Walmart struggled in its expansion into Japan, entering the market in 2002 through the acquisition of Japanese retailer Seiyu. While Japan represented an attractive retail market opportunity due to its large economy and consumer spending, Walmart faced significant challenges including a cultural mismatch with Japanese consumers' preferences for quality over low prices. It also struggled to adapt its supply chain and store models to Japan's unique geographical and real estate constraints. Despite branding efforts, Walmart had difficulty competing with well-established Japanese retailers and other foreign competitors like Carrefour that better understood the local market. By 2015, Walmart sold off its majority stake in Seiyu, representing a failed expansion attempt into Japan.

1. WALMART STRUGGLES IN
JAPAN
Group 1
Jain C Oommen
Susanna Sara Samuel
Arjun C B

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. 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. Business strategies

Product
Stationery
Food
Automotive
Home
appliances
Wal*Mart
Household chemicals
& consumables
Sporting
goods
Paint &
hardware
Health &
beauty aids

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. Key source of walmart’s
competitive advantages
Successful Vendor
Relationship
Efficient
Communication
Network
LOW PRICE
Value
Efficient
Employees Most
Operation Management
Customer-Oriented

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. 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. 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. Distribution and operation of
walmart

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. THANK YOU