CASE STUDY (2)

SECOND SEMESTER 2022/2023 (A222)

GFMA 3063 (G)
INTERNATIONAL BUSINESS

CASE STUDY (GROUP 2)

PREPARED FOR: DR. OOI SHIR MAY

PREPARED BY:

NAME MATRIC NUMBER

SITI SHAHILA AFFIRA BT SHAIFUL AMRY 273484

MOHAMMAD HANIF BIN SABARUDDIN 284980

GEORGINA KOO YU MEI 287203

NOORMONA TASYA BINTI ZAKARIA 291440

NOORUL ASHIKA BINTI ABDUL RAHIM 291456

WAN NURAINA SHAFIQAH BINTI WAN KHAIRUL 292454

ANWAR

DATE OF SUBMISSION: 13TH JUNE 2023

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Case Discussion Question

1. How does expanding internationally benefit Walmart?

• New Opportunities for Growth

Walmart has realized that it is the best time for them to take the opportunities to
expand their business in other countries since growth in the United States is becoming
more limited. So, that is why Walmart decided to expand their company globally. The
presence of Walmart into new markets has presented the company with new
opportunities for business development. The company has grown to become the most
successful retailer in a few nations, including China, Canada, and Mexico.

• Learning and Innovation

Walmart's growth into global markets exposes the company to a wide variety of
consumer preferences. This enables the organization to gain knowledge from other
cultures, adapt its strategies, and innovate in order to satisfy the demands of places. The
experience and insight gained through working in a variety of international markets can
be utilized to enhance business practices not only in those markets but also in others,
including the domestic market. Additionally, the company leverages its global supply
chain network to optimize logistics, reduce costs, and enhance efficiency. By adopting
its business model to suit diverse cultures, Walmart tailors its offerings and strategies
to meet local demands, ultimately strengthening its position in the international market.

• Diversified Risk
Walmart has successfully diversified its risk by entering a number of new markets.
Walmart's growth into international markets can make the company's operations more
diverse and less relying on a single market. This is important since the company's
domestic operation is dependent on a variety of factors, including the condition of the
economy in the United States as well as the performance of the retail industry in the
United States.

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• Economies of Scale
Walmart can reap significant economies of scale from global buying power. At the
beginning Walmart seemed not knowing well how the market was going in Mexico and
having a few problems there. Soon after that Walmart set the strategies by matching
their way of distribution system to the local environment. They control the distribution
system by building factories at Mexico distribution centres that help to serve better to
the company, and could cut the operation cost. Walmart improved their distribution
system by making sure stocking practices and sold merchandise not accepted more to
local taste and preference.

2. What are the risks that Walmart faces when entering other retail markets? How
can these risks be mitigated?

Walmart has struggle when expands into retail markets outside the United States due to
various challenges related to consumer preferences and habits, political and regulatory
frameworks, competitive landscape, and infrastructure (IvyPanda, 2021). Due to the
cultural differences between the U.S. and Mexican markets, this poses a significant
hurdle for Walmart's survival when the company fails to accurately understand and
cater to the needs and preferences of local consumers, which leads to low store traffic
and low sales. In addition, low leverage with local suppliers may make it difficult for
Walmart to effectively enforce operating standards and affect local suppliers' supply
chain practices. This can lead to potential reputational risk if suppliers do not meet
expected standards. These challenges present a major threat to Walmart's overseas
expansion efforts.

To mitigate these risks, Walmart must invest in understanding the local culture and
adapt its marketing strategy accordingly. Walmart must also adapt its operations to the
needs or special requirements of local markets and hire local talent to ensure its
products resonate with target customers. Besides, it is important to ensure that
purchasing power and discounts are integrated in a way that offers consumers with
affordable products. It is also important that Walmart continues to improve its
relationship with consumers and respond quickly to any issues that may arise.
Furthermore, Walmart needs to embrace and integrate new technologies to further
enhance their interaction with the external world, especially with their valued

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customers. In this way, Walmart will be able to remain relevant, competitive, and
profitable in the market.

3. Why do you think that Walmart first entered Mexico via a joint venture? Why did
it purchase its Mexican joint venture partner in 1998?

