Is Walmart Successful In The Us
1. Why is Wal-Mart successful in the US? What are Wal-Mart’s competitive advantages?
Wal-Mart is able to deliver the lowest possible price to their customers in a friendly environment focused on serving the customer’s every need. They effectively snuck into the retail shopping industry by opening stores in small towns where the population could buy everything they wanted at one place. Becoming the worldwide leader in sales for all companies does not happen without strong competitive advantages. Once Wal-Mart establishes itself in these small towns, they have taken over the demographic. All potential customers’ needs are fulfilled and competition is shut out. With the massive size of supply chain demanded to service thousands of stores, …show more content…
Wal-Mart can control their suppliers and drive costs down. The opportunity to sell your brand in a Wal-Mart store will ensure your brands success and this low cost demand from Wal-Mart is viewed as an acceptable trade-off for store presence by suppliers. Wal-Mart has the most effective supply chain in the world due to its integration of technology and information systems. They have a hub and spoke distribution system where they can ensure stores are fully stocked with product and deliveries are made on time. Finally, keeping the associates happy by incentivizing them with leadership potential, stock, and a family atmosphere, Wal-Mart is able to keep its workforce happy which in turn makes customers happy. These forces working together neatly ties Wal-Mart’s competitive advantages into its core and raises insurmountable barriers to entry.
2. 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 faces many new challenges they do not experience in the US.
They are stricken with local, state, and national regulations that make it very difficult to achieve efficiencies. In China, the value-creating supply chain model from the US will not work. National infrastructure cannot handle the amount of travel required by Wal-Mart trucks and the roadways that can, charge as much as 10% of truck value in fees. Also, the extremely large Chinese population is broken into severely distinct demographics. In the small “one horse towns” Wal-Mart would usually target, customers cannot even afford a bottle of shampoo and only buy day-to-day necessities. In Larger cities, the distribution of wealth is still enormous but customers shop for items on a whim. The Chinese people will visit stores as much as every day and usually buy very little, if at all. The intense competition of local and international chains makes the market very difficult and local protectionism decreases returns for foreign investors. With very little to incentivize associates, Wal-Mart is unable to effectively create the US culture that emanates in all aspects of operations. Wal-Mart cannot keep costs down and deliver best value to the Chinese consumer because of a combination of issues outside of their control. Their supply chain model is rendered ineffective and they are forced to buy from thousands of local suppliers. The cost per customer is much higher and large market share cannot be achieved. They will not be able to replicate their domestic model and be effective in
China.
3. What strategy do you recommend for Wal-Mart going forward?
Going forward, Wal-Mart needs to decide how they will measure success in China. Some of their competitors have made progress by side-stepping Chinese regulations and not worrying about the consequences. This is definitely something Wal-Mart is not comfortable in doing. The hub and spoke model will not work because they do not have enough stores in a one-day vicinity to make it cost effective. Opening more stores is not the answer. Moving to a boutique model, because Chinese do not buy in bulk, would not be effective for the business model Wal-Mart has developed over the years where they buy in large amounts to keep costs low. One way to increase revenues may be to charge people just to walk in the door. In Macau, MGM Resorts International charges $5 just to enter the property. Because of the Chinese curiosity when new stores open and desire to see different products, people pay the fee. Wal-Mart may also consider teaming up with local store owners and providing them with resources they otherwise couldn’t get in exchange for becoming a part of the Wal-Mart umbrella. Nonetheless, opening mega-centers and Sam’s Clubs doesn’t seem to be an effective business model in China for Wal-Mart going forward and they will be forced to either accept lower margins of return or change the way they do business.
Wal-Mart is able to deliver the lowest possible price to their customers in a friendly environment focused on serving the customer’s every need. They effectively snuck into the retail shopping industry by opening stores in small towns where the population could buy everything they wanted at one place. Becoming the worldwide leader in sales for all companies does not happen without strong competitive advantages. Once Wal-Mart establishes itself in these small towns, they have taken over the demographic. All potential customers’ needs are fulfilled and competition is shut out. With the massive size of supply chain demanded to service thousands of stores, …show more content…
Wal-Mart can control their suppliers and drive costs down. The opportunity to sell your brand in a Wal-Mart store will ensure your brands success and this low cost demand from Wal-Mart is viewed as an acceptable trade-off for store presence by suppliers. Wal-Mart has the most effective supply chain in the world due to its integration of technology and information systems. They have a hub and spoke distribution system where they can ensure stores are fully stocked with product and deliveries are made on time. Finally, keeping the associates happy by incentivizing them with leadership potential, stock, and a family atmosphere, Wal-Mart is able to keep its workforce happy which in turn makes customers happy. These forces working together neatly ties Wal-Mart’s competitive advantages into its core and raises insurmountable barriers to entry.
2. 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 faces many new challenges they do not experience in the US.
They are stricken with local, state, and national regulations that make it very difficult to achieve efficiencies. In China, the value-creating supply chain model from the US will not work. National infrastructure cannot handle the amount of travel required by Wal-Mart trucks and the roadways that can, charge as much as 10% of truck value in fees. Also, the extremely large Chinese population is broken into severely distinct demographics. In the small “one horse towns” Wal-Mart would usually target, customers cannot even afford a bottle of shampoo and only buy day-to-day necessities. In Larger cities, the distribution of wealth is still enormous but customers shop for items on a whim. The Chinese people will visit stores as much as every day and usually buy very little, if at all. The intense competition of local and international chains makes the market very difficult and local protectionism decreases returns for foreign investors. With very little to incentivize associates, Wal-Mart is unable to effectively create the US culture that emanates in all aspects of operations. Wal-Mart cannot keep costs down and deliver best value to the Chinese consumer because of a combination of issues outside of their control. Their supply chain model is rendered ineffective and they are forced to buy from thousands of local suppliers. The cost per customer is much higher and large market share cannot be achieved. They will not be able to replicate their domestic model and be effective in
China.
3. What strategy do you recommend for Wal-Mart going forward?
Going forward, Wal-Mart needs to decide how they will measure success in China. Some of their competitors have made progress by side-stepping Chinese regulations and not worrying about the consequences. This is definitely something Wal-Mart is not comfortable in doing. The hub and spoke model will not work because they do not have enough stores in a one-day vicinity to make it cost effective. Opening more stores is not the answer. Moving to a boutique model, because Chinese do not buy in bulk, would not be effective for the business model Wal-Mart has developed over the years where they buy in large amounts to keep costs low. One way to increase revenues may be to charge people just to walk in the door. In Macau, MGM Resorts International charges $5 just to enter the property. Because of the Chinese curiosity when new stores open and desire to see different products, people pay the fee. Wal-Mart may also consider teaming up with local store owners and providing them with resources they otherwise couldn’t get in exchange for becoming a part of the Wal-Mart umbrella. Nonetheless, opening mega-centers and Sam’s Clubs doesn’t seem to be an effective business model in China for Wal-Mart going forward and they will be forced to either accept lower margins of return or change the way they do business.