Wal-Mart Globalization Strategy

Wal-Mart Globalization Strategy

Introduction

Wal-Mart, as presented in the case study, is a Retail Company that initially started in the United States. It became an international company by the establishment of Sam’s Club near Mexico City in the year 1991. This paper presents the early global expansion and the cultural problems that Wal-Mart faced in its growth. It will also analyze the opportunities and challenges presented to it by the Russian market and the best strategy to use to enter the Russian market. The ideas will be presented logically to better present the real picture of a multinational corporation, Wal-Mart, in this case.

Wal-Mart Early Global Expansion Strategy

In the 1990s, Wal-Mart International Company employed its initial expansion strategy, which was a low price model. The company believed that the policy would be as successful as it was in the local market, the United States. Since the adoption of the strategy, Wal-Mart has been successful in several foreign markets. However, owing to the complexity of the different international markets, the impact of the strategy was not universal. An example of the markets that exhibited different results from the expected ones in Mexico, China, and the United Kingdom (Van Mansvelt, 2017). The company’s strategy in the above-indicated markets did not do very well owing to the opposition from the much established local retail firms.

Elsewhere in Germany, the company’s products did not meet the local’s tastes and preferences. Therefore, despite selling affordable products, the strategy did not meet the expectations of the company is expanding to Germany’s market fully. In addition to the above, the company’s joint venture in japan was faced with a severe challenge identified to relate to buying habits to which the company did not respond to effectively. Generally, the strategy did work in most of the foreign markets where the company sported potential opportunities. However, that did not stop the company from making advancements to more markets. The struggle continued, and up to date, the company is one of the multinational corporations that are leading in the market share 6,300 stores and approximately 900,000 associates in 27 countries outside the continental U.S.

About if the strategy was right or not depends on the organizational policy concerning the receptivity of the target customers. In my own opinion, it is a good strategy for Wal-Mart more especially a time like then when it was making severe advancements into new markets. The reason is that a seeming difficulty in convincing customers may want to try out the goods for their being affordable (Rice, 2016). Eventually, if the products are quality and affordable, Wal-Mart could smoothly sail through in getting new markets.

Wal-Mart’s Cultural Problems

Wal-Mart, like any other multinational corporation, grew to experience some issues, some of which were cultural. The few examples of cultural problems encountered by Wal-Mart include consumers being turned off by the attendants bagging the customers’ groceries. This act was ordered by American managers that were initially installed by the company. The action was against the cultural norms since the Germans were used to bagging their groceries and loved it that way. Another challenge was that German customers who were used to quick service with no more unnecessary relational mannerisms got put off by the clerks offering broad smiles as a way of encouraging them to come again. More to the above examples is that Germany was known to be a discounting nation. Germany, as indicated by a phrase by Mark Josefson, was the home of discounters (Kaelberer, 2017). He further argued that Wal-Mart was not competing on price as it did ion its local market, and therefore it was not easy for it to compete favorably in the foreign market that used discounts.

Opportunities and Challenges in the Russian market

Since its independence, Russia has been a communist country. The idea of communism is one that does not support the growth of businesses and ore, especially when it comes to multinational corporations. The nationals of a country that uphold communism will mostly favor their corporations even when the foreign company offers better terms for the acquisition of goods. In such a situation, it is always close to impossible for an international market to come into the market and grow while competing favorably with the local firms. In Russia, though not wholly whipped out, communism is slowly getting eradicated as capitalism takes over. It, therefore, offers an excellent opportunity for Wal-Mart international companies to sell in Russia and grow its ambitions there. On the same note, a change in attitudes and tastes and preferences amongst the Russians allows Wal-Mart to bargain for its offer and eventually win a proportion of the entire market if it manages to convince some of the consumers of its products (Hunt, 2015). An example concerning the above argument is the growth of taste for malls and supermarket goods as consumers slowly overcome the suspicion on freshness and quality of the products.

While presenting still on opportunities, it is good to recall the famous phrase amongst Russian employees in the past, “they pretend to pay us, we pretend to work.” It was a phrase common among the employees, and it was usually associated with delays in clearance. It is said that a form could take almost a month to move from one department to another (Chetty, 2015). Right now, the situation has improved with the automation of systems. It is thus an opportunity for Wal-Mart and any other multinational company to venture into the Russian market.