Walmart first entered Mexico via a joint venture to assist and handle the huge cultural
and economic contrasts between the United States and Mexico for its first international
shop which opened in Mexico City in 1991, they utilized a 50-50 joint venture concept
with Cifera company (Chavez 2002). Cifera, a retail company, is a partner that gives
learning opportunities and knowledge for Walmart in operating in the Mexican market
(Sternquist, 1997). Walmart's first step into overseas markets, led by a CEO from the
United States, Sam Walton, a forward-thinking entrepreneur, he is deeply committed
to creating a business culture of continuous development and avoids any of the self-
interests which is not only focusing on himself to making profit but also being
concerned to the company growth. Indeed, he also acknowledges the critical need to
understand and meet the demands and preferences of Mexican customers when entering
this new market.

Next, Henry Davis, Cifera's CEO is Mexican and has a deep understanding of American
and Mexican life since he studied in the United Stated before this. He plays a crucial
role in this joint venture. As we can see, back then in 1991, there were ongoing political
discussions of a free trade agreement between the United States and Mexico.
Furthermore, a result of the agreement allows both countries to actively trade with each
other without taxation or barriers. As a result, Walmart gained important insights into
the Mexican business, including local drivers and direct access to Cifera's customer
base (Data Monitor: Wal-Mart de Mexico, 2008).

In 1998, Walmart purchased its Mexican joint venture partner and decided to take over
Cifera by purchasing above 50 percent share of the company for $1.2 billion to become
a majority owner of Cifera which gives the power to Walmart in making a decision for
the company as well. Not only that, Cifera is known as the largest retailer in Mexico's
market which can give an opportunity for Walmart to become the dominant retailer in
that country. Lastly, the company's name was changed to "Wal-Mart de México y
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Centroamérica" to reflect its operation in Mexico, at the same time to show that
Walmart is also available and located in the surroundings of Central America.

4. What strategy is Walmart pursuing a global strategy, localization strategy,

international strategy, or transnational strategy? Does this strategic choice make
sense? Why?

Walmart pursued transnational strategy in their business operation. Transnational

strategy refers to a business approach where a company operates in many countries but
all the stores work together as one big team (IvyPanda, 2023). They can coordinate
their efforts, share ideas, and make decisions together and the key aspects of this
strategy includes response at the national level, operations at the international level and
taking lessons from the operations that are being conducted on a global scale. The aim
of the company in following such an approach is that it becomes the best choice for
goods that are low cost in the United States as well as the whole world. A company like
Walmart aims to find a balance between wanting to reduce costs and be efficient, while
also adapting to the specific tastes and preferences of each country where they operate.
Besides that, Walmart understand that all country has different tastes and preferences
where Walmart try to make some changes to suit the local culture. They will sell the
products that are popular or important in that specific country. So, by doing this,
Walmart can capture the demand and fit with the local community. This strategy makes
senses because Walmart has stores in many different countries, they can use their large
size opportunity to get better deals from suppliers. When they buy a lot of products,
they have more bargaining power and can negotiate lower prices. This means they can
offer products at great prices to customers, which makes people want to purchase at
their stores more. So, having stores all over the world helps Walmart save money on
products, and they pass those savings on to customers.

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References

Analysis Of Walmart’s Globalization Strategy. (29 April, 2022). Retrieved from GradesFixer:
https://gradesfixer.com

CliffNotes. (2023). The Globalization Of Walmart. Retrieved from CliffsNotes:

https://www.cliffsnotes.com

IvyPanda. (5 August, 2021). Walmart Company Analysis. Retrieved from IvyPanda:

https://ivypanda.com

IvyPanda. (5 August, 2021). Walmart Company's Risks and Threats. Retrieved from IvyPanda:
https://ivypanda.com

Kennedy, R. (2020). Strategic Management. Creative Commons Attribution.

Patrick Hayden, S. L. (2002). Wal-Mart: Staying on Top of the Fortune 500. Washington:
Graduate School of Political Management, George Washington University.

Wikipedia. (10 October, 2011). Wal-Mart. Retrieved from Wikipedia: https://en.wikipedia.org

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Appendix