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A Comparative Study of Strategies Adopte PDF
A Comparative Study of Strategies Adopte PDF
By
Yue, LIU
September 2007
Acknowledgements
like to thank the professors and lectures from whom I learned a lot throughout my
Business School that provided this value chance for my postgraduate studies as well
I wish to acknowledge all those who helped me with the information and data, and
those who showed their support and care during this period. Last, but by no means
This research aims to provide an overview of links between a firm’s strategies and the
China are compared and analyzed. This research adopted documentary research
method, particularly firms’ historical documentary review and analysis, for this
In China’s retail market, the competition is intensive and market conditions are
evolving. To capture greater market share in this market, Wal-Mart and Carrefour
adapted their strategies to cater local customers as well as economic and political
conditions. Although Wal-Mart and Carrefour in the same market environment, there
are still differences between the strategies adopted by each giant retailer. Therefore, it
is probably safe to argue that the differences between strategies adopted by the two
retailers, to certain extent, are due to their distinct firm-specific resources and
capabilities.
Contents
Page No.
1.1 Background
China has been developing rapidly in the last two decades, especially after
(WTO). Coupled with the trend of business globalization, many multinational firms
The development of Chinese retail market started since the 1980s when China started
the profound revolution in the retail industry since 1990s. In 1992, foreign capital was
allowed to enter Chinese retail sector. Although there were still strict regulations in
place to restrict the operation of foreign retailers at that time, the implementation
of these regulations was rather flexible and local authorities bypassed many of these
restrictions to support these foreign retailers (Levy, 1996). A large number of famous
appeared in China. Wal-Mart and Carrefour are the world number one and two
retailers in terms of turnover and employment (Colla and Dupuis, 2002), and they
entered into China in 1996 and in 1995, respectively. Wal-Mart has so far opened 68
shares. It is reported that Wal-Mart ranked as the largest retailer in the world, and
performs as the market leader compared with Wal-Mart in terms market share
(euromonitor.com). What interested most is that although both Wal-Mart and Carrefour
are in the same industry and the same Chinese retail market, their entry and expansion
strategies are quite different. It is possible that the different performances of the
foreign retailers can be partly explained by their different entry and expansion
strategies.
Wal-Mart and Carrefour pursue different strategies when entering and operating in
China. This is possibly because both Wal-Mart and Carrefour have their own
distinctive resources and capabilities which enable them to follow distinctive sets of
strategies even when they are in the same environmental setting—Chinese retail
market.
However, it may not be reasonable to say which particular strategy is better than the
other, because the strategies adopted are related and interact with the firm-specific
resources, and with the specific market conditions. The resource-based theory views
firms are heterogeneous and possess heterogeneity resources. According to Wernerfelt
emphasizes firm heterogeneity and path dependency, as each firm’s resource bundle is
unique, and the consequence of its past managerial decisions and subsequent
could it explain why different firms adopted different strategies even in the same
environmental context.
There have been many studies on strategies of Wal-Mart and Carrefour (Colla and
Dupuis, 2002), and development of supermarkets in China (Lo et al, 2001). This study,
however, applies the resource-based theory to compare the two giants’ strategies in
China. Thus, the first research question is that how the strategies of Wal-Mart and
Carrefour are different from each other; and the second research question is that why
(2). To analyze the strategies of Wal-Mart and how these strategies interact with
(3). To analyze the strategies of Carrefour and how these strategies interact with
(4). To implement a comparative study of the strategies of the two retailing giants.
(5). To make recommendations of strategies for the two retailers in the context of
Chinese entry into the WTO and further opening of the retail sector.
The possible differences of strategies of the two retailers are mainly analyzed in terms
local adaptation strategies, human resource management and social relationship. The
final objective is to link the resource-based view to these resources and present how
Therefore, the overall aim of this research is, by using the resource-based theory as
the basic principle and using the two cases—Wal-Mart and Carrefour, to provide an
overview of the relationship between the firm strategies and its possessed resources
and capabilities.
strategies reviewed in this chapter include the entering strategies, operating and
theory is reviewed and also linked with the previous part in Chapter2, providing an
analysis of why a firm prefers one strategy to another. The third chapter introduces the
methodology of doing this research. It includes the analysis of why the case study
research approach and documentary method are selected, why Wal-Mart and
Carrefour are chosen as the cases to study, and how the information and data
collected.
products, supplier power, and buyer power. It will not only identify the factors
competitive relationships, but also identify the opportunities and threats in this
Chapter 5 provides the studies of the strategies adopted by the two retailing
local adaptation strategies, and human resource management and public relations.
Chapter 6 compares and contrasts the similarities and differences between strategies
adopted by Wal-Mart and Carrefour in terms of the above six aspects. Then is the
analysis of the comparisons using the resource-based theory and explanations why
Finally, Chapter 7 includes the findings and conclusions of this research, and
recommendations will be provided to both Wal-Mart and Carrefour for their future
development. This chapter also contains a brief analysis of the limitations of this
research.
Chapter 2 Literature Reviews
Each country has different economic, political and legal systems. When a firm has
made decision to enter a particular market, these different systems determine the
opportunity costs of how to enter and develop in that country. This chapter reviews
the entry, expansion and development strategies available for foreign investors.
When firms have decided to enter a foreign market, how to enter becomes another
important issue. Generally, at this stage, companies need to consider the timing, scale,
Ghemawat (1991) argue that when thinking of the entry timing and entry scale, firm
should consider market uncertainty and the potential irreversibility of investment. Any
costs and commitment. Indeed, no matter whether large scale entry or small scale
entry, and no matter early or late entry, there must advantages and disadvantages of
each option.
Timing of Entry. Usually, it is an early entry when an international business enters a
foreign market before other competitors, and a late entry when after them. Liberman
and Montgomery (1988) suggest that there are first-mover advantages if a firm
pursues an early entry. The idea of first-mover advantage is that “the initial occupant
follower cannot match” (Grant, 2005, p236). According to Hill (2004), there are
several first-mover advantages for an international business. The first is that the first
mover could preempt rivals and capture demand by establishing strong brand
reputation with suppliers and customers. The second advantage is concerned with cost
advantages, which refers that, by enter the market earlier, the firm could produce at
lower cost by moving down the learning curve faster through building a larger
producing volume than competitors. A third advantage is that early entrants could
create switching costs so that customers are unlikely to switch to the products or
(Shaver, Witchell and Yeung, 1997). The most common one is known as pioneering
costs, which are costs that early entrants bear and later entrants could avoid (Hill,
2004). There are many causes of such pioneering costs as argued by Hill (2004). They
may arise in the form of time and effort spent on learning the rule of business systems
in a foreign country. Mistakes that are made as a result of that the early entrant fails to
understand the country he enters also brings pioneering costs. Pioneering costs also
would put the early entrant at a server disadvantageous position. In the conditions
mentioned above, the followers could learn from the early entrants’ experiences, avoid
the mistakes and costs, and ride on their investments. Shave, Mitchell and Yeung
(1997) have found that if international business could enter a foreign market after
Scale of Entry. When an international business enters a foreign market, the size of
entry is another important issue. Hill (2004) argues that large scale entry requires
commitment of significant resources and implies rapid entry. The resulted strategic
firm and difficult to reverse (Ghemawat, 1991). Ghemawat (1991) continues to argue
that such strategic commitment in the form of large-scale entry will influence the
the long run and deterring entry of potential competitors, but also in terms of
restricting its own resources to further expansion. Indeed, on one hand, the large entry
size is a signal to customer and distributors that this foreign firm make significant
strategic commitment to its investment and thus gains customers and distributors trust
and loyalty, and makes the potential entrants to reconsider their entry decision; on the
other hand, as the firm have made significant commitment to its investment, most its
resources are inevitably been sunk into this foreign market, which may limit the
further expansion into new market in another industry or country. Therefore, a firm
should balance the risks and benefits of significant strategic commitment.
Nevertheless, a small entry scale also brings benefits as well as risks to a firm when
entering a foreign market (Hill, 2004). A small size with little strategic commitment
would allow the firm to learn about the foreign market with limited risk. By achieving
this, the firm could first collect information of the foreign market and then deciding
whether to expand, maintain or quit. However, this small scale entry may have
switching costs.
A firm’s entry mode is how to enter the foreign market, and how to make its goods or
services available to foreign customers (Bishop, 2006). Generally, there are six
licensing, franchising, joint ventures, wholly owned subsidiary (Hill, 2004). Each
entry mode has its distinct characteristics (see, e.g., Hill, 2004; Hill, et al, 1990; Hill
and Kim, 1988; Anderson and Gatignon, 1986; Madhok, 1997; Brouthers and
international firm may use more than one entry modes simultaneously (Bishop, 2006).
According to Wei et al (2005) there are many factors affecting the entry modes, such
Host country factors are important in affecting the entry mode choice. Khanna and
Palepu (1997) argue that in some countries, there are extensive government
contract law. These would inevitably create significant risks for foreign investors and
make business operations less efficient (Isobe et al, 2000). According to Tse et al
(1997), nonequity-based entry modes, such as joint ventures, would like to be adopted
Cespedes (1988) argues that the resource availability and control determine the entry
mode choice for foreign investors. As any business decision is made based on
trade-offs between expected benefits and risks, when firms have made significant
investments into a foreign market, they should choose an entry mode with a high
degree of control such as wholly owned enterprises rather than one with high risks
and shared investment commitment such as joint ventures. Therefore, Larimo (1993)
and Hennart and Larimo (1998) argue that the larger the resource commitment to a
foreign market, the less likely that a firm will share the equity in a foreign market.
Hennart and Larimo (1998) argue that national culture is also widely believed to
modes will reflect characteristics of the home countries (Shetty, 1979). As what
Taylor et al. (2000) have found, although resource commitment is widely considered
true, Japanese multinational firms are more likely to adopt an entry mode with a lower
control even when resource commitment is high. Erramilli (1996) concludes that
firms from countries that are characterized as high power distance and low uncertainty
avoidance may prefer an entry mode with full ownership control in a foreign market.
