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Luminita Tanase -Midterm

Luminita Tanase -Midterm

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Published by lumiradut70

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Published by: lumiradut70 on Jul 12, 2012
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LUMINITA TANASE1. Do you recommend Brazil or China as the first international foray for WalMart? Give your quantitative reasons but also your beliefs on why you think one is better than the other. I recommend to WalMart to expand to Brazil. The Brazilian business environment is as rich andvaried as the country itself with a population of about 190 Million, a territory that can fit the wholeUSA minus Alaska.Even though China’s population is bigger than Brazil’s, and a huge supply of low-cost workers,mainland China has fast become the world’s manufacturing workshop, supplying everything fromtextile to toys to computer chips. I believe Brazil can provide better market opportunities thanChina.The quantitative reasons for moving WalMart to Brazil are:- Biggest aerospace power of the southern hemisphere- Biggest fixed line telephone market of Latin America- 3rd in the world in the aircraft industry- 3rd biggest global steel
making power - 3rd in the world computer market- 4th biggest TV network in the world- 5th biggest mobile phone market.- 7th biggest manufacturer of cars in the world car - 8th world oil power - 10th world producer of capital goods.I think Brazil is a better choice for Wal-Mart’s first international foray because of language whichis one way of many dimensions of communication. There are many skills important for bridgingcultural differences and communication gaps. When it comes to dealing with USA companiesBrazil people have a huge lead on Chinese in many aspects such as:
Body language / facial expressions – much easier to understand and follow
Overall presentation skills
Understanding of professional lingo
Grasp on general rules of professional communications and office etiquetteWith communications being one of the most important aspects of majority outsourcing initiativesBrazil have a huge lead on China. Brazil is in the top 10 of most industries in the world and thehigh literacy rate good educational system creates a sound foundation for future developments.2. Management must decide where the company wants to be positioned with regard to value andcost. Provide quantitative comparative information for the two countries.
Salaries: Operations manager: 159.0 % of US
Source: PayScale, Sourcingline, March 2010Real Estate: Office occupancy costs (CBD): 84.6 $/sf/yr Source: CB Richard Ellis, Colliers International, SourcingLine, March 2010Real Estate: Office occupancy costs (suburbs): 63.8 $/sf/yr Source: Colliers International, SourcingLine, March 2010Taxes: Corporate tax rates: 34.0 %Source: KPMG, October 2009Taxes: Indirect tax rates: 19.0 %Source: KPMG, October 2009Taxes: SMB effective tax rates: 69.0 %Source: Doing Business (World Bank), 2010
Salaries: Operations manager: 133.0 % of USSource: PayScale, Sourcingline, March 2010Salaries: Customer service representative: 40.0 % of USSource: PayScale, Sourcingline, March 2010Real Estate: Office occupancy costs (CBD): 47.5 $/sf/yr Source: CB Richard Ellis, Colliers International, SourcingLine, March 2010Real Estate: Office occupancy costs (suburbs): 31.8 $/sf/yr Source: Colliers International, SourcingLine, March 2010Taxes: Corporate tax rates: 25.0 %Source: KPMG, October 2009Taxes: Indirect tax rates: 17.0 %Source: KPMG, October 2009
Taxes: SMB effective tax rates: 63.5 %Source: Doing Business (World Bank), 2010Value outweighs cost. Companies that use foraying have realized that the supplier enters their value chain and becomes a critical part of what is delivered to the end client at the top of thatchain.Price certainly matters to customers, but it is not always the most important factor in a decision.There are other attributes and benefits that a retailer can offer and make it more valuable to thecustomer and thus able to be sold for a higher price. Since WalMart isn’t selling the exact same products as its local competitor, its strategy is a combination of differentiation and low-cost.WalMart needs to provide low prices to customers as part of their strategy and to operate lessinexpensively by producing at low cost and still retain reasonable margins.3. Pick a position in the market place that is viable in the sense that there is enough demand for thetypes of items that they sell(high end, middle, low end)Maintaining lower prices, Wal-Mart will continue to deliver increasing value to customers, strivingoff competition and increasing brand equity. Furthermore, as Wal-Mart’s own operational costsincrease year of year (utilities, payroll, equipment, etc) it must look for increasing concessionsfrom suppliers to maintain lower prices and profitability.In order to maintain a price leadership strategy, particularly one of EDLP, Wal-Mart must be ableto still make a profit. WalMart needs to work with its suppliers to reduce costs as far down as possible. By working with suppliers to cut costs, Wal-Mart is able to advertise, make payroll andotherwise pay for operations while remain profitable, and thus increasing value of its shares.When launching in a new country, companies look for target segments that are under served. Wal-Mart as in the USA may want to look to the rural market as under serviced, lacking low priceretailers carrying a wide array of department store-style inventory. This allowed Wal-Mart tocapture the rural market and then parlay that to small town and cities and eventually into urbanareas.4. Configure internal operations so that they support that position. What are the 4 keyconsiderations to you that need to be addressed?To maintain its strategy of low-cost and value to the customers, Wal-Mart needs to address thestate of the economy, the cultural differences and product mix, the logistics & distribution, andcompetition. First, it needs to focus on the current state of the economy. Although the current stateof the Brazilian economy could be characterized stable as compared, the future outlook of theeconomy does not provide any guaranties on a long-term basis. Second, WalMart needs to consider the cultural differences. Brazilian retail consumers consider product quality the most importantfactor in the decision-making process of purchasing, followed by product price, customer service,store cleanliness, and store distance. The product mix in Wal-Mart’s supercenters should be asclose to reflecting the needs of Brazilian consumers as possible. Offering products popular in the

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