WALMART STRUGGLES IN
Jain C Oommen
Susanna Sara Samuel
Arjun C B
Walmart is an American multinational retailer corporation founded
by Sam Walton in 1939 known for discount retailing
Large discount department stores and warehouse stores
World's third largest public corporation
(Fortune Global 500, 2012)
Largest retailer in the United States, and in the world
8,500 stores in 15 countries, under 55 different names
(UK - Asda, Japan - Seiyu, India - Best Price)
Mixed results in investments outside North America:
UK, South America, China are successful
Germany, South Korea were unsuccessful
Wal-Mart follows a Divisional
Organization Structure at the top
level and a matrix organizational
structure at the store level.
Divisional Organization Structure:
Earlier Walmart followed Geographi
cal Structure but now they have
shifted to Market Structure.
rural areas and Small towns
pattern of expansion:pushing from the inside out
“Always low prices-Always”
- advertising expense: 1.5% of sales
(while 2.1% for direct competitors)
Key source of walmart’s
Successful vendor relationship
purchasing partnership with suppliers
Sharing information electronically
Vendor managed inventory system
minimize inventory cost
Value employees most
“Yes We Can Sam” suggestion program
within a store”
•Shrinkage incentive plan
•Profit Sharing Scheme
•Management Training Program
Efficient operation management
-Hub-and-spoken distribution network
-Uniform Product Codes (UPC)
Distribution of walmart
Each Distribution center divided into different section basis of
quantity of goods received.
40 regional distribution centers for import flow and more than 140
distribution centers for domestic flow
Stores are saturated around the distribution centres so reduced
Hub and spoke distribution network
High inventory turnover rate ,once in every two weeks.
Some cases vendors supplied directly to stores.
Large-scale use of sophisticated technology such as Bar code, hand
held computer systems (Magic Wand) and now, RFID.
Every employee had information regarding products at distribution
They make 2 scans- one for identifying the pallet, and other to
identify the location from where the stock had to be picked up.
The hand held computers guide employee to the location of the
Segmentation, Target &
Target - Walmart’s credo is, “save money, live better” this
Walmart uses market segmentation to
determine where to open their stores and
what items to stock it up with.
summaries their target market, the lower-middle class and the poorer.
(Low income consumers).
Product strategy - Low prices, In-stock positions, Customer service
Service strategy - Respect the individual , High standards of service
Operation strategy - Short response time , low inventory , Cultural adaptation
Competitive strategy - customer satisfaction , Mkt Penetration By Selecting
Most Convenient Locations Acquired Or Constructed
–Logistic Efficiency: Speed To Market
Why Walmart became
successful in America
Competitively Reduced Cost (Puts All Gains & Savings Into
Focus on IT investments
One- Stop Shopping
Keep Customer Shopping: Added Food & Services
Full Stock Register
Full Product Line
50:50 joint venture
Made mistakes in
product mix recovered
60:40 partnership with
made mistakes in
100% owned green field
Argentina is a small
Acquisition of central
american retail holdings
adapted to the local
economy and there was
a high degree of
Wrong entry strategy
After 7 years got out
SWOT ANALYSIS (GLOBAL)
Efficient supply chain management
Service innovation and technology
Growth through adaptability.
E-tail’s continued development
Least cost of packaging
strong penetration strategies
Infrastructure (financial strength)
•Many countries are still left
•Globalization (diminishing trade
•Cold Storage market
•Increase in consumer purchasing
•Late entrant in international market.
•Unable to adapt to different countries
•Were unable to handle media
•High law suits against the company.
•Low penetration in European union
•International laws against anti
•Campaign against anti competitive
WALMART- JAPAN SCENARIO
Entered in Japan:-
1990 :- Real estate prices in Japan declined.
Prompting many foreign retailers to enter the
Wal-Mart started exploring the Japanese market
2002-03:- Wal-Mart-Seiyu Partnership.
Entry strategy in Japan
Walmart entered Japan in 2002.
Usual foreign strategy:
• License tie up
• Joint venture
• Wholly owned subsidiary
Entry to Japan
purchase of a 6.1 percent stake in the 371-store Seiyu chain, a struggling Japanese retailer. It’s
mission was offer low price and value added shopping experience to it’s customers.
First store at numazu which is a downtown
5th largest retailer in Japan- speed of entry into the market
Well established network of retail chain ( 1962) higher market penetration
The company was in crisis , so it becomes easy for walmart to acquire it.
-The economy of Japan is the third
largest in the world by nominal GDP (
4.628 trln $) the fourth largest
by Purchasing Power Parity and is the
world's second largest developed
economy. Japan hadconsumers with high levels of
-sophisticated a 451$ Bn retail
-a nation with high demand of food imports.
