Wal-Mart Stores: Every Day Low Prices in China

11750 words 47 pages
HKU590

ALI FARHOOMAND

WAL-MART STORES: “EVERY DAY LOW PRICES” IN CHINA
China “is the one place in the world where you could replicate Wal-Mart’s success in the U.S.”
- David Glass, former CEO of Wal-Mart Stores1

The beginning of spring 2005 must have left a mark on the corporate strategy of every retailer vying for a share in China, the world’s most populous consumer market. From this time on, foreign retailers were no longer constrained to specified regions, forced to enter into joint ventures with local partners, or hampered by a lack of distribution rights—China’s retail market had thawed and was laid open to all. To the world’s largest retailer, Wal-Mart Stores, China had long been a strategic imperative. On one hand, nearly
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The stores aimed to serve customers who, up until then, had to travel long distances to save money. Now they could buy the same goods cheaply at home. 3 This positioning proved to be critical to Wal-Mart’s success in the years to come as it grew outside competitors’ radar screens to a substantial size to command economies of scale. When sceptics doubted the purchasing power of a small population to support a big store, a retail miracle was in the making which would revolutionise the old, slumbering industry. In the first year of operation, sales at Wal-Mart stores were US$975,000. Ten years later, when the company was listed on the New York Stock Exchange in 1972, revenues had reached US$78million. The public listing provided the company with ample resources to finance a more rapid expansion, and by 1979 sales had surpassed US$1 billion. The powerful growth engine seemed unstoppable. In 1990, the company topped the list of major retailers in the US. And five years later, Wal-Mart stores could be found in all 50 American states, and in Mexico and Canada. In 2002 it became the world’s largest company in terms of sales. On January 31st 2005, Wal-Mart Stores reported net sales of US$285 billion, had a presence in nine countries with 5,289 stores and 1.6 million employees worldwide, offered multiple store formats including discount stores, supercentres, warehouse stores and neighbourhood markets, and was not only the largest company in the world but also the most admired

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