Wal-Mart A Case for Latin American Expansion

Essay by maya5053University, Master'sA, April 2010

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A Case for Latin American Expansion

While there is still growth potential in the US market through "green" initiatives, improved cost and technology efficiency, and its neighborhood market format, Wal-Mart's greatest growth opportunity lies in its core competency. Wal-Mart's success has been driven by strong store expansion, leveraged through best in class supply chain management. In a saturated US market, Wal-Mart should look to emulate this strategy in emerging markets. Wal-Mart's international footprint is relatively small with limited presence in the three primary markets of China, Latin America, and Europe. We believe Latin America has the most potential growth opportunities due to its proximity, culture, economics, and infrastructure.

Wal-Mart's domestic expansion has progressively increased every year. For example, from 2004 to 2008, the company opened 976 supercenters in the United States, an average of 244 supercenters a year.1 There is now a Wal-Mart store within 15 minutes of 90% of Americans.2

The inevitability of this continued expansion is market saturation. This has already become apparent as the world's largest retailer has ventured off its core competency into on-line music, health care and other lowest-cost initiatives to maintain its double-digit percentage growth of revenue.

While expansion into new products and services still reflect Wal-Mart's low cost structure, other companies have become more adept at securing market share. A recent example is the on-line music industry which Wal-Mart dominated until February of 2008, at which point Apple's 19% market share surpassed Wal-Mart's 16%.3 Apple gained dominant share despite Wal-Mart pricing its songs at $0.94, a full five cents cheaper than Apple's iTunes cost of $0.99 per song.4

Wal-Mart also faces increased domestic concern over its negative externalities. The retailer's business dynamics have been harshly criticized and have led many to resist the company's ventures...