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Ibrahim A. Tashkandi
Syed Mohommad Irtaza
Mohsin Javed
Mehmet Kose
Taha Nasir

200101290
200834140
201403660
201405040
201406160

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Table of Contents
INTRODUCTION ........................................................................................................................................ 3
SITUATION SUMMARY............................................................................................................................ 6
Current goals objectives and strategies in China .................................................................................. 6
Past strategies of Wal-Mart China ........................................................................................................ 7
SITUATION ANALYSIS ............................................................................................................................ 8
Company ............................................................................................................................................... 8
Collaborators ......................................................................................................................................... 8
Customer ............................................................................................................................................... 9
Competitors ........................................................................................................................................... 9
Political ............................................................................................................................................... 10
Economic ............................................................................................................................................ 10
Social................................................................................................................................................... 11
Technological ...................................................................................................................................... 12
SWOT Analysis .......................................................................................................................................... 13
Strengths ............................................................................................................................................. 13
Weaknesses ......................................................................................................................................... 14
Opportunities....................................................................................................................................... 14
Threats................................................................................................................................................. 15
CONCLUSION ........................................................................................................................................... 17

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INTRODUCTION

Good case studies give information experienced by the company and explain their current situation. The
reader is to predict their future move. From the name of the case Wal-Mart in China you can indicate
learning what happened when Wal-Mart, probably the biggest retailer corporation in USA & Canada,
expanded to China. Wal-Mart is well known internationally, they have expanded to Europe, Korea,
Mexico, and other countries. In fact, Wal-Mart branches are seen in more than 20 countries. Probably
everybody knows Wal-Mart, but definitely everybody knows China. It would be obvious to want to
expand to the largest, most populated, & growing nation. Wal-Mart decided to enter the Chinese market
in 1995, and by 2012 they had expanded to 140 Chinese cities owning 370 stores.
During the 17 years in China Wal-Mart has learned from many challenges, as mentioned in the
case. Varying from cultural issues to governmental regulations they have faced those challenges with
relative changes promising success. This report highlights the major points in the different parts of the
content. The case being analyzed was written in 2012 by Ali Farhoomand and published by ACRC Asia
Case Research Center in the University of Hong Kong. This report will not analyze what happened to
Wal-Mart after 2012 and is bounded by the information given by Mr. Farhoomand.

Wal-Mart
Corporation
Wal-Mart
America

Wal-Mart
International

Wal-Mart
Europe

Wal-Mart
Asia
Wal-Mart
China

Figure 1: Global Wal-Mart structure

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The organizational structure of Wal-Mart is shown above. If Wal-Mart international is valued outside the
larger Wal-Mart Corporation it would be ranked as the third largest retailer in the world. The current
direction that Wal-Mart International is planning to take is to use its capital to drive new store growth
with particular emphasis in the emerging markets of China, Brazil, and Mexico
Wal-Mart has the following types of stores operation in China:

Table 1: Wal-Mart presence in China

Total Retail units

374

Supercenter

334

Sams Club

Neighborhood market

Compact Hypermarket

Trust-Mart Hypermarket

29

The timelines below show the major events that took place in Wal-Mart China related to its management
and expansion of Wal-Mart in China.

1
2

Chan resigns as WalMart China CEO. COO

Mr Scott Price becomes
and CFO resigned
interim CEO of Walbecause of Wal-Mart
Mart China
Internationals plans to
introduce its EDLP
pricing strategy in China

Wal-Mart in China

3
Mr Greg Folan, senior
vice president of WalMart-International is
promoted to president
and CEO Wal-Mart
China

Page 4

1996

2010

Wal-Mart opened its first

supercenter and a Sams
Club, its members only bigbox store, in the special
economic zone of Shenzen.

Wal-Marts presence in
China grew to 189 units in
1010 Chinese cities.

Early 2012

Wal-mart doubled its

presence with 360 stores In
140 cities

Wal-Mart in China has started with the new CEO of China Division Mr. Foran, who was
promoted to CEO Wal-Mart China in early 2012. After that, the case showed us briefly what Wal-Mart
China is. Showing the economic situation of China, and shinning the opportunity for foreign investments
to target the growing nation, the interest to continue reading was warming up. The case highlighted what
Wal-Mart experienced not only during their
in life in China, but some relative points
from their experience in Asia. Foran would
benefit from reading the Case and this
analysis at least once. The case gives very
useful information for him to focus on and
consider in his decisions.

