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A report on

GLOBAL STRATEGIES OF
WALMART

(Subject – INTERNATIONAL BUSINESS)

JAYANTA KUMAR BISOI


16/06/DBM/09
MBA (4th sem)
Central University of Odisha
INTRODUCTION
In 1991, Walmart became an international company when it opened a Sam’s Club near Mexico
City. Just two years later, Walmart International was created. Since venturing into Mexico in
1991, Walmart International has grown somewhat erratically. During the 1990s the retailer
exported its big-box, low-price model, an approach the company expected to be as successful
in foreign markets as it was in the United States. Although Walmart has had success in several
overseas markets, this success has been far from universal. For example, in Mexico, China, and
the U.K., the company’s efforts to offer the lowest price to customers backfired because of
resistance from established retailers. And in Germany, Walmart could not seem to fit its model
to local tastes and preferences. In Japan, its joint venture had a series of setbacks, many related
to buying habits for which the Walmart model did not respond well. In Mexico, three of the
largest domestic retailers constructed a joint buying and operational alliance solely to compete
with Walmart.1 its presence in Hong Kong ended after only two years during the 1990s, and it
shuttered operations in Indonesia in the mid-1990s after rioting incidents in Jakarta. Walmart
also owned approximately 16 stores in South Korea and 85 in Germany; however, it sold off
these operations in 2006 after merchandise failed to match consumer tastes, distribution and
re-bagging problems arose, and strong loyalties to other brands made attracting customers
difficult and expensive.2
In addition, labour advocates and environmentalists have created headaches for the U.S.
behemoth, making continued expansion both cumbersome and expensive. For instance, in
2006, Walmart faced a strong public relations campaign from the All-China Federation of
Trade Unions (ACFTU) over Walmart’s refusal to let its workers in China unionize. Walmart
was eventually forced to con- cede, perhaps because the Chinese government also lent its
weight to the ACFTU’s campaign in its effort to establish unions in all foreign-funded
enterprises throughout the country. As of October 2006, almost 6,000 of Walmart China’s
30,000 employees were union members.3 Despite its public battle with the ACFTU, Fortune
China and Watson Wyatt still voted Walmart China as one of the “Top 10 Best Companies to
Work for” in 2005.4 As Walmart continues to expand its global operations, analysts are curious
to see how the company is received and whether consumers’ opinions in fragmented market
set- tings are a match with Walmart’s low price model.
Exhibit 1 Walmart International Operations, April 2010
Market RETAIL UNITS (04/2010) Date of Entry
Mexico 1,479 November 1991
Canada 317 November 1994
Brazil 438 May 1995
Argentina 44 August 1995
China 284 August 1996
United Kingdom 374 July 1999
Japan 371 March 2002
Costa Rica 170 September 2005
El Salvador 77 September 2005
Guatemala 164 September 2005
Honduras 53 September 2005
Nicaragua 55 September 2005
Chile 254 January 2009
India 1 May 2009
Notwithstanding these challenges, today, Walmart International is a fast-growing part of
Walmart’s overall operations, with 4,081 stores and more than 664,000 associates in 14
countries outside the continental U.S.5 (See Exhibit 1.) According to international chief C.
Douglas McMillon, Walmart is “progressing from being a domes- tic company with an
international division to being a global company.” In two decades Walmart International had
become a $100 billion business. Had it been a stand- alone company, it would have ranked
among the top five global retailers.6 (See Exhibit 2.) Walmart International’s business
represents a solid chunk of Walmart’s overall $405 billion revenues for the fiscal year 2010.7
With a market capitalization of more than $200 billion in 2010, Walmart is worth as much as
the gross domestic product of Nigeria. Four of America’s 10 richest individuals are from
Walmart’s low-profile Walton family, which still owns a 40 percent controlling stake. The
company’s portfolio ranges from superstores in the U.S. to neighbourhood markets in Brazil,
bodegas in Mexico, the ASDA supermarket chain in Britain, and Japan’s nation- wide network
of Seiyu shops. Walmart sources many of its products from low-cost Chinese suppliers. The
pressure group China Labour Watch estimates that if it were a country, Walmart would rank
as China’s seventh largest trading partner, just ahead of the U.K., spending more than $18bn
annually on Chinese goods.

