Annual Report to Shareholders". United States
Securities and Exchange Commission. Retrieved June 28, 2011.
"Walmart Corporate: Our Business". Walmart. Retrieved 19 January 2014.
"Walmart Corporate: United Kingdom". Walmart. Retrieved 19 January 2014.
"Market Cap Rankings". Ycharts. Zacks Investment Research. April 8, 2012.
Retrieved April 9, 2012.
Ann Zimmerman (June 7, 2010). "Rival Chains Secretly Fund Opposition to
Walmart".The Wall Street Journal. Retrieved June 8, 2010.
"Walmart 2010 Annual Report PDF (13.4 MB)." Walmart. 2010. Retrieved
October 22, 2010.

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Unbreacable Group

Instructor: PhD. Tran Thi Phuong Thuy