Massmart - South African Retailer Case Study

Massmart

Massmart is a South African retailer based in the city of Johannesburg. It is currently the country's third largest distributor of consumer goods and the leading wholesale warehouse business, owning a number of local brands, such as Makro and Game.

Along with the other main South African retailers, Massmart has been looking to capture the relatively untapped potential of the African continent. This expansion interest, as well as the market potential, attracted the interest of US retail giant Walmart. Their intention to acquire Massmart was announced in 2010, with the deal being finalised in September 2011 after much consideration by the South African authorities.

SWOT Analysis

Strengths

The majority of Massmart's business is conducted in South Africa, where it operates a total of 265 wholesale and retail stores. On top of this, it has begun to move out across the continent, with a current level of 13 stores in a number of other African countries.

Due to this strength Walmart, bringing a vast amount of expertise and experience to combine with Massmart's local knowledge, has decided to enter the South African market.

Weaknesses

Naturally, the acquisition by Walmart has raised a number of concerns. Whilst Massmart's shareholders voted to approve the offer and the South African competition commission also confirmed their authorisation to the deal, a number of groups have voiced significant concerns, mainly the unions.

Walmart is renowned for its controversial employment procedures and some are anxious that this reputation will be forced onto Massmart. Existing employees worry wages will be cut, local small business will be aggressively forced out of business and that union powers will be eroded, much like they are in the USA. On top of this, there are worries that this acquisition will lead to Massmart sourcing cheap goods from the Far East, leading local producers to suffer. Before the acquisition had even been completed, the mere rumour of the deal had been enough to result in threats of boycotts and strikes. The negative publicity this has