Walmart’s Global Strategy: Worth it?
In this struggling economic environment, more retailers of all sizes are going global to sustain their growth. Some of the biggest retailers have been expanding globally for years with noted success (Davies, 2014). Walmart is included as one of the biggest global retails and the company is expected to grow its international operations several times more than its domestic efforts. Why exactly is that? There is not a lot of buzz in America about Walmart being a successful global retail but it’s engraved into the American way. The reality is that Walmart has become the biggest retailer in the world (Davies, 2014). The company opened its first international store in Mexico in 1991, and now operates in all 50 states, Puerto Rico, Canada, China, Mexico, Brazil, Germany, Britain, Argentina, and South Korea. With over 6,100 stores open, this article will explore a little deeper into some of the company’s strategies to dominate the global retail market.
Management’s Focus on Global
Sadly, Walmart international is the hope of the retailer’s future. The company has been losing significant ground against its competitors. One of the simpler ways Walmart is successfully taking on international markets is by focusing the company’s plans for its global business. Current CEO David Cheesewright spoke recently about setting priorities for Walmart and international business is at the top of that list (Cramer, 2014). With countries like South Africa and Japan performing well and American stores struggling, the company turned its plans and resources to focus more on the areas where there is expansion potential. Important factors discussed as giving international markets a priority is growth in same-stores through price leadership, acceleration in e-commerce operations, and a significant and sustainable growth in China (Cramer, 2014).
Winning the Local Battle
Walmart had to understand the uniqueness in the local market and decide which aspects of its current business model needed to be slightly changed, which requires a local adaptation (Govindarajan and Gupta, 2014). China has been a major potential market for retailers as it is the most populous country in the world. Some of the biggest challenges China poses against retailers is the rules and regulations associated with business, which can at times be unpredictable (Cramer, 2014). Also, the middle class income for the Chinese population is less than what it would be in the United States. Walmart had to accept that the Chinese buy in small quantities and that the difference in language required a unique marketing approach for product labeling and brand names.
Walmart started by conducting a series of experiments to understand its customer appeal. It started by presenting different store formats such as a supercenter, a wholesale warehouse, and stores that targeted specifically the male market. The company also began testing the market in small satellite stores that seemed to fit better with customer’s buying habits and the Chinese trends in transportation and shopping. One of its more successful tests was the test of perishable products which the company then decided to expand due to a set of well received products that appealed to the Chinese palate (Govindarajan and Gupta, 2014).
Sourcing for products also required Walmart to adapt to its Chinese market and the company had three options:
- Products obtained by global suppliers
- Products manufactured in China by global suppliers
- Products from local suppliers
Walmart opted to buy over 85% of its supplies through options 2 and 3. This arrangement was made to adjust the craving of neighborhood clients for quality United States-made merchandise and the weight from nearby governments to buy domestic products.
Beating the Competition
Since Walmart was introduced to several of these countries, competitors saw it fit to retaliate against the retail giant, especially from other international companies establishing themselves in the same country. Walmart has used several strategies to address the issue of heavy competition in global markets.
The first approach for Walmart is to acquire a dominant player. This is a strategy the company used recently while being introduced to Germany when it acquired the Wertkauf hypermarket chain of 21 stores and one of the most profitable in the country. Building new supercenters was ill advised due to the zone restrictions laid out in several European countries. Walmart spent an estimated two years contemplating acquisitions including Britain’s Tesco, Germany’s Metro and the Netherland’s Marko. Wertkauf stores are very similar to Walmart’s with a format of high-quality employee teams and locations. The stores are already larger than any average German market (Govindarajan and Gupta, 2014).
The second approach for Walmart is to acquire the weaker companies which proves to be an effective approach. The global economy has the potential to turn a weak player into a powerhouse company in a short time, so Walmart looks into this potential just as it did with the Canadian company Woolco (Govindarajan and Gupta, 2014).
Suggestions for Future Offerings
Walmart is already the biggest retailer in the world. In order for the company to remain in a top position, it will have to continue to innovate in its efforts to make international stores better equipped and cut costs as much as possible without the compromise of sales. Walmart has never fully relied on any one vendor even though the company is the top customer for consumer product manufacturers. The company keeps its competitive edge through good inbound logistics. Distribution centers are now available all over the states to deliver products within a day to any Walmart store. This is a strategy that will serve other countries well while store visits are still the customer driving engine. Developing countries have not adopted e-commerce as the United States has, so there is still room for growth in store visits. Distribution centers nowadays operate through laser-guided conveyed belts and cross-docking techniques that receive products in one side while delivering products on the other side. The structure will allow Walmart to continue to save in costs while maximizing profits in the global market.
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