1/

Strategy Clock
Bowman’s strategy clock offers effective framework to evaluate and determine the company’s
competitive status by means of using various options. These options are classified into eight
parts namely: low added value, low price, hybrid, differentiation, focused differentiation,
increased price/standard, increased price/low value and low value/standard price.

Wal-Mart offers price 15-20% lower than others with the same products which we can see in
their website. (walmart.com)
According to appendix 1, the company is obviously in stage 2 which is perceived added
values is middle and price is low. What made Wal-Mart set such a low price and earn low
profit margin or even suffer a loss? This is one of their strategies to beat competitors. When
they become a new comer to enter a new market, they will set up a number of stores in
different location like China, they have been opening over 100 stores in different provinces.
For such a well established company, by earning from economy of scale, Wal-Mart could set
the price lower than competitors to earn a great deal of market share which is extremely
significant to a new entrant. After a period of time, most of the small store would suffer from
a loss because they could not compete with a big company. Therefore, it is the reason behind
that Wal-Mart positions itself as a low price status.
http://ivythesis.typepad.com/term_paper_topics/2008/07/ryan-airs-ansof.html

Product-Market Growth Matrix

Market penetration occurs when a company enters a new market with current products.
Wal-Mart expand the business to many countries like Mexico, China, Germany, they are
still producing the same products to all over the world. Despite the style of operating a
supermarket might be varied in various places, the products they are selling are almost the
same.
It is relatively easy for an internationally renowned company to gain competitors' market
share since the products are more guarantee and customers will believe in your brand.
Therefore, they could easily become a giant and pull competitors out of this industry.

The relationship
Wal-Mart is an international brand that expand to different markets with same products, the
significant factor to determine if it will be successful is price. Price might not be the first
priority to make purchase in customers' mind, however, if the new comers set a common price
that competitors does, customers will see no reason to buy the new brand. Therefore, in order
to expand internationally, market penetration and low price status should use together. The
element that could support the low price status of Wal-Mart is cost leadership which the
format has well been established in U.S, therefore, in order to attract loads of customers from
everywhere, Cost-leadership is a key to become leader in retail market.

Cost-leadership
Low cost leadership helps Wal-Mart to attract a large chuck of consumers despite stiff
competition in the industry. Traces of cost leadership are noticeable in the value chain of Wal-
Mart. Wal-Mart saves costs by holding stocks for less than 48 hours in its inventory. Wal-Mart
is known to negotiate with suppliers for the lowest cost of the product without any frills and
marketing expenses which adds to the cost.

1/One of the biggest innovations that Wal-Mart has introduced was in having a flexible
regional warehouse system. Most Wal-Mart stores are within a six hour drive of a Wal-Mart
warehouse. Wrote Camerius (2004), "Wal-Mart built the distribution center first and then
spotted stores around it, pooling advertising and distribution overhead"

2/A second strategy that Wal-Mart has pursued has been everyday low costs for customers.
While many businesses have attempted to make this claim, few have delivered like Wal-Mart.
Rather than have a few loss leaders on sale every week, Wal-Mart attempts to keep all items
in the store cheaper than competitors. This then allows Wal-Mart to avoid costly weekly
advertising in newspapers. Customers know that all Wal-Mart items are always on sale.

3/ A third area that Wal-Mart has used to maintain a cost leadership has been designing stores
based on consumer studies. Looking at consumer research, Wal-Mart has built stores with
wide aisles, warm colored carpeting, and smiley faced store displays. The stores are known
for having friendly greeters. Further, Wal-Mart uses brown papers bags rather than plastic
bags in some instances. All of these store designs have resulted from Wal-Mart heeding
consumer studies.

These competitive cost advantages translate low price to customers, with the back up of cost
leadership strategy, Wal-Mart could be able to use low price strategy to apply all over the
world. As a result, when they expand internationally, customers will associate Wal-mart with
low price which could easily be the selling point as a new comer. If some company only adopt
market penetration strategy to expand internationally foreign customer might not be attracted
by the brand, as what Wal-mart is selling are necessities which is not focus on differentiation,
customer might think there is no difference whether try the new brand or keep consuming in
existing supermarket. However, if it matches with low cost status, it will be much higher
potential for customers to switch their choice to Wal-Mart. The competitive advantages of low
cost induce customers to pay attention on and buy in there. To conclude, this two theories are
perfect match for company which attempt expanding to foreign country.

