Walmart Global Strategy – International Expansion Case Study

Introduction

In current contemporary business environments, companies are able to diversify their businesses to countries other than their country of incorporation; when operating across boundaries, leaders make decisions and develop strategies that are responsive to the needs of international and domestic customers (Kaushik and Cooper, 2000). The retail industry is one of the competitive segments in an economy; companies in the sector operating across the board need effective management style and unique marketing strategies.

Wal-mart is an international retail giant operating in more than 3,200 outlets in Europe, the United States, Asian countries and North American countries. To operate competitively across those countries with different cultures and consumer need, the company has effective global strategies. This paper analyzes Wal-marts global strategy.

Walmart History

Wal-mart stores have been in operation since 1962, with the first branch at Rogers, Ark, in United State of America. In a span of ten years, the company had diversified to major cities in United States and had 11 branches. According to Fortune 500, 2002 to 2010, the company is the leading retail outlet in the world. It specializes in different merchandise from electronic to toys.

The profits made by the company rose from $219.81 billion in 2002 to $405 billion in 2010 despite the world’s economic situation. The number of employees in the same period rose from 1.29 to 2.1 million. The company has over 8,747 retail units situated in 15 countries and operating under 55 different banners. The quality of managerial decisions has led to the company’s success. It adopts strategic management systems in all its operations.

Walmart Organizational Structure

Wal-mart understands that not all countries can be effectively tapped with a similar organizational structure; with this in mind, the company has some unique systems of structure that are relevant to the kind of market that the company is operating. The company’s structure established three main systems, Wal-Mart Stores, Sam’s Club and International Store; the difference of the stores is on the approach they take to sell the company’s products.

Under the structure of Wal-mart Stores, the company is further dividend into Discount Stores, Supercenters and Neighborhood Markets, the above structures offers different shopping atmosphere that assists the company divide the market on income lines; this is the main structure operated in the United States.

Sam’s Clubs are membership clubs where the company targets the well to do in the society; the stores are run on subscriptions and pay some returns to the members, they are common in Puerto Rico. International stores are divided further to retail stores, restaurants, discount stores, Sam’s Club and Supercenters; the main reason for the division is to ensure that the company can sell the products to different countries using the format that can suit the demands of the country.

When in the international scene, a company is affected by cultural believes, the countries living standards, the perception of the people among other factors; to be successful in different countries, there is need to develop the best organizational structure that reflects the needs of the particular market. Wal-mart management has recognized human resources needs and conducts an in-depth market analysis to know the best approach to the particular market (Kotter and Schlesinger, 2008).

One of the main benefits that the company gets from the structure is that it is able to learn a certain market and establish the best approach they can have for the particular market. When an area low-income people, the company ensures that the structure is responsive to the needs of that population in the form of costs and the packaging that they adopt.

Walmart Integrated Global Supply Chain Management

With the thousands of products that the company stores; it ensures that every store has the right quantity and quality of products using a computerized supply chain management system (Haag, Cummings, McCubbrey, Pinsonneault and Donovan, 2006). One of such strategic managed areas is supply chain management.

The company have 40 Regional Distribution Centers, which each covers an area of over one million square feet’s, inside the distribution centers, there are five conveyer belts that move over 9,000 merchandise, they operate 24 hours, seven days a weeks (Wal-Mart Corporate Website, 2011). The supply chain management operated by the firm is among the largest in the world.

Efficiency is crucial in ensuring that the company retains its leading position. In a single shop, the company operates eleven sections for the purposes of managing supplies. Section managers with a full team of procurement and supplies operate each section. The division ensures that the same manager manages similar goods because their trend in demand is likely to be the same.

For example, all Christmas merchandise are under one micro management and house hold goods under another. Demand for these departments varies with seasons. Procurement manager in every department is supposed to manage the stocks kept and ensure it satisfies its customer’s expectations. When a certain order need to be made, he liaises with the head of procurement for purchase (Kouvelis, Chambers and Wang, 2006).

