H & G H Mansukhani Institute of Management

ULHASNAGAR SUB:INTERNATIONAL MARKETING

SUBMITTED TO: PROF Milind Sir

SUBMITTED BY : DINESH MUDALIAR ROLL NO:39

EPRG MODEL
EPRG Model is an International Business model including three dimensions - Ethnocentric, Polycentric and Geocentric. It has been introduced by Howard V. Perlmutter within the journal article "The Tortuous Evolution of Multinational Enterprises" in 1969. These three dimensions allow executives to more accurately develop their firm's general strategic profile.

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Overview
The EPG model is a framework for a firm to better pinpoint its strategic profile in terms of international business strategy. It contains three elements - Ethnocentrism, Polycentrism and Geocentrism. The authors Wind, Douglas and Perlmutter have later extended the model by a fourth dimension, "Regiocentric", creating the "EPRG Model". The importance of the EPRG model is mainly in the firm's awareness and understanding of its specific focus. Because a strategy based mainly on one of the three elements can mean significantly different costs or benefits to the firm, it is necessary for a firm to carefully analyze how their firm is oriented and make appropriate decisions moving forward. In performing an EPRG analysis, a firm may discover that they are oriented in a direction that is not beneficial to the firm or misaligned with the firm's corporate culture and generic strategy. In this case, it would be important for a firm to realign its focus in order to ensure that it is correctly representing the firm's focus.

Each of the four elements of the EPRG Profile is briefly highlighted in the table below, showing the main focus for each element, as well as its correlating function, products, and geography.

Elements of the EPRG Model

Ethnocentrism
There is no international firm today whose executives will say that ethnocentrism is absent in their organization. The word ethnocentrism derives from the Greek word "ethnos", meaning nation or people, and the English word center or centrism.

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A common phrase set for ethnocentrism is tunnel vision. In this context,

ethnocentrism is the view that a particular ethnic groups system of beliefs and values is morally superior to all others. Ethnocentrism is characterized by or based on the attitude that ones own group is superior to others.

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The ethnocentric attitude is found in many companies that have many nationalities and culture groups working together. It is a natural tendency for people to act ethnocentrically because it is what they feel comfortable with. It is based on past experiences and learned behaviors and norms.

The ethnocentric attitude is seen often when home nationals of various countries believe they are superior to, more trustworthy and more reliable than their foreign counterparts. Ethnocentric attitudes are often expressed in determining the managerial process at home and overseas. There is a tendency towards ethnocentrism in relations with subsidiaries in developing countries and in industrial product divisions.
Organizations that are designed with an ethnocentric focus will portray certain tendencies. These include an organizations headquarters thats decision-making authority is relatively high. Home standards are applied to the evaluation and control of the organization. These standards are to ensure performance and product quality. Ethnocentric attitudes can be seen in the organizations communication process. This is evident when there is constant advice, and counsel from the headquarters to the subsidiary. This advice usually bears the message, This works at home; therefore it must work in your country". Organizations that portray ethnocentrism usually identify themselves with the nationality of the owner. For example, Wal-Mart is seen as an American company because its headquarters are located in America. The crucial critical concept of ethnocentrism in international organizations is the current policy that recruits from the home country are hired, and trained for key executive position in the organization. The ethnocentric attitude is a centralized approach. With the centralized approach, the training originates at the headquarters and than corporate trainers travel to the subsidiaries, and often adapt to local situations.

There are many costs that ethnocentrism can incur on an international organization. Using the centralized approach can cause inefficient staffing problems in the organization, this is because the employed staff will incur high financial costs to the global business as they have to pay for the transfer costs of the staff coming from the home country to overseas.

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This also could bring inefficiency to the business if the new

staff is not able to fit in and be culturally compatible in their newly situated location. There is often ineffective planning due to poor feedback from the international subsidiaries. The organization may see capital flight, as the best men in the foreign subsidiary will seek other employment opportunities. Ethnocentric organizations may lose their ability to build a high caliber local organization, which could lead to fewer innovations. This in turn could cause a lack of flexibility and local responsiveness. Costs and Benefits of Ethnocentrism

Costs

Benefits

Ineffective Planning due to poor feedback

Simple organization

Subsidiary valuable executive flight

Greater communication and control

Fewer innovations

Inability to build a high caliber local org.

