On September 27, 2010, Wal-Mart announced interest in purchasing the African-based Massmart for $4.6 billion dollars. Massmart is seen as the third-largest consumer goods distributor and viewed by Africans as a high-quality retailer. The top two rivals for Massmart are currently: Pick n Pay Stores Ltd. and Woolworths Holdings Ltd.
Factors that may affect Wal-Mart’s ability to succeed in the African market include: cultural barriers, poverty, crime, corruption, and a poorly maintained infrastructure.
In the U.S., Wal-Mart is seen as our most prominent discount retailer, but many local grocery and specialty stores feel the impact as Wal-Mart moves into their communities.
While grocery stores typically have one manager over a whole store, Wal-Mart takes this a step further. At Wal-Mart Supercenters, one manager is over the entire retail and grocery store, and associate managers are then assigned over the respective departments. This type of structure is highly competitive over smaller grocery chains such as: Publix, Kroger, and Winn Dixie stores trying to compete with the larger supercenters.
In more rural areas, a Wal-Mart will be strategically placed in communities that can sustain one large retailer, but would not be able to support two. In this example, if a Wal-Mart moved into an area with several small towns nearby, it is strategically placed so that if a large competitor like Target Supercenter were to put up a store, they would have a hard time competing in the local economy against an already established Wal-Mart Supercenter. But in markets like Nigeria, one of Africa’s most populated areas, there are 140 million people eager to shop at conveniently located Massmart stores.
This opportunity for Wal-Mart to gain market share on the African continent may be the most profitable move yet for the Bentonville, Arkansas based chain. Investors and stockholders alike watch cautiously as Wal-Mart makes their big move into Africa.