In this writing, the popular topic of supply chain management is discussed. Wal-Mart is used as a case study for this purpose. The company is chosen primarily because the company’s successes in the United States are astounding. The various innovation and new philosophies adopted by the company’s supply chain management in US are researched and presented. All these factors enable Wal-Mart to become the price leader in the retailing industry in US, with a dominating market share. The efficient supply chain management is undeniably one of the key success factors for the company, enabling the company to growth by leaps and bounds for an extended period of years – a very rare case in the modern corporate success stories. The writing continues by following the Wal-Mart duplication of efficient supply chain management system and philosophies in other countries. Firstly, the challenges faced by the company in setting up a similar and successful supply chain in China are discussed. The results are less than satisfactory and the costs of operation in China run high – a clear signal that the supply chain management system in US is hardly duplicable in China. The writing continues to argue that the failure of efficient supply chain in China is not a phenomenon in developing countries. Even in developed countries such as German and Japan, Wal-Mart is facing critical issues to keep the costs down and emerge as the price leader at the countries. A research on the possible reasons that the supply chains are hardly duplicable in other countries is discussed. Overall, it is illustrated that cultural and infrastructure differences between US and the other countries are the main factors. The writing concludes with some constructive suggestion on what managers should not ignored in duplicating any operational system to other countries. The cultural, social, political and infrastructure differences are highly critical factors to be considered.
A few decades ago, supply chain management is an unfamiliar concept to most people. Business people are primarily concern with how to ensure the supplies of raw materials or stocks are sufficient – without investigating on how to improve the characteristics of supply chain. The common mindset is to employ a larger warehouse for storage purpose in order to prevent stock out situation. However, in the past decades, we witness a lot of operational related changes in managing the supplies of a firm. Due to the rise of internet technology and the firm’s capability to manage information more effectively, as well as the increasing costs to a firm by storing huge volume of inventory or goods, the concept of supply chain is increasingly more important and being paid attention by companies. Today, supply chain is an important concept, widely taught in business schools and applied in workplace. The effective and efficient supply chain is indeed becoming the sources of competitive advantage for high-performing firms such as Toyota, Honda, Wal-Mart and many others.
The concept of supply chain is often broadly defined or described. Generally, it includes the coordination and facilitation of activities from vendors, manufacturing facilities, logistics service providers, both internal and external distribution lines, distributors, retailers and other relevant entities until customers. Various functions can influence the customers can actually be considered as an element of a company’s supply chain – ranging from sourcing, purchasing, manufacturing, operations, sales and marketing, distribution, transportation, customer services and relationship management and after sales support.
Definition wise, supply chain management can be defined as the management of activities that include procurement of materials and services, towards transforming them into either intermediate goods or final end products, and also in delivering these products or services through a specific distribution to customers (Heizer & Render, 2008). The scope of supply chain is large, and it may include all functional departments such as finance, marketing, operational, human resources and information technology. Furthermore, a supply chain can be more complex – it is dynamic, evolving and involves the constant flow of information, product, and funds between different department or strategic business units or operational stages.
The primary commonly agreed objective of a supply chain management is to maximize the value delivered to customers. To achieve this, it is critical for firms to ensure or collaborate with suppliers as their close business partners or strategic alliances in delivering value to customers, to keep adaptive to the marketplace and be responsive to changes in business environment. The effectiveness and degree of collaboration with suppliers are critical factors for a supply chain management process – and a long term strategic relationship with suppliers are essential to formation of competitive advantage in the business world today. In fact, the competition in modern days is no longer the traditional type of competition between companies, but is between network of companies – and these networks are often the supply chain of the companies involved.
In current business environment, the importance of supply chain management can never be ignored. Generally speaking, supply change management is currently an integral part of a firm’s business strategy – whereby the formulation of strategy and management of supply change are integrated concepts to be taken into account by managers in planning or executing the strategic directions of a firm. As discussed above, supply change management, if performed well, will become the source of competitive advantage for a firm. Effective supply chain can enhance a firm’s competitiveness and profitability from a few dimensions. Firstly, the effective management of supply chain can reduce the costs of a firm significantly – a lot of wastage due to storage of goods, delayed due to logistics issues, and mismanagement of inventory can be eliminated or avoided. By streamlining the supply chain, quality can be improved as well – as previously hidden costs or quality issues can now be observed and subsequently solved by management. For example, as the company manages the supply chain for efficiency, he may discover that the stocks stored in the warehouses in a moisture environment tend to spoiled or damaged. Apart from that, effective supply chain management will also enable a company to be responsive and adaptive to the market changes or demands. The very first signal of consumer demands or changes of tastes can be detected and analyzed, and the sharing and communication of this vital information will enable the team of companies in a supply chain to response accordingly. In the long term, strategically speaking, all these will enable the company to produce satisfied and happier customers. The many improved condition in terms of the value delivering process of a company will thus enable the revenue of a company to increase. Thus, effective supply change management can ultimately enhance the profitability of a company, in addition to serve as the source of competitive advantage of the company in marketplace.
In short, the large portion of the cost, quality and revenue of a firm is determined directly or indirectly on how well the supply chain is being managed. As discussed above, supply chain can be managed well to enable a company to achieve competitive advantage in the marketplace, although this is not an easy task. Viewing from these perspectives, a company should treat the supply chain management as an important factor to be considered in the business strategy of that particular firm.
Wal-Mart is perhaps the most successful retailer in the world. Sam Walton started Wal-Mart humbly in 1960 as a discount retailer in Arkansas. By the end of 2006, Wal-Mart has became the global retailing “juggernaut” that was unprecedented in the business world. As Boston Consulting Group (BCG) said “The world has never known a company with such ambition, capability and momentum.” In 2005, Wal-Mart has become the world’s largest retailers. It is estimated that there was approximately 140 million people in 16 countries shopped at Wal-Mart every week. Furthermore, Wal-Mart was number one employer in 21 states in United States. The company employed approximately 1.7 million people worldwide and expanding at the pace of 120,000 employees annually.
Sam Walton, the founder of Wal-Mart was a successful businessman that has proved that mass marketing and achieving economy of scales have helped companies prospered. Sam Walton deeply believed in the retailing concepts of offering significant price discounts to expand sales volume and increase overall profits. In fact, up to date, Wal-Mart main and famous corporate strategy is still to sell high quality as well as branded products at the lowest possible price, in order to beat the competition. In order to achieve this, an effective and efficient supply chain model is critically important and needed. In fact, efficient supply chain is the very core ingredient contributing to Wal-Mart’s successes and growth. In order to keep the price low, the company reduces costs by capitalizing various modern electronic and information technology in streamlining the company’s supply chain. Not only that, the warehousing is also being changed and invented to achieve minimal costs and maximum efficiency.
