Wal-Mart's offer to Massmart - Porter's Five Forces + other relevant forces

Thèmes abordés

WalMart South Africa Massmart Porter forces offer

Résumé du document

WalMart is thinking of implanting itself on a new continent: Africa. On November 29th, Wal-Mart offered $2.4bn for a majority stake (Simon Mundy, 2010) 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 's 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 expected by the market (Julien Pompey, 2010). The company's growth is now boosted by other markets like Mexico or China. To improve its economic situation on a mature market like the US, Wal-Mart is adapting to new trends by increasing the number of small convenience stores in cities or in suburban areas (Jonathan Birchall, 2010).The company is also looking abroad in emerging markets like Africa. Andy Bond, a Wal-Mart executive said that "South Africa presents a compelling growth opportunity and offers a platform for growth and expansion in other African countries" (Stephanie Clifford, 2010).

However, Wal-Mart has to be careful with its overseas operations. Its failure in Germany showed the limits of the "walmartisation". In eight years of presence in Germany, Wal-Mart lost $1 billion (Mark Landler, 2006); the world's largest retailer wasn't able to adapt to the German culture and cope with a very competitive market, especially coming from the hard-discounters.

Extraits

[...] Statistics South Africa [pdf]. Available at: [Accessed on November 2010] Sine nomine, 20--. South African competition law. South Africa info. Available at: [Accessed on November 2010] The Competition Commission Mergers and Acquisitions. [...]

[...] However, Wal-Mart has to be careful with its overseas operations. Its failure in Germany showed the limits of the “walmartisation”. In 8 years of presence in Germany Wal-Mart lost $ 1 billion (Mark Landler, 2006); the world's largest retailer wasn't able to adapt to the German culture and cope with a very competitive market, especially coming from the hard-discounters. The retailer also encounters difficulties in South Korea. The firm didn't change its features to the local costumers and kept on sticking with western marketing strategies instead of fitting into the local trends. [...]

[...] If Wal-Mart is the 1st multinational food retailer to implant it may give it advantages toward other multinational retailers that may follow its move to South Africa, like it happened with Carrefour in China. Indeed, the French retailer was the first to implant and is now the 1st worldwide retailer in the middle empire. Also being one of the first retailers to implant may give Wal-Mart low-priced acquisitions. South African market will probably grow faster with the arrival of the American retailer. [...]

[...] Regarding the working hours it is quite similar to the United States with 45 hours per week or 9 hours per day. The annual gross income for household was R 6 665) in 2006 (Stassa, 2008) Deregulation The food retail sector in South Africa is an oligopoly. A few firms get most of the sales. It is a liberal market encouraging trades It has a Competition Act (1998) based on the western models. The country is prohibiting anticompetitive conduct and abuses by the biggest companies. [...]

[...] The company has 288 stores in South Africa and 14 additional stores (Massmart, 2010) in other subSaharan African countries. With annual sales of $6,843 billion in June 2010 and a growth of Massmart is the 3rd largest retailer in South Africa and the 2nd largest by its numbers of stores of its sales are made in South Africa through 4 stores format: Massdiscounters, Masswarehouse Massbuild and Masscash. The strategy of Massmart is quite equivalent to Wal-Mart, both are using low-prices to be competitive. [...]