Camerius, J.W. (2004). Wal-Mart Stores, Inc.: Strategies for dominance in the new
millennium. In C. Hill & G. Jones (Eds.), Strategic management: An integrated approach
(C374-C385). Boston, MA: Houghton Mifflin Company.

Ansoff, I., Strategies for Diversification, Harvard Business Review, Vol. 35 Issue 5, Sep-Oct
1957, pp.113-124
Bowman, C. and Faulkner, D.; Competitive and Corporate Strategy; Irwin; 1996.

http://www.slideshare.net/Mrirfan/wal-mart-strategy-analysis

http://74.6.146.127/search/cache?ei=UTF-8&p=walmart+china+five+forces&meta=rst
%3Dhk&fr=FP-tab-web-t&u=www.plu.edu/%7Emeiklemr/doc/capstone-
paper.doc&w=walmart+%22wal+mart
%22+china+chinese+five+forces&d=C1Fq6rZfVAp4&icp=1&.intl=hk&sig=2KLDfvdu_2GT
kmO9v3_plw--

2/
After the first expansion in Germany, Wal-Mart did not learn from the failure which
still adopted the American style to other countries with different cultures. Wal-Mart
implemented the success formula - low prices, zealous inventory control and a large array of
merchandise — did not transfer the same utilities to Germany and South Korea whereas'
already established their own discount chains and customers with different habits.
(http://74.125.155.132/scholar?q=cache:LujV9KCd2CYJ:scholar.google.com/
+walmart+success+in+china&hl=zh-TW&as_sdt=2000)In addition, due to the inability to
compete with established discounters, like the Aldi chain in Germany and E-Mart in Korea,
Wal-Mart, they are hard to compete with rivals head to head since the low-price strategy is
not as appealing as in U.S. At last, they pull out of Germany and South Korea in 2006 and
started to look for some countries where people are more price sensitive-China.

After the wrong application in Germany and Korea, Wal-Mart tried to match the local culture
and buying behaviour in China. Wal-Mart has found the similar culture of shopkeepers and
bargain hunters in China. Starting with food, which Chinese insist be freshly harvested, or
even killed in front of them. Originally, Wal-Mart was trying to sell them dead fish and meat
packaged in Styrofoam and cellophane. Shoppers turned up their noses at what they saw as
old merchandise. Therefore, with the exception of ice-cream and dumpling that need to be
frozen, almost all foods are fresh. Wal-Mart began displaying the meat uncovered, installed
fish tanks and began selling live tortoises for turtle soup. (http://74.125.155.132/scholar?
q=cache:mw9EvepCJcYJ:scholar.google.com/&hl=zh-TW&as_sdt=2000) All seafood is alive
that customers could have their choices by grabbing the most fast-moving ones which style is
similar to market.
Other from food, Wal-Mart produces various products to match local characteristics. Wal-
Mart not only sells popular Chinese decoration like Black Chicken (Charcoal colored
chicken), mayonnaise and pork dipped bun, but also promoted electronics and space-saving
household devices. Portable closet and folding chairs are significant to suit the urban Chinese
home which reach the maximum of 750 square feet.
(www3.babson.edu/centers/retail_intelligence/upload/wal_mart_china.pdf)

Wal-Mart is growing up with China's middle class, which is expected attain 200 million by
2015. When it expanded the first Chinese store in 1996, Wal-Mart didn't offer
any unnecessary luxury like cosmetic product. Today, Wal-Mart's stores have added cosmetics
counters inside the front door, a line with giant posters of attractive Asian women with
extreme makeovers. This produces a great opportunity for Wal-Mart to expand their product
line by attracting the growing middle class to buy non-necessities since they will have much
more spare money comparing with before.

