Wal-Marts Entry into Japan
CASE SYNOPSIS
Wal-Mart entered Japan in May 2002 by purchasing a 6.1% stake in the Japanese retailer
Seiyu. Wal-Marts international expansion strategy was to partner with local retailers, assimilate
them to the Wal-Mart model and ultimately taking control of them. Following this strategy, after
entering Japan, Wal-Mart kept increasing their stake in Seiyu. Seiyu was a struggling retailer in
Japan that hoped to be rescued by the worlds largest retailer-Wal-Mart. However, by the time
Wal-Mart entered Japan, there were several international retailers in the market with multiple
outlets throughout the country.
The retail and consumer environment at Japan was extremely different from the
American consumer market. The supplier network was very difficult to penetrate that meant that
Wal-Mart was unable to pass on discounts to customers. Japanese customers had higher percapita incomes- they liked to purchase branded high-priced products as to them high price was
an indication of superior quality. Moreover, these customers liked purchasing more fresh produce
than customers anywhere in the world- making sourcing products at low prices very difficult for
the company. Finally, inter-market tastes of customers varied within markets in Japan making
customization a requirement for success. Despite all these market limitations, and earning no
profits, Wal-Mart raised its stake in Seiyu to 100% by April 2008.
In 2009 (the time this case was written) Ed Kolodzeiski, the CEO of Wal-Mart Japan, had
to make some tough decisions for the future of Wal-Mart Japan. He had to decide between
improving the Japanese model to drive the company to profits or leaving the Japanese market
altogether.
WALMART: REASONS OF EXPANDING TO THE GLOBAL MARKETS
Some of the reasons for Walmart to expand globally were:
Increased completion in the United States from other retailers like Target, Costco etc.
By 1990, Walmart had opened a store in almost all the states in the United States and
going global was considered as the next logical move in expansion of the retailer
Global expansion would open up a vast market, since the population in United States
represented a very small percentage of global population
Most international economies were encouraging globalization and liberalization during
early 1990s
Walmart could utilize their strong brand name to earn profits from markets worldwide
WALMART JAPAN: MAJOR ISSUES
When Walmart entered Japan by acquiring Seiyu in 1990, they had to overcome a number
of challenges. They failed to take into account the unique Japanese culture where high price is
associated with higher quality and a promise of everyday low pricing is viewed with suspicion.
They opened their stores in the outskirts of urban centers which limited the number of customers
that visited Walmart. Since most customers use the public transportation or use bikes, it was not
convenient for them to purchase items in bulk. Japanese customers like to purchase regionally
grown produce which meant that Walmart could not utilize a centralized distribution center to
distribute similar products to all the stores. Moreover, Walmart did not understand the differences
in transportation and logistics methods used in North America and Japan.
WALMART: SITUATIONAL ANALYSIS
STRENGTHS
Operational efficiencies
Unique Every Day Low Pricing strategy
Strong supplier relationships by using
WEAKNESS
Lack of adaptability to the cultures of
different countries (e.g. Germany)
Negative publicity especially employee
Electronic Data Interchange
relations
State-of-the art supply chain management
Late entry to some countries
system: RetailLink
Most recognized brand name
OPPORTUNITIES
THREATS
Many untapped markets around the world
Increase in consumer awareness about
Political restrictions to enter a market
global retailers
Public resistance to the company
Unorganized retail in many countries
Resistance by local mom-n-pop/ small
Increased customer acceptance to the
concept of discount retailing
Local competition
retail stores
