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    Global Expansion: Walmart in Spain: International Trade and Commerce

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    rohitmahali
    This document discusses Walmart's potential entry into the Spanish retail market. It analyzes the Spanish retail market environment, Walmart's current business model and failures in Germany, as well as strategies for potentially entering Spain through a joint venture with the Spanish supermarket chain Mercadona.

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    Global Expansion: Walmart in Spain: International Trade and Commerce

    Uploaded by

    rohitmahali
    6 views19 pages
    This document discusses Walmart's potential entry into the Spanish retail market. It analyzes the Spanish retail market environment, Walmart's current business model and failures in Germany, as well as strategies for potentially entering Spain through a joint venture with the Spanish supermarket chain Mercadona.

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    This document discusses Walmart's potential entry into the Spanish retail market. It analyzes the Spanish retail market environment, Walmart's current business model and failures in Germany, as well as strategies for potentially entering Spain through a joint venture with the Spanish supermarket chain Mercadona.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    6 views19 pages

    Global Expansion: Walmart in Spain: International Trade and Commerce

    Uploaded by

    rohitmahali
    This document discusses Walmart's potential entry into the Spanish retail market. It analyzes the Spanish retail market environment, Walmart's current business model and failures in Germany, as well as strategies for potentially entering Spain through a joint venture with the Spanish supermarket chain Mercadona.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 19

    Global Expansion: WalMart in Spain

    International Trade and Commerce


    Agenda

    • Current business model


    Status Quo • Lessons from the past

    • The environment: PESTEL


    The Spanish • The company: SWOT
    retail market • The market: Porter’s 5
    Forces

    Entering the • Mode of entry


    • The adapted business
    Spanish model
    market • Strategy

    International Trade and Commerce


    Status Quo

    International Trade and Commerce


    Current Business Model

    Decisions Consequences

    Policies Assets Governance Flexible Rigid

    Low wage,
    Information Autonomous Low costs, low A fast and
    non-union
    systems store operation prices efficient system
    workers

    Customer Bulk purchase, Supplier


    Specialty and
    priority, power over relationships,
    regular formats
    friendliness suppliers brand equity

    1 International Trade and Commerce


    Successes and Failures
     The virtuous cycle of Wal-Mart’s success stories
     Lack of adaptability and foresight in new markets?
    Attractiveness Contingent
    to Customer success
    Large may
    Sales
    and Brand not
    Value
    materialize

    Customer Service
    Local Culture +
    Supplier
    Low Cost
    Relationships
    International Available
    Expansion Infrastructure

    Laws of the Land Information


    Exchange
    + +
    Good Logistics Compliant Labour
    2 International Trade and Commerce
    Case in Point: Failure in Germany
     Labour issues

     Non-strategic acquisitions (Wertkauf & Interspar)

    3 International Trade and Commerce


    Case in Point: Failure in Germany
     Global expansion driven by country’s market size
    alone
     Little attention to required business model
    adaptations
     No real market penetration:
     Lack of strong buyer / supplier relationships
     Huge competition in a “price-sensitive market”
     No cultural adaptation:
     English the official language
     Oblivious of shopping habits, work habits
     Problems with German authorities (pricing, wages
    etc.)
    4 International Trade and Commerce
     Efficient centralized distribution system but hard to
    Spanish retail market

    International Trade and Commerce


    PESTEL analysis
    Political Economic
    • Government wants to deepen relationships • Economic crisis
    with USA • High unemployment rate (24.6%)
    • Moderate political risk • Entrenched market, few global players
    • VAT recently hiked (18% to 21%) • Expected downturn till at least 2013
    • 5% lower income tax than neighbours • Retail spending down 11% y-o-y in Q3-12

    Social Technological
    • Price sensitive market • The adoption of Electronic Point of Sale
    • Easy terms, post-sales services important (EPoS), Electronic Funds Transfer Systems
    • Food & beverage: 2nd highest family (EFTPoS) and electronic scanners have
    expense greatly improved the efficiency of
    • Fastest population growth during 2005-10 distribution and stocking activities, with
    • Closely controlled family based companies needs being communicated almost in real
    • Spanish language: different languages time to the supplier
    Ecological Legal
    • Important in the country : the energy • Hypermarket size > 4000 m2
    consumption decreased by 5.2% in 2012 • Competition and anti-trust laws strict
    • Selling below cost forbidden
    • Minimum salary: 748 €

    5 International Trade and Commerce


    Strengths Weaknesses
    • Automated distribution system • Customer concern due to low prices
    • Low prices • Low wages
    • Wide range of products • Large inventories
    • Growth/ Global Expansion