The major reason to determine the success or failure depends heavily on the expanding
strategy. Wal-Mart adopted Globalization strategy to set up business in Germany and Korea
which neglecting the unique local culture. Although global standardization is much more cost
effective, Wal-Mart is fail to meet the local needs. The internationally renowned selling point
of Wal-Mart is providing low price product with fair quality. However, there have established
lot of stores which totally understand the local culture and buying behaviour in Germany and
Korea, where the big retailer has lost $1 billion.
In contrast, Wal-Mart changed its strategies from globalization to localization for expanding
in China, they do waves of research in order to deeply understand the Chinese culture, as a
result, consumers are pushing retail sales to a 15 percent annual growth rate and market will
hit $860 billion by 2009. For example, they put all the living seafood in front of Chinese in
supermarket and let them choose the best one, also they display the meat uncovered to
let Chinese totally understand the whole process of handling the foods. They offer a
good match to tastes and preferences in China.
They do have learn from the past and improve the strategy. And now, after a decade of
ingratiating itself to Chinese consumers by adopting their customs and culture, Wal-Mart is
making its move from a minor player with just 3.1 percent of the market to a dominant force.
Therefore, they should learn how to improve the flexibility of the strategy and match different
characteristics of different countries.

3/
A/ keen competition

Tense competition must undoubtedly be the one of the main challenges for Wal-Mart. The
well established local and foreign companies understand the local culture deeply as well as
provide what locals actually need based on the buying behavior. As a new foreign company,
in order to occupy high market share may become a hard task for Wal-Mart. To cite some
examples, Argentina's

Carrefour, Holland's Royal Ahold and Germany's Makro, etc. Each of these

European companies entered foreign markets long before Wal-Mart did. Argentina, Japan and
Korea case will be used to further elaborate how keen competition will influence Wal-Mart
severely.

Argentina
The biggest competitor in Argentina is French Carrefour. By the time Wal-Mart have only
four stores, two Super centers, and two Sam’s Club in Buenos Aires region which is the
largest region that subsequently has the largest number of potential buyers, Carrefour had
operated for about 15 years and had 14 stores in Buenos Aires. Furthermore, Carrefour had
already built stable relationships with suppliers and even tried to persuade the latter to refuse
working with Wal-Mart.
Wal-Mart offered low prices and waves of discounts to Argentinean consumers as usual
approach they used in U,S. However, "Carrefour reacted immediately by opening new stores
and rejecting Wal-Mart’s discounts and advertising campaign."
http://www.articlesbase.com/college-and-university-articles/walmart-argentina-116672.html It
was a tough time for Wal-Mart.

Korea
Korea is fairly mature market and there was a local company called Emart, which is the
market leader. Emart warned Wal-Mart that this is a very local industry and it doesn’t matter
that you are the biggest retailer in the world – we are the biggest retailer in Korea. Wal-Mart
made an acquisition offer to Emart which Emart rejected. Wal-Mart entered as a small player
and could never become big. Seven years later they sold their stores to Emart and got out.
http://business.in.com/article/magazine-extra/walmarts-strategy-through-the-world/6042/1

B/ Cultural difference
Wal-Mart ignored the cultural differences between the U.S. market and others.

Argentina
"Argentinean consumers spend one close to one third of their incomes on food items. Wal-
Mart at the start in Argentina controlled 2.5% of food market comparing to 16.5% of not-food
products." (http://www.articlesbase.com/college-and-university-articles/walmart-argentina-
116672.html)
It shows lack of flexibility and knowledge of Wal-Mart because the statistics shown it is rare
that consumers just went out shopping for food will also buy the non-food products. Most of
the local and foreign company changed the format from hypermarkets to smaller stores that
would suite strange cultural desires of the native population. However, Wal-Mart did nothing
to match.

As a result, Wal-Mart is just expected to capture 3% of the Argentine retail market by 2008
with estimated sales of $3.1 billion . In 2007, according to a Citigroup report, Wal-Mart’s
market share of organized retail was 4% and the combined market share of the two biggest
players was 22%.
Some advise the company to pull out from Argentina and some other countries but just focus
on the most successful place - United States.

