Walmart case study in China

Week 4: Culture differences

1. Why is Walmart successful in the US? What
are the Walmart’s competitive advantage?
• EVERY DAY LOW PRICE (CA: low cost bc low cost outcomes low price. So the CA is
low cost)
• Walmart commands a CA from its cost leadership S in the industry=> sell goods at
lower prices than its competititors and still have profits
- Economic of scales
- Innovation in the process
- Low cost: agency, sales and administrative expenses, distribution
- Suppliers relationship
- Reputation for value
* High efficiency supply chain by engaged with technology (connect hubs, centers,
suppliers)
2. Identify the # in China markets=>
challenges to Walmart’s standardization?
• Walmart ideaology: people everywhere seek to buy goods of the best
quality and reliability at the lowest price + friendly environment =>
decide to apply standandardisation to China market
• However, China market posed a huge challenges to the
standardization
China retailing culture
• Market structure: one china, many markets – many types of market
from tier 1, 2 3… with differences in income. China rural population
cannot support the Walmart super center as well as America’s rural
population can; urban population;’s willingness to shop far away is
challenges = limited car ownership
=> Fragmentation market
• Distribution channels: under-developed infrastructure + tech
framework, local protectionism=> limited stores in a geographical
area => challenges the CA of using tech to purpuse low cost S
(impared with business model
• Customer perferences and buying behavior
- Living environment – small and noisy=> spend free time in comercial
centers
- Behavior: window shopping, compare prices and quality of # shops,
curiosity of new stores
- Impulsive buying, swing by promotional campaign
- Brand concious but loyalty; buy for the actual value
- Fresh concept
- Vehicles: bicyle, motorbike-> Buy less on any one trip
=> Cost of serving high per customer
• Other challenges
- Shoplifting=> higher rate than other markets=> drive up cost
- FRESH – main consumer drivers => higher cost to satisfy fresh demand
CHALLENGES COST STRUCTURES AND
DRIVE UP COST
The main challenge for Walmart in China is to maintain the low cost per
serving
MANY SUGGESTIONS FOR FUTURE
THAT NEED TO CONSIDER
• REPOSITIONING the brand (tái định vị thương hiệu) FROM EDLP ->
should create sub-brand and enter China with that brand
• DECENTRALISE (phân quyền) AND GIVE MORE AUTONOMY FOR EACH
STORES=> FIT LOCAL DEMAND (shorterm solution) (bc still demand
the high cost to invest)
• WAIT UNTIL THE MARKET BECOME MORE FAVORABLE
=>PENETRATION (not rcm)
Walmart positioning
• More for less (more benefit value, less price)