By Charmaine Chen We Lin, University of Ballarat
Executive SummaryWith growth stalling in the United States in the early 2000s, Wal-Mart Stores Inc. is looking to international expansion for growth (Daniels et. al., 2007, p.298). Wal-Mart eyes for Japan - the second-largest and one of the wealthiest economies in the world, with a GDP of $3.15 trillion and per capita GDP of about $25,000 (Hodgetts et. al., 2006, p.229). Wal-Mart's business model is based on selling a wide variety of general merchandise and marketing, at “always low prices” (Wal-Mart, 2006). However, competition in the Japanese market is extremely tough and Wal-Mart finds that its strategies and business models, which worked in the United States and other countries, are not suitable in the Japanese market. Wal-Mart faces obstacles in replicating certain strategies – such as bypassing the intricate strings of distributors, trying to attract and convince Japanese customers that it offers good quality products at low prices, and implementing the “Smart System” (Wal-Mart’s in-store computer system). In order to survive in the Japanese market, there is a need for Wal-Mart to better understand the cultural nuances in Japan, in order to come up with more detailed, tailored and flexible approaches. This paper explores the important role of “culture” in international management by looking at Wal-Mart’s foray into the Japanese market – the successes and failures of its strategies.
1.0 IntroductionInternational expansion is a double-edged sword. Successful international business operations bring a great deal of profits to multinational corporations (MNCs). Failed international ventures, however, can be very costly. An important aspect that MNCs need to consider in international management is the role of “culture” – how culture affects the success of international expansion, and how it determines what can or cannot be done in international business. This paper first examines relevant case studies of international business operations, the background of Wal-Mart Stores Inc. and the meaning of culture as it applies to international management. This paper also looks at how differences between the “national culture” of Japan and the “organisational culture” of Wal-Mart Stores Inc. impact the performance of Wal-Mart in Japan, and affect the efficacy of its expansion strategies.
2.0 Literature reviewA case study of several American fast-food franchises in Brazil by Risner (2001) found that success for the franchise brand is a result of “consumer acceptance” of the product, which is “determined by how strategically the company integrates itself into the habits and lifestyle of Brazil”. Winning the patronage of the Brazilian is achieved by marketing strategies “sensitive to their perceived needs of what is a unique and quality product offering
[1]” (Risner, 2001, p.95). In Mexico, for instance, Wal-Mart uses the same trademark “everyday low price” strategy it uses in the United States (focusing on low, non-promotional prices and comparing its prices to those of the leading nearby competitors); but the retailer has also done “extensive local market research”, and as a result, Wal-Mart prices only the “most notable products” below those of its key competitors (Bartlett et. al., 2008, p.196). Sensitivity towards local culture is alson exemplified by J.C. Penney in its entry into the Brazilian market. J.C. Penney bought Lojas Renner; a family-run regional department store chain. But rather then turning Lojas Renner into just another J.C. Penney outpost, the company kept things local (McFarlin and Sweeney, 2006, p.291). By comparison, Wal-Mart (in Japan) seems to be less willing to project a local image or rely on local expertise when operating abroad. Critics suggest that Wal-Mart has a “headquarters knows best” mentality and “lacks sufficient international business experience in its top management ranks” (McFarlin and Sweeney, 2006, p.291).
3.0 Background of Wal-Mart Stores Inc.[1] According to Risner (2001, p. 96), care must be taken when it comes to expanding abroad because for instance, although (in her study) Brazilians are fond of foreign products, a “foreign name brand does not instantly win customer loyalty”.
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