sse_wumart_group4
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Case 2Wumart Stores:China’s Response to Wal-MartGroup 4Erika Brag (20200) Anna Ohlsson (20313) Xin Guo (70397) Liang Wang (70404)
Retail Industry in China
Retail sector predominantly state-owned before 1978
Reforms made retailing much more competitive
Besides overseas players, non-existing high quality and non-state owned Chinese retailers before Wumart
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Founded in Beijing,1994 Supermarket chain offering low price and good
value Largest market share in the city, 7th in the nation High growth rate, around 30% per year since
found Focus on developing on home market, regional
player Developed from an IT start-up to a dominant
regional retailer giant In 2004: Wal-Mart's annual sales reached $300
billion In 2004: Wumart’s annual sales reached $2.4
billion In 2005: Wumart had opened 503 stores
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WuMart Company Profile
Tangible assets in 2005: 503 stores in beginning of 2005 659 stores at end of 2005 Growth of 8% in number of stores from
2004 (Walmart: 30%) Wumart sales of $2,411million (Walmart:
$1,256million) Net sellable area Wumart: 202208 sqm Formats: hypermarkets (12), supermarkets
(47), Convenience stores (436), drug stores (8)
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Wumart’s resources and competitive advantage
Intangible assets in 2005:
In-depth customer understanding – preference, shopping habits
Early commitment to IT technology, POS, MIS, ERP
Company culture:” respect, a strong sense of responsibility and co-operation, innovation and learning, and great attention to details”
Brand image of reliability, quality and value for money
Relationship with state-owned companies and regional government
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Wumart’s resources and competitive advantage
Human resources: Higher motivation in privately-owned
company Familiarity and knowledge of chairman on
Chinas retail industry Employee talents with overseas study and
work experiences
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Wumart’s resources and competitive advantage
Organizational capabilities:Management: introduce overseas advanced management technology
Distinctive competence: Wumart’s format and it’s strong bargaining power with low cost and good value products High social status: active political participation and philanthropic work
Core competence: co-operational skills with regional government and state-owned companies
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Wumart’s capabilities and competitive advantage:
Inimitability-Relationship basis: good relationship with government and state-owned stores-Path dependency: brand equity, customer understanding, reputation in community
Substitutability: Wumart concept is not easy to substitute, they have differentiated themselves on the market by offering quality products at a 10% lower price
Expansion strategy: started by building supermarkets and convenience stores, then hypermarket on the base of loyal customers.
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Wumart’s sustainability on home market compared to international entrants:
Limitations:-corporate expansion needs close relationship with regional governments -local customers in other regions would not recognize the Wumart brand name-regional consumer preferences, tastes, and shopping behavior would need to be understood-bargain power would be weakened and supply chain could be overstretched-need to find an adapted logistics system abroad (IT program…)-retail format abroad could be different
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Wumart’s transferability abroad:
Company culture can be copied:” respect, a strong sense of responsibility and co-operation, innovation and learning, and great attention to details”
Company management skills can be copied abroad.
Co-operation strategy with local stores can be copied to an extent. Depends on politics in country (state-owned or not)
Low price concept (negotiation with local suppliers)
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Wumart’s transferrable resources :
Challenges:
Capital, scale economics As the increase of IPO, people’s lifestyle
may change in the urban cities Urban and rural gaps, regional gap,
different perception of value No brand and customer basis abroad
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Wumart’s transferability abroad:
Opportunities: Enter the market in the friendly cities
(more flexible policy) Cooperate with local companies who are
seeking foreign capital and investment Start philanthropic work abroad to build
brand recognition and reputation Start business from catching Chinese
customers firstly (10% of Thai population, 4.5 ~ 6 million)
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Wumart’s transferability abroad: