Carla Cordero - Carles De Oleza - Alex Doldán - Patricia Igual - Luis Pérez

How to transfer core competencies to other

countries?

Outline• History Overview

- Vision, Mission and Goals

• Interna & External Analysis- Value Chain- SWOT & Pestel Analysis- 5 Forces Model- Main Competitors

•Internationalization- Driving Forces- Entry decisions- Examples of success and failure

•Suggestions

History Overview• 1962: Walten Brothers opened fist Walmart in Arkansas• 1970: Walmart became public• 1990: 1st National retailer• 1991: International Expansion• 1993: Creation of “Great Value”• 2003: Largest corporation in the world• 2012: 50th Anniversary

Advertising slogans:Save Money. Live better

Mission Statement, Vision, Goals, & Purpose

Vision:“If we work together, we’ll lower the cost of living for everyone…we’ll give the world an opportunity to see what it’s like to save and have a better life.

Mission Statement: To help people save money so they can live better

Goal:Becoming in an international brand

Customer Target

• “Wal-Mart's targeted demographic: – Modest incomes– Shoppers interested in prices

• But the customer base is changing

Internal & ExternalAnalysis

Firms’ Value Chain

General administration

Human resource management

Technology development

Procurement

Inbound logistics

Operations Outbound logistics

Marketing and sales

Service

Firms infrasctructure: close connection between headquarter and local stores.

Human resources: - Based on Interaction practices between company and employees-Low pay but other benefits (health care plans, retirement plans, or promotion opportunities)-2.2 million associates globally. -Every time we open a supercenter, we provide roughly 300 jobs -Women57% of our U.S. workforce, 27% of corporate officers, and 20% of our Board of directors.

Techonology development: It is the key factor of the company. It constitutes a competitive advantage against competitors.- Computer-based technology POS (Point of sales) system Satellite System

Procurement:-Wal-Mart deals directly with manufacturers, by passing all intermediaries. - EDI : Electronic data interchange MANUFACTURER – WALMART - CUSTOMERS

Support Activities

Primary ActivitiesInbound Logistics

Operations Outbound Logistics

Marketing and sales

Service

-VMI system (Vendor managed inventory) continuous replenishment

-EDI (Electronic Data Interchange

3 business segments:

a)WalMart stores- Super centers- Discount centers- Neighborhood

markets

b) SAM’S Club

c)WalMart international

-Hub and spoke distribution system.

- CROSS DOCKING: logistic technique to make the distribution process more efficient

- Word of mouth communication.

-focuses on everyday low prices

“Save money, live better”

-Sales are on a self-service, cash-and-carry basis.

-accepting returned goods

-Satisfaction guarantee

- Opening hours(24/7)

Business Formats

• Walmart Discount Stores 629 in the US

• Walmart Supercenter: Walmart Discount Stores + Full Service Supermarket. 3,029 in the US.

• Walmart Market: Previously branded as Walmart Neighborhood Market. 199 in the US.

2) Sam’s Club. Buy in large quantities. 611 opened in the US.

1) Walmart Stores

Walmart in the US

Distribution Channels • “Saturation Strategy”• The company owns a fleet of more than 3,000 trucks and

12,000 trailers.• The Wal-Mart Way – Cross Docking.

Competency Valuable RareDifficult to

imitateDifficult to substitute Conclusion

Integrated technology of supply chain Yes Yes Yes Yes Sustainable Compt. adv

Ability to generate large sales volume Yes No No Yes Comp. Parity

Superior logistics system Yes Yes Yes Yes Sustainable comp. adv

Operation decentralization Yes Yes Yes No Temp. comp. adv

Strong culture Yes Yes Yes Yes Sustainable comp. adv

Human resources (management team and employee autonomy) Yes Yes Yes No Temp. comp. adv

Resource - Based View Of The Firm

INTE

RNA

L FA

CTO

RSEX

TERN

AL F

ACTO

RS

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

SW• Diversity in products & services• Convenient prices & locations• Strong market presence• Customer loyalty• Strong financial performance• Cost and pricing advantages over

rivals• Good supply chain

• Global Expansion: new geographic areas

• Increasing online sales• Strategic alliances

Acquiring rival firms

HarmfulHelpful

•Brand image-weak reputation•Low global presence•Behind rivals in e-commerce

• Intense Competition• Laws and Regulations:

Trade policy• Cultural barriers• Current economy • Slow market growth• Transport of distinctive comptencyOT

PESTEL Analysis• Political: Policies on economy, trading

agreements (NAFTA…) . • Economical: Unemployment Rate, slightly increase

in consumption.• Socio Cultural: Faster pace of live- Efficiency is key. • Technological: Use of IT technologies. Online

shopping. • Environmental: Recycling, Contamination issues. • Legal: More laws and more complex.

The Five Forces Model1. Bargaining Power of

Customers: LowI. Customers usually make small purchases.

II. A large number of customers.III. Wal-Mart’s main customers are

individuals.

2. Bargaining Power of Suppliers: Medium-LowIV. Wal-Mart purchases huge quantities of

products from its suppliers.V. Low switching costs from one supplier to

another.VI. Products have a lot of substitutes.VII. Almost all the products are not critical for

Wal-Mart.

