Overview, International Expansion

Successes Failures and Lessons Learnt

Team Members: Arun Maithani 11A
Jeetendra Ahriwar
Nikita
Shweta Sharma
Vinay Biradar

COMPANY
OVERVIEW

Walmart operates in the retail industry with presence across 27

countries
Company Background
Industry

Retail

Founded

1962, Rogers, Arkansas, U.S.

Founder(s)

Sam Walton, James Bud Walton

Headquarters

Bentonville, Arkansas, US

Products
Website
Subsidiaries

Apparel/footwear specialty, cash & carry/warehouse club, discount

store, hypermarket/supercenter/superstore, supermarket,
eCommerce
Corporate.Walmart.com
Walmart.com
Asda, Sam's Club, Seiyu Group, Walmex, @WalmartLabs, Walmart
eCommerce

COMPANY

Walmart is the worlds third largest employer, with about

2.2
OVERVIEW
million employees across 11,208 locations Only US department
of defense and Chinas PLA employs more!
Key Facts
Employees

2.2million (2013)

Number of locations

11,208

Countries

27

Headquarters

Bentonville, Arkansas, U.S.

World's largest public corporation

Biggest private employer
World's most valuable companies (market
value)
Largest grocery retailer in the US
More than 100 million customers per week
Total sales almost $476 billion in 2013

ORGANIZATION
STRUCTURE

Divisional structure at the top level of the organization

C. Douglas McMillon
President and CEO

Charles M. Holley Jr. CFO

Karrenann Terrell CIO
Gisel Ruiz COO

Functional
Geographical

Wal-mart United
States
Greg Foran - CEO

Wal-mart
International
David
Cheesewright- CEO

Sams Club
Rosalind Brewer CEO

SEGMENTAL
ANALYSIS

Walmart operates as Walmart Stores in the US, Sams Club as

Members Only Store in the US, and International Stores

Sales (2013)

Walmart Stores US

Largest division, accounting for $258

billion sales
Also includes Walmart's online retailer,
walmart.com

11%
27%
62%

Sams Club

525 stores US
Is a member only, cash and carry
operations
Walmart US
Walmart Intrenational
Sams Club

International

6,337 stores
Presence in 26 countries
2.2 million employees worldwide

COMPANY
Overview

Walmart an overall perspective

Wal-Mart
Mission/
Vision
Product Strategy

To give ordinary folk the chance to buy the same thing as rich people.
1. Lowest prices across-board the product lines
2. Product USP: core competency
Low prices, In-stock positions, Customer service

Service Strategy

1. Respect for the individual

2. High standards of service
3. Constant strive for excellence

Segmentation

middle-class, lower middle

Positioning

Consistent positioning- Always low prices

Activities

1. Food retail
2. Non-Food retail
3. On-line food retailer

Intangibles

Personalized customer service

Co-branding

Co-branding with McDonalds

COMPANY
EVOLUTION

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

1970:
1st IPO
1962:
Wal-Mart
was
opened
first store

1970:
Wal-Mart
began to
grow

1999:
Named
#1 stock
on the
Dow
Jones
Index

2014:
Largest
private
employer

COMPETITIVE

Optimization of Supply chain, economies of scale, and

ability to
ADVANTAGES
negotiate favorable terms results in lower costs for Walmart that
it passes on to price sensitive consumers
Lowest Prices for Consumers who are price sensitive, thereby creating
sustainable model and penetrating the market even further
Optimize
Optimize
ddSupply
Supply
Chain
Chain
Key
Key
Competit
Competit
ive
ive
Advantag
Advantag
ee

Integrated supply chain and

optimized distribution networks
allows Walmart significant
savings, which lower costs,
thereby improving margins

Economies
Economies
of
ofScale
Scale

Able to decrease and spread its

operating expenses through its
massive scale, and thus as volume
rises per-unit costs decline

Favourable
Favourable
Negotiable
Negotiable
Terms
Terms

Able to leverage its market share

to negotiate lower prices;
company provides a significant
business to its suppliers

SWOT(Global
context)

Walmarts case for internationalization SWOT in global

Although
there is high competition, Wal-Mart derives its strength from its scale of
perspective
operations and cost leadership strategy; emerging economies present a huge
opportunity

Strength

Weakness

Efficient supply chain management

Targeted marketing
Service innovation and technology
Growth through adaptability.
E-tails continued development
Least cost of packaging
strong penetration strategies
Infrastructure (financial strength)

Poor public image

Late entrant in international market.
Unable to adapt to different countries
Ununionised & Strict labor laws
Were unable to handle media
High law suits against the company.
Low penetration in European union

SWO
SWO
T
T
Opportunity
Many countries are still left
Unorganized retail
Globalization (diminishing trade barriers)
Cold Storage market
Increase in consumer purchasing power
E-business
Unemployment

Threats
Terrorism
Competitors
Negative publicity
International laws against anti dumping
Campaign against anti competitive practices

International
Expansion

Journey of Internationalization of Walmart started with AmericasEurope and Asia were not the natural choice
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:
1. Latin America
2. Europe
3. Asia
Its Retail industry was mature which meant that a new entrant would have
to take market share away from an existing player
Competition (Metro A.G. in Germany, Carrefour in France...)
Lack of strong local customer relationships

Logistically too far away from USA

Different Culture
Higher entrance costs

Canada 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.

