Group 3 : Argha Basu, Esra Dede, Josh Avellanet, Vanika Narula, Yesenia Castillo
WALMART STORES: EVERY DAY LOW PRICES IN CHINA
Summary:
Entering into emerging markets is a common trend for businesses in the present times.
This case presents a similar situation where Wal-Mart was trying to venture in China, one
of the most populous consumer markets of the world. Attracted by the size of this market,
and its income potential, Wal-Mart overlooked the institutional framework of this market.
Wal-Mart had been successful in the United States, which was its home market with its
strategies of everyday low pricing and targeting the rural population. Their business model
was designed to cater to their home market. On the other hand, although being one of the
fastest emerging markets, international businesses in China were restricted to specific
regions until 2005. Only in spring 2005, when the market was opened for all the players, it
became one of the most important economies to trade in owing to its size.
The company faced many challenges in this market , primarily being the failure to
replicate its Everyday Low Pricing Strategy and the use of a centralized distribution
System in the Chinese market. The Chinese consumer profile differed from that of an
American consumer and these differences resulted in the failure of their basic strategy.
Also, although Chinese market was difficult because of the local protectionism, the
competitors like French retailer, Carrefour were doing well in the same market.
In order to establish in this growing market and to succeed, Wal-Mart should move from
its centralized approach to decentralized systems. This can be done by decentralizing its
finances to stores, so that local taxes are paid. Also, it can partner with a domestic retailer
that will be helpful to understand the local market effectively. Additionally, it should adopt
a different strategy for urban and rural population which includes supermarkets for urban
areas, and discount stores for the rural regions.
Analysis:
Wal-Mart started in US and strategized on the concept of avoiding direct competition with
the market leaders, by targeting rural areas for opening their stores which were not
attractive markets for the leaders. The business model was based on price and service
differentiation strategy. They had different names like the “Every Day Low Prices” and
“Special buy” which helped driving more customers from all income levels.
Wal-Mart had a resource based view and it leveraged its resources and capabilities, which
included both tangible and intangible resources. Doing this, it was able to lower its cost
