Wal-Mart In China Essay

In Porterfield’s model, we first assess threats to entry. This typically deals with barriers such as product differentiation and cost advantages independent of scale to name a couple. Threats that were prevalent amongst Wal-mart China included lack of economies of scale and government policies that hindered their expansion efforts originally. Low profit margins of 2% to 3% forced Wal-mart to increase the amount of product they produced in order to succeed in the long run. However, with Chinese culture factoring in, Wal-mart had to decrease number of units packaged into each finished product. Government policies also took a role in how Wal-mart China operated when first entering the market and throughout it’s existence in China. In 1996 when Wal-mart China first entered the market, the government had a policy in place that specified that all foreign investors attempting to enter the market must form a joint venture and or other cooperative agreement with a domestic company, and furthermore the chinese partner would have to …show more content…
This measures conditions that facilitate rivalry over market share. Wal-mart China experienced large numbers of competitors who ate into their profit margins and market share. After the 2012 government policy was issued, a large number of hypermarkets came into operation which decreased Wal-mart China’s market share. With growing competition, Wal-mart’s smaller-formatted discount convenience stores, SmartChoice closed it’s doors due to a competitive 80% majority in domestic convenience stores versus the 20% of foreign run stores. In addition, Wal-mart China’s chief domestic competitors, China Resources and Shanghai Brilliance Group, had a combined $3 billion in sales and 8,000+ stores under their reign. This in turn, affected Wal-mart China’s plan of expansion through their new business ventures however their acquisition of TrustMart helped to level off losses due to domestic