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CASE STUDY 3

In-Depth Integrative Case 2.2

Walmarts Global Strategies

Introduction Exhibit 1 Walmart International Operations,
April 20108
In 1991, Walmart became an international company when
Retail Units
it opened a Sams Club near Mexico City. Just two years Market (04/2010) Date of Entry
later, Walmart International was created. Since venturing
Mexico 1,479 November 1991
into Mexico in 1991, Walmart International has grown
Canada 317 November 1994
somewhat erratically. During the 1990s the retailer exported
Brazil 438 May 1995
its big-box, low-price model, an approach the company
Argentina 44 August 1995
expected to be as successful in foreign markets as it was
China 284 August 1996
in the United States. Although Walmart has had success in
United Kingdom 374 July 1999
several overseas markets, this success has been far from
Japan 371 March 2002
universal. For example, in Mexico, China, and the U.K.,
Costa Rica 170 September 2005
the companys efforts to offer the lowest price to custom-
El Salvador 77 September 2005
ers backfired because of resistance from established retail-
Guatemala 164 September 2005
ers. And in Germany, Walmart could not seem to fit its
Honduras 53 September 2005
model to local tastes and preferences. In Japan, its joint
Nicaragua 55 September 2005
venture had a series of setbacks, many related to buying
Chile 254 January 2009
habits for which the Walmart model did not respond well.
India 1 May 2009
In Mexico, three of the largest domestic retailers con-
structed a joint buying and operational alliance solely to
compete with Walmart.1 Its presence in Hong Kong ended
after only two years during the 1990s, and it shuttered Notwithstanding these challenges, today, Walmart
operations in Indonesia in the mid-1990s after rioting International is a fast-growing part of Walmarts overall
incidents in Jakarta. Walmart also owned approximately operations, with 4,081 stores and more than 664,000 asso-
16 stores in South Korea and 85 in Germany; however, it ciates in 14 countries outside the continental U.S.5 (See
sold off these operations in 2006 after merchandise failed Exhibit 1.) According to international chief C. Douglas
to match consumer tastes, distribution and re-bagging McMillon, Walmart is progressing from being a domes-
problems arose, and strong loyalties to other brands made tic company with an international division to being a
attracting customers difficult and expensive.2 global company. In two decades Walmart International
In addition, labor advocates and environmentalists had become a $100 billion business. Had it been a stand-
have created headaches for the U.S. behemoth, making alone company, it would have ranked among the top five
continued expansion both cumbersome and expensive. For global retailers.6 (See Exhibit 2.) Walmart Internationals
instance, in 2006, Walmart faced a strong public relations business represents a solid chunk of Walmarts overall
campaign from the All-China Federation of Trade Unions $405 billion revenues for the fiscal year 2010.7
(ACFTU) over Walmarts refusal to let its workers in With a market capitalization of more than $200 billion
China unionize. Walmart was eventually forced to con- in 2010, Walmart is worth as much as the gross domestic
cede, perhaps because the Chinese government also lent product of Nigeria. Four of Americas 10 richest indi-
its weight to the ACFTUs campaign in its effort to estab- viduals are from Walmarts low-profile Walton family,
lish unions in all foreign-funded enterprises throughout which still owns a 40 percent controlling stake. The com-
the country. As of October 2006, almost 6,000 of Walmart panys portfolio ranges from superstores in the U.S. to
Chinas 30,000 employees were union members.3 Despite neighborhood markets in Brazil, bodegas in Mexico, the
its public battle with the ACFTU, Fortune China and ASDA supermarket chain in Britain, and Japans nation-
Watson Wyatt still voted Walmart China as one of the wide network of Seiyu shops. Walmart sources many of
Top 10 Best Companies to Work for in 2005.4 As its products from low-cost Chinese suppliers. The pres-
Walmart continues to expand its global operations, ana- sure group China Labour Watch estimates that if it were
lysts are curious to see how the company is received and a country, Walmart would rank as Chinas seventh largest
whether consumers opinions in fragmented market set- trading partner, just ahead of the U.K., spending more
tings are a match with Walmarts low price model. than $18bn annually on Chinese goods.9
258
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In-Depth Integrative Case 2.2 Walmarts Global Strategies 259

