Wal-Mart Inc. is the multi-billionaire departmental and groceries store, whose market value has recently reached to maximum in U.S. But analysts believe that the company possess enormous market potential overseas. That means the company should target different markets and should take risks in expanding globally.
Because of its increasing market volume, Wal-Mart (NYSE:WMT) market has been extended to different countries like Mexico, Japan and China. However, there has been a disappointment this year in china’s market as the company was not able to make any difference. Chinese branches have faced issues like decreasing sales, food scandals and accounting infraction.
The problems with China branches are severe as Wal-Mart has been operating in the county for about 18 years now and has only succeeded in contributing 2% of the company’s overall revenue.
According to the most recent analysis reports, for many years Wal-Mart has some major flaws in order to rise in its retail businesses. However, the problems have been ignored by the management. The company claims China to be one of the best and potential markets and have subsequently accepted its bad performance in the Asian land. Now the question arises, if it is a good idea to invest in China or not?
The company has failed to understand the psyche of Chinese people for the purpose of setting objectives and making strategies. Wal-Mart stores sell retail products at extremely low price in China, which does not work out for the company at all. Whereas, due to this reason, the Chinese customers have the perception that Wal-Mart sells cheap products, therefore it compromises to the products quality.
The company also faced some compliance issues and has been targeted by health and safety regulatory authority numerous times, which also affected company’s growth process in China. In the past, company has been charged on labeling of non–organic food as being organic. In 2014, the “five spice” donkey meat apparently was found to contain fox DNA. Wal-Mart reputation has been badly hurt in China and it appears to have lost consumer trust who now believes that the company use different standard and policies for China.
Company has also faced compliance issues in accounting. According to Bloomberg, Wal-Mart had accepted that it has placed inventories with incorrect prices on the label. This faulty practice occurred to charge higher prices, and therefor to expand profits.
Currently, Wal-Mart China is in the progression of re-gain its original status of effectiveness and efficiency with revenue making objectives. The company had already shut down almost 20 to 30 stores in China and has cut 250 jobs in marketing and merchandise departments.
Wal-Mart (NYSE:WMT) stock quote is up by 0.06%, was traded at $87.33 at market close on Friday.