Situation and Context
Wal-Mart, a United States based company, was the second largest company in the world in 2007 with net sales of nearly $345 billion. It had spread it's activity from the general discount merchandise to food, digital photo services, vacation planning , internet access, flower deliver, DVD rentals and financial services. Wal-Mart had its strong base of operations in the US amongst the rural markets and while it was already noticing competition from Target, this competition reached fierce levels when Wal-Mart started shifting its operations towards urban areas. Wal-Mart's other competitors were Kmart which merged with Sears to become the third largest retailers. Next to these two major retailers, warehouse stores for specialty markets had become very successful and were challenging general retailers. Wal-Mart was also faced with PR issues in the US as it had dropped before the end of 2006 to the 12th place in the rankings of Fortune magazine from being the most admired company in 2004. The low wages for its employees, the employment of mainly part-time employees and the reduced expenses associated to health-care coverage lead to this decline. There were also allegations that it didn't enforce child labor and worker-safety rules in relation with its international suppliers. By 2005 there were two unions in the US that were driving "The most relentless PR assault on Wal-Mart" according to Fortune magazine. In 2004, Wal-Mart lost up to 8% of consumers due to these issues according to McKinsey & Co. As a response Wal-Mart had started a great PR initiative in 2005, together with the largest PR firm in the US to highlight it's new low-cost generic drug product, it's contribution to Hurricane Katrina relief and to highlight it's environmental sensitivity. While all these events were unfolding on its home front, Wal-Mart was expanding internationally. Both in Canada and in central and south America Wal-Mart expanded and flourished. Although initially, rigidly imposing US culture with this expansion it started adapting to the local needs. In Europe, Wal-Mart started in Germany and the United Kingdom. In Germany it had acquired 2 small chains of hypermarkets which were remodeled after the acquisition. Germans were however resistant to Wal-Mart's American style merchandising and workplace practices and combined with strong price competition from German hard discounters it eventually sold its stores and left Germany in 2006 with a $1 billion loss. In the United Kingdom, after initial success at sales there had reached 50% of Wal-Mart's international sales, it was faced with difficulties. British retailers had closed the price gap and shopping habits of the Brits had moved up-market. In Asia, Wal-Mart entered Korea where it expanded before selling its business there. In China, where lies the greatest potential market, it was up to 70 stores by 2007 and it had placed a $1 billion bid on a company with a total of 100 stores which is pending the Chinese government's approval. In Japan few people were aware of its entry on the market so they decided to keep the local store's brand but not it's practices and as people were resilient to the overall low-price strategy, this led to great losses. In India where the market is also huge and the middle class is gaining proportions, Wal-Mart entered through a joint venture with one of its largest phone companies where it's focus is on logistics and wholesale operations.
Wal-Mart has been expanding their operations from rural areas into the urban areas in the US where it's meeting tough competition from Target whose sales growth is increasing while that of Wal-Mart is decreasing. Wal-Mart's public image in the US has been greatly damaged leading to significant losses in customers. They have started work on repairing the damage to their public image. Internationally Wall-Mart have had success both in North and South America. The success story is more...
Please join StudyMode to read the full document