Global Expansion: A Risky Business

One person was killed, 450 were injured and millions of dollars in damage was done.

That’s the tally after riots when about 100,000 anti-globalization protesters filled the cobblestone streets of Genoa, Italy, during the Group of Eight economic summit in mid-July. Anti-globalization sentiment seems to be increasing. The same meeting of leaders of the wealthiest industrialized nations and Russia attracted only about 2,000 protesters in 1999.

As American restaurants and retailers branch into Europe, many Europeans are fighting back — literally.

Wal-Mart Stores Inc. has said that most of its growth in the next few years will come through the international division. So far, the world’s largest retailer has been operating slightly under the radar of most protest groups, but that can’t continue for long.

“I’m sure if you stopped anybody who was protesting globalization and asked them what they thought about Wal-Mart, they would have plenty to say,” said Al Norman, who has written a book titled “Slam Dunking Wal-Mart: How You Can Stop Superstore Sprawl in Your Hometown.”

“Wal-Mart is one of the most reviled companies in the United States and internationally,” Norman said. “Wal-Mart is a global company and truly a global bad actor.”

Norman said urban sprawl isn’t strictly an American problem. He often travels abroad to speak to groups concerning big-box retailers like Wal-Mart.

Wal-Mart has 244 stores in England and 94 in Germany. The Bentonville-based company is reportedly looking to expand in Europe but has yet to open stores in other European countries. Some analysts speculate Wal-Mart will venture into Italy or France next.

McCulture Clash

From a Starbucks coffee shop in China’s Forbidden City to a McDonald’s restaurant at the foot of the Spanish Steps in Rome, American companies have squatted on some of the most hallowed historic ground in the world.

Globalization is knocking down barriers, erasing national borders and promoting free trade in a step toward integrating us all into one single global economy.

But some people just don’t like the idea.

They say globalization destroys jobs, towns and their way of life. It allows powerful nations like the United States to hold sway over them economically.

McDonald’s has been a prime target for protesters in Europe, particularly in France.

In 1999, French peasants dismantled a McDonald’s under construction in Millau, and a terrorist bombing killed a McDonald’s employee last year.

Laurence Turbec, 28, died after a bomb exploded outside the company’s restaurant near Dinan in Brittany. Turbec, team leader of the breakfast shift, triggered the blast when he opened the door that faced the restaurant’s drive-through lane one April morning.

Police said the bomb was set to go off during the night when the eatery was usually empty, but the kitchen timer failed to work, so it exploded when struck by the door. The bomb was made with three pounds of dynamite. Investigators suspected a small separatist group called the Breton Revolutionary Army planted the bomb. It was the first terrorist action to claim a life in France since 1996.

The American hamburger chain has infuriated some Europeans by building restaurants at the foot of the Spanish Steps in Rome and on the Champs Elysees in Paris, just down the street from the Arc de Triomphe, which was commissioned in 1806 by Napoleon. McDonald’s opened its first restaurant on the Champs Elysees in the 1980s, and now the company has two on that street.

Although many Parisians complain about the hamburger joint on their most famous avenue, it is reported to be the most popular restaurant in France, at least in terms of gross sales. They may complain about it, but a lot of people are lining up for a Royale with Cheese (Big Mac). Of course, this “McDo” (as the French call them) is in a prime location in Paris for locals and tourists alike. The Champs Elysees draws about 500,000 people each day during the week and 700,000 each weekend day.

According to the company’s second-quarter earnings report, McDonald’s has 29,000 restaurants in 120 countries serving 45 million people a day (more than the entire population of Spain). The company plans to open another 1,500 restaurants worldwide this year. McDonald’s has 760 restaurants in France (which has a population of 59.3 million) and 230 in Italy (population 57.6 million).

The opening of a McDonald’s in the mid-1980s near the famous Spanish Steps in Rome spawned the “slow food movement” in Italy, a laid-back gastronomic response to the invasion from fast-food America.

