Wal-Mart in Various Markets Case Study

Introduction

Wal-Mart is a leading multinational company from the United States. The leading retail company experienced growth since its establishments, which resulted in presence in more than 15 countries across the globe (Czinkota & Ronkainen, 2012).

The successful expansion of Wal-Mart in the domestic and international market is mainly down to the cost leadership strategy that enables saving of customers’ money through discounted products.

Although the company experienced constant expansion of global markets, there have been instances of failure, particularly in Germany, Japan and Korea. The success and failure of the company in some markets require an analysis of the company’s strategies to identify areas of weaknesses and recommend strategies for success.

Cultural problems encountered in various markets entered

In expansion into various international markets such as Japan, Germany and South Korea, Wal-Mart experienced cultural challenges, which compromised success in the new markets. For instance, in Germany problems with management culture and failure to understand the local culture resulted in the company’s failure.

For example relationship with employees was not appropriate, as the company treated German employees like American employees, which resulted in annoyance and low morale. The company violated on ethical codes with their spying on employees proving unacceptable among Germans (Ivey Publishing, 2013). The tendency to disregard employee feedback many employees feel ignored and they became apathetic about the company.

The company failed to understand the local culture and buying behavior of Germans, which meant inadequate responsiveness to market needs. Wal-Mart has an arrangement that results in much time spent in the store, which is against people’s preferences in foreign markets. In fact, most customers prefer time efficiency and want the least time spent in retail stores.

The situation was similar in Japan and South Korea will cultural variances resulting in employee frustration and lack of customer satisfaction leading to poor organizational performance in the countries. Unlike the popular perception of Wal-Mart in America and other foreign markets, the brand became unpopular in Germany, Japan and Korea (Ivey Publishing, 2013).

Successful strategies for Wal-Mart in foreign markets

The success of Wal-Mart in expansion to global markets is based on its unique retail strategies, which developed a strategic framework to ensure continuous and sustainable growth. At the core of the successful strategy is the policy of maintaining low cost operations to ensure customers buy products at the lowest prices.

The customer needs are at the center of all store formats in global establishments, which results in higher growth rates than competitors in the global foreign markets. Saving money for customers is the key driver for growth as opposed to competitors who focus more on growing return on investment through profitability and sales growth.

More importantly, the company endeavors to establish fruitful relationships with stakeholder, especially employees and suppliers as well as detailed consideration in the design of outlets and merchandizing approaches. The company creates the spirit of high performance and takes on every opportunity to save operational cost.

The strategic formula enables Wal-Mart to achieve an effective marketing mix by providing high quality to customers, effective placement, and pricing of products. The industry leadership and successful global expansion are also due to the cost saving approach, which the retail store passes on to customers through competitive pricing.

The company has major retail capabilities and endeavors to improve the retail processes through central management and investment for long-term gains (Ivey Publishing, 2013). The company management is ready to test, adapt and use effective merchandizing techniques in new markets for success, especially by learning from the success of other retail stores in the market.

Through a major investment in the distinct cross-docking system of managing the inventory, the company achieves economies of scale, which is a major aspect of the low cost and price strategy.

Cross-docking ensures continuous availability of products, which are sold immediately without necessarily storing them. Furthermore, the low pricing strategy means the retail giant does not need frequent promotions that add costs (Ivey Publishing, 2013).

Experience from Germany and Japan

From the cases Wal-Mart’s expansion to Germany and Germany, it is apparent that cross-cultural and international business presents major challenges even for large multinationals (Czinkota & Ronkainen, 2012). The experience of the two countries indicates the need for multinational companies such as Wal-Mart to be aware of local cultures and customize the market proposition to the foreign markets.

For effective localization of products and services, organizations should conduct adequate cultural research before moving to new countries and ensure continuous assessment of local cultures. Continuous assessment enables firms to measure their localization strategies and develop adaptation strategies in markets.

The experience in Japan and Germany markets is a clear indication that multinationals can fail in foreign markets unless they understand the local culture to leverage on the benefits of the international markets. Lessons from Wal-Mart’s experience in Germany and Korea offer important lessons for international companies seeking global expansion (Czinkota & Ronkainen, 2012).

Investing away from the host country requires several considerations including culture. Although foreign markets offer opportunities for expansion and market growth, there are challenges such as indoctrinated cultural biases that call for effective strategizing.

Ghemawat’s CAGE– Distance between US and SA

The four major dimensions of distance elaborated by Ghemawat reveal critical differences between the United States and South Africa. Wal-Mart must consider the cultural, economic, geographic and administrative differences.

Geographically, the company will have to adjust its transportation and communication functions because it deals with bulky products, which require effective coordination. Culturally, there is the relative difference in American and South African consumer tastes and preferences, which also covers aspects of media communication (Czinkota & Ronkainen, 2012).

Potential in African market

Africa has a market potential owing to an increase in the number of middle class people in the continent who are buying from the food industry. Even in global economic downturns South Africa and other parts of Africa experienced positive growth in major industries.

Governments and other stakeholders are making significant investments in infrastructure, which supports the distribution of products and services as well as market penetration (Ivey Publishing, 2013). Furthermore, various food products are in short supply because of limited production potential, a gap that can be filled by Wal-Mart.

African companies dominate the food retail industry and the industry accounts for significant parts of the total revenue from retailing. Convenience is a major aspect of the growing middle class, which represents an opportunity for Wal-Mart.

The food retail industry is going through transformation in terms of market preferences, retail trends and consumer tastes, with most consumers preferring healthy living and general wellness. Apparently, Africa, especially South Africa has potential for expansion of Wal-Mart and penetration of untouched market territories (Ivey Publishing, 2013).

Cultural challenges in Africa

Wal-Mart must consider the diversity in African cultures, understand and respect the cultures for success. For instance, with an estimated 800 languages used on the continent and more than 11 official languages in South Africa, the company must develop effective strategies. Other cultural problems include the preferred relationship-building approach in Africa as opposed to the bureaucratic approach of the west.

The continent has a general culture of autocracy and strict adherence to hierarchy. The system is more political and less transparent with high prevalence of paternalistic attitudes in specific cultures. Furthermore, there is significant individualism in a hugely collective society. There is a relatively higher level of ambiguity and people do not have high value in the concept of time (Ivey Publishing, 2013).

Recommendations for success in Africa

From the discussion of Wal-Mart’s global strategies, the company management has an obligation of ensuring effective management of stakeholders in the emerging African market. It is important for managers to understand the socio-political and cultural environment of the African market and develop a clearer feeling of the difference in cultures between the company system and Africa.

There should be a close involvement of the corporate center in developing and executing effective entry strategies for the retail company and the CEO should maintain constant engagement with stakeholders directly. The organization and its leadership should not use acquisition to avoid the responsibility of direct engagement with stakeholders.

Indeed, while the target company for acquisition may provide important advice, Wal-Mart must not view it as a substitute to stakeholder engagement. More importantly, the company should embrace effective communication and feedback to obtain an understanding of issues in the African market to design strategies aimed at solving the specific issues.

Success in Africa entails making sacrifices in the present to reap benefits in the future. Respecting the African culture and way of doing things is important in achieving support for company operations in the continent. The company should take part in the support of socioeconomic development projects.

References

Czinkota, M. & Ronkainen, I. (2012). International marketing. Boston, MA: Cengage Learning.

Ivey Publishing (2013). Walmart’s African Expansion. Web.