Wal-Mart in China
Wal-Mart’s strategy in the United States is low-cost, in addition to its high volume strategy. This is meant to help the company achieve customer satisfaction through its low prices, and through quality customer service. What makes Wal-Mart have cost advantages in the United States lies in its distribution practices. Wal-Mart has a distribution network that has superior capabilities, compared to its competitors. This includes the location of its stores; these are located in strategic places, and are many in number, therefore, it is easier for customers to spot them. Wal-Mart also has a speedy growth in the United States. This is reflected in its increased number of stores, even as it plans to open more stores in the United States in the next two years. The superior information management of Wal-Mart is another source of the company’s cost advantages in the United States. Wal-Mart offers a big range of products to its customers, thus raising its cost advantages, as customers will buy all the products they need under one roof. Finally, customer satisfaction contributes to Wal-Mart’s low cost advantages. Since this company has satisfied employees, these offer quality services to customers, who keep coming back (“The Economist” Web).
These sources of cost-advantage have helped Wal-Mart gain a competitive advantage in the United States. Wal-Mart’s efficient distribution such as cross-docking helps the company save costs from lower levels of inventory, which leads to lower prices and more customer satisfaction. Wal-Mart uses IT to integrate its suppliers, and this reduces the company’s cost of distribution and saves the costs that the company could have incurred linking up with manufacturers. Wal-Mart’s work force culture that ensures employee and customer satisfaction has helped the company attain customer loyalty, and its employees work productively. Wal-Mart has also maintained its everyday low prices in the US, and this helps lower advertising costs, improve stability of supply chain and customer satisfaction. All these factors have helped Wal-Mart compete healthily in the market, since these are cost saving, enabling Wal-Mart to grow more and register an increased market share (“The Economist” Web).
When Wal-Mart got an entry into the Chinese market in 1996, the management thought that by duplicating the business model of the US market in China, the company could still rise to success in China. However, this was wrong, since Wal-Mart in China has been faced by a myriad of challenges despite its everyday low prices. This has been overtaken by Carrefour, a foreign investor in China. This show that China has not achieved a competitive advantage in China, as is the case in the US. Problems with food labelling have led Wal-Mart to be sanctioned, and close to 13 of its stores closed down by the Chinese authorities. This in addition to the Chinese culture, Anti-monopoly laws, Anti-unfair competition laws, and Price laws, among other restrictions in the market, has weighed Wal-Mart down in China. The fact that Wal-Mart is a foreign company in China makes it hard for it to grow, since China prefers their domestic companies to grow more than the foreign companies (Wang and Farhoomand Web).
For Wal-Mart to be effective in China, management should put the cultural factor in consideration. Apart from cooking their own food, the Chinese value fresh foods, compared to Americans. Therefore, most processed foods should be replaced with health foods. Asians are quality-oriented; therefore, Wal-Mart’s everyday low prices might not apply in China, since they view these as low-quality products. Some cultures believe that cheap is low in quality. Additionally, instead of targeting the low-income earners in China, as it does in the US, Wal-Mart in China should target high-income earners, as China is different from the US. Finally, Wal-Mart should consider opening more stores in China, and improving on its distribution, since China is more populated than the US.
The Economist. “Wal-Mart: How big can it grow?” April 15, 2004. Web. Retrieved 21 February
Wang, Iris and Farhoomand, Ali. “Wal-Mart Stores: “Everyday Low Prices” in China.” Harvard
Business Review. September 11, 2006. Web.
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