WALMART IN JAPAN

Section 1: Title page Minh

- Title:
Failure of Walmart in Japan: An Analysis of International Business Challenges
- Student IDs and names

Section 2: Introduction

Introduction: In today’s globalized economy, understanding the international business

environment is critical for the success of multinational corporations. This environment
encompasses a variety of factors including economic conditions, cultural differences, political
and legal systems, and technological advancements. Studying the international business
environment helps businesses identify opportunities, manage risks, and develop strategies that
can lead to sustainable growth in diverse markets.

The objective of this presentation is to analyze the case of Walmart's entry into the Japanese
market, identify the key challenges it faced, and evaluate the strategies it employed to
overcome these challenges. By examining Walmart's experience, we aim to derive insights and
lessons that can inform other companies seeking to expand internationally. The intended
outcome is to highlight the importance of cultural adaptation, strategic flexibility, and thorough
market research in achieving success in foreign markets and to draw lessons that can benefit
other companies in similar situations.
 Section 3: Case presentation

I. Overview of Walmart: Walmart Inc., founded in the US in 1962 by Sam Walton, is one of the
largest retail corporations globally. Operating on the principle of Everyday Low Prices (EDLP) and
a global expansion strategy, Walmart has developed a network of over 11,000 stores across 27
countries. The company is renowned for optimizing its supply chain, managing costs efficiently,
and utilizing advanced technology to enhance customer experiences. Walmart's primary business
segments include retail operations, e-commerce, and financial services.

1. Walmart’s Vision and Mission:

● Vision: "Be the destination for customers to save money, no matter how they want to
shop." Walmart aims to be the go-to place for customers looking to save money,
regardless of their preferred shopping method.
● Mission: "We save people money so they can live better." Walmart's mission is to help
consumers save money so they can live better lives. This is achieved through offering
products at everyday low prices (EDLP).
2. Walmart's business situation in the world:
● Global Operations: Walmart operates over 11,000 stores in 27 countries, including
major markets such as the United States, Canada, Mexico, the United Kingdom, China,
and Brazil. Additionally, Walmart has a significant presence in other Asian markets like
India and Japan.
● Revenue and Profit: In the fiscal year 2023, Walmart generated over $572 billion in
revenue, with a net profit of approximately $13.7 billion. This growth is attributed to
the company’s continuous expansion and development globally.
● E-commerce: Walmart has made substantial investments in e-commerce, competing
directly with Amazon. The company acquired platforms like Jet.com and Flipkart to
bolster its online presence and improve delivery services.
3. Walmart’s Marketing Segmentation, Targeting, and Positioning in Japan:
● Segmentation:
 ○ Walmart segmented the Japanese market based on demographic, geographic,
and behavioral factors. They focused on families and middle-aged consumers
who tend to shop at supermarkets for daily necessities.
○ Additionally, Walmart considered lifestyle segmentation, targeting customers
seeking good value products and prioritizing convenience.
● Targeting:
○ Walmart targeted the middle-income and family segments, emphasizing
customers interested in saving money and shopping at large supermarkets.
○ They also aimed to attract younger customers by offering competitively priced
technology and fashion products.
● Positioning:
○ Walmart positioned itself as a retailer providing quality products at affordable
prices, emphasizing convenience and product variety alongside low prices.
○ In Japan, they attempted to create an image combining everyday low prices with
high-quality products to attract local consumers.
II. Overview of Japanese market and culture
a. Market
Japan is the third-largest economy in the world, characterized by a high GDP and significant per
capita income. The Japanese retail market is highly competitive, with consumers favoring high-
quality and domestically produced goods. Japanese consumers are known for their preference for
detail and durability in products. The shopping culture in Japan also places high demands on
customer service and shopping experience.
 b. Culture
We use Hofstede’s cultural dimensions to provide a framework that explain why
Walmart struggled in Japan

● Power Distance Index (PDI):

U.S.: 40 | Japan: 54

Implications: Japan’s higher PDI means there is a greater acceptance of hierarchical order
and authority. Walmart’s more egalitarian approach from the U.S. might not have aligned
well with Japanese expectations of hierarchy and structure.

● Individualism vs. Collectivism (IDV):

U.S.: 91 | Japan: 46

Implications: The U.S. is highly individualistic, whereas Japan is more collectivist. Japanese
consumers prioritize group harmony and loyalty to local brands, which may have made it
difficult for Walmart to build loyalty.

