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No. of Recommendations: 4
Thanks to Tim Hanson for his interesting and good analysis. But Tim doesn't mention Wal-Mart past failures abroad. WMT experimented with Western Europe and had to exit the market. They closed shops in Germany, as the culture of their stores didn't work there (see here for instance: http://www.dw-world.de/dw/article/0,,2112746,00.html). Also, as Tim mentions there are very big competitors in the world and Europe is full of them, such as Carrefour, the French retail giant, etc. To WMT's credit, they exited the market they couldn't crack and learnt their lessons. I assume they are applying those lessons to the other markets they are now entering. But to what extent can we be sure that the same problems will not show up again?

They now seem to be interested in emerging markets such as those that are part of the famous BRIC group (Brasil, India, China, but not Russia). Emerging markets are perhaps a better target, but they also have their problems. The same issues that WMT encountered in Germany can probably be found in emerging economies, such as "know your customers." Are these markets mature enough to experience the development of such a retailer as WMT? When WMT started in the US, many retailers were already occupying the place, but WMT came in with a different offer. Is WMT in the same position in the BRIC countries today?

Any comment welcome. Thanks.
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No. of Recommendations: 2
I'm glad you mentioned the failure of Wal-Mart in Germany. I am an American living in Germany and so I did visit their stores here, hoping perhaps to find American products, for example. I did not enjoy the experience --- the store was too big, too shabby and too impersonal --- and I can well understand why most Germans felt the same and Wal-Mart was not a success here.

I will follow the recommendation, but with somewhat mixed feelings; perhaps other countries are different.
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But Tim doesn't mention Wal-Mart past failures abroad.

You are correct that Wal-Mart exited both the German and South Korean markets some years back, unable to maintain a profitable market presence there.

In a number of ways, I think this is good for us. First, it demonstrates that the company is unwilling to throw good money after bad in the event they cannot produce profitable growth. This is why there is a margin of safety here. If Wal-Mart succeeds abroad, we have lots of upside. If they don't, they won't destroy value by deploying capital into a black hole, meaning we have limited downside.

Second, I think Wal-Mart learned from those experiences and is deploying that learning in at least 2 ways. The first is by identifying local partners with which to work and being more accommodating to local norms (ex. union negotiations in South Africa). The second is that the company is focusing more on emerging markets where there is limited entrenched competition and more consumer appeal of low prices. Both Germany and S. Korea had very entrenched local competition and consumers that were wary of American brands as well as consumers for whom price was not always a primary purchasing point.

Tim
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