Case Study:

Wal-Mart Stores “Every Day Low

Prices” In China
 SAM WALTON LESSONS AND STORY

1. VALUE OF MAKING MONEY 5. BE SELF SUFFICIENT

6. FIRST MOVER BUT FAST MOVER (NOT FIRST BUT NOT
2. COMPETITIVE AND BEST LAST)

3. PEOPLE SKILL AND TEAM WORK 7. EXPAND WITH GREAT PARTNERS

8. SELL WITH DRAMA
4. LEARN, EXPERIMENT AND FOCUS TO WIN • WAKE UP WITH SOLID DETERMINATION
• NEVER FEARED OF BEING WRONGED

9. SAM ALWAYS FOCUS ON TWO THINGS (FOCUS ON

ESSENTIALS)
• SELL AS CHEAP AS YOU CAN
• CUSTOMER SATISFACTION
WALMART RETAIL PRODUCTS
 MONEY SERVICES

CREDIT & PREPAID DEBIT CARDS Gift Cards

• WALMART CREDIT CARD
• WALMART MONEYCARD
• BLUEBIRD BY AMERICAN EXPRESS
• NETSPEND VISA
• RAPID RELOAD
SEND & RECEIVE MONEY
• Walmart Gift Cards
• Walmart eGift Cards
• Visa/MasterCard/AMEX Gift Cards
• Corporate Gift Card Program
• Other Gift Cards
Other Money Services
• Walmart Pay

• MONEY TRANSFERS • Express Money Services

• Check Printing
• BILL PAY
• Tax Prep Services
• MONEY ORDERS
• Coinstar1
• CHECK CASHING
• PayPal
 PRODUCT SERVICES

PROTECTION PLANS
• WALMART PROTECTION PLANS
• FILE A CLAIM
HOME SERVICES
• ASSEMBLY
• TECH SETUP
• INSTALLATION
OTHER PRODUCT SERVICES
• PERSONALIZED PRODUCTS
• PHOTO PRINTING
• TRADE-IN PROGRAMS
• SAM'S CLUB MEMBERSHIPS
 BUSINESS SERVICES

WALMART FOR BUSINESS

• CORPORATE GIFT CARD PROGRAM
• PROMOTIONAL PRODUCTS
 HEALTH SERVICES

• PHARMACY
• WELLNESS CENTER
• VISION CENTER
• REFILL A PRESCRIPTION
• FLU & IMMUNIZATIONS
• CLINIC SERVICES
 REGISTRY SERVICES