Japan
Shoppers generally believe Wal-Mart offer 15%-20% discount less than others shop but with
the same products. However, "Japanese customers are not price sensitive as U.S customers. In
Japan, shoppers associate low prices with low quality and doubt if jeans can sell for $10. "In
the Japanese consumer mind, they're seen as selling cheap stuff at cheap prices -- and that can
be a problem," says David Marra, a principal at management consultancy A.T. Kearney Inc. in
Tokyo. On the other hand, Japanese likes sashimi as we all know, they like to have fresh
produce. However, due to the Wal-Mart format did not regard it as a must in U.S, the globe
standardization did not match the Japan style. ()
Most of European retailers that operate in foreign countries long time ago started to change
the format to suit different needs and culture. Wal-Mart did not bother doing that. It is
extremely difficult to compete that way. Wal-Mart should have taken seriously cultural
differences prior to entering foreign market.

Wal-Mart might encounter dilemma that strategy should be more localize or globalize. Excess
localization will lead to ballooning costs while excess standardization can bring stagnation.
Striking balance means understanding and consideration of which business part should be
tailor-made for specific country, how costly customization would be, and how much of an
impact they will have. For example, it may cost a lot when Wal-Mart do research non-
stopping years by years on the buying behavior of foreign customers, hire several local
employees for understanding local culture easier and faster, mass production may not be as
effective as Wal-Mart doing in U.S. Globalization makes everything standardize and united,
Wal-Mart thus could enjoy the economy of scale, however, it will be much harder for them to
lower costs when products, distribution system, suppliers, etc. are not the same.

Nevertheless, since the huge costs of localization come from research cost which regarded as
fixed cost. Being the giant retailer in most countries, the fixed cost will graduate be lower if
Wal-Mart still keep on the track and earning over billions profit a year. Since what Wal-Mart
is selling are necessities and they are cheaper than others in the retail market, plus inflation
can not be avoided, customers will still be loyal. Therefore, this could recognize as a long-
term investment

4/Balanced scorecard
a/ Financial perspective

5/ Strategy evolution

Globalization is a process which entails the free movement of capital, goods, services and
labour around the world. Initially, due to the reason Wal-Mart see how successful they operate
business in U.S, they decided to adopt the current method to apply all over the
world. Undoubtedly, Global standardization could reduce the cost as economy of scale can be
attained. The key selling point of Wal-Mart is providing cheaper product with acceptable
quality, for example, the company offer 15-20% discount while other company keep the
original price. Therefore, in order to stabilize and strengthen this advantage, mass production
is the key element to determine if they could keep offering lower price to public.
Globalization seeks rising the profitability and cost reduction, it seems feasible for such a
huge company to adopt this strategy, however, each place does have the unique culture and
customers are not ideally the same. Therefore, Wal-Mart started to put more efforts and
resources on research and development and marketing activities in order to fit in different
places. Mexico and Germany case will be used as an example for interpretation.

Global standardization strategy

a/ Mexico
Mexico is the first internationally expansion for Wal-Mart in 1991. In the very beginning,
Wal-Mart attempted to use the U.S style method to Mexico. Unfortunately, The distribution
system was being replicated due to the unexpected differences and poor condition of Mexico.
(http://books.google.com.hk/books?
id=Sy8vejqbcocC&pg=PA140&lpg=PA140&dq=poor+infrastruture,+crowded+roads,
+and+a+lack+of+leverage+with+local+suppliers&source=bl&ots=lHI2337kSV&sig=5bteOp
FrzMZkQQJg48yHS307ocM&hl=zh-
TW&ei=80ArTJy4AsuecY3B7ZgD&sa=X&oi=book_result&ct=result&resnum=1&ved=0C
BgQ6AEwAA#v=onepage&q&f=false)Such as the poor infrastructures, crowded roads, and a
lack of leverage with local suppliers caused the delivery of product could not be distributed to
Wal-Mart stores. As a result, the costs increased and products could not be sold at a lower
price as usual.
From the prospective of culture differences, the buying behavior is different from American.
Most of the Mexicans like to buy fresh foods like fish, meat, tortillas and a small volume each
time since they usually do not own a large refrigerators and car which are huge differences
that Wal-Mart did not realized.

