Walmart's Global Strategy Case:

3. How would you characterize Walmarts Latin America strategy? What countries were targeted as part of this strategy? What potential does this region bring to Walmarts future global expansion? What cultural challenges and opportunities has Walmart faced in Latin America?

4.. What group of countries will be targeted for Walmarts future growth? What are the attractiveness and risk profiles of these countries? What regions of the world do you think will be vital for Walmarts future global expansion?

5. How would you characterize Walmarts response to pressure for greater ethics and social responsibilities in its expansion strategy and supply chain? Are its responses appropriate and adequate?

Below are some helpful exhibits.

Exhibit 1 Walmart International Operations, June 2015 Retail Units Market (June 2015) Date of Entry Mexico 2,360 November 1991 Canada 400 November 1994 Brazil 499 May 1995 Argentina 108 August 1995 China 433 August 1996 United Kingdom 621 July 1999 Japan 346 March 2002 Costa Rica 225 September 2005 El Salvador 91 September 2005 Guatemala 223 September 2005 Honduras 82 September 2005 Nicaragua 88 September 2005 Chile 399 January 2009 India 21 May 2009

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Exhibit 2 The Largest Global Retailers, 2014 Walmart $476bn $105bn Costco $99bn Carrefour $99bn Lidl $99bnTesco $98bn Kroger $86bn Metro Ag $81bn Aldi $79bn Home Depot $73bn Target

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Exhibit 3 Walmart International Retail Unit Count (20012006)

Exhibit 4 Walmart International Retail Unit Count (20062015)

Thank you!

Case:

Country 2001 2002 2003 2004 2005 2006 11 295 278 11 149 25 56 Argentina Brazil Canada China Germany Japan Mexico Puerto Rico 398 774 54 315 UK 241 267 258 15 1,288 South Korea Total 16 282 16 1,587 15 1,355 1,071 1,170 2,285 2009 2010 2012 2007 13 299 289 2008 21 28 43 2011 63 479 325 88 2013 94 558 379 2015 105 557 394 313 345 318 197 305 0 2014 104 556 389 380 405 434 317 252 512 333 316 279 202 328 Country Argentina Brazil Canada Chile China Costa Rica El Salvador Guatemala Honduras India Japan Mexico Nicaragua Puerto Rico UK Total 160 70 75 164 175 53 56 5 371 414 1,4691,730 55 60 56 55 371 385 4,112 4,612 392 394 371 889 1,023 1,197 404651 54 54 56 335 352 358 2,757 3,121 3,615 81 20 431 2,290 86 15 419 438 2,088 2,353 7379 56 55 541 565 5,3605,826 438 2,199 80 56 576 5,784 55 592 5,949 Introduction In 1991, Walmart became an international company when it opened a Sam's Club near Mexico City. Just two years later, Walmart International was created. Since venturing into Mexico in 1991, Walmart International has grown somewhat erratically. During the 1990s, the retailer exported its big-box, low-price model, an ap- proach the company expected to be as successful in foreign markets as it was in the United States. Although Walmart has had success in several overseas markets, this success has been far from universal. For example, in Mexico, China, and the U.K., the company's efforts to offer the lowest price to customers backfired because of resistance from established retailers. And in Germany, Walmart could not seem to fit its model to local tastes and preferences. In Japan, its joint venture had a series of setbacks, many related to buying habits for which the Walmart model did not respond well. In Mexico, three of the largest domestic retailers constructed a joint buying and operational alliance solely to compete with Walmart.1 Its presence in Hong Kong ended af- ter only two years during the 1990s, and it shuttered operations in Indonesia in the mid-1990s after rioting incidents in Jakarta. Walmart also owned approximately 16 stores in South Korea and 85 in Germany; how- ever, it sold off these operations in 2006 after merchandise failed to match consumer tastes, distribution and re-bagging problems arose, and strong loyalties to other brands made attracting customers difficult and ex- pensive.2 In addition, labor advocates and environmentalists have created headaches for the U.S. behemoth, making continued expansion both cumbersome and expensive. For instance, in 2006, Walmart faced a strong public relations campaign from the All-China Federation of Trade Unions (ACFTU) over Walmart's refusal to let its workers in China unionize. Walmart was eventually forced to concede, perhaps because the Chinese government also lent its weight to the ACFTU's campaign in its effort to establish unions in all foreign-funded enterprises throughout the country. Despite its public battle with the ACFTU, Walmart China received the Howard Award for "Most Respectable Foreign Enterprise in China" in 2014.4 As Walmart continues to expand its global operations, analysts are curious to see how the company is received and whether consumers' opin- ions in fragmented market settings are a match with Walmart's low-price model. Notwithstanding these chal- lenges, today Walmart International is a fast-growing part of Walmart's overall operations, with 6,300 stores and more than 900,000 associates in 27 countries outside the continental U.S.5 (See Exhibit 1.) According to international chief C. Douglas McMillon, Walmart is "progressing from being a domestic company with an international division to being a global company. In two decades Walmart International has become a $100 billion business. If it were a standalone company, it would rank among the top five global retailers.6 (See Ex- hibit 2.) Walmart International's business represents a solid chunk of Walmart's overall $482 billion in reve- nue for the fiscal year 2015.7 With a market capitalization of more than $200 billion in 2016, Walmart is worth as much as the gross domestic product of Algeria. Four of America's 10 richest individuals are from Walmart's low-profile Walton family, which still owns a 40 percent controlling stake. The company's portfolio ranges from superstores in the U.S. to neighborhood markets in Brazil, bodegas in Mexico, the ASDA super- market chain in Britain, Japan's nationwide network of Seiyu shops, and a controlling stake in South African retailer Massmart. Walmart sources many of its products from low-cost Chinese suppliers. The pressure group China Labour Watch estimates that if it were a country, Walmart would rank as China's seventh largest trading partner, just ahead of the U.K., spending more than $18 billion annually on Chinese goods.8 Walmart Early Internationalization In venturing beyond its large domestic market, Walmart had a number of regional options, including entering Europe, Asia, or other countries in the Western hemisphere. (See Exhibits 3 and 4.) At the time, however, Walmart lacked the requisite financial, organizational, and managerial resources to pursue multiple countries simultaneously. Instead, it opted for a logically sequenced approach to market entry that would allow it to apply the learning gained from its initial entries to subsequent ones. In the end, during the first five years of its globalization (1991 to 1995), Walmart decided to concentrate heavily on establishing a presence in the Americas: Mexico, Brazil, Argentina, and Canada. Obviously, Canada had the business environment closest to the U.S. and appeared to be the easiest entry destination. The other countries that Walmart chose as its first global points of entry- Mexico (1991), Brazil (1994), and Argentina (1995)were those with the three larg- est populations in Latin America. 9 The European market had certain characteristics that made it less attrac- tive to Walmart as a first point of entry. The European retail industry was mature, implying that a new en- trant would have to take market share away from an existing player-a very difficult task. Additionally, there were well-entrenched competitors on the scene (e.g., Carrefour in France and Metro A.G. in Germany) that would likely retaliate vigorously against any new player. Further, as with most newcomers, Walmart's rela- tively small size and lack of strong local customer relationships would be severe handicaps in the European arena. In addition, the higher growth rates of Latin American and Asian markets would have made a delayed entry into those markets extremely costly in terms of lost opportunities. In contrast, the opportunity costs of delaying acquisitionbased entries into European markets appeared to be relatively small. 