Walmart's African Expansion

Contributed by: 1. Dommeti Gaayathri

DM 17215
2. Nadesakumar
DM 17224
3. Priya RJ

4. Sai Vishnu M N
5. Surekha R
6. Tara Vinyasa

DM 17244
DM 17253
DM 17256

Spread

Walmart & Africa

Africa contained 6 of the 10
fastest growing economies from
2001 and 2010.

About Walmart

Walmart just more than the worlds

largest retailer was founded by Mr. Sam
Walton in 1962.

The lowest prices, anytime, anywhere

Largest public corporation by revenue in

the world with working population of
around 2.1 million with sales of $400
billion

Walmart Approach
Strategies, business & structure aligned for cost
based model.
Grocery, entertainment, home ware, apparel and
healthcare products with 100000 different products
As largest retailer, Walmart had high bargaining
power and was able to demand low price from
suppliers.
High purchasing power suppliers to use
walmarts own inventory management system.
Large Buyer Demand quick changes to orders
Low fixed costs by maintaining no-frills environment
Low wages by preventing unionization
No rely on salesperson

Challenges at home
Criticism for low wages and relentless
pressure on suppliers
The Walmart Effect local shopes
forced to close because of big competition
Issues with rising labour costs
Difficulty to acquire huge area in Urban
areas due to high costs
Intense competition from Target, Tesco,
Safeway and online retailers like amazon
By 2011, Sales had declined for 8
consecutive quaters

International Expansion
Started international expansion in early 1990s.
JV with Mexican retailer Cifro and renamed as
Walmart de Mexico
Replicates the operational practices of Walmart
in US under Walmarts Management
Expanded into Canada, North America, China,
Europe, Germany.
Exited German Market due to the inability to
obtain a competitive advantage
Further expanded to Japan, South America and
next was looking forward to Africa

South Africa
Fastest growing economy with boasting
modern infrastructure, well-defined
finance and communication sectors.
History: Colonization, racial segregation,
Apartheid system and its abolition
In 2011, 80% blacks and 9% white/colored
GDP per capita $11,400 in 2011
Half of the population below poverty line
and one-quarter of the population
unemployed

South Africa
Free education 75% had education
higher than primary school & 8%
uneducated
17.8% of the adult population affected by
HIV
Ubuntu harmony, continuity, reciprocity
and symbiosis
Relatively stable government
parliamentary democracy

Business in South Africa

No restriction to foreign investment
Investors Handbook
South African Competition Act determines whether a
merger could be justified based on public interest

Impact on industry/geographical area/employment

Competitive ability of disadvantaged people
South Africas ability to compete internationally

Management

philosophy Ubuntu openness,

loyalty, mutual respect and empathy
Unionization & wages set by collective
bargaining agreements

South African
Consumers
Retail sales $132 billion in 2011
Highly price conscious customers and very
low loyalty
Consumer goods industry dominated by
Shoprite, Pick n Pay, Massmart, Spar and
Metcash -80% of sales
Large informal retail sector small scale
entrepreneurs, tuck shops, roadside shops
Non-agricultural consumer goods were
mostly imported

Consumer goods industry

Largest grocer with huge customer base
Shoprite
It had 1000 outlets in 17 countries & strong
market position because of price
leadership, reputation
Pick n Pay food retailer, clothing, general
merchandise predominantly in SA
Massmart discount firm which sold
groceries to electronics.
Fierce rivalry and customers were not loyal

Acquisition & Decision

Walmart made an offer to Massmart for
$16.5 billion rand
The mother of all boycotts Cosatu
threatened a strike if Walmart entered SA.
Merger approved with conditions

2 year ban on layoff of existing employees

3 year term of bargaining agreement
$100 million rand investment to improve SA

suppliers
Massmart-Walmart supplier Development fund

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