Growth Strategies Case Study

Case Title:

Growth Strategies of WuMart : The Wal-Mart of China

Abstract:
WuMart was founded by Stanford graduate Dr. Zhang Wenzhong in 1994, when it established its first supermarket. Within 10 years, the company had become one of the top ten leading retail chains in China, with rapid expansion in scale and steady growth in both revenue and profits. It was successfully listed on the Hong Kong Stock Exchange in November 2003 and its stock price value had crossed HK$25 by mid 2006. By 2006, WuMart had become Beijing’s biggest retailer with over a dozen hypermarkets, nearly 50 supermarkets, 444 convenience stores, and 8 chain drug stores. Additionally, it had over 500 stores in Beijing and other surrounding areas which Zhang planned to double by the end of the decade. Major retail chains had only 0.5% of retail sales in the Chinese market while WuMart’s market share in the greater Beijing area, including Beijing city, was just over 5%.

The case traces the history of the retail trade in China and the developments over the last decade. It talks about the increasing buying power of the emerging and expanding Chinese middle-class in both the urban and rural sectors. The case analyses WuMart’s strategies and discusses the three major acquisitions made by the company in 2006. It also talks about WuMart’s attempt to evolve as a national brand in China by trying to penetrate into the unrepresented Western and North Eastern regions. Promotional campaigns by the company as also technical up-gradation using SAP are also discussed. Competition from local business houses and foreign retail groups is also analysed.

The case further looks at the challenges ahead for WuMart. Some of the factors to be considered are: the importance of local preferences based on cultural differences, the growing appetite for brands among Chinese consumers, the need for more Hypermarket stores, expansion linked to economies of scale, M&As of local and medium sized retail companies, and consolidation together with market leadership.

Pedagogical Objectives:

• The case is expected to help students understand and analyse the following points
• The development of the retail trade in China and the rise of local business houses like WuMart
• The leading presence of WuMart in the Beijing area and the need to expand markets in the least developed regions of China so as to become a national brand
• The threat from competitors, both local business houses and foreign retail groups
• Mergers and Acquisitions by WuMart, especially in 2006, to consolidate its top-ten ranking
• The use of SAP and other software by WuMart to enhance its position in the Chinese retail business.

Keywords :  Wumart; China; Wal-Mart; Retail trade; Convenience Stores; Supermarket; Middle Class; WTO; strategy; acquisitions; takeover; Growth Strategies Case Study; Zang Wengzhong; Supply Chain; Market Share; Consolidation and Growth

Contents : 
Retail Trade in China
WuMart Strategy
Acquisitions by WuMart in 2006
Technical upgradation with SAP
Stock Price Chart: WuMart Stores
WuMart Markets & Stores
WuMart: Financial Summary