Lack of flexibility and responsiveness

Polycentrism
Polycentrism is one of the three legs in the EPG framework that identifies one of the attitudes or orientations toward internationalization that is associated with successive stages in the evolution of international operations

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Polycentrism can be defined as a host country orientation; which reflects host countries goals and objectives with respect to different management strategies and planning procedures with regard to international operations. Under a polycentric perspective, a companys manageme nt team believes that in international business practices local preferences and techniques are usually found most appropriate to deal with the local market conditions. In the most extreme views of polycentrism, it is the attitude that culture of various c ountries are different, that foreigners are difficult to understand and should be left alone as long as their work is profitable.

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Although there is great benefit to taking into consideration local preferences in the host country when it comes to international business practices, a polycentric approach has its obstacles once implemented. A polycentric approach gives rise to the problems of coordination and control. Management usually loses coordination of its international subsidiaries usually because they are forced to operate independently of one another, and establish separate objectives and plans which meet the host countries criteria. Marketing of the companys products are organized on a country-by-country basis, and marketing research is conduc ted independently in each country.

Management is unable to have total control over the company in the host country because it is found that local nationals have a better understanding and awareness of national market conditions, more so than home office

personnel. This is very accurate in several aspects of the products delivery including pricing, customer service and well-being, market research, and channels of distribution. Therefore, the majority of control in the host countries practices is lost, and the company is forced to manage its operations from the outside. Local nationals occupy virtually all of the key positions in their respective local subsidiaries, and they appoint and develop their own people.
There are a few other drawbacks to the polycentric approach which may restrict a multinational company from completely realizing its full potential in the host country. The first drawback of a polycentric approach is that the benefits of global coordination between subsidiaries such as the dev elopment of economies of scale cannot be realized.

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This basically restricts the company for mass production of its products, as they are forced to

manufacture its products with the local preferences being the priority of production. Secondly, the fact that because all of the subsidiaries work independently of one another, learning across geographic regions is not applied to one another. Therefore knowledge that could be beneficial across all regions is lost, and subsidiaries could be worse off than if they had obtained the knowledge. Lastly is that the treating of each market as unique may lead to the duplication of facilities. By focusing on the business practices of local preferences and techniques which pertain to the local market conditions, the subsidiary in the host country could mimic that of local companies and appear less appealing to local consumers.
In concluding, a polycentric approach should only be used within a company in which there is a certain amount of comfort in allowing the host country to make all major decisions, following their own procedures and objectives. It must be understood that there is limited control or communication between the home and host-country, and products and distribution may vary across countries. Companies should evaluate all legs of the EPG model before implementing a strategy, as all companies differ in international strategy among industry and region.

Costs and Benefits of Polycentrism

Costs Waste due to duplication Localization costs of universal products Inefficient use of home-country experience Excessive regard for local traditions at expense of global growth Benefits Intense exploitation of local markets Better sales due to better-informed local management More initiative for local products More host government support Good local managers with high morale

REGIOCENTRIC ORIENTATION

Management views regions as unique. Management seeks to develop an integrated regional strategy to market products in the particular identified region. Eg. A US company that focuses on the countries included in the NAFTA is a regiocentric orientation. Similarly, a European company that focuses its attention on the Europe is regiocentric Here, the firm researches the markets, understands customers and competition in the region and evolves competitive strategies. It may examine several market entry strategies but common ones are joint ventures, or subsidiary operations in the target region. For example, a firm targeting Europe may set up a manufacturing base in one of the European countries to bypass EC's requirements or quota restrictions

Regiocentric staffing policy involves hiring and promoting employees based on specific regional context where subsidiary is located. This approach is used when regional employees are needed for important positions. However, both employees from host countries and a third country are employed. The disadvantage of using this type of policy is that sometimes employees from home or host countries are not unselected. Instead, employees from a third are selected to subsidiary in which they may face cultural differences

