Taking Wal-Mart Global
Lessons From Retailing's Giant
Vijay Govindarajan and Anil K. Gupta
During 1992-93, Wal-Mart agreed to sell low-priced products to two Japanese retailers, Ito-Yokado and Yaohan, that would market these products in Japan, Singapore, Hong Kong, Malaysia, Thailand, Indonesia and the Philippines. Then, in 1994, Wal-Mart entered Hong Kong through a joint venture with the C.P. Pokphand Company, a Thailand-based conglomerate, to open three Value Club membership discount stores in Hong Kong.
MODE OF ENTRY
Once Wal-Mart had selected the country or countries to enter, it needed to determine the appropriate mode of entry. Every company making this move faces an array ...view middle of the document...
So, the company chose to form a 50-50 joint venture with Cifra, Mexico's largest retailer, counting on Cifra to provide operational expertise in the Mexican market.
For further expansion in Latin America, Wal-Mart targeted the region's next two largest markets: Brazil and Argentina. The entry into Brazil was also accomplished through a joint venture - with Lojas Americana, a local retailer. But Wal-Mart was now able to leverage its learning from the Mexican experience and chose to establish a 60-40 joint venture in which it had the controlling stake.
The entry into Brazil gave Wal-Mart even greater experience in Latin America, and so it chose to enter Argentina through a wholly owned subsidiary. This decision was reinforced by the fact that there are only two markets in Argentina of significant size.
CLONING THE CORPORATE DNA
Wal-Mart had developed several major capabilities in the United States. Thus Wal-Mart's ability to clone its domestically grown DNA and insert it into its global operations would be a key to success, as illustrated by its entry into Canada.3
Wal-Mart acquired Woolco Canada at a time when a combination of high costs and low productivity had driven the Canadian company into the red. Wal-Mart quickly reconfigured Woolco along the lines of its successful United States model, a strategy facilitated by the similarity between the United States and Canadian markets. This transformation occurred in four central areas:
1. Work force: Once the purchase was finalized, Wal-Mart sent its transition team to Canada to familiarize Woolco's 15,000 employees with the Wal-Mart way of doing business. The team was successful in clarifying and defining Wal-Mart's core beliefs and practices to the new Woolco associates.
2. Stores: At the time of the sale, many of Woolco's122 stores were in poor shape. Wal-Mart brought every outlet up to its own standards and renovated each plant within three to four months. It took an additional three to four months to restock each store.
3. Customers: Although the Woolco acquisition was Wal-Mart's first entry into Canada, the company had a head start in building a consumer franchise because most Canadians live near the United States border and were already familiar with Wal-Mart. Wal-Mart leveraged this high brand recognition into customer acceptance and loyalty by introducing its "everyday low prices" approach to a market accustomed to high/low retail pricing.
4. Business Model: A broad merchandise mix, excellent customer service, a high in-stock position and rewarding employees for diminished pilferage were among the United States core attributes that were successfully transplanted into Wal-Mart's Canadian operation.
The transfer of Wal-Mart's corporate DNA to Canada produced dramatic results. Between 1994 (the time of acquisition) and 1997, sales per square foot increased from C$100 to C$292 and market share rose from 22 percent to 45 percent. During the same period, expenses as a...