Wal-Mart's Japan Strategy
In-Depth Integrative Case: Wal-Mart’s Japan Strategy
1. Question: Do you believe Wal-Mart can be successful by circumventing the current Japanese distribution system?
The Japanese distribution system has two distinct characteristics: too many very small retailers and multiple layers of wholesalers. Japanese consumers prefer to buy fresh, high quality food and have the tendency to purchase goods in small amounts and at frequent intervals. Since real estate is very expensive in Japan, people live in very small apartments and they are not used to doing big shopping, because there is not much space to store things. The majority of small-sized retail stores are run as family businesses, and there are preferential tax treatments granted to these retail stores. In addition, there are regulations placed on large-scale retail stores.
Japan’s current distribution system is a huge barrier to Wal-Mart’s traditional way of doing business. Wal-Mart’s direct-supplier system could not be more different in its design, its business philosophy and its operations from Japan’s multi-layered system. There are two options, either Japan’s system will change, or Wal-Mart will have to adapt.
In order to be successful, Wal-Mart will have to create an unassailable competitive advantage in the Japanese market, Wal-Mart will have to create a logistics and distribution system that is lower cost and more efficient than anything currently in use in Japan. Wal-Mart’s distribution strategy is likely to follow a multi-stage, multi-method approach. These different methods may be approached as parallel strategies. While the long term vision will be to change the nature of the supply chain process and fully implement their Retail-Link system, it will take time to make this transition.
Initially, Wal-Mart will have to work through the multi-layered Japanese distribution system, treating wholesalers much as they would suppliers. Wal-Mart will have to work with the larger wholesalers to upgrade
1. Question: Do you believe Wal-Mart can be successful by circumventing the current Japanese distribution system?
The Japanese distribution system has two distinct characteristics: too many very small retailers and multiple layers of wholesalers. Japanese consumers prefer to buy fresh, high quality food and have the tendency to purchase goods in small amounts and at frequent intervals. Since real estate is very expensive in Japan, people live in very small apartments and they are not used to doing big shopping, because there is not much space to store things. The majority of small-sized retail stores are run as family businesses, and there are preferential tax treatments granted to these retail stores. In addition, there are regulations placed on large-scale retail stores.
Japan’s current distribution system is a huge barrier to Wal-Mart’s traditional way of doing business. Wal-Mart’s direct-supplier system could not be more different in its design, its business philosophy and its operations from Japan’s multi-layered system. There are two options, either Japan’s system will change, or Wal-Mart will have to adapt.
In order to be successful, Wal-Mart will have to create an unassailable competitive advantage in the Japanese market, Wal-Mart will have to create a logistics and distribution system that is lower cost and more efficient than anything currently in use in Japan. Wal-Mart’s distribution strategy is likely to follow a multi-stage, multi-method approach. These different methods may be approached as parallel strategies. While the long term vision will be to change the nature of the supply chain process and fully implement their Retail-Link system, it will take time to make this transition.
Initially, Wal-Mart will have to work through the multi-layered Japanese distribution system, treating wholesalers much as they would suppliers. Wal-Mart will have to work with the larger wholesalers to upgrade