Reference no: EM133088806

Walmart - "Lost in translation"

Walmart became the largest retailer in the U.S. through superior logistics, cost-cutting, site selection, capital investment in its footprint and a relentless push to focus on low prices. It figured the same strategy would work in the rest of the world...but it has not quite gone according to plan.

Walmart has so far been successful in Mexico and elsewhere in North America, however, this has not always been the case overseas. For example, its units in Germany and Japan have been sold, its China online presence is fading and now it wants to sell part or all its British supermarket and general merchandise chain, even though this has been a relatively strong market for Walmart in general.

Japan was the world's second-largest economy after the U.S. in 2002 when Walmart decided to invest in Seiyu. But the U.S. giant entered with neither an overall strategy nor in-store tactics to achieve much of a presence in a country faced with an aging population and declining purchasing power.

Walmart now aims to grow in China, India, South Africa, and other emerging economies. The reason Walmart did not remove its Japanese business until now was partly because it has positioned Japan as a steppingstone for its pan-Asia market. Also, when Walmart considered leaving Japan around 2010, the idea met with internal resistance, as a complete withdrawal would likely have made it impossible to advance into a developed economy again.

Walmart - India expansion

In India, the situation is somewhat different. After buying over 77% of the online Flipkart business in 2018, Walmart has doubled down on what is the world's last great retail frontier. It has increased its equity share of Flipkart to 82%, kicking in another $1.2 billion. Then Flipkart announced it was buying Walmart India, which is essentially a B2B wholesaler that supplies the country's Kirana stores, (small neighbourhood locations selling food and merchandise). A new online marketplace called Flipkart Wholesale is expected to launch in August 2020 to service this channel.

For Walmart the stakes are high. India is considered the last large marketplace where the retail landscape is yet to be fully tapped. India has millions of small, local retailers - there are believed to be more than 12 million Kirana stores in the country - Indian regulations have protected these merchants, setting up various regulations to block large multinational retailers from the U.S. and Europe. As a result, there is limited to no large mass merchant or department store formats and even online, the market is fragmented.

Walmart is not the only business trying to figure out the Indian retail business. Amazon, which was outbid by Walmart for Flipkart, has launched Smart Stores, an online platform for local stores that allows shoppers to access its app.

Walmart's overseas model

So, "why the Walmart model isn't working overseas?"... is a question many have asked, and few answered satisfactorily. While it is true that it often went into a foreign market and told the locals this was the way we did it back in the U.S, it did learn to adapt in some markets. It has built businesses from scratch and bought existing retailers, and neither was a deciding factor in success or failure. It has worked with partners or gone it alone, again without any clear pattern emerging. Also, it has gone into both sophisticated markets like Japan and third world countries without a consistent track record.

India is important to Walmart, as it needs a growth market and India is the best shot. However, based on its track record, success in the world's second most populous country is no sure thing. Walmart may be good at so many things but too much seems to get lost in translation when it sets sail for foreign markets. For a company famous for its founder driving around visiting stores in his old, beat-up pickup truck, it's a curious phenomenon that its only true successes have been on the Western Hemisphere land mass...where you can indeed drive to see your stores.

1) Explain any two (2) key determinants of culture. Use relevant examples to frame your answer within the context of the given case and international business.

2) The case highlights some challenges faced by Walmart in its foreign expansion. Critically discuss why the culture of a country might influence the costs of doing business in that country. Illustrate your answer with relevant examples

3) Discuss the ethical implications of religious values on international business practitioners such as Walmart and other such businesses