10 While the Asian markets had huge potential when Walmart launched its globalization effort in 1991, they were the most distant geographically and different culturally and logistically from the U.S. market. It would have taken considerable financial and managerial resources to establish a presence in Asia. 11 However, by 1996, Walmart felt ready to take on the Asian challenge and it targeted China. This choice made sense in that the lower purchasing power of the Chinese consumer offered huge potential to a low-price retailer like Walmart. Still, China's cultural, linguistic, and geographical distance from the United States presented rela- tively high entry barriers, so Walmart decided to use two beachheads as learning vehicles for establishing an Asian presence.12 During 1992-93, Walmart agreed to sell low-priced products to two Japanese retailers, Ito- Yokado and Yaohan, that would market these products in Japan, Singapore, Hong Kong, Malaysia, Thailand, Indonesia, and the Philippines. Then, in 1994, Walmart entered Hong Kong through a joint venture with the C.P. Pokphand Company, a Thailand-based conglomerate, to open three Value Club membership discount stores in Hong Kong.13. Success in Mexico and China Overall, Walmart has had a very successful experience in Mexico. In 1991 Walmart entered into a joint ven- ture with retail conglomerate Cifra and opened a Sam's Club in Mexico City. In 1997 it gained a majority posi- tion in the company and in 2001 changed the store name to Walmart de Mexico, or, more commonly, "Wal- Mex." In addition to its 256 Walmart Supercenters and 161 Sam's Club warehouses, Wal-Mex also operates Bodega food and general merchandise discount stores, Superama supermarkets, and Suburbia apparel stores. The majority of its stores are located in and around Mexico City; however, it does business in over 145 cities throughout Mexico. Opening nearly 100 stores in 2015, Wal-Mex has shown no signs of slowing down. As of 2016, it operated over 2,200 stores in Mexico. 14 The rapid growth of Wal-Mex over the last decade has not been problem-free. A 2012 report by the New York Times uncovered widespread bribery occurring at the Wal-Mex executive level, resulting in a three-year-long corruption investigation by the U.S. Justice Depart- ment. According to the New York Times report, a senior Walmart lawyer was contacted by a former executive at Walmart de Mexico in September 2005. In the e-mail and followup conversations, the former executive (later identified as the lawyer in charge of obtaining construction permits for Walmart de Mexico) indicated that Walmart de Mexico had paid bribes for permits throughout the country to fuel growth prospects. In re- sponse, Walmart dispatched investigators to Mexico City. Those investigators found overwhelming evidence of bribery and hundreds of suspect payments totaling more than US$24 million. The investigation also found that Walmart de Mexico's top executives had taken steps to conceal the evidence from Walmart's headquar- ters. 15 Shortly after the investigation commenced, Walmart warned shareholders that its reputation could be affected by the bribery scandal. Shares dropped by 5 percent in April 2015, representing approximately US$10 billion in value. Walmart noted that inquiries from media and law enforcement could affect the per: ception among certain audiences of its role as a corporate citizen."16 Between 2012 and 2015, roughly two dozen representatives from the U.S. Justice Department, FBI, SEC, and IRS became involved in the investiga- ception among certain audiences of its role as a corporate citizen."16 Between 2012 and 2015, roughly two dozen representatives from the U.S. Justice Department, FBI, SEC, and IRS became involved in the investiga- tion. 17 In the wake of the investigation and bribery charges, Walmart has created a new executive position to ensure that all Walmart employees are complying with the U.S. Foreign Corrupt Practices Act. 18 In late 2006 the company was also approved by Mexico's Finance Ministry to open its own bank. In a country where 75 percent of citizens have never had a bank account due to high fees, Banco Walmart de Mexico Adelante" added much-needed competition to the financial services industry and offered consumers lower fees than traditional banks. 19 In November 2007, Wal-Mex opened its first consumer bank, Banco Walmart, in Toluca; by December 2014, the company had opened branches in 2,100 stores. Banco Walmart especially targeted the lowincome market in a country where just 24 percent of households have savings accounts, compared with 55 percent in Chile. In the short term, this strategy included luring newcomers with easy instructions and en- try points, like minimum balances of less than $5 and no commissions, compared with $100 minimums at competing banks. Long term, Wal-Mex's plans included boosting sales via debit cards and easing users into more profitable services like insurance. In 2014 alone, credit card sales grew by 50 percent, with over a half of a million active credit card users in total. Later that year, Wal-Mex cashed in on the successes of Banco Walmart by selling the business to Inbursa for US$250 million.20,21 Wal-Mex's plans for future growth in- volve more heavily targeting the 16-24-year-old age group, which constitutes 55 percent of Mexico's popula- tion. In 2016, Mexico ranked as Walmart's number one international destination with over 2,300 retail out- lets, far ahead of its second major international destination, the United Kingdom, which had only 600 stores.22 In 2014, Walmart de Mexico was a top performer globally with a gross margin of 22 percent and 9.7 percent growth in operating income over the previous year.23 Though not as easy as its experience in Mexico, Walmart has also found decent success in China. Walmart entered the Chinese market in 1996 when it pened a Supercenter and Sam's Club in Shenzen. As of 2016 the company had expanded to 433 stores with over 100,000 employees. In order to cater to its Chinese shoppers, Walmart has introduced retail-tainment" and attempted to create a more hands-on shopping experience.24 China's Tourism Bureau even named one un- derground Walmart store a tourist destination.25 In addition to its own stores, Walmart has had a stake in the Taiwanese Bounteous Company Ltd., which owned the popular chain of Trust-Mart stores.26 In late 2006, The Wall Street Journal publicized a $1 billion deal between Walmart and Bounteous, in which Walmart would acquire Trust-Mart's 100 stores over the course of three years. In light of Walmart's slowing U.S. sales and the termination of its operations in Germany and South Korea, the company's expansion in China is quite timely. Like its operations in Mexico, Walmart has also entered the Chinese financial service industry, by in- troducing a credit card with Bank of Communications Ltd.27 Walmart's expansion has not gone unnoticed. Domestic Chinese rivals have also built up their businesses in order to compete. Shanghai Bailan Group pur- chased four rival supermarkets and department stores nearly a decade ago, now employing over 200,000 and operating over 6,000 stores.28 China Resources Enterprise has hired away managers from foreign chains and cut staff in order to increase its profitability.29 While these efforts signal greater competition for Walmart in particular, they are necessary for domestic companies to survive in China's $4 trillion retail market, which