Strengths and Weaknesses of Wal-Mart's Entry Strategy into Mexico - Coursework Example

?International Business Evaluate the strengths and weaknesses of Wal-Mart’s entry strategy into Mexico. When Wal-Mart entered Mexico, there were anumber of positive as well as negative points which were encountered by this global retail chain. These embody the essential strengths and weaknesses that Wal-Mart had when it decided to make its mark within the North American neighbor of the United States. Since Wal-Mart had already made a name for itself within the American market, moving towards a new market (Mexico) was always going to be a risky proposition. But then again, Wal-Mart as it was, had to cater to diverse markets in their localized settings so that it could become a global brand and not just be typecast as an American retail chain alone. This is the reason why Wal-Mart decided to move south of the United States to Mexico. When one understands how this move came about, the strengths and weaknesses are easily distinguished. The strengths that can be accounted here included the already known name of Wal-Mart which spoke volumes about the kind of trust and confidence that the American consumers had in this retail giant. Also the everyday low pricing mechanism, and the highly efficient operations with state of the art logistics spoke at length of how Wal-Mart had made its name as a benchmark within the American retail spheres. This was the era of early 1990s when Wal-Mart had made a decision to explore the Mexican market. It teamed up with one of the already established retailers – Cifra, so that assistance could come in handy for both the chains. They decided to launch supercenters which would sell groceries and general merchandise. Wal-Mart had a win-win situation because it was entering into a completely new market and its operations within the United States had taught it that diverse customers can be served well, if there was a proper hierarchy within tasks and when operations were handled amicably. Thus the strengths for Wal-Mart depended a great deal on how it entered into the Mexican markets and created a name for itself all over again. Even though it was renowned in the United States, the slow down in the home country meant that Wal-Mart had to come up with something different and new. This could have only taken place with entrance within a new zone, yet being attached with the United States in one way or the other. Mexico is a neighboring nation of the United States and hence there were fewer risks involved for Wal-Mart because the region was more or less the same. With these strengths, came the weaknesses as well. Wal-Mart did not quite study the Mexican shopping habits and since it had already teamed up with Cifra, it knew little about the shopping trends revolving around the Mexicans. This was an important aspect related with Wal-Mart as it needed to find out more about them to begin with. The Mexicans preferred to buy fresh produce from local stores which included items like meat, tortillas and pan duice. This was an important understanding that must have been worked upon well by Wal-Mart before it decided to land within the Mexican market. Yet somehow there was a missing link present here. Since the Mexicans did not quite have large refrigerators at home, this meant that they bought on a regular basis. It actually asked them to come back again and purchase fresh produce. Also many Mexicans did not have cars which essentially meant that they could not shop much in one go. They would come back and buy small chunks though (Anand, 2009:171). This implied for fewer volumes of purchases on their part which defied the concept of large retail chains which were introduced by Wal-Mart in the first place. Hence the weaknesses were quite of a stringent nature as far as Wal-Mart was concerned. These needed to be worked upon at to produce sound results. What this fundamentally meant was the fact that Wal-Mart was losing ground within Mexico and since it was a new market, anything to this effect was not at all appreciated by the head quarters. Wal-Mart knew that its strengths and weaknesses would go hand in hand before something constructive came about. The entry for Wal-Mart was all the more critical since it involved aspects that deemed significance in the long run scheme of operations with Mexico. It had to bear fruit sooner or later but what remained imperative under such considerations was the fact that strengths should have been far more in number than the weaknesses that were eventually encountered. This would have resolved the ambiguities for the sake of Wal-Mart within Mexico. 2. Evaluate how effective Wal-Mart’s staffing approach in Mexico was in relation to the company strategy. One should believe that Wal-Mart’s staffing strategy was in line with the company’s approach to attain goals within the Mexican market. This comes about in the form of an understanding that locals were rightly given the roles within Wal-Mart because they formed the core basis of its staffing approach. They understood the market better and connected with the local level staff and workers. Further, it was imperative to give them the chance since they were a part of the Mexican market themselves. Had Wal-Mart imposed individuals from the United States, it would have made things more complex than one can think of. Instead they correctly opted for the Mexican locals who knew more about their conditions and the landscape so that business could flourish more easily. It gave Wal-Mart a chance to comprehend the kind of people it was catering to. It also provided for the insight that the