Wal-Mart is undoubtedly the largest retain store in the world. This American firm has been keen on increasing its market share as a way of expanding its financial strength. Originally operating exclusively in the United States, this firm has grown to cover various other markets in Europe, Asia, South American states among other regions. The firm is still planning further expansion to other world regions.
According to Jie (2013), Wal-Mart has massively benefited from the increasing globalization that is taking place in the world. This scholar says that one of the sure ways through which a firm can manage the competitive market is to expand to various world markets. As other retail firms penetrate the American market, Wal-Mart has developed an ambitious program that would ensure that it has global market coverage.
Although this comes with numerous benefits to this firm, there are some challenges that this firm has to deal with. The management must respond to these challenges in an appropriate manner to ensure that they do not have negative impact on this firm in its expansion program. This study will review literatures about this topic in order to determine some of the global expansion challenges that Wal-Mart should be ready to manage.
According to Paula (2013), culture is one of the most challenging environmental factors to deal with in an organization. This scholar says that culture can be looked at in two fronts. The first front when analyzing culture is the organizational culture. Every organization has its own unique culture that it uses to operate in the market. Wal-Mart is one of the firms that have developed strong organizational culture within the markets it operates.
Gabriel (2011) says that it is very important that a firm develop a specific organizational culture that would guide the behavior of its employees when working on behalf of the firm. This scholar says that every individual has some unique characteristics that make him or her different from other members. This means that a large firm like Wal-Mart with thousands of employees would need to find a way of making these employees have similar approach that is desired within the firm.
There must be a conventional way of behavior that should be common among all the employees as a strategy to win customers. With the current competitive market, it is important that this firm develop an organizational culture that will help guide its employees in the new regions it is entering.
The problem with the organizational culture comes in when the firm tries to use the normal organizational culture it has been used to in other regions, especially in the United States (Koen, Erguncu & Gokhan, 2013). One fact that this management must realize is that the workforce at its parent country in the United States is very different from that in other countries that it is expanding to, especially in the developing countries.
For instance, the organizational culture common in Wal-Mart’s American stores where men and women are treated as equals may not work well in Saudi Arabia. This is because in Saudi Arabia, men are still considered as being superior to women. Trying to inculcate an organizational culture that challenges this notion may be challenging because individuals in this country have internalized this kind of reasoning.
Given that Wal-Mart plans to expand its market coverage globally, it would be very challenging to learn how to develop new organizational culture in every country it enters. It may even force this firm to sacrifice some of the values it has been holding so dear for years in other regions of the world.
The second front of looking at culture is at the regional level. Wal-Mart is planning to make major entry into various regions around the world. According to Mun and Yazdanifard (2012), media has been very instrumental in influencing the world culture in a convergent manner. This scholar says that media has been the main instrument of enhancing globalization. However, one fact is that this globalization has not managed to create a universal culture in the world.
Although some of the cultural practices that were considered extreme such as human sacrifice have been eliminated, the management of Wal-Mart must realize that there is some uniqueness of culture in different regions. A good example of culture clash that this firm should be able to deal with is on the use of color. In its brand image, one color that comes out strongly is the yellow color. This brand- with the yellow color- is the identity of this firm in the market.
However, this may pose some problems in its expansion efforts. The firm is eying the South African market (Wagner, & Mazzon, 2013). However, it will find it difficult promoting its brand using the yellow color because the Zulu people- who make the highest percentage of the black South Africans in this country- associate the color with evil spirit.
They consider yellow as a color that carries with it bad omen. This superstitious belief has forced many firms in this country to handle this color with a lot of care. This cultural practice will be standing on the path of development of the Wal-Mart brand in this country.
Similar other cases can be identified in various countries this firm is planning to enter. This demonstrates the extent to which this firm may be forced to compromise some of its cherished values in order to achieve success in these new regions.
According to Mühlbacher (2009), issues with intellectual property have affected various business organizations around the world. In the developed countries such as the United States and United Kingdom, the law is very clear on the protection of intellectual right. In these markets, Wal-Mart can be assured that its intellectual rights cannot be infringed upon because the law is very clear on the penalties that this would carry. However, this is not the case in other markets around the world.
Gregory (2010) says that some countries lack clear policies guarding the intellectual property. This makes it easy for on party to steal intellectual rights of another firm and get away with it. Other countries have laws meant to protect intellectual right, but the law enforcement officers are not doing their work to enforce the law. Some are easily compromised, especially when they feel that they can be given some form of benefits.
This unfortunate situation has seen many firms suffer because they do not stand to enjoy the benefits of their creativity. Once they come up with a creative idea that should be of benefit to them, competing firms would steal the idea soon after its introduction to the market. Wal-Mart must find as a way of dealing with this in its global expansion program.
