Case Analysis: Wal-Mart Stores: „Everyday Low Prices“ in China
Case Analysis: Wal-Mart Stores: „Everyday Low Prices“ in China
I. Introduction Within less than 30 years, Wal-Mart had transformed from a small rural retailer in Arkansas into the largest retailer in the U.S. In order to continue this rapid growth, the company had started to pursue international expansion grounded in the belief that the firm’s business model of offering quality products at low prices and great customer service would appeal to consumers everywhere around the world (p.8)[1]. China was of particular interest in going international as Wal-Mart’s top management held the opinion that it was the only market in which the firm’s success story in the U.S. could be repeated (p.2/8). However, in 2005 (nine years after its market entry), Wal-Mart was far away from replicating its domestic success story in China. The retailer experienced losses in China and was trailing behind domestic as well as international rivals like Carrefour that featured sales twice as high as Wal-Mart’s (p.17).
II. Analysis of Issues and Problems According to its poor performance, Wal-Mart was facing the issue how it could compete successfully in the Chinese market. Of particular interest was thereby the question whether Wal-Mart could become successful by duplicating its domestic business model. Beyond, the question how such a model could be effectively implemented in the Chinese market arose. On the one hand, the Chinese market appeared attractive and suitable for Wal-Mart’s business model with its “Every Day Low Prices” due to the “vast size in land and population, an emerging middle class optimistic and eager to spend, and consumers’ relentless pursuit of value” (p.1). Additionally, predicted annual growth rates of eight to ten percent would increase China’s annual retail sales to US$ 2.4 trillion by 2020, thus making it a major market in the future (p.9). On the other hand, the Chinese market also imposed several challenges and hurdles on Wal-Mart which
I. Introduction Within less than 30 years, Wal-Mart had transformed from a small rural retailer in Arkansas into the largest retailer in the U.S. In order to continue this rapid growth, the company had started to pursue international expansion grounded in the belief that the firm’s business model of offering quality products at low prices and great customer service would appeal to consumers everywhere around the world (p.8)[1]. China was of particular interest in going international as Wal-Mart’s top management held the opinion that it was the only market in which the firm’s success story in the U.S. could be repeated (p.2/8). However, in 2005 (nine years after its market entry), Wal-Mart was far away from replicating its domestic success story in China. The retailer experienced losses in China and was trailing behind domestic as well as international rivals like Carrefour that featured sales twice as high as Wal-Mart’s (p.17).
II. Analysis of Issues and Problems According to its poor performance, Wal-Mart was facing the issue how it could compete successfully in the Chinese market. Of particular interest was thereby the question whether Wal-Mart could become successful by duplicating its domestic business model. Beyond, the question how such a model could be effectively implemented in the Chinese market arose. On the one hand, the Chinese market appeared attractive and suitable for Wal-Mart’s business model with its “Every Day Low Prices” due to the “vast size in land and population, an emerging middle class optimistic and eager to spend, and consumers’ relentless pursuit of value” (p.1). Additionally, predicted annual growth rates of eight to ten percent would increase China’s annual retail sales to US$ 2.4 trillion by 2020, thus making it a major market in the future (p.9). On the other hand, the Chinese market also imposed several challenges and hurdles on Wal-Mart which