Walmart in China
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Question 1
The reason behind Walmarts success in the United States stems from the unique business model that it successfully adapted. Walmarts model exhibited operational excellence that was founded on the concepts of providing everyday low prices combined with excellent customer service and high quality products. In the United Sates, Walmarts core competencies were the highlights and the sources that allowed the company to build a sustainable and profitable competitive advantage. The company started by strategically positioning itself in the rural areas that were ignored by competitors. This allowed Walmart to target the customers who, before Walmarts arrival, had to travel long distances to get lower prices.
In addition to its correct positioning and targeting strategies, Walmarts operational excellence model was successful due to the unique combination of culture, processes and management systems that worked together to provide the customer with the best value and customer service at the lowest prices.
Walmarts main competitive advantage of “everyday low prices” was possible due to managements constant effort to offer prices that were lower by 20% than any competitor. Additionally, the ability to provide low prices to customers originates from the Walmarts massive buying power and tough negotiation skills to get their suppliers to drive down their prices further down while maintaining high quality and punctual delivery. On the other hand, to be able to keep prices down, Walmarts operational excellence and its culture of effective cost control processes enabled it to achieve economies of scale. The companys embedded culture of cutting costs, including its anti-unionization position, was shared and accepted by all employees at Walmart.
Additionally, the adaptation of a strong logistics and distribution network supported by state of the art inventory management and supply management technologies and systems, offered Walmart a distinct competitive advantage in the industry.
Furthermore, excellent customer service was embedded within the companys culture as employees were expected to go out of their way to provide customers with excellent service. This strategy helped build relationships with customers and reinforced loyalty and customer return rates.
On the other hand, it is important to note that the success of the Walmart business model was facilitated by the full understanding of the local culture, regulations and laws and the way business is conducted in the United Sates, in addition to the readiness of the American infrastructure that allowed for the successful adaptation of Walmarts strong logistics and distribution model. At the end of the day, Walmart is an American concept that fit the American culture and was not faced with the any cultural, administrative, geographic or economic challenges that would generally complicate the successful implementation of a business model in a foreign market.
Question 2
Unfortunately, the replication of Walmarts domestic model in its original form will not succeed in the Chinese market. A successful implementation of the companys business model will require some adjustments that will allow it to cope with the cultural, administrative, geographic and economic differences that exist between China and the United States.
Walmart cannot build and sustain the same competitive advantage in china through the successful domestic model, because the sources behind the domestic core competencies are not present in the Chinese market.
From an economic differences perspective, in contrast with the domestic market, Chinas rural areas were not growing as fast as the urban areas, in addition to presence of the uneven distribution of wealth issue. As a result, Walmart cannot target the rural areas in china as it did in its original domestic model. On the other hand, competition