He should ask

himself, why did the previous CEO resign?

So he can fulfill the expectations of the IGD,
which is a non-profit grocery watcher. IGD
predicts that:
China would be the biggest grocery market in the world, with total sales possibly reaching US$1.4
trillion... (Wal-Mart in China, Farhoomand, 2012)

It seems that Mr. Foran has a great challenge in front of him. He has to triple the grocery sales of 2010, in
order to fulfill IGD expectations.

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SITUATION SUMMARY

Greg Foran, the CEO of Wal-Mart China, is probably always thinking of why Mr. Chan resigned. What
could he do to meet what is expected of Wal-Mart China. Would the UK grocery watcher IGD prediction
be correct? Foran had to focus and learn about the Chinese market, customer behaviors, workers rules,
reputation, maintain EDLP, and always the increasing safety policies.
Luckily for Mr. Foran, Wal-Mart strategy has adapted to Chinese customer behaviors. The stores
have more features to satisfy customer expectations. Chinese customers are product selective, especially
fish, meat, & vegetables. Many, if not all, Wal-Mart stores in China have live fish tanks, and displayed
meat for customer selection. They also have fresh rabbit corners for customers to get fresh rabbit meat.
This is very difficult to maintain, where health policies are critical to meet. Wal-Mart has experienced the
Chongqing customer complains. Wal-Mart implemented their health inspections, but would that satisfy
EDLP strategy. Wal-Mart has established a good reputation to contribute to society. About a million
kilowatt-hour of electricity and 860 tons of carbon dioxide emission cut were contributed by Wal-Mart in
their Earth Month green campaign. Wal-Mart China has to maintain the good reputation and make sure
the Chongqing scandal issue doesnt affect customer perception.
Wal-Mart EDLP strategy was chosen to still be the method they want to use in the Chinese
market. Wal-Mart management knew that they had to face major issues. Supply chain efficiency plays a
big role in EDLP. Wal-Mart had succeeded in pushing suppliers to cut cost and be more efficient. They
worked with the Environmental Defense Fund, the National Resources Defense Council and Business for
Social Responsibilities to suppliers to cut costs.
The Chinese market introduces many challenges to management. The customer expectations of
fresh products and maintaining an EDLP strategy is challenging. The corporation reputation is critical
especially with the increasing health regulations. Wal-Mart has to maintain the good image and put a
good strategy to move forwards. The SWOT analysis is a very important task to support developing the
marketing strategy leading to success.
Current goals objectives and strategies in China
Now that Mr. Greg Foran is CEO of Wal-Mart China, he has to frame a better strategic focus based on
various factors that are present in China. At present, key information in the case points out to the current
goals and objectives and strategies that the management in China including him, and Wal-Mart
International propose.
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The key goals and objectives that they are focusing on include:
1. A winning strategy to combine local relevance and global leverage to woo the ever-growing
market of Chinese middle-class consumers.
2. Improve returns through increased profitability in China by focusing on middle income customers in
high-growth markets.
3. Expand into growing secondary and tertiary cities in China
4. Emphasis on leveraging globally its vast network of IS, sourcing, business processes and shared
services to Reduce costs, focus on its core EDLP policy that is followed worldwide and provide
differentiated, value-led products on its shelves
The strategies that management is contemplating to implement its objectives and goals for Wal-Mart
China include:
1. Introducing compact stores format in Chinas second and third tier cities which would keep costs
down and reach customers not geographically close to a supercenter or hypermarket.
2. Continue implementing EDLP strategy and expansion in China to help Chinese customers save
money so that they can live better.
3. Increase Wal-Marts online presence. This included plans for Chinese shoppers to pick their Web
orders at physical locations.
Past strategies of Wal-Mart China
In the past Wal-Mart China has followed the following goals and strategies:
1. Implementation of EDLP strategy by offering more products at consistently lower prices instead of
having sales or temporary discounts and seasonal sales.
2. Utilize synergies of multi-sales channels by expanding into online sales
3. Steps taken to be locally relevant and corporate social responsibility initiatives.
4. Creation of a global position, global compliance officer to monitor bribery related issues and end the
completely.
5. Failing strategies in Korea, Germany and Russia because of failing to do a proper analysis of
consumer market and having a relevant strategy.
In the sections that follow we will do a situation analysis, a SWOT analysis and finally suggest proposed
strategies for Mr. Greg Foran based on Wal-Mart Chinas current objectives, goals, strategies and our
analysis.