Exhibit 2 The Largest Global Companies Walmart Early Internationalization

and Retailers, 2008
In venturing beyond its large domestic market, Walmart
had a number of regional options, including entering
Worlds biggest companies Europe, Asia, or other countries in the Western hemi-
sphere. (See Exhibits 3 and 4.) At the time, however,
By number of employees, 2008
Walmart lacked the requisite financial, organizational, and
Wal-Mart Stores 2,100,000
managerial resources to pursue multiple countries simul-
China National Petroleum 1,618,000 taneously. Instead, it opted for a logically sequenced
State Grid 1,537,000 approach to market entry that would allow it to apply the
learning gained from its initial entries to subsequent ones.
765,000 US Postal Service
In the end, during the first five years of its globalization
640,000 Sinopec (1991 to 1995), Walmart decided to concentrate heavily
498,000 China Telecommunications on establishing a presence in the Americas: Mexico, Brazil,
495,000 Carrefour
Argentina, and Canada. Obviously, Canada had the busi-
ness environment closest to the U.S. and appeared the
486,000 Hon Hai Precision Industry
easiest entry destination. The other countries that Walmart
456,000 Gazprom chose as its first global points of entryMexico (1991),
452,000 Deutsche Post Brazil (1994), and Argentina (1995)were those with the
SOURCE: CNN
three largest populations in Latin America.10
Worlds biggest retailers The European market had certain characteristics that
made it less attractive to Walmart as a first point of entry.
By annual sales, latest figures The European retail industry was mature, implying that a
Wal-Mart Stores $405bn
new entrant would have to take market share away from an
existing playera very difficult task. Additionally, there
$124bn Carrefour were well-entrenched competitors on the scene (e.g., Car-
$96bn Metro AG refour in France and Metro A.G. in Germany) that would
$77bn Tesco likely retaliate vigorously against any new player. Further,
as with most newcomers, Walmarts relatively small size
$75bn Kroger
and lack of strong local customer relationships would be
$71bn Costco severe handicaps in the European arena. In addition, the
$68bn Home Depot higher growth rates of Latin American and Asian markets
would have made a delayed entry into those markets
$66bn Aldi
extremely costly in terms of lost opportunities. In contrast,
$65bn Target the opportunity costs of delaying acquisition-based entries
$63bn Walgreen into European markets appeared to be relatively small.11
SOURCE: CNN, RETAIL INFO SYSTEMS
While the Asian markets had huge potential when
Source: Guardian (http://www.guardian.co.uk/business/2010/ Walmart launched its globalization effort in 1991, they were
jan/12/walmart-companies-to-shape-the-decade). the most distant geographically and different culturally and

Exhibit 3 Walmart International Retail Unit Count (20012006)

Country 2001 2002 2003 2004 2005 2006
Argentina 11 11 11 11 11 11
Brazil 20 22 22 25 149 295
Canada 174 196 213 235 262 278
China 11 19 26 34 43 56
Germany 94 95 94 92 91 88
Japan 0 0 0 0 0 398
Mexico 499 551 597 623 679 774
Puerto Rico 15 17 52 53 54 54
UK 241 250 258 267 282 315
South Korea 6 9 15 15 16 16
Total 1,071 1,170 1,288 1,355 1,587 2,285

Source: Walmart Annual Reports for fiscal years 2001, 2002, 2003, 2004, 2005, 2006.
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260 Part 2 The Role of Culture

Exhibit 4 Walmart International Retail Unit Count (20062010)

Country 2007 2008 2009 2010
Argentina 13 21 28 43
Brazil 299 313 345 434
Canada 289 305 318 317
Chile 0 0 197 252
China 73 202 243 279
Costa Rica 137 149 164 170
El Salvador 63 70 77 77
Guatemala 132 145 160 164
Honduras 41 47 50 53
India 0 0 0 1
Japan 392 394 371 371
Mexico 889 1,023 1,197 1,469
Nicaragua 40 46 51 55
Puerto Rico 54 54 56 56
UK 335 352 358 371
Total 2,757 3,121 3,615 4,112

Source: Walmart Annual Reports for fiscal years 2007, 2008, 2009,
2010.

