Wal-Mart's Expansion to Other States and Countries

Pages: 9 (2984 words) Published: January 15, 2011
Wal-Mart’s first foray outside the United States was in Mexico in 1991. Although Wal-Market executives had no previous foreign experience, they recognized that there were substantial income and cultural differences in Mexico. Accordingly, the American retail giant established a 50/50 join venture with Cifra SA, Mexico’s largest retailer. Despite havig a partner, the company made a number of blunders. Among them were poorly translated signs and a merchandise assortment that including inappropriate items such as ice skates,, leaf blowers, and riding lawn mowers. To make matters worse, wal-mart’s vaunted information system would automatically re-stock merchandise that local managers had tried to close out. The Mexican stores sold American-stlyle packedge meat and vegetables, which many shoppers preferred to purchase from small neighborhood stores. Also, most Mexican suppliers shipped directly to stores rather than to retailer warehouses and distribution centers. Thus, wal-mart lacked the control that translates into low prices in the United States. As Sam Dunn, Director of administration for Wal Mart de Mexico, commented, “The key to this market is distribution. The retailer who solves that will dominate.” One sign of Wal-Mart’s long –term commitment to Mexico was its decision in mid-1997 to convert its joint venture shares into Cifra common stock and purchase enough additional shares to have a controlling stake in the company; the new enterprise is called Wal-Mart de Mexico S.A de C.V. (Walmex). Meanwhile, Wal-Mart turned its sights further south. In 1995, the company teamed up with Lojas Americanas SA and opened five stores in Brazil; operating without a partner in Argentina, Wal-Mart opened four stores. By 2000, the company was operating 12 Supercenters in Argentina. The stores offer a staggering variety, with a typical mix of approximately 50.000 different products. In 1994, wal -mart entered Canada by acquiring the 122-store Woolco chain. The market appeared very attractive, because a high percentage of the Canadian population lives within 100 miles of the border. In addition to a high familiarity with Wal-Mart, Canadians also speak English and have a monetary system that is similar to the American one. The small size of existing Woolco stores resulted in disappointing sales; Wal-Mart responded by moving to new locations or expanding units. Much early sales growth came at the expense of existing department stores. Future growth may be hampered by the relatively small Canadian population and a trend towards cross border shopping to escape high value-added taxes. Also, management at Zeller´s, Wal-Mart´s main competitor in Canada, has responded by renovating stores and expanding beyond its traditional discount formula. South America

The retailing environment in South America is very competitive, in part because Carrefour had arrived first. The French company inked distribution deals with manufactures of leading local brands; this is a key advantage, because well-known consumer packaged –goods brands such as Tide detergent are not widely accepted in South America, Moreover, Carrefour player hardball, undercutting Wal-Mart´s prices on key items such as cooking oil, rice, and shampoo. Some observer’s noted that Carrefour´s French heritage undoubtedly gave it the upper hand in presenting fresh fish, meat, and produce. Local retailers were strong as well; faced with rampant inflation in the late 1980s, they had invested in sophisticated cash registers and an inventory control system to help them make frequent-even daily-price adjustments. Despite these competitive challenges, Wal-Mart quickly adapted to the unfamiliar environment. It hired local managers, who in turn helped develop the right product assortment and merchandising approaches. For example, the Wal- Mart Supercenters in Argentina initially kept fresh seafood in glass display cases. However, South Americans typically want to examine prospective food...
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