Geocentrism
The third and last aspect of the EPG model is the geocentric portion, this notion focuses on a more world-orientated approach to multinational management. The main difference of geocentrism compared to ethno and polycentrism is that is does not show a bias to either home or host country preferences but rather spotlights the significance of doing whatever it takes to better serve the organization. This is evident in the sense that upper management does not hire or delegate responsibility to an individual because they best exemplify the host or home countries opinions. Instead, management selects the person best suited to foster the companies goals and solve problems world wide. The purpose of this is to build an organization in which the subsidiary is not only a good citizen of the host nation but is a leading exporter from this nation in the international community and contributes such benefits as (1) an increasing supply of hard currency, (2) new skills and, (3) a knowledge of advanced technology. The sole goal of geocentrism is to globally unite both headquarters and subsidiaries. The firms subsidiaries are thus neither satellites nor independent city states, but parts of a whole whose focus is on worldwide objectives as well as local objectives, each part making its unique contribution with its unique competence. Furthermore, geocentrism boils down to product differentiation, diversifying functions in the sense that different markets require dissimilar behavior, and lastly geographic location. Out of all aspects of a business there are two that are predominantly geocentric - research and development and marketing. As stated previously this is because different markets, regions, and countries require distinctive ways of approaching them. For example, the standards in which the home country operates are going to be much different from how the host country operates. What is accepted as a permissible way of treating employees in the United States, the home country, may not be acceptable to Chinese employees, in the host country. In addition, consumer tastes vary greatly from home country to host country, and going even further these tastes will continue to change from country proving that for R&D to be effective it must be world-oriented.

It is the overall goal of geocentrism to form a collaborative network between headquarters and subsidiaries; this arrangement should entail a set of universal standards that can thus be used as a guideline when attacking key business decisions. Such decisions include the management and start-up of new plants, ideas of how to market a product to a new consumer base, and product alterations. The most effective way to enforce geocentrism is with a formal reward system that encourages both subsidiary and headquarters managers to work for global goals rather than just defending home country values. This ideology is a great example of how todays business must manage both global and local issues in order to succeed in the end. While there are many obstacles that will hinder a company's ability to become geocentric, there are also a handful of forces which will drive them towards this. For instance, there is the loss of national sovereignty when one nation is dominated by another - this can lead to a loss in economic and political nationalism. There is also the feeling from host countries that receive disproportionate reimbursement from international profits that only fuels the lack of trust toward big corporations felt by political leaders of host countries. On the other hand, there are also forces that push an organization to the geocentric notion of managing a multinational corporation (MNC). The first and most obvious of these is competition, if one company is to enter a new country or market it forces rivals to do the same in order to maintain pace. Secondly, there is a large amount of customers available to MNCs internationally that require a geocentric approach in order to effectively targeted. A third force causing this movement is the abundance of growing world markets, occurring in areas such as income earning age population, rising GDPs, and escalating disposable income in areas such as China and Korea.

With that said geocentrism is an ideology that must be accepted by any corporation operating globally in order for any sort of success and long term stability to attained. However, there are certain aspects of the business life in which ethnocentrism and polycentrism are more adequate models to follow, but functional smoothness and success in both home and host countries is dependent upon upper managements ability to select individuals who are world orientated as opposed to home or host country centered.

Costs and Benefits of Geocentrism

Costs

Benefits

High communication and travel costs

Integrated global outlook

Educational costs at all levels

More powerful total company throughout

Time spent in consensus decision-making

Better quality of products and services

International headquarters bureaucracy

Worldwide utilization of best resources

Too wide distribution of power

Improved local country management

Personnel problems, especially those of international executive reentry

Greater commitment to global objectives

Higher global profits

PROS OF EPRG MODEL The orientation of the dominant senior management group influences and shapes diverse aspects of a multinational enterprise, including strategy, structural design, pricing, resource allocation, and administrative processes. The study made managers aware that culture was an important aspect to consider in international business affairs. It started a whole series of studies on culture in the business environment. The model provides insight in how an international organization evolves in time and what organizational and staffing challenges lay ahead. The EPRG mix can be used to determine how far an organization has internationalized. CONS OF EPRG MODEL The model is organisation centred disallowing environmental influences. Its international orientation is measured solely on internal aspects. In the real world these orientations never appear in a pure form. In any organisation some degree of ethnocentricity, polycentricity or geocentricity are present .Perlmutters organisational development process does not always hold. In certain circumstances, irrespective of the companys size and internationalisation experience, a country-centred strategy, similar to Perlmutters polycentric view, may be the best possible orientation and not a geocentric orientation

