Expansion of Wal-Mart in Asia

Topics: Subsidiary, Types of companies, Parent company Pages: 7 (4487 words) Published: November 2, 2014

Introduction
In this assignment, we decided to choose Wal-Mart as our assignment’s company. Wal-Mart was the biggest retail corporation in the world in terms of its revenues in 2013. The main reason of choosing Wal-Mart is because it’s courage to open up many new retailers in other foreign countries market. Besides, Wal-Mart always is a leader in retail industry because it’s maintained through continuous innovation behavior. In order to achieve the commitment “everyday low prices to consumer”, Wal-Mart has established an excellent procurement and delivers system. Wal-Mart also has their own excellent information system management and sharing information with suppliers to maintain a good inventory control. Wal-Mart is a family owned business, also known as a family limited liability company. (Kennon, 2014). Sam Walton decided to expand the business with chosen a wholly owned subsidiary mode for his initial entry due to it offers a higher degree of control and the speed of expansion tend to be more measured for organic growth. (Conglomerates & Spinoff, 2014). In addition, those product that sell in the Wal-Mart store can be categorized divided into six categories which are entertainment, grocery, health and wellness, apparel, hardlines, and household items. We will more focus on commodity product in our assignment due to commodity is the most common product for our daily use and commodity is the most profitable in Wal-Mart. United States (U.S.) just represents 4% of world's population, Wal-Mart already saturated domestic market. Moreover, Asia is the world’s largest and most populous continent for Wal-Mart to invest. (Continents, 2013). Whenever wall-mart can find a strategic location in Asia, they should establish the largest retailer in the town. Therefore, there will be less competitors will enter into the market at that location. Furthermore, Asia is a good choice for doing offshoring due to emerging markets at here with a lower disposable income offer huge platforms for growth in discount retailer. For instance, operation cost and other expenses in Vietnam, Philippines and other are lower than U.S. expenses. In order to maximize their revenue, Wal-Mart should put more effort in understanding Asian culture, so they able to fulfill and satisfy Asia’s customer needs. Wal-Mart can invest more capability to growth in Asia after understand well of their culture after they understand well in their culture and find out the opportunity, then Wal-Mart should invest more in Asia. (Lusper, 2012, page30) 2.0 Current Expansion Strategy

2.1 Wal-Mart in Japan
Nowadays, economy of Japan grows rapidly. Japan becomes the world’s second largest retail market. It reaches US$ 1124 billion in 2007. Japan also a attract market when doing business. The number of travelling also grow continuously due to Japan is a “shopping city” as their reason to visit Japan. In another word, Wal-Mart has good opportunities to enter Japan market in Asion region. In 1990s, real estate price in Japan is decling, Wal-Mart start seeking in Japanese market. In 2002, Wal-Mart decides to expand their market at Japan. At first, Wal-Mart enter Japan by acquiring 6.1% stake (371 store) in Seiyu. Wal-Mart choose to acquire due to Seiyu is the 5th largest supermarket chain in Japan. Seiyu had 400 retail stores across Japan. At that moment, Seiyu facing company crisis and it has a well-established retail chain network that gives a very good chance to acquire it. “Acquisition is the fastest expansion strategy, and is often used as a means to archive product diversification and geographic diversification, but to expand through acquisition can be a costly affair.” (Hollensen, 2004). In 2003, Wal-Mart become biggest shareholder of Seiyu which acquires 34% stake. In 2005, Seiyu continued lose, Wal-Mart acquire 42% stake. Hence, Wal-Mart purchase the remaining shares so that Seiyu become the wholly-owned subsidiary of Wal-Mart in 2008. Wholly-owned subsidiary refer to...
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