Case 7Walmart’s Expansion in Africa:

A New Exploration Strategy

The (M)inh-Thi, (A)lexandru, (R)aphael, (K)atharina, (S)ilje

Overview

Introduction

The Growth of Walmart

International Expansion

The Secret of Success

Why is Africa so

attractive?

Massmart‘s acquisition

Growth strategy

Expected strategic

advantage

Challenges

The Year 2011

The Growth of Walmart

Founded in 1962

By Sam Walton in Brentonville, Arkansas

Went public in 1972

International expansion in the 90‘s

Anticyclical measures

Believe in revenue

Today‘s situation

original Walton's Five and Dime, now the Wal-Mart Visitor's Center

International Expansion

Mexico (1991)

Canada (1994)

Argentina (1995)

Brazil (1995)

China (1996)

India (2007)

South Africa (2010)

OUT: Germany, South Korea and Japan

The Secret of Success

Customer centric approach

EDLP

Offering extended services

Adaption to local cultures

3 „magic“ principles

Respect the individual

Service for customers

Strive for excellence

Why is Africa so attracitve?

Emerging market

Expected growth of 5 %

Important market

Entering Africa

Joint Venture with Massmart

Using existing knowledge and

infrastructure

Growth Strategies of Massmart in the African Continent

Founded in 1990

Second largest distributor of consumer goods:

374 stores in 12 countries in sub-Saharan Africa

Focus on high volume, low margin, low-cost distribution of

branded consumer goods

Strategy: continual improvement of business model and

investment

Business model

“A three-year look ahead”

Focus on:

Leadership

Supply Chain

Private Brands

Financial services

New format stores

Sustainability

Walmart’s Acquisition of Massmart

The deal

Initial offer: $4 billion for a 100% stake

Final offer: $2,32 billion for a 51% stake

The problem

Massmart lay-off “closely linked” to the merger

Walmart’s use of its influence to boost imports

The solution

No staff dismissal for two years

Honouring the existing labour agreements

Expected Strategic Advantages

Make use of high GDP growth in Africa

Rise of the middle class, thus increasing demand

Benefit from Massmart’s developed network

Challenges Walmart will have to face in the African continent

One-size fits-all approach

Cultural & infrastructural barriers

Data research of customer behaviour

Poor legal systems & weak securities

Resistance from local groups and Government of South Africa

What happened to Walmart’s operations after taking a 51% share in Massmart in

2011?

2012 - South African government requested the deal to

be re-examined

Re-hire workers

13 million dollars fund

What happened to Walmart’s operations after taking a 51% share in Massmart in

2011?

Main reason to deal – create

new jobs

Use their 51% stake to expand

Expanding may be slowed

down346 stores in RSA

Discussion Why do you think Walmart is not present in Austria?

What could they have done differently to succeed in China or Germany?

Which CSR actions could Walmart take in Africa in order to imbed itself in the community?

Do you have personal experience with Walmart ??

“International Management – Managing Across Borders and Cultures” – Helen Dereskyhttp://www.reuters.com/article/2012/03/09/us-massmart-walmart-idUSBRE8280KH20120309http://www.forbes.com/sites/greatspeculations/2011/06/10/wal-mart-takes-on-africa-with-massmart/http://www.bloomberg.com/news/2011-05-31/wal-mart-s-2-4-billion-bid-for-south-africa-massmart-approved-with-terms.htmlhttp://www.africastrictlybusiness.com/growing-middle-classhttp://www.bloomberg.com/news/2013-04-15/wal-mart-brand-favored-in-massmart-s-africa-growth-drive.htmlhttp://www.comptrib.co.za/assets/Uploads/Wal-Mart--Massmart-Transcripts/Wal-Mart-order-31.05.2011.pdfhttp://en.wikipedia.org/wiki/Walmart

Thank you for your attention!