Wal-Mart Stores: Everyday Low Prices in China Essay Example
Wal-Mart Stores: Every Day Low Prices in China
Key Issues
Wal-Mart is currently 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 coastal 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.
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
Key Issues
Wal-Mart is currently 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 coastal 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.
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