wo/mort 5tores "verydoy /ow prices" in chino

Subm|tted by vinoyo kumor 6o//o

Sect|on 402

Introduct|on S|tuat|ona| Ana|ys|s

WalMarL Lhe global reLall glanL wlLh sales of uSu 283 8n and effecLlve operaLlons across nlne
counLrles wlLh over 3000 sLores and over 16 mllllon employees worldwlde was Lhe undoubLed
klng of dlscounL reLalllng WlLh lLs reLall porLfollo comprlslng dlscounL sLores super cenLers
Sam's club and nelghborhood markeLs WalmarL has undoubLedly conquered Lhe uS reLall
markeL WalMarL SLores sLarLed eyelng areas beyond lLs home counLry and looklng aL
uncharLered waLers ln Lhe overseas markeLs 8y Lhls Llme lL had rapldly expanded lnLo many
sLaLes ln Lhe uS and saLuraLed many reglonal markeLs where compeLlLlon was growlng flercely
WalMarL's maLure dlscounL concepL and buslness model were ready Lo be exporLed 1he
managemenL flrmly belleved LhaL consumers were allke everywhere around Lhe world ln
searchlng for quallLy producLs aL greaL prlces and deslrlng Lo be LreaLed well unforLunaLely
WalmarL was noL able Lo capLlvaLe Lhe reLall markeL lndeed nlne years afLer lLs markeL enLry ln
1996 WalMarL ranked behlnd lLs world rlval Lhe lrench Carrefour ln Lhls paper l presenL my
analysls of Lhe slLuaLlons prevalled durlng LhaL polnL of Llme as well as my suggesLlons and
recommendaLlons


ore Va|ues and key Success Iactors
8efore analyzlng and dlssecLlng Lhe Chlna sLraLegy ln deLall lL would be useful Lo see whaL
made WalMarL Lhe lnsurmounLable mounLaln lL was ln Lhe uS markeL LocaLlon prlce and
assorLmenL were Lhe Lop 3 facLors consumers Lreasured and WalMarL ensured lL always
'exceed consumer expecLaLlons' 1he prlme focus was prlce and quallLy
LlsLed below are Lhe ma[or facLors whlch gave WalMarL lLs compeLlLlve advanLage
- Market entry and ore r|nc|p|e WalMarL enLered by Lrylng Lo solve Lhe people's problem
ln rural backwaLer Lowns and expanded qulckly Lo saLuraLe small one horse Lowns SaLuraLed
reglons dldn'L face dlrecL compeLlLlon from blg players llke kmarL 1hls sLraLegy also meanL
reduced cosLs due Lo lower land and real esLaLe prlces Lvery uay Low rlces" was Lhe
unshakeable crux of Lhe value LhaL WalMarL offered Lo lLs cusLomers 1hls prlnclple was proved
Lo be a successful lnnovaLlon ln reLalllng
- ustomer Va|ue CusLomer value ls hall mark for WalmarL 1hey ensured greaL cusLomer
servlce respecL for Lhe lndlvldual 1hey lmplanLed Lhelr bellefs lnLo Lhe hearL of every
execuLlve manager and assoclaLe Lhereby creaLlng a greaL shopplng experlence
- r|c|ng strateg|es 1hey sLrlcLly lmplemenLed Lhelr core prlnclple of everyday low prlces and
ensured LhaL prlces are offered for any good aL a lesser prlce Lhan lLs compeLlLors
- artnersh|ps w|th supp||ers uescrlbed as a 'lovehaLe' relaLlonshlp WalMarL lmproved Lhe
efflclencles of lLs suppller parLners Loo and carved ouL long sLandlng deals aL unbellevable
prlces 1helr '8oll 8ack' phllosophy passed on beneflL of drop ln producer's prlce Lo cusLomer
addlng value
- Unr|va||ed D|str|but|on and Log|st|cs Management WalMarL's hub and spoke model glvlng
lLs own fleeL of Lrucks and 993 on Llme dellvery record gave lL unparalleled economy ln
dlsLrlbuLlon lL lnvesLed heavlly ln lLs unlque 'crossdocklng' lnvenLory sysLem by whlch goods
were conLlnuously dellvered Lo sLores ofLen wlLhouL havlng Lo lnvenLory Lhem lowerlng cosLs
as well as glvlng Lhe lndlvldual managers more conLrol aL Lhe sLore level
- I1 |nfrastructure WalMarL very early demonsLraLed commlLmenL Lo Lechnology ln lLs
lndusLry Wlse use of Lechnology provlded WalMarL wlLh realLlme lnslghL lnLo merchandlse
forecasLlng plannlng produclng and shlpplng and subsLanLlally lmprovlng efflclency and
producLlvlLy lL has Lhe mosL efflclenL dlsLrlbuLlon and loglsLlcs neLwork ln Lhe lndusLry whlch
allowed lL Lo keep merchandlse movlng Lo lLs 1333 dlscounL sLores 1713 supercenLers and
331 Sam's Clubs ln Lhe uS and enabled lL Lo offer lLs cusLomers Lhe rlghL producL mlx aL Lhe
rlghL Llme whlle keeplng Lhe lnvenLory and assoclaLed cosLs as low as Lhey could posslbly be

