Wal-Mart as a true Global Firm
A global firm or a multinational corporation like Wal-Mart is a corporation or an enterprise that manages production establishment in at least two countries.
Wal-Mart Stores, Inc. operates in 15 countries worldwide aside from the United States. It has more than 2,400 units in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Germany, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico, South Korea and the United Kingdom. Aside from that, Wal-Mart own more than 3,800 facilities in the United States. It employs 1.6 million associates and serves more than 138 million customers per week visit in Wal-Mart stores worldwide. In fact, Wal-Mart Stores, Inc. is the world’s largest retailer with 5.2 billion in sales in fiscal year ending January 31, 2005.
If for sheer size alone and the number of countries Wal-Mart is operating, then truly this largest retail store is a “global firm poster child”. However, a global firm strictly defined is not only a firm that have business ventures in two or more countries other than its origin but is a firm that incorporates a worldwide perspective in its operations rather than inheriting the local perspective of the country of its origin.
Wal-Mart attends people around the world. People with different culture and therefore, sometimes people with different needs or preferences. It is a very diverse market in which Wal-Mart operates. Wal-Mart foresees the need to adapt and incorporate the culture of its host country if it wants to be successful in its investment. Wal-Mart as a company experienced international success through its ability to adapt Wal-Mart’s unique concepts to each new country. Wal-Marts associates are involved in local communities and cultures. They respond to customer needs, merchandise preferences and local suppliers. By serving each local market in its own unique way, Wal-Mart International has realized significant growth with potential for much greater development worldwide.
Wal-Mart usually go into joint ventures or into buying big local retailing companies outright in its international expansion. By doing so, it retains the culture of the old company which is a native to the foreign country while changing only its name to Wal-Mart. Wal-Mart associates adopts a global perspective in its international operation instead of following the corporate culture and portfolios of the original store. Like for example in Brazil, it developed what is now called small format stores or “Todo Dia”. These smaller stores enable Wal-Mart to enter crowded Brazilian neighborhoods where they could never locate a supercenter. In its international ventures, Wal-Mart learned a very important lesson of flexibility and adaptation. This is much obvious in Wal-Mart’s store design. The neighborhood market is now also used in populated cities in China.
Another proof of Wal-Mart’s associate’s global perspective is its global sourcing of products. It first identifies a product commonly used by all its consumers around the world, and then Wal-Mart look for opportunities to improve the products supply to provide for its international costumers. With increase product supply, economies of scale is usually gained thereby reducing the price of the product. Wal-Mart then retails these products to its worldwide chain of stores.
Wal-Mart International Success
Wal-Mart has been hugely successful in its ventures to Latin countries like Mexico and Puerto Rico. Wal-Mart moved also to South America by opening ventures in Argentina and Brazil. The investment in Brazil is also promising but its counterpart, Argentina was been hugely affected by political turmoil and economic crisis. China, the dream market of every retail industry player proved to be another “good business” endeavor. Wal-Mart only started operating in China in 2000 but it is expanding its retail outlets left and right before the end of 2003.
So what could possibly be the common factor between the countries mentioned where Wal-Mart yielded good investment returns? Among the four countries mentioned where Wal-Mart generated good return of investments, Brazil and China belongs to the top 10 most populous countries in the world. Mexico is at number 11 of the 2005 ranking. It has always been an unspoken retailers dogma that the more the number of expected buyer, the better chance of business growth.
Wal-Mart was been widely known as a retailer store that offers products at a cheaper price. Another consideration to look up to as to explain Wal-Mart’s success in the mentioned countries is the individual countries Gross Domestic Product (GDP). GDP is defined as the total output of goods and services for final use produced by an economy, by both residents and non-residents, regardless of the allocation to domestic and foreign claims. It does not include deductions for depreciation of physical capital or depletion and degradation of natural resources.
In simple terms if the GDP is divided by the population, it gives us an idea of how wealthy the people are on average with in a particular country. GDP may be used as one of many indicators of the standard of living in a country. Based on the recent estimates of the CIA factbook on the countries ranking of GDP per capita as of 2005, Puerto Rico is registered at number 56 of 232 countries. Puerto Rico have a GDP per Capita of ,500. Mexico ranked 86 with a per capita of ,000, followed by Brazil with a per capita of ,500 and is ranked at number 93. China, despite its recent economic boost, ranked at a lowly number 118 with a GDP per capita of ,200.
If we would compare this to United States GDP per capita of ,800, the above mentioned countries can be classified as generally poor. Though it should be noted that GDP is not the sole estimate of a particular country’s living standard.
Wal-Mart’s success can be generally attributed to the large population and the low cost of living standard on the above mentioned countries, other factors not in consideration. With Wal-Mart’s affordable goods and services, people would logically shop at Wal-Mart’s store.
Wal-Mart’s Expansion Plan
According to the Retail Construction Magazine, announced its plans for the continuation of its aggressive unit growth for the fiscal year beginning Feb.1, 2005. Domestically, the Wal-Mart division plans to open 40 to 45 new discount stores and 240 to 250 new Supercenters in the fiscal year. The company expects that relocations or expansions of existing discount stores will account for approximately 160 of those Supercenters, while the remainder will be new operating units.
Wal-Mart International plans to open 155 to 165 units in its current markets. The company anticipates that relocations or expansions of existing stores will report for approximately 30 of these units, while the remainder will represent new operating units for the company.
Wal-Mart is still currently doing its own research and feasible studies as to which country it is planning to conquer next. I can suggest India as my top prospect for opening another giant supermarket named Wal-Mart. Population wise, India ranked among top 10 of world’s most populous country, a common denominator among countries where Wal-Mart proved successful. It also has a GDP per capita estimate as of 2005 of $ 3, 400, way below also if compared to the United States, which is another factor it shares with the other countries where Wal-Mart gained success in its operation.
Other than that, India being a one billion country of people now has a large young working population with a median age of 24. The number of nuclear families in urban areas is growing fast. Then there is the increase in working women population. Add to these the emerging opportunities in the service sector. Next is the astonishing consumer finance boom. Add to this the growing credit card spend. And last but not the least, the changing pattern in rural consumption, a sure sign that the consumer revolution will soon spread to rural India (Business Standards, 2004). Rated the fifth most attractive emerging retail market, India is being seen as a potential goldmine. It has been ranked 2nd in a Global Retail Development Index of 30 developing countries drawn up by A T Kearney. The list was developed as a response to requests from retail chains facing saturated demand in most western markets (IBEF, 2004). A.T. Kearney has estimated India’s total retail market at 2.6 billion which is expected to grow at a compounded 30 per cent over the next five years. India’s vast middle class and its almost untapped retail industry are key attractions for global retail giants wanting to enter newer markets (IBEF, 2004).
India seems to have all the ingredients Wal-Mart is looking for in brewing another foreign venture. Corporate studies done by international consulting firm also affirms to the good prospect India is giving to the retail industry. And another good thing about India is its culture is a mold between the East and the West, a big advantage for a global firm like Wal-Mart who is looking also for global customers.
Credit:ivythesis.typepad.com
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