Questions for the Wal-Mart Case
Questions for the Wal-Mart Case
This section highlights all those successful strategies which Wal-Mart could pursue in future as these strategic decisions have proved to be fruitful for the company which are discussed as follows:
Joint Venture in Mexico
When entering and operating in any known or unknown marketplaces, Wal-Mart may consider entering the new location through joint venture with a local or domestic firm. This strategy was already pursued in Mexico where Wal-Mart acquired market leadership and launched WALMEX. Instead of employing robotic model of supply chain, as done in the United States, Wal-Mart may consider entering into distribution contracts with local suppliers.
In addition to this, Wal-Mart may carry Everyday Low Price (EDLP) model in every marketplace to combat price wars and acquire leadership position . While entering and operating in a completely new market, Wal-Mart should design a pricing strategy to address the needs of consumers belonging to both the low and high income groups. In other words, Wal-Mart should serve the target consumers regardless of their income and purchasing power.
At the same time, senior management of Wal-Mart should refrain from paying bribes for acquisition of any fixed asset from the local government for business operations. This suggestion should be kept in mind every time Wal-Mart enters and operates in a new market. Its corporate image was already damaged in 2012 when such a concern came to the front in Mexico where senior officials were alleged of paying briberies.
Acquisition of Local Businesses
Wal-Mart may also consider entering and operating in new marketplaces by acquiring majority or 100% stake in local businesses. This was already done successfully in Canadian market where Wal-Mart utilized its operational competence to take over local stores and keep them profitable. As far as human resources strategy is concerned, if the acquired local business has a profitable history, Wal-Mart could retain the local workforce, including the senior management. However, poor performing employees should be laid off immediately whereas as low performing personnel should be exposed to extensive and adequate customized training sessions. This should be done to improve employees’ skills while increasing their morale and productivity at work for long-term employee retention.
Wal-Mart should design its marketing and selling activities depending upon the local tastes and culture while it enters and operates in a new market or business arena. The product offerings should also be customized depending upon the preferences, buying behavior and purchasing power of local people. The most prominent example in this regard is that of Brazilian market where Wal-Mart operated discount stores to address or satisfy needs of the middle class families.
Operations in China
The local government also required foreign investors to enter into a joint venture or partnership agreement with local businesses. Therefore, Wal-Mart should consider local regulations and examine the business culture prevailing in any given market. Wal-Mart, while entering and operating in any market, should locate its stores in densely populated areas. This will stimulate regular customer visits and frequent purchases for Wal-Mart.
Other Strategies to Consider
Wal-Mart can also enter new markets and operate successfully if it acquires local business while form business alliance between its different divisions. The merger of Wal-Mart Mexico and Wal-Mart Central America are quite notable in this regard where a single powerful division was formed. Wal-Mart can also offer credit services to valued customers who make purchases frequently, as done by Wal-Mart in Chile.
What Strategies Wal-Mart should avoid while entering and operating in new Markets?
The very first lesson was learned by Wal-Mart’s management in Argentina. As the company entered this market without any joint venture, acquisition or partnership with any local business, it struggled in Argentina to make ends meet. Carrefour, Wal-Mart’s major competitor in Argentina, outperformed the company in many ways. Due to price wars and boycott from suppliers, Wal-Mart was unable to gain success in Argentina.
Different foreign business rivals or competitors of Wal-Mart also failed miserably when they enter Chilean market without forming any business alliance with any of the local partners. These competitors (such as J.C. Penney, Carrefour and Home Depot etc) did not even acquired majority stake into local businesses to make themselves with domestic business environment and formulate strategies accordingly. Therefore, Wal-Mart must avoid this mistake if it wishes to enter and operate successfully in any given marketplace.
Another strategy which Wal-Mart should refrain from executing is offering high cost products while abandoning low cost or low priced items sales. This lesson was already learned in the Chinese market where Wal-Mart targeted upper middle class and sold only those items that appealed to this segment. Wal-Mart temporarily discontinued offering Everyday Low Price (EDLP) model. This strategy did not prove to be successful for Wal-Mart as it abandoned its traditional model of business and financial success. At the same time, while entering and operating in any new market, Wal-Mart should avoid designating complete authority to store managers for looking after all operations. Wal-Mart should employ “segregation of duties” model to minimize human errors, mistakes and fraudulent activities. Centralization of business operations is quite notable in this regard .
Wal-Mart entered South Korea without analyzing local consumer preferences which must be avoided in the future to enter and operate in new marketplaces effectively. This is because Wal-Mart would be unable to sight and exploit new business opportunities . Local consumer base of South Korea preferred luxurious items instead of low priced products. Therefore, Wal-Mart should avoid entering and operating in those markets where Everyday Low Price (EDLP) model is not welcome. Similarly, Wal-Mart should avoid the mistake to offer products on its own. For instance, consumers in South Korea preferred food and beverage items whereas Wal-Mart offered electronic, dry and clothing products. Because of these wrong moves, Wal-Mart witnessed depressing financial performance over an eight year period in South Korea.
In Japanese market, Wal-Mart made a mistake by entering and operating this arena. This was so because Wal-Mart did not study domestic dynamics. In Japan, low priced items were associated with low quality due to local mindset. Wal-Mart, in future, should avoid making such a mistake and analyze what value propositions appeal to a specific target market. Marketplaces where market leaders were already struggling to make ends meet, Wal-Mart should avoid entering and operating in such markets. Markets where local regulations are strict and labor unions are actively involved in business environment, Wal-Mart should enter and operate in such markets very carefully, as happened in Germany.
In a Nut Shell
Wal-Mart should enter into business alliance through joint ventures and partnerships with local businesses while entering and operating in different marketplaces . This was successfully witnessed in Mexico, Central America and South Korea etc. however, it should avoid making the mistake to ignore local consumers’ preferences and buying behavior. Not only should the demographics be examined carefully but the local regulations and business arena of attractive marketplace must be well taken care of. Wal-Mart should locate stores in densely populated areas to stimulate frequent customer visits but should avoid ignoring their needs and preferences.
References
BDC. (2013, October). Emerging consumer trends facing Canadian entrepreneurs. Retrieved March 07, 2016, from Business Development Bank of Canada: https://www.bdc.ca/Resources%20Manager/study_2013/consumer_trends_BDC_report.pdf?ref=shorturl-consumertrends
Handley, L. (2013, June 26). Asda: creating brand personality. Retrieved March 07, 2016, from Marketing Week: https://www.marketingweek.com/2013/06/26/asda-creating-brand-personality/
KSU. (2015, August 19). Elements of Internal Control. Retrieved March 07, 2016, from Kansas State University: https://www.k-state.edu/internalaudit/internal-controls/
PwC. (2012, November). Navigating Joint Ventures and Business Alliances. Retrieved March 07, 2016, from PricewaterhouseCoopers (PwC): https://www.pwc.com/us/en/deals/publications/assets/pwc-navigating-joint-ventures-and-business-alliances.pdf