The entry strategies are very important for a firm when they have decided to enter a
foreign market. The entry strategies include the timing, scale and modes of entry. It is
obvious that an early entry may gain several advantages, but they must be balanced
against the pioneering costs and risks. Large scale entry into a foreign market implies
great strategic commitment that limit the flexibility of the firm, while potential huge
benefits are also associated with such a strategy. Concerned with the entry modes,
there are six modes for a firm to enter a foreign market, and each of them has its own
important factors that affecting the choice of modes. Firms that are going to enter a
foreign market need to balance the benefits, costs and risks associated with each
After the entry into a foreign market, how to organize and operate the business in the
foreign market is also significantly important. According to Grant (2005), every firm
has three sets of key characteristics—goals and values, resources and capabilities, and
external environment, and is mainly concerned with planning how to achieve its
goals.
There are four basic strategies for international firms to compete in a global
strategy try to transfer valuable skills and products that competitors do not possess to
foreign markets, but undertake limited local customization. Firms that pursue a
multidomestic strategy try to customize their product offering, marketing and all other
business strategies to adapt the foreign national conditions to achieve maximum local
through experience curve effects and location economies to achieve a low cost
strategy. Firms that pursue a transnational strategy plan to exploit experience curve
effects and local economies, transfer core competencies and focus on local
responsiveness, which may enable firms simultaneously achieve both cost and
differentiation advantages. Each of the four strategies has both advantages and
disadvantages, and Hill (2004) argues that international firms should choose the
appropriate strategy based the pressures for cost reduction and for local
responsiveness.
how to compete in the particular industry. Besanko et al (2003) argue that a firm’s
position in the market is one of the most important factors in determining a firm’s
success, and a firm’s generic strategy describes how it positions itself to compete in
the market. There are three generic strategies that establish basic models for strategic
1980).
Cost Leadership is the strategy that a firm succeed by achieving the lower cost per
unit of products than competitors’ without sacrificing a quality (Holt and Wigginton,
2002). By achieving cost leadership, the firm could gain significant market share.
Cullen and Parboteeah (2005) argues that the efficiency achieved by cost savings
could occur anywhere from the very beginning of the production, such as the design
or research of a product or raw material purchases, to the end of product final sale.
Grant (2005) suggests that every business can be viewed as a chain of activities that
creates value, and each activity along the value chain has different cost structure.
Therefore, to build cost advantages, a firm needs to analyze costs structure and cost
drivers of each activity along the value chain. Grant (2005) has concluded the
requires full understanding of the processes from inputs to customer delivery. Usually,
the firm’s divisional structure is a useful guide, but firm should also consider the
perform a particular activity. Then the firm should establish the relative importance of
the activities that are the major source of cost in the total cost of the product. After
that, the firm should compare the costs of identified activities with those of
competitors, and hence could find out which activities the firm performs more
efficiently and which not. Identifying the cost drivers of each activity is very
important. Cost drives are the factors that determine the level of cost for each activity,
such as wages rates and defects rates are important cost drivers for labour intensive
activities. However, some business activities are interrelated, and hence the cost of
this kind of linkages in order to identify the right cost drivers. Through the stages
above, the firm therefore could identify the opportunities to reduce costs of each
possible activity along value chain. There are several ways for firms to achieve cost
advantages, and Figure 3 has summarized these drivers of cost advantage (Grant,
2005, p254).
2.3.2 Differentiation
Differentiation advantage is the strategy that firms provide superior value within the
industry to customers (Cullen and Parboteeah, 2005). Porter (1980) argues that the
perceived superior value as compared to industry competitors is the key for the firm to
differentiate itself against competitors. The basic reason is that, through differentiation,
firms could charge premium prices on the superior value of the product and thus enjoy
more profits than competitors in the industry. Usually, firms could provide the
superior value to customers through many ways such as unique product features,
should match customers’ demand for differentiation with the firm’s capacity to supply
As the demand side is concerned, the key is to fully understand customers in terms of
their requirement and preference of product features, and their willingness to pay for
superior value. Therefore, Grand (2005) has concluded several useful techniques that
can guide the firm’s positioning and pricing of their product, including
competing products (Schiffman, et al., 1981), conjoint analysis that analyzes the
customers’ preference among different attributes (Cattin and Wittink, 1982), hedonic
price analysis that calculates the market price for each valuable attribute (Gondal,
1994), and value curve analysis that identifies innovative combinations of product
characteristics that can create new market space for a firm (Kim and Mauborgne,
1999). However, Grant (2005) argues that the above statistical market research
what really matters is an understanding of customers on what and how they behave,
because most customers choose a product that reflects their social goals and values to
realize community with others or one’s own identity. These social and psychological
On the other side, the firm’s ability to offer differentiation is also important to achieve
marketing, distribution, and customer services ((Holt and wigginton, 2002). Grant
(2005) concludes several principal stages that use the value chain to identify
opportunities for differentiation advantages for firm. The first stage is that the firm
should construct a value chain for the firm as well as customers. Then along the value
chain, the firm can identify the drivers of uniqueness in each activity in order to assess
the firm’s potential for differentiating its product. Among the drives of uniqueness
identified, firms should select the most promising differentiation variables for the firm.
Firm then locate linkages between the value chain of the firm and that of the
customers so that a firm can identify the means by which it can create value for
customers and can evaluate the potential profitability of differentiation.
Focus strategy, compared with the above two basic generic strategies, can also be
concentrating on one good or services (Holt and Wigginton, 2002). The key issue is
competitive scope, which represents how broadly a firm targets its products or
services (Cullen and Parboteeach, 2005). Cullen and Parboteeach (2005) argue that
focus strategy offers several strategic advantages for firms relative to broad-based
competitors. It enables the firm to react more quickly and behave more flexible than
rivals to customer needs, and also helps a firm to attract and retain customers. There
that the firm offers their products to cater the needs of particular class of customers,
and the example of customer specialization is that clothes of Top Shop are designed
for young and fashion people while those of Burberry are designed for classic and rich
people. As a result, the firm would not underserve or overserve customers who
means that the firm produces a limited set of products for a wide set of customers so
that the firm could serve these group of customers especially well. The focus on a
limited set of products enables the firm to enjoy benefits of economies of scale and
learning economies. The geographic specialization means that the firm offers their
products within a narrowly defined geographic market, which would enable the firm
to enjoy economies of scale such as in local marketing, and to better serve local
markets. In addition, Besanko, et al (2003) conclude that these three basic focus
strategies, compared with broad-based strategies, insulate the firm from competition,
as limited customer demand in some segment of market could more benefit the only
one focusing firm in this market in terms of little competition and substantial returns.
Cost leadership, differentiation, and focus are three generic strategies for firms to
create their competitive advantages in order to compete in the market they are serving.
Each of them can help a firm to realize success in the market with keen competition.
Therefore, firms need to recognize their internal strengths and weakness as well as
external environment, and hence formulate a suitable strategy and then implement it
Starkey, 2000). Indeed, people are the most valuable assets in a firm. Without people,
the firm would not exist; plans, decisions and strategies would not be carried out; and
the activities a firm carries out to use its human resources effectively, and the basic
functions include staffing, training, motivation and labour relations (Hill, 2004).
and Ghoshal (1989) argue that an effective human resource management is vital for
and Wigginton, 2002). Therefore, when a firm enters into a foreign market and hence
management.
three broad strands (Keating and Thompson, 2004). The first concerns human
(Schuler et al, 1993; Sparrow et al, 1994; Scullion, 1995; Taylor et al, 1996; De Cieri
and Dowling, 1999). These studies particularly argue that the nature of both
implement their human resource management in the local subsidiaries (Ferner, 1997),
and Adler and Ghadar (1990) indicate that international human resource management
Schneider and Barsoux, 1997; Adler, 2003). They argue that cultures, values and
and practices are not transferable from one culture to another. The third is
management systems and practices across different nations (Pieper, 1990; Brewster et
al, 2000; Clark, 1996). They describe and explain differences of human resource
management systems between different countries, and argue that these differences are
attributed to different national cultural, legal, economic, and social environments. The
three strands of international human resource management studies have the similar
difference is that each of them has its distinct focusing explained point.
Staffing. Schein (1985) refers staffing policy as the selection of employees for
particular jobs and it does not only involve selecting individuals who have the
required skills, but also a tool for developing and promoting corporate culture.
Geringer et al (2002) also found that technical skills as well as a person’s potential to
do to good job are important selection criteria for managers in 13 countries. Therefore,
the main objective for selection is to enable the firm to achieve and attain higher
performance. According to Hill (2004), there are three types of staffing policy: the
subsidiaries and home-country nationals occupy key position at headquarters, and the
geocentric approach—the best people regardless of nationality are recruited for key
jobs. Each of the three approaches has advantages and disadvantages. By hiring
home-country nationals, the firm can easily maintain unified corporate culture,
transfer core competencies to foreign subsidiaries; On the other hand, this will limit
turnover rate, and will fail to understand host-country cultures that lead to “cultural
myopia” (Hill, 2004). Recruiting host-country nationals will enable the firm to avoid
the problems of “cultural myopia” and enjoy the benefits that the local managers
bring to the firm such as political, social and business connections; however, it also
has disadvantages such as gap between host-country and home-country managers due
headquarters and foreign subsidiaries (Holt and Wigginton, 2002; Hill, 2004). The
geocentric staffing policy enables the firm to build and make the best use of a cadre of
environment in order to perform better. It is found and estimated that there are high
failure rate and costs of expatriation all over the world (Harvey, 1983; Black and
Gregersen, 1999; Caudron, 1991). Therefore, Dowling and Schuler (1990) found that
cultural training, language training and practical training are useful ways to reduce
prevalent all over the world, communications in the language of the host-country will
effectiveness. Practical training refers to that firms often devote considerable effort to
build expatriate community alike with good sources of support and information, and
therefore the expatriate manager and the family will be more easy and smooth to
adapt to a foreign life and culture. Unlike expatriate managers, managers from
only learn through their own experience (Cannon, 1995), and hence although they
have the potential to do a good job, they lack international knowledge and experiences.