has been increasingly competitive ever since the country joined the WTO and dropped restrictions on foreign retailers. Mixed Results in Europe and Japan In 1998 Walmart entered the European market through Germany by acquiring 21 Wertkauf hypermarkets, onestop shopping centers that offered a broad assortment of high-quality general merchandise and food. Ger- many was seen as the largest single base for retailing in Europe. Wertkauf's annual sales were about $1.4 bil- lion, and its stores operated similar to the popular Walmart Supercenter format in the U.S. Walmart's execu- tives considered Wertkauf as an "excellent fit" for Walmart and hoped that it would provide the company with an ideal entry into a new market.30 However, Walmart's operations in Germany quickly turned into a costly struggle. There were a number of critical factors that the company underestimated when it entered the new market. First of all, the stores of the acquired German retail chain were geographically dispersed and of- ten in poor locations. Also, Walmart had faced some serious cultural differences, which it tried to resolve by making one error after another. For example, the company initially installed American managers, who made some well-intentioned cultural gaffes, like offering to bag groceries for customers (Germans prefer to bag their own groceries) or instructing clerks to smile at customers (Germans, used to brusque service, were put off).31 Other problems, however, were largely outside Walmart's control. Two German discounters, Aldi and Lidl, dominated the grocery business, with smaller shops that featured cut-rate, though still good-quality, food. Aldi also heavily promoted one-week sales, featuring deeply discounted merchandise, ranging from wine to garden hoses, that draw customers back. While Walmart's vast size gave it enormous leverage in pur- chasing clothing and other goods, it had to buy much of the food for its German stores locally. And there, it lacked the muscle of Aldi, which had 4,100 shops and a presence in nearly every town in the country.32 "Germany is the home of the discounter," said Mark Josefson, a retail analyst at Kepler Securities in Frankfurt. "Walmart is not competing on price, and that is one of its main attributes in its home market." Beyond these competitive pressures, there was another serious factor to consider, namely that the German consumer was one of the most parsimonious and price-conscious in Europe. Profit margins in German retailing were the lowest in Europe.33 Walmart struggled in Germany for almost 8 years. Analysts said that Walmart Germany was losing about 200 million (137 million a year on a turnover of about 2 billion, despite several at- tempts to turn around the business. In 2006 it finally made the decision to withdraw from the German mar- ket, by selling its 85 German stores to the rival supermarket chain Metro and taking a pre-tax loss of about $1 billion (536 million) on the failed venture. 34 The decision to sell out to the Metro Group came two months after Walmart sold its 16 stores in South Korea and it appeared a rare retreat by the world's largest retailer from its breakneck global expansion.35 In contrast, Walmart's second retail destination in Europe, the United Kingdom, has brought the company much-needed success. Walmart entered the U.K. market in June 1999 by acquiring ASDA Group PLC, Britain's third-largest food retailer. Walmart offered 6.7 billion ($10.8 billion). The cash deal, which topped a rival bid from the British retail group Kingfisher PLC, was predicted to double Walmart's international business at a stroke and put it in a position to expand its retailing expertise through- out Europe.36 Walmart executives said they hoped to draw upon ASDA's management talent and experience. ASDA's stores are a little less than half the size of Walmart's supercenters of more than 200,000 square feet (18,000 square meters) in the United States, but the lack of space in much of Europe for new out-of-town shopping developments could make ASDA's formula more relevant as a platform for expansion.37 However, while the chain has been only a moderate success, delivering consistent results, Walmart has been frustrated in its efforts to expand, though competing in Britain's feverishly competitive supermarket industry has taught Walmart a good deal. Nevertheless, ASDA is now something of a center for excellence for its global grocery sales. The head of global marketing for Walmart is based at ASDA's head office in Leeds. And, in an example of Walmart's global distribution muscle, The Wall Street Journal recently reported that the best-sell- ing wine in the whole of Japan is an own-label ASDA Bordeaux.38 The third major strategic step in Walmart's early 2000s global expansion was entering the Japanese market. In 2002 Walmart set foot in Japan with the purchase of a 6 percent stake in the 371-store Seiyu chain. Despite continued losses, Walmart gradually raised its stake, making Seiyu a wholly owned subsidiary in June 2008. Walmart has had to confront numer- ous issues in Japan, from longtime Seiyu managers resisting its initiatives to a tendency among Japanese shoppers to equate low prices with inferior products. Also, bulk deals did not play well in a country where many lived in small urban apartments, and the country's grocery distribution system was populated with wholesalers who brokered deals between suppliers and retailers, skimming profits. Even rival Carrefour abandoned this market.39 Edward J. Kolodzieski was the man in charge of turning Seiyu around. As CEO of Walmart Japan, Kolodzieski has slashed expenses, closed 20 stores, and cut 29 percent of corporate staff. In- store butchers were removed, with most meat now processed in a central facility. With the freed-up floor space, Seiyu bulked up meals-to-go offerings. To bypass the middlemen, Seiyu has also boosted the number of products it imports directly from manufacturers by 25 percent in 2009, and also focused on increasing sales of its own private-label brands.40 The biggest change, however, was a shift away from weekly specials to "eve- ryday low prices" in areas like baby care and pet products, and, eventually, throughout the store. Taking a age from Britain's ASDA, Seiyu instead used its marketing dollars to compare prices against competitors. With the pressure of prolonged recession, Japanese consumers have finally accepted that they can buy quality mer- chandise for a lower price.41 After spending 100 billion yen (roughly $1.2 billion), Walmart's situation in Ja- pan had stabilized by 2010, with two years of consistent profits.42 As of 2016, Walmart holds at about 440 Seiyu stores across Japan. Refocusing on Latin America The year 2005 became another turning point in Walmart's strategy. Somewhat frustrated by strategic failure in Germany, and very slow expansion in the developed countries like Canada and the U.K., the company has turned its focus toward Latin America. Walmart has decided to leverage its positive experience in Mexico to- ward other South American countries. In 2005 Walmart successfully entered this market with the purchase of a 33-1/3 percent interest in Central American Retail Holding Company (CARHCO) from the Dutch retailer Royal Ahold NV. CARHCO is Central America's largest retailer, with 363 supermarkets and other stores in the following five countries: Guatemala (120), El Salvador (57), Honduras (32), Nicaragua (30), and Costa Rica (124). CARHCO has approximately 23,000 associates. Its sales during 2004 were approximately $2.0 billion.43 Prior to that, in March 2004, Walmart bought a 118-store supermarket chain, Bompreco, in northeastern Bra- zil for $300 million, also from Royal Ahold of the Netherlands. This acquisition has significantly increased Walmart's competitive position in the country. In 2006 the company made another successful deal with Por- tugalbased Sonae by purchasing