沃尔玛的中国发展之路 - 案例研究

305-587-1 Wal-Mart’s China Experience Introduction Wal-Mart Stores Inc. (Wal-Mart) topped the Fortune 500 list of the world’s largest corporations for the third consecutive year in 2004. Wal-Mart was the world's largest retailer, had more than 5,700 stores (Exhibit-I), including 1,350 discount stores, nearly 2,000 combination discount and grocery stores, and 550 warehouse stores (SAM'S CLUB). It had more than 68,000 suppliers around the world. China had emerged as an important market for Wal-Mart in the early 2000s. Wal-Mart gained respect among business community when it topped the China Business Competitive Index in 2004. The journey of Wal-Mart in becoming one of the “Most respected Companies in China”1 had not been without hindrances. The company had to deal with various issues including local regulations, supply chain and logistics issues in China. Wal-Mart International Wal-Mart became an international company in 1991 when a SAM’S Club opened near Mexico City. Two years later, Wal-Mart International was created to oversee the opportunities for the company worldwide. Since then, the International segment had seen rapid growth and consumer acceptance. It had millions of consumers at more than 1,500 units in nine countries; Wal-Mart International employed more than 330,000 associates around the world. Nearly 75% of Wal-Mart’s stores were located in the US, the rest being in nine other locations around the world (Annexure -1). Wal-Mart was the largest retailer in Canada and Mexico. It owned 42% of Japanese supermarket chain SEIYU. It also operated in Argentina, Brazil, China, Germany, Korea, Puerto Rico and the United Kingdom. Wal-Mart’s offered products ranging from food to clothing, electronics to health and beauty products to sporting goods, entertainment (CDs, DVDs, and videos), and toys. Wal-Mart entered China in August 1996 with the opening of its first Supercenter and SAM'S Club in Shenzhen. By 2004, Wal-Mart had 46 stores in China, employed more than 20,000 associates. Retail in China China had opened its retail industry to foreign investors in phases. In 1992, the State Council granted two foreigner investors’ pilot ventures its approval, respectively in Beijing, Shanghai, Tianjin, Guangzhou, Dalian, Qingdao and five special economic zones. They had to be equity joint ventures with the Chinese partner holding 51%. They were not allowed to conduct 1 In 2002 and 2003, Wal-Mart was elected as one of the “Most Respected Companies in China” by the Enterprise Management Case Study Centre of Beijing University and Economic Observer This Case was written by Vedpuriswar A and Sonpal A, IBS Research Center. It is intended to be used as the basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. The case was compiled from published sources. ©2009, IBS Research Center. No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission of the copyright owner. ecch the case for learning Distributed by ecch, UK and USA North America Rest of the world www.ecch.com t +1 781 239 5884 t +44 (0)1234 750903 All rights reserved f +1 781 239 5885 f +44 (0)1234 751125 Printed in UK and USA e ecchusa@ecch.com e ecch@ecch.com 305-587-1 wholesale business. In 1999, the rules were relaxed further, and all provincial capitals, cities exercising independent planning were included. And, foreign investors were allowed to wholesale deals of self-imported commodities.2 From 1988 to the early 2000s, retail sales in China grew at 15% annually (Exhibit –2), to $628 billion in 2004, making it the third-largest market in the world. With China’s entry into the WTO in 2001, many global retail giants (Exhibit – II) were lured into the country, having an optimistic view of the investment environment. Traditionally, the Chinese lined up in state-owned stores, which had limited offerings. After the liberalization of the sector, local chains and the multinationals were pushing out the old state retailers and mom-and-pop shops by building big, convenient stores in prime central locations in Beijing, Shanghai, and Guangzhou. Despite the expansion of the global retail giants, China's $240 billion3 retail market which was Asia's second-largest after Japan, was dominated by local firms such as Wumart Stores and Bailian Group, also known as Brilliance. The scenario changed as the global players like Carrefour made it to the list of top five retailers in 2005.4 (Exhibit -III) Chinese Market Demographics With a population of 1.3 billion, China was a highly heterogeneous market with vast differences in the preferences across cities in terms of population, economic system and business cultures. The southern part of the country had witnessed