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Wal-Mart Changes Tactics to Meet International Tastes (Distribution…
Wal-Mart Changes Tactics to Meet International Tastes
Deep Pockets
Wal-Mart has sales of nearly $105 billion and profits of $3,2 billion
Bob L. Martin, Wal-Mart's head of international operations, is confirdent that the company will eventually become the dominant retailer in South America.
With opportunities for growth dwindling at home, the company is opening fewer than 100 domestic stores a year, down from as many as in the early 1990s
The current rate of openings can't generate the profit gains that Wal-Mart wants, and it main hopes lie overseas
A Small Operation So far
The six-year-old international opeartion is relatively tiny; it accounted for only 4.8 percent of Wal-Mart's 1996 sales
Most of the company's international revenue comes from Canada and Mexico
The performanec of Wal-Mart's 16 South American stores may well indicate the future outlook
In South America and Asia, Wal-Mart is building from scratch in markets already dominated by savvy local and foreign competitor unlike in Canada and Mexico
Distribution Problems
Wal-Mart's effort to stock such a wide variety of merchandise is hurting it
In United States, the company runs like a well-oiled machine, maintaining a highly sophisticated inventory-management system and its own network distribution centers
Wal-Mart in Sao Paulo depends on suppliers or contract truckers to deliver most of its goods directly to stores because it doesn't own its distribution system
The biggest issue Wal-Mart has is shipping product on time and getting it on the shelf
Wal-Mart built a warehouse in Argentina and one in Brazil that it says will eventually reduce its distribution problems
Some local suppliers have difficulty meeting Wal-Mart's spesifications for easy-to-handle packaging and quality control
Wal-Mart also has sought to drive hard bargains with divisions of its major suppliers back in the United States
Losses Forecast
Wal-Mart doesn't break out financial data on its South American Operation
Wal-Mart says its supercenter in Osasco, Brazil, was the top-grossing store in the entire company
Not only did Carrefour arrive first, it now has a total about 60 stores in Argentina and Brazil but it is maneuvering with prices and promotions to keep Wal-Mart off balance
Carrefour, which, like Wal-Mart in the United States, drives hard bargains with its suppliers, can afford to play low-ball because it has the critical mass that Wal-Mart lacks here.
Carrefour's advantage is ephemeral and that customers value Wal-Mart's broader choice
Various Mistakes
Wal-Mart's troubles in SOuth America stem partly from its own mistakes. Analysts say it failed to do its homework before plunging in
In Brazil, Wal-Mart brought in stock-handling equipment that didn't work with standarized local pallets
Wal-Mart has also been slow to adapt to Brazil's fast changing credit culture
Small-business customers are reluctant to sign up for fear Wal-Mart could provide tax-information to the authorities on their purchases
Problems Called Temporary
Wal-Mart's Mr. Glass characterized the missteps as temporary problems and inevitable in entering a new market
Wal-Mart says that it is developing a strong group of young executives and hasn't suffered high turnover
Prilla Lidyana / 29116001 / YP55