Contents

Executive Summary............................................................................2
Mode of Entry....................................................................................4
Wal-Marts Globalizations Strategy - !!ortunities and "#reats in
$#inese Mar%et Entry.........................................................................&
Wal-Marts Strategy Execution 'rocess.............................................(
Ma)or *ssues +aced by t#e +irm........................................................(
+ive +orces Model of $om!etition........................................................,
SW" -.-/0S*S.................................................................................1
Wal-Mart 'ES" analysis 2ased on $#inese Mar%et................................3
'olitical...........................................................................................3
Economic........................................................................................3
Social............................................................................................45
"ec#nology....................................................................................45
$onclusion.......................................................................................44
6eference........................................................................................42
1
Executive Summary
Wal-Mart is an American company, it has been a dominating force in the United States Retail
market and more specifically, it operates and sells itself as a discount chain. Sam Walton the
founder of this corporation had a vision, or it ould be more precise to say he had a different
approach toards obtaining his goals. Sam Walton chose to sell products at a loer price,
thus reducing his profit margin, hoever, he decided to rely on a high volume of sales in
order to reach profits. Wal-Mart began its businesses about si!ty years ago" it began ith a
single store in Arkansas, USA. #he Wal-Mart $orporation presently ons over %&&& store
around the orld, ith '(&& outlets in the United States alone. #he corporation operates )&&
stores in the Americas *not counting the USA+, '%& in stores in ,urope, and --& stores in the
Asian continent.
Wal-Mart has four parts to their corporate strategy
.ominance in the Retail Market
,!pansion in the U.S. and /nternational Markets
$reation of 0ositive 1rand and $ompany Recognition
1ranch 2ut into 3e Sectors of Retail
Wal-Mart4s public affairs strategy must ork to make implementation of these strategy goals
happen. /ts public affairs strategy enables the company to move into other sectors of the
marketplace and broaden into foreign countries. #he public affairs strategy also entails
gaining access to politicians ho can help Wal-Mart achieve its goals. Wal-Mart has a very
live 0olitical Active Action $ommittee that provides almost a 5uarter million dollars yearly.
Wal-Mart has achieved (6& 1illion .ollars in sales in (&&%, making the company the largest
corporation in the orld considering sales, and not to mention being the biggest retail
organi7ation in the orld. Wal-Mart faces rigid competition in both its domestic and
international markets" hoever, Wal-Mart has a huge lead over its competitors. Wal-Mart4s
sales ere more than double that of the blended sales of its to closest competitors. #his
pro8ect e!plains an analysis about the marketing management issues faced by Wal-Mart and
its global strategies in order to e!pand the business all over the orld. #here are many
significant factors to be considered to make a global e!pansion, such as business strategies,
entry modes, and threats and opportunities in the markets. #he right business strategies and
2
entry modes employed ill increase the firm4s chances of success and influence the future of
the retailer.
Analysis of Globalisation Strategies
9lobal retail e!pansion has attracted many large-si7ed companies ith targets to increase
business profits and market share. 9lobal e!pansion not only attracts large organi7ations but
also small to medium-si7ed companies, companies ne to international e!pansion, as ell
as those ho are already e!panding in the international arena. /n going outside the United
States, Wal-Mart had the option of entering ,urope, Asia or other countries in the Western
hemisphere. /t could not afford to enter them all at the same time for at least to reasons.
:irst, in ;)); Wal-Mart as lacking the necessary competencies and resources - financial,
managerial, and organi7ational. Second, a logically se5uenced strategy to market entry
allos a company to apply the learning gained from its initial market entries to its
conse5uent entries.
#he choice of hich market to enter first is not alays simple. .uring first five years of its
globalisation *;)); to ;))%+, Wal-Mart focused intensely on developing an e!istence in the
Americas< Me!ico, 1ra7il, Argentina and $anada. /t is relevant to look at hether it should
have concentrated first on ,urope or Asia instead. #he ,uropean marketplace e!perienced
particular features that created it less appealing to Wal-Mart as a first point of entering. #he
,uropean retail industry is mature, implying that a brand ne entrant ould need to bring
market share aay from a current player is a really challenge. /n addition, there has been
ell-entrenched competition around *e!ample, $arrefour in :rance and Metro A.9. in
9ermany+ hich ould be most likely to retaliate intensely against any ne player. And
,uropean retailers have formats similar to Wal-Mart=s, neutrali7ing the competing edge Wal-
Mart might have anticipated had its business model been completely ne to the market.
