INTERNATIONAL RETAILING

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Dr. 3/31/12 Gupta, BE, MBA, PhD, (National Univ. of Sumeet

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CARREFOUR

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FRANCE BASED RETAILER

METRO

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GERMANY BASED RETAILER

TESCO

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UK BASED RETAILER

WAL-MART STORES INC

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US BASED RETAILER

SEIYU

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JAPAN BASED RETAILER

BEST PRICE

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INDIA BASED RETAILER

OBJECTIVES

International marketing Marketing analysis and foreign market entry strategies International retail environment Selection of retail market Methods of international retailing Role of IT in international retailing 3/31/12

WAL-MART STORES INC

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DOMINATING GLOBAL RETAILING

OUTLINE

The Humble Beginnings Expansion and Growth Strategy International Expansion

Mexico Europe Asia

Problems and Issues Lessons Learned

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THE HUMBLE BEGINNINGS

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Founded by Sam Walton 1962

Waltons Initial Learning

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The First Store

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Where was the store located and why?

The First Store

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Volume and Inventory-turn velocity define competitive advantage in the discount retail business What was their Concept works in small Basic towns Strategy?

With population that were scratching a subsistence level of living Few employment alternatives

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The Concept Walmart could provide jobs at decent wages

Steady jobs at decent wage required to staff the store Small Operations in Rural What Areas with minimal were the competition in retail thus Challenge allowing flexibility in pricing s? merchandise Low local real estate costs Stores were decidedly austere in appearance
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Low Operating Costs

Walmart developed its own large warehouses to fulfill its needs

What Developed large logistics operations, complete with a were the Challenge fleet of truck and a private s? satellite system as well

Thus costs were kept low

Capitalizing on Challenges
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Expansion and growth

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Cheerful greeting by the senior citizens of the company Fully Stocked shelves with a wide range of products No backroom inventory Employee bonuses linked to departmental level performance

Prices set as low as possible Operating Philosophy and and variable from store to Culture

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store reflecting the

Flat organizational structure Frugality (Economy class travel, Stay at Budget motel on a sharing basis, not hiring taxis as far as possible, minimalist dcor at the warehouse)

Visitors had to pay for a cup of coffee even at headquarters

Customer Philosophy and Operatingcentric dictum (10feet rule) Culture

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Centrally managed from its offices at Bentonville Group of buyers who negotiated discounts directly with manufacturers Negotiations carried out in a small windowless office Buyers were tough negotiators and demanded a wide array of price and Supplier Management service concessions
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was the largest

National Brand Strategy

Well known brands at relatively lower prices thus demonstrating superior value to its customers Brands self-advertised and hence Wal Mart could reduce its advertising budget

Wal-Mart could price Mattel Toys 22% below Toys R Us

Supplier Management
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Private labeling Strategy

Began with Ol Roy Dog Food Its brands competed with National brand Manufacturers started manufacturing store brands for leading retailers

Supplier Management
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Supplier Management
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Suppliers Credentials

Very stringent requirements in terms of product quality, shipping, stocking, and instore displays

RFID required imposed on its 3/31/12 suppliers that would enable

Transactions to be conducted through Retail Link, a proprietary EDI (IS that allowed the electronic tracking of purchase orders, invoices, payments and inventories) Supplier Management

Tangible payoffs to suppliers in terms of inventory monitoring and management

Jack Welch, the former CEO of General Electric, once observed that he learned more about the customers who bought GE light bulbs from Wal-Marts supplier reports than he did from his own marketing department. Supplier Management After all, the relationship between the manufacturer 3/31/12

Suppliers could not raise their prices

Walmart continued to compensate at old rates Billed its suppliers for missed or delayed deliveries Paid suppliers when their items was scanned upon sale to a customer

Supplier score card to keep 3/31/12 track of the performance

Supplier Management

E.g., Rubbermaid Newell merger

Passive submission Active engagement in maximizing ones own piece of Wal-mart Pie (Shelf capture approach) Newell-Rubbermaid offered a wide variety of largely non-seasonal, low technology, high-volume essentials that were Suppliers Strategies relatively low priced.
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itself as a very

