Walmart's Africa expansion, Ivey Publishing Challenges at Home Criticized for - Its low wages for employees Unethical pressure on suppliers Difficult for the company to keep labor costs low – Increasing cost of living Rising health care costs Not successful in urban compared to rural – Tough to acquire large spaces If available, property values were much higher

1. WALMART’S AFRICAN
EXPANSION
Section 2
Group 9
Saurabh Arora DM18246
Sharon Sravya DM18247
Shivam Shukla DM18248
Shreeja Thirunarayanan DM18249
Soumika Das DM18250

2. COMPANY BACKGROUND
1962
• Sam Walton founded Walmart.
• Goal – “lowest prices, anytime, anywhere”
1970
• Became a publicly traded company listen on NY Stock Exchange.
1980
• Reached $1 billion annual sales
1997
• Achieved $100 billion annual sales
2011
• Employed 2.1 billion people
• Annual sales of $400 billion

3. Challenges at Home
• Criticized for -
 Its low wages for employees
 Unethical pressure on suppliers
• Difficult for the company to keep labor costs low –
 Increasing cost of living
 Rising health care costs
• Not successful in urban compared to rural –
 Tough to acquire large spaces
 If available, property values were much higher

4. International Expansion
1991
• JV with Mexican Retail company ‘Cifra’
• Later purchased major stake in 1997
1994
• Acquired Canadian retail chain Woolco
1996
• Purchased 35% stake in China’s Trust-Mart
1997
• Purchased 2 German retail chains – Wertkauf and Interspar
• Exited after facing difficulties with supplier networks in 2006

5. Country analysis - SA
• Dutch colonized in 1650’s
• Birtish conquered in 1800’s
• Racial segregation – Apartheid system
• 1948 – Segregation via Apartheid system enforced by National party
• Apartheid ended in 1994
• Population 52 Million
• 80% People Black, 9% coloured or White
• 11 Official languages, only 10% spoke English
• GDP - $11400 in 2011, 64th in World
• ½ Population Below poverty
• ¼ Population Unemployed

6. Country Analysis(Cont…)
• Free Education, only 8% no education - But, skills shortage
• Affected by HIV/Aids, 17.8% , Most deaths in the world due to
HIV/Aids
• Modern infra, well developed legal and communications
• Good financial system and Forex.
• Highly supportive of Ubuntu
• More mobile phone connects than the number of people
• Has no restrictions to foreign trade
• South African competition Act
• Power of Unions – Cousta
• No Minimum wages
• Emergence of Black middle class – Urbanization
• People Highly price conscious very less loyal

7. Porter’s 5 Forces
Bargaining Power of Suppliers
Low
Walmart has the power to demand low prices
Threat of Substitutes
High
Ecommerce
Threat of New Entrants
Low
No deep pockets
Bargaining power of Buyers
High
Walmart promised everyday low price, if
not the consumers will switch
Rivals
Moderate
Rivals not as powerful as
Walmart

8. Cage framework
Evaluating different dimensions to analyze trade interactions
b/w 2 countries – United States and South Africa
Cultural –
• Different languages –
82% people speak English in
US, whereas in SA local
languages are spoken
• Different Religions –
More than 75% of the people
are Protestants or Catholics in
US, in SA most people are
Protestants or other type of
Christians
• Different Race –
80% people are white in US
whereas same percentage of
people are black in SA
Administrative –
• Different currencies –
1 US dollar = 13.4 SA rand
• Common colonizers
• Stable democratic
government in both
countries
Geographic –
• No common border
• Area – US it’s 10 M sq.
km and SA it’s 1.2 M
sq. km
• Climate – In US it’s
temperate and in SA
it’s semiarid
• Distance between
Washington and
Johannesburg is 8000
mi
Economic –
• GDP per capita -
US it’s $50,000 whereas in
SA it’s $11,400
• Unemployment ratio -
In US it’s 9%, in SA it’s 25%
• % of people below
poverty line –
In US it’s 15% and in SA it’s
50%.
• Natural resources –
In US it’s crude oil, coal and
natural gas. In SA it’s gold,
chromium and platinum

9. Eclectic paradigm
A three-tiered framework to determine if it should pursue FDI
Ownership
•51% stake in Massmart will allow Walmart to take decisions independently.
•It can also use existing knowledge, infrastructure and market of Massmart
Location
•South Africa is the only country of Africa in BRICS
•Expected growth of at least 5% in emerging economy
•Were able to appease ‘Cosatu’, one of the largest labor union of South Africa
Internationalization
•SA will be as a spring board into other African markets
•Walmart can have control over its patents, manufacturing processes and quality of its products

10. Five Contexts Framework
• Political and Social Systems –
 SA considered business and financial hub of Africa
 Principal of Interconnectedness
• Openness –
 No restrictions to foreign investment
 Govt. sees foreign investment as an opportunity to stimulate growth
• Product Markets –
 Spending pattern shifted due to emergence of black middle class
 65% of population in urban areas contrary to Walmart’s strategy of opening stores in rural areas
• Labor Markets –
 Market faces shortage of skilled labor
 Extensive unionization in South Africa which is prone to frequent strikes
 Wages are set by collective bargaining agreements
• Capital Markets –
 Financial institutions are very strong in South Africa
 Well developed money, foreign exchange and capital markets relative to rest of Africa

11. Thank You! 