Walmart’s Foreign Expansion Essay
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Walmart has a merchandising strategy of everyday low prices and highly efficient operations, logistics, and information systems. This helps keep Walmart at a minimum inventory level and avoids overstocking and understocking. With major success in the United States, in the 90s it began to expand internationally, Mexico being the first. At first, Mexico did not do so well, since the consumers live a different life and have different buying patterns. Fresh produce was of the upmost importance, and that is something that Walmart would have never known if they had not hired people that were familiar with the country to manage their stores.
It also believed that Mexico would be introduced to a different shopping culture, with the help of the American culture that Walmart will be bringing in.
Now it is Walmarts most successful foreign venture. With the success in Mexico, it decided to take their business in developed counties like Germany and South Korea. Here, Walmart did not have much success here.
Local rivalries knew exactly how to cater to their customers, which made it difficult for Walmart to compete with already established local shopping markets. In addition, the everyday low price strategy that Walmart was all about did not seem to attract these developed countries like they did in the United States and Mexico. They appreciated higher quality merchandise and liked paying for what they got. They did not have a discount hunting mindset like American and Mexican consumers had. In the end, after many years, it decided to pull out of Germany and South Korea. They decided to seek other developed countries that would find their everyday low pricing strategy appealing. Thus, they expanded in China, slowly but surely.
China consumers were discovered to be bargain hunters but also noticed that they had to change a bit to fit the Chinese culture. They are big on having their food fresh, to the point that their meat has to be cut right in front of them. This differentiation must be catered to in order for Walmart to be successful in China. And they did so, by having meat uncovered and having fish tanks where consumers where able to choose their own fish themselves. Once they did this, their sales soared. Another factor in China is that they require embracing unions, which is something that Walmart had resisted in the past in the United States. It then decided to allow unions in its Chinese stores, which made it even more successful. This gave them the confidence to keep opening stores up in China.
Case Discussion Questions 1. Do you think Walmart could translate its merchandising strategy wholesale to another country and succeed? If not, why not? I do not think that Walmart would be successful internationally if it keeps the same merchandising strategy because all countries are different. Even though its everyday low prices caters to all people, some people simply do not have the access to get to such a warehouse. And also people do not have the same buying patterns in the United States like in Mexico. They need to hire people that are familiar to the area and know the target market in order for them to succeed internationally.
2. Why do you think Walmart was successful in Mexico? By hiring people that know Mexico’s culture and know how businesses are run there, they were able to successfully entice their Mexican consumers. Once their consumers were hooked on Walmart, they incorporated the American culture as well and it was highly approved. Consumers loved the low prices that Walmart provided, making it the most successful foreign venture.
3. Why do you think Walmart failed in South Korea and Germany? What are the differences between these countries and Mexico? The everyday low pricing that attracts consumers in Mexico simply was not appealing to Germany and South Korea. Already established local shopping markets were successful enough all in their own. They excelled at catering to their customers and knew customers preferences. Walmart was unable to handle their competition and they strategy was never going to work there.
4. What must Walmart do to succeed in China? Is it in track? Walmart needs to have the China culture on their mind in order for them to be successful there. In China, the consumers are very different, they are big on having their food fresh, which is why they want to see their food cut and chosen right in front of them. In any other way it would be insulting. Walmart discovered this and had the Chinese consumers mindset by doing various tactics that made their sales soar, they are definitely on track.
5. To what extent can a company such as Walmart change the culture of the nation where it is doing business? I believe that it is nice for a different culture to be introduced in their home culture because learning and having different cultures come together is good. But completely bringing a different culture and forgetting about the home culture is too much. They are used to something already they cannot be bombarded with a different culture that they are not knowledgable of, they need to be introduced to it first before that can even be successful.