The division is a mechanism to ensure that each section is management is efficient. (See the appendixes1 and two for the company’s domestic and international supply chain systems). Head of procurement department have two major departments, the procurement section and traffic/freight. Traffic head ensure that he allocates each department the right number of trucks to transport good from the suppliers or to customers or otherwise

This kind of approach ensures that at any one time the company has the right number of stocks and delivers timely to its customers (Larson and Halldorsson, 2004).

For an efficient supply chain management, the company has developed certain strategic functions, which leads to overall efficiency.

Inventory Management

Wal-mart has a just in time supply inventory management mechanism; this means that it ensures its goods are delivered when they are needed; its aims at ensuring that there are no goods lying in the warehouse; goods are either on shelves displayed for sale or in transit.

To operate such a system, the company has updated information about the market. It knows when a certain good is in high demand and when it is not. With that kind of approach, the company is able to order for goods in the right quality and quantity.

Cross-Docking Logistics

This is a logistic mechanism where a company does maintain limited number of warehouses; this ensures that between loading and unloading of goods, there is minimal storage. This system of supply ensures that Wal-Mart suppliers get their goods timely in their best state. An efficient method ensures that there is fast delivery of materials and supply of goods to the final consumer.

To support this strategy, the company has employed dedicated drivers who have undergone training on customer service and time management courses. The system also saves the company warehousing costs like rent, maintenance and other associated costs. The expectation and conduct of a driver is stated in Wal-mart, The Private Fleet Driver Handbook, it states how robust a driver should be to ensure that he delivers goods at the right time from or to the company.

Procurement and Strategic Alliances

The relations that Wal-mart maintains with its suppliers give it an upper hand. This is where the suppliers are willing to supply the company with goods; Wal-mart respects contracts of supply, for example, it pays its suppliers in time.

To be on the save side, the company contracts at least two suppliers for the same commodity, though this may be of different brands. For example, it stocks Samsung and Sony electronics, which to a certain extent they are, substitutes. In times of high demand, the company procures from both companies.

Green Supply Chain Management

Wal-mart adopts a green supply chain management. This system ensures processes of a company are environmentally friendly. The kind of trucks that the company uses are highly fuel efficient with most of them using modern fuel efficiency mechanisms.

The company services its trucks regularly to ensure that they are fuel-efficient. When procuring for goods, it only contracts those suppliers who respect the environment. If the production method adopted by a supplier pollutes the environment, then the company avoids such a supplier.

Wal-mart has contracted a company that deals with its wastes. The contracted company ensures that those recyclable wastes are recycled appropriately and those that cannot be recycled are disposed in the right way.

Integrated Supply Chain Management

The company has adopted computers in their supply chain management. This is where it uses a real time stock managements system, which has set reorder levels of certain goods. After a sale at the cashier, a code records the sale in the main database.

When any good gets into the company’s stores, it must go through the database section for entering in the system. With such kind of management, Wal-marts procurements managers at section levels and head office are able to manage their stocks effectively

Walmart International Marketing Strategy

To stand out amidst high competition, Wal-mart has an effective marketing strategy; the strategy is responsive to the needs of certain market thus the system may seem different in different countries. To come up with the specific marketing approach to use, the company undertakes a massive marketing and market research to establish the best persuasion approach they will use in the particular market.

In particular the company adopts 4p marketing Mix approach were it ensures that the 4p’s (Pricing, products, promotion and place) have been addressed accordingly; the prices set for the same products vary with the target market and the place that the company sells (Mentzer, 2001).

As a policy, the marketing department that is at the head office and represented at every outlet is mandated with the role of advising the company on the best way they can improve their products and services. For instance, in some branches, there are personal marketing approaches, while in others there are indirect marketing methods (Möller, 2006).

The main agenda that the department’s aim at meeting is to have satisfied and loyal customers; to develop and retain customer loyalty, the company has implement a CRM (customer relationship management) programs in all it branches (see appendix 3).

Diversity Management

Wal-marts management appreciates that it can only offer value and quality services to its customers when it maintains satisfied, quality and quantity human capital. To meet this noble agenda, the human resources department ensures that the needs of employees regardless of their location have been addressed effectively (Renckly and Renckly, 2003).

