Competing with Global Retail Brands: The Case of Wal-Mart in Brazil

Wal-Mart

Written by Chipo Mapungwana

Retailers, compared to other industries have been especially late in entering global markets. Many retail brands , even the larger ones have largely confined themselves to their home markets because of the belief that the retailing business  did not possess the conditions appropriate for internationalisation. Global retail brands viewed the differences in consumer behaviour, local competition, operational challenges  and government  protectionism  and  supplier unavailability as  major deterrents to  internationalisation.

Factors influencing  internationalisation of retail brands 

Internationalisation of retail brands has changed in the last 20 years because of:

  • access to and changing information technology which now enables retail brands to control foreign operations.
  • global sourcing which has created the possibility of economies of scale  and availability of international suppliers.
  • emergence of global consumers creating the need for supply of global brands.
  • growing brand conscious and quality sensitive middle and upper classes in many countries

Why Global Brands are coming your way!

  1. They want to expand into markets with higher growth rates
  2. They are facing limited opportunities in their domestic markets  through saturation, and excessive competition.
  3. They can afford new and innovative  retailing technologies.
  4. In Europe, they are facing recessionary pressures.
  5. They have stronger marketing orientation, are bigger and have accumulated experience over many years.

A Brief about Wal-Mart

  • Started in 1962
  • Biggest retailer in the World
  • Operates four store formats including, discount stores, supercentres, warehouse clubs, deep discount outlets.
  • Implements  four strategic pillars including: cost leadership, customer orientation, logistics and information technology.
  • As of July 2012,  had 2 million staff members
  • Has 4253 stores around the world
  • Sales exceed US$405 billion, more than the GDP of many countries
  • Serves 100 million customers a week.

Why Global Retail brands give local retailers the shivers?

  1. The sheer size of global retailers in most cases is such that local retailers can not compete on fair ground.
  2. Global brands have set their minds to  international expansion  in order to keep their growth  momentum.
  3. Global retailers are great at research and they target markets that have many of the following characteristics: fragmented  local retail industries, dormant competition, underserved customer segments, traditional retailing practices, high margins and unsatisfactory customer service.
  4. Local customers in many countries that are targeted by global brands are  price sensitive and welcome retailers that can offer them quality products at lower prices.
  5. Global brands have the muscle to control suppliers and many local suppliers want to do business with them.

Competing against Global brands: How Brazilian retailers dealt with Wal-Mart onslaught

Neutralise the competitor’s  action by:

  • putting pressure on suppliers  not to sell to the new, foreign competition .
  • self-regulation of the retail sector  , thus reducing  predatory pricing

Establish competitive advantages by:

  • changing retail practices through the adoption of technologies,  improvement in service and greater efficiency.
  • enhancing management professionalism  and training staff.
  • hiring experienced executives
  • learning from retailing brands in other countries and markets
  • adopting I.T. technologies  to increase efficiencies
  • increasing investment in logistics , a competitive advantage of Wal-Mart.
  • increasing retail store areas to take advantage of scale economies  to sell at lower prices.

Redefine the Market by:

  • expanding presence in the domestic market through opening new stores  and in new geographical areas.
  • concentrating on key markets by focusing on key locations and servicing those markets well.
  • adopt niche strategies by competing through service, new selling channels such as online selling or unique  products.
  • expand regionally or internationally

Change ownership by:

  • associating  local brands with  a foreign retailer  in order to increase  size and get a stronger market position.
  • acquiring smaller stores  in order to increase market share.

While each country and sector will have its own way of protecting itself, there is no getting away from global expansion and from global companies knocking and find their way into local markets. How you prepare your company for the competition will determine whether or not your organisation will survive. On the other hand, seeing how other companies have handled new markets will also enable companies to enter the global arena and compete with foreign companies in new markets.

For Branding consulting contact Chipo at chipomaps@gmail.com

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About chipomaps

A brand reputation, marketing and new media trainer and consultant. Constantly curious, constantly learning.
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