The multibillionaire groceries and departmental items providing company, Wal-Mart (NYSE:WMT), appears to have reached its maximum market volume in the United States. However, according to analysts, the company still has a huge market potential outside of the United States, which means the company should now expand internationally and target different market regions in the World.
This is why the company has expanded to different markets around the World including Japan, Mexico and China. The company’s market in China appears to be crumbling and has failed to make any major breakthrough this year. Problems like food scandals, falling sales, and accounting infractions have become a common problem for the company’s China branches. The problems have appeared really fast and are major in nature.
The problems are of serious nature since the company has now been operating in China for 18 years and has only managed to contribute 2% revenue to the overall revenue of Wal-Mart (NYSE:WMT),.
According to the latest analysis reports the company has some major cracks in its retail businesses and the problems developing for years, have been greatly neglected by the management. The company’s words ran hollow after it declared China market to be the best and most potential of all and subsequently openly admitting its worst performance in China. Therefore the prevailing question now is whether the investment in China is a good idea or a bad one?
The company appears to have problems in developing understanding of the Chinese people for the purposes of planning its strategies and objectives. The company provides extremely low priced retail chains across the World including China, which anyhow does not work very well in China. The Chinese consumers claim that the company sells cheap products with a perception that it has low quality.
The company also appears to have some compliance issues as well and has been under fire from health and safety regulatory authorities several times. Such issues affected the company’s growth several times. The company once passed on non-organic food items labeling them as organic. While in 2014 the five spice donkey meat allegedly contained the fox DNA raising a whole lot of questions on the company. The company has badly broken the consumers’ trust and now a large number of consumers in China think that the company follows a different set of standards for China.
The company also reported to have compliance issues in accounting when it placed inventories with wrongly labeled prices. The faulty accounting compliance occurred to mark higher prices, to inflate profits.
Presently Wal-Mart (NYSE:WMT), China is in the process of reviving its previous status of efficiency and precise effectiveness with profit making objectives. The company has closed almost 20 to 30 different stores across the country and announced to cut jobs in merchandise and marketing by a number of 250. The company has also posted the executive managerial officers, in order to contain the situation.
The company currently operates with more than 400 chains in China alone with the third largest market share in the country, while its sales are crumbling. According to analysts, Wal-Mart (NYSE:WMT), should adapt with a few latest technological local companies and should hire their services in order to appear keen. China has a huge scope of ecommerce which can be effectively utilized.
