Walmart in China
Walmart in China
Introduction
Walmart, founded by Sam Walton in 1962, is the largest retail company in the world. The low cost strategy and hence the “Every Day Low Prices” (EDLP) strategy allowed Walmart to outperform competitors in the US. Besides having stores in the US, Walmart has also expanded its market worldwide. Walmart’s entry into China was not surprising, given its population and growth potential. Nevertheless, Walmart China had been struggling with its sales volume. It was only ranked twentieth in sales out of all the Chinese chain stores in 2005. Walmart’s strategic move in the US does not seem to be applicable in the Chinese market. Different factors in the Chinese market blunted the cost advantage of Walmart. This paper will analyze and discuss the strategic issues of Walmart in China with SWOT analysis and Porters’ five forces.
SWOT Analysis
Strength
* Offers a large variety of products, with recognized labels * Low cost strategy allows Walmart to achieve “Every Day Low Prices” * International linkages around the world
Weaknesses
* Labor issues arose due to union pressure
Opportunities
* Chinese consumers are more concern about the value that a product can bring about, they demand for higher quality and service * Expansion of the middle sector implies increasing consumer spending * Entry into the World Trade Organization (WTO) in 2001 lifted restrictions and opened up the market
Threats
* Competition from both foreign retailers like Carrefour and local retailers * Income disparity (Gini coefficient over 0.4 – the alarm level) and difference in rural and urban areas result in difficulty in pursuing a uniformed strategic move across nation * Red tape and local protection policies add to cost, which restrict the Walmart’s further expansion in China * Under-developed infrastructure like poor transportation network, difference in consuming habit between Chinese and Americans, and prevailing
Introduction
Walmart, founded by Sam Walton in 1962, is the largest retail company in the world. The low cost strategy and hence the “Every Day Low Prices” (EDLP) strategy allowed Walmart to outperform competitors in the US. Besides having stores in the US, Walmart has also expanded its market worldwide. Walmart’s entry into China was not surprising, given its population and growth potential. Nevertheless, Walmart China had been struggling with its sales volume. It was only ranked twentieth in sales out of all the Chinese chain stores in 2005. Walmart’s strategic move in the US does not seem to be applicable in the Chinese market. Different factors in the Chinese market blunted the cost advantage of Walmart. This paper will analyze and discuss the strategic issues of Walmart in China with SWOT analysis and Porters’ five forces.
SWOT Analysis
Strength
* Offers a large variety of products, with recognized labels * Low cost strategy allows Walmart to achieve “Every Day Low Prices” * International linkages around the world
Weaknesses
* Labor issues arose due to union pressure
Opportunities
* Chinese consumers are more concern about the value that a product can bring about, they demand for higher quality and service * Expansion of the middle sector implies increasing consumer spending * Entry into the World Trade Organization (WTO) in 2001 lifted restrictions and opened up the market
Threats
* Competition from both foreign retailers like Carrefour and local retailers * Income disparity (Gini coefficient over 0.4 – the alarm level) and difference in rural and urban areas result in difficulty in pursuing a uniformed strategic move across nation * Red tape and local protection policies add to cost, which restrict the Walmart’s further expansion in China * Under-developed infrastructure like poor transportation network, difference in consuming habit between Chinese and Americans, and prevailing