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Wal-Mart eyes Africa for expansion
A Wal-Mart in Panorama City, Calif.
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Kai Ryssdal: Wal-Mart may be the 800-pound retail gorilla, but like a lot of companies these days, it's having a hard time expanding in what's become a slow growth world. With American consumers pretty much tapped, the company's going overseas again.
Wal-Mart's going to spend $4 billion to get a toe-hold in what may well be one of the fastest growing markets left out there.
Janet Babin reports from North Carolina Public Radio.
Janet Babin: Wal-Mart's in talks to buy South Africa's third largest retailer, Massmart Holdings. The chain sounds like the Wal-Mart we know: It sells electronics, food and general merchandise. And its strategy -- keep prices as low as possible.
U.S. shoppers have been hit hard by the recession, so Wal-Mart's turned to emerging markets. And by some estimates, Africa is home to one billion potential customers. But analysts worry that the retail giant is spending too much to reach them -- some $4 billion.
Investment officer Walter Todd at Greenwood Capital says that's a high price to enter a market filled with economic and political risks of its own.
Walter Todd: Any of these countries that have different laws and so forth are gonna have their own set of risks, and certainly that's there with this acquisition as well, but that's the trade-off that you're making for trying to enter these fast-growing markets.
But, he says, Wal-Mart doesn't have much choice. The company has announced plans to open smaller-formatted stores in the U.S. But the only place left for supercenters may be a new continent.
I'm Janet Babin for Marketplace.
The reporter says Wal-Mart may not have a choice (but to expand in emerging markets...).
No. They do have a choice, as does every other corporation. They do not have to expand forever. They are profitable, they should be happy with that. They and others do not have to keep getting bigger and bigger.
I was somewhat perplexed by the remark at the end of your segment on Wal-Mart expanding to Africa, that Wal-Mart "doesn't have much choice" but to open stores on a new continent. These stories are often framed with an implicit assumption that businesses must constantly expand at all times, but why is this accepted as the status quo? Isn't the whole idea of neverending growth/profits/housing-price-increases one of the fallacies that helped bring about the current recession?
If Wal-Mart's investors can't think of another choice, let me suggest that they could reinvest some of the company's profits on improving their business model, products, or services, or perhaps even develop more sustainable (in economic, social, and environmental senses) business practices.
