International Business Management: Walmart Case - Essay Example

? International Business Management Introduction The term international business, generally explains all the transactions done commercially between two or more nations, countries or even regions without any political boundary restrictions. In this case, private companies conduct these transactions only for the profit they gain from it, while governments conduct them for the profit and mostly for the political reasons. This kind of business not only involves the transaction of goods, but also the transaction of other things like labor, services, skills and people (Potter, 2011). Business is categorized into two main groups: one is the local business, whereby the corporate involved does their transactions within the borders, the other category of business is the international business; this involves the transactions being done across the borders. Cooperates that operate across the borders are referred to as the multinationals. They are mostly developed from one country or region and with time, they extend to other regions. There are those companies that operate across the borders. They are known as multinational companies. They are therefore, said to have worldwide approach to the world’s finest markets and products. In this paper, three of these kinds of companies will be discussed: these are Walmart and Tesco retail stores and the German retailer ALDI. Although these companies are all multinationals, they differ in one way or another, for example, they use different types of strategies to run their operations, some of these strategies include cutting of the costs, the cost of labor, the cost of raw material, charity work. The business strategies for these multinational companies must be based on international marketing system in order for them to compete in the global competition. This is because the business operating methods differs from country to country, therefore, it is necessary to understand the different cultures and languages and also the political and legal systems and by doing, this a company can attain the global commercial success. Looking at each company’s strategies in details, this paper will identify the most effective and appropriate strategies to be applied in the operation of a multinational company (ALDI, 2009), To begin with, this paper will go into details of one of the most effective strategy that Walmart Company has ever applied and how profitable it was to the company. Walmart was born about one hundred years ago by a young man, he used some shoeboxes of post cards with great dreams that one day the company would grow (ALDI, 2009). Now Walmart is worth $4.1 billion with its products sold in 38000 retail stores locally and internationally in 100 countries. Apart from that, their products are marketed online, televisions, movies and cables (ALDI, 2009). The main aim of Walmart is to fulfill human needs and comfort their hearts hence bringing them together. Walmart strengthens their customers’ engagement by trying to improve their relationships. As a matter of fact, businesses that retain the customers’ good relationship are likely to experience positive results in return, such as good profit. Positive customers’ attitude towards your business retains good memories of the transaction made. According to the research conducted recently, it shows that, in around 1990 to 1995, the greeting card sales, which are considered ever-increasing, appeared in the mass channels, in the year 2000, the achievement of Walmart alone was 20 percent of all the greeting cards marketed. The majority of sales in these channels were accounted for by the three brands (Porter, 1985). They include: Gibson, American greetings and the Walmart’s flanker brand – Ambassador ( ALDI, 2009). The branded greeting cards of the Walmart accounted for only less than 20% of the entire market. Their products were sold primarily through the card shops of Walmart and through the chain of drug shops. The share of the sale of greeting cards by Walmart was 39% including all brands. During this same period, among the Walmart overall corporate sales, Ambassador brand sales were becoming an ever increasing proportion, its margins were decreasing due to the multiplying leverage of retailer above the manufacturers and the mass channel competition heightening(Organ, 2010). In that case, the trend, whereby the largest share of the corporate was being dominated by less profitable brand, was the worst thing that happened to the corporate. However, corporate management had to change the rules of the whole game so that they could be able to reverse or eradicate this negative trend. They finally decided to introduce and apply the power of the Walmart brand in mass channel (ALDI, 2009). This did not go without some challenges, the major challenge was the eradication of the card shops and the chain drug stores which was thought to be the cooperate source of money. The research was conducted on the chain stores and card shops history in order to determine the impact of this new strategy. It was found that the impact was very little (Organ, 2010). Before the launch of this strategy, the corporate, through extensive store consolidation, marketing, merchandising, system and the improvement of standards, the management studied the two channels’ viability. This was done possibly through the Walmart gold crown development. They then, through all channels, advertised the power of Walmart to all the mass channel retailers (Porter, 1985). It was later found to be fruitful where one of the retailers highly believes in Walmart’s power to a point whereby, it refused an offer of $100 million in terms of sales by one of the competitors, if it switches to it from Walmart. Walmart then used a unique strategy whereby all the other mass channel brands drastically increased their products’ prices higher than the inflation for some time, Walmarts product prices remained low (Benson & Gilmore, 2004). In this case, over 66% of the Walmarts greeting cards were marketed under $2, while 89% those of the competitors were sold at a price above $2, (Area Managers, 2005). The competitors funded their accelerating terms of