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Wal-Mart Stores: "Every Day Low Prices" in China

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Kaplan University
Graduate School of Business and Management
GB520 Strategic Human Resources

Wal-mart Stores:
“Everyday Low Prices” in China

Prepared by Keith Flores

May 25, 2010
Professor
Dr. Rebecca Herman

Summary of the Case The Arkansas based company Wal-Mart had been attempting to gain a foothold in China since 1996 and has encountered a variety of problems in doing so. Initially, the company was hindered by Chinese business regulations which were saturated with layers of bureaucracy and forced the US retailer to go slowly. Meanwhile, its chief competitors were bending the rules to their advantage and making greater progress in establishing a secure foothold in the world’s largest consumer market. Wal-Mart was faced with logistical difficulties, regulatory hurdles, and an apparent need to adjust their business model to better fit the Chinese consumer culture. The result was a very challenging business environment that would put the retailer’s business model to the test.
Major Issues
One major issue that Wal-Mart faced was that of molding their domestic business model to fit the Chinese consumer culture. In the United States, Wal-Mart had seen great success by targeting smaller communities that were underserved by their chief competitors K-Mart and Woolworths. The basic format involved building a store in a rural location and then driving out competitors by making it impossible to compete with the retail giant’s exceedingly low prices. Once they had achieved dominance in a market, they would maintain their hold by offering a wide variety of goods at the lowest possible prices. The intent was to bring brand names out of dense population centers and into the smaller markets without bringing the associated costs.
However, in China strict government control of market access prevented Wal-Mart from building stores in smaller markets.…...

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