Errata for Instructor’s Manual Chapter 12 – The Strategy of International Business
Hill, International Business, 7th Edition

CLOSING CASE: Wal-Mart’s Global Expansion

Summary

The closing case describes Wal-Mart’s international expansion strategy. Wal-Mart, today the largest retailer in the world, was a purely domestic company until 1991. When the company decided to expand into Mexico, critics warned that the company was too American, that its model would not work in other where markets where infrastructure, consumer tastes and preferences vary, and where established retailers already dominated. Wal-Mart went ahead with its expansion plans anyway, opening a joint venture operation in Mexico with local retailer Cifera. Discussion of the closing can revolve around the following questions:

QUESTION1: How does expanding internationally benefit Wal-Mart?

ANSWER 1: Wal-Mart really had no choice but to expand internationally if the company was to continue to grow. The company had reached a saturation point in the U.S. market, and needed to expand elsewhere in order to grow revenues. However, other benefits have accrued as a result of the international expansion including the ability to reap significant economies of scale from its global buying power, and gains from the cross-flow of ideas across the thirteen countries in which the company now competes.

QUESTION 2: What are the risks that Wal-Mart faces when entering other retail markets? How can these risks be mitigated?

ANSWER 2: While Wal-Mart is often considered to be the biggest retailer of its kind, competition is strong in foreign markets. Carrefour, for example, generates more than half its profits outside France. Wal-Mart has to be careful not to alienate customers or it will risk losing them to one of the other major hypermarket chains. Wal-Mart also has find just the right balance