Tuesday, April 2, 2013

Walmart’s Wait & Watch Game

Wal-Mart is in no Hurry to up The Ante in India. The Retailer is Expanding and Strengthening its Wholesale Business, Hoping to Leverage those Strengths in The Future when Multi-Brand retail opens up.

These are interesting times for organised retail in India. Even more so for Wal-Mart, the world’s largest retailer and the largest listed company by revenue (roughly $422 billion in sales last year). The Bentonville, Arkansas-based Wal-Mart knows that India - which it entered in 2007 through a 50:50 joint venture with Bharti Enterprises - is critical to its ambition to further grow its lucrative global business. Already 26% of the company’s revenue comes from outside the US. Wal-Mart’s international business clocked more than $100 billion in revenue last year, expanding by more than 80% in the last five years.

Indubitably, India is a big pond for big fish Wal-Mart. But there’s a big catch. Wal-Mart’s strategy hasn’t really worked well outside the North and South American markets of Mexico, Brazil and Canada. In most major Asian and European markets like Germany, South Korea, Japan and China, Wal-Mart hasn’t exactly lived up to its formidable reputation as the world’s mightiest and meanest retailer. After entering Germany in 1997 through acquisitions, it exited the market in a jiffy in 2006 (less than a decade), owing to intense competition from the likes of Metro AG. Clearly, its brassy American ways failed to find favour with the Germans. A more or less similar set of circumstances forced it to close the doors on South Korea in 2006 (again, in less than a decade). In Japan, too, Wal-Mart has had a spotty performance so far, failing to live up to any lofty expectations. Its ELDP (Every day low price) scheme is not finding favour with the Japanese, who are ready to pay higher prices for quality. The story in China is not so happy either where its profits and sales are reportedly declining, creating survival issues for the company.

These developments have certainly dented Wal-Mart’s confidence, forcing a change in its strategy. The company is more cautious now about entering new markets. It has learnt its hard lessons. The aggressiveness - entering new markets by buying out local competition (like in Germany and South Korea) - is now tempered with a new-found mellowness and it now sees virtue in the wait-and-watch approach to new markets before taking the plunge.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist). For More IIPM Info, Visit below mentioned IIPM articles
Posted by at
Labels: , , , , , , , , , , , ,