Wal-Mart and Carrefour Experiences in China: Resolving the Structural Paradox Harvard Case Solution & Analysis

Introduction

The paper attempts to analyze the international strategies implemented by Wal-Mart and Carrefour to enter the Chinese market. The paper also attempts to provide the behavior of Chinese consumer market along with the understanding of direct distribution system in China. Moreover, the paper provides alternatives for both companies in devising strategies for the Chinese market. Lastly, the paper provides recommendations for both companies to build a sustainable strategy for their operations in China.

Chinese Consumer Behavior

The consumer market of China is different from the western economies consumer market where consumers prefer fresh stuff instead of preserved and formulated food or liquid. This includes the intake of fresh fruits, vegetables, meat, and juices. The consumption of rice and tea is higher and in bulk quantity in every parts of China which represents that the country highly relies on quality food material (Kaynak & Chan, 2014). The individual preference of a Chinese consumer is based on buying small amount of grocery items but with a higher rate of frequency. This allowed customers to visit stores on frequent basis. The consumers have a trend as they have low brand loyalty and tend to switch from consuming one country’s products to different country’s products on frequent basis. Although, the Chinese consumers prefer European brands over their national Chinese brands because the European brands have more varieties and are richer in taste (Kaynak & Chan, 2014).

Chinese consumers are price sensitive as they prefer low cost products with relatively high quality. Chinese customers play smart while purchasing a product as they have knowledge of what they are buying from the market. However, at the same time Chinese consumers’ value global brands and they compare those global brands with any other brands as they also like to fluant the things that they have bought. Chinese consumers also view shopping as a fun exercise where people buy brands which are most liked and preferred by them. Chinese consumers also like to choose products from different varieties of products displayed in the shelves. They feel unsatisfied if they are not presented with many products in choosing their type of brand (Lu, 2008).

Direct Distribution in China

Direct distribution channels and network is widespread, implemented and accepted in the country. Chinese often relate this particular concept with a term called ‘guanxi’ which is referred as to improve relationship and connections while conducting business. As dicovered by learning centers in the United States, guanxi reduced the impact of risk and disappointments in a business. The direct distribution network limits the number of wholesalers and retailers while performing business. The process of direct distribution in China involves having the manufacturer’s own warehouses and sales staff. The main reason for direct distribution is the guanxi approach used by Chinese manufacturers. However, guanxi has imposed challenges for companies operating in China to guanxi with suppliers and retailers due to their local differences (Lu, 2008). Although, the particular direct distribution network reduces the cost of managing supplies and also increase profit as little profits are shared with middlemen. The Chinese market has very few large-scale distributors and wholesalers which limits the competition and maintains an ownership of the market. The Chinese retail market is being dominated by two retail giants namely Wal-Mart and Carrefour which have huge channel powers and satisfies a consumer behavior of comparing the two brands (Lu, 2008).

Problems with Distribution System

While considering the growth of the Chinese market, the current distribution channel caters a limited rural area market because of low presence of distribution companies. There is no national logistic system in China as the trend does not aid to focus on building huge distribution networks. The transport system is also inadequate in the country due to which only 1st tier cities get the chance to avail different international products, however the rural areas are left with little foreign and local direct investment. A huge cost is associated with setting up of distribution networks which is why the government avoid spending investment. It is also the bureaucratic interference which restricts companies to enter in the country to make investments in distribution network to make it strong (Kaynak & Chan, 2014).....................

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