its 140 Brazilian stores for $757 million. The Sonae purchase was expected to boost Walmart's presence in Brazil's wealthier southern states. With the Sonae acquisition, the Walmart store count increased to 295 units in 17 of Brazil's 26 states. However, this move made Walmart only the third-largest retailer in Brazil, following Carrefour of France and Companhia Brasileira de Distribuie Po de Acar.44 Brazilian operations, however, have struggled in recent years. Frustrated by lackluster operating profit margins, Walmart invested US$22 billion between 2010 and 2015 in capital improvements to spur sales in Brazil. Between 2007 and 2013, the number of Walmart locations across Brazil doubled. Despite the investment, sales growth continued to stall. By 2013, Walmart had posted its fifth consecutive operating loss in Brazil. In December 2015, Walmart strategically closed 60 stores across Brazil, representing 10 percent of its operations.45 Another step in the sequence of its strategic moves in Latin America was Walmart's expan- sion into Chile. In 2009 Walmart acquired a majority stake of D&S's (short for Distribucin y Servicio) 224- store chain for $1.6 billion. In acquiring D&S, the nation's leading grocer and third-largest retailer, Walmart hopes to cement its dominance in Latin America, where it is by far the biggest retailer with $38 billion in sales, estimates research firm Planet Retail, double that of its closest rival, Carrefour. In Chile, Walmart enters a market that has long been inhospitable to foreign retailers. Home Depot, Carrefour, and JCPenney are mong the companies that have tried, and failed, to make it in Chile, a nation of 17 million with the sixth-largest retail market in Latin America.46 Walmart has increased D&S's expansion budget from $150 million to $250 million, which would go toward opening nearly 70 stores in fiscal year 2010, many of them small stores that cater to lower-income shoppers, according to Vicente Trius, Walmart Latin America's president and CEO. The appeal of D&S goes well beyond its stores. About 1.7 million Chileans carry a Presto card issued by its financial ser- vices unit, up from 1.2 million in 2004. There is a saying here that large retailers generate sales with [stores and earnings with their credit cards," says Rodrigo Rivera, a partner with the Boston Consulting Group in San- tiago.47 Indeed, analysts estimate some South American retail chains generate upwards of 70 percent of their profits from financial services. (At D&S that figure is just 17 percent.) Walmart already offers financial ser- vices in Mexico and Brazil, though its attempts to launch a bank in the U.S. have failed. The retailer is keen to grow the Presto business by adding more low-risk services such as selling life insurance for outside ven- dors.48 Walmart's Plans for 2016 Forward After several years of rapid international growth, Walmart presented revised plans in 2016 aimed at retool- ing its existing stores while continuing global expansion. Internationally, the company plans to refocus on neighborhood stores and supercenters, which will better meet market demands. Throughout 2016, Walmart identified and closed 115 significantly underperforming international locations, impacting roughly 6,000 em- ployees. More than half of the store closures occurred in Brazil, with the remainder spread across South America.49 Despite the strategic closings, more than 200 new international locations, consisting of supercent- ers and local neighborhood stores, were opened internationally in 2016. This results in the largest, fastest international expansion in Walmart's history. In particular, the Indian, Chinese, Canadian, and African mar- kets are key to Walmart's future international strategy.50 China In 2015, Walmart announced ambitious growth plans for China. By the end of 2017, the company hoped to open 115 new stores, creating 30,000 new jobs. The new stores will increase Walmart China's total store count to 530. Additionally, Walmart will invest US$60 million to remodel and refresh a portion of the existing Chinese stores that it operates.51 Rather than being the "largest" retailer in China, Walmart is aiming to be the most trusted. This long-term goal includes improving the perceived quality of the goods it sells. Though online retailer Alibaba still holds a dominant lead in online market share, part of Walmart's strategy includes embracing online sales. In 2012, the company acquired Yihaodian, an online retailer that sells perishable goods, and in 2015, Walmart released a cell phone app to provide consumers with the ability to order prod- ucts for either home or in-store delivery.52 India The other attractive growing market from the BRIC group that also drew Walmart's attention is India. India is widely regarded as one of the world's fastest-growing retail markets, and one of the most frustrating for foreign retailers. Despite the liberalization of the Indian economy, foreign companies are still prohibited from owning a majority stake in grocery stores. Due to the legal and logistical difficulties of entering the Indian marketplace, Walmart has adopted a strategy of partnering with local companies. Walmart originally joined with the Bharti Group, an Indian conglomerate, to form a joint venture intended to open stores under the Best Price Modern Wholesale brand name. During their five-year partnership, Walmart and the Bharti Group opened 20 stores in urban centers across India. Though the partnership was amicably dissolved in 2013, Walmart remains open to using the joint-venture approach as it expands across the country.53 In the summer of 2015, Walmart announced aggressive expansion plans with a renewed focus on wholesaling stores as op- posed to traditional retail. While government restrictions prevent majority ownership of grocery stores by foreigners, there are no restrictions over wholesalers. By 2020, Walmart plans to open 50 new stores, more than tripling its current number. These new stores, acting as a one-stop shop for a variety of grocery-type items, are targeting small business owners as customers, rather than everyday consumers. In total, Walmart will invest between US$240 and US$300 million in the Indian market, creating 2,000 permanent jobs.54,55,56 Canada Established in 1994 and headquartered in Mississauga, Ontario, Walmart Canada currently operates 394 stores and serves more than 1 million customers each day across Canada. Walmart is Canada's third-largest employer with more than 90,000 associates and was recently named one of Canada's top ten corporate cul- tures by Waterstone Human Capital.57 In January 2015, Walmart Canada announced that the company will invest several hundred million dollars in capital improvements over the following year. Plans included opening 30 new supercenters by the end of the fiscal year, adding 230,000 square feet of additional retail space. In total, about 1,000 new permanent in-store jobs will be created by the new stores, as well as 3,700 construction jobs.58 In addition to store expansions, Walmart Canada is investing tens of millions of dollars into its distribution network and e-commerce projects. Walmart Canada's website currently receives 400,000 customers every day and boasts 150,000 different items for sale. Online ordering, with in-store pickup, con- stitutes a portion of this current e-commerce investment. Walmart's focus on improving its distribution cen- ters is aimed at increasing the company's market share in the fresh food and grocery sector. Approximately 300 permanent jobs will be added to the distribution side of the business with these investments. 