wal-mart in Japan

WALMART STRUGGLES IN JAPAN

Group 1

Jain C OommenSusanna Sara SamuelArjun C B

ABOUT WALMART

Walmart is an American multinational retailer corporation founded by Sam Walton in 1939 known for discount retailing

Large discount department stores and warehouse stores

World's third largest public corporation (Fortune Global 500, 2012)

Largest retailer in the United States, and in the world

8,500 stores in 15 countries, under 55 different names (UK - Asda, Japan - Seiyu, India - Best Price)

Mixed results in investments outside North America: UK, South America, China are successful Germany, South Korea were unsuccessful

Organizational Structure

Wal-Mart follows a Divisional Organization Structure at the top level and a matrix organizational structure at the store level.

Divisional Organization Structure: Earlier  Walmart followed Geographical Structure but now they have shifted to Market Structure.

Matrix organizational structure

Business strategies Produc

t

Wal*Mart

Stationery

Food

Home appliances

Household chemicals & consumables

Health &beauty aids

Paint &hardware

Sporting goods

Automotive

Business strategies

Place:

pattern of expansion:pushing from the inside out

Price:

Promotion:

rural areas and Small towns

“Always low prices-Always”

“Everyday-low-prices”

-few promotion: - advertising expense: 1.5% of sales (while 2.1% for direct competitors)

Key source of walmart’s competitive advantages

LOW PRICE

Successful Vendor Relationship

Efficient Communication

Network

Value Employees Most Efficient

Operation ManagementCustomer-Oriented

Successful vendor relationship purchasing partnership with suppliers

Efficient purchasing

Sharing information electronically effective communication low

cost

Vendor managed inventory system minimize inventory cost

Value employees most

• “Yes We Can Sam” suggestion program

•“Store within a store”

•Shrinkage incentive plan

•Profit Sharing Scheme

•Management Training Program

Motivation HighProductivity

LowerCost

Efficient operation management

• Distribution Network-Hub-and-spoken distribution network

-Owned warehouses

-Cross-docking

•Operating system-Uniform Product Codes (UPC)

-Satellite system

HigherProductivity

LowerCost

Distribution and operation of walmart

Distribution of walmart Each Distribution center divided into different section basis of

quantity of goods received. 40 regional distribution centers for import flow and more than

140 distribution centers for domestic flow  Stores are saturated around the distribution centres so

reduced transportation cost Hub and spoke distribution network High inventory turnover rate ,once in every two weeks. Some cases vendors supplied directly to stores. Large-scale use of sophisticated technology such as Bar code,

hand held computer systems (Magic Wand) and now, RFID. Every employee had information regarding products at

distribution center. They make 2 scans- one for identifying the pallet, and other

to identify the location from where the stock had to be picked up.

The hand held computers guide employee to the location of the specific product.

Segmentation, Target & Positioning

Segmentation –

Target - Walmart’s credo is, “save money, live better” this summaries their target market, the lower-middle class and the poorer. (Low income consumers).

Positioning

Walmart uses market segmentation to determine where to open their stores and what items to stock it up with. 

Product strategy - Low prices, In-stock positions, Customer serviceService strategy - Respect the individual , High standards of service Operation strategy - Short response time , low inventory , Cultural adaptation Competitive strategy - customer satisfaction , Mkt Penetration By Selecting Most Convenient Locations Acquired Or Constructed– Logistic Efficiency: Speed To Market

Why Walmart became successful in America

• Competitively Reduced Cost (Puts All Gains & Savings Into Reducing Prices)

• Consumer-centric Sales• Localization• Co-operated Suppliers• Store-manager Autonomy Focus on IT investments• One- Stop Shopping • Keep Customer Shopping: Added Food & Services• Full Stock Register• Full Product Line• Merchandising Ladder• Private Branding

COUNTRY ENTRY STRATEGY

REMARKS POSITION

MEXICO 50:50 joint venture Made mistakes in product mix recovered successfully

1

BRAZIL 60:40 partnership with lojas americana

Tough competition, made mistakes in product mix

failed

Argentina 100% owned green field stores

Argentina is a small economy

3

Costa rica, Guatemala, Honduras , Nicaragua

Acquisition of central american retail holdings company

adapted to the local economy and there was a high degree of localization.

