Wal-Mart’s Global Strategies and Potential Expansion

Wal-Mart’s Global Strategies and Potential Expansion

The global business environment continues to experience many changes. The political dynamics in economics and the new technological inventions have continued to influence how businesses operate in the rapid growth of the need for globalization of its operations (Brenman & Lundsten, 2009). However, the complexity and unpredictability of these globalization influences have continued to challenge the development of many business organizations. However, due to globalization and the need for business to venture into new markets with an adaptation of various entry market strategies with regards to international markets with consideration of the cultural, behavioral, and organizational differences of the new markets before considering to venture (Luthans & Doh, 2012). One considerable company that utilized the global strategies in venturing in new markets is Walmart.

Walmart, managed to become an international company in 1991 when it opened a Sam’s Club near Mexico City (Luthans & Doh, 2012)through its abilities to withstand the global challenges and adopting suitable global strategies to its global operations. The company, however, managed to grow erratically in its global ventures beyond the domestic market, which it had dominated and grown considerably. The initial entry consideration of Walmart included several region options of entering through Europe, Asia, or other countries in the western regions and the Latin American market. However, through consideration of the cultural and behavioral characteristics different from the domestic market. Walmart considered entering the global market through the Latin American countries of Mexico (1991), Brazil (1994), Argentina(1995), and Canada (Luthans & Doh,2012) since they had similar market characteristics as those enjoyed by the company in the United States.

Contrary to the western countries, which had aspects of a mature retail industry, making it less attractive to Walmart. It was hard for Walmart, a new entry to take a market share from the existing and established companies. Such as the Carrefour in France and the Metro A.G. in Germany(Brennan & Lundsten, 2009), however, considering that the company lacked the necessary financial, organizational, and managerial resources the company took a global strategy of internationalization. Through greenfield strategy with aggressive market entry strategies to establish themselves among the Latin American market.

The aggressive strategy of entering the market through the internationalization of greenfield strategy, Walmart was able to establish itself as a global entity and a strong brand (Lasserre, 2017). Through the utilization of the various aspects of economic opportunities, Walmart entered the specific markets through a joint venture, Acquisition, offshore sourcing strategy, and building its store. Through these particular entry methods, the company was able to mitigate and utilize the opportunities exhibited by the cultural differences of each country it ventured. The joint venture which is entered through Mexico helped the company to gain the right knowledge of the new market and helped it work with the local authorities very well. In contrast, Acquisition helped it avoid the time consumed in establishing and building up their stores, whereas there was the presence of stores. However, they had not significantly taped their opportunities and resources in the economy (MS, 2016). The immense strategies enhanced Walmart establish itself even with the lack of necessary financial, organizational, and managerial resources through utilizing a low price model to the customers.

Through the expansion in the Latin market and utilization of the specific market strategies, Walmart has successfully gained market share and has continuously experienced growth in the merchandise and food retailing markets. Its expansion made its escape and avoided the risk of experiencing stagnation from the limited opportunities offered by the domestic market. They were making it possible to enjoy the economies of scale and the enormous market provided by the population of the Latin Market and the presence of untapped marketplace, which made it possible for them to safeguard their core competency of selling everyday life gods at a low price (Deresky, 2000). The strategies also enabled the company to avoid competition from the local companies. They helped them to explore and learn the market before considering become an entity of their own and expand without collaboration. Therefore finding the center of its achievement of low priced products and service the strategy is very suiting for a retail company such as Walmart. They were enabling the customer to feel the cultural value by dealing through local dealers (MS, 2016) since most are reluctant to try out exotic products from foreign countries on a daily business.

However, expansion in new markets is not always as easy as it seems. The cultural differences and lack of knowledge of the latest market has its challenges and opportunities as well to the new market entry company. Walmart, as a new entry to the Latin market and especially the Mexican market, faced various challenges but was offered multiple opportunities likewise by the market prospects of the country. The expansion of the company in the market was facilitated by the chance of having the barriers to cross border investment falling in the 1990s (Luthans & Doh, 2012). In anticipation of a free trade agreement between the U.S. A and Mexico, Walmart ventured into the market through the realization of low-cost operations of services and eased of doing business. However, the lack of knowledge about the Mexican consumer taste and preference made it hard for the company to venture on its own. Due to the lack of leverage with local suppliers, but the knowledge of market practices well from domestic, which was not well established in Mexico, was a concern for the company is using a joint venture (Brennan & Lundsten, 2009). Through the investment, the company was able to mitigate the various challenges in cultural differences and the law and regulations that protected the local retailers in Mexico that would become a limitation to their expansion.

Consequently, the significant population offered Walmart an opportunity and the reason factor for venturing in Mexico due to the availability of a market that was not fully exploited, and the retailers present were not well established compared to the Walmart (MS, 2016). The domination of the domestic market provided Walmart with adequate knowledge regarding the execution of the business. It offered services that were well received by the customers through the integration of a well-established technological base in its advertising strategies in the marketing of its products and services. The cultural differences significantly impacted changes and how Walmart used to operate. Domestically the company enjoyed a culture of freedom and independence where the company was self-reliant, and competition in the market encouraged productivity and innovation, which prompted the freedom of operation of business to the efficiency with a considerate significance being devoted to time aspects with less direction (Luthans & Doh, 2012). However, the culture of the Latin countries offered little competition with the need to have great managerial resources for the operations. The workforce needs constant monitoring and supervision contrary to the national culture of self-drive and also equality among the population since the gender disparities were huge in the country.

Consequently, due to the business complexities, there is a constant need to expand the operations. Globalization continues to change in dynamics and change business operations. Therefore considering these aspects, the potential future expansion of the company is more prominent and avoidable. Since what works in a specific country may not work in another state while expanding the services to other countries, the company may utilize the product strategy (Luthans & Doh, 2012). Through the product strategy, the company has already established itself in different markets, and the rest of the countries faces high competition, such as the U.K. market. There is a need to have a high end product with a leading edge in its services and operation from the locally established companies. However, before ultimately entering the market, the company must carry out a test of the market by introducing its product to the market and use differentiating services and strategies to capture the customers in the market. It is essential nevertheless to carry out a market study and survey to learn out the market dynamics of the intended expansion to avoid the venture form backfiring and evaluate the significance of the return of investment to warrant the market venture.

Conversely, the market is defined by globalization, and many investments are made in foreign countries due to the exploitation of these multinational companies’ resources in their domestic market. Also, the availability of technology enables exchanges to study different cultures and continues to change consumer preferences and tastes. Markets must consider their abilities and employ a strategy that suits them well to acquire a significant market share in the global market. Walmart, through their acknowledgment of their limitations, they opted for a logical venturing. They chose first entering into a market with a considerable share of customers but with less competition. Enabled their growth and can now compete with big companies through their strategies of providing low price products and services and the enormous customer loyalty from its brand name and utilization of improved technology.

References

Brennan, D., & Lundsten, L. (2009). An Assessment of Wal-Mart’s Global Expansion Strategy in the Light of its Domestic Strategy. European Retail Research, 23(1), 125-151. doi: 10.1007/978-3-8349-8203-2_7

Deresky, H. (2000). International management: Managing across borders and cultures. Pearson Education, India.

Lasserre, P. (2017). Global strategic management. Macmillan International Higher Education.

Luthans, F., & Doh, J. P. (2012). International Management: Culture, strategy, and behavior. New York: McGraw-Hill.

M.S., S. (2016). Why Are Manufacturers Less Powerful than Retailers in Trade Circles? A Case Study of Wal-Mart Retailing Business. Journal Of Global Economics, 04(01). doi: 10.4172/2375-4389.1000173