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Global Expanision of Wal-Mart

A.Other than a need to expand, what other reasons would Wal-Mart have for opening stores globally?
b.Why would it be beneficial for Wal-Mart to have suppliers in different countries?
c.Why would Wal-Mart want strong centralized control of its stores? Why would Wal-Mart want strong local control of stores?
d.What pitfalls and opportunities, other than those mentioned in this case, will Wal-Mart face over the next few years?

Below are the answers to the questions please only use it as references because it's the same answers in the teacher's manual. Thanks.

Answers:
a. Possible reasons for Wal-Mart to start international operations include:
1. Domestic revenues do not increase at a pace Wal-Mart wants them to. Therefore, Wal-Mart intends to achieve a high growth rate in foreign countries to hedge against the slow business in the domestic markets.
2. A rival European chain, Carrefour SA, has already a strong presence in the South American market. Wal-Mart could lose the market totally if it did not respond quickly.
3. Foreign operations would also help Wal-Mart identify potential new low-cost suppliers for domestic operations.
b. Having many suppliers in different countries would enhance Wal-Mart's "everyday low pricing" formula by allowing it to hedge against cost increases due to economic and/or political conditions in a given country.
c. Strong centralized control is helpful for aligning local operations with the overall corporate objectives. Additionally, Wal-Mart's years of domestic expertise in retail operations, e.g., distribution systems, can best be leveraged to improve distribution in South America if strong centralized control is implemented. On the other hand, it may be impossible to analyze customer preferences and understand cultural differences unless local managers control certain aspects of the business.
d. In general, political instability is a major concern in South American countries. For instance, due to the recent downfall of the Argentine economy, Wal-Mart may experience difficulties if the Argentine government starts to employ policies that favor domestic producers rather than foreign companies. Also, if the dollar continues to gain in value against major South American currencies such as the Argentine Peso and Brazilian Real, American exports into these countries will be expensive compared to their local competitors, which will negatively impact Wal-Mart's margins.

Solution Preview

a. Other than a need to expand, what other reasons would Wal-Mart have for opening stores globally?
Reasons for Wal-Mart to start international operations are:
1. Wal-Mart wants to increase the volume of its purchases so that it can have a greater bargaining power with its suppliers;
2. Foreign economies remain strong and so the economic health of Wal-Mart will remain sound if it opens stores abroad.
3. Just as emerging economies open up, Wal-Mart opens stores globally to get first-mover advantage.
b.Why would it be beneficial for Wal-Mart to have suppliers in different countries?
It would be beneficial for Wal-Mart to have suppliers in different countries because:
1. It would be possible for ...

Solution Summary

This solution discusses the reasons why Wal-Mart is expanding globally.

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