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Wal-Mart Stores Everyday Low Prices in China Case Solution

Solution Id Length Case Author Case Publisher
994 728 Words (3 Pages) Ali F. Farhoomand, Iris Wang University of Hong Kong : HKU590
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The answer is No, which is reflected in negative margins from last 9 years. Obviously, there cannot be a “one size fits all” strategy in today’s business world and Walmart’s failure in Germany and East Asian markets are the perfect examples of it.

Considering the case of China, three of the major limitations were socialism, uneven wealth distribution and inefficient supply chain. Walmart was accustomed to fair and ethical competitive environment in US. However, successful hypermarket business in China required decentralization of business strategy and by-passing or ignoring regulations. Walmart didn’t do either of them and hence botched.

Following questions are answered in this case study solution

  1. Should Wal-Mart replicate its domestic model in its original form in China? Why? Can it build the same competitive advantage in China through its successful domestic model?

  2. What are some threats specific to the Chinese market that Wal-Mart must be aware of, and consider, to implement a successful strategy leading to strategic advantage?

  3. Is Wal-Mart good or evil? Please present arguments supporting each consideration, and synthesize by presenting your own opinion in view of your analysis.

  4. What are some industry-specific key or critical success factors (CSFs) associated with the discount retail industry? (Answers are not necessarily in your text, and you need to research the industry).

Case Analysis for Wal-Mart Stores Everyday Low Prices in China

Moreover, another major factor of Walmart’s US success was its policy to exploit the potential of rural retail market. This aspect was eliminated due to near zero buying power of rural consumers in China. Also, the lean and responsive supply chain model failed due to lack of expressways and restrictions on the number of stores in particular vicinity, both of which lead to higher cost. 

What are some threats specific to the Chinese market that Wal-Mart must be aware of, and consider, to implement a successful strategy leading to strategic advantage?

Intensifying competition by local retail giants, inefficient supply chain, window-shoppers and regulatory restrictions are specific threats of Chinese market. Exhibit 1 clearly indicates that local retail giants like Bailian Group, Dailian Dashang group, Beijing Hualian etc. which are estate owned, have grown at above 20% and have sales at least 3 times of Wal-Mart’s. Local licensing requirements and bureaucratic system also hampers the timeliness of business activities and deprive the first mover advantage.

Transport infrastructure, disorganized or absent IT network and unjust regulations have also made Wal-Mart uncompetitive by increasing costs. Additionally, Chinese consumers enjoy window shopping as their favourite leisure activity. This phenomenon leads to crowded stores, which are inefficient in terms of Sales in US dollars per square foot in a given time. Hence, the cost of serving a single customer from a crowd of 100 people is very high, and a lot of time and effort is wasted on people which are not the genuine customers.

Is Wal-Mart good or evil? Please present arguments supporting each consideration, and synthesize by presenting your own opinion in view of your analysis.

Wal-Mart has both bright and dark sides of its corporate image. It has created thousands of jobs, reinvented the retail business model, introduced effective cost control strategies and made sure that customers get the best value for their money every day. However, low wages, contractual employment, absence of labour union and continuous pressure of cost cutting on its vendors have created negative perceptions.

However, the bottom line of every business activity is making a profit for its shareholders, which can only be achieved by conducting business ethically and giving value for money to the customers. Walmart’s growth of 300 times in number of stores (18 to above 5000) and 10,000 times in net income (1 to above 10000 million USD), clearly indicate that it has delivered what it promised to its customers and shareholders. It is this win-win situation which has made everybody happier and wealthier.

What are some industry-specific key or critical success factors (CSFs) associated with the discount retail industry? (Answers are not necessarily in your text, and you need to research the industry).

Higher value of money, customer service, repetitive business and motivated staff are some CSFs associated with global discount retail industry. Customer loyalty is a very complex phenomenon and retail business cannot thrive unless a relationship is built on a personal level with customers. Dishonesty, biasness and unethical treatment may result in loss of customer loyalty.

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