● Masculinity vs. Femininity (MAS):

 U.S.: 62 | Japan: 95

Implications: Japan’s high masculinity score indicates a strong emphasis on competition and
achievement, which translates to high expectations for quality and service. Walmart’s focus
on low prices may have fallen short of these expectations.

● Uncertainty Avoidance Index (UAI):

U.S.: 46 | Japan: 92

Implications: Japan’s high UAI reflects a preference for clear rules and structure, while the
U.S. is more comfortable with ambiguity. Walmart’s more flexible approach might have
clashed with the Japanese preference for stability and predictability.

● Long-Term Orientation vs. Short-Term Normative Orientation (LTO):

U.S.: 26 | Japan: 88

Implications: Japan’s long-term orientation values perseverance and thrift, while the U.S.
has a more short-term focus. Walmart’s strategies may not have resonated with the long-term
planning and cautious spending habits of Japanese consumers.

● Indulgence vs. Restraint (IVR):

U.S.: 68 | Japan: 42

Implications: The U.S. leans towards indulgence, favoring free gratification of desires.
Japan’s restraint culture regulates gratification of needs through strict social norms.
Walmart’s marketing strategies focusing on consumer spending might not have resonated
well with the more restrained Japanese culture.

III. THE CASE:

Walmart entered the Japanese market in 2002 by acquiring a 6.1% stake in Seiyu, a major local
supermarket chain. Over the years, Walmart increased its stake, fully acquiring Seiyu by 2008.
Despite efforts to adapt its business strategies to the local market, Walmart faced significant
challenges in understanding and meeting consumer demands, ultimately failing to compete with
domestic retailers. In 2020, Walmart decided to sell the majority of its stake in Seiyu and
withdraw from the Japanese market after nearly two decades of underperformance.

Why this case is related to IBM:

1. Expansion from the U.S. to Japan:

○ Concept: Walmart, an American company, expanding to Japan exemplifies
international business. This move was part of Walmart’s globalization strategy
to seek growth opportunities beyond its domestic market.
○ Application to the case: The differences between the U.S. and Japanese
markets in terms of culture, consumer habits, and business environment posed
significant challenges for Walmart. Their inability to effectively adapt to these
differences was a primary reason for their failure
2. Segmentation, targeting, and positioning:
○ Concept: STP is a crucial aspect of international business management,
especially when expanding into foreign markets. It involves market
segmentation, target selection, and positioning of products/services to meet local
customer needs.
○ Application to the Case: Walmart attempted to implement STP in Japan by
segmenting the market, targeting specific customer groups, and positioning
itself as a low-cost retailer. However, this strategy failed due to their inability to
meet the high expectations for quality and service of Japanese consumers.
3. Foreign direct investment (FDI):
○ Concept: FDI involves a company investing directly in production or business
operations in a foreign country. While FDI brings technological, managerial,
and employment benefits, it also involves risks related to cultural and policy
differences.
○ Application to the case: Walmart’s investment in Seiyu represents a form of
FDI. Despite this, they could not fully leverage the benefits due to a lack of
understanding of the market needs and the inability to adapt swiftly to the local
business environment
 Section 4: Case analyse:
Lanlilach
(tham khảo) Idea des slide cho JP consumer behavior + approach: chia ra 2 phần song song
trong cùng 1 slide
note: (content) là chú thích thêm, không khuyến khích bỏ vào slide

Slide1: WAL-MART: Attempted takeover but failed

Reason: Fail to apply operation strategy and culture adaptation in Japanese Market

Slide2:

● Walmart attempted to apply its global standardization strategy,

which had been successful in the U.S. and other markets, with
minimal customization for Japan.
● Comparative advantage: low price => core competencies
⇒ leveraging economies of scale to maintain cost leadership.

⇒ High Pressures for Cost Reductions and Low Pressure for Local
Responsiveness (characteristic of the strategy)

Slide 3:

Issue: Limited Understanding of the Local Market

Approach:
● Entry strategy: a strategic alliance with Seiyu (an established retailer in Japan with a
significant number of stores across the country.)
Aim: to dominate the wholesale and retail market of the Land of the Rising Sun.
Evaluate: Strength ⇒ Establish a quick presence in Japan and make use of infrastructure.
Weakness: Inability to fully integrate Walmart’s cost-driven model with Seiyu’s operations. ⇒
restructure ⇒ failed to translate into long-term success

Slide 4:

Issue: Culture Misassignment (Japanese consumers have distinctive shopping preferences shaped
by their culture and values, which Walmart failed to account for. )

(pricing strategy)

Approach:
Business philosophy: "Everyday Low Price" <EDLP> (focuses on offering consistently low prices
to attract value-seeking customers)

JP consumer: - Emphasis on Quality: (Japanese shoppers equate "value" with quality and
uniqueness rather than low prices.)

