Wal-Mart, the largest retailer in the world, was founded in 1962 by an American Sam Walton in Arkansas State in the US. It did not start international expansion until 1991 when it opened Sam’s club in Mexico City. Since then it has expanded its international business to 13 countries in Latin America, Europe, Asia and Canada. In Latin America and Asia, it started from scratch while Europe and Canada entered the market through acquisitions. This paper summarizes Wal-Mart’s efforts in global expansion in regard to efforts made at globalization, challenges encountered in the process of globalization, and mistakes and successes made in the efforts (Deresky, 2008).
Efforts in globalization
Wal-Mart’s global expansion started in 1991 after the death of its founder, Sam Walton. His successors realized that if they waited any longer to expand to other countries, they would lose the window of opportunity to other retailers and create a gap that would be hard to close. It, therefore, needed to move fast. They elected a president for international business, Bob Martin, who moved with speed to a neighboring country, Mexico, and later to Brazil and Argentina. After operating in the three countries for three years, the company had learned enough and entered the Canadian market by acquiring a Canadian retailer Woolco, with 122 stores. In Canada it faced stiff competition from established and large stores such as Eaton’s and Zellers, but, eventually emerged as the largest store by the end of 2005 with 272 stores and 6 Sam’s clubs. From here, Wal-Mart moved to Europe targeting the UK and Germany markets where it operated with various degrees of success but, eventually exited the German market in 2006 terming it as a difficult market (Ball, Geringer, MuCullock, McNett & Minor, 2008).
Wal-Mart entered the Asian market in 1996 when it opened in the Chinese market. It experienced problems immediately and adjusted to become the biggest foreign retailer by 2006 with 46 supercenters, 3 Sam’s clubs, and 2 neighborhood markets. This was followed in 1998 by the South Korean market, which had just been liberalized to allow for foreign retailers. The company bought Makro stores and opening up new stores in the capital city of Seoul and Taejon. Problems soon cropped up of poor choice in location and tastes and as was the custom with the company, they quickly learned and adapted to local tastes. This saw them grow and expand to Japan in 2002, where they started by acquiring a 6.1 % share of Seiyu, a large supermarket chain. The company is looking at the prospects in India and Russia, countries that will present a different set of challenges but as is the motto with Wal-Mart, they will learn from these experiences (Ball et al., 2008 & Deresky, 2008).
Wal-Mart Challenges in globalization
It has encountered technical constraints in Logistics and transportation in different countries. High levels of efficiency were hampered by lack of modernized suppliers in China. Technological conveniences such as bar coding were not standardized and retailers had to recode themselves or distribute labels to the suppliers. These are added costs to the process and an obstacle to efficiency characteristic of Wal-Mart. In Germany, the company faced the same inadequate technological constraints as they tried to introduce to suppliers their advanced information systems and inventory management (Ball et al., 2008).
Integration of the Wal-Mart culture in the USA to its international business was challenging. It had to take along the cheers, Sam Walton quotations and pictures, the focus on the customers, EDLP to international subsidiaries (Deresky, 2008). The practice of selecting goods from stores and having clerks bag them with no bargaining did not auger well with the German shoppers who are used to haggling their purchases. Also, bans on romantic involvement between supervisors and employees of Wal-Mart were challenged by their associates in Germany leading to lawsuits (Ball et al., 2008).
Another challenge for Wal-Mart in its globalization Endeavour was bureaucracy and red-tapism in some of the countries it has subsidiaries. In China, graft by government officials and long delays in the approval process proved cumbersome. They had to appease the government officials by sponsoring visits to Wal-Marts headquarters in the US, supporting local charities among other things (Ball et al., 2008).
Wal-Mart faced stiff competition from other big retailers on its entry to the European and Canadian markets. These were strong and well entrenched in the markets such that it was difficult for Wal-Mart to utilize its internal growth as a competitive advantage. In the UK the Tesco group was a major rival and in Canada, Eaton’s, Zellers and Bays (Upbin, 2004).
Mistakes made in globalization efforts
In china, it entered in 1994 and immediately encountered problems due to poor selection of merchandise and location. They for example stocked paper towels which the majority of Chinese did not know what they were or thought were some luxury items. Another brand was with matching kitchen items such as curtains, a towel which they learned people made them at home instead and the extension ladders stocked in American stores. In South Korea poor choice of merchandise and location that is outside the city center. In Mexico, they had stocked tennis balls that they did not realize can’t bounce well in high attitudes and huge lawn mowers stocked in US markets that locals just looked with curiosity (Ball et al., 2008).
In Germany, it forced its system of acquisition which involves fast acquisitions of existing stores but failed. It acquired two large companies in two cities in a year which brought challenges in management due to inadequate infrastructure in Europe. It had to bring American Expatriates to most management positions which were lacking in German language skills. The supplier also resisted the information systems and management inventories that the company used (Deresky, 2008).
Also, in Germany failure to sign an industry-wide collective bargaining agreement with the labor union created problems for it in the country. Another mistake the company made in this country was to implement its policy on bans on romantic involvement between supervisors and employees of Wal-Mart. The bans were challenged by their associates in Germany leading to lawsuits that are a distraction and an added cost. The company eventually dropped them (Deresky, 2008).
In Mexico designing and construction of extensive parking lot which they realized only tired the shoppers as they crossed to get to the buses. The widely used means of transport was buses rather than personal cars as they had thought (Upbin, 2004).
Things Wal-Mart has right in international expansion
Its tendency to learn from mistakes made. This is helped by the popular 7.30 am Friday meetings where postmortems of both failed and successful operations are done by operations staff from 36 regions every week. The staff flies to the company’s headquarters in Bentonville, Ark every week for hours-long meetings where experience and ideas are shared (Upbin, 2004).
Decentralization of decision-making is another successful idea Wal-Mart has implemented in its expansion mission. Country presidents of Wal-Mart were given the authority to make and implement decisions so as to avoid delay by the chief financial officer John Menzer. To this effect, they handle their own merchandising, sourcing and real estate (Deresky, 2008).
High ethical standards are maintained everywhere Wal-Mart opens its doors by treating all their customers well regardless of the country they are in the same (Deresky, 2008).
Wal-Mart adapts to local tastes, culture and products to suit local customers. In Mexico, their stores stock cheese, meat, and produce that fits the local diet. Promotions also target the local consumer (Deresky, 2008). The same is adopted in its Chinese market where it markets mass products from Chinese manufacturers and farmers. It has brought products from little-known parts of the country such as hams, oats and mushrooms from remote and rural provinces (Ball et al., 2008).
Emphasizing customer service and broader merchandise mix in competitive countries such as Brazil. Here, Wal-Mart had stiff competitors in French retailer Carrefour and other Brazilian retailers who outdid Wal-Mart in Prices because of strong relationships with local suppliers (Ball et al., 2008).
Wal-Mart has expanded globally to become the largest company in the world. It has extended its subsidiaries to 13 countries in the world in Latin America, Asia, Europe, and Canada with various degrees of success. In its efforts, it has encountered many challenges and conquered some to be a world leader in a retail business. In this journey, it has done things that have resulted in success and made mistakes that have cost the company but, which it always learns from. The company has plans to expand further and is looking into future prospects for expansion to other countries such as India and Russia.
Ball, D. A.,Geringer, M. K., MuCullock, W. H., McNett, J. M. & Minor, M. S. International Business. McGraw-Hill Irwin, 2008.
Deresky, H. International management: managing across borders and cultures. Prentice Hall, 2008.
Upbin, B. Wall-to-Wall Wal-Mart. Forbes 2000, 2004.