International
Expansion

Mixed Results from Internationalization: Success in Mexico

1991 - 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 Mexico
2010 - 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
retailer
CIFRA supplied Walmart with supplier connections
Helping in dealing with local authorities
In return, Walmart transferred logistics knowledge to CIFRA, which also helped
improve their local supply chain management.
Problems faced in Mexico:

International
Expansion

Mixed Results from Internationalization: Success in Mexico

Lesson Learnt:

Adaptation: Stocking what Mexican Consumer wanted

Partnership with a Mexican truck company to improve distribution network

Vendor Park Concept Suppliers opening factories near Wal mart stores

Today Mexico is the most brilliant example of a countrys Internationalization

Strategy- 2.8 times the next competitor in Mexico
Evaluation in Canadian Market
Entry 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 suppliers
This reduced errors in manual restocking methods, reduced over stocking in the
stores, and reduced unnecessary transportation and ultimately a reduction in

International
Expansion

Mixed Results from Internationalization: Failure in Germany

and South Korea
1998 - Entered European market through Germany by acquiring 21 Wertkauf
hypermarkets with a similar operations like Walmart
Struggles:
Stores were situated in poor locations and geographically dispersed.

Errors like hiring American managers who implemented the same strategies as
they would at home
Competitors like Aldi and Lidl - with lower prices.
Losing profits of about 200 million euros a year
Offering
Instructing
Stores
were
2006 - Walmart sold the stores to customers
Metro and took
a pre-tax lossclerks
of about
billion
to bag
to$1smile
situated in poor
their
groceries
at customers
locations
and
where
German
German used to
geographically
prefer to do their
professional
dispersed.
work on own
service

Learning 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.

KEY CHALLENGES
FACED

Despite best attempts to survive in new markets, Walmart faced

failures in a few countries and had to close down its operations
Issues

Lack of planning
Stores were situated
in poor locations and
geographically
dispersed.

Walmart
in
German
y

Walmart
in South
Korea

Limited Multicultural
Awareness
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 Lidl

First
First entered
entered Europe
Europe through
through opening
opening store
store in
in Germany
Germany
Stores
Stores were
were competing
competing with
with entrenched
entrenched local
local general
general merchandise
merchandise and
and food
food
merchants,
merchants, rendering
rendering Walmart
Walmart unprofitable
unprofitable
Restricted
Restricted from
from running
running sales
sales except
except for
for certain
certain times,
times, and
and the
the operation
operation
never
appealed
to
the
German
shoppers
never appealed to the German shoppers
Adaptability
Adaptability Issues
Issues Wal-Marts
Wal-Marts stores
stores originally
originally had
had taller
taller racks
racks than
than
those
those of
of local
local rivals,
rivals, forcing
forcing shoppers
shoppers to
to use
use ladders
ladders or
or stretch
stretch for
for items
items on
on
high
shelves
high shelves
Design
Design Issues
Issues Wal-Marts
Wal-Marts utilitarian
utilitarian design
design
ceilings
ceilings with
with exposed
exposed
pipes

put
off
shoppers
that
were
used
to
the
decorated
ceilings
pipes put off shoppers that were used to the decorated ceilings in
in E-Mart
E-Mart
stores.
stores.
Suitability
Suitability to
to Consumers
Consumers Wal-Marts
Wal-Marts shoes-to-sausage
shoes-to-sausage product
product line
line did
did
not
suit
the
shopping
habits
of
many
non-American
shoppers
that
prefer
not suit the shopping habits of many non-American shoppers that prefer
daily
daily outings
outings to
to aa variety
variety of
of local
local stores
stores that
that specialize
specialize in
in groceries,
groceries, drugs
drugs
or
household
goods,
rather
than
shopping
once
a
week
at
Wal-Mart
or household goods, rather than shopping once a week at Wal-Mart
Scalability
Scalability Wal-Mart
Wal-Mart had
had 16
16 stores
stores
aa small
small presence
presence that
that contributed
contributed
to
its
decision
in
to
sell
out
to
a
Korean
discount
chain,
Shinsegae
to its decision in to sell out to a Korean discount chain, Shinsegae for
for $882
$882

KEY CHALLENGES
Walmarts attempt to deliver the same layout of stores
FACED
throughout the world was faced with numerous challenges
across countries

