Case Study: Wal-Mart's Foreign Expansion

Case Study: Wal-Mart's Foreign Expansion

Introduction

Today's industry has become so competitive that in order to gain competitive advantage business have to expand internationally. Actually, the phenomenon of globalization has determined several firms to spread out to overseas markets. Foreign expansion provides various benefits to the business such as increase in customers, access to talented pool, faster and better products, increase in profit, and better future. A business can have all these benefits if they successfully understand and adapt the culture of countries. Behaviour, patterns, and traits of consumers should effectively be understood (Rowell, 2003). Culture and consumer behaviour is very important to understand prior to expansion. In this paper, we are going to evaluate the success of foreign expansion of Wal-Mart with reference to a case. The purpose of this paper is to let readers know about the importance of understanding foreign culture and consumer behaviour patterns as they play the most important role in success of a business.

Company Background

Wal-Mart is largest retailer with tons of benefits above the rest. The success strategy of Wal-Mart is based on low price. It has highly efficient logistics, operations, and information system that keep inventory to minimum and ensure against both understocking and overstocking. Wal-Mart is the world's largest retail operation, with over $400 billion in annual sales, 4,100 stores in the United States, and 3,500 stores overseas. In 2009, Wal-Mart was the highest-volume grocer in the United States, with approximately $100 billion in sales and a 21 percent share of the grocery market. Wal-Mart also operates several international markets, but these are the United Kingdom, Canada, Japan, Mexico, Brazil and China. This product range includes both national and private-brand manufacturers (McNeill, 2006).

Question # 1

Facing slow down growth in U.S. Wal-Mart started to expand its operations, in early 1990s, it entered into Mexico. Wal-Mart joint itself with largest retailer of Mexico, Cirfa. The purpose of was to open range of superstores that sell both general merchandise and grocers. The strategic reason of entering Mexican market was that, consumers of Mexico preferred a low cost product which was exactly in alignment with the success strategy of Wal-Mart. Over some time period, the population of Mexico of 100 million grew increasingly affluent, driving demand for consumer goods. Environmental reason to choose to enter Mexican market was lesser competition and it had local company to join hand with. Wal-Mart decided to go for joint venture with Cirfa because it reduced the risk and help the company to obtain cheap market knowledge. Moreover, Wal-Mart took the opportunity as in mid-1980s; Mexico dismantled its barriers to trade and relaxed restriction of foreign investment (Bustos, 2011). Wal-Mart succeeded in Mexico because it learned about the unique shopping behaviour of Mexican consumers. They noticed that majority of Mexicans do not have cars like their American consumers therefore they decided to open stores near to the residential areas so that people could easily walk and purchase from these stores.

Question # 2

The staffing approach was the ...