Mexican market was much different to what the United States one had in essence. The differences were apparent in a number of different ways but the discussion for now centers on the premise of the staffing approach adopted by Wal-Mart within the Mexican market (Anwar, 2004:78). The effectiveness can be gauged easily since Wal-Mart chose local managers who knew more about the shopping habits and trends of their own people – at times even more than the Wal-Mart representatives who came from the United States. Things became better at Wal-Mart within Mexico because these managers were made to control merchandising and follow a particular strategy within the wake of the very same. They built smaller stores where people could walk into and purchase goods at their own free will. Wal-Mart thus brought about a change within the lives of the people by bringing them goods and products which were in their direct demand. The company hoped that it could change the culture of shopping with Mexico in a gradual way. This was indeed the company strategy that was being followed within Mexico. Wal-Mart had an ideology to bring about a shift which was much needed with the terrains of this country. This would have resolved quite a few issues as far as consumer buying patterns and their habits were related. This company strategy explicitly asked the consumers to learn more from their American counterparts so that there was a beneficial feel to them. These benefits were there for the taking and immense significance was indeed paid towards such domains. Forming up a company strategy and sticking by it was also seen as one of the initiatives that would have eventually drawn in more and more success for Wal-Mart in the long run. The staffing approach revolved around this company strategy which paved the way for providing direction and the much needed strength that any organization or retail chain would like to have as soon as its inception takes place. The staffing approach adopted by Wal-Mart was aptly driven because local level managers and staff would have done the trick for the retail chain rather than importing individuals from the United States who understood little about the people and how different processes were handled on a day to day basis. It is because of this reason that Wal-Mart became the largest retailer of the country in a short span of time and achieved success mainly due to the correct approach adopted by the Wal-Mart head quarters (Tigert, 2006:84). This was required so as to take care of the norms which had come up in the line of moving operations to a completely new country, i.e. Mexico. The staffing approach was thus in line with the company strategy that Wal-Mart had adopted. This started to pay dividends right from the beginning as training regimes which were employed within Wal-Mart Mexico aimed to tackle the issues which the Mexican employees would face from time to time, as well as the hiring and firing mechanisms that needed to be in place. Therefore it would be correct to state that Wal-Mart was able to fulfill its responsibilities which it owed to the Mexican nation by giving their locals a chance to explore work opportunities and to localize the Wal-Mart culture as much as possible. It was able to create the much needed feel of a personalized local chain than other similar organizations could come up with. 3. Why do you think Wal-Mart failed in South Korea and Germany? What are the differences between the countries and Mexico? Wal-Mart was unable to achieve its goals and objectives within South Korea and Germany because firstly these were developed nations which did not hunt for bargains. Their people focused more on high quality merchandise rather than being reliant on the Wal-Mart mechanism of everyday low pricing. The reason why Wal-Mart failed within South Korea and Germany is largely due to lack of research within the relevant quarters. Had this been done early on, Wal-Mart would have devised ways and means to compete with the best retail stores that are already present within these nations. Even though South Korea is located differently from Germany, where the former is in Asia while the latter being in Europe, the markets are inherently different. The difference lies in terms of their people, their needs and requirements, their shopping trends and habits and so on. The similarity however is in relation to how they view products within retail stores. They would rather opt for quality than relying on discounts. They would be more dependent on efficient operations than laidback approaches that are usually the hallmark of retail chains and stores within developing countries. Since South Korea’s economy is on the upward trend, there is more that one can ask for in terms of quality and efficient operations. Same is the case with Germany where high-tech systems are in more demand than mere price cuts and discounts, which would not be appreciated if compared alongside other product attributes available within the retail chains (Arnold, 1999:145). This is the reason why Wal-Mart failed as a retail chain within these two developed countries. The differences between South Korea and Germany when kept in comparison with Mexico included that of discounts. This meant that Mexicans looked for discounts more than South Koreans and Germans which does not come as a surprise at all. Since Mexico is a country that is not such an affluent one, Wal-Mart had to become a success there due to its everyday low pricing mechanism, highly efficient operations and fresh produce almost on a daily basis. On the other hand, South Koreans and Germans looked at things from a