Situation analysis: Wal-Mart in U.S.

CompanyStrong corporate culture: low-cost & customer; EDLP as value proposition;Very centralized management;Hypermarkets mainly in small towns.

Customers High disposable income;P. behavior: few trips & big planned purchase;Brand loyalty;Processed food, rather than freshness.

CompetitionWal-Mart leader in U.S. Collaborators

Integrated IT systems with Wal-Mart;Low bargaining power;Partnerships; Efficient logistics.

Context No union or legal barriers;Developed infrastructure;Authorities not blocking.

Situation analysis: Wal-Mart in China

CompanyStrong corporate culture: low-cost & customer; EDLP as value proposition;Very centralized management;Hypermarkets in big cities.

CustomersIncome disparity & consumption: urban Vs. rural;Purchasing behavior: many trips - little purchase; Comparing prices in different shops;Impulse purchase;Freshness of the food;Shoplifting.

CompetitionIntensified competition;Local players dominating the market;EDLP standard value proposition;Supermarket as the most common format.

CollaboratorsLack of IT integration with suppliers: purchasing & distribution more difficult.

Context Local Protectionism: taxes; Illegal Tolls & lack of geographic freedom; Poor Infrastructure;Labor unions. & tighter labor regulation

Peterson, Management decision model

Adaptative management

Scenario Planning

Maximum sustained yield Build resilience

unce

rtai

nty

Controllability

Controllable Uncontrollable

Hig

hLo

w

What is the next step…

Scenario Planning

Strategy: defining & implementing it (1/7)

Strategy: defining & implementing it

Scenario planning (simplified)…

Foreign business restrictions

Low High

Hig

hLo

w

Cultural change

EXIT

AGRESSIVE

RE-EDUCATEADAPTATION

STATUS QUOI love US!

Citizen protest

Sticking to traditions

We want US out!

(2/7)

Alternatives

+ adopting a homogenous bm to local fit+ usage of established /proven channels+ better fit for local needs + elimination of cross cultural problems+ support of local authorities

- risky negotiation process M&A- non-usage of possible synergies- against global/uniform strategy

+ higher decentralization (growth potential)+ follows Wal-Mart global strategy (Mexico)+ higher responsiveness to meet local needs+ support of local authorities

- unions problem remain- loss of control

+ no union problem+ no change of value proposition+ short time horizon+ known losses

- not following global expansion strategy- loss of the future market- not following global expansion strategy

+no change of value proposition +usage of synergies

-still union problems-very long time horizon-no possible short term measures-ignore local disparities

Strategy: defining & implementing it

Aggressive(local supermarket chain)

Exit(Withdraw from that market)

Re-educate(educate chinese)

Adaptation(changing store format)

1-3years

5-7years

6 months

10 - 15 years

(3/7)

Strategy: defining & implementing it

Scenario planning: Alternative selection

Foreign business restrictions

Low High

Hig

hLo

w

Cultural change

EXIT

AGRESSIVE

RE-EDUCATEADAPTATION

STATUS QUO

ADAPTATION

(4/7)

Strategic Road Map (5/7)Strategy: defining & implementing it

Efficient staff(corporate culture)

Key

Local autonomy(org. structure)

China coverage(control, org. size)

Guanxi(ext. environment)

Strategic imperatives

Strategic Road Map (6/7)Strategy: defining & implementing it Ke

yLo

cal a

uton

omy

(org

. str

uctu

re)

Effici

ent s

taff

(cor

pora

te c

ultu

re)

1st year 2nd year 3rd year 4th year 5th year

1.Identify change agent & involve

2.Convince & involve key stakeholders

3.Support from top-management

4.Communication

1.Adapt Wal-Mart’s China mission & vision statement to China’s culture

2.Create organizational chart (national, regional, local)

3.Define clear responsibilities & power for decision making

4.Incentives to foster commitment

5.Develop profit centers

1. Bonus and compensations system

2. Performance review system

3. Training

Critical initiatives

Chin

a co

vera

ge(c

ontr

ol, o

rg. s

ize)

Gua

nxi

(ext

. env

ironm

ent)

Strategic Road Map (7/7)Strategy: defining & implementing it

1st year 2nd year 3rd year 4th year 5th year

1.Establish budget for business related meetings

2.Contact & develop relationship influencer

3.Networking events: Chinese New year

4.Develop relationship with local Government

1.Marketing research to understand needs

2.Taylor product offering

3.Launch new supermarket format

Risks(a) China’s Government: tighter restrictions to foreigner(b) Product offering not aligned with local tastes: Market research Benchmarking Pilot trial with only a set of stores

-

Critical initiatives

Thank you for your time….Team A