Additionally, as ith most beginners, Wal-Mart=s reasonably small si7e and lack of strong
local customer relationships ould be e!treme obstacles in the ,uropean area.
Wal-Mart may have managed these challenges by entering ,urope through an ac5uisition,
but the higher groth rates of >atin American and Asian markets ould have made a
delayed entering into those marketplaces incredibly e!pensive regarding lost possibilities.
2n the other hand, the opportunity costs of postponing ac5uisition-based entries into
,uropean markets came out to be reasonably little.
3
#here is no doubt that Asian markets had massive opportunities hen Wal-Mart introduced
their globalisation efforts in ;));. ?oever the Asian market is geographically remote and
culturally and logistically different from the United States market. /t ould have taken
considerable financial and managerial resources to establish a presence in Asia. :inally,
Wal-Mart chose as its first global points of entry to Me!ico *;));+, 1ra7il *;))-+ and
Argentina *;))%+, the countries ith the three largest populations in >atin America.
Mode of Entry
2nce any business chosen the country or countries to enter, it is important to find out the
proper mode of entry. ,ach and every business creating this move faces a range of options<
/t could gain a current player, establish connections ith an e!isting player or start
9reenfield operations, either alone or in collaboration ith another player.
Wal-Mart made an entry in $anada ith an ac5uisition. #his as a sensible move for three
factors. :irst, $anada is a matured market - an unattractive situation for 9reenfield
operations, since including neer shops *i.e., ne capacity+ ill only intensify an already
high level of local competition. Second, because there are immense income and cultural
similarities beteen the United States and $anadian markets, Wal-Mart faced relatively little
need for ne understanding. #herefore, entering through a strategically alignment as
unneeded. #hird, a badly operating player, Woolco, as available for purchase at an
economical price. :urthermore, Wal-Mart=s business model as e!actly hat Woolco
needed to convert itself into a feasible and healthy business.
:or its entry into Me!ico, Wal-Mart used a different approach. 1ecause there are significant
incomes and cultural dissimilarities beteen the United States and Me!ican markets about
hich the company needed to learn, and to hich it needed to tailor its operations, the local
market re5uirements ould have made a start up problematic. So, the company chose to
form a %&-%& 8oint venture ith $ifra, Me!ico=s largest retailer, counting on $ifra to offer
operational e!pertise in the Me!ican market.
:or additional e!tension in >atin America, Wal-Mart focused the region=s ne!t to largest
markets< 1ra7il and Argentina. #he entry into 1ra7il as also carried out through a 8oint
venture - ith >o8as Americana, a local retailer. 1ut Wal-Mart as no ready to control its
learning from the Me!ican e!periences and decided to set up a 6&--& 8oint venture in hich
4
it had the controlling stake. #he entry in to 1ra7il offered Wal-Mart even better e!perience in
>atin America, and so it decided to enter Argentina through a completely oned subsidiary.
#his move as strengthened by the fact that there are only to markets in Argentina of
significant si7e.
Wal-Marts Globalizations Strategy - Oortunities and !"reats in
C"inese Mar#et Entry
1y ;))6, Wal-Mart takes on the Asian challenge. /t targeted $hina, ith a population of more
than ;.( billion in 6-& tons. #he reason of this choice as made because of the loer
purchasing poer of the $hinese consumer provided massive possibility to a lo-price
retailer like Wal-Mart. Still, $hina=s cultural, linguistic and geographic distance from the
United States created relatively e!treme entry barriers, so Wal-Mart planned to utili7e to
beachheads as learning vehicles for establishing an Asian presence.
Wal-Mart Stores has finali7ed an agreement to obtain a little share of @ihaodian.com,
$hina4s largest online retailer. /f the ac5uisition is successful, Wal-Mart ould have the
opportunity to gro their business to the orldide of online shopping market, hich ould
then produce additional income. ?oever, china=s anti-monopoly bureau considered the
ac5uisition as e!cluding or limiting the competition of value added telecommunication
services market segment in $hina. 1esides from Wal-Mart having control of the services of
@ihaodian.com, the latter could also use Wal-Mart4s vendors and logistics sources and
system to track stocks.