59 Walmart Canada has leveraged the failure of other foreign retailers within Canada to its advantage. In 2015, Target announced that it would be withdrawing from the Canadian market, leaving a network of 133 empty big-box retail spaces in its wake. In mid-2015, Walmart Canada agreed to purchase 13 former Target loca- tions, as well as a distribution center.60 South Africa Walmart first emerged in South Africa through its US$2.4 billion purchase of 51 percent of Massmart, the country's third-largest retailer, in 2010. Since then, Walmart has been slow to expand. A lack of infrastructure has caused headaches; at the current time, distribution networks across the country are inconsistent, increas- ing the amount of time that it takes products to reach consumers. Additionally, there are not enough shopping centers and malls to accommodate stores as large as Massmart. In response, Walmart is moving toward build- ing standalone stores. In 2015, Walmart constructed 19 new ground-up stores.61 Walmart also views South Africa as a bridge to the rapidly emerging African marketplace. In 2015, Walmart announced plans to enter Nigeria, and the Massmart brand has plans to open a few stores in strategic locations in Angola 62,63 Walmart's Global.com Challenge to Amazon.com Sensing the shift towards digital sales in both developed and developing economies, Walmart has heavily in- vested in building its e-commerce infrastructure. The company spent tens of billions in 2015 alone. With more commerce being conducted on smartphones, Walmart introduced a new mobile app in 2015 to mprove the user interface. Unlike Amazon, which has no physical stores, Walmart sees digital ordering with instore pickup as a unique niche with potentially high growth. Grocery items, with the need to be refrigerated, are not able to be easily fulfilled by other online retailers, like Amazon, but are well-suited for in-store pickup at a Walmart. Using the Walmart app, customers can order groceries and other fresh food items and quickly pick up their merchandise in person. Walmart is also developing and modernizing its delivery and fulfillment systems. To a large degree, this means emulating Amazon's strategy. To compete with Amazon's "Prime" ship- ping services, Walmart has begun offering "Shipping Pass," which provides users with unlimited three-day shipping on all online orders. Amazon Prime has led to increased consumer loyalty, a benefit Walmart also hopes to gain. To modernize its delivery services and increase its ability to ship to all locations around the world, Amazon is currently developing drone delivery services. In 2015, Walmart also announced its intent toutilize drones in the near future. Building an extensive online infrastructure has the secondary benefit of increasing the variety of digital products that companies like Amazon and Walmart can offer. Specifically, companies with a massive networking infrastructure can provide customers with online services, like cloud storage, using the servers that they already have purchased. Amazon first took advantage of this by offering free storage space to Prime members and to other customers for a monthly fee. Walmart has followed by in- troducing OpenOps, an open-source cloud service. Despite the progress, Walmart's online sales still lag far behind Amazon's. While Walmart's product line consists of nearly a million items, Amazon boasts over 19 million. In 2015, despite the introduction of its "Walmart Pay" mobile wallet and millions in investment, Walmart's online sales grew only 12 percent. During the same period, Amazon's sales grew by 20 percent, further increasing its already overwhelming lead in global online sales. By the end of the year, Walmart recorded US$13.7 billion in online sales while Amazon recorded mprove the user interface. Unlike Amazon, which has no physical stores, Walmart sees digital ordering with instore pickup as a unique niche with potentially high growth. Grocery items, with the need to be refrigerated, are not able to be easily fulfilled by other online retailers, like Amazon, but are well-suited for in-store pickup at a Walmart. Using the Walmart app, customers can order groceries and other fresh food items and quickly pick up their merchandise in person. Walmart is also developing and modernizing its delivery and fulfillment systems. To a large degree, this means emulating Amazon's strategy. To compete with Amazon's "Prime" ship- ping services, Walmart has begun offering "Shipping Pass," which provides users with unlimited three-day shipping on all online orders. Amazon Prime has led to increased consumer loyalty, a benefit Walmart also hopes to gain. To modernize its delivery services and increase its ability to ship to all locations around the world, Amazon is currently developing drone delivery services. In 2015, Walmart also announced its intent toutilize drones in the near future. Building an extensive online infrastructure has the secondary benefit of increasing the variety of digital products that companies like Amazon and Walmart can offer. Specifically, companies with a massive networking infrastructure can provide customers with online services, like cloud storage, using the servers that they already have purchased. Amazon first took advantage of this by offering free storage space to Prime members and to other customers for a monthly fee. Walmart has followed by in- troducing OpenOps, an open-source cloud service. Despite the progress, Walmart's online sales still lag far behind Amazon's. While Walmart's product line consists of nearly a million items, Amazon boasts over 19 million. In 2015, despite the introduction of its "Walmart Pay" mobile wallet and millions in investment, Walmart's online sales grew only 12 percent. During the same period, Amazon's sales grew by 20 percent, further increasing its already overwhelming lead in global online sales. By the end of the year, Walmart recorded US$13.7 billion in online sales while Amazon recorded a record US$107 billion, leading some to question if Walmart could ever pose as a serious e-commerce chal- lenger.64,65 Continued Challenges with Corporate Responsibility Like other retailers, Walmart continues to face challenges from its exposure to the realities of production and sales in emerging and developing regions. On the sales side, as noted above, Walmart has been embroiled in corruption scandals in Mexico and India. On the production side, a fire at a Bangalore textile factory in late 2012 and two horrific accidents at garment factories in Bangladesh in 2013 have placed renewed pressure on U.S. and European clothing brands to take greater responsibility for the working conditions of the factories from which they source products. What happened in Bangladesh has underscored the difficulties and vulner- abilities of outsourcing production to sometimes unreliable and unethical suppliers. In early 2013, more than 1,000 workers were killed when an eight-story garment factory in Dhaka caught fire while thousands worked inside. Not two weeks later, a fire killed eight workers in another site in Bangladesh. After initially denying it had production at these locations, Walmart eventually confirmed that it had ordered garments from a sup- plier who utilized the plant.66 Then, on June 11, another fire erupted at a Dickies garment factory on the out- skirts of Dhaka, causing employees to run from the building, raising further questions about safety in Bangla- deshi factories.67 As a result, Walmart and the Gap Inc. subsequently announced their signing of the Bangla- desh Worker Safety Initiative to ensure factory safety in Bangladesh. This agreement, backed by a $50 million commitment, will be overseen by the Bipartisan Policy Center, a nonprofit group based in Washington. As part of this effort, various U.S. retail trade groups who had been concerned about the legal liability associated with the competing, European-dominated agreement will join with Walmart and the Gap.68 On June 25, 2013, the Obama administration announced it was suspending trade privileges with Bangladesh, removing the country from the list of countries with most-favored-trade status. The move came after pressure from unions