Established in 1969, Wal-Mart is one of the leading American retailers globally. This American retail chain operates several hypermarkets and stores globally, with its headquarters in Arkansas. Wal-Mart is one of the leading entities offering employment opportunities internationally and in the US. Scott and Davis (2007) clarified that Wal-Mart was the biggest United States employee in 2005, with 1.7 million employees. Walmart had the highest number of employees in all the US sectors. By 1970, Wal-Mart had accumulated a considerable profit margin that facilitated its internationalization process. The company has been successful due to effective management and implementing realistic and appropriate strategies. Wal-Mart demonstrates these strategies in its vision, mission, culture, and philosophy. Wal-Mart differentiates from its competitors by positioning itself as a low-cost retailer. While the Wal-Mart has been largely successful, it continues to experience operational and resource-based challenges and labor-related issues.
Identification of Issues
Wal-Mart is one of the multinational-retailers dealing with internationalization-related challenges. Internationalization continues to affect Wal-Mart at different levels and hence the way it conducts its business (Mujtaba & Maxwell, 2007). Global business expansion comes with several challenges related to the external business environment (Mujtaba & Maxwell, 2007). Wal-Mart faces considerable challenges related to environmental issues, such as resources and operations. Organizational environment entails all forces that affect the operations and working of an organization. Organizational forces mostly comprise external environmental challenges, such as governmental regulations, competition, suppliers, and policies. Therefore, Wal-Mart faces challenges related to stiff competition and poor environmental relations from the perspective of an organizational environment.
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Wal-Mart’s operational challenges are related to international expansion. Wal-Mart got into the South Korean market in the 1990s. After more than ten years of operation, the company left the South Korean market in 2005. The company faced considerable setbacks in operations and failed to understand the Korean customers due to their preferences compared to American customers (Kim, 2008). In particular, Wal-Mart faced critical issues in executing its main strategies in South Korea. For instance, the South Korean market has vital constrictions, such as local protectionism and supply chain disintegration. As such, Wal-Mart faced issues in food distribution and challenges in market entry. Wal-Mart faced critical issues due to the existence of several distributions of layers in the South Korean market.
Moreover, the Korean retailers were not willing to embrace an open data exchange approach. The South Korean vendors held a considerable market in the South Korean market, and had a chance to supply to other competitors. This implies that Wal-Mart could not have a competitive edge in buyer power. Moreover, Wal-Mart lacked power or failed to control the procurement and Korean supply chain. Successful business operations in foreign markets require a company to understand the unique conditions. For this reason, Wal-Mart failed to establish an effective national supply chain in South Korea (Kim, 2008). Therefore, Wal-Mart failed to establish its default business approach in the South Korean setting.
In addition, Wal-Mart has considerable issues emanating from management, such as employee relations and working conditions. For instance, Wal-Mart stores in some countries do not prioritize employees’ values. These challenges may emanate from poor hiring and selection policies. In particular, a company can hire employees that do not match the needs and expectations of an organization. According to Mujtaba and Maxwell (2007), Wal-Mart depends exclusively on employees to meet customers’ expectation. This means that employees must have the proper skills to meet customers’ expectations. The failure of employees to match the expectations of customers is a challenge in business internalization (Mujtaba & Maxwell, 2007). Therefore, the failure of Wal-Mart to hire and retain employees with the needed values and skills to meet customers’ needs continues to be a challenge.
Wal-Mart treats its global employees differently. According to Gereffi and Christian (2009), Wal-Mart’s behavior to global employees had been subject to labor controversy. In particular, Wal-Mart’s global suppliers have attracted intense scrutiny from labor unions and non-governmental organizations. Evidence shows that Wal-Mart has been developing labor and business strategies depending on culture, market, and institutions in host countries or countries of operations. According to economic evidence, the employment practices of Wal-Mart vary depending on host countries.
Moreover, Wal-Mart works indirectly with broader international supply chain workforce. The workforce in the global supply chain can be considered as Wal-Mart’s indirect employees. For instance, the Dateline NBC television documentary exposed the deplorable working conditions of Wal-Mart’s global suppliers (Gereffi & Christian, 2009). In particular, there have issues related to child labor in Bangladesh. Moreover, there have been claims that Wal-Mart should view child labor differently from the United States. The Kathie Lee Gifford scandal also exposed Wal-Mart’s issues related to child labor (Gereffi & Christian, 2009). However, Wal-Mart tends to blame its suppliers on child-labor issues. However, there have been other issues labor issues apart from child labor. There have been other violations related to age, class, and gender discrimination in the global supply chain.
Analysis and Evaluation
Wal-Mart’s issues can be best described by the resource dependence, contingency, and strategic choice theory theories.