1

Hong kong Joint venture Wrong entry strategy disaster

Indonesia partnership Political crisis failed

Korea acquisition Emart market dominance

After 7 years got out

SWOT ANALYSIS (GLOBAL)Strength

• Efficient supply chain management• Targeted marketing• Service innovation and technology• Growth through adaptability.• E-tail’s continued development• Least cost of packaging • strong penetration strategies• Infrastructure (financial strength)

Weakness •Late entrant in international market.•Unable to adapt to different countries•Were unable to handle media•High law suits against the company.•Low penetration in European union

Opportunity•Many countries are still left•Unorganized retail•Globalization (diminishing trade barriers)•Cold Storage market•Increase in consumer purchasing power•E-business

Threats•Terrorism•Competitors•Negative publicity•International laws against anti dumping•Campaign against anti competitive practices

WALMART- JAPAN SCENARIO

Entered in Japan:-

1990 :- Real estate prices in Japan declined.

Prompting many foreign retailers to enter the

country.

Wal-Mart started exploring the Japanese market

in 1997. 

2002-03:-  Wal-Mart-Seiyu Partnership.

Entry strategy in JapanWalmart entered Japan in 2002.

• Usual foreign strategy:

• License tie up

• Joint venture

• Wholly owned subsidiary

• Entry to Japan purchase of a 6.1 percent stake in the 371-store Seiyu chain, a struggling Japanese retailer. It’s mission was offer low price and value added shopping experience to it’s customers.

• First store at numazu which is a downtown

• Why seiyu???

• 5th largest retailer in Japan- speed of entry into the market

• Well established network of retail chain ( 1962) higher market penetration

• The company was in crisis , so it becomes easy for walmart to acquire it.

Why japan??

-sophisticated consumers with high levels of disposable income -a nation with high demand of food imports. ( self sufficiency rate 41% only)

Japan’s Retail Sector Attracts throughout Asia- accounts for 55% of Asian market.For foreign companies, Japan’s market holds significant opportunities for advancing into other Asian markets.

-The economy of Japan is the third largest in the world by nominal GDP ( 4.628 trln $) the fourth largest by Purchasing Power Parity and is the world's second largest developed economy. Japan had a 451$ Bn retail industry.

Retail industry in Japan

As can be seen from the pie chart, Walmart entry to Japan as General Supermarket / Department Stores retail model means that it’s entering a relatively small market, at least when compared to other forms of retail in Japan.

Wal-Mart only has 2.6 percent market share and Japan accounts for just 2.5% of Wal-Mart’s $443 billion in revenue in 2011 (source).

Challenges in JAPAN

Geographical Japan is a small country with limited spaces. Small housings and apartment sizes, with high rent prices means that Japanese

would need to minimize their purchases. Cultural and demographic

Aging population Cultural differences Japanese tends to prefer quality over low prices High entry barriers for foreign retailers: strong bond between manufactures and

wholesalers so price controlled by them. Economical

Several small purchases. High operating costs, especially because of the prices of rent and buildings in

general. Inability to apply original supply chain model : Negative public image

Branding efforts by walmart

Social Media to Enhance Sales and Brand Reputation.

In store promotional activities organized different campaigns . eg: sageriku ( request down) campaign

To support EDLP (Every Day Low Price) strategy in Japan

Give our customers opportunity to indicate their preferences and provide a feedback

Enhance our sales and brand reputation in Japan

Competitors of walmart in Japan

• The types of competition in Japan include both domestic and international players.

• It’s biggest Japanese competitors are 7-Eleven Japan Co. Ltd., Aeon Co. Ltd., and Ito-Yokado Co. Ltd. As of 2008, all of these companies drastically outperformed Seiyu Ltd. (Wal-Mart).

