International Business - Essay Example

International Business Table of Contents International Business Table of Contents 2 Introduction: An overview 3 Strategy Analysis for Wal-Mart 3 Pros and cons of acquiring: How did it go well for Wal-Mart 4 Wal-Mart- ASDA: The Conclusion 5 Reference 7 Bibliography 7 Introduction: An overview Wal-Mart is one of the biggest names on the sky of retail industry. The establishment of Wal-Mart happened in the year of 1962 by the Walton. Throughout this time, Wal-Mart has been following a phenomenal expansion plan; even be it consolidating with small town businesses; they have done it all. Now, Wal-Mart was looking for Expansion in UK. The strategy was all in place. In 1999, Wal-mart acquired ASDA, the British supermarket chain. Since 1999 ASDA has been wholly owned by Wal-Mart. ASDA was operating in almost every segments of retail including food and non food items. This company also works in cost effect environment. The take over of ASDA made a good amount of news in UK retail industry and had far reached consequences in British Retail industry. Strategy Analysis for Wal-Mart To expand its business Globally Wal-Mart was mainly targeting on the countries which have the highest family income like Germany and Britain; the countries with the highest population like China, Brazil and Korea. So, now Wal-Mart put its bird’s eye on UK expansion plan. Setting up a new company on its own in UK seems not to be a good choice for Wal-Mart. A new set up will not have any client base, any reputation in the UK market. Moreover Wal-Mart will not be so familiar with the business customs. So setting up a new business and survive in a competitive environment while get accustomed to its people, culture and business customs will be quite a tough way for Wal-Mart to get into UK market. Building a company from scratch seems to be an unnecessary and expensive way to move on. So Wal-Mart moved to acquire an established retail chain in UK. Before finalizing the deal with ASDA, Wal-Mart had looked upon Tesco and Sainsburys. These all companies are the strengths of UK retail chain industry (Corporate Watch UK, 2004). So, as Wal-Mart was looking for an established and well recognised retail company in UK, ASDA was the obvious choice. Pros and cons of acquiring: How did it go well for Wal-Mart ASDA was a company carrying almost same values and operation strategies as Wal-Mart. Even in the mid 90’s the management of ASDA has consciously followed several Wal-Mart approaches. ASDA used to prop up itself as the ‘Britain’s Lowest Priced Supermarket’ (Butt, “Asda keeps title as cheapest UK supermarket”). On the other hand Wal-Mart also promotes it under the slogan ‘Save Money, Live Better’. They believe in offering quality products for much lesser prices. As the core competence and objective of ASDA is in consent with those of Wal-Mart; Wal-Mart did not have to take much effort to align with the business strategy. People were able to connect more with Wal-Mart’s objective, as they are familiar with the objective of the other company. ASDA is one of the largest retail chains in UK market. Buying out this company helped Wal-Mart to get a certain market share with its client base, good will and more over its people. Being new in a country, it would have been difficult for Wal-Mart to identify right calibre to run on their operations. Moreover different countries can have different working styles. So having a company with its people will let Wal-Mart to concentrate more on operations rather than looking for key people for their business. Wal-Mart will have a readily available client base to build upon. Same things can be said in case of getting suppliers for its operations. ASDA had been already well known to its suppliers, so getting suppliers was not of so concern to Wal-Mart. As ASDA was also working in the same operational environment, the processes were all in place; the human resources were skilled enough to take over Wal-Mart’s operational and tactical activities. Wal-Mart did not have to invest much in processes and resources for its UK operations. So it was a less time consuming expansion process for Wal-Mart. The management style was almost similar as in this case ASDA was consciously imitating Wal-Mart. So change in management could not affect much in case of ASDA. Even many of the ASDA top management personnel were in charge of ASDA division. ASDA management was quite respectful for the managerial strategies of the Wal-Mart team and as the management style was quite similar, the conflicts were less in case of aligning strategies between two management teams. ASDA has one of the largest sales in UK retail market. So obviously by acquiring ASDA, Wal-Mart faced less risk in sales and profitability. Competitive advantage was already gained by acquiring an established, profitable company with one of the large consumer base. Wal-Mart- ASDA: The Conclusion Being a subsidiary wholly owned by the company, Wal-Mart, ASDA has become the second largest retail group in UK with a market share of 17%. Their operations also include non-food items. Sainbury was overtaken by ASDA in the month of July, 2003. As in the month of June, 2004, ASDA operated in 2589 stores (Corporate Watch UK, “ASDA/WAL-MART”). Even in the recent time of recession ASDA was able to increase its market share. Wal-Mart is now based in 15 countries with around 8000 shops world wide. Wal-Mart reported much higher group profit in October, 2009, despite being faced by a tough year for economy. ASDA reported a rise of 5.6 percent in sales in the stores opened at least one year back. The US group said that internationals have been the fastest growing sector of Wal-Mart with outstanding performance in UK, Brazil and Mexico. By acquiring ASDA Wal-Mart has posted its presence in UK market, having higher sales and profitability. On the other hand, by the help of Wal-Mart, ASDA acquired the second place in UK retail chain industry, directly competing with TESCO (Reuters, “Wal-Mart overseas profit climbs, UK’s Asda shines”). Now ASDA is the biggest non-US subsidiary of Wal-Mart. It seemed that acquiring ASDA was a very good tactical leap forwarded By Wal-Mart. Reference Butt, Riazat. 2007. “Asda keeps title as cheapest UK supermarket”. 11 Jan 2010. . Corporate Watch UK. November, 2004. “ASDA/WAL-MART”. 11 Jan 2010. . Reuters. 2010. “Wal-Mart overseas profit climbs, UK’s Asda shines”. 11 Jan 2010. . Bibliography ASDA. No Date. “ASDA”. . Straub, T. Reasons for frequent failure in Mergers and Acquisitions: A comprehensive analysis. Wiesbaden: Deutscher University, 2007. 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