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Dorothy YuIain Darroch
Stephanie Falls
Spain? Portugal? Italy?
Table of Contents About Wal-Mart About Wal-Mart International Criteria for Investment Opportunity European Union Country Descriptions Chosen Country Recommendations
STANDARDIZATION Beliefs
Respect for the Individual Service to Our Customers Strive for Excellence
Pricing Strategies Every Day Low Price (EDLP) Rollback Special Buy
Operations 1991: SAM’S Club opened near Mexico City 1993: creation of Wal-Mart International rapid growth and consumer acceptance.
Employment 330,000 associates in Argentina, Brazil, Canada, China, Germany,
Korea, Mexico, Puerto Rico and the United Kingdom. also owns a 37.8% interest in Seiyu, Ltd., a leading Japanese retailer.
Global Expansion building new stores series of acquisitions
Financial results. 2004 fiscal year end sales reached $47.5 billion, a 16.6 percent
increase over the previous year, and that operating profit rose to $2.3 billion, an increase of 18.6 percent over the prior year.
Global Strategy, Local Focus. Success: ability to transport the company’s unique culture and
effective retailing concepts to each new country. effort to adapt to local cultures and become involved in the local
community. Local customer needs, merchandise preferences and local suppliers.
INTERNATIONAL
INTERNATIONAL
34 Supercenters 3 Sam’s Clubs 2 Neighborhood
Markets. employs more
than 20,000 associates.
1991: joint venture: Cifra first country for Wal-Mart International 1997, Wal-Mart acquired operates 671 units in 31 states employs more than 105,000 associates
across the country.
1999: acquisition: ASDA 256 ASDA stores 7 GEORGE apparel
stores 21 depots
Employs around 134,000 Wal-Mart name: 1st
appeared on a UK store in 2000
13 ASDA-Wal-Mart Supercentres throughout the UK.
1998: acquisition21 Wertkauf hypermarkets 74 Interspar hypermarkets
employs more than 13,000 associates
• Cultural Problems• Entry Method•“Loss Leaders” banned• Unions
Common EU considerations
Exchange Rates
Translation exposure/Transaction exposure Interest rates All deal with a similar network of suppliers
Evaluation Criteria1. Demand Conditions 2. Market Analysis3. Labour Issues4. Political Risk and Strategies5. FDI requirements and incentives6. Relationship with the US7. Taxation8. Bribery and corruption
Demand Conditions
GDP per Capita, With PPP $US 22,000
Population 40,280,780
2004 2005 2006 2007 2008
Retail sales (US$ m)218,50
3247,40
0251,10
6249,58
0254,22
5
Retail sales volume growth (%) 2.4 2 2.2 2.1 2.3
Market Analysis Young hypermarket sector
Competitors:
El Corte Inglés = Largest
High End
Carrefour = 2nd Largest
enjoys 90% brand recognition.
Rules on new store development
Labour Issues Labour Force: 18.82 million Wages under EU average Worst unemployment in EU:
11.3% Hypermarket do not have to
abide by the “siesta” working hours.
Wages are determined in contracts – no hourly wage
Dues-paying union membership is among the lowest in the EU (10%)
Political Risk and Strategies
Government incentives to companies to create permanent jobs
Government restrictions on the expansion of the hypermarket sector
FDI requirements and incentives U.S. is the largest foreign investor in Spain. Ministry of Economy is ready to offer assistance to companies that are interested in investing in the country Top 3 business functions: Manufacturing, retail, sales marketing & support
Relationship with the US
Spaniards voted for entering NATO and are fond of American products
Support given for the war in Iraq and Afghanistan
Taxation Corporate tax rate: 35% VAT to end-consumer 16%, reduced =
4-7% – businesses entitled to deduct VAT borne against VAT charged.
Tax on Business Activity (IAE) Local rate depends on many
factors, such as size and location of the business, the type of business, and number of employees.
Bribery and corruption Spain is the 22nd least corrupt nation
in the World - Transparency International
Demand
Lowest GDP per Capita, With PPP $18,100 US
Population: 10,356,117
2004 2005 2006 2007 2008
Retail sales (US$ m) 40,724 47,078 48,446 48,068 48,889
Retail sales volume growth (%) 4.3 4.8 3.9 2.2 2.2
Market Analysis 16 Jumbo & Pao de Açucar hypermarkets Smallest domestic retail sales market in EU Retail is best-performing and most sought-after
property segment in Portugal Going from small independent specialist retailers to
one that is dominated by large multinationals driven down average prices in the retail industry,
making the industry more competitive
Labour Issues Lowest labour cost in the EU Lowest Productivity Overly rigid labour market Low level of unionization General Workers Confederation of Portugal (CGTP) New Labor Law approved by Parliament
aiming to make the labor market more flexible Unemployment rate: 6.4%
Political Risk and Strategies Hypermarkets closing down
small retailers Government may be
putting in expansion restrictions
Legal system Slow and ineffective Leads to binding arbitration
of investment disputes
FDI requirements and incentives No distinctions exist between foreign- owned and
Portuguese- owned companies No limit on the repatriation of profits and/or dividends Tailored incentives package on a case by case basis New incentives regime - PRIME launched July 2003 investments >150000 euros, tax free loans and grants
for a percentage of qualifying investments
Relationship with the US Pro- American After revolutionary war, Portugal was the first neutral
country to recognize the U.S.
