Is Maxima a Wal-Mart in sheep's clothing?

  • 2007-01-17
  • By Todd Graham

SHOPPING KINGS: The U.S. based Wal-Mart (right) is slowly working its way into Europe's retail landscape, while Maxima (left), the privately owned Lithuanian- based retailer, has taken the Baltic markets by storm.

RIGA - Americans familiar with the ubiquitous retail store Wal-Mart will likely experience a sense of deja vu when shopping at Maxima, the most powerful retailer in the Baltic states. Both offer a similar mixture of foodstuffs and consumer goods, while the color blue is a prominent design feature for each. But just how similar is Maxima with the American retail giant Wal-Mart? Might Wal-Mart someday muscle in and take over the Lithuanian based retail giant with its established network of 370 stores in Lithuania, Estonia, Latvia, as well as EU newcomers Romania and Bulgaria?

Randy Richards is the Chair of the Department of Managerial Studies and a Professor of Philosophy and Managerial Studies at St. Ambrose University in Davenport, Iowa. For the past six summers he has also been a lecturer at the Inter-national Business School at Vilnius University where he has researched the similarities be-tween the two stores.

Despite certain similarities of appearance, the market conditions in which Maxima and Wal-Mart came about, their expansion strategies and their corporate culture have significant differences, according to Richards.
"The primary difference [between Wal-Mart and Maxima] is in the vision and the values of their organizations. That value at Wal-Mart is deeply rooted in the lowest price possible. I don't think that it is the driving value at Maxima, Rimi or Iki. I don't think they see lowest possible price as their dominant strategy," Richards explains.

Richards notes that it has taken Wal-Mart about 15 years of incremental growth to reach its dominant position, while Maxima has acquired its market position during the last five years. And where Wal-Mart started out with rural outlets before moving into urban territory, Maxima started out in densely populated urban areas.
It is on the strength of this sort of experience that Maxima's expansion strategy is toward Bulgaria and Romania rather than neighboring Poland.

"They may have found conditions in Romania and Bulgaria that were more similar to what they were used to in the Baltics, and my sense is that their strategy is to go into those areas where there isn't any prior market presence to exploit empty niches rather than trying to compete on price in a developed market such as Poland," Richards says.
Maxima's current expansion policy seems to be to find a hole and fill it, rather than the Wal-Mart strategy of pricing competing retailers out of the market.

Poland has already experienced the economic effects of entry into the EU and Maxima may be betting on a repeat of what has happened in the Baltics.
Namely, the hope that EU accession will lead to a rise in credit and an economic boom in Romania and Bulgaria in the coming years. With its elaborately developed retail network, Maxima is ideally siuated to profit from such a scenario.

Asked whether Wal-Mart might attempt a take-over of Maxima, Richards was reticent, saying he had "no better opinion than the man on the street on that one." However, Richards does believe that Maxima might not be too averse to the idea.
"I think that Maxima is positioning itself to raise its profile to be taken over, but I don't know that they offer the kind of logistical position that Wal-Mart is interested in. Wal-Mart is very conscious of the cost of logistics," he explains. "I would say that this may be a possibility once Wal-Mart gets their German operations running the way that they want."

Even though Maxima might not be a target for Wal-Mart's plans of world domination, the executives in Bentonville, Arkansas should take notice of the rapid growth and major market share achieved by the Lithuanian business.
"The relationship between Maxima and Wal-Mart is superficial. The only similarity is that, like Wal-Mart, they dominate in the markets in which they operate," Richards says. "Maxima, by percentage, dominates the marketplace more than Wal-Mart. Maxima has a much higher market penetration in Lithuania and Latvia then Wal-Mart has in the U.S. market."
Indeed, retail market penetration for Wal-Mart in the U.S.A. was 8 percent in 2005, while Maxima saw a market penetration of 21 percent in Latvia, and 38 percent in its native Lithuania during the same period.

Maxima is a small player in an emerging market with little pull with Chinese suppliers, while Wal-Mart has turned the tables in retail to the point where it calls the shots to manufacturers and controls price from the very beginning.
The markets in which Maxima operates are a fraction of the size of Wal-Mart's, but although Maxima may not have Wal-Mart's formidable muscle it is still a major retail force in the developing retail landscape of the New Europe.