5C Analysis
While a situation analysis is often referred to as the "3C analysis", the extension to the 5c analysis has allowed businesses to gain more information on the internal, macro-environmental and micro-environmental factors within the environment. The 5C analysis is considered the most useful and common way to analyze the market [5] environment, because of the extensive information it provides.

COMPANY The company analysis involves evaluation of the company's objectives, strategy, and capabilities. These indicate to an organization the strength of the business model, whether there are areas for improvement, and how well an organization fits the external environment. Goals & Objectives: An analysis on the mission of the business, the industry of the business and the stated goals required to achieve the mission. Position: An analysis on the Marketing strategy and the Marketing mix. Performance: An analysis on how effectively the business is achieving their stated mission and goals. Product line: An analysis on the products manufactured by the business and how successful it is in the market.

CONSTITUTION constitution are useful for businesses as they allow for an increase in the creation of ideas, as well as an increase in the likelihood of gaining more business opportunities. The following type of collaborators are: Agencies: Agencies are the middlemen of the business world. When businesses need a specific worker who specializes in the trade, they go to a recruitment agency. Suppliers: Suppliers provide raw materials that are required to build products. There are 7 different types of Suppliers: Manufacturers, wholesalers, merchants, franchisors, importers and exporters, independent crafts people and drop shippers. Each category of suppliers can bring a different skill and experience to the company. Distributors: Distributors are important as they are the 'holding areas for inventory'. Distributors can help manage manufacturer relationships as well as handle vendor relationships. Partnerships: Business partners would share assets and liabilities, allowing for a new source of capital and skills. Businesses must be able to identify whether the collaborator has the capabilities needed to help run the business as well as an analysis on the level of commitment needed for a collaborator-business relationship.

Competition analysis

Competition

deals with the competitive forces within the new market. The firm entering the new market needs to consider issues such as competitive rivalry, threat of substitutes, bargaining power of suppliers and buyers as well as threat of new entry. As the competition also relates to the market and things such as market growth and market potential, this thesis will include general market characteristics under this section as well

CUSTOMERS Customer analysis can be vast and complicated. Some of the important areas that a company analyzes includes Demographics Advertising most suitable for the demographic Market size and potential growth Customer wants and needs Motivation to buy the product Distribution channels (online, retail, wholesale, etc.) Quantity and frequency of purchase Income level of customer

CULTURE To fully understand the business climate and environment, many factors that can affect the business must be researched and understood. An analysis on the climate is also known as the PEST analysis. The types of climate/environment firms have to analyse are: Political and regulatory environment: An Analysis of how active the government regulates the market with their policies and how it would affect the production, distribution and sale of the goods and services. Economic Environment: An Analysis of trends regarding macroeconomics, such as exchange rates and inflation rate, can prove to influence businesses. Social/cultural environment: Interpreting the trends of society, which includes the study of demographics, education, culture etc. Technological analysis: An analysis of technology helps improve on old routines and suggest new methods for being cost efficient. To stay competitive and gain advantage over competitors, businesses must sufficiently understand technological advances.

