Walmart's Market Entry Strategy in Austria

This assignment examines the feasibility of Walmart entering the Austrian market through Foreign Direct Investment (FDI). It analyzes Austria's economic conditions, energy security, and business environment to assess the potential for success. The report also considers relevant theoretical frameworks like Carroll's Pyramid of CSR and the born-global firm concept. Finally, it concludes that FDI presents a viable and advantageous mode of entry for Walmart into the Austrian market.

Business Organizations and
Environments in a Global Context

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
BACKGROUND OF WALMART.................................................................................................1
BACKGOUND OF AUSTRIA.......................................................................................................2
PORTER FIVE FORCE..................................................................................................................2
PESTEL...........................................................................................................................................4
CONCLUSION................................................................................................................................6
REFRENCES...................................................................................................................................7

INTRODUCTION
It is very important for any business organisation that they are expanding their operations
which will be helping them all into increasing their profits and revenue with this. For this it is
important that they are getting the relevant options or opportunities available then only their
operations could be allocated to other than home country (Hamilton and Webster, 2018).
Expanding and establishing operations, trading and business of any company especially that of
multinational one will be very essential for them. Thus within this particular report discussion
will be done on one of the best MNC of America which is Walmart Inc. which is planning to
expand its existing operation within Austria. Further the report will cover background of both
company and country in terms of business with explaining PESTLE and Porter 5 force for
understanding the business environment completely.
BACKGROUND OF WALMART
Walmart Inc. is one of the biggest multination companies which is having its operation into
worldwide and covering about half of the world’s retail market. It is the American multinational
retail corporation which is having or operating as chain of hypermarket, grocery stores and
discount departmental stores which is selling daily retail food and other items (Lasserre, 2017).
The company was founded in year 1962 and till the current time it is having about 11000+ stores
that too in around 27 countries of world. It is worth noticing that Walmart is largest company in
world in terms of revenue in year 2018 which is about $500 billion and with this it is also having
highest number of employees than any other company which is 2.3 million. The company is a
publicly traded and family owned which is controlled and managed by Walton family with
having about 50% of shares with them. The company is not only having its operations into
products but also selling most of the service into countries like that of Walmart money, Pickup
Today, Walmart pay, Money-card and Walmart-2-Walmart.
While there are number of competitors of Walmart into world market as it is operating all
over countries. The competitors of company included that of Target Corporation, Giant Tiger,
Aldi, Ingles and Publix. So all of these are giving tougher competition to company as they are
struggling to get into markets like that of Korea and China (Marquis and Raynard, 2015).
Walmart entered into German food market with having 2% in 1997 and the highest share of
German market which was Aldi with about 19% share. Walmart is also operating within Austria
which is country into Europe but certainly it need to expand its operation within the country.
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BACKGOUND OF AUSTRIA
Austria is country in Central Europe which is having Vienna as its largest city and also its
capital with having about 9 million populations and sharing its border with Germany and Czech
Republic. The country is consistently ranking to highest in terms of GDP as is highly
industrialised nation of Europe which is also well-developed country as well. Privatisation
started in 1980 when largest of its companies and industries started to be nationalising with
reducing its holding to state level (Crane and Matten, 2016). This was more as compared to other
countries of Europe as the labour movements were mostly high into this country. Austria’s main
trading partner is Germany with which they are doing most of their import and export is done
with Germany only.
Into the economic crisis of 2008 had greater impact on the economy of Austria as it was
having 67% of imports coming from other European Union member states. It is growing at faster
rate from 2011 and is having most of the cash inflow of money from the Foreign Direct
Investment (FDI). It was also expected to grow and then reach to $500 billion till year ending
2018 and the will be growing more in coming next five years. All of GDP and GNP of country
are having most of its contributor to about manufacturing and service sector and this slowed
down in year 2013 (Stead and Stead, 2017). There are other factors which are impacting country
like that of wages paid to labour which are high and impacting labour intensive companies or the
high inflow of FDI into Austria. The most important industries of company are like that of
services, manufacturing, insurance and accommodation which are growing faster with the help
and flow of FDI into market.
PORTER FIVE FORCE
This is a kind of tool or framework which is working and analysing competitive
environment of business that is drawing special attention on the business and industry as well.