Mission Statement
Wal-Mart store customers, lawn and garden, jewellery, shoes, electronics, family clothing and
toys, including the selection of a board of directors of the goods offered. In 1962, Wal-Mart
stores in 1974, which increased to 5.4 million dollars in sales volume of $ 700,000(Gielens,
Van de Gucht, Steenkamp, & Dekimpe, 2008). The largest retailer sales abroad enjoy a solid
profit, but weak sales and public relations debacles continued to struggle at home with. For
fiscal year 2011, Wal-Mart more than 25 billion dollars, a 6.4% increase in operating income
earned abroad AR-based chain saw (Wal-Mart Stores, Inc., Annual port 2012). However,
administrators found difficult to attract U.S. shoppers. The chain saw the decline of traffic and
Wal-Mart, shopping pinched by gas prices, high unemployment, and urban and rural areas to
bring back the opening 40 small Wal-Mart Express stores. Sales beyond, the chain also
struggled with a shaky image. In June 2011, the U.S. Supreme Court in favour of promotions
and payment and retailer of women blame men threw out a case of discrimination (Freeman,
Nakamura, Nakamura, Prud, & Pyman, 2011). Administrators can breathe a sigh of relief when
the U.S. lawmakers less depending on chain in Mexico in April 2012 launched an investigation
following allegations of bribery, Wal-Mart, another blow.

SWOT Analysis
Strengths
Wal-Mart Store's three main segments: Sam's Club and the international stores: There
are Wal-Mart Stores, Sam's Club and International Stores. Supercentres and
Neighbourhood Markets are divided into Sam's Club on the other hand and a business
of membership warehouse clubs. New York Stock Exchange (Palmer, 2005), Wal-Mart
Stores as of January 31, 2004 Discount Stores in the United States about 1478, 1471
Supercentres, 538 Sam's Club and Neighbourhood Market in 64 runs. This is a great
addition to local operation, Wal-Mart and the international segment, retail sales in eight
countries and Puerto Rico process applies. Involved made into retail stores, restaurants,
discount stores, Supercenters, Sam's Club, and many formats, Wal-Mart's international
segment. Technology Deployment: up to 6% by the end of the following Wal-Mart's
RFID chips will reduce shrinkage and other forms of loss (Huang, Hansen, & Anderson,
2012). This process would be very expensive and time-consuming. For example, the
store format: Wal-Mart's one-stop shopping for the family to meet the growing demand
will continue to introduce Supercenters.
Not a good one-stop store, the prices in a store, they offer a large selection of goods at
very competitive. Can get great discounts from suppliers because of their size and thus
pass on these savings to customers (Global 500, 2012). They are local suppliers and
other major brands, as well as supply of goods, their production of branded goods. Their
size and purchasing power is a great power.
Weaknesses
This, at least, has a working relationship, the need for labour and management is
important to highlight the negative effects because it reflects. Use the control of such a
large organization, and especially the staff to manage a large enterprise. Suppliers in
terms of price and are always under pressure with the ability to provide needed. Because
of customers often concerned with low prices and quality of the goods. This warranty
is offered to compensate to a certain extent with satisfaction. For example, Wal-Mart's
benefits package (Matsa, 2011), low-wage and part-time in order to cut costs and
maintain their reputation for heavy reliance on temporary help.
Opportunities
Wal-Mart's core retail business can be separated into four retail parts, including
combining groceries, Wal-Mart Stores, Super Centres, Sam's Club warehouses and
Neighbourhood Markets. Wal-Mart stores and super centres "one-stop family
shopping" give (Kusum, Jie, Krishna, & Kruger, 2010). Sam's Club by buying directly
from suppliers in the country by providing discounted rates for members of the leading
members-only warehouse club. Neighbourhood Market food, pharmaceutical and
general merchandise for customers who need a convenient shopping experience. And
forming partnerships with other countries to enter these countries are probably the main
opportunity for the expansion ... strategy 'more of the same' is employed. It is also
possible to inherit from overseas companies. Home delivery orders placed through
Internet ASDA is a great opportunity in the UK (Singh, Hansen, & Blattberg, 2006).
Most of the shops on the edge of the city, such as fuel costs rise and people have less
willing to travel. There is a strong possibility that the creation of Wal-Mart stores. This
overcomes the local objections and increased travel costs. Times of recession, people
are looking to save money.
Threats
There are other competitors in the domestic retail, Sears, Costco, K-Mart and Target.
Internationally, each country outside the boundaries of a few of their internal equivalent
of Wal-Mart has spread. Carrefour (France), Tesco (UK), Metro (Germany) to retail
outlets in many countries are no exception. I hate Wal-Mart's potential to compete with
local dealers and are likely opposition. In addition, competition from local shops at
Wal-Mart is likely to increase as the increase in travel costs. In Europe (Harris, 2009),
the German retailers, Aldi and Lidl is growing more advanced. These companies offer
limited stock, but the local and cheap. ALDI efficiency, Wal-Mart, normally between
20,000 and 30,000 items against the name of the game is only 1000 or so, with stock
items including Southwest Airlines grocery business. Although Wal-Mart's large, are
likely to compete with similar companies. Low wages and poor working conditions, the
'bad' cheap supply of goods, laboratory and environmental problems of our country - to
be successful, any ethical stance is open to attack (Huang, Hansen, & Anderson, 2012).

