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Walmart’s Expansion in Africa: a New Exploration Strategy

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The mission statement for Walmart is a simple statement to focus on consumer needs. “We save people money so they can live better. If we work together, we’ll lower the cost of living for everyone we’ll give the world an opportunity to see what it is like to save and have a better life”(Walton S.)
Walmart’s company culture includes a list of values and beliefs it establishes through its management and employee relations. The company’s marketing efforts are to establish awareness that they are the price leaders in their market. In recent times, the company has focus on becoming involved more in local communities by charity and service.
With the general instability of the global economy, corporations like to play it safe; Walmart is an example of a multinational which is making a bold move. Acquiring South African grocery chain Massmart offered Walmart a safe foothold to prepare for the next step, which is continental expansion. South Africa is arguably the most westernized country in Africa. Western companies in general perceive it as easier to do business there than in other African nations.

The SWOT analysis of Walmart shows that the company can have higher long-term success potential through aggressive global expansion, especially in retail markets in developing countries.
Walmart’s strengths are all related to the size of its business. These strengths enable the company to withstand threats despite its weaknesses. Walmart’s strengths for further global growth are:
• Huge and loyal customer base
• Global organizational size
• Strong employee base
• Strong financial position
• Low price strategy, special buy and roll back strategy
• Power brand in retail industry
• Core competencies includes high efficiency of information technology, global supply chain and inventory
• Huge market share in USA

Walmart’s global organizational size gives the firm deep pockets to fund growth and expansion. The global supply chain also provides business resilience from market-specific risks. In addition, Walmart’s supply chain has high efficiency because of advanced technologies for monitoring and controlling the movement of products from suppliers to its stores.


Walmart’s weaknesses impose challenges on the firm’s ability to withstand threats also identified in this SWOT analysis. These weaknesses are directly related to the company’s generic strategy. Walmart uses the cost leadership generic strategy, which leads to the following weaknesses:

• Complains regarding products quality
• Product recall
• Thin profit margins
• In the past Walmart was criticized for pressurizing the employee Union
• Easily copied business model
Thin profit margins are a typical effect of using the cost leadership strategy. Because Walmart minimizes selling prices, it also needs to minimize profit margins and rely more on sales volume. The cost leadership strategy also makes Walmart’s business model easy to copy. The firm does not have significant competitive differentiators, except for its business size.

Walmart’s opportunities are mainly about expansion and improving business practices. These opportunities are linked to the global economic situation. Also, the human resources situation in the organization presents issues that are actually opportunities for the firm to improve. In this portion of the SWOT analysis, Walmart’s opportunities are:
• Massive growth of the African’s population
• Increased consumer spending
• Expand brand portfolio
• Green initiatives
• Contribute to corporate social responsibility
• Improvement in human resource practices
• Expansion in existing domestic and international markets
• Improvement in quality standards, inhabitants welcome the store concept: high quality and packaged

Walmart’s opportunity to expand in developing countries is based on their high-growth economic condition. On the other hand, the opportunities on HR practices directly relate to the criticisms on the company’s employment practices. Walmart’s opportunity to improve quality standards addresses consumers’ concerns on the health effects of using low-cost and sometimes low-quality products.

The threats to Walmart’s business are linked to the retail market condition and the changes on consumer perceptions about the products they buy. These factors should compel the company to make some competitive strategic changes. In the context of this SWOT analysis, the threats to Walmart are:
• Government regulation in different countries
• Employee Union
• Facing strong and aggressive competition
• Healthy lifestyle trend
• Infrastructural barriers and cultural differences in consumer behavior, preferences
• Slow expansion in Africa

The healthy lifestyle trend is a threat and an opportunity. It threatens Walmart’s business because most of the company’s goods are not healthful, organic or natural. It is an opportunity for Walmart to improve its quality standards. However, this factor is more of a threat because the firm currently does not prioritize healthful products in its stores. Aggressive competition is a threat because other large retailers could use aggressive marketing and strategies to capture some of Walmart’s customers.


Ever since the 2008 global economic crisis, Walmart began to rely more heavily on international markets. In fact, according to estimates by Forbes, its international segment is currently contributing about 40 percent to the company’s stock price.
Walmart has a focus on growing its return on investments through development of gross margin improvements, inventory management, and disciplined capital allocation processes. The company has developed ways to increase labor productivity by its associates which helps to leverage the operating expenses. It has also achieved strong sales and gaining market share in many countries by using innovation combined with its competitive advantages.

Massive growth of the African’s population and increased customer spending made Africa to gain attraction of the leading business with its strong economic growth in the recent years, for Walmart the African’s growth was an opportunity to expand by acquiring 51 percent of South Africa´s Massmart for about $2.4 billion. When the company’s Chief Executive Grant Pattinson presented Massmart´s first-half results for 2013, he made the company’s intentions very clear; “we want to slightly shift our focus away from South Africa and put more resources into African growth.” (Pattinson G.)
As it did with the acquisition of a majority stake in Massmart, Walmart is pursuing the same strategy across the continent, trying to gain control over successful local retailers in growth economies.

