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Team Members: Arun Maithani 11A Jeetendra Ahriwar NikitaShweta SharmaVinay Biradar

Overview, International Expansion Successes Failures and Lessons Learnt2Company BackgroundIndustryRetailFounded1962, Rogers, Arkansas, U.S.Founder(s)Sam Walton, James Bud WaltonHeadquartersBentonville, Arkansas, USProductsApparel/footwear specialty, cash & carry/warehouse club, discount store, hypermarket/supercenter/superstore, supermarket, eCommerceWebsiteCorporate.Walmart.comWalmart.comSubsidiariesAsda, Sam's Club, Seiyu Group, Walmex, @WalmartLabs, Walmart eCommerceCOMPANY OVERVIEW

Walmart operates in the retail industry with presence across 27 countries

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Key FactsEmployees2.2million (2013)

Number of locations11,208Countries27HeadquartersBentonville, Arkansas, U.S.World's largest public corporationBiggest private employerWorld's most valuable companies (market value)Largest grocery retailer in the USMore than 100 million customers per weekTotal sales almost $476 billion in 2013

COMPANY OVERVIEW

Walmart is the worlds third largest employer, with about 2.2 million employees across 11,208 locations Only US department of defense and Chinas PLA employs more!Divisional structure at the top level of the organizationFunctionalGeographical

ORGANIZATION STRUCTURE5Walmart Stores USLargest division, accounting for $258 billion salesAlso includes Walmart's online retailer, walmart.comSams Club525 stores USIs a member only, cash and carry operationsInternational6,337 storesPresence in 26 countries2.2 million employees worldwide

SEGMENTAL ANALYSIS

Walmart operates as Walmart Stores in the US, Sams Club as Members Only Store in the US, and International StoresWal-MartMission/VisionTo give ordinary folk the chance to buy the same thing as rich people.Product Strategy1. Lowest prices across-board the product lines2. Product USP: core competencyLow prices, In-stock positions, Customer serviceService Strategy1. Respect for the individual2. High standards of service3. Constant strive for excellenceSegmentationmiddle-class, lower middlePositioningConsistent positioning- Always low pricesActivities1. Food retail2. Non-Food retail3. On-line food retailerIntangiblesPersonalized customer serviceCo-brandingCo-branding with McDonaldsCOMPANY Overview

Walmart an overall perspective7

COMPANY EVOLUTION

Walmart has come along way from its first store opening in 1962 to the worlds largest employer in 2014

Optimization of Supply chain, economies of scale, and ability to negotiate favorable terms results in lower costs for Walmart that it passes on to price sensitive consumersOptimized Supply ChainEconomies of ScaleFavourable Negotiable TermsKey Competitive AdvantageLowest Prices for Consumers who are price sensitive, thereby creating sustainable model and penetrating the market even furtherAble to leverage its market share to negotiate lower prices; company provides a significant business to its suppliersIntegrated supply chain and optimized distribution networks allows Walmart significant savings, which lower costs, thereby improving marginsAble to decrease and spread its operating expenses through its massive scale, and thus as volume rises per-unit costs declineCOMPETITIVE ADVANTAGES

StrengthEfficient supply chain managementTargeted marketingService innovation and technologyGrowth through adaptability.E-tails continued developmentLeast cost of packaging strong penetration strategiesInfrastructure (financial strength)

Weakness Poor public imageLate entrant in international market.Unable to adapt to different countriesUnunionised & Strict labor lawsWere unable to handle mediaHigh law suits against the company.Low penetration in European union

OpportunityMany countries are still leftUnorganized retailGlobalization (diminishing trade barriers)Cold Storage marketIncrease in consumer purchasing powerE-businessUnemploymentThreatsTerrorismCompetitorsNegative publicityInternational laws against anti dumpingCampaign against anti competitive practices

SWOT(Global context)

Walmarts case for internationalization SWOT in global perspective

SWOTAlthough there is high competition, Wal-Mart derives its strength from its scale of operations and cost leadership strategy; emerging economies present a huge opportunity9Journey of Internationalization of Walmart started with Americas- Europe and Asia were not the natural choiceInternational Expansion

Walmart started its internationalization bid in 1991 as a strategy to grow further, having already covered to all the major US states. At this stage Walmart had three regional choices for expansion:Latin AmericaEuropeAsiaIts Retail industry was mature which meant that a new entrant would have to take market share away from an existing playerCompetition (Metro A.G. in Germany, Carrefour in France...)Lack of strong local customer relationshipsLogistically too far away from USADifferent CultureHigher entrance costsCanada had the business environment closest to the U.S. and appeared the easiest entry destination. The other countries that Walmart chose as its first global points of entryMexico (1991), Brazil (1994), and Argentina (1995) those with the three largest populations in Latin America.Mixed Results from Internationalization: Success in Mexico1991 - Walmart entered into a joint venture with Cifra and opened Sams Club in Mexico City.1997 - Gained the majority position in Cifra.2001 - Renamed the store to Walmart de mexico aka Wal-Mex.2005 - Walmart opened 93 new stores and saw 13.7% increase in net sales overall.2006 - Opened its own bank in Mexico2010 - 1,479 Retail outlets in Mexico

Evaluation of entry Strategy: Walmart entered Mexico with a JV with its local player, CIFRA, the largest retailer in Mexico:Better knowledge of local market and local cultures as CIFRA was the largest retailerCIFRA supplied Walmart with supplier connectionsHelping in dealing with local authoritiesIn return, Walmart transferred logistics knowledge to CIFRA, which also helped improve their local supply chain management.

