Key Facts, Issues and Strategies
Since 1991, Walmart International has experienced mixed results with its big-box, low cost strategy around the world, yet managed to progress to running 4,112 units in 15 countries – just shy of matching the number of units in the United States. The famous “Everyday low prices”, one-stop-shop Walmart boasts such a product assortment that it achieves economies of scale and scope in operations and marketing (Etgar & Rachman-Moore, 2010). Reception of this strategy was so poor in Germany and Korea that Walmart withdrew from those countries in 2006 (Boyle, 2009). Other countries, such as Brazil, Canada and the United Kingdom, have been very receptive with hundreds of units per country. Walmart’s success is based in maximizing its supply chain. In spite of its size and clout, Walmart is attempting to further increase its buying power by consolidating its purchasing with partners (Boyle &Wolf, 2010). The larger the amount of any commodity a large retailer can purchase, the greater the concession on price, delivery, and credit it can extract. In some cases the exclusivity can be a demonstration of monopsonistic procurement and the buyer power that comes with it (Guruswama, Sharmy & Jos, 2007). As a result of analyzing Walmart’s global expansion using several analytical tools I will highlight its successes, its failures and its learning curve. I will suggest a future strategy for Walmart in two of the most likely targets for growth – India and China – that will capitalize on these findings and build on emerging management processes within Walmart International. History of Walmart Global Expansion
Walmart took its first step into the global arena in Mexico in a joint venture with Grupo Cifra in 1991. This first step grew by leaps and in 2008 Walmart held 55% of the Mexican retail market and was the largest employer in Mexico (DeGregorio, Thomas, deCastilla, 2008, p.532). According to their 2010 Annual Report, Walmart Mexico boasts 1,469 units in a variety of formats. After almost 30 years of exponential growth in the United States, Walmart expanded out to the global market. Verdier, et. al. did an internationalization performance study involving Walmart and Carrefour, and surmised that given Walmart’s age, they were best prepared to expand quickly in the international market, while Carrefour began earlier in their life cycle, they progressed at a slower pace (2010). Since 1991, Walmart International has experienced mixed results with its big-box, low cost strategy around the world but still progressed to running 4,112 units in 15 countries. In 1994, Walmart entered China by way of collaboration with a Thai organization, the C.P. Pokhpand Company (Bhandari, 2010), and is now at 279 units after investing in Trust-Mart’s 100+ retail units. India has posed challenges delaying Walmart’s market entrance, most notably the prohibition of FDI that was relaxed in 2006 after the United States Ambassador to India met with several top representatives of Indian government (Rai, Rajshekhar 2005). Shortly after, a joint venture with Bharti Enterprises was formed with a conditional memo of understanding (Press Trust of India, 2008). Walmart US remains stable in net sales growth (2010 – 63.8% of net income), with Sam’s Club showing a 3-year decline (ending 2010 at 11.5% of net income). Walmart Global is showing slow but steady increases and ended 2010 at 24.7% of Walmart’s net income (walmart.com). Current Key Strategies in China and India
In 1999, after the departure of Walmart’s International Division head, Walmart began “trying to manage a complete U-turn on international strategy from piecemeal organic growth to aggressive acquisition” (Economist, 2000). This is evident in their continual acquisitions and joint ventures. Performance of these acquisitions now accounts for 24.7% of Walmart’s net sales...