Wal-Mart’s Successes and Failures
Wal-Marthad its fair share of successes and failures in different parts ofthe world. Indeed, the fact that it has become the third largestretailer in the world, at least, in terms of its sales. Wal-Mart wassuccessful in varied countries such as Mexico, Canada and UnitedKingdom. The success of the company in these countries may have beentriggered primarily by the competitive and aggressive pricing, andcapitalization on the availability of cheap labor, which allowed forthe maintenance of low prices and costs. In Mexico, for instance, thegiant retailer is noted to have attracted customers through itsconsistent policies of low pricing, as well as the well-stockedaisles. On the same note, the company kept its logistic costs low inthe supply chain by partnering with a local trucking company.
However,the company had a hard time entering and conquering some markets suchas Brazil and Argentina, and was even forced out of other marketssuch as South Korea and Germany. In Brazil, the stuttered entry andgrowth of the company was blamed on its product mix. It is noteworthythat its product mix was deemed more suitable for U.S suburbanitesthan Brazilians. This would indicate that sufficient research had notbeen done regarding the best way of approaching the market, as it isalways imperative that a retail chain customize its offering to theneeds of the target market. In addition, the stuttered growth wasblamed on the EDLP model (Everyday Low Prices model) was contrary tothe periodic cycles of markups and discounts that are common in theBrazilian market. In the case of China, the market was extremelyfragmented and also came with immense competition, not only fromother foreign retailers such as Tesco, Metro and Carrefour, but alsothe hundreds of small family-owned stores. On the same note, Wal-Marthad a difficult time adapting to the local tastes of the Chinesemarket. Similar cultural variations also accounted for its failure inthe German market.
Nevertheless,its low pricing, logistics, product variety and supply chain enhancedits capacity to succeed in a large number of markets. Product varietyensures that the company can cater for the needs of a more diversemarket, while low pricing ensured that almost every person couldafford the items. Logistics and supply chain allowed the company tocut its operating costs in the long-term and short-term.
Successful Modes of Entry into Foreign Markets
Thegiant retailer used a number of entry modes in its foreign markets,some of which were successful and others unsuccessful. However, themost successful entry mode was by acquisition of existing businesses.Acquisition underlines the processes where companies buy otherexisting companies in the market, thereby absorbing them into thefold (Cantet al ). This was seen in the entry of Wal-Mart into the UnitedKingdom market where it acquired Asda, a particularly successfulretailer, which had more than 200 stores, and whose sales amounted toabout $19 billion. There are varied reasons why this mode of entryworked for the company. First, it is noteworthy that had an alreadyestablished market, in which its reputation was already solid. Thismeans that the acquisition eliminated the cost of marketing forWal-Mart or even establishing new structures in new markets. Ofparticular note is the fact that even after the acquisition, Wal-Martdid not change or replace the Asda brand, as this was already apopular brand in the country. In addition, it is noteworthy that thetwo retailers would have been having the same target market. Thismeans that the two would be competing for consumers, a factor thatwould have cut their sales and profits in both the short-term andlong-term. However, the acquisition of this already establishedretailer was a technique of eliminating competition for Wal-Mart inthe new market. This acquisition, particularly, placed it at a higherplatform to not only undercut rivals’ prices, but also expand itsinventory to incorporate general merchandise.
However,the mode of entry was determined by the environment or the type ofmarket that the retailer was targeting. Indeed, it is noted that thecompany used different modes of entry to get into the target market.For instance, the only way that it could have entered the Africanmarket was through the acquisition of a majority stake in an alreadyexisting company Massmart, which had 377 stores in varied Africancountries, a large number of which were in South Africa.
Recommendations for Success in the African Market
Theacquisition of a 51 percent stake in the already well establishedMassmart allowed Wal-Mart to have a semblance of success in theAfrican market despite the politics and immense influence of tradeunions. However, this would not be a guarantee for further success inthe African market in the future. Indeed, there are varied strategiesthat the company should use to be successful in this market.
Inthe first year, the company will have to establish a defining modelof business in the continent. In this regard, the EDLP model wouldcome in handy in attracting consumers into the retail chain. Ofparticular note is the fact that competitive prices play a crucialrole in determining the success of a business in Africa as a resultof the high rates of poverty. In essence, offering competitive pricesgoes a long way in enhancing its competitiveness in the market.
Thesecond year should complement the achievement of the first yearthrough enhanced and targeted marketing in every branch. Themarketing strategies should be customized to the specific countries,although discounts and reduced prices have been seen to beuniversally applicable in the African market.
Inthe third year, the company would need to align itself to thecultural ways of the people in the existing markets. As much asAfricans value their cultures, the rapid modernization has ensuredthat a large number of people crave for things that are foreign(Andrianaivoand Charles67). It is only in the recent times that African markets havecustomized their strategies to suit the African ways of lives. Inessence, such strategies would come in handy especially in attractingthe upper classes of people.
Inthe fourth year, the company needs to form alliances or partner withlocal suppliers and logistic companies, particularly those that areprimarily based in the countries it is situated. Such partners wouldenhance its reach in the interior parts of the countries where theproducts it retails are primarily produced in(Ismailet al 56). These partnerships would enhance the reputation of thecompany and allow it to penetrate other parts of the country, whilealso cementing its capacity to have fresh produce at any time of theyear at a low price(Ismailet al 56).
Inthe fifth year, the company would need to increase its offering inthese markets and diversify beyond the foods and perishablecommodities. Venturing into other aspects of the market such asapparel and merchandise, as well as electronics would increase theadaptability of the company in the long-term, while also enhancingits competitiveness and profitability.
Andrianaivo,Mihasonirina, and Charles A. Yartey. Understandingthe Growth of African Financial Markets.Washington: International Monetary Fund, 2009.Print
Cant,M C, Heerden N. Van, and Hellicy C. Ngambi. MarketingManagement: A South African Perspective.Cape Town, South Africa: Juta Academic, 2010. Print.
Ismail,Tashmia, Nicola Kleyn, and Gwen Ansell. NewMarkets, New Mindsets: Creating Wealth with South Africa`s Low-IncomeCommunities Through Partnership and Innovation.Auckland Park, South Africa: Stonebridge Books, 2012. Print.