Walmart China

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HKU984

ALI FARHOOMAND

WAL-MART IN CHINA (2012)
Introduction
Summer was making its picture-perfect debut in New South Wales that day in October 2011, but Mr Greg Foran hardly noticed. Newly hired away from his role as head of Australia’s leading supermarket chain, Woolworth’s Supermarket Division, he was set to work as a senior vice president at Wal-Mart International, the fastest growing division of the world’s largest retailer, Wal-Mart Corporation. However, what exactly he would be doing was still open to discussion. It was not until the sudden and somewhat mysterious departure of Mr Ed Chan, the president of Wal-Mart China, that Foran’s new role suddenly emerged. That Australian summer, far from the approaching winter back in Bentonville, Arkansas, Wal-Mart’s corporate headquarters in the United States, Foran tried to learn more about why Chan had resigned after only four years at Wal-Mart China’s helm. China promised Wal-Mart a market potential like none seen since the company’s own monumental growth and retail dominance in the United States decades earlier. Was it the pork-labelling probe that temporarily shut all 13 of Wal-Mart’s stores in the southwestern Chinese city of Chongqing (not to mention the detaining of over two dozen employees) nine days earlier that forced Chan’s departure? Or was it the resignations, only five months earlier, of Chan’s chief financial officer and his chief operating officer? Although all the executives cited “personal reasons”, the financial media suggested that it was Wal-Mart International’s plans to introduce its Every Day Low Price (“EDLP”) pricing strategy in China that prompted the resignations. But how could such a successful model for cost reduction be viewed as negative in the Middle Kingdom? Foran found out the answers to many of his questions when, five months later, in early February 2012, Mr Scott Price, then president and CEO of Wal-Mart Asia and the interim CEO for Wal-Mart China, announced Foran’s promotion to president and CEO of Wal-Mart China. Foran was moving to Futian District, Shenzhen, a nine-hour plane ride, some 4,500 miles, from Sydney. At the press conference announcing Foran’s new role, Price proudly presented Foran as a man with a “distinguished career in retail” and “uniquely qualified to lead our growing business in China”. Only three months later, with Foran only in the job a

Linda Garrett prepared this case under the supervision of Professor Ali Farhoomand for class discussion. This case is not intended to show effective or ineffective handling of decision or business processes. © 2012 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be reproduced or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise (including the internet)—without the permission of The University of Hong Kong. Ref. 12/516C

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12/516C

Wal-Mart in China (2012)

little over a month, Price told the investment community that Wal-Mart China must work harder to become the dominant player in China.1 But it was when Price announced the following that Foran finally knew where his future would lead: “I’m very pleased he (Greg Foran) is bringing his talents to help us continue WalMart’s expansion (in China) and enhance our efforts to help Chinese customers save money so that they can live better.”2 Price’s challenge to Foran, made publicly for the world to witness, was to expand in China, increase Wal-Mart China’s online presence, and work to contain its costs. Price’s comments probably left even more questions in Foran’s mind. However, with his second summer of the year approaching, it appeared that Foran was indeed in for an endless summer.

Background
Wal-Mart’s Growth in China In 1996, China’s national economy was growing at a rapid pace. The gross domestic product reached over US$1,064.4 billion,...
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