Of course, it is fair to mention that the Wal-Mart successes are not solely contributed by efficient supply change management. Many other factors contribute to the successes of Wal-Mart as well (and these factors will be presented briefly as follow). One important contributor of Wal-Mart success is due to its management emphasis on workforce and corporate culture. The corporate culture of Wal-Mart – arguably the contributor of success, is a conservative, religious, having a focus on continuous learning and family-oriented one. The employees in the company are called the “associates” – in order to promote a family-oriented culture in the company. Apart from that, some researchers argued that one of the key success factors for Wal-Mart is due to its growth strategy by expanding stores physically, tactically and territorially. To explain, when a Wal-Mart store commences operation in a particular territory, the goal of that store is to dominate the local competition from all dimensions. Such a competitive mindset and spirit is the key contributor of highly aggressive and successful domination of Wal-Mart over the long run. Some authors associate such a strategy to Sam Walton experience in army – where he was actually employing military strategy of winning post by post and to enhance the company situation and foundation before expanding to another new post. Utilizing such a strategy, instead of opening up stores in the key metropolitan cities to reach the widest possible market share, Wal-Mart is actually expanding by opening stores in adjoining territory (and then only spread its base subsequently to other big cities).
Wal-Mart is not content with its success in the U.S. only. The company has been aggressive in expanding to foreign market. Firstly, the company ventures to Canada and Mexico. Then, the company expands to Europe, primarily to UK and Germany. Subsequently and until now, the company is expanding to Asia, which includes Japan, Korea, Hong Kong and China. To put the international expansion into perspective, as of the year 2005, Wal-Mart has more than 4000 stores in the United States, 815 in Mexico, 393 in Japan, 322 in United Kingdom, 278 in Canada, 85 in Germany, 54 in Puerto Rico, 60 in China, 293 in Brazil, 16 in South Korea and 12 in Argentina (Mujtaba & Maxwell, 2007).
As discussed above, effective and efficient supply chain management at Wal-Mart is one of the contributors of success for the company. The highly advanced, cutting edge and revolutionary supply chain management techniques enable the firm to keep its costs low – lowest in the retail industry – and fantastically supporting the brand name of the company as the low cost leader in retail industry. In fact, the company tagline is famous – everyday low prices – a well-known representation of Wal-Mart as the Best Cost Provider in the industry. This can be evidenced by the lowest distribution costs as compared to the competitors. The Wal-Mart has a distribution cost of 0.9% as a percentage of revenue, while this figure for Sears is 3.8% and 2.9% for Kmart. In reality, Wal-Mart has been constantly rated as the most efficient retailer around the world and this indicates that its supply chain is superior and efficient (Mujtaba & Maxwell, 2007). In the following sections, the supply chain of Wal-Mart will be discussed from several perspectives, namely from the (a) purchasing management, (b) distribution and logistics management, and (c) usage of technology and information system.
Perhaps the sourcing and purchasing department of Wal-Mart is the stringent most and experienced among the retailers. The company has very comprehensive system in sourcing and purchasing, ensuring the very low costs and yet high quality of products are sourced and purchased by the company. Among the many factors related to the purchasing department or management of Wal-Mart are discussed in the following paragraphs – namely (a) elimination of middleman, (b) working closely with suppliers, (c) partnership with efficient suppliers to provide consumers with excellent products and services at lowest possible price in their stores, (d) strong bargaining power as buyer against suppliers, (e) product sourcing on a global scale (particularly from China), and (f) usage of private brand to lower the costs while enhancing profit margin.
Elimination of middleman. In order to cut costs, Wal-Mart is always trying to buy direct from the factory or manufacturing entities. In the early days actually, Sam Walton as well as the purchasing team will often visit the buying department constantly in order to eliminate the wholesalers and distributors. By eliminating the distributors, the costs can be saved as now the company is sourcing directly from the factory or producer directly.
Working closely with the suppliers. The purchasing department of Wal-Mart is constantly working closely with the suppliers in determine which item to be source since the early days of operation and growth of Wal-Mart. In fact, the purchasing department of Wal-Mart has many offices for the staffs and personnel from the supplier side. The suppliers indeed have several full time staffs, both analysts and managers stationed in the Wal-Mart’s purchasing office. With this arrangement, Wal-Mart ensures that the communication and cooperation between the company and its suppliers are close and continuous, and thus the partnership between the two parties will be effective and efficient.
Partnership with efficient suppliers to provide consumers with excellent products and services at lowest possible price in their stores. According to Mujtaba & Maxwell (2007), one of the reasons the supply chain management is so effective at Wal-Mart is because the company has been proactive managing and controlling the various suppliers. They have been continuously sourcing from the most effective suppliers, and managing the suppliers to cope with their demands in United States and abroad. Wal-Mart actually established many standard or best practices for the suppliers who would like to have business relationship with them. All these standards are not easy to conform to – where Wal-Mart requires the suppliers, contractors or even sub-contractors to follow its ethical standards and business practices in their contractual cooperation agreement. Not only that, Wal-Mart has also proactively and diligently monitors the factory and manufacturing operations of its suppliers to ensure that these suppliers are constantly adhering to the legal and operational requirements and practices demanded by Wal-Mart. It is not surprising that Wal-Mart is known for improving the efficiency of its suppliers particularly in the areas of logistics and supply chain optimization.
Bargaining power of Wal-Mart. To a certain extent, Wal-Mart can be seen as bullying all these smaller suppliers, using their strong bargaining power as buyer in the process throughout its growth across United States and the world. For example, in the year 2005, Wal-Mart demanded its top suppliers to implement RFID tags and new inventory management technology on its merchandise in order to track merchandize from suppliers’ warehouses to Wal-Mart stores. Some suppliers have been also forced to reduce costs, besides to increase efficiency to meet the huge cost cutting demand from Wal-Mart. Nonetheless, many suppliers have fewer choices because Wal-Mart offers a chance and promise them various opportunities to increase their revenues and market shares.
In fact, Wal-Mart has been constantly pressing the suppliers through its enormous power and growth. It may be easy to think that Wal-Mart work closely with suppliers for better effectiveness and efficiency in the supply chain, but many events and rules or regulations set by Wal-Mart are highly unfavorable to the smaller scale supplier. Wal-Mart always demands that the supplier will need to follow the payment terms and guidelines set by the company. Besides, the suppliers are required to share information to Wal-Mart. Even the methods and the details in purchasing of raw materials by suppliers are required to be shared to Wal-Mart. Worse still, it is commented by some observers that Wal-Mart is controlling the communication of the suppliers with other party, and the manner and places these suppliers are allowed to sell their goods. Wal-Mart also demands the suppliers to support them in a political fight. Much of the costs in marketing is born by the suppliers, although the end results from these marketing efforts may be highly beneficial to Wal-Mart. Wal-Mart is said to be reluctant to pay for cooperative advertising, promotion or distribution changes or fees incurred during marketing the goods and services to customers.
Product sourcing on a global scale. Wal-Mart is one of the earliest retailers to source its products globally, for better quality and yet lower price of products. One of the reasons Wal-Mart able to deliver high quality products at the lowest price is due to its sourcing efforts and activities in China (when the RMB is artificially priced at an undervalued level). In order to source from China seriously, Wal-Mart actually opened a few offices in China since 1980s. For this, many Wal-Mart purchasing executives are constantly working in China to collaborate and cooperate with local factories in China to source for Wal-Mart products.