fast paced development, harbouring huge incomes and high spending power. Of the total population, 64%5 was still in the rural areas, suggesting huge scope for penetration and development. In the 1970s, China introduced a one-child policy, which gradually led to rapid aging (Exhibit -IV). The consumption pattern was maturing in the urban households with considerably higher disposable incomes.6 The growth in average disposable income was increasing at 8-9% (Exhibit- V). It was forecasted that from 2000 to 2015, there would be a reduction in food consumption sector combined with an increase in the consumption of the household facilities, articles and services.7 China’s domestic consumption of goods and services increased to the point where it became one of the key pillars of the economy. Rising income levels and increased purchasing power meant that the Chinese consumer was now wealthier, more sophisticated and more demanding. Growing Chinese Middle Class The potential customers were a middle class that totaled 130 million in 2004. China’s chief negotiator at the WTO talks, Long Yongtu, had forecasted in November 2004 that, within 10 years, 400 to 500 million Chinese would enjoy a “middle-income” life, making China a “much bigger market” than the United States. Similar claims were made as part of Olympic investment promotions. According to a forecast8, China would have a 200 million-strong middle class, able to “buy cars and housing and spend money on leisure travel” by 2005.9 2 “China-Retail Sector Overview”, http://Strategies.ic.gc.ca,November 15th 1999 3 News on Retail in China, http://biz.yahoo.com , May 2005 4 “News on China’s Top Retail Chains”,www.runsky.com/homepage/english/news/biz/ 5 Yu Carrie and Wong Marina,“Retail & Consumer Market in China”, www.pwchk.com, May 2002. 6 “Income of Urban Households by Region (2003.6)”, http://www.chinadaily.com.cn 7 “Global Watch”, www.ufji.co.jp, February 2003 8 by the Chinese Academy of Social Sciences (CASS) 9 www.wsws.org/articles, March 2002 2 305-587-1 Wal-Mart’s China Experience When Wal-Mart entered China in 1996, it had little understanding of China's consumption habits and consumption culture. As the global Vice President of Wal-Mart Mart John B. Menzer mentioned “…at the beginning of our business, our bread sections produced US-style bread, which was too sweet and the Chinese consumers did not like eating. Now our bread and cakes are completely localized. Our bakers are local staff workers too.”10 Observing that the consumers preferred fresh fruits and vegetables, and Wal-Mart ensured that its stores stocked them in plenty. Meat was displayed unwrapped in Wal-Mart China stores because Chinese customers thought it looked fresher that way (this also saved money on packaging). Most Chinese shoppers bought groceries they needed for a day or two unlike in the U.S where they bought for a week or more. "[Wal-Mart] did a lot of research, and the conclusion was that we have to have a very good fresh-food presentation," mentioned the president of Wal-Mart China. By 2005, Wal-Mart operated 46 retail stores across China, from Shenzhen in the south, to Kunming, Yunnan, in the west, and Harbin, Heilongjiang, in the north. It rapidly expanded in China's increasingly modern business environment. China's distribution sector posed challenges. Wal-Mart and its suppliers overcame these challenges through innovative and flexible supply chain management and logistics strategies which were vital to Wal-Mart's success in China. Logistics Management The traditional distribution system in China consisted of a national distributor dealing with state distributors, who in-turn coordinated with regional distributors. This system increased the price of the goods but was still efficient. It saved the cost of long distance transportation otherwise to be traveled by the individual distributors. In 1996, the scenario changed with the bloom of hypermarkets (Exhibit –VI). These hypermarket retailers bought the goods from either the third parties or the manufacturers themselves at low prices by negotiating bulk discounts. Wal-Mart had the reputation of squeezing the lowest deal out of the manufacturers and was successful in China too. Regionalism and Supply chain management China was divided into provenances acting as independent regulatory units. The local administrative bodies and physical infrastructure built to protect local interests posed difficulties for road transportation, private and commercial trucking, customs clearance for imports, and inter-provincial purchasing, whether for distribution or wholesale. Such regionalism posed difficulties in regulatory control of retail consumer and