logistically from the United States market. It would have throughout Mexico. Wal-Mex has shown no signs of slow-
taken considerable financial and managerial resources to ing down. In 2005 Walmart opened 93 new stores and saw
establish a presence in Asia.12 However, by 1996, Walmart a 13.7 percent increase in net sales overall. As of Febru-
felt ready to take on the Asian challenge and it targeted ary 2007, it operated 889 stores in Mexico and had plans
China. This choice made sense in that the lower purchasing to open another 125 that year.15
power of the Chinese consumer offered huge potential to a In late 2006 the company was also approved by
low-price retailer like Walmart. Still, Chinas cultural, lin- Mexicos Finance Ministry to open its own bank. In a
guistic, and geographical distance from the United States country where 75 percent of citizens have never had a
presented relatively high entry barriers, so Walmart decided bank account due to high fees, Banco Walmart de Mexico
to use two beachheads as learning vehicles for establishing Adelante added much-needed competition to the finan-
an Asian presence.13 cial services industry and it was hoped would begin to
During 199293, Walmart agreed to sell low-priced offer consumers lower fees than traditional banks.16 In
products to two Japanese retailers, Ito-Yokado and Yaohan, November 2007, Wal-Mex opened its first consumer bank,
that would market these products in Japan, Singapore, Banco Walmart, in Toluca; by August 2010, the company
Hong Kong, Malaysia, Thailand, Indonesia, and the had opened nearly 250 branches. Banco Walmart is espe-
Philippines. Then, in 1994, Walmart entered Hong Kong cially targeting the low-income market in a country where
through a joint venture with the C.P. Pokphand Company, just 24 percent of households have savings accounts, com-
a Thailand-based conglomerate, to open three Value Club pared with 55 percent in Chile. Wal-Mex plans to boost
membership discount stores in Hong Kong.14 sales via debit cards, later ease users into more profitable
services like insurance, and make money on interest-rate
Success in Mexico and China spreads. Wal-Mexs mission is to lure newcomers with
Overall, Walmart has had a very successful experience in easy instructions and entry points, like minimum balances
Mexico. In 1991 Walmart entered into a joint venture with of less than $5 and no commissions, compared with $100
retail conglomerate Cifra and opened a Sams Club in minimums at competing banks. Wal-Mex is also eyeing
Mexico City. In 1997 it gained a majority position in the the $23 billion remittances marketthe amount sent
company and in 2001 changed the store name to Walmart home every year by Mexican immigrants in the U.S.17
de Mexico, or more commonly, Wal-Mex. In addition Wal-Mexs plans for future growth involve more heav-
to its 195 Walmart Supercenters and Sams Club ware- ily targeting the 1624-year-old age group, which consti-
houses, Wal-Mex also operates Bodega food and general tutes 55 percent of Mexicos population. In April 2010,
merchandise discount stores, Superama supermarkets, Mexico ranked as Walmarts number one international
Suburbia apparel stores, and Vips and El Portn restau- destination with 1,479 retail outlets, far ahead of its sec-
rants. The majority of its stores are located in and around ond major international destination Brazil, which had only
Mexico City; however, it does business in over 145 cities 438 stores.18
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In-Depth Integrative Case 2.2 Walmarts Global Strategies 261

Though not as easy as its experience in Mexico, Walmart made some well-intentioned cultural gaffes, like offering
has also found decent success in China. Walmart entered the to bag groceries for customers (Germans prefer to bag
Chinese market in 1996 when it opened a Supercenter and their own groceries) or instructing clerks to smile at cus-
Sams Club in Shenzen. As of late 2006 the company had tomers (Germans, used to brusque service, were put off).26
expanded to 73 stores in 36 cities. In order to cater to its Other problems, however, were largely outside Walmarts
Chinese shoppers, Walmart has introduced retail-tainment control. Two German discounters, Aldi and Lidl, dominated
and attempted to create a more hands-on shopping experi- the grocery business, with smaller shops that featured cut-
ence.19 Chinas Tourism Bureau even named one under- rate, though still good-quality, food. Aldi also heavily pro-
ground Walmart store a tourist destination.20 moted one-week sales, featuring deeply discounted mer-
In addition to its own stores, Walmart has had a stake chandise, ranging from wine to garden hoses, which draw
in the Taiwanese Bounteous Company Ltd., which owned customers back. While Walmarts vast size gave it enor-
the popular chain of Trust-Mart stores.21 In late 2006, The mous leverage in purchasing clothing and other goods, it
Wall Street Journal publicized a $1 billion deal between had to buy much of the food for its German stores locally.
Walmart and Bounteous, in which Walmart would acquire And there, it lacked the muscle of Aldi, which had 4,100
Trust-Marts 100 stores over the course of three years. In shops and a presence in nearly every town in the country.27
light of Walmarts slowing U.S. sales and the termination Germany is the home of the discounter, said Mark
of its operations in Germany and South Korea, the com- Josefson, a retail analyst at Kepler Securities in Frankfurt.
panys expansion in China is quite timely. Like its opera- Walmart is not competing on price, and that is one of its
tions in Mexico, Walmart has also entered the Chinese main attributes in its home market. Beyond these com-
financial service industry, by introducing a credit card petitive pressures there was another serious factor to con-
with Bank of Communications Ltd. in late 2006.22 sider, namely that the German consumer was one of the
Walmarts expansion has not gone unnoticed. Domes- most parsimonious and price-conscious in Europe. Profit
tic Chinese rivals have also built up their businesses in margins in German retailing were the lowest in Europe.28
order to compete. In 2005 Shanghai Bailan Group pur- Walmart had struggled in Germany for almost 8 years.
chased four rival supermarkets and department stores and Analysts said that Walmart Germany was losing about
now operates over 5,000 stores. China Resources Enter- 200 million (137 million) a year on a turnover of about
prise has hired away managers from foreign chains and 2 billion, despite several attempts to turn around the
cut staff in order to increase its profitability.23 While these business. In 2006 it finally made the decision to withdraw
efforts signal greater competition for Walmart in particu- from the German market, by selling its 85 German stores
lar, they are necessary for domestic companies to survive to the rival supermarket chain Metro and taking a pre-tax
in Chinas $841 billion retail market,24 which has been loss of about $1 billion (536 million) on the failed
increasingly competitive ever since the country joined the venture.29 The decision to sell out to the Metro Group
WTO and dropped restrictions on foreign retailers. came two months after Walmart sold its 16 stores in South
Korea and it appeared a rare retreat by the worlds largest
Mixed Results in Europe retailer from its breakneck global expansion.30
and Japan In contrast, Walmarts second retail destination in
In 1998 Walmart entered the European market through Europe, the United Kingdom, has brought the company
Germany by acquiring 21 Wertkauf hypermarkets, one-stop much needed success. Walmart entered the U.K. market
shopping centers that offered a broad assortment of high in June 1999 by acquiring ASDA Group PLC, Britains
quality general merchandise and food. Germany was seen third-largest food retailer. Walmart offered 6.7 billion
as the largest single base for retailing in Europe. Wertkaufs ($10.8 billion). The cash deal, which topped a rival bid
annual sales were about $1.4 billion, and its stores operated from the British retail group Kingfisher PLC, was pre-
similar to the popular Walmart Supercenter format in the dicted to double Walmarts international business at a
U.S. Walmarts executives considered Wertkauf as an stroke and put it in a position to expand its retailing exper-
excellent fit for Walmart and hoped that it would provide tise throughout Europe.31
the company with an ideal entry into a new market.25 Walmart executives said they hoped to draw upon
However, Walmarts operations in Germany quickly ASDAs management talent and experience. ASDAs
turned into a costly struggle. There were a number of 229 stores are a little less than half the size of Walmarts
critical factors that the company underestimated when it supercenters of more than 200,000 square feet (18,000
entered the new market. First of all, the stores of the square meters) in the United States, but the lack of space
acquired German retail chain were geographically dis- in much of Europe for new out-of-town shopping devel-
persed and often in poor locations. Also, Walmart had opments could make ASDAs formula more relevant as a
faced some serious cultural differences, which it tried to platform for expansion.32
resolve by making one error after another. For example, However, while the chain has been only a moderate
the company initially installed American managers, who success, delivering consistent results, Walmart has been
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262 Part 2 The Role of Culture