Usage of private brand to lower the costs while enhancing profit margin. Many of the products sourced from China are used as the private brand of Wal-Mart. This indicates that the private brand of Wal-Mart is contributing to the company success and higher profitability since 1980s. At the time, usage of private brand is still a relatively new concepts and ideas – very few retailers are doing it. The introduction of private brand is appealing and attractive to customers because these private brand products are often priced at a deep and steep discount to the branded products. However, consumers soon realized that the quality of private brand products and the branded products are roughly similar. As a result, many consumers started to purchase the private brand product from Wal-Mart. Apart from that, the usage of private brand had also significantly increase the bargaining power of Wal-Mart, as now the company will not be dependent on the supplier’s brand or products to sell in the retail stores. It is relatively easy for the company to find a reliable OEM for Wal-Mart compared to begging a manufacturer holding the branded product to sell to them.
The distribution system and logistics management of is being optimized for efficiency and effectiveness throughout the years in a continuously manner. In fact, in retailing, the cost of transportation and the arrangement of logistics related operation and activities is the key to success. Good logistics arrangement will lower the costs of a retailer due to transportation, while enhance the retailer responsive to market speed in dealing with the frequently fast changing consumers trends and business environment. Among the factors to be discussed in the following section in the issue related to distribution and logistics management for Wal-Mart are: (a) unique geographical expansion strategy, (b) hub-and-spoke distribution centre, and (c) standardization of casing and cartons sizes and the cross-docked shipment arrangement.
Unique geographical expansion strategy. A truly effective and efficient supply chain is only possible when the strategy of the firm is supportive of the supply chain management system. Specifically, the Wal-Mart’s strategy to expand from a territory to the nearby areas is highly supportive and indeed instrumental to the efficient supply chain formation of the company. Due to this sort of expansion technique, the company able to control and manage its own distribution centers with just a truck fleet to supply its stores. Sam Walton has been insisting to saturating a particular areas around a distribution centre before further expansion are launched. The stores opened around the distribution center are design to be reachable within a day of driving distance. This is essential for the company to gain economies of scale.
Hub-and-spoke distribution centre. The distribution system whereby the expansion of stores around the distribution center (i.e., within one day of driving distance as mentioned above) is called the hub-and-spoke system. Such a system is rare and innovative at the very early days of Wal-Mart expansion throughout US. Due to such a system, many of the Wal-Mart’s stores are situated in suburban areas, which enjoy the cheaper rental fees. These stores however, are placed near or just besides the major highways, ensuring that they are highly and conveniently accessible by customers. On the however hand, many of the competitors’ stores are spread around the entire US. The philosophy of the competitors to top tap into the market of various huge cities – thus their stores are located in prime areas that required a much higher rental costs to operate. In the long run, many competitors are losing out as their costs are much higher if compared to the operation costs of Wal-Mart. When the competitors started to notice that the hub-and-spoke system employed by Wal-Mart is efficient and cost saving, Wal-Mart had already built up a highly efficient logistics network which is hardly imitable. Many of the retailers are being hurt as Wal-Mart started to keep the price down and taking away their market share – further deteriorating their competitive position from economies of scale perspective.
Standardized casing sizes and the cross-docked shipment arrangement. One of the reasons that Wal-Mart able to keep its transportation and logistics costs low is due to the in-house tracking division. By having an in-house trucking division, the costs of transportation is kept low and the control of the logistics and distribution activities are possible by Wal-Mart itself. Thus, flexible arrangement can be made, and cost saving plans or measures can be implemented easily. Not only that, with the close partnership and cooperation with the suppliers, the company able to further enhance the costs saving from a cross-docked shipment arrangement. Under the cross-docked system, the products from suppliers are picked up Wal-Mart internal trucking services to be shipped to the distribution centers in a direct manner – why no storage is required between the inbound and outbound trailers. To further enhance the efficiently and to reduce mistakes from the movement of goods, Wal-Mart has also been working with suppliers to standardize the product casings or cartons’ sizes and labeling convention. Such a system or standardization approach enable the company to control and plan the distribution system more effectively while at the similar time driving down the costs (both from financial or time management perspective) significantly.
Application of technology and state-of-the-art innovation in information system is the key to effective and efficient supply chain management of Wal-Mart. The use of information technology is particularly important for Wal-Mart astounding success and growth in US – where the latest technology enable the firm to lower the costs of operations, enhance the collaboration with suppliers, enable proactive planning and forecasting by the retailer, and to be responsive to market changes or demands. Some of the key success factors identified from this context are: (a) use of real-time information and data, (b) application of Retail Link computer system, (c) application of central database system with UPC bar codes system, and (d) the adoption of CPRF (i.e., Collaborative Planning, Forecasting, and Replenishment approach) and VMI (i.e., vendor-managed inventory program) system.
Use of real-time information. Wal-Mart is one of the early adopter of information system management for improving the company’s supply chain. By application of useful and advanced information system management, the company able to possess critical real time information on the stock and inventories level for each store. With such an arrangement and system, the various merchandize can be replenished in an automatic manner. Not only that, the real time information available also enable the manufacturers to be notified as fast as possible provided a particular items or products are sold out in a store. Such a piece of information is highly useful for both Wal-Mart and the suppliers. In normal days, the sold-out stock can be replenished automatically. However, when the personnel or analysts believe that there is a change in consumer trends or tastes (derived from the analysis of the real-time information available), they may manually alter the stock or inventory movement to each and every stores of Wal-Mart around US. By replacing the most of the manual jobs with application of real-time information system, while maintaining some degree of flexibility to be responsive to the market changes or environment, the company able to operate in an efficient manner with lesser wastage incurred compared to the competitors.
Application of Retail Link computer system. It is said that the effective and efficient supply chain in Wal-Mart is made possible by continuous and creative application of the state-of-the-art information technology and distribution management system simultaneously. The usage of Retail Link computer system is the essential success factor. Wal-Mart has been passionate in using technology to ensure that its customer value delivery system is kept at a low price – in order to fulfill its promise to customers of ‘everyday low price’. In contrast, the competitors are seemingly slow to response or capitalize on the use of advanced technology for better supply chain or inventory management system. In fact, in the early 1990s, Retail Link is the biggest civilian database globally. The Retail Link is a powerful system. It enables Wal-Mart to collect all the sales information made by the company constantly in great details as well as recording all the stock information in stores. By having such a system, real-time data concerning stock level as well as revenue for every single product can be provided to the suppliers. With such a system, the suppliers are expected to actively observe; study and analyze the consumers’ trends and demands, and automatically replenish their respective products on a continual basis.
Central database system with UPC bar codes system. As early as the 1980s, Wal-Mart had already been investing in a central database which is essentially a modern store-level point of sales system widely used by retailers today. Such a central database is also accompanied by the installation of UPC bar codes; which enable the collection of real time data and information for analysis purposes. Perhaps that is an earliest form of customer relationship management system – where Wal-Mart combine all the stores data, revenue information and external information such as economic growth or weather forecasts to anticipate the changes of consumers requirements or needs. Apart from that, by capitalizing on such an advanced system, Wal-Mart can also improve the accuracy of the purchasing and supply chain-related forecasts.
The adoption of CPRF and VMI. Wal-Mart is one of the early adopter of the integrated methodology in planning and forecasting activities together with the suppliers. The integrated approach being applied is called the Collaborative Planning, Forecasting, and Replenishment approach (CPRF). Such as system is critical in terms of planning and forecasting for all parties involved in a supply chain, because the very critical information such as data collected from promotion, sales per item for a certain period, and inventory amounts remaining are shared and delivered to all parties. This enables the suppliers to make better forecasting and informed decisions. On the other hand, the automatic and continual replenishment of goods are enabled by the adoption of VMI system. VMI is essentially the vendor-managed inventory program. This system enhances the suppliers’ capability to manage its respective inventory level at Wal-Mart distribution centers. Most of the suppliers of Wal-Mart current have such a system in place – making the supply chain of Wal-Mart the most efficient one in the world.
