Wal-Mart Stores, Inc. (NYSE:WMT) has had a difficult time in China. The company struggled to comprehend Chinese consumers as well as their culture. As opposed to the US, Chinese consumers vary a lot from city to city in their requirements. Hence, Walmart finds it difficult to provide the right products in the different cities and provinces of China.
China is a classic example of how globalization has its pitfalls. With a population of 1.3 billion many companies perceive it as a highly attractive market. However, if you examine the market closely, China is a big challenge for western companiesץ
Although the country has achieved great economic progress, since opening its markets in 1979, yet it remains a difficult market to capture. Chinese consumers are very different from Western consumers. It’s very difficult for western organizations to appeal to local consumer preferences. Another hurdle is political. Western companies find it hard to tackle China’s complicated mix of local as well as national political entities.
Walmart has been adversely affected by bad relations with both the local as well as national level politicians. China just doesn’t have Walmart’s greatest assets, which is a super-efficient as well as technologically sophisticated supply chain. Walmart did not foresee that scaling up its business model in China would encounter so many issues.
Although China is the world leader in infrastructure investment for the past many years outside its main cities its infrastructure is poorly developed and beset with problems. Efficient transportation in China is a challenge given its huge physical size and underdeveloped rail, ground and air infrastructure. Hence, Walmart’s China venture has found it difficult to be profitable. Also, the former has always underperformed in this vast and potentially booming market.
Managers require a better understanding of the cultural, economic and political environments in the nation in which they plan to operate. Globalization only works if the economic, political and cultural climate of the countries is taken into consideration for doing business there. Other companies planning to invest in China should learn from Walmart’s mistakes and incorporate them into their business strategy. Only then do they have a good chance of success.