Internationalization and globalization are two important but different concepts in the business environment. In terms of internationalization, an international strategy refers to a range of operations options that organizations consider when seeking to operate beyond the country of origin. In these options, an organization focuses on ‘localization’ where efforts are made to tailor-provide services and goods that suit the market where the organization enters (Ghemawat 21). On the other hand, a global strategy refers to the process of coordinating extensive activities that are spread geographically in many countries (Johnson 263).
Although Wal-Mart is the world’s largest retailer, it has been reluctant to expand its operations in Africa. It only has a small presence in the Southern Africa region. Yip’s globalization framework shows important aspects of the company’s slow expansion in Africa. Firstly, in terms of market drivers, Wal-Mart provides the sale of retail goods, which are also in demand in the African retail market (Ailawadi 577).
Hence, the company is in a good position to expand in Africa. Secondly, the cost drivers are the key hindrances to expanding to other markets. It is more costly to do business in Africa, owing to poor infrastructure and slow urbanization. Hence, the fact that the population that the company can serve is small limits the rate of its expansion in urban centers. Thirdly, government drivers are also a major factor for Wal-Mart’s slow expansion in Africa. Entry barriers are more since governments seek to protect local and young retailers from the international competition that can be brought by globally profitable companies such as Wal-Mart (Hofstede 348).
Lastly, competitive drivers are also a key factor for Wal-Mart. With low-profit margins from its already established stores in Africa, expanding might lead to more operational costs, which can take away its profits from its most profitable markets outside Africa (Johnson 263).
While Wal-Mart has the financial resources to expand in Africa, profitability is the most important determinant of whether it is viable or not. In the end, it is evident that the company’s potential for success in Africa is low now. The most important global strategy that Wal-Mart should adopt is entry through local acquisitions or partnerships. The advantage of this method is that the company will venture into a market that has a strong base through the established retail chains it acquires (Ghemawat 23). However, the downside of this plan is that its profits will be limited through partnerships and acquisitions.
Further, as a company that has a strongly established supply chain, wrangles may be witnessed, especially with other shareholders who may want to retain the status quo. A global strategy gives a company the road map through which it will drive its expansionist agenda in the global market (Ellickson and Grieco 3). It allows a company to make an elaborate market study and analysis of the options that it can adapt to drive its success (Greenwald and Kahn 96). On the other hand, if a given global strategy fails for lack of due consideration of all drivers or due to unforeseen market changes, it can easily lead to major losses for a company.
It is evident that globalization and internationalization relate to the process of organizations expanding beyond their home countries to new markets. In this process, Yip’s global framework identifies four market drivers, which include cost, market, government, and competitive forces. The analysis of Wal-Mart’s potential for expansion in Africa has shed some important insights for companies that wish to venture into other markets.
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Ellickson, Paul, and Paul Grieco. “Wal-Mart and the geography of grocery retailing.” Journal of Urban Economics 75.1 (2013): 1-14. Print.
Ghemawat, Pankaj. Redefining global strategy: Crossing borders in a world where differences still matter. Watertown, MA: Harvard Business Press, 2013. Print.
Greenwald, Bruce, and Judd Kahn. “All strategy is local.” Harvard Business Review 83.9 (2005): 94-104. Print.
Hofstede, Geert. “The interaction between national and organizational value systems.” Journal of Management Studies 22.4 (1985): 347-357. Print.
Johnson, Gerry. Exploring Strategy: Text and Cases. New York, NY: Pearson, 2013. Print.