RMS Walmart

Walmart
Agenda:
Introduction: Walmart
Why go Global?
PEST Analysis
Porters 5 Forces
Walmart in Germany
Reasons for Walmart's failure in Germany
SWOT Analysis
Walmart in India?
Introduction- Walmart:
Walmart was founded bySam Waltonin

1962, incorporated on October 31, 1969
By 1988, Walmart was the most profitable

retailer in the US
Walmart has over 11500 stores across the

world & more than 50% of these were
outside USA
Only 30% of revenue is accounted by its

international operation
Walmart operates
different names:
Walmart
globe
Mexico
with
Best
Price
ASDA
Walmex
United
States,
Puerto
Rico
across
United
Kingdom
India
Walmart Success
Formula:
Everyday Low Price
Sophisticated logistics and inventory

management techniques
Strong emphasis on customer services
Dedicated and committed work force; employee

directly tied to market value of companys stock
Why Go Global?
Expansion of
information
technology
Emerging
markets
Increasing
cultural
homogenization
US accounts for
only 4% of
worlds
population
Saturated
Domestic
Market
Lowered trade
barriers
Go
Global
Walmart expanded into Germany in 1997
It could exploit
its tremendous
buying power
A
T
S
E
P
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l
a
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t
y
x
n
E
a
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r
Ge
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s
i
s
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a
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p
nt
e
m
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e
l
eva
PEST Analysis:
Political:
Policies in Germany were not conducive to the entrance
of big retailers in the country
Number of maximum hours allowed per week was
amongst the lowest in the world
Stringent policy against price cut
Economic:
Retail industry in Germany is very competitive and low
margin industry
Germany is the biggest retail market in Europe
GNP of the country in 2000 was 2 trillion Euros with the
total population of 80 million people
PEST Analysis:
Social:
Germans were very price conscious
Culture in Germany was very different than that in US
Many more people considered themselves as price conscious
rather than quality and service conscious
Technological:
Technology used by German retailers was among the best in
the world
German labors were highly skilled, use technological logistics
application and complex network coordination
c
r
o
F
5
s
r
e
t
r
o
P
e
h
t
in
y
la
p
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a
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r
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c
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f
s
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io
r
a
V
ny
a
m
Ger
il
a
t
re
s
e
in
y
r
t
s
u
nd
Porters 5 Forces
Competitors:
Retail industry in Germany was least profitable
The profits were less than one percent of sales for most of
the retailers
The market during early 2000 was consolidating at that point
with percentage of revenues by top players in the industry
increasing
Customer power:
Customers were very price conscious
Customers have high buying power over retailers since there
was no switching cost
Most of the customers were influenced by prices rather than
quality and service
Porters 5 Forces
Supplier power:
Manufacturers enjoyed much higher power in Germany
Suppliers preferred retailers who would give them high volumes
Relationship between suppliers and existing big players being very strong
Threat of substitutes:
Little threat of substitute for retailers
No threat from e-tailors at that time
Barriers to entry:
Difficult for a new entrant to enter in the German retail industry
Supplier relationship and cultural integration proved to be big barriers in the
industry
ts
i
e lo w
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W e s s o th e th i
a
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SWOT
Largest cooperation (3 times the next competitor)

Strong relations with suppliers
8.4 mn. transactions update/minute
Strong distribution centre and logistics
Cross docking and effective inventory management
Huge database
Low adaptability to different country formats

Low International market expertise
Minor in International retailing
Poor expansion plan implementation in Germany
SWOT
Growing Middle class in emerging

economies
Competitors for sale at lower than book
value
Ecommerce sector growth
Anti-globalisation movements
Presence of local established retailers
Culture differences with acquired retailer
EDLP pricing and predatory pricing not
permitted in some countries
Why Walmart entered

Germany
The retail market in United States was getting saturated
The population of US was not increasing much
Some small players were trying to make an entry.
The competition amongst retailers was intense in US.
No growth opportunity from that as well.
Entry barriers were not high in retailing industry due to increasing

globalization
Having expanded in all the parts of US, the company had to look
towards international expansion in order to maintain growth.
Competitors like K-mart were giving stiff competition to Walmart and

market share was under pressure.
Walmart wanted to leverage its successful strategy of EDLP in

other countries
They believed that this strategy could be successfully replicated to

foreign countries.
Entry Strategy of
Walmart
Walmart entered the Germany with two

consecutive acquisitions
It bought two struggling German Retail chains
1997
21 Wertkauf stores
1998
74 Spar hypermarkets
Fundamentally flawed
Entry by Acquisition Strategy
Spar was considerably the weakest player in German market
Run down stores which were heterogeneous in size and format
Most of them were located in lass well-off inner city residential areas
Walmart paid 650 million Euros for the subtenant status
The real estate value was far less than this amount
After the lease expires, Walmart could be forced to give up those stores
The network of stores was not appropriate
80 % of the German population did not had a Walmart store in their vicinity
Other Reasons for Failure

