Wal-Mart International

Wal-Mart International

Introduction

In 1993, Wal-Mart had become America’s leading retailer, with net sales of $67 billion from its Wal-Mart stores, Sam’s Clubs, and Wal-Mart Supercenters. The Company had grown at a rate of 25% per year since 1990, and it was clear that to continue at its current rate of growth, Wal-Mart would have to seriously consider continuing its recent international expansion.

During 1992, Wal-Mart had entered into a joint venture with CIFRA, Mexico’s largest retailer, which currently operated 24 stores in Mexico and had plans to open 70 new stores by 1995. The Company had also recently completed the acquisition of 122 Woolco department stores in Canada. Each of these expansions had presented unique challenges for Wal-Mart to adapt its operations to suit local market demands, but Wal-Mart had successfully risen to the challenge. Given the Company’s successful track record, it seemed logical to continue to expand internationally.

If Wal-Mart didn’t expand internationally, David Glass, Wal-Mart’s CEO, felt that companies would start to come to the US and increase competitive pressures domestically. International expansion would drive growth and help in maintaining Wal-Mart’s dominant domestic position. Namely, entrance into foreign markets would force competitors to focus on their primary markets. If Wal-Mart planned to maintain its dominant position in the U.S., international expansion would not only drive growth, but it would also keep potential competitors trying to operate stores in their home markets rather than expanding into the U.S.

Wal-Mart

Company Background:

Sam Walton began his retail career working at J.C. Penney while in college and later leased a Ben Franklin franchised dime store in Newport, Arkansas (1945). In 1950, he relocated to Bentonville and opened a Walton Five and Dime. By 1962, Walton owned 15 Ben Franklin stores under the Walton Five and Dime name. Walton felt that big supermarkets would eventually destroy the smaller, traditional five and dimes and in 1962, Walton opened his own supermarket discount store. Eight years later, the Company was trading on Wall Street and had 30 stores.

Wal-Mart’s growth accelerated greatly during the 1970s. The Company aggressively marketed itself to middle class shoppers by advertising "Everyday Low Prices." Walton motivated his employees by impleme...

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...ring Argentina with a local partner, analysts expected the new stores to be able to capture additional market share and initially achieve lower operating and administrative expenses than if Wal-Mart entered on its own.

Martin wondered which of these alternatives would be most beneficial to Wal-Mart.

Summary

The annual shareholders meeting was coming up, and Bob Martin needed to make a recommendation to Glass on how to proceed. Although Glass agreed with Martin that international expansion needed to continue, he wasn’t convinced Argentina was the best choice. Glass wanted to be sure that they had considered all of the risks involved before making such a large investment in a new country. If Martin did decide that Wal-Mart should invest in Argentina, Martin wondered which alternative to recommend. He needed to finish his analysis and prepare a report for Glass that compared the alternatives. Whatever Martin’s recommendations, he knew they needed to be presented with a compelling argument. This was a critical year for Wal-Mart, and Glass would want to be able to demonstrate to Wal-Mart’s investors that the Company could overcome its slow down in growth during the last year.