Global bodies such as the international monetary fund

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Unformatted text preview: orld will come from regions other than North America and Western Europe, with virtually all indications pointing to the global economic power shift (Economist, 2011). Developing markets’ rise in importance has been aided by the post -recession public debt crisis in some western countries and the poor growth outlook for these markets. Consequently, investors and companies are increasingly looking at emerging markets for better returns and long term growth prospects. The retail industry is amongst those that are fast globalising. Even before the recession and current economic challenges in their home markets, retailers from the west recognised that global expansion was required in order to maintain an acceptable growth rate, as their own markets matured and became saturated. With spending power shifting to emerging markets, leading global retailers such as Wal-Mart, Carrefour, Metro AG and Tesco are in a scramble to get a foothold in these markets (Financial Mail, 2011). 1 Entry into developing markets is widely recognised to be complex because of the institutional voids and social challenges that characterise these markets. Western multinational corporations (MNCs) also battle with the cultural and business differences they encounter (Ghemawat, 2001). As these developing countries generally face huge social challenges, high levels of activism around social issues usually abound. Firms entering these markets, therefore, face the challenge of understanding and engaging with various stakeholders. The purpose of this research is to examine the management of stakeholders by a multinational retailer entering a developing market, using the case of Wal-Mart in South Africa. The objective of the research is to contribute to understanding entry dynamics to emerging markets from a stakeholder management perspective. 1.2 Research Scope The scope of this research will be limited by the following definitions/descriptions: Emerging Markets/Countries refers to the rapidly growing and industrialising economies of Asia, Latin America, Eastern Europe and Africa. Multinational Enterprises (MNEs) or Multinational Corporation (MNCs) shall mean firms with some foreign sales or foreign production of ten per cent (10%) (Rugman 2009); and Entry shall mean entry by means of a merger, acquisition or takeover. The research will be done on how stakeholders were managed by Wal-Mart during its recent entry into South Africa. [Wal-Mart is best suited for the research as it is the largest company in the world and retail involves significant operations in a country that is being entered.] 2 1.3 Research Motivation Many MNEs, especially from the developed markets, are looking at or are already expanding into emerging markets. However, entering developing markets can be complicated. While research has been undertaken on the challenges of entering into developing markets, there has not been any significant focus on managing and engaging stakeholders upon entry. Some research exists on managing stakeholders when entering developed markets, but there are not many of these in a developing economy context, particularly in the retail industry. Yet, given the social challenges in developing countries, stakeholders play a far more significant role than in developed countries. For retailers, entering emerging markets is even more complex as it requires managing relationships with more stakeholders in a new and unfamiliar environment (Palmer & Quinn, 2007). Many of the mistakes made on entry can be prevented by a better understanding of stakeholder management. The research is motivated by the desire to demonstrate the strategic importance of stakeholder management, especially for developed country MNEs entering emerging markets. The researcher believes that greater knowledge in such situations could result in a more positive outcome for both MNEs and their stakeholders in emerging markets. [Page 2] Motivating the study was also the opportunity that the entry of Wal-Mart into South Africa and stakeholder reaction to it presented. The entry of Wal-Mart into South Africa was a matter of considerable national interest. Not since the years of economic sanctions during Apartheid, has Foreign Direct Investment (FDI) elicited such controversy. Issues raised by stakeholders threatened to derail, and indeed did, delay the implementation of the merger. The entry led to drawn-out public hearings before the South African 3 competition authorities and was subjected to parliamentary hearings and court litigation. Two factors seem to generate heighted interest in Wal-Mart; its considerable size and perceptions, right or wrong, of how Wal-Mart relates to some of its stakeholders, such as trade unions, in its home country. The convergence of these issues in South Africa provides a rarer opportunity for this study. It provides lessons that could be of wider application and contribute to better understanding of stakeholder management dynamics during retail entry in a way few other cases would. There will therefore be significant lessons to be learnt from the Wal-Mart experience, from both an academic and pract...
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