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
Excerpts
Background
Wal-Mart was founded by American retail legend Sam Walton in Arkansas in 1962. He opened the first store in Rogers, Arkansas. In 1983, warehouse stores under the name Sam's Club were opened. In 1998, Wal-Mart Supercenters were opened.
After operating for over more than five decades, the company had become the world's largest private employer and retailer by 2015. Wal-Mart aimed to help people save money and live better through its retail stores, mobile apps, and online portal. The magnitude of Wal-Mart's operations could be estimated from the fact that as of 2015, every week, more than 250 million customers and members visited its 11,000 stores in many countries across the globe. Leading the retail business, Wal-Mart worked through innovative thinking and its commitment to saving people' money so they could live better...
Wal-Mart in China
Wal-Mart entered China in 1996. The groundwork to enter the country started in 1994, when a team of executives from the company went to China to understand the market. The first store was opened in Shenzhen. In partnership with Shenzhen International Credit Investment Company, Wal-Mart opened Supercenter and Sam’s Club in the country. In 1996, Wal-Mart was permitted to set up business in only eleven Chinese cities including Shenzhen, Beijing, Shanghai, and the five economic zones, with the number of stores per city being limited to only three. The retailer’s scale of operations was thus well below the desired level.....
Wal-Mart's Struggle in China
Like many other international retailers, Wal-Mart, had been finding it tough to survive in China with handsome profits margins. In August 2014, it agreed that its performance in China was among the worst in its major overseas businesses. There were various reasons for its plunging sales in China like the slow economic growth of the country in recent times, cultural differences, competition from local vendors, etc. The following factors had led to slow and uneven gains for Wal-Mart in China....
Wal-Mart's Strategy Adjustment
As of 2015, the number of Wal-Mart stores in China was considered fairly small, given the country’s massive retail sector. Despite being the world’s largest retailer, many of Wal-Mart's global strategies failed in China. The American retailer required an immediate strategy adjustment to ensure its survival in the world’s second largest economy...
China - A Tough Market for Foreign Players?
Analysts and industry experts believed that China was a tough market for foreign players, especially retailers. In China, retailers were burdened with more responsibility than in any other country for the products they offered. For example, in the US and many other countries, it was the primary responsibility of the manufacturers to ensure the quality of the products which their retailers sold. 48 Be it any product, like ketchup or dried beef, the manufacturers were liable to provide the retailers with good quality products. In contrast, in China, it was the retailers and not the manufacturers that were accountable for product quality...
Road Ahead
With China proving to be a tough market for international retailers, many such companies had either scaled back or quit the market altogether. However, Wal-Mart had no immediate plans to exit this market believing as it did that it would be successful in the country in the coming years. In China, pricing a foreign brand had always been very tricky. Many Chinese shoppers believed that the higher the price, the better the quality or the higher the status. 52 If a foreign brand was priced lower than a local one, shoppers suspected that it had defects. Analysts felt Wal-Mart should price its products keeping this factor in mind. The biggest change in Chinese consumer behavior was due to the young generation’s rising wealth and increasingly Westernized lifestyle. Therefore, the demand for higher-quality products, particularly among the younger generations, had accelerated in the past few years. Wal-Mart had to take such changes into account.....
Exhibits
Exhibit I (A):Business Formats under Wal-Mart China
Exhibit I (B): Wal-Mart Stores in China*
Exhibit II : Number of Wal-Mart Stores in China*
Exhibit III: Wal-Mart China’s Sales Revenue (in US$ Billions)
Exhibit IV : Alleged infractions on Wal-Mart China
Exhibit V : Wal-Mart Stores in China*
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