B/Germany
Wal-Mart adopted American approach in Germany operation which they only focus efforts on
the growth and return on investment strategies. After the success in U.S, the company
attempted to apply the old formula all over the world. Wal-Mart's American managers
pressured German executives to enforce American-style management practices in the
workplace. "Employees were forbidden, for instance, from dating colleagues in positions of
influence. Workers were also told not to flirt with one another." (http://www.dw-
world.de/dw/article/0,,2112746,00.html)

When it comes to American, we must think of friendly and nice. Also, Wal-Mart as a U.S
company requiring sales clerks to smile at customers which represents politeness and willing
to serve every time. Ironically, this practice made some male shoppers seen as flirting and
scrapped the morning Wal-Mart chant by staff members. At last, the Wal-Mart retreat from
Germany is expected to cost it about $794 million euros.
(http://www.corpwatch.org/article.php?id=13969)

It is not feasible to force a business model onto another country's market just because it works
well in your own country. The solution is match with the local taste and adopts the changes
that found out from the research on the cultures even it is ridiculous to your own view.

Transnational strategy
This strategy faces both strong cost pressures and great pressure from local responsiveness.
Under this strategy, the company has to concern more about the local needs and response
other than globalization, cost control is needed to take care of simultaneously.
After several fail expansions in foreign countries, Wal-Mart leant from those mistakes and
take action on putting more recourse in researching in order to understand the local culture.

China
As mentioned before, Wal-Mart expanded into China with more responsive in concerning the
different culture from U.S.
For example, Wal-mart decorated their store to be more “market” in China. Keeping the foods
fresh and displaying in front of customers. Furthermore, due to the increasing number of
middle class, they open new cosmetics counter which recognize as not necessity in Wal-Mart
to meet the demand in China.

Fortunately, Wal-Mart is not stubborn that never change the U.S format. Wal-Mart currently
has made customization the “Store of the Community” strategy, which tailors formats and
products to the local customers. "Through the use of the Retail Link software program, Wal-
Mart can now work with its suppliers to tailor store merchandise with precision, create maps
of local customer demand, and track the two year history of every item’s daily sales in every
Wal-Mart store."(walmart.com)
Although the profit might be getting lower since Wal-Mart could not enjoy as much as
economy of scale when comparing with the globe standardization strategy, the
successful international expansion could bring a lot other than profit to Wal-Mart.

6/ Expanding internationally offers numerous advantages to Wal-Mart.

a/ Economy of scale (Create entry barriers for new comer)
Being a dominant company in retailing, the size of company provides it with efficiencies
which uses to lower costs. For example, “its size allows Wal-Mart to do its own purchasing
more efficiently since it has roughly 5,000 large stores worldwide.”
(http://news.morningstar.com/classroom2/printlesson.asp?docId=144752&CN=COM)This
gives the company powerful bargaining power with its suppliers. Not only does it get its
products cheaper, but its size allows it more inexpensive distribution. “The company
developed the ability to distribute its merchandise from a vast network of distribution centers
served by a private truck fleet.” (walmart.com). This enabled them to restrict inventory at the
same time keeping opening stores.

Declining unit costs discourage firms from entering the market since new comers must do so
at a large scale. Wal-Mart's scale requires any competing firms to have plenty of capital as
they will face plenty of sunk costs. The company's large advertising campaigns put pressure
on competing firms to try and match those expenditures in order to appear competitive. This
make the entry barriers become larger, avoiding the number of rivals which will share out the
profit. Though economies of scale provide a distinct competitive advantage, competing firms
will seek to become larger to try and minimize the role of economies of scale. This is why
Wal-Mart has to continually innovate and seek out new competitive advantages.
(http://www.helium.com/items/888341-how-wal-mart-really-works)

Furthermore, since they have waves of branches in different countries if they expand
internationally, the acquisition of information concerning the preferences of customers in U.S,
like what they buy the most and the least enables the company spread its best practices across
other branches as references.

“Wal-Mart installed a new barrier to entry when the firm developed its electronic data
interchange system that improved communication with suppliers and distribution centers and
improved inventory control.” (Walmart.com). Advanced distribution channels are efficient for
lowering price, thus it could set technological barrier for firms that want to step in this
industry.

b/ Bank Loan
Since the reputation of the company will be increased if they expand internationally, also, the
amount for such a big chain store
c/ share ideas

d/ Risk diversification