International Business

Background:

Wal-mart made its first concrete moves toward foreign expansion in 1991, 55 joint venture with Mexico’s largest retailer, Cifra. $4 1985- $15.12 1990 and $29.50 1991. PE ratio is 40, investors had very high expectations regarding the company’s ongoing growth.

1. What were the reasons for Wal-Mart to globalize its operations?


Global expansion in its core discount retailing business as well as business diversification into other types of retailing, such as supermarkets, financial services.

Deciding not to grow was not really an option for Wal-Mart. Lack of growth not only hurts the stock price; it also makes the company a less attractive employer for ambitious hard-charging people. Note alas that one of the key factors in Wal-Mart’s historical success has been it dedicated and committed workforce. Because of its stock purchase plan, the wealth of Wal-Mart employees was directly tied to the market value of the company’s stock, strongly linking growth to its positive effect on stock price and to company morale.

In sum, Wal-Mart’s decision to commerce global expansion in 1991-1992 appears to have been right on the mark.

2. What was the rationale for choosing its international markets?


Europe, Asia, or others in 1991, cannot enter them all at once since at the time Wal-Mart lacked the competencies and resources (financial, organizational, and managerial) to launch a simultaneous penetration all over the globe.

And, for any company, a logically sequenced approach enables it to apply the learning gained from its initial market entries to its subsequent moves.

(Apple to learning, successful and unsuccessful experience!!!)

1. close country, like Puerto Rico and Canada. (in geographically, economically, culturally proximate to the U.S.)

2. Latin America (Mexico, Brazil, and Argentina)

3. 1997 Asia and Europe.

Three steps: 1, a higher priority to emerging rather than developed markets; within emerging markets, a higher...