Holt and Wigginton (2002) have identified several opportunities for local managers to
gain knowledge and experiences. First, there have been many distance learning as
well as education alliances formed between local and western schools that create new
and more learning opportunities for people all over the world. In addition, many
international firms send local promising managers back to school and hence many
leading American universities take this opportunity to offer resident, exchange as well
important but also expensive investment for international firms, because they often
hire people with management potential, and then help them to develop and give full
Motivating Employees. Even if an international firm has the best strategy and human
resources, it will not be successful if the management does not well motivate and lead
employees in the host-country. Mitchell (1997) defined motivation as the process that
attaining a goal; thus, motivation is the stimulus that drives behaviors. However, in
the context with diversified cultures, motivation becomes more complicated as the
cultural characteristics are not universal. Hofstede (1980) argues that human values
and needs such as perceived importance of monetary rewards and achievement vary
same way by the same phenomena. Hofstede (1983) found that even within the same
culture in one country, people’s perceptions may also vary among different social
European Values Surveys suggest that people from different nations place different
magnitude of importance to their work functions. Indeed, people from some countries
may place self-achievement at a higher priority while others may place monetary
work centrality as the degree of general importance of work relative to other interests
for an individual. Parboteeah and Cullen (2003) examined work centrality differences
in 26 countries and found that national cultures do have significant impact on people’s
work centrality. They found that uncertainty avoidance and masculinity negatively
affect work centrality, and individualism positively affects work centrality. Usually,
people with greater work centrality usually work more and are dedicated, and hence
lead to more effective organization (Collen and Parboteeah, 2005). Moreover, the
value of rewards may differ among different nations and cultures. Holt and Wigginton
(2002) argue that motivation is inextricably linked with employees’ perceived value of
rewards that reflects the meaning of their efforts. They continue to argue that
recognition than those in collective nation, and people in masculinity culture more
motives across cultures. Alder (1997) argues that most motivation theories, such as
Maslow’s hierarchy of needs, ERG, expectancy theory, etc., were developed in the
context of American. As cultures are not universal, neither are these theories.
needs in which the hierarchy can be adapted according to foreign national cultures.
Therefore, managers should understand the host-country’s value about work, jobs and
effectively.
Every firm plans and implements various strategies in order to create competitive
advantages so that they could outperform their competitors and earn a higher rate of
(2003) argue that a firm must create more values, which depends on its stock of
profitability, a firm must ensure its successful strategies and the created competitive
strategies are sustainable (Cullen and Parboteeah, 2005). Sustainable is critical and it
means that strategies are not easily neutralized or attacked by competitors (Aaker,
1989), and its competitive advantage persists despite efforts by competitors or
Therefore, during 1990s, the resource-based theory of firm was developed, and it
argues that any firm is essentially a pool of resources and capabilities which
determine the strategy and performance of the firm; and if all firms in the market have
the same pool of resources and capabilities, all firms will create the same value and
1993; Dierickx and Cool, 1989; Grant, 1991; Wernerfelt, 1984; Mahoney and Pandian,
1992). Lockett and Thompson (2001) state that “resource-based view emphasizes firm
heterogeneity and path dependency, as each firm’s resource bundle is unique, and the
that so is each firm’s opportunity set”. Resource-based theory also argues that, to
sustain competitive, a firm should possess resources and capabilities that are
characteristics can lead to the asymmetries in the resources and capabilities of firms in
the industry and serve as the basis of sustainability. Besanko et al (2003) suggest that
that are defined by Rumelt (1984) as the forces that limit the extent to which a
activities of other firms. There are two groups of isolating mechanisms: impediments
to imitation that impede existing firms and potential entrants from duplicating
resources and capabilities, such as legal restrictions, superior access to inputs or
advantages that increase the economic power of a competitive advantage over time,
such as learning curve, reputation and buyer uncertainty, buyer switching costs and
network effects.
The resource-based theory has been diffused and accepted widely. Peng (2001)
suggested several reasons for this. The first is that resource-based theory has greater
and economic schools of thought in strategy (Mahoney and Pandian, 1992). The third
reason is that the logic of resource-based theory is simple and easy to understand. In
p15). The final reason is that various high visibility forums and events have supported
the resource-based theory, and thus the role of credible is instrumental. With the
above attributes above, the resource-based theory is adopted by most firms all over
the world.
after they have made an entry decision to a foreign country, and each of these entry
modes can bring both advantages and disadvantages to these firms. Therefore, the
selection of the most appropriate entry mode involves significant tradeoffs and it is
very important for the firm’s future development. Hill et al (1990) argue that a
particular entry decision is closely related to the overall strategic resources and
Hill (2004) has made some generalization for international firms about how to select
an entry mode based on the resources they owned. He suggests a distinction between
those are easy and rapid for competitors to imitate if not protected well, so a wholly
owned subsidiary is the most rationale entry mode to protect technological know-how.
However, licensing and joint-venture are often selected when the firm owning the
technological know-how would like to reduce the risk of the technology being
the other hand, some firms create competitive advantages by deploying management
how-how, and they possess value brand name and reputation. Usually, brand names
are protected by laws and regulations, as a result many firms would choose a
country, and the subsidiaries may be in forms of wholly owned or joint ventures.
resources and capabilities that both the parent firm and subsidiary own. In the early
part of this research, several drivers of cost advantages have been identified, such as
advertising and research and development. Usually larger and more reputed firms may
enjoy benefits of bulk purchases at a lower unit price, large coverage of advertisement
at a lower advertising cost per consumer, and R&D spillovers when ideas developed
in one project are of help in another project (Besanko et al, 2003). Therefore, for firms
with resources and capabilities that enable the drivers of cost advantages, a cost
strategy is concerned, Grant (2005) argues that firms need to consider their internal
potential and advantages for differentiation compared with their competitors. Usually,
addition, each activity along the value chain is also very important, such as quality of
components and materials, wide variety of product, fast delivery, efficient order
processing, strong brand reputation, and customer after-sale services (Grant, 2005).
These resources and capabilities provide favorable conditions for firms to pursue a
differentiation strategy. For international firms, Peng and Wang (2000) argue that it is
not necessary that the resources and capabilities needed are a one-way process
originating form headquarters, but rather, subsidiaries can develop their own. As
Birkinshaw (1996) reported, some subsidiary growth is driven by its own distinctive
management. Therefore, the choice of strategies does not depend on the resources and
In this paper, it has been argued that human resources are critical for the success of an
international firm. Human resources offer skills, knowledge, and reasoning and
decision-making abilities (Grant, 2005). Grant (2005) also suggests a few kinds of
resources and capabilities that human resources bring to the firm. The first is that the
education, training and experiences of employees determine the skills available to the
of the firm. Moreover, the social and collaborative skills of employees bring the
capacity of the firm to transform human resources into organizational capabilities.
Finally, the commitment and loyalty of employees determine the capacity of the firm
human resources play significant role on the performance of the firm. If these
characteristics are inimitable and immobile, then resource-based theory suggests that
the firm is able to create and maintain its competitive advantages compared with its
competitors.
Taylor et al (1996) have studied three levels of human resources—the parent firm, the
subsidiary and the employees. They suggest that top managers at the parent firm level
present some of the most valuable, unique, and hard to imitate resources. Top
specific tacit knowledge, and thus Carpenter et al (2001) argue that this kind of
experience and knowledge are difficult to access and imitate for other international
firms those do not possess. At the subsidiary level, staffing subsidiaries with
subsidiary (Gupta & Govindarajan, 2000), and seeking a fit between its human
resources practices and local culture (Schuler & Rogovsky, 1998), are all suggested to
at the employee level, Bae & Lawler (2000) and Lee & Miller (1999) found that it is
competitive advantages.
Human resources possess complex social relationships, and Barney (1991) argues that
social relationships may be one of the most difficult to imitate resources. Therefore,
from the resource-based view of point, human resources are vital to propel the further
The previous chapter has reviewed the strategies for international firms to enter,
expand and develop in a foreign country, and how the resource-based theory
contributes to the selection of an appropriate strategy. This chapter will introduce the
A methodology is “the analysis of, and rational for, the particular method or methods
used in a given study, and in that type of study in general” (Jankowicz, 1994).
This dissertation will find out the extent to which the strategies of Wal-Mart and
Carrefour in China are different from each other and the reasons why they are
2004). This dissertation will apply the qualitative method to conduct the comparative
study of the two retailing giants’ strategies. According to Van Maanen (1983, p9),
qualitative methods is defined as procedures for “coming to terms with the meaning
not the frequency of a phenomenon by studying it in its social context”.
Cresswell (1998) listed five research approaches that each has a distinguished history
in one of the social science disciplines and then explores their application in research
5. Case studies, concerned with a detailed and in-depth description and analysis of a
Considering the research questions, I choose the case study to conduct this research.
investigation, often with data collected over a period of time, of phenomena, within
their context, and the aim is to provide an analysis of the context and processes which
illuminate the theoretical issues being studied”. Hartley also argues that case study is
social or organizational processes. In addition, Yin (1994) suggests that case studies
are preferred when “how” and “why” questions are to be answered, and when the
researcher has little control over events and when the focus is on a current
and Carrefour in the Chinese retail industry, and an analysis of the differences
After designing the research, the research methods that are going to be used are also
interview; panels, that gather a group of people to have a free flowing, but focused,
collected.
documentary review and analysis is adopted for this specific case study. History is
regarded as a repository of facts and can be used to illuminate the present and future
documents can be used in two different capacities. The first is that they are remnants
of earlier processes in the organization and thus bear witness to activities in the past.
They tell the activities and events happened at that period of time, but researchers
need to identify and verify the authentic document required. On the other than, these
sources may tell numerous information about some hidden situations, processes and
attitudes within the organization. These requires critical scrutiny because they involve
Two cases—Wal-Mart and Carrefour are selected to be studied in this research. This
First, due to the aim of this research—to provide an overview of the relationship
between the firm strategies and its possessed resources and capabilities, a comparative
studies of more than one firm in the same market context would be more convincing
than one case studies. By contrasting the different strategies adopted by different
firms in the same context, the determinant factors—resources and capabilities are
stressed as the main points. However, the number of cases chosen cannot be too much.
Studying a great number of cases would result in verbose and repeated data
interpretation and analysis. It is also a work burden. Two or three cases should be the
better choice for a comparative study. Due to time and words limitation of this
several factors. First, Wal-Mart and Carrefour are the largest two retailers worldwide.
