Wal-Mart Struggles in Japan

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Case Details:

Case Code : BSTR186
Case Length : 20 Pages
Period : -
Organization : -
Pub Date : 2005
Teaching Note :Not Available
Countries : -
Industry : -

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Wal-Mart's International Operations

In early 1990s, Wal-Mart announced that it would go global. It wanted to look for international markets for the following reasons:

Wal-Mart was facing stiff competition from K-mart and Target , which had adopted aggressive expansion strategies and had started eating into Wal-Mart's market share.

Although Wal-Mart had the scope to expand in the US, it was becoming difficult for the company to sustain its double digit growth rate. Wal-Mart was suffering from soft sales and rising inventories, especially in respect of its Sam's Club divisions.

Wal-Mart also realized that the US population represented only 4% of the world's population and confining itself to the US market would mean missing the opportunity to tap potentially vast markets elsewhere.

In the early 1990s, globalization and liberalization opened up new markets and created opportunities for discount stores such as Wal-Mart across the world.

During the first five years of its globalization initiative (1991-1995), Wal-Mart concentrated on Mexico, Canada, Argentina and Brazil, which were close to its home market.

It started with Canada and Mexico due to the similarities in people's habits, culture and the business environments in these countries and also because the North American Free Trade Agreement (NAFTA) made it easier for US companies to enter these markets.

Wal-Mart's decision to enter Argentina and Brazil was based on the high growth rates of the Latin American markets...

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Wal-Mart's Entry Into Japan

In the 1990s, real estate prices in Japan declined, prompting many foreign retailers to enter the country. Wal-Mart started exploring the Japanese market in 1997. Other major foreign retailers Costco and Carrefour entered the Japanese market in 1998 and 1999 respectively (Refer Table V for foreign retailers in Japan). Costco and Carrefour entered Japan without a local partner and faced difficulties from the very beginning. This convinced Wal-Mart that it should partner with a Japanese company so as to enable it to understand the peculiarities of the Japanese market...

The Wal-Mart-Seiyu Partnership

Wal-Mart and Seiyu identified IT and distribution as the key areas for reforming the retail business of Seiyu. During 2002-03, Wal-Mart also conducted extensive focus group researches and studied retailers in Japan so that it could apply this insight to the management of Seiyu's stores. Seiyu launched a five-year plan in December 2002, called as the "New Seiyu"program. Through this Seiyu wanted to implement the best practices offered by the Wal-Mart model. In line with the above program, in August 2003, Seiyu began the roll out of Wal-Mart's store information system called as "Smart System".

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