Question

Walmart’s Global Strategy

Walmart’s international division has an important job. With 80% of the retail industry’s growth coming from outside of the United States, Walmart’s $137 billion in international sales in 2014—29% of sales overall—is a key driver of overall revenue growth. To drive this performance, David Cheesewright, CEO of Walmart’s international division, is focusing on current operations in growth markets and e-commerce. Shopping trends indicate that what customers buy is changing fast, and that they are quickly switching to online shopping platforms. After decades of work trying to develop a foundation in the Chinese market, Walmart is consolidating its portfolio of stores in that country, closing nonperforming retail stores and investing in successful ones. To enter the Chinese e-grocery market, Walmart holds a 51% stake in Yihaodian, which has posted triple-digit growth—twice the market rate. The company’s operations in Brazil and Mexico are experiencing slowing growth, in part a result of economic cycles and their brand’s life cycle, but they still offer the opportunity to develop strong, mature businesses. International expansion comes with country-specific challenges. After experiencing too many regulatory difficulties in India, Walmart canceled plans to open retail stores there. Instead, Walmart India is focusing on business-to-business sales.

Although Walmart has successfully dominated the U.S. market, it has found that expanding its reach across the globe does not always fit with its strengths. In addition, navigating the variety of economic and regulatory requirements across different countries adds significant complexity to the company’s operations. Finally, gaining access to and managing workforces with different values, cultures, and languages present tremendous challenges.

QUESTIONS

1. What criteria should a company use to determine which countries it should expand into?

2. How can a company assess how cultural and economic differences might impede its ability to succeed in different countries?

3. What things can companies do to manage a global workforce more effectively?

SOURCE: S. Banjo, “Wal-Mart’s Strategy to Jump Start Growth in China,” Wall Street Journal, August 5, 2014.

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Answer 1

1. The company should first of all assess the demand of its products in the country it wants to expand into. For this, company must conduct a survey or gather secondary research data about the customer preferences in the other country. Then the company must develop a strategy to enter, it can be a franchise model, partnership or establishing it's own stores in the other country. This decision depends upon the risks involved and returns gained by expansion. Company must use these criteria of riskiness of business, costs involved, customer preferences, expected revenue etc before expansion.

2. Company can assess how cultural and economic differences might impede it's ability to succeed in different countries by assessing the local culture and preferences of customers in these countries. Also the company must assess the income level of these customers and the amount that they can spend on it's products. It must also assess cost benefit analysis by expanding to these countries. Based on this assessment only, impediments to succeed in different countries can be ascertained.

3. Companies can manage a global workforce more effectively by engaging with them on a regular basis, catering to their training needs, hrlpingbthem develop skillsets, formulating a mechanism to have open communication among the workforce and with the management as well, motivating the employees to achieve organizational goals and mission etc.