frustrated in its efforts to expand, though competing in toward Latin America. Walmart has decided to leverage
Britains feverishly competitive supermarket industry its positive experience in Mexico toward other South
has taught Walmart a good deal. Nevertheless, ASDA is American countries. In 2005 Walmart successfully entered
now something of a center for excellence for its global this market with the purchase of a 331/3 percent interest
grocery sales. The head of global marketing for Walmart in Central American Retail Holding Company (CARHCO)
is based at ASDAs head office in Leeds. And, in an from the Dutch retailer Royal Ahold NV. CARHCO is
example of Walmarts global distribution muscle, The Central Americas largest retailer, with 363 supermarkets
Wall Street Journal recently reported that the best- and other stores in the following five countries: Guatemala
selling wine in the whole of Japan is an own-label (120), El Salvador (57), Honduras (32), Nicaragua (30),
ASDA Bordeaux.33 and Costa Rica (124). CARHCO has approximately 23,000
The third major strategic step in Walmarts early 2000s associates. Its sales during 2004 were approximately $2.0
global expansion was entering the Japanese market. In 2002 billion.38
Walmart set foot in Japan with the purchase of a 6 percent Prior to that, in March 2004, Walmart bought a 118-store
stake in the 371-store Seiyu chain. Despite continued losses, supermarket chain, Bompreco, in northeastern Brazil for
Walmart gradually raised its stake, making Seiyu a wholly $300 million, also from Royal Ahold of the Netherlands.
owned subsidiary in June 2008. Walmart has had to confront This acquisition has significantly increased Walmarts
numerous issues in Japan, from longtime Seiyu managers competitive position in the country. In 2006 the company
resisting its initiatives to a tendency among Japanese shop- made another successful deal with Portugal-based Sonae
pers to equate low prices with inferior products. Also, bulk by purchasing its 140 Brazilian stores for $757 million.
deals did not play well in a country where many lived in The Sonae purchase was expected to boost Walmarts
small urban apartments, and the countrys grocery distribu- presence in Brazils wealthier southern states. With the
tion system was populated with wholesalers who brokered Sonae acquisition, Walmart store count increased to 295
deals between suppliers and retailers, skimming profits. units in 17 of Brazils 26 states. However, this move made
Even rival Carrefour abandoned this market.34 Walmart only the third-largest retailer in Brazil, following
Edward J. Kolodzieski was the man in charge of turn- Carrefour of France and Companhia Brasileira de Distri-
ing Seiyu around. As CEO of Walmart Japan, Kolodzieski buio Po de Acar.39
has slashed expenses, closed 20 stores, and cut 29 per- The last step in the sequence of its strategic moves in
cent of corporate staff. In-store butchers were removed, Latin America was Walmarts expansion into Chile. In
with most meat now processed in a central facility. With 2009 Walmart acquired a majority stake of D&S (short
the freed-up floor space, Seiyu bulked up meals-to-go for Distribucin y Servicio) 224-store chain for $1.6 bil-
offerings. To bypass the middlemen, Seiyu has also lion. In acquiring D&S, the nations leading grocer and
boosted the number of products it imports directly from third-largest retailer, Walmart hopes to cement its domi-
manufacturers by 25 percent in 2009, and was also nance in Latin America, where it is by far the biggest
focusing on increasing sales of its own private-label retailer with $38 billion in sales, estimates research firm
brands.35 Planet Retail, double that of its closest rival, Carrefour. In
The biggest change, however, was a shift away from Chile, Walmart enters a market that has long been inhos-
weekly specials to everyday low prices in areas like pitable to foreign retailers. Home Depot, Carrefour, and
baby care and pet products, and, eventually, throughout JC Penney are among the companies that have tried, and
the store. Taking a page from Britains ASDA, Seiyu failed, to make it in Chile, a nation of 17 million with the
instead used its marketing dollars to compare prices sixth-largest retail market in Latin America.40
against competitors. With the pressure of prolonged reces- Walmart has increased D&Ss expansion budget from
sion Japanese consumers have finally accepted that they $150 million to $250 million, which would go toward
can buy quality merchandise for a lower price.36 After opening nearly 70 stores in fiscal year 2010, many of
spending 100 billion yen (roughly $1.2 billion), by 2010, them small stores that cater to lower-income shoppers,
Wal-Marts situation in Japan had stabilized, with two according to Vicente Trius, Walmart Latin Americas pres-
years of profits and reports that it was looking for further ident and CEO. The appeal of D&S goes well beyond its
expansion through acquisition.37 stores. About 1.7 million Chileans carry a Presto card
issued by its financial services unit, up from 1.2 million
After 2005: Refocusing on Latin in 2004. There is a saying here that large retailers gener-
America ate sales with [stores] and earnings with their credit
2005 became another turning point in Walmarts strategy. cards, says Rodrigo Rivera, a partner with the Boston
Somewhat frustrated by strategic failure in Germany, and Consulting Group in Santiago.41
very slow expansion in the developed countries like Indeed, analysts estimate some South American retail
Canada and the U.K., the company has turned its focus chains generate upwards of 70 percent of their profits
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In-Depth Integrative Case 2.2 Walmarts Global Strategies 263

