International Expansion Motivation

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BUSINESS POLICY STRATEGY

InternationalExpansion: Motivation

NewsCommentary # 2

Topic:‘Wal-Mart embracing smaller stores in growth strategy’

Chapter2

MaysaaRahal

BPS451

July29, 2014

InternationalExpansion: Motivations

Synopsis

Shelly,(2014) in her article ‘Wal-Mart embracing smaller stores in growthstrategy,’ argues that Wal-Mart Corporation’s strategy ofimplementing small retail stores is a new business model of enhancinginternational business expansion. Specifically, Shelly (2014), sharesthe concept of international business expansion. In particular, theShelly (2014) gives an analysis of the strategic approaches embracedby Wal-Mart in maximizing its sales volume, lowering operation costs,diversifying business market, reducing risks and enhancing itsoverall competitiveness globally. The intention to implement smallretail shops has been due to shrinking of price gaps between thefirm’s products and those of its competitors like Amazon (Shelly,2014).Wal-Mart has recorded low sales volume since the beginning ofyear 2014 in local and global markets (Shelly, 2014).

Relevance

Thefirm has been faced with a number of challenges arising from lowsales volume, management of workforce and increasing competition(Shelly, 2014). In an attempt to recover its competitivenessglobally, Wal-Mart has adopted the strategy of smaller stores that isdifferent from the pricing approach used earlier (Shelly, 2014). Inaddition, Wal-Mart has plans to improve its online marketingstrategies through ‘dynamic pricing’ in order to have leveragewith its main competitors like Amazon (Shelly, 2014).

Inmy opinion, the move by Wal-Mart, to open smaller stores and increaseonline competitiveness, is one way of reducing costs associated withrunning and the management of retail shops. In addition, I am of theopinion that, by opening smaller stores Wal-Mart will reduce risksassociated with running large superstores in one location and spreadits international market. Smaller stores that are spread in differentlocations are able to improve sales due to wide area covered unlikein the case of one centralized large superstore. In the same line, Ithink, running small retail stores reduces risks because in the eventof low sales in one store, sales in other stores might be highthereby reducing the risk of overall low sales volume in a givenregion. In my analysis, I think that by opening small retail outletsby Wal-Mart will enable the firm solves its labor challenges byminimizing the number of employees.

Wal-Marthas been operating large supercenters and diversifying this withsmall retail shops would help spread its market coverage, reduceoperating costs and risks associated with having one large store inone location (Twarowska, (2013). My opinions are that, mixing largestore with small stores will help Wal-Mart diversify its businessmarkets globally and reduce the risks of possible business failureespecially in an event of economic crisis. I reckon that, increasesin sales volume will eventually lead to more business expansionbecause more sales mean more profits and higher growth opportunityfor the business. Although, small stores suffer from competition bylarge businesses, I think the small stores have the capacity to offermore personalized sales services, lower prices and specializedstocks. Furthermore, increasing the number of small stores creates avalue chain that takes advantage of arbitrage opportunities in themarket (Desset al. 2012).

Internationalgrowth of the business could be achieved through diverse ways inorder to reap maximum benefit(Anderson, 1993).The approach used to affect the growth of the businessinternationally should be based on a critical assessment of strengthsand weaknesses in the face of internal and external challenges. In myopinion, Wal-Mart approach of opening smaller stores is a gooddiversification strategy through which the firm will be able toattain economies of scale, create value chains, reduce operationcosts, risks and enhance the overall growth of the company’sproducts(Katarzyna, 2013).

References

Anderson,O. (1993). On the internationalization process of firms: A criticalanalysis.

Journalof International Business Studies, 34,209-231.

ShellyBanjo, (2014). Wal-Mart embracing smaller stores in growth strategy.TheWall Street Journal.Retrieved on July 22, 2014 fromhttp://www.marketwatch.com/story/wal-mart-embracing-smaller-stores-in-growth-strategy-2014-07-08

Dess,G., Lumpkin, G., Eisner, A., &amp McNamara, G. (2012). Strategicmanagement: Text and cases (6thed.).New York: McGraw Hill.

TwarowskaKatarzyna. (2013). Internationalbusiness strategy-reasonsand forms of expansion into foreignMarkets.MariaCurie-Skłodowska University, Poland.Retrieved on July 22, 2014 fromwww.toknowpress.net/ISBN/978-961-6914-02-4/…/ML13-349.pdf