Early global expansion strategy and First Enter strategies


In the early 1990s, Walmart think-tanks rightly realized that internationalization was the need
right now. For the future growth, it was important that Wal-Mart should explore markets
outside the U.S. There have three main reasons: Firstly, it calculated that the U.S. population
account for only 4 of the world's population, so Walmart confined itself to a small piece.
Secondly, even it was a relatively small market which had saturated and growth becoming flat.
Finally, some people believe that the emerging markets have a greater potential for discount
retailing. As mentioned, the market growth opportunities for Walmart in the United States are
becoming more and more limited. Therefore, in early 2000s, the company decided to start its
global expansion.
Meanwhile, the "Low Price Promises" is an advertising strategy that is known in any language.
Walmart has adopted productive business strategy that in each country its stores will have a
different name and the products produced are of different quality according to the preferences
of the local customers in international country. Walmart's corporate management strategy is
including sale of high quality products at the lowest price.
In the adventure beyond its huge domestic market, Walmart had a lot of regional options, it
including enter into Asia, Europe or other western hemisphere countries. However, at the time,
Walmart lacked of the necessary financial, organizational and managerial resources to pursue
a number of countries and regions simultaneously. Instead, Walmart chose a logical sequencing
method to enter the market that would allow it to apply the learning gained from its initial
entries to subsequent ones. Finally, Walmart decided to focus on establish a presence in the
Americas, Mexico, Brazil, Argentina and Canada for the next few years.
In 1991 Walmart began to expend into international market; they began their
internationalization by enter into the two geographically closest markets, which are Mexico
and Canada. They first choose to entered Mexico, the country which Walmart chooses that has
had a very successful experience joint venture with Mexico's largest retailer, Cifra, to open the
Sam's Clubs in 1991 (Chain Store Age,2001), and the next step was to enter Canada through
acquisition in 1994.
Obviously, Canada and Mexico are the neighbour markets which had the closest business
environment to the U.S. and also the easiest entry destination. Canada is a mature market and
there are significant incomes and cultural similarities between the United States and Canadian
markets, since most Canadians live near the U.S. border, they were already familiar with the
company. So Wal-Mart faced relatively little need for new learning. Mexico and Canada are
two good markets for Wal-Mart first starting the expanding to international market.

