WALMART IN CHINA

Walmart In China



Executive Summary

China, a country with population of 1.3 billion people and is currently experiencing rapid growth in economy since it open itself to the world for investment. In the year of 1994, Wal-Mart made its first move to China by selecting CITIC (China International Trust and Investment Corporation) group as local partner for the investment. Opening its first store in Shen-Zen in the year of 1996 and since then has grown to 81 stores in 20 more cities around china. In China, Wal-Mart is using adaptation strategy where it locally sourced its product although the organizational culture is standardized with the home country. Adaptation strategy does not apply only to the product wise, in term of the store formats are also adapted to the local cultures where racks height, and stores layout are also changed to meet local taste.

From the macro-environment view of the china retailing industry, Wal-Mart will face threats on the political side where the government is not transparent enough in the policy making. Moreover, it is currently anticipating the economic big turnover by tightening the regulations on the land although China is still encouraging foreign investment. In China, Wal-Mart will face strong competition from its arch-rivals Carrefour and other strong local competitor such as Lian-Hua supermarkets and China Resources Enterprise of which both are the pioneers in the China retailing industry. The current position of Wal-Mart in China is still far away to be as the same level with them as Wal-Mart is unable to apply its superiority in logistics that win the competition in USA.

Although it is a vast market, not all the populations have great spending power. It is a country of haven and have not, where the income disparity become a large issue. The middle income class only represents 25-30 millions people and mostly remain in the urban area. China is a very fragmented market and rich in cultures background which may trap companies to generalize them. Despite of it, China is certainly a very attractive market to invest in as the indicators in economic has been shining for the last twenty years.

Walmart in China

Company Background

History

Sam Warton, the founder of today's retailer monster started the business in the year of 1962 in Bentonville, Arkansas. The first store is called “Warton's Five and Dimes” (Belsie, 2002). Currently, the number of stores has grown to 6796 stores, covering 15 countries around the world, beside United States there are Wal-Mart in Canada, Argentina, Puerto-Rico, Mexico, Guatemala, Brazil, Honduras, El-Salvador, Nicaragua, Costa-Rica, United Kingdom, Japan, and China (Peebles, 2002, 88).

Wal-Mart expansion campaign in China begins in the year of 1994, where it sent a team to evaluate the prospect of investment in that country. The first store only started to operate in the year of 1996 in Shenzhen (ICFAI, 2005). The last count made in 4th April 2007 showed that the number of the stores in China has grown to 81 stores; 76 supercenters, 3 SAMs club and 2 neighborhood markets (Modigliani, ...