Wal-Mart has been the topic of two recent articles in the WSJ that serve to reinforce subjects we've discussed in the Club recently. Miguel Bustillo writes on 11/17/10 that Wal-Mart U.S. sales fell 1.3% last quarter for the sixth consecutive time. This is attributed to "stiff" competition from Target and Dollar stores. Nearly all of Wal-Mart's growth is coming from international operations which account for one fourth of its $400 Billion in revenues.
Mariko Sanchanta writes on 11/15/10 that Wal-Mart appears to have established itself in Japan where it now owns 400 stores and plans to grow by acquisitions. While Japan has one of the largest retail markets in the world, the market is highly fragmented with numerous small, inefficient and highly politically defended family-type stores. Wal-Mart has been trying to establish itself in Japan since 2002 but has only been profitable for the past 2 years. Wal-Mart has attributed its success to Japan's 10 years of deflation making its citizens sensitive to lower prices. Wal-Mart is now focused on entering China, Brazil and India. Success is not assured. Wal-Mart sold its German operations after 8 years of failure and has exited South Korea.
- should Wal-Mart follow the great American business tradition of using gov't to defeat its rivals? Monopoly status looks to be fading if it doesn't.
- If Wal-Mart is unpatriotic because it supplies from China, should we praise it for generating $100 billion dollars in overseas revenue? That outsourcing/buy American argument can get tricky
- national culture: failure in Germany and South Korea, success in Japan. Same company.
- free markets unlock value. Think how happy all of those small Japanese retailers were to sell their stores to Wal-Mart. They can now re-invest or spend the money and Wal-Mart can bring efficiencies of scale for Japanese consumers. Of course those little stores that don't sell in time will be wiped out (Schumpeter)
- why has Japan had 10 years without growth despite massive gov't spending? Compare their "zombie" banks to our banks "toxic" assets.
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