The greatest similarity in these operations is the fact that Wal-Mart was able to acquire already successful operations with large market shares in countries with developed infrastructure. This fact that they could take already thriving stores and implement their price saving techniques allowed for their vast success. Wal-Mart is not the best at choosing products for the consumers; however they are extremely talented with slashing prices and streamlining the supply chain of their goods. When an international market allows Wal-Mart to focus on this aspect of the supermarket business the results are staggering. The developed infrastructure is also vital to Wal-Mart in that they are needed for the sophisticated product stocking practices, and their demands to be able to supply low cost, just-in-time retailing for customers. It is this retailing which allows Wal-Mart to stock so many items in their limited space.
3) In markets where Wal-Mart has failed, what seems to have been the basis of those
failures?
- Is there a common theme to their failures? If “yes”, what is it?
- Are their failures relevant to only the markets in which they failed? Or-- are the reasons for possible failure existent in every market—but more manageable in some markets that others?
Wal-Mart failed most significantly in the German and South Korea. They did so due to their lack of specialization towards the markets in those countries. Wal-Mart did not understand the customer needs in these countries and this eventually lead to their need to exit these markets. Wal-Mart does not put very much effort into their market research. For example, in Germany, the retailer put a lot of money into remodeling the stores into their standard stores and training the staff as they always have, but this had adverse effects. In Germany the customers are not used to these ways of shopping and were not receptive to this new way of business. The extra-wide isles were not necessary and only used up space in the stores, the checkout lines with baggers were not effective as the German people were used to bagging their own goods and the greeters at the door were considered disrespectful. In this situation everything which Wal-Mart tried to change had negative results. The company did not look at the culture and what sort of system had worked in the past, they just simply implemented their system and in this case it did not work. This same mentality is evident in the South Korean market. The failure in this market was due to the lack of proximity to the shopper. In that culture, the people who do the shopping, primarily the house wives, do not travel far from their homes to purchase their groceries and this is why the large retail store system of Wal-Mart was unsuccessful. They failed to target the customers and were thus force to withdraw from the country.
It seems as if Wal-Mart enters each market the same way and has the same chance at failure. They do not do market research and only implement their way of doing business, regardless of the customer wants and needs. They are effectively blindly testing out markets and withdrawing when their system of large low price retail stores does not work. If they happen to be fortunate enough to purchase a chain which already has a good product mix for the local culture then they are likely to succeed in implementing their system, but even this is not enough sometimes as seen in Germany.
4) Is the Wal-Mart business culture a help or a hindrance when they expand into
other country’s? Give examples from the case to support your position.
The Wal-Mart business culture has been both helpful and a hindrance, depending on the culture they are trying to enter into. It helped them when they entered the United Kingdom as the company the acquired the ASDA chain of supermarkets which shared the same culture making for a seamless transition. The ASDA chain had already in place price rollbacks and greeters at the doors as well as the practice of calling their employees “colleagues.” These traits are very similar to that of Wal-Mart and thus the culture of Wal-Mart aided the deal in the United Kingdom; whereas, in Germany the company culture had the opposite effect. The German culture clashed with the culture of Wal-Mart in a couple ways. First off the Germans have very strict labor unions which made it difficult for Wal-Mart to maintain a low overhead due to high labor rates. Also the greeters at the doors which are successful in welcoming guests in other cultures turned out to be offensive and rude in the German culture. Possibly the largest hindrance was the refusal of Wal-Mart’s German executives to learn the language and understand the culture.
When Wal-Mart’s culture works with the culture of a foreign country, they are in fact wildly successful and are able to secure astronomical market shares. On the other hand they are not willing to adapt their culture to that of the country they are trying to enter which has cause them to suffer. The fact that the management in Germany was not willing to learn the language goes to show how unwilling they are to adapt. Without being willing to learn at least a little bit of conversational German shows how uninterested Wal-Mart is in succeeding with their globalization efforts all throughout the world. They are only willing to try to implement their way of doing business and culture and hope that it works, in the global market hopes and dreams only take you so far.