They have similar business scales and strength, and hence they are comparable in
terms of their resources and capabilities. In addition, Wal-Mart and Carrefour entered
China in the same period of time, and then expand and develop together experiencing
different periods of policy changing. This enables a successive analysis of the two
retailers’ strategies from their entry until today. Furthermore, although Wal-Mart
ranked head Carrefour in the world, but it becomes following Carrefour in Chinese
retail market. These three factors all enable a comprehensively comparative study of
their strategies.
method can often be collected, without having to contact companies, in public sources
available to most of people. The main sources of these historical information that
online database and so on. The available sources of information are listed in Table 3.1,
and the ticked ones are the sources available to use for this research.
As this research is concerned, the websites of parent companies are good sources of
the overview of Wal-Mart and Carrefour, as well as their possessed resources and
capabilities. The websites of local companies provides their activities and strategies in
China. Both provide the information year by year, which provides convenience and
reliability for researchers. Some important figures and policy documents can be
Government P.R.C, and Ministry of Commerce China, which enable the collected
academic journals, textbooks and etc., especially with great reputation, will provides
reliable and just information and analysis of the activities and strategies of Wal-Mart
and Carrefour.
3.5 Summary
According to the research aims and objectives, this research chooses Wal-Mart and
research method, both Wal-Mart and Carrefour’s historical documentary are reviewed
and analyzed. All the information and data about Wal-Mart and Carrefour will be
public published newspapers, magazines, academic journal articles, textbooks and etc.
Due to the strict approval, edition and reputation, these sources of information and
how changes in the business environment may affect performance and identification
It is probably safe to argue that, since the Chinese economy reformation occurred in
1979, retail sector is one of the sectors with the most rapid changes, the most
fundamental transformation and most intensive competition. Since 1979 the free
market retailing became legal again, and Chinese retail sector grew exponentially
(Davies, 1994). Davies (1994) found that after free market retailing was permitted, the
million in 1992. By the end of 2001, the number of retail businesses reached around
more mature and complete. Every retailer, from domestic to foreign ones, is
differentiating itself to realize its distinct position in this industry, and adopting
advanced management models and technologies.
The most important event in Chinese retail industry is the market openness policies
for foreign investment started in 1992. This openness policy brings both opportunities
and challenges to Chinese retail industry. On one hand, it leads to industry revolution,
and on the other hand, it brings intensive competition to domestic retailers. China
opened its retail market gradually to foreign retailers. In July, 1992, the central
government of China issued Commercial Retail Areas on the Issue of the Use of
Foreign Investment Approvals, which started to allow one or two foreign retailers to
open business as pilots in Beijing, Shanghai, Tianjin, Guangzhou, Dalian and Qingdao,
and five Special Economic Zones. However, there are four conditions for these
foreign investments: (1) the Chinese partner must have a stake more than 51%, (2)
they must form joint ventures or cooperation to enter the market, (3) they cannot
operate wholesale businesses, (4) the proportion of imported goods, shall not exceed
30% (Marketing Briefs). In June 1996, the central government of China expanded the
number of experimental cities to all provincial capital cities and several separated
planned cities, and also allowed foreign retailers to operate wholesale businesses. This
is believed to indicate that China, especially the retail industry, took an important step
in the opening policy. At the end of 2004, China removed all limits on business
location, amount and shares structure. Accompanied with the large market with great
profit potential, the foreign investments greatly accelerate the pace of entering China.
4.2 Market Definition
product market and geographic market. Retail can be defined as the function and
providing brick-and-mortar stores with a large range of commodities and services for
consumer shopping. Others, such as Chinese traditional wet markets and street market,
as well as online retailing and television retailing, are considered as substitutes in this
analysis. Consumers tend to shop locally, and consumers of a metropolitan area tend
to visit retailing stores in the same vicinity. It might be thought that each metropolitan
will define the geographic market to be studies as the entire Chinese retail market.
five forces framework (illustrated in Figure *) will be performed to analyze the retail
industry in China.
According to Besanko et al (2003), internal rivalry refers to the jockey for shares by
firms within a market. Due to the economy reformation in China, the number of
competitors in Chinese retail industry is increasing rapidly. Especially after China
officially became a member of WTO, the foreign retailers enter China market as well
as expand in China in a significant rapid pace. In addition, each competitor may have
different cost. There is also substantial excess capacity for each retailer. Furthermore,
in this retail market, customers often have low switching costs. According to Besanko
Therefore, the Chinese retail market meets the criteria for fierce internal rivalry.
According to China Internet Information Center News (2002), China has planned to
create its own large domestic retailers. There are a few domestic retailers engage in a
fast and large development. With a few number of international retail giants, the
competition in China retail industry is inevitably intensive and sharp. Table 4.1 shows
the a few top retailers in China consisting both domestic and foreign ones.
Sales in 2006
Rank Retailer Name Number of Outlets
(Billion RMB)
24 Tesco, UK 9.30 47
From the table, it is easy to find that domestic retailers occupy the top five retailers in
terms of sales in 2006, and they own a significant market share in Chinese retail
market. Carrefour, the best performing foreign retailer took the sixth position and
Wal-Mart took the fourteenth. However, in recent years, the openness policies become
more relax and flexible, more and more foreign retailers landed China. Most of them
have completed their strategic layout of their stores over China perfectly. Therefore,
although some of the domestic retailers have occupied the leading position, they are
still face severe challenges. It is estimated that in the next few years, 60% of Chinese
retail market will be owned by 3-5 world-class retail giants, and 30% will be owned
by Chinese national retail giants, and the rest of 10% will be owned by regional retail
giants.
4.4 Entry
sellers, and (2) entrants will decrease the market concentration which will in turn heat
up internal rivalry. Usually, there are many kinds of entry barriers in an industry.
In the early years after economy reformation, there was no foreign retailers allowed to
enter China, and Chinese central government encouraged and supported the
good way to make profit due to the small entry barriers. It does not entail significant
economies of scale or experience curve, because small retail stores still make profits
with lower cost. Retailers’ reputations are not significantly important, as the goods
they sell to customers are less different. Retailers can access to buyers easily and there
Recently, China central government has introduced policies to regulate and promote
limitations of foreign retailers to enter and develop in China, the barriers for both
domestic and foreign retailers to enter Chinese retail market became smaller. More
and more powerful domestic and foreign potential entrants will enter this market.
However, small entry barriers, on the other hand, discourage potential entry to this
industry. A report from A.T. Kearney found that the attractiveness of Chinese retail
(2003) suggested expectations about post entry competition are also important. As
more and more enter this market, the competition is inevitably considered as intensive,
and market is gradually saturated. However, from Chinese retail market’s overall
growth trend, many experts conclude that there is still huge potential for further
Center, the retail market in China will maintain an annual growth rate of 8% to 10%.
In addition, the value of RenMinBi (RMB) will also influence the potential entrant to
the retail market. First, if there is RMB revaluation, the consumers’ real purchasing
power will increase and hence the retailers will benefit from this, which will
encourage more entries. Second, the RMB revaluation indicates the real prices of
imported goods decrease, which will benefit the retailers and encourage potential
entrants.
Substitutes and complements are two important factors influencing market demand.
Substitutes would divide the profits and intensify the competition in this market,
while complements would boost the demand and hence enhancing profit opportunities
in this market.
substitutes of retailing stores in Chinese retail market. Wet markets are large and
the other hand, sell fresh food in the open by private sellers with tiny stalls. The
environments of both are dirty, crowded and noisy. The competitive advantages of wet
markets and street markets lie in cheaper prices and fresher food. In the early days,
these wet markets and street markets are strong substitutes of retailing stores. With the
variety of goods, and outstanding services provided by retailing stores attract more
In addition, nowadays, sales on Internet and television become more and more
popular. Advanced technology enables the online and television shopping transactions
to be gradually fast and safe. Furthermore, online and television shopping are
considered to be time and cost sufficient. Combined with the increasingly fast paced
2001, the Internet retail sales had hit RMB 1200 billion that is more than one third of
the traditional retailing format with sales of RMB3230.6 billion (euromonitor.com).
There is no doubt that online and television retailing brings great challenges and
Both Chinese traditional market and modern online and television retailing reap the
market demand in this retail industry. However, online shopping will complement and
can boost the demand for brick-and-mortar retailing stores. The presence online will
increase the exposure of the retailer, and give the potential customers a full
and hotels, will also boost the sales of retail industry in one city.
Besanko et al (2003) argue that the supplier power is the ability where industry’s
upstream input suppliers to negotiate prices that extract industry profits. Besides, they
also suggest that suppliers may have two kinds of power over a downstream industry.
If suppliers are in a competitive market, then they have “indirect power”. Suppliers
with indirect power charge the downstream industry according to the supply and
demand in the upstream industry, and also can sell their goods and services to the
highest bidder. Supplier have “direct power” if the industries of suppliers are
without destroying that market. Both direct and indirect power will erode the profit of
downstream industry.
In China, especially after China’s entry to the WTO, relationships between retailers
possible that the retailing stores have become the most important distribution channels
with great development potential. Retailers are the most important customers for the
manufacturers. Especially in China, there are a lot of medium and small suppliers and
the intensive competition often makes the fittest to survive. Therefore, the suppliers
have weak power over retailers. On the other hand, with the further and fast
development of retail industry, many retailers are becoming larger in terms of their
operating scales and hence their purchasing scales. This will lead the retailers to a
have to seek domestic retailing channels to distribute their goods and services. As a
result, retailers would benefit in terms of their bargaining power as well as the prices
have low bargaining power, and they impose little threat to the profit of retail industry.
Buyer power refers to the ability of individual customers to negotiate purchase prices
that can extract profits from sellers, and analogous to supplier power, and buyers also
have direct and indirect power over retailers (Besanko, et al, 2003).
Due to the sustained growth of GDP in China, citizen’s personal incomes are rising,
and therefore this further stimulates citizen’s consumption level. With fast economic
growth, the Chinese consumption level is expected to grow continuously (Luo, 1998).
