WALMART OPERATING IN ASIA: IN THE CONTEXT OF

CHINA, INDIA AND JAPAN

INTRODUCTION
Walmart is the leading grocery retailer in the World. The success of company results from not
only domestic market dominance but also the efforts in global expanding aggressively. The
company had wide and deep vision when considered East Asia as an integral component of
the global production network. In addition, the liberalisation in trade barriers and investment
incentives in Asia have shown a positive signal for foreign MNCs. Therefore, Asian
expansion became the strategic choice.
The aim of this essay was to illustrate the Walmart success in overall and to discuss the
prospects of China, India, and Japan in detail. The essay was divided into 3 parts. The first
part represented a brief introduction to the Walmarts business as a whole; the next part
focused on analysing the strategy in Asian operations and the final one emphasised on
potential threats and responsiveness to those threats.

DISCUSSIONS
The first sessions gave Insights to Walmarts business. As Walmart is the largest international
retailer in the World (Global Powers Report, 2013) and also ranked 1st place in the 500
Fortunes Company List (Fortune Magazine, 2013) with approximate Total Revenue of US$
470 billion. The company was founded in 1962 by Sam Walton and has developed amazingly
over the past 5 decades. One of the reasons that lead to the companys success is the concept
Every Day Low Prices slogan that has been kept solidly from the very beginning, which
attracts consumers, especially in these economically difficult times.

Since the mid-1980s, Walmarts prosperity had begun, the number of stores had escalated to
882 and the company became the US retail market leader in 1990; however, abroad
expansion was only started until 1991. The first expansion of this Multinational Corporation
came to Central and South America, then into Europe and Asia. Nowadays, it is estimated to
have 11,000 stores in 27 countries under 55 names, in Asia, the total stores takes up to 851
stores in 3 countries, which are China, India and Japan (Figure 1, Walmart Annual Report,
2013).
The company has different store setups Walmart US, Sams Club and Walmart International.
The formats of these portions are discount department stores, neighbourhood supermarkets,
superstores or the neighbourhood supermarkets (Sams Club) (Euromonitor, 2013).
Walmart not only provides products with comparatively low and reasonable price, it also
brings a seamless experience to customers, they are either enormous variety of product ranges
from creatively effective production network or innovations like online shopping or mobile
check-out through the efforts of investments in technology. The aim of business is to bring
the customer satisfaction in terms of pricing, convenience and joyful since Walmart has full
awareness that it customers are people from middle-class income society, who have high
burdens on budget and tense considerations on product choices.
Although profits generating heavily on US market, Asian business still has certain
contributions to the company development. The aggressive new stores establishing in markets
like emerging Chinas, developed Japans and new and potential Indias shows the ambition
of being dominant and firmly sustainable in the long-run. The Figure 2 shows a upward trend
of Walmart International sectors in 10 years.

The second session analysed Strategy of Walmart in 3 Asian countries including China, Japan
and India. This session covered up the motives of internationalisation, how Walmart entered
the markets, reasons of choosing these countries and the organization of production network
as well as other business activities.
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Motives of internationalisation

Pull Factors and Push Factors contributed to the decision of expanding abroad to Asian
countries of Walmart (Johnson and Turner, 2003 and Treadgold and Davies, 1988). According
to the authors, the push factors or reactive reason are the drives happening within the home
country, which result in finding for international opportunities. Pull factors or proactive
reasons are appealing conditions in foreign countries that attract firms to do cross-border
business.
One of the push factors that made Walmart went abroad was the implicit risks caused from
highly depending on domestic market. Economic downturn, political issues, and uncertainty
in external environment may affect the consumption and create profit decrease. Furthermore,
Whitehead (1992) and Alexander (1990) indicated the effects of market saturation. Since US
grocery retail industry has been very saturated, high competitive, uncertain and sophisticated;
Walmarts responded by doing foreign business in other to sustain in the long-run.
In terms of pull factors, Dunning (1994) pointed out 4 factors to explain the cross-border
business action. Firstly, as mentioned, the high dependence on domestic market can cause
risks. Therefore, Walmart needed to look for efficiency through diversifying business globally
both to reduce risks and to be beneficial from economy of scale. Secondly, in terms of global
expansion context, Carrefour, Walmarts largest rival, was the faster mover experienced since
1973 (Carrefour History, 2013). As a result, Walmart concerned market related factors and
executed internationalisation to emerging or large markets to avoid left behind. Griffin and
Pustay (2007) also highlighted the impacts of competitive forces on internationalisation.
Thirdly, Walmart competes on price, cost reduction is vital; seeking for countries having
cheaper resources of labour force, supplies, etc. is advantageous for business. Fourthly,
Global Expansion helps build global branding awareness, which creates foothold in
customers minds. Moreover, the argument of higher expected profitability was also given by
Williams (1992). From the above discussions, the outstanding markets to be most attractive
and proper with Walmarts motives were Japan, China and India.

