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Walmart in china

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It is a framework analysis of the wumart case

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Walmart in china

  1. 1. WUMART STORES China’s Response to Walmart
  2. 2. WUMART: MACRO ENVIRONMENT <ul><li>Name : Wumei: signifies quality- Touch Point </li></ul><ul><li>Regional Player: COO effect </li></ul><ul><li>Low price high value </li></ul><ul><li>Structural Changes </li></ul><ul><ul><li>Dominant market position at home </li></ul></ul><ul><ul><li>Financials </li></ul></ul><ul><ul><li>Deep mgmt </li></ul></ul><ul><ul><li>Industry Expertise </li></ul></ul><ul><li>Competition </li></ul><ul><ul><li>Foreign Players, State owned </li></ul></ul><ul><li>More Formats, mature </li></ul><ul><li>Regulations loosened </li></ul><ul><li>Market: highly localized, good infrastructure, fragmented </li></ul><ul><li>Consumers </li></ul><ul><ul><li>Diversity, SCM important, local competition </li></ul></ul>
  3. 3. STRENGTHS <ul><li>COO: patronage </li></ul><ul><li>Brand loyalty </li></ul><ul><li>Infrastructure </li></ul><ul><li>Rapid but low cost expansion </li></ul><ul><li>Foothold at home </li></ul><ul><li>Use of IT </li></ul><ul><li>SCM </li></ul><ul><li>Relationships (PR) </li></ul><ul><li>Bargaining Power </li></ul><ul><li>Understanding of CB </li></ul><ul><li>Multi Format </li></ul><ul><li>3 rd Party Logistics </li></ul><ul><li>Centralization </li></ul><ul><li>Geographical Concentration </li></ul><ul><li>Political Participation </li></ul><ul><li>CSR </li></ul>
  4. 4. WEAKNESSES <ul><li>Regional Associations: limitations </li></ul><ul><li>Political Uncertainity: Vulnerability </li></ul><ul><li>Local Presence </li></ul><ul><li>Brand Visibility in other regions? </li></ul><ul><li>Centralized: Limitations to expansion </li></ul>
  5. 5. OPPORTUNITIES & THREATS <ul><li>Opportunities </li></ul><ul><ul><li>Expansion with restructuring </li></ul></ul><ul><ul><ul><li>National </li></ul></ul></ul><ul><ul><ul><li>International </li></ul></ul></ul><ul><ul><ul><li>Rural Market </li></ul></ul></ul><ul><li>Threats </li></ul><ul><ul><li>EDLP: Till When </li></ul></ul><ul><ul><li>High govt dependence </li></ul></ul><ul><ul><li>Brand: Long term? </li></ul></ul><ul><ul><li>Regional CB: evolving </li></ul></ul><ul><ul><li>Stakeholders </li></ul></ul><ul><ul><li>New regions- new strategies </li></ul></ul>
  6. 6. BCG MATRIX Wumart
  7. 7. COMPETITIVE ADVANTAGE: SOURCES <ul><li>Strongest bargaining power  </li></ul><ul><ul><li>Strongest  bargaining power with the local Suppliers -->>“Everyday Low Prices” pricing strategy </li></ul></ul><ul><li>Regional advantage (first and foremost advantage) </li></ul><ul><ul><li>Convenient transportation , manufacturing and trading center -->> Lower the cost </li></ul></ul><ul><ul><li>High population density -->> High passenger flow  </li></ul></ul><ul><ul><li>Lower store density  less competitors than that of Shanghai -->> Less intensive competition     </li></ul></ul><ul><ul><li>Regional dominance -->>Better defence against international retail giants  </li></ul></ul><ul><ul><li>The knowledge of customer preference, habit and supply base.      </li></ul></ul><ul><li>Relationships </li></ul><ul><ul><li>Close relationship with local government -->> Protection  </li></ul></ul><ul><ul><li>Collaboration with SOEs -->> Protection and low-cost expansion </li></ul></ul>
  8. 8. SUSTAINABLE COMPETITIVE ADVANTAGE <ul><li>Competitively valuable Resources: </li></ul><ul><ul><li>Tangible         </li></ul></ul><ul><ul><ul><li>Multi-Formats(meet consumers needs) ->valuable but not sustainable (Great Flexibility) </li></ul></ul></ul><ul><ul><li>Intangible </li></ul></ul><ul><ul><ul><li>market positioning(Regional play) ->not sustainable (fragmented nature of the Chinese retail market) </li></ul></ul></ul><ul><ul><ul><li>Strong corporate culture-> sustainable </li></ul></ul></ul><ul><ul><li>Capabilities </li></ul></ul><ul><ul><ul><li>early commitment to technology (compare to international entrants -> NOT as competitive advantage) </li></ul></ul></ul><ul><ul><ul><li>low-cost, asset-light expansion -> sustainable only in a certain period(limit amount of state-owned retail companies) </li></ul></ul></ul><ul><ul><ul><li>Active political participation and philanthropic work -> sustainable (special political arena and government impact) </li></ul></ul></ul>