from financial services. (At D&S that figure is just Exhibit 6 Walmart Actual and Projected Square
17 percent.) Walmart already offers financial services in Footage Growth by Segment (in millions)
Mexico and Brazil, though its attempts to launch a bank Actual Projected
in the U.S. have failed. The retailer is keen to grow the Additional Square
Presto business by adding more low-risk services such as Footage for: FY09 FY10 FY11
selling life insurance for outside vendors.42 Walmart U.S. 23 14 11
Sams Club U.S. 2 1 1
Walmart International 19 23 25
Walmarts Plans for 20102011
Total Company 44 38 37
In October 2009 Walmart Stores, Inc., presented its global
plans for store and club growth in the next year at its Source: walmartstores.com.
annual conference for the investment community and
updated its projections for capital expenditures through
the fiscal year ending on January 31, 2011. According to
mately 37 million square feet in fiscal year 2011.45
this plan, total capital spending for the fiscal year ending
Square footage growth (excluding any acquisitions) is
January 31, 2010, is projected to be in a range of $12.5
projected as shown in Exhibit 6.
to $13.1 billion, up from approximately $11.5 billion in
Walmart International plans aggressive investment,
fiscal year 2009. Total capital spending for the fiscal year
particularly in growth markets such as China and Brazil.
ending January 31, 2011, is projected to be in a range of
The International portfolio includes a variety of formats,
$13.0 to $15.0 billion.43
from supercenters to small grocery stores. New stores are
Our plan for growth is clearly intended to increase
expected to add approximately 23 million square feet in
shareholder value, said Tom Schoewe, executive vice
fiscal year 2010, and approximately 25 million more
president and chief financial officer. In the U.S., were
square feet in fiscal year 2011. These projections are
building new stores and accelerating the pace of our
based on the existing store base and do not include pos-
remodels because they have been so successful at winning
sible acquisitions.46
and retaining customers. Were stepping up growth in our
We will continue our organic growth strategy, with
International operations to take advantage of growing
strong capital discipline and optimization of our portfolio
economies and opportunities in emerging markets, such
of formats and brands worldwide, said Doug McMillon,
as China and Brazil.44 Capital expenditures for all pur-
president and CEO of Walmart International in company
poses are projected as shown in Exhibit 5 and exclude the
press release in October 2009. We will allocate capital,
impact of any future acquisitions.
by country and by format, to improve returns from these
If fiscal year 2009 were placed on a constant currency
investments.47
basis with fiscal year 2010, international capital expen-
ditures in fiscal year 2009 would have been approxi-
mately $3.8 billion. In the fiscal year ending January 31, China
2010, the company expected to add approximately In March 2010, the official website of Chinas Ministry
38 million square feet globally, compared to approxi- of Commerce reported that Walmart had set up a new
mately 44 million square feet added in the prior year wholly owned subsidiary in Hebei. This move is report-
(excluding square footage added by acquisition). Walmart edly designed to help Walmarts smooth expansion and
expects to increase global square footage by approxi- localization of Walmart in China. An insider from Walmart
revealed to the local media that the company will continue
to speed up its expansion in China in 2010 and in the
future the Chinese market is expected to have the most
Exhibit 5 Walmart Actual and Projected Capital
Walmart stores worldwide, exceeding even its domestic
Expenditure 20092011 (US$ billions)
American market.48
Actual Projected
Since 2009, Walmart has set up more than 10 wholly
Segment FY09 FY10 FY11 owned subsidiaries in Chinese cities and provinces, includ-
Walmart U.S. $5.8 $6.66.8 $7.08.0 ing Hunan, Chongqing, Hubei, and Dongguan. Before set-
Sams Club U.S. $0.8 $0.80.9 $0.71.0 ting up these regional subsidiaries, Walmart cooperated
Walmart International $4.1 $4.24.4 $4.55.0 with Chinese companies, including Shenzhen International
Corporate $0.8 $0.91.0 $0.81.0 Trust & Investment, for expansion in China. However, the
Total $11.5 $12.513.1 $13.015.0 complicated operating processes slowed down the retail-
ers expansion. With the help of these new subsidiaries,
Source: walmartstores.com. Walmart opened nearly 40 new outlets in 2009 and the
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264 Part 2 The Role of Culture

