This document discusses Walmart's success factors in the US and examines whether these factors led to success in other countries. It analyzes Walmart's entry and failures in Germany, South Korea, Brazil, China, Japan, and briefly mentions failures in Hong Kong, Indonesia, and Russia. Key reasons for failure included an inability to adapt strategies to local market differences, high operating costs, lack of relationships with suppliers, and not fully understanding local consumer preferences. The document suggests Walmart's IT and supply chain strategies were more successful in China.

1. Wal-Mart
Group No - 06
Karthik K.
Sushil Chaudhari
Sai Sandeep
Sree Harsha
Siddharth Padki
Sheekant E.

2. What are the success factors for Wal-Mart
in the US ?
Purchasing
Economies of scale
Electronic hook-ups
Less than 4% purchase
volume
Store Location
Large discount stores in
small rural area
In bound logistic
Saturation strategy
Distribution center
Satellite network system
Human Resource
Dedicated work force
Offering for the employees
Performance based
promotion
Marketing strategy
Every day low prices
Store Operation
Cost advantage
Sales per square feet
Management
information & control
Excellent IT structure
Benchmark information

3. Did the success factors work in other
countries?
YES
 Mexico, Canada, Britain
 Largest retailer in Mexico &
Canada
 Third largest in Britain
NO
 Japan, Korea, Germany,
China, Indonesia, Brazil and
Hong Kong
 Withdrew from Germany

4. Did the success factors work in other
countries?
China
Too much competition
Income Disparity
Local Protectionism
Infrastructural Deficiency
Distribution challenges
Regulatory restrictions
Lack of IT network
Consumer behavior
Many trips, little purchases
Fresh means alive
Shoplifting

5. Did the success factors work in other
countries?
Japan
Challenges in implementing retail link
system as suppliers lacked the
technology
Retailer supplier relationship
traditionally personal – challenge
switching to impersonal electronic
system

6. Did the success factors work in other
countries?
Germany
Existing competition
Customers felt : extra services lead to higher prices
Extending store hours – not allowed
Cutting prices violated manufacturer’s price
maintenance agreements
High labour costs

7. Did the success factors work in other
countries?
South
Korea
Operated in buildings of six to eight floors
within dense cities
Unable to adjust its traditional model in
different building structure
Merchandise mix
Location of stores far from the city

8. Detailed Analysis: Marginal success and
failure in other countries
Japan - (Failure)
• Lack of storage room to store purchases - Small housings and apartment
sizes, with high rent prices.
• Several small purchases, compared to Walmart usual practice of centralized,
big stores, with bulk purchasing to save costs.
• High operating costs, especially because of the prices of rent and buildings in
general - Average commercial land prices in Japan is 156,857 Yen (USD
2,017)/sqm.
• Inability to apply original supply chain model
Lots of stores, lots of supplies to be delivered, but no warehouse space.
• Costly trash disposal procedure- Japanese environmental consciousness
about waste disposal, added to their minimalist lifestyle, would discourage
any bulk purchases from Walmart.

9. Germany - (Failure)
• Failed to build good relationships with suppliers
– With a 1.1% share only of the German market, the company found
suppliers unwilling to tow the line.
– Demanded access to suppliers’ premises to check their operations and
the quality of the products. This did not go down too well with
German suppliers and as a consequence Wal-Mart failed to build good
relationships.
• Wal-Mart's American buyers made classic errors in Germany such as
stocking large number of US pillow cases which did not fit German Pillows.

10. Brazil - (Failure)
• Customers had to travel several miles to reach the stores
• High average stock out rate(40%) – suppliers unable to produce and supply
to the requirements
• warehouses located far away from stores – leading to stock out
• Traffic problem – hindered on-time delivery
• very huge product line – problem with stock maintenance
• advertisement of stocked out products - strain on supply chain.

11. China – (Success)
• Successful vendor relationships
– No nonsense negotiator which lead to efficient purchasing
– Partnership with suppliers & sharing information electronically which resulted
in efficient communication.
– Vendor managed inventory system which minimized inventory cost.
• Hub & spoke distribution network, owned warehouses and cross-docking
gave better control over their distribution network.
• China sourcing at the scale of Chinese population which gave competitive
advantage of its operation efficiency that enabled U.S. Wal-Mart to be low
priced.

12. Can failures be attributed to poor retail
strategies in these countries?

13. Germany Failure
Flawed Entry by acquisition strategy
• Acquired Spar – weakest German retailer
• Run down stores, non lucrative location of stores in less well off inner city
residential areas
• Cost burden- Poor returns realized even after Wal-Mart acquisition
High operating costs
• Strict zoning and planning regulations posed challenges for organic
growth
• Due to comparatively small size of Wal-Mart, it could not enjoy significant
price concessions or relaxations from suppliers
• To fully exploit economies of scale in food retailing, min. annual turnover
of around €7.7 billion is de rigeur –2.5x Wal-Mart Germany’s actual sales.

14. Germany Failure
EDLP : Empty Promise
• Existing German retailers like Aldi, Lidl, Rewe and Edeka matched all of
Wal-Mart's price cuts
• Aldi defended its position as Germany’s undisputed cost and price leader
No excellent service
• Wal-Mart's traditional US centered view of customer service not fully
compatible with German sensibilities
• 10 foot rule
• “Greeter” and “Bagger” did not go down well with Germans as well
• Restrictive shopping hour regulation

15. South Korea Failure
Inefficient retail clustering
• Several stores need to be in close proximity to enable sharing of
merchandise, distribution networks
• Wal-Mart Korea unable to capture logistically efficient locations
• Most of Korean retailers already located stores in key areas and built a
distribution systems to optimize merchandise mix and operations
EDLP as customer value proposition
• Wal-Mart's EDLP proposition lacked strategic fit to preferences of Koreans
• Koreans are quality conscious and brand loyal. Will not switch to cheaper
brands
• Not compromise on service and quality for lower prices
• Perceived Wal-Mart as cheap market place with warehouse style layout

16. South Korea Failure
Failure to implement IT strategy
• Wal-Mart's IT systems were at the core of its success linking vendor
supply operations to Wal-Mart's distribution network
• Information advantage lets Wal-Mart be the toughest negotiator
• Korean vendors reluctant to have EDI system with Wal-Mart
• As a result, Wal-Mart did not buyer power in Korea as it does in USA
• Complete lack of control over Korea supply chain and procurement
• If IT strategy was successful,
• Wal-Mart could access supplier operational process and the costs, and
negotiate the vendor prices.

17. South Korea Failure
• Wal-Mart completely failed in developing an effective
localization strategy for Korea market
• It did not build a strong alliance with suppliers
facilitating integrated supply chain
• Consequently, it could not obtain ability to control
logistics from sourcing to delivery
• It also failed to understand the Korean customer taste
and preferences

18. Russia Failure
• Decided to enter the market through
acquisition, not green-field development,
• Missed out on a deal to acquire Kopeika, one
of Russia's largest discount grocery chains.
Some other reasons
• Late entry
• Land costs
• Unsure about Store format

19. India ??
• Wal-Mart’s retreat comes amid slowing
growth in India and the failure of officials to
open and modernize the economy to attract
foreign investment
• Authorities investigation: whether Wal-Mart
violated foreign-investment rules by giving
Bharti an interest-free loan of $100 million
that could later be converted into a controlling
stake in the joint venture

20. Some other failures
• Hong Kong:
– entered in 1994
– Left after two years because of failure in
merchandise selection and location
• Indonesia
– Entered in 1996
– Jakarta store was looted and torched in 97-98
riots