of Walmart in Germany
Failure with Cultural Integration
Walmarts employees are unhappy about the low pay in the company
Walmart forced the usage of English as the official language
Walmart was not able to lay down employees in Germany as easily as

it did in US
Failure of Everyday Low Prices Strategy
Price cut was matched by competitors
The goods made available were not at high discount
Walmart was unable to achieve cost leadership since it was unable to

attain economies of scale and control over retail network
Lack of Customer Satisfaction
Walmart was unable to tweak its services according to the German

preferences like self servicing
Key Challenges in India
FDI Restrictions
Social & Political Resistance
FDI Restrictions of 51% on Multi-brand Retail

Protests from political parties, local retailers, dealers.
Negating penetration of Mom & Pop Stores
In local cities, the network of Kirana Stores is

extensive
Features like sales on credit facility is available
Poor Infrastructure will cause inefficiency in value

chain
Indian roads, ports & freight facilities are way below

global benchmark
Should
Should Walmart
Walmart enter
enter
India
India
Decision on Entering India
Yes
No
Acquiring a local player
Operational and Cultural

Issues
Not Recommended
Organic Growth
Regulation Issues
Not Recommended
Greenfield Venture
High Risk
Not Recommended
Joint Venture
Recommended
Growth Opportunities
More Downside Risk
Competition of Walmart
Names
Category
Target Segment
Big Bazar
Diversified
Merchandise
Middle Class
Pantaloons
Apparels, Accessories
Upper Middle Class +

Lower Middle Class
Shoppers Stop
Apparels, Accessories
Upper Class
Star Bazaar
Diversified
Merchandise
Upper Middle Class +

Lower Middle Class
More, D mart
Merchandise
Middle Class + Upper

Middle Class
Effects due to entry of Walmart

in Indian Retail Industry
Negative Effects
Positive Effects
Loss of business for

small scale department
stores
Low pricing wars
Excessive Competition
Affects Local traders and
small retail shops
Profit realization of
farmers
Improvement in supply
chain and infrastructure
Inflow of massive capital
More jobs across supply
chain
It will bring the global
best practices, quality
standard and cost
competetiveness in India
Survival of Walmart in
India
It adapts to Indian consumer preferences and

cultural values
It takes advantage of the competition landscape
It uses its influence to aid economic reform in

India.
Walmart can independently operate as a cash and

carry or wholesale operation and hold a 51 percent
stake in a multi-brand retailing operation in select
cities
Thank You
!!!

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Walmart

Reasons for Walmart's failure in Germany

Walmart was founded bySam Waltonin

By 1988, Walmart was the most profitable

Walmart has over 11500 stores across the

Only 30% of revenue is accounted by its

Everyday Low Price

Sophisticated logistics and inventory

Strong emphasis on customer services

Dedicated and committed work force; employee

Walmart expanded into Germany in 1997

Largest cooperation (3 times the next competitor)

Low adaptability to different country formats

Growing Middle class in emerging

Why Walmart entered

The retail market in United States was getting saturated

The population of US was not increasing much

Some small players were trying to make an entry.

The competition amongst retailers was intense in US.

No growth opportunity from that as well.

Entry barriers were not high in retailing industry due to increasing

Competitors like K-mart were giving stiff competition to Walmart and

Walmart wanted to leverage its successful strategy of EDLP in

They believed that this strategy could be successfully replicated to

Walmart entered the Germany with two

It bought two struggling German Retail chains

Spar was considerably the weakest player in German market

Run down stores which were heterogeneous in size and format

Walmart paid 650 million Euros for the subtenant status

The network of stores was not appropriate

Other Reasons for Failure

Failure with Cultural Integration

Walmart forced the usage of English as the official language

Walmart was not able to lay down employees in Germany as easily as

Failure of Everyday Low Prices Strategy

Price cut was matched by competitors

The goods made available were not at high discount

Walmart was unable to achieve cost leadership since it was unable to

Lack of Customer Satisfaction

Walmart was unable to tweak its services according to the German

Key Challenges in India

Social & Political Resistance

FDI Restrictions of 51% on Multi-brand Retail

Negating penetration of Mom & Pop Stores

In local cities, the network of Kirana Stores is

Features like sales on credit facility is available

Poor Infrastructure will cause inefficiency in value

Indian roads, ports & freight facilities are way below

Decision on Entering India

Acquiring a local player

Operational and Cultural

More Downside Risk

Upper Middle Class +

Upper Middle Class +

Middle Class + Upper

Effects due to entry of Walmart

Loss of business for

It adapts to Indian consumer preferences and

It takes advantage of the competition landscape