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The Globalization Aspects of Walmart
Overview
This case study the major retailer Walmart and how it has ventured into international business. Starting back in 1950, owner and founder Sam Walton opened a small general store in Bentonville, Arkansas called Walton’s 5&10 (Walmart Corporate, 2019). Inspired by his early success from his dime store, it wasn’t until 1962 that he opened his Walmart in Rogers, Arkansas. From there Walmart has developed into the largest retail store in the world brining in over $480 billion annually. Walmart has almost monopolized the industry in fact, bankrupting several other retailers such as K-Mart, and Sear’s. One of the only major retailers that remains strong today is Target.
Towards the end of the 1980’s and 90’s Walmart thought that it had grown to its max capacity within the United States and began to make plans to grow internationally. Walmart opened its first store in Mexico in 1991. Today Walmart has over 6,300 stores internationally and is continuing to grow at a rapid place. I have even noticed that Walmart, much like Amazon, now sells name brand products as well. You can absolutely buy Nike and Under Armour from Walmart, it will just have to be online and through a third-party seller, much how Amazon does all of their business.
[bookmark: _Hlk24887509] Walmart’s growth internationally did not come without trials and tribulations though. While staying in the America’s it was noticed to be a fairly smooth transition. Of course, there were some growing pains, like the lack of managerial and organizational skills, but for the most part success was able to kick in. It wasn’t until Walmart sought to open in China that it came in contact with issues. Their first being location. Retail much like in real estate, location is the key to success. Beijing had restricted operations for all foreign retailers, including the requirements for government-backed partners and also limited the number and locations for stores (Geringer, McNett, Minor, & Ball, 2016, pg. 255).
Walmart was able to find a home in China in a city named Shenzhen, which is a growing community on the border of Hong Kong. Walmart began to have some serious growing pains while learning how to conduct business in China. For example, Walmart no longer tries to sell extension ladders or a year’s supply of soy sauce or shampoo to Chinese customers simply because the majority of the people in that given location tend to live in apartment complexes with limited storage space (Geringer, McNett, Minor, & Ball, 2016, pg. 255). The next major issue that Walmart ran into with China was that their government wanted the majority of the products to be locally sourced which was an issue since Walmart prided themselves on having the American shopping experience. Because of this, Walmart was to source approximately 85% of its products in the Chinese stores.
The next major market goal for Walmart is the anticipation of opening up to the billion-person market in India. So far strict government barriers have prevented Walmart or any other foreign-owned retailer for that matter from finding success in India but John Menzer, the former head of Walmart’s international operations said “many smart people-much smarter than I, believe that India could be the next China” (Geringer, McNett, Minor, & Ball, 2016, pg. 255).
Walmart views international expansion as a critical part of their strategy, because as I previously stated, there isn’t much more room for growth for them herein the United States. In the 1980’s and 90’s Walmart about maxed its capacity in the United States taking over the retailer business, and discovered that in an effort to continue growth and profit, they needed to move internationally to keep their competitive edge.
Walmart initially found success in Central and Latin America before moving over to China. It found its first form of success with its very first store internationally in Mexico City, Mexico. To achieve this success, Walmart found success in a partner, Cifra, that was able to provide expertise in operating in the Mexican market. From there, Walmart merged with and took the majority of a company called Lojas Americana when it moved to Brazil. Finally, Walmart started its venture in China in Shenshen when it formed a venture with two politically connected Chinese partners. If you notice, there is sort of a trend here. Walmart finds an area, then finds a partner that is the subject matter expert of said area then ventures with that partner to achieve success for both.
I think that Walmart should do exactly what they did in going into China. They should find a partner that has political representation and go about inserting themselves in a legal fashion that keeps them in the good graces of the government. Walmart should also look at the area where they are moving as well. You don’t want a lot of electronic devices in an area where there is no electricity. Unless you start with the selling of portable generators. Bringing people power that do not have it could be a huge success. Any conveniences that are lacking that can be brought for a low price would be a very smart move. Not only will it improve the economy and the lifestyle of the people but it will also build lasting relationships which can definitely help a growing market.
Culture is defined as the customs, arts, social institutions, and achievements of a particular nation, people, or other social group. Understanding the culture of the nations that Walmart wanted to venture into was a huge part of their international success. The text gave a perfect example when it said that Walmart learned early not to offer a year supply of goods or sell ladders in a certain area in china because the majority of the people living in that area had limited storage due to confined space in apartments. However, I wouldn’t rule out the option to be able to order such products for people who still desired them. Another big piece that culture plays into this falls right under customs. for example, should Walmart move into India and sell produce there, in an effort not to offend. They probably don’t want to sell beef there seeing as how the cow is a sacred animal in the Hindu religion.
This is the process by which the economic well-being and quality of life of a group of people whether it be a township, region or country are improved. The text makes perfect sense of this when it says “a nation’s level of economic development affects all aspects of business conducted there, and international managers encounter markets with widely differing levels of development” (Geringer, McNett, Minor, & Ball, 2016, pg. 255). In other words, the products that Walmart sells to a small town in nowheresville where the average person makes $4 a day isn’t going to have the same products for sale or at least not at the same inflated prices as they would in downtown Houston, Texas because the people of the smaller town simply will not be able to afford it.
Political forces are parties, personalities, or pressure groups that strongly influence economic and political stability of a country through action and pronouncements. In the case of this study there were a lot of political force involvement. The text says that “the results of government intervention in trade are well understood. When governments impose trade restrictions, the cost of traded goods increase” (Geringer, McNett, Minor, & Ball, 2016, pg. 135). In this case study that is exactly what happened to Walmart. Initially Walmart received push-back from China stating that they could not be in Beijing, so they found a political partner and was able to use them to find success on where to go and what to sell in the local area.
References
- About Us. (n.d.). Retrieved from https://corporate.walmart.com/our-story.
- Geringer, J. M., McNett, J. M., Minor, M., & Ball, D. A. (2016). International business. New York, NY: McGraw-Hill Education.
- Govindarajan, V., & Gupta, A. K. (2002, June 19). Taking Wal-Mart Global: Lessons From Retailing’s Giant. Retrieved from https://www.strategy-business.com/article/13866?gko=203b4.
- Nassauer, S. (2018, April 30). Walmart resets its international ambitions. Retrieved from https://www.marketwatch.com/story/walmart-resets-its-international-ambitions-2018-04-30.
- Our History. (n.d.). Retrieved from https://corporate.walmart.com/our-story/our-history.
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