Lecture notes and slides for teaching the case, Wal-Mart Stores: "Everyday Low Prices" in China. Based on the case study from Harvard Business Publishing found here: http://hbr.org/product/wal-mart-stores-everyday-low-prices-in-china/an/HKU590-PDF-ENG

1. Case Study:
Wal-Mart Stores “Every Day Low Prices”
In China
INTB 5000
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2. Webster University
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3. Wal-Mart Stores “Every Day Low Prices” In China
FACTS:
 First opened in Shenzhen on August 12, 1996
 As of December 2007
 94 stores in 51 cities
 Employs 43,000+ associates
 Serves around 5 million customers per week
 Transition from rural US to metro/urban in China
 Competitive analysis a core value of the company
 Shopping 1,500 items and price matching them through “Special Buy” Analysis
 Major pressure from the Chinese regional governments to centralize in high growth
regions
 About-face by Chinese govt. on Shanghai is of interest
 Has major implications on Wal-Mart’s ability to provide infrastructure for stores
 Supply Chain Challenges Abound
 Tier 1 cities include Beijing – Tianjin, Shanghai, Guangzhou
 Tier 2 cities include Chengdu, Nanjing, Chongqing, & Wuhan
 Tier 3 cities include Changzho, Jinhua, Mianyang
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4. Wal-Mart Stores “Every Day Low Prices” In China
7,058 Units
1.9 Million Associates
UK 23 offices sourcing from 70 countries
340 Units
Canada
292 Units
Japan
393 Units
US China
4,103 Units 86 Units
Mexico Puerto Rico
54 Units Trust-Mart
943 Units
101 Units
Central America India
433 Units Brazil JV –Aug 2007
297 Units
Argentina
16 Units
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5. Wal-Mart Stores “Every Day Low Prices” In China
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6. Wal-Mart Stores “Every Day Low Prices” In China
China Sales
In billion US dollars
$400
$344
$350
$312
$300 $285
$256
$250 $230
$200
$150
$100
$50
$0
FY03 FY04 FY05 FY06 FY07
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7. Wal-Mart Stores “Every Day Low Prices” In China
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8. Wal-Mart Stores “Every Day Low Prices” In China
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9. Wal-Mart Stores “Every Day Low Prices” In China
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10. Wal-Mart Stores “Every Day Low Prices” In China
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11. Wal-Mart Stores “Every Day Low Prices” In China
Opinions
Customer focus is critical even in new markets
Price leadership will work in other nations besides the US
Supplier partnership deserves heavy investment
Supply chain management is what this country needs
Technology enablement is key
EDI = Electronic Data Interchange
VMI = Vendor Managed Inventory
Satellite Links = For Real-time Updates
Corporate Social Responsibility
 Environmental Sustainability
 Food & Product Safety
 Community Involvement
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12. Wal-Mart China Five Forces Model
• Foreign General Merchandisers or
Potential Discounters
• Established Chinese Retailers
New Entrants •Asian Conglomerates with lower cost structures
Competitive Rivalry
Bargaining Rivals: Carrefour, Tesco
Power Bargaining
and many other smaller
of Suppliers shops Power of Buyers
• U.S. Product Manufacturers • Diversity of ethnic and economic
• Foreign Manufacturers backgrounds
• Local Government Restrictions
• Consumers in Metropolitan
• Tariffs
•Slow Growth Initiatives
Substitute Areas with high per capita
income
Products
• Cultural bias for a specific
and Services condition of products, delivering
in a unique supply chain, is key to
• Small, Village Shops these consumers
•Regional Chains
• Home grown (literally)
• Global chains establishing new stores

13. Analysis: Wal-Mart Stores “Every Day Low Prices” In China
Value of goods procured from China
USD billions
**
25-30* 2.6*
1.5*
2.0
CAGR
CAGR 26%
15 33% 1.6
CAGR
1.3 20%
12
10.3
0.5
4
2000 01 02 03 2007 2001 02 03 2004 2000 2006
Over 300 employees in the Procurement centers in Aims at consolidating volume
Shenzhen global 10 different cities of China at country level to drive
procurement center 25% of 2003 volume (approx. cost savings, while
18-20% of 2003 volume USD0.5 bn) sourced direct, simultaneously capturing
(approx. USD2.5 bn) sourced with growth of 30% per year country-specific
direct advantages; e.g., in fleece
fabric from Taiwan
* Target value Webster University
** Including all categories; global sourcing in non-food categories would be approximately >80% of the total 13