This enables Chinese retail industry to enter a good stage of development. In 2005,
China central government issued Central Government’s proposal on the Fifteenth Five
Year Plan Project of National Economy and Social Development. This policy was
confidence, promote potential consumption, and hence to support the retail industry to
develop more healthy and continuously (www.gmw.cn). It is estimated that during the
period of the fifteenth Five Year Plan (2006-2010), the growth rate of consumption
increase of citizen’s income levels, more and more people are seeking a better
lifestyle. The increase of car ownership and improved transportation links enable
people to travel to and shop in farther retailing stores. In addition, it is reported that,
due to the lower import duties and tariffs after China’s accession to WTO, sales of
high quality consumption goods have started enlarging in small market because more
and more middle-class income residents are able to afford the spending on those high
Table 4.2 summarizes the five forces in the recent Chinese retail market. Generally,
each retailer faces intensive competition and challenges as well as great opportunities
in this market. The profitability of this industry depends on many factors, of which
government policies play a more important role in China than in other countries.
Substitutes/Complements Medium
In this chapter, Wal-Mart and Carrefour are chosen as two representatives of foreign
retailers in China. They are two of the largest foreign retailers in China and enter
China in an early time. Therefore, it is more convincing if these two foreign retailers
are used to provide an overview of how foreign retailers enter and develop their
business models in Chinese retail market. The objective of this chapter is to analyze
the two giants’ entry and development strategies, and especially how their strategies
5.1 Wal-Mart
Wal-Mart was established by Mr. Sam Walton, who is believed to be the legend of the
Wal-Mart has become the largest chain retailer in the world. In 2005, Wal-Mart has
reached the sales of $312.4 billion. Currently, Wal-Mart has opened nearly 6,800
shopping stores globally, and employs more than 190 million peoples, located in 14
countries. It is estimated that there are about 176 million visits per week
1962 Company founded with opening of first Wal-Mart store in Rogers, Arkansas.
1969 Company incorporated as Wal-Mart Stores, Inc. on Oct. 31.
1972 Wal-Mart approved and listed on the New York Stock Exchange.
1983 First SAM'S CLUB opened in April in MidWest City, Oklahoma.
1987 Wal-Mart Satellite Network (largest private satellite communication system in the
U.S.) was completed.
1988 First Supercenter opened in Washington, Missouri.
1990 Wal-Mart became nation's No. 1 retailer.
1991 International market entered for the first time with the opening of a unit in Mexico
city.
1992 President George Bush presented Sam Walton with the Medal of Freedom.
1996 Wal-Mart entered China through a joint-venture agreement with Shenzhen
International Fiduciary Investment Co. Ltd.
1997 Wal-Mart replaced Woolworth on the Dow Jones Industrial Average.
1998 Wal-Mart introduces the Neighbourhood Market concept with three stores in
Arkansas.
1999 Wal-Mart had 1,140,000 employees, making the company the largest private
employer in the world.
1999 Wal-Mart acquired the ASDA Group plc. in the United Kingdom (229 stores).
2000 H. Lee Scott named president and CEO of Wal-Mart Stores, Inc.
2001 Wal-Mart named by FORTUNE Magazine as the 3rd most admired company in
America.
2002 Wal-Mart signed JVs with Zhongxin Company for future stores in Shanghai and
nearby.
2002 Wal-Mart topped Fortune’s Global 500 and ranked first among the “Most Admired
Companies in America.
2002 China becomes Wal-Mart’s most important purchasing centre in the world.
2003 Wal-Mart opened its first outlet in Beijing in July. After then Wal-Mart has opened
27 outlets in China by August.
2004 Wal-Mart held its shareholder meeting on March 4 in Shenzhen, China.
2006 Wal-Mart makes its first foray into Central American retailing by buying a stake in the
region’s top retailer from Dutch retailer Royal Ahold, which has stores in Costa Rica,
Guatemala, EI Salvator, Hoduras, and Nicaragua.
“Satisfactory Services” all over the world, Wal-Mart has won a large number of
customers. There is no doubt that Wal-Mart is always the industry leader in terms of
foreign market expansion as well as management models. Table 5.1 highlights some
Wal-Mart entered China in 1996, which is four years after the allowance by Chinese
central government. It is also the time when China central government increased the
number of experimental cities, where foreign retailers are allowed to operate their
businesses. Wal-Mart did not enter until the further openness policy in China, which
illustrates that Wal-Mart considered this as mature and great opportunities for its entry
As stated in the previous chapter, in 1996, foreign retailers must follow the
regulations from Chinese central government to start their businesses, and one of
regulations was that their businesses must be in form of joint ventures or cooperation
with one Chinese partner and the Chinese partner must own a stake more than 51%.
Therefore, before its formally entry, Wal-Mart and Shenzhen International Trust &
Investment Co., Ltd, China, signed Agreement on Joint Ventures, and established
“Shenzhen Wal-Mart & Pearl River Department Stores Ltd” in August 1995
(www.szitic.com). In the following year 1996, Wal-Mart opened its first super center
Stores Formats. After entering in Chinese retail market, Wal-Mart tried with different
store formats. Supercenter is always the principal format for Wal-Mart retailing since
its first supercenter opened in March 1988 in Washington. Today, Wal-Mart has over
1,000 supercenters all over the world and China has 81 supercenters. Wal-Mart’s
supercenters have become the customers’ favorite store formats, and they lead to the
procurement agents for their members, and provide the branded merchandises at
preferential prices to companies and individuals. The products in Sam’s Club are
packed in large packages, and the shopping environment is like warehouses. Hence,
these lead to lower margin costs and thus, enable members to experience lower prices.
Although there are now two neighborhood supermarkets, they seem to fit better with
Asia, said, ”Wal-Mart evolved by starting in smaller cities and moving into the larger
cities” (Meredith, 2004). Indeed, when Wal-Mart took Shenzhen as their first step of
entering China, the store distribution network implied its “second tier cities”
expansion direction. This can be easily proofed when Wal-Mart limited its store
locations in South of China such as Shenzhen, Dongwan, Xiamen and etc. between
1996 and 2001. Until 2001, Wal-Mart gradually moved to bigger cities, such as
Guiyang, Changchun and Nanjing. In the two largest cities—Beijing and Shanghai,
Wal-Mart only opened three stores in each city in a late stage. In addition, most of the
stores are located in communities and the junction of urban and rural areas that are far
Expansion. Although Wal-Mart ranks No.1 in the worldwide, its growth in China is
not aggressive. Table 5.2 shows the expansion list of Wal-Mart in China. It can be
found that, in the early years of Wal-Mart’s entry, the speed of expansion was slow.
Wal-Mart started to accelerate its expansion in 2004 when the central government of
2000 Wal-Mart opened it first supercenter in Dalian, Liaoning Province, which is the first
supercenter in the North of China.
2001 Wal-Mart entered Fujian Province; opend 7 stores totally this year in China.
2002 The first neighborhood market opened in Shenzhen, Guangdong Province; opened 7
stores totally this year in China.
2003 Wal-Mart opened Sam’s Club in Beijing, and opened 8 stores totally this year in China.
2004 Wal-Mart opened 11 stores totally in China, which is the year that opens the most stores.
2005 Wal-Mart entered Shanghai for the first time, and opened the first supercenter in
Shanghai
2006 Wal-Mart opened its Shanghai’s second store.
2007 Wal-Mart bought 35% of shares of Trust-Mart.
2006, the expansion of Wal-Mart in China took the form of opening new stores.
However, in 2007, Wal-Mart spent $1 billion acquiring Trust-Mart, which is also one
Wal-Mart until Wal-Mart willing to invest such large amount of capital is that
Trust-Mart has large number of stores and its leading position in China. Undoubtedly,
China.
Chinese consumers, since the average income of Chinese population remains low.
Therefore, Wal-Mart must enable its costs to be low enough so that its low price
they would not charge suppliers’ administration fees for the products entered their
store. The aim of this announcement is believed to lower the cost of suppliers and
hence enable the suppliers to lower the prices offered to Wal-Mart. This not only helps
Wal-Mart to achieve its lower costs position, but also promote the good relationship
with suppliers.
costs. Wal-Mart requests suppliers to adopt electronic data interchange system, which
can transfer information swiftly and can save stock-holding costs. Each store sends
information and orders to its suppliers via the Internet and has products replenished in
on-average two days versus five days of their rivals (Huey and Walton, 1992). Its
week (once bi-weekly to their rivals) and reduce storage space and delivery time.
therefore increase profitability by 2.5% compared with their competitors (Stern and
Stalk, 1998).
However, in fact, Wal-Mart faces the embarrassment that their prices are not low
the products quality. Wal-Mart has a strict control over the goods they are purchasing.
Usually, Wal-Mart orders and replenishes the stock of goods directly from the
manufacturers. They even purchase from overseas if suppliers provides a lower prices.
In addition, Wal-Mart appealed some purchasers who accepted bribes in court. Thus,
the goods purchased have a good quality and price assurance in Wal-Mart.
Wal-Mart, as the No.1 international retailer, started to learn to do things the Chinese
way. They need change in order to adapt the special environment of retail market in
China.
different from those of Americans, due to the differences in culture, income, and
many other factors. Taking the food purchase for example, Chinese shoppers prefer to
select their own fresh vegetables, fruits, live fish and seafood (Trunick, 2006), and
they insist on requesting foods to be freshly harvested, or even killed in front of them.
In the early days of Wal-Mart, Chinese shoppers were not satisfied because Wal-Mart
was trying to sell them dead fish as well as meat packaged in Styrofoam and
critically important to create and maintain a strong customer base (Trunick, 2006), it
began to adapt to customers needs in the way of displaying uncovered meat, live
fishes and killing in front of costumers. In addition, Wal-Mart in China has put in
demonstration stations for cosmetics where customers can be shown how to apply
(1999), Wal-Mart also accepted that most Chinese buy small quantities of goods, and
differences.
would not charge suppliers any administration fee for the goods entering in its
supercenters, it won acclaim from its suppliers. This makes its competitors surprised
and embarrassed. This decision of Wal-Mart allows suppliers to yield more profits in
the market, and enables the continuous and good cooperation relationship. In 2003
and 2006, Ministry of Commerce China and China Chain Store & Franchise
with both Chinese central and local governments. This is a good strategy for
China, and in 1996 the purchasing reached $2 billion. Chinese government favored
this exporting scale, and for return, Wal-Mart gets the permit to opening its first store.
forces foreign companies to allow trade unions under a proposed legal amendment
(Fong, 2006). Naughton (2006) suggests that after eight years’ hard line in China,
Wal-Mart soften and agreed to accept unions in 2004. Partly because Wal-Mart
this is also good chance to maintain good relationship between Chinese governments.