Corporate-Level Strategy

MAIN STRATEGY SUB DESCRIPTION AIM


STRATEG
Y
Differentiati Offers unique warranties and brand  Consumer
on strategy images thus Wal-Mart’s customer’s loyalty
believe that they are being provided
with the best buying options among
competitors.
Grow Green The organization has launched a  To become
strategy range of programs in order to more
encourage sustainability of the environmental
world fisheries, forests and farmers. ly responsible
Furthermore via this Wal-Mart
intends to reduce energy use and
wastage, and push its nearly 60 000
suppliers to produce goods that are
Corporate Growth ecofriendly. and thus encouraging
strategy Strategy consumers to buy green items
Vertical The organization develops its own  To gain
Integration brand name products called Sam’s control over
Choice (Carlson, 2004) pricing of
1990 Wal-Mart acquired McLane a items such as
leading US supply chain services Soda. Cereal,
company. (McLane co,2010) Pet food

Strategic Pioneering effort with Proctor and  Value added


partnerships Gamble, Partnership with CRM and service offering.
environmental defense fund to
implement sustainability.
Hollywood movie companies and
Music recording label companies
(Pereira, 2003).

Walmart uses a combination strategy of overall cost leadership and differentiation. They use
differentiation by having a wider variety of products than their competitors. Walmart's
transportation, logistics, and information systems lower their costs. They also lower costs by
having no-frills service and by having economies of scale. Walmart's successful overall cost
leadership/differentiation strategy leads to high entry barriers for competitors.

Business Level Strategies

MAIN SUB DESCRIPTION AIM


STRATEGY STRATEGY
“LOW PRICES Wal-Mart Creates positive perception  To attract new
ALLWAYS” in the mind of the consumer. The customers.
organization want the consumer to  Meet consumer
believe that they are conducting expectation of low
business with most reputed retailer and price merchandise.
that they are getting the best price deal
in the market.
Convenience store To create stores that are 20 000 sq feet  Capture new market
strategy or less which is 1/7 the organization segments
size of Wal-Mart stores. These new
stores will mix market side and
BUSINESS neighborhood market concepts.
LEVEL Big Box strategy To create stores which exceeded 50 000  Economies of scale
STRATEGIES Sq feet long, Single storey building
with no doors, this achieves economies
of scale by high volumes and low price.

Volume The organization uses its high volume  Long term


purchasing purchasing power to negotiate the best relationships with
prices from suppliers.(Thomas & supplier,
Strickland cited in online essays,2010)  Best price deals for
Furthermore the organization at all goods
times intend to maintain positive  thus creating long
relationships with its term partnerships
suppliers.(Thomas & Strickland cited between both parties
in online essays, 2010 )
Operational Level Strategy

MAIN SUB DESCRIPTION AIM


STRATEGY STRATEGY
Wal-Mart culture The company has created a culture of Competitive
Supporting values, skills, technology of advantage
suppliers, customer relationship and its
human resources

Technology Wal-Mart has created significant Allow the


competitive advantage through the IT organization to
systems, it has developed to manage its achieve economies
warehouses and stores. Furthermore of scales and thus
 Implementation of Wal-Mart’s give mangers more
unique cross docking control in terms of
OPERATIONAL  Massively parallel processor store level. (online
LEVEL computer system to track stock essays ,2010)
STRATEGIES movement. (Daugherty 1993
cited in online essays, 2010 )
 Strategy of use of IT in all
vertical of business
Location selection The organization selects target location Dominate market
without any form of direct competitions. before competition
Transportation Operations efficiency strategy Efficiency and
and logistics effective use of logistic management effectiveness of
strategy, faster check out time, real time operations.
data used to profile each market strategy
predicts demand and optimizes stock
strategy.

Functional Level Strategy


To branch out in to new sector of the retail industry
Diversification into new sector of business is a Wal-Mart stagey (Pereira, 2003). However this
only applies within the retail industry viz during the course of last 40 years Wal-Mart has
diversified its operation into pharmacies, automotive rapier shops and grocery sales shops.
Nevertheless it has failed to diversify into other industries thus limiting the expansion of
organization.
Human Resource Management strategy
However the company strongly believes that all practices and policies of Wal-Mart should be
diverged in order to create uniformity at national level, company level, institutional level,
industry level and individual HRM practice factors as argued by Liu (2004) Zero tolerance
policy towards unionization.
MAIN STRATEGY SUB STRATEGY DESCRIPTION AIM