Lmployee moLlvaLlon was also a key parL for Lhe recognlLlon and value of WalmarL WalmarL
had grasped Lhe arL of moLlvaLlng lLs employees from all levels Lo perform Lhelr besL
Lmp|oyee cu|ture WalMarL was compleLely non unlonlzed wlLh an open doors pollcy lL had
low Lurnover and exLremely happy employees Cross Lralnlng removed boredom for Lhem
whlle sLock opLlons and proflL sharlng were moLlvaLlng and lmblbed selfesLeem amongsL rank
and flle workers also
Iruga||ty cost contro| noL only was Lhe frugal culLure resLrlcLed Lo lower rung employees
Lop managers Loo flew economy class and sLayed aL budgeL hoLels
Strategy execut|on ldeas come 'a dlme a dozen' and ofLen execuLlon ls key Pere ls where
Sam WalLon excelled wlLh hls speed and perfecLlon lmmedlaLe enLry and fasL expanslon
before oLhers could even bllnk meanL LhaL he capLured and saLuraLed underserved markeLs
long before anyone else reallzed Lhelr poLenLlal 1hus Lhelr locaLlonal sLraLegy became
lmposslble Lo copy as Lhere was no scope lefL ln Lhose markeLs
- Iocus on Serv|ce Whlle Lhe sLores could have glven Lhe consumers Lhe same assorLmenL of
goods Lhe comblnaLlon wlLh prlce and servlce made WalMarL unbeaLable 'CreaL CusLomer
servlce respecL for lndlvldual and sLrlvlng for excellence' were Lhe 3 cardlnal prlnclples
everyone ablded Lo


Strateg|c Mode| |n h|na
As descrlbed earller WalMarL had noL been able Lo dellver Lhe same resulLs ln Lhe Chlnese
markeL lL was Lhus clear LhaL Lhe WalMarL could noL creaLe Lhe compeLlLlve advanLages ln
Chlna based on lLs Amerlcan Model Many facLors conLrlbuLe Lo large scale dlfferences beLween
Lhe Lwo counLrles leadlng Lo dlluLlon of WalMarL's compeLlLlve edge ln Chlna
- D|verse opu|at|on and Income D|spar|ty 1he rural markeL ln Chlna was noL llke Amerlca
where Lhe slze of populaLlon deLermlned Lhe urban/rural sLaLus buL was acLually lacklng ln
purchaslng power maklng Lhelr rural enLry sLraLegy redundanL here
- Loca| rotect|on|sm 1hls greaLly hampered WalmarL as evldenced ln Lhe case Lhrough Lhe
Shanghal example and made Lhelr cenLrallzed accounLlng pollcy a handlcap for Lhem as each
sLaLe wanLed Lo geL Lhelr own share of Laxes from WalmarL's proflLs 1he 2001 rullng agalnsL
local proLecLlonlsm bodes well for WalMarL's fuLure ln Chlna
- Imposs|b|e to reproduce |og|st|cs mode| Chlna suffered from lack of adequaLe lnfrasLrucLure
Lo reproduce Lhe dlsLrlbuLlon model whlch was a key compeLlLlve advanLage ln Lhe uS
- kegu|atory restr|ct|ons and bureaucracy CrowLh was conflned Lo only 3 sLores per clLy and
LhaL Loo only for few clLles CovernmenL had Lo approve each branch and Lhese comblned wlLh
WalmarL's own eLhlcs of dolng buslness correcLly and abldlng by regulaLlons hampered lLs
growLh whlle compeLlLors openly flouLed rules
- Lmp|oyees 1he same source of sLrengLh was a weakness ln Chlna where Lhere was Lhe
concepL of unlonlzed work force and WalmarL's pollcles dld noL go down well ManagemenL
Lurnover was hlgh and labor offlclals condemned WalMarL for squeezlng suppllers and maklng
workers suffer