• WEDDING
• BABY
• EVENT
 AUTO SERVICE

• AUTO CARE CENTER

• AUTO BUYING
• TIRE FINDER
 PET SERVICES

• PET MEDICATIONS
• NEW PET PARENT RESOURCES
 WALMART: EVERYDAY LOW PRICES STRATEGY
• WAL-MART IS THE WORLD’S LARGEST RETAILER STORES EMERGED IN ARKANSAS, USA SINCE
1962 BY SAM WALTON WITH HIS BELIEF THAT THE FUTURE OF RETAILING LAY IN
DISCOUNTING, FOCUSING ON VALUE DRIVERS: PRICE AND SERVICE, CONVENIENCE AND A
WIDE RAGE OF PRODUCT ALL IN ONE STORE.
• THE SUCCESSFULLY OF IMPLEMENTATION IS TO ADAPT INNOVATIVE PRACTICE SELLING THE
BRAND WITH SLOGAN ” EVERY DAY LOW PRICES” (EDLP) MIXED WITH OTHER PHILOSOPHIES
INTO ITS PRICING.
• IN EARLY DAYS, ONE OF THE KEY STRATEGY WAS CONCERNED ON SMALL TOWN LOCATIONS:
OPEN DISCOUNT STORES IN SMALL TOWN AND SPREAD OUT ITS STORES AND FILLING UN-
SERVED GAPS AVOIDING FROM COMPETITION RADAR. AS, WAL-MART SATURATED ITS MARKET
AND EFFECTIVELY BARRED NEW COMPETITION.
 WALMART: EVERYDAY LOW PRICES STRATEGY
• WITH THE PROSPECT OF LOW PRICE POLICY, WAL-MART IS HARSH COST CONTROL. NON-STOP OF
REDUCING OF THEIR PRICE PARALLEL WITH COST CONTROL. INCLUDING OF BEING THE
PARTNERSHIP WITH SUPPLIERS, THEY CLAIMED THAT IT HELPED THE SUPPLIERS IMPROVE INVENTORY
MANAGEMENT AND EFFICIENCY AS WIN-WIN PARTNERSHIP. ANOTHER CORE COMPETENCE IS
LOGISTIC MANAGEMENT.
• WAL-MART VERY EARLY DEMONSTRATED COMMITMENT TO TECHNOLOGY IN THE INDUSTRY. BEING
THE EARLIEST TO ADOPT SATELLITE TECHNOLOGY CONNECTION THE CHAIN TO ONE BIG
NETWORK. MOREOVER, WAL-MART HAS BEEN SEEKING FOR THE CONTINUING DEVELOPMENT BY
ADOPTION RFID IN THE SYSTEM.
• IN TERM OF SERVICE, WAL-MART UNDERSTANDS THE ART OF MOTIVATING ITS EMPLOYEES FROM
ALL LEVEL TO PERFORM THEIR BEST. FOR INSTANT, UNDER THE “TEN-FOOT RULE”, ANY MEMBER OF
STAFF WITHIN TEN FEET OF A CUSTOMER MUST OFFER THEM ASSISTANCE.
• ITS LABOR RELATIONS ARE EXCEPTIONAL. WORKERS ARE NOT PLAIN EMPLOYEES BUT “ASSOCIATES”,
ELIGIBLE FOR A SHARE OF THE PROFITS AND STOCK OPTIONS IN THE COMPANY. THIS HAS CREATED
A FAMOUSLY LOYAL AND HIGHLY COMPETITIVE WORKFORCE.
 WALMART: EVERYDAY LOW PRICES STRATEGY
• NOW, WAL-MART IS FACING A CHANGE TO THEIR BUSINESS IN CHINA. OVER THE PAST FEW YEARS CHINA’S RETAIL
INDUSTRY AND ITS DISTRIBUTION AND LOGISTICAL INFRASTRUCTURE HAVE OPENED UP SIGNIFICANTLY WITH DECREASED
GOVERNMENT REGULATION
• FOR WAL-MART THIS WILL MEAN A LARGE CHANGE IN ITS BUSINESS STRATEGY AND IT WILL NOW LOOK TO PROFITABLY
EXPAND WITH CHINA’S BOOMING ECONOMY.
• IN ORDER TO SET A NEW STRATEGY WAL-MART WILL NEED TO IDENTIFY WHAT ISSUES IT WILL FACE IN THE SHORT AND
LONG TERM.
• ONE SUCH ISSUE IS THE FACT THAT THE BUSINESS MODEL USED IN AMERICA WILL NOT DIRECTLY TRANSPLANT TO CHINA.
• FOR EXAMPLE, IN THE U.S., WAL-MART PLACES STORES IN SMALL TOWNS TO GAIN A COMPETITIVE ADVANTAGE. CHINA,
ON THE OTHER HAND, WILL NOT SUPPORT SUCH A STRUCTURE. IN CHINA, THE ECONOMIC GROWTH HAS BEEN
CONCENTRATED EXCLUSIVELY IN SEA SIDE REGIONS SUPPORTING URBANITES.
• THE U.S. BUSINESS MODEL ALSO USES WAL-MART’S DISTRIBUTION, LOGISTICS, AND IT NETWORKS TO GAIN ECONOMIES
OF SCALE AND COMPETITIVE ADVANTAGES
• CHINA DOES NOT HAVE THE INFRASTRUCTURE FOR WAL-MART TO GAIN THE SAME SCALE ECONOMIES AND
ADVANTAGES. INSTEAD, WAL-MART CHINA WILL NEED TO FIND ALTERNATIVE WAYS TO TURN CORE COMPETENCIES INTO
COMPETITIVE ADVANTAGES.
• OTHER ISSUES WAL-MART CHINA FACES ARE DIFFERENCES IN CONSUMER PREFERENCES HABITS BETWEEN AMERICAN
AND CHINESE CONSUMERS, INCREASING COMPETITION AMONG FOREIGN AND DOMESTIC FIRMS, AND OVERCOMING
LOCAL PROTECTIONISM OBSTACLES.
 WAL-MART STORES “EVERY DAY LOW PRICES” IN
CHINA
• WALMART WAS ONE OF THE FIRST MAJOR INTERNATIONAL BRANDS TO ENTER CHINA, HAVING
OPENED ITS FIRST STORE IN 1996.
• DESPITE THE EARLY START, THE BRAND HAS STRUGGLED TO DOMINATE IN CHINA AS IT HAS IN THE
US, STALLING OUT WITH A LITTLE OVER 400 STORES.
• WALMART WAS ONE OF THE FIRST BIG INTERNATIONAL BRANDS TO ENTER CHINA, DRAWN BY THE
PROMISE OF BIG PROFITS FROM THE COUNTRY'S EXPLODING MIDDLE CLASS, WHICH IS PROJECTED
TO GROW TO 550 MILLION PEOPLE BY 2022.
• WALMART OPENED ITS FIRST STORE IN CHINA IN 1996, IN THE CITY OF SHENZHEN, AND HAS
GROWN TO 424 STORES IN THE INTERVENING YEARS.
• BUT DESPITE THIS GROWTH, IT HAS STUMBLED MIGHTILY IN ITS EXPANSION EFFORTS. BY MOST
ACCOUNTS, WALMART FAILED TO PROPERLY READ CHINESE CONSUMERS' DESIRES AND CATER ITS
STORES TO THE MARKET. THE RESULTING RUN-OF-THE-MILL SALES, COMBINED WITH FOOD SAFETY
SCANDALS, RAPID TURNOVER OF CEOS, AND SCUFFLES WITH THE GOVERNMENT, PREVENTED THE
US RETAIL GIANT FROM CAPITALIZING ON WHAT MANY THOUGHT WAS A GOLDEN OPPORTUNITY.
 WAL-MART STORES “EVERY DAY LOW PRICES” IN
CHINA
• IN RECENT YEARS, WALMART HAS RECOVERED SOME BY INVESTING IN AND PARTNERING
WITH JD.COM, CHINA'S LARGEST E-COMMERCE RETAILER AFTER ALIBABA. THAT THE RETAILER
HAS PLACED ITS EGGS IN JD'S E-COMMERCE BASKET ISN'T A BAD STRATEGY, AS CHINESE
CONSUMERS SHIFT THEIR SPENDING TO ONLINE.
• BY THE MOST RECENT MEASURES, E-COMMERCE ACCOUNTS FOR A WHOPPING 21.4% OF
TOTAL RETAIL IN CHINA. BY COMPARISON, THE US IS HOVERING AROUND 12%. IN RECENT
YEARS, WALMART HAS BUILT OUT A ROBUST ONLINE GROCERY BUSINESS.
 SWOT ANALYSIS OF WAL-MART
Strengths Weakness
• Wal-Mart is a powerful retail brand. It has a reputation for value
for money, convenience and a wide range of products all in one
store.
• The biggest obstacle Wal-Mart faced in Mainland
• The company has a core competence involving its use of information China was lack of an information-technology
technology to support its international logistics system. network with suppliers making the purchase and
• Wal-Mart has a lot of suppliers, since the company claimed that it distribution difficult
had always treated its supplier as partners and also helps
suppliers improve inventory management and efficiency.
• Wal-Mart has a competitive strategy. For example everyday low
prices (EDLP) or Always Low prices, this helped to drive the concept
of EDLP and drew a million customers to its door.