total number of Walmart stores in China exceeded that of the worlds fastest-growing retail marketsand two of the
its competitor Carrefour for the first time.49 most frustrating for foreign retailers. Walmart boasts one
wholesale outlet so far in India, and it has only a 30-person
Brazil development administrative office in Moscow to show
after more than five years of scouting in Russia. But
In this most open of the large emerging economies, the
through a combination of joint ventures, acquisitions, and
worlds two biggest supermarket chains and a homegrown
expansion, the retailer is hoping to become a major player
competitor are battling for dominance. Leading the field
in both countries.54
is Companhia Brasileira de Distribuico Grupo Po de
Indias $350 billion retail sector is composed of small
Acar, with revenues of $13 billion in 2009. Close
family-run ventures, with organized chains accounting for
behind is Frances Carrefour, with sales last year of $12.6
less than 5 percent of sales. To get around government
billion. In third place, but making a big push, is the
restrictions on foreign retailers selling to consumers,
worlds No. 1 retailer, Walmart Stores, which operates
Walmart recently teamed up with Bharti Enterprises to
under several names in Brazil. It racked up $9.5 billion
open a cash-and-carry operation in the northern city of
in sales in Brazil last in 2009.50
Amritsar. Best Price Modern Wholesale, as its called,
All three plan to invest big in Brazil in coming years.
technically caters to merchants and small businesses. But
As its middle class expands, annual spending on food
with few restrictions, more than 30,000 members have
is expected to rise 50 percent over the next five years, to
signed up for the first store.55
$406 billion, says Carlos Hernandez, a Madrid-based ana-
As in the U.S., the emphasis is on a wide selection of
lyst at consultant Planet Retail. Among the emerging
goods in one location at a low costeverything from Cas-
nations known as the BRICs, Brazil offers fewer barriers
trol motor oil and sneakers to milk in large canisters that
to business than Russia, India, and China. India bans for-
can be tied to the side of bicycles. Best Price employs
eign stores that sell multiple brands, and Russia limits
25 people to go around the region each week and check
expansion by retailers. China is attractive because of its
prices at mom-and-pop shops, to ensure that theyre
rapid economic growth, expected to be 8 percent in 2010,
consistently offering the best value. Raj Jain, a former
versus 5.8 percent in Brazil. However, Brazil is more
Whirlpool executive who now heads Walmarts Indian
developed in terms of infrastructure and wealth creation,
operations, also opened a training institute in Amritsar last
says Justin Scarborough, a retail analyst at Royal Bank of
December in partnership with Bharti and the Punjab
Scotland in London. Consumers are used to shopping in
government.56
hypermarkets, whereas retail in China is more traditional.51
Walmart plans to open 10 to 15 outlets through the
Already No. 1 in Mexico, Walmart aims to overtake
partnership over the next three years, eventually employ-
Carrefour to become No. 2 or No. 1 in Latin Americas
ing about 5,000 people. But McMillon wants to see
largest market. The Bentonville (Arkansas) retailer plans
Walmart running its own retail stores there, too. He
to spend $1.2 billion this year to open 110 new stores in
pressed his case with commerce and agriculture ministers
Brazil, on top of the 436 it now operates. It may also
in New Delhi in July. What I tried to convey is that we
scout out an acquisition, says Hctor Nez, president of
would invest more, and faster, if we had the opportunity
Walmart Brazil. We have a very, very clear plan to win
to do so, he says. A representative from the Indian gov-
here in Brazil, he says. We are investing heavily to start
ernment declined to comment.57
having a much more solid and persuasive presence.52
In April of 2010 Scott Price, president and CEO of
Walmart is opening the cash spigot at a time when Car-
Walmart Asia, reinforced the major points of Walmarts
refour is contending with the recession in Europe, which
Asian strategy: We will capture 10 to 15 markets in Asia
accounts for 80 percent of its revenues. Annual sales growth
in ten years. At present, expansion plans for India alone is
for the Paris-based chain at home has averaged less than
the full time job for us. He also noted that India has a lot
1 percent over the last 10 years. To defend its No. 2 position
of potential as it has availability of a highly educated work-
in Brazil, Carrefour is planning to spend $1.4 billion over
force. The retail giant would also like to increase sourcing
the next two years. The goal: to add 70 stores and double
from India for their stores all over the world, he said.58
Brazils share of Carrefours overall sales to 20 percent by
In Russia, the impediments to retail development are
2015. Po de Acar, which is 34 percent owned by French
less visible but no less worrisome. Corruption is rampant
supermarket chain Casino, says it will invest $2.8 billion to
with various administrative authorities capable of gum-
add 300 stores to its 1,080-store chain by 2012.53
ming up operations if payments are not made. Anticorrup-
tion group Transparency International ranked Russia
India and Russia 147th out of 180 countries on its most recent corruption
The other two attractive growing markets from the BRIC perception index. While Walmart is looking at opening its
group that also draw Walmarts attention are India and own stores in Russia, its far more likely it will start by
Russia. India and Russia are widely regarded as two of acquiring a local retailer. Analysts say the prime candidate
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In-Depth Integrative Case 2.2 Walmarts Global Strategies 265

