Walmart Automobile Sales in Colombia

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The globalization of entrepreneurial activity is a significant step in the process of expanding a specific business and increasing opportunities for capitalizing profits. Nevertheless, the nature of measures in the domestic and international markets is different due to the distinctive requirements of the target audience, the specifics of work in particular regions, unique adaptive practices, and other significant aspects.

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In the marketing industry, an emphasis on the individuality of the work environment is one of the main principles to promote specific goods or services and ensure steady demand. In this regard, the concept of global marketing is a phenomenon that characterizes tactical decisions on organizing pricing, promotion, and other policies to ensure business stability not only in the domestic market but also abroad.

The case of Walmart as a global retailer is an example of how addressing growth opportunities through business globalization can take place. This corporation has developed from a small network, and today, it provides services for the sale of general goods to a large number of consumers in different world regions.

The global marketing strategy that Walmart adheres to gives it the possibility of promoting specific groups of products through attention to the characteristics of entry markets, in particular, their indicators of demand and needs of the population. On the example of automobile sales, the retailer’s activities will be evaluated in the context of optimal business conditions in two countries – Germany and Colombia.

Based on the analysis of the target markets, sales in Colombia are preferable for Walmart due to a favorable business environment – the minimum number of competitors, population needs, and the ability to address economic and social challenges in the country. The comparison of the two countries concerning the opportunities for expanding business and implementing the global marketing program suggests a potentially more favorable outcome in Colombia than in Germany.

Walmart’s History and Success

Walmart first opened its doors in 1962 in Rogers, Arkansas. Walmart was the second venture into the retail industry by former Army veteran, Sam Walton. Shortly after the opening of the initial store, Walmart incorporated in 1969, and the rest is history. In the 50+ years since, Walmart has established itself as the biggest and most successful company by revenue in the world. It was ranked 1st on Forbes Fortune 500 list in 2019, reporting in $514 Billion in revenue for the year. (Forbes, 2019) As of 2020 Walmart has established itself in over 27 countries around the world with over 11,500 stores. (Walmart, 2020).

By revenue, they are considered the most successful retail and discount store in the world. Based on their website, Walmart’s mission and goal is “to save people money so they can live better”, but that’s corporate talk and every organization offers a similar variation of it. As a business the goal is always to increase revenue and decrease costs. Even with the title of the most successful country in the world Walmart’s goal is to continue to expand throughout the world and increase its revenue.

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Walmart Analysis: Blue Ocean

The main reason that Walmart became so successful so quickly was due to the unique strategy that founder Sam Walton took when it came to operate a retail store business. Their success can be explained using the Blue Ocean strategy. In its simplest terms, a Blue Ocean strategy results in creating new demand and a market space that is uncontested, where there is ample opportunity for rapid and profitable growth and competitors are virtually irrelevant. (Blue Ocean Strategy, 2020) Walton’s Blue Ocean strategy was based on two principles: economies of scale and minimization of operation costs.

Economies of scale allowed Walton to lower prices, as he was able to make up for reduced margins in sales volume. Walton also aimed to reduce operation costs when and wherever possible, including driving the same old vehicle, and using budget hotel rooms during business trips. The dramatic reduction in prices increased the demand, which increased his sales dramatically, and reducing his operation costs allowed him to get away with slim margins (Hyde, R.R. 2020, March 30).

That is how Walmart was able to set itself apart in the retail industry. Walmart created a demand for low prices of everyday items. They became uncontested by any other business in the same industry. They became too big for competitors to keep up with, as they grew larger their margins continued to increase allowing them to continue to place products on the shelves for even better margins. This strategy is what allowed Walmart to become the largest company in the world.

Country Analysis: Germany

Germany’s current political system is considered a Federal Parliamentary Republic, its central government is composed of 3 main branches, a judiciary, an executive, and a legislative branch (“Germany Legal Research Guide: Government and Political Structure”, n.d.), a structure very similar to that of the United States. At the start of 2020, the country started going through what Kate Connolly from the Guardian (2020, February) calls a “political crisis”.

In January, Angela Merkel’s, (Germany’s chancellor, the country’s most powerful politician) elected successor, Annegret Kramp-Karrenbauer, resigned her position due to an act of defiance by members of her own party. Kerrenbauer’s resignation comes at a especially inopportune time for two specific reasons. The first is that Germany will assume the rotating presidency of the council of the European Union in July. Second, chancellor Merkel has also announced that she will not seek re-election in 2021, when her current term ends (Le Blond, 2018).

