B GIO DC V O TO

TRNG I HC HOA SEN

KHOA KINH T THNG MI

CHANGE MANAGEMENT
WAL-MARTS STRATEGY
OF ORGANIZATIONAL EFFECTIVENESS

Sinh vin thc hin:

Trn Bi Dung

2005536

in Quang Hin

2002263

Trn Nguyn Phng Thu

2000588

Lp:

Change Management _ QT212DE01-0600

Ging vin:

Thy Hunh Thin Quc Vit

HK 16.1A, Thng 10 / Nm 2016

ABSTRACT
The report focuses on how retailing giant Wal-Mart changed and survived in the
Japanese market after the failure in South Korea. It points out the problems of company's
decision to apply American way without localizing in South Korea. We discusses in detail
Wal-Mart's strategy of effectiveness and describes its efforts to bring out the best results in
retailing.
Issues:
Environment and structure of the South Korean and the Japanese retailing industry
Impact of culture on the company in the business activities
Change in strategy of Wal-Marts effectiveness to survive in Japan

Contents
ABSTRACT...................................................................................................................2
Contents.........................................................................................................................3
LIST OF FIGURES........................................................................................................4
1.

The theory of organizational effectiveness....................................................................5

2.

Strategy of Organizational Effectiveness at Wal-Mart...................................................5

a.

About Wal-Mart.............................................................................................................5

b.

Wal-Mart Korea and Wal-Mart Japan: Challenges of entering a foreign market..........7

i. Wal-Marts failure in Korea...........................................................................................7
ii. Wal-Mart in Japan..........................................................................................................8

3.

Conclusion....................................................................................................................11
REFERENCE...............................................................................................................12

LIST OF FIGURES
Figure 1. Wal-Marts Logo.........................................................................................................5
Figure 2. Organizational Structure of Wal-Mart........................................................................6
Figure 3. Walmart International Retail Unit Count (2001 2006)............................................7
Figure 4. Top 5 retailers in South Korea by market share.........................................................8
Figure 5. Walmart International Retail Unit Count (2006 2010)..........................................10

a. The theory of organizational effectiveness

Organizational effectiveness is the definition of how effective an organization
achieves the outcomes that the organization willing to get. Organizational effectiveness group
in organizations may have talent management, leadership development, organization design
and structure, design of measurements and scorecards, implementation of change and
transformation, etc. The organizational effectiveness group does many or all of the following
roles:

Manages and improves activities between every

Improves reliability, speed and quality

Strategizes for higher adoption rates in every areas

Reorganize the structure, process and people if necessary

(Organizational Effectiveness, 2016)

b. Strategy of Organizational Effectiveness at Wal-Mart

In the intensely competitive and highly dynamic business era of today, every
organizations need an effective stratgy for survival in the market amidst competition, WalMart is no exception.
i.

About Wal-Mart

Figure 1. Wal-Marts Logo

Current market

Headquartered in Bentonville, Arkansas, the company was founded by Sam Walton in

1962 by Sam Walton and incorporated on October 31, 1969; headquartered in Bentonville,
Arkansas. In August 31, 2016, Wal-Mart has total 11562 stores and clubs in 28 countries,
under 63 banners. The company works with the Wal-Mart name in the United States and
Canada. It has many stores in many countries, such as Wal-Mart de Mxico y Centroamrica
in Mexico and Central America, or Asda in the United Kingdom, Best Price in India, and

knowned as Seiyu in Japan. It has wholly owned operations in Argentina, Brazil, and Canada.
It also owns and operates the Sam's Club retail warehouses.
Wal-Mart firstly started with a single discount store and the simple idea of selling
more for less, and then it has grown into the largest retailer in the world for 50 years. Today,
the company has about 260 million customers with more than 11500 stores under 63 banners
in 28 countries and e-commerce sites in 11 countries each week. In 2016 which is financial
year, Walmart's revenue is 482.1 billion dollars. They hired 2.3 million associate employee on
the world, especially in the USA they employed 1.5 million. It's one of all parts that walmart
committed to creating the chance and conveying to their consumers and global communities.

Organizational structure of Wal-Mart

Figure 2. Organizational Structure of Wal-Mart

ii.

Wal-Mart Korea and Wal-Mart Japan: Challenges of entering a foreign

market
1. Wal-Marts failure in Korea
Wal-Mart Korea was established in 1998 for its international expansion, with 16
outlets store in South Korea. However, it had a major failure in this market with the Every
Day Low Price (EDLP) strategy. After 8-year operation, in 22nd May, 2006, Wal-Mart
decided to sell all 16 outlets to Shinsegae and then Wal-Mart became E-Mart when these
stores were managed by Shinsegae.
Why did Wal-Mart fail and leave South Korea?
Wal-Mart is known as the worlds largest retailer, but what is the reason of the critical
shortfalls in South Korea? There are three key issues related to Wal-Marts failure.

Market Structure and Business Model (Internal Reason)

According to Korean Analysts, Wal-Mart was slow in opening stores, they were not
aggressive enough in expanding their networks in South Korea. With 16 outlets, with the kind
of market share they build that would not allow them to press the suppliers on pricing.
Before received Wal-Mart, E-Mart were occupied 30% of South Korean market share,
Lotte Mart of Lotte Shopping took 12% of market share. As we can see when they lost the
race, they could never catch up said Koo Chang Gun at Korea Investment and Securities.

