World's Largest Retailer in the World's Most Populous Country: Wal-Mart in China
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Case Code: BSTR495 Case Length: 13 Pages Period: 1996-2015 Pub Date: 2016 Teaching Note: Available |
Price: Rs.600 Organization: Wal-Mart Industry: Retail Countries: China Themes: Globalization, Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
In 2015, the largest retailer in the world, US-based Wal-Mart Stores Inc. (Wal-Mart), announced its plans to open 115 new stores in China, increasing the number of its stores by almost a third in the country. The push for expansion came after Wal-Mart's net sales started falling. While planning to open new stores, the retailer also decided to close some of its underperforming stores. China’s huge population, booming middle class, and increasing disposable incomes made it a lucrative market for Western retailers like Wal-Mart. Despite having been present in China since 1996, Wal-Mart continued to face several challenges in the country. The retailer's profits were stagnant and it had been losing market share in China since 2009. Experts said the main reason for its poor performance in China was its inability to understand the Chinese consumers and their buying decisions. Wal-Mart's globally successful polices did not work in China, and severe competition from the local players posed challenges for it. Also, Wal-Mart faced a backlash in China for its business practices and it was accused of violating some of the norms.
Although China’s contributions to the retailer’s overall revenues were only around 2%, Wal-Mart still considered the market important from a long-term perspective. Following massive projections made by many consultancies across the world about the growth and spending power of China's middle class, Wal-Mart realized that the Chinese market presented an unmissable opportunity and so decided to adjust its existing strategies to ensure it succeeded in the country. It started addressing the challenges it faced in China by focusing on product quality, following local formats of business, and understanding the changing demands of the customers.
In 2014, UK-based retailer Tesco exited from China after a nine-year struggle for survival. Therefore, it looked tough for Wal-Mart also to sustain its success in the country. Analysts opined that it would be difficult for Wal-Mart to beat the local retailers and clear its stained reputation even if it took steps to resonate with the local markets and become a trustworthy brand...
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