Walmart’s Expansion Strategy in Africa

Abstract

One of the largest retail businesses is Walmart Inc. With the constant growth and development observed in this corporation, it is of no surprise to note that the company does engage in regular expansions of its outlets. This has successfully been done in countries such as China and Canada. The involvement of this Company in these ventures has helped it to launch a platform for interacting with many customers around the globe. The secret behind its exemplary performance in attracting customers on a large scale is the implementation of the `Every Day Low Policy’ policy (Kenny, 2014). The Company also largely depends on the customer-centered strategy of allowing customers to return items that they purchased and found out that the products had some defects.

In order to come up with a strategy that would help evaluate the demand of its products in Africa, the Company decided to start by extending its services to South Africa. This is one of the best-performing countries in terms of socioeconomic growth and development. Going by the report that many of the African countries have shown reasonably good economic growth over the years, Wal-Mart Inc has developed a strategic plan of fully venturing into this market.

Wal-Mart plans to officially enter into the African market due to the increased levels of consumption that have been recorded in this continent.  Therefore, the plan would commence with acquiring giant retail in South Africa under the name of Massmart. However, it is expected that the company would face many challenges that lie in the cultural and infrastructural aspects (Kenny, 2014). Since the securities and legal framework for handling business risks are weak in the continent, it is projected that the company will experience this as one of the major challenges as well. The entry into the African market will also see the company experience uncertainties in consumer fluctuation.

Walmart Company’s Actions

With the existing mutuality between the company and local cultures; employing the locals of the countries that the Company operates in, Wal-Mart Inc has learned its lessons despite the failures. Finally, the company has decided to invest in the African continent. The company decided to enter the African market by taking over Massmart Holdings Ltd of South Africa by purchasing $2.4 billion of its shares. This would amount to a 51% stake of Massmart being given to Wal-Mart (Kenny, 2014). Through the deal signed with the South African giant retail outlet, it would be possibly an easy task to access the sub-Saharan Africa market as well. This is in connection to the fact that Massmart has 288 stores which are situated in 14 countries in the sub-Sahara.  In this strategic plan, Wal-Mart has promised to make sure that within a span of two years, there is no employee is fired regardless of the financial status of the company. In order to increase the sales and expand the customer loyalty base, the company has resorted to low prices, efficient operations, hiring of local managers, and making use of technical expertise that the local people possess.

Specific Global Strategies

In this plan, it is observed that Wal-Mart opting to enter into the difficult to predict the African market through Massmart was the best strategy. This is advantageous because, Massmart has enough knowledge of the African market (Kenny, 2014). The shared sourcing of the two companies, additionally, would help the company to flourish and seek amicable solutions t the challenges that they might face in the market. The company has already established supply for its products and therefore, supply chain management would be easily be maintained. Despite the challenges that are projected to be a hindrance to the company’s operations, the sub-Saharan countries would be huge scope for business expansion. These strategies are globally accepted and used by other international companies in order to expand their market and competitive advantage (Chang, 2012).

The use of local expertise in each of the countries that they will invest in will be one of the applauded global strategic plans of garnering support from the local customers as well as developing a liking (Chang, 2012). As outlined in business, this amounts to corporate social responsibility and with this in place, more jobs will be available for the unemployed. When a corporation blends with the local communities in order to better their lives by offering low prices for their goods and services and creating job opportunities, the customer base for the company in question grows and keeps the business going (Brea-Solís, Casadesus-Masanell, & Grifell-Tatjé, 2014). This strategy has been employed by Walmart for its entire time of operation. Therefore, it has worked before and would work with the unexploited African market.

The company’s initiatives are not new and have been tested before; despite the challenges that they have faced in the past, it is evident that gradually, the growth of consumption of Walmart’s products in Africa will progressive (Brea-Solís, Casadesus-Masanell, & Grifell-Tatjé, 2014). In comparison to other nations that the company has ventured into such as china, Canada, and Mexico, it is pretty clear that the successes surpass the failures. It is expected that a similar scenario will be noted in the African continent. It would be advisable for the company to ensure that there is no rush to the plan that they have laid down. At this point, one step should be taken at a time by studying the market knowledge, the culture and the connections that they can create in order to make a strong foundation (Hise & Barcan, 2011). The mistakes that the company made in its expansion plan in Germany, Japan and Korea should be a source of learning and making the right decisions about the African market.

References

Brea-Solís, H., Casadesus-Masanell, R., & Grifell-Tatjé, E. (2014). Business Model Evaluation: Quantifying Walmart’s Sources of Advantage. Strategic Entrepreneurship Journal9(1), 12-33. http://dx.doi.org/10.1002/sej.1190

Chang, B. (2012). Strategies of Post-entry Foreign Expansion: Speed-up or Slow-down?. IBR5(8). http://dx.doi.org/10.5539/ibr.v5n8p123

Hise, R. & Barcan, D. (2011). Vinchel Contemplates Market Expansion Strategies. Journal Of Business Case Studies (JBCS)4(1), 1. http://dx.doi.org/10.19030/jbcs.v4i1.4740

Kenny, B. (2014). Walmart in South Africa: Precarious Labor and Retail Expansion. International Labor And Working-Class History86, 173-177. http://dx.doi.org/10.1017/s0147547914000167

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