WAL-MART'S ENTRY INTO THE UK RETAIL MARKET

Wal-Mart's Entry into the UK Retail Market

Table of Contents

Wal-Mart's Entry into the UK Retail Market3

Background3

Entry strategies and customisation in target markets4

Conclusions12

References14

Appendix18

Wal-Mart's Entry into the UK Retail Market

Background

The purpose of this paper is to assess the long-term opportunity (or lack thereof) for Wal-Mart in the UK. Wal-Mart is the world's largest retailer and the UK market offers a logical next step following Wal-Mart's 1997 entry into the European market via Germany. Retail internationalisation is discussed and how Wal-Mart might enter the UK market. Wal-Mart's North American growth is attributed to a unique organisational culture, low cost operating procedures and a significant consumer impact related to the determinant low price, assortment, service and community support store choice attributes. These attributes are discussed in a UK context and conclude that the UK workforce would respond positively to the front-line empowerment of the “Wal-Mart Way”. UK consumers also would support the unique Wal-Mart retail proposition. In terms of efficient supply chains, however, Wal-Mart will not offer any significant competitive advantage over UK retailers.

Introduction

For Wal-Mart to sustain its historical double-digit growth rates, it needs to develop non-US markets. In this context, Europe is a logical target market for Wal-Mart. It comprises highly industrialised, developed nations with relatively familiar religious, government and economic institutions. An expanding European Union (EU) and a common currency in the form of the Euro will facilitate pan-European trade. Furthermore, no major national retailer in Europe dominates in the same way Wal-Mart dominates North America. Finally, there is much room to grow in Europe. One estimate is that Wal-Mart's current global sales equate to only 6 percent of the 1997 total European retail market (Poynor, 1998). Wal-Mart has recognised this opportunity and entered Europe via Germany through the acquisition of 21 hypermarkets from Wertkauf BmbH in December 1997 and 74 hypermarkets from Spar Handels AG a year later (The Wall Street Journal Interactive Edition, 1998a). Future expansion into other parts of Europe is clearly a possibility; however, the UK is the subject of this paper in view of the considerable speculation surrounding Wal-Mart's possible plans for this market.

Specifically, the paper considers how successful the “Wal-Mart Way” can be incorporated into the UK retail environment. To achieve this objective, a review of the appropriate portions of the literature on retail internationalisation is undertaken. The likely options for Wal-Mart in its quest to enter the UK market is then discussed and finally, the key success factors in Wal-Mart's growth and their applicability to the UK will be identified.

Entry strategies and customisation in target markets

The motives for internationalisation are strongly linked to the target markets chosen and the method of market entry. The category specialists have tended to opt for organic growth in that they can replicate their successful format in new markets. Hence, there is a link between entry strategy and standardisation of retail offer. This replication of concept conforms to Levitt's (1983) original ideas on the globalization of markets and relates to Salmon and Tordjman's (1989) ...