South-Western - Management  
Wal-Mart Hopes It Won't Be Lost in Translation
Topic Global Management
Key Words Global strategy, culture
News Story

As a strategy for getting into the Japanese retail market, Wal-Mart bought a 38% stake in Japan's fourth largest retailer, Seiyu. It believes that by working through a local partner, Wal-Mart can better navigate Japan's network of suppliers, which has frustrated other foreign investors. Seiyu is a chain with falling sales and a debt-to-capital ratio that is more than twice the industry average in Japan. Wal-Mart believes it can cut costs and bolster profitability, and its "everyday low prices" may be a hit with Japan's increasingly bargain-conscious consumers.

Wal-Mart has a five-year plan that includes:

  • Reducing the hours worked by full-time staff members and increasing the percentage of part-time workers
  • Computerizing operations
  • Remodeling aging stores
  • Persuading manufacturers and wholesalers to cut prices so Seiyu can pass the savings to consumers
  • Centralizing the retailer's operations, including giving product scanners to aisle clerks and creating inventory databases
  • Teaching the employees to sell the Wal-Mart way by putting managers through intense training sessions

Some concessions have been made to allow for consumer preferences, such as mailing circulars to consumers used to the practice, and buying goods from local suppliers rather than from Wal-Mart's network.

Questions
1.

Why has Wal-Mart chosen to buy into an existing retail chain rather than building its own stores in Japan?

2.

What cultural issues pose a threat to Wal-Mart's success in this venture? How is Wal-Mart addressing these issues?

Source "Wal-Mart Hopes It Won't Be Lost in Translation," The New York Times December 14, 2003.
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