From Bentonville to Guangdong - How Walmart can leverage its key strengths to succeed internationally
by Matt De Paolo, MBA ‘14 (3/11/14)
Getting the real scope with Beth Keck, Senior Director of Walmart's Global Women's Economic Empowerment, on international expansion
- An Interview with Beth Keck, Senior Director of Walmart's Global Women's Economic Empowerment, October 18, 2103
Walmart has encountered a number of successes and a few failures in its international expansions. What lessons have been learned by these experiences?
Walmart has learned to identify partnerships whose cultures already have an element of Sam Walton’s philosophy embedded in their DNA and to adapt to the local retail environment. This lesson was driven home by the company’s experience in Germany, one of the company’s early international expansions. We focused on our traditional hypermarket format in a country where customers preferred hard discount retail. On the other hand, our MassMart partnership in South Africa has thrived because there was more cultural compatibility between our companies from the outset and we embraced a multi-format approach.
Each country is different and may require a unique retail solution. For example, we found that going into the back-end instead of the front-end of retailing offered better chances for market entry in India. In China, a more traditional hypermarket format has been a good fit. Our experience in Germany also taught us not to change the brand after and acquisition. Local retailers have developed an amount of brand loyalty that should not be sacrificed if at all possible.
Are there any additional lessons that have been learned?
Yes, let’s use our Indian expansion as an example where we involved a multi-disciplinary team for the market entry. Our team included our M&A International Corporate Affairs teams from Bentonville, merchants from other markets where we had operations, and Global Procurement which had an office in Bangalore. The idea was to leverage Walmart’s existing resources, and to create ad-hoc teams as required. . We also brought in expertise in such areas as government affairs and public relations which requires local knowledge. In addition to doing the business due diligence required for a market entry, we also worked to get out our messages about the benefit that Walmart could offer to the Indian market. We published White Papers highlighting the social benefits of improved farming and supply chain management to Indian consumers. We also leveraged the positive testimonies of Indian suppliers about the company’s business practices. These businesses had been exporting to Walmart and their advocacy was helpful in sharing our story.
Generally speaking, what effect does a Walmart expansion have on foreign retail markets?
On the whole, the effect can be very positive. There are a number of benefits that Walmart brings to markets that are dominated by retailers operating in the informal sector. The informal sector by nature operates outside of that country’s regulations, which means employees may not enjoy the structured benefits and opportunity for advancement that are made available to the formal sector. Companies operating in the formal sector pay taxes, while those in the informal sector may not. Additionally, the supply chain of the informal sector is significantly less efficient than that of a company operating in the formal sector. This often limits the quality and availability of products to the end consumer in that market.
Walmart can also offer its suppliers access to international markets that informal competitors cannot. A good example is our distribution of a South African wine known as Seven Sisters. The product did very well throughout our MassMart outlets and is now sold by Walmart stores in the United States.
Does Walmart bring best practices refined in its international operations back to its core market in the United States?
All the time. Our UK operation had a very strong apparel business. The George brand was well designed and has been made available around the world. Our attitude is to obtain excellence in one product line and leverage it throughout the organization if it is relevant to our customers in those markets. We also strive to source as close to the farmer as practical. The first step is for our supplier development team to explore how to structure more direct relationships and remove inefficient intermediaries. This allows for more efficient communication between retailer and supplier regarding quantity and quality. The result is that food loss from supplier to consumer is reduced, customers benefit from fresher food and farmers benefit from steady market access. This best practice was developed in Central America.
From your perspective, where do Walmart’s greatest opportunities lie in the coming decade?
Our company is ideally situated to build upon the success it has achieved, by continuing to promote advances in smallholder agriculture, women’s empowerment, healthy living, and hunger alleviation. By emphasizing such values throughout our operations, we believe we can position our company at the intersection between profit and the social issues of the day.
As the largest retailer in the world, Walmart has unparalleled capability to positively impact the communities in which it operates. This is why we have chosen to make public commitments. It holds us accountable. Our corporate social responsibility resonates in the developing world, in particular.