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Agenda
The Walmart Way y The Success Model y China Market y Challenges Faced
y
Start in small towns ignored by other retailers, become a monopoly and increase store density Keep retail costs low
Real estate costs were low in small towns Employees were paid through a stock and cash structure Used its bargaining power and operations expertise to reduce the cost of suppliers which were transferred to customers Disintermediation and minial agency costs
Customer loyalty
Multiple formats various points of reaching customers Loyalty programs Used the discount program to optimize inventory
Recommendations
When in Rome, do as a Romans do From Global to multidomestic strategy making Walmart China a SBU Walmart strengths to be tweaked to fit in China Delegate accounts and financial controls decentralized. One store per province will do accounts for all stores in that province; keep every government happy Reduce the inventory and align with Chinese taste Source locally, create long term suppliers and make them invest in IT and other cost saving infrastructure Explore freight options such as rail and water ways which are strong in China
Recommendations
Walmart has to grow to capitalize on its core competencies More freedom for growth in 2005 & 2007 Will be able to own its backend freight company completely Follow the Mexico model rather than US model for growth Acquisitions Create more discount stores, the best growth model in price conscious economies (China has none) China is growing and with wealth, consumer habits will change
Saved shoppers at least 15%on a typical cart of groceries Roll-back philosophy Special Buy offers Monitoring of competitor prices
y
Supplier Partnerships
Large volumes at lowers prices Pressed to remove supplier inefficiency
Competitive Advantages
First mover advantage in small towns Robust distribution network Large volume sales higher bargaining power with suppliers y Pioneers in IT enabled Supply Chain
y y y
High brand image Leverage the above to provide lowest cost to the customer
China Market
y 7th
Largest retail market US$860 Bn in 2006 y Huge differences in urban & rural y Intensifying competition
International retailers with funds and domestic players with local knowledge Carrefour, Lotus, Tesco, Metro had presence
y
Challenges Faced
Income Disparity y Local Protectionism y Infrastructural Deficiency y Regulatory Restrictions y Lack of IT Network y Chinese consumer behaviour y Fresh means alive y Shoplifting
y
Way Forward
y y y y y y y
Identify the urgent need to view China as totally different from other countries Forego the centralized approach and explore branch decentralization Modify stores to engage customers more, more focus on instore selling displays for impulse purchases Develop local suppliers at nearest distance to overcome infrastructural deficiency Engage in local development (eg Pepsi, Merck) to win over loyalty in unexplored areas Employee Chinese managers who can better understand the employee social fabric Partner or acquire local business houses to gain better credibility with the Chinese populace and access to prime space