Walmart Company used joint ventures and alliances as an entry method into the international market. The company decided to concentrate on developing its presence in Mexico, Canada, Argentina, and Brazil as the first international entries. It entered the Mexican market in 1991 after getting into a joint venture with Cifra. As a result, they opened Sam’s club in the city which gained dominance in 1997 and was later changed to Walmart de Mexico in 2001 (Bryant et al., 2018). The company also operated general merchandise and Bodega food stores including Suburbia and Superama supermarkets. The two apparel stores operated in more than 145 cities within Mexico.
The choice to use the joint ventures and alliances entry approach was appropriate for Walmart. First, the venture with the retail conglomerate Cifra encouraged diversification that reduced the risks associated with investing in a new market. The conglomerate had established an internal market that could not be affected by the external capital in case of underdevelopment. Another benefit is that the conglomerate guaranteed the growth of earnings, especially with Walmart’s aim to reduce the prices of commodities in the market. Besides, the alliances with the two stores also helped to improve the efficiency of the company in the market (Khan & Lew, 2018). The fact that the stores had already developed in Mexico made it easy to boost brand awareness to the customers thus improving the sales. As such, it enabled Walmart to gain knowledge about the market in a quest to improve operations to meet the needs of consumers. Furthermore, the entry method steered the mitigation of political factors that come with a company doing business alone in a foreign country.
Some political issues like tax rates may pose significant threats to a company, especially to the extent of losing operations in a specific country. Formulating such alliances protected the company from related costs making it successful in the market. On the other hand, the strategy was efficient because it assisted to overcome restrictions and collisions in competition. Often, companies entering new markets face stiff competition from the already established firms in the existing market. As a result, the new companies may fail to sustain their operations because of the difficulties in finding new customers in the market (Bryant et al., 2018). However, the interaction of a new company with an existing one helps to reduce the effects of the competition making it successful. The venture also makes it easy to compete against other companies considering the increased resources to attract new customers by meeting their demands.
Walmart experienced various cultural problems in the international markets entered. First, the preferences of the consumers varied with their cultural stands making it difficult to satisfy different needs. The wide range of consumer preferences in the markets made it challenging to enter a market that was already dominated by local manufacturers in the area. In some instances, the local firms joined efforts to compete against Walmart making its success a nightmare (Benito et al., 2019). Lastly, the linguistic differences, considering that Walmart is an American company made it difficult to gain a presence in a market dominated by different language groups. As such, it required considerable efforts, both managerial and financial to gain a full presence.
Assuming the role of a director at Walmart’s global strategic planning team, entry into Latin American markets could be the most appropriate decision. The move would help to replicate its success considering the dominant share in the Mexican and United States markets. Walmart can adapt to the changes in the new market by adjusting the entry strategies to align with the cultural and consumer needs rather than investing in hypermarkets. The essence is to reach value-oriented customers in the market. The retail market in Latin America is underdeveloped with fewer global competitors making it a good opportunity for the company to invest (Bryant et al., 2018). In developed countries like Argentina and Brazil, Walmart is ranked eighth and fourth respectively thus showing how the markets will pose less competition. Central and South America are also other markets that have not been entered by most companies, making it a good opportunity for entry.
The Latin Americans also pose a range of cultural differences that can be manipulated to boost profitability. The company can generate a high Return On Investments and control possible risks in the economy effectively. The key to business success will be addressing the needs of local consumers in the area in a bid to boost awareness of the products. The Hispanics, for example, portray a unique sense of traditional and conservative culture that serves as a good opportunity for Walmart to utilize (Khan & Lew, 2018). They also have developed a unique pattern of buying that the company can use to gain dominance in the market. The basis for Walmart is to approach the market flexibly with ways to accommodate the needs of target consumers.
On the other hand, Latin America has registered a growing purchasing power with a considerable increase in population. Unlike the United States with 178.8 million consumers, Latin America has 268.8 million active consumers (Khan & Lew, 2018). It is also one of the regions with youthful individuals of age between 15 and 19 years. The growing youth population means an increased buying power in the near future thus an opportunity for growth (Benito et al., 2019). The same philosophies used earlier could be applied in the case of Latin America, for example, hypermarket expansion approaches to leverage its scale and brand while capitalizing on specific consumer needs. The occurrence of smaller towns and lower-income segments in the region offers a chance for Walmart to utilize its bodega formats to enter the market.
Considering the opportunities identified in Latin America, the most appropriate entry method for Walmart to use is allying with some of the leading hyper supermarkets in Latin America. This way, it can incorporate the new commodities into the already known ones thus; it is a proper entry method to the market. It will also be an opportunity to analyze the responses of the consumers before establishing its full operations in the region. The company must learn from the previous mistakes considering the failures it experienced earlier from entering the market directly (Khan & Lew, 2018). The level of sales from the stores will determine whether the company will have a successful entry into the market. Furthermore, the population in the region is sensitive to tradition and conservation thus understanding whether the products meet such requirements is a useful approach.
The implementation of the strategy will first involve scanning the environment and noting the threats and the most viable opportunities to direct the investment. The process will also take in the choices of possible alliance groups to interact with during the period in the region. A SWOT analysis will be done for the groups to determine their levels in the market and determine the suitability of each for the venture. The best groups will be selected and business links developed before any resources are invested (Benito et al., 2019). Another step is to conduct an analysis of internal resources, which determines the extent and size of the investment. The resources required will be stated and specific financial plans made to cater to specific items of the business.
The next step will be developing goals based on the internal and external environment scans. The objectives will involve the appropriate time for entry, the level of commodities to be introduced to the market, and the analysis strategy (Benito et al., 2018). The areas for goal setting will be aligned with finance, operations, marketing, profitability, and human resources aspects. The accurate forecasts for the market trends will then be provided to the top management for discussion and approval targeted toward providing the best operations. The trends will be based on technological aspects, political factors, and economic, regulatory, and social features that influence the business operations in the region (Khan & Lew, 2018). It is also important to determine the likelihood of the alliances being successful as a way to introduce the products to the new market. The measure will be based on the cultural knowledge of the alliance partner regarding the market. The essence is to allow the satisfaction of customers by considering their tastes and preferences in the supply of products.
Benito, G. R., Grøgaard, B., & Rygh, A., (2019). Bringing corporate governance into internalization theory: State ownership and foreign entry strategies. Journal of International Business Studies, 50(8), 1310-1337. Web.
Bryant, S. K. Hunt, I., & Watts, A., (2018). Walmart’s international expansion: successes and miscalculations. Journal of Business Strategy. Web.
Khan, Z., & Lew, Y. K. (2018). Post-entry survival of developing economy international new ventures: A dynamic capability perspective. International Business Review, 27(1), 149- 160. Web.