Insightful analysis and commentary for the US and global equity investor
Contributors: Douglas McIntyre Jon C. Ogg

Previous Posts

Friday, October 13, 2006

Home Depot Takes The Slow Boat To China

Stocks: (GM)(WMT)(HD)

Home Depot want to join Wal-Mart, GM, Ford and legions of other US companies that want to tap the massive Chinese market.

To accomplish its goal of entering the market in the big Asian country, Home Depot is planning to take an equity stake in Chinese retailer HomeWay, a sort of HD wanabee with 10 stores.

Home Depot may want to be careful about having its prayers answered. While other US companies have had some success in China, it has not been without reversals.

Wal-Mart has a very large presence in China, but the government labor union has moved in on the big retailer, and the future of labor costs in Wal-Mart stores is in question, leading to worries about its margins there.

As for the large US auto companies, they have set up joint venture to sell cars to the Chinese, only to find their joint venture partners starting their own competing car brands with the production and design lessons they have learned in the JVs.

Because the government of China has the final say in all business practices and operations of large companies in China, the playing field is hardly level. Home Depot may want to learn from Wal-Mart and GM's hard lessons.

China may be a big market, but it is hardly a perfect one.

Powered by Blogger