Taxation Corporate tax rate: 25% in 2005, 20% 2006 VAT to end-consumer 17% Double Taxation Prevention Treaty
Bribery and corruption Portugal is the 27th least corrupt nation in the World -
Transparency International
Demand Conditions GDP per Capita PPP $US 26,200 Inflation 2.3% (2003) Current Account Deficit $US 21,942 million Change in Net Reserves -$US 11,362 Population: 58,057,477
Market Analysis Retail Sector valued at $US 270
billion (2003) 60 million consumers Sophisticated and high brand
awareness Centre of International Market High competition from European
Chains Carrefour (Worldwide), Crai,
Esselunge (Spa), GS, SMA
Labour Issues Regional Issue
Infrastructure Problems
Women and Youth
Underground Problems
Unemployment: 8.9% (2003), EMU Standard 8.8%
Historical Difference between South 18.4%, Central 6.6%, 3.7%
40% Workforce
4 major – CGIL, CISL, UIL, UGL Important role and notable
activism
Political Crisis expected mid 2005 Deeply divided Silvio Berlusconi – PM and Italy’s richest person
FDI Requirements and incentives $US 15bn – 1.1% GDP No major impediments but high bureaucracy Government Authority & Italian Anti-Trust Conformity with EU Treaty Article 43 Limted Incentives for companies like Wal-Mart Requirements
Reformed 1st Jan 2004 to make easier Bring into line with Western Corporate Models
Relationship with USA Strong and Growing – Economic and Political 2002 trade $US 34.4 billion US imported $US 24.3 billion of Italian GoodsBUT:
NATO bombing in the Balkans in spring 1999, some retail outlets identified with the U.S. were the targets of attacks, almost always after hours, that resulted in minor damage (broken glass, graffiti) but no injuries to personnel.
Taxation• Italy – US Tax Treaty to avoid double taxation of firms with operations in both countries• Corporate Income Tax (IRES) 33% on Italian source income• Resident or Non Resident?
Bribery & CorruptionHighest among G7 countries – 42nd in Transparency.org rankingsContributing factors (WTO):
BriberyBureaucracy & ConfusingRegulationsPolitical party financing
Low civil servant wagesParmalat,Argentine,Cirio bankruptciesInternational Accounting Standards
The ResultsSPAIN ITALY PORTUGA
L
Demand: GDP
Retail Growth
Market Size
Competition
Labour Issues
Political Risk
FDI
Relationship with the US
Taxation
Bribery & Corruption
TOTALS
2nd 1st 3rd
1st 2nd
3rd 2nd 1st 3rd
1st 3rd
2nd 1st 3rd
2nd
2nd 2nd 1st
1st 3rd
2nd 1st 3rd
1st
3rd 2nd
1st 1st 3rd
2nd 15 23 20
Our Choice: Big Market and growing
GDP High Unemployment: Wal-
Mart creates Jobs High consumer spending Presence of Carrefour for
acquisition Low Union presence
Trade Union Density Italy 44.1% Portugal 25.6% Spain 18.6%
FDI Incentive for services Modernized economy
ACQUISITION “Wal-Mart set to buy hypermarkets
from Carrefour”U.S. retail giant is now negotiating with its
closest global competitor, Carrefour. possible purchase of the 12 hypermarkets, 15
supermarkets and 12 smaller stores that Carrefour must sell, as a result of the merger with Promodes last year.
Competition: Wal-Mart ruthless in using its huge global resources for waging predatory price wars.
deal between Carrefour and Wal-Mart would be made subject to appropriate trade union action.
Entry Recommendations
“Wal-Mart is said to be interested in Carrefour hypermarkets in Spain”
Wal-Mart wants to buy the twelve Carrefour hypermarkets in Spain
has been eyeing the Iberian market already for long.
“French Fusion” – the economist
Entry Recommendations
2nd largest retailer worldwide Over 10,000 stores in 29 countries Hypermarket, Supermarket, Hard Discount Leader in 9 countries:
France, Belgium, Spain, Portugal, Greece, Brazil, Argentina, Taiwan, South Korea and Indonesia.
$US 120 billion sales 420,000 employees
Carrefour
THANK YOUANY QUESTIONS?
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