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