Wal-Mart Struggles in Japan
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Case Details:
Case Code : BSTR186
Case Length : 20 Pages
Period : -
Organization : -
Pub Date : 2005
Teaching Note :Not Available
Countries : -
Industry : -
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"It will be a long-term story to see if Wal-Mart can take advantage of the merits of the Japanese market."
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-Yasuyuki Sasaki, Retail Analyst, Credit Suisse First Boston in 2002.
"Japan is a challenging market, but it is also a very significant growth opportunity."
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- Greg Penner, Chief Financial Officer, Wal-Mart Japan in 2004.
"For Wal-Mart, success in Japan is important, since a solid foothold in the world's No. 2 retail market could someday be a key to future growth."
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-Business Week Magazine in 2005.
Introduction
Wal-Mart Stores Inc. (Wal-Mart) entered Japan in March 2002,
through an alliance with Seiyu Limited (Seiyu), Japan's fifth largest retailer
in 2002. There were mixed reactions from analysts.
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Some cited macro-economic factors like the low rate of growth4 and an aging
population that made Japan's retail market less than attractive. However, others
felt that despite these factors, Japan's $451 billion retail industry was
sufficiently large to justify Wal-Mart's interest.
As soon as it entered Japan, Wal-Mart brought in its best practices in retailing like Every Day Low Prices5 (EDLP) and Rollback,6 for which the firm was renowned. It also attempted to introduce substantial changes to the management of Seiyu stores by revamping its store layouts, and implementing Retail Link,7 its widely appreciated supply chain management software. Despite these efforts, Seiyu registered consecutive losses in 2003 and 2004.
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Some experts commented that Wal-Mart's retailing model was not suitable for Japan. They pointed out that Japanese consumers preferred conveniently located stores within the city and were not visibly price-conscious. They added that foreign retailers had trouble with procurements due to the multi layered network of suppliers and retailers in the Japanese retail sector.
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Experts began to compare Wal-Mart's experiences in Japan with its experiences in other countries such as Mexico and Germany. While Wal-Mart had a shaky start in Mexico, it later emerged as a market leader in the country. In Germany, however, it could not overcome initial setbacks and was still struggling. Experts wondered whether the Japanese venture would replicate the Mexican success story or the German misadventure. In August 2005, Wal-Mart announced that it was contemplating launching stores with its own brand name in Japan. This seemed like a bold move by Wal-Mart, especially since another big foreign retailer - Carrefour8 - had exited the Japanese market just a few months earlier in March of the same year, after struggling to establish itself for six years. |
Despite its troubles with Seiyu, Wal-Mart also made a bid to acquire Japan's fourth largest retailer Daeiei in 2004, when it was being restructured through a bailout. However, Wal-Mart's bid for Daeiei was rejected in September 2005, dealing a big blow to its expansion plans in Japan. Had the bid been successful, Wal-Mart could have emerged as the second largest retailer in Japan after Ito Yokado.
Wal-Mart Struggles in Japan
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