Porter 5 forces were given by Michael E Porter in 1979 for analysing and identifying the impact
of pure competition into profits of all the firms in market. These factors are considered to as
microenvironment within the contrast of general environment into overall industries. This will be
including or identifying for change in any of the forces of close for the company which is
effecting. All these factors of market o industry is affecting all ability of company to serve its
customer and making profits (Cavusgil and Knight, 2015). The Porter 5 force is having factors
that are horizontal includes threat of new entrants, that of substitute and rivals. While vertical
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factor will be including that of bargaining power of customer and supplier of Porter 5 forces.
These factors are mostly based on SWOT analysis which will be finding for the strength and
weakness of company based on within market (Walmart Inc. Five Forces Analysis, 2018). While
there are also other Porter strategy which is including generic competitive strategies.
Threat of substitute-
There is most threat of substitute within the retail market of Austria as the sector are
having many influence on sale of products and services as well. The threat of potential
substitutes includes that of having relation with all other marketing or services which is the best
segment of industry. Retail sector will be having many substitutes like that of small grocery
stores, payment online merchants and other retailers (vom Brocke, Zelt and Schmiedel, 2016).
While it is considered that the threat of substitute is very much weak into market that would be
impacting the retail industry of Walmart. As there are many wider variety of goods and services
which are offered by Walmart in Austria but then also they are having few or no substitutes for a
giant company like that of Walmart.
Threat of competition-
The threat of competition is very high as there are number of competitors of Walmart like
that of Target Corporation, Giant Tiger, Aldi, Ingles and Publix will be having certain number of
share from the market.
Threat of new entrants-
In addition to this it could be included that they threats to new entrants are very high or
strong into market of retail industry. As there are very low cost this is regarded to as one of the
very strongest factor of doing or conducting business. While there will be very higher cost of
brand development will also be having moderating force as Walmart is having very high brand
value in market. There are very easy to enter into market of retail sector with having the potential
of small retailers and their entry is based on location, availability of food or other products. The
cost of capital will also be very much low due to which it is regarded to as stronger force of
entrance of other retailers or small grocery stores (Ferrell and Fraedrich, 2015). But rather it is
also included that for establishing one of the brands it will be very costly as it would be requiring
more of financial resources in building up of stronger brand image into market.
Bargaining power of supplier-
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Within the retail market bargaining power of suppliers is very weak forces as there are
very larger industries which could not be able to satisfy their own need and demand. As the
supplier of industry would be largely impacted by MNC like that of Walmart due to having
number of suppliers. There are also many tough competitions into all the existing suppliers
which are also regarded to as weaker force with having high availability of supply. This will be
impacting the company to larger extent as will be having weaker potential impact on Walmart
and the other small suppliers will be having weaker potential impact onto suppliers. There is
much higher availability of suppliers and product supply which will be impacting strategic
growth of Walmart.
Bargaining power of customer-
All the retailers of market will be facing very weaker bargaining power as there are
number of retailers and number of customers as well. There is larger population of buyer will be
making it very much difficult for Walmart to satisfy demand of each of them and then
overcoming to pressure of retail firms as well (Carroll, 2016). So this larger population will also
be having weaker force with higher diversity of them and smaller size of individual purchase as
well.
PESTEL
This is the most important and common framework which is tool used by marketers in way
of analysing and then monitoring macro or external environment of organisation which are
having greater impact on growth and profits of firm. This tool is majorly used to identify what
are these factors which could impact and influence firm, their decision making power and
finding out all sorts of threats and opportunity from market. There are about 6 factors which
could be impacting the firm and its decision making power which are like that of political,
economical, social, technological, environmental and legal. All these factors will be helping in
identifying any sort of market with more clear and greater impact which will also be helping
Walmart in identifying retail and overall market of Austria so that company would be able to
make decision of expanding its operation in country (Brannen, Piekkari and Tietze, 2017). So
here will be PESTEL of Austria for analysing its decision which is made as per the contract of
Walmart and FDI investments as well.
Political factor-
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These are those factors which are concern with governmental and political view of
country helping company to identify that how important it is to get identification of policies of
nation. All the political factor will be greatly impacting Walmart and their decision of FDI into
Austria as these factors are level of intervene of government into the economy of country. Being
a democratic nation it is very much essential for Austria that they are vastly growing with help of
its people and other nations like that of Germany as well. The country is facing very much stable
and highly competitive nation of Central Europe which is considered to be as very good political
environment for companies like that of Walmart which is planning to expand into country.
