Wal-Mart Foreign Expansion
Wal-Mart, the world’s largest retailer, has built its success on a strategy of everyday low prices, and highly efficient operations, logistics, and information systems that keep inventory to a minimum and ensures against both overstocking and understocking. The company employs some 2.1 million people, operates 4,200 stores in the United States and 3,600 in the rest of the world, and generates sales of almost $400 billion (as of fiscal 2008). Approximately $91 billion of these sales were generated in 15 nations outside the United States. Facing a slowdown in growth in the United States, Wal-Mart began its international expansion in the early 1990s when it entered Mexico, teaming up in a joint venture with Cifra, Mexico’s largest retailer, to open a series of supercentres that sell both groceries and general merchandise. Initially the retailer hit some headwinds in Mexico. It quickly discovered that Mexicans shopping habits were different. More people preferred to buy fresh produce at local stores, particularly items like meat, tortillas and pan dulce which didn’t keep well overnight (many Mexicans lacked large refrigerators). Many consumers also lacked cars, and did not buy in large volumes as consumers in the United States did. Wal-Mart adjusted its strategy to meet the local conditions, hiring local managers who understood the Mexican culture, letting those managers control merchandising strategy, building smaller stores that people could walk to, and offering more fresh produce. At the same time, the company believed that it could gradually change the shopping culture in Mexico, educating consumers by showing them the benefits of its American merchandise culture. After all, Wal-Mart’s, managers reasoned, people once shopped at small stores in the United States, but starting in the 1950s they increasingly gravitated towards large stores like Wal-Mart. As it built up its distribution systems in Mexico, Wal-Mart was able to lower...
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