5) Has Wal-Mart had to change their level and method of political interaction with
governments as they have expanded internationally? Why or why not? Give examples from the case to support your answer.
Wal-Mart has had to adapt to the varying amounts of political interaction required to do business internationally. Examples of such places are Indonesia, China, South Korea and India. In Indonesia when they entered there was fair amount of political unrest and a need to partner with a local company if entrance into the, market was desired, which they did with the Lippo Group. In China the Government involvement was huge and still continues to be, when Wal-Mart entered this market they were required to offer a 35% stake of their operations to a local company and thus they dealt with the government rules in order to gain entrance. South Korea had strong regulations governing foreign retailers prior to 1997 and thus halted Wal-Mart from entering, but once the regulations were liberalized they decided to enter the market. The Indian market is perhaps the most highly regulated one; Wal-Mart has just recently in 2009 opened a location in India after lobbying since 2005. The Large amount of government regulation in this market keeps Wal-Mart from implementing their Everyday Low Prices because a foreign retailer is not allowed to offer competition to local retailers in India. For this reason Wal-Mart has opened a wholesale only operation in India under the name of Best Price Modern Wholesale. This is the vast extent of the government regulation and is something which Wal-Mart has had to deal with for many years to first enter into this market and will like continue to deal with for years to come.
6) How effective has Wal-Mart been at maintaining their business model as they
have expanded internationally?
Wal-Mart has been very good at maintaining their business model. In fact they have maintained it so well that they have been forced to leave certain international markets due to the fact they have been unwilling to change. When expanding into a global market it becomes important to adapt and embrace the local cultures and only implement what can work in those cultures. This is something which Wal-Mart has not embraced and it appears through their failures that they just simply throw their business model into a country and decide if it is working after a year or two. If the bottom line tells them they can stay, then they stay and if they are not profitable they cut their losses, lose millions and leave. With a company this large I guess they have the resources to be irresponsible with their global operation implementation, but it not sensible to expect to have an influence around the world with the same model. Cultures are so vast and different that such a centralized model will not work and without compromise and adjustment, there will be no extravagant success.
7) What are the four [4] most important lessons from this case? Why?
- The importance of understanding a foreign market is a key piece of international expansion. Without doing the necessary market research to understand the wants and needs of a target market is a vital error which can be seen through Wal-Mart’s expansion. Entering into a new market blindly is irresponsible and could potentially result in a loss of a great deal of money as seen with Wal-Mart.
- Adaptation to a foreign market is another lesson. Without being willing to adapt to a foreign market, one cannot expect to be profitable and successful in that market. Wal-Mart was unwilling to even learn the local language when in Germany and these lacks of immersion into the culture greatly hindered their efforts and eventually lead to their withdrawal from Germany.
- Assuming that a model that works at home will work abroad is a key error made by Wal-Mart. This error can be seen through their strict adherence to their business model which quite frankly did not work everywhere. Just because something is sold at the best price does not necessarily mean that someone will buy it. An example of this comes from the Brazilian market where Wal-Mart was told that the locals liked, “Football” so the Brazilian Wal-Mart stocked low priced Dallas Cowboys football apparel, which apparently did not sell because the locals enjoyed a different type of football, which we know as soccer.
- Looking at successful businesses in a perspective country gives a glimpse into what is working in that country. In Mexico and the United Kingdom, Wal-Mart purchased already flourishing businesses and further improved them. This technique worked and if they would have put more time into understanding why these worked and implemented what they learned then they may have had an easier time with some of their less successful ventures. If Wal-Mart wouldn’t have wanted to change the German operations so vastly then the outcome would have been much more favorable. However they tried to bring about too much change instead of focus on what has already been working in that country. So if it isn’t broken, don’t try to fix it.
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