Opportunity for Expansion - the Case of Wal-Mart Essay

Opportunity for Expansion - the Case of Wal-Mart - Essay Example The expansion of a firm in the international market is often considered as the most effective method for increasing organizational competitiveness and ensuring a long – term growth. In practice, this strategy can be risky, especially if it is not carefully planned. The level at which opportunities for expansion need to be used by organizations for improving their market position is reviewed in this paper. Reference is made to a specific organization, Wal-Mart, a major competitor in the global retail industry. Currently the firm operates in about 27 countries (Wal-Mart 2012, corporate website). Despite its success, the firm tries to secure its market position through continuous expansion; in US market, where the firm is based, the chances for further growth seems to be limited. The expansion in the international market seems to be the firm’s only chance for achieving a long – term growth. 2. Expansion in new markets – Wal-Mart 2.1 Background Wal-Mart is a l eading firm in the international retail market. The firm’s stores are dispersed globally, making Wal-Mart one of the most powerful competitors in its industry. The firm was first established in 1962, in USA (Wal-Mart 2012, corporate website). ... In 2010, the firm planned to increase their international stores, approximately by ‘600 stores worldwide’ (Tice 2010). For the US market, the establishment of just 160 new stores was considered as sufficient for responding to customers’ needs (Tice 2010). In 2012, the firm plans to invest a high amount of money, about $750 million (CBC News 2012), for expanding its operations in Canada. The above investment involves in the ‘renovation and expansion of the firm’s existing stores creating 14,000 new jobs across Canada’ (CBC News 2012). It should be noted that in 2011, the firm had developed a major plan of expansion in the US market, adding ‘hundreds of small stores across US under the name Wal-Mart Express’ (Bustillo 2011). This is an effort for expansion in the internal market, as combined with the expansion internationally, which is considered as quite important for standardizing the firm’s performance in USA. The opportuni ties of expansion given to Wal-Mart, as described above, are analyzed below; reference is made to appropriate theory but also to the practical implications of the particular initiatives. Also, the potential effects of these strategies on the organization’s performance are discussed, as they can be estimated by using the figures presented in the firm’s financial reports for the last 5 years, a period during which the firm’s efforts for expanding internationally have become intensive. 2.2 Evaluation of the firm’s current expansion strategies 2.2.1 Organizational expansion in theory The decision of organizations to expand their activities internationally can be based on different criteria. According to the ‘monopolistic advantage theory’ (Luo 1999, p.27), organizations may decide to expand in the global