Walmart’s success and triumph over the other competitors in the retail business are attributable to its business model. The company’s pillar, “Everyday Low Price (EDLP),” appears to have played the largest role in ensuring that the stores attract and retain customers, given that most buyers are price-sensitive. While other companies embarked on high margins with considerable returns, Walmart focused on low margins but high sales volume and cutting costs. Additionally, the company focused on competition in which the management gauged the volume of visits by shoppers in the competitors’ outlets and used the data to determine the best time to lower costs and attract customers. Third, the company embarked on a mission to empower its employees, which gave the morale and motivation to work closely with customers.
Walmart targeted unique market segments, a strategy that helped increase its customer base and sales volume. In this case, the company targeted small towns with under 50,000 people. On the contrary, competitors thought such towns could not sustain large stores in the long run. This helped Walmart to grow below the radar of its larger competitors. Also, when the company opened up a store in a small town, it achieved a monopoly status since other competitors would not find the need to follow. This way, the company saturated its market and barred competition from larger companies.
According to the case study, Walmart has a competitive advantage over other retailers in the industry. Specifically, the company provides products to consumers at lower prices than competitors. Secondly, the company embarks on lower product costs, improved in-store section and variety, and reduced inventory carrying costs. Moreover, the case study demonstrates that Walmart has highly competitive pricing for consumers compared to the competitors in the market.
Several factors hindered Walmart’s success after entering the Chinese market. First, China had a large income disparity following the economic reforms of the 1980s and 1990s. Even though the low-income population still purchased consumer products, the disparity was so large that companies like Walmart found it difficult to develop a uniform strategy for merchandising in the country. It was difficult to satisfy consumer demand in different geographical regions of the country. Secondly, China still had a policy of local protectionism, which sought to protect local companies from competition by foreign firms, which were forced to pay higher levies and taxes. Third, infrastructure deficiencies, such as highway and expressway networks, greatly affected Walmart’s distribution system and logistics. There were also regulatory restrictions, such as limiting the number of stores in a city to three and closing other cities from entering foreign firms. Moreover, the IT network was poor and inefficient, which made it difficult to communicate with suppliers. In addition, shoplifting was a major problem that retailers faced in the Chinese market, which greatly affected Walmart’s stores across the country.
With its strategy of “everyday low price,” Walmart wrongly profiled the Chinese market. Walmart assumed that all Chinese consumers are alike, especially in terms of being price-sensitive. The company assumed that every consumer in the country is looking for low-priced products more than quality and other aspects. Meanwhile, the Chinese economy was expanding, and different classes of people were emerging, including many wealthy people looking for other aspects of products apart from price.
As a manager in this situation, I would take an action plan to help the company change its strategy to fit the dynamics of the Chinese market. First, I would define the goal of increasing sales by 8% per annum for three years. In this case, I would assess the situation, determine the causes of the problem, and find out possible methods of resolving it. Secondly, I would list tasks and activities necessary, including restructuring the stores to ensure they attract local communities with designs and products that meet their needs. Then, I would identify critical tasks and involve stakeholders in the process. This way, I would involve local strategists with knowledge of the local markets, brainstorm ideas, and develop a master plan for action.
Based on the analysis, I would advise the board of directors to conduct adequate market research. With market research, it is possible to identify the unique needs of local markets in each location and provide customized store designs and products rather than assuming that the whole country has similar consumer needs and preferences.