The purpose of this article is to examine why Walmart International adopts acquisition cooperation as a corporate strategy to strengthen its technology-based market. From the perspective of the supply chain, it explains and answers why Walmart companies adopt acquisition cooperation. The author explains what acquisition is and why, from the perspective of the supply chain, Walmart adopts this cooperation strategy. The author below uses official data from the Walmart website to explain in detail..
In 1962, Walmart was founded in Rogers, Arkansas and expanded its operations until the 1980s, when it opened the first Sam’s Club, a goods warehouse equipped with a computer system that allowed for faster and more accurate payments. In 1987, there was rapid technological advancement, and the company introduced the largest satellite communication system in the United States, connecting operations through voice, data, and video communications. In 1990, rapid technological developments allowed Walmart to grow into the number one retail company in the United States (Walmart, 2024). Currently, Walmart operates three business segments: Walmart US, Walmart International, and Sam’s Club.
Walmart’s global sales by business segment in 2024
Source: T. Ozbun, 2024, Statista.com
Walmart US operates in all 50 US states, Washington DC and Puerto Rico. Walmart International operates in 18 countries outside the US, including Canada, Costa Rica, Mexico, India and South Africa. Meanwhile, Sum’s Club operates in 44 US states and Puerto Rico.
Within the framework of companies cooperating with each other to expand their presence, Walmart has three ways of cooperation. The data presented is taken from Walmart’s official website (2024). The first is expansion outside the United States, opening stores in Canada in 1994, China in 1996, and establishing a company in Florida in 2022. The second is acquisitions, etc. In 1998, Walmart acquired Asda, one of the largest supermarket chains in the UK. In 2009, it acquired shares in D&S SA, a major Chilean retailer. To date, Walmart has full control over the Chilean retail market. In 2011, it made acquisitions in South Africa, starting with Massmart Holdings, Inc. In 2013, it acquired Bharti Walmart Privat Limited of India. In 2015, it acquired Jet.com ($3 million), one of the online retail companies. The partnership helped Walmart increase sales by 63% through innovative technological advances and increase its online inventory from 10 million to 67 million items. In the same year, Walmart also acquired a stake in Yahodian, a leading Chinese e-commerce company. In 2021, the acquisition allowed Walmart to increase its holdings by 51%.
In 2017, it acquired Shoes.com, a leading online footwear and apparel company. Walmart then acquired Moosejaw ($51M), a well-known retailer of outdoor sports. Moosejaw is best known as an e-commerce company, but also operates multiple stores. Walmart acquired Modcloth, a vintage goods company with an emphasis on plus-sized women. The company began to hit a dead end in its pursuit of a retail sales strategy. The acquisition of Jet.com is a premium product of the leading American online men’s clothing retailer. Walmart’s strategy was to sell at lower prices. In 2018, Walmart acquired more shares in Flipkart India.
The third is that Walmart Inc. will be acquired by selling its shares. Such a cooperation process can occur by considering the conditions that the company must take. Walmart once sold its shares in Seiyu Japan to KKR and Rakuten for a minority stake of 15%. The purpose of this partnership was to accelerate Seiyu’s technological development. While the acquisition incident occurred, Walmart Argentina was acquired by Grupo de Narvaez in 2020. The acquisition was considered because Walmart Inc. analyzed the impact of the pandemic on the Argentine economy. There was a currency crisis in Argentina, which affected people’s purchasing power and put the company at risk.
From this explanation, we can see three interesting points about Walmart’s cooperation. First, the strategy Walmart most often uses to expand its company into other countries is acquisition, not directly establishing a company. Second, Walmart mainly acquires well-known retail companies that dominate the market in a country. Third, most of the acquisition cooperation focuses on technology transfer for Walmart to strengthen its online-based market. The following graph shows Walmart’s global sales from 2006 to 2024. The company has significantly increased its sales every year.
Walmart’s worldwide net sales from fiscal 2006 to fiscal 2024
Source: T. Ozbun, 2024, Statista.com
According to Summer N. Levine, an acquisition is a transactional activity between two parties, where the buyer becomes the owner of most or all of the seller’s assets. In an acquisition, the acquiring company controls the activities of the acquired company in terms of company structure and activities. The human resources of the acquired company can be retained or fired, so when a company makes an acquisition, the company has a great deal of control over the company’s structure and activities (Nabbal et al, 2023). When Walmart acquires a company, it shows that Walmart’s position affects the entire company in terms of both company structure and activities.
A supply chain is a set of business processes that connect multiple parties to add value to a product and distribute it to consumers. Each party in the supply chain network can contribute in the form of inputs that increase the value of the product. A supply chain is not limited to factories and suppliers, but must also consider the context of distributors, warehouses, and retailers, as well as the needs of consumers. As Sunil Chopra and Peter Meindl explain in their book Supply Chain Management (2016), “The decisions you make to design, plan, and operate your supply chain play a critical role in the success or failure of your company. To remain competitive, your supply chain must adapt to changing technologies and customer expectations.”
The indicators of supply chain activities are Supplier – Manufacturing – Distributor – Retailer – Customer. Walmart is a retail company in the third position. The supply chain activities to be a retailer require suppliers, manufacturers and distributors. Below is an overview of Walmart’s supply chain process. First, Walmart provides products and price information to customers. Second, the customer who has made a purchase transfers funds to Walmart. Third, Walmart communicates POS data and replenishment orders to the warehouse or distributor, which then sends the order back to the store by truck. Fourth, Walmart transfers funds to the distributor, and fifth, the distributor also provides price information and sends delivery schedules to Walmart. The above explanation shows how supply chain activities as a retail company affect sales. Retail companies like Walmart have subsidiaries in the chain that complement each other. If such companies want to set up a company outside their home country, they need to ensure that the value chain of Walmart as a retail company is available and operational. So, ensuring the presence of suppliers, manufacturers, distributors and customers is very complicated and will cost a significant amount of capital.
Therefore, based on the above explanation, the author concludes three points about why Walmart International company makes more acquisitions than directly building companies for overseas expansion. (1) By making acquisitions, Walmart does not need to spend a lot of capital to build from scratch in terms of availability of suppliers, manufacturers, and distributors. The acquired companies already have the system, so Walmart only needs to operate it. (2) By making acquisitions, Walmart can easily control the companies with technology transfer as the main focus, so Walmart’s direction is not to expand the building of companies, but to expand Walmart’s technology-based market. In line with the supply chain perspective for companies to remain competitive, the supply chain must be in line with technology development and consumer needs. In this era, consumers tend to need online-based market, so technology becomes an indicator that plays a key role in companies. (3) By making acquisitions, Walmart can easily control the market without fearing other competitors, so Walmart’s strategy is mainly to acquire domestic well-known retail companies. Based on the above three considerations, the author believes that this is the reason or cause why Wal-Mart chooses acquisition to expand into the international market.
