Wal-Mart Wise to Abandon Russia

| About: Wal-Mart Stores, (WMT)

In contrast with Pepsi (NYSE:PEP), which deepened its involvement in Russia by acquiring Wimm-Bill-Dann (NYSE:WBD) (see "Pepsistroika"), Wal-Mart (NYSE:WMT) has decided to forego opportunities in Russia for the time being (see "Wal-Mart Closes Russian Office").

U.S. retail group Wal-Mart Stores Inc will close its Moscow office amid a lack of acquisition opportunities, abandoning for now its long-running quest to enter the Russian market.

“We continue to be excited about our international business, including markets where we already operate, such as Brazil, China and India, where we have tremendous growth opportunity,” McMillon (EVP at Wal-Mart) said in the statement.

… overseas retailers have found it tough to succeed in Russia … with Sweden’s IKEA at times complaining openly about corruption and a surplus of red tape.

This represents a wise exercise of restraint on Wal-Mart’s part. It is, indeed, incredibly difficult for foreign retailers to succeed in Russia, one of the riskier emerging markets (see "Doing Business in a Developing Country" or "Russia and the BRICs").

And when comparing Pepsi’s decision to acquire Wimm-Bill-Dann with Wal-Mart’s decision not to acquire a Russian retailer, the difference in operational experience makes all the difference. Pepsi has 30+ plus years worth of experience operating in Russia that predates its Wimm-Bill-Dann acquisition. Wal-Mart, by contrast, has very little experience operating in Russia to draw on.

What’s more, Wal-Mart’s performance in other foreign markets, most notably in China, has not suggested that it has a consistent track record of operating profitably in the developing world.

My kudos then to Wal-Mart on their wise non-entry decision.

Disclosure: No position