Resource Dependence Theory
Scott and Davis (2015) clarified that resource dependence theory comprises of the national behavior and politics within and outside an organization in terms of management decisions. Companies can react differently to power and dominance in the market in order to stay competitive. Wal-Mart, should employ resource dependence theory to establish strategic collaborations and improve its relationship with employees and customers. Firstly, resource dependence borrows from three main ideas to explain how organizations should manage their interactions with other companies. Secondly, organizations should borrow from several strategies to improve their autonomy and seek their business’ interests (Scott & Davis, 2015). Moreover, power is not just for rationality or efficiency: it is important to establish the external and internal factors that influence organizational power. The focus should on power and the strategies used to pursue their business interests.
Wal-Mart failed to make key strategic alliances in the South Korean market. This failure resulted in the exit of Walmart from the South Korean market after ten years of operations. Resource dependence theory identifies a company’s interdependence as one of the main motivations for alliance formation. Based on the strategic interdependence perspective, firms should form alliances based on the greatest interdependence. For example, Wal-Mart experienced considerable issues in its supply chain in the South Korean market. Wal-Mart could have made strategic coalitions with local companies to enhance its supply chain. Specifically, interdependent firms are more likely to share each other’s resources to lower challenges or resource uncertainty (Hillman et al., 2009). This implies that while Wal-Mart is globally successful, it needs to make coalitions and ties with local companies when operating in new markets. Social networks, for instance, would result in sustainability in the supply chain. In general, resource dependence helps a company to make strategic coalitions, which are critical in the sustaining business operations.
Contingency Theory
On the other hand, the contingency theory explains that there is appropriate method to organize and manage a company. Scott and Davis (2015) explained that a company should utilize internal and external environment. This implies that Wal-Mart can implement use different strategies to be successful in foreign markets. Therefore, Wal-Mart needs to utilize both the internal and external resources and environment to realize its objectives. Wal-Mart needs to understand that strategic decisions depend on contingent or environmental conditions. In the United States market, Wal-Mart’s internal features meet the demands of the market. For this reason, Wal-Mart has been successful in the US market. However, it must adapt its internal features when operating in a foreign market. In other words, success in the market depends on the best adaptation strategies. An organization has to clarify internal features and its market demands. This implies that adaptation depends on the understanding internal features and environmental demands.
According to contingency theory, different environments place unique requirements on organizations (Scott and Davis, 2015). For instance, Wal-Mart must respond to different needs in foreign markets. Wal-Mart encounters uncertainty, opportunities, and constraints in foreign markets. The US market, for instance, is a stable market to Wal-Mart. This implies that Wal-Mart has to adjust to instabilities in foreign market. Wal-Mart operates in different environments, characterized by low and high uncertainty. While Wal-Mart might have been successful in some aspects, it experienced considerable challenges in supply chain and unique customer needs. This implies that different subunits in Wal-Mart encounter unique demands in the global market. For instance, the global supply chain faces uncertainties due to policies and changes in the legal framework. A company has to cope with several challenges originating from different specialized units (Scott and Davis, 2015). For instance, supply chain management in some countries is characterized by formalized and centralized channels. Moreover, the decision-making process can also affect Wal-Mart’s operations. Decision-making in the US context is highly decentralized while centralized in some regions, such as China. Wal-Mart operates in varied business environments, and therefore, it needs to have a differentiated internal structure. In addition, a more differentiated internal structure makes it difficult for a company to coordinate its activities in the global scale. Therefore, Wal-Mart needs more resources in order to coordinate several activities and to solve challenges related to internationalization.
Strategic Choice Theory
The strategic choice theory explains that organizations must adapt to the context to realize different opportunities. The failure to adjust to different contexts would result in lost opportunities, increased costs of business, and business losses. Internal factors that include employee training and employee skills must align with customer needs (Child, 1997). For instance, Wal-Mart needs to train employees to meet customers’ needs. Moreover, the company needs to adhere to labor laws by avoiding child labor in host countries. Power holders within Wal-Mart must decide on the best course of action. Strategic choice looks beyond the environment of operation and focuses performance against economic challenges. This implies that an organization should restructure its internal and external processes. Child (1997) explains that strategic choice allows an organization to make a decision through pro-action and re-action processes. The term strategic should exemplify matters of importance to an organization. While Wal-Mart is increasing its scale and size, it must focus on relationships between environment and agency. For instance, Wal-Mart may not preserve its autonomy in some regions of operation due to policies. However, it must create relationships that would enable it to accomplish strategic objectives (Child, 1997). Several internal organizational factors influence strategic choice. Some of these factors include organizational culture and the qualification of employees. Wal-Mart must have a pool of qualified employees in order to enhance its competitive advantage globally. In general, strategic choice allows will allow Wal-Mart to focus on matters of importance that would enable the company to stay competitive in new markets.
