WAL-MART IN AFRICA TEACHING NOTE

ABSTRACT
This case is about Wal-Marts entry into the Africa and the challenges it faced when entering the African market. Wal-Mart started to put more emphasis on international markets since the financial crisis of 2008 to fuel its growth as the opportunities available in the domestic market dwindled. Wal-Mart had mixed results in global markets. Wal-Mart started to focus on Africa as other markets which offered good growth potentiality like India were still closed to foreign players. It decided to expand in Africa in the inorganic way by acquiring a local retailer. It made a preliminary offer to buy South African Retailer, Massmart in September, 2010. Massmart was the second biggest retailer in South Africa and had its operations spread across many African countries. The offer was accepted by the share holders of Massmart and South Africas Competition Tribunal in June 2011. Later, Wal-Mart ran into trouble when some trade unions and government departments alleged that Wal-Marts entry will lead to huge job losses and damage the domestic manufacturing sector of South Africa. The government departments who were opposed to the deal have filed a petition with the Competition Appeal Court of South Africa for a review of the ruling by South Africas Competition Tribunal. However, the Competition Appeal Court ruled that Wal-Mart could go ahead with its acquisition of Massmart. Some analysts were still skeptical of WalMarts fortunes in Africa. They warned Wal-Mart of committing similar mistakes it had committed in Germany and South Korea.

TEACHING OBJECTIVES AND TARGET AUDIENCE

This case is designed to enable students to: Understand the issues and challenges faced by multinational companies like Wal-Mart when entering new markets. Appreciate the importance of understanding the local market conditions by multinational companies when entering new markets. Analyze the strategies that need to be followed by companies when entering a foreign market where it has little experience. Discuss and debate the strategies that Wal-Mart should follow in the future to succeed in the African market. Discuss the lessons that Wal-Mart should learn from its past experience in international markets like Germany. Explore the policies that Wal-Mart should follow to avoid any future controversies that Wal-Mart might face regarding its business practices in Africa.

This case is meant for MBA/MS students as a part of the Strategy/Marketing Management curriculum.

TEACHING APPROACH AND STRATEGY

This case can be used effectively in classroom discussions as well as in distance learning programs. In the classroom mode, the case moderator can initiate the discussion by giving a brief introduction about WalMart and its past experiences in other international markets. The reasons for its entry into the African market can also be briefed. This can be followed by a discussion regarding the initial problems faced by

Wal-Mart in Africa and the strategies that it should follow to succeed there. The moderator can take the discussion further with the help of the following questions. What were reasons for Wal-Mart to shift its focus on Africa? Do you think Africa offers good growth prospects for Wal-Mart in future? What strategies should Wal-Mart follow to succeed in a market like Africa with low income levels and high poverty incidence? Do you think its low cost model will be successful in Africa? Give reasons to support your answer. Why did Wal-Mart face opposition from trade unions and other government departments regarding its acquisition of Massmart? Do you think the opposition coalition had a valid point in opposing the deal by Wal-Mart? Justify your answer. Given the low income levels on many countries in Africa, should Wal-Mart first consolidate its operations in the countries where Massmart had operations or expand to new markets? Give reasons to justify your answer.

REFERENCES AND SUGGESTED READINGS

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Wal-Marts Africa and India Plans Boost its International Outlook, http://www.forbes.com, March 25, 2012. Donna Bryson, Wal-Mart Gets Go-ahead in South Africa, http://news.yahoo.com, March 9, 2012. Massmart Could Open up to 20 Stores in Nigeria, http://af.reuters.com, February 22, 2012. Tiisetso Motsoeneng, Massmart Could Open Up To 20 Stores in Nigeria, http://af.reuters.com, February 22, 2012. Olumide Taiwo and Jessica Smith, Big Box vs. Spring Boks: Wal-Marts Troubles Entering the South African Retail Market, www.brookings.edu, November 1, 2011. Sikonathi Mantshantsha, Billionaire Wiese Targets Nigeria as Wal-Mart Enters Africa, http://www.businessweek.com, August 12, 2011. Jennifer Booton, Wal-Mart Enters South Africa with Massmart Deal, http://www.foxbusiness.com, June 20, 2011. Max Clarke, Walmart Enters Africa Despite Union Opposition, http://www.freshbusinessthinking.com, June 1, 2011. Allison Martell and Jessica Wohl, Target to Test Wal-Marts Mettle in Canada, http://www.reuters.com, April 11, 2011. Stephanie Clifford, Wal-Mart Bids for Massmart to Expand into Africa, http://www.nytimes.com, September 27, 2010. Matthew Boyle, Wal-Marts Painful Lessons, http://www.businessweek.com, October 13, 2009. Daniel Workman, Wal-Mart Finally Get It: Lessons from South Korea & Germany, http://danielworkman.suite101.com, July 31, 2006. Kate Norton, Wal-Marts German Retreat, http://www.businessweek.com, July 28, 2006. Christine Lepisto, Walmart Leaves Germany: Blame Smiles, Love or Plastic Bags, http://www.treehugger.com, June 30, 2006. Choe Sang-Hun, Wal-Mart Selling Stores and Leaving South Korea, http://www.nytimes.com, May 23, 2006. Kelly Olsen, Wal-Mart Pulls Out of South Korea, Sells 16 Stores, http://www.usatoday.com, May 22, 2006. Wal-Mart: Struggling in Germany, http://www.businessweek.com, April 11, 2005.

Mexican Retailers Unite against Wal-Mart, http://www.expresstextile.com, July 29, 2004. About Us, http://www.walmartstores.com/AboutUs/. History Timeline, http://www.walmartstores.com. Saving People Money so they can Live Better Worldwide, http://www.walmartstores.com. Wal-Mart-2012 Annual Report. T.A. Frank, A Brief History of Wal-Mart, http://www.reclaimdemocracy.org. https://www.cia.gov/library/publications/the-world-factbook. http://www.massmart.co.za/pdf/massmarts_operations_in_Africa_2011.pdf. http://www.prnewswire.com/news-releases/south-africa-retail-direct-selling-b2c-e-commerce-report2012-150747085.html. 27. http://www.walmartstores.com/AboutUs/275.aspx. 18. 19. 20. 21. 22. 23. 24. 25. 26.