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Entering international markets is an important aspect of multinational and global firms. Adopting the right market entry strategy becomes extremely essential for them to be able to achieve success and stability in international markets. Moreover, the country that they enter also forms an extremely important aspect of their strategy Global firms are very prudent while they choose the country that they wish to enter and this provides them with a lot of strategic and competitive advantage. So, a firm needs to be extremely careful as well as analytical about entering international markets (Global Retail Business, 2007).
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Wal-Mart is one such firm that has a strategy of entering foreign markets through opening their subsidiaries in international markets. It has captured several international markets and is yet to capture the Indian market which has high potential; and so forms one of the most attractive avenues for international expansions of Wal-Mart (Global Retail Business, 2007). This paper analyzes the several aspects of Wal-Mart entering the Indian market and the possible environmental as well as country specific risks and challenges that it might have to face in the near future if it tries entering India. This paper also provides an understanding about the various strategies used by Wal-Mart and their impact on the future of Wal-Mart as well as its strategic and competitive position in the market (Wal-Mart, 2009).
“Wal-Mart” is a popular name in the global retail industry. It is well known for its visionary strategy of providing the customers maximum value for their money. Wal-Mart forms a global example for world class logistics and supply chain and has also been known to have maintained its market leadership in several of the countries. It presently operates successfully in 15 different countries with about 8500 stores (Wal-Mart, 2009).
Wal-Mart was begun as a retail store by Sam Walton in the year 1962. It is a U.S. based firm that got listed on the New York Stock Exchange in the year 1972. It is one of the financially strongest companies in the world as it gets listed in the Fortune 500 companies. From then on Wal-Mart has painted the picture of an envisioned chain of retail stores that redefine the retail industry all over the world (Wal-Mart, 2009).
Wal-Mart has shown immense efforts in case of constantly improving its supply chain and building up its logistical competency as it forms a crucial and major element of its strategy. The main reason for the popularity and success of Wal-Mart is the fact that it adopts a global strategy of providing maximum value to customers for the money that they spend, and as money is of universal value this strategy has always proven to be successful in all of the countries where it operates. In this way, Wal-Mart has mainly been able to succeed because of its strong strategies and its successful implementations of operations (Wal-Mart, 2009). It has been an early player in most of the international countries that it has entered, including USA, UK, Brazil and Argentina, where it has greatly succeeded and it operated under several different names in all of these countries (Farfan, 2010).
Wal-Mart bases its functioning on the strategy of it being a price leader. It is able to provide price leadership as it has a very strong supply and logistics management in every single country that it operates. It has been able to achieve this strong position mainly because of having built strategic competencies in this domain it has a very strong supply chain which is based on the format of networking with the suppliers and partnering with them. Including suppliers as strategic partners and providing those better profits and income for faster and responsive services has helped Wal-Mart be able to formulate a strong system of supply which is extremely efficient and effective (Farfan, 2010).
Wal-Mart has several strategies of integrating its supply chain and this leads to cost efficiency as it does not have to stock larger inventories. In this way, Wal-Mart has formed a strategic competitive advantage for itself and is able to operate in the global environment as a global player. Wal-Mart has thus been able to compete with stores like K-Mart, Tesco, Wal-Mart and 7 Costa in several other countries which form some of its major global competitors, especially in the UK market. One of the most impactful strategies of Wal-Mart has been to attract customers by offering them value for money and this strategy has been kept constant throughout the business model of Wal-Mart. These strategies combined with convenience and quality of service including online buying facilities has taken Wal-Mart to a different level of the business of managing a global chain of retail stores (Farfan, 2010).
There are several strategic challenges also that are faced by Wal-Mart. In case of having to operate in international markets, there is a lot of strategic risk that has to be borne by Wal-Mart. They are vulnerable to political risks, legal requirements, technological changes, economic volatility, changes in value of foreign currency and most importantly international levels of growing competition. These are some of the most important elements of strategic risk and challenges that have to be handled and considered by Wal-Mart while functioning in the international markets and business environments (Soderquist, 2005).