The slow food movement gained more support after Italy’s first suspected case of mad cow disease was reported in February in a cow at a slaughterhouse that supplies meat to McDonald’s restaurants in Italy and elsewhere in Europe.

Big Mac Attack

Jose Bove, 48, a sheep farmer in France, became a folk hero in his homeland after 300 of his supporters disassembled a McDonald’s restaurant in 1999 that was under construction in Millau. Bove was convicted of criminal vandalism and sentenced to three months in prison. The incident has become known as the “Big Mac attack.”

“For us, McDo is a symbol of industrial nutrition and a multinational corporation that is trying to put down roots everywhere,” Bove said in a newspaper interview. “And it is [only] as a symbol that we attacked it.”

Bove’s protest purportedly was prompted by the United States’ decision to levy high tariffs on French ewes’ milk cheese in retaliation for the European Union’s decision to ban imports of hormone-treated beef from the United States, according to Agence France Presse.

Bove’s actions came to represent a growing public discontent with many globalization issues (such as genetically modified foods) and a feeling of powerlessness in the face of the U.S. economy’s European expansion.

Bove likened the movement to dismantle the McDonald’s to the nonviolent protests of Mahatma Gandhi. His trial last year attracted thousands to Millau.

Sprawl-Busters

Al Norman spearheaded an effort in 1993 to keep Wal-Mart from building a store in his hometown of Greenfield, Mass. It worked. Norman said he has a list of 150 U.S. cities that have successfully kept the retail giant out. The most recent addition to the list is Buffalo, Minn., which barred Wal-Mart with a July 19 decision by the city council.

Norman runs an operation called “Sprawl-Busters,” which helps people who are trying to prevent large retailers from building stores in certain areas.

The key, Norman said, is to implement city regulations that prevent big-box retail stores.

Norman said there are three issues concerning Wal-Mart and other big-box retailers like Kmart, Target and Home Depot:

• Economics — When these companies open stores, local businesses often close because they can’t afford to buy and sell goods as cheaply.

• Quality of life — Since these companies build large stores on the edge of cities, they cause urban sprawl as downtowns become ghost towns and the retail hub moves to the suburbs.

• Environment — Building large superstores usually has a negative impact on water and air quality in addition to causing more traffic congestion.

Because Wal-Mart has yet to go into Europe with the vengeance of McDonald’s, the world’s largest retailer has been just a blip so far on the anti-globalization radar.

“I think, below the headlines is this concern with Wal-Mart,” Norman said. “This is a big issue abroad and getting bigger.”

The streets of Genoa

Of course, not all of the protesters in Genoa were violent. Many were pacifists who were appalled by the actions of trouble makers. Violence gets headlines, though, and that’s what some of the protesters wanted.

In 1999, the World Trade Organization Ministerial Conference in Seattle attracted about 50,000 protesters, allegedly representing some 1,000 groups of people ranging from farmers to anarchists.

In addition to Starbucks, Seattle is home to two of the nation’s largest exporters: Boeing and Microsoft.

Starbucks was once again the target of protesters last June when the Organic Consumer Association descended on Seattle.

Despite Starbucks’ previous pledge to meet many OCA’s demands, staging a protest in Seattle against Starbucks draws media attention, which is what the group wanted.

The consumer group wants Starbucks to stop using genetically modified milk and other foods with genetically modified ingredients.

Starbucks said it planned to offer milk free of genetic tinkering at its more than 2,700 U.S. stores by the end of July.

But the advocacy group, which has a staff of only 13, said it targeted Starbucks because it had a customer base that is concerned about the environment.

The Forbidden Cup

Starbucks drew heated criticism last year when the chain opened a coffee shop at the footsteps of the Son of Heaven in the Forbidden City, China’s most hallowed historic place.

Five million Chinese a year visit the ancient Forbidden City and tour the capital’s centuries-old palace complex. Now, next to the Palace of Heavenly Purity, once the residence of China’s emperors and still the symbolic center of the Chinese universe, is a Starbucks Coffee shop.