sales by their structures of lower costs and higher prices of products (Olivia, 2011). These competitors placed their bets on very fat sales terms, which earned them distribution with many of the mass retail chains. Although this mass channel share was based on how much the brand earns the biggest amount of money, Walmart was strategizing on how to change things by introducing the brand equity power into the mass channel (Area Managers, 2005). This strategy earned Walmart greeting cards the highest recognition by the customers. Walmarts’ greeting brands acquired the highest percentage of consumer awareness. The competitors, who had their products overpriced, nameless and inferior, were locked into long term which had very high sales terms (Elliott, 2005). This condition made Walmart the winner hence the competitors could not easily reduce their prices without negatively affecting their revenue, profits and stocks. The second multinational company that this paper focuses on is Tesco. Tesco is a grocery and a general merchandise retailer, which is said to be multinational and is located in Cheshunt England (REUTERS, 2008). It is the largest grocery company in the UK and internationally, it has stores in over 13 countries. This makes it the worlds third largest in terms of the revenues. Currently, this company is worth $24.4 billion. According to the research conducted recently on the company’s strategic plans, it was found out that, the management has set up a plan. The plan was to cut down the building and development of large stores and instead focus on the smaller stores. This plan also involves the supermarkets hence reducing the struggle for space in the UK. One of the greatest achievements of this strategy is to reduce the growth of competition in Britain space. This is possible when the large hypermarkets are reduced and instead the smaller formats are introduced (REUTERS, 2008). Although these changes will cost Tesco much money and a lot of time, it will reduce the amount used in the UK by 15% every year. Moreover, Tesco operation on this strategy is expected to be successful even more and more in the next coming years without affecting its impact in the market share (REUTERS, 2008). The study further suggested that, by opening fewer big hypermarkets and reducing the expansion of the stores, the UKs capital expenditures of Tesco would be reduced by $200million to $ 1.3 billion in a period of one year. The company’s expenditure on the land purchasing and the building cost also reduces by 300 to 400 million dollars per year. Millions of Tesco’s money is expected to be used in the reconstruction of new stores, maintaining the offering of fresh foods by the stores. It is also suggested that, only $800M would be used in this program for a period of two years hence saving quite substantial money to be then used in to the overhaul. Tesco also has introduced club card instead of the money off coupons (Elliott, 2005). They will focus on the coupons and vouchers when offering money off products which the customers already buy instead of encouraging the new products trail. Also Tesco is said to focus on the food instead of the non-food or the clothing products (REUTERS, 2008). The company believed that, their customers will only like the GDA information in packaging over the traffic light system but after conducting a research recently, they realized that the combination of the two is more preferable. Therefore, the traffic light system is now introduced so that the desire of the customers is put forward. Cancer has become a world threatening disease; it has claimed lots of productive people all over the world. In the year 2008, the United States of America launched a campaign to raise money for the treatment and research of cancer. Since this campaign, stand up to cancer, has started, over $100 million has been raised for the research on the disease. Among the campaigners, Tesco has joined the new campaign in the United Kingdom by the channel 4 and the United Kingdom’s cancer research (Kumar, 2006). Tesco is trying to reduce the carbon emission from its stores by introducing LED lighting in their stores (Thelwell & Myra, 2008). The LED fittings will be placed at the external signage, the sales floor lighting, and in addition, the cold rooms will be lit using LED, this includes freezers and d fridges (REUTERS, 2008). This LED lighting in the cold rooms is said to be more efficient compared to the other lighting techniques. In the ovens, the LED lighting is not appropriate due to the fact that, the temperature is too high therefore making it difficult for LED to function. By introducing this LED lighting, Tesco is expecting to minimize the usage of energy by a considerable percentage. This is much effective in the smaller stores, whereby they are small in size and their ceilings are lower than the big hyper (Thelwell, & Myra, 2008). The corporate, where women are employed to the boardroom, are said to perform even well than where men dominate the board room. Women are biologically capable of multitasking; they are able to do many things at the same time, which means their brains are more powerful than men’s. In that reason, Tesco has introduced a system whereby more women will be introduced to the board room (REUTERS, 2008). By doing this, Tesco will strengthen its management team hence increasing the possibility of the company’s performance to increase. The other company that we are going to look at is the Germany ALDI. This is a grocery retailer based in Germany. It was fast established in Essen and nowadays, it has over 5000 stores spread all over the world (Kumar, 2006). ALDI has one aim as it operates, ‘top quality at an incredible low price’ which they believe makes them unique and they also believe this should be employed in other stores all over. The recession, felt globally is the economic factor and it happened because of the housing bubble in United State of America in the year 2005-2008. The recession has made many customers prefer high quality goods being sold at a lower price rather than the expensive ones (Kumar, 2006). Due to this reason, ALDI was able to win customers even without necessarily advertising or doing