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Walmart's Experience in China

Essay by   •  April 11, 2011  •  Term Paper  •  1,607 Words (7 Pages)  •  1,888 Views

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Abstract: Being the biggest successful retail giant in the world, Wal-Mart has prepared to irradiate worldwide. After setting foot in North America, South America, Europe and Asian, the situation turned out to be not as satisfactory as expected. China is the ideal field for Wal-Mart to conquer.

Nevertheless, due to the profound differences in culture, politics, administration, geography and economics, things in China are going to be tough. To achieve this goal, Wal-Mart needs to adjust strategies in a series of aspects according to the actual setting of Chinese market

Summary of Key Issues and Recommendations

 China is a huge market for retailers with large population base, unserved booming needs, many domestic suppliers. However, in the meantime, the country, the market, customer behaviors, social economy structure and so on differ in enormously.

 Wal-Mart's sophisticated operation model that works perfectly in north and south American has met waterloo in German and been struggling in Japan and South Korean.

 Nine years after first entry in 1996, Wal-Mart's sales in China ranked only twentieth in the list of all chain stores and reported loss so far.

 Wal-Mart needs to design another business model which matches the specific Chinese environment instead of simply duplicated everything from the US.

 Wal-Mart is required to maintain a balance between operating globally and act locally.

Analysis

From an ordinary retailer started to the largest retailer in the world, people marvel at Wal-Mart's growth and success. The root cause of this victory is that Sam Walton understands the American market and environment so well that he can design business strategies that meet the tastes of Americans and avoid head-on competitions with existing big players. Wal-Mart has built a set of competitive advantages which enable itself survive and grow.

"Every Day Low Price" is probably the first thing that jumps out when people think of Wal-Mart. Only to keep the price low is a challenging task, let alone to maintain the level every day. To realize its promise, Wal-Mart was brave enough to build the store in small towns instead of busy but expensive downtowns. Although at the first glance, it went against the principle that stores should be close to its targeted customer group. But it turned out to be a smart decision because establishing in small towns could avoid head-on competition with strong big competitors, keep away new entries by saturating the small regions and cut expenses on space renting.

Moreover, Wal-Mart searched every possible way to control the cost that includes reducing operating expenditure, helping suppliers improve their efficiency and investing high technology in distribution and logistics management. For suppliers, Wal-Mart played a mean role and a helpful role at the same time. Wal-Mart's shrewd negotiators leverage the huge purchasing power to bring down the price as much as possible, demand high quality, and require punctual delivery. Meanwhile, Wal-Mart developed a partnership with them to improve the efficiency in manufacturing and inventory which in turn could enable lower price for Wal-Mart. I see this as a three-win partnership for the reason that not only Wal-Mart and suppliers but also end customers get the value.

Another aspect that we cannot ignore about Wal-Mart is the great effort and leading role to construct the well organized and structured distribution network equipped with advanced technologies such as barcode, EDI and even satellite technology to guarantee the fast and prompt delivery as well as a widespread information communication network. It also laid the foundation for future rapid expansion nationally and further internationally. This highly developed logistics system indirectly lower prices in a long run because the more efficient inventory management along with merchandise forecasting, planning and shipping could decrease a big portion of operating expenses.

Besides the exciting low price, Wal-Mart also leveraged its human power to provide excellent service to win and then hold customers. Warm smiles, timely help which is not limited to goods or within the stores and friendly environment, all these gave the customers a feeling that Wal-Mart cared about them not only because of the money. With the positive incentive system, every employee of Wal-Mart earned what they deserved according to their performances. This less hierarchy structure spurred everyone contribute to the big family productively.

Bearing the success and glory, Wal-Mart entered the arena across the Pacific Ocean. However, things went on not as smoothly as expected. China is the big market but must handle with great care.

Being so different from US, China is a country which open the door to foreign companies and investors not long ago. Several precedents have demonstrated that simply duplicating previous efficacious models and strategies will not work in this country. China is a developing country differs drastically in different geographic regions. For example, People gather mostly in the east coastal cities and at the

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