Walmart-world’s largest retailer, is a successful as a king of retailing in US market. After this success, Wal-Mart Stores started eyeing areas beyond its home country and looking at unchartered waters in the overseas markets. Wal-Mart’s mature discount concept and business model were ready to be exported. The management firmly believed that consumers were alike everywhere around the world in searching for quality products at great prices and desiring to be treated well. So, Walmart began its expansion strategies in the Chinese market.
The article mentions the reasons for Wal-Mart's decision to go global , discusses in detail the entry strategy and the localization strategies including procurement and store management. The corporate governance practices followed by the company in China is also discussed. We now analyze the problems the company faced in China because of the differences between the operational and cultural environment of its home market and the Chinese market. Finally, a discussion on the future prospects of the company in the Chinese market and my recommendations is presented.
Success of Walmart in US- Key factors
Strategy in US:
Market Capture: Wal-Mart has aimed to serve customers who had to travel long distances to save money. It opened “one horse”, rural, backwater towns ignored by other retailers. It grew outside competitors' radar screens to a substantial size to command economies of scale. Public listing provided Wal-Mart with ample resources to finance there by leading to more rapid expansion. Strategy to win strong customer base: It sold brand products for less by offering multiple store formats, including discount stores, supercentres, warehouse stores, and neighborhood markets. This strategy brought customers from all income levels. Competitor Restriction: With its unique combination of culture and strategies, Wal-Mart set itself apart from its competitors. It entered the market as discount stores in small towns which avoided direct competition from stronger players. Due to small populations it served once Wal-Mart opened a store, the town could not support another store of similar size. Lastly, rural backwaters also reduced costs due to lower land and real estate prices. Cost Controls: This can be attributed as one of company's core capabilities. With a goal they tried every possibility to drive down the price of products to the lowest they could possibly be . The huge purchasing power created a huge supplier base with 68,000 suppliers. Wal-Mart demanded lower price, high quality, efficient bookkeeping and punctual delivery from their suppliers. It helped suppliers improve inventory management and efficiency by weeding out extra costs. It forced its suppliers to search hard for ways to eliminate the inefficiency in their own processes in order to drive costs to a minimum and to improve the quality of their products Logistics Management: Use of technology gave Wal-Mart great efficiency in the supply chain arrangement and a distinct competitive advantage.Using electronic data interchange (EDI), satellite technology it wasable to connect all stores to home office enabling its customers the right product mix at the right time while keeping inventory and associated costs as low as they could possibly be. Benefits to Workers: Wal-Mart started profit sharing plans for rank and file workers, which led 2/3 of the American workforce own stock in Wal-Mart. By cross training people are allowed to switch jobs to enable them to understand different parts of the company's operation, which gave them more variation in their jobs. It strived to promote open door policy so that employees could channel complaints. There are several factors which customers usually consider and these factors are never ignored by Walmart. The following factors gave Wal-Mart a competitive advantage: • Quality of merchandise
• assortment of goods
• price level
• store environment...