Economic factor-
Austria, with its well-developed market economy and high standard of living, is closely
tied to other EU economies, especially Germany's. Its economy features a large service sector, a
sound industrial sector, and a small, but highly developed agricultural sector (vom Brocke, Zelt
and Schmiedel, 2016). There was very much increase into demand of foreign goods and export
which recorded into many sort of distress like that of international financial crisis, employment
and global economic downturn as well that started in 2008-2009. Due to this there was reduction
into the GDP of country which was about 3.8% in 2009 and then slightly growth in 2010 which
was of 2%. There are many sort of international and financial crisis that was witnessed by one of
the largest bank of Austria that was having its operations like that of eastern, central and western
countries of Europe. All government of country introduced many supportive roles like that of
nationalization and prevention of insolvency. Into many medium term of all Austrian bank will
be requiring many further capital that could be improved with help of Globalisation and
economic outlook as improving the restricting of bank of Austria.
Social factor-
There are any type of social factors which are impacting the company like that of lifestyle
of customers, standard of living and preference of customers as well. This is reason why country
is regarded to as World Competitiveness Yearbook it ranked 1 in quality of life in year 2009.
Technological factor-
These are those factors which are always leading to motivation of all people within the
innovation and use of digital or latest technology of countries. Technological factor is
determining how much developed a country is and how they are growing within market with use
of most effective and efficient the use is. As today’s environment is very fast growing and is
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changing with the impact and use of innovation and creativity as well. As within the retail
industry there are many fast changing technologies which are been functioning with use of
mobile banking, fast payment and online shopping as well. So Austria is also very fast growing
technological nation with having or using most of its growth with use of these technologies and
innovation only (Stead and Stead, 2017). With the help of this only it is quite possible to
influence the people as they would be using the technological advancement the most.
Environmental factor-
For a long time after the war (world war), reconstruction and supporting the industrial
development were the only priorities to Austrians. Only in the late seventies, environmental
movements gained momentum and the general awareness of pollution and other issues increased.
Later, a Green party formed and a number of environmental laws were released to protect the
nature of the nation. The major environmental issues concerned with Austria are 1) transit traffic
mostly in Tyrol & Salzburg (important road link connecting north and south Europe) 2)
industrial pollution.
Legal factor-
The labour law or other legal factor will be impacting the company and its operations like
they need to follow all type of legal formalities which is attracting the customers from around the
world. It could be included that there is tax of about 25% for strong showing the further
comparison of EU member state.
Other factors:
Climate change and natural catastrophes increasingly influence business location
decisions. Austria ranks second worldwide concerning the security of energy supplies (Barak,
2016). Electricity is available more than 99 percent of the time.
CONCLUSION
From the above analysis it could be included that there are many chance of Walmart to get
itself into more market of Austria with help of FDI. There are many sources for company to get
through and penetrate into market of country and helping to customers to satisfy their need. So
the company would be using and having FDI as best and most important mode of entry.
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REFRENCES
Books and Journals:
Barak, M.E.M., 2016. Managing diversity: Toward a globally inclusive workplace. Sage
Publications.
Brannen, M.Y., Piekkari, R. and Tietze, S., 2017. The multifaceted role of language in
international business: Unpacking the forms, functions and features of a critical challenge
to MNC theory and performance. In Language in International Business (pp. 139-162).
Palgrave Macmillan, Cham.
Carroll, A.B., 2016. Carroll’s pyramid of CSR: taking another look. International journal of
corporate social responsibility, 1(1), p.3.
Cavusgil, S.T. and Knight, G., 2015. The born global firm: An entrepreneurial and capabilities
perspective on early and rapid internationalization. Journal of International Business
Studies, 46(1), pp.3-16.
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and
sustainability in the age of globalization. Oxford University Press.
Ferrell, O.C. and Fraedrich, J., 2015. Business ethics: Ethical decision making & cases. Nelson
Education.
Hamilton, L. and Webster, P., 2018. The international business environment. Oxford University
Press.
Lasserre, P., 2017. Global strategic management. Macmillan International Higher Education.
Marquis, C. and Raynard, M., 2015. Institutional strategies in emerging markets. The Academy of
Management Annals, 9(1), pp.291-335.
Stead, J.G. and Stead, W.E., 2017. Management for a small planet. Routledge.
vom Brocke, J., Zelt, S. and Schmiedel, T., 2016. On the role of context in business process
management. International Journal of Information Management, 36(3), pp.486-495.
Online:
Walmart Inc. Five Forces Analysis. 2018. [Online]. Accessed through: <
http://panmore.com/walmart-five-forces-analysis-porters-model-case-study>.
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