( self sufficiency rate 41% only)
Japan’s Retail Sector Attracts
throughout Asia- accounts for 55% of
For foreign companies, Japan’s market
holds significant opportunities for
other Asian markets.
Retail industry in Japan
As can be seen from the pie chart,
Walmart entry to Japan as General
Supermarket / Department Stores
retail model means that it’s
entering a relatively small
market, at least when compared
to other forms of retail in Japan.
Wal-Mart only has 2.6 percent
market share and Japan accounts
for just 2.5% of Wal-Mart’s $443
billion in revenue in 2011
Challenges in JAPAN
Japan is a small country with limited spaces.
Small housings and apartment sizes, with high rent prices means that Japanese
would need to minimize their purchases.
Cultural and demographic
Japanese tends to prefer quality over low prices
High entry barriers for foreign retailers: strong bond between manufactures and
wholesalers so price controlled by them.
Several small purchases.
High operating costs, especially because of the prices of rent and buildings in
Inability to apply original supply chain model :
Negative public image
Branding efforts by walmart
Social Media to Enhance Sales and Brand
In store promotional activities
organized different campaigns .
eg: sageriku ( request down) campaign
support EDLP (Every Day Low Price) strategy
Give our customers opportunity to indicate their
preferences and provide a feedback
Enhance our sales and brand reputation in Japan
Competitors of walmart in
The types of competition in Japan include both domestic and
It’s biggest Japanese competitors are 7-Eleven Japan Co. Ltd.,
Aeon Co. Ltd., and Ito-Yokado Co. Ltd. As of 2008, all of these
companies drastically outperformed Seiyu Ltd. (Wal-Mart).
All of these companies have different strategies, much of their
success can be credited to their experience in understanding how
their country buyers and sellers interact.
Two main international competitors are Carrefour from France and
Tesco from the United Kingdom.
These firms had similar challenges to Wal-Mart with their
international expansions, but each faced them differently.
Tesco made large investments in market research that allowed
them to build stores that better met the Japanese consumer’s
needs. Their cautious expansion and well thought out plans have
helped them succeed in the Japanese retail industry.
New entry into japan
about culture and
7-11 JAPAN co ltd
established in Japan
about culture and
SWOT ANALYSIS OF WALMART
Strong brand name(benefit for
Strong financial backup
Identified and tied up with the 5th
largest retailer which made its entry
Good IT infrastructure
Inability to incorporate Japanese culture
Difficulty in lowering costs since most farms
and fisheries in Japan are small, family-run
operations that frequently offer better deals
on smaller orders rather than on larger ones.
Difficulty in cutting costs out of its supply
chain- a key to Wal-Mart’s success in the US
Labor costs in Japan is comparatively higher
Lack of prior market research
Relaxed restrictions on retailers and changing
Japan’s $451 billion retail industry which is the
second largest in the world
Third largest economy with a population of 127
million and one of the highest per capita income
in the world
Too many small retailers
Wal-Mart can raise pressure
Opportunity to make its presence felt in Asia
Consumers pay more attention on quality, service,
stores, design and not just on price
Localized preferences(walmart business model of
Multi-layered traditional distribution system in
Large presence of small scale retailers
Insecurity feeling developed in the minds of
Japanese consumers as a result of mass firing that
Chinese products are not accepted by japanese
Competition from domestic players like Aeon, Itoyokado
PEST ANALYSIS- Japan
Favorable entry regulations for foreign retail companies
Favorable climate for mergers and acquisitions
Low degree of violence and corruptions
Distress among public regarding foreign intervention
Recession climate in favour for walmart
One of the highest per capita income
Deflation climate in Japan favoured walmart
Has a significant large aging population implying a small and
less willing work force
Quality conscious japanese consumers
Culture oriented customers
Japanese consumers prefer to purchase fresh products in
small quantities at frequent intervals
Japanese consumers have strong preferences for local
Low resistance for technological up gradation
East adaptation and rapid growth of internet
Comparison of American and
Bulk purchasing to save costs.
No problem with EDLP
Walmart establishes strategic
partnerships with most of
Variety and offers by walmart
accepted by American people
Japanese tends to prefer
quality over low prices
Walmart has to challenge the
unusually powerful Japanese
suppliers and manufacturers
to conform with its Walmart
Variety offered by Walmart is
not attractive to Japanese.
Walmart, now in Japan
From EDLP, WMT is slowly trying to convince
consumer about their value pricing.
In store promotions
Prices are visibly displayed
Fresh vegetables and fruits are visibly positioned
EDLP to save money, live better
US was a saturated market for Wal-Mart and it was looking for
opportunities in other countries.
Wal-Mart needs to adapt to the host countries culture rather than
replicating American model.
Wal-Mart has to consider employee relations, especially in a foreign
Proper market study needs to be done before entering to the market.
Gradual adaptation and development.
Wal-Mart's communication inabilities – low cost does not mean low