Wal-Mart Case What are some of Wal-Mart’s FSAs? To what extent are these FSAs location-bound or internationally transferable? Wal-Mart’s FSAs are the things which they have been so successful with in the US. These include their ‘every day low price’ (EDLP) philosophy, which is based on efficient distribution systems, low prices negotiated with suppliers, very innovative technology and efficient processes with suppliers. Another FSA is its so-called ‘exceptional service’.
This includes smiling at customers, helping them and exceeding their expectations. The EDLP philosophy is internationally transferable to the point where it is being hindered by foreign laws, like in Germany. If the environmental conditions are suitable, EDLP has proven that it is a successful strategy, but the conditions vary per country. The ‘exceptional service’ that Wal-Mart offers can be seen as internationally transferable, but its success also depends on the conditions within foreign countries.
If the customers are not used to such extensive aid while shopping, they might find it annoying, intimidating or even harassing. What distance components (relative to the US) do American retailers face in Germany? Give examples. How did these distance components affect the exploitation of Wal-Mart’s FSAs transferred to Germany? First of all, the location of Wal-Mart Germany’s warehouses and the distance between the headquarters of the two former chains brought problems. Furthermore, the German zoning laws are a distance component which American retailers have to face with.
The two warehouses that Wal-Mart had in Germany, located in the western part, were almost 500 kilometres away from its eastern and southern stores, which made managing very hard and complicated. The German zoning laws required that Wal-Mart’s huge stores’ impact had to be assessed. This made Wal-Mart unable to expand rapidly and because the relatively small size of its German stores negatively influenced its operating costs, it ultimately affected Wal-Mart’s FSAs in a negative way, because (in combination with other restrictions) it could not keep up its ability to keep the prices as low as possible for customers.
Did Wal-Mart overestimate the transferability of its FSAs? Yes, they have. A nice example of their attitude towards expanding to Germany has been given by Beth Keck, an international spokeswoman for Wal-Mart: ‘Germany was a good example of that naivete… We literally bought the two chains and said, “Hey, we are in Germany, isn’t it great? ”’. Wal-Mart had took for granted that their success formula would also work in Germany, because it worked everywhere. However, they had not studied the German economy and laws as intensive as they should have.
Had they done this, then they would have known that their EDLP philosophy was very hard to transfer to Germany, because of certain rules and regulations such as zoning laws, limited store hours and fair trading and antitrust laws. Furthermore, they could have foreseen that the distance between their headquarters and their stores would be a problem. Wal-Mart took their strategy for granted, but it could have saved them a lot of trouble if they had studies Germany much better than they have.
Can you provide an update on Wal-Mart’s international expansion, using materials available on the Web? In August 2007, Wal-Mart achieved an agreement on establishing a joint venture with Bharti Enterprises, which would be called Bharti Wal-Mart Private Limited, for back-end supply chain management and cash-and-carry operations in India. The first store opened in May 2009, there are currently 7 stores in India. In December 2005, Wal-Mart acquired a majority interest in Seiyu, Japan, making it a Wal-Mart subsidiary, after they had already acquired a 6. % stake in May of 2002. This stake was increased from 50. 9% tot 95. 1% in December 2007 and, after acquiring the remaining shares, Seiyu became a wholly owned subsidiary in June 2008. Furthermore, Wal-Mart acquired a majority stake in Distribucion y Servicio D&S S. A. , Chile’s leading food retailer, in January 2009. D&S has over 34,500 associates, more than 180 stores, 10 shopping centres and 85 PRESTO financial services branches. ~ Sources: http://walmartstores. com/AboutUs/246. aspx http://en. wikipedia. org/wiki/Walmart