Walmart is a chain of discount department stores. It is one of the world’s largest corporations in terms of revenue and largest private employer in the world. In this case, the success and challenges faced by Walmart are discussed. The main question arises that how can Walmart further expand by learning from its past mistakes.
The case briefly discusses its success in America due to its excellent operational Management, which in another sense is a competitive advantage. After the expansion opportunities, exhaustion and limitation in United States, the company decided to start its business and operation in different countries as well as in different continents. The very first business strategy of Walmart is Everyday Low Price (EDLP), which attracts customers by offering lower price than the competitors. Moreover, Walmart’s other strategies are also efficiently well-aligned to EDLP.
Walmart has an exceptionally great supply chain. It has little variety of products that mean fewer customized products, longer lead-time productions and larger batch sizes that allow the firms to supply at low-unit cost. It has always maintained good relations with its suppliers in any part of the world which is one of the reasons of its success. The six major drivers i.e. facility, inventory, transportation, information, sourcing and pricing; and their roles are critical for the better supply chain. Walmart has been operating its logistic system and take benefits on term of inventory costs. All the factors of supply chain of Walmart support each other very effectively to lower its supply cost to enable the EDLP strategy.
After exploiting maximum opportunities of expansion in United States in early 90 s, Walmart planned to seek opportunities throughout the world. In this case, all the attempts of Walmart to replicate its successful United State business Model in Mexico, Canada, Brazil, Argentina, China, South Korea, Japan, Germany, United Kingdom and Africa.
Mixed outcomes from these ventures are identified along with elements like; venture’s location choices, times of entry and modes of entry. Problem is the failure of its operation mainly in Asian country which raised a question for Walmart that what are the chances of its success if the company planned to go for expansion in India in 2013.
Pertinent facts and assumptions
The success of Walmart in the country like Mexico was due to smart investment to attract the more customers and efficient strategy to build good relations with its suppliers to form a strong supply chain. However, initially wrong investments were also made such as making U.S style parking lots at local area store where most people arrive by bus.
Therefore, by learning from past mistakes and analyzing it very keenly can help Walmart to save a lot of money to get wasted and which can be invested in effective expansion plan to reap more profit. It should not only focus on the economic and social norms of the country, but also to understand different strata within the societies of all countries in order to operate in an effective manner. However, for running business, it is necessary to be clean in books of government of that country along with being accepted by the people.
No controversies should be occurred while operating. Even for the expansion or increment in stores it was very important that in which country what strategy should be implemented as by starting its operations Walmart faced different issues in Mexico than Canada. Walmart is in a business in which competition is very tough by the local retailers as well as outsiders. Therefore, formulating the right strategy for the right problem in a right time is crucial. Before starting business and operations in any country, Walmart needs to do effective sufficient research about the customs, economy, traditions, laws and legislation of that country to guard itself against any future problem beforehand.
As in Chile, once Walmart become the Market leader then it became very hard for the competitors to gain any attraction or share in the market. That is why Walmart needs to do continuous effort to sustain its position. Walmart should not force itself to stay in any market for too long period estimated revenue. This is because that would not be much beneficial for the business overall, therefore, Walmart must do some alternation in its main operating strategy to run its business in any country but only if it is worthy.
For example, in Asia due to more resistance to change, people did not appreciated Walmart, and they prefer their local stores or the ones who they know for years. Therefore, for Asia specifically, if Walmart needs to go to start operations and sustain its market share then first it needs to do extensive research which can be very costly. However, the business went smooth in Europe and Africa because Walmart has smartly taken the opportunities there. Like in Africa despite the strong resistance of trade unions, South African competition tribunal agreed upon Walmart’s bid for controlling as take in Mass mart. Walmart had effectively exploited this opportunity and then as a part of approval; it was required to form local suppliers and also avoid job cut for some years. Furthermore, entering into South African market turned out to be a win-win situation, as South suppliers perceived Walmart’s entry as their ticket to the global market.
Following are the concise facts of all the operations of Walmart in different countries.
- Used Mexican center and brought EDLP strategy into the country
- Cheap labor force was available
- Retained former employees
- Acquired poorly managed company
- Similar to Walmart’s US stores but differentiated
- Expanded using smaller stores; similar with Mexico and Brazil.
- Used US-based format
- Slow to adapt to local tastes in Brazil
- Covered up both northeastern and southern part
- Launched middle market targeted middle-class
- Competitive Market
- Urban intensive life
- Missed target positioning
- Acquired poor chains
- Price oriented tough competition and customers’ high loyalty on existing market
- Suppliers’ strong loyalty on existing competitors
- Strict regulation on pricing and location
- Strong influential labor union
- Cultural difference in consumers opposed to U.S.
- Valued luxurious image
- Customer focused on different values
- Acquired retailers that had similar business model to U.S.
- Competitive Market
- Unsuitable strategy (Low Price with Low Quality)
- Acquired major retailer
- Allowing store’s local identity
- Acquired successful domestic payer
- Local partner has similar customer and operations to U.S.
- Local partner’s other business entice customers
- Operated under Mass mart
- Loose competition
Analysis of alternative solutions
1) Improve the Quality and Technology of Existing Stores Along With Expansion
Walmart can do more expansion in its existing stores in the countries where they are already entertaining the customers with a better service and have effective supply chain such as Mexico United States and United Kingdom. It is also necessary to always have an edge among its competitors. It is also necessary to consider other elements to do research for most suitable price to retain its customer and to attract is potential customers. In order to improve the quality, it is very important to keep it employees motivated so that they can work with full devotion but for that company need to invest on training of its employees and giving them more incentives. Now every multinational firms and companies are being socially responsible.
Walmart can invest more in being socially responsible to sustain its reputation rather taking risk by entering into new markets. Penetration in existing markets is usually less risky than entering into new markets. A lot of investment is needed to enter the new markets while less investment with greater return can be expected by improving the Quality and technology of existing stores along with an expansion in the same market. Technology has played a vital role to drive change in almost all aspects of business.
Walmart can go an extra mile in incorporating technological advancement to be number one. By improving many aspects of the existing stores, can be a lot more beneficial than taking risks of entering into new markets and do a lot of research on that first…….
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