Walmart: international successes and failures

The biggest retailer in the world has found that internationalisation is considerably more

challenging than expansion at home.

Walmart began its international operations 1991 andtoday the UK, Brazil and China are their largest markets outside the USA. Walmart International is thecompany's fastest growing unit with sales of $141bn(85bn, 106bn) in 2015, accounting for about 30percent of Walmart's overall sales. It included closeto 800,000 employees in over 6,200 stores and11 e-commerce websites in 28 countries. Internationalisation results have, however, been mixed as Walmarthas struggled to understand local buying patterns,culture, competitors and regulations, not the least inemerging markets.Walmart first entered the Americas and has sinceexpanded into ever more distant geographic markets.The early entry into Canada and Mexico was successful, but South America's largest market, Brazil, hasbeen considerably more challenging. After two decades they are still losing money there. Their challengesinclude regulatory problems, strong competition fromthe French supermarket chain Carrefour and beingunable to convince shoppers about Walmart's 'everyday low prices' model. In 2016, they restructured theBrazil operations and closed 60 outlets, accounting for5 percent of its sales.European expansion results have similarly beenmixed. The acquisition of the ASDA Group in the UKwas relative successful while Walmart experiencedeight years of struggle in Germany that ended in amarket exit. First, they did not have enough scaleeconomies compared to local competitors, like Aldi,with strong relationships with German suppliers andalready catering to price-conscious consumers. Second, cultural mistakes were made as customers did notapprove of American service practices. A third challenge was Germany's then strict regulations on location and opening hours. German workers also resistedWalmart workplace customs, resulting in labour unionconflicts.Walmart's first Asian expansion into South Koreawas similar to the German story with strong local competition and failures to meet local customer needs. Itended in exit after eight years. China has been more of

a mixed picture. On the one hand, sales have steadilyincreased - over 400 stores have been established and

they make a profit. On the other hand, the distance,both geographically and culturally, was considerablylarger than first anticipated. An early discovery wasthat Chinese consumers prefer frequent shopping tripsin contrast to Walmart's home-based experience wherecustomers drive to out-of-town stores and fill their carswith large multi-packs. While they encountered a completely different international market, they also facedlarge regional variations in this vast and multi-ethnic

country. They have also struggled with local regulations and food safety issues and tough competitionfrom Carrefour.

In a 2014 interview with theWall Street Journal, Walmart International President and CEO DavidCheesewright, former CEO of Walmart's UK supermarket chain Asda, admits to the struggles, but explainedthey would still be the Walmart growth engine. Heemphasised four initiatives:'First, create platform for sustainable growthin China.... Second, turn around our operation in Brazil....Third, we have to rejuvenate Mexico....And, fourth we have to drivee-commerce.'

Questions

1. Walmart's strengths and weaknesses

2. Why Carrefour is more successful than Wal-Mart

3. What are the advantages of Carrefour in China

Sources: Dudely, R., 'Wal-Mart's everyday low prices fail to stir Brazil

ians',Bloomberg Business, 23 April 2014; S. Banjo, 'Wal-Mart's strategy

to jump start growth in China',Wall Street Journal, 5 August 2014; A.

Felsted, 'China set to remain at head of line for grocery sales',Finan

cial Times, 23 August 2015;Thomson Reuters Street Events, 'Wal Mart

Stores Inc. 22nd Annual Meeting for the Investment Community', edited

transcript, 14 October 2015; L. Whipp, 'Walmart to close 269 stores as it

revamps online presence',Financial Times, 15 January 2016.