As a result, Germany will assume the rotating presidency while appearing internally out of order. When a new chancellor (likely from a different party judging by the internal turmoil) is elected in 2021, it will be highly probable that currently standing policies will be modified or removed entirely, and the country could be headed in a completely different direction.

The election of a new chancellor, and the shift in direction will most certainly have a trickle-down effect on the economy, the market, and certainly new businesses. Legislation that favors new businesses today might drastically change or be non-existent next year. Businesses thinking about entering Germany should diligently analyze the current political situation and decide if the business will be able to handle an almost-guaranteed new legislature, by a new chancellor in 2021.

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Taking all of this into account, Germany’s current political climate could be considered mildly stable. Judging by their current political standpoint, it is not the worst time to enact a business in Germany, but investors and new businesses must be prepared for near-certain political shifts.

Germany’s Law System and Intellectual Property

Germany follows a Civil Law system (Lehmann, n.d.). As Victoria Cromwell from Barbrimarketing describes it, Civil Law systems “rely on written statutes and other legal codes… which establish legal procedures, punishments, and what can and cannot be brought before a court“ (2019, April 1).

Opposite to the Common Law system that is practiced in the United States, Germany often relies on statutes and codes for sentencing, and they place much less importance on judicial precedent. This system can be appealing from a business standpoint, as this can mean that cases brought to the court by businesses will likely not drag-on indefinitely as they do in countries where judicial precedent can engulf the entire case. Reduced court times equals reduced costs, which is preferably for businesses.

Intellectual property protection is a very important aspect that any business entering new territory must consider. Any business entering Germany would be happy to discover that Germany has some of the most vigorous intellectual property protection laws. The country’s Patent and Trademark office issues patents, utility models, trademarks, and offers design protection (2020, August 10).

In addition to all of these protections, the country’s Act Against Unfair Competition prevents competitors from making false claims about a product in order to attract customers (Heidenreich, n.d.). When it comes to business rights, Germany offers some of the best protection in the world, business owners, inventors and entrepreneurs can be at peace knowing that their inventions will be protected if they are issued a patent.

Germany’s Economy

The economic sector of Germany also offers favorable ground for new business, entrepreneurs and inventors. Germany operates under a mixed economy (Amadeo, 2019, October 23). The economic sector is driven by supply and demand like a traditional market economy, while simultaneously the central government makes all major economic decisions, similar to a command economy.

This means that the market is allowed to drive itself to a great extent, but the federal government is always in control, with the ability to influence it as they see fit. New businesses should not be turned off by command economies, as they can actually be a good thing. If the government believes a business to be a central contribution to the market, they are more likely to offer incentives in the form of tax breaks or other contributions.

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In regards to their economic size, the World Factbook states that Germany has the largest economy in Europe and the fifth largest in the world, the World Factbook also states that they are a leading exporter of machinery, vehicles, chemicals, and household equipment (“The World Factbook: Germany” 2018, February 1). The country’s GDP in 2019 was at 3.9 Trillion, placing it in 4th place among world rankings (“Germany GDP – Gross Domestic Product 2019” 2020, January 17).

According to Trading Economics, their inflation rate increased from 2016 to 2018, from.83% to 1.93%, but has since declined in 2020 to 1.67%, (Germany Inflation Rate 1950-2020, n.d.) and according to Statista, their unemployment rate is currently at 5.3% for 2020 (Koptyug, 2020, January 31). By the numbers, Germany’s economy is in great shape. Their GDP is in the world’s top five, their inflation is under the standard 2%, and they are considered “fully employed” judging by their 5.3% unemployment rate.

The only number that might make a new business think twice about entering Germany would be the relatively low unemployment rate at 5.3%. Due to the country being considered fully employed, a new business might need to offer higher, more competitive wages to attract employees. It can be argued however, that the high GDP should render this a non-issue. At first glance, it can be argued that Germany’s economy is a great place to start a business.

However, despite a less developed economy and a significantly lower share of exports, Colombia is a better choice than Germany for the target market intervention. Based on the analysis of the state’s profile, one can note that its low performance is favorable for Walmart’s opening and may be a background for selling vehicles sustainably. The discussion of specific economic and legal aspects may provide key recommendations for Walmart in relation to the implementation of its global marketing program towards Colombia and substantiate this solution due to relevant examples.

Country Analysis: Colombia

Known as a third world country, or perhaps the cocaine haven, even the central land for coffee production: Colombia contains similarities to the U.S. while maintaining its rural political issues. A presidential republic, Colombia has a legislative, executive and judicial branch with a president and appointed cabinet. After having visited the third time, my heritage country has unusual quirks and laws allegedly similar to the U.S.A.’s political framework. Colombia has variations that make it not so similar to the United States, however a culture that takes pride in music, family, and togetherness is something the U.S. could adopt.