Another opportunity available for Wal-Mart as the idea of discount store models. Wal-Mart
could take the first step to start a discount store layout e!tension before the other retailers
because the discount store model is no an appealing option in $hina. Wal-Mart is the
leading retailer in $hina because of the ac5uisition of #rust-Mart=s ;&&-outlet-strong
hypermarket netork. As A Result, Wal-Mart has the opportunity to broaden in $hina, by
introducing a ne Adiscount compact hypermarketA format developed under #rust-Mart in
$hina.
Wal-Mart prepared to gro massive in $hina and the company had arranged to start another
ten stores throughout the metropolitan areas. ?oever, the attempt e!perienced some
problems, mainly from the government of $hina. $hina=s state-controlled All-$hina
5
:ederation of #rade Union *A$:#U+ had intended to have the action to sue Wal-Mart as ell
as other non-$hinese companies if these companies did not have union divisions in their
$hinese operations. #he main challenge in this issue as that Wal-Mart as ell knon for
their anti-union position. /n order for them to make it through in the market, Wal-Mart had
decided to respect the choice of their orkers in $hina ho needed to create a union. #his
movement might benefit $hina, but Wal-Mart ould have limitations managing orker
benefits and limited ays in solving complaints. ,ven though there ere many hassles
faced, as a multinational retailer, it as a must for Wal-Mart to ad8ust to the specific markets
they are running in.
Wal-Marts Strategy Execution $rocess
Ma%or &ssues 'aced by t"e 'irm
#he retail market is dominated by fe retail leaders, ith Wal-Mart challenging in lot of retail
categories. Wal-Mart plays against Bmart and #arget in the general merchandise retailing,
against $ostco in the arehouse club segment, and against Broger, Albertson4s and
6
W-/-
M-6"
W-/-
M-6"
Use of cutting-edge
technology in
procurement,
distribution, and
inventory control
Use of cutting-edge
technology in
procurement,
distribution, and
inventory control
ta!ng "al-#art
$ith a strong
management team
and providing
employees $ith
state-of-the-art
training resources.
ta!ng "al-#art
$ith a strong
management team
and providing
employees $ith
state-of-the-art
training resources.
%mplementing a
corporate culture that
treats individuals $ith
respect and dignity.
%mplementing a
corporate culture that
treats individuals $ith
respect and dignity.
&roviding superior
customer service and
striving for
continuous
improvement.
&roviding superior
customer service and
striving for
continuous
improvement.
Safeay in the supermarket retailing. $ompetition among retailers focuses on prices, shop
locality, differences in store format and merchandise mi!, store si7e, shopping environment,
and image ith consumers. Additional research offered by the folloing figure diagnoses the
competing atmosphere of the retail industry.


'ive 'orces Model of Cometition

'
Threat of Substitute Products
Weak: substitutes for big box
retailers are small supermarkets;
substitutes are higher priced related
to the result they deliver.
Threat of New Entrants
Weak: Entering barriers are higher
because of the existence of sizable
economies of scale and large
capital demands; present industry
members will highly contest efforts
of newcomers to gain a market
foothold.
Rivalry among Cometing
Sellers
!ierce: Competing sellers have
induced heated price competition
and are active in creating clean
moves to develop marketplace
standing and business overall
performance.
Sulier "argaining
Power
Weak: Industry members
account for a huge
portion of supplier's total
sales and continued large
amount purchases are
crucial to the well being
of suppliers.
"uyer "argaining
Power
Weak: here is a wide
base of customers so no
single customer can
demand price
concessions! buyers
purchase merchandise in
small amounts! buyer
loyalty for particular
brands exists
Strengt"s
$ost advantages over the rivals. $ost effective
supply chain management practices.
Uni5ue skills in distribution systems"
computeri7ed and efficient distribution of
products into its stores, from manufacturers to its
collection of delivery trucks that made daily
deliveries to nearby shops.
$ompany4s intense CWe Sell for >essD brand
image and reputation that creates loyal
consumers.
,conomies of scale advantages in delivery,
advertising and marketing, and procurement.
Wea#nesses
A approach ithout proprietary protection
and therefore can be duplicated by
competing retailers ho Cal-martificatesD
their supply chain, *>ack of sustainable
competitive advantage+.
Weak presence in ma8or city areas.