Case study Summary

About Wal-Mart Wal-Mart is a retailer of consumer goods founded in 1962 by Sam Walton. The company obtains profits through volume, with a low-cost strategy. Its Every Day Low Prices business plan is supported by aggressive pricing policies, a state-of-the-art retail and supply chain distribution system, advanced inventory management systems, and little promotion and advertising efforts. The large success of the company led to global expansion that began in the early 1990s. Global Expansion: Wal-Mart, the second largest retailer in the world, entered Japan in 2002. It used its usual foreign strategy of forming a joint-venture (used to help with economic and political challenges). The company enters foreign markets by purchasing large stakes in similar retailers and takes gradual control of ownership by increasing investment through time. Historically these acquisitions are gradual, and have been met with both success and failure. The retailing giant has operations in 28 countries under 60 different banners. Examples of failed and abandoned markets include South Korea, Germany and Indonesia. Expansions that have proven largely profitable are Mexico and Canada. A struggling market similar to that of Japan is the United Kingdom. Judging from these varying country performances, one can see that its formula for success has not yet been perfected. Summary of Strategy & Performance: Wal-Mart in Japan 1999Talks begin with struggling Japanese retailer Seiyu. Seiyu had 400 retail units across Japan 2002Wal-Mart purchases 6.1% stake in Seiyu, beginning expansion 2003Seiyu begins reorganizing structure; implements point-of-sale and SMART inventory tracking systems across 53 stores. Store efficiencies increase by capturing consumer trends Wal-Mart acquires 34% stake in company, becoming the Seiyus biggest shareholder Net income fell to lowest level between 2002-2007, with a loss of $772 million 9 new locations open

2004Wal-Mart opens its first pilot superstore, Japanese are not familiar with the supercenter concept The company implements its supply-chain and distribution management system, Retail Link, in half of its locations Company lays off 1500 (25%) of headquarters staff, resulting in bad PR Reduces advertising Seiyu manages to cut costs by 6.1% Reports annual loss of $66 million 2005Seiyu announces loss of $118 million CEO Masao Kiuchi takes blame and resigns Wal-Mart increases ownership to 42% 2006Wal-Mart built and opened U.S.-style distribution center Some individual store sales turned positive Company reports loss of $151 million Wal-Mart ends year with 54% stake in Seiyu 2007Wal-Mart implements SMART system in more than 75% of its stores to help better meet customer needs, enhance product selection, hopes to increase sales Seiyu reports loss of $469 million 2008Wal-Mart completely acquires Seiyu for $875 million, taking 100% ownership of the company Makes Seiyu a subsidiary of the company Introduces new activities including merchandising, distribution and logistics Closes 20 outlets and cut 6 percent of its workforce Business Challenges and Suggestions: So, where did Wal-Mart go wrong? The companys global marketing strategy had many flaws. Read below to find an explanation of these challenges and what could have been done to prevent or control them. Cultural misunderstanding: Wal-Mart failed to grasp the consumer and retail environment in Japan. With a population of 127 million, the highest per capita income and the second largest economy in the world, Japan is a very attractive market for retailers. The opportunity exists, but there is much more research and planning that needed to be done before expansion began. Instead of adapting business operations to the Japanese culture, the company essentially assumed the Japanese would readily adapt to Wal-Marts. This was not the case. For