Colombia’s Legal System

Colombia practices civil law, in terms of Spanish and French civil codes. These codes are defined as “sources recognized as authoritative are principally legislation – especially codifications in constitutions or statutes enacted by governments – and secondarily, custom” (CIA World Factbook, 2019).

Colombia’s Economic System

The crisis in Venezuela has had a domino effect on neighboring countries in South America; more specifically Colombia. An influx of immigrants has spiked growth in Colombia beginning September 2019, and even prior to that, after visiting Colombia in 2016 (The World Bank, 2019). “Colombia has taken a leading role in adopting an open borders policy and implementing good practices in the provision of services to Venezuelan migrants and returned Colombians in areas such as education to health, services of employment and humanitarian aid” (The World Bank, 2019). Considering The World Bank does not have any active loans in Venezuela, it is highly essential for Colombia to extend the open borders policy.

While Colombia has medium stability in its economic structure, setbacks like non certified infrastructure, poverty, drug trafficking, and unstable security structure are hindering Colombia from succeeding as a progressive outlier to South America. Per Global Economy, the political stability of Colombia, as of 2018, sits at 0.81; just 10 years prior existed at -1.85 (The Global Economy, 2020). Exports consist of petroleum, oil, coal and coffee that help maintain a GDP of $711.6 billion and $14,400 per capita.

These will be the focus and catalyst for our business model. More recently, Colombia has taken aid of ~$448 million, which was increased by ~$30million compared to last year. This aid is not limited to the current structure, or destruction of welcoming in refugees, but will be allocated towards anti narcotic efforts, economic development, and military (Norman, 2019). In regards to unemployment, Colombia sits at 12.99% as of January 2020, where its norm has been ~9.3% (CEIC, 2020).

Recommendations

For Walmart, automobile sales in Colombia is a potentially more convenient way to implement its global marketing program. Due to the fact that, compared with the German market, the competition for the sale of vehicles in South America is significantly less high, the chance to promote products successfully increases.

More opportunities may be provided due to lower saturation of this market with target products. In addition, by entering into Colombia, Walmart can implement a program of assistance to the country, focusing on its economic and social challenges. The provision of jobs is one of the valuable prospects in the face of increased unemployment. Moreover, the current standard of living of the population is not high, which explains the value of affordable sales projects for target products. As a result, this direction of the globalization of the marketing plan is more suitable.

Due to the fact that the standard of living of the Colombian population is lower than in Germany, the organization of automobile sales at low prices is more relevant in the South American region. In addition, fuel resources are key export products in this country, and this is favorable for organizing sales of vehicles at affordable prices. The Colombian currency is weaker against the US dollar and the euro, which, in turn, makes it possible not to tie sales to the leading world currencies.

The mergers and acquisitions strategy is optimal for entering the Colombian market. Walmart can gain leadership by working with local trade networks and maintaining supply chains through individual retailers. In addition, Walmart’s marketing campaigns have sufficient funds and resources to ensure sustainable supplies, which, in turn, eliminates the possibility of delays and poor service. Thus, the implementation of the global marketing program by Walmart should take place in the Colombian direction as a potentially successful region to intervene and ensure stable automobile sales.

Conclusion

Organizing automobile sales in the Colombian market through the mergers and acquisitions strategy is a potentially more convenient form of implementing a global marketing program for Walmart than in Germany. The comparison of economic, legal, and social development indicators proves that in the South American region, there are more conditions for stable sales at affordable prices.

The Colombian market is not oversaturated, and competition is a significantly less likely outcome of the intervention in this environment than in Germany. Assistance to the country in supporting its development may be carried out through addressing the current issues, for instance, providing jobs to the population. The global marketing program realized in Colombia is a valuable step to expand Walmart’s influence and, at the same time, gain competitive advantage and customer recognition.

Works Cited

CEIC. (2020). Colombia Unemployment Rate. Web.

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BusinessEssay. (2022) 'Walmart Automobile Sales in Colombia'. 12 May.

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BusinessEssay. 2022. "Walmart Automobile Sales in Colombia." May 12, 2022. https://business-essay.com/walmart-automobile-sales-in-colombia/.

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BusinessEssay. "Walmart Automobile Sales in Colombia." May 12, 2022. https://business-essay.com/walmart-automobile-sales-in-colombia/.