Read the article below called \"Emerging markets: Lessons from Walmart\" (Jopson

Question

Read the article below called "Emerging markets: Lessons from Walmart" (Jopson, 2011) and answer in a concise, short post the below questions:

What were the biggest challenges for Walmart? Why?

What are the top opportunities for Walmart in those countries? Why?

Emerging markets: Lessons from Walmart

Jopson, Barney; Weaver, Courtney . FT.com ; London (Dec 18, 2011)

Walmart's international business is huge and growing.Walmart International on its own had revenues of $109bn last year, making it the third biggest retailer in the world by sales, trailing only Walmart US ($310bn) and France's Carrefour ($135bn). So it is an excellent prism through which to view the trials and tribulations that foreign retailers face in emerging markets, particularly the Bric countries of Brazil, Russia, India and China, where so many are looking for ways to convert rising consumer wealth into profits.The lessons that can be learnt from Walmart's experience are vital to any retailer grappling with acquisitions - the US retailer's preferred means of entry - regulation, real estate, corruption and personnel.One striking fact is that whereas Walmart International has operations in 28 countries, and has reported sales up 16 per cent in the first 9 months of this year, it is only half way there in the Brics: it does not have a retail presence in India or Russia. For about 48 hours this month, the company was celebrating the chance to open its first shops in India, only to have the opportunity taken away. A political storm forced Manmohan Singh, the prime minister, to reverse planned reforms that would have allowed foreign retailers to own majority holdings in local supermarket chains, and to own outright single brand stores, such as Apple, Zara or Tiffany &Co. India's closed doors have not stopped Walmart from setting up a joint venture with Bharti Enterprises, an Indian conglomerate, to run a small wholesale supply business that would provide the foundation for an expansion into retail. However, this month's U-turn has sown seeds of doubt that could limit how much foreign retailers are willing to invest.In Russia it is a different story. The door is open to foreign retailers. The question is whether you have the guts to go in. Last December Walmart closed its Moscow office having been very publicly on the prowl for takeover targets for three years.The decision came a week after X5, Russia's largest retailer by sales, announced a $1.7bn deal for Kopeika, a discount store chain that Walmart could have snapped up. Now Walmart could be eyeing X5 itself, after it hired Lev Khasis, the former chief executive Russia's biggest food retailer.Walmart's problem in Russia is to find an acquisition that comes without governance or corruption worries. Matt Lasov of Frontier Strategy Group, an emerging markets-focused consultancy, says: "Everybody says that corruption, bureaucracy and administrative processes hurt foreign business [in Russia] ... We'll see if Walmart can do it. It's just a tough environment to navigate."Sweden's Ikea has been discouraged by widespread corruption and graft that have slowed its expansion during its 11-years in the country. David Marcotte, of Kantar Retail, a consultancy, points out that unlike many European peers, Walmart has to obey the strict mandates of the US Sarbanes-Oxley Act on accounting and corporate governance. It is also bound by the Foreign Corrupt Practices Act, the US's anti-bribery legislation, and this month revealed it had launched an internal probe into whether some international employees had violated the law. In the Bric countries where Walmart does have stores, the company forecasts its Brazil business will grow at 1.4 times the pace of the rest of its international operations over the next five years and that China will grow at 2.5 times the pace. It turned its first profit in China only in 2008 - a dozen years after it entered the market - and has endured a turbulent 2011. In October, authorities in the Chinese city of Chongqing accused Walmart of mislabelling ordinary pork as organic and ordered it to close 13 stores for two weeks. This was a big blow in a country where, against a background of food safety scandals and deep consumer concern, foreign grocers use the quality of food to differentiate themselves.The Chongqing government also revealed it had punished Walmart 21 times since 2006 for various violations, complaining that while the retailer admitted to mistakes it never improved. A week later Walmart's boss in China and a high-up human resources executive resigned "for personal reasons". Chinese political analysts say that in Chongqing, Walmart fell victim to the political posturing of an ambitious communist party regional boss who wanted a high-profile foreign punch bag. People who know Walmart say it also had problems - familiar to multinationals that are expanding fast maintaining compliance and controls as it has hired lots of people who were inevitably unfamiliar with "the Walmart way". Acquiring whole companies, with their own ways of working, makes that even harder and Walmart has taken a long time to integrate the 100-plus stores of Trust-Mart, a Chinese chain it acquired in 2007. Still, its growth in China seems unperturbed: net sales for the third quarter rose by 16.1 per cent from a year ago and like-for-like sales at stores open at least a year grew by 6 per cent. In Brazil too, Walmart has been slow to find the right strategy for two acquisitions made in 2004 and 2005 - and this time it's performance has suffered more. Only this January did it begin to introduce its trademark "everyday low prices" across the board - as opposed to the "high-low" strategy of yo-yoing discounts and mark-ups that Brazilian retailers use. It is a bold example of a retailer trying to change shopping habits. "They are forcing a single merchandising and marketing message," says Mr Marcotte. "The response to it is reasonably good. It's not bad. It's not great."Net sales and like-for-like sales grew in the quarter to the end of July but then fell by 1 per cent and 5.7 per cent respectively in the following three months, just as Brazil's economic growth was shuddering to a halt. But in praise of the retail giant, Mr Marcotte notes: "In the international market they are far more innovative. They are far more interesting," he says. "They are willing to put their necks out and do something that may fail." That is a lesson for other multinational retailers to consider.

Credit: By Barney Jopson and Courtney Weaver

Explanation / Answer

Ans

The biggest challenges are corruption, redtapism, domestic politics, beuracracy. Also adjusting to local conditions and changing work culture of acquired firms is difficult and painful process

2 The opputunities are taking advantage of greater growth in emerging markets. These oppurtunities aren't available in usa. Further consumer spending is fastly growing in these economies like China. Walmart can make significant gains there. Further Market widens and so does revenue and profit. In the process walmart can obtain goods in cheap countries and sell them at profit in dear markets.

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