Problems faced in Mexico: Poor distribution network due to poor infrastructure, crowded roads, unwillingness of suppliers to cooperate overall resulting in costs 20% higher than that in USCultural Differences- Selling what US consumers were buying

International Expansion

Mixed Results from Internationalization: Success in MexicoInternational Expansion

Lesson Learnt:Adaptation: Stocking what Mexican Consumer wantedPartnership with a Mexican truck company to improve distribution networkVendor Park Concept Suppliers opening factories near Wal mart storesToday Mexico is the most brilliant example of a countrys Internationalization Strategy- 2.8 times the next competitor in Mexico

Evaluation in Canadian MarketEntry mode of Acquisition. In 1994, Walmart announced its entry into Canada with the purchase of 120 out of 142 Woolco Discount from the Woolworth Corporation. Walmart avoided a time-consuming - that of building up stores Most of Woolco Stores, had floor space of 100,000 square feet or more, accompanied by strategic and attractive leases.

Walmart Canada also implemented Radio Frequency Identification Technology (RFID) in 20 stores and about 12 of their suppliersThis reduced errors in manual restocking methods, reduced over stocking in the stores, and reduced unnecessary transportation and ultimately a reduction in emissions of carbons

1998 - Entered European market through Germany by acquiring 21 Wertkauf hypermarkets with a similar operations like WalmartStruggles:Stores were situated in poor locations and geographically dispersed. Errors like hiring American managers who implemented the same strategies as they would at homeCompetitors like Aldi and Lidl - with lower prices. Losing profits of about 200 million euros a year2006 - Walmart sold the stores to Metro and took a pre-tax loss of about $1 billionLearning- Begin to understand different perspectives To suspend judgment of what is normal Adapt sales campaigns and business interactions to specific localities and situations instead of assuming that one approach will work everywhere. International Expansion

Mixed Results from Internationalization: Failure in Germany and South KoreaStores were situated in poor locations and geographically dispersed. Offering customers to bag their groceries where German prefer to do their work on ownInstructing clerks to smile at customers German used to professional serviceDespite best attempts to survive in new markets, Walmart faced failures in a few countries and had to close down its operationsIssuesStores were situated in poor locations and geographically dispersed. Cultural difference errors such as hiring American managers who implemented the same strategies as in the US, and were unable to compete with domestic competitors such as Aldi and LidlLack of planningLimited Multi-cultural Awareness Adaptability Issues Wal-Marts stores originally had taller racks than those of local rivals, forcing shoppers to use ladders or stretch for items on high shelvesDesign Issues Wal-Marts utilitarian design ceilings with exposed pipes put off shoppers that were used to the decorated ceilings in E-Mart stores. Suitability to Consumers Wal-Marts shoes-to-sausage product line did not suit the shopping habits of many non-American shoppers that prefer daily outings to a variety of local stores that specialize in groceries, drugs or household goods, rather than shopping once a week at Wal-MartScalability Wal-Mart had 16 stores a small presence that contributed to its decision in to sell out to a Korean discount chain, Shinsegae for $882 million in 2006Walmart in South KoreaWalmart in GermanyFirst entered Europe through opening store in GermanyStores were competing with entrenched local general merchandise and food merchants, rendering Walmart unprofitableRestricted from running sales except for certain times, and the operation never appealed to the German shoppersKEY CHALLENGES FACED

Walmarts attempt to deliver the same layout of stores throughout the world was faced with numerous challenges across countriesMind-set of Buyers- tendency among shoppers to equate low prices with inferior products. Lack of Cross- cultural awareness- Bulk deals don't play well in a country where many live in small urban apartments.Corrupted grocery distribution system in Japan and the country's grocery distribution system is populated with wholesalers who broker deals between suppliers and retailers, skimming profits. Government restrictions Retailers to source 30 percent from small suppliers which is difficult for Walmart to comply withAllegations impacting Corporation Image Continuing US investigation of fraud Targets unfulfilled Partnership with Bharti was to achieve liberalization of the Indian market. It wasnt fulfilled, thus partnership endedMind-sets of consumers Large stores are looked upon as being expensive it is the smaller neighbourhood stores that are viewed as offering lower prices since the customer believes their expenses are lowerLack of planning Fewer smaller, more central or more localised, neighbourhood-type stores that deterred a lot of people Peoples Perception Walmart has to convince their potential customers of the quality and freshness of the food, and that the general merchandise offered is of high quality despite its low priceUnderstanding of Consumer Behaviour Buying decisions not price driven. Chinese customer equates Walmarts everyday low price policy as being cheap and not very safeINDIAJAPANCHINA