example, in Japan there is a much larger need for local store customization. Consumer buyer behavior is much different than in the United States, with purchasing patterns and product selection varying greatly between regions. They have a tendency to buy smaller quantities in regular intervals rather than the more American idea of stocking up. Similarly, the concept of large retail stores is foreign. Retailers with the highest growth rate are small specialty stores; quite the opposite of Wal-Mart. The culture tends to buy more fresh produce than pre-packaged goods as well (something Wal-Mart does not usually specialize in). Lastly, the Japanese view high price as equaling high quality. This mentality causes them to purchase 40% of the worlds luxury goods annually. Packaging and appearance of goods play a huge role in their purchasing decisions. When looking at Wal-Marts product selection, it is obvious they do not usually cater to luxury-brand customers. All of these cultural misunderstandings lead Wal-Mart away from success in Japan. Perhaps more research into their cultural values and patterns could have helped avoid some of these mishaps. Inability to carry out a low cost strategy Given the above facts, it is obvious that the idea of Every Day Low Prices does not appeal to the Japanese market in the same way it does in the American, Mexican and Canadian markets. This is a very different culture and population to cater to. Wal-Marts low cost marketing strategy may not be as effective globally as it is domestically. They earn their profits through high volume sales over differentiation, and this approach is just not as successful in Japan. Supply chain inefficiencies In Japan there are strong and close-knit supplier webs that provide retailers with their goods. This country puts a higher value on close, local relationships, making it very difficult for foreign firms to enter the industry. With so many changes in products due to local store specifications, it forces firms to deal with many different suppliers. This is not favorable to large retailers, as they dont have the time or national presence to make the necessary relationships to do business. Wal-Mart is not used to this high level of supplier power. Their value usually comes from cutting costs with suppliers enough to pass onto their customers while using synergy to increase efficiencies. Difficulties managing their supply chain are another substantial reason Wal-Mart is struggling in Japan. Pressure from competition: The types of competition in Japan include both domestic and international players. Its biggest Japanese competitors are 7-Eleven Japan Co. Ltd., Aeon Co. Ltd., and Ito-Yokado Co. Ltd. As of 2008, all of these companies drastically outperformed Seiyu Ltd. (Wal-Mart). Although all of these companies have different strategies, much of their success can be credited to their experience in understanding how their country buyers and sellers interact. Two main international competitors are Carrefour from France and Tesco from the United Kingdom. These firms had similar challenges to Wal-Mart with their international expansions, but each faced them differently. While Carrefour had complications so complex that it exited the market in 2004, Tesco was able to gradually expand and prosper. Tesco made large investments in market research that allowed them to build stores that better met the Japanese consumers needs. Their cautious expansion and well thought out plans have helped them succeed in the Japanese retail industry. It is imperative for Seiyu and Wal-Mart to recognize their competitions advantages and formulate better ways to respond.

Seiyus pre-Wal-Mart conditions: Lastly, it is necessary to examine Seiyus business situation before Wal-Mart took over the company. Formed in 1956, Seiyu was successful until the 1990s when Japan experienced an economic recession. During this time the company acquired a large amount of debt that totaled $7.46 billion at the start of the millennium. Although the company was in trouble, they did not receive assistance from its larger owner, Saison Group, because they too were experiencing the financial crisis. This situation is important to consider when evaluating Wal-Marts performance. Although it was predicted that Wal-Mart could save the Japanese retailer, their debt and economic troubles may have been too much to reverse. Looking back, Seiyu may not have been the best company for Wal-Mart to begin their expansion with. Summary/What next?: As of 2008, Wal-Mart had invested over $3 billion dollars in its expansion into Japan. The question is, will it be worth it in the long run? They have made many mistakes in the past, but as of 2011, Wal-Mart is still operating in Japan under the same brand name, Seiyu. According to their most recent annual financial report, they claim profits are growing as the Japanese become more favorable towards the Every Day Low Price strategy and as their operational efficiencies increase. Despite these claims, the firm closed 23 additional stores by the end of their 2009 fiscal year, and net investment now totals $5.7 billion. I believe the root cause Seiyu and Wal-Marts failure can be traced back to their initial global marketing strategy. A better understanding of Japans culture and how it affects supplier-relations and the competitive landscape could have prevented many of the companies problems. Will their low-cost strategy ever actually turn a profit for the company? My guess is not any time soon, but only time will tell.

1.Analyze retail industry in japan Discuss the favourable and unfavourable factors that influence retail sector in japan?
Japans retail market is the worlds second largest, worth some US$1,124 billion (135 trillion yen) in 2007. Benefiting from a base of sophisticated consumers with high levels of disposable income, per capita retail expenditures have reached US$8,800. Japan is a mature market, yet it hums with the dynamic development of new businesses, urban renewal, and local city development, presenting a broad range of opportunities for market entry. Japans Retail Sector Attracts throughout Asia Japans retail market attracts consumers from across Asia. The number of tourists traveling to Japan from other parts of Asia continues to grow, with roughly 35% citing shopping as one of their reasons for visiting. Moreover, womens fashion magazines from Japan are especially popular in China, Taiwan, Hong Kong and South Korea, highlighting the power of Japanese retail to resonate throughout Asia. For foreign companies, Japans market holds significant opportunities for advancing into other Asian markets.

