Section 1
Wal-Mart Stores, Inc. is world-known multinational corporation, which possesses chains of large-scale department stores, where the majority of goods can be bought at discounted prices. The success of the business model, developed by Wal-Mart, is determined by wide range of factors, which form the combination, which allows Wal-Mart to have competitive advantage in the rivalry with such competitors as Kmart and Target in the USA and CostCo in Canada.
The first and most important factor of corporation’s success is the fact that Wal-Mart makes best possible use of price-based differentiation. Selling products, which are used by great numbers of consumers both at the level of North America and international level, creates great competitive advantage due to high utility and price sensitivity, demonstrated by Wlamrt’s consumers. As it was formulated by B.Ortega (1999), what customers should think about Wal-Mart is that they should think of low prices and guaranteed satisfaction (59).
The second crucial cornerstone of Wal-Mart success story is creating a special culture, which allows building, maintaining and continuously contributing to the enhancement of customers’ loyalty
. According to D.Soderquist (2005), one of Wal-mart principles is that to create a great company, you must create a culture where everyone shares the same values, purposes and expectations of success (25). Wal-Mart culture rests on three basic pillars, namely treating everyone with respect and dignity, being in business in order to satisfy customers and striving to excellence in everything the company does.
Active sharing this culture in inner and outer communication determines, firstly, employees being interested in achieving excellence and, secondly, consumers’ loyalty.
In 2006, willing to become more appealing to the needs of consumers, Wal-Mart refused from using its one-size-fits-all approach, having decided to concentrate its marketing strategy on six major demographic groups at the U.S. market, including African Americans and Hispanics (U.S. Business, 2006)
Some researchers suggest that three major sources of cost advantage for Wal-Mart are low corporate overheads, efficient supply chain and low labour costs (The Economist, 2004).
Entering South African market with an intention to further expand to African market is one of most large-scale and challenging initiatives, ever though out by Wal-Mart leaders. Unusual nature of such a decision calls forth the need to analyze it with the help of OLI framework, which represents one of most powerful tools to research into foreign direct investments against the background of three major potential sources of advantage, which can be associated with company’s becoming multinational.
They are ownership, location and internationalization. Ownership advantages are most often connected with the fact that the firm may have some advantages, which allow it to overcome the costs, which go along with, firstly, entering the market of a foreign country and, secondly, operating within this market. Possessing higher-than-average level of assets is the key factor, which can allow the multinational enterprise to continue growing beyond existing scope of its operation. The examples of these assets are product development, firm-specific managerial structures and even successful marketing strategies.
Nevertheless, it is still necessary to mention that vertical and horizontal motives can reinforce each other. Two variables, which are used to assess successfulness of location, are concentration and proximity.
When getting a benefit, associated with proximity (getting away from the need to operate the business too far away from locations, where the majority of firms producing plants and retail stores are located), the firm loses in the regard of concentration as it is not profitable to concentrate all retail stores close to each other.
Optimal scale of internationalization is dependent on the balance between the transaction costs of using the market and organizational costs. Here the risk of imitating firm’s strategies and techniques is also to be taken into account.
Concluding theoretical exploration of OLI we can suggest that from the point of view of this theory, any organization, which is willing to get engaged in foreign direct investment, should be special, which means that it should possess some dimension of superiority and be confident in the fact that it will be able to compensate the lack of proximity with specifically developed control systems. After having formulated this conclusion, let us discuss Wal-Mart’s entering the market of South Africa and thereafter African markets in broader terms with regard to OLI.
As we have already mentioned before, Wal-Mart is currently possessing lots of both tangible and intangible assets. Among most valuable assets it is necessary to mention existing supply chains, which are based on long-term relationships with suppliers, who enable Wal-Mart to sell extremely wide range of products at lower prices; image of the brand; market segmentation and targeting strategies etc. These assets allow Wal-Mart to enjoy competitive advantage and emerge to new markets. Location seems to be most questionable issue with regard to entering the market in Africa due to the fact that entering markets in Africa means opening totally new continent for Wal-Mart’s activities.
Here we would like to specifically underline difficulties, which are associated with ensuring maintaining low prices for wide range of goods in the light of high costs of supplying products to Africa. In case there are no ways to be found to ensure low transportation prices, it will be impossible to ensure low prices for products.
Vast majority of consumers in Africa are even more sensitive to utility and prices as Europeans, therefore, inability of Wal-Mart to maintain reasonable prices, despite high transportation costs will lead to low sales rates and significant losses.
On the other hand, it is not worth underestimating importance of Wal-Mart’s culture-related benefits and low prices of operating business in Africa.
Considering Wal-Mart’s significant experience in the field of expanding to new markets, its entering African market seems to be reasonable in terms of internationalization dimension.
