Wal-Mart Essay Example for Free

Wal-Mart Essay Wal-Mart’s first foray outside the United States was in Mexico in 1991. Although Wal-Market executives had no previous foreign experience, they recognized that there were substantial income and cultural differences in Mexico. Accordingly, the American retail giant established a 50/50 join venture with Cifra SA, Mexico’s largest retailer. Despite havig a partner, the company made a number of blunders. Among them were poorly translated signs and a merchandise assortment that including inappropriate items such as ice skates,, leaf blowers, and riding lawn mowers. To make matters worse, wal-mart’s vaunted information system would automatically re-stock merchandise that local managers had tried to close out. The Mexican stores sold American-stlyle packedge meat and vegetables, which many shoppers preferred to purchase from small neighborhood stores. Also, most Mexican suppliers shipped directly to stores rather than to retailer warehouses and distribution centers. Thus, wal-mart lacked the control that translates into low prices in the United States. As Sam Dunn, Director of administration for Wal Mart de Mexico, commented, â€Å"The key to this market is distribution.  The retailer who solves that will dominate. † One sign of Wal-Mart’s long –term commitment to Mexico was its decision in mid-1997 to convert its joint venture shares into Cifra common stock and purchase enough additional shares to have a controlling stake in the company; the new enterprise is called Wal-Mart de Mexico S. A de C. V. (Walmex). Meanwhile, Wal-Mart turned its sights further south. In 1995, the company teamed up with Lojas Americanas SA and opened five stores in Brazil; operating without a partner in Argentina, Wal-Mart opened four stores. By 2000, the company was operating 12 Supercenters in Argentina. The stores offer a staggering variety, with a typical mix of approximately 50. 000 different products. In 1994, wal -mart entered Canada by acquiring the 122-store Woolco chain. The market appeared very attractive, because a high percentage of the Canadian population lives within 100 miles of the border. In addition to a high familiarity with Wal-Mart, Canadians also speak English and have a monetary system that is similar to the American one. The small size of existing Woolco stores resulted in disappointing sales; Wal-Mart responded by moving to new locations or expanding units. Much early sales growth came at the expense of existing department stores. Future growth may be hampered by the relatively small Canadian population and a trend towards cross border shopping to escape high value-added taxes. Also, management at Zeller? s, Wal-Mart? s main competitor in Canada, has responded by renovating stores and expanding beyond its traditional discount formula. South America The retailing environment in South America is very competitive, in part because Carrefour had arrived first. The French company inked distribution deals with manufactures of leading local brands; this is a key advantage, because well-known consumer packaged –goods brands such as Tide detergent are not widely accepted in South America, Moreover, Carrefour player hardball, undercutting Wal-Mart? s prices on key items such as cooking oil, rice, and shampoo. Some observer’s noted that Carrefour? s French heritage undoubtedly gave it the upper hand in presenting fresh fish, meat, and produce. Local retailers were strong as well; faced with rampant inflation in the late 1980s, they had invested in sophisticated cash registers and an inventory control system to help them make frequent-even daily-price adjustments. Despite these competitive challenges, Wal-Mart quickly adapted to the unfamiliar environment. It hired local managers, who in turn helped develop the right product assortment and merchandising approaches. For example, the Wal- Mart Supercenters in Argentina initially kept fresh seafood in glass display cases. However, South Americans typically want to examine prospective food purchases up close and even touch them; Wal-Mart made the appropriate changes. Wal-Mart quickly discovered that, in South America, the entire family shops together; it turned out that Wal-Mart? s aisles were not wide enough to accommodate such groups. Shoppers also were information deprived; Wal-Mart responded with clinics and in-stone demonstrations such as weekly makeovers in the cosmetics departments. Wal-Mart also had to adjust the approach of its Sam? s Club warehouse stones. Small business operators were expected to account for a significant amount of purchases at Sam? Club. However, even these buyers were unable to afford the bulk packs that are mainstays of Wal-Mart? s wholesale club format. Sam? s managers were forced to break down bulk quantities into smaller packs and even sell individual items. Europe Market entry in europe came in 1997 whit the purchase of 21 hypermarkets from Wertkauf GmbH. The following year Wal-Mart acquired 74 additional hypermarkets from Spar Handels AG. The early going was difficult; the two acquired companies were merged under a centralized headquarters, a major remodeling program affecting most of the stores was launched, and distribution was centralized. In addition, the company? s aggressive pricing resulted in a price war among Germany? s retailers who had already been through traumatic changes related to the reunification with East Germany in 1990. Wal-Mrt? s losses in Germany for 1999 were estimated to run as high as $200 million. However, with the transition largely in place, in 2000, company officials announced plans to open 50 more stores in Germany and to double its share of the hypermarket sector to 20 percent by 2003. In 1999, wal-Mart shocked the European retailing world by offering more than $10 billion for Britain? third largest supermarket chain, Asda Group PLC. It was the largest cash offer ever made for a UK business. Industry observers noted that Asda had spent years studying such fundamental elements of the Wal-Mart approach as everyday low pricing and an â€Å"anti-management â€Å" management culture that, for example, calls for having a greeter at the front of the store and stresses the importance of calling store personnel â€Å"colleagues†. As Asda Chairman Archie Norman said, â€Å"The culture and attitude of Wal-Mart is one that we aspired to†. ASIA Wal-Mart is also targeting Asia. With China due to join the world trade organization, wal-mart executives intend to capitalize on the economic expansion that will follow, wal-mart? s earliest foray into china, a joint venture launched in 1996 with Thailand’s Charoen Pokphand group, was terminated after 18 months due to management differences. Although Beijing restricts the operations of foreign retailers, wal-mart executives have made a point of building relationships with government officials. In addition, wal-mart exports approximately 4 billion worth of goods from china each year. Joe Hatfield, wal-mart? chief in Asia, spent a great deal of time checking in local shops to better understand the type of merchandise the typical Chinese consumer wants to buy. Through trial-and-error, wal-mart has learned what type of merchandise sells and what doesn? t. by the end of 2000, wal-mart had 10 stores in china. However, it still lags behind France’s Carrefour SA, which has opened more than 20 small-scale discount stores in 14 Chinese cities. Wherever wal-mart goes, competitors are forced to adjust to the new retail climate. In china, Dutch retailer Royal Ahold NV and Hong Kong supermarket chain park ? N shop have scaled back. In the face of wal-mart? voracious appetite for acquisitions, metro AG, Germany’s number one retailer, bought the Allfauf and kriegbaum hypermarket chains. New slogans that closely resemble wal-mart? s such as â€Å"ehrliche Niedrigpreise† (honestly low prices†) greet shoppers at metro? s real hypermarkets, and the stores open earlier in the day. Still, the size and scale of wal-mart? s operation give it tremendous buying power. For example, wal-mart buys 20 percent of all the Pampers brand disposable diapers produced by Procter gamble. In Mexico, Francisco Martinez, CFO of rival commercial Mexicana SA, noted, â€Å"I buy 20,000 plastic toys, and wal-mart buys 20 million.