Opportunities Threats
• To take over, merge with, or form strategic alliances with other global
• Very high competition in china market, especially the local brand.
retailers, focusing on specific markets such as Europe or the Greater
• The Buying behavior of Chinese consumers, Chinese consumers always
China Region.
compare the different of the price before they make a purchase.
• The stores are currently only trade in a relatively small number of
• Regulatory restrictions, in china the constraints on a foreign retailer’s
countries. Therefore there are tremendous opportunities for future business
operation directly limited the regional expansion of Wal-Mart stores and
in expanding consumer markets.
the efficient use of distribution centers.
• New locations and store types offer Wal-Mart opportunities to exploit
• Local protectionism, it is serious problem faced by many multinational firms
market development. They diversified from large super centres, to local
trying to expand operations through china.
and mall-based sites.
• The Infrastructural Deficiency, Wal-Mart distribution system depended on
• Opportunities exist for Wal-Mart to continue with its current strategy of
transportation, but china transportation were no well connected and were
large, super centers
serious fragmented.
 CASE QUESTIONS
Q:1Why is Wal-Mart successful in the US? What are Wal-Mart’s competitive advantages and its
sources?
• WAL-MART HAS THE CRITICAL STRATEGY SUCH AS EVERY DAY LOW PRICES (EDLP) TO CAPTURE DEMAND OF
CONSUMERS AND BRAND REPUTATION AND TRUST OF CUSTOMERS MAKE WAL-MART BECOME OUTSTANDING FIRM.
• TWO KEY DEVELOPMENTS MADE THE SUCCESS POSSIBLE:
• DISTRIBUTION: WAL-MART SET UP HIGHLY AUTOMATED DISTRIBUTION CENTRES, CUTTING DOWN ON DELIVERY TIME AND
COSTS.
• INVENTORY FLOW: THE COMPANY’S COMPUTERIZED INVENTORY SYSTEMS GAVE MANAGERS REAL-TIME INFORMATION ON
THEIR STOCKS, SPEEDING UP THE RE-ORDERING OF GOODS.