Chinese visitors can now sip mocha frappuccinos while visiting the palace and contemplating heavenly purity.

“This is no different from slapping China’s 1.2 billion people and 5,000-year traditional culture in the face,” said the China Consumer Journal. “Some people’s anger is no different from their feelings when our embassy was bombed.”

The Chinese aren’t thrilled with the nearby Kentucky Fried Chicken restaurant either.

KFC will be evicted from Beihai Park, another Imperial site in the city center, when its lease expires in 2002. And McDonald’s recently removed its golden arches from outlets by Tiananmen Square.

Even with the 2008 Olympic games coming to China, there are still tensions between that nation and the United States. And the emergency landing of a U.S. military plane in Hainan and ensuing hostage situation didn’t do much to help assuage those tensions.

Starbucks has 4,435 locations, 3,620 in North America and 815 internationally. The company plans to open 1,200 new cafes during this fiscal year and another 1,200 next year. During each of those years, about 375 of the 1,200 new cafes will be opened outside of North America, the company said in its last quarterly earnings report.

But not everyone in China is opposed to American expansion there. Hoyt Purvis, a journalism professor at the University of Arkansas, said he was in China in 1998 talking with one of the officials of the three-gorges dam project on the Yangtze River.

Purvis said a comment from the Chinese official caught him off guard.

“He said his children really needed a McDonald’s.”

Globalization Uses Existing Structures

Wal-Mart primarily has gone into existing buildings in England and Germany.

One reason is that those are two of the most land-restrictive nations in Europe. Another could be that such an invasion isn’t as noticeable if Wal-Mart doesn’t alter the landscape. If locals slowly become accustomed to Wal-Mart, they’re less likely to object when Wal-Mart decides to build a new store.

When asked about its European expansion, a Wal-Mart spokesperson said the only person who could comment about that was too busy to call the Business Journal back.

Al Norman, author of “Slam Dunking Wal-Mart: How You Can Stop Superstore Sprawl in Your Hometown,” said Wal-Mart went into Canada with a similar approach, initially occupying “dead Woolworth’s stores.” After a jittery start, Wal-Mart has since taken over the retail market north of the border.

Wal-Mart opened its first international store in Mexico in 1991. The company entered Germany in December 1997 with its purchase of the 21-store Wertkauf hypermarket chain at an estimated cost of $660 million-$1 billion. The move sent retailers scrambling for property in Germany and raised the value of the Interspar chain that Wal-Mart later purchased.

Wal-Mart is currently building its first store in Germany from the ground up. The $17.4 million store in Pattensen, near Hanover, is scheduled to open next year.

Wal-Mart is the low-price leader in the United States, but logistics has made it difficult for the company to offer lower prices in Germany than some local companies, such as Aldi.

In 1999, Wal-Mart spent $10.8 billion to purchase the 229-store Asda Group Plc., Great Britain’s third-largest supermarket chain.

Wal-Mart International sales were up 41.2 percent (from $22.7 billion to $32.1 billion) last year over the previous fiscal year. That’s out of a total of $191.3 billion in worldwide sales for the year ended Jan. 31, 2001.

In 1999, Wal-Mart saw international sales jump 85.6 percent to $22.7 billion, but much of that increase can be attributed to seven months of sales from the newly acquired Asda stores.

International sales accounted for 17 percent of Wal-Mart sales in 2000, compared with 14 percent in 1999 and 9 percent in 1998.

1999 was the first year to reflect sales from the new stores in Germany. 2000 was the first full year to reflect sales from the Asda stores in Great Britain.

Operating income for the international division increased in 2000 by 36.1 percent to $1.1 billion. Operating income for the division was up 48.8 percent in 1999 to $817 million.

In 2000, John Menzger, president and CEO of Wal-Mart International, said he hoped a third of the company’s earnings growth would come from profits in the international division by 2005. In 1998, 20-25 percent of the earnings growth came from international operations.