Local tailoring Develop lesser market fits, To To come more locally


work form regional hubs responsive to
FUNCTIONAL consumer needs.
LEVEL Targeting value Offer branded general To encourage repeat
STRATEGIES oriented customers merchandise. Intergraded logistics purchasing and high
: Suppliers to check out, provide volume purchasing.
continues and reliable service

Competitive edge of Walmart


Wal-Mart succeeds in the United States simply by selling branded products at low cost. But
that doesn't explain it all. Following is an analysis of Wal-Mart's competitive strategy.1
Purchasing
Wal-Mart enjoyed scale economies in purchasing as a result of its more than 50 percent market
share position in discount retailing. Though Wal-Mart may be the top customer for consumer
product manufacturers, it deliberately did not become too dependent on any one vendor (no
single vendor constituted more than 4 percent of its overall purchase volume). Further, Wal-
Mart had persuaded its nearly 3,000 vendors to have electronic "hook-ups" with stores to
reduce overall order entry and processing costs for itself and its vendors.
In-bound logistics
About 85 percent of all the merchandise that Wal-Mart sold was shipped through its
distribution system to the stores (competitors averaged less than 50 percent). Wal-Mart
used a "saturation" strategy for store expansion. The standard was to be able to drive to
a store within a day from a distribution centre. A distribution centre was strategically
placed so that it could eventually serve between 150 and 200 Wal-Mart stores within a
day. Stores were first built as far away as possible but still within a day's drive of the
distribution centre; then the area was filled in back to the distribution centre. The
distribution centres operated 24 hours a day using laser-guided conveyer belts and
cross-docking techniques that received goods on one side while simultaneously filling
orders on the other. The company owned a fleet of more than 3,000 trucks and 12,000
trailers (most competitors outsourced trucking). Wal-Mart had implemented a satellite
network system that was used to share information between the company's network of
stores, distribution centres and suppliers so orders could be consolidated, enabling the
company to buy full truckloads without incurring excess inventory costs. Wal-Mart's
distribution and logistics infrastructure saved transportation costs (2 percent to 3
percent cost advantage relative to competitors), increased flexibility, insured 100
percent in-stock position and increased store selling space (by reducing the space
required for back-room inventory storage).
Store operations
As a result of better management of stores, Wal-Mart enjoyed cost advantages and sales
per square foot advantages versus competitors. These advantages were derived from
several sources.
Store location: In the early years, Wal-Mart's strategy was to build large discount stores
in small rural towns. The locations resulted in lower operating expenses, especially
payroll and rent. Competitors, such as Kmart, which were focused on large towns with
populations of more than 50,000, ignored Wal-Mart. This built effective entry barriers
as it became highly uneconomical for competitors to enter regions Wal-Mart had
already saturated.
Human resource management: Wal-Mart created a dedicated work force - with higher
labour productivity, lower turnover and excellent customer service - offering profit
sharing, incentive bonuses and discount stock purchase plans; promotion from within;
promotion and pay raises based on performance, not seniority, and an open door policy.
Management information and control systems: Wal-Mart's management information
and control systems helped the company manage its more than 3,000 stores in remote
places thousands of miles away from headquarters. Store-level data were collected,
analysed and transmitted electronically to see how a particular region, district, store,
department within a store or item was performing. This eliminated stock-outs, reduced
the need for markdowns on slow-moving stock and maximized inventory turnover. The
benchmark information across stores was also a valuable tool to help "problem" stores.
Shoplifting controls: Wal-Mart has cut its pilferage-related losses by instituting a policy
in which 50 percent of the savings created by pilferage decreases in a particular store
(versus the industry standard) is shared among store employees.
Marketing
Wal-Mart's marketing strategy was to guarantee "everyday low prices" as a way to
attract customers. The traditional discount retailer, which relies on "sales," not only has
to do more advertising and promotions but also has to rely more on catalo mailing,
build-up of inventory before a sale, markdowns on the unsold inventory, etc.