Acquiring a weak player. Acquiring a weak player in the local market is an effective approach, provided the global company has the ability to transform the weak player within a very short time. This is what Wal-Mart did in Canada in acquiring Woolco.
Launching a frontal attack on the incumbent. Attacking dominant and entrenched local competitors head-on is feasible only when the global company can bring significant competitive advantage to the host country. Wal-Mart's entry into Brazil illustrates the potential - and the limitations - of a frontal attack.6
Carrefour, the French retailer, had been operating in Brazil since 1975. When Wal-Mart entered Brazil in 1996, it decided to overtake competitors by aggressively pricing its products. This strategy backfired, as Carrefour and other local competitors cut prices as well, leading to a price war and initial losses.
Wal-Mart realized that its global sourcing did not provide any built-in price advantage because the leading sales category in Brazilian supercenters was food items, whose sourcing tended to be local. Competitors such as Carrefour had an advantage in local sourcing because of their long relationships with local vendors.
So Wal-Mart chose to focus on areas where it could differentiate it self: customer service, targeted at neutralizing Carrefour, and merchandise mix, targeted at overwhelming smaller local competitors.
An industry observer remarked: "While small shops in Brazil have a strong customer service component, most large stores, including Carrefour, have adopted the European ethic that the customer is fortunate to have them available and if they are unhappy about something, they are welcome to go next door. To entice shoppers away from these large but user-unfriendly stores, Wal-Mart stressed its customer service, an asset enhanced by its policy for hiring and promotion.7
SPEED OF GLOBAL EXPANSION
Did Wal-Mart globalize quickly enough? One way to evaluate its speed is to compare the...