Facing strong and aggressive competition as Shoprite´s fear appears metaphorically clear when one considers that the retail chain is dreading competition from a store that dedicates only 250 square meters to perishable food products, while it boasts 5683 square meters of food aisles in the same location, enforcing exclusivity clauses to prevent Massmart from competing against them. In its application to the Court, Shoprite claimed that it would “lose sales and suffer financial loss if Game is permitted to trade as a general supermarket and grocery store, as well as a liquor store, at the center”( Sarita von Wyk ). The court ruling, which came out in late October was in favor of Shoprite. While the GAME-store court-ruling was a battle won for Shoprite, it seems that the company is well aware that no matter how many stores it may run all over the region, Massmart´s Walmart-style aggressive expansion is going to be very hard, if not impossible, to stop.

Contribute to corporate social responsibility, Improvement in human resource practices as the company is seen as “green,” donates to struggling populations of people such as the hungry and victims of natural disasters, uses cheap advertisements for their products to key demographics, and has special promotions and sales such as back-to-school shopping, Black Friday, and Holidays gift ideas. Some opportunities that can improve Walmart’s weaknesses, Healthy lifestyle trend, Slow expansion in Africa are creating alliances or buying out other companies that they may be in competition with. Creating an alliance could be beneficial in keeping low prices between two companies so prices are not increased. Acquiring a company completely could eliminate the idea of prices being increased and be more profitable because more customers would be brought to Walmart.

Green initiatives, Walmart currently has 3 environmental goals to be supplied 100 percent by renewable energy, to create zero waste, to sell products that sustain people and the environment (, 2010).
Walmart recognizes the importance of integrity and keeping a good reputation. Some key strategies include “developing the people, driving the productivity loop, winning in global ecommerce, reinvigorating customer focused culture, and leading on social and environmental issues” (2012 Annual Report).



1. Detail the growth of Walmart and its international experience
Walmart key focus was the customer satisfaction, relied on three principles: respect for the individual, service to customers and to strive for excellence. As part of their customer centric initiatives Walmart had set up a unique pricing strategy. They would offer customers their daily needs at the lowest price possible. The Everyday low price strategy, special buys and roll back policies contributed to Walmart’s growth in the United States. In addition Walmart had also implemented “special Buy” and “Roll Back” policies and operated different concept of store formats as discount stores, supercenters, neighborhood markets and market side to meet the varied needs of its customers (Exhibit I.) In the same time Walmart practiced constant cost reduction due to direct purchasing, optimized logistic, distribution and communication via satellite, internet.
Subsequent to the economic recession in the U.S. during the early 90s and with an aim to expand their business, Walmart had ventured into international markets. As initial step, Walmart concentrated on neighboring countries like Mexico, Canada, Brazil and Argentina.
Walmart used different entry strategies depending on which region they were looking to do business in. The success of Walmex in Mexico was due partly because of the similarity of customer interest. Mexico customers enjoyed Walmart’s business model and the same strategy was implemented in Canada, Brazil and Argentina. Although localization strategies were still applied, they virtually had the same interests concerning pricing strategies and demand of products. Where Walmart faced challenges were countries in Asia, such as Japan and China. In China, not only was culture an issue, but also language and major local changes would have to be made. They would further face stiff competition from other retailers. Importantly, in Japan the low- price strategy was not attractive to consumers because they linked with low quality and in China, the Chinese government restricted the number of stores to be operated by foreign retailers. Moving forward in conquering new foreign markets, Walmart experienced the success in UK and major failure in Korea and Germany as the Germany government restricted retailers selling products below cost on permanent basis. For Walmart it was difficult to be successful in countries with totally different culture and with language barrier to attract customers.

