Big-Box Retail Expansion
In 2012, Target expanded its business into Canada. The proximity to the U.S. as well as Canadians’ familiarity with the brand made expansion across the border seem like a natural step for the retail powerhouse. However, after only two years, Target faced $2 billion in losses and announced plans to close all of its Canadian stores.
Walmart became the largest retailer in the U.S. through superior logistics, cost-cutting, site selection, and a relentless push to focus on low prices. The company assumed the same strategy would work in the rest of the world…but it has not quite gone according to plan. The company has had success in North America, including Mexico. In China, there has been some success with the bricks-and-mortar stores but little with its online presence. Walmart packed up its locations in Germany and Japan and is considering selling off parts or all of its British chain (once the poster child for international expansion).
In 2006, Home Depot bought the Chinese home improvement company Home Way and its 12 stores in the country. With its booming economy and strong real estate market, China seemed like it would be an easy win for America’s home improvement giant. However, by 2012 Home Depot closed the last seven of its 12 original stores.
Questions:
1) Why are big-box stores that are so popular in the United States (and often in Canada and Mexico) failing overseas? Be sure to use the expansion criteria from the chapter in your analysis.
2) Do you think these companies should attempt expansion again? Explain why or why not. If so, what should they do differently? Walmart is currently trying to break into India. What suggestions do you have regarding this expansion?
