Case 7

Walmarts Expansion in Africa:

A New Exploration Strategy
The (M)inh-Thi, (A)lexandru, (R)aphael, (K)atharina,
(S)ilje

Overview
Introduction
The Growth of Walmart
International Expansion
The Secret of Success
Why is Africa so attractive?

Massmarts acquisition
Growth strategy
Expected strategic advantage
Challenges
The Year 2011

The Growth of Walmart

Founded in 1962
By Sam Walton in Brentonville, Arkansas
Went public in 1972
International expansion in the 90s
Anticyclical measures
Believe in revenue
Todays situation

original Walton's Five and Dime, now the Wal-Mart

Visitor's Center

International Expansion
Mexico (1991)
Canada (1994)
Argentina (1995)
Brazil (1995)
China (1996)
India (2007)
South Africa (2010)
OUT: Germany, South Korea and Japan

The Secret of Success

Customer centric

approach
EDLP
Offering extended

services
Adaption to local cultures

3 magic principles
Respect the individual
Service for customers
Strive for excellence

Why is Africa so
attracitve?
Emerging market
Expected growth of 5 %
Important market

infrastructure

Entering Africa

Joint Venture with Massmart

Using existing knowledge and

Growth Strategies of
Massmart in the African
Continent
Founded in 1990
Second largest distributor of consumer goods:

374 stores in 12 countries in sub-Saharan Africa

Focus on high volume, low margin, low-cost

distribution of branded consumer goods

Strategy: continual improvement of business model

and investment

Business model

A three-year look ahead

Focus on:
Leadership
Supply

Chain

Private

Brands

Financial
New

services

format stores

Sustainability

Walmarts Acquisition of Massmart

The deal
Initial

offer: $4 billion for a 100% stake

Final offer: $2,32 billion for a 51% stake

The problem
Massmart lay-off closely linked to the
merger
Walmarts use of its influence to boost imports
The solution
No

staff dismissal for two years

Honouring the existing labour agreements

Expected Strategic
Advantages
Make use of high GDP growth in Africa
Rise of the middle class, thus increasing

demand
Benefit from Massmarts developed network

Challenges Walmart will have to

face in the African continent
One-size fits-all approach
Cultural & infrastructural barriers
Data research of customer behaviour
Poor legal systems & weak securities
Resistance from local groups and Government of South

Africa

What happened to Walmarts

operations after taking a 51% share
in Massmart in 2011?
2012 - South African government requested

the deal to

be re-examined

Re-hire workers
13 million dollars fund

What happened to Walmarts

operations after taking a 51% share
in Massmart in 2011?
Main reason to deal create

new jobs
Use their 51% stake to expand
Expanding may be slowed
346 stores in
RSA

down

Discussion
Why do you think Walmart is not present in

Austria?
What could they have done differently to
succeed in China or Germany?
Which CSR actions could Walmart take in
Africa in order to imbed itself in the
community?
Do you have personal experience with
International
Management
Managing Across Borders and Cultures Helen Deresky
Walmart
??
http://www.reuters.com/article/2012/03/09/us-massmart-walmart-idUSBRE8280KH20120309
http://www.forbes.com/sites/greatspeculations/2011/06/10/wal-mart-takes-on-africa-with-massmart/
http://www.bloomberg.com/news/2011-05-31/wal-mart-s-2-4-billion-bid-for-south-africa-massmart-approvedwith-terms.html
http://www.africastrictlybusiness.com/growing-middle-class
http://www.bloomberg.com/news/2013-04-15/wal-mart-brand-favored-in-massmart-s-africa-growth-drive.html
http://www.comptrib.co.za/assets/Uploads/Wal-Mart--Massmart-Transcripts/Wal-Mart-order-31.05.2011.pdf

Thank you for your

attention!