1. Wal-Mart practices the Global Market Orientation? Support this statement by providing specific examples from the article. (15 points) Wal-Mart is the leading company in retail markets worldwide, with net sales of $ 344,992 million in 2007. Many would argue that Wal-Mart is the face of retail globalization. Nevertheless, this multinational company had to struggle through testing times to reach this status. The growth of any corporation is neither assured, nor a straightforward process – Wal-Mart’s development was not only connected with executive ambition, motivation, progression and new opportunities; but also inevitably uncertain times, unnecessary costs, legitimacy and resistance. This consequently lead to Wal-Mart’s failure in certain markets, and for this reason the board of directors needed to comprehend why these different events occurred, as well as considering possible approaches to overcrossing certain barriers. Wal-Mart’s success and growth is based on its three main segments: * Wal-Mart Stores
* Sam’s Club
Typically, the company concentrates on its US proven success formula, which encompasses a number of different factors. This includes a low price strategy, which aims to satisfy the customer’s needs through offering low prices, which is demonstrated through its strap line ‘Every Day Low Prices’. In addition, it offers high convenience with ‘highly’ motivated employees – however this appears to be oxymoronic in nature, when taking into account that the Wal-Mart’s wages fall short off motivating employees, with wages less than any other retailers. Another factor of the US success formula is the intense pressure on suppliers for discounts, which gives Wal-Mart the opportunity to lower prices, which will in turn be transferred to the customers. However, this meant that suppliers had Wal-Mart as their sole client, making them very dependent upon Wal-Mart. A final factor is a high-technologies distribution network which ensures efficient supply of goods. Furthermore, Wal-Mart has the largest private satellite communication system, which allows the executives a total overview on costs and products from factory to the checkout counter. Today, more than 75,000 employees are working for Wal-Mart’s Logistic and Information Systems Division and using the latest technology. These different components put together were the beginning of a new phase during the 1990’s, where Wal-Mart changed this strategy towards a quick and successful expansion; due to its supercenter formats, the grocery retailing, and the first steps into global retailing.
Wal-Mart used primarily, Joint ventures, Acquisitions, and Greenfield investments, as entry modes to get access to foreigner countries.
Joint ventures were undertaken in Mexico because it was geographically near the home market, and in the beginning of the 90’s its economy recovered from stagnation. Subsequently, the retail sector grew fast which made Mexico attractive to enter. The joint venture (50% - 50% alliance) between Wal-Mart and Cifra was focused on introducing ‘Sam’s Club’. The company decided to enter Mexico through a joint venture, because they used the existing distribution channels from Cifra to build on and to gain the partner’s local knowledge. For further expansion in Latin America, Wal-Mart targeted the region’s next two the largest markets: Brazil and Argentina. The entry into Brazil was also accomplished through a joint venture with Lojas Americana, a local retailer. But Wal-Mart was now able to leverage its learning from the Mexican experience and chose to establish a 60% - 40% joint venture in which it had the controlling stake. The entry into Brazil gave Wal-Mart even greater experience in Latin America, and so it chose to enter Argentina through a wholly owned subsidiary. This decision was reinforced by the fact that there are only two markets in Argentina of significant size (The Wal-Mart Encyclopedia, 1995). In 2004, the...
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