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Walmart Case Study

Essay by   •  February 10, 2012  •  Case Study  •  2,835 Words (12 Pages)  •  2,193 Views

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Chapter 1 - Summary

The market forces are dynamic and push the companies for making some strategic decisions. These strategic decisions are crucial when they involve heavy investment and effort. One of the means the businesses expand is by means of entering into foreign markets. This report will discuss about the largest retailers of United States market "Walmart" which plans to enter Australia which is a new foreign market. This move by Walmart is not devoid of speculations and expectation of success and failure. Various factors influence in making a decision for a firm to enter a new market such as current and potential size of market, level of competition, legal and political environment, socio-cultural environment, GDP per capita and, purchasing power and rural/ urban distribution of population. It will also discuss about the methods adopted by Walmart to enter the new market and study patterns. A number of factors have to be taken into consideration before making a move in foreign country as the legislations, competitors and socioeconomic differences exists in each country. Overall, this report will identify the methodology of Walmart of entry in Australian market and describe the forces that may influence in entry of new market place. It will also look into the economic situations of Walmart home country and analyse the advantages of going international while being operating already in diverse markets.

Chapter 2 - Introduction

Walmart is the largest multinational company in retail industry (Cullen and Parboteeah, 2008). Walmart retail store was started by Mr Sam Walton in 1945. He began his career as J. C. Penny management trainee. In infancy of the Walmart store Mr Walton leased a Ben Franklin franchised in Arkansas, United States of America. He kept on struggling in retail industry and by the year 1962 he owned the store under the name of Walton 5 & 7. In the same year he with assistance of his brother James opened the first Walmart Discount city in Rogers, Arkansas. In 1970 Walmart went for public offering at the time when its sales were scoring at $44 million and had 18 stores under its umbrella in small and medium sized towns. It grew to 276 Walmart stores by the year 1980.

The commitment of Waltons' in retail industry gave them consecutive successes. In United states alone Walmart operates approximately 700 discount stores together with 610 Sam's Club, 900 and 2,900 super center that are involved in selling groceries and general merchandise (Walmart). Walmart has been growing since then.

Sam's Wholesale club was introduced by Walmart in 1983. The company signed a joint venture in 1987 with Dallas based supermarket chain and started Hypermart*USA. The next acquisition move was witnessed in 1990 when Walmart acquired wholesale distributor company McLane. In 1992 founder Mr Sam died but the company expanded its operations in Mexico. The year 1994 marks acquisition of Woolco Stores by Walmart in Canada. It carried on with the international expansion and by 1996 it entered in China, followed by Germany in 1997, carried forward by acquisitions in Brazil in 1998. Interspar hypermarkets in Germany and ASDA group in United Kingdom were also acquired in the year 1998. In 2000 it started selling house hold appliances at selected scores only. In the year 2001 it formed alliance with America online for internet ordering by the customer. 2002 came out to be the big year for Walmart. In this year company was crowned America's largest corporation by Fortune Magazine, also developed strong holding in Japan but had to close first store in Germany. In 2002 it opened up 178 supercenters, 33 discount stores and 25 SAMS'S club together with 107 international units. In 2003 it had to sell one of the distribution businesses as divestment however in same year opened a new store in Beijing, China.

The year 2004 witnessed acquisition of 118-Store Bompreco Chain in Brazil and opening up of online music library at competitive rates. In the year 2005 major achievement attribute to introduction of Metro 7 line, opening of third store in Beijing and acquisition of 140 stores in Brazil. The achievements also included in the year 2005 was signing of an agreement with Garth Brooks as a result of which star's music were to be sold only by Walmart. The year 2006 did not bring much success and Walmart had to sale 85 stores in Germany and 16 stores in South Korea while opened only one supercentre in California. In 2007 major breakthrough of joint venture occurred between Walmart and Bharti Enterprises for entry in Indian market. In 2008 major scuffles in organization hierarchy occurred. In the year 2009 Walmart acquired a major stake in Chile's largest food retail. In 2010 it opened its new Latin America headquarters. 2011 marks acquisition of stake in South African retailer. Walmart has a good history of profitability even during the recessionary period. While Wal-Mart's US retail operation enjoyed a boon during the deep recession as many shoppers traded down to its lower-priced stores, more recently it has struggled, logging eight consecutive quarters of negative same-store sales. The slump followed corporate missteps, including a decision to narrow its product assortment and de-clutter its stores, which alienated its core customers. In fiscal 2011 (ends January) overall sales increased by more than 3% vs. the previous year, with net income up by about 14% over the same period. However, all the sales growth came from the company's international and Sam's Club divisions, which grew by 12% and 3.5%, respectively. Wal-Mart US eked out a 0.1% change in sales in fiscal 2011 vs. fiscal 2010.Looking abroad for growth, Wal-Mart in mid-2011 bought a 51% stake in South African retailer Massmart Holdings in a deal valued at about $2.4 billion. The purchase bought Wal-Mart entry into the fast-growing African market. In June 2011 Walmart International acquired a 51% stake in South African retailer Massmart, which operates 288 stores in 13 countries in sub-Saharan Africa, in a deal valued at about $2.4 billion.

Chapter 3 - Environmental Analysis

The environment in which Walmart is operating is crucial. The business environment is comprised of internal and external environment. There are few factors that have to be taken into consideration for evaluation of internal environment such as Walmart mission statement, policies, employees, management, climate, culture, resources, managerial philosophies and leadership style (Figure 1). Walmart mission statement is

"If we work together, we'll lower the cost of living for everyone...we'll give the world an



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