Industry Analysis Case Study

China's Retail Industry (A): An Assessment of Potential and Challenges

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Abstract:
The first of this three-part case series helps richly and deeply analyse a happening industry in China - retailing. Its competitive dynamics is the fine thread that runs through all the three cases. Now that China is on every global (MNC / TNC) company's growth agenda, the class can debate industry-specific dynamics as well as economy-wide factors. So bigger questions pop out. What is the "China Factor"? What does this mean to the companies operating or willing to operate in China? What should be their homework before entering China? What should be their strategic moves, while they are in China -strategy or tactics? With Chinese economy integrated into the global economy (since 1978 and more so from 2001 when it formally joined the WTO), its economic growth rate has hovered around 10% - 12%. And that's very good news for all the major global corporations because there is huge demand there. However, this good news has a flip-side too: China's business terrain is bumpy for a variety of reasons. What are those reasons? Hard infrastructure and soft infrastructure are the prime suspects. But many more are embedded into this case series that can be unearthed with meticulous analysis. Retail industry is one among the many that saw intensified competition during the past decade, in China. Competition is not yet even because of huge untapped potential; so a discussion on Industry Life Cycle can ensue. It is for the players to strategise their moves and counter-moves, where value chain analysis would prove essential. Market entry strategies of Wal-Mart and Carrefour would make up for an interesting analysis.

Pedagogical Objectives:

• To give a brief overview of retail industry's formats and the operational dynamics involved
• To understand the potential and attractiveness of China's retail industry
• To analyse the challenges of operating in China's retail industry because of its value chain
• To debate on the critical success factors in China's retail industry
• To analyse the market entry strategies of Wal-Mart and Carrefour and debate on their effectiveness.

Keywords : Wal-Mart; Carrefour; Economic reforms in China; Retailing in China; Centralised supply chain system; Logistics and Supply Chain Management; Centrally planned economy; State-owned department stores; Dalian Dashang; China's traditional retail industry; Metro AG; Ito Yokado; Industry Analysis Case Study; Chinese Guanxi; Retail industry dynamics