Through my research, Walmart’s success in china mainly due to the takeover action of local (Chinese) supermarket called “Trust mart”. This takeover costs Walmart 1 billion dollars but the benefits in long-run will be definitely over that.

Initially in Chinese supermarket industry, Carrefour occupy the biggest market share, followed by Tesco , Trust mart, etc. It is very hard for the new producer to join the market since the market is more or less already saturated. The scarce land resources make it is the company like Walmart to construct a new mall in downtown of megacity like GUANGZHOU.

However, Walmart take advantage of its own huge capital flow and takeover the second largest supermarket franchise in China directly, combing with a few Walmart opened before this takeover, it becomes the largest supermarket franchise in China and take numerous advantages. For instance, the market in central GUANGZHOU named “Trust mart” before now named Walmart.

The next step is easy for Walmart, just do what they do before in Western country. Economics of scale makes the price lower and indeed much more competitive, the mature management team organizes all stuff in order. The variable cost for Walmart is lowest so its price is most competitive in the market. For the huge sunk cost, as long as Walmart take advantage of variable cost, as the time goes, it must result in multiple returns in near future.

Reference：

Zhang, Yuanfeng. “Wal-Mart’s success in China.”yuanfeng zhang’s blog. N.p., 8 Oct 2013. Web. 16 Nov. 2013.