Personal Perspectives and Solutions
Wal-Mart should form strategic alliances and invest in building organizational culture to solve the issues discussed above. These solutions would solve Wal-Mart’s weakest positions in the international business sector. In particular, building alliances would allow Wal-Mart to maintain a competitive advantage in foreign markets. Wal-Mart’s biggest challenge in the South Korean market was the inability to collaborate with local vendors.
Formation of Strategic Alliances
From the perspective of resource dependency theory, a strategic alliance would be central to Wal-Mart’s sustainability in foreign markets. In the international market, a company needs bargaining power and effective use of interdependencies (Kogut, 2000). In other words, a bargaining power and parity in interdependencies would result in a sustainable alliance. The first step Wal-Mart needs to undertake is to identify strategic partners. According to the social network theory, a firm can form sustainable alliances by recognizing strategic partners. Secondly, the process of selecting a strategic partner can be long. Wal-Mart needs to undertake research to identify the most visible partners. The most important factor during this process is the evaluation of internal processes and outcomes associated with particular goals and interests. In this way, Wal-Mart would be able to recognize its gaps and strengths. Consequently, Wal-Mart will select a partner that will complement its weaknesses. Strategic alliances are similar to symbiotic relationships. Partners have to give and take on equal measure. According to Kogut (2000), network theory and strategic alliances are central to the success of business ventures. Alliances help to lessen social status and any possible implications that might originate from unstable alliances. Wal-Mart needs to establish strategic alliances in order to stay competitive in foreign markets. Like in the case of South Korea, Wal-Mart could have been successful if it entered into strategic alliance with local vendors. There is power in the human coalition. For example, the Aramean coalition managed to pass Isreal’s border because of the power of coalitions. According to Merida (2015), The phrase, “horses and chariots” emphasizes the human power of this coalition” (Merida, 2015, p. 158). 1 Kings 20:1-1 reads, “Now Ben-Hadad King of Aram mustered his entire army. Accompanied by thirty-tow kings with their horses and chariots, he went up and besieged Samaria, and attacked it” ( New International Version , 1978/2000). This Scripture illustrates the power of a coalition. Therefore, Wal-Mart should focus on forming coalitions that strengthen its business strategies.
Analyzing and Restructuring Wal-Mart’s Strategy
While making strategic alliances is vital, Wal-Mart should not overlook contingency factors. Most literature on the supply chain management tends to focus on chain alliances, ignoring contingency components. This means that Wal-Mart should focus contingency factors such as industry growth, market uncertainty, and industry concentration (Mujtaba & Maxwell, 2007). Firstly, Wal-Mart should establish the rate of industry growth before engaging in strategic partnerships. Highly competitive industries necessitate the need for strategic alliances. On the other hand, the slowness in industry growth eliminates the need for alliances. Secondly, industry concentration helps to indicate the need for strategic partners. For instance, before joining a market, Wal-Mart needs to establish the number of competitors as well the performance of firms in that industry. Wal-Mart has been successful because of the use of cost-leadership approach and the economies of scale. However, bargaining power is not enough in foreign markets. Therefore, Wal-Mart must establish the rate of firm concentration or competition to determine the needed alliances. Thirdly, Wal-Mart must consider general uncertainty. For instance, Hoffmann (2007) found out that business managers must learn to adjust their business strategies based on market contingencies, and at the same time form weak and strong ties until the market becomes certain. Similarly, Wal-Mart must form both weak and strong alliances after joining a new market. The case of South Korea illustrates that Wal-Mart could have formed alliances as the market instabilities grew. In general, Wal-Mart should be willing to join weak and strong alliances as a business sustainability strategy.
Investing in Organizational Culture
Organizational culture helps to describe company’s values, norms, values, social networks, and power. Wal-Mart needs to have an international culture and speak with one voice. Moreover, a culture will prevent employees from listening to the wrong voice (Merida, 2015). A culture prevents employees from making decisions that meet immediate desires. For instance, Ben-Hadad was a greedy King, who focused on his interests. His demands were “more extensive, more intrusive, and more immediate” (Merida, 2015). Wal-Mart continues to face challenges related to child labor and employee discrimination. Therefore, there is a need to establish a strong global culture to guide the behavior of Wal-Mart’s global employees. Moreover, Wal-Mart’s culture must incorporate the unique values of its employees. In general, cultural training will help the company to deal with labor-related issues ethically.
Conclusion
Wal-Mart has been successful but also experienced challenges during its internationalization process. This paper has used three theories: resource dependence, contingency, and strategic choice to explain the situation facing this global retailer. Wal-Mart should focus on strategic alliances, contingencies, and invest in organizational culture. It should prioritize strategic alliances in order to use resources efficiently. Contingency factors will help the company to evaluate the global market and make informed decisions in regards to strategic alliances. Finally, a globalized organizational culture will enable Wal-Mart to solve employment-related challenges.
References
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