Summary
Analysis
OK, for the record, I have to admit that in my last post about Walmart’s acquisition efforts in China, I said that "You’ve got to give Walmart some credit for making such a big move in China". Now that I have had a few weeks to think about it, this move does not seem like such a good idea.
Think of it this way: Your current China operations are having trouble. Store sales per square meter are lower than your competitors, you haven’t quite got the right approach for local consumer tastes, and your famous logistics system is not really up and running yet in China…Is this the right time to add on a large acquisition which will more than double your number of stores???
Maybe you could justify this if you were acquiring Makro China stores, for example, as Makro is basically a Euro-clone of Walmart. But in this case, Walmart is acquiring Trustmart, a Taiwanese-owned and managed chain of hypermarkets with a very different culture and style than Walmart’s. Where Walmart is conservative, slow, and centrally-controlled, Trustmart is wild, fast, and decentralized in terms of decision making (by the way, they are also more successful in China than Walmart). Putting these two unlikely partners together is going to take a lot of management time and attention. Now go back to the beginning of this paragraph and decide for yourself whether this is the right time for this move.
Despite the announcements that claim the stores will remain separate, it seems more likely that they will be merged in terms of operations. My guess is that this announcement is just something to keep the 68,000+ staff calm during the extended buy out process.
On the subject of staffing, Walmart recently has said goodbye to their 62-year-old outgoing chief executive of Wal-Mart China, Joe Hatfield, and brought in a Hong Kong native, Ed Y. Chan, to replace him. Mr. Chan, who will be president and CEO of Wal-Mart China, comes to the company from the Dairy Farm Group, where he was most recently regional director of North Asia. From what I have been able to learn about him, his speciality/background is in acquisitions as opposed to actually running retail stores. So I guess, from an optimistic point of view, he is well-positioned to handle the Trustmart acquisition process. On the pessimistic side, I have to wonder who is ever going to get Walmart’s real business strategy on the right track in China? The chain-smoking good ol’ boy, Joe, could never seem to quite get his finger on the pulse of the Chinese consumer after more than 10 years in China. You have to assume that Chinese-speaking Mr. Chan will have a better chance at figuring this out, but on the other hand, Hong Kong Chinese are notorious for stepping on the toes of and not listening to the mainland locals…
