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Wal-Mart –Global Expansion

Wal-Mart –Global Expansion. Case Study. Introduction. Established in Arkansas by Sam Walton in 1962. In the last four decades has become the largest retailer in the world (Sales>$330 bn, 7000 stores). Competitive advantage – efficient merchandising, buying power and good HR policies.

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Wal-Mart –Global Expansion

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  1. Wal-Mart –Global Expansion Case Study

  2. Introduction • Established in Arkansas by Sam Walton in 1962. • In the last four decades has become the largest retailer in the world (Sales>$330 bn, 7000 stores). • Competitive advantage – efficient merchandising, buying power and good HR policies. • Additionally – good information and distributions systems.

  3. Intro (Contd.) • 1990 – limited growth in US, there decided to expand globally. • 1991 – First store in Mexico through JV. • 1991-1995 – Learning curve in foreign environment. • 1995 – strategic alliance with a local trucking company in Mexico to improve distribution systems. Also catering to local tastes.

  4. Intro (Contd.) • Subsequently expanded to 13 countries. • 2006: >2000 stores outside US. $62 bn worth of revenue came from overseas stores. • Strategy – acquired existing local retailers and transformed them using Wal-Mart systems.

  5. Q1: How does expanding internationally benefit Walmart? • EOS due to global buying power. • Reduced supplier power, high bargaining power. • Benefitted from local ideas (two level stores, wine retail area). • Waterfall strategy ensured lessons learnt in one location were applied in subsequent stores. • Pre-empted other competitors entry into overseas location. • The growth in US was stagnating and therefore the overseas expansion ensured sustainability.

  6. Q2: What are the risks Wal-Mart faces when entering other retail markets and how can this be mitigated? • Strategic and culture fit different in foreign markets. Mitigation – adaptation to local tastes. • Competition from established hyper-mart chain such as Carrefour (mitigation - have better EOS, good product fit and improved logistics). • Unforeseen tarrifs or other protectionist measures, barriers to entry. Mitigation – due diligence prior to entry and waterfall strategy. • Price war. Late mover disadvantage. (Mitigation – local sourcing and house brands).

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