Part I describe Walmart expansion As the largest retail chain in the world, Walmart is one of the earliest companies that realize that waiting too long to get into foreign countries would give competitors a lead that would be difficult to close. However, globalization is always a double-edged sword. Despite that Walmart is the world’s largest company with a turnover of $312. 4 billion, Walmart’s results from globalization had been mixed. In 1991, the establishment of Sam’s Club near Mexico City represents takeoff of Walmart’s globalization.
In 1998, In 1998, Wal-Mart acquired a controlling interest in Mexico’s largest retailer, Cifra, which operated stores throughout the country, ranging from the largest chain of sit-down restaurants to a soft lines (apparel, home furnishings, fabric) department store. In 2000, Wal-Mart changed Cifra’s name to Wal-Mart de Mexico. Acquisition is a common way in that Walmart goes into other countries’ markets. In March 2004, Wal-Mart Brazil announced the acquisition of Bompreco, a retail chain with 118 units; In late 2005, Wal-Mart acquired the retail operations of · Sonae Brasil S.
A. (Sonae). In 1994, Wal-Mart purchased all 122 Canadian Woolco discount stores. Walmart entered South Korea in July 1998 by acquiring a majority stake in Makro. In the United Kingdom (UK), Wal-Mart had acquired ASDA, a profitable chain in 1999; In the spring of 2000, Walmart moved quickly to finalize its $10. 8 billion deal to acquire the 232-store supermarket chain, which was Walmart’s largest acquisition ever. Acquisition helps Walmart conquer some foreign countries quickly. Some successful examples are Walmart’s practices in Mexico, Brazil and United Kingdom.
At the end of 2005, Wai-Mart operated a total of 807 stores in Mexico, including 107 Super centers and 71-SAMS CLUBS. The company employed more than 112,000 associates across the country. as of December 2005, Wal-Mart Brazil operated 22 Wal-Mart Super- centers, 15 Sam’s Clubs, and 2 Todo Dias and 116 Balaio discount stores. Employing about 28,000 associates, Wal-Mart was the sixth-largest retailer in Brazil. In December 2005, Wal-Mart had 273_ASDA Super Centers, 21 ASDA! Wal-Mart Supercenters, 10 GEORGE stores, and 5 ASDA Living stores and 4 ASDA Small Town stores in the UK.
The company employed more than 150,000 people in the UK. Acquisition is not a master key to door of any country, some failures remind Walmart to reconsider its global strategy. In Canada, Walmart’s initial operation did not get off to the right start. Indeed, for the first three years (1995-97) Wal-Mart Canada showed major losses. Fortunately, things got improved subsequently. But the luck did not last to Korean market: In May 2006, Wal-Mart announced that it would sell all 16 of its South Korean stores to Shinsegae and exit from Korean market.
It is not fair to entirely account Walmart’s losses in Canadian and Korean markets for failure of acquisition strategy. Expansion globally is always a systematic and complicated process, in which a lot of factors need to considered, such as politics, diet habits, consuming psychology etc.. Looking the history of Walmart’s expansion through, Walmart was used to, or had to, apply joint venture under tight restrictions in foreign countries. And it is indeed hard to evaluate whether joint venture is an ideal approach or not. Wal-Mart had entered Indonesia, attracted by the world’s fourth most populous country.
The retailer faced numerous challenges in a country where retailers operated under tight restrictions?. Walmart teamed up with Lippo Group. However, the development of Walmart Indonesia was not smooth as expected. China is another country where Walmart had to partner with other to practice its expansion strategy. Walmart and other foreign retailers had to offer a 35 percent stake in each store to a Chinese joint venture partner and were restricted to a territory of approximately 40 cities each. After China joined WTO, Walmart obtained greater management authority.
Meanwhile, Walmart became actively involved in government relations and started talking directly with Chinese government officials at both local and national levels and through trade groups in both the United States and China. In December 2005, Walmart had 46 Supercenters, 3 Sam’s Clubs, and 2 Neighborhood Markets in China, together employing more than 27,000 associates. However, at the end of 2006, Walmart was laying the groundwork to become the biggest foreign chain in China with the $1 billion purchase of a major retailer-a Taiwanese-owned supermarket chain called Trust-Mart- which-would more than double its presence in China.
And in Wuhan, a Chinese city with a population of approximately 10 millions, there is only one Walmart supercenter. Compared with McDonald’s, it is safe to say that Walmart has a long way to go to complete its global expansion. Part II Top management orientation in Walmart: The orientation of top management refers to the degree of domination of the MNE headquarters over subsidiary management and HR practices as compared to the degree of localization of subsidiary practices. In my opinion, Walmart’s senior management orientation is Geocentrism.
The most significant characteristic of Walmart is its perpetuation: Walmart hires best employers all over the world, and is willing to train them to take key positions everywhere in the world, which typically matches the requirement of Geocentrism. In addition, a word “localization” is usually connected with “globalization”. As a multinational Enterprise, Walmart’s global strategy determines that Walmart has to localize itself from Decision Making to Evaluation, from Rewards to Punishment. On the other side, Wal-Mart’s approach to competing in overseas markets had evolved over time.
But three main ingredients never change: Brand names (Wal-Mart and· Sam’s Club), ‘Every Day Low Price’ (EDLP) strategy, and ethical standards. In order to keep its core value, Walmart need to figure out the balance between localization and standardization. The only flaw, I think, is Walmart information flow. There is no doubt that Walmart’s subsidiaries have smooth channel to communicate with headquarter. However, based on my research, there is not so many practices to strengthen communication among subsidiaries. In any case, we cannot deny that Walmart is Geocentrism.
