Wal-Mart's Rising Sun?: A Case on Its Entry into Japan (Case #2, Notes)
Overview
Japan is the world's second-largest economy, with a population of 127 million and one of the highest per capita incomes in the world; making it a highly attractive market for retailers. Wal-Mart, the world's largest retailer, began global expansion activity in the 1991. While it was able to replicate its domestic success in Mexico and Canada, the company failed in Germany and Indonesia and is still struggling in the UK market.
Wal-Mart entered Japan in 2002 by purchasing a 6% stake in Seiyu Ltd. Wal-Mart continued to increase its stake in the company, eventually buying all of Seiyu's stock and making it a full subsidiary by 2008. Between 2002 and 2008, Wal-Mart invested over $3B in Seiyu. From this investment, Seiyu remodeled existing stores, integrated Wal-Mart's admired Retail Link system and refined their product offerings to suit Japanese tastes. Seiyu only rose to become Japan's 5th largest retailer in revenue terms and 14th in market share.
Seiyu is facing harsh competition from several international and domestic players with multiple outlets spanning the country. 7-Eleven Japan Co. Ltd., a subsidiary of Seven & I Holdings Co. Ltd., operates over 11,500 stores in Japan and accounts for 21.7% of all convenience store sales. Carrefour, the world's second-largest retailer, which entered Japan in 2000 without a partner, recently sold all eight of its stores to AEON, the second biggest retailer in Japan and departed the Japanese market indefinitely with losses of $264 million
Many foreign retailers find it exceedingly difficult to forge relationships with Japanese suppliers, cut costs and pass discounts on to customers at the same time. Some also fail to understand that Japanese consumers buy more fresh produce than shoppers elsewhere, prefer local customization of products, and have an affinity for luxury products as they directly associate quality with price. "Every Day Low Prices" smacks of poor quality to the Japanese consumer.
Despite the management change, strategic initiatives, and continued efforts to be successful, Wal-Mart has failed to make a profit from its Seiyu venture in its entire seven-year lifetime.
Case Objectives
• Report on Wal-Mart's entry and performance into the Japanese retail industry
• Investigate Wal-Mart's other international expansion efforts
• Summarize the histories and business models of Wal-Mart and Seiyu
• Present the Japanese retail industry, competitive landscape and consumer culture at the time of Wal-Mart's entry
• Expose the barriers and obstacles to Wal-Mart's success in Japan
Discussion Questions
1. Was Seiyu the best partner for Wal-Mart?
2. What were Wal-Mart's cultural oversights & how could they more effectively adapt to meet the needs of Japanese consumers?
3. Given the competitive landscape in the Japanese Market, do you think Wal-Mart should consider converting/adopting to the convenience store format?
4. Should Wal-Mart leave Japan? If so, what would be the implications on Wal-Mart as a corporation and a brand? If not, how can Wal-Mart remain competitive and become profitable?