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BUSN 412 Week 2 Case Study

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BUSN 412 Week 2 Case Study http://www.worldcrunch.com/business-finance/why-walmart-can-039-t-beat-the-competition-in-brazil/walmart-mexico-corruption-carrefour-retail/c2s9527/ BRASILIA – There’s a strange section on Walmart Brazil’s website, strange at least for a retailer. It’s not the usual invitation to apply for a job, “Work with us,” but an invitation to make real estate deals with the huge multinational company. “If you own land or a building where it would be possible to install new Walmart Brazil stores, fill out the following form.” That little announcement is evidence of Walmart’s insatiable appetite for expansion, an desire for growth that led to criticism of the company when the New York Times revealed last April the company’s massive use of bribes to expand in Mexico. Walmart used the bribes to accelerate the process of buying property and to secure store permits from public officials. The scandal made the company’s stock prices drop in Mexico and New York, and forced it to postpone plans for expansion in Mexico and Central America. It also led to a lawsuit by several pension funds in the United States, whose portfolios were affected by the decreased stock price. In Brazil, the company is not thinking about slowing down, but it still suffering from the effects of the scandal. And all eyes are on Walmart’s next moves. Last year was a difficult one for the giant retailer’s global operations. The damage to its reputation from the corruption scandal left a mark on all of the company’s operations in the region. That is certainly the case in Walmart’s second most important market, Brazil. According to the Brazilian Association of Supermarkets (known as Abras), Walmart Brazil had sales of $11.5 billion in 2011. The American company did not manage to beat the French giant Carrefour, which had $14 billion in sales the same year. Pão de Açúcar, which is also owned by a French company, is undeniably the market leader and had sales of $25.7 billion in 2011. Around 80 percent of Brazil’s retail market is controlled by foreign companies, which is one of the reasons there has been so much growth in that domain, as foreign capital is infused into the market. Projections for the retail market in Brazil are promising. According to consulting firm A.T. Kearny’s Global Retail Development Index, Brazil has had the highest growth in the world in this sector for two years in a row, and a 15% increase just in this last year. Brazil is followed by Chile, China, Uruguay and India. Eternal Third Place For retail analysts, there is only one explanation for Walmart’s struggles in Brazil: the lack of synergy between the nine different brands and five different formats it is operating in the country. The company currently operates three different kinds of supercenters, three supermarket chains, a cash and carry wholesaler, a chain of smaller local stores and Sam’s club buyers’ club. “Although it has been in the market for 17 years, Walmart has not yet been able to centralize its management,” said Roberto Nascimento, professor of business at the School of Publicity and Marketing in Brasilia. “Today the network has three different realities, one in the Northeast, one in the Southeast and on in the South. The differences in leadership among the different companies can explain this situation.” Walmart Brazil’s CEO, Marcos Samaha, understands that perfectly well. In a teleconference with analysts to disclose the company’s results from the first trimester of 2012, he emphasized that the group would start the process of revamping its Brazilian operations. The idea is to unify communications between all of the different brands. Another modification in progress is an effort to reduce the company’s cost structure in Brazil. The initiative includes a strategy called

BUSN 412 Week 2 Case Study

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