There are various types of research methodologies used by researchers in conducting a study on a topic. Many of the research methods are basically approaches to obtain information from the people around. Some of the commonly used research methods widely applied by researchers and employed in this writing is presented in this section.
Literature search. Usually, literature search is the basic research methods must be used by any academic research journal or project. It involves reviewing the readily available academic journals or other form of reliable researches performed by other researchers. Sometimes, other dependable sources of information may also be used – such as trade publications, newspaper, magazines, annual reports, and other published materials by the corporation itself. The literature search is usually most conveniently conducted by accessing the online academic database.
Communication with relevant people. To talk to other people in order to obtain information is perhaps the longest available research method. Such a research method is useful to elicit or ferret out the unpublished information, or information about very current events. People can be very resourceful. Often, meeting with suppliers, customers, prospects, management of a company can obtain a great deal of critical information about a particular business. The drawback of this research method is regarding the validity and dependability of the information obtained from the people. Besides, the sample size might be small and may not comprehensively represent the population.
Personal interviews. Personal interview is basically about interviewing a particular person to obtain in-depth and comprehensive information. It is time consuming and may incur higher costs than other methods because it is conducted as a one-to-one interview. Personal interview is frequently required when the subject refuse to undertake other form of interview methods. Besides, it is also a viable method if the researchers have close relationship to the interviewee so that he may ferret out more information.
Conducting survey through telephone. For a research involving large sample, telephone interview or survey is one of the viable approaches. This method is good in the sense that it allow the interviewer the chance for opinion probing. Based on the feedback and reaction from the interviewees, the interviewer may change their questions accordingly.
Mail survey. Mail survey is one of the most costs effective methods to gather information. This method is suitable and should be used when the sample size required for research is relatively large, or the respondents or participants of the survey come from various geographical areas. However, the drawback of this method is that it may take longer time to complete a particular survey. The response rate may also be low. Not only that, it is relatively hard for the researcher to investigate or ask more details questions if the feedback or responses from the survey participants are not clear.
Email and internet survey. The email or internet survey method is a relatively new research mechanism. This is the most costs effective way to undertake a survey. Besides, it is also the fastest method to conduct a survey. However, the main issue with this method is that the demographic of internet users may not representative of the entire population under research. Thus, before choosing such a research technique, the bias due to demographic impacts of internet users should be carefully considered.
The research is a qualitative study on Wal-Mart and its supply chain management, with a focus on its operation in China. To conduct the research, questionnaires are used – with personal interviewing the respective management of Wal-Mart in China and the customers shopping at Wal-Mart in China as the main source of information. Besides, other information is also found from newspaper and the academic journals available from database. This approach is relevant to our case because the study require an understanding on the operations on Wal-Mart and to collect various comments and feedback from the customers. Most of the research is carried out using either telephone or internet survey method. These two methods are the most cost effective approaches.
There are two set of questionnaires developed to investigate the Wal-Mart supply chain issues and details from the country’s operation in China. The first questionnaire is directed towards the management and the second set is directed towards the customers. The interview is performed on a random basis for the customer in Wal-Mart. The interview on the mangers is performed on an availability basis. There questionnaire are presented in the following section.
- Where do you live?
- Have you experienced to shop in War-Mart?
- If yes, how do you find about it?
- If the answer is positive, how often you shop in War-Mart?
- What attract you to shop in War-Mart?
- If the answer is negative, explain the reason.
- Where do you prefer to go and why?
- How many years have you work in War-Mart?
- What is your position in War-Mart?
- Is it easy to keep ‘JIT’ delivery?
- The inventory level of you local store?
- The rate of the shelf replenishment of your local store?
- What type of product has the highest rate of shelf replenishment?
- What is the level of customer satisfaction?
- Who are the biggest competitors of War-Mart in China?
- Can you explain more on the competitive advantages of War-Mart and its inadequacy?
For the questionnaires designed for the managers in Wal-Mart, a total of 10 set of completed questionnaires are sent out. However, only eight of the questionnaires are completed and eventually sent back to the author. Perhaps the other two managers are too busy and do not have the time to seriously go through the questions asked in the questionnaire. However, this may not seriously affect our research because 2 out of 10 managers can be considered a small percentage. Nevertheless, it is acknowledged that if they are able to participate and feedback to us, the findings in this study can be more dependable and comprehensive. About 100 email and internet telephone surveys are made to the customers of Wal-Mart. The respondent rate is pretty good – around 76% of the people respondent well. The rest of the survey participants are less able to answer the questions designed because they may not be willing to participate in the survey. Some of them are suspicious of this survey and may not give sincere answers. All of these cases are excluded from this research.
From the research, a lot of critical information can be obtained. For example, in the research on the customers of Wal-Mart, 10% of the customers say they prefer to go other supermarket or groceries shop because the distance from their house to Wal-Mart is pretty far. 4% of the customers however complain that the goods sold in Wal-Mart are not really very cheap. Another 9% of the customers being survey indicate that they do not really trust the quality or brand name of Wal-Mart. The most significant findings is that around 70% of the customers indeed believe that the food and beverages, such as fish, vegetables, and others consumable products in Wal-Mart is not fresh, and they indeed prefer to purchase these items from the nearby supermarket or wet market in the morning around their housing areas. Not only that, for the consumables products, these people believes and trusts more in local brand, in which they have been consuming for a long period. They are relatively resistance against other new brand.
The findings from the customers are indeed consistent with the survey results obtained from the questionnaire distributed to the managers in Wal-Mart. They agree that the stock replenishment rate for food and beverages, particularly such as meat, fish and vegetables are slower than the daily appliances such as toilet papers, toilet paper, spoon, forks, paper, and etc. This makes sense when the customers largely believe that the vegetables, fish and meats sold in Wal-Mart is not as fresh as those sold directly in the wet market. The discussion on Wal-Mart operational issues from various literature reviews and some of the findings from the questionnaire survey will be summarized in the following sections.
China is a huge country, with the most populous and highest market potential status in the world. Besides, China is one of the fastest growing economies in the world. Today, the nation has not only becomes the world’s factory hub, but also has emerge as one of the biggest markets for consumers goods, due to the large population available in the country. The long period of economic expansion of the nation enables the Chinese to have more disposable income and better lifestyle today. Specifically, the nation experiences an emergence of a large pool of educated middle class people, particularly at the east coast of the country in recent years. The people in middle class have higher health awareness, demand for lifestyle and knowledgeable. With the growth of large pool of rich middle class people in the country, the economic environment is favorable for businesses seeking expansion to the country. The explosion of consumer markets in China is definitely an enticing one. However, without a proper comprehension and in-depth knowledge on how the market works in China, selling in China can be a risky and challenging one. It is interesting to observe and study how such a highly successful and performing company in China is facing great difficulties in its expansion to the biggest consumers market in the world. In the next section, the various challenges faced by Wal-Mart in China are discussed.
