Analysis of the Chinese Retail Market and Walmart's Success in China

Threat of new entrants

Threat of new entrants (High) - The threat of new entrants in the Chinese retail market is considerably high due to the gradual increase of individual retailers. It becomes stressful for the traditional retail models to keep up with technological advancement (Baxter, 2019).

Bargaining power of buyers (High) - Customers are given the highest priority even by pioneered retail companies like Walmart. Throughout the years the account of customer goods sales has reached about 72.6% which has ignited retail growth in China.

Bargaining power of suppliers (Medium) - Supplier bargaining power has little influence on the growing retail business in China. The strategic planning business with a small supply chain shreds the risk of overpowering supplier demands (Baxter, 2019).

Threat of substitution (Medium to Low) - Competitive environment of the Chinese retail sector possess a threat to matching up with product innovation. Through diverse distribution of the products and services, the established companies subsequently avoid substitution.

Competitive Rivalry (High) - The brisk economic growth in China's retail market is a serious issue for international companies to venture into the market. The wealth accumulation of the nation provides a considerable competitive market for local and international brands (Anastasiu, GavriÅŸ and Maier, 2020).

Political Factors- Government regulations have directed China's focus on the development of e-commerce market. The dispute with the United States is a potential factor for ruining the political stability of China. It can disrupt the trading environment with powerful investors (Nandonde, 2019).

Economic Factors- Lower labor cost and a high rate of GDP is major business advantage in China. However, increasing inflation rate is a serious concern mainly for foreign companies.

Social Factors- The massive population of the country provides a huge and diverse customer base for the retail sector. Retail companies in e-commerce are handed a competitive advantage due to high internet consumption (Tumaku and Ren, 2020).

Technological Factors- Technological advancement through product innovation has changed production and distribution. The launch of a mass entrepreneurship and innovation program helped the country to transform into an innovation-driven economy.

Legal Factors- Banning social media has restricted the revenue collection from the digital platform. Apart from this, restrictions in foreign investment have decreased the number of international investors in the Chinese market (Nandonde, 2019).

Environmental Factors- Implementing sustainable guidelines for business has a chance for increased production costs and limited profitability. China needs to innovate technologies to decrease the pollution level and manufacturing cost.

Bargaining power of buyers

The identified threats and opportunities for Walmart are

Threats- Political instability, uncertain policies, legal restrictions and increasing cost of manufacture might lead Walmart to a loss of revenue (Yuan, Zhang and Wong, 2021).

Opportunities- The technological advancement and sustainable business guidelines, increasing GDP, low labor cost and diverse customer base would also help Walmart innovate the business.

Biggest differences that make Walmart successful in the US and not in China are

Government Regulations-Walmart operates in a liberal market in the US as compared to China. The interference of the government in changing policies has pulled the sales of Walmart back in China (Ma, 2021).

Local protectionism- China is more protective of its local market which does not allow multinationals to enjoy free flow in trading.

Product Quality- The dependence of Walmart on the US market is a major reason why the product design is more Eurocentric (Stern, 2019).

Diverse Needs- Meeting diverse needs of the Chinese consumer base is a real challenge.

Walmart should concentrate on redeveloping its strategic marketing techniques and plan the investment at the beginning. If the company fails to revise the profit rate after this, then it should reconsider China as a potential market.

References 

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