Intl Business 338
10, September, 2010
Wal-Mart takes on the World
The following paper is a summary of how Wal-Mart has faced limited growth on American soil, was forced to look else- where for growth opportunities, particularly in foreign countries, where market shares were already established. Wal-Mart found itself facing political, ideological, cultural, and technological barriers in its attempt to enter the markets on foreign soil. Wal-Mart deliberately selected emerging markets as a starting point for international expansion (pg.395). In Latin America, Wal-Mart targeted large growing populations like in Mexico, Argentina, and Brazil; in Asia, it sought out China. Wal-Mart used a 50-50 joint venture to help in the entry into Mexico, because of culture and income differences. Instead of opening new stores they acquired existing supermarkets (Rowell). In Brazil they went in on 60-40 venture, learning from Mexican deals. When they entered Argentina, they went in owning 100 percent stakes basis. Wal-Mart had to learn the Do’s and Don’ts of each market entered (pg 396). In Asia, Beijing restricted the operations of foreign retailers. These restrictions included requirements for government-backed partners and limitations on the number and location of stores. Again, Wal-Mart went into China with a joint–venture. Wal-Mart had many miscues in doing business in China, for instance households in China have very different products than in North America. Shopping lists are not as big as U.S. based consumers. Items of regular use in North America are not even known in China (pg. 396). The Supply Chain in China is primitive; partly because of cost and quality remain the priority . Supply Chain knowledge, execution and talent are the main reasons why China is slow to adapt. In the United States, smaller towns have a homogeneous customer base and a standard of living that supports the market and a store. In China, this isn’t the case. The standard of living in China as a whole, especially in rural areas, is significantly lower than in the United States and the smaller towns can’t necessarily support a hypermarket or even multiple stores. Wal-Mart’s domestic model enables the company to profit on margins by selling large quantities of products and making less on each sale through the hypermarket format. American buying habits support this model. Chinese shoppers are the complete opposite of their American counterparts. Where shoppers in the United States live in large homes with ample storage, the average Chinese consumer has little room for storage or extraneous possessions. A typical Chinese shopper will visit a store every day and will purchase just enough to make it through to the next day. This in turn means that the average Chinese consumer will spend significantly less per trip, perhaps $6-$10 rather than $40-60 per trip. Chinese consumers are also obsessed with the freshness of food and prefer to purchase live animals and fresh vegetables as opposed to processed meats or food. To meet this need, Wal-Mart must purchase many products from local vendors in smaller lots. This prevents the company from taking advantage of economies of scale and the operational efficiencies that make its domestic model work in the United States. A strategic goal of Wal-Mart is to expand. It has done so successfully. Looking at the facts and figures clearly shows the corporations dominance and power. Currently the corporation employs over 1.3 million employees, one million in the US alone. The company owns over 4000 stores worldwide. Over 1,200 units (stores) are in operation internationally. Domestically, Wal-Mart is the largest US retailer, employing around 1 million people. It has over 3,000 stores and outlets, and 77 distribution centers. The company serves more than 100 million customers weekly in all 50 states, Puerto Rico, and several nations around the world....
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