International Business: Wal-Mart Analysis - Research Paper Example

International Business: Wal-Mart Analysis 1. Wal-Mart Stores, Inc. is an American public multinational corporation headquartered at Bentonville in United States. It is a retailing industry founded by Sam Walton in 1962. The company operates abundant large discount department stores and warehouse stores. Wal-Mart employs the service of 2,100,000 workers so as to meet the interests of its customers across the globe. Previously, it was the world’s largest retail industry and now it ranks at third position. This company is also the largest grocery retailer in United States and deals with diverse ranges of product lines. Wal-Mart mainly operates in 17 different countries and they are: Brazil, Argentina, Canada, Chile, China, Costa Rica, El Salvador, Guatemala, Honduras, Japan, India, Mexico, Puerto Rico, Nicaragua, Pakistan, United Kingdom and United States. 2. It is identified that both US and UK follow a free market approach that does not impose any regulation on business expansion. According to this concept, the government has only a distant role in market regulation. In contrast, China has adopted a more restrictive approach so as to preserve the interests of its traditional traders. Although, China possesses world’s largest potential market, the strict market regulations adversely affect Wal-Mart’s business interests. As compared to Chinese market, Indian market covers the features of both capitalism and a socialistic market economy (Indian Market). This mixed market system provides equal power to industrialists and government over the market. Like in the case of US and UK, Japan maintains a free market system so as to encourage national as well as international traders. Japan’s industrialized economy is the third largest in the world. According to Daniels, Radebaugh, Sullivan, and Salwan (2011, p. 144), different nations follow different market systems and regulations. This varied market structures raise many challenges to Wal-Mart Stores because the organization is forced to restructure its marketing policies in accordance with the trade laws of the nations in which it operates. 3. The sources of political risk for the countries in which the Wal-Mart has its presence vary. For instance, the organization operates in Pakistan where political conflicts and terrorism are at its peak. Such a political atmosphere is not beneficial for a multinational company like Wal-Mart because the political instability would seriously impinge on the firm’s marketing operations. Similarly, China is a communist country that strongly opposes capitalistic ideologies. Under this situation, the Wal-Mart cannot function effectively in China since the communist perceptions of Chinese government does not fit with the capitalistic interests of the organization. In this way, the Wal-Mart may face different political threats from its various foreign markets. Therefore, it is recommendable for the company to select foreign market segments carefully while dealing with international expansion. The above said political constraints prevent the organization from developing its product lines and business strategies in the target country. 4. Many groups of individuals possess shares in Wal-Mart and these stakeholders can be mainly categorized under two heads such as market and non-market stakeholders. A market stakeholder has an economic stake in what the company does; whereas a non-market stakeholder possesses a political stake. It is obvious that market stakeholders always aim at their economic benefits. Since both these groups contribute to the operational requirements of the company, Wal-Mart’s stakeholders must get benefits that are adequate to cover the risk elements they have taken. In the view of Brigham and Ehrhardt (2011, p.572), since investment opportunities and earnings of an international company vary from year to year, it will have to make great efforts to maintain stable dividend distribution. Hence, the shareholder satisfaction is a difficult task for multinational companies. 5. Wal-Mart’s code of conduct for operating its business practices involves “respect for the individual”, “service to the customer”, and “striving for excellence” (Walmart: statement of ethics). To illustrate, while the Wal-Mart Stores extend its operations to a foreign country, the company must be careful about integrating its basic business strategies with the target country’s market environment. Hence, the company should follow a systematic business procedure so as to implement the aimed integration process successfully. While the firm respects individual values and rights, it would assist Wal-Mart to attain market reputation within the market horizon of the targeted foreign country. A good market stature is the powerful asset of any organization as it captures the market concentration to a large extent. In the opinion of Daniels et al, (2011, p. 508), effective customer service is an essential factor in gaining market dominance because customer is the key role player in every market. Customer satisfaction and thereby mouth-publicity technique would add to the expansional tactics of the company. Operational excellence is also a notable feature that can highly amplify the business growth of a firm. Therefore, Wal-Mart Stores wishes to follow its code of conduct when operating in foreign countries. 6. Wal-Mart always considers the problems of the local community in which it operates; and Corporate Social Responsibility (CSR) has been set as the company’s one of the major concerns of business development. The Wal-Mart offers ranges of social responsibility programs to China that mainly includes “sustainability, feedback to community, care for children, support for education, and disaster relief” (Walmart). The company has spent donations of nearly RMB 60 million for various Chinese communities since its entry into China in 1996. It has also assisted the Chinese government to minimize the responsibilities associated with public welfare. It is observed that Wal-Mart’s operation in China also gives great emphasis on environmental safety. 7. According to Knorr and Arndt (2003), Wal-Mart’s failure in Germany clearly points that the company must be more careful while taking investment decisions and actions in future. The Wal-Mart’s over reliance on its US success was the main cause that led the firm to a strategic failure in Germany. Since Wal-Mart is a corporate giant and US’ largest retail industry, it has the capacity to raise abundant financial sources. In contrast, this competitive advantage influences the management to take up higher risks. Hence, it is advisable for the Wal-Mart to consider various opportunities and threats that exist in the market where the company proposes to launch its business. References Brigham, E. F & Ehrhardt, M. C. (2011). Financial management: Theory and practice. Edition 13, Cengage Learning. Daniels, J. D., Raderbaugh, L. H., Sullivan, D, P & Salwan, P. (2011). International Business: Environments and operations. 11th edition, Pearson Education India. ‘Factsheet of Wal-Mart China Corporate Social Responsibility Saving people money so they can live better’. Wal-Mart. Retrieved from http://www.wal-martchina.com/english/community/community.htm ‘Indian Market’. (n.d.). Economy Watch. Retrieved from http://www.economywatch.com/market/world-markets/indian-market.html Knorr, A & Arndt, A. (2003). Why did Wal-Mart fail in Germany? IWIM Institute for World Economics and International Management. Retrieved from http://www.iwim.uni-bremen.de/publikationen/pdf/w024.pdf Statement of Ethics. (n.d.). Wal-Mart. Retrieved from http://ethics.walmartstores.com/ Read More