KEY CHALLENGES FACED

15Country Mode of Entry Strategy Fate of the dealCanada 391 stores Acquisition Woolco 122 stores in 1994VERY SUCCESSFULWiped out T.Eaton Company, a major player

Operated in areas that have high brand recognition Operated in areas requiring minimum cultural adaptation Emphasised on customer service & store design

UK584 retail storesAcquiring Acquired ASDAs operations(232 stores)1999SUCCESSFUL.Competitors-Tescos and SainsburysCashing on the M&A synergiesMexico 2226 storesJoint VentureEntered in 1991 JV with CIFRA

Local market knowledge

Overcame cultural barriers

SUCCESSFUL.(50% of the market)

Competition by Carrefour

Walmarts international strategy have delivered mixed results however the organization has been learning from all the mistakesKEY CHALLENGES FACED

Country Mode of Entry Strategy What was the fate of the dealGermany Acquiring Acquired largest players Wertkauf and IntersparFAILED.Entered in 1997(21+74 stores);Exited in 2007-American Style Working practices-High Labor Costs.-Management-- Staff Rifts-Competitors: ALDI and LIDI (cheap) .Similar business and HR modelsMet EU guidelines for businessBrazil 557 stores 60-40 JV Started in 1995. Leveraged experience of Mexican mkts When entered in 1995

Already Carrefour,P de A, and Sendas

So very tough competition(Pi was eaten)

Emphasised on Customer service Developed economies of Scale Utilised Discount tactics Argentina 105 storesGreenfield Operation Gained experience from Mexico & Brazil -Wrong anticipation of the Argentine

-Competition by Carrefour

Started in 1995. Economies of Scale Walmarts international strategy have delivered mixed results however the organization has been learning from all the mistakesKEY CHALLENGES FACED

Country Mode of Entry Strategy What was the fate of the dealS.KoreaAcquiring majority sharesEntered in 1998 .

Acquiring majority shares in KOREA MAKRO FAILED. no personalization, quality first)

-Exited in 2006,like NOKIA,NESTLEGOOGLE and CARREFOUR. (unfair labor standards, wages)Japan433 storesAcquiring-Entered in 2002 - stake in Seiyu Ltd 6.1%In 2005 acquired majority stakeCompetitors were Daiei,Sogo,Mycal

-Continuing losses every year ( US marketing model)China 401 stores

Greenfield Operations Started in 1996, Global sourcing Merchandising & store designs suiting the consumers-Took much time-Biggest Walmart Supplier.

-Forced to allow unionization of workers.-Gender Discrimination-Immigration law-suit

Sourced stocks from international suppliers who manufacture in China. Global sourcing office in 2002Sourced from local manufacturers who understand local tastesMet government trade & business laws Walmarts international strategy have delivered mixed results however the organization has been learning from all the mistakesKEY CHALLENGES FACED

FUTURE OUTLOOK

Small Format Stores and E-commerce to be key growth drivers for Walmart

Capital investment, especially in technology and e-commerce, and expansion in international markets to drive sales in futureFUTURE OUTLOOKReferences http://corporate.walmart.com/our-story/ http://stock.walmart.com/ http://fortune.com/fortune500/wal-mart-stores-inc-1/ http://www.bloomberg.com/quote/WMT:US http://www.huffingtonpost.com/tag/walmart-bloomberg/ http://corporate.walmart.com/our-story/our-business/ http://corporate.walmart.com/our-story/our-business/walmart-us http://corporate.walmart.com/our-story/our-business/sams-club http://corporate.walmart.com/our-story/our-business/international http://www.nytimes.com/2006/05/23/business/worldbusiness/23shop.html?_r=0 http://www.businessweek.com/stories/2003-10-05/a-bumpy-ride-in-europe http://www.nbcnews.com/id/9815727/#.U-p_umN9Z-4 http://www.businessweek.com/stories/2005-04-10/wal-mart-struggling-in-germanyhttp://corporate.walmart.com/our-story/locations/mexico#/indiahttp://www.forbes.com/sites/greatspeculations/2014/04/02/challenges-wal-mart-faces-in-mexico-and-china/http://www.sfu.ca/~sheppard/478/syn/1137/G_6_1137.pdfhttp://anirbankar.com/category/international-strategy-for-walmart/http://www.bidnessetc.com/25154-walmart-unveils-growth-strategy-for-international-business/https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=7&ved=0CEcQFjAG&url=http%3A%2F%2Fwww.researchgate.net%2Fprofile%2FLee_Yee_Mun%2Fpublication%2F234167019_WALMART_SUCCESS_IN_MEXICO_CANADA_AND_CHINA_GLOBAL_EXPANSION_STRATEGIES_ENTRY_MODES_THREATS_AND_OPPORTUNITIES%2Flinks%2F02bfe50fbfe066efdb000000&ei=MAR7VPCzDsiouQTK44CABA&usg=AFQjCNGl7Zbj7Cd9FtS5swfYnpaTq3I6EA&sig2=L0gVFv5hL79gOZ-AZO1yTA&bvm=bv.80642063,d.c2Ehttp://corporate.walmart.com/global-responsibility/