However, Wal-Mart expansion to China is a bitter one – where the company is still facing challenges in rolling out its services in the country. In China, Wal-Mart is struggling with daunting primitive supply chain. However, the competitors are doing just fine in the country. For example, both Carrefour and Metro are operating profitably in the country. It is found that Wal-Mart duplication and implementation of its superior supply chain management strategy, techniques and philosophies to China is not feasible. China is a highly complex and complicated country – it is not as homogeneous as the US. Various challenges or difficulties causing the duplication or implementation of Wal-Mart revolutionary and advanced supply chain management system in China are discussed in the following paragraphs. Among them are: (a) different consumers’ behaviors, culture and preferences, (b) tough competition from the local players, (c) tough competition from other multinational or transnational companies, (d) the need of a brand name to compete, (e) there is no cohesive national distribution system in China, (f) high delivery and distribution costs in China, and (g) there is no ‘one Chinese market (i.e., the consumers’ tastes and behaviors in China are not homogenous as in US).
Different consumers’ behaviors, culture and preferences. The culture and consumer behaviors in China are different from that in US. Thus, Wal-Mart purely positioning itself as the deep discount brand name with quality goods may not be sufficient. Although the Chinese has no problem accepting foreign goods and services (in fact, some researchers even argued that the Chinese consumers are more open to Americana then the consumers from Europe), they have distinctive habits and cultural behaviors that must be taken into account. Often, besides products or services quality, the Chinese consumers also demand a bit of style from the products to be purchased. To buy any products or services because it is cheap may not be very relevant to the Chinese market. Not only that, the Chinese consumers are also found to spend less on shopping per visit than the Americans, but in fact they tend to shop more often.
It is found that China is a fragmented market. Even all the Chinese exhibit different consumer behaviors in different part of China. Furthermore, the country has a large variety of religions and ethnicity. The fragmented China is traditionally and currently dominated by small community shops and small regional chains. The emergences of new huge retailer chains are still new concepts. The long developed and optimized model of Wal-Mart business based on behaviors and consumers’ tastes in US is not applicable to Chinese in the country. Without proper adaptation and evolvement to the new context in China, it is hard for Wal-Mart to compete effectively. The situation is even more pessimistic when we consider the consumers’ tendency in China to favor against specialized retailers. They seemingly prefer and require more product expertise and post-services provided by the specialized businesses.
As the market in China is highly fragmented, the local tastes from regions to regions in China are unique. Some examples may be able to help the consumers to understand the huge differences of tastes across the vast and complicated country. The northern Chinese prefer the sweet milk powder but the southern Chinese prefer low-fat varieties. Another example, Soya bean oil and sunflower bean is sold well in Shanghai but not in Beijing. Similarly, the Tsingtao beer is welcomed in many areas of China, but the Yanjing Beer is far more accepted by people in Beijing.
It is also argued that the Chinese demand of food or consumers products are strikingly differ than that from US. The Chinese often demand the food to be freshly harvested, and if possible, to be killed in front of them (a practice that would become negative highlight in mass media if such practices are found in the US). In fact, the huge demand for fresh products in China can be observed from the constantly thriving of typical wet market in China. Most of the wet market in China has no-frills and open air venues – displaying livestock in cages. These are the common places where the Chinese have been shopping for fresh foods. According to Fong and Linebaugh (2006), half of the every single dollar food in China was spent on live and fresh products – and this obviously making the task of running a national chain with high efficiency a daunting one.
Tough competition from the local players. The local Chinese companies are fierce and aggressive as well. Many of the local players are competitive and do not seem to fear the tightening and increasing pressure of competition. Perhaps these local companies are forced to compete in order to survive. Merger and acquisitions of retailers in the country by local players have been common, so that the combined company will enjoy larger economies of scale and scope. In 2005, China’s Bailian merged two departmental stores to create the largest listed retailer chain in China, to become more competitive. The management of Bailian is highly aggressive and ambitious – they plan to increase the revenue by 20% to more than USD 13 billion in the next few years. The increasing competition is definitely negative news for Wal-Mart.
In fact, China is still primarily controlled by the domestic retailers (Naughton, 2006). Statistically speaking, in the year of 2006, the China’s top 30 domestic chain stores expanded the stores in operation from a 20% market share to exceeding 16,000 outlets. This has significantly dwarfing the expansion and growth of all the other foreign players in China.
Tough competition from other multinational companies. Besides, due to the highly attractive business opportunities offered by China, multinational retailers are also increasing their presence and footing in China. Among the more famous large and powerful retailers include IKEA, Carrefour, Metro and etc. As the competition is stiff, the industry outlook becomes gloomy and highly challenging. Although Wal-Mart is famous for its desire and strategy to compete and dominate, the other large multinational and transnational companies are not weak as well. It is undeniably that under such a situation, increased competition will further erode the profit margin of Wal-Mart, and the companies may spent much efforts to entice the consumers or customers to buy from their stores as compared to the rest of the competitors.
The need of a brand name to compete. Although Wal-Mart is famous in US, it may not be so well-known in China. The Chinese are more familiar with the local companies, or with other multinational companies such as Carrefour and Metro with long presence in the country. To compete successfully in China, Wal-Mart definitely needs some local brand. To do this, they must be forming partnership with local brands. The journey will be tough for Wal-Mart to purely compete in China with solely a pricing strategy. Many Chinese consumers may be used to their local brand, and tend to make repeat purchases from the existing supermarket or stores. It is definitely challenging for Wal-Mart to change such kind of behaviors.
There is no cohesive national distribution system in China. The Wall-Mart attempt to become the national retail chain in China is hindered as the country is too vast, complex and do not have a cohesive national distribution system. To put all these arguments into perspective, the China territory is roughly the size of the continental US, but the country still does not have a wide nationwide logistics network of trucks and infrastructure that enable efficient delivery of supplies from farm to shop shelf. Due to the lack of a centralized distribution system in China, the efficient and revolutionary supply chain strategy and techniques is not portable to China. Apart from that, the amount of refrigerated trucks in China is also lacking, and thus this present huge challenge to modern hypermarket such as Wal-Mart to match the fresh products and the lower of costs to local competitors. The key competitive advantage of Wal-Mart is thus, becoming irrelevant in China.
High delivery costs in China. Almost all foreign retailers face high transportation costs in China. The deliveries costs from one region to another region in China are costly, and require long hours. According to the estimation of American Chamber of Commerce (cited by Fong and Linebaugh, 2006), the transportation and logistics costs in China are relatively high if compared to the developed country. The costs are actually 16% of overall product costs in China whereas the costs are only 4% in the more developed countries. Besides, the advanced trucks for delivery of goods are not sufficient. Firstly, the refrigeratored trucks are very rare. Secondly, only about 20% of the freight trucks in China are containerized. This means that majority of the cargo is vulnerable to damages from sun light or rainfalls. Even with the use of high tech transportation services, the vast territory of China is making many of the delivery process slow and inefficient. For example, the time required to deliver goods by trucks from Beijing to Urumqi in Xinjiang requires a period of 1 week.
