Walmarts Business Models - Essay Example

Competitor Country features:
Walmart’s business models center around the everyday low price model. 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 labor costs, and zoning laws. Altho0ugh China has a 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 localized 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 goods demanded were different at different locations and a standardized 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 with 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 demands such as high quality and low prices, which are 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 behavior further hindered Walmart’s competitiveness.