    SWOT

    Opportunities Threats
    • Growth, global expansion (+ Mercadona’s own • Currency risks for profit expatriation
    expansion plans) • Political and Economic risks amid EuroZone
    • Drive down costs by combining own crisis
    technological expertise and local partner’s • Antitrust regulations against big-tickets joint
    knowledge ventures
    • Government wants to deepen relationship to USA • Unemployment rate 24.6% (2012)
    • Declining economy due to crisis 2011
    • Bureaucracy

    6 International Trade and Commerce


    Porter’s 5 Forces (Spanish retail industry)
    ENTRANTS
    (1) Governmental
    framework,
    decentralization
    (2) Entry barriers: retail
    regulations
    (3) EU Service Directive

    SUPPLIERS INDUSTRY
    (1) Walmart may dictate RIVALRY
    BUYERS
    (2) Mercadona‘s strong (1) Medium-sized
    (1) Unemployment
    relationship to suppliers supermarkets
    (2) Tourism
    (3) Favoring (2) Mercadona
    (3) Variation
    infrastructure of (3) Wide range of
    suppliers near cities supermarkets

    SUBSTITUTES
    (1) Large distribution
    chains
    (2) Wholesalers
    (3) Middle-sized
    supermarkets

    7 International Trade and Commerce


    Entering Spain

    International Trade and Commerce


    Mode of Entry
     Organic growth obstacles:
     Need local expertise, established supply chain and
    cultural knowledge
     Land regulations make new development expensive and
    time-taking
     Barely enough surplus demand to support another big
    player
     Motivations for Joint Venture:
     Acquisition may be too expensive, may create hostilities
     Spanish IPOs improbable due to increasingly illiquid
    markets
     Twin benefits: combine own technological advances and
    supply chain expertise with local knowledge and
    relationships
    8 Avoid short term market risks,
    International Trademedium term Eurozone
    and Commerce
    risks and gain on long term partner expertise and brand
    Mercadona
     Turnover: EUR15,267mn, No of stores: 1,311 (in Spain)
     9th most reputable company in the world in 2009 by the
    Reputation Institute as listed in Forbes Magazine
     Expansion plans into Italy, France, Belgium, Portugal;
    Wal-Mart’s gateway to continental Europe
     Orientation towards Mercadona’s secret to success
     high productivity
     flexible working conditions
     employee training
    A rare mix,
     performance-linked bonuses
    even among
     permanent, full-time working contracts its Spanish
     above average wages, no mass layoffs peers
     employees‘ dedication
     watching costs, passing savings to customers

    10 International Trade and Commerce


    Recommendations
     Leading European retail format = discounters (low priced
    stores with limited assortment but good quality for certain
    target groups) [Pfohl and Roth, 2008]
     Market stagnant: aim to grab competitors’ market share
     Capitalize on the downturn sentiment
     Participate in social causes for community benefit and visibility
     Crisis => lower ability to pay => prices a critical factor => EDLP
    rules
     Population density rising, improved accessibility more
    important than new establishments
     Target new formats (eg. neighbourhood stores) at untapped
    areas
     Place supermarkets in areas more accessible to tourists
     Experiment with Marcedona‘s employment practices in other
    EU markets
    9 International Trade and Commerce
    The ‘adapted’ Business Model

    Attractiveness to
    Customer Large Sales +
    Higher
    productivity and
    expansion
    better service opportunities

    Marcedona’s local
    cultural knowledge
    Marcedona
    Marcedona’s
    ’s Low Cost and Low
    Supplier
    employme Prices
    Relationships
    nt practices

    WalMart’s innovative supply Better bargaining


    and distribution technologies and good quality

    11 International Trade and Commerce


    Features of the Model
    Aligned Self-Reinforcing Robust

    • Highest cost savings • Once positive • Imitation would


    realized across synergies from the require huge
    geographies joint venture, the resources and
    • Continuous growth trajectory established presence
    expansion of the would be steeper in the entrenched
    everyday low price than possible for market
    system either retailer alone • The combination of
    • As also shown by the inimitable
    feedback loop consequence of Wal-
    Mart and
    Marcedona’s
    business model
    should be strong
    against competitors
    • Substitution by small
    retailers is a
    negligible threat in
    Spanish market

    12 International Trade and Commerce


    Case in Point: Tackling the labour issue
    Intangible benefits
    Job security

    Low compensation

    High Productivity Happy Employees


    13 International Trade and Commerce
    Thank You for your Attention

    Elodie Lichtenberger
    Harshit Krishna
    Lara Aschenbrenner
    Louise Roche
    Marie Nauméa

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