Japanese tends to prefer quality over low prices, which constrasts with Walmart core value: EDLP (Every Day Low Price). When a nation has a very strong purchasing power, such as Japan, why settle for cheap stuffs when you can buy high quality expensive products and still have money to spare?

Favourable and Unfavourable factors of Japan retail sector

Japan is a small country with limited spaces, which has several implications for Walmart as below: Small housings and apartment sizes, with high rent prices means that Japanese would need to minimize their purchases. Lack of storage room to store purchases. A typical apartment in Japan would be 1LDK (1 room apartment with Living, Dining, and Kitchen area). Room size in Japan is measured by Jo (1 Jo = 1 tatami/Japanese mat = .88m x 1.76m). 1 LDK apartment would be about 18 Jo, which measures to only 27,55 sqm. Several small purchases. Minimize purchases, they would make their purchases several times a week, in small quantities. This means that stores would have to be readily available within reasonable distance, and bulk purchasing is discouraged. Compared to Walmart usual practice of centralized, big stores, with bulk purchasing to save costs, a neighborhood convenience store would be more suitable for the Japanese people. High operating costs, especially because of the prices of rent and buildings in general. Average commercial land prices in Japan is 156,857 Yen (USD 2,017)/sqm, with average commercial land price in Tokyo reaching 1,551,400 Yen (USD 19,956)/sqm, followed by Osaka with average commercial land price of 493,700 Yen (USD 6,360)/sqm. Inability to apply original supply chain model Lots of stores, lots of supplies to be delivered, but no warehouse space, or overtly expensive warehouse space, since space is a premium in Japan. Walmarts supply chain management that is one of the strengths of Walmart in US, and based on US model, can't be applied here. That's why Toyota invented JIT: to avoid the constraint of using warehouses, and hence, adding more costs to the product line High operating costs, especially because of the prices of rent and buildings in general. Average commercial land prices in Japan is 156,857 Yen (USD 2,017)/sqm, with average commercial land price in Tokyo reaching 1,551,400 Yen (USD 19,956)/sqm, followed by Osaka with average commercial land price of 493,700 Yen (USD 6,360)/sqm.

Inability to apply original supply chain model Lots of stores, lots of supplies to be delivered, but no warehouse space, or overtly expensive warehouse space, since space is a premium in Japan. Walmarts supply chain management that is one of the strengths of Walmart in US, and based on US model, can't be applied here. That's why Toyota invented JIT: to avoid the constraint of using warehouses, and hence, adding more costs to the product line

2.The Entry Strategies Plays An Important Role In International Expansion Of A Company What type of entry strategy did walmart pursue in japan? Discuss pros and cons of the strategy
WalMart, having seen Carrefours difficulties, adopted a more cautious approach, seeking a Japanese partner with knowledge of local consumer tastes. Following six months of negotiations, it bought a 6 per cent stake in Seiyu, Japans fourth largest supermarket group, in 2002. This partnership seemed to work smoothly, and it raised its stake to 34 percent of Seiyu six months later. WalMart allowed the J apanese management to continue running the business and retained the Seiyu name on the stores. This strategy is similar to its market entry strategy in the UK, where it acquired Asda supermarkets. Companies like Wal-mart, adopt international strategy for global expansion because they have core competences which they can capitalise upon especially if its difficult for their rivals to match them. Companies with International strategy have important part of their value chain such as decision making, expertise, new products and international operations being controlled or decided from their headquarters. However such centralised decision making can often impede upon the abilities of the subsidiaries to respond to local demands Wal-mart has a cost efficient operating system with an expense structure that is among the lowest in the industry Its price of food was estimated to be 20% lower than its competitors in the United States Wal-mart is therefore trying to replicate this successful American strategy and core competence of Everyday Low Price (EDLP) in the Japanese international market. Though this strategy has been success in some of its international markets such as Mexico and China, the results in Germany and Korea were so poor that Wal-mart withdrew from those countries in 2006. Once again the success of this strategy is still questionable in Japan. Japanese consumers associate low price with low quality as they are willing to pay high price for high quality products The perception of customers towards low price signifying low quality is particularly high in its clothing segment . This low price strategy was adopted by Wal-Mart in its entry into Japan in 2002, especially because it was at a time when the country was just emerging from a prolonged recession and consumer income was low. In order to erase this image of Low Price signifying Low Quality from the minds of their customers, Wal-Mart has introduced, more expensive products for the customer segment that prefers high cost while still maintaining some low cost variants. For example,

