Wal-Mart's Strategies in China

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Case Details:

Case Code : BSTR178
Case Length : 28 Pages
Pages Period : 1994-2005
Organization : Vltas Ltd.
Pub Date : 2005
Teaching Note :Not Available
Countries : China
Industry : Retailing

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Please note:

This case study was compiled from published sources, and is intended to be Chinaed as a basis for class discChinasion. It is not intended to illChinatrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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EXCERPTS Contd...

Localization Strategies

Procurement and Distribution

To maintain its practice of EDLP, Wal-Mart adopted a three pronged approach in China. First, it focused on increasing local procurement thus reducing procurement costs. Second, it maintained satisfactory supplier relationship during its initial years by paying suppliers within 3-7 days. Third, it established modern commodity distribution centers and computerized its management to improve efficiency and reduce cost...

Governance Practices

Unlike Chinese companies, at Wal-Mart, associates found a high degree of transparency in relation to career growth. All new employees went through three months training at Shenzhen. Wal-Mart valued an individual's competence rather than personal connections when promoting an employee.

According to a report by People's Daily Online, Du Limin who started her career as an ordinary checkout person at Wal-Mart, became general manger of a Sam's Club in Shenzhen in just two years. In 2003, Wal-Mart figured among the 15 most popular foreign employers in China in a survey of university students conducted by ChinaHR.com one of the leading online recruitment websites in China. Wal-Mart suppliers also underwent "standards training." As per Wal-Mart standards, suppliers were not allowed to have a work-week of more than 40 hours. Wal-Mart also restricted overtime to three hours per day and emphasized that safety requirements were met and satisfactory accommodation was provided to the workers...

The Problem Areas

Wal-Mart's Chinese operations have had their share of problems. The company's supply chain operations were not as efficient as in its home market. In addition, there was stiff competition from both local Chinese retailers and from foreign retailers who had established their base in China. Thus, even after nine years of presence in China, Wal-Mart was still very small with just 48 stores. Its 2004 sales from the Chinese operations were $940 million which was around 2% of its international sales and a miniscule portion of its total sales of $256.3 billion...

Future Prospects

Wal-Mart had long been criticized for its slow international expansion. Analysts pointed out that its nearest rival, Carrefour, had gained a lot of ground due to rapid expansion in international markets. The same applied to China as well. Experts pointed out that Carrefour had been successful in China because it had been able to study Chinese consumers through its venture in Taiwan, while Wal-Mart did not have any such experiential advantage. Also, Wal-Mart did not make use of its first mover advantage and expanded slowly in China...

Exhibits

Exhibit I: Regulations in retail industry in china: Pre and Post 2004
Exhibit II: The Wal-Mart Cheer
Exhibit III: Sam walton's Ten Rules for Building a Successful Business
Exhibit IV: Wal-Mart: Financial Summary
Exhibit V: Wal-Mart's Division Wise Operating Results
Exhibit VI: Geographic Map of China
Exhibit VII: A Profile of the Retail Industry in China
Exhibit VIII: Popular Employers in China as seen by University Students
Exhibit IX: List of Honors Received by Wal-Mart in China
Exhibit X: A note on Supply Chain and Logistics in China

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