International Business Walmart case study - Essay Example

Wal-Mart in South Africa Wal-Mart in South Africa Expanding the business of a company internationally ought to bea matter of grave concern for any prospective company. Wal-Mart has not been left behind in this respect since it has expanded its business in other nations, such as China, Germany, India, and Japan, despite being headquartered in the United States (U.S.). What is more is that Wal-Mart has expanded to the African continent, in South Africa; however, the prospects of this move are yet to be justified.

It is not guaranteed that Wal-Mart’s expansion in South Africa will be successful because there have been business failures in several nations, such as Germany and India. As such, it is worthwhile to analyze the prospective of Wal-Mart in South Africa by first considering the four dimensions of distance between the U.S. and South Africa as well as the disadvantages and disadvantages of Wal-Mart in South Africa using Eclectic Paradigm as it will be delineated in this discussion.The distance between the U.S. and South Africa can be considered through four dimensions: cultural, political, geographic and economic distance.

Firstly, the cultural distance deals with the cultural attributes, which are very essential in determining the manner in which individuals will interact with each other as well as with companies (Ghemawat, 2001). Whereas the majority of the inhabitants of the U.S. are whites, blacks are predominant in South Africa. The U.S. is an English speaking nation, whereas South Africans speak isiZulu language to a greater extent in trivial English. Also, in the U.S., the Protestant, and Catholic religions are prevalent while, on the other hand, Protestant and other Christian religions are prevalent in South Africa.

Secondly, the political distance between the U.S and South Africa is eminent in the sense that they do not share a common currency: U.S. dollar for the U.S. and the South African rand for South Africa. Thirdly, the geographical distance between the two countries exists in terms of geographical size, climate, and population. The U.S. covers a geographical area of 9,826,675 square kilometers (sq. Km) whereas South Africa traces the U.S. with 1,219,090 sq. Km in geographical size. Besides, the U.S. has a temperate climate, which is different from the semiarid climate in South Africa.

Additionally, the U.S. has a population of 316,668,567 whereas South Africa has 48,601,098. Lastly, the economic distance between the U.S. and South Africa is apparent from the GDP per capita, $ 50,000 for the U.S and $11,400 for South Africa, the real GDP growth rate, 1.8 % for the U.S. and 3% in South Africa, unemployment rate, 9% for the U.S. and almost 25% in South Africa, and the population below poverty line, 15.1% for U.S. and 50% in South Africa (Robson and Beninger, 2013). The distance between the U.S. and South Africa cannot be overemphasized.

Similarly, the advantages and disadvantages of Wal-Mart in South Africa can be analyzed using the Eclectic Paradigm model. The model suggests that firms the essence of the international expansion of firms is grounded on the location, ownership and internalization advantages (John, 1988). In this sense, Wal-Mart has internalization disadvantages since it has to license Massmart to market its products rather than internalizing the ownership advantage. Since the South African government is protecting its domestic industries from unfair competition, Wal-Mart had to acquire the share of Massmart and thus giving up its ownership advantage.

Wal-Mart has a location advantage in South Africa since the government is open to financial, legal and political systems of South Africa are sound and stable. What is more is that South Africa has an advanced communication and transport infrastructure. The ownership advantages of Wal-Mart is South Africa is that the company has a competitive advantage over the key players in the consumer good market, such as Pick n Pay, Shoprite, Metcash, Spar and Massmart (Robson and Beninger, 2013). Given this, the prospect of Wal-Mart in South Africa is justified.

ReferencesGhemawat, P. (2001). Distance still matters. Watertown, MA: Harvard Business Review.John, D. (1988). The Electric Paradigm of International Production: A Restatement and Some Possible Extensions. Journal of International Business Studies, Vol. 19(1), pp. 1-31.Robson, K & Beninger, S. (2013). Wal-Mart’s African Expansion. Ontario, Canada: Ivey Publishing