#15 Wal-Mart’s Latest Failure?
Chinese media has recently reported that Wal-Mart may add yet another country to it’s growing list of international failures. In 2008 Wal-Mart has 208 stores throughout China. Within the past 12 years of trying, Wal-Mart has not only failed to become profitable, but it even had to accept a loss in market share. According to data from the Chinese Department of Trade, it has dropped from rank 17 in 2004/2005 to rank 30 this year. Before the background of previous failures, e. g. the one in Germany, it’s time to think about the reasons for Wal-Mart’s repeated problems in foreign markets. Could it be that their business model doesn’t fly in other countries? Is Wal-Mart entering the wrong markets?
January 6, 2009 @ 12:35 am
I know that Wal-Mart usually builds it`s stores on the outskirts of a town. And I think in big towns, people might not like driving to the other side of a town for shopping, especially since gas prices went up! Wal-Mart should thing about the situation if you only would like to by some milk or bread. In this case, more smaller convenience stores are better than few megastores.
I also think that the main reason for Wal-Mart losses was its failure to understand the culture and the shopping habits in China. However, although it may be accurate that Wal-Mart failed in terms of understanding the market. It could be also possible that Wal-Mart has problems of applying the corporate culture to the culture in China.
For this reason I think that the business model of Wal-Mart can`t run very well in any markets with it´s only one stupid strategy – a us-strategy without regional aspects.
January 13, 2009 @ 8:39 pm
I personally do not think that Wal-Mart is entering the “wrong” markets. But in my opinion they are entering different markets with the “wrong” strategy, motivation and operations. Entering China requires more than adapting the formula of cheap, steep and deep. First of all, Wal Mart is obviously not interested to find out more about foreign markets (for example through market research activities). Although it is very easy to adapt the same strategy into different markets – it does not give you the “ticket” to success.
There are a lot of environmental factors you have to consider in different countries (culture, regulations, consumers needs, wants and conceptions of products, brands and promotion…). For example like Deepak Advani, the chief marketing officer of Lenovo Group (the 3rd largest personal-computer maker) said: “With global strategies, global products and global go-to-market, it becomes very difficult – you need to develop products that appeal to them, speak to them with relevant messages and channels that are more accessible to them!”
If you ignore these factors it is very hard to be really successful. Concerning operations – it would be suggested to have local managers. But it is then also necessary to take their suggestions, opinions and decisions seriously. Local managers know the market, competitors, suppliers and customers. In general it can be said that although if adapting the same business model is time and cost efficient – it does not bring you the desired success on the long term. “Global as possible but local as needed”
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December 29, 2011 @ 12:12 pm
I agree with the other comments that Wal-Mart is not entering the wrong markets their problem is the “wrong strategy”. Out of the reason that countries like Germany and China a very attractive markets a big company like Wal-Mart can not ignore them. However, they have to find out in detail who are their potential customers and how is the situation and the buying behaviour in that country. I can imagine that they have access to a lot of information of the new markets. They just have to use it in the right way and create a sensitivity for the different cultures.
Wal-Mart is following a very low uncertainty avoidance. They are trying something new, they want to enter complete different markets and they are taking a huge risk. But I think in the markets like Germany and China their potential customers do not think in that way.
Wal-Mart tries to implement the American style of buying with the huge Wal-Mart stores. However, the customers in different countries do not want to change their buying habits in that way. They are overstrained with this concept! Wal-Mart has to act localy and has to adapted its strategy in each market.
October 1, 2018 @ 5:57 am
Wal-Mart’s problem was not with the market selection but with the strategy they used to enter into the market. Before entering into a global market, addressing the environmental factors of a country regarding culture, government and policies, price competition, product selection, and consumption habits are essential for a company to be successful internationally. Since each global market is different; companies need to change their business models and focus on a business plan that will help them achieve success globally. After evaluating the needs and wants of the consumers in a target market, if a company is unwilling or unable to adapt to change then, they should not enter into that targeted market.
Wal-Mart needs to understand that the American way of doing things will not always work, because people and cultures are different around the world. Wal-Mart needs to step back from the buying model in America and focus on the buying models of competitors in that specific country they want to enter. Putting their focus on changing products, the entry strategy, locations of stores, prices of products, and store model is the only way Wal-Mart will be to compete in the global market. Wal-Mart has to be the one willing to change because consumers have too many choices they do not need to change their behaviors.
April 21, 2019 @ 7:54 am
The largest retailer Walmart is struggling in its international markets. It has done well in Mexico, it has not done well in the second largest market of the world, China. Walmart had had problems understanding Chinese consumers as their buying decisions aren’t always price driven. They are more inclined towards tailor-made products and a shopping environment that reflects local preferences.
Some of the failures it has had has been culturally driven. It has had problems in understanding discerning Chinese consumers as their buying decisions aren’t always price driven. They are more inclined towards tailor-made products and a shopping environment that reflects local preferences. Walmart has also suffered from difficult relationships with politicians. The company has also had its fair share of run-ins with the law.
Its greatest challenge is China’s economic infrastructure that is problematic and under developed. This was rooted by Walmart sophisticated supply chain strategy. The efficient transport of goods from one region to another is a challenge because of China’s sheer physical size, and because its air, ground, and rail infrastructure does not meet developed country standard .
March 4, 2022 @ 10:36 am
There is obviously something fundamentally gnarly about taking a grocery business internationally. From my studies in Scotland, I remember the case of Tesco, the biggest UK grocery chain. They wanted to take their business to the US and despite doing their research like living with typical US families. Unfortunately, for them, they ignored most of those findings on how grocery shopping is done in the US and relied on their UK concept.
Reading up on Walmart and Tesco it was immediately noticeable that they in parts did not focus on the respective culture. US and UK citizens do speak the same language and also match on other consumer traits. However, US customers tend to buy in large bulks and that is where the Walmart experience comes in and succeeds. UK consumers on the other hand are used to having small corner stores, thus buying smaller package sizes, thus consumers in both countries have different grocery shopping expectations and habits. Tesco knew about that but still stuck to their small store ‘Fresh & Easy’ concept, which is not a perfect fit for the US market.
My final thought is on the consumer itself. I was wondering whether consumers are braver when it comes to fashion as they wish to differentiate from one another. Why else did Banana Republic, Urban Outfitters really well expanding abroad? I argue that consumers do not seek that differentiation from others but go safe and mainstream with their grocer, meaning they trust in those brands that are local, established and known for years.