Introduction: This is a proposal for a U.S. based company to create a supercenter store in Australia modeled on Wal Mart. This would be the flagship store in a chain of superstores serving the major population centers in Australia which are concentrated on the eastern coast of this nation. The purpose is to convince potential investors of the feasibility of this idea.
Background: Kerry Dolan of Forbes writes that lured by bargains prices, customers in Mexico have been flocking in ever-greater numbers to the 600 plus retail outlets across the country owned by Wal-Mart de Mexico. That helped Walmex, as it is known locally, to increase revenues in 2002 by 13% to $10.2 billion. Profits on sales in Mexico grew in 2002 by 12% to $476 million. This represented a return on sales of 4.7% thanks in part to the fact that Mexican nationals are now firmly in charge of determining the mix of products that will be offered at each of Wal-Mart de Mexico's store formats. This is higher than the 3.3% profit margin reported by its parent company (Dolan 84). Even if only a small portion of this success can be repeated in Australia, this new business venture will be successful.
It has been suggested that if the superstore model can be successful in a developing country like Mexico, it can be successful anywhere. This argument, however, is illogical. The country where this business model would work best would be one in which:
Americans, American companies and American ideas are welcomed
The economy is not over-regulated. It must be a nation in which federal, state and local regulations do not strangle business before it has a chance to grow
The country selected must be one from which profits are easily repatriated to the United States, and one in which profits are not subject to double taxation
Countries that should be avoided include countries that require majority ownership by a local national
There must be sufficient dispos...