Question

You work as an analyst in the planning unit of a firm with international operations. From time to time, you might be called to a meeting to discuss certain aspects of international business. As you state your responses to the Discussion Board questions, assume that you are in a formal, management discussion. Your manager has asked that you state your sources when citing facts or important concepts, for good order.

Question 2: You are in a meeting to try to understand what it takes to enter new markets. What lessons can be learned from Walmart's experience in Mexico (refer to article below)? Specifically what were the basic mistakes Walmart management committed early on and what can be learned in terms of entering a market?

http://www.wright.edu/~tdung/Walmart_in_mexico.html (Links to an external site.)Links to an external site.

Answer 1

A business organization would like to foray and venture into one or more abroad/ international markets, once it has established itself firmly and successfully in its own home market. The stability of the business, brand awareness, loyal customer base, and stupendous sales figures give the company enough confidence to take on the challenges that an international exposure and venture may bring in.

But apart from unknown threats, a new market may also have new competitors, a different culture, different kind of customer aspirations related to products and services, different regulations and economic scenario, varying infrastructure, and other aspects. These should be fully and carefully considered and evaluated so that the risk of failures is reduced and that of success is enhanced. A business organization that wants to be successful in foreign markets need to identify the entry points, formulate and implement a proper and well research marketing strategy, and should also make the right collaborations (such as franchisees, partnership, and others) so that the probability of success increases. A business should:

1. conduct the analysis of market segments.
2. undertake the “gap analysis” of products/ services while comparing them with the local offerings.
3. undertake the SWOT analysis in lieu of the competition.
4. develop requisite business strategies.
5. review the government policies/ patent/ trademark/ Quality Assurance benchmarks as per the local regulations and standards, and
6. should also consider, evaluate and reframe (if required) distribution and logistics framework/ network (Day and Evans).

While Walmart is today a preferred brand in Mexico and operated more than 2411 stores in the year 2017) (Statista), the company did make many blunders while entering the Mexican market. Some of the mistakes are given below.

Not understanding the market needs

The first and initial Walmart stores in Mexico had a number of items that were not/rarely used by Mexicans. Some of these items included fishing tackle, the riding lawn mower, ice skates and others.

The lesson here is that the market analysis should be complete and the customer wishes, needs, and aspiration should be fully assessed before a product or service is offered to them.

A supply and distribution system not overhauled for the Mexican market

When the managers of Mexican stores of Walmart tried to get rid of the unwanted items by selling them on heavy discounts, the “automatic” assistant ordered fresh batches of these products. Subsequently, a new batch of unwanted and undesired items was supplied by the BentoWilly corporate headquarters of Walmart. A vicious cycle of loss and failure occurred until the issue was specifically addressed. There were also other logistical problems that Walmart had to face in Mexico until it found out some good allies ( including Transportes EASO SA),

We can learn that it is important to frame and optimize the distribution and supply chain so that it can address the specific needs and conditions of a particular market, and not go by general assumptions.

Partnerships that were treated like an unwanted appendage

Walmart failed to give due importance to its new partners like Cifra. The company did not share any technological resources and knowledge with the new partner, and also did not allow it to take advantage of its global buying power.

What we can infer is that suitable partnerships should be held. The collaboration should be sustainable and beneficial to either of the partners and either partner should get the advantage of the resources and expertise of the partnering firm. Success and beneficial results can only be attained through a trustworthy partnership that is created for an optimal timeframe and is symbiotic in nature.

Cultural problems

Cultural aspects of an international venture may include the religious language, norms, and others (Kilsguard et al). Walmart acquired Cifra but the executives of the company had a formal culture of working and professionalism that was different from the culture of Walmart. There were cultural clashes, which included the refusal of the new Cifra executives to go out for the “hunting” recreations when invited by Walmart management.

Again, we can see that how important it can be for a company to fully understand the culture, economy, and other aspects of the international market where it expects to be successful.

Walmart was able to win the Mexico market because of its anonymous buying power, cheap labor (available In Mexico), and other factors. All other aspects that the company did not take into account while making the foray caused problems later on. It is hence important to undergo each step of analysis/scrutiny and to evaluate all the factors relating to an international market foray before actually entering it.

References:

1. Day, Dennis and Michael Evans. “10 Key Steps To Expanding Your Business Globally”.4 mar. 2015,Retrieved from < www.forbes.com/sites/allbusiness/2015/03/04/10-key-steps-to-expanding-your-business-globally/#7af23ce63803 >
2. Kilsgurad, David et al. “Cultural differences when entering a new market”. Kristianstad University. 2008. Retrieved from <http://www.diva-portal.org/smash/get/diva2:231290/FULLTEXT01.pdf >