Walmart’s Global Strategies

Walmart’s Global Strategies

Introduction

Wal-Mart Incorporation is a global company that operates various grocery stores, discount department stores, and hypermarkets. Wal-Mart became a global firm after it established a Sam’s Club near the city of Mexico. To remain competitive, the company is focused on expanding in new markets where it provides quality brands based on the needs of local consumers. One of the key issues that are covered in this paper is the global strategic expansion that Wal-Mart adopts during its expansion in the European Union. During its operations, the company is faced with various cultural problems that impact its profitability and image as a responsible corporate firm, for example, bribery. In addition, the paper will discuss the challenges and opportunities that Wal-Mart faces in the local and global markets. The company also adopts specific expansion strategies, for instance, merger and acquisition, as discussed in this paper.

Wal-Mart’s Global Strategy Expansion

Wal-Mart’s strategy to go global is based on the merger and acquisition of other companies located in developing and developed markets. Despite the challenges that Wal-Mart faces, it has expanded its overall operations, including the establishment of 6,300 outlets and more than 900,000 associates in more than 27 countries outside the US.  In its effort to enter the European market in 1998, Wal-Mart acquired Wertkauf Hypermarkets. This acquisition strategy can be used by the company in the future to effectively penetrate other countries in Europe. In 1999, Wal-Mart also acquired ASDA Group, the third-largest food outlet in Britain (Chris, 2017). This entailed offering $10.8 billion to the ASDA Company shareholders. This cash deal was important since it toppled the rival bid from the Kingfisher PLC, and it placed Wal-Mart in a position that would enhance its expansion in the European market.

The merger with ASDA became a center for excellence for Wal-Mart international grocery sales since the head of global marketing for the company is situated at the former head office in Leeds. As an example of how globalization has positively impacted on Wal-Mart, the Wall Street Journal reported that ASDA Bordeaux, a brand owned by Wal-Mart, is the best-selling wine in Japan. Another example of an acquisition strategy by Wal-Mart as it focuses global market was the purchasing of a 6% stake in the Seiyu Chain in 2002. As the company gradually increased its stake, Seiyu was made a fully owned subsidiary in 2008.

Global strategy expansion by Wal-Mart, including the acquisition of other supermarkets and chain stores, is a good technique. This is because the company is able to utilize the marketing strategies adopted by companies in Europe and other markets to effectively reach its new customers (Irma, Allison, and Sarah, 2018). In addition, the company will utilize the resources of other firms to reduce the cost of production and increase profitability.

Wal-Mart’s Cultural Problems

The operations of Wal-Mart are negatively affected by the cultural problems that the company faces. The firm faced some serious cultural differences. As it tried to resolve the cultural differences, the company made one error after another. For instance, at one time, the company managers created well-intentioned cultural gaffes, for example, offering bag groceries for its customers. Nonetheless, this was contrary to Germans culture, where customers prefer to use their bags when purchasing their groceries.

The global business arena is plagued by cultural distinctions that negatively impact on international companies. In its attempt to globalize and enter all regions in Europe, Wal-Mart will need to understand the culture of the local consumers. This includes ensuring that its marketing executives comprehend languages used in the European Union, including German, French, Croatian, Dutch, Bulgarian, English, Greek, Irish, and Italian.

The international division of Wal-Mart is mandated to conduct research in the targeted markets. In this responsibility, the division has been successful. Nonetheless, it has failed to create consumer preferences that are based on the culture in some regions, for example, most of the Asian countries. In the Asian market, Wal-Mart faced cultural problems while entering China. For instance, since the local customers knew small-scale traders with noisy and packed stores, and the prices were low, they purchased their products from them instead of buying from Wal-Mart. This made Wal-Mart offer well-spaced and clean outlets, but the local customers felt uncomfortable.

Opportunities and Challenges

The increasing global demand for food products and apparel provides an opportunity for Wal-Mart. In 2016, the market capitalization of Wal-Mart stood at $200 billion. With this financial strength, the company can use the resources to expand further in Mexico, Brazil, Japan, and South Africa. In addition, Wal-Mart sources most of its products from Chinese suppliers due to low costs (Nathaniel, 2019).  This can be used as an opportunity by the company to reduce the prices of the brands that are highly demanded by the customers, thus increasing the total sales of the company. The company can also undertake extensive market research in the European Union market to establish the unmet needs of its consumers. In this way, Wal-Mart will provide brands that are in line with the needs of European-based consumers.

