Walmart Inc. has reset its international strategy and concluded that it needs collaborations to capture more markets in the world. Walmart Inc. has been in discussion with hundreds of stores around the world to enter into the new markets globally. Wal-Mart Inc. has been trying to enter into many attractive retail markets such as India, UK, and Brazil. After spending years building its stores in the global markets, Wal-Mart Inc. has gone into a strategic shift and invested millions of dollars in joint ventures, and acquisitions to get higher growth in the competitive markets. Some international activities of Wal-Mart Inc. can be traced to this strategic shift. For instance, after much effort, Wal-Mart Inc. had sold its majority stake in the Brazilian unit to the Advent International. Walmart Inc. still retained a 20% stake in the business which had resulted in the non-cash $4.5 billion loss in the last quarter. It was one attempt to reshape the global footprint of Wal-Mart Inc. after its UK and Indian deals. In the UK market, Walmart Inc., after failing to get a substantial position, has merged its stores with its UK-based competitor, Sainsbury, to focus on other markets.
After the appointment of the CEO, Macmillan, Wal-Mart has stopped building its stores all over the world and focused on spending money in online business, e-commerce startups and for improvement of its current stores. A merger with Sainsbury could result in a retail giant with a revenue stream of more than GBP 50 billion in the UK market. Walmart Inc. has also bought Jet.com for $3.3 billion. Wal-Mart Inc. has shown its willingness to partner with the local powerhouses in the UK for immediate growth and for beating Amazon globally.
In China, the retailer owns 440 stores. Walmart has sold its e-commerce division Yihaodian in China to the company JD.com to get stakes in another Chinese e-commerce company. Wal-Mart Inc. has partnered with several grocery deliveries, distribution and warehousing companies in China. In Japan, Walmart Inc. with 330 of its stores has joined venture with Rakuten Inc., a local online retailer of Japan, which provides retail online deliveries and books globally (Nassauer).
All these strategies are constructed to battle out Amazon in the bigger picture. The company Amazon Inc. has announced to invest $5 billion in India, and it has already rapidly invested against Flipkart in India since Flipkart launched in 2003. Even though Amazon has the benefit of entering the market first, Walmart is still going to give Amazon a tough time. India is considered as the key battleground by Walmart. Walmart Inc. has grown slowly from opening its branded physical retail stores to opening wholesale outlets in hopes of opening open consumer-facing stores. Walmart Inc. has, until now, opened 21 wholesale stores (Best Price) with plans to open more in the future (Boyle).
As it is discussed that Walmart Inc. has reset its global playbook to challenge the supremacy of Amazon in global retail markets, it was not always Walmart main strategy. Walmart Inc., known for a hands-on approach in the US, made huge investments in the international markets. Walmart Inc. has acquired now 80% stake in the Indian Flipkart after $16 Billion investment, which makes it the biggest merger in the history of India as well as in the history of Walmart. Walmart Inc. has dedicated itself to establishing its success in a new market through its traditional approach. However, the Indian merger shows a shift in its international growth strategy. Walmart Inc. is now looking for the best route to enter into a new market. Trial and error have equipped Walmart with experience as it has learned the hard way. Wal-Mart Inc. has abandoned its operations in South Korea and Germany. In India, its last attempt to enter alone had failed as well. WalmartInc. is now cautious of its brand equity and is not imposing Walmart culture everywhere. On the contrary, it is now respecting the local culture by entering into joint ventures with the local companies.
Even though Walmart is following a new strategy which is better than the last one, its shares devalued when the stakes were sold in the UK and Brazil. Wal-Mart Inc. has shown that even if there is pressure for focusing on short-term earnings and returns, it is more focused on the long-term earnings as all investments are being made by keeping in view this international growth strategy. Walmart Inc. has the opinion that short-term goals are not in its best interest and interest, not create value over time for it. Walmart Inc. owns 51% of the Walton family, which makes it more flexible to make long-term decisions. Wal-Mart Inc. is better positioned in this term as compared to its competitors as it acts more like a private company (Stacey, Nicolaou and Fontanella-Khan). The patience of the Walmart shareholders for this long-term investment approach would decide whether Wal-Mart would continue this strategy in the future or not. For instance, the Flipkart acquisition would be financed with debt issuance. This investment would wipe about 25 cents off the earnings per share this year and 60 cents in the next year. Walmart Inc. outlook by the S&P has also been downgraded from stable to negative because of this reason. Thus, a shareholder can get concerned over this strategy. Amazon, on the other hand, has investors with a lot of patience. Still, Walmart has not entered into the Indian market to fail in the retail game, and it cannot afford to lose it. Therefore, it is a need that its shareholders should have patience.