Thus Wal-Mart China has three options for its sourcing. The first is that products are
purchased from global suppliers and the products are not manufactured in China; the
second option is that Wal-Mart can purchase products from global suppliers and the
products are manufactured in China; and Wal-Mart can purchase goods from local
two and three. This does not only meet the needs of Chinese consumers for high
standards imported products, but also reduce the pressures from local government to
information of local retailers and centralized sourcing practices and then directly
distributes goods to each distribution centre (Lin and Liang, 2001). Wal-Mart
established three distribution centers supplying its supercenters in China, but it does
not sound like much of a logistics network to support its operations. It is widely
believed that the global success of Wal-Mart is mostly attributed to the excellent
Wal-Mart and its suppliers. Huffman (2003) argues that Chinese provincial autonomy
and self-sufficiency hinder interprovincial trade and pose difficulties for road
transportation, private and commercial trucking, and Customs clearance for imports.
distribution and operation centers in large scales. Therefore, Wal-Mart in China often
establishes distribution centers first and then opens stores in cities nearby. This
inevitably limits the speed of expansion by opening new stores as well as increases
“The undeniable cornerstone of Wal-Mart’s success can be traced back to our strong
belief in the dignity of each individual we view our associates as much more than a
pair of hands to do a job, but also as a wonderful source of new ideas. Our people
employees’ training programs. Joe Hatfield, president and CEO of Wal-Mart Asia
points out that training takes place every day in every store (Trunick, 2006). Wal-Mart
sends employees with good skills and potentials to US to attend Walton Institute,
whereas those who do not speak English fluently are provided with other trainings
(2006), Wal-Mart China has a 16% employee turnover rate which is the lowest among
any operation worldwide, especially in an area where skills are in short supply and job
tenth anniversary of its entry into China, Wal-Mart invited more than 120 employees
whose tenure was 10 years and their families to come to Shenzhen headquarters to
attend “Wal-Mart 10th anniversary celebration for staff”, and share Wal-Mart’s ten
years of glorious achievements.
“We should not ask for benefits from life, but contribute to the community we live
more than $3.4 million, to local charity and welfare organizations over the past ten
years. Wal-Mart China associates have also denoted more than 130,000 man hours to
and disaster relief. Recently it was awarded as Most Generous MNC Donors in China
5.2 Carrefour
The Carrefour Company was created by the Fournier and Defforey families in 1959 in
Carrefour opened its first supermarket in 1960 and then invested and opened its first
hypermarket in 1963. In 1969, Carrefour entered Belgium and opened its first store
outside France by forming alliance with local partners. Carrefour stepped outside
Europe in 1975 by opening a hypermarket in Brazil. Over the past 40 years, the
Carrefour group has become the world’s second largest retailer and the largest in
Europe. Today, Carrefour has reached 30 countries in Europe, Latin American and
Asia. Currently, Carrefour has opened over 12,500 stores all over the world, with
Carrefour entered China in 1995, and large scale of operation was the main objective
since its first entry. It was still the period of tight control over foreign retailers by
Chinese central government. At that time, foreign retailers were only allowed to
operate in several particular cities, and only allowed to own less than 49% of shares in
their joint ventures or cooperative enterprises. Carrefour did form a joint venture with
Chuang Yijia Commercial City and Jiachuang took over the businesses and
management of Chuang Yijia. After Chuang Yijia opening the chain store at Beijing
control over the interests of its chain store and started to expand in China through
Source: www.carrefour.com
Before coming to Mainland China, Carrefour entered in Taiwan and opened the first
Carrefour hypermarket in Asia in 1989. Lean-Luc Chereau, the head of Carrefour
China, in an interview by Child (2006) stated that entering Taiwan brought a fantastic
advantage when entering China in terms of learning how to adapt and deal business
with Chinese. It is obvious that, although the economic systems are different between
Taiwan and Mainland China, both the life and business cultures are fairly similar.
Therefore, experiences in Taiwan are more valuable for international business than
the principal format for Carrefour expansion. Yan (2003) argues that this hypermarket
format fits the countries like China who is developing fast due to low prices of
products. He also suggests that this hypermarket format poses challenges to both large
department stores by lower prices, and small chain stores by comprehensive goods. In
2004, Carrefour opened its first Champion supermarket in Beijing as asked by Beijing
supermarket and hence he saw a very difficult future for supermarkets (Child, 2006).
Carrefour opened 150 Dia discounted convenience stores in Shanghai and 100 in
stores from Taiwan. Carrefour would more likely to learn from and follow 7-Eleven in
Store Location. China is still a country with a relative low income level and hence
the mainstream power of consumption remains in large and prosperous cities and city
centers. Therefore, Carrefour establishes their stores in first tier cities and also in
more prosperous and business areas (Li, 2004). Yan (2003) argues that Carrefour’s
strategy of store location enables its leading position among foreign retailers. He
continued to argue that the decision of selecting Shanghai as the headquarter location
Carrefour has almost finished its strategic networking establishment in coastal cities
Expansion. Carrefour, at the end of 2006, was ranked the 6th in Chinese retail market
in terms of sales with 95 stores. Table 5.4 shows the development histories of
Carrefour in China. The development of Carrefour is rapid, and this can be proofed by
the report from Ministry of Commerce, China that until June 2004, Carrefour was
ranked the first with sales of $0.97 billion and 50 stores among foreign retailers in
China (Li, 2004). However, in 1999 Carrefour was warned for its expansion by China
central government as the shares that Carrefour held was more than regulated in its
retail joint venture (Yan, 2003). In 2001, Carrefour stopped expansion and
development operations for 18 months due to the failure of getting approval from
central government but only local government (Child, 2006). After that, in the year
2001, Carrefour continued its fast expansion. From Table 5.4, it is clear that the
announced that Carrefour may acquire at least ten Chinese retailers as part of its
Source: www.carrefour.com.cn
The slogan of Carrefour China is “Happy Shopping in Carrefour” and the mission is
to fulfill customers’ needs with full effort and provide the best prices to customers in
every country, in every retailing format, and in the range of the best goods
shopping environment and low prices. In terms of low prices, Li (2004) suggests that
the prices of goods in Carrefour are lower than those in Wal-Mart, especially the
prices of living necessities such as rice, food, oil and so on. This lower prices strategy
provides Carrefour a competitive advantage in the retail market competition and leads
more and more competitors to imitate. The lower prices come from lower costs of
purchasing goods. It is suggested that Carrefour adopted various and rather flexible
sourcing methods, such as local stores can purchase their own goods as long as the
prices of purchased are low, and this leads to famous fake white wine affairs in
However, according to Qin (2004), the actual shopping environment contradicts with
its “Happy Shopping in Carrefour”. In Shanghai, there are many complaints on the
difference between the prices on shelf and actually paid. In addition, although there is
poster saying, “You found the cheaper prices elsewhere, you get twice the prices
Furthermore, as most of Carrefour hypermarkets are in city centers, the limited car
It is probably safe to argue that the leading position among foreign retailers is
attributed to its local adaptation to some extent, and its experiences in Taiwan play an
important role.
Carrefour understand the buying behavior and habits of customers in Mainland China.
Therefore, since their first entry in Chinese market, Carrefour decided to adopt
fresh-market style for vegetables, fishes and other seafood, and to display the above
products at lower prices in a better and cleaner environment (Child, 2006). This
undoubtedly provides a fresh market image that Chinese customers are accustomed to.
In addition, Carrefour also believes that customers group for each store are different
and unique, so Carrefour organize each store differently to adapt the needs of their
local customer group in terms of products varieties, and their places and orders on
shelves, and most of these adaptation decisions are made by local store management
quarter-hour ahead of the customers, which means that the products will not be too
advances or too late (Child, 2006). For some new but not too advanced products,
suppliers are believed to be strained (Li 2004; Yan, 2003). Li (2004) argues that
Carrefour often reaps profits by charging suppliers’ administration fees and asking
created by Carrefour in Chinese retail market, and if a supplier would like his
products enters Carrefour hypermarket, the supplier needs to pay six different kinds of
fees that may reach 36% of expected sales of his products (Li, 2004). In 2003,
Shanghai Seed and Nut Roasters Association proposed to stop supplying to Carrefour
in order to protect the benefits of more than 5000 members in the association due to
some of Carrefour stores transfer the loss of discounting, product wear and tear as
well as negative balance of proposed sales to suppliers. This inevitably leads to more
costs to suppliers.
local governments. Carrefour’s remarkable volume of goods purchase win favor and
support from local government, as it generates a large export profit margin for local
with Chinese central government. The main reason is believed to be that, in order to
realize its rapid strategic expansion, Carrefour disregards the regulations on foreign
retailers from central government, and exploit the loophole of the regulation
differences between local governments and central government (Yan, 2003). Chinese
central government was annoyed by this, and hence put Carrefour in the blacklist and
strategies in China. This was not resolved until Carrefour sold its illegal shares in its
joint ventures and announced the decision to establish 10 sourcing bases in China for
Similar to Wal-Mart, Carrefour also purchases most of its goods within China.
However, each store of Carrefour has around 85% of its stock procured locally and
has them distributed directly to each store. Carrefour believes that this flexibility of
purchasing strategy does not only cater the needs of local customers, but also can
established 11 sourcing bases in big cities in China since 1995 and plans its 12th
Shanghai, Guangzhou and Wuhan; each store is also empowered purchasing rights for
delay of information system development in China brings higher costs and difficulties
to large retailers as most suppliers are still at the stage of workshop that are unable to
enable Carrefour to save costs on distribution as well as catering the different needs of
Carrefour established its first Carrefour China Institute in Asia, and it aims to train
Chinese staff to take positions with more responsibility. Training covers staffs,
supervisors, department managers and mandarins, and provides both general and
addition, to retain trained and talent people, Carrefour needs them to sign a three- or
five-year contract: any staff who go to work with a competitor have to pay back the
money Carrefour spent on training, and that is a huge amount of money; but if staff
stay for five years and more, they are given a super bonus that is several times of
salary (Child, 2006). This significantly reduces employees’ turnover rate in Carrefour
China.
