Heather Evans.docx

Wal-Marts Entry into Japan

CASE SYNOPSISWal-Mart entered Japan in May 2002 by purchasing a 6.1% stake in the Japanese retailer Seiyu. Wal-Marts international expansion strategy was to partner with local retailers, assimilate them to the Wal-Mart model and ultimately taking control of them. Following this strategy, after entering Japan, Wal-Mart kept increasing their stake in Seiyu. Seiyu was a struggling retailer in Japan that hoped to be rescued by the worlds largest retailer-Wal-Mart. However, by the time Wal-Mart entered Japan, there were several international retailers in the market with multiple outlets throughout the country. The retail and consumer environment at Japan was extremely different from the American consumer market. The supplier network was very difficult to penetrate that meant that Wal-Mart was unable to pass on discounts to customers. Japanese customers had higher per-capita incomes- they liked to purchase branded high-priced products as to them high price was an indication of superior quality. Moreover, these customers liked purchasing more fresh produce than customers anywhere in the world- making sourcing products at low prices very difficult for the company. Finally, inter-market tastes of customers varied within markets in Japan making customization a requirement for success. Despite all these market limitations, and earning no profits, Wal-Mart raised its stake in Seiyu to 100% by April 2008. In 2009 (the time this case was written) Ed Kolodzeiski, the CEO of Wal-Mart Japan, had to make some tough decisions for the future of Wal-Mart Japan. He had to decide between improving the Japanese model to drive the company to profits or leaving the Japanese market altogether.

WALMART: REASONS OF EXPANDING TO THE GLOBAL MARKETSSome of the reasons for Walmart to expand globally were: Increased completion in the United States from other retailers like Target, Costco etc. By 1990, Walmart had opened a store in almost all the states in the United States and going global was considered as the next logical move in expansion of the retailer Global expansion would open up a vast market, since the population in United States represented a very small percentage of global population Most international economies were encouraging globalization and liberalization during early 1990s Walmart could utilize their strong brand name to earn profits from markets worldwide

WALMART JAPAN: MAJOR ISSUESWhen Walmart entered Japan by acquiring Seiyu in 1990, they had to overcome a number of challenges. They failed to take into account the unique Japanese culture where high price is associated with higher quality and a promise of everyday low pricing is viewed with suspicion. They opened their stores in the outskirts of urban centers which limited the number of customers that visited Walmart. Since most customers use the public transportation or use bikes, it was not convenient for them to purchase items in bulk. Japanese customers like to purchase regionally grown produce which meant that Walmart could not utilize a centralized distribution center to distribute similar products to all the stores. Moreover, Walmart did not understand the differences in transportation and logistics methods used in North America and Japan.

WALMART: SITUATIONAL ANALYSIS

STRENGTHS Operational efficiencies Unique Every Day Low Pricing strategy Strong supplier relationships by using Electronic Data Interchange State-of-the art supply chain management system: RetailLink Most recognized brand nameWEAKNESS Lack of adaptability to the cultures of different countries (e.g. Germany) Negative publicity especially employee relations Late entry to some countries

OPPORTUNITIES Many untapped markets around the world Increase in consumer awareness about global retailers Unorganized retail in many countries Increased customer acceptance to the concept of discount retailingTHREATS Local competition Political restrictions to enter a market Public resistance to the company Resistance by local mom-n-pop/ small retail stores