4. Core Competences as Competitive Advantages Low prices from suppliers, low agency costs, low overhead costs due to employee compensation model, low production costs Strong brand awareness, proven EDLP strategy, awareness of customer value proposition Strong buyer influence, efficient distribution due to warehouse location 4
5. Maximizing Strategic Capabilities for Sustainable Competitive Advantage 5 Incorporate domestic (Chinese) suppliers and produces , adjust to foreign regulatory framework such that supply chain can work around poor foreign IT networks China, like many other countries has a strong union presence and or mandatory unions. Adaptive planning is necessary to address this issue Must familiarize itself with cultural labor practices, close communication gaps, integrate foreign (Chinese) managers into HR strategy, create transparency in employment model Engage in intensive research of the foreign consumer as well as society and culture, understand the socioeconomic framework for consumers
7. Customer Country Features 7 Dothe socioeconomic and regulatory frameworks of Wal-Mart’s customer countries provide the corporation with a competitive advantage? What will Wal-Mart need to do in order to improve on to sustain or augment these global competitive advantages?
13. Vertically integrate domestic (Japanese) producers into the supply chain to appease the desire for domestically-produced goods.
14.
15. Key Challenges in Fulfilling Strategy In China 13 Inability to comprehend consumer preference or behavior, purchasing patterns, societal makeup No IT infrastructure in China which results in poor communication in supply chain Tolls on foreign transportation of products, regulations in place to prevent expansion High level of competition, differentiation almost irrelevant, easily substitutable products, EDLP is nullified since elasticity of demand is approx. 0
16. Discontinuities in International Strategy 14 Does not effectively address costs associated with protectionism or value chain effects, poor economic evaluation of foreign markets Void of strategy to address density issues in foreign market, no dynamic research on expansion vs. land use policies and laws Strategy not easily adaptable to foreign markets, doesn’t grasp cultural/societal differences, does not account for socioeconomic contingencies No foreign managers in HR approach, poorly formulated and non-transparent HR strategy, pursuing labor practices that are not applicable to foreign society
17. Conclusion: Achieving Sustainability Wal-Mart does a poor job of adjusting for foreign consumer practices in its international strategy Globally, Wal-Mart is losing a grip on its competitive upper hand Leveraging EDLP is no longer enough to SUSTAIN its competitive advantage There is a necessity for adaptive planning/contingency planning – this is critical to the vitality of the international strategy The implementation of a more transparent global HR strategy and employment model that account for cultural/communication gaps Wal-Mart must understand how EDLP is translated across multiple landscapes and adapt strategic marketing practices such that the desires of consumers (value vs. quality vs. price) are communicated accurately. 15
18. References An, F. (2009) “China Business Strategy: Wal-Mart and Chinese Culture”. Fili’s World, A Different Look at Chinese Culture. Retrieved August 7, 2010, http://www.filination.com/blog/2009/03/14/china-business-strategy-walmart-chinese-culture/ Bhatnagar, P. (2006) “Wal-Mart’s Challenge in China”. Retrieved August 1, 2010, http://money.cnn.com/2006/01/12 Farhoomand, A. (2005) “Wal-Mart Stores: ‘Every Day Low Prices in China’. Asian Case Research Center, 1-27 Huang, K. and Gale, F.(2008) “Demand for Food Quality and Quantity in China”. Retrieved August 1, 2010 http://www.us.usda.gov/publications Rigby, D. K. and Haas, D. (2004) “Outsmarting Wal-Mart”. Harvard Business Review, December 2004 Winston, A. (2008) “Wal-Mart’s new Sustainability Mandate in China”. Business Week, October 28, 2008 16
Editor's Notes
Understanding the global customer is essential to sustaining competitive advantage because socioeconomic factors in other countries will create a high level of variability in consumer preferences— impacting the corporate, marketing, and operational strategies both positively and negatively. Thus, it is not only important to identify and sustain competitive advantages, but to find areas to improve on in order to augment these strategic capabilities.
Great Britain presents Wal-mart with a great market to explore its strategic capabilities and enhance its core competences. The presence of flexible labor regulations, coupled with low cost of employment and termination, will help reduce operating costs and allow the corporation to continue to achieve cost-efficiencies and reduction its operating overhead. Furthermore, consumers here are willing to pay a premium for quality which has strong implications for Wal-Mart’s revenue margins if they can redefine its marketing strategy to fit customer preferences. Another competitive advantage that Wal-Mart could capitalize on is the preference for consumer in Great Britain to shop via mobile and internet channels. It is found that they prefer such shopping methods 25% of the time (Wal-Mart Research Team, 2009).
Wal-Mart’s EDLP strategy should create a strong competitive advantage in Canada since the customers are cost-conscious consumers that desire shopping at lower-priced retailers and they enjoy saving money (Flavelle, 2010). Even more importantly, demand is relatively elastic and the consumers will respond to the “roll back” advertising that the company engages in. Still, Wal-Mart must keep the integrity of its marketing as substitution is highly elastic and consumers can easily become customers of competitors. Even more impactful is that 29% of Canadian employees carry union cards (Flavelle, 2010). Thus, to remain a strong presence, Wal-Mart will need to make sure that it prevents expansion in areas dense with union members and employees.
Mexico is a country where Wal-Mart probably experiences its highest level of competitive advantage. There is no real threat of substitution and members of society are very trusting of promotions and advertising promises (Feuer, 2010). Since Wal-Mart has done a good job delivering on its customer value proposition, they can continue aggressive competitive tactics because there is rapport built up between the corporation and its consumers. Furthermore, substitution is very inelastic, which should make it easier for the company to expand throughout the country. Another competitive advantage that Wal-Mart can experience is changing marketing to appease to people under the age of 30— as this number accounts for 65% of the population (Feuer, 2010).
Japan presents Wal-Mart with more of a challenge as its consumers are very frugal. These consumers are willing to pay a premium for quality which is implicative of the company’s need to stray away from EDLP marketing and start with more quality-oriented advertising. In terms of management, if Wal-Mart can incorporate more Japanese mangers into the current employee structure, then it will quell some cultural and communication issues that derive from having American managers run a corporation all Japanese employees (Wal-Mart Research Team, 2007). The Japanese consumers also have a dislike for cheaply made, foreign-manufactured goods (Wal-Mart Research Team, 2007). Thus, Wal-Mart would benefit from vertically integrating Japanese producers (domestic) into the supply chain to appease the customer desires. Lastly, land use policies are stringent against big-box sprawl. There will need to be some contingency planning involved if expansion endeavors are thwarted by such policies.
