Foreign Direct Investment: Wal-Mart and ASDA

Topics: Wal-Mart, Retailing, Supermarket Pages: 6 (1999 words) Published: April 26, 2010
Foreign Direct Investment
Wal-Mart – ASDA

Wal-Mart is an American company, based in Arkansas, USA that runs large discount department stores. The company was started in 1945 when Sam Walton open a store in Arkansas, the premise behind the company was to slightly undercut its competitors while still making a profit. This idea proved a large success. In 1962 the name Wal-Mart was established when Walton open ‘Wal-Mart Discount City’ store by the time the company was incorporated in 1969 it had expanded 38 stores spread over 3 states, again operating under the same premise of marking up slightly less than the competitors.

ASDAs life began in 1965 with the merger of Asquith supermarkets and Associated Dairies, the name ASDA is an abbreviation of the two names ASquith Dairies. In 1968 ASDA bought two large stores from Government Exchange Mart (G.E.M) that were failing and in the first week of trading by ASDA the sales grow from £6,000 a week under G.E.M to £30,000. The space given by the size of the stores allowed ASDA to create its own range of goods, which is considered to be on of the reasons behind the company’s early growth. By 1981 ASDA had expanded out of its northern home south with a total of 80 stores. Unfortunately this time also seen the managing director leave the company to be replaced by John Fletcher whose ideas to improve profitability was to increase profit margin on branded items, this increased profits in the short term but lowered the companies price competitiveness, straying away from the company’s founding principals. This led to decline in customer numbers and Fletcher left the company just 3 years later. By the beginning of the 1990’s ASDA was falling apart it had bought a chain stores know as Gateway for a high price and was struggling due to it, and ASDA entered in a doomed loop of increasing prices and loosing customers. Archie Norman took over the company as CEO after the share holders revolted. Made some radical changes to the company, completely changing it management style and returning back to the companies base ‘ASDA price – Pocket the Difference’

In the 1980’s Wal-Mart continued to expand in to southern United States states and by 1987 had 1198 stores. The 1990’s saw continued growth it to other United States states such as New York and by 1993 the company had managed to reach one billion dollars worth of sales in one week. By 1995 Wal-Mart were well on there way in to foreign markets with 276 international stores, by the time Wal-Mart looked in to purchasing ASDA in 1999 it was the world’s largest private employer.

After ASDAs struggling period in the early 1990s, its future was looking up towards the end of the 1990s. 1999 saw a large discussion about a £18 billion merger between ASDA and kingfisher, but this was no more than just a ruse to cover what was really happening to ASDA. The kingfisher merger was days away when Wal-Mart made a £6.7 billion offer the ASDA could not refuse. Both ASDA and Wal-Mart had very similar ideas about management style and, giving the customer what they wanted, cheap goods. In addition both had spread out from just groceries in to other areas, such as ASDA’s George Clothing range.

The Asda acquisition thrusts Wal-Mart into the midst of a government inquiry of supermarket pricing

A regal entrance into the U.K. Chain Store Age, 10870601, Dec99, Vol. 75, Issue 13

The Time that Wal-Mart purchased ASDA may also cause them problems; in 1999 the office of fair trading asked the competition commission to look it to the possibility that supermarkets were bullying suppliers. Wal-Mart are an international brand they would have intended to use this to there advantage and ‘shop around’ for the cheapest goods, this investigation would have caused them to look closely at how they source there suppliers to ensure that they are not caught up in the inquiry. If it wasn’t for the kingfisher merger possibility Wal-Mart may have waited until the air had...

Bibliography: A long, long way from Bentonville. Economist, 00130613, 9/30/2006, Vol. 380, Issue 8497
A regal entrance into the U.K. Chain Store Age, 10870601, Dec99, Vol. 75, Issue 13
About ASDA – History, (Accessed 10/02/2007)
Frank, T.A. "A Brief History of Wal-Mart." The Washington Monthly. April 1, 2006
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Knestout, Brian P., Wal-Mart Buys Britain! Eyebrows Arch! Kiplinger 's Personal Finance Magazine, 1056697X, Sep99, Vol. 53, Issue 9
Rogers, David S, Possible Consequences of Wal-Mart 's Acquisition of ASDA, European Retail Digest; Sep99 Issue 23, p51, 2p
Teena Lyons, Competition Commission inquiry into supermarkets,, Wednesday October 31 2007
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