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Walmarts Global Strategies

Professors Report

Prepared by:
Karen Chavez
Cody Buckley
Vanessa Ybarra
Caidi Davis
Randolph Leroy

Phone: (07) 3510 8111


Fax: (07) 3510 8181
Email: cavakaraco@myutsa.edu
Website: www.cavakaraco.edu

Section I: The Abstract


In 1991, Walmart became an international company when it opened a Sams 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 approach 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. (Luthans & Doh, 2015) In this report we will take a look at Walmarts global strategy and
how it made an impact within a few of its successful International Markets. You will be able to manage
across cultures with the CW model of Walmarts International businesses within Brazil, China, Germany,
and Mexico. You will be able to identify each countries geography, politics, economics, and social factors.
And in general will be able to analyze Walmarts global expansion strategy within the various sections of
this report.

Section II: Cultural Wizard

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Section III: Geography, Social Factors, Politics, and Economics


Brazil
Politics
Brazil is the Federative Republic of Brazil; there are 26 states and one federal republic that overlook all
26 states of Brazil. Government type is a Federal republic and there are pressure groups such as the
landless Workers movement. The highest court is the Federal Supreme Court and the legal system is on a
civil note.
Geography
Largest country in South America and in the Southern Hemisphere; shares common
boundaries with every South American country except Chile and Ecuador. Mostly tropical,
but temperate in south. Mostly flat to rolling lowlands in north; some plains, hills,
mountains, and narrow coastal belt. Natural resources of bauxite, gold, iron ore,
manganese, nickel, phosphates, platinum, tin, rare earth elements, uranium, petroleum,
hydropower, timber. Deforestation in Amazon Basin destroys the habitat and endangers a
multitude of plant and animal species indigenous to the area; there is lucrative illegal
wildlife trade; air and water pollution in Rio de Janeiro, Sao Paulo, and several other large
cities; land degradation and water pollution caused by improper mining activities; wetland
degradation; severe oil spills.
Economics
Brazil is characterized as a well-defined country with mining, aquaculture, manufacturing and service
centers that are just constantly expanding and growing. After a good steady growth 2008 is when they hit
a recession for about two quarters. After their recession in 2008 Brazil was one of the first countries to
start rising up in the economy as it started to prepare for the world cup Fifa for 2014. One of their strong
selling factors that help their economy grow is coffee, soybeans, wheat, rice, corn sugarcane, cocoa,
citrus and beef. Brazils industries are textiles, shoes, chemicals, cement, lumber, iron, ore, tin, steel,
aircraft, motor vehicles, and parts.
Social Factors
The majority of Brazilians are Roman Catholic and the other third are different dominations of
Protestants. In the more rural areas of Brazil there are the people who practice spiritual beliefs, which
makes up about the one third of them. The main language in Brazil is protges, but of course there are
some areas in Brazil in which they speak Spanish, German, Italian, English, and Japanese etc. Brazilians
do believe in the terms of "I" and "We". They are known to look out for themselves for their best
interests. But when you portray them together as "Brazilians" they do look out for each other and paint a
pretty picture of themselves. Unemployment levels are high in the age groups of 15-24 after that it is
easier to find a job and to keep one.

(CIA, 2014) (The Hofstede Centre, 2014) (Nicol, 2012)

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China
Politics
Communist State, current President Xi Jinping. Chinese law system.
Geography
One of the largest producers and consumers of agricultural produce. Global leader in production of
cereals, rice, cotton, potatoes and tea. China also dominates sheep and pork livestock farming and the
worlds production of fish products. The mining sector occupies an important place in the Chinese
economy, since the countrys subsoil is rich in energetic resources. China has significant coal reserves
(the country's primary energy source), which account for two-thirds of the total primary energy
consumption. It is the world leader in the production of certain ores like phosphate and titanium and also
has significant petrol and natural gas reserves. It is the worlds fifth biggest oil producer with 3.8 million
barrels a year.
Economics
Second richest country in the world (GDP), emerging financial market.
Social Factors
1. Middle class growth: size of middle class is growing hand in hand with China's economic
development. 2. Imbalance of wealth:mostly refering to the urban/rural discrepancy, but also amongst
classes; a large percentage of the population earns low salaries which hinders the government's efforts to
increase domestic demands. 3. Urbanisation: Currently 62% of the population lives in rural areas, but
urban areas expected to be home to 70% of the population in the next 20 years. 4. Ageing nation: Most
of China's population is elderly, especially due to their 1 child policy. Infrastructure and social services
do not meet the demand of this ageing population. 5. Environmental concerns: China's practices nto
based on sustainability have caused many environmental issues which are now affecting its population
as well as the planet; public health and long-term sustainable development are the country's main
concerns.