- EDLP = lower-quality goods, deterring quality-focused consumers.

Slide 5: có thể gộp slide(4+5)

Issue: Culture Misassignment (pricing strategy)

Approach:

Business philosophy: "Everyday Low Price" <EDLP>

JP consumer: - hunting for items with frequent sales and discounts. ("Price is an important
factor for Japanese consumers, and they enjoy the feeling of scoring great deals
during sales.")"Supermarkets here distribute flyers and discount coupons every day,
and the Japanese even have a habit of shopping at multiple locations to take
advantage of these sales events.")

Evaluate: ⇒ ⇒ Not efficient, even Counterproductive

Slide 6:

Issue: Culture Misassignment (distribution strategy)

Approach:

Seiyu:- product portfolio: mix offers varied items from dry goods to electronics and clothing
- importing goods to reduce costs rather than prioritizing local sourcing. (Walmart imported
many products to leverage global sourcing and reduce costs, but Japanese consumers often
prefer locally grown or sourced goods for freshness and taste. )

JP consumer: - sensitivity to seasonal changes in food items and packaging aesthetics.

- Focus on Freshness and Local Products (Fresh produce, seafood, and locally
sourced goods are highly valued. Shoppers prefer to buy these items from
trusted, local retailers with a reputation for quality and freshness )
 Evaluate:
- Cultural Disconnect ( Imported products did not meet Japanese consumers' demands for
freshness and local authenticity, )
- Limited Appeal for Fresh and Local Products

Slide 7:

Issue: Culture Misassignment (distribution strategy)

Approach:

Seiyu: -Bulk products and warehouse-style setups.

- invested in advanced inventory management systems and streamlined Seiyu’s supply chain
operations. to improve operational efficiency and reduce waste within Seiyu.

JP consumer: - Attention to Details ( Japanese consumers expect clean, aesthetically pleasing store
layouts and carefully curated product selections.)

- Japanese consumers often prefer smaller specialized stores( over large-scale

supermarkets, )
- are willing to make frequent visits to the supermarkets, corner shops, and traditional
wet-markets to buy in small quantities..

Evaluate:
- do not meet Japanese consumers' demands for local authenticity, pushing them toward
domestic competitors.
( Competitors like Aeon tailored their offerings to local preferences, including regional
specialties and higher-quality product lines.)
⇒ This approach did not resonate with Japanese consumers, who associate low prices with low
quality. (As a result, Walmart struggled to gain traction among its target audience.)

Phần chữ xám BỎ r nka chỉ để lại tham khảo th á

1. Culture understanding:
Costumer behavior:

Understanding and adapting to Japanese consumer culture is pivotal for any

international retailer, and Walmart's entry into the Japanese market necessitates a nuanced
 comprehension of the distinctive values, preferences, and behaviors that shape the Japanese
consumer landscape.

However, Research has shown that consumer taste and preferences and shopping habits of
Japanese consumers are different from US consumers, and thus affected the performance
of Mal-Mart in this markets. For instance, the Japanese consumer has been referred to as
the “most difficult consumer to strategize…”, shown that Japanese are sensitivity to price,
seasonal changes in food items, love new products, and consider freshness and convenient
shopping location as extremely important, are willing to make frequents visits to the
supermarkets, corner shops, and traditional wet-markets to buy in small quantities. For
example, Japanese chains change merchandise in fresh seafood sections three times a day. In
other words, local chains offer whole fish from nearby ocean in the morning, sliced into
sashimi in the afternoon; and marinated and grilled fish in the evening. For special events,
displays are converted overnight after store hours.

A ceiling labour-standards effect:

Labor standards––in particular freedom of association and collective bargaining rights––and

higher wages in the formal sector reduce employment in that sector and thereby contribute to
the informalization of employment (Galli, 2004).
As a transnational retailer, Walmart finds it feasible to adapt its practices to suit countries
where labour standards are lower than in its domestic market, but find it difficult to adapt
and compete in business environments with higher labour standards, like Japan, than in its
domestic market.