This part explained how Walmart entered China, India and Japan through chosen strategies
and entry mode.
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Chosen strategies to compete in Asian economy

Expanding to unfamiliar markets with cultural distances, different political, economic and
social themes caused difficulties. By scanning the industry and analysing by Porters 5
Forces, Walmart could construct critical adaptions for doing business. When expanded to
Asia, the company was fully aware of fierce competition within the industry, the competitors
Walmart have faced not only strong MNCs like Carrefour, Tesco, etc but also local rivals like
local retailers, traditional markets, and small household businesses. In India, 90% of US$500
billion of retail market was captured by business so-called mom and pop stores (Reuters,
2013). In addition, customers switching cost is 0, any provider have lower price would
result in lack of customers loyalty. Furthermore, emerging markets like China and India have
had high value in retailing sector that indicates potential exploitation for new entrants.
Maintaining knit and tight relationships with suppliers was momentous because of pricing
factors, the power of Walmarts suppliers have always been strong. However, substitution
seemed unclear since buying grocery is obviously significant.
From the above discussion, wise strategic decisions were necessary for long-term
sustainability of Walmart. In terms of global expansion, Walmart adapted localization
strategy. In details, due to the industry characteristic selling commodity products to satisfy
universal needs, Walmart always uses price as a competitive weapon. Therefore, the cost
reduction is too vital to sustain, which means high cost reduction pressure is considerable.
Moreover, as different countries have variety of preferences; as a result, high local
responsiveness in terms of the in house R&D, marketing, production, products serving and
distributions shall be implemented to adapt the local peoples needs.

Walmart also applied the best cost leadership strategy, which provided products with
comparatively low price and best customer values as it had made the reputation for the
company. However, Walmart did have certain extent of differentiation (George, 2007).
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Entry mode

In general, the entrant of Walmart in Asian markets was quite similar in different countries. In
early stage, China and Indias governments had applied restriction to foreign operations,
which required carrying out joint-venture with a company (Ball et all, 2007). However, in the
later liberalization, these countries lessened the barriers, and Walmart did not hesitate to
employ acquisition to take over the ownership and control of a local retailer over time,
Walmart possessed wholly-owned company with less time consuming, immediately grabbing
market share, lowering risks and reducing competition within the industry.
In 1996, Walmart entered China through a joint-venture agreement and opened its first
supercentre and Sams Club in Shenzhen, a special economic zone, an area had preferential
tax treatments and proposed special policies to attract FDI (Tseng and Zebregs, 2002). From
2007 to 2012, the acquisition of local retailer Trust-Mart was completed, which pushed
Walmart to be the leader in retailing market (Gerreffi and Ong, 2007). Walmarts
establishment e-commerce headquarters in Shanghai in 2011 and 51% stake ownership of
Yihaodian (an e-commerce business) showed its ambition to occupy the online commercial
market.
The entrant of Walmart in was quite similar to China; in 2002, the company purchased 37%
stake of Seiyu, a successful Japanese retailer, to start the business in this nation. In 2008,
Seiyu were listed as wholly-owned subsidiary of Walmart even though the business brand
name was retained.
Much the same to China, India operations was established in 2007 through a joint venture
agreement with Bharti Enterprises, which was considered as a forced partnership as Walmart

had to transfer its expertise and technology under the pressure of policymakers constraint in
retail sector (ABC News, 2007). However, the 2012s new regulations allowed Walmart
purchasing all the stake of Bharti so that it could build greater presence and inaugurate solely
in this Asias third largest economy (Forbes, 2013).
The next part illustrated the attractiveness of given Asian countries to explain the Walmarts
selection. While China and India showed potential appeals in terms of market size, economic
and population. The matured retail industry in Japan was somewhat attractive to Walmarts
expansion.
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China and India