(FITA, 2009) (ActiveUKChina, 2012)

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Germany
Politics
Federal Republic. Civil Law System. Split into 16 States
Geography
Natural Resources- Coal, Natural Gas, Iron ore, Copper, Nickel, Salt, Timber, Uranium. Temperaturetemperate & marine; cool and cloudy. However, there are wet winters and summers.
Economics
One of the worlds largest and most technically advanced producers of iron, steel, and machinery. 1.6%
of population is in agriculture, 24.6% in industry, and 73.8% in services.
Social Factors
15.5% of population below the poverty line. 91.5% of population is German. 34% of population
is Protestant, another 34% of the population is Roman Catholic, 28.3% unidentified.

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Mexico
Politics
Mexico is a Federal Republic. Has a civil law system with US constitutional law influence. Have three
branches of government: executive, legislative, and judicial. Gained Independence on September 16,
1810.
Geography
North America, bordering the Caribbean Sea and the Gulf of Mexico, between Belize and
the United States and bordering the North Pacific Ocean, between Guatemala and the
United States. A climate that varies from tropical to desert. Multiple Terrains ranging from
high, rugged mountains; low coastal plains; high plateaus; desert. Natural resources
makeup of petroleum, silver, copper, gold, lead, zinc, natural gas, timber. Plagued with
tsunamis along the Pacific coast, volcanoes and destructive earthquakes in the center and
south, and hurricanes on the Pacific, Gulf of Mexico, and Caribbean coasts.
Economics
Mexico's $1.3 trillion economy has become increasingly oriented toward manufacturing in
the 20 years since the North American Free Trade Agreement (NAFTA) entered into force.
Per capita income is roughly one-third that of the US; income distribution remains highly
unequal. Mexico has become the United States' second-largest export market and thirdlargest source of imports. Mexico has free trade agreements with over 50 countries
including Guatemala, Honduras, El Salvador, the European Free Trade Area, and Japan putting more than 90% of trade under free trade agreements. In 2012 Mexico formally
joined the Trans-Pacific Partnership negotiations and formed the Pacific Alliance with
Peru, Colombia and Chile.
Social Factors
Mexico ethnic group makeup mestizo (Amerindian-Spanish) 60%, Amerindian or
predominantly Amerindian 30%, white 9%, other 1%within a population of roughly 210
million citizens. Mexico has a birth rate of 19.02 births/1,000 population (2014 est.) and a
death rate of 5.24 deaths/1,000 population (2014 est.). The religions for the country is
Roman Catholic 82.7%, Pentecostal 1.6%, Jehovah's Witnesses 1.4%, other Evangelical
Churches 5%, other 1.9%, none 4.7%, unspecified 2.7% (2010 est.). Spanish is the
language spoken by 92.7% of Mexico population.

(CIA, 2015) (National Geographic, 2015)

Section IV: Analysis


1.
Walmart's early global expansion strategy is, in basic terms, to start with countries close and
culturally similar. They plan to learn and adapt one or a few countries at a time. Walmart "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. Starting with minimal funds for globalization, Walmart decided to focus
on the Americas: Mexico, Brazil, Argentina, and Canada. These four countries are environmentally close
to the United States. Canada is logically the safest point of entry, as it is the closest to American culture
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and shares its border. Mexico, Brazil and Argentina were chosen partly because they have the three largest
populations in Latin America. Europe has a much tougher retail industry to break into. It is a very mature
market, and Walmart's lack of relationships and relatively small size at the time, was not up for the task of
breaking into the European retail market. Europe is also much more difficult geographically in terms of
logistics and distribution. Asia posed the same logistic issues for a first point of expansion. While Walmart
believed that there was amazing potential in Asia, the vast cultural differences and geographic distance
were too large of an issue in the beginning of global expansion.
2.
Walmart faced several cultural issues when breaking into the international market. In 1998, seven
years after entering Latin America, Walmart began operations in Germany. It quickly became a struggle.
Walmart entered this market through acquisition of Wertkauf hypermarkets. These were formatted very
similar to Walmarts style of operation. Walmart made the assumption that they could transition American
norms straight into Germany. American managers were treating these stores as they would in the United
States. Very normal behaviors in the US, such as smiling and greeting customers as well as bagging
groceries for the customers, did not go over well with the harsher German clientele. Japan market entry in
2002 was also a cultural battle for Walmart. Most Japanese people live in small urban apartments;
therefore, the bulk shopping experience that Walmart offers was not ideal. Walmart's strategy for early
entry did not work very well in Germany. The transition into Canada and Latin America were rather
smooth, and not much adaptation was required. This likely gave the company the wrong impression about
their other global ventures. Simple changes to the stores' business style helped Walmart to stabilize and
become successful in Japan. Their entry strategy of using the knowledge gained in other foreign markets
to adapt to the present country, proved to be successful. Walmart eventually made the decision to pull out
of the German market. As the inability to merge with customers' desires and the countries norms proved to
be a constant struggle and major financial loss.
3.
Walmart's Latin America strategy was to choose the countries with the largest populations to begin
with. The targeted countries were Mexico, Brazil and Argentina. Latin America is full of opportunities for
Walmart. This company has been very successful in Mexico already. Brazil has one of the largest
emerging economies and Walmart plans to take full advantage of its expanding middle class and
subsequently their growth in annual spending. "We have a very, very clear plan to win here in Brazil. We
are investing heavily to start having a much more solid and persuasive presence" said the President of
Walmart Brazil, Hector Nunez. Expansion into Chile is the last step of the Latin America strategy, and is
plan for cementing Walmart's dominance in Latin America. Latin American has mostly been a success
story for Walmart, but there have been incidences of cultural challenges. For example, there was a major
bribery scandal that took place in Mexico. Many countries in Latin America constantly struggle with
unethical business practice. This has been a rather significant cultural abnormality that Walmart has had to
handle. There have also been cultural factors that brought opportunities to Walmart. For example, seventy
five percent of Mexican citizens did not have a bank account because of the poverty level and high bank
fees. In 2006, Walmart opened its own bank in Mexico to target the low income bracket. Walmart has
really focused on other countries in South America after all of the positive experiences it has had there.
4.
The countries targeted for Walmart's future growth are China, Brazil, India, Russia, Canada and
South Africa. Each of these countries possesses traits that are quite attractive to Walmart, and others that
could potentially be risky. China's citizens mostly have a very low purchasing power which is great for
low-price retailers such as Walmart. China's rapid economic growth is also beneficial to Walmart. On the
other hand, "China's cultural, linguistic, and geographical distance from the United States presented
relatively high entry barriers". Chinese consumers are also accustomed to traditional markets for
shopping, as opposed to the supermarket style of Walmart. Despite these challenges, China is expected to
have the most Walmart stores worldwide. As stated in question 3, Brazil is the most open of the large
emerging countries. This is a very attractive quality in the eyes of Walmart. India and Russia have two of

