Walmart's Foreign Expansion

Walmart's Foreign Expansion

Walmart, the largest retailer, has built success from low prices and highly efficient operations and logistics. Walmart operates 4,200 stores in the U.S and 3,600 in the rest of the world. Due to a slowdown in growth in the U.S, Walmart decided to expand to Mexico by teaming up with Cifra, Mexico's largest retailer, to open super centers that sell groceries and general merchandise.

Walmart found little success initially because it quickly learned that shopping habits of Mexicans differed from American's shopping habits. Mexicans preferred to purchase fresh produce from local stores and since many lacked cars they did not buy in large volumes like Americans. Upon realzing this issue, Walmart changed its strategy by hiring local managers that understood Mexican culture and it built smaller stores that people can walk to. Soon enough, Walmart was able to find success in Mexico and it has become Mexico's largest retailer.

Walmart attempted to expand to developed nations, such as Britain, Germany and South Korea and found little success. Walmart was competing with well-established retailers in all three countries and it was unable to meet consumer's preferences, which is the purchase of high quality merchandise. Given Walmart's discount strategy, it was difficult to compete in those markets. Eventually, Walmart pulled out of Germany and South Korea in 2006.

Walmart still looked for retailing opportunities to expand in developed nations that did not have strong local competitors. Walmart's most recent centerpiece of international expansion efforts has been China. Walmart opened its first store in 1996 and initially expanded very slowly. Walmart quickly learned that the Chinese were bargain hunters that liked low prices and that the Chinese middle-class was very similar to Americans than Europeans. While that was great for Walmart, it had to adapt its operations and merchandising strategy to succeed in China. Walmart learned that the Chinese consumers liked their food freshly harvested and were offended by Walmart trying to sell them dead fish and meat packed in Styrofoam and cellophane. Walmart adjusted its strategy to meet consumers' needs.

Making the necessary changes to meet consumers' needs was not the only issue Walmart was dealing with. It learned that success in China meant embracing unions. Given that Walmart strongly resisted unions in the U.S, it felt it would be a problem but then realized that in China unions don't bargain for labor contracts. In mid-2006, Walmart agreed to allow unions in its Chinese stores and now Walmart claims that China lies at the center of its growth strategy. Despite economic slowdown, Walmart insists it will continue to open new stores in China at a 'double-digit rate'.