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SITUATION ANALYSIS
Company

Wal-Mart, the American corporation running a chain of largest departmental stores around the world, is
renowned for providing cheap and high range of products on low prices. In August 1995, Wal-Mart
arrived in china with collaboration with Shenzhen International Co. Ltd, with an ambition to conquer the
wide retail landscape. Wal-Mart, ranked number 2 in the Chinese market, enjoyed much success but faces
a tarnished image backed by scandals such as bribery issues, personnel change and food safety concerns
which had also forced many of its stores to shut down. Eventually, Wal-Mart had to hired an image
consultant to lessen the impact of scandals that had wracked Wal-Mart. Learning from its failure, WalMart finally learned to become locally relevant by gaining insight of the Chinese culture and decided to
deploy its evergreen everyday EDLP strategy in china which have been success in other international
markets such as Argentina, South Africa, India and Chile.

Collaborators

Currently Wal-Mart strategic focus is to expand its multi-sales channels throughout its emerging market.
Since its debut in china, Wal-Mart had high spirits regarding its expansion in the Chinese market. After
arriving in china with a joint venture with Shenzhen Intl., Wal-Mart started opening its Sams club, its
members only superstore store. Later Wal-Mart acquired 35% stake in Trust-Mart, a Taiwanese-owned
chain of retail supercenters. By early 2012, it nearly doubled its presence to 370 stores in 140 Chinese
cites. Wal-Mart further introduced its brick and motor type land contained stores as opposed to its
traditional giant warehouse. The move made possible for customers to conveniently shop without hassling
over finding products on multiple floors. Wal-Mart has also created technology platforms in seven
different countries to execute a global e-commerce strategy. By observing the immense growth in Chinese
online market, Wal-Mart invested US$500 million in 360buy.com, the fastest growing retailer company
privately held in Beijing. Later Wal-Mart also staked on a leading online Chinese grocery store company,
Yihaodian. Wal-Mart acquired majority of its shares in Yihaodian in efforts to reach the young online
consumers by providing them unique online shopping experience.
.

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Customer

Among the leading supermarket chains in china, Wal-Mart ranks second with a customer market share of
2.98% and sales reaching 50 Million Yuan (RMB). With the booming middle class, a decade after will
earn china a status of a true middle class surpassing china. Chinas online customers are increasing at an
extraordinary rate with a whopping 161 million online shoppers who frequently purchase various
products. According to the statistics of china information network center(2010), food segment make up to
2% of the online shopping, which is still great considering the densely population of china. As the middle
class gains strength trend shows that Chinese are becoming more status conscious and are no longer
satisfied with cheap imitations, paying premium is preferred if a product or service enhance their status.
Chinese customers are different than their western counterparts. Traditionally a Chinese buyer is
interested in food, cosmetics, package size, variety and store location as compared to American buyer
who persists with non perishable items such as electronics. The buying process for them is impulsive as
they frequently visits the store to see whats new on the shelf and often tend to purchase items in small
bundles and only if they are locally relevant.