agricultural products. For example, health and sanitation certificates with local conditions applied to nationally approved food products also. Local laws applied for wholesale purchases of alcohol and tobacco products. Local governments often used both these means to regulate or hinder the inter-provincial transportation and distribution of the products which came under their purview. Wal-Mart operated on the concept of providing customers with the widest choice and selection possible, at an "everyday low price." The flexibility and efficiency that nationwide procurement and centralized distribution allowed was the key to achieving this goal. Wal-Mart's supply chain in China was centralized in south China through the Shenzhen distribution center and in north China through the Tianjin distribution center. 10 www.english.people.com.cn , May 2005 3 305-587-1 Wal-Mart did not encourage local suppliers that sold products exclusively to local stores to use its distribution center, but encouraged suppliers that sold nationwide to use the distribution center because it was more efficient for a supplier to deliver to one location than to all the Wal-Mart stores across the country. For suppliers who had difficulty making a long journey to the distribution center, and still wanted to sell nation-wide, Wal-Mart offered back-haul services. The use of distribution centers and back-haul trucks were efficient and allowed Wal-Mart to maintain control over most of its distribution chain. Though the trucking was contracted out, Wal-Mart managed the rest of its supply chain directly. Despite the lack of national and advanced systems, for years Wal-Mart operated and aggressively expanded its retail business in partnership with associates11, joint venture partners, suppliers, and government officials. Wal-Mart used case studies of fragmented transportation and distribution to educate its suppliers to help them streamline their operations and reduce costs. As these issues required company participation in the debate for liberalization and standardization, Wal-Mart became heavily involved in government relations and participated in these debates by talking directly with Chinese government officials at both local and national levels and through trade groups in both the United States and China. Building Financial Logistics In order to support retail activities, several joint ventures between Chinese state-owned transport firms and foreign freight or parcel companies were established. China's traditional banking, finance, insurance, and taxation structures were bureaucratic and cumbersome. Regional fragmentation of finance regulation, tax laws, and other institutions had the same effect on the payment side of the supply chain as regional protectionism had on the transport and distribution side. Businesses in China depended heavily on paper flow of documentation, which increased costs. Also, since modern insurance was relatively new to China, claims processing was time consuming and confusing. Wal-Mart worked with the Chinese government to set up a holding company to consolidate joint venture distribution and finance, streamlining the supply chain, finance and payment systems and also minimizing the documentation requirements. Human Resources China offered Wal-Mart the cheap labour resource combined with a large potential market of 1.3 billion 12of population. Wal-Mart capitalized on it as it had always done in the U.S. It had a reputation of being the hard-task master. Wal-Mart was often criticized on the grounds of low wage payments to its workers all over the world. In China too, it faced the same problem. A study by the National Labor Committee found that workers in China's Guangdong Province who made toys for Wal-Mart toiled as much as 130 hours per week for wages averaging 16.5 cents per hour13 when the legal minimum in China was 31 cents an hour14 (below the minimum wage) and no health insurance. The workweek was seven days when five days was legal.15 Workers told ILRF researchers that they often worked 15 hours per day, seven days a week, without overtime pay, in order to meet Wal-Mart’s production quotas. The CEO, Lee Scott claimed that the company’s profit margin per worker was too small to allow them to pay workers more. 11 Wal-Mart refers to its employees as associates 12 http://www.rossworld.net/pipermail/lasen/2004-February/000662.html 13 “ Wal-Mart Pay Gap” www.ips-dc.org/projects/global_econ 14 “ Wal-Mart Pay Gap” www.ips-dc.org/projects/global_econ 15 www.corpwatch.org/article.php 4 305-587-1 In China, the law prescribed formation of union under a single body namely All China Federation of Trade Unions (ACFTU). In 2004, Wal-Mart