Value & Culture: As the largest retail company, Walmart must focus on customer and quality. Actually, that’s exactly what they do. The customer is No. 1 in the Walmart culture, and they are putting tremendous effort into understanding customers and serving them in new ways. Its Global Customer Insights group is developing world-class analytics to identify customer trends and support merchandising and marketing decision-making within the business. At the same time, the importance of getting even closer to our customers is always emphasized throughout their ranks.
Business Model & Behaviors: To satisfy customers’ one-stop shopping experience, Walmart regards a broader assortment as the approach to attract customers. In 2012, Walmart added back more than 10,000 products across hundreds of merchandise categories. Walmart selects suppliers with high standards, assuring that it is the first to be offered new innovative products. Meanwhile, Walmart continue to fine-tune its offerings. All kinds of national brands, private brands and opening price point products can be seen in Walmart, to adapt different tastes.
As we all acknowledged, “Every Day Low Price(EDLP)” is one of the most important ingredients of Walmart. EDLP is the result of Walmart’s everyday low cost (EDLC) philosophy. Walmart lowers costs by reducing expenses, increasing productivity and leveraging technology to improve efficiency throughout our supply chain and our operations. And as the largest retail company, occupying an important role in many countries’ retail markets, Walmart are able to negotiate with suppliers to obtain lower prices.
For example, in Mexico, Since Walmart had more purchasing power than the next 17 largest Latin American retailers combined, it was able to negotiate price discounts from its suppliers and generate economies of scale. Walmart attempts to develop a variety of channels – core supercenters, smaller formats such as Neighborhood Market and Walmart Express, and eCommerce. The rise of Internet has Walmart pay attention to online business. Site to Store and Pick Up Today, which provide shopping alternative to Walmart customers, promote its online business grow.
KPC: Compliance & Integrity: Walmart is implementing a stronger global compliance organization. The job of every Walmart associate must begin with integrity. Ethics and compliance are non-negotiable. Walmart aligns its global compliance, ethics, investigations, and legal functions under one organization. In addition, full compliance with all laws and regulations is premise that they operate in any markets. Walmart has improved its compliance programs significantly and taken appropriate action for any instance of non-compliance.
We’re pleased with the progress we’ve made through training, new processes and procedures and recruiting exceptionally strong talent to fill new roles. Acceptance of Diversity: When people mention Walmart today, it is not a certain national company any more. “Globalization” has stamped deep brands on Walmart. With its expansion, both employees and customers have different skin colors, languages, tastes and consume concepts. In this situation, acceptance of diversity plays more critical role in Walmart’s development.
Part III a. China’s Twelve pillars First pillar: Institutions. The quality of institutions has a strong bearing on competitiveness and growth. China’s institution ranked in the middle of all surveyed countries (50th ). Second pillar: Infrastructure. Well-developed infrastructure reduces the effect of distance between regions, integrating the national market and connecting it at low cost to markets in other countries and regions. China ranked on 48th with a score of 4,46. Third pillar: Macroeconomic environment.
The stability of the macroeconomic environment is important for business and, therefore, is important for the overall competitiveness of a country. China’s macroeconomic situation remains very favorable, 11th of 144 countries. Fourth pillar: Health and primary education. A healthy workforce is vital to a country’s competitiveness and productivity. Workers who are? ill cannot function to their potential and will be less productive. China receives relatively high marks in health and basic education (35th) and enrollment figures for higher education are also on the rise, Fifth pillar: Higher education and training .
Quality higher education and training is particularly crucial for economies that want to move up the value chain beyond simple production processes and products. China places on 62th with a score of 4. 32 Sixth pillar: Goods market efficiency. Countries with efficient goods markets are well positioned to produce the right mix of products and services given their particular supply-and-demand conditions, as well as to ensure that these goods can? be most effectively traded in the economy.
Chinese market efficiency places 59th(down 14). In this ? illar, insufficient domestic and foreign competition is? of particular concern, as the various barriers to entry appear to be more prevalent and more important than? in previous years. Seventh pillar: Labor market efficiency. The efficiency and flexibility of the labor market are critical for ensuring that workers are allocated to their most effective use in the economy and provided with incentives to give their best effort in their jobs. China has the greatest number of labor in the world. However, due to deficiency of efficiency and flexibility, China only ranks on 41th.
Eighth pillar: Financial market development. The recent economic crisis has highlighted the central role of a sound and well-functioning financial sector? for economic activities. Ninth pillar: Technological readiness. The technological readiness pillar measures the agility with which an economy adopts existing technologies to enhance the productivity of its industries, with specific emphasis on its capacity to fully leverage information and communication technologies (ICT) in daily activities and production processes for increased efficiency and enabling innovation for competitiveness.
For China, technological readiness takes a place of 88th(down 11), which has negative influence on Chinese competitives. Tenth pillar: Market size . The size of the market affects productivity since large markets allow firms to exploit economies of scale. In the era of globalization, international markets can to a certain extent substitute for domestic markets, especially for small countries. China has the largest population in the world. With the increase of consume level, China is the second market in the world.
Eleventh pillar: Business sophistication. Business sophistication concerns two elements that are intricately linked: the quality of a country’s overall business networks and the quality of individual firms’ operations and strategies. With a score of 4. 25 (45th), there is huge space for China’s firms to improve their operation and strategies. Twelfth pillar: Innovation. The final pillar of competitiveness focuses on technological innovation. Compared with last pillar, China shows better performance on innovation – placing 33th with a score of 3. 85.