Concluding we would like to state that WalMart still needs to wisely consider its chances to maintain low prices despite costs, associated with entering the market and operating within it, so that profitability of the African venture can be guaranteed.
Section 2
Subsection A
Among all the countries in the world Brazil is most often recognized the top one in respect of deforestation rates. Despite the fact that it may seem that the issue of deforestation in Brazil is just of local or national importance, its effects testify to world-scale importance of Brazilian deforestation problem. The first and most important concern with regard to deforestation is its exerting significant influence on global climatic change as rainforests, located in Brazil, are of great importance for efficient carbon dioxide exchange processes. They play key role in absorbing ever increasing carbon dioxide emissions, resulting from the activities of industry. Furthermore, Brazilian rainforest is one of most biologically diverse regions in the world with several million of plants and species living near Amazon. Deforestation calls forth disappearance of species. Systemic nature of the environment in rainforests in Brazil causes the fact that disappearance of one species determines disappearance of another, thus contributing to one of world’s oldest ecological systems being continuously destroyed.
Moreover, removal of forests undoubtedly exerts high-scale negative influence on economic and social life of indigenous peoples, who live in Brazilian rainforests, as forests provide them with food, shelter and fuel. Gold mining activities in Brazil, which are estimated to be one of key threats to preservation of rainforests, are potential source of further contamination and strengthening the environment-related effects, highlighted above.
Analysis of global effects of deforestation in Brazil allows us to state that this issue is of global importance and thus should be jointly solved by international community’s members. Deforestation should be prevented by mutual efforts.
Subsection B
Therefore, I think that it is better to continue existing UN surveillance and prevention projects in Brazil, launched in terms of the UN Forum on Forests activities.
According to the information, provided by the UN Department of Economic and Social Affairs, in May 2013 the UN started the new imitative, called the Global Forest Watch 2.0., aiming at achieving quality forests management, forming reliable up-to-date and easily accessible data on the state of forests and impact of deforestation (UN Department of Economic and Social Affairs, 2013). Effective measurement and getting reliable data on deforestation issue is considered to be one of important prerequisites for successful prevention of deforestation both at national and international levels. Nevertheless, it seems that launching a project, aimed only on measuring and monitoring deforestation is not enough for the UN action with regard to deforestation in Amazon region prevention in the light of climate change- and biodiversity-related concerns.
While there are international treaties on climate change, which contain binding provisions for states, who have signed and ratified these treaties, there is still a lack of emphasis on concrete issue of deforestation, which is concerned not only with climate change as the global problem and one of central elements of the U.N. environment policies, but preserving biodiversity of world’s oldest ecosystem and protecting the rights of indigenous people.
As deforestation has complex effects, it should to be singled out into specific area of the UN activities, so that binding international treaties can be elaborated on, so that related countries are obliged to work out and stick to programs, ensuring effective combating deforestation.
According to the research by Climate policy initiative (2013), most important prevention measures to be taken to combat deforestation are connected with conservation and creating protected areas (21-22). It is still necessary to effectively manage the balance between the programs, aimed at achieving economic growth and prosperity of the region, and protecting the environment. In this regard it is necessary to mention that either in terms of combating deforestation-related treaty or separate international document a question of partially compensating costs, associated with combating deforestation, should be solved as tropical countries usually belong to developing ones and will undoubtedly suffer from the need to balance economy development and environment protection programs.
Common framework for combating deforestation and dealing with related issues, which is to be developed by the UN for countries, which are touched upon by the issue under study, can help facilitate transnational cooperation and sharing experiences in terms of combating deforestation. Last, but not least the document should concentrate on are privileges, which the countries might get for their successful performance and related penalties. While the most effective privilege is to be concerned with compensating costs for launching prevention programs, while usual penalties, stemming from membership in international organization can be applied.
References
Associated Press. (2006). Wal-Mart to drop one-size-fits-all approach. US Business, 9 Jul.2006
Climate Policy Initiative.(2013). DETERring Deforestation in the Brazilian Amazon: Environmental Monitoring and Law Enforcement. Rio de Janeiro: CPI
Ortega, B. (1999). In Sam We Trust: The Untold Story of Sam Walton and how Wal-Mart is Devouring the World. London: Kogan Page Publishers
Soderquist, D. (2005). The Wal-Mart Way: the inside story of successes of world’s largest company. Nashville: Thomas Nelson, Inc.
UN Department of Economic and Social Affairs. (2013). New UN-backed monitoring tool aims to help combat deforestation. Retrieved 24 November 2013 from http://www.un.org/en/development/desa/news/forest/new-un-backed-monitoring-tool-aims-to-help-combat-deforestation.html
Wal-Mart. How big can it grow? (2004).The Economist, Apr.15th, 2004.