Private satellite network that worked in conjunction with the EDI system and a point-of-sales system Own logistics through a central hub-and-spoke system of warehouses and distribution centers. Little inventory storage in these centers and active Use of Technology practice of cross-docking
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Mandatory usage of Retail

Different Stores for Different Folks

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INTERNATIONAL EXPANSION

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Market potential based on economic and political risk, growth potential, and availability of real estate for development. Saturated Markets: Acquisition strategy Easy availability of Land: Organic Growth Unknown territories: Joint Evaluation Criteria Venture
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Wal-Marts Mode of Entry

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Joint Venture with Cifra and later on increase its equity to 62% Bodega Aurrera stores targeted at lowest income strata Superama stores targeted at middle and high income customers 26% of all international Mexico revenues Leveraged location specific

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Victim of price war due to its close rival Carrefour Price Comparison flyers distributed in Wal-Mart parking lots Carrefour was a leader in South American market and has strong merchandising experience as compared to Wal-Mart

Brazil and Argentina

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In Germany through acquisition of Wertkauf (a German retailer that had fallen on bad times in 1997) Acquisition of Interspar Imported its own management team to covert the acquired stores into Wal-Mart stores Wal-Mart rural culture did Europe-Germany not blend well with German sensibilities 3/31/12

Oligopolistic Market structure (Key Players: Metro-19.7, Rewe-13.6, Edeka/AVA-12.7, Aldi-10.1, Tengelmann-7.6) Ultra-low profitability in the industry (0.8% of sales)

Family owned retailers (Principle of doing business is not maximization of WalMart-Failure in Germany shareholder value)

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Zoning regulations

Flawed entry by acquisition strategy

21 Wertkauf stores (1997) 74 Spar hypermarkets at exceptionally high cost Euro560 million (1998 ) Organic growth was not possible

WalMart-Failure in Germany
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Management by hubris and clash of cultures approach to labor relations

Not able to understand or adapt to the specific conditions of doing business in Germany CEOs (e.g., Rob Tiarks) were US citizens who were unwilling to learn German

Ignorance with regard to the WalMart-Failure in Germany manifold complexities and the legal and institutional 3/31/12 framework of the German

Balatant failure to deliver its legendary we sell for lessalways, EDLP, Excellent services value proposition

Aldi was undisputed cost and price leader in Germany. WalMart could not systematically undercut Aldi and the other hard discounters

Its assortment was not even substantially cheaper than WalMart-Failure in Germany the traditional retailers

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10 feet rule or the concept of

Bad publicity due to repeated infringement of some important German laws

German anti-trust legislations ban all undertaking with superior market power from selling a range of goods below costs price without any objective justification

All corporations must disclose WalMart-Failure in Germany their basic financial information including a 3/31/12 balance sheet and an annual

UK (Acquisition of Asda which worked the Wal-Mart way at 6.7billion pound in 1999) Local Managers were given leeway ASDA was already a successful venture Strategies from ASDA were imported to reform German Europe-UK venture and import fashion clothing into US to compete 3/31/12

Korea: Acquisition of Makro (High real estate cost lead Wal-Mart to design stores encompassing 6-8 stories)

Exercise its option to increase its holdings to become a majority partner Chains owned by the Korean Chaebols had better supplier links and long-term relationships (works on the Asia-Korea and Japan principle of GuanXi)

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Japan: Joint venture with

Could roll out many of its strategies successfully Local purchases of 95% of its products Leveraged its Chinese supply network to export products worth $12 20 billion to its US operations Moved to Beijing and later into rural heartland of the Asia-China country Promising but difficult

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Lessons learned

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OBJECTIVES

International marketing Marketing analysis and foreign market entry strategies International retail environment Selection of retail market Methods of international retailing Role of IT in international retailing 3/31/12

Wal-Mart in India. Will it Succeed?

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