CLher lmporLanL facLors llke lack of a welldeveloped l1 Netwotk and regulaLory ban of
saLelllLe usage Chlnese culLure of 'mooy ttlps llttle potcbose 'ftesb meoos ollve menLallLy
for grocerles and sbopllftloq (3 compared Lo 03 worldwlde) meanL LhaL Lhe Amerlcan
model was clearly oosolteJ Lo Chlna and clearly requlred a reLhlnk

1he h|nese keta|| Industry
Pavlng undersLood Lhe dlfferences LhaL exlsL beLween Lhe Chlnese and Amerlcan markeLs lL ls
lmperaLlve we carry ouL a macro level analysls of Lhe lndusLry ln Chlna before proceedlng Lo
recommendlng Lhe way ahead for WalMarL ln Chlna A look aL Lhe lndusLry forces would
reveal Lhe followlng


1hus we can see LhaL LhaL Lhe Chlnese lndusLry ls an aLLracLlve one from Lhe polnL of vlew of Lhe
lncumbenLs Lhe only ma[or drawback belng lnLense compeLlLlve rlvalry


SWC1(Strengths Weakness Cpportun|t|es 1hreats) Ana|ys|s of Wa|mart
1he followlng are Lhe lnferences LhaL can be made by SWC1 analysls of WalmarL ln Chlna



kecommendat|ons
We can draw Lhe sLraLeglc road map for WalMarL as follows

1he Chlnese lndusLry as seen above ls a hlghly fragmenLed one wlLh a loL of small players 1he
nexL naLural sLep ln Lhe lndusLry would have Lo be LhaL of consolldaLlon and WalmarL can use lLs
exLenslve flnanclal muscle Lo negoLlaLe good deals Lo expand lnLo oLher clLles wherever
posslble and pursue organlc growLh where noL

new sLore formaLs should be lnvesLed ln for Lhe Chlnese consumer 'A blgger number of smaller
shops wlLh a more of weLmarkeL feellng mlghL be more Lo Lhe local LasLe Lhan Lhe Amerlcan
sLyle shops

WalMarL ls known for low prlces and ln Chlna where everyone ls golng for low prlces (ofLen aL
Lhe expense of quallLy) WalMarL should poslLlon lLself as a 'quallLy' reLaller where you noL
only geL low prlces buL also Lhe besL quallLy

WalmarL ls seen as an ouL and ouL Amerlcan brand ls obvlously a weakness ln Chlna 1here have
been loL of proLesLs agalnsL WalmarL ln Chlna for lL suppller squeezlng and anLlunlonlzaLlon
pollcles and adapLlng Lo local culLure ls lmperaLlve for bulldlng cusLomer loyalLy

1he lack of a welldeveloped lnfrasLrucLure means LhaL WalMarL wlll have Lo reLhlnk lLs
operaLlons A few opLlons are
1he older model of sLocklng more ln sLore for reduclng LransporLaLlon cosLs mlghL be more
vlable ln Chlna
'Worklng LogeLher wlLh Lhe local parLner Lo undersLand where how Lhe local regulaLlons can
be used or ad[usLed for WalmarL's successes

We should keep ln mlnd LhaL as Lhe Chlnese economy grows expands lL wlll ulLlmaLely
resemble a developed one ln Lhe long run one where WalMarL ls unbeaLable 1he above
sLraLeglc LacLlcal recommendaLlons should ensure a proflLable survlval Llll LhaL polnL