Walmart is an American-based multinational retail entity with a large chain of discount and silos stored. The company was established in 1962, became a corporate in 1969, and joined the New York Stock exchange in 1972. The company's efforts to go international started in the 1990s. Walmart attempted several strategies, some of which were a failure, while others were successful. Today, retail has channels in different countries, and it used various techniques to establish its entries.
Walmart Strategies
Walmart’s first strategy was the low-price entry strategy. The entity expected that the low-price model would be sufficient to win market entry in several countries, as it was the case with the United States. However, it experiences several backfires, including in Mexico, China, and the United Kingdom. The company's efforts to offer customers with low-price products was highly resisted because the countries were against starting a retailer. In Mexico, the retailer experienced high competition from the local retailers that made alliances and bought joints to compete against Walmart.
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Walmart also used the logically sequenced approach of entry into new markets. The company opted to enter into every country at a time. This is because the business lacked the necessary financial, organizational, and managerial resources to pursue and make simultaneous entries in different nations. The approach allowed Walmart to apply the knowledge gained from the initial entry to eliminate mistakes.
The primary reason why Walmart decided to concentrate on entering the Mexican and Canadian rather than expanding in the Asian market was that both markets were close to the American market, where the retailer was thriving. Other countries that the company chose included Brazil and Argentina; they were among the largest in Latin America. Walmart did not consider the European market for the first entry because of the unattractive characteristics. For instance, the European retail market was mature. In this case, a new entrant would have required taking a market share away from the existing entities, which would have been difficult. Besides, the European markets were geographically distanced and different from American culture. It would have taken Walmart quite a tremendous financial and management effort to manage it in the European and Asian markets.
Cultural Challenges
One of the cultural challenges that Walmart experienced during the nationalization was a rejection of the cheap-price products. One of the reasons why the retail failed is because its low-price products were rejected In the European market. Another challenge is that Walmart did not have enough financial and management resources to facilitate the expensive entry in the developed and mature markets. Walmart failed to make an entry into the Asian market because it lacked a strong customer relationship. In China, Walmart experienced cultural-linguistic, which was a huge hindrance to success, mainly due to the communication barrier.
Between the low-cost and the logically sequenced approach of entry, the later method of entry was successful. The first strategy was rejected hence resulting in a total fail of the entity. For the second approach, the management learned from every entry and applied similar knowledge on the next entry. It helped in avoiding the previous mistakes that might have occurred before.
One of the lessons that Walmart learned from German is never to underestimate things when making a new entry. Walmart underestimated several critical factors when entering the German market, hence resulting in a costly struggle. For instance, the German retail chains were always dispersed and in poor locations. Managers also ignored feedback from employees. The management was unwilling to take up any advice and suggestions from the junior employees. This resulted in frustration among employees and low employee morale, thus negatively impacting its overall efficiency. Another cause for the failure was Walmart's management's failure to analyze the local market and customers' demands and expectations. The display was annoying for the customers because discounted products were hidden while the premium products were displayed in the conspicuous shelves. Germany is the home of discounters, and customers were offended when they could not easily reach the discounted products.
In Japan, Walmart experienced failure because it did not consider customers' perceptions; it experienced resistance from the Japanese managers. In Japan, low-price products are considered low quality. Walmart also had small shopping spaces, which restricted customers to only shop a small quantity. The management also failed to orient the stall towards the Japanese culture and simply assumed it would easily acclimatize to Walmart.
Characterizing Walmart’s Latin American’s Strategy
Walmart's expansion strategy was characterized by closeness and similarities of cultures into Latin America. The company chose the Latin American nations because they are culturally close to the United States. The strategy provided a platform for Walmart to utilize its existing managerial and financial resources to tap into the emerging market while reducing the risks associated with operating abroad. The strategy targeted countries like Mexico, Argentina, and Canada. In China, the United Kingdom, India, and Japan, Walmart used the strategy characterized by market-seeking initiatives. The entity had a sharp eye for new market developments concerning a huge market share, growing purchasing power, and economic liberation.
Walmart's global expansion into Brazil, China, and India resulted from the anticipated view to be commanding the highest economic and purchasing power soon. There was a possibility that Walmart would continue to grow in case there was no economic crisis. Through the use of the international expansion policy, Walmart was expected to continue expanding. The system would allow the company to act in response to product features, flexibilities, regional operations, and market necessities to satisfy the customers' needs.
Walmart has used supermarket acquisition in the past. The company can purchase supermarkets at relatively competitive prices. Another opportunity for the company is the current economic crisis experienced by the competitors. The fact that the competing entities are suffering from credits and market disintegration allowed Walmart to use the merger or acquisition to take advantage of the already developed financial solutions and local knowledge of those companies it acquires or merges with.
Expansion's greatest challenge is cultural differences. Walmart has struggled to understand its customers and their consumption patterns. The entity needs to understand the market, customers, and the changing consumption pattern in various countries to attain its goals.
Walmart’s Future
Walmart's target countries in the future expansion included China, India, Canada, and South Africa. Walmart aimed at increasing the number of stores in China by 115. It also aimed at remodeling and refreshing the already operating stores. Another future aim was to make the entity be perceived as the most trusted in China and improve the perceived quality of the products it sells. The Chinese market aims to provide online retail as an opportunity for Walmart to compete with other renowned entities like Alibaba. With the availability of the acquired online retailer and release of the cell phone app that allowed people to order goods online, Walmart would be on the right track.
In India, foreign businesses are restricted from owning the majority of grocery stores. To deal with the barrier, Walmart sorted to establish partnerships with local entities hence creating a joint venture. The entity also aimed at using the wholesale strategy as there are no government restrictions on wholesales. By 2020, the company's objective was to triple the number of stores and make them 50. The one-stop type of shop would target small business owners and not everyday consumers. In the Canadian market, Walmart aimed to use the fall of foreign businesses to increase their position in the market. After Target's exit from the Canadian market, Walmart purchased 13 of the former stored and distribution centers. South American market was faced with a lack of infrastructure consistent distribution networks. The fact that there are no enough shopping malls makes it an excellent target for the entity. Walmart plans to use the South African market as a bridge for entering other emerging African markets. Africa, as a continent, is an excellent target for Walmart's expansion.
Walmart’s Response to Pressure
Like any other entity, Walmart’s exposure to the realities of production and sales in emerging and developing regions led it to several challenges. Walmart was faced with various scandals, including the corruption issues in Mexico and India. It also had problems with poor working conditions for employees in the garment factories. Several workers lost their lives in Bangalore, Dahaka, and Bangladesh. As a response, the entity, in collaboration with Gap Inc., developed the Bangladesh Worker Safety Initiative to ensure employee safety in Bangladesh factories. Even though Walmart has significantly tried to ensure employee safety, the assurance is no longer there, especially with the Obama administration's suspension. The response is inadequate. Walmart continues to struggle with managing the extent of global supply chains with multiple layers of suppliers .
Conclusion
Global expansion is critical for every business. Not all entry strategies apply to all nations. Therefore, a company needs to research and understand the market and target customers to understand the most appropriate entry strategy. It is also essential to take advantage of opportunities and develop a foundation for competence in a foreign nation. Like Walmart, entities must be ready to deal with various challenges and risks that may hinder their successful entries into new markets.
