wal-mart in Japan


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wal-mart in Japan

  1. 1. WALMART STRUGGLES IN JAPAN Group 1 Jain C Oommen Susanna Sara Samuel Arjun C B
  2. 2. ABOUT WALMART  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
  3. 3. Organizational Structure  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.  Matrix organizational structure
  4. 4. Business strategies  Product Stationery Food Automotive Home appliances Wal*Mart Household chemicals & consumables Sporting goods Paint & hardware Health & beauty aids
  5. 5. Business strategies  Place: rural areas and Small towns pattern of expansion:pushing from the inside out  Price: “Everyday-low-prices”  Promotion: “Always low prices-Always” -few promotion: - advertising expense: 1.5% of sales (while 2.1% for direct competitors)
  6. 6. Key source of walmart’s competitive advantages Successful Vendor Relationship Efficient Communication Network LOW PRICE Value Efficient Employees Most Operation Management Customer-Oriented
  7. 7. Successful vendor relationship  purchasing partnership with suppliers Efficient purchasing  Sharing information electronically low effective communication cost  Vendor managed inventory system minimize inventory cost
  8. 8. Value employees most • “Yes We Can Sam” suggestion program •“Store within a store” •Shrinkage incentive plan •Profit Sharing Scheme •Management Training Program Motivation High Lower Productivity Cost
  9. 9. Efficient operation management • Distribution Network -Hub-and-spoken distribution network -Owned warehouses -Cross-docking •Operating system -Uniform Product Codes (UPC) -Satellite system Higher Productivity Lower Cost
  10. 10. Distribution and operation of walmart
  11. 11. 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 transportation cost  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 center.  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 specific product.
  12. 12. Segmentation, Target & Positioning  Segmentation –  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).  Positioning 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
  13. 13. Why Walmart became successful in America • • • • •  • • • • • • Competitively Reduced Cost (Puts All Gains & Savings Into Reducing Prices) Consumer-centric Sales Localization Co-operated Suppliers Store-manager Autonomy Focus on IT investments One- Stop Shopping Keep Customer Shopping: Added Food & Services Full Stock Register Full Product Line Merchandising Ladder Private Branding
  14. 14. COUNTRY ENTRY STRATEGY REMARKS POSITION MEXICO 50:50 joint venture Made mistakes in product mix recovered successfully 1 BRAZIL 60:40 partnership with lojas americana Tough competition, made mistakes in product mix failed Argentina 100% owned green field stores Argentina is a small economy 3 Costa rica, Guatemala, Honduras , Nicaragua Acquisition of central american retail holdings company adapted to the local economy and there was a high degree of localization. 1 Hong kong Joint venture Wrong entry strategy disaster Indonesia partnership Political crisis failed Korea acquisition Emart market dominance After 7 years got out
  15. 15. SWOT ANALYSIS (GLOBAL) • • • • • • • • Strength Efficient supply chain management Targeted marketing Service innovation and technology Growth through adaptability. E-tail’s continued development Least cost of packaging strong penetration strategies Infrastructure (financial strength) Opportunity •Many countries are still left •Unorganized retail •Globalization (diminishing trade barriers) •Cold Storage market •Increase in consumer purchasing power •E-business Weakness •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 Threats •Terrorism •Competitors •Negative publicity •International laws against anti dumping •Campaign against anti competitive practices
  16. 16. WALMART- JAPAN SCENARIO  Entered in Japan:-  1990 :- Real estate prices in Japan declined.  Prompting many foreign retailers to enter the country.  Wal-Mart started exploring the Japanese market in 1997.  2002-03:- Wal-Mart-Seiyu Partnership.
  17. 17. 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 • • • • Why seiyu??? 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.
  18. 18. Why japan?? -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 industry. disposable income -a nation with high demand of food imports. ( self sufficiency rate 41% only) Japan’s Retail Sector Attracts throughout Asia- accounts for 55% of Asian market. For foreign companies, Japan’s market holds significant opportunities for advancing into other Asian markets.
  19. 19. 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 (source).
  20. 20. Challenges in JAPAN    Geographical  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  Aging population  Cultural differences  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. Economical  Several small purchases.  High operating costs, especially because of the prices of rent and buildings in general.  Inability to apply original supply chain model :  Negative public image
  21. 21. Branding efforts by walmart    Social Media to Enhance Sales and Brand Reputation. In store promotional activities organized different campaigns . eg: sageriku ( request down) campaign  To support EDLP (Every Day Low Price) strategy in Japan  Give our customers opportunity to indicate their preferences and provide a feedback  Enhance our sales and brand reputation in Japan
  22. 22. Competitors of walmart in Japan • • • • • • The types of competition in Japan include both domestic and international players. 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.
  23. 23. Competitor analysis    WALMART New entry into japan Poor relationship with suppliers Poor knowledge about culture and customer perception    7-11 JAPAN co ltd Already well established in Japan Strong relationship with suppliers Good knowledge about culture and customer perception
  24. 24. SWOT ANALYSIS OF WALMART Strengths in Japan Strong brand name(benefit for entry)  Strong financial backup  Identified and tied up with the 5th largest retailer which made its entry easy.  Good IT infrastructure 
  25. 25. Weakness in Japan       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 aging population Labor costs in Japan is comparatively higher Lack of prior market research
  26. 26. Opportunity in Japan     Relaxed restrictions on retailers and changing consumers attitude 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 Unconsolidated market o o o Too many small retailers Wal-Mart can raise pressure Opportunity to make its presence felt in Asia Pacific Region
  27. 27. Threats in Japan        Consumers pay more attention on quality, service, stores, design and not just on price Localized preferences(walmart business model of standardization) Multi-layered traditional distribution system in Japan Large presence of small scale retailers Insecurity feeling developed in the minds of Japanese consumers as a result of mass firing that happened Chinese products are not accepted by japanese consumers Competition from domestic players like Aeon, Itoyokado
  28. 28. PEST ANALYSIS- Japan POLITICAL  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 ECONOMIC  Recession climate in favour for walmart  One of the highest per capita income  Deflation climate in Japan favoured walmart
  29. 29. Cont.. SOCIAL  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 products TECHNOLOGY  Low resistance for technological up gradation  East adaptation and rapid growth of internet
  30. 30. Comparison of American and Japanese model AMERICAN MODEL      Bulk purchasing to save costs. No problem with EDLP strategy Walmart establishes strategic partnerships with most of their vendors Individualist walmart Variety and offers by walmart accepted by American people JAPANESE MODEL      Small purchases Japanese tends to prefer quality over low prices Walmart has to challenge the unusually powerful Japanese suppliers and manufacturers to conform with its Walmart model. Collective Japan. Variety offered by Walmart is not attractive to Japanese.
  31. 31. Walmart, now in Japan  Price:   From EDLP, WMT is slowly trying to convince consumer about their value pricing. Promotion: In store promotions  Prices are visibly displayed  Fresh vegetables and fruits are visibly positioned   Positioning:  EDLP to save money, live better
  32. 32. Our learnings  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 country.  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 quality.
  33. 33. THANK YOU