• THE COMPETITIVE ADVANTAGES OF WAL-MART ARE TECHNOLOGY, BEING THE EARLIEST TO ADOPT SATELLITE
TECHNOLOGY CONNECTION THE CHAIN TO ONE BIG NETWORK.
• BESIDES, WAL-MART HAS BEEN SEEKING FOR THE CONTINUING DEVELOPMENT BY ADOPTION RFID IN THE SYSTEM.

• USING THE INVENTORY MANAGEMENT OVER THE COMPETITORS AND A LOT OF SUPPLIERS THAT DEAL WITH WAL-
MART. ALSO, THE MAIN SUCCESSFUL OF WAL-MART IS COST-CONTROL.
• WAL-MART CAN CONTROL AND AVOID UNNECESSARY COST VERY WELL, THEREFORE WAL-MART CAN OFFERS A
LOW PRICE THAN COMPETITORS TO CONSUMERS AS A RESULT OF ECONOMIC OF SCALE
 CASE QUESTIONS
Q2: SHOULD WAL-MART REPLICATE ITS DOMESTIC MODEL IN ITS ORIGINAL FORM IN CHINA? WHY?
CAN IT BUILD THE SAME COMPETITIVE ADVANTAGE IN CHINA THROUGH ITS SUCCESSFUL DOMESTIC
MODEL?
• WAL-MART SHOULD NOT USE THE SAME STRATEGY FORM IN CHINA. BECAUSE IT IS DIFFERENT
IN CULTURE , ENVIRONMENT, LEGAL AND POLITICS.
• THE ORIGINAL MIGHT BE SUCCESS IN US BUT THE CHARACTERISTIC OF CHINESE PEOPLE IS
TOTALLY DIFFERENTLY FROM US’S PEOPLE.
• IT IS HARD TO BUILD THE COMPETITIVE AS THE SAME AS IN UNITED STATE BECAUSE DUE TO
LOCAL SUPPLIER, DISTRIBUTION OR SUPPLY CHAIN IS NOT THE SAME AS IN USA. ALSO, WAL-
MART MIGHT LACK OF TECHNOLOGY IN CHINA, SO I THINK THE ORIGINAL MODEL MIGHT
NOT WORK IN CHINA
 Q:3 PROVIDE SUGGESTIONS ON POTENTIAL STRATEGIES THAT WAL-MART CHINA
SHOULD CONSIDER IN GOING FORWARD.