  9. 9. EMERGING MARKETS <ul><li>Political </li></ul><ul><ul><li>Uncertainty </li></ul></ul><ul><ul><li>Intervention/ regulations: trade, tarriff </li></ul></ul><ul><li>Economic </li></ul><ul><ul><li>GDP low </li></ul></ul><ul><ul><li>Middle level income consumer sector high/ growing </li></ul></ul><ul><li>Social </li></ul><ul><ul><li>Classes , CB, trends, demographics </li></ul></ul><ul><li>Technology </li></ul><ul><ul><li>Infrastructure low, growth opportunities </li></ul></ul><ul><li>Environmental </li></ul><ul><ul><li>Regulations less developed </li></ul></ul><ul><li>Legal </li></ul><ul><ul><li>Not fully developed, FDI, stringent, labor costs </li></ul></ul>
  10. 10. CHINESE CONSUMERS <ul><li>Foreign retailers wear suits when they welcome visitors, while the Chinese wear shorts because they feel they are familiar with their clients </li></ul><ul><li>China’s 1.3 billion people are rapidly urbanising and ravenous for all the goods they couldn’t have a generation ago. </li></ul>
  11. 11. <ul><li>China’s government is eager to promote domestic consumption. But the Chinese middle class is not nearly as rich as the middle class in rich countries. </li></ul><ul><li>The key is the less developed areas of the country. </li></ul><ul><li>There could be political tensions if a foreign retailer gets too big or too dominant </li></ul>
  12. 12. WU MART STRATEGIES <ul><li>merges the comfort of supermarket services and the distinct taste of the Chinese population </li></ul><ul><li>higher  margin of consumer preference in Chinese market because Wumart strategy uses the technological advancements used by modern supermarket chains and integrating the taste and culture of Chinese </li></ul>
  13. 13. <ul><li>Chinese and Asian population needs the comfort of modern research and advancement of modern retail marketing but multinational supermarket companies needs to vary their retail marketing strategies according to the given culture considering the inner feelings and preferences that will affect the actual buying stage </li></ul>
  14. 14. WALMART IN CHINA <ul><li>Store count: </li></ul><ul><li>Trust-Mart Hypermarket (35% stake) - 104 </li></ul><ul><li>Supercenter - 222 </li></ul><ul><li>Sam’s Club - 6 </li></ul><ul><li>Neighborhood Market - 2 </li></ul><ul><li>Smart Choice - 3 </li></ul><ul><li>Discount Compact Hyper – 1 </li></ul><ul><li>Total annual sales - $ 7.5 billion </li></ul>
  15. 15. STRATEGY IN CHINA <ul><li>China’s retail market 3 rd largest after USA and Japan </li></ul><ul><li>Main focus is how to attract shoppers </li></ul><ul><li>Changed layout of stores for Chinese market </li></ul><ul><li>Wet Market in their stores, selling live meat and seafood </li></ul><ul><li>Working with universities and government to help promote training and education for the Retail industry </li></ul><ul><li>Target is middle class people, upscale merchandise to cater to materialistic sentiments </li></ul><ul><li>Acquired 35% stake in Trust-Mart (in Feb 2007) </li></ul>
  16. 16. WHAT CAN WUMART DO? <ul><ul><li>Foster political relations </li></ul></ul><ul><ul><li>  </li></ul></ul><ul><ul><li>Extensive customer research </li></ul></ul><ul><ul><li>Continually upgrade in ICT systems </li></ul></ul>
  17. 17. CHALLENGES FOR WALMART <ul><li>Leadership </li></ul><ul><li>Logistics and Supply Chain </li></ul><ul><li>Labour </li></ul><ul><li>Legitimacy </li></ul>
  18. 18. THANK YOU

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