Globalization and technology have forced organizations to change the manner in which they conduct business. Wal-Mart, the world leading retailer, has made a series of moves in the local and international space over the years, all of which are indicators of the impacts of globalization and technology on the corporation. The company became a corporation in 1969, and in 1970, it became a public corporation, although the family holds most of the company's shares. Currently, Wal-Mart operates four divisions including Sam’s clubs, Wal-Mart stores, international sales and other businesses (Gereffi & Christian, 2009). The company has managed to make four times the same revenue as its closest competitor, Carrefour. Wal-Mart’s SWOT analysis indicates that the company mainly benefits from globalization and technology. The company’s strengths include active inventory, docking, supply chain and logistics systems. The company also prides itself with the world’s most extensive satellite communication system, service innovation and technology, and effective penetration strategies. Some of the opportunities that the company has exploited include globalization, and E-business. Nonetheless, Wal-Mart’s overreliance on an efficient supply chain and poor public image due to sweatshop tendencies limit the corporation’s growth into the global market, and therefore, the organization incorporates corporate social responsibilities practices.
Wal-Mart has continually exploited the opportunities presented by globalization and technology to become the multinational corporation that it has become today. The company which only had one store in 1962, increased its number of stores to 482 in 1982, and by 2003, it had grown to 3211 stores in the United States alone. After its massive growth in the United States, Wal-Mart needed more opportunities for growth, and globalization presented the perfect arena. Additionally, while the United States forms a large customer base, it only harbors 4% of the world’s population. Also, the company’s discount retailing was a significant attraction for the global community. Wal-Mart’s first move in the global community was in Mexico, with the opening of Sam’s club in 1991. In 1997, the company made a second move in the country by acquiring interests in Cifra, a leading retailer at the time. The next step was in Canada where the company purchased 122 stores in 1994, and by 2013, Wal-Mart had a total of 379 retail units in the country. The third expansion was in China in 1996 with the opening of stores in Shenzhen. In 2007, they purchased 35% interest rates in Trust-Mart. Other extensions include in countries like the United Kingdom, Japan, Chile, India, and South Africa. Notably, the corporation has used different entry strategies depending on various factors and in some countries, more than one approach. For example, in Brazil, the corporation used both Joint ventures and acquisitions. Some of the strategies include acquisitions, new stores, joint ventures, and Greenfield operations (Gerreffi & Christian, 2009).
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Wal-Mart was exceptionally successful in the United States for supplying the consumer with branded goods at low prices, but technology and globalization form a considerable part of the company’s success story. The vision guides the company which is itself under pressure to change its business model which relies on dominance over its vendors and meager prices that the Low Prices offered by the company serve a low-wage economy. According to Lee Scott, “Low Prices give people a raise every time they shop with us.” With single-parent families on the rise and women being the primary shoppers in a patriarchal society, the vision works in their favor considering that most women earn considerably low wages. Also, besides the fact that a huge population is of low-wage workers, the consumer culture, and overburdened women made Wal-Mart a more attractive retailer for low-income earners (Gereffi & Christian, 2009). Emphasis on low prices is a clear indication of the corporation’s business model and how it has impacted the society’s reception towards its products and services. Wal-Mart slogan is “Everyday low Prices,” and the low prices are further reinstated in the company’s mission statement: “offer the lowest price. Cut costs to the bone, and keep cutting so you can offer the lowest price.” However, the overemphasis on low prices and quality is not without consequence for the suppliers who are under extreme pressure to continue cutting costs and keep improving quality at their expense.
First, the company which relies heavily on an adequate supply chain ensures that all its vendors hook-up electronically with stores to reduce the processing cost for the corporation and the vendors at the same time. The company also largely depends on infrastructure, and it has several distribution centers with the capacity to supply between 150 and 200 stores daily, ensuring that each of these stores is within a day of reach. The distribution centers operate 24/7 and are fully equipped with conveyor-belts and cross-decking technology that receives goods while filling out orders (Gerreffi & Christian, 2009). Wal-Mart’s corporation also uses its massive communication satellite to facilitate the consolidation of orders between their stores and distribution centers. The communication satellite also facilitates the management of its stores remotely by collecting, analyzing and transmitting data electronically to display the performance of each store. Notably, the multi-domestic strategy in the United States along with their transnational approach was extremely effective, but the transnational strategy is not as successful in the international community. In addition to the failure of the transnational strategy to work in other countries, the corporation continues to face other challenges. Some of the weaknesses include a poor public image, labor unions and strict labor laws, and difficulties adopting in the international community. Threats include terrorism, Anti-dumping laws, Wars, adverse competition especially in Europe and zoning, and trade regulations.
