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Walmarts Successful Globalization Into the Chinese Market

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Walmart’s Successful Globalization Into The Chinese Market Stanley Armstrong Southern New Hampshire University

Abstract There has been an increasing enthrallment over global expansion across the globe. Likewise, there are many things that factor into making such an enormous decision a successful one. Some of these factors include, the strategies to which the business will use, what modes of entry they will take, and what are possible threats and opportunities that may arise. Choosing the right strategy to enter into a new market is key in determining the success of the company now and in the future. I. Introduction “Walmart Stores, Inc. was founded by American retail legend Mr. Sam Walton in Arkansas in 1962. Over nearly 50 years of development, the company has served customers and is now the world’s largest private employer and retailer, on the top of the Fortune 500 list. Walmart is among the most recognized global brands.” (Walmart China Factsheet) II. Global Expansion Lately, many large companies within the retail division who seek to increase their profits and hold a greater market share have decided to expand their companies globally. Global expansion has grown to the point where its not only attacking large companies, but has increased the efforts of those small-scale companies, those who are foreign to expanding internationally, and even those who have already ventured into international markets. There have been many up and coming retailers who have been successful with moving their business into the international sector. These companies have played an intricate part in opening the avenues for more retailers. There have also been, however, some downfalls to more established retailers attempting to expand internationally. These factors can be attributed to regulatory, legal and cultural challenges, competition, and attempting to change local shopping behavior (Fox, 2011) III. Walmarts business strategy in China The objective of Walmart in China was to become an independent retail chain while there is currently no national distribution system. With success in this market, the potential for profits are enormous, seeing that retail business on the mainland had a worth estimated at about 75o billion US in 2008. The only obstacle standing in their way at this time would be the distribution system. In the US Walmart operates under an anti-union policy, but thus far in China they have already succumb to demands from the All-China Federation of trade unions (Distribution Critical to Wal-Mart China Strategy). This however, did not deter Walmart from its goals. As elsewhere, even in China, Walmart is said to operate under their “three core values of respect for the individual, service to the customer, and striving for excellence” (Walmart China Factsheet). Walmarts strategy is to build their “business one store and one customer at a time, so as to fulfill our core mission — save people money, so they can live better, and continue to make a difference in the lives of our customers, members and associates” (Walmart China Factsheet).

IV. Walmart’s entry mode Most multinational companies look at entry into the Chinese market as not being a feasible option to expand their business, but will be necessary for their business to thrive in the future. China’s economy is currently seeing exponential growth. The growth of Walmart within the United States seems to be slowing down these days, therefore the knowledge of potential growth and wealth in the Chinese market that is not saturated looks to be a great option for the company. Upon acquiring ownership control over China’s Trust-Mart, Walmart sought to become one of the leading factors within the retail sector of China. Not only did Walmart utilize acquisition strategy into China, but they also saw the potential for the production and the assembly of their products within the Chinese market. Walmart decided to implement an offshore sourcing strategy in China. Walmart is now one of the top exporters to the United States from a manufacturing company housed in China. This is interesting due to the fact that Walmart doesn’t hold any of their plants for manufacturing in China. The Chinese manufactures that Walmart uses are solely responsible and they take the initiative on themselves to keep up with whatever requirements are. Walmart keeps themselves at an arms length therefore they do not have any control over how the products are manufactured. Another strategy Walmart utilized in China was there selling strategy. In this Walmart sought out to purchase their products from China manufactures at a very low rate, then they would turn around and reselling these products at a marked up price in countries all across the world, including the United States.