lots of product promotions. On the other hand, this strategy of reducing the products’ prices has some challenges also; the production cost also rises following the same global recession. This therefore made the corporate introduce yet another strategy. Furthermore, the taste of the customer has changed due to social and health reasons. Many people prefer organic foods and try to avoid the genetic modified ones. They believe that the organic foods are more healthy in their bodies because they have not been processed using a lot of chemicals like the GMOS (Kumar, 2006). Therefore, this becomes another challenge needed to be solved. In that case, ALDI has taken a step of changing the production strategy by introducing special foods for the customers with health problems like diabetes; also it has changed its attention towards the production of the organic foods. This strategy has raised the company’s income because the products are being sold at higher prices. This is because the customers do not consider the price more than the quality of the food and the welfare of their health. ALDI uses a strategy which is more suitable in the product management. They focus on the products that are fast moving in their store. Unlike the other store which carries over 25000 products, the ALDI carries only 700 products (Flew, 2007). Food products are perishable and when they are kept in the stores for a long period they lose their original perfect taste. In this case, ALDI reduces the risk of losing money overproducing. Also, they attract many customers who like the fresh products. ALDI is a company that is changing its face rapidly over the past few years. It has been considered the poor people stores due to the fact that it has been favoring the poor people who are not in a position to raise much money shopping in the other stores. But currently, ALDI has been trying to win the upper market and middle class customers. Following the fact that Tesco as the top market leader has experienced some problems in the marketing department, ALDI is now slowly, shifting from a situation where poorer people come to shop in a place where more middlemen are shopping (Flew, 2007). This has made ALDI gain courage and confidence while expanding their stores. ALDI also had experienced the recession in the UK but this did not have much impact on ALDI. This is due to the fact that, people can change the dressing mode or any other activity with the change of economic situation but it is not possible to do away with food. One cannot buy a car or new cloths during the recession period but food must be taken at all times. Currently, ALDI is planning to build more stores in the United Kingdom and also to expand and repair the existing ones. ALDI is therefore, targeting to put in place 1500 more stores in the UK and other nations in the surrounding. Comparing all the three companies, we can observe that all of them have different strategies to operate their transactions. To begin with, looking at the main strategy Walmart applied, it is clear that the company benefited a lot (Benson & Gilmore, 2004). The introduction of this plan enabled the company increase the success of the retail; this was done by the introduction of gold crown program. On the other hand, we look at the Tesco’s strategic plans and initiatives. Tesco, being the largest rectal company in Germany, has introduced numerous strategic plans: the introduction of the club cards, which enhances a more comfortable transaction, the employment of women board members, the replacement of the LED lighting, the contribution of the charity work and donations. All these activities have made Tesco grow faster than any other multinational store (Fuery, 2003) it is therefore clear that, the strategies used by Tesco are more effective than those of Walmart. This is because, they touches the heart of the people hence making them love the products of their good friend Tesco. The main backbone of any business is customers, although it is also important to consider the internal management structure, the customers welfare remains the crucial one. The strategies used by the ALDI are also targeting the welfare of the customers, its management decided to lower the price of the products and improve the quality of the products. This was effective due to the fact that people started shifting from purchasing goods of high price due to the effect of the recession in the United Kingdom (Olivia, 2011). Although this strategic plan seems to be effective, it has some challenges, it is not that easy to maintain the high quality and yet reduce the price. This is because, at the time of recession the companies operation cost goes up, hence it becomes very easy for the company to experiences losses. Therefore comparing this strategic plan with that of Tesco, it is clear that those applied by Tesco are more effective. The overall activity of business management require a lot of creativity in order to maintain a profitable flow , this therefore requires a lot of applicable ideas which are then monitored and brought together to form a considerable perfect strategy(Lacey, 2002). These strategies vary from one place to another or from one business to the other. However one is able to judge the most effective ones. In our case here, the strategies used by Tesco seems to bare the biggest profit. In conclusion, it is clear that the paper has explained in details the benefit of having a good management plan, which enables the company achieve their goals. As a matter of fact, the three multinational companies have experienced same benefits although in different propulsions. It is therefore important for any management team, from whichever the company, to apply new strategies based on the type of customers they have. References ALDI (2010). Retrieved from. www.german-retail-blog.com. On July 23, 2010. ALDI Stores as Culture (2012). Retrieved from. www.h2g2.com. On September 2000. ALDI, (2009), Available at: http://www.ALDI.co.uk/index.htm [Accessed on September 2012] ALDI. (2006) ALDI is the biggest wine retailer in Germany. Progressive Newsletter 79. Progressive Group International Newsletter. 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