2. Describe the growth strategies of Massmart in the African continent
Walmart, the world’s largest corporation, had corned the African continent to utilize the emerging opportunities there, in this respect Walmart had chosen Massmart, another retail giant (263 stores in south Africa and 25 stores in other African countries)in Africa as a route to enter the African continent, especially in the sub-Saharan countries as expansion business scope. Due to the labor unions fear that Walmart will not respect the African’s employees’ rights and keeping their jobs, the deal between Walmart and Massmart was finalized for $2.32 billion representing 51% stake, keeping valid Walmart strategic advantage to gain access to the African retail market.
3. Detail Walmart’s acquisition of Massmart and the expected strategic advantages
South African antitrust authorities approved Wal-Mart Stores Inc.’s 16.5 billion rand ($2.4 billion) takeover of Massmart Holdings Ltd. with the same conditions proposed by the retailers, angering labor unions. “This was a very important test case” for foreign direct investment into South Africa, “All this will go to show whilst South Africa is open for business, the costs and difficulties of investing are great.”( Attard Montalto P.)
South Africa's Competition Commission approved Walmart's proposed acquisition of a 51% stake in Massmart, a South African firm that owns 265 wholesale and retail stores in South Africa and 25 more in 13 other African countries. Massmart's shareholders love the 16.5 billion rand ($2.4billion) deal.Despite retail and consumer products companies’ almost single-minded focus on operational efficiency, there is also a mood of cautious optimism as they continue to seek growth opportunities in new areas, both in South Africa and across Africa. Opportunities identified include attracting informal trade at the lower end of the market into the formal retail sector and capitalizing on the opportunities presented by the country’s steadily expanding black middle class. In contrast, online retailing will remain a niche proposition for the medium term, although is expect to see growth accelerate as Internet access reaches critical mass.
According to Business Monitor International, South Africa’s retail economy will grow by 50% in the next years.
4. Analyze the challenges Walmart will have to face in the African continent
The US$2.4 million (16.5 million ZAR) takeover was agreed upon with a few conditions. For the next two years, there will be no job cuts at Massmart, and local union labor agreements must stay in place for the next three years. There is also a stipulation that any new hires should come from a pool of 503 Massmart workers laid off in the last two years. In addition, the companies will establish a US$14.9 million supplier development fund to help local suppliers compete in the global market.
“All this will go to show while South Africa is open for business, the costs and difficulties of investing are great.” (Attard Montalto P.)
Wal-Mart’s plan for Africa is not without its critics. There are concerns, firstly, about job creation and the survival of small local retail. “Massmart’s growth has been fueled by acquiring independent retailers. The international retailers aren’t there but there’s a strong local retail industry. We expect Wal-Mart to grow but not retail employment to grow.” (Jacobs K.)
Broad mix of people shop at Wal-Mart but people who make more money spend more money. In other words, the cost savings of stores like Walmart will more likely benefit middle-class Africans. However, has not been enough research on what Wal-Mart’s impact is on communities in emerging economies.
Considering the delivery from South Africa to other African countries, Walmart could face challenges at border posts, due to inefficient rail and airline services, poor road infrastructure, high vehicle maintenance costs
5. What happened to Walmart’s operations after taking a 51% share in Massmart in 2011?
Walmart’s entry into the African market would enhance their business and revenue as after taking 51% share, Walmart operations in the African continent through Massmart joint venture will facilitate sourcing and maintain continuous retail supply chain management, will increase its outlets to 20 from 1 in a span of two years, helping Walmart’s revenue growth. Walmart’s should expect that the expansion will not happen too fast, due to cultural and infrastructural barriers.
This SWOT analysis shows that Walmart must prioritize using its strengths to exploit opportunities in the global retail market. The company’s weaknesses and threats should be secondary priorities. There are a few recommendations to help the company expand, reduce liability, maintain reputation, and decrease social backlash.
Walmart should improve its brand image as it operates low-quality products at a much affordable price than its competitors. The company should inherit more brands that are established in quality rather than grow its own brands through acquisitions. Profit maximization is hurting the retail giant’s image, yet improving profits year after year. The company has made a great leap into electronics sector and must compete with consumer electronic business leader, Best Buy. The company also faces backlash through community groups, unions, lawsuits from employees, and environmental groups. Walmart should participate in more local community events by sponsoring reputable non-profits in each of its locations.
By connecting to local schools, the company can regain trust in parents, the next generation of shoppers, and community activist that may have an unfavorable review of them.
Walmart has been accused of hurting small businesses and disrupting the markets in many small town communities. This lowers purchasing power of the community, although as the price leader approach appears to save customers money to live better. Small businesses can employ more workers and in return they will shop at Walmart with higher purchasing power. Walmart should help empower small business, not to compete against them, but to provide whole sale options and support to help them succeed. With proper distribution to other small business as a supplier, Walmart can help the small businesses to grow and still generate revenue. (McCormack 2010).
Walmart can improve its HR management standards and product quality standards to improve firm performance. Also, the company must continue expanding its business to exploit economic opportunities in developing markets. Walmart’s strengths based on its global organizational size, global supply chain, and high efficiency of the supply chain can support aggressive global expansion in the foreign markets.
Walmart should create and accept unions, rather than their simple “comprehensive benefits package.” The lack of unions is one of this company’s weaknesses. A union would provide better health benefits, pension plans, workers compensation and increase pay. The package that this company currently provides includes is short-term disability insurance, free counseling and health information service, quit tobacco program, and critical illness insurance. The plan does some have benefits, but does not provide nearly as much as a union would.

Sam Walton stated, “I had no vision of the scope of what I would start… but I always had confidence that as long as we did our work well and were good to our customers, there would be no limit for us.” (Walton S.).
South African retailers such as Shoprite, Pick 'n' Pay, Spar and Woolworths are highly sophisticated and offer a fine array of fresh food, at least in the big cities. But they cannot match Walmart's scale, global sourcing network or logistical brilliance. So there is a chance that Walmart will reduce prices so much that it affects the national inflation rate, as it has in America.
Wal-Mart, and other international companies, wants to benefit from a continent poised for dynamic growth fuelled by a rising young population of workers and consumers and global demand for its commodities, an idea known as 'Africa Rising'.
Much of Wal-Mart’s success in Africa will ultimately depend on their market strategy and ability to overcome logistical hurdles (Tonder V.) It will depend on where they position themselves in the consumer market.

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