Wal-Mart is thinking of implanting itself on a new continent: Africa. On November 29th, Wal-Mart offered $2.4bn for a majority stake to the South African retailer Massmart. We are going to assess the potential entry of Wal-Mart in South Africa through Porter's five forces and other relevant forces (legal, social, deregulation and globalization).
Ubiquitous in the United States, Wal-Mart sales are still increasing, but less than expected. Sales growth in 2010 has been limited to 2.8%, to reach $103 billion, instead of the $105.4 billion that was expected by the market. The company's growth is now boosted by other markets like Mexico or China.
Tags: Wal-Mart entry to Africa, Wal-Mart sales
[...] The use of other forces can often be relevant in some industr because it represents other external factors of competition ANALYSIS RIVALRY AMONG EXISTING FIRMS Overview of the world Before viewing the competition in the United States and in South Africa, we thought it could be relevant to first see the global situation. TURNOVER RANK RETAILER 2009/ Wal-Mart Stores Carrefour Metro Group Tesco COUNTRY OF ORIGIN NET SALES 09/10 NET SALES 09/10 DOMESTIC CURRENCY MILLIONS $404,743 $163,852 $91,412 $90,091 $77,279 $404,743 117,51 66,56 £57,528 55,42 NET SALES 08/09DOMESTIC CURRENCY MILLIONS $401,134 118,94 67,96 £54,167 ANNUAL CHANGE, DOMESTIC CURRENCY US France Germany UK Schwarz Group Germany Source: IGD Retail Analysis Datacentre, calculated in 2010 From this data and the sales of 2009 we can draw the following diagram to see the differences of turnovers between the top 5 food retailers Wal-Mart's turnover is significantly above the others. [...]
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[...] WalMart's implantation in South Africa (if the deal is made with Massmart) will probably be followed by other estern firms wanting to expand and use the significant growth of an emerging market to boost their financial results. In South Africa the food retail industry local companies that spread all over the territory. Wal-Mart has made an offer to the 3rd largest retailer in the country Massmart. The company has 288 stores in South Africa and 14 additional stores (Massmart, 2010) in other subSaharan African countries. [...]
[...] OTHER RELEVANT FORCES Legal The announcement of Wal-Mart's offer to Massmart caused violent reaction from the main unions Saccawu and Cosatu. Indeed, they said that “Wal-Mart is one of the worst union-bashing employers in the world” and recalled all the lawsuits and issues that are facing the retailer. The Unions also announced that they "will fight against any erosion of hard-fought-for workers' rights and benefits and not tolerate the destruction of local procurement policies or the further decline of local manufacturing. [...]
[...] South Africa has also a lot of influence on the African land; it's a gate to the rest of the continent CONCLUSIONS AND RECOMMENDATIONS As a conclusion, Wal-Mart's offer to Massmart has raised many interrogations. Even if negotiations are still progressing, everyone is already taking sides and giving opinions about the acquisition. Regarding the analysis that we did above, we can imagine the potential of the South African retail industry. Our recommendation for Wal-Mart would be to implant in South Africa. [...]
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