Another opportunity at the moment for Wal-Mart in Russia is that there is high-risk potential but good returns. The reason is that the market currently revolutionizing and great opportunities are yet to be exploited, with the current firms realizing great potential in less wealthy provinces of Russia. More realistically regarding the above thought is the idea that shortly entry into the market will be very costly since it will involve the purchase of mature entities. Therefore, it will be prudent enough for Wal-Mart to get into the market at the moment than later.

Russia does not only present opportunities for multinational corporations, but it also presents challenges for the same. One of the problems is that there is a lot of fear that politically connected competitors can quickly seize intellectual property despite the form of the competition has changed to be based on prices and quality of products but not politically controlled. If the thought is proven right and Wal-Mart decides to enter the market, then it risks losing the intellectual property to well-connected dome corporations, and this seriously offers a turn off for Wal-Mart Corporation (Andreff, 2016).

Multinationals Wal-Mart being one of them, is bound to experience brain-draining of the top Russian employees, more especially in math and computer science. The problem started and has persistent due to a lack of local start-ups coupled with a lot of opportunities abroad. If the above situation persists in Russia, Wal-Mart is more likely to experience a lot of competition from firms outside the country for professionals who are most reliable in running its affairs in Russia. If such happens, then Wal-Mart will stand to spend more on training new professionals who can take over responsibilities, and this has a lasting impact on the company’s profitability.

Another factor that directly offers Wal-Mart a challenge is a time-consuming bureaucracy. Resultantly, the world’s number one retailer firm has been outmaneuvered by the European multinational corporations. Auchan AUCH.UL and Metro MEOG.DE have taken advantage of the Russian market and, within no time, have taken the third and the fourth biggest food retailers in the $300 billion-plus market. Therefore, it is undoubtedly a fact that Wal-Mart cannot just walk into the market and command a sizeable market share that can sustain its goals in the Russian market (Samoilenko, 2016).

Wal-Mart Entry Strategy for the Russian market

Owing to the opportunities offered by the Russian market and the corresponding challenges, I propose that Wal-Mart uses a joint venture strategy. A joint venture strategy is simply a partnership between a domestic and a foreign firm. The two parties invest money, share ownership, and share control of the firm. Typically, the international partner provides the expertise necessary for running a business in the new market, business connections, and networks necessary to give the firm company and any other in-country elements of marketing like real-estate. It is also the responsibility of the foreign partner to make sure that the firm acquires the necessary regulatory compliance requirements (Lang, 2015). Owing to their inflexibility, joint ventures require serious commitment from the firms so that it can succeed in its operations. The advantageous part of this strategy is that it may afford tax advantages and more, especially in countries where foreign corporations are taxed more than the local firms. It may also take advantage of being able to establish businesses in several countries, more especially in situations where companies partner to do business in a world region.

Conclusion

Wal-Mart sets an excellent example for multinational corporations that are struggling in attaining globalization. It started from a quite humble beginning and employed quite an unusual strategy in achieving globalization. It faced severe challenges ranging from financial, organizational, and also cultural, but in all that, it managed, and today it stands out as a leading retailing firm in the world.

References

Andreff, W. (2016). Outward foreign direct investment from BRIC countries: Comparing strategies of Brazilian, Russian, Indian, and Chinese multinational companies.

Chetty, S., Ojala, A., & Leppäaho, T. (2015). Effectuation and foreign market entry of entrepreneurial firms. European Journal of Marketing.

Hunt, I., Watts, A., & Bryant, S. K. (2018). Walmart’s international expansion: successes and miscalculations. Journal of Business Strategy.

Kaelberer, M. (2017). Wal-mart goes to Germany: Culture, institutions, and the limits of globalization. German Politics and Society, 35(1), 1-18.

Lang, S., & Klein, L. (2015). Walmart’s sustainability initiative. The Routledge International Handbook of the Crimes of the Powerful, 197.

Rice, M. D., Ostrander, A., & Tiwari, C. (2016). Decoding the development strategy of a major retailer: Wal-Mart’s expansion in the United States. The Professional Geographer, 68(4), 640-649.

Samoilenko, A. (2016). E-commerce in Russia: Challenges and Opportunities: Russian e-commerce market for local and foreign entrepreneurs.

Van Mansvelt, J. D., & Temirbekova, S. K. (2017). Challenges and opportunities. BIOLOGY AGRICULTURAL, 478.