Wal-Mart Stores: Every Day Low Prices in China
Wal-Mart Stores: Every Day Low Prices in China
Why the ‘Every Day Low Price’ does not work in China?
From the cost structure and supply chain management perspective:
Rigorous cost control -Compared to many local competitors, Wal-Mart is subject to a number of unfavorable fees and charges. Transportation cost is high as import makes up a large proportion of inventory. Opening stores in prime location also increases land and rent lost. The undercapacity of distribution centres also contribute to its heavy cost.
Efficient distribution and logistics management- Lack of IT system makes it costly and inefficient to transfer information, leading to ineffective inventory logistics. Distant distribution centres and poor infrastructure make distribution management of goods costly and complex.
Small town location - Population in small town do not have sufficient buying power. Poor transportation infrastructure which does not support supply of much demanded fresh food further makes it difficult to implement the model in US.
CAGE analysis USA China
Cultural Bulk purchase twice a week Many trips, little purchase
Administration Federal and state government. Liberal government. Flexible, large degree of freedom Central government. Tight control over administration.
Geography Located in the heart of America
Accessible throughout the whole territory Located in the heart of Asia,
Highly inaccessible and undeveloped western region
Economics Mature, industrialized economy, leader in world economy. Free market advocate Emerging market with large income gap
Slow transition from planned economy to capitalist economy
Porter's 5 forces analysis
Threat of substitute products: Domestic stores and international chain stores can provide similar services.
Threat of established rivals: Domestic stores have existed for long and enjoys support from the government. Numerous foreign chains exist in the market, having captured greater sales than Wal-Mart.
Threat
Why the ‘Every Day Low Price’ does not work in China?
From the cost structure and supply chain management perspective:
Rigorous cost control -Compared to many local competitors, Wal-Mart is subject to a number of unfavorable fees and charges. Transportation cost is high as import makes up a large proportion of inventory. Opening stores in prime location also increases land and rent lost. The undercapacity of distribution centres also contribute to its heavy cost.
Efficient distribution and logistics management- Lack of IT system makes it costly and inefficient to transfer information, leading to ineffective inventory logistics. Distant distribution centres and poor infrastructure make distribution management of goods costly and complex.
Small town location - Population in small town do not have sufficient buying power. Poor transportation infrastructure which does not support supply of much demanded fresh food further makes it difficult to implement the model in US.
CAGE analysis USA China
Cultural Bulk purchase twice a week Many trips, little purchase
Administration Federal and state government. Liberal government. Flexible, large degree of freedom Central government. Tight control over administration.
Geography Located in the heart of America
Accessible throughout the whole territory Located in the heart of Asia,
Highly inaccessible and undeveloped western region
Economics Mature, industrialized economy, leader in world economy. Free market advocate Emerging market with large income gap
Slow transition from planned economy to capitalist economy
Porter's 5 forces analysis
Threat of substitute products: Domestic stores and international chain stores can provide similar services.
Threat of established rivals: Domestic stores have existed for long and enjoys support from the government. Numerous foreign chains exist in the market, having captured greater sales than Wal-Mart.
Threat