There is no ‘one’ Chinese market. The population in China is not homogenous and the local tastes differ from region to region in China. It is worth to highlight that China is a country with more than 10 dialect groups and the climate of various areas range from the tropical to the subarctic one. The people and geographical characteristics are extremely diverse, unique and different. Under such a circumstance, it is impossible to stock shelves in large quantities. For example, according to Fong and Linebaugh (2006), the most popular carbonated drink in the province of Shandong, China is not Coke or Pepsi, but is a local brand called Laoshan.
The operations of Wal-Mart and Carrefour are different and worth mentioning. In China, Carrefour is the first hypermarket to collect a variety of fees from the suppliers wishing to participate in any events organizes by Carrefour. Besides, other types of fees collected by Carrefour include the fees for listing the suppliers’ products on the shelf, the rental of display space, promotional fees, and printing of brochures charges. The situation is different in Wal-Mart. In Wal-Mart, the functional department of promotion and marketing is distinctive department from the purchasing unit. For this, Wal-Mart does not impose other sort of fees such as rental of shelf, promotional fees, and costs of printing brochures from the suppliers. On the other hand, Wal-Mart will ask the suppliers to reduce the pricing charged to Wal-Mart. In other to maximize the revenue for the company, both Wal-Mart and Carrefour have different approaches.
Both methods have their own advantages or disadvantages. For Carrefour, by combining both the functional departments of purchasing and promotional, the company can achieve flexibility in marketing issues, and adapt to the environmental and market changes in a fast manner. Besides, such a model also allows the company to offer specific products offerings to the customers according to geographical areas. In contrast, systematic and orders are of prior importance in Wal-Mart. In Wal-Mart, all products are benchmarked and standardized. Even the placement on shelf and the location of the products to the sizing of the products are standardized. The decoration or the descriptions of the goods are also having standardized design. The benefits of these are that the pricing can be low and the process and work flow in Wal-Mart can be highly efficient. The pricing for all of the products in Wal-Mart is enabled to follow the everyday lowest price for all sorts of products.
However, the situation in Carrefour is different. Firstly, the products and display is not standardized to the extent of what the Wal-Mart is having now. Besides, Carrefour is not having the lowest price for all products or goods in the hypermarket strategy. Indeed, Carrefour is following a strategy to offer deep discount to some certain products (where sometimes, the deep discount can be below the costs of the products sold to Carrefour) to entice the customers to pay visits to Carrefour. However, the products not in promotional lists may not be as cheap as offered by Wal-Mart. All these send confusion to the customers on which hypermarket is really offering the cheapest products.
The degree of benchmarking and standardization in products offering and process or work flow in Wal-Mart is the key success factors in highly developed countries such as the US. However, that strategy may no longer be relevant in China. In US, many of the manufacturing plants are fully developed and is having highly advanced customization technologies. That is not the case in China currently, although the country is chasing up the trend in a very fast manner. Besides, it is relatively harder to impose standardization and quality benchmarking for the entire local manufacturer in China, because many of the manufacturers have different standard of operation and products quality. These causes that the operations, particularly at the sourcing side of Wal-Mart in China is facing abundant difficulties and lose out to Carrefour eventually, due to the extreme standardization requirement.
Due to the two different revenue generation strategies by Wal-Mart and Carrefour, the companies have very different capabilities and requirement in term of its business processes or operational activities. Carrefour has higher flexibility in terms of the sourcing activities, and the revenue can be highly adaptive to the market requirement. However, that is not the case in Wal-Mart. As we have already discussed, Wal-Mart is having high degree of standardization to achieve its everyday low-cost model – making them highly susceptible to limitations or wrong doings by the suppliers. Carrefour has fewer issues on the suppliers’ side, because Carrefour can be flexible in choosing the suppliers, as the business process in Carrefour is not designed to achieve standardization. Such a standardization requirement is causing Wal-Mart to eventually losing out, as to manage such a business process is highly challenging in China, particularly the manufacturers have different standards, and the consumers all different part of the country are having different brand preferences. Although there is a force to urge the many manufacturers to converge towards a standardized quality and manufacturing process, the trend is still slow, and the time required to implement all of these changes may be long. This is indeed dragging Wal-Mart supply chain management process.
The challenges faced by Wal-Mart in China are not isolated events. In fact, a review of the international expansion strategy of the company reveals that the company does have several other high-profile pull back or financial losses from other developed or developing countries as well. Of course, to be fair to the company, some success cases of Wal-Mart in the international arena are also discussed and presented. Seemingly, the best practices or advanced supply chain management system that contributes to the success of Wal-Mart in US is not portable to many other countries around the world. All these can serve as the evidences showing that the many issues must be considered in implementation of a supply chain system in a specific situation. Each and every country may be unique, and such uniqueness must be considered in designing or formulation of an efficient, effective and successful supply chain between companies. Even the famous and revolutionary supply chain of Wal-Mart – that is responsible for the creation of superior and long term growth for Wal-Mart in US is facing huge challenges and suffers financial setbacks in other countries.
The foreign expansion journey of Wal-Mart is perhaps an adventurous but bitter one. In the following paragraph, it is discussed several failed expansion scenario by Wal-Mart to the following countries: (a) Germany, (b) Hong Kong, (c) Japan, (d) Korea, and (e) Indonesia.
Wal-Mart in Germany. Perhaps the weakest and most unfortunately oversea business venture is the expansion to Germany. Wal-Mart has been suffering huge losses from time to time in Germany. According to German paper, Lebensmittel Zeitung, the recent losses suffered by Wal-Mart is around USD 32 million, with a small revenue of USD 404 million (Masters, 2004). According to Wal-Mart personnel however, the losses are primarily associated with problematic staffing issues, challenges in application and implementation of Wal-Mart’s distribution system in the country, and also the difficulties in adapting the Wal-Mart superior logistics and inventory management system to Germany. However, that is not the only rationales observed by various researchers. In reality, the unique rules and regulation in Germany is also forbidding the company from following its usual lowest price strategy – where there are legal requirements in Germany forbidding any company to price goods below costs of production. Apart from that, there are also regulations in Germany curtailing weekend hours – and the impacts are that the usual highly profitable Sunday in US is bad for retailing companies in Germany. Other researchers however mentioned that poor acquisition is also one of the main factors causing the company to lose out in Germany. Both the acquisition projects, Interspar and Wertkauf had been turned over for numerous times, an indication that the company is already in hardship situation. Besides, different customers’ tastes and cultural values are also possible factors contributing expansion hardship to Wal-Mart. The value proposition to US, Canada or UK is no longer relevant to Germany market. Firstly, the market in Germany is much more competitive. Secondly, it is believed that the consumers in Germany have higher brand loyalty to existing strong brands. All these forced Wal-Mart to close down some of its branches in Germany.
Wal-Mart in Hong Kong. Wal-Mart entered into the Hong Kong market (i.e., in the early of 1990s) is a failure – after two years, the company left Hong Kong, primarily due to merchandize and location selection errors.
Wal-Mart in Japan. It cannot be denied that Japan is one of the largest markets in the world as well. The opportunities in Japan is huge and attractive, if Wal-Mart able to compete successfully in this country. However, in Japan, Wal-Mart is just recorded minor improvement. As early as 2002, Wal-Mart has been forming partnership with Seiyu in Japan. In reality, the company is facing various difficulties in implementing its revolutionary Retail Link system in Japan. The primary reason cited for such a failure is that many of the Japanese suppliers have yet institute the technology, and thus, effective and efficient communication with Wal-Mart is hindered. This causes negative impacts to the order and replenishment system for Wal-Mart in Japan. Not only is that, in Japan, the business culture is very different than that from US. The relationships between a retailer and supplier are often based on traditional personal ties since older generations. To hardly forcing Wal-Mart system to Japan is to force the various suppliers to switch to impersonal electronic relations and to request the suppliers to adjust their culture according to Wal-Mart demand. These are all daunting tasks.