and continuing concerns about the Bangladeshi government's ability to maintain safe working conditions in its factories.69 Walmart and other retailers continue to struggle with how to manage extended global supply chains with multiple layers of suppliers. Country 2001 2002 2003 2004 2005 2006 11 295 278 11 149 25 56 Argentina Brazil Canada China Germany Japan Mexico Puerto Rico 398 774 54 315 UK 241 267 258 15 1,288 South Korea Total 16 282 16 1,587 15 1,355 1,071 1,170 2,285 2009 2010 2012 2007 13 299 289 2008 21 28 43 2011 63 479 325 88 2013 94 558 379 2015 105 557 394 313 345 318 197 305 0 2014 104 556 389 380 405 434 317 252 512 333 316 279 202 328 Country Argentina Brazil Canada Chile China Costa Rica El Salvador Guatemala Honduras India Japan Mexico Nicaragua Puerto Rico UK Total 160 70 75 164 175 53 56 5 371 414 1,4691,730 55 60 56 55 371 385 4,112 4,612 392 394 371 889 1,023 1,197 404651 54 54 56 335 352 358 2,757 3,121 3,615 81 20 431 2,290 86 15 419 438 2,088 2,353 7379 56 55 541 565 5,3605,826 438 2,199 80 56 576 5,784 55 592 5,949 Introduction In 1991, Walmart became an international company when it opened a Sam's Club near Mexico City. Just two years later, Walmart International was created. Since venturing into Mexico in 1991, Walmart International has grown somewhat erratically. During the 1990s, the retailer exported its big-box, low-price model, an ap- proach the company expected to be as successful in foreign markets as it was in the United States. Although Walmart has had success in several overseas markets, this success has been far from universal. For example, in Mexico, China, and the U.K., the company's efforts to offer the lowest price to customers backfired because of resistance from established retailers. And in Germany, Walmart could not seem to fit its model to local tastes and preferences. In Japan, its joint venture had a series of setbacks, many related to buying habits for which the Walmart model did not respond well. In Mexico, three of the largest domestic retailers constructed a joint buying and operational alliance solely to compete with Walmart.1 Its presence in Hong Kong ended af- ter only two years during the 1990s, and it shuttered operations in Indonesia in the mid-1990s after rioting incidents in Jakarta. Walmart also owned approximately 16 stores in South Korea and 85 in Germany; how- ever, it sold off these operations in 2006 after merchandise failed to match consumer tastes, distribution and re-bagging problems arose, and strong loyalties to other brands made attracting customers difficult and ex- pensive.2 In addition, labor advocates and environmentalists have created headaches for the U.S. behemoth, making continued expansion both cumbersome and expensive. For instance, in 2006, Walmart faced a strong public relations campaign from the All-China Federation of Trade Unions (ACFTU) over Walmart's refusal to let its workers in China unionize. Walmart was eventually forced to concede, perhaps because the Chinese government also lent its weight to the ACFTU's campaign in its effort to establish unions in all foreign-funded enterprises throughout the country. Despite its public battle with the ACFTU, Walmart China received the Howard Award for "Most Respectable Foreign Enterprise in China" in 2014.4 As Walmart continues to expand its global operations, analysts are curious to see how the company is received and whether consumers' opin- ions in fragmented market settings are a match with Walmart's low-price model. Notwithstanding these chal- lenges, today Walmart International is a fast-growing part of Walmart's overall operations, with 6,300 stores and more than 900,000 associates in 27 countries outside the continental U.S.5 (See Exhibit 1.) According to international chief C. Douglas McMillon, Walmart is "progressing from being a domestic company with an international division to being a global company. In two decades Walmart International has become a $100 billion business. If it were a standalone company, it would rank among the top five global retailers.6 (See Ex- hibit 2.) Walmart International's business represents a solid chunk of Walmart's overall $482 billion in reve- nue for the fiscal year 2015.7 With a market capitalization of more than $200 billion in 2016, Walmart is worth as much as the gross domestic product of Algeria. Four of America's 10 richest individuals are from Walmart's low-profile Walton family, which still owns a 40 percent controlling stake. The company's portfolio ranges from superstores in the U.S. to neighborhood markets in Brazil, bodegas in Mexico, the ASDA super- market chain in Britain, Japan's nationwide network of Seiyu shops, and a controlling stake in South African retailer Massmart. Walmart sources many of its products from low-cost Chinese suppliers. The pressure group China Labour Watch estimates that if it were a country, Walmart would rank as China's seventh largest trading partner, just ahead of the U.K., spending more than $18 billion annually on Chinese goods.8 Walmart Early Internationalization In venturing beyond its large domestic market, Walmart had a number of regional options, including entering Europe, Asia, or other countries in the Western hemisphere. (See Exhibits 3 and 4.) At the time, however, Walmart lacked the requisite financial, organizational, and managerial resources to pursue multiple countries simultaneously. Instead, it opted for a logically sequenced approach to market entry that would allow it to apply the learning gained from its initial entries to subsequent ones. In the end, during the first five years of its globalization (1991 to 1995), Walmart decided to concentrate heavily on establishing a presence in the Americas: Mexico, Brazil, Argentina, and Canada. Obviously, Canada had the business environment closest to the U.S. and appeared to be the easiest entry destination. The other countries that Walmart chose as its first global points of entry- Mexico (1991), Brazil (1994), and Argentina (1995)were those with the three larg- est populations in Latin America. 9 The European market had certain characteristics that made it less attrac- tive to Walmart as a first point of entry. The European retail industry was mature, implying that a new en- trant would have to take market share away from an existing player-a very difficult task. Additionally, there were well-entrenched competitors on the scene (e.g., Carrefour in France and Metro A.G. in Germany) that would likely retaliate vigorously against any new player. Further, as with most newcomers, Walmart's rela- tively small size and lack of strong local customer relationships would be severe handicaps in the European arena. In addition, the higher growth rates of Latin American and Asian markets would have made a delayed entry into those markets extremely costly in terms of lost opportunities. In contrast, the opportunity costs of delaying acquisitionbased entries into European markets appeared to be relatively small. 