About three-quarters of the revenue of Wal-Mart is still generated from its US operations. The Chinese and Indian markets represent two of the biggest opportunities which have been a major attraction for the retailers. Alibaba is dominating the Chinese market while the Amazon and Flipkart have about 61% of the online retail market of India. The Indian e-commerce market is about $30 billion in value, and the value is about to grow by 27% annually for the coming five years. Walmart has entered into these markets in the expectation of reducing its dependence on the US retail segment.
As per the analysts, the strategic shift of focusing on e-commerce and merging the stores of Walmart are depicting its aim to challenge Amazon. The retailer Walmart has reported its comparable sales to be raised by 3.4% in the third quarter, which is above the expectations of Wal-Mart by 2.9%. Walmart Inc. has also shown growth of 43% in e-commerce sales. The stores of Walmart allow its customers to order online and pick their orders on their nearest stores. The dramatic increase in the Wal-Mart locations to retrieve the online orders posted on its website and the addition of ModCloth and Lord & Taylor brands on its website has expanded its online market (Wahba).
Walmart Inc. has now eclipsed Apple as well while Amazon and eBay are still ahead of it. Sam’s Club growth in revenue has increased by 5.7%, which was positively influenced by the strong digital growth and the closing of the weaker stores. The international segment of Walmart has increased revenue by 1.6%, without the impact of currency changes. Walmart Inc. has reported earnings per share of $1.08 which has also 1.08, en the forecasts of $1.01 earnings per share of the analysts. The revenue growth expectation was surpassed as well by Walmart. Walmart Inc’s significant expansion plan in China, Mexico, and the US, and its acquisition of the Flipkart India has thrown the challenge for Amazon in India to maintain its retail presence. The tech giant’s partnerships with Alphabet, China’s Tencent, Microsoft, and JD.com are all part of the same international strategy. Walmart Inc. is expecting its revenue to grow by 2.4% by the year 2023 by following this international growth strategy (Lahiri).
In the end, it can be concluded with these words that whatever the results, it is unambiguous that Wal-Mart Inc. is not going to give free space to Amazon in any of the international markets. Amazon would have to fight for its share in the global retail market as it is witnessed in the Indian market. The growth in the value of Wal-Mart and its revenue indicates that Wal-Mart is on the right track. Following this international growth strategy, it can build its strong presence by providing low prices every day in key emerging markets and reap benefits very soon before any of its competitors. Walmart strategic shift in its international growth strategy has been just one of the many changes through which it would have to go to battle with Amazon.
Work Cited
Boyle, Matthew. “Walmart’s Brazilian Blunder Comes to an End With Advent Deal.” Bloomberg. Bloomberg, 5 June 2018. Web. 28 November 2018. https://www.bloomberg.com/news/articles/
2018-06-04/walmart-s-brazilian-blunder-comes-to-an-end-with-sale-to-advent.
Lahiri, Anusuya. “Walmart’s Aggression Is Contributing To Its Potential Upside.” Seeking Alpha. Seeking Alpha, 26 November 2018. Web. 28 November 2018. https://seekingalpha.com/article/4224594-walmarts-aggression-contributing-potential-upside.
Nassauer, Sarah. “Walmart resets its international ambitions.” Market Watch. Market Watch, 30 April 2018. Web. 28 November 2018. https://www.marketwatch.com/story/walmart-resets-its-international-ambitions-2018-04-30.
Stacey, Kiran, Anna Nicolaou and James Fontanella-Khan. “Walmart shifts global strategy to battle Amazon.” Financial Times. Financial Times, 13 May 2018. Web. 28 November 2018. https://www.ft.com/content/48bc9928-5540-11e8-b3ee-41e0209208ec.
Wahba, Phil. “Think Walmart Can’t Beat Amazon? Think Again: E-Commerce Extends Streak of Big Sales Gains.” Fortune. Fortune, 15 November 2018. Web. 28 November 2018. http://fortune.com/2018/11/15/walmart-earnings-ecommerce/.
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