Carrefour China makes effort on being an enterprise citizen with full responsibilities
on society all over the world, such as actively sponsoring for public welfare events
and community building. In 2004, Carrefour China was awarded as Top Ten Foreign
established Carrefour (China) Food Safety Fund Foundation, whose aim is to promote
highly interacting with Chinese government policies and market conditions. Some of
these strategies lead a competitive position for Wal-Mart or Carrefour, while some
need to be adjusted for further and better development. This chapter will firstly
compare and contrast the similarities and differences between strategies adopted by
Wal-Mart and Carrefour. The second part of this section will explain the link between
the resources and capabilities that they possess and the strategies they adopted by
Both Wal-Mart and Carrefour entered China in the mid-1990s, and there are both
similarities and differences of the strategies adopted by the two giants according to
the previous chapter. This section will provide an assessment of the two giants’
with local companies. Before 2004, when Chinese central government cancelled
limitations on foreign retailers’ entry mode, joint ventures were the only mode that
foreign retailers can choose. Although the entry modes are chosen according to the
government regulations, both Wal-Mart and Carrefour expressed that they would still
enter in form of joint ventures if there were no such regulations. As listed in Table 2.1,
foreign retailers can benefit form local partners’ knowledge of the host country on
Therefore, it is probably safe to argue that joint ventures are the optimal entry modes
Although the entry modes that two giants adopted were the same, there are differences
in details. First, Wal-Mart formed a joint venture with Shenzhen International Trust &
Investment Co., Ltd, China, and followed government regulations strictly. However,
Carrefour exploited the loophole of regulation, and formed a nominal joint venture
with Zhongchuang Commercial Company, China, but controlled most of shares and
large a large scale in a short period in China (Li, 2004). By controlling more shares
In addition, Wal-Mart entered China in 1996, and Carrefour entered in 1995. Although
there is only one-year difference, the government policies on foreign retailers changed
were only allowed to enter 11 cities throughout China. However, in 1996, Chinese
central government allowed foreign retailers to enter all provincial cities and some
other cities. This early entry also provides Carrefour first-mover advantages by earlier
establishing strong brand reputation and stable customer groups. Wal-Mart’s later
Indeed, before its entry into China, Wal-Mart had prepared for four years and made
great efforts. In 1992, Wal-Mart received a charter in Chinese retail industry, and set
up its agency in Hong Kong to conduct researches on Chinese retail market. The
researches. Carrefour, on the other hand, entered Taiwan firstly where the cultures as
well as customers preferences and buying habits are closely similar with those of
Mainland China. After learning and gaining successful experiences in Taiwan, their
entry was easier and more confident, especially for future expansion.
Obviously, Wal-Mart and Carrefour are the largest two retailers in the world, and they
have strengths and powers to expand aggressively to become the market leader in
Chinese retail industry. However, during more than 10 years development in China, at
the end of 2006, Carrefour and Wal-Mart ranked only the 6th and 14th respectively,
Before end of 2006, both two giants expanded through opening new stores. At the end
of 2006, Carrefour ranked the 6th by opening 95 new stores and Wal-Mart the 14th by
opening 71. This market structure changed when Wal-Mart acquired Trust-Mart which
have101 stores. This is the first acquisition for Wal-Mart in China, and did push
According to Hill (2004) there are advantages and disadvantages for both opening
new stores and acquisitions. By establishing a new store, on one hand, foreign firms
could have a greater control over the forms of its subsidiary stores such as cultures,
operating routines and so on; on the other hand, it is slow and risky to establish new
stores. Acquisitions are quick to execute, preempt competitors and less risky, but they
also fail because of clashes between cultures in two firms, difficulties in integrating
resources of two firms, and inadequate preacquision screening. On the early stages of
Wal-Mart and Carrefour’s entry in mid-1990s, the competition in Chinese retail
industry, especially in the supermarket niche, was not intensive, and hence it allows
Wal-Mart and Carrefour to spend time on expanding by opening new stores. This
provides advantages for two retailing giants to build its brand image and reputation in
Chinese retail market. Today, as the retail market in China opening further, the
considered to cost time and money, so acquisition becomes a competitive option for
Store locations are important for retailers. Wal-Mart and Carrefour adopted different
strategies for locations. Wal-Mart prefers to locate stores in second tier cities, and
their strategy is to start in smaller cities and then move to larger ones. Carrefour,
however, particular emphasizes its stores to be located in big cities and city centers or
prosperous areas. China is still a developing country with a relative low level of
people’s income. Therefore, more developed cities and city centers are still the
mainstream of higher consumption levels that lead to higher sales for retailers.
different positioning strategies, which can be seen from their marketing slogans
respectively. Wal-Mart emphasizes “Low Prices Everyday”. It conveys to customers
that it is always the right choice to shop at Wal-Mart since the prices are cheap
everyday. Carrefour, on the other hand, with “Happy Shopping in Carrefour”, aims to
emphasizing its good shopping environment. The Chinese name of Carrefour is Jia Le
Fu, in which Jia means family, Le means joy, and Fu means happiness. It expresses
the shopping environment in Carrefour will bring joy and happiness to families shop
there. However, the facts contradict with positioning strategies for both of Wal-Mart
and Carrefour.
As prices are concerned, both retailing giants understand that prices are vital for
Chinese consumers. In the retail industry, the main sources of costs are procurement
and stock management. Wal-Mart takes its advantages of its advanced information
system that can reduce the costs of sending and receiving information and orders with
suppliers, as well as the costs of stocking. Wal-Mart also stops charging products
administration fees to suppliers so that pay less when purchasing from suppliers as
these suppliers bear less cost. Carrefour, however, lower the prices of people’s
prices are low. Although Wal-Mart emphasizes its low prices in its slogan, it is found
that prices in Wal-Mart are not lower enough or even higher than those from
Carrefour, and it is also widely agreed by customers (Qin, 2004). The slightly lower
prices of products enable Carrefour to gain more market shares than Wal-Mart.
For shopping environment, Wal-Mart wins Carrefour slightly. This is the
differentiation strategy that firms provide superior value within the industry to
customers (Cullen and Parboteeah, 2005). Wal-Mart always has tight control over the
products they sell. All products are purchased directly from suppliers, even some of
them from another country. Wal-Mart prohibits close and abnormal relationships
between purchasers and suppliers to avoid corruption that lead to unsatisfied product
qualities. However, there have been many scandals concern with Carrefour’s products
qualities. The main reason is that Carrefour pursues flexibility and low costs purchase
and not all products are purchased from suppliers, and hence the quality of products
cannot be assured for customers. In addition, as most of stores are located in city
centers, there are also complaints on the car parking problems. The unmatched actual
Carrefour. This differentiation allows firms to charge premium prices on the superior
Having a good relationship with customers, suppliers and, especially with government
of China is important for foreign enterprises in China. They are all determinant factors
retailers. Therefore, both Wal-Mart and Carrefour adjust their selling models
especially for foods, to cater the buying habits of Chinese customers. On its first day
of entry, Carrefour adopted fresh-market style for vegetables, fishes and seafood.
habits, as at the early stage of development Wal-Mart still relied on the same form of
selling food in America or Europe, and sold vegetables, dead fish and seafood in
Styrofoam and Cellophane. Today, both Wal-Mart and Carrefour adopted the Chinese
traditional wet market selling models but provides a better shopping environment for
customers.
Wal-Mart and Carrefour adopted totally different strategies in dealing with suppliers.
administration fees to suppliers, and allows suppliers to yield more benefits. Carrefour,
fees were created and promoted by Carrefour in Chinese retail industry and become
the main source of retailer’s profits in China. In addition, Carrefour also charges many
other various kinds of fees to suppliers, which leads to lots of complaints from
while Carrefour does not. It is believed that harmony relationships with suppliers
As relationship with government is concerned, both have good relationships with both
local and central governments. As both are two retailing giants in the world, and
hence they make great contribution to local and national economy and receive great
favors from governments. The only difference lies in the attitudes towards
following regulations from its first entry until its expansion and development, whereas
Carrefour often exploits the loopholes of these regulations to reap its benefits. In 2001
Carrefour was warned for its disregard of regulations and was forced to stop further
for both political and economic reasons. Therefore, when entering and developing in
China, foreign firms need to understand, respect and follow the government
regulations.
Sourcing and logistics are important for retailers. Huffman (2003) suggests that the
effective management of sourcing and logistics is always high on many retailers’ lists
of goals. Wal-Mart and Carrefour adopted totally different strategies for their sourcing
and logistics. Both of the two giant retailers have more than 80 percent of their
headquarters, and goods are then distributed to each distribution center. Wal-Mart has
three distribution centers in China for all of its stores. Carrefour, however,
therefore each store have their own rights and decisions on their goods purchasing and
stocking.
There are both advantages and disadvantages for the two strategies. Centralized
sourcing and distribution would be better in terms of products quality and delivery
stores that Wal-Mart has in China is still small, and the costs of such strategies would
that the products quality and delivery cannot be assured. However, it is more suitable
Both Wal-Mart and Carrefour attach great importance on its employees training and
retaining. As argued by Cannon (1995), although managers from host countries may
have good management knowledge, skills and potential, they lack cross-cultural
exposure and they only learn through their own experience. Therefore, both Wal-Mart
and Carrefour send good and potential management employees to their head offices in
parent countries to learn for their future career development. Employee motivation is
also important for firms’ human resource management. This would reduce the rate of
employees’ turnover and help talent retaining. Wal-Mart, for example, awarded
employees who worked for 10 years on its 10th anniversary celebration. Carrefour, use
Corporate social responsibility is closely related to business ethics, and it refers to the
idea that businesses have a responsibility to society beyond making profits (Cullen
and Parboteeah, 2005). Both Wal-Mart and Carrefour devote much time, money and
other public activities. These do not only lead to better environment and society in
China, but they are also ways to marketing themselves and build brand image in the
society.
capabilities, the opportunity set for each firm is distinct from others. Therefore, the
strategies are planned depending on resources and capabilities a firm possesses. In the
last section of this chapter, strategies adopted by Wal-Mart and Carrefour are
compared and contrasted in terms of six aspects. This section will use resource-based
theory as basic principle to explain the relationship between resources and capabilities
Hill (2004) argues that the choice of entry modes depends on the type of know-how
Wal-Mart and Carrefour both adopted joint ventures as their entry modes and also will
continue with this method during their further development. Wal-Mart and Carrefour
both are successful and ranked the first two large retailers in the world. Their
difficult to imitate. On the other hand, by forming a joint venture with local partners,
the two retailing giants are able gain valuable knowledge on Chinese market,
economic and political conditions. Therefore, joint ventures are good options for their
entry. Through joint ventures, not only their valuable resources—management
know-how is applied while protected in Chinese market, but they also gained valuable
During the expansion of Wal-Mart and Carrefour, they adopted different store location
strategies, and the speed of expansion of Carrefour is slightly more rapid than that of
first store outside France in Belgium in 1969, and now Carrefour has presented in 30
countries globally. Wal-Mart entered Mexico and opened its first oversea store in
1991, and now there are only 15 countries that Wal-Mart has entered. In addition, the
China.