10 While the Asian markets had huge potential when Walmart launched its globalization effort in 1991, they were the most distant geographically and different culturally and logistically from the U.S. market. It would have taken considerable financial and managerial resources to establish a presence in Asia. 11 However, by 1996, Walmart felt ready to take on the Asian challenge and it targeted China. This choice made sense in that the lower purchasing power of the Chinese consumer offered huge potential to a low-price retailer like Walmart. Still, China's cultural, linguistic, and geographical distance from the United States presented rela- tively high entry barriers, so Walmart decided to use two beachheads as learning vehicles for establishing an Asian presence.12 During 1992-93, Walmart agreed to sell low-priced products to two Japanese retailers, Ito- Yokado and Yaohan, that would market these products in Japan, Singapore, Hong Kong, Malaysia, Thailand, Indonesia, and the Philippines. Then, in 1994, Walmart entered Hong Kong through a joint venture with the C.P. Pokphand Company, a Thailand-based conglomerate, to open three Value Club membership discount stores in Hong Kong.13. Success in Mexico and China Overall, Walmart has had a very successful experience in Mexico. In 1991 Walmart entered into a joint ven- ture with retail conglomerate Cifra and opened a Sam's Club in Mexico City. In 1997 it gained a majority posi- tion in the company and in 2001 changed the store name to Walmart de Mexico, or, more commonly, "Wal- Mex." In addition to its 256 Walmart Supercenters and 161 Sam's Club warehouses, Wal-Mex also operates Bodega food and general merchandise discount stores, Superama supermarkets, and Suburbia apparel stores. The majority of its stores are located in and around Mexico City; however, it does business in over 145 cities throughout Mexico. Opening nearly 100 stores in 2015, Wal-Mex has shown no signs of slowing down. As of 2016, it operated over 2,200 stores in Mexico. 14 The rapid growth of Wal-Mex over the last decade has not been problem-free. A 2012 report by the New York Times uncovered widespread bribery occurring at the Wal-Mex executive level, resulting in a three-year-long corruption investigation by the U.S. Justice Depart- ment. According to the New York Times report, a senior Walmart lawyer was contacted by a former executive at Walmart de Mexico in September 2005. In the e-mail and followup conversations, the former executive (later identified as the lawyer in charge of obtaining construction permits for Walmart de Mexico) indicated that Walmart de Mexico had paid bribes for permits throughout the country to fuel growth prospects. In re- sponse, Walmart dispatched investigators to Mexico City. Those investigators found overwhelming evidence of bribery and hundreds of suspect payments totaling more than US$24 million. The investigation also found that Walmart de Mexico's top executives had taken steps to conceal the evidence from Walmart's headquar- ters. 15 Shortly after the investigation commenced, Walmart warned shareholders that its reputation could be affected by the bribery scandal. Shares dropped by 5 percent in April 2015, representing approximately US$10 billion in value. Walmart noted that inquiries from media and law enforcement could affect the per: ception among certain audiences of its role as a corporate citizen."16 Between 2012 and 2015, roughly two dozen representatives from the U.S. Justice Department, FBI, SEC, and IRS became involved in the investiga- ception among certain audiences of its role as a corporate citizen."16 Between 2012 and 2015, roughly two dozen representatives from the U.S. Justice Department, FBI, SEC, and IRS became involved in the investiga- tion. 17 In the wake of the investigation and bribery charges, Walmart has created a new executive position to ensure that all Walmart employees are complying with the U.S. Foreign Corrupt Practices Act. 18 In late 2006 the company was also approved by Mexico's Finance Ministry to open its own bank. In a country where 75 percent of citizens have never had a bank account due to high fees, Banco Walmart de Mexico Adelante" added much-needed competition to the financial services industry and offered consumers lower fees than traditional banks. 19 In November 2007, Wal-Mex opened its first consumer bank, Banco Walmart, in Toluca; by December 2014, the company had opened branches in 2,100 stores. Banco Walmart especially targeted the lowincome market in a country where just 24 percent of households have savings accounts, compared with 55 percent in Chile. In the short term, this strategy included luring newcomers with easy instructions and en- try points, like minimum balances of less than $5 and no commissions, compared with $100 minimums at competing banks. Long term, Wal-Mex's plans included boosting sales via debit cards and easing users into more profitable services like insurance. In 2014 alone, credit card sales grew by 50 percent, with over a half of a million active credit card users in total. Later that year, Wal-Mex cashed in on the successes of Banco Walmart by selling the business to Inbursa for US$250 million.20,21 Wal-Mex's plans for future growth in- volve more heavily targeting the 16-24-year-old age group, which constitutes 55 percent of Mexico's popula- tion. In 2016, Mexico ranked as Walmart's number one international destination with over 2,300 retail out- lets, far ahead of its second major international destination, the United Kingdom, which had only 600 stores.22 In 2014, Walmart de Mexico was a top performer globally with a gross margin of 22 percent and 9.7 percent growth in operating income over the previous year.23 Though not as easy as its experience in Mexico, Walmart has also found decent success in China. Walmart entered the Chinese market in 1996 when it pened a Supercenter and Sam's Club in Shenzen. As of 2016 the company had expanded to 433 stores with over 100,000 employees. In order to cater to its Chinese shoppers, Walmart has introduced retail-tainment" and attempted to create a more hands-on shopping experience.24 China's Tourism Bureau even named one un- derground Walmart store a tourist destination.25 In addition to its own stores, Walmart has had a stake in the Taiwanese Bounteous Company Ltd., which owned the popular chain of Trust-Mart stores.26 In late 2006, The Wall Street Journal publicized a $1 billion deal between Walmart and Bounteous, in which Walmart would acquire Trust-Mart's 100 stores over the course of three years. In light of Walmart's slowing U.S. sales and the termination of its operations in Germany and South Korea, the company's expansion in China is quite timely. Like its operations in Mexico, Walmart has also entered the Chinese financial service industry, by in- troducing a credit card with Bank of Communications Ltd.27 Walmart's expansion has not gone unnoticed. Domestic Chinese rivals have also built up their businesses in order to compete. Shanghai Bailan Group pur- chased four rival supermarkets and department stores nearly a decade ago, now employing over 200,000 and operating over 6,000 stores.28 China Resources Enterprise has hired away managers from foreign chains and cut staff in order to increase its profitability.29 While these efforts signal greater competition for Walmart in particular, they are necessary for domestic companies to survive in China's $4 trillion retail market, which has been increasingly competitive ever since the country joined the WTO and dropped restrictions on foreign retailers. Mixed Results in Europe and Japan In 1998 Walmart entered the European market through Germany by acquiring 21 Wertkauf hypermarkets, onestop shopping centers that offered a broad assortment of high-quality general merchandise and food. Ger- many was seen as the largest single base for retailing in Europe. Wertkauf's annual sales were about $1.4 bil- lion, and its stores operated similar to the popular Walmart Supercenter format in the U.S. Walmart's execu- tives considered Wertkauf as an "excellent fit" for Walmart and hoped that it would provide the company with an ideal entry into a new market.30 However, Walmart's operations in Germany quickly turned into a costly struggle. There were a number of critical factors that the company underestimated when it entered the new market. First of all, the stores of the acquired German retail chain were geographically dispersed and of- ten in poor locations. Also, Walmart had faced some serious cultural differences, which it tried to resolve by making one error after another. For example, the company initially installed American managers, who made some well-intentioned cultural gaffes, like offering to bag groceries for customers (Germans prefer to bag their own groceries) or instructing clerks to smile at customers (Germans, used to brusque service, were put off).31 Other problems, however, were largely outside Walmart's control. Two German discounters, Aldi and Lidl, dominated the grocery business, with smaller shops that featured cut-rate, though still good-quality, food. Aldi also heavily promoted one-week sales, featuring deeply discounted merchandise, ranging from wine to garden hoses, that draw customers back. While Walmart's vast size gave it enormous leverage in pur- chasing clothing and other goods, it had to buy much of the food for its German stores locally. And there, it lacked the muscle of Aldi, which had 4,100 shops and a presence in nearly every town in the country.32 "Germany is the home of the discounter," said Mark Josefson, a retail analyst at Kepler Securities in Frankfurt. "Walmart is not competing on price, and that is one of its main attributes in its home market." Beyond these competitive pressures, there was another serious factor to consider, namely that the German consumer was one of the most parsimonious and price-conscious in Europe. Profit margins in German retailing were the lowest in Europe.33 Walmart struggled in Germany for almost 8 years. Analysts said that Walmart Germany was losing about 200 million (137 million a year on a turnover of about 2 billion, despite several at- tempts to turn around the business. In 2006 it finally made the decision to withdraw from the German mar- ket, by selling its 85 German stores to the rival supermarket chain Metro and taking a pre-tax loss of about $1 billion (536 million) on the failed venture. 34 The decision to sell out to the Metro Group came two months after Walmart sold its 16 stores in South Korea and it appeared a rare retreat by the world's largest retailer from its breakneck global expansion.35 In contrast, Walmart's second retail destination in Europe, the United Kingdom, has brought the company much-needed success. Walmart entered the U.K. market in June 1999 by acquiring ASDA Group PLC, Britain's third-largest food retailer. Walmart offered 6.7 billion ($10.8 billion). The cash deal, which topped a rival bid from the British retail group Kingfisher PLC, was predicted to double Walmart's international business at a stroke and put it in a position to expand its retailing expertise through- out Europe.36 Walmart executives said they hoped to draw upon ASDA's management talent and experience. ASDA's stores are a little less than half the size of Walmart's supercenters of more than 200,000 square feet (18,000 square meters) in the United States, but the lack of space in much of Europe for new out-of-town shopping developments could make ASDA's formula more relevant as a platform for expansion.37 However, while the chain has been only a moderate success, delivering consistent results, Walmart has been frustrated in its efforts to expand, though competing in Britain's feverishly competitive supermarket industry has taught Walmart a good deal. Nevertheless, ASDA is now something of a center for excellence for its global grocery sales. The head of global marketing for Walmart is based at ASDA's head office in Leeds. And, in an example of Walmart's global distribution muscle, The Wall Street Journal recently reported that the best-sell- ing wine in the whole of Japan is an own-label ASDA Bordeaux.38 The third major strategic step in Walmart's early 2000s global expansion was entering the Japanese market. In 2002 Walmart set foot in Japan with the purchase of a 6 percent stake in the 371-store Seiyu chain. Despite continued losses, Walmart gradually raised its stake, making Seiyu a wholly owned subsidiary in June 2008. Walmart has had to confront numer- ous issues in Japan, from longtime Seiyu managers resisting its initiatives to a tendency among Japanese shoppers to equate low prices with inferior products. Also, bulk deals did not play well in a country where many lived in small urban apartments, and the country's grocery distribution system was populated with wholesalers who brokered deals between suppliers and retailers, skimming profits. Even rival Carrefour abandoned this market.39 Edward J. Kolodzieski was the man in charge of turning Seiyu around. As CEO of Walmart Japan, Kolodzieski has slashed expenses, closed 20 stores, and cut 29 percent of corporate staff. In- store butchers were removed, with most meat now processed in a central facility. With the freed-up floor space, Seiyu bulked up meals-to-go offerings. To bypass the middlemen, Seiyu has also boosted the number of products it imports directly from manufacturers by 25 percent in 2009, and also focused on increasing sales of its own private-label brands.40 The biggest change, however, was a shift away from weekly specials to "eve- ryday low prices" in areas like baby care and pet products, and, eventually, throughout the store. Taking a age from Britain's ASDA, Seiyu instead used its marketing dollars to compare prices against competitors. With the pressure of prolonged recession, Japanese consumers have finally accepted that they can buy quality mer- chandise for a lower price.41 After spending 100 billion yen (roughly $1.2 billion), Walmart's situation in Ja- pan had stabilized by 2010, with two years of consistent profits.42 As of 2016, Walmart holds at about 440 Seiyu stores across Japan. Refocusing on Latin America The year 2005 became another turning point in Walmart's strategy. Somewhat frustrated by strategic failure in Germany, and very slow expansion in the developed countries like Canada and the U.K., the company has turned its focus toward Latin America. Walmart has decided to leverage its positive experience in Mexico to- ward other South American countries. In 2005 Walmart successfully entered this market with the purchase of a 33-1/3 percent interest in Central American Retail Holding Company (CARHCO) from the Dutch retailer Royal Ahold NV. CARHCO is Central America's largest retailer, with 363 supermarkets and other stores in the following five countries: Guatemala (120), El Salvador (57), Honduras (32), Nicaragua (30), and Costa Rica (124). CARHCO has approximately 23,000 associates. Its sales during 2004 were approximately $2.0 billion.43 Prior to that, in March 2004, Walmart bought a 118-store supermarket chain, Bompreco, in northeastern Bra- zil for $300 million, also from Royal Ahold of the Netherlands. This acquisition has significantly increased Walmart's competitive position in the country. In 2006 the company made another successful deal with Por- tugalbased Sonae by purchasing its 140 Brazilian stores for $757 million. The Sonae purchase was expected to boost Walmart's presence in Brazil's wealthier southern states. With the Sonae acquisition, the Walmart store count increased to 295 units in 17 of Brazil's 26 states. However, this move made Walmart only the third-largest retailer in Brazil, following Carrefour of France and Companhia Brasileira de Distribuie Po de Acar.44 Brazilian operations, however, have struggled in recent years. Frustrated by lackluster operating profit margins, Walmart invested US$22 billion between 2010 and 2015 in capital improvements to spur sales in Brazil. Between 2007 and 2013, the number of Walmart locations across Brazil doubled. Despite the investment, sales growth continued to stall. By 2013, Walmart had posted its fifth consecutive operating loss in Brazil. In December 2015, Walmart strategically closed 60 stores across Brazil, representing 10 percent of its operations.45 Another step in the sequence of its strategic moves in Latin America was Walmart's expan- sion into Chile. In 2009 Walmart acquired a majority stake of D&S's (short for Distribucin y Servicio) 224- store chain for $1.6 billion. In acquiring D&S, the nation's leading grocer and third-largest retailer, Walmart hopes to cement its dominance in Latin America, where it is by far the biggest retailer with $38 billion in sales, estimates research firm P