Wal-Mart in Korea. Wal-Mart operation in South Korea has been experiencing difficulties due to misjudgment with regards to merchandize mix for the local market. Firstly, the local tastes are different from Wal-Mart expectations. Secondly, the stores opened up by Wal-Mart are situated to far from city centers, and many people do not have easy or convenient access to these stores. Not only are those, the strong labor unions and furious competition also detrimental forces causing Wal-Mart to retreat from Korea.
Wal-Mart in Indonesia. Wal-Mart’s venture to Indonesia is an unfortunate one. In lesser than two years (starting 1996), the company left Indonesia; because one of the stores in Jakarta was looted and damaged during the riots in 1998.
It is important to mention that Wal-Mart does have several success cases in foreign and international venture. For example, the venture to UK, Mexico and Canada is a successful and profitable. In fact, these three countries are the biggest success in terms of Wal-Mart expansion to the international landscape. In 2005, more than 80% of Wal-Mart’s sales figures are derived from these three countries.
Wal-Mart in UK. Somehow, the Wal-Mart achievement or performance in UK is a satisfactory one (although on some occasions, the subsidiaries at UK underperform for a short period of time). To be fair, the company does have some successes in foreign country expansion beside Canada and Mexico. The Wal-Mart acquisition of ASDA to expand in England is a success one. The supply chain management system of Wal-Mart is implemented and duplicated successfully in the country – where it is witnessed that its operations are improved due to expansion of general merchandize, increasing its food and apparel offering, successfully under pricing the rivals and beating the competition, and capitalizing on the existing advanced state of the art inventory and logistic handling techniques. According to researchers, the sales per square foot in the UK is actually four times higher than at Sam’s Club – an astounding figure of $2000 per square foot (Greg Masters, 2004).
Wal-Mart in Mexico. The strategic alliances with Cifra in Mexico is successful – where currently, Wal-Mart is the largest retailer in the country. Similar to the situation in US, the Wal-Mart strategy and focus on price cuts, domination over competition and its “everyday low prices” is often perceived as the key success factors in this country.
Wal-Mart in Canada. Wal-Mart is the third largest retailer in Canada. The success of Wal-Mart in Canada is largely expected, since the culture and the strategic geographical issues of Canada are similar to US. In effect, Wal-Mart superior supply chain management system is implementable and portable to this country.
There are a variety of complicated and intervening reasons on Wal-Mart failure to duplicate its superior supply chain management system to other countries. The reasons causing financial losses or unsatisfactory performance of Wal-Mart discussed in the following paragraphs include: (a) lack of flexibility and adaptability in designing and implementation of supply chain in foreign countries, (b) intense competition, (c) duplication of business model without sufficient adaption to local cultures or situations, (d) insufficient infrastructure in the other countries, and (e) different consumers behaviors (which in turn affecting the design of supply chain in the other countries).
Need for more flexibility. According to Neil Shister (2007), economic climate changes may be the key issues here. The giants are often rendered as less competitive by exactly the things that enable its glory successes in the early days. He believe that successes of any supply chain is increasingly dependent more on agility, whereby the capability to exploit changing circumstances and being responsive to market without impairing profitability. Unfortunately, the supply chain of Wal-Mart is still too similar to that of a command and control approach designed to deliver standardized mass products at minimum costs – may not be relevant in foreign countries or in the future. Accordingly, it is more important to start looking at supply chain that can operate on a more flexible scale with more emphasis placed on mass customization of products and services for various differentiated markets.
Intense competition. The global expansion is not a new phenomenon. Large multinational and transnational companies are all aware of the attractiveness and potential of pursuing an international expansion strategy. The emergence of China, India, Russia and Brazil – collectively called as the BRICs – is obvious and the profit potentials are largely acknowledged. However, the risk of expansion is higher as well, as every powerful corporation is now eyeing the similar thing and cut-through competition is the result. In fact, Wal-Mart is still relatively inexperience and young compared to the other retailers, such as Carrefour from France, Metro from Germany, and Tesco from UK. All of these powerful competitors have been doing business in the foreign context longer than Wal-Mart. Their experiences, network and capabilities are nonetheless, a huge factors affecting Wal-Mart’s success or failure.
Duplication of business model without sufficient adaption to local cultures or situations. According to Steve Spivak, consultant from Retail Forward management consultancy firm, the Wal-Mart biggest mistakes in its global expansion strategy (as illustrated by several high profile failures and pull-out from foreign countries) is due to the company’s act of transplanting the US business model and management techniques or methodology to a new foreign market. This is not hard to understand, as each market has own unique characteristics, of which the highly successful system designed and developed in a particular country may no longer be relevant to other countries. The local populations can be resistant to foreign approaches, or simply too used to their existing habitual behaviors or brand preferences or consumption lifestyles.
Insufficient infrastructure in the other countries. Some countries may not have sufficient or well developed infrastructure which is essential for Wal-Mart to duplicate its supply chain system in the respective country. For example, in China, the land is vast and the road or infrastructure supporting the linkages between regions in the country is less developed.
Different consumers’ behaviors. The variety of consumers’ behaviors and tastes are nonetheless the vital factors creating tremendous challenges to Wal-Mart in optimizing or streamlining its operation. For example, the consumers’ tastes from a region may differ to the other region in a particular country. All these will demand Wal-Mart to alter the distribution and logistics system – all of which will increase the transportation and operation costs for the company.
A survey of the various internal expansion issues and failures indicate that Wal-Mart must not take the various cultural and unique business practices in foreign land for granted. Some recommendations are presented as follow.
Partnership with local business entities and to leverage on the local management experiences. It is important for Wal-Mart to form strong and reliable partnership with local firms as every part of the world may not be similar, has the respective unique cultural and societal values or preferences. Besides, after acquiring a target company for expansion purposes in the foreign countries (as this is the usual expansion strategies to foreign countries by Wal-Mart), it is important to keep the existing management team in place. Wal-Mart can think t capitalize and leverage on these management experiences and insights. The learning curve can be shortened significantly and many costly mistakes can be avoided.
Listen to the local consumers and avoid assuming homogeneity among all consumers around the world. Based on the stories and ideas gathered from experts and researchers, it is found that a common theme leading to Wal-Mart failures or unsatisfactory results is due to its insufficient or lack of understanding of the local cultures or market insights. Of course it is not reasonable to expect that Wal-Mart know all the information in advance, but it is essential for the company to actively listen to the local customers or consumers. The cultural differences must be acknowledged, tackled and handled properly. Bad assumptions that may ease decision making process but is not relevant to Wal-Mart growth in the foreign countries should be scrutinized.