0lagued ith annual return rates of -%E.
Oortunities
,!tension into neer geographical areas"
saturating the U.S. market ith Supercenters
and globali7ing Wal-Mart functions.
Ac5uisition of small retail stores to - increase
market share, take advantage of economies of
scale, reduce number of competitors.
,ntering into alliance or 8oint ventures that can
boost the firm4s market areas and increase its
competing abilities.
$ombining backards to further control cost in
merchandise production.
!"reats
Ma!imi7ing intensity of competition that
may compress profit margins.
:ederal 9overnment lasuit claiming
discrimination against omen in pay,
training and 8ob assignments, and
promotions.
,!treme local resistance to Wal-Mart
entry into the community.
$ombative orker=s unions putting
pressure on Wal-Mart to increase its
benefits and ages.
(
SWO! A(A)*S&S
Wal-Mart $ES! analysis +ased on C"inese Mar#et
1y carrying out 0orter4s 0,S# analysis looking at 0olitical, ,conomical, Social and
#echnological, the results ill be lined up ith regards to Wal-Mart=s policy on 8oint ventures.
/t ill establish on past academic research articles and theories. #hese decisions underpin
the entry strategy Wal-Mart has adopted to enter into the $hinese market, CWal-Mart is
e!porting its retail savvy east to Asia ith stores opening in $hinaD *?alverson, ;))-, p;+.
2vervies of the entry strategy taken by Wal-Mart in $hina based on this 0,S# analysis are
follos.
$olitical
When thinking about any business strategy it is crucial for an organisation to evaluate the
political environment in hich choices needs to be created. /t must consider legislation,
government positioning, trade contracts and policy. /n $hina, the political agenda revealed
Wal-Mart to such potential boundaries in the shape of e!tremely regulated systems
favouring domestic firms and avoiding a so-called foreign takeover. ?oever, timely changes
in government policies meant that Wal-Mart as ready to gain a foothold, as $hina as
Fopened up to investment4, and the government Falleviated restrictions on foreign businesses,
and promoted $hinese entrepreneurs to enter 8oint ventures ith Westerners4 *?ornbloer,
(&&-+. Wal-mart4s entry strategy at the time plainly gained from this. Wal-Mart started a 8oint
venture ith $itic 0acific >td ith the sole purpose of gaining an ell-knon brand in the
e!tremely competing $hinese domestic retail industry. As $hina continued to formulate a
more open commercial approach, economic development possibilities began to emerge
especially as the economic environment as right. #he political environment contributing to
a ne promising $hinese market, helped opportunistic companies including Wal-Mart to
build 8oint venture strategies, hich offered them better reach and control over distribution
channels and supply chains.
)
Economic
/n relation to any retailer considering global e!pansion, the strategy it bases its actions upon
has to be lined up to market situations. 1ased upon market conditions certain strategy
decisions ill be developed and in Wal-Mart=s case, its development of a 8oint venture
strategy in economic terms is clear. Wal-Mart4s entry strategies ere very much in line ith
$hina4s %-year plan of economic groth. ,conomically the US-$hina 1usiness $ouncil also
demonstrates a pattern of groth, hich clarifies hy Wal-Mart needed to e!pand into
$hina, ith political help back in the USA. /n relation to retail sales these have improved
significantly during the last decade. 1y carrying out a 8oint venture entry strategy, Wal-Mart
as ready to apply labour pools already present in the retail field ithout taking on start up
costs. :urthermore, the si7e of $hina=s orkforce meant that Wal-Mart as ready to
significantly reduce the cost of capital investment, $hina=s numerous labour supply means
that companies can choose to use manual procedures instead of automatic procedures and
still save money.
Social
When using 0,S# to create a strategy, the social aspect of the location is also very
important. $ultural perceptions, country particular product development and language
barriers are a fe of the difficulties that should be looked at e!ternal to the firm. Wal-Mart,
hen entering $hina, has had to develop a approach around reali7ing these problems and
ho to deal ith them. #herefore, it is not really surprising that 8oint-ventures seemed to be a
sensible entry strategy for Wal-Mart into $hina. #hrough adapting such a strategy Wal-Mart
has avoided a fe of the problems it e!perienced in ,urope, specifically that language
barrier. #hrough ac5uiring an association ith domestic firms, Wal-Mart has attained an
understanding of the cultural re5uirements of the $hinese people. Using the cultural
e!perience gathered from its initial entry, Wal-Mart has started to diversify its strategy to
reach out into areas not supplied by the typical hypermarkets.
