This decision was reinforced by the fact that there are only two markets in Argentina of significant size. Thus Wal-Mart's ability to clone its domestically grown DNA and insert it into its global operations would be a key to success, as illustrated by its entry into Canada. Wal-Mart acquired Woolco Canada at a time when a combination of high costs and low productivity had driven the Canadian company into the red. Wal-Mart quickly reconfigured Woolco along the lines of its successful United States model, a strategy facilitated by the similarity between the United States and Canadian markets.
This transformation occurred in four central areas:. During the same period, expenses as a percentage of sales in Canada declined by basis points. Wal-Mart's Canadian operation turned profitable in - only two years after acquisition. By , it had become the leading discount retailer in the country. Local adaptation A company wishing to establish local presence must understand the uniqueness of the local market and decide which aspects of its business model require little change, which require local adaptation and which need to be wholly reinvented.
Wal-Mart's entry into China provides insights into this process. As the most populous country in the world, China is a major potential market for retailers. Retail sales in China grew at an annual rate of 11 percent between and , propelled by economic liberalization and a large pent-up demand for consumer goods. But the Chinese market also poses unique challenges because regulations and government policies are often unpredictable and China's infrastructure is not well developed.
Also, middle-class disposable income is dramatically lower in China than in the United States, so that even discount-minded Wal-Mart must reinvent its business model to operate within the reach of key population groups.
Finally, Wal-Mart had to accept that most Chinese tend to buy in small quantities, and that language differences required tailored marketing approaches for product labeling and brand names. Wal-Mart responded by conducting a number of experiments. First, it experimented with different store formats to see which had the greatest customer appeal. One was the Shenzhen Supercenter, a hybrid store combining a supercenter and a warehouse club where memberships were sold but non-members could also shop at "everyday low prices" plus a 5 percent premium.
The Shenzhen operation also experimented with stocking merchandise targeted at a predominantly male market. Wal-Mart also began testing smaller satellite stores that seemed to fit better with the buying habits, as well as the transportation and shopping trends, in China. In addition to varied formats, Wal-Mart tested merchandise items to determine what would have the greatest consumer appeal and fit best with the Chinese culture. As a result, Wal-Mart began to carry a wider range of products, particularly perishable goods that appealed to the Chinese palate.
Product sourcing was another area requiring adaptation. Wal-Mart elected to purchase 85 percent of its merchandise for the Chinese market in China through a combination of options 2 and 3. This solution sought to balance the desire of local customers for high-status United States-made consumer goods and pressure from local governments to purchase domestic goods.
Battles with local competitors Whenever a company enters a new country, it can expect retaliation from local competitors as well as from other multinationals already operating in that market.
Successfully establishing local presence requires anticipating and responding to these competitive threats. Wal-Mart has used several approaches to neutralizing local competitors in different markets:. Acquiring a dominant player. Wal-Mart used this approach in its entry into Germany.
Having determined that building new hypermarkets in Germany would be ill-advised due to the mature European market and that strict zoning laws precluded greenfield operations, Wal-Mart spent more than two years exploring potential acquisitions, including Britain's Tesco, Germany's Metro and the Netherlands' Makro. Wertkauf's stores, similar in format to Wal-Mart's, featured high-quality personnel and locations, and were larger than the average German hypermarket.
Acquiring a weak player. Acquiring a weak player in the local market is an effective approach, provided the global company has the ability to transform the weak player within a very short time.
This is what Wal-Mart did in Canada in acquiring Woolco. Launching a frontal attack on the incumbent. Attacking dominant and entrenched local competitors head-on is feasible only when the global company can bring significant competitive advantage to the host country. Wal-Mart's entry into Brazil illustrates the potential - and the limitations - of a frontal attack. Carrefour, the French retailer, had been operating in Brazil since When Wal-Mart entered Brazil in , it decided to overtake competitors by aggressively pricing its products.
This strategy backfired, as Carrefour and other local competitors cut prices as well, leading to a price war and initial losses. Furthermore, we are committed to maintaining a diverse workforce and an inclusive work environment.
Suppliers meet these standards by operating their businesses in an ethical and sustainable way. The low pricing coupled with enhanced customer service is aimed at ensuring customer satisfaction. At low cost, it can be observed that the company incurs minor production costs. This is made possible due to the unmatched distribution capability that the company enjoys over its competitors. With respect to high volume, Wal-Mart has been able to register increased growth in sales due to the low prices the company offers to the customers.
Lastly, on consumer satisfaction, the company offers low prices for its products. The company also observes employee motivation and effective data management to enhance the customer experience.
