#68 Transnational Take-Over Alert: ASDA of US buys UK operations from Danish Netto
If approved by UK authorities, Asda, Wal-Mart’s British arm will be acquiring almost 200 UK stores of the Danish Netto chain for an alleged amount in excess of 1 billion US$. Acquiring smaller stores seems like a good move for Wal-Mart in Europe. First, shopping habits in many regions seem to change in a way that (an aging population of) shoppers start to develop a preference for more frequent shopping of smaller quantities in convenient locations. Second, zoning regulations prevent retailers from opening new locations. However, the usual caveats apply: first, Wal-Mart hasn’t done too well in a number of international markets, including European ones (just think of the disaster in Germany). Most recently Asda’s sales dropped inthe UK and it has been loosing market share to its competitors. Second, cultural differences. In addition to differences between national cultures that Wal-Mart sometimes has troubles with, there’s also the fact that Wal-Mart’s pervasive business model isn’t something that travels easily into other contexts. Looks like there’s some homework to do before the post-acquisition integration pains start.
January 14, 2011 @ 8:31 pm
Taking over 200 stores from another company is a huge step, also for the American consumer goods giant Wal-Mart.
On the one hand this acquisition will cause many opportunities and advantages, but on the other hand there are many issues that have to be considered.
The purchase will give Asda a much greater mix of store sizes and they get the opportunity to expand their reach into new neighborhoods.
As the shopping habits of many people seem to change, Asda is trying to follow this trend. Most of the Netto stores in Great Britain are only fifth the size of the average Asda supermarkets, which means that such stores attract a fundamental different target group. But what about the majority of people who love it to shop in huge supermarkets with a wide and deep range of products? I can not imagine that the current trend of small shops will extend across all consumers.
Another problem is that Asda’s sales dropped recently and therefore they lost market share. In my opinion this fact makes it much more difficult for the company to process such a huge acquisition. Because especially in such situations customer satisfaction and customer loyalty are more important than ever to be able to compete with the other huge supermarket chains in the UK like Tesco’s, Sainsbury’s and Morrison’s.
Wall-Mart also has to consider that the European market and the target group of consumer goods are very different to the American. Wall-Mart is used to operate in markets with large shops and a wide product range. The Danish Netto chain has much experience with the European target group. I am not sure if Wall-Mart, or in this case Asda, can cope with that.