it has jeans for $10 and $ 35 option as well this however may further confuse its customers who may not understand the basis for such price disparity. Japan is a country with a high context society and collectivistic way of life They have strong ties to families and groups and great emphasis for quality and prestige As a result of these strong social ties, Wal-Marts sacking of 25% of Seiyus work force including 1500 managers and employees in 2004, was wrongly perceived by the Japanese people. Wal-mart opens its stores for 24 hours a day, this is seen as stressful by the employees and generally seen as an infiltration of the American culture into Japan. Its introduction of American, Canadian and British managers who act on headquarters decisions rather than employing Japanese managers who understand the market better further portrayed them in a negative light to both the employees and the general public. This consequently led to the loss of some of its customers Another core competence which Wal-mart introduced into Japan is its technology-focused inventory replenishment system which is linked to their suppliers. It helps them monitor and manage their inventories. However, because the Japanese people prefer personal interaction when doing business , the implementation of this Information technology strategy has not been easy, especially as Japan has several layers of distribution network which are closely networked and difficult to penetrate. It thus makes high volume discounting difficult and merchandising more expensive Wal-Mart is however trying to eliminate the middle-man in order to successfully implement its low price strategy Wal-marts response to local tastes, preferences and general way of life is perceived as low in its international strategy as It tends to implement its competences into international markets with little considerations to what the local demands, preferences, expectations are and this has led to its struggle to survive in Japan

3.Analyze the strategies adopted by Wal-Mart in Japan through its joint venture with seiyu . Do you think the company is going to be achieve rapid growth in japenese market? Why?
Wal-Mart initially made a failed entry into Japan in the mid 1990s when it entered the market through selling its products in local supermarkets, however sales were disappointing . The initial failure could be associated to slow market drive by the local super markets as Wal-mart had little or no control over them. This can be seen as a major disadvantage of indirect exporting . However, in 2002 Wal-mart made a second attempt into Japan Japan is one of the wealthiest and developed economies in the world. It has the second largest consumer market . Wal-marts entry into Japan was through partnership with Seiyu Ltd which is Japans fifth largest hypermarket and was in financial distress at that time It was a deal which was done in phases as agreed by both parties. Wal-mart was to initially acquire 6.1% of Seiyu shares and gradually increase its stake by acquiring up to 67% of Seiyu in 2007 . Sumitomo Corp a leading trading company in Japan also had a 15.6% stake of Seiyu . In 2005, Wal-

mart increased its acquisition stake making Seiyu a Wal-mart subsidiary and increasing Wal-marts control over Seiyu. In 2007, Wal-marts stake was again increased to 95.1% . This partnership deal was meant to help Wal-mart minimise its risk of internationalising in Japan where there is strong domestic competition, price wars and strong suppliers and also help its entry and expansion in the market Yes ,company can achieve rapid growth in Japanese market if it rethinks over its strategies and adopts following measures Wal-Mart is very successful in its domestic market and also some foreign markets such as China and Mexico where it had to adjust its strategy in order to respond better to local pressures. It is therefore recommended that Wal-mart should further develop its strategy in Japan and respond better to the countrys local demands and preferences through the opening of convenience stores in order to capture that market segment and offering more fresh local products to meet the local demand. Walmart should also employ Japanese managers who understand the market better. These measures will help Wal-mart to succeed better in Japan where the pressure for low price by customers is not emphasised rather high quality is preferred. Wal-mart can still maintain its international strategy with a little more responsiveness to local demand as there is no one best strategy to adopt. This move will save Wal-mart from withdrawing from the market where it has already invested $1 billion USD. Walmarts low sales value from international operations in comparison with Tesco reveals that the retail market is still a viable industry for Wal-mart to exploit