INTERNATIONAL OPERATIONS

International Operations

International Operations—Wal-Mart

Introduction

In today's world more and more companies are internationalizing. Companies are finding it difficult to rely on the home market when they want to expand their scale in terms of operations and profits. As a result, companies are looking to move overseas to spread the risk, generate growth and maximise profits. Wal-Mart is one example of such a company. Wal-Mart is one of the largest retail companies in the world. The first Wal-Mart store opened in Arkansas, USA in 1962. Its first overseas store opened in Mexico City in 1991 and since then Wal-Mart has opened in other parts of the world, including Canada, South Korea and the UK. After problems in Germany and South Korea, Wal-Mart took a slow and gradual entry into the Japanese market. Wal-Mart entered Japan in 2002 with a 34 percent interest in Seiyu, Japan's fifth largest supermarket retailer (Hodgetts, Luthans and Doh, 2006). This discussion will look at the international management process undertaken by Wal-Mart in Japan. There are five components of this discussion starting with the reasons for Wal-Mart's international expansion. The next section deals with Wal-Mart's entry strategy into Japan. The third section explains Wal-Mart's experience with Japan's distribution system while the fourth section attempts to single out what is the most important thing for Wal-Mart to be successful in Japan. The final part of the discussion examines the cross-cultural challenges faced by Wal-Mart with its employees in Japan.

What are the major reasons for Wal-Mart's decisions to go global?

A company can have many reasons to go global including an aim to expand its market. The major advantages are a growth in revenue and increased brand and shareholder value. In Wal-Mart's case it was already a dominant home player and thus has no other choice other than expanding overseas to counter the saturating market in the US.

Experience and good leadership

Wal-Mart is one of the biggest companies worldwide and have a huge market presence. This has been possible because of effective management and cost cutting procedures on their part. It was this management that Wal-Mart was relying on to give them a chance of succeeding overseas.

Great opportunities in overseas

Wal-Mart was already doing business successfully in the U.S., where it had a strong market position (See appendix). However, the US market is very competitive; and many major competitors such as Best-buy, K-Mart and Target were creating a lot of problems. Although, these competitors were still well behind Wal-Mart in terms of size and market share, however Wal-Mart was hampered by this competition as manufacturers and suppliers started to lower their price and began eating into Wal-Mart's market share. Therefore it was a good idea to expand into new markets where the turnover was huge. Wal-Mart wanted to tap into these non-US markets to gain more opportunities to help keep their annual growth in the double digits (Deresky, 2006).

Increasing Profits

According to Deresky (2006), Wal-Mart expanded overseas to seek economies of scale. This would have increased both demand & supply and volume buying, which in ...