Competitors

Euromonitor, the world leader in strategy research for consumer markets, states that china had at least 32
hyper market operators (2010). On the other hand United States had only 10 with Wal-Mart being the
largest with 80% of the market. Regardless such success it is still not easy to conquer Chinese market as
one of the major problems multinational companies encounter by the government are the trade barriers
and favorable governmental regulations toward local merchants. In 2012, Chinese government announced
to reduce exports and increase its own customer spending. Such changes will renew the competition from
domestic Chinese retailers for Wal-Mart by other multinationals. According to the Trade sources and
company information, Wal-Mart along with its acquired company, Trust-Mart, is ranked at second in
terms of market share in china with Sub Art Retail Group leading the chart. Carrefour, the French retailer
and also Wal-Marts largest international rivals resides at number 4 with the market share value of 2.57
%( 2010). Carrefour who entered the Chinese market a year later than Wal-Mart achieved much success.
According to the head of Carrefour china, Mr. Chereau, success in was due extensive study of Taiwanese
culture and lifestyle which share high resemblance with Chinese culture. In 2012 Carrefour announced to
accelerate in the china and was set to open 30 new stores by the end of the year. After the Trust-Mart
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acquisition, Wal-mart doubled its presence in the country throwing back its French retail rival, Carrefour.
But with one acquisition it was still not enough to dent other domestic competitors such as China
Resources and the Shanghai Brilliance Groups who at the times runs 8000 stores and had US$3billion in
sales combined. Wal-Mart also gambled on its Smartchoice compact stores in 2008. Soon after its
opening, Wal-Mart closed all its three stores in Shenzhen denying the closure claiming that they were
only test sites. The reason being the highly competitive convenience store market in china at the time.
Approximately 80% of the convenience stores were owned by Chinese with only 20% held by foreign
owners.
Chinese online shopping market is one of the largest growing markets with online sales expecting
to cross US$159.4 billion by 2015. With the competitors gaining shoppers through swiftly and cheaply
reaching customers by local bicycle couriers, Wal-Mart sensed an opportunity to grasp. Wal-Mart thus
invested in 360buy.com which was the fastest growing retailer in china. Apart from that Wal-Mart also
purchased majority of shares of Yihaodian, a leading online grocery company.

Political

Like any corporation, Wal-Mart has to consider political situation before expanding internationally. WalMart in China faced some political challenges, like government requests of having Chinese partners for
foreign investors. The Chinese government allowed foreign businesses to carry out operations on its
special economic zone site; however, its compulsory to have a joint venture with one Chinese partner
with not more than 49% of the stake. Wal-Mart had to sign a contract with Shenzhen International
Fiduciary Investment Co, Ltd, China. In 1995. Wal-Mart experienced a challenge dealing with labor
unions. The Chinese government practiced sending union representatives directly to workers. It is
important for Mr. Foran to look at more recent political issues. In 2012, the Chinese government
announced to reduce exports in order to upsurge own consumption, which makes it even coarser to
conquer the booming Chinese market.
Economic

China continues to dominate the world as a second largest economy. According to the Chinese national
bureau of statistics, grocery retail market will continue to grow in the country. The market grew 11% in
China as compared to US at only 4.2%. This signifies the future of the Chinese market as the US and
Wal-Mart in China

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European economies slump continues in 2012. Chinese citizens are more inclined towards improving
their lifestyle. Many Chinese workers are moving in first and second tier cities to earn a better living. A
survey result shows an increase in domestic consumption. The pursuit of better lifestyle is further
supported by the credit card balance rise in 2009 to 17% from the previous year. Today, globalization is
in fact one of the major proponents worth analyzing in the company's economic environment. As the
middle class brought prosperity to china, it also opened the doors for high end foreign retail stores to
reach second tier cities. With the prosperity segment population in low million, the demand for luxury
goods is far more widespread.

Social

Market acceptance and customer presence are the integral part of company external and internal analysis,
it leads them to define their focus and future target markets. Only after underlining the difference
between diverse cultural values, Wal-Mart China can achieve high customer intimacy, hence brand
loyalty. It is important to always think of what the customer wants, and expect to appreciate. Wal-Mart
had to adapt to Chinese culture by changing their way of food display, especially meat, and vegetables.
Chinese customers prefer to have fresh fish than frozen, actually most prefer to capture alive. Meat had to
be displayed differently so customers find attractive.
There are two major trends observed in Chinese shoppers as opposed to its American
counterparts. Firstly, they check what is new on the shelf and tend to visit the market on a daily basis and
prefer a variety in products. Secondly, they dont purchase in bundles, as they shop frequently and buy in
small quantity. As the middle class status conscious attitude prevails in Chinese culture, it opens the
opportunity for foreign investors to invest in their second tier cities. This renovation is well supported the
experts, who estimate by 2020, Chinese population will earn a reputation of a true middle class.
Wal-Mart should do research before assuming people behavior. Entering a market without
understanding their buying behaviors might end up like trying to sell radios to deaf customers. Mr. Foran
knows the importance of studying culture; for example Wal-Mart had a bad experience when
implementing EDLP in the Korean market. Korean culture is brand consciousness; people would pay a
premium price if a branded product or service that adds into his status. Also Wal-Mart did not study
customer trends in Germany and Korea and a result failed badly.

