When Walmart decided to expand into China, a countless number of hurdles stood in its place. They knew that the store model that has made them the number one retailer in the world was not going to work within Chinese culture, but just how much different would they have to be from the cookie-cutter stores that are found all across the United States? In order to dominate the retail market in China as successfully as they have in other markets across the world, dynamic change and the ability and willingness to work with the Chinese government would be crucial to their success in China.
Faced with the strict rules and regulations that would hamper their growth and general operations, Walmart had to find a way to make and keep China and her people happy. Along with all the excitement, pomp, and circumstance that Walmart would bring into China, certain blemishes would follow as well. Low wages, discrimination, and utter dominance over an area it occupies left many questions as to whether Walmart would be accepted or rejected. But the first stumbling block that Walmart would have to face upon entering China would be one of its most challenging: The Government of the People’s Republic of China (Naughton).
Upon entering any foreign market, one of the biggest problems facing Walmart and its expansion is government regulation and government worry over the massive company’s monopolization and impact on local markets. Moving into China, Walmart was going to have to assure the Chinese government that they were there to give the Chinese people a better retail alternative, provide abundant employment, and help China’s economy by establishing healthy competition, all while providing the Chinese people with an increased range of products and increased product quality available at the lowest possible prices (Huffman).
Walmart in the United States is a very powerful company. In other countries, however, they are not viewed the same. This became very clear when they entered into China. Walmart faced problems that couldn’t be fixed with quick solutions. Finding suppliers, dealing with unions, rigid local competition, and cooperating with a communist government are examples of such problems. Once it found solutions to the above problems, Walmart opened a Supercenter and Sam’s Club in Shenzhen in 1996 (Foreman).
Walmart China, as it is known today, actively participates in communities by providing funding for charities, education and medical care. In fact, in April of this year, Wal-Mart launched its third annual nationwide community service week: “Keeping the Traditional Virtues – Walmart Filial Piety Activity”. For a period of one week, community service for the elders of each specific community holding the event was performed. This government and community involvement is necessary for Walmart and the trust it needs to gain from the Chinese people (Walmart).
When Walmart first opened its doors back in 1996, they first felt the restraints from the government while trying to put products on their shelves. As an result of Mao and the period when every village and community was designed to be self sufficient, Walmart could not set up conventional distribution centers such as are found here in the United States. Products that would move from one city to another would require the approval of local officials, a task of staggering proportions. Instead, Walmart has had to set up buyers in each community and city that it operates in to purchase items that have to be bought locally through government and state approved vendors.
Because of this, there are not very many national brands that can be found inside of Walmart China. This is gradually changing as China evolves and her people become more influenced by western culture and style. An example would be with cosmetics. When Walmart China first opened, the cosmetics available would not sell. It wasn’t until demonstrations were given and the local Chinese ladies were given makeovers that the make-up started to sell. As a result, not only did the cosmetics started selling fast, Walmart was able to bring in more expensive, higher-end brands (Trunick).
When Walmart China bought initial products from suppliers back in the first few years in operation, for every purchase order issued, there were twenty-one documents that went along with it, simply to comply with central and local government regulations. Each individual store had to write the purchase orders by hand and issue their own checks. There could be no central ordering or payment systems. Hard paperwork was required, and still is today although not as much, which resulted in having to pay additional employees to process the paperwork, subjects documents to human error, and is simply inefficient. Today, although the rules are definitely felt and abided by, regulations are slowly easing up. Walmart is slowly becoming able to centralize more and more of its processes (Trunick).
Walmart is a well-admired company today in China. Just as employee songs and Walmart chants can be found in sites in the United States, they can be found in the Chinese locations as well. Adjusting to operating under the People’s Republic of China wasn’t the only thing Walmart had to get used to. They also had to get used to local customs and preferences. When Sam’s club first opened, it didn’t do as well as the Sam’s clubs here. The simple fact was that the Chinese didn’t have storage available to them such as we take for granted here in the States. The Sam’s Club in Shenzhen had to evolve to fit the needs of its customers and not vice-versa if it was to succeed. It did and it has, respectfully (Huffman).
In every country, city, and community around the world that Walmart operates in, they constantly strive to be an asset to the area they are in. Not only do they provide numerous jobs to the areas, including employment to disable persons, they enable families to be able to afford things that they may not otherwise be able to afford. The contributions that Walmart makes to every community its in are numerous, and Walmart China is no exception. A few examples of the awards Walmart has won in China, according to the Walmart China website, are as follows:
•Supplier Satisfaction by Business Information of Shanghai for five consecutive years.
•Best Employer for University Student.
•Leading Multi-National Enterprise in Asia by Asian Wall Street Journal.
•Best Employer in China Retail Industry by CCFA.
•China Most Valuable Brand by Fortune Chinese Version.
•2008 Top 10 Best investing Fortune 500 Companies in China by Southern Weekend Magazine.
•Excellent Employer by Fortune Chinese Version.
•Multi-Nation Company Charitable Donations by Forbes Chinese Version.
•Most Admired Company by Fortune Chinese Version.
•Best Community by Guangming Daily.
Today, Walmart serves more than 28 million customers each month in 89 cities throughout China. It employs over fifty thousand people in China alone. Along with improving the way of life for the people and towns it serves, Walmart China is also helping the environment in the areas it operates in. In the mountainous regions of China, it is building water reservoirs in order to help solve water shortage problems facing the farmers and residents residing there.
To help villagers reduce their carbon footprint and provide hot water to their village, Walmart is supporting the installation of solar panels. They also have implemented a direct farm program that works to eliminate the amount of time fruits and vegetables take to get to the store. Not only does this help to ensure the best possible quality of produce, it helps sustain the local farms and villages who produce the goods. It ends up being a win for the consumer as well as the grower (Walmart).
Despite the governmental control that China has on Walmart versus other countries that Walmart operates in, China as proven to be a goldmine for Walmart’s growth, especially since their expansion has slowed in markets such as the United States due to such factors as saturation and slowed economy. Emerging economies, such as what China is experiencing, is extremely promising for Walmart’s continued growth and development. Walmart China has taken problems and turned them into opportunities. By working heavily with the local and national government, they have been able to overcome barriers to ensure their continued success.
The biggest challenge that Walmart has faced in China is the acceptance of organized labor. In every market but China, Walmart has aggressively worked to keep unions out of their store. But unlike labor unions such as we have here, the unions in China are different. Chinese unions don’t negotiate labor contracts as they do here. In China, they are considered an arm of the government, they help secure social order, and they provide funding to the Communist Party. After several years of unrelenting persistence by the government, Walmart China finally buckled and unions were established across the nation (Naughton).
Foreman, William. “Wal-Mart’s New Market: Small Town China”. Huffington Post. 18 Oct. 2008. 1 Dec. 2009 .
Huffman, Ted. “Wal-Mart in China: Challenges Facing a Foreign Retailers Supply Chain”. China Business Review. 1 Dec. 2009 http://www.chinabusinessreview.com/public/0309/wal-mart.html>.
Naughton, Keith. “The Great Wal-Mart of China”. Newsweek. 30 Oct. 2006. 5 Dec. 2009 .
Trunick, Perry. “Wal-Mart Reinvents Itself in China”. Logistics Today. 6 Jan. 2006. 5 Dec. 2009 .
Walmart. “A Brief Introduction to Wal-Mart in China”. Wal-Mart China. 7 May 2009. 5 Dec. 2009 .