allowed formation of unions in China. This was seen as the major exception made, as it had never allowed unions in any of its stores around the world. Technology Wal-Mart’s proprietary software was designed to link the suppliers, to analyze the market and track data on what products sold more and what did not. An apparel salesman from China mentioned, "I understood immediately that the Wal-Mart style was different”. He was asked to upgrade his company's green terry-cloth jackets, the officials from the Wal-Mart were annoying sticklers for quality, deadlines and price. "When we started with Wal-Mart, I thought their way was too much of a hassle, too complicated…But later I understood their way was better." Wal-Mart had in effect tried to replace a Chinese business culture built on personal relationships with its own modern supply network, built on information technology. China was increasingly on the lookout for investors from whom it can buy, borrow or copy high-growth technology. The transfer of Wal-Mart technology proved hugely disruptive in a market that was far larger and far less stable than the United States, particularly if Wal-Mart realized its ambition of opening "thousands" of stores.16 Road Ahead In Asia, China was an emerging destination. Analysts 17remained optimistic, “Regardless of the investment cycle, China’s emerging urban middle class will continue to enjoy double-digit income growth over the next few years. This elite group, which already numbers around 130m, forms the mainstay of discretionary demand and should ensure that growth in consumer spending remains strong as investment growth cools off in the coming years. Their purchasing power is now approaching the per-capita average among Asia’s newly industrialized economies. As long as key structural trends remain in place, the incomes and spending of the newly rich can only continue to rise. We project that the urban middle-class population will swell to 170 million (60% of the total population) by 2015, as China’s ongoing integration into the global economy continues to open up opportunities for private entrepreneurs and skilled labour. Over the same period we expect WTO-led deregulation, market oriented reforms and foreign direct investment to sustain the progress of China’s industrial and tertiary economies in terms of both productivity and scale.” In order to capture the bigger share of China market, Wal-Mart Stores Inc. planned to open 12 to 15 new stores in China in 2005, as it tried to keep pace with competitors such as Carrefour. "We have a small number of stores compared with the customer base. We see huge growth potential." mentioned James Lee, vice president, corporate affairs in China Wal-Mart.18 16 Welcome to Wal-Mart - Newsweek International Editions - MSNBC_com.mht 17 at HSBC 18 http://www.sfgate.com/cgi-bin/article 5 305-587-1 Exhibit -I: Store Count of Wal-Mart’s International Operation Wal-Mart Stores: Wal- Mart stores are the flagship retail division of Wal-Mart Stores, Inc. It is a discount retailer offering a wide variety of general department cations across s merchandise. Source: Annual Report 2005, Wal-Mart Stores Inc. merchandise. Supercenters: The Wal- Mart Supercenter provides one-stop family shopping convenience. The store combines a full-line of groceries and a general merchandise under one roof. SAM'S CLUBS: SAM’S Club is the leading members-only warehouse club with lo the country. Neighborhood Market: offer a convenient shopping for customers who need groceries, pharmaceutical and general 6 305-587-1 Exhibit – II: Growth of Retail Sales in China Source: CEIC Exhibit – III: Top Retailers Based on the Half- yearly Sales Data of 2005. No. Name of the Retail Chains 1. Bailian Group 2. Gome 3. Suning 4. Dashang 5. Carrefour Source: Ministry of Commerce, China State Government Exhibit -IV: Changing Age Profile of China: 2003 to 2013 0 100 200 300 400 500 Persons in Millions 0 to 14 15 to 24 25 to 39 40 to 59 60+ Age Group 2003 2013 Source: “The Dramatically Changing Age Profile of China: 2003 to 2013”, www.asiandemographics.com, December 13th 2003. 7 305-587-1 Exhibit -V: Growth in Average Household Disposable Income (%) 0 2 4 6 8 10 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Growth (%) Source: State Statistical Bureau, HSBC. 8 305-587-1 9 Exhibit – VI: Hypermarkets: Growth Potential Hypermarkets remain the smallest of these retail sectors in China, but have the highest growth rate. Hypermarkets 48% Convenience Stores 12% Department Stores 5% Supermarkets 4% 1997-2002 compounded annual sales growth. Source: Flannery Russell, “China’s Sam Walton”, www.forbes.com, December 12th 2003. Wal-Mart’s China Experience