is Lenta, a fast-growing, privately held chain of 34 hyper- ated distribution centers. The center will include a pilot
markets and the nations fifth-largest retailer. Lenta of fuel cell technology and many other sustainable fea-
founder Oleg Zherebtsov is saddled with debts and sold tures. Walmart Canada is committed to reducing costs
his 35 percent stake to the investment group of private while implementing energy-saving strategies across its
equity firm TPG and the private equity arm of Russian operations. The companys new stores are now 30 percent
state bank VTB in early September.59 more energy-efficient than previous prototypes.66
According to another source Walmart made a prelimi-
nary offer to the Kopeika store chain in June 2009.60 South Africa
Walmart is not the first retailer Kopeika has dealt with.
In October of 2010, it was announced that Walmart was
X5 Retail Group tried to negotiate a deal at the end of
conducting due diligence on Massmart, a leading retailer
2008 and it was in discussions with Magnit in January
in South Africa which operates 288 large stores located
2009. Kopeika operates a network of around 500 super-
in 14 African countries, most of them in South Africa
markets in Moscow and the Moscow region, where it
where it has a strong presence catering to a range of
competes with around 400 X5 Retail Group Pyaterochka
customers. Initially, reports suggested that Walmart
stores and Dixy Groups outlets. Walmart is actively
would offer 32 billion rand ($4.63 billion) to own
seeking a partner in Russia. It was in negotiations with
Massmart outright.67 Subsequently, it was reported that
St. Petersburgbased hypermarket operator Lenta in 2008,
Walmart would bid only for a majority controlling share
but no deal was reached.61 With rivals such as Metro
(more than 50 percent but less than 100 percent) in
expanding their presence through new stores, and Carre-
order to preserve Massmarts listing on the Johannes-
four opening its second outlet in September, they cannot
burg stock exchange.68 If either deal goes through, it
wait, says Planet Retail analyst Milos Ryba.62
would place Walmart ahead of its European competitors
Tesco PLC and Carrefour SA, which dont have any
Canada stores in Africa.
Established in 1994 and headquartered in Mississauga,
Ontario, Walmart Canada currently operates 317 stores
and serves more than 1 million customers each day across Walmarts Global.com Challenge
Canada. Walmart is Canadas third-largest employer with to Amazon.com
more than 85,000 associates, and was recently named one In January 2010 Vice Chairman Eduardo Castro-Wright
of Canadas top 10 corporate cultures by Waterstone announced that Walmart is creating a new unit that will
Human Capital.63 be responsible for driving online growth around the world,
In February 2010 Walmart Canada announced that the both in developed markets where the company has stores
company will open 35 to 40 supercentres in 2010. Accord- and an online presence and in markets it doesnt. This
ing to Walmart, the projects will include new stores, relo- new organization will be called Global.com.69
cations of existing stores, store expansions, and store Wan Ling Martello, formerly the Chief Financial Offi-
remodels, representing a combined investment of almost cer of Walmart International, will be the Executive Vice
half a billion dollars in Canadian communities. The super- President and Chief Operating Officer of Global.com. In
centres are expected to generate approximately 6,500 her new role, Wan Lings primary responsibilities will
store and construction jobs, with specific store locations include (1) development and execution of a global strat-
to be announced over the coming weeks and months. egy for e-commerce; (2) establishing cross-functional and
The combination of one-stop shopping and low prices cross-border Walmart relationships designed to accelerate
that our supercentres provide has been embraced by our and broaden growth in the global online channel; and
customers, said David Cheesewright, president and CEO (3) the creation of technology platforms and applications
of Walmart Canada. We look forward to bringing this that can be used effectively in every Walmart market.70
popular format to a new range of shoppers.64 In early 2008, the retailer said it would invest millions
In addition to store expansions, Walmart Canada is of dollars in its global e-commerce initiative, which it
investing in its first sustainable refrigerated distribution labeled a multi-billion dollar opportunity over the next
center, which is anticipated to open in Balzac, Alberta, in three to five years. Walmart, with stores in 15 countries,
the fall of this year. The company is investing $115 mil- currently operates separate e-commerce sites in the U.S.,
lion in its construction. The center will create 1,400 jobs, U.K., Mexico, and Brazil. It has been working on devel-
including trade and construction jobs.65 oping a single global e-commerce platform that would be
Expected to be one of the most energy-efficient distri- replicable in all of its markets, similar to the model devel-
bution facilities of its kind in North America, the cutting- oped by its rival Amazon.71
edge distribution center will be an estimated 60 percent In the U.S., where the retailer competes directly with
more energy-efficient than Walmarts traditional refriger- Amazon, Walmart has named Steve Nave, currently chief
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266 Part 2 The Role of Culture