different perspective as they believed that quality reigns supreme over discounts. They were actually not running after discounts at all, which is a staggering piece of information once compared with Mexico. Since the South Koreans and Germans have stable economies on board, their people do not seem to bother when it comes to discounts as is the case with Mexico. The developing nations always require assistance in the form of discounts for the sake of the people and other similar initiatives and undertakings. This can never be the case with a developed nation where onus is on delivering quality more than the reduction of prices of goods and products available in retail. The developmental curve requires more persistence and adherence to new ideas and approaches which are the hallmark of countries like South Korea and Germany (Fernie, 2002:162). If there were no operations that are handled in such a way, there is failure written all over their business regimes. Hence a good perspective is to make efficiency and effectiveness within retail operations a ‘must-have’ so that success can be guaranteed. This cannot be however deemed as an acceptable excuse for the Mexican market where emphasis largely centers on how well products are priced and since price is such an important tangent, there is nothing else that one can look for when the talk surrounds this domain. Understanding the failure of Wal-Mart within South Korea and Germany whilst being hailed as a success in Mexico raises many eyebrows, but the main onus should always lie on localized marketing processes and activities. It will solve quite a few issues if understood from this perspective. Had the localization process been conducted in an amicable way, there would be little in terms of losses that Wal-Mart had to suffer in South Korea and Germany. Perhaps it would not have to wind up its operations within these two nations to begin with. 4. Evaluate the role of culture in International Business using relevant examples from the case study. The role of culture within international business is of immense value since it literally makes or breaks a business. If the cultural angles are not given the proper emphasis that they deserve, there ought to be several issues which can be engulfed by the nations that undertake such avenues. The cultural understandings dictate how well a business regime would be taken care of and the effect of the local customers who are relevant to such a market domain. It makes the businesses feel inclined to serve the customers as per their respective needs. It puts the priority back within the strides of the business which is a fundamental aspect that needs to be understood irrespective of the culture this business belongs to. The cultural aspects give it the much needed attention that it richly requires and deserves. Hence all out concentration towards the sake of the business is manifested by the cultural realms, which is indeed a very positive thing. Now if the business does not pay heed to a cultural facet, then it is the fault of the business more than anyone else. It makes things difficult and should be tackled in a proper way by the senior management domains in an organization. It also asks the business hubs to feel the plunge because they have not been ready to deliver the goods as far as the cultural tangents are related. If one wants to understand how culture could have played a better role within this case study alone, take the example of China where its population are bargain hunters (Chen, 2009:55). They would go to any heights just to make sure that they buy products at a cheaper price and are ready to hold back for discounts. This is an important understanding within the terrains of the Chinese people and how they view retail shopping realms within their entireties. The example of Chinese people is all the more significant because it gives the international businesses a chance to understand the local markets and how these develop over a period of time (Tong, 2006:100). The emphasis is geared to achieve solid results for the sake of the consumers spread in different corners of the world. The cultural settings for the sake of Wal-Mart are such that it has to have a local strategy in place because if this does not happen, then there are bound to be serious issues for it from a global perspective. If one market is able to comply with its operations, there is reason that other markets must also benefit from such localized settings. Wal-Mart has made all the right moves within the Chinese market and it is for this reason that it has been able to extract the profits that it should deserve (Siebers, 2012:91). Since the Chinese market is renowned for manufacturing inexpensive alternatives around the world, it is only natural that Wal-Mart puts up these Chinese products on its stores so that the Chinese populace buys them at a minimal cost. It will lead to huge volumes of sales since China has a very huge population. It puts things into proper zones as far as understanding the dictum of China is concerned and the marketers and managers within this country know for certain that they are investing in the right direction. All said and done, the role of culture within international business is quintessential towards achieving success in the long run. If it were not for culture, there would be a series of issues that a business like Wal-Mart would have to face on a regular basis. This is the way to go forward as far as exploring new markets and territories is concerned for Wal-Mart, which remains a very huge name all over the world. 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