Being a global corporation, Walmart has to consider numerous ways of penetrating domestic markets. The appearance of any new entities is complicated by the already saturated state of most markets. However, Walmart has the advantage of being one of the world’s largest companies, which gives it leverage when entering a new market. At the same time, even Walmart is not invincible to local specifics. Nuances in-laws, financial and economic conditions, and even cultural relativity can offset the efforts of new entrants. Therefore, using the same strategy for every market is short-sighted. I agree with Walmart’s decision to penetrate domestic markets via different ownership forms.
A joint venture is a form of ownership that presupposes sharing of risks and costs between parent companies. Companies use this strategy when the risk of entering the market on one’s own (for instance, using the form of a wholly owned subsidiary) is too high. Such instability is particularly characteristic of emerging markets, such as India. Although it is a growing economy, there are risks pertaining to taxes, bureaucracy, and cultural misunderstanding. Therefore, partnering with a local conglomerate Bharti Enterprises was a risk reduction stem for Walmart. It should also be noted that this particular venture was ultimately canceled by Walmart buying Bharti’s shares; it did smooth the former’s entrance to the market.
A similar situation can be observed in South Africa, where local Massmart sold more than fifty percent of its shares to Walmart. Once again, a similar approach is used: diversifying risks by partnering with a local company to enter a high-growth market. It should also be noted that unlike in India, Walmart bought the majority stake (51%). In essence, it allows the company to make all major decisions in South Africa while delegating day-to-day operations to Massmart, thus capitalizing on local conditions.
Walmart’s strategy in Mexico was similar to the one in South Africa – it established a joint venture with CIFRA. Later Walmart acquired a majority in CIFRA and proceeded to rename it into Walmart de Mexico, which continues to operate under this label. Expanding into Mexico was not as risky as would later be the case with India, as Mexico is closer to the United States both geographically and economically. The most important threat was anti-monopoly laws, which threatened to damage Walmart’s policy of lower prices; however, as Walmart did not buy 100 percent of the stakes, those that remained belonged to local partners, who are able to operate inside the Mexican law framework.
The United Kingdom is different in that it is a saturated developed economy. Entering it was more challenging than an emerging market. The reason why Walmart bought the majority of Asda lay in its availability. Had Walmart not acquired the majority, it would have been sold to another company. As a result, Walmart could make all decisions itself without considering the needs of a partner.
However, it should also be noted that Walmart ultimately sold the majority of its stakes. As such, it appears that entering a foreign market should be done with a partnering company, even if it means sharing revenues. In India, South Africa, and Mexico, Walmart retains the majority, while in the UK, it is now barely present. Therefore, a joint venture is the most viable option for entering and staying in a foreign market.