Walmart in China

1534 WordsNov 5, 20127 Pages
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…show more content…
The intensity of rivalry is quite high in the Chinese retailing industry. Not only does Walmart China have to compete with all the foreign retailers like Carrefour and Tesco, but also with the local ones. The local retailers pose an even bigger threat to Walmart owing to their well-established network and prime locations. Moreover, exposing to foreign competition allows the local retailers to imitate the foreigners’ techniques and hence improve their own supply chain efficiency. Also, the fact that the local retailers have entrenched customer, supplier and distribution bases, further intensified the rivalry in the retailing industry. (Farhoomand, 2006) Lastly, the presence of income disparity in China makes the national merchandising plan more challenging. China’s Gini coefficient of 0.4 suggested that income inequality is at an alarming level. There are poor individuals that cannot even afford buying daily necessity while the affluent customers are constantly looking for luxurious products (Farhoomand, 2006). Given this huge income disparity, Walmart China has been finding it difficult to develop its cost leadership strategy as they cannot standardize their products easily and have to provide different products that meet different customers’ needs. Strategic Approaches and recommendations All the factors in the Chinese retailing industry show that the cost leadership strategy adopted in the US Walmart might not be applicable in China.

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