The main risk in the present scenario is the uncertainty in the economic conditions. Situations like recession and global financial crisis greatly impact the position of a firm like Wal-Mart that is operating on international finance and has to deal with foreign exchange on regular or operational basis. The change in political and legal conditions or rules and regulations can lead to severe problems for Wal-Mart as there would be intense changes in the polices for offshore, taking away the earnings in foreign currency back to the home country and also in case of fall in value of dollars it can cause Wal-Mart losses of huge magnitudes (Global Retail Business, 2007).
Technology is another extremely essential aspect for Wal-Mart in case of international businesses. Wal-Mart needs a certain level of technological base and support in order to be able to manage its huge supply chain and logistics facilities. In case of these facilities not being available in some of the countries, Wal-Mart faces several issues and problems regarding managing their supply chain and logistics system. This leads to them needing a strong technological development in a country where they wish to start their business.
Wal-Mart can take several strategic actions that can help it to be able to overcome some of the issues that it has faced in the past. Its human resource strategy, though a strong one has been condemned several times. It is essential that they focus on forming a strong and global human resource policy as well as a rewards and compensation system as it has been condemned for compensations that are lower than the industry standards. Moreover it has been formulated on American standards and not on global standards (Global Retail Business, 2007). This needs to be corrected and a global human resource strategy needs to be formulated by Wal-Mart. It is extremely important that Wal-Mart considers the problems of risk management and economic issues while entering another country. They need to look into several aspects like competition and the number of competitors in the global as well as international markets (Soderquist, 2005).
They need to form strong market information and market research systems which can help them form a very strong base for understanding foreign cultures and foreign markets. This would help them be more accurate and sure about their position as well as formation of a strong international and country based strategies (Soderquist, 2005). For instance Wal-Mart needed to change several to fit into the policies of inventorying that it adopted in the USA to be able to be compatible in the global markets. It becomes extremely essential for these aspects to be considered by Wal-Mart while entering foreign markets as that can help it to form a very strong and substantial position that can sustain the environmental forces and changes as well as adapt accordingly and fit into the international environment. This can help it to strengthen its position in the global markets (Global Retail Business, 2007).
One of the most important and crucial element of an international business is its decision to enter foreign markets and there are several evaluations, analysis and considerations that a firm needs to make before entering foreign markets. This includes an analysis of the country specific risks and factors. They have to consider the economic and competitive forces along with technological, political, demographical, legal and several such factors of a country (Soderquist, 2005).
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Wal-Mart has for long been stating its desire to enter India and establish its business as India is considered as a land of opportunities. There is a huge potential for growth and development in India. India is one of the most populous or highly populated countries in the world. It has been ranked second, just after China and has been stated that it will have a population higher than that of China in few years. This provides Wal-Mart a great opportunity to capture one of the largest markets where the demand can be forecasted to be extremely high. There are several favorable market conditions and situations that encourage Wal-Mart to enter India (Soderquist, 2005).
The demographic conditions, the economic conditions and several of the political and legal conditions are extremely favorable. Most importantly, in the recent past, India has been able to develop into a land of technological developments which increases its attractiveness as a business destination. This makes it easier or an organization like Wal-Mart to be able to enter India and establish its global business model of providing high value to its customers and achieve this not by diminishing their margins but by using a highly effective supply chain that can help reduce the cost of operations.
India is a land of several cultures and is one of the most favored destinations for the purpose of international businesses. This is mainly because of the growth and population along with favored economic conditions. This helps Wal-Mart be able to increase its chances of success in India. In case of the Indian retail market, this industry has several small players and there are hardly any strong global players which have been able to capture the Indian retail market. It would take them a strategy of integrating the complete retail industry and all of the small players in order to make this fragmented retail industry suitable for the implementation of the business model of Wal-Mart in a successful manner (Farfan, 2010). It is possible to do so only by ensuring that the small retailers are integrated and they are utilized in the supply chain of Wal-Mart. Negotiating with these retailers and helping them earn better profits is a way to be able to form the supply chain that can be reflexive and based on technological advancements. If this negotiation is not feasible then they will have to try and form the supply chain from the scratch and this would require them to ensure that they are able to do this in an effective manner (Farfan, 2010).
India is a country where in the customers would be easily attracted by value for money, like in all other countries and so this model of Wal-Mart is extremely feasible for India. At the same time India is a large country and around 45-50 stores of Wal-Mart can be started here. In this way it provides a substantially large and substantial market where in Wal-Mart can benefit out of the international expansion (Farfan, 2010).