As a global company, Wal-Mart is faced with various challenges related to its human resources management and marketing strategies. For example, in 2006, the company experienced a public relations campaign from the All-China Federation of Trade Union when it refused to allow its employees in China to join a union (Ingram, Yue and Rao, 2010). The Chinese government played a crucial role during this campaign since it made it mandatory for foreign-funded companies in the whole country to establish unions for their workers.

The corruption scandals are major challenges that Wal-Mart faces. The company was accused by the Securities and Exchange Commission that it allowed third parties in India, Mexico, Brazil, and China to pay foreign officials of the government without ensuring the Foreign Corrupt Practices Act was followed. Even though the company indicated that it has cooperated with the US government during the making of payments, it has accepted to pay $138 million to resolve criminal charges initiated by the Department of Justice and another $144 million to cater for the charges initiated by SEC.

Wal-Mart Entry Strategy

Market penetration is one of the major strategies adopted by Wal-Mart. The company aims at meeting the market demands of its current market and then goes global. Current markets refer to markets where the organization has existing activities. While implementing this strategy, Wal-Mart ensures that it sells more services and goods to current customers by offering discounts and other kinds of offers. For instance, since the company is a cost leader in its industry, Wal-Mart provides a wholesale package of various products at discounted prices. The firm has also enhanced its online presence to improve the accessibility of its brands by customers.

Market development is another strategy that Wal-Mart adopts. This strategy entails the provision of Wal-Mart’s brands to new markets. For instance, using this intensive growth technique, Wal-Mart can open new outlets in the European Union market. The company can also improve its presence in new markets by investing in online activities to improve retail transactions. In addition, Wal-Mart uses product development with the objective of expanding its retail business. This strategy entails providing new products in the market where the company operates. For product development to be effective, the company should focus on marketing strategies in addition to investing more in research and development (Constantinides, 2006). Wal-Mart values diversification that entails the production of totally news brands in new markets. For example, in 2010, the company acquired Vudu Inc. and entered the video streaming sector. This growth strategy is used by Wal-Mart while it searches for firms that it can integrate into its existing operations.

Conclusion

Wal-Mart Incorporation is a global firm operating various grocery stores, discount department stores, and hypermarkets. In its global expansion, the company mostly depends on merger and acquisition. For example, in 1998, Wal-Mart acquired Wertkauf Hypermarkets. This acquisition strategy can be used by the company in the future to effectively penetrate other countries in Europe. In 1999, Wal-Mart also acquired ASDA Group. Wal-Mart is faced with some serious cultural differences, and as it tries to resolve the cultural differences, it makes one error after another. Even though the company is faced with challenges, for instance, the corruption scandals, it can use the resources to expand further in Mexico, Brazil, Japan, and in South Africa. In addition, Wal-Mart should continue sourcing most of its products from Chinese suppliers to ensure it offers affordable prices to its customers.

References

Chris, M. (2017).Discount Grocery Retail on the Rise: Five Strategies for Traditional Brick & Mortar. Available from https://www.forbes.com/sites/chrismorley/2017/08/11/discount-grocery-retail-on-the-rise-five-strategies-for-traditional-brick-mortar/#5a5b1f717548

Constantinides, E. (2006). The Marketing Mix Revisited: Towards the 21st Century Marketing, Journal of Marketing Management, Vol. 22, 2006, p. 41.

Ingram, P., Yue, L, and Rao, H. (2010).Trouble in Store: Probes, Protests, and Store Openings by Wal‐Mart, 1998–2007. American Journal of Sociology. University of Chicago Press.116 (1): 3–12.

Irma, H., Allison, W, and Sarah, B. (2018). Walmart’s international expansion: successes and miscalculations, Journal of Business Strategy, Vol. 39 Issue: 2, pp.22-29.

Nathaniel, S. (2019). Walmart SWOT Analysis & Recommendations. Available from http://panmore.com/walmart-swot-analysis-recommendations-case-study

Wal-Mart Incorporation.https://www.walmart.com/