• CREATING GUANXI
• CONDUCTING MARKETING EXPANSION RESEARCH: A
CRITICAL ROLE IN GLOBAL SUCCESS.
• IT PERMITS THE COMPANY TO TAKE INTO ACCOUNT
DIFFERENT ENVIRONMENTS, ATTITUDE AND MARKET
CONDITIONS AND HENCE TO MINIMIZE RISKS.
• TO GET INFORMATION FOR POSSIBLE BUSINESS
EXPANSION
• TO MONITOR THE POLITICAL CLIMATE
• TO REVIEW VARIOUS WAYS OF MARKET
• TO EVALUATE THE BUSINESS PARTNERS
Alternatives
• Wal-Mart has many options when
determining what strategy to set going
forward in China’s newly deregulated
market.
• One such option is to accept defeat.
Wal-Mart has attempted to transplant its
American business model in other
countries such as Germany, South Korea,
and Japan and realized huge failures.
• Japan is consistently a “loss making”
operation for Wal-Mart, and Wal-Mart
has already completely retreated from
Germany and South Korea due to its
inability to..
 WAL-MART STORES “EVERY DAY
LOW PRICES” IN CHINA
FACTS:
 First opened in Shenzhen on August 12, 1996
 As of December 2007
 Transition from rural US to metro/urban in China
 Competitive analysis a core value of the company
 Shopping 1,500 items and price matching them through “Special Buy” Analysis
 Major pressure from the Chinese regional governments to centralize in high growth
regions
 About-face by Chinese govt. on Shanghai is of interest
 Has major implications on Wal-Mart’s ability to provide infrastructure for stores
 Supply Chain Challenges Abound
 Tier 1 cities include Beijing – Tianjin, Shanghai, Guangzhou
 Tier 2 cities include Chengdu, Nanjing, Chongqing, & Wuhan
 Tier 3 cities include Changzho, Jinhua, Mianyang
 94 stores in 51 cities
 Employs 43,000+ associates
 Serves around 5 million customers per week
3
WAL-MART STORES “EVERY DAY LOW PRICES”
IN CHINA 7,058 Units
1.9 Million Associates
UK 23 offices sourcing from 70 countries
340 Units
Canada
292 Units
Japan
393 Units
US China
4,103 Units 86 Units
Mexico Puerto Rico
54 Units Trust-Mart
943 Units
101 Units
Central America India
433 Units Brazil JV –Aug 2007
297 Units

Argentina
16 Units

3
WAL-MART STORES “EVERY DAY
LOW PRICES” IN CHINA

3
 WAL-MART STORES “EVERY DAY
LOW PRICES” IN CHINA
$400
China Sales
$344
$350 In billion US dollars
$312
$300 $285
$256
$250 $230

$200
$150
$100
$50
$0
F Y 03 F Y 04 F Y 05 F Y 06 F Y 07

3
WAL-MART STORES “EVERY DAY
LOW PRICES” IN CHINA

3
WAL-MART STORES “EVERY DAY LOW PRICES” IN
CHINA

3
WAL-MART STORES “EVERY DAY LOW PRICES” IN CHINA

Webster University
3
WAL-MART STORES “EVERY DAY LOW PRICES” IN CHINA
 WAL-MART STORES “EVERY DAY
LOW PRICES” IN CHINA
Opinions
Customer focus is critical even in new markets
Price leadership will work in other nations besides the US Supplier partnership
deserves heavy investment
Supply chain management is what this country needs Technology
enablement is key
EDI = Electronic Data Interchange
VMI = Vendor Managed Inventory
Satellite Links = For Real-time Updates Corporate Social
Responsibility
 Environmental Sustainability
 Food & Product Safety
 Community Involvement
 WAL-MART CHINA Potential
• Foreign General Merchandisers or
Discounters
FIVE FORCES MODEL New Entrants • Established Chinese Retailers
•Asian Conglomerates with lower cost structures

Competitive Rivalry
Bargaining
Rivals: Carrefour, Tesco Bargaining
Power and many other smaller
of Suppliers shops Power of Buyers
• U.S. Product Manufacturers • Diversity of ethnic and
• Foreign Manufacturers economic backgrounds
• Local Government •
Restrictions Substitute Consumers in
Metropolitan Areas
• Tariffs
•Slow Growth Initiatives
Products with high per capita
income
and Services • Cultural bias for a specific
• Small, Village Shops condition of products,
•Regional Chains delivering in a unique
• Home grown (literally) supply chain, is key to these
• Global chains establishing new consumers
stores
 ANALYSIS: WAL-MART STORES “EVERY DAY
LOW PRICES” IN CHINA
Value of goods procured from China
USD billions

