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Wal-mart - Essay Example

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Its supply strategy in its home country was to build stores in remote locations where other stores were not available, thereby creating markets and adequate sales volumes to generate economies of scale from…
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Wal Mart Competitors’ home, supplier, and partner countries 2) and supplier bypass 3) Political, legal and regulatory climate Competitor Country features:
Walmart’s business models centers around the everyday low price model. Its supply strategy in its home country was to build stores in remote locations where other stores were not available, thereby creating markets and adequate sales volumes to generate economies of scale from them. It is a discount store outlet, focused on marketing brand names for lower prices. Similar stores such as Woolco and Kmart were not as successful as WalMart, because the latter had some unique operating principles which worked to its benefit. After four decades of operation, Woolco outlets have disappeared, while Kmart has moved into bankruptcy, so that WalMart is the top ranking store in the United States. China is WalMart’s largest supplier, but in terms of sales WalMart ranks 24th in China after the local stores, while French retail giant Carrefour ranks fourth.
The WalMart model of everyday low prices, coupled with supplier and cost controls has been successful in some countries such as Mexico, Canada and Britain. In Germany, the company has not done well due to existing competition, high labour costs and zoning laws. Altho0ugh China has the kind of market size comparable to domestic markets, thereby presenting an opportunity to duplicate domestic success, this has not occurred, as stated above. The Company has been losing money since its arrival in the country. Some of the other foreign retail chains operating in the country include UK’s Tesco, Thailand’s Lotus and Germany’s Metro. The local Chinese retail chain, Bailan, was most successful because of localised demand, supply base and distribution. Due to the wide disparities in income among Chinese customers, Walmart could not operate its national model, because purchasing patterns and good demanded were different at different locations and a standardised model was not successful. Local protectionism was also a barrier. The poor infrastructure in the country also added to the logistical and supply costs, thereby increasing costs.
Firstly, Walmart’s attracted customers by its Everyday Low Prices. It maintained a relentless cost control system by allowing few perks for its officers and employees. It was also able to negotiate tough deals with its suppliers, using its ability to place bulk orders to also make other demand such as high quality and low prices, which it then passed on to its customers. It ,maintained several distribution outlets and initiated an electronic data interchange system, allowing suppliers to track sales to deliver new stocks and they were also able to exchange invoices, purchase orders and other documents electronically.
The Chinese retail market was originally under Government control, but after its economic reform policy in 1978, high quality and good service began to replace existing conditions. The retail sector became increasingly competitive. One of the changes in China’s environment is that the country opened up its retail market to everyone, so that foreign retailers were not placed in the position of being forced to enter into distribution agreements or joint ventures with Chinese locals, as had been the case with the Government’s mandating of a 51% Chinese ownership of joint ventures. After 2005, the retail markets were opened up, but due to regulatory restrictions on a foreign retailer’s operations, Walmart was unable to achieve economies of scale. It stuck to rules, while its rival Carrefour bypassed Government regulations to occupy important markets. The lack of IT systems and differences in Chinese customer behaviour further hindered Walmart’s competitiveness.
References:
*Farhoomand, Ali. “Walmart stores: Everyday low prices in China”, Asia Case research Centre. Read More
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