Since it operates in different countries, the management maintains human capital of different nationality and cultural believes (Triandis, 2006). In every outlet, the management of the outlet is expected to blend the human capital in the optimal manner possible to ensure that the company benefits from advantages of diversity as it mitigates against any negative effects like cultural differences (Smith and Mazin, 2004).

The salary scale of employees is competitive in different markets and the management ensures that it has respected the rule of law in the country of operation. When differences in labor laws prevail, the legal department is always called to interpolate and advise the company on the way forward. A number of motivational measures have been enacted to ensure that employees produce to their optimal level (Swamson, 2009).

When recruiting employees, the management is keen to looks for such traits that can move the stores forward, the attitude, experience and education that the person has are some of the considerations that the company considers when choosing an employee of any rank. After one has been employed, the company takes into it as the role of motivating and creating an enabling environment for self-development and knowing of one’s talents, skills and intellectual property.

Walmart’s Low-Cost Strategy

The marketing and trading approach adopted by Wal-mart has made the company be able to sell its products at relatively lower prices than the price sold by its competitors; it low cost strategy has earned the company its legendary status. To maintain the prices at a low rate the company has three main approaches, they are firm-level economies, efficient distribution systems, and lower labor costs.

The large number of outlets makes the company be able to enjoy economies of scale in different manners like distribution costs and transport. It is also able to buy products at bulk resulting to a reduced cost per unit. With large sales, the company is able to sell products are lower prices and recover the lost profit from the increased number of sales.

The approach undertaken by the company’s management ensures that there are high rates of creativity, innovations and the big-box format of management. In 1987, the company’s human resources were said to have a 47% higher in productivity, the rate was 41% higher in 1991 than those employees in other similar companies. The price advantage has been used as one customer care strategy that makes the company to of choice by a number of people, the benefit extends to groceries, supermarkets and super-enters; when

A study conducted on grocery retail outlets prices in 2002 shown that at Wal-mart super-stores, the prices of a basket of items cost 17% lower than the cost of similar products in similar chain outlets in the region. The reduced cost of products is a saving to the consumers thus; customers are more likely to buy from the outlets than any other outlet (Swamson, 2009).

Total Quality Management Strategies (TQM)

To ensure that the operations within outlets in different places are managed effectively, the company has an effective information and technology system. The system is crucial for customer service, internal process management, and communication among branches. Information platforms of the company include intranet, internet, and e-business tools (Walker, Walker and Schmits, 2003).

To make quality decisions, the management has recognized the benefits that can be derived from knowledge management tools like business intelligence and data mining tools. Before making a strategic decision, the company ensures it has, quality information needed (Fred, 2008).

As an overall strategy, Wal-mart undertakes total quality managements in its local and international braches; TQM ensures that the company’s operations are up to the management expected level (Noruzi, 2011).

Despite the above global approaches, that have seen the company succeed, some areas it is experiencing some shortcoming.

Weaknesses of Walmart Global Strategy

The pricing strategy adopted by the company has seen it have china supply most of its products since China is able to offer products at the low costs that the company aims at. When the shelves of the company have been filled with Chinese commodities, then it risks the chances of negative marketing, perception and attitude by other nations especially the Americans on Chinese commodities.

Secondly, despite the world being more inclined to be a capitalist, the company has been blamed for unethical business processes; some of the commodities are so cheap than the cost that other traders has acquired the commodities from the manufacturer, this reduces their competitiveness and they are more likely to be led out of business.

Alternatively, small-scale business cannot prevail in places that the chain has a store since they will have issues competing effectively; the result is locking out a number of small traders from business, unfair competition and job losses (Fred, 2008). The notion that prices should be low has been used to justify the company’s low wage arte; compared to other traders in the same industry, the company has a low wage rate and minimal benefits to its staffs.

It is able to keep the low wages because the employees are not unionized; those grocery attendants in other unionized similar chains earn higher than the pays of Wal-Mart. The retail industry is having an increasing competition; many players that are coming with their strategies and policies to enjoy the benefits that the industry seems to be having.