- Describe the approaches undertaken by the company to address the issues/problems:

Customer behavior:
Wal-Mart formed a strategic alliance with Sumitomo Trading and purchased a 34% share
of Seiyu in 2002. Seiyu has consistently been among the top five supermarket chains in
Japan in the past few decades. However, after taking over Seiyu, Walmart decided to
implement some Global standardization Strategy and have some reoperate process for the
retailer chain to fit with its core value. Some reoperate processes I can mention are Walmart
replicated the strategy of selling oversized products at high discounts, a tactic that
succeeded in many places but did not align with consumer preferences in Japan.
Furthermore, Wal-Mart’s merchandising mix offers varied items from dry goods to
electronics and clothing, which is viewed by Japanese to be more westernized than those of
local chains.

- Evaluate the company’s approaches:

Customer behavior:
Firstly, There may be a relationship between culture and the costs of doing business in a
country or region. Hence, at the very beginning, Walmart has chosen a very rational way
to enter the Japan market through a strategic alliance to obtain Seiyu’s share then took
 over it, so they have facilitated all the advantages of being a strategic alliance. As a matter
of fact, The strategies to align with the culture differences of Japanese ppl that I have
mentioned above, were practiced by Seiyu before Wal-Mart’s takeover but are costly and
therefore went against the low-cost, scale driven approach adopted by Wal-Mart, which is
Walmart core competencies and really success in it home country is US and most
International market that it had entered. Thus, all these practices were consequently
eliminated as they created operational complexity for the distribution data structure
developed and used by Wal-Mart (Aoyama, 2007). So they choose the case of high
Pressures for Cost Reductions and low Pressure for Local Responsiveness and choose to
use the Global standardization Strategy and reoperate by some practices like I have
mentioned above .Thereby, Walmart has put it in a difficult situation from having the
foundation of advantage to start gain the Japanese market’s preference again in their
way.

Phần Hồng-In đậm là đưa lên slide

Issue: A ceiling labour-standards effect:

Labor standards––in particular freedom of association and collective bargaining rights––and

higher wages in the formal sector reduce employment in that sector and thereby contribute to
the informalization of employment (Galli, 2004).

As a transnational retailer, Walmart finds it feasible to adapt its practices to suit countries where
labour standards are lower than in its domestic market, but find it difficult to adapt and
compete in business environments with higher labour standards, like Japan, than in its
domestic market.

Approach:
In Japan, after Wal-Mart’s take-over of Seiyu, restructuring resulted in involuntary early
retirement of 25% of its full-time employees and raising the share of part-time employees
to 85% (Aoyama, 2007). The CEO of Seiyu was also forced to resign without completing
his term; still an unspoken taboo in Japan’s culture of lifetime employment.

In addition, the introduction of a new IT-based supply chain system, which Walmart
facilitated from one of the Drivers of Globalization is Technology, placed more workload
on part-time employees.

Evaluation:
In order to reduce the cost delivered by using the Human resources “inherited from
Seiyu”, they decided to conduct a lay-off and apply the role of technology. However, the
lay-off reportedly had a negative impact on the morale of Seiyu employees after Wal-
Mart’s take-over of Seiyu (Aoyama, 2007). According to Aoyama (2007), Seiyu’s stock price,
 which doubled immediately following the announcement of Wal-Mart’s take-over, fell to
a third of its peak by mid-year 2005.

⇒ Thereby, it can be seen that this action of Walmart has left a bad impression in the
awareness of Japanese people which also affects its business practice.

- Suggest alternative or better solution (if applicable), and explain why

For the first key issue is Culture Understanding: Like we have evaluated that Walmart had made a
great choice in choosing the case of Seiyu to enter the Japan market. Therefore, our group
suggests that Walmart can start over again by having a deeper research in the Japan market
so that understanding can help it redevelop its business practices in this country. Thereby,
they can avoid some unintentional problems caused by the process of doing business in
this international market (The lay-off event,...).

Moreover, Walmart can change their strategy, instead of sticking with its Global
Standardization Strategy, although this have success in most International market Walmart
had entered, it can choose to move to the Localization Strategy so they can align with the
“Special” Business Culture of this market since as a reality result shows that this way of
strategy cannot implemented effectively in this specific market.

Diverse product Portfolio: Not just focus on delivering a group of products for low-cost
segmentation but also others segmentation, especially for premium ones since it has been
proved that quality has a greater impact on the Japanese market.

