Wal-Mart Takes On the World
Questions
1. In which countries has Wal-Mart done well? Can you identify any
common consumer, market, retailer, or entry strategy traits across
these countries that might account for Wal-Mart’s success?
Solution:
Wal-Mart has done well in the United States, Canada, Mexico, Puerto
Rico, Hong Kong, China, and England. The United States, Canada, Hong
Kong, and England are relatively affluent markets; Mexico is in-between
and China and Brazil lag behind Mexico in affluence. Thus, the first trait of
Wal-Mart’s success might be countries with healthy economies—at least
healthy enough that customers have some disposable income. Another
characteristic is that these markets may not be as demanding as the
Germans and Japanese. Perhaps they are more interested in lower price
(the British seem to be like the United States in this regard). Obviously
price would be important in Mexico and China, where incomes are lower.
Canada and the United States are considered predominantly Anglo
countries, so perhaps the success of Wal-Mart in these countries along
with the United Kingdom is not surprising as these consumers share a
similar heritage and even a common retailing approach. In all of these
countries, Wal-Mart has either had good partners (Hong Kong, Mexico,
and China) or bought successful store chains (Canada and Puerto Rico).
Thus, access to local market knowledge is an important factor in
successful entry. This is especially true of the United Kingdom, where
ASDA had already adopted and adapted the Wal-Mart philosophy for their
market. Where Wal-Mart has not used existing expertise (Germany), they
have not been successful.
2. In what countries has Wal-Mart done poorly? Can you identify any
common consumer market, retailer traits, or entry strategies across
these countries that might account for Wal-Mart’s lack of success?
Solution:
Germany, Japan, Brazil, and Argentina have not been good entries for
Wal-Mart. In Germany and Japan, consumers are more demanding and
more quality conscious. They seem to be less interested in the type of
goods that Wal-Mart sells. In both locations, real estate and market
conditions stymie Wal-Mart’s growth—whether this is unions or convoluted
distribution systems. In both Japan and Germany, Wal-Mart bought
existing chains with shabby stores and poor sales. Perhaps the lack of
success of their acquired firms accounts for why Wal-Mart management
did not utilize the expertise of those managers. Another possibility is that
Wal-Mart had had such good success in Mexico and Canada that it was
overconfident of its approach when it entered the German market. Since
then, it seems to be more willing to listen to local partners.
In Brazil and Argentina, there are many factors against success—
economic factors, real estate, and crowded cities demanding different
store formats. Also, Wal-Mart found it hard to compete with Carrefour,
which is the second largest discount chain in the world. Although
Carrefour has some stores in Mexico, Wal-Mart had not previously
entered a country where Carrefour was entrenched (it stays away from the
German market) and is a formidable foe. So, in these markets, Wal-Mart
encountered more competition than it had had anywhere else except in
the United States.
3. In your opinion, will Wal-Mart be successful in Japan? Why or why
not?
Solution:
Japan will probably be like Germany. Wal-Mart would have to improve the
quality of their assortment, possibly change store formats, and give
themselves a more upscale look. They would also have to change their
pricing strategy and promotional policies in order to cater to the Japanese
consumer. Japan is difficult to market in because of their protectiveness of
their markets and the closed nature of their distribution system (this is
changing slowly). One thing that Wal-Mart has going for them is that they
are American and the Japanese seem interested in American products.
Retailers, however, in Japan have learned the hard way that they must
adapt very, very carefully to the Japanese market. Given that Wal-Mart
still has not cracked the market in Germany, one has to wonder about
Wal-Mart’s ability to do this—especially as Wal-Mart. They might consider
that some countries are just not amenable to the standard Wal-Mart image
and approach. In addition, their slow approach to entry is giving Japanese
chains (who can be formidable competitors) time to change their
strategies to counter Wal-Mart.
4. Beyond India, what countries do you think Wal-Mart should consider
entering? What factors are important in making this decision? Be
prepared to defend the countries that you choose.
Solution:
Some possible choices are Australia, which has the same Anglo heritage
other Southeast Asian countries such as Thailand; other European
countries such as France, Italy, and Spain (a very likely market); the
Scandinavian countries; Holland; Belgium, etc. Most of the Middle Eastern
and African countries are not viable candidates at the time, with the
exception of South Africa (which is not particularly large or rich). Neither
are the South American countries, with the exception of Chile. Most of
them have economies and governments that are highly volatile and are in
the economic doldrums. If countries are not large or do not have a
significant population, Wal-Mart’s bottom line will be better enriched by
opening another store in the United States. It takes a lot of population to
justify the high costs of entry by Wal-Mart.