Analysis of Sam's Clubs China Entry Strategy

The case study is a perfect example of how failure to know and understand the market one is competing in can be disastrous, even for corporations as large and as experienced as Wal-Mart. Just because something has been successful in America it does not mean that the same business model can be duplicated in a different global market with the same results. Wal-Mart entered into a joint venture with Charoen Pokhand (CP) Group to facilitate their entry into the Chinese market. However, they failed to utilize one of CP’s greatest assets, their market knowledge, and this ultimately led to the demise of their Value Club stores. If Wal-Mart had properly used CP’s expertise to better understand the Chinese marketplace they would have devised an entry strategy that catered to the wants and needs of the local market and subsequently increased their chances of success. Every industry has certain key success factors that all businesses must possess to be a viable competitor. For warehouse clubs, “The key operating strategy is to maintain low costs and high turnover” (Herndon p. 3). Companies need to have a strong and extremely efficient logistics system in place in order to keep their costs down and to keep their stores stocked with the right merchandise mix. Knowing the right merchandise mix is essential to the success of warehouse clubs because they offer limited choices and product categories in order to maintain their low costs. Before they can determine what products to sell, they must fully understand their target market.
Knowing who your customers are is a key success factor for any business, and this is especially true for warehouse clubs. The opening of these stores requires a tremendous investment of time and capital. In order to maximize this investment companies need to know which products will sell so they do not end up with a warehouse full of useless inventory. They need to know what brands their target market prefers, what sizes, how many they

Cited: Andreoli, Teresa, “Wal-Mart sees potential fortune in China debut,” Discount Store News, July 15, 1996, pg. 1-2. Herndon, Neil, “Hong Kong shoppers cool to Wal-Mart’s value Club,” Marketing News, November 20, 1995, pg. 11. Mintel. (2005). Warehouse Club Buying - US - February 2005. Retrieved September 12, 2007, from Mintel Market Research Reports database. <http://libproxy.library.unt.edu:3224/sinatra/oxygen_academic/my_history/show&list=my_history/display/id=121119/display/id=151773/display/id=151702?select_section=121119>