At the same time, Wal-Mart has tried to learn from the issues that e!perienced hen
entering ,urope. Wal-Mart4s entry strategy into $hina takes into account the re5uirements of
the community. Wal-Mart has capitalised on the positive impact of being seen ithin the
community as a sympathetic and generous enterprise. /n addition, Wal-Mart has developed
a strategy, hich focuses on upstream methods ith all the purpose of fulfilling consumer
re5uirements.
1*
!ec"nology
#echnological invention also is an element, that has to be considered henever creating an
entry strategy into an unfamiliar e!ternal environment. Wal-Mart on entering the $hinese
market anted to gain competitive advantages over other retailers by presenting advanced
steps around marketing and applying cost reduction processes. :or e!ample, taking control
of the supply chain and outsourcing.
/n addition Wal-Mart has created Fadvanced retail technology and e!perience to $hina= and
advanced =$hina4s retail industry standards and development4 *.tradeinservices.com+,
hich has helped it to build cheaper products, providing innovation, controlling supply chains
and fulfilling the needs of buyers. #hrough adapting both of the e!ternal and internal
approaches Wal-Mart has been able to build control over and put value to particular areas
that concentrate on customer communication as its core competence ithin $hina.
Conclusion
A business should have an effective strategy from the very beginning, not only for global
e!pansion, and the Wal-Mart organi7ation has had its techni5ue since the start. When
evaluating the Wal-Mart case, it is clear that the company entered the market concentrating
mainly on loering their costs, and folloed the same approach to their global e!pansion.
Wal-Mart keep the prices lo to attract more consumers and give consideration to their
prices to be their main selling point. #hey search for to be the cheapest in the market rather
than being uni5ue, hen it comes to strategic planning their option ould be classified under
general strategies of cost reduction.
When broadening orldide, other components need to be included ith the strategic plan
of a company, in some cases, a system that as successful in one country ill be unusable
in another due to the different environmental and social dissimilarities beteen the to
countries. At this point, an international company ould have to options" they should either
try and make their techni5ue ork in the ne country, or make changes to their strategies to
better fit in the local arena. Wal-Mart has decided the second option. #hey often associate
ith a current company in foreign markets rather than try to enter on their on. #his helps
them adapt and ad8ust their operation so that it fits the ne country.
11
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,eference
$harles :ishman *(&&6+ The Wal-Mart Effect: How the World's Most Powerful Company
Really Works--and HowIt's Transformn! the "mercan Economy, (nd edn., < 0aperback.
Gim $arland, Go Ann $arland *(&&'+ Entrepreneural #son$ %trate!y$ and %tructure< Whitney
0ress.
$harles :ishman, Alan Sklar *(&&6+ The Wal-Mart Effect, ;st edn.< 0aperback.
Alden, ,, and 1uckley, 3, (&&-. Wal-Mart 1ecomes >argest $orporate 0olitical /nvestor.
*2nline+ Available at http<HHreclaimdemocracy.orgHalmartIlargestIpoliticalIdonorIinvestorH
*Accessed at (( Aug (&;-+.
Sophie Gohnson. What "re the &oals$ #sons ' Msson %tatements of an
(r!an)aton* Available at< http:++small,usness-chron-com+!oals-.sons-msson-
statements-or!an)aton-/0122-html *Accessed< ;&th August (&;-+.
1all, 1. ?o 1ig of A #hreat /s /nternet Shopping to 1rick J Motor 0rofitable RetailK *2nline+
Available at http<HH.profitableretail.comH(&;(H;&Hho-big-a-threat-is-online-to-brick-
mortar-profitable-retailH *Accessed at (( Aug (&;-+.
$arpenter, M.A. and .unug, S. 0, (&;;. :oreign ,!change and the 9lobal $apital Market.
*2nline+ Available at http<HHcatalog.flatorldknoledge.comHbookhubH';%LKeMfk-;6L'LL-
ch&L *Accessed at (' Aug (&;-+.
3ote.esk, (&&). 0orter4s :ive :orce Model. *2nline+ Available at
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*Accessed at (' Aug (&;-+.
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