Management Wal-Mart's Challenges in the Global Market Term Paper
- Length: 10 pages
- Sources: 4
- Subject: Business
- Type: Term Paper
- Paper: #726997
Excerpt from Term Paper :
Wal-Mart's challenges in the Global market
Wal-Mart as the world's leading retailer has been spreading very fast extending its power across the world market. This began with the nine countries in South America, Asia, and Europe. This expansion is likely to extend even in the near future. As the company attempts at penetrating the hypermarket culture in different countries, it has encountered a battery of severe problems in the process of its global operations. Joint ventures and acquisitions of local businesses have become a major challenge in nationalism economies. Therefore, strict rules and regulations imposed by governments have blocked Wal-Mart's business operations. Late entry and miscalculating competitors have destroyed location opportunities and tampered with Wal-Mart's relationship with local suppliers. The company experienced big challenges in the global market due to its inability to adapt to new local cultures. In addition, sex discrimination, unions, and low wages prompted employees to have an evil perspective towards Wal-Mart (Steers & Nardon, 2006).
The global economy has been facing radical transformations in the recent past decades. Cultural and geographical distances have shrunk notably with the advances in fax machines, airplanes, world broadcasting satellites and global computers and the most important element: the internet. From such advancements, business corporations have been widened significantly in terms of their supplier sources and markets (Jha, 2011).
People are referring the current modern business world as globalization. Globalization entails worldwide business operations in free markets, open flow of services, goods, knowledge, capital, and competition. This has led to the current efficient economic world. With an increase in the number of global firms penetrating local markets, local firms are also going global. This has resulted in a competitive business environment, which has increased quality of products, widened the variety of goods in the market, and made prices decrease. The processes of globalization have made world consumers the biggest beneficiaries. Globalization has created a lot of product diversification besides expanding into foreign markets, making services, and products universally accessible it has also increased options for consumers (Kneer, 2009).
Globalization means that market expansion of services and goods produced. However, globalization leads to a competitive market environment. Deterioration of the environment could be a source of opportunities for businesses that can adopt environmentally friendly production processes. Neglected infrastructures have become another opportunity for firms specializing in communication, transportation, and construction industries. The stagnant economic condition could be best suited for firms that are good at lean marketing and production techniques. Low expertise has posed challenges for training and educational companies to develop effective programs that seek to upgrade human skills (Koontz & Weihrich, 2010).
Wal-Mart Inc. is a retail discount chain store that operates primarily across the states of the United States. The advent of information technology appliances has allowed Wal-Mart to establish customer preferences thus updating manufacturers on what to produce and at what time (Brunn, 2006).
Wal-Mart is satisfied with its culture and the core values of the business that translate into core beliefs. Public information regarding Wal-Mart indicates that its customer-oriented culture stems from the organization's pursuit of authentic customer service and low commodity prices. The company is built on three major beliefs, which include respect for others, strive for excellence and service to customers. Additionally, these three beliefs have been supported by two essential requests. The first rule requires that the company attend to request as per the time they are made. The other rule is to offer greetings in a passionate manner. This philosophy has led Wal-Mart to operate differently from competitors in the aggressive market industry. The company strives to become the friendliest, exceed customer expectations, and give better services. Furthermore, the company has developed a unique concept of ensuring all its stores provide a variety of name brands at noticeable discounts, which is part of its daily pricing strategy (Hitt, Ireland & Hoskisson, 2008).
Aggressive expansion in the international market is another tool for growth. The global unit was designed to monitor and manage the growing opportunities. This unit is among the highest growing departments of the company. The financial reports from Wal-Mart demonstrate that sales generated by the international department have exceeded $40 billion. The growth rate has been rated at sixty percent as from 2010. The company believes that if the trends in the United States slow down, the division will replace the market. According to the head of the international division, the international division seeks to be the growth of Wal-Mart when the trend in the U.S. market slows down. The company has extended its outlets across the global market place after operating in the international market for approximately thirteen years. Wal-Mart has erected thousands of stores in nearly twelve countries across the world. These stores are not newly established stores; some of them arise from the purchase of local firms and joint ventures as strategies that the company has adopted in expanding in every country (Quelch & Deshpande, 2004).
In the 1990s, Wal-Mart began inducing its goods to the world through establishing joint ventures with Mexican leading retailers such as Cifra. This made Mexico become among the first members of the international division. This was followed by new operations in Puerto Rico, which opened Wal-Mart stores through acquiring local chains of supermarkets. This enabled Wal-Mart to connect with local suppliers. Opening of new stores in Brazil confirmed the company's expansion plans in South American segments. The company began operating through opening new clubs in the region's metropolitan area. After establishing its stores in Brazil, the company has expanded and grown in five different states. Next year, Wal-Mart plans to acquire the leading hypermarket and supermarket chain, Bompreco in Northern Brazil. This will begin by opening a new club. Currently, the company is running into twelve supercenters and four distribution centers (Steers & Nardon, 2006).
The growth in the number of outlets is a continuous plan adopted for the expansion of the company. Accordingly, the company's leadership had announced of the growth plans in overseas markets indicating that nearly a third of its revenue be derived from outside the saturated American sector. Therefore, Wal-Mart's expansion in foreign markets has been perceived as a permanent strategy of gaining dominance in the global retailing industry (Jha, 2011).
Expansion Problems in International Market
The large hypermarket and supermarkets store fresh foods. The neighboring stores provide pharmacy, smaller food, health, and beauty for customers who are oriented with convenience. This formatting standardization has helped the branding and expansion of Wal-Mart in international and U.S. markets. Wal-Mart would not have succeeded in expanding its market share without a measurable retail position as the leading world retailer (Kneer, 2009). The company has adopted a plan based on low pricing strategy, provision of a variety of products, enhanced customer service, and support for the neighboring community. It is evident that Wal-Mart can follow the low pricing strategy because it boasts of a high inventory and competitive gross margin turnover. The company engages economies of scale to achieve low prices. This is coupled by close relationships with vendors, effective systems of information technology and efficient logistics of supply chain. This concept has worked on the regional and global levels with the aim of low costs, improved quality, lower prices, and increased volume. Wal-Mart's rapid development to attain the world's leading retailer position took relatively s short time. Wal-Mart believes that it has no option but to embrace rapid expansion abroad (Koontz & Weihrich, 2010).
Following this consideration, Wal-Mart has been using the shortcut to expand through acquisition and joint ventures with local retail chains. The company has a lot at its disposal motivating it to buy Woolworth in Canada. It has an ongoing joint venture in Mexico, as an entry tactic in the Mexican market. In a span of six months, Wal-Mart managed to buy out wholesale clubs in Argentina (Quelch & Deshpande, 2004).
Besides the expansion of Wal-Mart in different countries and its intended plans to expand into more, the company is still trailing in the competitive market. Some four European retailers including Ahold and Carrefour boast of a couple of decades as being experienced in international operations compared to Wal-Mart. Carrefour is the giant France retailer and one of the major rivals of Wal-Mart in international retailing. While this giant corporation has already penetrated forty countries, Wal-Mart has only managed to enter twelve. This case involves the competitive advantage of first come first serve. New entrants such as Wal-Mart must design other strategies in persuading customers to shop at its stores (Steers & Nardon, 2006).
Wal-Mart must realize that it is a new player in the international market and must strive to establish a strong trust in its strength and pricing of products. Large-scale stores emerged to judge the intensity of Wal-Mart. Although Wal-Mart is used to control the U.S. market, its extraordinary superiority in the U.S. cannot fit in the global marketplace. At the time of its entry in the international market, its rivals…