Week 8 – Walmart ChinaQ3. Identify the challenges Walmart need
positioned to capitalize on globalization’s potential, and many areWalmart Chinaspectacularly unsuccessful in their attempts to globalize.Managers tend to speak optimistically about the prospects of globalization,China provides the setting for a classic cautionary tale about globalization.and for good reason. Globalization has fostered an increasinglyGiven a population of more than 1.3 billion people and the market potentialinterconnected world, with more than $30 trillion in goods and servicesthat goes hand in hand with a consumer base of that size, the prospect oftraded and more than $1 trillion in corporate investment each year.expanding to China is enough to make any manager’s eyes light up. TheAdvances in information technology and transportation have helpedpotential is seemingly limitless.facilitate globalization-connecting developed and developing worlds,lifting some 400 million people out of poverty along the way.But on further inspection, it becomes clear that China poses tremendouschallenges for Western companies. The first obstacle is economic. ThoughNations are now inextricably linked through global trade and investment.China has made tremendous strides and enjoyed incredible growth sinceThere is no turning back. Accordingly, managers often view globalization asopening its markets to global trade and investment in 1979, thea powerful and inevitable force, and they tend to treat it with reverence-development of its economic institutions and its infrastructure has laggedspeaking of it as if it were a breakthrough technology, the wave of thebehind that in the West. The second obstacle is cultural. Chinesefuture that will change the world, if not their companies’ fortunes. And theyconsumers, for example, tend to be very different from those in the West,tend to think of themselves as the champions of globalization, akin towhich makes it difficult for Western companies to appeal to local consumerexplorers embarking on a mission to discover and conquer far-off,tastes. The third obstacle is political. Western companies struggle tounexplored lands.skillfully navigate China’s complex web of local and national politicalorganizations. All of these factors led G.E.’s CEO Jeff Immelt to conclude:Managers express their optimism for globalization in terms of the”China is big, but it is hard.”profitability it can generate for their companies. They salivate at thepotential for double-digit sales growth. They are seduced by opportunitiesWalmart has learned these lessons the hard way. Walmart’s ongoingthat promise to slash costs by half or more, simply by shifting operationstroubles in China, since opening its first superstore in Shenzhen in 1996,overseas. And they lead their companies on journeys to global markets inreflect a fundamental misunderstanding of China’s political, economic, andsearch of untapped and untold riches.cultural environments.However, opportunity and reality do not always coincide. AlthoughThe American retailer has struggled to understand Chinese consumers andglobalization certainly holds promise, it is also rife with hazards. ItChinese culture. Chinese consumers, unlike those in the U.S., differ widelypresents risks that managers fail to appreciate and that they oftenfrom city to city in their needs. Walmart therefore struggles to find theoverlook. Sadly, in the high-stakes world of global strategy, companiesright product mix to offer in the 117 cities and 25 provinces in which itregularly fail to convert potential into profits. Most companies are poorlyoperates. This makes it challenging to sell a core set of productsnationwide.