**

25-30* 2.6*

1.5*
2.0
CAGR
CAGR 26%
15 33% 1.6
CAGR
1.3 20%
12
10.3
0.5

2000 01 02 03 2007 2001 02 03 2004 2000 2006

Over 300 employees in the Procurement centers in Aims at consolidating volume
Shenzhen global 10 different cities of China at country level to drive
procurement center 25% of 2003 volume (approx. cost savings, while
18-20% of 2003 volume USD0.5 bn) sourced direct, simultaneously capturing
(approx. USD2.5 bn) sourced with growth of 30% peryear country-specific
direct advantages; e.g., in fleece
fabric from Taiwan

* Target value
** Including all categories; global sourcing in non-food categories would be approximately >80% of the total 13
 ANALYSIS: WAL-MART STORES “EVERY DAY
4
3

LOW PRICES” IN CHINA

ANALYSIS: WAL-MART STORES “EVERY DAY
4
4

LOW PRICES” IN CHINA

ANALYSIS: WAL-MART STORES “EVERY DAY
LOW PRICES” IN CHINA

Harvard Business Review 70(2; March–April 1992), pp. 60–71.

Source: Adapted from Garrison Wieland for “Wal-Mart’s Supply Chain,”
Warehouse
and
Distribution
Center
Management
System
 ANALYSIS: WAL-MART RFID PLAN
Base In transit Regional Walmart Walmart,
Manufacturing Sam’s Club
Product Distribution and
AiO & Malaysia Completion Neighborhood
Personal Flextronics Center Market Stores
Printers

AiO & Shanghai Memphis

Personal Calcomp Memphis
Menlo Walmart
Printers Flex
DC1
Sanger,
Scanners Shenzhen Texas
& Mentor Media
Cameras
Walmart
DC2
Bangkok
AIO Cleburn,
Venture
Texas

Toner Hong Kong

Canon
Walmart
Toner/ Guadalajara DC3 De-
Tokyo Flex Soto, Texas
Personal
Canon
Laserjet
Guadalajara Supply Site
Personal LJ Canon China Jabill
Tag Site
Virginia
InkJet
Various Sonoco Delivery Site
Supplies
 Analysis: Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value

Firm Infrastructure

Support
Human Resource Management
Activities
Technological Development
Procurement

Service
Operations

Outbound

Marketing
Logistics
Inbound

& Sales
Logistics
PrimaryActivities
WAL-MART VALUE CHAIN ANALYSIS, CHINA SPECIFIC
Firm Inferior fixtures standardization, Trucks, Average store size 84,000
Infrastructur square feat
e

Activities
Human Resource Non-unionized, Full autonomy to associates, Decentralized,
profit sharing program, Job rotation, Stock purchase plan
Support
Management

Technology UPCat POS,EDI, Information system, VMI ,Cross ducking , Satellite

Developme system, CPFR
nt
Procurement Maintain long-term relationship, No single supplier accounting for
more than 2.4%, Selective suppliers ( P&G & GE), NO nonsense policy
 VMI  Six days a  Two step  Everyday ECR

Margin
system week(9~2 hub and low price Satisfactio
 Retail link 1) spoke Always n
 EDI Monday low guarantee
price,
 CPFR (12:30~17:3 distributing always policy
0) system  Self  Quick
service response
 Cash a n
d (QR)
carry
Save
money,
live better
 credit card,
Primary Inbound Outbound Marketing
Laya After Sales
Operations
Activities Logistics Logistics way& Sales Service
plan
 RECOMMENDATION FRAMEWORK:
WAL-MART STORES “EVERY DAY LOW PRICES” IN CHINA
 Recommendation:
Seller
Better Collaborative Planning & Forecasting Processes are Needed

Once
FRONT END AGREEMENT
Collaborative
Planning

Qtr.
JOINT BUSINESS PLAN

CREATE SALES FORECAST

Collaborative
Wk, Mo
IDENTIFY EXCEPTIONS Forecasting
RESOLVE EXCEPTIONS

Collaborative
CREATE ORDER FORECAST
Replenishment
Wk, Mo

IDENTIFY EXCEPTIONS

RESOLVE EXCEPTIONS

GENERATE ORDER
Buyer