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A Discussion of Foreign Investments

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Your company is considering plans to purchase an interest in drug store chains in Germany and the UK. But before senior managers are prepared to consider the investment, they would like to look at how other American companies have fared when buying European retail chains.

In December 1997, Wal-Mart took over 21 Wertkauf stores in Germany followed by 74 Interspar stores in 1998. In the U.K. Wal-Mart has purchased ASDA, a supermarket/discount chain that now advertises itself as "part of the WalMart family."

Investigate the recent FDI by WalMart into the United Kingdom and Germany. Gather press releases, articles in the business press, and search the Library and the Internet for published sources of information.

Describe why Wal-Mart undertook the investment, why the British and German governments allowed it, and the extent of its success or failure.
Identify the types of management decisions that needed to be made.
Identify any political or cultural problems that have occurred.
Would it have been better for Wal-Mart to build a subsidiary "from the ground up" rather than buying existing chains? If so, why didn't Wal-Mart pursue this option?

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Your company is considering plans to purchase an interest in drug store chains in Germany and the UK. But before senior managers are prepared to consider the investment, they would like to look at how other American companies have fared when buying European retail chains.
In December 1997, Wal-Mart took over 21 Wertkauf stores in Germany followed by 74 Interspar stores in 1998. In the U.K. Wal-Mart has purchased ASDA, a supermarket/discount chain that now advertises itself as "part of the Wal-Mart family."
Investigate the recent FDI by Wal-Mart into the United Kingdom and Germany. Gather press releases, articles in the business press, and search the Library and the Internet for published sources of information.
Describe why Wal-Mart undertook the investment, why the British and German governments allowed it, and the extent of its success or failure.
Identify the types of management decisions that needed to be made.
Identify any political or cultural problems that have occurred.
Would it have been better for Wal-Mart to build a subsidiary "from the ground up" rather than buying existing chains? If so, why didn't Wal-Mart pursue this option?
About Wal-Mart
Founded in 1962 by Sam Walton, Wal-Mart followed an amazing pattern of success and growth, eclipsing all other U.S. department store retailers by the early 1990's. It employs over 1 million people in the United States at 3,400 stores and 1.4 million people worldwide at more than 4,500 retail units in many countries including United States, Mexico, Puerto Rico, Canada, Argentina, Brazil, China, Korea etc.
Sam Walton, the founder of Wal-Mart, opened the first Wal-Mart store in Rogers, Arkansas in 1962. The company is publicly traded at the New York Stock Exchange under the symbol WMT and has its headquarters in Bentonville, Arkansas.
Wal-Mart operates as an aggregator, distributor, and retailer of consumer goods. It organizes its business into three principal segments: Wal-Mart Stores, SAM'S CLUB and International. The Wal-Mart Stores segment is the largest segment of Wal-Mart's business, accounting for 67.3% sales during the fiscal year ended January 31, 2005 (fiscal 2005). The segment consists of three different retail formats, all of which operate in the United States. The Company's SAM'S CLUB segment consists of membership warehouse clubs that operate in the United States, and accounts for 13% of fiscal 2005 sales. In addition, the Company owns an unconsolidated minority interest of approximately 37% of The Seiyu, Ltd., a retailer in Japan.
(Source: www.msn.com)
Hence Walmart is the world's largest retailer and it want to gain market share in European markets also. Hence it entered ...

Solution Summary

This solution provides a detailed discussion about a foreign investments made by companies, and includes the following topics: management decisions, political/cultural problems, and building subsidiaries.

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