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Wal-Mart’s Global Strategy: When Opportunity Knocks

ATLANTA -- Wal-Mart is taking an opportunistic, rather than programmed, attitude toward its global expansion.<P>The world's largest company doesn't have a firm blueprint or time line for moving into other overseas markets, said Lee Scott, president...

ATLANTA — Wal-Mart is taking an opportunistic, rather than programmed, attitude toward its global expansion.

The world’s largest company doesn’t have a firm blueprint or time line for moving into other overseas markets, said Lee Scott, president and chief executive officer of Wal-Mart Stores.

“We’re more opportunistic than strategic,” Scott said, speaking to an audience of international retailers and suppliers here at the World Food Business Summit sponsored by CIES-The Food Business Forum. “We’d like to be in a number of countries, but we’re not on a time line. We don’t want to overpay. It’ll be obvious when it’s the right time.”

Wal-Mart operates close to 4,500 stores in North America, Latin America, Europe and Asia. But non-U.S. business represented less than 20 percent of the retailer’s sales of about $218 billion last year, or about $40 billion. While Wal-Mart remains the world’s largest retailer, it isn’t the most international — that distinction belongs to Carrefour SA of France. And Wal-Mart has had mixed experiences in recent years with international forays, especially in such markets as Germany. But it remains committed to growing globally by fine-tuning its ability to adapt to local markets, Scott stressed.

“There are differences between markets, and we’ve never been confused about that fact,” he said. “We’d never take a U.S. store and put it in Argentina and expect customers to flock there. But although we understand there are differences, we’re not always as good at understanding what those differences are.”

Scott said that while Wal-Mart will remain flexible to the needs of local markets, it will not bend on some core attributes of its culture, including everyday-low-price and a customer-centric approach.

“The number one question I get is, `When will we have to change to succeed in other countries,”‘ he said. “Well, I don’t think so, because the customer is always the boss. I can’t think of a country where customers want to be abused. They want value, and we are a low-price retailer. We don’t buy high-margin retailers. We can’t manage that.”

Scott pointed to the acquisition of Asda Group in the U.K. as a positive experience because of a “great management team,” which has since brought some best practices to other parts of the company. Wal-Mart has been successful in fixing problems in its Canadian operations and is “doing better” in Brazil and Argentina, he said. Scott also said the company is having successes in Mexico. He did not discuss the company’s German business.

Scott said Wal-Mart has succeeded over the years partly by being underestimated. “People said we would struggle when we left Arkansas and got to places like Alabama, 600 miles from Arkansas. We even hired a person to work on the cultural differences between Arkansas and Alabama. Then we were told that in New Jersey or New York our style won’t be successful,” he said, explaining that, ultimately, the forecasts did not bear fruit.

Wal-Mart’s biggest global opportunities include building on best practices, private brands, shared logistics knowledge and global supplier partnerships, Scott said.

“With global supplier partnerships, we need to continue to find out how to take costs out,” he said. “We want to have consumers enjoy the benefits. As you move prices down, you drive consumption up. That’s good for us, suppliers and consumers.”

Scott said Wal-Mart is requiring certain input and behavior from suppliers, including providing insights on customer needs, the competitive environment and the strategic direction of categories; becoming familiar with Wal-Mart personnel at all levels — from top executives to buyers — in order to better understand the culture and requirements of the retailer, and addressing topics such as speed to market, item profit and loss and promotions.

Editor’s note: David Orgel is editor in chief of WWD’s sister publication Supermarket News.”