14. Analysis: Wal-Mart Stores “Every Day Low Prices” In China
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15. Analysis: Wal-Mart Stores “Every Day Low Prices” In China
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16. Analysis: Wal-Mart Stores “Every Day Low Prices” In China
Source: Adapted from Garrison Wieland for “Wal-Mart’s Supply Chain,”
Harvard Business Review 70(2; March–April 1992), pp. 60–71.
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17. Warehouse and
Distribution Center
Management System
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18. Analysis: Wal-Mart RFID Plan
Base In transit Regional Walmart Walmart,
Manufacturing Sam’s Club
Product Distribution and
AiO & Malaysia Completion Neighborhood
Personal Flextronics Center Market Stores
Printers
AiO & Shanghai Memphis
Personal Calcomp Memphis
Menlo Walmart
Printers Flex
DC1
Sanger,
Scanners Shenzhen Texas
& Mentor Media
Cameras
Walmart
DC2
Bangkok
AIO Cleburn,
Venture Texas
Toner Hong Kong
Canon
Walmart
Toner/ Guadalajara DC3 De-
Personal
Tokyo Flex Soto, Texas
Canon
Laserjet
Guadalajara Supply Site
Personal LJ Canon China Jabill
Tag Site
Virginia
InkJet
Various Sonoco Delivery Site
Supplies
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19. Analysis: Value Chain Analysis
Identifying Resources and Capabilities That Can Add Value
Firm Infrastructure
Support
Human Resource Management
Activities
Technological Development
Procurement
Service
Operations
Outbound
Marketing
Logistics
Inbound
& Sales
Logistics
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Primary Activities 19

20. Wal-Mart Value Chain Analysis, China Specific
Firm Inferior fixtures standardization, Trucks, Average store size 84,000
Infrastructure square feat
Non-unionized, Full autonomy to associates, Decentralized,
Activities
Human Resource
Support
Management profit sharing program, Job rotation, Stock purchase plan
Technology UPC at POS, EDI, Information system, VMI ,Cross ducking , Satellite
Development system, CPFR
Procurement Maintain long-term relationship, No single supplier accounting for
more than 2.4%, Selective suppliers ( P&G & GE), NO nonsense policy
VMI Six days a Two step Everyday ECR
Margin
system week(9~21) hub and low price Satisfactio
Retail link Monday spoke Always n
low
EDI (12:30~17:30) guarantee
price,
CPFR distributing always policy
system Self Quick
service response
Cash and (QR)
carry
Save
money,
live better
credit card,
Primary Inbound Outbound Layaway
Marketing After Sales
Operations
Activities Logistics Logistics plan
& Sales Service
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21. Recommendation Framework:
Wal-Mart Stores “Every Day Low Prices” In China
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22. Recommendation: Increase the Accuracy and Velocity
of the Chinese Supply Chain With Heavy Investment
in IT (RFID)
 With “slap and ship” you just spend money – use
the information
 pallet logical build process reduced from minutes
to seconds
 Improvements in transfer of pallet/case-level
inventory between manufacturing and distribution
center sites
 Operational benefits from improvements in
outbound processes
 Automated identification at key stages of the
assembly production line to gain manufacturing
efficiencies
 Master data management influences the NPDI
process
 Global deployment not easy
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25. Recommendation:
Better Collaborative Planning & Forecasting Processes are Needed Seller
Once
FRONT END AGREEMENT
Collaborative
Planning
Qtr.
JOINT BUSINESS PLAN
CREATE SALES FORECAST
Collaborative
Wk, Mo
IDENTIFY EXCEPTIONS
Forecasting
RESOLVE EXCEPTIONS
Collaborative
CREATE ORDER FORECAST
Replenishment
Wk, Mo
IDENTIFY EXCEPTIONS
RESOLVE EXCEPTIONS
GENERATE ORDER
Buyer Webster University
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26. Recommendation: Buy Trust-Mart
黑龙江
吉林
新疆 辽宁
宁夏
内蒙古
北京
河北
青海 山西
山东
西藏 陕西
河南 江苏
四川
河北
湖南 江西
贵州 福建
云南
广西 广东
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27. Recommendation: Invest heavily in the 3K to 20K sq. ft. store segment and
make analytics and supply chain performance real-time
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28. MAGAZINE
ASDA
LIVING
mini
Webster University bompreco
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