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Publish Date: 2024-12-03

Harvard Case - Walmart China: Challenging Alibaba's New Retail

"Walmart China: Challenging Alibaba's New Retail" Harvard business case study is written by Ali Farhoomand, Filip Ziolek. It deals with the challenges in the field of Operations Management. The case study is 25 page(s) long and it was first published on : Mar 20, 2020

At Fern Fort University, we recommend that Walmart China adopt a multifaceted strategy to effectively challenge Alibaba's dominance in the New Retail landscape. This strategy encompasses leveraging Walmart's existing strengths in supply chain management, operations strategy, and global sourcing, while simultaneously embracing digital transformation and innovation to create a compelling customer experience and compete effectively in the Chinese market.

2. Background

Walmart China faces a formidable competitor in Alibaba, a company that has successfully integrated online and offline retail experiences through its 'New Retail' strategy. Alibaba's ecosystem, encompassing platforms like Taobao, Tmall, and Hema, offers consumers a seamless shopping experience, leveraging data analytics, technology, and logistics to personalize offers and fulfill orders efficiently.

Walmart, despite its global dominance, has struggled to replicate its success in China. Its traditional brick-and-mortar model has faced challenges in adapting to the rapidly evolving digital landscape, leading to a decline in market share and profitability.

3. Analysis of the Case Study

Competitive Analysis:

  • Alibaba's Strengths: Strong online presence, advanced technology and data analytics, integrated ecosystem, strong customer loyalty, and a robust logistics network.
  • Walmart's Strengths: Global sourcing capabilities, established supply chain and operations infrastructure, strong brand recognition, and a vast network of physical stores.
  • Walmart's Weaknesses: Limited digital presence, slower adaptation to the Chinese market, lack of integration between online and offline channels, and a perceived lack of innovation.

Porter's Five Forces Analysis:

  • Threat of New Entrants: High - The Chinese market is highly competitive, with new players emerging regularly.
  • Bargaining Power of Buyers: High - Consumers have numerous choices and access to information, making them price-sensitive.
  • Bargaining Power of Suppliers: Moderate - Walmart's global sourcing capabilities provide leverage, but suppliers in China have their own bargaining power.
  • Threat of Substitutes: High - Online retailers and other channels offer alternative shopping experiences.
  • Rivalry Among Existing Competitors: Very High - Intense competition exists between established players like Alibaba, JD.com, and other local retailers.

SWOT Analysis:

  • Strengths: Global sourcing, established supply chain, strong brand recognition, vast physical store network.
  • Weaknesses: Limited digital presence, slow adaptation to Chinese market, lack of integration between online and offline channels, perceived lack of innovation.
  • Opportunities: Growing Chinese middle class, increasing smartphone penetration, demand for convenience and personalized experiences, potential for omnichannel integration.
  • Threats: Intense competition from Alibaba and other players, evolving consumer preferences, regulatory changes, and potential economic slowdown.

4. Recommendations

1. Enhance Digital Capabilities and Integration:

  • Develop a robust online platform: Invest in a user-friendly website and mobile app, offering a seamless shopping experience, personalized recommendations, and convenient payment options.
  • Integrate online and offline channels: Create a seamless omnichannel experience by allowing customers to browse online, order online and pick up in-store, or return online purchases in-store.
  • Leverage data analytics: Implement data-driven insights to personalize offers, optimize inventory, and improve customer service.

2. Optimize Supply Chain and Operations:

  • Improve inventory management: Utilize demand forecasting methods, MRP, and ERP to optimize inventory levels and reduce waste.
  • Streamline logistics: Develop a more efficient logistics network to ensure faster delivery times and lower shipping costs.
  • Embrace lean manufacturing principles: Implement lean manufacturing techniques to reduce waste and improve operational efficiency.

3. Focus on Customer Experience and Innovation:

  • Offer personalized services: Leverage data analytics to personalize product recommendations, promotions, and customer service.
  • Invest in innovative technologies: Explore technologies like AI-powered chatbots, virtual reality shopping experiences, and smart shelves to enhance customer engagement.
  • Develop a strong loyalty program: Offer exclusive discounts, personalized offers, and rewards to incentivize repeat purchases.

4. Strategic Partnerships and Acquisitions:

  • Partner with local companies: Collaborate with Chinese startups or established players to gain access to local expertise, technology, and customer insights.
  • Consider strategic acquisitions: Acquire smaller, innovative companies with strong digital capabilities or a loyal customer base.

5. Leverage Global Sourcing and Operations Expertise:

  • Expand global sourcing network: Leverage Walmart's global sourcing network to secure high-quality products at competitive prices.
  • Share best practices: Transfer knowledge and best practices from other international markets to improve operations and customer service in China.

5. Basis of Recommendations

These recommendations are based on the following considerations:

  • Core Competencies and Consistency with Mission: Leveraging Walmart's strengths in supply chain management, global sourcing, and operations strategy while embracing digital transformation and innovation aligns with Walmart's mission to provide low prices and a great customer experience.
  • External Customers and Internal Clients: The recommendations address the needs of Chinese consumers, who value convenience, personalized experiences, and competitive prices. They also empower internal teams to leverage technology and data to improve operational efficiency and customer satisfaction.
  • Competitors: The recommendations are designed to directly address Alibaba's strengths, including its digital capabilities, integrated ecosystem, and data-driven approach.
  • Attractiveness: The recommendations are expected to enhance Walmart's competitiveness in the Chinese market by increasing market share, improving profitability, and building a stronger brand presence.

6. Conclusion

Walmart China has a significant opportunity to challenge Alibaba's dominance in the New Retail landscape by embracing a multifaceted strategy that leverages its existing strengths and embraces digital transformation and innovation. By focusing on customer experience, optimizing operations, and leveraging its global expertise, Walmart can create a compelling value proposition that resonates with Chinese consumers and positions the company for long-term success in the dynamic and competitive Chinese market.

7. Discussion

Alternatives:

  • Focusing solely on price competition: While price competitiveness is important, it may not be sustainable in the long term, especially against competitors with stronger digital capabilities.
  • Acquiring a major Chinese e-commerce player: This could be a costly and risky move, requiring significant integration efforts and potential cultural clashes.

Risks:

  • Rapidly evolving technology: Staying ahead of the technological curve requires continuous investment and adaptation.
  • Regulatory changes: The Chinese government's policies and regulations can impact the retail industry significantly.
  • Economic slowdown: A slowdown in the Chinese economy could affect consumer spending and impact Walmart's performance.

Key Assumptions:

  • Consumer demand for convenience and personalization will continue to grow.
  • Technology will continue to play a crucial role in shaping the retail landscape.
  • Walmart will be able to successfully integrate its online and offline channels.

8. Next Steps

  • Develop a detailed implementation plan: Outline specific actions, timelines, and resource allocation for each recommendation.
  • Pilot test key initiatives: Implement pilot programs to test new technologies, services, and partnerships before scaling them up.
  • Continuously monitor and adjust: Track key performance indicators (KPIs) and make adjustments to the strategy based on market trends and customer feedback.

By taking these steps, Walmart China can effectively challenge Alibaba's dominance in the New Retail landscape and position itself for long-term success in the Chinese market.

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Case Description

Walmart miscalculated when it entered China using its "Every Day Low Prices" strategy. It struggled with value proposition, local regulations, staff incentive schemes, logistics, and significant economic and cultural differences between regions. After two decades it developed successful operations in China. With Chinese led disruption labelled as "New retail," that meant full integration between online and offline commerce, Walmart had to ensure its continued success in this new environment.

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