As the choice of stores location is concerned, Wal-Mart would more likely to choose
smaller and second tier cities in China, whereas Carrefour would more likely to
expand to larger and more developed cities. For Wal-Mart’s choice, this is also due to
the past experiences during its development processes. Wal-Mart started in a small
city in Arkansas, US and continues to develop new stores in smaller cities more than
in big cities to avoid intensive competitions. As Lin and Liang (2001) suggest,
talents and accumulates experiences. This has been traditions for Wal-Mart to develop
development strategies.
Both Wal-Mart and Carrefour adopt cost leadership strategy and offer low prices in
order to capture more market shares. As argued in previous chapters, cost advantages
research and development. Wal-Mart and Carrefour are both large retailers in China.
As most of their products sold worldwide are purchased in China, their buying powers
are relative high than other retailers. Therefore, this enables the two retailing giants to
purchase at lower prices. In addition, they also enjoy the benefits from advertising,
because their larger coverage of their advertisement enables lowers advertising costs
per consumers. Wal-Mart also possesses advanced information system that enables its
every store where employees wander around to replenish goods and see if any
assistance is required (Lin and Liang, 2001). Wal-Mart also especially regulates its
staff to keep “ten-foot attitudes” and “eight-tooth smiles” for customers. Wal-Mart
insists on ordering and purchasing goods from suppliers directly to assure their
qualities. It also pays more attention on customers’ complaints and requests. With
During the development of Wal-Mart and Carrefour, both retailing giants make great
efforts on its local adaptation. Carrefour adapted on the first day of its entry, such as
food selling as well as exploiting the loophole of government regulations. These are
its distinct strategies for its expansion and development in China. Regardless of
whether Carrefour’s strategies are good or not, compared with Wal-Mart, Carrefour is
more adapted to Chinese market environment and hence expands and develops faster.
advantages for Carrefour’s local adaptation strategies. Although Wal-Mart took four
years in researching Chinese market, economic and political condition, these research
results are not unique, and they can be obtained or imitated by any competitors.
strategies.
The sourcing strategies adopted by Wal-Mart and Carrefour are totally different. This
is also due to the difference resources that each of the two retailing giants possesses.
Wal-Mart is famous for its logistics system and it is widely considered as one of the
most important factors that lead to global success of Wal-Mart. Take Wal-Mart in US
for example, a distribution center with satellite system is capable to distribute for 120
stores, and Wal-Mart use its own lorries to distribute goods to stores that are no far
US, it is believed that with the increase of the number of stores, Wal-Mart’s
sourcing strategies, and hence the distribution of goods relies on local sourcing base
know-how and also the lower costs of such a strategy. Therefore, although Wal-Mart
costs more money and time on its distribution system, it may benefit more than
6.3 Summary
Carrefour respectively. There are both similarities and differences. Generally, the
strategy that Wal-Mart adopted is more smooth and steady, enforcing long-term
These strategies adopted by each firm depend on various factors, such as government
regulations, market conditions and so on. However, they are mostly affected by the
resources and capabilities that each firm possesses. Since each firm has its unique
bundle of resources and capabilities that determine opportunity set for each firm,
although Wal-Mart and Carrefour are in the same industry with the same context, the
strategies adopted are different and it is determined by the resources and capabilities
The previous chapters have analyzed and compared the strategies adopted by
Wal-Mart and Carrefour, and provided the explanations of links between the strategies
competition in Chinese retail market especially after China’s entry into WTO, foreign
retailers need to plan and implement their strategies tightly according to market
conditions and their firm-specific resources. This chapter will first conclude the
findings of aims and objectives of this research. A conclusion will be drawn in the
following part. There are also recommendations to both Wal-Mart and Carrefour for
their future development in China. At the end of this research is the limitations of this
research.
the relationship between firms’ strategies and its possessed resources. Through the
China, comparing and contrasting the similarities and differences of these strategies
adopted, and combining the resource-based theory with the comparative studies,
retail market gradually become open to foreign retailers, especially after Chinese
entry into WTO. Therefore, the retail market in China also evolves with these changes.
Based on Porter’s Five Forces framework, in Chinese retail market today, the internal
rivalry is highly intensive, potential entry level is medium to high, the influence of
substitutes and complements are medium, suppliers of retailers have low to medium
level of power, and the power of customers are medium. Therefore, it can be
adapts its strategies to the local market conditions and government policies. Carrefour
also adapts its strategies according to Chinese market condition. However, Carrefour
pursues aggressive development strategies and sometimes disregards and exploits the
Through a comparative study of the two retailing giants’ strategies, it is found that
there are both similarities and differences between their strategies. The choices of
their strategies are selected largely based on the resources and capabilities they
after China’s entry into the WTO. This research employs case studies research method
and uses Wal-Mart and Carrefour and Chinese retail industry as representatives to
illustrate foreign firms’ entry and development in China. It can be found that although
the retail market in China is of great potential, the competition is very fierce. In
government and paying attention on government regulations are very important for
foreign investors. Therefore, foreign firms need to plan its entry and development
strategies based on economic, market and political conditions. However, the resources
and capabilities are the critical factors in determining strategies, as they provide
unique opportunity sets for each firm. Through the analysis of strategies of Wal-Mart
and Carrefour, it is found that both giant retailers plan strategies according to local
advantages on their local adaptations. In addition, their successes also rely on the
strategies exploited based on their resources and capabilities. However, there is also
Undoubtedly, after China’s entry into the WTO and policies are more open to foreign
investors, more and more foreign investment come into China, and they bring
entrants are successful worldwide. However, business models and experiences proved
resources and external environment are both critically important for foreign investors.
From the previous analysis, there are both similarities and differences between the
strategies adopted by Wal-Mart and Carrefour. Some of the strategies may lead to
competitive advantages, while others are not. If the strategies that do not lead to
benefits, the firm needs to consider how to adjust it for its future positive development.
If it is the unique resources and capabilities that lead to competitors’ success, the firm
some recommendations are made for their further development in the context of
China’s entry into the WTO and further opening of the retail sectors.
Wal-Mart’s strategies are considered to focus on long-term development and they are
there are still some strategies to be adjusted or paid more attention to for its better
development in future.
First, to be more flexible. Wal-Mart keeps developing very steadily, and it can be
proved by its expansion and distribution strategies. Wal-Mart still focuses more on
opening new stores in second tier cities, and the number of stores in developed and
large cities is still low. However, although “circumvent big cities” strategies are used
developed cities and prosperous areas. In addition, it has been more than 10 years
since it entered China, it is time for Wal-Mart to invest more in large and prosperous
cities and areas. Distribution systems of Wal-Mart also need to be more flexible. Due
to the small number of stores in China, it is still difficult for Wal-Mart to realize
These inevitably increase the delivery time and costs. Therefore, Wal-Mart should
consider a more flexible logistic system to lower the costs of distribution currently.
In addition, Wal-Mart acquired Trust-Mart at the end of 2006, and thus Wal-Mart
needs to make effort on integrating resources of the two firms to achieve greater
market shares as well as profits, but it still may be great challenges for Wal-Mart.
Learned from Wal-Mart’s acquisition experiences worldwide, if Wal-Mart acquired a
profitable firm, then the acquired firm will stay profitable, such as acquisitions in
Canada, Mexico and UK; if Wal-Mart acquired a failed firm, then the acquired firm
will continue to make loss. Trust-Mart that Wal-Mart acquired is a firm with
the integration of the resources and capabilities. Resources integration is important for
Carrefour’s strategies are more aggressive since its first entry into China, and hence
the expansion and development of Carrefour are more rapid and fluent than those of
Wal-Mart. However, its rapid and aggressive expansion makes Carrefour neglect
The most important issue is that Carrefour needs to attach importance on the
received more complaints from customers and suppliers, and warning from
cheaper than Wal-Mart, the customer services are also vital for survive of a retailer. In
addition, Carrefour always reaps great profits from suppliers, and hence suppliers can
obtain a small profit margin. Therefore, it is dangerous for Carrefour if these suppliers
leave and stop supplying in the future especially when Wal-Mart have a stronger
buying power.
In addition, Carrefour needs to focus on its long-term development and plan strategies
having an integrated supplier network for its sourcing and distribution centers should
be more important than opening more and more new stores. Empowered purchasing
and distribution rights and management hinder the delivery quality of goods, which is
information systems on communicating with suppliers and stocking, which will save
This research aims to provide an overview of the relationship between the firm
strategies and its possessed resources and capabilities. It uses Wal-Mart and Carrefour
as two cases representatives and studies their activities and strategies in Chinese retail
market. The research relies on qualitative research methods by collecting data and
company reports and etc. These public published sources of information improve the
data and information would be collected and two cases would be studied better and
more completed. In addition, this research only chooses two cases to study their
strategies and possessed resources and capabilities, so if there were more cases such
as Tesco and Makro, the research would be more convincing. Furthermore, interviews
and surveys are important methods in case studies, and if there were interviews or
surveys conducted the research would be more inductive. Moreover, the data and
information may not be the latest, and some of the latest reports does now allow to
access. As a result, the analysis and recommendations are based on the strategies and
activities accessible, and therefore they may be preliminary and more detailed and
study on the resources possessed by domestic retailers and foreign respectively and
how theirs strategies differ form each other, and their future development responding
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