Wal-Mart Takes On the World Questions 1. In which countries has Wal-Mart done well? Can you identify any common consumer, market, retailer, or entry strategy traits across these countries that might account for Wal-Mart’s success? Solution: Wal-Mart has done well in the United States, Canada, Mexico, Puerto Rico, Hong Kong, China, and England. The United States, Canada, Hong Kong, and England are relatively affluent markets; Mexico is in-between and China and Brazil lag behind Mexico in affluence. Thus, the first trait of Wal-Mart’s success might be countries with healthy economies—at least healthy enough that customers have some disposable income. Another characteristic is that these markets may not be as demanding as the Germans and Japanese. Perhaps they are more interested in lower price (the British seem to be like the United States in this regard). Obviously price would be important in Mexico and China, where incomes are lower. Canada and the United States are considered predominantly Anglo countries, so perhaps the success of Wal-Mart in these countries along with the United Kingdom is not surprising as these consumers share a similar heritage and even a common retailing approach. In all of these countries, Wal-Mart has either had good partners (Hong Kong, Mexico, and China) or bought successful store chains (Canada and Puerto Rico). Thus, access to local market knowledge is an important factor in successful entry. This is especially true of the United Kingdom, where ASDA had already adopted and adapted the Wal-Mart philosophy for their market. Where Wal-Mart has not used existing expertise (Germany), they have not been successful. 2. In what countries has Wal-Mart done poorly? Can you identify any common consumer market, retailer traits, or entry strategies across these countries that might account for Wal-Mart’s lack of success? Solution: Germany, Japan, Brazil, and Argentina have not been good entries for Wal-Mart. In Germany and Japan, consumers are more demanding and more quality conscious. They seem to be less interested in the type of goods that Wal-Mart sells. In both locations, real estate and market conditions stymie Wal-Mart’s growth—whether this is unions or convoluted distribution systems. In both Japan and Germany, Wal-Mart bought existing chains with shabby stores and poor sales. Perhaps the lack of success of their acquired firms accounts for why Wal-Mart management did not utilize the expertise of those managers. Another possibility is that Wal-Mart had had such good success in Mexico and Canada that it was overconfident of its approach when it entered the German market. Since then, it seems to be more willing to listen to local partners. In Brazil and Argentina, there are many factors against success— economic factors, real estate, and crowded cities demanding different store formats. Also, Wal-Mart found it hard to compete with Carrefour, which is the second largest discount chain in the world. Although Carrefour has some stores in Mexico, Wal-Mart had not previously entered a country where Carrefour was entrenched (it stays away from the German market) and is a formidable foe. So, in these markets, Wal-Mart encountered more competition than it had had anywhere else except in the United States. 3. In your opinion, will Wal-Mart be successful in Japan? Why or why not? Solution: Japan will probably be like Germany. Wal-Mart would have to improve the quality of their assortment, possibly change store formats, and give themselves a more upscale look. They would also have to change their pricing strategy and promotional policies in order to cater to the Japanese consumer. Japan is difficult to market in because of their protectiveness of their markets and the closed nature of their distribution system (this is changing slowly). One thing that Wal-Mart has going for them is that they are American and the Japanese seem interested in American products. Retailers, however, in Japan have learned the hard way that they must adapt very, very carefully to the Japanese market. Given that Wal-Mart still has not cracked the market in Germany, one has to wonder about Wal-Mart’s ability to do this—especially as Wal-Mart. They might consider that some countries are just not amenable to the standard Wal-Mart image and approach. In addition, their slow approach to entry is giving Japanese chains (who can be formidable competitors) time to change their strategies to counter Wal-Mart. 4. Beyond India, what countries do you think Wal-Mart should consider entering? What factors are important in making this decision? Be prepared to defend the countries that you choose. Solution: Some possible choices are Australia, which has the same Anglo heritage other Southeast Asian countries such as Thailand; other European countries such as France, Italy, and Spain (a very likely market); the Scandinavian countries; Holland; Belgium, etc. Most of the Middle Eastern and African countries are not viable candidates at the time, with the exception of South Africa (which is not particularly large or rich). Neither are the South American countries, with the exception of Chile. Most of them have economies and governments that are highly volatile and are in the economic doldrums. If countries are not large or do not have a significant population, Wal-Mart’s bottom line will be better enriched by opening another store in the United States. It takes a lot of population to justify the high costs of entry by Wal-Mart.
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