Some markets will pose this challenge, and unless the management comes with measures to curb this vice, it may suffer a lot instead of benefiting in this new market.
Human resource issues
According to Roberts (2012), issues with human resource may not affect Wal-Mart when it makes the decision to go global, especially when targeting the developing economies. This firm is currently operating in developed economies where human resource is very expensive. This is not the case in the developing economies. However, this firm would be forced to find a way of boosting the skills of the people it shall employ to work in its outlets.
Another issue about human resource that this firm will have to deal with is attitude. According to Turner and Hodges (2010), most of the foreign retail stores operating in Afghanistan have complained of high levels of pilferage of stock. This scholar says that most of the citizens of this country have negative perception about the west. When employed in firms that are associated with the west, they would easily steal items either before they reach the shelves or at the shelves.
This attitude has persisted despite the improving relations between this government and the United States government. This means that if Wal-Mart is planning to expand to this or other countries with similar attitude, it must find a way of dealing with negative attitude of the employees.
Other relevant issues
One of the most attractive markets that Wal-Mart has shown interest in is the African and Asian markets. According to Fox (2011), Africa has been considered as an untapped market with huge potential. For this reason, Wal-Mart has been trying to find its way into this market. One challenge that this firm should be ready to deal with in this market is insecurity and political instability. Most of the African major cities have been considered as generally insecure because of inadequate policing.
It is common for an armed robber to terrorize a supermarket, especially if it is located in the suburbs of the city. Such incidents would always bring massive losses to the firm. A number of these countries are also undergoing some form of revolution in their leadership. Libya, Tunisia, and Egypt ousted their military leaders, and the countries are yet to achieve political stability. This means that operating in such markets will put the firm in a delicate situation.
The rioters can easily break into the supermarket and steal every single item on stock (Experian Marketing Services, 2012). During such times, most of the people employed in various institutions are also forced to remain at home because of the insecurity. This means that the purchasing power will be reduced considerably. With such stagnating economies, it becomes very difficult to move ahead because the rate of sales will be very low.
According to Ernst & Young (2012), in its global expansion program, Wal-Mart must realize that the infrastructural development that is experienced in the United States and other developed countries are common in every part of the world. Klohs (2012) says that Wal-Mart’s expansion plan has been targeting developed economies around the world. However, the new global expansion program would mean that this firm would be forced to go beyond the developed countries that it has been patronizing.
Some of the emerging economies in Africa and the rest of the world do not have developed infrastructure. Most of their roads are dilapidated, and some rail systems are completely collapsed. This is the kind of situation in east African countries. The management must have a way of operating successfully in the market despite these poor means of transport.
Finally, the management of Wal-Mart will be forced to develop a system that would be able overcome the bureaucracy and corruption that is rife in some of the new markets it plan to enter. Transparency International has indicated that some of the most corrupt governments are found in the developing economies, which is the primary focus of Wal-Mart in its current expansion program.
For instance, Nigeria has attracted many investors due to its high population and its rich oil reserves. Another country that Wal-Mart would be interested in is Venezuela. These countries do not have well-established retail outlets and the presence of Wal-Mart in them would be a benefit to this firm (Dewhurst, Harris, Heywood & Aquila, 2012). However, these governments have a lot of bureaucracy, especially when dealing with foreign investors.
Wal-Mart would have to visit numerous offices in order to get permit allowing it to operate in Nigeria. The officers in charge are always none committed to their work. An application sent to their offices would take weeks or even months to be processed while the processing can be done in hours. In some extreme cases, one would be informed that the application file has gone missing and the process must begin anew. This is always done on purpose.
What these officers always want is to be bribed in order to do their work. Those who are not ready to offer the bribe get to suffer. These countries also have numerous regulatory agencies that would come to inspect the normal operations of the firm. According to Accenture (2009), the inspection they make is not always meant to bring sanity into business fraternity. The inspections are meant to increase corruption avenues.
During their inspection, the lawbreakers and law-abiding firms are equal before them. The only difference to them is the ability to pay the bribe. In such countries, it is not rare to find a law-abiding businessperson sent to jail for false crimes, while the criminals are making huge profits irregularly. These are some of the challenges that this firm will be forced to face with diligence in order to achieve the desired results.
It is a fact that Wal-Mart’s global expansion program is very ambitious and can help it increase its market share. However, the management of this firm must appreciate the fact that this comes at a cost. A number of challenges would come along the way, and the ability of this firm to manage them diligently would always dictate its success or failure in that particular market.
Each region around the world has some unique characteristics that would bring unique challenges to this firm during its operations. The management of Wal-Mart should identify these challenges before making an entry and determine if they are manageable. It is upon the analysis that it can make the decision to enter these markets.
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