Wal-Mart and Carrefour Experiences in China: Resolving the Structural Paradox Harvard Case Solution & Analysis

Analysis

Wal-Mart v/s Carrefour

Entry Strategy

In 1995, Chinese government made restrictions on the retail industry in which it limited the operations of the foreign companies. Before entering in Chinese market, Carrefour had been operating in Taiwan where it maintained an alliance with Shanghai Hualian Company to enter the Chinese market. Shanghai Hualian had close ties with the Shanghai government which helped the company to expand in other 1^st tier cities with complete support of the government despite of central plan for restrictions. At that time of the year, very little competition existed and Carrefour was the first international retail company to enter in Chinese market with strong business alliance. Carrefour adapts well with the local consumer behavior and local market and mostly hires local people(Tian, 2007).

While considering the strategy of Wal-Mart, the company always rely its international business expansion through acquisitions. However, Wal-Mart abided by the rules and laws of Chinese governments which made the company’s progress slow. The company also had debates and issues over taxes with the government which halted the company’s progress in entering the bigger 1^st tier cities of the country. However, Wal-Mart acquired Trust-Mart to strengthen its business and also to spread its coverage in bigger cities of China(Kaynak & Chan, 2014).

Locations

The exhibit 3 shows the places where Carrefour has located its stores in Shanghai. In every parts of the country, Carrefour locates its stores at crossroads which is also the meaning of the word ‘Carrefour’ used in French. The particular strategy is also applied for the Chinese market. Crossroads are the business centers or the residential places for the urban people, where the consumers have a higher disposable income. Wal-Mart applied a slightly different strategy than Carrefour where it located its stores near suburban areas. Exhibit 4 shows the location of stores opened by Wal-Mart in Shanghai. Wal-Mart stores are located in rural areas or near speed roads where lower income of consumers are present. These consumers have to reach these stores through cars(Kaynak & Chan, 2014).

Shopping Environment

As the strategy of Carrefour mostly focuses on targeting the local market, the company has associated itself with a Chinese term Jia, le, fu, meaning family, happiness, and luck. These letters have high regards and cultural importance in Chinese traditions. However, at the other end Wal-Mart’s Chinese name does not portray any message as it has no meaning in Chinese. Carrefour has perfectly reflected the Chinese consumer behavior in its merchandising concept. Chinese consumers often require choosing from a broader product category due to which the company has developed longer and broader shelves than normal. Carrefour has also strategically changed and tailored its merchandising according to the different places of Shanghai varying on the percentage of consumers. As one of its store opened in Shanghai, Carrefour had mostly placed imported products in its shelves because 40% of its consumers were foreigners and a need was identified by the company(Kaynak & Chan, 2014).

Pricing

Carrefour places both high and low priced products in its stores in Chinese market, whereas, Wal-Mart applies a low pricing strategy to cater the low end consumers and as well as high end consumers(Kaynak & Chan, 2014).

Supply Chain

Wal-Mart has its own central distribution network located in Kengzian, China expanded on the area of 40,000 square meters. However, Carrefour has applied a different distribution strategy in which local distributors are hired by the company because it believes in a flexible approach as the Chinese market is evolving in the global arena. Direct-to-store strategy of Carrefour has enabled it to lower the cost of supply chain which is total opposite of the Wal-Mart strategy where high investment is involved. However, Carrefour faces tremendous challenges regarding uniformity in its service and quality which is the place where it lacks in its distribution strategy(Kaynak & Chan, 2014).

Expansion

The expansion strategy of Carrefour is based on organic expansion in which the company aims to expand in Chinese market according to the number of customers or sales target achieved. This strategy is entirely opposesthe merger and acquisition strategy applied by Wal-Mart. The particular strategy of Wal-Mart is aggressive in nature as it focuses on large-scale acquisitions(Kaynak & Chan, 2014).

Who is doing better?

As per the current statistics and analysis, Carrefour has dominated the Chinese market with flexible logistics strategies and localized merchandising techniques to cater the market efficiently. Carrefour has understood the nature of the market and has performed well in targeting the Chinese market..................................

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