Media ManagementCase: Wumart Stores: China’s response to Wal-Mart

Group 1aEkaterina, 40192@student.hhs.seFranziskaNiklasMaria

COMPETITIVE ADVANTAGE OF WUMART: SOURCES AND SUSTAINABLITY

Sources of competitive advantageResource

Strong regional foothold, multiple retail format

Relationship with SOE’s and governments

Understanding of consumers

Brand image and corporate culture

Centralized procurement, distribution and logistics

(MIS, ERP)

Competitive advantage

«Every day low prices”, small stores enable fast growth

Rapid but low-cost expansion (synergy effect)

Good reputation

Support from political authorities

Strongest bargaining power with local suppliers

Tangible

Intangible

Capabilities

Sources of competitive advantageResource

Strong regional foothold, multiple retail format

Relationship with SOE’s and governments

Understanding of consumers

Brand image and corporate culture

Centralized procurement, distribution and logistics

(MIS, ERP)

Competitive advantage

«Every day low prices”, small stores enable fast growth

Rapid but low-cost expansion (synergy effect)

Good reputation

Support from political authorities

Strongest bargaining power with local suppliers

Tangible

Intangible

Capabilities

How sustainable is Wumart’s competitive advantage domestically?

• Yes, because of path dependency principle

Hard to copy

• Questionable, competitors also constantly work on upgrading the resources (i.e. good relations , IT)

Durability

• No information about knowledge management in the company, but strong corporate culture

Appropriability

• On local market not likely to be substituted

Substitutability

• Some resources are not, i.e. IT usage, but mostly capabilities in regions have competitive superiority

Competitive superiority

TRANSFERRING COMPETITIVE ADVANTAGE AND LEVERAGING RESOURCES

Ability to transfer competitive advantage to other countries

Strengths Weaknesses

Retail ExperienceEstablished MIS , ERP, logistics systemsCorporate Culture

Local knowledge concentrationParticularities of Chinese market hard to transferLack of foreign network

Opportunities Threats

Emerging marketsEconomy of scaleImprove bargaining power

Strong global players Loosing focus on home marketNegative image of Chinese enterprises

Key points of transferring competitive advantage

• Risk of failure when expanding globally is high• Good opportunities to further expand in China

with other retail formats• Government connection is key but hard to

transfer

Expansion potential to other retail sectors and formats

• Build on existing brand image • Established networks, logistics, customer knowledge• Support of the government

However , there is threat of loosing core focus

Specialty franchise storeClothing storePrivate labelDrug store

SUSTAINING WUMART’S PERFORMANCE IN THE FUTURE

Challenges Wumart faces

• Risk of losing other attractive markets before they are saturated by rivals

• Changes in government policy• Awareness of brand name only in home

region, not in other areas• Market research for new markets• Transfer “Beijing model” to other regions

Recommendations to Wumart

• Build strong presence over all of China• Explore Joint Venture opportunities

(consolidation)• Continue to build relations with government ,

BUT also consider how to work without governmental support

• Be on front edge of technology

Long term planning of international expansion strategy

• Employ foreign top-managers • Joint Ventures• Market Research

References

• Collis & Montgomery, “Competing on Resources”

• Farhoomand A., Tao Z., ”Wumart Stores: China’s Response to Wal-Mart», Harvard Business Review 07/317C