operating officer, as general manager of its website, taking cultural challenges and opportunities has Walmart
over from Raul Vazquez, who has taken a new position faced in Latin America?
as head of the retailers new Walmart West division. 4. What group of countries will be targeted for
But Mr. Nave will now report directly to John Fleming, Walmarts future growth? What are the attractive-
the chief merchandising officer who himself previously ness and risk profiles of these countries? What
served as CEO of Walmart.com. Mr. Castro-Wright said regions of the world do you think will be vital for
Walmart hopes to integrate merchandising and opera- Walmarts future global expansion?
tions capabilities of the dot-com organization with those
of our traditional retail business. Walmarts online mar- Exercise
keting will now be overseen directly by Stephen Quinn, You are part of Walmarts global strategic planning group
its chief marketing officer. and have been asked to explore the benefits and chal-
The changes reflect Walmarts strategy of tying its lenges of expansion into one of the following regions.
website closely to its stores, which some argue could give Divide into 6 teams, each representing a country or region
it a long-term strategic advantage over Amazon. Currently of the world other than North America.
around 40 percent of its U.S. business is delivered to
stores for pickup under its site to store service, which Team Country/Region
it sees as also augmenting the development of smaller 1 Latin America
format stores in the future.72 2 Western Europe
Questions for Review 3 Central/Eastern Europe
4 Japan
1. What was Walmarts early global expansion strat- 5 China
egy? Why did it choose to first enter Mexico and 6 Russia
Canada rather expand into Europe and Asia?
2. What cultural problems did Walmart face in some Describe the opportunities and challenges of expansion in
of the international markets it entered? Which early your assigned country or region. Be sure to summarize
strategies succeeded and which failed? Why? What the cultural environment, how it differs from the U.S., and
lessons did it learn from its experience in Germany what challenges that might pose for the company.
and Japan?
3. How would you characterize Walmarts Latin Amer-
Source: This case was prepared by Tetyana Azarova of Villanova Uni-
ica strategy? What countries were targeted as part versity under the supervision of Professor Jonathan Doh as the basis
of this strategy? What potential does this region for class discussion. It is not intended to illustrate either effective or
brings to Walmarts future global expansion? What ineffective managerial capability or administrative responsibility.

Please ignore the exercise.

Answer only the first 3 questions - not the fourth one.