Figure 3. Walmart International Retail Unit Count (2001 2006)

Source: (Villanova University 2012)

Figure 4. Top 5 retailers in South Korea by market share

Cultural and Communication (External Reason)

Firstly, Na Hong Seok, an analyst at Good Morning Shinhan Securities in Seoul said
that Wal-Mart is an example of worlwide giant who has failed to localized their operations in
South Korea, because they could not read what Korean housewises want when they go
shopping.
Additionally, the way to display the products is also affect on the shopping culture of
Korean, these racks in Wal-Mart are taller than other domestic stores.

Product/Service Failure (External Reason)

Korean work a lot, so they are interested in the product got high quality to serve their
high quality life. Almost them do not care about the price first, if the product is very cheap
but the quality is not good enough they will not buy it. For instance, in E-mart the customers
feel like in spa than a warehouse, when they walk through the isles, they will be serve by the
sample of products such as fresh juice, fresh coffee, fresh grill meat, biscuit, etc. And with
one kind of product, there are have many brands for customers to choose and each product
are managed by different friendly and smiling staff.
Beside that South Koreans like fresh vegetables and fresh food rather than dry
procducts and the type of clothing that Wal-Mart sells.
2. Wal-Mart in Japan
Historically, Japan and Korea have had cultural interactions for more than 1500 years
and had direct political contact for a long time. They have the same economy and business

environment, but Wal-Mart are really successful in Japan. By learning from the failure of
South Korea, the company found out the correct answer to localize its business model to
Japanese markets tastes and preferences.
Japan was a potential market for foreign business to enter, so for Wal-Mart, success in
Japan is very important. In 2002, Wal-Mart joined Japanese market with the purchase of a 6
percent stake in the 371-store Seiyu chain. Despite continued losses, Wal-Mart took gradual
control of ownership by increasing investment, making Seiyu a wholly owned subsdiary in
June 2008. Because of the differences between the operational and cultural environment like
South Korea, Wal-Mart had to face numerous problems in Japan. The Seiyu managers
resisted the reduction of product quality to lower costs. Besides, bulk deals did not play well
in this country. Even rival Carrefour had to quit this market. But after spending 100 billion
yen (roughly $1.2 billion) in 8 years, in 2010, Wal-Marts situation in Japan had stabilized,
with two years of profits and reports with ambitions to expand the Japanese markets.
How could Wal-Mart survive in Japan?
There are three key issues related to Wal-Marts success.

The leaders decision about Market Structure and Business Model

Edward J. Kolodzieski, CEO of Wal-Mart Japan, was the man in charge of turning
Seiyu around. He made important decisions: slashed expenses, closed 20 stores and cut 29
percent of corporate staff. The company replaced in-store butchers with meals-to-go case;
removed the middlemen by importing some kinds of products directly from manufacturers by
25 percent in 2009 and focus on increasing sales of its own private-label.
Wal-Mart's entry also made local rivals change their strategies. They began to make
acquisitions, started to cut their prices and forced the Japanese suppliers to match Wal-Mart's
discounting strategy.

Figure 5. Walmart International Retail Unit Count (2006 2010)

Cultural and Communication (External Reason)

The Japanese market is highly difficult to serve. The stubborn Japanese consumers,
who traditionally think that cutting price means cutting quality, were difficult to accept
the strategy of low prices and broad merchandise selection. So Wal-Mart had to change the
Japanses thought. They changed steps by steps, stopped weekly event and made Everyday
Low Prices promotions in sectors like babycare and pet products, and throughout the store.
With the pressure of prolonged recession, Japanese shoppers have to finally believe that they
can buy quality stuffs with a lower price.

Product/Service (External Reason)

Japan is a small country with limited spaces and high rent prices, so they have to build
a new store format: smaller size with multiple location and high performance. Moreover, the
company has also found that importing food directly from other countries can cut the price of
local competitors. For example, grapes can be 20 percent cheaper if they import straight from
California.
Because of the aging Japanese population, the retailer created many special products
and promotions. The most popular product in Wal-Mart at that time was called "298-Yen
Bento", a single-serve, freshly prepared meal that sells for about $4. This product hit the
pockets of low-income people and one who on a pension with limited funds. Mr. Namioka, a
74-year-old pensioner, said he and his wife have to spend carefully to use their limited money
last every month, and that Seiyu's prices would help offset the impact of a new increase in
Japan's consumption tax, which is rising from 5% to 10% by 2015.

c. Conclusion
We recognized the reason why Wal-Mart left South Korea because these three main
reasons:
Market Structure and Business Model.
Cultural and Communication.
Product/Service Failure.
And Wal-Mart also got experiences and then they are correct and become a successful
retailer in Japanese Market.
Truthly, we learnt many lesson through this problem of Wal-Mart such as
1. Pay more attention on four areas that will lead your company to the chance of
success, they are (1) Market Structure and Business Model; (2) Cultural and
Communication; (3) Politics and Regulation; (4) Product/Service.
2. Any product will run up against certain cultural factors. If understanding these and
avoiding problems or obstacles, your company can increase your success.
3. The Business Model must align to the Martket Structure that the product is
entering. But each business model will not work in each situation, so the
companies must alter appropriately.
4. Change to adjust the business environment and improve the organizational
effectiveness

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