. Case Analysis (10 points each question, 20 points)

Wal-Marts Push into Africa

Wal-Mart continued its international expansion efforts recently with the acquisition of South Africas Mass Mart chain. According to Wal-Mart CEO Doug McMillan, Mass Mart was an attractive option because of its multiple formats and strong management team. The acquisition gives the mega discounter an instant presence in a region that is showing strong signs of growth. At the moment, Wal-Mart is expanding its presence in the region slowly, concentrating for now on the country of South Africa where it earns over 90 percent of its revenue in the region. Doug McMillan notes that in addition to this being a quickly growing market, it is also a good place for the discount chain to gain knowledge of the local market. In time, Wal-Mart hopes sub-Saharan Africa will become as important to the company as Latin America is.

Wal-Marts entry in Africa has not been without controversy. Some politicians complain that the retailer will zap the ability of local companies to compete. However, Doug McMillan believes otherwise. He point out that because Wal-Mart has a policy of buying much of its merchandise locally, the company actually helps to create jobs. Wal-Marts policy is important to the firm as well. By working with local suppliers, Wal-Mart can streamline logistics and stock items that fit with the local market.

In the future, Wal-Mart hopes to continue its international expansion by building a presence in India. In fact, the company had already begun the process when Indias government put things to a stop. Doug McMillan is cautiously optimistic that in time Wal-Mart will be able to return to the market. For now though, Wal-Mart plans to continue to focus its efforts on its existing international ventures. In the long-term however, Wal-Mart is excited about prospects in Brazil and China as well as its continued presence in South Africa.

1.Discuss the advantages of entering a foreign market via an acquisition. Do you see any drawbacks to Wal-Marts recent decision to acquire the Mass Mart chain in South Africa?

2.What does Wal-Marts presence in South Africa mean for the country? Why has India taken a stance against retailers like Wal-Mart?