Both China and India have had significant growth in economies in recent years. Figure 3
illustrated the sharp increase in GDP of those countries. In addition China and India were
ranked at first and second place in the Worlds Population with 1,384,694,199 and 1,255,720
people respectively (WPR, 2013). These factors proposed huge potential to gain greater
profit returns; thus, these nations became Walmarts choices.
Moreover, both countries applied liberalized economic reforms that started since 1970s in
China and later India followed in 1990s; these programmes transformed the economies
dramatically. In China, retail sector competitiveness, economies of scale in not only state
enterprises but also the private sector escalated progressively. The transitions from stateowned stores to new shopping centres, hypermarkets demonstrated optimistic signals to
retailers like Walmart (Farhoodmand, 2006). Indias and Chinas participation to WTO in
1995 and 2001 opened new opportunities for company in term of reduction of quotas, tariffs,
and corporate tax; repatriation of revenue to home country (WTO, 2013).
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Japan

A high income-level country with developed infrastructures like Japan was also brought
higher expectation of consumer purchasing power and larger sales

The second sessions latest illustration was ability to organizing production network and
business activities of Walmart in Asian economies. Walmart built its production network
through variety of operational and business activities in Asian market. In China, Walmart
utilized offshore sourcing approach in its host country, which performed manufacturing and
assembling to export products back to United States.
Moreover, production network organizing was carried out through localizing sourcing
activities help slash out the delivery cost (Gereffi and ng, 2007). A simultaneous application
of cross-docking technique and global procurement centres centralizing sourcing working
contributed to higher efficiency and boosted economies of scale (Lin and Liang, 2007,
Chuang et al, 2011). Marketing practices were promoting message of serving lowest price but
highest customer-value added, Human Resource activities included not only caring to
customers with open atmosphere but also employees career concerns like training and profitsharing. Technology was strongly invested to emphasize the e-commerce and data gathering,
which helped accelerating stock-turnover. By implementing those business practices,
Walmart have succeeded significantly and had foothold in the home countries market.
The final session of this essay clarified the threats that Walmart have faced during its
operations. Both Chinas and Indias business shared similar risks, which were income

disparity in rural and urban areas, too burdened protectionism for local company, lack of
developed infrastructure (Lin and Liang, 2007). Bureaucratic red tape, approval processes
were difficult in China, a lot of cost-requiring and inefficiency caused from sophisticated
procedures also involved. Unfamiliar store format like hypermarket and conceptual
Walmarts tradition Everyday Low Prices seemed unattractive and insufficient since
cultural platforms of Chinese were instinctive saving and frequent purchasing (The City
Wire, 2013). In India, too many manor languages and energy related issues like power and
cold-storage system were complexities to deal. To overcome these hardships and dilemmas,
Walmart had to put large efforts on adapting consumers preferences, which are sourcing
local but American base brands to ensure the product quality, practising Corporate Social
Responsibility locally. Conduct and prolonging relationships with local suppliers and
authorities were critical to maintain business sustainability (Ball et all, 2007).
Besides, Walmarts problematic constraints in Japan were personal interaction influencing on
business, high labour cost, multi-layer distribution system, and its partner Seiyus debts
before joining with Walmart. However, Walmarts efforts adapting to Cultural differences,
applying past-time hiring regime and early retire encouragement as long as the strong capital
base helped to some extent reduced the problems

CONCLUSION
In conclusion, Walmart has always been the largest retailer in the World with outstanding
success not only in United States but also outside the nations barrier. In Asia, Walmart has
gained substantial achievements in terms of global expansion thanks to the rational market
selection, proper strategy appliance and flexibility in organizing production network.
Although Walmarts operations in China, India, and Japan have faced threats to be harmful to
the business, Walmarts wise strategic application and experiences generated from others
countries may help overcome the obstacles.

In recommendation for Walmart, the company should not eager to expand aggressively but
constitute adequate and competent structures as solid premises for future. Furthermore,
absolutely solving the present matters will help avoid unexpected consequences and intricate
circumstances.
(2299 words)