India is based on the neighborhood grocery store model. The neighborhood grocery store fits in the consumer market and provides retail services to its customers. The neighborhood grocery store competes in the local market and other branded stores compete on a national or global level. Yet the concepts of market as well as their nature and also the nature of their competition are very similar (Farfan, 2010).
Management of country specific risk
County specific risk and its analysis are extremely important or essential for the purpose of analysis of possibilities of success in a country, especially in case of international expansions. I is possible to analyze this by ensuring that the chosen country is compatible with the strategy of the company and suits the present global business model of the organization. In this way it is possible to assess the risk and also evaluate the feasibility of making a capital investment in such ventures. India forms a favorable option as it provides stable political conditions and favorable economic and technological conditions. These conditions are of great benefit and can help Wal-Mart to increase its presence in the global retail market. It is of great benefit to the business of Wal-Mart as it would help them increase sales and returns to shareholders along with strengthening their brand value (Soderquist, 2005).
Benefits and Implementation
There are several benefits provided by this strategy of international expansion and entering India. The first and foremost is an increased sales and revenue as well as better returns to shareholders. Moreover diversifying its portfolio y expanding its business and entering India would automatically help Wal-Mart to form a better risk management strategy. It can cater to several needs of the untapped segments and thus can expand its business.
Wal-Mart mainly faces political, social, ethical and legal aspects which are not restricted to that of USA. Wal-Mart needs to focus on these aspects at a global level. Competition, political and legal issues, and economic uncertainty are certain weaknesses of the industry as well as the operating environment. As India helps balance these factors which are extremely critical for Wal-Mart can help them benefit n the long run or in terms of strategic benefit (Soderquist, 2005).
The supply chain of Wal-Mart is one of the best and most effective supply chain systems and logistics in the global retail industry. It is essential that the system in India is supported by technology that helps it be flexible as well as cost effective. It can be used to automate as well as integrate the several operations of the supply chain along with the operations of the main unit and formulate an integration of ordering or procurement systems and enable achieving higher economies of scale. Higher economies of scale will help the firm absorb more number of transactions and also expand significantly. The processes of supply chain can be easily integrated into one single system that is proactive and can also help in forming stronger strategic partnerships with the suppliers of Wal-Mart. In this way, it is possible to create a better supply chain. It is also important to ensure that the delivery system and order processing system is strengthened (Soderquist, 2005).
This requires the usage of a semi-automated technology and a responsive system that can help it to implement self-processing of orders and informing the transporters or logistics department about the orders to be delivered. An interface of processing through the warehouse can be removed and a direct interface between the suppliers and the orders to be delivered by the logistics company can be creates. This requires partnering with the suppliers as well as the transporters and also create an automation of orders that are placed online, be directly sent to the suppliers as well as the logistics and transporters. This can help them form a direct chain with lesser number of intermediaries or parties or points through which the products need to travel. This can help them significantly reduce the overhead expenses and also the number of errors. In this way, semi-automation can be of great use to improve the supply chain at Wal-Mart (Soderquist, 2005).
There are a few strategic issues faced by Wal-Mart in deciding what should be its strategy in the future and how it should be implemented. This includes formulating a global standard in order to maximize customer satisfaction and also creating local plans to handle competition. The retail industry is crowded with local, national and international players. These strategic issues can be resolved by using the above mentioned strategies and methods and using further international expansions in the Asian market.
Wal-Mart has framed its business model around the core called customer. It has truly succeeded at giving the customer the maximum possible value for money. Quality at reasonable prices has ensured customer loyalty as well as volume of sales. Moreover it has constantly provided buyers’ incentives in the form of discounts and offers. This ensures more number of customers to Wal-Mart than any other retail store in the world (Soderquist, 2005).
Wal-Mart should adopt strategies of reducing competition and handling it effectively through product differentiation, manage risk effectively, and immune itself against economic mishaps, expand internationally into developing markets, cut down or rationalize its costs and upgrade its technology applications. These measures would help Wal-Mart sustain as a market leader in the long-run or well into the future. These can help it survive and sustain in the long run.
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