Question

Walmart is a huge retailer but gets only about a quarter of its sales from outside the United States. Coles is one of the largest retailers in Australia and gets very little of its sales outside Australia. Based on your research

What factors should these top retailers consider in choosing countries for internationalizing their operations?

What are the best markets for these firms to target for foreign expansion?

What types of questions should management at each firm ask in assessing its readiness to internationalize?

Answer 1

Factors to consider for international expansion

Wal-Mart and Coles are the leading retailers but their international presence is limited. Therefore, factors considered for international expansion are elaborated. Distribution is a key to succeed in the consumer market and therefore, logistics and infrastructure provided in the countries to build an excellent distribution system need to be considered by the companies. Market characteristics such as customer’s preferences, lifestyle, shopping patterns, local flavor, values and traditions, etc. must be known to these companies to provide tailor made products and services as well as advertise without violating cultural norms and traditions. Human skills are very important and Wal-Mart and Coles need to consider presence of skilled employees to carry local operation efficiently in the countries where they intend to expand their business. Ease of doing business in a particular country is also vital to expand business as it can facilitate operations of companies in those countries where ease of doing business is very good. Political and legal factors are also vital to enter into the foreign market. Political stability, government policies to facilitate FDI or protect domestic industries, custom duty imposed on foreign products, repatriation of profits, barriers to entry etc. need to be considered. Legal environment such as laws of intellectual property rights, crime mitigation ability of the country through laws, etc. need to be considered as well. Economic conditions such as GDP, income of people, etc. are also important to consider. Customers demography and market size are also significant factors. These factors ensure that the countries can be attractive places to expand the business.

Best market characteristics

The characteristics of best market are ease of doing business, large market size, high income of people, high GDP and a good economy growth, legal rules facilitate foreign direct investment, political stability, low crimes, strong infrastructure to build distribution network, low barriers to entry and exit in foreign market, low restrictions placed on repatriation of profits. Along with these characteristics, cultural practices that accept foreign products, low uncertainty avoidance by customers, skilled manpower availability, and economic labor availability also make a foreign country market as attractive market to invest. In these countries, Wal-Mart and Coles should expand their businesses.

Types of questions to assess market attractiveness

The types of questions should be open ended questions to probe deeper about the market characteristics. These questions should be asked by Wal-Mart and Coles.

What is the market size company aims for?

What is the purchasing behavior of the target customers?

What legal and political influences are found on a foreign company operation in the country?

What challenges are existed in the market in terms of competition, entry barriers, repatriation of profits, etc. and how to overcome from these challenges?

What is the income level and saving of target customers in the country?

What is the existing infrastructure to distribute products in the country?

What specific cultural practices and norms present in the country offering challenges doing business in the country?

What is the existing demography of the market and how the product of the company will address the needs of different segments in the country?

These questions can assist Wal-Mart and Coles to expand their international business successfully.