JAPAN

INDIA

CHINA

Mind-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 with
Allegations 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 ended
Mind-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
lower
Lack 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 price
Understanding of Consumer Behaviour Buying decisions not price
driven. Chinese customer equates Walmarts everyday low price policy
as being cheap and not very safe

KEY CHALLENGES
Walmarts international strategy have delivered mixed
results

FACED
however the organization has been learning from all the
mistakes

Country

Mode of
Entry

Strategy

Fate of the deal

Woolco 122 stores in 1994

Canada
391
stores

Acquisiti
on

Operated in areas that have

high brand recognition
Operated in areas requiring
minimum cultural adaptation

VERY SUCCESSFUL
Wiped out T.Eaton Company, a major
player

Emphasised on customer
service & store design
UK
584
retail
stores

Acquirin
g

Acquired ASDAs
operations(232 stores)1999
Cashing on the M&A
synergies

SUCCESSFUL.
Competitors-Tescos and Sainsburys

Entered in 1991 JV with CIFRA

Mexico
2226
stores

SUCCESSFUL.(50% of the market)

Joint
Venture

Local market knowledge

Competition by Carrefour
Overcame cultural barriers

KEY CHALLENGES
Walmarts international strategy have delivered mixed
results

FACED
however the organization has been learning from all the
mistakes

Country

Germany

Mode of
Entry

Acquirin
g

Strategy

What was the fate of the deal

Acquired largest players Wertkauf

and Interspar

FAILED.
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 models

Met EU guidelines for business

Started in 1995. Leveraged

experience of Mexican mkts
Brazil
557
stores

60-40 JV

Emphasised on Customer service

Developed economies of Scale

When entered in 1995

Already Carrefour,P de A, and
Sendas
So very tough competition(Pi was
eaten)

Utilised Discount tactics

Argentina
105
stores

Greenfie
ld
Operatio
n

Gained experience from Mexico &

Brazil

-Wrong anticipation of the

Argentine

Started in 1995. Economies of

Scale

-Competition by Carrefour

KEY CHALLENGES
Walmarts international strategy have delivered mixed
results

FACED
however the organization has been learning from all the
mistakes

Countr
y

S.Kore
a

Japan
433
stores

Mode of
Entry
Acquiring
majority
shares

Acquiring

Strategy

What was the fate of the deal

Entered in 1998 .

FAILED. no personalization, quality

first)

Acquiring majority shares in KOREA

MAKRO
-Entered in 2002 - stake in Seiyu
Ltd 6.1%
In 2005 acquired majority stake
-Competitors were Daiei,Sogo,Mycal
Started in 1996, Global sourcing
Merchandising & store designs
suiting the consumers

China
401
stores

Greenfiel
d
Operatio
ns

Sourced stocks from international

suppliers who manufacture in
China. Global sourcing office in
2002
Sourced from local manufacturers
who understand local tastes
Met government trade & business
laws

-Exited in 2006,like NOKIA,NESTLE

GOOGLE and CARREFOUR. (unfair
labor standards, wages)
-Continuing losses every year ( US
marketing model)

-Took much time

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

FUTURE OUTLOOK

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

for Walmart

Small Format Stores

Neighbourhood Markets and Express stores continue to register robust
sales
Plans to add 270-300 new stores in the US in fiscal 2015, recently
doubled number of stores
Wal-Mart has been losing customers to small convenience stores,
plans to win them back
Could utilize its large supercentres as cross docks to supplement the
inventory needs of small stores
May acquire an existing dollar chain, expansion potential up to 23,000
stores in US

E-commerce
Online business currently very small (3% of revenues)
Lost out on recent online retail boom due to immaterial size
Improving its mobile apps, and employing strategies such as shipfrom-store, pay-with-cash, scan-&-go, same-day-delivery and crowd
sourcing
Groceries make 50% of revenues, plans to grow online grocery sales
Not expected to be big in near term, key growth driver in long term

FUTURE OUTLOOK

Capital investment, especially in technology and e-commerce,

and expansion in international markets to drive sales in future

Capital Investment
Capital Investment between $11.8 to $12.8 billion expected in fiscal
2015, $200 million reduction from 2014 guidance
33-37 million net retail square feet to be added worldwide, more than
half in US including small format store openings
Net sales to increase by 3-5% (by $14-$16 billion)
Focus on operational expense discipline for Everyday-Low-Pricing
strategy
New investments in technology and e-commerce

International Business
Wal-Mart growth in the US slow due to struggling economy and
reduced government benefits, hence plans for further international
expansion
Expects to add 5 lakh jobs worldwide over next 5 years
Better global supply chain to bring more transportation logistics inhouse
Wal-Mart India plans to rollout a new ecommerce platform in late 2014
(around Diwali season)

References
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-germany
http://corporate.walmart.com/our-story/locations/mexico#/india
http://www.forbes.com/sites/greatspeculations/2014/04/02/challenges-wal-mart-faces-in-mexico-and-china/