It can be summed up that the company has managed to acquire volume through the low pricing strategy and the provision of quality services at the convenience of the customers. It is imperative to note that the company has located its business in areas with minimal competition. The company has also remained innovative on how to enhance customer loyalty Soderquist VRIO analysis is an analysis of an organization in terms of the resources that it possesses.
The resources of a company include the assets and the competencies that a company can use in improving its business operations.
This is aimed at increasing the profitability of the company. Value analysis answers the question of whether the firm or the company can exploit an opportunity with the available resources and also neutralize the threat that can be available. Resources are few and scarce.
In connection to this statement, the term Rarity in the VRIO analysis refers to the ability of the Corporation to control the resources that are available to it. Organization analysis answers the question of whether the company structure is organized and whether it can exploit available resources Barney In the VRIO analysis of Wal-Mart, the management of the Corporation has exploited the resources and uses them to achieve success in implementing the goals of the company.
This can be reflected in the success achieved by the company. It has been the most successful retail Corporation over the years. This can be credited to the organization of the company because there is well-organized management that can utilize the resources. The Value part of the VRIO analysis is a factor whereby the Corporation has utilized the available opportunities by use of its resources.
It has also effectively managed the rare resources. The company has avoided the imitation of products by the use of technology Barney The delta model of business strategy is a model that involves the customers in the management process.
The model was developed by Arnoldo Hax and Dean Wilde and is referred to as the customer-centric model. The delta model of business strategy enhances innovativeness and creativity geared towards ensuring customer satisfaction. This strategy is said to be a shift from the ordinary strategies, and it introduces strategic flexibility in the ever-changing business environment. One of the philosophies that were developed by the pioneers of Wal-Mart Corporation is to give the best services to customers.
Therefore, the management of the Corporation involves the customers in their innovations to ensure that customers are satisfied. The bottom of pyramid strategy is an approach in business whereby the developments of new models are targeted at the areas that are not technologically developed. In this strategy, it is believed that the less developed regions can become successful through the involvement of multinationals Prahalad Wal-Mart has used this strategy to get access to the less developed areas and has received a favorable response in terms of profits.
Wal-Mart is the most successful retail Corporation in the world. It has made immense profits from its operations. The success of the Corporation is attributable to the rich resources that the Corporation has. It has able human resource that has helped it in the management of the resources.
The Corporation has also utilized the information systems to improve services to customers. It can deliver orders on time and has developed trust from customers due to the low prices and the quality products that are offered to customers. This has enabled the Corporation to establish a sustainable resource base and sustainable profits over the years. In return, the company has utilized its resources in achieving the success that it has enjoyed over its competitor organizations.
In fact, the success of Wal-Mart has been recognized through the various awards that it has won. It has also used the bottom of the pyramid business strategy to develop the less developed regions in the U. In a general sense, Wal-Mart is the most successful retail stores in the world.
This success is attributable to the management strategies of the company and the resources available to it. Koontz, H. Palikala, V n. Prahalad, C K , The fortune at the bottom of the pyramid.
Robinson, T R , International financial statement analysis. We use cookies to provide the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Abstract Wal-Mart has been successful in operating retail shops in various countries globally. Background Wal-Mart is a public corporation with its headquarters located in Bentonville, Arkansas, in the U. Review of theory Wal-Mart resources In this section, the overall resources of Wal-Mart will be discussed. Sustainable competitive advantage For the Corporation to be successful for a long time, it should establish a competitive advantage that can be sustained for a long time.
Firm Analysis Strategy development Wal-Mart has embraced the strategy of ensuring that high volume is attained at a relatively low cost. Delta Model of Business Strategy The delta model of business strategy is a model that involves the customers in the management process. Bottom of Pyramid Strategy The bottom of pyramid strategy is an approach in business whereby the developments of new models are targeted at the areas that are not technologically developed. In the United States, that has meant shifting tactics to court wealthier Americans who shop online , expanding beyond its lower-income customer base in suburban and rural areas.
Walmart has scooped up native digital brands like Bonobos, partnered with grocery delivery startups, and built out e-commerce capabilities with Jet.
Related: Walmart's stumbles with online growth. But Walmart faces an uphill climb online against Amazon at home, and it's searching for opportunities abroad. The company first ventured outside the United States in to start a joint enterprise in Mexico.
It's Walmart's largest overseas market today, with more than 2, stores. Walmart operates more than 6, stores in 27 countries, including in Africa, Latin and Central America, Asia and Canada. Walmart tapped a new CEO to lead its international division at the beginning of the year.
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