Case Study

Wal-Mart Enters China In 1991, outside the United States Wal-Mart opened its first in Mexico City, in 1997. Now it has more than 1200 stores in nine countries outside the United States (Argentina, Brazil, Canada, China, Germany, Korea, Mexico, Puerto Rico, and the United Kingdom). Retailers other than U. S. Firms are also expanding across the globe. Makro a Dutch wholesale club is South East Asia's leading Store Group Carrefour of France is the leading retailer in Brazil and Argentina and recently opened an outlet in Shanghai. Yaohan, a Japanese retail chain with headquarters in Hong Kong, expanding in Europe and U.S. In fact the four non U.S. retailers operate in more countries and have significantly more foreign sales than Wal-Mart, America's largest retailer.

According to market and business analysts, internationalization is essential for retailers to prosper in the future. One expert predicts the rise of four or five dominant global retailers that will enjoy substantial advantages in Pricing, Sourcing, and logistics.

And other analysts opine that "We are really moving to boundary less retailing." Retail firms that succeed internationally find a way to bring value to local markets that local competitors cannot match. This value may be in the form of Low Price, Selection, Service, Image, Unique products, or other features desired in multiple cultures.

Toys "R" Us has found unmatched selection a feature that offers it a strong brand image and a competitive advantage in Europe and Japan despite prices higher than in the United States. Michael Goldstein, the CEO, Noted after talking to the customers who were leaving a store, when asked what they liked about the store, every one of them said selection. No one paid attention to pricing, which has been the one of the big concerns for the firm.

In Hong Kong, as elsewhere, it is Disney's products and image that draw customers. There was a near riot when a Disney store opened in Hong Kong in 1994. The out let can hold only 150 people at a time, and

5,000people routinely show up each day. The store has giant screens continually showing clips from Disney films and clerks dressed in 1950s collegiate gear.

The Hong Kong Market:

Hong Kong shoppers are very price sensitive. Many appear to treat shopping almost as a competitive sport in which the person who gains the lowest price wins. However, despite the desire for low price, convenience often plays a dominant role in store choice. Few Hong Kong Chinese have access to a private car. Instead, they rely on buses and taxis. Carrying large items or bulk purchase home by bus is difficult or impossible. Using a taxi is expensive. Thus, most Hong Kong residents shop within a few kilometers of their residence. Even if transportation were not an issue, house size would be. Most residents live in very small apartments. Many of these apartments are only 300 square feet. Give n small refrigerators and limited storage space, Hong Kong consumers shop for food and other items virtually daily. They cannot easily buy in large quantities or size and store the product no matter what savings they might obtain by doing so. Frequent shopping is made easier by the fact that most of the large apartment buildings contain a number of retail outlets such as a small grocery store, pharmacy, laundry, and restaurant. Hong Kong has thousands of small businesses. However, most face the same purchasing constraints that household do. They do not have access to private transportation and lack storage space. The small business often double as the family residence and potential storage space is required for family activities.

Wal-Mart's Approach:

Wal-Mart is entering the market with a small chain of value clubs that are similar to small Sam's clubs; that is, they will be small-scale retail / wholesale, cash and carry, membership warehouse operations. Wal-Mart's traditional approach is to offer Customers the goods and services they desire at a price well below the competition. However, it also relies on relatively large, bulk purchases for much of its sales. One opportunity for Wal-Mart is to open outlets near the many new apartment houses being constructed in new territories. The enormous building boom in this region will house many less sophisticated new residents from china who may be particularly appreciative of the low price and selection Value Clubs will offer. Wal-Mart has learned how to make its U.S. customers feel like they are shopping at their own personal store. It will continue this approach in Hong Kong. For Example, it will accept returned goods with a smile. This policy basically does not exist in Hong Kong, even if the items are defective. However, it remains to be seen if low price and unique service will be enough. As one shopper commented while visiting the store and looking at a four-pound Jar of Skippy peanut Butter: "The price is right, but where would I put it?"

Discussion Questions:

1. Will Wal-Mart succeeds? What would you recommend to help it succeed?

2. What value is relevant to the success of retail stores such as Wal-Mart? How Should Wal-Mart ad-just its strategies to be consistent with the prevailing value system in Hong Kong?

3. How will Wal-Mart need to alter its approach as it opens stores in the following countries?

a.Japan

b.Egypt

c.Germany

d.South Africa

4.How can Wal-Mart use reference group influences to its advantage in Hong Kong?