V. Opportunities and threats Businessdictionary.com defines opportunities and threats as "agents, factors, or forces in an organizations external environment that are out of its control, and can directly or indirectly affect its chances of success or failure. The two combined are factors that management uses in order to make strategic decisions on which markets they will enter. i) Opportunities Walmart sought out to acquire stake in Yihaodian, which is the largest online retail store stationed in China. This acquisition would allow Walmart the opportunity to monopolize the market through online shopping and in turn significantly increase their overall income. On the “14th of August 2012, the Ministry of Commerce (MOC) has approved plans by Wal-Mart Stores, Inc. allowing the U.S. retail giant to control China's largest online supermarket Yihaodian on restrictive conditions” (Xinhua, 2012). Walmart could also look at other opportunities such as investing in a chain of discount stores. Currently, no other retail chain in this market thus far have begin to venture into this type of concept. Walmart could take the initiative and look at branching out into the discount store tactic, which seems to be a hot commodity in China at the moment. The acquisition of Trust-Mart left Walmart to be the single biggest retail chian in China. This alone gives Walmart the upper-hand and resources to control a larger share of the market in China by formatting and launching a discount store chain around the country. ii) Threats The initial goal of Walmart was to enter into the Chinese market and become one of the largest retailers in the area. Walmart, however, faced many obstacles along the way to that goal. Many of these challenges that Walmart had to face came solely from Chinas government. The All-China Federation of Trade Union (ACFTU) threatened Walmart, as well as all other foreign retail subsidiaries doing business within the country with legal actions as well as possible punitive damages if unions where not formed with the country. The biggest issue is that Walmart is notorious for being against unions as it demonstrates in its stores across the United States. From a business perspective Walmart knew in order to succeed in this market they would have to make an exception, and they agreed to honor the wishes of their employees who wanted to establish a union in China. This inadvertently be a plus for China since Walmart will not have unrestricted control over their employees and the benefits that they receive, but Walmart knew that taking these steps were vital in what there overall goal is in this type of international market. VI. Discussion Walmart has been a great example of how a multinational company can enter and then succeed in an international market. Through their exceptional marketing strategies as well as their choice of entry modes, Walmart has made it evident that there is the opportunity for a business to expand into and international market. Walmart should though do more extensive research on the market that they wish to enter in order to avoid setbacks on the entry. Walmart is, and will continue to grow. They have been successful in the market within the United States, and will prove to be in other markets across the world. Walmart showed on several occasions throughout its entry into China that as a company they are able to change and adapt to the countries in the international sector. In the Chinese market Walmart used a cost leadership strategy. This yielded the company an enormous amount of success as they were able to sale their products at extreme reduced rates and bringing in a higher sales volumes. VII. Conclusion The decision of Walmart to expand into the Chinese market was a successful one. Walmart has the ability to infiltrate and dominate the market. Walmart is accredited for efforts on not only being able to preserve their business on the home turf, but was for being able to do the same in global markets as well. Although Walmart did have some setbacks while entering into the Chinese market, they were still able to overcome those challenges and saturate the market, overtaking the competition on the way. Walmart is known for taking care of the customer from any class. They offer an array of products low prices, and building relationships by turning the consumer into repeat customers.

References [1] Asia, Media. (17 November, 2006). Distribution Critical to Wal-Mart China Strategy. Web. Retrieved from http://www.brandrepublic.com/news/605284/ [2] BusinessDictionary.com. Opportunities and Threats. Web Retrieved from http://www.businessdictionary.com/definition/opportunities-and-threats.html [3] Chandler, Clay. (25 July, 2005). The Great Wal-Mart of China, For the worls biggest company, the key to growth lies in the worlds biggest country. Web. Retrieved from http://money.cnn.com/magazines/fortune/fortune_archive/2005/07/25/8266651/ [4] Fox, Kenneth, A. (2011) Learn To Expect The Unexpected In Global Retail Expansion. Volume 14 Issue 4. Web. Retrieved from http://thesoundingsgroup.com/wp-content/uploads/2011/12/GBR1104-Global-Retail-Expansion-new.pdf [5] Frazier, Mya. (18 June, 2007) Brazil, China Build Wal-Mart bottom Line. Retailing: With Boom Years in U.S. a Memory, Giant Eyes International Expansion as Source of Future Gains. Web. Retrieved from http://adage.com/article/print-edition/brazil-china-build-wal-mart-bottom-line/117307/ [6] Reuters. (24 October, 2013). Walmart Plans More Stores and E-Commerce in China. Web. Retrieved from http://www.nytimes.com/2013/10/25/business/international/wal-marts-china-plan-to-focus-on-e-commerce.html?_r=0 [7] Roberts, Dexter. (24 October, 2013) Walmart’s China Expansion Aims To Tap Urbanization. Web. Retrieved from http://www.businessweek.com/articles/2013-10-24/walmarts-china-expansion-aims-to-tap-urbanization [8] Walmart.com. Walmart China Factsheet. Web. Retrieved from http://www.wal-martchina.com/english/walmart/ Wang, Ester. (23 April, 2013). As Wal-Mart Swallows China’s Economy, Workers Fight Back. Web. Retrieved from http://prospect.org/article/wal-mart-swallows-chinas-economy-workers-fight-back [9] Witt, Michael A. (06 March, 2012). The Ten Principles For Doing Business in China. Web. Retrieved from http://www.forbes.com/sites/insead/2012/03/06/the-ten-principles-for-doing-business-in-china/ [10] Writer, Staff. (01 April, 2007). Wal-Mart Acquires Stake in China’s Trust-Mart. Web. Retrieved from http://www.arabianbusiness.com/wal-mart-acquires-stake-in-china-s-trust-mart-146963.html [11] Xinhua. (14 August, 2012). China Approves Wal-Mart Control of Yihaodian. Web Retrieved from http://english.sina.com/business/2012/0814/496447.html

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