The Five Forces Model3. Potential entrants / Barriers to entry: Medium-HighI. Economies of scale.II. High capital requirements.III. Customers mainly look for products with low prices and

standard quality.IV. Low switching costs among companies for customers.V. Requires a precise distribution system.

4. Power of Substitutes: HighI. Prices and quality of substitute products are very competitive.II. Performance of substitute products are similar.III. Consumer switching costs are low.

The Five Forces Model• 5. Potential Competitors/ Rivalry: HighI. Wal-Mart represents the 25% share of the U.S. Supermarket

business.II. Competitors have similar sizes.III. Industry growth is slow.IV. Exit barriers are high.V. There is a high production capacity

WAL-MART main competitors:

Retailer Industry: • Target • K-Mart

Supermarket Industry: • Dollar General • Lowe’s Food.

Strategic Group Map

Number of Product CategoriesLow

Low

High

High

Cust

omer

ser

vice

/ Pr

ice

Main CompetitorsRetailer Industry: Target

I. Target is the main competitor of Walmart II. ranked #33 in the Fortune 500.III. Target offers very similar products.IV. Target went abroad in January 2011.

Mission: to Make Target your preferred shopping destination in all channels by delivering outstanding value, continuous innovation and exceptional guest experiences.

Supermarket Industry: Dollar General

I. One of the main competitors, pursuing low prices.

II. Good location in smaller communities is the main competence advantage.

III. Strategy: Save time, save moneyIV. Many items per $1

Mission: to best serve others by keeping it real and simple.

Business-Level Strategy: Combined Strategy

Walmart combines a Cost-Leadership and Differentiation strategies because:

I. Allowed to achieve a large scale and an efficient supply chain.

II. Has its own low-cost brands, like Great Value.III. A unique cost structure that allows Walmart to

establish the lowest prices and achieve competitive advantage. (best value/price combination )

IV. Present in many different industries and markets with efficient distribution channels.

V. Very difficult strategy to imitate by offering a broad quantity of products at a low price.

Internationalization

Internationalization

• Reasons for expanding abroad• Risks• International Strategy• Success• Key issues

Forces Favoring Globalization• 3 main reasons– Saturated domestic market– United States represents only 4% of world’s population

(missing of 96% of potential customers)– Emerging Markets with lower disposable income offer

huge platforms for growth in discount retailer.• Economies of Scale• Growth• Revenues• Reduce political risk

Risks of Expanding Abroad• Management Risk– Culture, language, customer preferences,

distribution systems.• High investment

• Political and Economic risks

• Exchange Rates risk

Entry Decisions• Important decisions any company needs to

face when going international:

– What markets to enter, when and what size.

– What strategy to follow.

– What mode of entry.

What markets to enter?

Europe:

•Mature Markets

•High Rivalry

•Lack of strong costumer relationship

What markets to enter?

Asia:

•Most distant geographically

•Most different culturally and logistically

•Required high financial and managerial resources

What markets to enter?

Latin America:

• Closest markets

• Large population

•Emerging Markets

Walmart International

What Strategy to follow

TransNational

Low High Local Responsiveness

Low

Hig

h

Cost

Pre

ssur

es Global

Multidomestic

International

Mode of entry of International Expansion

Mode of entry of International ExpansionYear Country Mode of Entry

1991 Mexico 50% Joint Venture Cifra

1994 Brazil 60% Joint Venture Lojas Americana

1994 Canada Acquisition Woolco (weak player)

1995 Argentina Wholly owned Susbidiary

1996 China New opening, JV, Acquisition

1998 South Korea Adquisition

1999 U.K. Acquisition of ASDA

2002 Japan Acquisition Seiyu

2002 Germany Acquisition of Wertkauf and Spar

2007 India Joint Venture

2011 Southern African Countries Acquisition of Massmart Holding Limited

Examples of International Success• Mexico: – Largest Walmart’s foreign presence (68%)– 38% Retail Market Share in Mexico

• Canada– One of the most successful international expansion– Acquired Woolco Stores and changed structure

• Both countries are close and were exposed to Walmart.

Examples of International Success• China:– Most populous country– Lower income in middle-class families– Adaptation to market– 85% of products from local suppliers.

Examples of International Failure• Germany– Walmart was not able to benefit from economies of scale– Unable to become cost leader– Mode of entry:

• Wertkauf (right move) • Spar (wrong move)

– Culture differences– Low profitability market– Lost $1 Billion

Examples of International Failure• India– Political and legal barriers:• Foreign companies are not allowed to set up big stores

unless they sell only one brand.

• South Korea– Very demanding customers– Did not customized to market– Big companies also fail in South Korea

Key Success Factors• A supply chain with integrated technology

• An ability to generate large sales volume (economies of scale)

• Every Day Low Prices

• Superior logistics systems

• Decentralized operations

• A strong and unique culture (in U.S.)

Suggestions

“Think local, act global”• Locally leveraged:– Shared knowledge between units.

• Worldwide learning: – Advantages of interconnected economies.

• Adaptation:– To locally customize processes and services

Questions & Answers