MRKT19037 Case 2: Wal-mart’s entry into Africa – not business as usual but a leap into unknown territory
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Case 2: Wal-mart’s entry into Africa-not business as usual but a leap into unknown territory
MRKT19037 Assessment Title
Individual Task: International Marketing Case Analysis
Select one of the following two International Marketing cases, and answer the questions listed in your chosen case. These cases will be uploaded on the Moodle site on/before week 5 for you.
- Case 1: Tourism New Zealand – using research to activate the ‘active considerers’
- Case 2: Wal-mart’s entry into Africa – not business as usual but a leap into unknown territory
Notes for the assessment task
- Prepare the case in a report format with a title page, table of contents, executive summary, introduction, answers to the case questions, and conclusion.
- Answers to each of the questions must be within 500 words and be explained with theoretical justifications and practical examples with appropriate citations.
- The total word limit for the whole document must not exceed 3000 words, including references.
- You need to have citations/references of at least 8 recent and relevant journal articles, and two textbooks;
- Please ensure that your task includes relevant concepts, theories, tools, and models etc. discussed in 6-8 weeks in this unit.
- The Turnitin Matching rate must not exceed 20%.
- Please upload your assessment task online through a specified assessment link, and by week 8. It must be a word document.
- Please familiarise yourself with the University’s assessment policy and procedure, grading policy, assessment extension policy, late submission penalty, plagiarism policies and the like.
- As per the policy, late submission of an assessment task will attract a 5% deduction of available marks for each day after the due date.
- If you need to submit an assessment extension request, you can only apply through the unit Moodle site at least 24 hours before the deadline ends.
- Please consult your lecturer and tutor about developing this assessment task. The selection and presentation of resources from Google, Wikipedia, Social Media (e.g., Instagram, Facebook, LinkedIn etc.), NetMBA, MarketingTeacher, tutor2u, assessment hire and other third party sources will be assessed negatively.
Assessment Due Date
Week 8 Friday (11 Sep. 2020) 5:00 pm AEST
Return Date to Students
Week 10 Friday (25 Sep. 2020)
For more details about the following marking criteria, please read the marking rubric and watch the recorded videos that are to be available in the Moodle site, and participate in your class regularly.
- 5 questions X 6 marks = 30 marks
- Report format + styles + citations/references = 10 marks
Wal-Mart’s entry into Africa—not business as usual but a leap into unknown territory
When firms expand offshore they need to consider the cultural environment of the country they wish to enter. Whereas Western developed countries are characterised by individualism, most developing country markets are characterised by collectivism (Hofstede 2001), which mandates a greater awareness of the context in which the business is to take place because developing countries are mostly high-context environments (Schutte and Ciarlante 1998). Firms in the West generally adopt a shareholder approach to doing business and are driven by what is in the best interests of their shareholders. In developing countries, however, a wider stakeholder approach is required in order to take collectivism into account and address the concerns of a wider range of stakeholders. This is necessary because both governments and consumers in developing country markets are sensitive to what they perceive as the economic imperialism of large Western corporations. This is especially the case with corporations that have a reputation in their country of establishment for getting their own way through political lobbying or making contributions to political parties—this power causes concern because some of these companies have a turnover that exceeds the GDP of many developing country markets. The internationalisation activities of Wal-Mart, the world’s largest retailer, illustrates the need for this cultural sensitivity in both selecting foreign markets to enter and choosing the most appropriate market-entry strategy.
Wal-Mart’s international expansion strategy
Wal-Mart was founded by Sam Walton in 1962 in Arkansas, USA. The Walton family tightly controls the retailer and still retains about a 40% stake in the business. The retail giant’s business model is centered on achieving efficiency in its global supply chain network and high customer service levels. The retailer employs more than 1500 employees in its procurement department. It sources products from more than 600 factories across the world, thereby accruing economies of scale that enable it to offer consumers competitive prices. Wal-Mart is popular with consumers looking for variety and value. However, the retailer has constantly been criticised for squeezing out margins from suppliers as part of its cost-cutting strategy, and it has a reputation for being anti-union and aggressive in wage negotiations. Wal-Mart has persistently denied these claims, highlighting its mutually beneficial relationships with suppliers across the world as evidence of its commitment to the wellbeing of suppliers and the communities in which the company does business. Having experienced significant growth in the 1980s and 1990s, Wal-Mart recognised the limitations for growth posed by its concentration on the US market. Hence, the company began to expand into international markets. To date, Wal-Mart operates under 55 brands in 26 countries via more than 5600 retail units whose net sales exceeded US$125 billion in 2012.
Initially the European market appeared to Wal- Mart to be the most logical international market region to penetrate, given the similarities in the business landscape that potentially existed between the European market and the USA. However, Wal-Mart chose not to target this market for its maiden foray into international markets. The main reason for initially avoiding the market was the presence of established competitors in countries such as the UK, France and Germany. Therefore, Wal-Mart switched its attention to growing but under-served market regions—the emerging markets in Asia and Latin America. Wal-Mart recognised the potential countries such as China, Brazil, Argentina and Mexico had for retail opportunities. However, the company had significant shortcomings in terms of skills and knowledge on how to do business in these markets. It therefore chose to initially focus on the Latin American markets for its international expansion. Asia was deemed to be geographically and culturally too distant to be used as a stepping stone, unlike Latin America. The retailer opened its first international store in Mexico in 1991 as a 50–50 joint venture. Drawing on lessons from the Mexican venture, it went on to open a store in Brazil in 1996 through a 60–40 joint venture. It then progressed to open a wholly owned subsidiary in Argentina. Thus its entry modes were largely shaped by both local conditions in target markets and lessons learned from previous ventures. The company has since focused on acquisitions in these markets. For example, in Mexico it now operates more than 1000 units, which give it a more than 50% market share. Wal-Mart set up operations in China in 1996 initially through a partnership with a Thai conglomerate that had a sound track record of doing business in China. The company then moved on to establish a joint venture with two politically well-connected partners—the Shenzen Economic Development Zone and the Shenzen International Trust and Investment Corporation. This joint venture was motivated by the challenges Wal-Mart faced in doing business in China, such as bureaucratic restrictions and long delays in approval from the central and local government agencies. The company learned that these were better addressed by engaging partners who had longstanding relationships with these agencies. Hence the challenge for serving the Chinese market was more than just understanding the customers’ different tastes and shopping habits; the influence of the political and legal environment was also an important consideration. This initial experience strategically positioned Wal-Mart to exploit any opportunities that might arise from the Chinese Government’s liberalisation of the retail sector. This opportunity was realised in 2006, when Wal-Mart outbid competitors such as Carrefour and Tesco to acquire a leading Chinese retail chain. This was Trust-Mart, which had more than 100 supercentres in 20 cities giving Wal-Mart the largest network of food and department stores in China…
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