Please enable JavaScript.
Coggle requires JavaScript to display documents.
Wal-Mart (DEEP POCKETS (Bob L. Martin, Wal-mart's Head of…
Wal-Mart
DEEP POCKETS
-
Sales of nearly $105billion last year and Profits of $3.1billion. The Bentonville, Arkansas, behemoth has deep pockets
-
Four newest stores are smaller than the initial outlets in Sao Paulo and Buenos Aires and in mid-size cities where competition isn't so fierce
Bob L. Martin, Wal-mart's Head of International Operations
-
-
-
He adds that Wal-Mart plans to add eight stores in both Argentina and Brazil next year, doubling the number now in each country
A lot is riding on Wal-Mart's global expansion drive, which is targeting not only South America but also China and Indonesia. Two other markets full of promise and pitfalls
With opportunities for growth dwindling at home, The company is opening fewer tha 100 domestic stores a year, down from as many as 150 in the early 1990s.
David D. Glass, Chief Executive
"If we're good enough in international , we can duplicate Wal-Mart"
-
A SMALL OPERATION SO FAR
The six year old international operation is relatively tiny; it accounted for only 4.8% of Wal-Mart's 1996 sales.
Most of the company's international revenue comes from Canada, where Wal-Mart purchased 120 stores from Woolworth Corp, in 1994
And from Mexico, where earlier this year it bought a controlling stake in Cifra, SA, its partner and now has about 390 stores
Last year, the international unit had an Operating Profit of $24million, its first, compared with a $16million Loss in 1995
Mr glass said he expects international growth to account for a third of Wal-Mart's annual increase on sales and profits within 3 to 5 years
In Canada and Mexico, customer familiar with the company from cross border shopping trips and by acquiring local retailers
In South America and Asia, Wal-mart is building from scratch in markets already dominated by savvy local and foreign competitors such as Grupo Pao de Acucar SA of Brazil and Carrefour SA of France
DISTRIBUTION PROBLEMS
Wal-Mart's effort to stock such a wide variety of merchandise is hurting it. Squeezing out costs in the supply chain is crucial to its "every day low pricing" formula
In US, The company runs like a well-oiled machine, maintaining a highly sophisticated inventory management system and its own network of distribution centers
Timely delivery of merchandise is a relative concept in the bumper to bumper traffic of Sao Paulo, where Wal-Mart depends on suppliers or contract truckers to deliver most of its goods directly to stores.
"The biggest issue Wal-Mart has is shipping product on time and getting on the shelf", says Jim Russel a national account manager for Colgate-Palmolive Co, in Bentonville
Wal-Mart recently built a warehouse in Argentina and one in Brazil it will eventually reduce its distribution problems
Another issue is some local suppliers have difficulty meeting Wal-Mart's specifications for easy-to-handle packaging and quality control, forcing the retailer to rely so heavily on imported goods.
Wal-Mart also has sought to drive hard bargains with divisions of its major suppliers back in the United States.
LOSSES FORCAST
-
Wal-Mart's Brazilian partner, Lojas Americanas SA, expect Wal-Mart to lose $20million to $30million in Brazil this year, on top of estimated $48million in losses since starting up in South America in 1995
In Argentina where the company doesn't have a partner, Wal-Mart executives concede that it is losing money but say its performance meets expectations
" What counts is that we are finding great customer acceptable", Mr. Martin says
Mr. Martin contends that Carrefour's advantage is ephemeral and that customers value Wal-Mart's broader choice
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.
-
VARIOUS MISTAKES
-
The six South American Sam's Club locations, the members-only warehouse stores that sell merchandise in bulk, got off to a slow start largely because shoppers weren't used to paying a membership fee
Merchandise flubs not the only mistakes. In Brazil, Wal-Mart brought in stock-handling equipment that didn't work with standardized local pallets. It also installed a computerized bookkeeping system that failed to take into account Brazil's wildly complicated tax system
The company initially imported items such as cordless tools, which few South Americans use, and leaf blowers, which are useless in a concrete jungle such as Sao Paulo.
-
-