Much can be learn from its competitors, namely Carrefour in China. Carrefour is indeed the most successful foreign retailer in Asia. It is acknowledged that although Carrefour is smaller in size if compared to Wal-Mart, the company enjoys deep competitive advantages as it has much deeper and wider global reach. Due to its agility and flexibility, these companies able to beat Wal-Mart’s strategy of provincial growth approach. Wal-Mart should humbly learn from the success retailers and to grasp the local culture and practices. The supply chain or consumer relationships management program should not be ported blindly to any foreign countries. The merchandize should be able to reflect the surroundings.
The operations of Wal-Mart should be planned at the regional level. As for the cases such as in China, the business environment and the cultural and societal setting in the nation is complex and complicated, ands thus, it is advisable that the supply chain management system of Wal-Mart should take a provincial approach in terms of planning, forecasting and distribution.
Supporting the construction of infrastructure in important market. Many of the merging countries do not have excellent infrastructure such as roads or rail-roads connecting all regions in the country. In fact, there are not many countries that have such comprehensive infrastructure level if compared to US. For example in China, the non-existence of good transportation network among and within regions is the key factor causing the duplication of US supply chain model is not possible. In order to solve all these issues, Wal-Mart can negotiate with the government and plan for better infrastructure in the country. At the similar time, this can enhance the publicity and images of the company around the world.
Go beyond lowest price and quality products. In many of the countries, providing the quality products with lowest price may not be sufficient. The consumers in other countries may have strong brand loyalty and demand the products offering to be stylist. The environment of the stores may be also important – and the demands or requirements from the consumers can be highly complex. Marketing intelligence and research unit should be formed by the Wal-Mart to investigate these issues and then to make relevant changes for better profitability and growth in the foreign countries.
The design and formulation of an effective and efficient supply chain is a complicated and evolving process. In different national context or business environment, the best or optimized supply chain may differ. There is not a single version of supply chain to be implemented in every part of the world. Many issues must be considered in implementation of a supply chain system in a specific situation – and these issues are often include the cultural and societal difference between countries, the infrastructure settings in a particular countries and the geographical issues in a nation. In fact, many other factors may be affecting the supply chain as well – such as the competition from both foreign and local market players in the similar industry, and the political environment in a particular country, although these factors are observe to be affecting the efficiency and effectiveness of a supply chain less frequently. Overall, in short, each and every country may be unique, and such uniqueness must be considered in designing or formulation of an efficient, effective and successful supply chain between companies. Even the famous and revolutionary supply chain of Wal-Mart – that is responsible for the creation of superior and long term growth for Wal-Mart in US is facing huge challenges and suffers financial setbacks in other countries.
Many lessons can be learned from this research. Firstly, the basic research steps, procedures and requirements can be learned. By trials and errors, I can start to understand more on the process. This is very different from when I am reading the guidelines presented on a book regarding the best procedures of tactics to conduct a research. I seriously start to appreciate the saying that – if you do not do it, you don’t understand. Not only that, I start to understand that the most important criteria for a good research is not about the technical parts of the research. It cannot be denied that researchers with technical knowhow and experiences can be highly helpful, but the patience, the emotional dimensions of the researchers are more important. Research is a process that requires great patience, determination, commitment and sufficient passion on the topic under researched for the completion of the final piece of practical and useful research findings. The emotional factors are more important than the technical knowhow. Much technical knowledge can be learned from conducting this research. For example, the search of literature reviews in databases of library, the use of qualitative research methods, the usage of several media to communicate to interviewees, and the presentation of the research findings in a professionally acceptable research report. Apart from that, some useful and practical interpersonal skills can be learned and polished as well. For example, the can now better convince people on doing something for me, such as to fill up questionnaire. The research also enhances my understandings on the important of interpersonal relationships, skills and networking in the society.
Although the research is carried out with care and diligence, many areas have various limitations. The limitations are mainly due to the inexperience and the lack of understanding on the tricks and best practices in conducting a research professionally. First of all, as this is a qualitative research project, the research findings may be subject to some subjectivity in interpretation by the author. My ability to interpret may not be mature or sophisticated enough for producing truly insightful or remarkable research findings. This can be mitigated as I gather more knowledge on the research topic. Besides, the research is also not being conducted in an effective and efficient manner. Many of the issues that require some degree of attentions in conducting in the research project is not being aware of. Thus, last minutes corrections are required, and this has decrease the quality of the research. The research findings, is also not being presented in a truly professional manners. Some sections should be further elaborated while some others should be reduced its word counts. However, to truly improve the report format on this issue may require long hours, but I simply am running out of time to cater for this weakness. Nonetheless, it is also aware that more interviewees should be selected for the research purposes.
Overall, the research methods used in this research is generally acceptable. However, there are many rooms for improvement. In the future, I shall conduct my research with more attentions being paid on several issues as follow: (a) always start early, (b) always conducts tutors or lecturer assistance before proceeding to important chapters, (c) have a good understanding on the general concepts of the research topic before proceeding, and (d) always write down your findings in a systematic manner so to avoid excessive tasks at when the deadlines of the research is approaching.
The research carried out in this writing still has many unanswered areas. Not only that, the nature of the research and the methodologies used in this research report has several inherent limitations. Thus, to understand the topic in greater details, more researches can be carried out. Several recommendations on the topic, nature and ideas for future researches will be suggested as follow.
Firstly, quantitative, instead of qualitative research methods can be used to conduct the research. The research carried out in this report is qualitative in nature. The issues of all qualitative research are that, it is subjective, and it may suffer from the personal biases due to the researcher or the interviewees. To avoid these problems, and in fact, to provide greater validity and objective evidences to the findings presented on this research findings, a quantitative research is relevant and should be carried out.
Secondly, the scope of research can be extend further, to investigate the Wal-Mart supply chain management in other countries, such as its failure in Japan, Germany or its operation in UK. The case in China may be too specific, or perhaps other issues on the supply chain management in foreign countries are not being reflected from the case study of Wal-Mart operations in China. As such, it is easily understandable that a research on the company’s operations in other countries may be relevant and insightful.
For those readers who are interested to understand the key success factors of Wal-Mart, the research findings presented in this report may be too general. In fact, various factors contributed to the successes and growth of Wal-Mart. Thus, it is reasonable also for people who want to understand the broad strategy of Wal-Mart of the key success factors (apart from having an effective and efficient supply chain management system) that enable the company to enjoy such a great success in the retailing industry. According to some of the literature research, some other key success factors include the Wal-Mart culture, the conservative money management of the company, the spiritual leaderships of Sam Walton and etc. In fact, supply chain may be just a part of the complete picture. However, for readers who wish to understand on the big picture, they may need to conduct a further research on other key success factors of Wal-Mart. In fact, it is not fair to blame the Wal-Mart’s failure or unsatisfactory results in China due to its limitations of supply chain management system in China. It is also highly probable that other key success factors of the company are not duplicable in countries such as China, Japan or Germany.
Not only that, the similar research can also be carried out on other companies, which supply chain management system is efficient and serve as one of the key success factors contributing to the firm’s successes and growth. Some of the famous companies that are having a efficient supply chain include Dell Computers, Boeing, and Lucent Technologies. Interestingly, company such as Dell Computers, is having great successes in US, is also having some troubles in China. Thus, it is not hard to understand that such a research on the supply chain management system in Dell Computer can be highly beneficial or insightful for researchers investigating the concepts, ideas and best practices of an efficient supply chain management system.
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