Wal-Mart –Global Expansion Case Study

Introduction Established in Arkansas by Sam Walton in 1962. In the last four decades has become the largest retailer in the world (Sales>$330 bn, 7000 stores). Competitive advantage – efficient merchandising, buying power and good HR policies. Additionally – good information and distributions systems.

Intro (Contd.) 1990 – limited growth in US, there decided to expand globally. 1991 – First store in Mexico through JV. 1991-1995 – Learning curve in foreign environment. 1995 – strategic alliance with a local trucking company in Mexico to improve distribution systems. Also catering to local tastes.

Intro (Contd.) Subsequently expanded to 13 countries. 2006: >2000 stores outside US. $62 bn worth of revenue came from overseas stores. Strategy – acquired existing local retailers and transformed them using Wal-Mart systems.

Q1: How does expanding internationally benefit Walmart? EOS due to global buying power. Reduced supplier power, high bargaining power. Benefitted from local ideas (two level stores, wine retail area). Waterfall strategy ensured lessons learnt in one location were applied in subsequent stores. Pre-empted other competitors entry into overseas location. The growth in US was stagnating and therefore the overseas expansion ensured sustainability.

Q2: What are the risks Wal-Mart faces when entering other retail markets and how can this be mitigated? Strategic and culture fit different in foreign markets. Mitigation – adaptation to local tastes. Competition from established hyper-mart chain such as Carrefour (mitigation - have better EOS, good product fit and improved logistics). Unforeseen tarrifs or other protectionist measures, barriers to entry. Mitigation – due diligence prior to entry and waterfall strategy. Price war. Late mover disadvantage. (Mitigation – local sourcing and house brands).