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the fastest growing retail markets. While this is very appealing to Walmart, both of these countries are also
very frustrating and difficult to work with. India is full of government imposed restrictions on foreign
retailers, which makes it very hard for Walmart to establish itself there. Russia poses different kinds of
barriers. This country has a heavy presence of corruption. Administrative authorities do not operate fairly
and often expect bribes and payments. Further expansion in Canada is desirable to Walmart because they
are already the third largest employer in the country. The biggest risk that Walmart will face in Canada is
competition. Target opened 150 stores in 2011 alone. Walmart also has its eye on South Africa. This is
appealing to Walmart because they are interested in acquiring an existing retailer, who operates in fourteen
African countries and reaches a wide range of customers. This plan for expansion is also very risky. It is
their first step towards operating in Africa, and there are always challenges that come with a new territory.
Asia is likely the most vital region for Walmart to move into. There are not many existing retailers like
Walmart in areas like India. Traditionally there are only small markets and street vendors. If hypermarkets
are ever given the opportunity to truly operate in India, Walmart will want to have their foot in the door.
Indias retail market is expanding faster than most all other countries. Japan and China are full of
potential, and further expansion in this region will be vital to Walmarts success and competitiveness.
In regards to ethics and social responsibility, Walmart has already had to deal with several cases.
5.
So far, they have had to deal with bribery in Mexico and potential corruption if they were to expand into
Russia. In Mexico, they responded appropriately. They conducted an investigation and warned their
shareholders about the potential decline of the company's reputation. They also created a new position to
ensure that all of Walmart's employees are complying with the U.S. Foreign Corrupt Practices Act.
Walmart is also being very cautious about entering Russia, as bribery is not acceptable in the United
States. Social Responsibility includes sustainability and energy efficiency. Walmart has not really
practiced this responsibility thus far, but they are making headway in Canada. They are investing $115
million in the construction of the first sustainable refrigerated distribution center. The new stores in
Canada are also thirty percent more energy efficient than previous stores. Walmart's responses and actions
have been appropriate, as many of the locations they have expanded to, are not practical to establish
energy efficient or environmentally friendly locations just yet. They have responded well to ethical issues
in business and are attempting to promote the American ethical standards in other countries of operation.
Walmart could be doing more in regards to their social responsibility, but it seems that this is a priority and
they are establishing their first real attempt in Canada.
(Luthans & Doh, 2015)

Section V: Conclusion
Not every entry into a foreign country is successful. Local laws and restrictions sometimes can
create unforeseen challenges. Sometimes there are local market dynamics that make good supply chain
strategies impossible to operate. Walmart has learned, sometimes the hard way, it is important to hire local
managers who understand local consumer preferences and how to market to these consumers. Different
tastes mean it is necessary to change the product assortments, adjust low-prices and merchandise in-store
differently than the company is used to. Of course, store location is always important and research on real
estate takes time and guidance by local experts. Given the capital investment required to open a new store,
a bad location can be a very costly mistake. (Leb, 2013) Walmarts global strategy can further propel them
into new markets at any time and further its global dominance into the international realm no matte what
region or country it enters like Russia, India, or Guam. Walmart has pursued globalization aggressively
since its first move across the border in 1991 and in 2015 will continue to press on to newer markets.
(Govindarajan & Gupta, 2002)

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References
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