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Case 7Walmart’s Expansion in Africa:
A New Exploration Strategy
The (M)inh-Thi, (A)lexandru, (R)aphael, (K)atharina, (S)ilje
Overview
Introduction
The Growth of Walmart
International Expansion
The Secret of Success
Why is Africa so
attractive?
Massmart‘s acquisition
Growth strategy
Expected strategic
advantage
Challenges
The Year 2011
The Growth of Walmart
Founded in 1962
By Sam Walton in Brentonville, Arkansas
Went public in 1972
International expansion in the 90‘s
Anticyclical measures
Believe in revenue
Today‘s situation
original Walton's Five and Dime, now the Wal-Mart Visitor's Center
International Expansion
Mexico (1991)
Canada (1994)
Argentina (1995)
Brazil (1995)
China (1996)
India (2007)
South Africa (2010)
OUT: Germany, South Korea and Japan
The Secret of Success
Customer centric approach
EDLP
Offering extended services
Adaption to local cultures
3 „magic“ principles
Respect the individual
Service for customers
Strive for excellence
Why is Africa so attracitve?
Emerging market
Expected growth of 5 %
Important market
Entering Africa
Joint Venture with Massmart
Using existing knowledge and
infrastructure
Growth Strategies of Massmart in the African Continent
Founded in 1990
Second largest distributor of consumer goods:
374 stores in 12 countries in sub-Saharan Africa
Focus on high volume, low margin, low-cost distribution of
branded consumer goods
Strategy: continual improvement of business model and
investment
“A three-year look ahead”
Focus on:
Leadership
Supply Chain
Private Brands
Financial services
New format stores
Sustainability
Walmart’s Acquisition of Massmart
The deal
Initial offer: $4 billion for a 100% stake
Final offer: $2,32 billion for a 51% stake
The problem
Massmart lay-off “closely linked” to the merger
Walmart’s use of its influence to boost imports
The solution
No staff dismissal for two years
Honouring the existing labour agreements
Expected Strategic Advantages
Make use of high GDP growth in Africa
Rise of the middle class, thus increasing demand
Benefit from Massmart’s developed network
Challenges Walmart will have to face in the African continent
One-size fits-all approach
Cultural & infrastructural barriers
Data research of customer behaviour
Poor legal systems & weak securities
Resistance from local groups and Government of South Africa
What happened to Walmart’s operations after taking a 51% share in Massmart in
2011?
2012 - South African government requested the deal to
be re-examined
Re-hire workers
13 million dollars fund
What happened to Walmart’s operations after taking a 51% share in Massmart in
2011?
Main reason to deal – create
new jobs
Use their 51% stake to expand
Expanding may be slowed
down346 stores in RSA
Discussion Why do you think Walmart is not present in Austria?
What could they have done differently to succeed in China or Germany?
Which CSR actions could Walmart take in Africa in order to imbed itself in the community?
Do you have personal experience with Walmart ??
“International Management – Managing Across Borders and Cultures” – Helen Dereskyhttp://www.reuters.com/article/2012/03/09/us-massmart-walmart-idUSBRE8280KH20120309http://www.forbes.com/sites/greatspeculations/2011/06/10/wal-mart-takes-on-africa-with-massmart/http://www.bloomberg.com/news/2011-05-31/wal-mart-s-2-4-billion-bid-for-south-africa-massmart-approved-with-terms.htmlhttp://www.africastrictlybusiness.com/growing-middle-classhttp://www.bloomberg.com/news/2013-04-15/wal-mart-brand-favored-in-massmart-s-africa-growth-drive.htmlhttp://www.comptrib.co.za/assets/Uploads/Wal-Mart--Massmart-Transcripts/Wal-Mart-order-31.05.2011.pdfhttp://en.wikipedia.org/wiki/Walmart