Wal-Marts Entry Strategy - Assignment Example

Wal-Mart Q Do you believe Wal-Mart can be successful by circumventing the current Japanese distribution system? What are the some of the problems you foresee? Answer1 Japanese distribution channel are very different from U.S and others. They are as ineffective as they are difficult. “The system is divided into many layers of wholesalers who have built strong relationships with other wholesalers, manufacturers, importers, as well as retailers”. (xtra.emeraldinsight.com/.../viewContentItem.do?contentType=Article&hdAction=lnkhtml&contentId=869134 )Furthermore, these close relationships frequently provide an informal barrier to American companies which desire to sell directly to end-users or retailers. Walmart’s primary advantage is to over come barriers that are related to Multi-tier distribution which has at all times been the common approach of doing business in Japan. Over time, Wal-Mart will alter that. By approaching the suppliers directly, Wal-Mart will establish a more well-organized distributional system. Retailers will have to set up a similar system to stay competitive. Wal-Mart will approach the strong suppliers, mainly those that might already have globally established relationship for aid in building this innovative and extremely different distributional system. The most important advantage is that the benefits of that enhancement in distributional efficiency will be enjoyed by both i.e. Wal-Mart as well as their suppliers. Wal-Mart does uneventfully gain success in superseding the wholesaler segment, they will be in a lot better of if they are in a position to distribute goods at less expensive costs, which will allow them to pass along a little of the price savings to customers. The degree of success that Wal-Mart will encompass in Japan depends on the degree to which Wal-Mart can adjust Retail Link to Japan’s distribution system. Also, Wal-Mart will have to obtain a handsome amount of real estate to get the economies of scale required to be successful, at the same time keeping local management content. And finally they must be patient, as the Expansion into Japan maybe takes a lot of time. I believe that Wal-Mart is successful by circumvent the current Japanese distribution system by reflecting activities of manufacturers as well as retailers to circumvent the wholesalers, share knowledge, and incorporate decision making. Wal-Mart recently decided to gain 66.7 percent of Seiyu, Japans fourth largest retail group. Ten years ago Wal-Mart had attempted to sell its private label cookies in Japanese stores, and customers emptied out all the shelves. But the Japanese buyers did not buy them again as they were too sweet, a part from this most of them were also broken. Wal-Mart had not learned from its past lessons because like Germans, Japanese too are finicky shoppers. But it did learn one thing that is too moving slow in Japan, carefully studying consumer habits as well as preferences. Nevertheless, Wal-Mart will face a number of severe challenges. Japanese consumers are different from the typical Wal-Mart shopper. They want local products, look for extremely fresh produce and fish, and are extremely detail oriented and require a lot of information regarding products. They would like name brands; purchase in small quantities. They buy only a little food that would last them a few days, and want items that are separately wrapped. Q2). Do you agree with Wal-Mart’s entry strategy? What are some of the inherent risk? Do you think that a faster market entry would be more effective? Answer 2. In order to avoid the mistakes made in Germany, It has been very forth coming about its entrance in Japan; here too it has followed a slow and steady strategy. This strategy has many risks , the greatest risk came forth even right before it entered Japan, Carrefour the second largest retailer entered the market one month before Wal-Mart did as their strategy was fast paced . The slow pace of their strategy could be a ladder for it’s global as well local competitors. Another big risk for Wal-Mart could be the fact that they have avoided opening their own stores and believed that working with a local supplier would help them. This added in slowing them down in their entry into the market, as they decided that Seiyu was the prefect local partner. Another risk would be that Wal-Mart might have a bit more trouble with a different side of its strategy i.e. its everyday low prices. Japanese retailers usually attract customers into stores with big discounts on special items, which they market and publicize in weekly leaflets called chirashi. By contrast, Wal-Mart depends less on special discounts and in its place promises continuous low prices. Another inherent risk is that Wal-Mart may not be able to overcome Japan’s multilayer distribution system as their entry in Japan is slow paced. Thus considering the fact that interaction while doing business in Japan is more prevalent than that in the united sates in order to supersede the distribution layers one has to be fast in entering the market. Considering Wal-Mart’s past performance in Germany, it is better for them that they keep their pace slow. Because when Wal-Mart goes for a fast pace it tends to forget the fact that their inventories systems are what gives them the edge, and thus it causes them operating losses. Faster market entry for Wal-Mart will not be effective for their progress. Q.3) in your opinion, what is the single most important thing Wal-Mart can do to ensure success in Japan? Answer3 If Wal-Mart is successful in duplicating what it has done in the United States, it might be able to modify the way consumer goods are sold as well as distributed in Japan. If Wal-Mart is able to successfully skip the middleman as well as deploy its supply chain system, then may be able to give the customer products at low prices. Wal-Mart at present does not buy directly from the manufacturers. Wal-Marts strategy for everything it sells, is to eliminate the middleman, buy direct from suppliers and pass the savings on to customers. By skipping the middle man Wal-Mart will have to start establishing a Retail Link with their major suppliers, mainly those that already have strong relationships with Europe and the US. This will be a sluggish process and might take quite a few years before it is developed as the software for the Retail Link as it will first have to be modified in Japanese language. Q4) Do you think that Wal-Mart is doing enough cross cultural training with its Seiyu employees? What is the greatest challenges Wal-Mart face in relating to its Japanese employees? Answer 4 Wal-Mart has tried its, best to give the best cross cultural training possible to their Seiyu employee, the workers receive cultural training so that they can become confident , upbeat and goal orientated. But there seems to be some set backs in their training. Every company has to change a little according to the culture and life style of the country they are entering in, but Wal-Mart seems to want to change its employees completely. This has caused Wal-Mart to face many challenges as the employees feel that their employers are being a little tough as they are flown to Arkansas for training, so that they can comply with the world standards and work in the “Wal-Mart way” (Hodgetts p230). This is very unusual for retail store employees in Japan, thus introducing something so new has made their employees feel that their job is a difficult one. Another challenge which they face is that, they have introduced the practice of praising co- workers in a society where being humble is considered a good trait. Thus it causes the employees great discomfort in accepting such praise. Backslapping compliments are uncommon in Japan as here workers are trained to be modest and bosses usually command respect by means of intimidation. All these challenges seem small to Wal-Mart, it appears confident, that the Japanese workers are finally getting the management’s message. They have a strong believe that the Japanese employees will also begin to sell the Wal-Mart way. Work Cited Hodgetts, R. M.., Luthans, F., and Doh, J. P., In-depth integrative case 2: Walmart’s Japan Strategy from International Management, Culture, Strategy and Behavior (sixth edition). McGraw-Hill in 2006 pp. 226-232 xtra.emeraldinsight.com/.../viewContentItem.do?contentType=Article&hdAction=lnkhtml&contentId=869134 retrieved on 1st March 2008 Read More