Wal-Mart\'s Global Expansion the Following

Wal-Mart's Global Expansion

The following is an analysis of the Wal-Mart's Global Expansion case study, utilizing the AMA case study analysis process. In addition, four discussion questions regarding the case are answered.

Wal-Mart's Global Expansion

Analysis of the Relevant Facts:

Wal-Mart has enjoyed phenomenal growth since its inception in 1962. However, after nearly three decades of operations in the United States, the company realized that expansion was limited nationally, due to market saturation. In 1991, the company ventured beyond American borders, and through a joint-venture with Cifera, opened its first stores in Mexico. The organization quickly discovered that the processes they had perfected in the U.S. did not translate as well in Mexico. Changes to strategies were made and relationships developed which eventually led to not only the organization's success in Mexico, but other countries as well (Hill, 2007).

Root Problems & Components:

The root problem for Wal-Mart's expansion internationally lies in a different operating environment, for the organization. The components of this problem include a variety of facets, some of which are under their control -- some of which are not. The primary components are: infrastructure challenges, differing consumer needs, and newer supplier relationships.

Alternatives:

There are a variety of alternatives Wal-Mart may want to consider when expanding internationally, to address this problem. They may choose to only enter markets where infrastructure is in place to allow their current logistical strategies to work effectively. They may choose to build infrastructure to support their facilities. They may choose to only offer products in which there is currently demand. They may offer alternative products hoping to spur new demand for previously unknown products. They may purchase current retailers and utilize existing supplier relationships, at first. They may require suppliers to expand their operations to regions where they are expanding, to facilitate their expansion. Lastly, Wal-Mart may choose simply not to enter any new markets.

Evaluation of Alternatives, Choice and Implementation:

By choosing areas where adequate infrastructure is already in place, Wal-Mart will be able to utilize the extremely efficient transportation system similar to what they have developed for the United States. Building infrastructure or operating with inadequate infrastructure will be costly. Utilizing existing relationships will allow a supply of local materials to also help reduce prices, as well as will likely be a selection of products for which there is already current local demand. Requesting existing suppliers to expand in conjunction with their plans is unfeasible, as many companies are not in the position to make this expansion. This, as with the adequate infrastructure, will help keep costs low, reflected in the low pricing for which the company is known. These locally-demanded products will help ensure revenues as Wal-Mart gets their retailing foot in the door of a new area. For these reasons, the alternatives which Wal-Mart should choose are: selection of areas where adequate infrastructure is in place, utilizing merged organization's existing relationships, and offering items where there is already established demand.

To implement these strategic choices, Wal-Mart will need to carefully consider the geographic regions in which it wishes to expand. Surveying of existing infrastructure will be critical to determine if it meets their needs. In addition, to implement these strategies, Wal-Mart will need to enter new markets by merging or partnering with existing retailers to take advantage of their existing relationships. Lastly, market studies must be conducted to decide what product mis will sell the best in these new locations, focusing on products that are already strong sellers in the area.

Alternative:

After a year of operation, Wal-Mart should evaluate the success of their entry into the new market. Sales, profits and market share will tell the organization if they're on the expected track. If not, the degree of difference must be evaluated. In some instances, there may be a geographic region in which Wal-Mart's model simply doesn't fit well with the culture. In those instances, they will have to re-evaluate their strategies.

How does expanding internationally benefit Wal-Mart?

Expanding internationally benefits Wal-Mart in a variety of ways. First, they are able to continue organizational growth, despite market saturation in the United States. The company can enhance their economies of scale, with global buying power. There are many of Wal-Mart's key suppliers who already have an international presence that they can utilize and demand even greater discounts from, with globalization. These lower costs can help them increase profits and increase market share, both in the U.S. And abroad. Lastly, Wal-Mart has been able to utilize ideas they've picked up in different countries for stores they already have in the U.S., such as multilevel stores and wine departments (Hill, 2007).

What are the risks that Wal-Mart faces when entering other retail markets?

The primary risks Wal-Mart faces when entering new markets are those experienced in their entry in Mexico. Wal-Mart assumed that their current strategies would be easily implemented in the new market. However, the resources needed to facilitate the strategies, such as infrastructure and relationships, were not in place (Hill, 2007). Wal-Mart can mitigate these risks by ensuring these support structures are in place, or alternative strategies to work around these deficiencies have been developed.