382第一次文章
382第一次文章
382第一次文章
1. Introduction
After realizing the limitation for growth in western countries, the US multinational
retail giant Wal-Mart seeks to expand its business in some growing but under-served
emerging market region such as Africa. Then, Wal-Mart chose South Africa as its
stepping stone to open up Africa market. Accordingly, Wal-mart decided to enter into
South Africa through the process of joint venture, offered to buy 51% of South
African retail giant Massmart Holdings Ltd (Bernhardt 2011). However, there is
This essay is written to analyze Wal-Mart’s business operation in South Africa which
introducing detailed screening approach required for market in South Africa and
adaption in business strategy, analyzing the pros and cons of Wal-mart’s strategy of
entering into a joint venture with Massmart, and finally listing the actions that should
Although the developing market possesses huge retail opportunities, entering into
challenges.
Firstly, one of the inevitable challenges that Wal-Mart will face in the early stage of
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the process of its entry is that how to manage relationships with stakeholders in South
entry into South Africa were negative because of Wal-Mart’s bad reputation for
squeezing out margins from suppliers and being anti-union and aggressive in dealing
with staff and competitors. These stakeholders’ motives and roles are listed in the
Figure1.
entry permission in South Africa (Bernhardt 2011). For instance, South Africa merger
regulation requires all large mergers, such as the merger between Wal-Mart and
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Commission assess the merger, it must make a recommendation to the Competition
Tribunal to ask for approval for the merger. However, it is difficult for Wal-Mart to
participation in the retail sector intensified the hindrance of Wal-Mart gaining entry
permission (Andile 2010). More seriously, with trade liberalization slowing or even
response to the economic recession on the impact of industry and employment has
There are many indicators which influence Wal-Mart considering choose South Africa
market for its maiden foray into the Africa market. Compared to Asian and South
American countries, South Africa is much less attractive to global retailers. However,
the South African market has its uniqueness and offers a relatively stable gateway to
the African continent (CORIOL ISRESEARCH 2001). From the Figure 2, the detailed
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Figure 2: Regional supermarket retailing overview (CORIOL ISRESEARCH 2001)
Firstly, from a population perspective even though the population of South Africa is
relatively small, Wal-Mart could benefit from the dynamic fueled by growing young
2015).
Secondly, by graphing the results, the retail food sales through supermarkets in
developed countries has been up to around 80% and there are also large number of
such as South Africa can offer better investment opportunities for international
retailers as there is so much potential space for South African retail trade, and the
However, the high unemployment level and local suppliers protection in South Africa
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have brought Wal-Mart many social pressures ( Bride 2011). Most South African
brands, products and tastes are still national and most food sales occur outside
time-consuming logistic and poor traffic infrastructure will influence the development
of Wal-Mart ( Brown 2010). But it also denotes opportunities for Wal-Mart as it can
differentiate Wal-Mart from local competitors for its advanced procurement processes
Actually, through the detailed screening, Wal-Mart has recognized the considerable
interest on entering into Africa market. South Africa has been growing to be an
important emerging economies in the world trade and could also be used as the
markets, Wal-Mart finally decided to make joint venture with South African retail
giant Massmart (Bernhardt 2011). Actually, Wal-Mart has tried a variety of strategies
to enter international markets, as can be seen in Figure2, the major entry mode of
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Figure 3: Walmart International Activities (CORIOL ISRESEARCH 2001)
Considering South Africa was geographically and culturally too distant to Wal-Mart.
Using other kinds of entry mode such like exporting or license may not benefit
Wal-Mart, it may even cause Wal-Mart losing sufficient control to its assets and
consistency of brand image. However, it does not mean that Wal-Mart always gains
success from joint venture and acquisition entry mode. Wal-Mart has once failed in
acquisition (Bride 2011). Therefore, determining entry mode is very important, but the
timing and method of entry are important as well. Entering a new market as early as
possible or wait for first mover is quite different. As Wal-Mart's influence in South
Africa is relatively small, it is important for Wal-Mart to enter South Africa at an early
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choice for Wal-Mart. Once Wal-Mart has localized itself well and built a good
relationship with South African stakeholders, it can completely merge the partners to
Pros
Picking Massmart as its joint venture partner can bring many advantages to Wal-Mart
Africa and its African Operations have done extremely well. It possesses the
experience and knowledge of doing business in South Africa which can be able to
help Wal-Mart reduce the likelihood of being trapped with indigenous cultural and
Secondly, Massmart and Wal-Mart are similar in their store formats. It is considered
to be the most natural fit for Wal-Mart amongst South Africa. Therefore, it will cut
Thirdly, facing the unfamiliar markets, right partner’ insights can give much guidance
terms of dealing with political and legal environment. It will help Wal-mart to manage
Cons
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There are also existing disadvantages for Wal-Mart establishing joint venture with
Massmart.
subsidiary, it will gain more revenue without having to share with partner.
venture with Massmart was negative. In order to establish joint venture with
Massmart, Wal-Mart had made many compromises to the stakeholders and operating
business based on a number of conditions. The coalition against the merger kept
2.5. The measures to ease the tensions between the company and the
As can be observed above, Wal-Mart has a very tense relationship with South African
Firstly, Wal-Mart needs to ease its labor relations as there was a coalition of key
stakeholders especially government and trade union against its bid because of its poor
labour practice. South Africa has been facing pressure from unemployment crisis, so
they have raised their concerns over fear of job losses. Wal-Mart should make
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guarantees that there will be no job cuts in the near future and promise enhancing
Secondly, the motives of the South African government against the merger between
Wal-Mart and Massmart are mainly to protect local suppliers. They have raised
concerns that Wal-Mart’s buying power would lead it to shift to imports, hurting the
commit to buy certain volumes in South Africa and ensure that some procurement
Wal-Mart. Wal-Mart can use its strengths to help South Africa's economic
protect the environment such as adopting recycle materials as package and focus on
waste-related issue. Because developing countries will ignore the protection of the
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3. Conclusion
In conclusion, the process of Wal-Mart gain entry permission into South Africa is
complex. As these developing countries generally face huge social challenges, high
levels of activism around social issues usually abound. Firms entering these markets,
therefore, face the challenge of understanding and engaging with various stakeholders
( Bonakele 2011). It is vital for Wal-Mart to build a good relationship with South
African stakeholders and taking effective measures to alleviate conflicts with South
African stakeholders.
offering and opportunity that benefit locals and local suppliers. However, objection
parties still argued with concerns of detrimental effect of this joint venture, such as
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Reference
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Bride, M 2011, “Wal-Mart: juggernaut or job creator?”, Cape Times, vol.1, no.1, p.9
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Brown, J 2010, “inside retail Wal-Mart faces tough challenges in SA market: Business
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