Professional Documents
Culture Documents
Case Study
2. Examine and analyze the entry and expansion strategies of Wal-Mart in Japan
4. Understand Wal-Mart's efforts to integrate its global best practices with local
strategies in Japan
Wal-Mart Stores Inc., Japanese Retail Industry, Every Day Low Prices EDLP,
Carrefour, Daeiei, Aeon Co., Sam's Clubs, Consumer Behavior, Low cost strategies,
Localization Strategies, Pricing Strategy, IT systems, Supply Chain and Logistics
Please note: This case study was compiled from published sources, and is intended to be used as a basis for
class discussion. While care has been taken to ensure correctness of the facts, Accuracy of information cannot
be guaranteed.
1. Introduction – Wal-Mart in US Retail Market
Wal-Mart is the world’s largest retailer with $345 billion in sales for the fiscal year
ending Jan. 31, 2007. Wal-Mart Stores, Inc. includes Wal-Mart Supercenters, discount
stores, Neighborhood Markets and SAM’S Club warehouses. Wal-Mart employs 1.9
million associates worldwide and more than 1.3 million in the United States, making it
not only one of the largest private employers in the U.S. Wal-Mart has been a dominant
player in the US retail market which is most competitive in the world, a fact well-known to
British retailers Sainsbury's and Marks & Spencer which failed to attract US customers.
Wal-Mart has more than 7,000 stores and wholesale clubs across 14 markets.
Wal-Mart operates more than 4,000 facilities in the United States and more than 2,800
more in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Guatemala,
Honduras, Japan, Mexico, Nicaragua, Puerto Rico and the United Kingdom. In 2007,
Wal-Mart became No. 1 on the FORTUNE 500 list and in 2003 and 2004 Wal-Mart was
named “Most Admired Company in America” by FORTUNE magazine.
Sam Walton started Wal-Mart in 1962. He and his wife, Helen, put up 95 percent
of the money for the first Wal-Mart store. Sam believed that the American consumer was
shifting to a different type of general store and discount stores would be very successful.
In the 60s, Kmart expanded across the country, while Wal-Mart had only 15 stores. But
this changed in the 70s when public offering created the capital infusion that grew the
company to 276 stores in 11 states.
In the 1980s, Wal-Mart became one of the most successful retailers in America.
Sales grew to $26 billion by 1989 at 1,400 stores, compared to $1 billion in 1980. Wal-
Mart Stores, Inc. branched out into warehouse clubs with the first Sam's Club in 1983.
The first Supercenter, featuring a complete grocery department along with the 36
departments of general merchandise, opened in 1988. Wal-Mart invented the practice of
sharing sales data via computer with major suppliers, such as Proctor & Gamble.
3. Wal-Mart – Timeline
Wal-Mart Timeline
1962 Sam Walton started Wal-Mart in 1962
1970 First distribution center in Bentonville, Arkansas
1972 Listed on the New York Stock Exchange
1970s 276 stores in 11 states
1975 Famous 'Wal-Mart Cheer' was introduced by Walton
1978 Wal-Mart purchased the Hutcheson Shoe Company
1980s Sales grew to $26 billion by 1989 at 1,400 stores
1983 First Sam's Club
1988 First Supercenter
1991 First international store in Mexico
1992 Wal-Mart entered Puerto Rico
1993 Wal-Mart formed an international division
1994 Expansion into Canada
1995 Entry in Argentina and Brazil
1996 Entry in China
2002 Wal-Mart acquired a 6.1 % stake in Seiyu
2003 Majority interest in Seiyu, making it a Wal-Mart subsidiary
2007 Wal-Mart’s 3000th international store
.
4. Wal-Mart: Quick Facts
The world's largest retailer Wal-mart Stores Inc. (Wal-Mart) invested about 850
million USD for full ownership of struggling Japanese subsidiary The Seiyu Ltd (Seiyu).
Wal-Mart now has secured 95.1 percent of shares in Seiyu. Wal-Mart plans to continue
to seek the remaining shares and then delist Seiyu from the Tokyo Stock Exchange.
Over the decades, Wal-Mart has emerged as the largest company in the world
(revenue-wise) and a dominant player in the retailing industry by successfully adopting a
cost leadership strategy. Ever since Sam Walton began operations in 1962, he believed
that retailing was a volume-driven business, and WalMart stores could achieve success
by offering consumers discounts i.e. better value for their money. Sam opened discount
stores in smaller towns (average population of 5,000) to capture market share while
leading retailers like Sears Roebuck & Company, K-Mart and Woolco largely neglected
them. Later, Wal-Mart expanded into metropolitan cities and entered into food retailing.
Investments in IT helped Wal-Mart manage its supply chain better and sustain its
growth. Wal-Mart was among the first companies in the retailing industry to use IT to
offer value-added services to customers. Wal-Mart's product prices were generally lower
by 20% than those of its competitors. Many believed that Wal-Mart's aggressive growth
and its strategy to kill competition could only be stopped by filing an antitrust suit.
Seiyu believes that offering permanent discounts across all stores that have
made Wal-Mart so competitive and dominant in the U.S. is not possible at this time as it
has struggled to cut costs. And Wal-Mart strongly believes that offering deep discounts
is essential to keep customers coming back. One of the reasons, Seiyu has not been
able to cut costs is because Japanese consumers typically buy more fresh products,
while most farms and fisheries in Japan are small, family-run operations which offer
better deals on smaller orders rather than on larger ones. And what sells well in
Hokkaido is often eschewed in Kyushu, so retailers have to do lots of local
customization, which creates logistical headaches that can cut into profits. Seiyu
continues using newspaper inserts, called chirashi, an established practice at Japanese
retail outlets. If not for weekly special discounts the prices are relatively high. Seiyu will
keep using the flyers until customers no longer require wooing.
Wal-Mart has seen full-year losses at its Japanese subsidiary Seiyu widen in
2006, to 55.79bn yen ($468.8m; £240m), against a 17.7bn yen loss in 2005. While
convenience stores and specialty retailers have done well, large retailers like Aeon Co.,
Japan's largest retailer, and Daiei are also unable to lower its prices as well. This inspite
of Aeon's efforts to cut costs by investing into new computer systems and strategy to
bypass middlemen. Even Carrefour, world's second largest retailer struggled in Japan
and in 2005, there were rumours as to it selling its 8 hypermarkets.
"Everyday Low Prices cannot be achieved overnight, but we have to meet the
challenge. Otherwise, there will be no rebirth of Seiyu." - Seiyu President Masao Kiuchi
(2005). Seiyu is making an effort to offer both low cost and expensive product offerings
to its customers. By using Wal-Mart's IT systems in its stores, Seiyu believes it can
analyse consumer behaviour and purchasing patterns.
Store Format
Average 107,000 square feet, employ an
Wal-Mart Discount Stores average of 225 associates and offer 120,000
items.
Developed in 1988
More than 2,300 nationwide in US
Wal-Mart Supercenters Average 187,000 square feet, employ 350 or
More associates on average and offer 142,000
different items.
First opened in 1998,
More than 120 Neighborhood Markets,
Wal-Mart Neighborhood
Average 42,000 square feet
Markets
Employ 95 associates on average and offer
about 29,000 items.
More than 584 Sam’s Club locations
Average 132,000 square feet
Sam’s Club
Average of 160 to 175 associates and offers
approximately 5,500 different products
7. Related Reading