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Technological

Wal-Mart has a good experience in supply chain and supports suppliers to become more efficient. WalMart had succeeded in pushing suppliers to cut cost and be more efficient. They worked with the
Environmental Defense Fund, the National Resources Defense Council and Business for Social
Responsibilities to help suppliers cut costs.
With an enhanced technology platform, e-commerce can be a great dimension to capture customer
demand. China Internet Network Information Center reveals that nearly 161 million users shop online
spending $48.8 billion sales. Forecasts s
Suggest the sales wound hit a whopping $159.4 billion by 2015. Such an impressive growth is a
significant potential in Chinese e-commerce sector.

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SWOT Analysis
Strengths

Global business strengths: Wal-Mart had global network of information systems, sourcing, business
processes and shared services.
Strong CEO to implement strategies: To deploy the strategy of Wal-Mart, Mr. Greg Foran was made the
new CEO and President in China. He had a distinguished career in retail, and was uniquely qualified to
lead the retail business in China, based on his previous experience as head of an Australian supermarket
chain.
Low expense structure: The Companys expense structure was among the lowest in the industry.
Previous successes in China: Wal-Mart created 50,000 local jobs in China. By 2012, Wal-Mart doubled
its presence in 2012 with 370 stores in 140 cities.
Reliable co-partner in China: Wal-Mart acquired a company to operate in China. This acquisition TrustMart had key strengths that helped Wal-Mart to operate efficiently. Trust-mart had national sales,
distribution and purchasing networks that were key to Wal-Marts entry in China.
Strong e-commerce platform: Wal-Mart had a strong e-commerce platform around the world. It
successfully invested in e-commerce by acquiring many companies in China.
Multi-channel usage by Wal-Mart: Wal-Mart used online tools and mobile applications to sell to
consumers in China
Strong initiatives in China: Wal-Mart established relationships with more than 20,000 Chinese suppliers
sourcing 95% of the products in its stores locally. It also implemented many women empowerment
initiatives in China such as the Womens Leadership Development Commission. Other initiatives
included using sustainable energy, and CSR initiatives.
Steps to reduce substandard selling: Wal-Mart took strong steps to reduce the selling of expired products
in China which was praised by Chinese authorities.

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Weaknesses

Top management resignations might reduce effectiveness: Most of the top management of Wal-Mart had
resigned including the Chief operating officer and the Chief financial officer and the previous president.
Weak performance in China: Wal-Mart had low profit margins in China of around 2-3%.
No clear plan for Wal-Mart in China: Due to land constraints, Wal-Mart build two types of smaller
supermarkets in 1st tier cities but later reversed the decision and closed them. The management had failed
to study the differences in culture and consumer perceptions of Chinese customers.
Flawed decision making around the world: Wal-Mart did not do a proper analysis and failed in its attempt
to implement the EDLP strategy in Korea, Germany and Russia, because it did not study the consumer
market properly and did not have a proper strategy for Non-American markets.
Bribery incidents damaged the companys reputation: Between 2004 and 2005 the companys internal
reports showed that there were 90 such cases in China.
Instances of selling wrongly marketed products and expired products: In China it was found that WalMart was selling expired products and selling products that were different from how they were marketed.
This caused closing of 13 stores in of Wal-Mart.
Poor local management in China: The problem of selling expired and falsely marketed products stemmed
from the lack of professional attitude from local Chinese management.

