Walmart Case Analysis[1]

 

2 9  2009  

 

Straategic Market Plannin ng

 

Autthor: Praveer Khaitan Stud dent ID: 2110618098

 

 

06/110/2009  

[W WAL‐‐MA ART SSTORESS  “EV VERY DAY LOW W PRIC CES” IN CH HINA A]  This is a Case Anaalysis of Waal-Mart in China C based d on the HBR case giveen to us in Strategic S Market Planning class and represents the originaal work off the authoor. Use of outside informaation has been b only to augmennt case arguments annd wherevver used haas been referencced. Exhibits referred to t in the annalysis are the ones givven in the case. The caase is set in the year y 2006 and a we will be analyzing it at thaat point of time. Furtheer developm ments by Wal-Maart in Chinaa since 20066 have beenn ignored forr the purposse of case annalysis.

Wal‐Mart Stores  [“EVERY DAY LOW PRICES” IN CHINA]   

Introduction  Wal-Mart the global retail giant with sales of USD 285 BN and effective operations across nine countries with over 5000 stores and over 1.6 million employees worldwide was the undoubted king of discount retailing. With its retail portfolio comprising discount stores, supercentres, Sam’s club and neighbourhood markets, consistently healthy net margins of around 3-4% (from Exhibit 3), revenue CAGR of 12.80% over the last 5 years (from $156 BN to $285BN) and with the confidence of having conquered the US market and having driven competitors like Kmart & Woolco to bankruptcy, Wal-Mart clearly had its eyes on the international market, more specifically, the emerging markets.

Situational Analysis: Wal­Mart in China  With the opening up of the Chinese Retail Industry in 2005, the retail world had gone into a tizzy. The world’s most populous state, an emerging middle class with purchasing power and willingness to spend, no wonder they were salivating. Wal-Mart had additional strategic interest in it, with over USD 20 BN worth Chinese goods flowing through its inventories worldwide; a successful Chinese model would have significant cost repercussions. However, over the past decade since its entry into China, Wal-Mart had lagged behind leading retailers like Carrefour, and ranked a lowly 20 (from Exhibit 1). It had been driven out of Brazil, Indian retail market was out of bounds till 2005, and with no operations in Russia, China was the only BRIC country where Wal-Mart could make its presence felt in the near future. With a forecasted CAGR of 8-10% translating into a total retail market of US$2.4 trillion by 2020, Wal-Mart just couldn’t let this opportunity slip.

Key Success Factors (KSFs) in the US  Before analysing and dissecting the China strategy in detail, it would be useful to see what made Wal-Mart the insurmountable mountain it was in the U.S. market. Location, price and assortment were the top 3 factors consumers treasured (as per Exhibit 5) and Wal-Mart

1  Introduction | Strategic Market Planning   

Wal‐Mart Stores  [“EVERY DAY LOW PRICES” IN CHINA]   

ensured it was always ‘exceeded consumer expectations’, prime focus being price and quality. Listed below are the major factors which gave Wal-Mart its competitive advantage: •

Entry Strategy: Wal-Mart entered by trying to solve the people’s problem in rural backwater towns and expanded quickly to saturate small one horse towns. Saturated regions didn’t face direct competition from big players like Kmart who thought that