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Wal Mart A Case For Latin American Expansion

2055 words - 9 pages

Wal-Mart:A Case for Latin American ExpansionWhile there is still growth potential in the US market through "green" initiatives, improved cost and technology efficiency, and its neighborhood market format, Wal-Mart's greatest growth opportunity lies in its core competency. Wal-Mart's success has been driven by strong store expansion, leveraged through best in class supply chain management. In a saturated US market, Wal-Mart should look to emulate this strategy in emerging markets. Wal-Mart's international footprint is relatively small with limited presence in the three primary markets of China, Latin America, and Europe. We believe Latin America has the most potential growth opportunities due ...view middle of the document...

With Wal-Mart's dominant market share in the U.S. and Mexico1, the next progression in their international strategy is to optimize and expand their existing footprint in Latin America to replicate this success. Wal-Mart can adapt to changes in the market place sooner by adjusting their go-to-market strategy of store types to align with consumer and cultural needs instead of simply building large hypermarkets. For example, in 2008 Wal-Mart Brazil will concentrate on their Toda Dia and Maxxi brands which are smaller, bodega type stores, in order to better reach value conscious consumers.The retail market in this region is still currently underdeveloped as Carrefour is the only other global, big-box competitor within the region. Within the most developed countries of Brazil and Argentina, Wal-Mart is only 4th and 8th in market share, respectively. In addition, they have not yet entered other rapidly emerging South American markets. With such potential in areas so close to their core business, the next step to realize immediate profitability is to increase expansion in South and Central Americas.Understanding the local culture and its needs is the key to generating high ROI and controlling risks in the Latin American economy. The ability and agility to respond to local consumers is the key to success. For example, Hispanics tend to be conservative and traditional and have established certain patterns and buying habits that Wal-Mart must adapt to. Wal-Mart must approach each market with flexibility and a keen sense of awareness on how best to accommodate the target consumer.South America has experienced tremendous growth in population, including the middle class, as well as a growing purchasing power over the last several years in these countries. There are 268.8 million people in Latin America who are active consumers, compared with 178.8 million people in the United States. Latin America is one of the most youthful regions of the world with a median age of 24 years and a population of 52.1 million people between 15 and 19 years old, compared to a median age in the United States of 35.5, and a population between 15 and 19 of 21.7 million. With more buying power, a growing youth population and a general aspiration for American products, there is significant opportunity for growth.Wal-Mart's international markets have the ability to waiver from some core "Wal-Mart philosophies," such as a steadfast focus on hypermarket expansion, which provide a unique opportunity to leverage the Wal-Mart brand and scale, yet capitalize on their specific market needs. In much of South America, Wal-Mart needs to redirect its energy towards growth in lower income segments and smaller towns with its Bodega format. The retailer consistently captures market share from traditional trade through its successful marketing and merchandising strategy to this segment of the population. Another key opportunity in Latin America is consumer credit services. These are becoming...

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