Opportunities

Chinas thriving economic condition: Foreigners could operate businesses in China in a streamlined
manner. It had more prosperous growth compared to western economies.
Promising retail sector in China: Chinas retail sector was estimated at US $ 7803 billion and was
expected to grow at 11% to reach US$ 1.5 trillion by 2015.
Consumer buying power high in China: Consumers in China had high purchasing power that was seen in
the rise of credit card balances. Also 75% of all urban households traded in at least one product category

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of spending according to a study. Additionally Chinese consumers had more money than officially
reported in statistics. China is expected to be the largest consumer market in the world in 2020.
Demand for premium price products was high in China: Chinese consumers were willing to pay premium
prices and buy luxury goods.
Shift of middles class consumers to secondary and tertiary cities: Chinese middle income customers were
moving out of large urban cities into smaller ones. Premium prices could be charged for products and
services that might enhance their status.
Strong online-buying culture: China had 161 million online shoppers with a market of US$48.8 billion
and is expected to reach US$159.4 billion.
Strong consumer loyalty: Despite the closure of 13 Wal-Mart stores, many Chinese customers still
preferred Wal-Mart as they liked the product selection and prices.

Threats

Previous closure of Wal-Mart might influence customer perceptions: 13 Wal-Mart stores in China had
closed for two weeks due to selling expired products and falsifying the features of most products. This
will be a new challenge to address for the new CEO.
Dependence on making JVs in Chain: All foreign retailers like Wal-Mart were dependent on the
companies they made a joint venture with in China.
Competition in Chinese 2nd tier cities: These cities witnessed the opening of many European and
American retailers that might break Wal-Marts market share.
High competition in China: China had around 32 hypermarket operators, while the US had just 10. This
increases competitive pressure for Wal-Mart. One of the competitors, Carrefour, used its experience in
Taiwan to be successful in China.
High competition in convenience store segment in 1st tier cities
Reduction in exports could lead to lower market share: China planned to reduce its exports. This might
encourage local and foreign retailers to increase their market share to absorb consumer spending.

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Mergers are an inefficient of operating: Chinese law required retailers to merge with a local company to
operate in China. Mergers are commonly thought of inefficient use of companys capital, as the main
focus is to integrate, leaving aside core day to day operations. This will be a hindrance for Wal-Mart to
operate to its true potential like elsewhere.
Small customer segment: Price-conscious customers made up the vast majority of Wal-Mart customers.
Any change in this segment will drastically affect the sales of Wal-Mart. The EDLP strategy would work
for this segment but not the ones who are not price conscious
Small merchants that sold at very low price: The EDLP strategy of Wal-Marts was facing competition in
China from many merchants who were selling cheaper than Wal-Mart.

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CONCLUSION

Based on the SWOT and situation analysis, we have concluded the following:
1.

Introducing compact stores format in Chinas second and third tier cities is recommended because
there is a significant shift of middles class consumers to secondary and tertiary cities. Failure of such
stores in first tier cities was because there was intense competition in the convenience store segment
in those cities. For 2nd and 3rd tier cities no such competition exits and Wal-Mart should capitalize on
this opportunity. If management discovers that it is not feasible to have smaller scale stores then a
supermarket or hypermarket could be established in these cities.

2.

It is not feasible to continue implementing EDLP strategy in China as it is done at present. Regarding
the market reach of such strategy, the EDLP strategy only appeals to small customer segments that
are price-conscious. Any change in this segment will drastically affect the sales of Wal-Mart. The
EDLP strategy would work for this segment but not the ones who are not price conscious. At present
Chinese customers are demanding premium price products and are willing to buy luxury goods. This
shows that a price-conscious segment is diminishing. Furthermore, The EDLP strategy of WalMarts is facing competition in China from many merchants who were selling cheaper than WalMart.
What we suggest management is to study the customer perceptions of EDLP in China, the
proportion of customers who will be interested in products that are sold through this EDLP strategy
and analyze if they can compete with other merchants who are selling at lower prices. Previously
Wal-Mart International did not have a proper system to study consumer sentiments in Korea, Russia
and Germany and which is why they failed there. A new framework should be introduced to study
the customers and devise relevant strategies.
However Wal-Mart should still continue utilizing the efficiency part of EDLP which strives to
reduce costs and streamlines process. It is only the marketing and pricing side of the EDLP strategy
that has to be revisited.

3.

The current goals and objectives of Wal-Mart China state that it will provide differentiated, value-led
products on its shelves. However, no strategies to fulfill these objectives are being implemented by
Mr. Foran. Our analysis clearly point out to the fact that Chinese customers are getting interested to

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buy luxurious products and those that enhance their status. Therefore Mr. Foran should have a
relevant strategy to provide differentiated products.

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