The latest events in Wal-marts activities in China are an indication of the challenges presented by both technology and globalization. China has over 1.3 billion people who offer a perfect opportunity for expansion for most corporations. However, since opening its first store in the country since 1996, the company has continued to struggle to understand the Chinese consumer. Like many other western entrants in China, there is a constant misunderstanding of the Chinese political, economic and cultural environment. Salomon (2016) asserts that the Chinese people vary significantly in culture in each city and province, and therefore, it has become challenging to customize products and services to suit this cultural diversity in the 25 provinces and 117 cities that Wal-Mart has its presence. Additionally, most entrants into the market experience difficulties with the authorities since the country has an intricate web of political organizations both locally and internationally. Worse still, despite the numerous technological advancements in China, the country’s infrastructure still lags behind as compared to that in the West. For a company like Wal-Mart that heavily relies on an adequate supply chain, this is a significant challenge. Besides China, Wal-Mart has a history of clashing with political authorities in other countries. For example, Wal-Mart was once fined by the Chinese government for product violations forcing the company to pay hefty fines and close its stores in the country temporarily (Salomon, 2016). However, the biggest challenge for the company is the failing economic infrastructure for a company which seeks to transfer its strength in supply chain effectiveness. Transport has, therefore, become a significant challenge for Wal-Mart due to the country’s rail infrastructure which is yet to meet the standards of the average developed country. As a result, Wal-Mart has failed to meet its profit expectations in spite of the lucrative nature of China.
Besides, the poor entry strategy in China, Wal-Mart is also suffering from a poor public image. Multinational corporations like Wal-Mart employ the most significant percentage of low-wage earners. As a result, many countries and labor unions have firmly rejected the entry of the multinational company in their country because of the low-wages. Like the case of many other corporations, these giant corporations avail commodities to the consumers at exceptionally low prices, but in essence, others in the supply chain pay for these hefty discounts. Although retailing is cost-effective, it is based on a cost-reduction model which leaves others at a significant disadvantage. The corporation is mostly recognized for its control over its suppliers, unethical labor practices, and its reliance on the neoliberal practices that became popular after World War II (Gerreffi & Christian, 2009). Both manufacturers and suppliers heavily rely on Wal-Mart’s marketing abilities, and therefore, they are forced to comply with its demands, making it a perfect representation of a sweatshop. Additionally, the company does not allow a single vendor to become responsible for over 4% of its supplies (Gerreffi & Christian, 2009).
Consequentially, the power of manufacturers and suppliers has been reduced significantly, and therefore, the company continues to impose its demands on them mercilessly. In the process, the wages of its employs continues to take a downward trend while the company continues to grow in revenue. According to Gereffi & Christian (2009), managers have to propose labor budgets that must be approved by the headquarters. For a while, there have been numerous efforts to unionize the workers at various Wal-Mart stores, but very little success has been achieved. While Unions try to show these workers that they have the power to improve their working conditions, it is challenging to unionize workers in the Wal-Mart stores that are scattered across the United States and the globe. As a result, political organizations are taking steps to dictate low wages and entry into new markets. These laws include zoning, minimum wages, location, store size and working conditions. Some of these countries have limited its business practices in their countries while others have managed to block their entrance.
In a fast-growing global economy, it is essential that corporations give back to the community instead of being purely driven by economic gains. Corporate Social Responsibility is an effective strategy that corporations are using to allow people to accept their business practices (Nwagbara, 2013). The needs of every stakeholder should be addressed sensitively to avoid conflicts and to allow for a smooth running of the business. Companies that want to practice CSR must also remain innovative to maintain their competitive edge.
Globalization and technology can become excellent tools for business success, but when assumptions are made and expectations are too high, expansions into foreign countries can fail to be as effective. For companies like Wal-Mart seeking to expand globally, it is important to remember that opportunities come with risks that each company must anticipate. Additionally, corporations must also be sure that the resources and the nature of the market in other countries will accommodate their strengths to avoid a mismatch that will lead to losses. The assumption that a business model in the domestic market will translate equally in other markets is wrong and often leads to frustration as was the case with Wal-Mart. Despite the success that Wal-Mart has made as a global corporation, the corporation has failed to become as profitable in the United States since 1996. Nonetheless, it is undeniable that both globalization and technology have fueled the success of the company as well as its continued growth. The company uses globalization to maintain its growth and expand into other markets while reducing the cost of business processes through technology. Code-dressing, conveyor belts and an active control and information system have made it easy for the company to manage its numerous stores across the globe. However, Wal-Mart must improve its public image through strategies such as CSR to maintain its competitive edge and to ensure its continued growth.
References
Gereffi, G., & Christian, M. (2009). The impacts of Wal-Mart: The rise and consequences of the world's dominant retailer. Annual Review of Sociology, 35.
Nwagbara, U., & Reid, P. (2013). Corporate Social Responsibility (CSR) and Management Trends: Changing Times and Changing Strategies. Economic Insights-Trends & Challenges, 65(2).
Salomon, R. (2016, February 21). Here's Why Walmart Stumbled on The Road to China. Fortune.
Sum, N. L. (2010). Wal-Martization and CSR-ization in developing countries. In Corporate Social Responsibility and Regulatory Governance (pp. 50-76). Palgrave Macmillan, London.
