Walmart

Walmart's African Expansion  

Contributed by: 1. Dommeti Gaayathri DM 17215 2. Nadesakumar DM 17224 3. Priya RJ

4. Sai Vishnu M N 5. Surekha R 6. Tara Vinyasa

DM 17244 DM 17253 DM 17256

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Walmart & Africa “Africa contained 6 of the 10 fastest growing economies from 2001 and 2010.”

About Walmart 

Walmart – just more than the worlds largest retailer was founded by Mr. Sam Walton in 1962.

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The lowest prices, anytime, anywhere

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Largest public corporation by revenue in the world with working population of around 2.1 million with sales of $400 billion

Walmart Approach Strategies, business & structure aligned for cost based model.  Grocery, entertainment, home ware, apparel and healthcare products with 100000 different products  As largest retailer, Walmart had high bargaining power and was able to demand low price from suppliers.  High purchasing power – supplier’s to use walmart’s own inventory management system.  Large Buyer – Demand quick changes to orders  Low fixed costs by maintaining “no-frills” environment  Low wages by preventing unionization  No rely on salesperson 

Challenges at home Criticism for low wages and relentless pressure on suppliers  “The Walmart Effect” – local shopes forced to close because of big competition  Issues with rising labour costs  Difficulty to acquire huge area in Urban areas due to high costs  Intense competition from Target, Tesco, Safeway and online retailers like amazon  By 2011, Sales had declined for 8 consecutive quaters 

International Expansion Started international expansion in early 1990s.  JV with Mexican retailer Cifro and renamed as Walmart de Mexico  Replicates the operational practices of Walmart in US under Walmart’s Management  Expanded into Canada, North America, China, Europe, Germany.  Exited German Market due to the inability to obtain a competitive advantage  Further expanded to Japan, South America and next was looking forward to Africa 

South Africa Fastest growing economy with boasting modern infrastructure, well-defined finance and communication sectors.  History: Colonization, racial segregation, Apartheid system and its abolition  In 2011, 80% blacks and 9% white/colored  GDP per capita $11,400 in 2011  Half of the population below poverty line and one-quarter of the population unemployed 

South Africa Free education – 75% had education higher than primary school & 8% uneducated  17.8% of the adult population affected by HIV  Ubuntu – harmony, continuity, reciprocity and symbiosis  Relatively stable government – parliamentary democracy 

Business in South Africa No restriction to foreign investment  “Investors Handbook”  South African Competition Act determines whether a merger could be justified based on public interest 

 Impact on industry/geographical area/employment  Competitive ability of disadvantaged people  South Africa’s ability to compete internationally

 Management

philosophy – Ubuntu – openness, loyalty, mutual respect and empathy  Unionization & wages set by collective bargaining agreements

South African Consumers Retail sales $132 billion in 2011  Highly price conscious customers and very low loyalty  Consumer goods industry dominated by Shoprite, Pick n Pay, Massmart, Spar and Metcash -80% of sales  Large informal retail sector – small scale entrepreneurs, tuck shops, roadside shops  Non-agricultural consumer goods were mostly imported 

Consumer goods industry Largest grocer with huge customer base – Shoprite  It had 1000 outlets in 17 countries & strong market position because of price leadership, reputation  Pick n Pay – food retailer, clothing, general merchandise – predominantly in SA  Massmart – discount firm which sold groceries to electronics.  Fierce rivalry and customers were not loyal 

Acquisition & Decision Walmart made an offer to Massmart for $16.5 billion rand  “The mother of all boycotts” – Cosatu threatened a strike if Walmart entered SA.  Merger approved with conditions 

 2 year ban on layoff of existing employees  3 year term of bargaining agreement  $100 million rand investment to improve SA

suppliers  Massmart-Walmart supplier Development fund

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