The main competitor of Walmart in the United Stares in Kmart; the company has a different approach to business and is likely to be a great threat to the company. Wal-marts lack a visionary strategy; the management policies have no clear guidelines and set out strategy to see it succeed in the future. They seem to be riding on the success that the company has attained and lacking ways to create an increased business in the future (Haag, Cummings, McCubbrey, Pinsonneault & Donovan, 2006).

Recommendations

To ensure that the company maintains it leadership skills, it should consider using business-to-business relation approaches; approaches that ensure that there is good interaction of businesses in the same line, thus the company needs to look into its pricing strategy and ensure that it is ethical and acceptable.

When handling employees, the company should combine various motivational theories like Expectation theory and equity theory so that they can come up with the approach to handle the disparities in salaries that seems to prevail; when they do this they will be assured of qualified and highly motivated staffs.

According to industrial relations, a company that has good human resources management like the way Wal-Mart claim should have salaries harmonized and probably higher than that offered by similar companies; the company should look into its policies. To remain competitive amidst an increasing number of retailers, the company should look for ways to differentiate its services and products from other businesses (Fred, 2008).

Conclusion

Wal-mart is an international retail outlet that has succeeded in the global scenes because of its effective global business management systems. Some of the systems that have given the company an upper hand include its global organizational structure, integrated global supply chain management, international marketing strategy, international Human resources management approach or Diversity management, information systems, knowledge management, and Total quality management (TQM) strategies.

References

Fred, D. ,2008. Strategic Management: Concepts and Cases. New Jersey: Pearson Education.

Haag, S., Cummings, M., McCubbrey, D., Pinsonneault, A. and Donovan, R. ,2006. Management Information Systems For the Information Age. Ontario: McGraw Hill.

Kaushik K.D. and Cooper, M., 2000. Industrial Marketing Management. Marketing Journal, 29(1), pp. 65–83.

Kotter, J.P. and Schlesinger, L.A.,2008. Choosing strategies for change. Harvard Business Review, 80(30), pp. 117-124.

Kouvelis, P.,Chambers, C. and Wang, H. ,2006. Supply Chain Management Research and Production and Operations Management. Review, Trends, and Opportunities. In: Production and Operations Management, 15(3), Pp. 449–469.

Larson, P.D. and Halldorsson, A. ,2004. Logistics versus supply chain management: an international survey. International Journal of Logistics: Research & Application, 7(1), pp. 17-31.

Mentzer, J. T.et el. ,2001. Defining supply chain management. Journal of Business Logistics, 22(2), pp. 1–26.

Möller, K. ,2006. Marketing Mix Discussion – Is the Mix Misleading Us or is We Misreading the Mix?. Journal of Marketing Management, 22(3/4), pp. 439-450.

Noruzi, M. ,2011. A study of Globalization in International Business. Interdisciplinary Journal Of Contemporary Research In Business, 2(9) , pp. 88-90.

Renckly, B. and Renckly, R. ,2003. Human Resources. New York: Barron’s Educational Series.

Smith, S. and Mazin, R. ,2004. The HR answer book: an indispensable guide for managers and human resources professionals. New York: Amacom Div American Mgmt Assn.

Swamson, R. ,2009. Foundations of Human Resource Development: Easy read Large Edition. San Franscico: ReadHowYouWant.

Triandis, H.C., 2006. Cultural Intelligence in Organizations. Group and Organization Management, 31(1),Pp. 20-26.

Walmart Corporate Website., 2011. Wal-mart. Web.

Walker, D., Walker, T. and Schmits, J. ,2003. Doing business internationally: The guide to cross-cultural success (2nd ed.). Boston: McGraw-Hill.

Appendices

The following diagrams illustrate the company’s domestic and international supply chain systems.

Chart 1: Domestic customers supply chain management system

(Haag, Cummings, McCubbrey, Pinsonneault & Donovan, 2006).

Chart 2: International supply chain management

(Haag, Cummings, McCubbrey, Pinsonneault & Donovan, 2006).

Charts 3: Wal-marts marketing structure

(Kaushik and Cooper, 2000).