Walmart’s Early Global Expansion Strategy
Walmart is an International Company, which has experienced fast growth in the global market in recent years. The company has diversified its international operations to various countries, including Mexico, Japan, Canada, Brazil, and China, among others. Low price Model is a major strategy that Walmart uses when venturing to new international markets. While the Company was introducing its products into new global markets, it took the option of selling the products at low prices in order to acquire a larger market share and penetrate deeper into the market with ease.
It is evident that this strategy worked effectively in some markets such as the United States but failed in other markets such as China and the U.K. The company has also successfully entered into joint ventures as a way of introducing products in foreign markets. Joint venture is a unique and effective strategy for market expansion in the business world. Discounting is a strategy that Walmart International has also used, which has proved to be successful in some regions but unsuccessful in others. After its failure in Germany, Walmart has established a highly qualified leadership strategy and applied effective leadership theory in its day-to-day operations, which has seen great changes in its current new markets.
Reason for Entering Canada and Mexico
Walmart chose to enter the Canadian market because the business environment in Canada was very close to the United States’, and according to its management, it was an easier destination for a new entrant. The proximity of Canada to the US made it easier for transportation purposes, and at the same time, enhanced cost reduction and management (Etgar, M & Rachman-Moore, 2010). The allocation of resources also proved to be easier for Walmart due to the convenient distance, and this turned out to be very successful.
On the other hand, Mexico turned out to be a very attractive market for the company due to its large population. It is evidently known that in order for any business to succeed, proper marketing research on its population is essential. The larger the population is, the more likely the demand for goods and services. The stakeholders’ theory provides for the satisfaction of interests of various stakeholders of a given firm. In the case of Walmart, Canada, and Mexico provided an opportunity to maximize returns for shareholders. In addition, positive reception made it easier for Walmart to provide services and products that served the interests of customers in those markets.
Walmart had less interest in the European market since it realized some characteristics that would not be beneficial to the company as a first-time market entrant. This also called for effective leadership that would enhance its decisions and strategies while going international in this region. The market in Europe was at the maturity stage, and this meant that Walmart had to work very hard in order to acquire the existing market from other existing retailers who had already established their brands and captured a sizeable market share (Hitt, Ireland & Hoskisson, 2014). This is clear that Walmart also required proper market and competitor’s research before introducing their products in Europe.
The company’s products were not highly recognized in Europe, and this required a proper strategy to create publicity for its products in order to achieve a positive response. This state of European market called for the application of leadership theory, and given that it was a big risk to move to Europe, the company made a decision to enter Mexico and other markets near the United States first. It is essential to understand the political stability of a region, cultural practices, buying habits, economic stability in order to assess the chances of surviving and succeeding in a foreign market.
Cultural Problems in International Market
In most cases, Walmart International had to employ American employees, but this did not work properly in some foreign markets such as Germany. Generally, leadership theory calls for sound management practice as well as sensitivity to diversity. In this case, the management process of employees in America is not the same as that in Germany or other foreign markets.
Most countries embrace employee feedback, which was not the case with Walmart International, where top management made all the decisions without engaging subordinates and other lower cadre employees. The language barrier was also a cultural problem that the company faced, and this led to poor communication between customers and employees who mostly came from the United States (Christopherson, 2006). In applying stakeholders’ theory, Walmart ought to have embraced diversity in its human resource in order to serve the interests of customers and employees alike.
Early Strategies that Succeeded and those that Failed
Introduction of products at a low price succeeded in most of the foreign markets; in Mexico, success was influenced by the country’s large population. The expansion in Mexico was fast, and this also led to a joint venture with retail conglomerate Cifra, which later saw Walmart acquire majority shares. Currently, Walmart has its businesses running in more than 145 cities in Mexico. Low pricing strategy is a well-known marketing tool that easily helps products and services penetrate in the market fast due to their affordability by the target market. The strategy helps in combating competition, thus increasing the volume of sales and profitability. The highly concentrated population in Mexico consists of ages between 16-24 year olds, and this was the target market for Walmart.
Giving discounts has also been a very effective tool for Walmart in some foreign markets; however, this has been unsuccessful in other countries such as Germany. After struggling in Germany for years, Walmart was forced to sell its shares to a competitor, Metro Supermarkets (Peng, 2008). Walmart’s stakeholder theory did not work well with most employees in Germany. The company was poor in addressing employees’ values and interests. For instance, close control management strategy used by Walmart did not go down well with employees in Germany who are used to freedom in their work.
Lessons Learnt from Experience in Germany and Japan
Leadership and Management – Walmart’s entry into Germany market turned out to be a very costly struggle. There was a continuous impact of poor management and leadership, mainly resulting from failure to analyze Germany’s local market and culture before venturing there. Employees and customers also claimed to be very frustrated, thus showing that Walmart had failed in corporate social responsibility and leadership.
Generally, effective leadership and management are essential tools in business, since they highly determine its future survival and success. This same case applied in Japan, where the company was blamed for its poor leadership and management strategies (Ryu & Simpson, 2011). This indicates that the company needs to improve its application of corporate social responsibility and ethics theory.
Research and Development – In Japan, despite initial challenges, Walmart survived and has even announced profits after focusing on strategies that promoted the satisfaction of stakeholders’ interests. Proper research and development should be carried by each and every company that intends to enter a new market. This helps in acquiring proper knowledge of the market, customers, suppliers, competitors and acquiring any other relevant information that would prevent poor decision making (Lymbersky, 2008). Walmart should have keenly carried out these strategies before entering the market.
Highly Trained and Qualified Personnel – It is clear that the reported business failure in both markets was as a result of poorly qualified personnel and poor treatment of employees. Employees require effective and quality training in order to cater and enhance the employee-employer relationship and also employee-client relationship effectively. The highly qualified management team is also very important, especially when starting a new business in essence to making the right decisions and putting the right strategies to action.
Christopherson, S 2006, ‘Challenges Facing Walmart in the German Market’, in S Brunn (Ed), Wal-Mart World: The World’s Biggest Corporation in the Global Economy, Taylor & Francis, New York, pp. 7-12.
Etgar, M & Rachman-Moore, D 2010, ‘Geographical expansion by international retailers: A study of proximate markets and global expansion strategies’, Journal of Global Marketing, vol. 23, no. 1, pp. 5-15.
Hitt, M, Ireland, R & Hoskisson, R 2014, Strategic Management: Concepts and Cases: Competitiveness and Globalization, Cengage, CT.
Lymbersky, C 2008, Market Entry Strategies: Text, Cases and Readings in Market Entry Management, Christoph Lymbersky, Hamburg.
Peng, M 2008, Global Strategy, Cengage Learning, OH.
Ryu, J & Simpson, J 2011, ‘Retail internationalization: Lessons from “Big Three” global retailers’ failure cases’, Journal of Business & Retail Management Research, vol. 6, no. 1, pp. 1-10.