• All of these companies have different strategies, much of their success can be credited to their experience in understanding how their country buyers and sellers interact.

• Two main international competitors are Carrefour from France and Tesco from the United Kingdom.

• These firms had similar challenges to Wal-Mart with their international expansions, but each faced them differently.

• Tesco made large investments in market research that allowed them to build stores that better met the Japanese consumer’s needs. Their cautious expansion and well thought out plans have helped them succeed in the Japanese retail industry.

Competitor analysis

WALMART New entry into

japan Poor relationship

with suppliers Poor knowledge

about culture and customer perception

7-11 JAPAN co ltd Already well

established in Japan

Strong relationship with suppliers

Good knowledge about culture and customer perception

SWOT ANALYSIS OF WALMART

Strengths in Japan

Strong brand name(benefit for entry)

Strong financial backup Identified and tied up with the 5th

largest retailer which made its entry easy.

Good IT infrastructure

Weakness in Japan

Inability to incorporate Japanese culture Difficulty in lowering costs since most farms

and fisheries in Japan are small, family-run operations that frequently offer better deals on smaller orders rather than on larger ones.

Difficulty in cutting costs out of its supply chain- a key to Wal-Mart’s success in the US

aging population Labor costs in Japan is comparatively higher Lack of prior market research

Opportunity in Japan Relaxed restrictions on retailers and changing

consumers attitude Japan’s $451 billion retail industry which is the

second largest in the world Third largest economy with a population of 127

million and one of the highest per capita income in the world

Unconsolidated marketo Too many small retailerso Wal-Mart can raise pressureo Opportunity to make its presence felt in Asia Pacific

Region

Threats in Japan

Consumers pay more attention on quality, service, stores, design and not just on price

Localized preferences(walmart business model of standardization)

Multi-layered traditional distribution system in Japan Large presence of small scale retailers Insecurity feeling developed in the minds of Japanese

consumers as a result of mass firing that happened Chinese products are not accepted by japanese

consumers Competition from domestic players like Aeon, Ito-

yokado

PEST ANALYSIS- Japan

POLITICAL Favorable entry regulations for foreign retail companies Favorable climate for mergers and acquisitions Low degree of violence and corruptions Distress among public regarding foreign intervention

ECONOMIC Recession climate in favour for walmart One of the highest per capita income Deflation climate in Japan favoured walmart

Cont..

SOCIAL Has a significant large aging population implying a small

and less willing work force Quality conscious japanese consumers Culture oriented customers Japanese consumers prefer to purchase fresh products in

small quantities at frequent intervals Japanese consumers have strong preferences for local

products

TECHNOLOGY Low resistance for technological up gradation East adaptation and rapid growth of internet

Comparison of American and Japanese model

Bulk purchasing to save costs.

No problem with EDLP strategy

Walmart establishes strategic partnerships with most of their vendors

Individualist walmart Variety and offers by

walmart accepted by American people

Small purchases Japanese tends to prefer

quality over low prices Walmart has to challenge

the unusually powerful Japanese suppliers and manufacturers to conform with its Walmart model.

Collective Japan. Variety offered by Walmart is

not attractive to Japanese.

AMERICAN MODEL JAPANESE MODEL

Walmart, now in Japan

Price: From EDLP, WMT is slowly trying to convince

consumer about their value pricing. Promotion:

In store promotions Prices are visibly displayed Fresh vegetables and fruits are visibly positioned

Positioning: EDLP to save money, live better

Our learnings

US was a saturated market for Wal-Mart and it was looking for opportunities in other countries.

Wal-Mart needs to adapt to the host countries culture rather than replicating American model.

Wal-Mart has to consider employee relations, especially in a foreign country.

Proper market study needs to be done before entering to the market. Gradual adaptation and development. Wal-Mart's communication inabilities – low cost does not mean low

quality.

THANK YOU