Section 5: Implications for firms/managers in a similar situation:

Some implication for Future Global Retailers like Walmart to enter Japan market in
general and others market in particular:

Adapt to Host Culture and Market: Having a successful, long-term presence in selected
countries requires a clear understanding of each country’s infrastructure, demographics,
political and economic systems, in addition to cultural awareness and an understanding of
shopping practices (Hunt et al., 2018). A company unable to coordinate a smooth transition
into a new market and adapt their domestic strategies to specific host market culture and social
norms will find it nearly impossible to operate a successful venture. Walmart in this case
suffered from some level of ineffective market adaptation. All retailers preparing to enter
international markets must take very seriously the risks they will face, including their level of
ability to adapt to subtle and not so subtle cultural differences. It is easy for companies to
overestimate their appeal to consumers in turn expecting similar results as they have found in
their domestic markets. Companies must take steps to gain awareness of host country
culture and social norms by such methods as hiring highly qualified local talent and then
actually listening to and learning from this labor resource, researching consumer
expectations of existing retailers in the market as well as ways they are not being
adequately served, and exploring ways to connect the retail store to the local culture
 through product selection, customer service, and community participation (Ryu &
Simpson, 2011).

Attain Competitive Advantages in the New Market: Wal-Mart suffered from difficulty
surrounding replicating their competitive advantages in new markets, especially those related
to price and economy of scale, which they enjoyed in their domestic markets. Wal-Mart was
especially harmed in Japan by a lack of distribution and price advantages which are
fundamental to their success historically. Highly developed local competition and regulations
limiting store development both hindered their ability to compete. (Đọc tham khảo cái CA về
price khiến nó fail) Before retailers enter a new market, it is critical that they closely examine
their existing market advantages that are critical to their success and plan for developing
the exact strategy so they can achieve similar results in the new market. If they find they
will not be able to replicate the same advantages, they must seriously consider the validity of
entry into that particular market unless they have identified different but equally valuable
advantages they can develop in the new market which can help insure successful market entry.
As Wal-Mart learned, a company cannot attempt to counter the lack of advantages in the host
market with the success of those in the domestic market as the resulting strain creates
fundamental harm to the domestic corporate whole, resulting in domestic economic pressure
for change (Ryu & Simpson, 2011).

Section 6: References (APA style)

Galli, R., & Kucera, D. (2004). Labor standards and informal employment in Latin America.
World Development, 32(5), 809-828.
Bhattacharya, A., & Michael, D. (2008). How Local Companies Keep Multinationals at Bay.
Harvard Business Review, 86(3), 84-95. Retrieved from HBR
Collis, D. J., & Stuart, S. (2012). Walmart Stores in 2003. Harvard Business School Case 704-
430. Retrieved from HBS
Hill, C. W. L., & Hult, G. T. M. (2019). International Business: Competing in the Global
Marketplace (12th ed.). McGraw-Hill Education. Retrieved from McGraw-Hill Education
Larke, R., & Causton, M. (2005). Japan - A Modern Retail Superpower. Palgrave Macmillan.
Santos, J. B., & Laczniak, G. R. (2009). "Walmart in Japan: A Failure to 'Cross the T's' of Cross-
Cultural Interaction?". Journal of International Business Studies, 40(7), 1115-1131. Retrieved
from JSTOR
Yoffie, D. B., & Rossano, E. (2012). Walmart around the World. Harvard Business School Case
712-436. Retrieved from HBS
Walmart Inc. (2020). Annual Report 2020.
Aoyama, Y. (2007). Oligopoly and the structural paradox of retail TNCs: an assessment of
Carrefour and Wal-Mart in Japan. Journal of Economic Geography, 7(4), 471-490.
Aklamanu, A. (2015). Understanding failure in international retailing: An institutional framework
for future investigation. In Institutional impacts on firm internationalization (pp. 238-263).
London: Palgrave Macmillan UK.
Layasri, B., & S Mrinal. (2023). Walmart Hanabi: Igniting Sparks in the Japanese Retail Sky.
International Journal for Multidisciplinary Research, 5(6).
https://doi.org/10.36948/ijfmr.2023.v05i06.10284
Hunt, I., Watts, A., & Bryant, S. K. (2018). Walmart’s international expansion: Successes and
miscalculations. Journal of Business Strategy, 39(2), 22-29.
Ryu, J. S., & Simpson, J. J. (2011). Retail internationalization: Lessons from" Big Three" global
retailers' failure cases. Journal of Business and Retail management research, 6(1).