Organizational strategic plan
Wal-Mart is one of the largest multinational retail firms. The firm’s success originates from adoption of optimal business, functional, and corporate level strategies. One of the corporate level strategies that the firm has continuously implemented relates to expansion strategies.
Wal-Mart started its market expansion efforts in the early 1990s. The firm has adopted different market expansion strategies such as acquiring local firms, joint ventures, and organic expansion. The firm’s decision to adopt the market expansion strategy hinged on the desire to maximize its economic gains by exploiting market opportunities (Sims, 2007).
Over the years, the firm has managed to enter and position itself in the international market. Currently, the firm is targeting emerging markets in Asia and Africa. However, the firm’s success in the two regions will face various challenges. This paper identifies and describes the organizational issues that the firm may face in its quest to expand into the international market.
The organizational issues discussed relate to cultural differences, inability to develop a strong brand, human capital challenges, and difficulties in understanding the local consumer patterns. Moreover, this paper outlines the strategies that Wal-Mart should implement in order to address the organizational issues identified.
Organizational issues faced
According to Menipaz and Menipaz (2011), cultural difference is one of the major issues that multinational companies face. Wal-Mart’s international market expansion effort will be subject to differences in national and organizational culture between the US and the target foreign market in a number of ways.
First, the firm will experience a challenge in its quest to communicate and create market awareness regarding its products and services.
Some governments such as Zimbabwe have instituted strict legal regulations that limit entry of multinational companies. In a bid to enter these markets, Wal-Mart will be required to partner with local firms.
Therefore, the firm will not market its products directly. Such legal regulations may affect the firm’s ability to penetrate the target market. However, partnering with local firms might not succeed due to corporate culture clash between Wal-Mart and the local firms.
The two firms might not possess similar cultures with regard to the norms, attitudes, and beliefs. Moreover, their organizational culture may vary based on the firm’s mission, vision, and philosophies. This aspect will limit the effectiveness with which the two firms implement business and operational strategies (Carleton & Line berry, 2004).
Differences in organizational culture between the two firms will also affect the working relationship between Wal-Mart’s employees and employees of the firm that it will partner with. Differences in organizational culture might prompt employee conflict due to variation in work policies and procedures. For example, culture variation with regard to gender might affect how the firm’s employees treat men and women.
In Saudi Arabia, men are considered more superior to women; therefore, they are treated differently. On the other hand, US firms treat men and women equally. Trying to inculcate a culture of equal treatment to men and women in Saudi Arabia might lead to conflict amongst employees due to the existence of internalized reasoning.
Building an international brand
Wal-Mart’s success in some of the international market is hampered by the firm’s inability to create substantial market acceptance. South Africa is one of the markets that Wal-Mart intends to enter. However, the firm’s branding strategy may limit its market penetration in this area. One of the factors that will limit its market penetration is the yellow color that the firm has used in its branding strategy.
Aslam (2006) asserts, “Color is an integral element of corporate and marketing communication” (p. 15). Color enables organizations to induce the consumers’ moods and emotions. Moreover, color influences the consumers’ purchasing behavior and perception towards certain products. Therefore, it enables organizations to differentiate and position themselves in the market.
In its branding strategy, Wal-Mart has adopted the yellow color. However, the yellow color is associated with bad omen amongst the Zulu community, which is the largest population of the South African society. Therefore, the likelihood of the firm succeeding in South African with its current branding strategy is limited.
The firm’s management team should not assume that its products are acceptable in all market due to its global outlook. Scott and Zou (2012) opine that brand managers may assume that their brands are acceptable in the international market by the virtual of being international brand.
Therefore, it is imperative for brand managers to conduct a comprehensive consumer market research in order to determine the extent of its brand recognition and image in the international market.
The firm’s performance in the international market will be determined by the quality of its human capital. The labor market in the host country might not have the necessary skills and experience that the firm requires. Collings (2009) asserts that most emerging markets such as Africa and Asia are experiencing talent gap despite their high rate of population growth.
A study conducted by the Economist Intelligence Unit (2008) shows that the level of skills in the labor market in emerging countries does not meet the requirements of most multinational companies. The study further asserts that the talent gap in emerging markets is widening.
The above sentiments are echoed by findings of a study conducted by PricewaterhouseCoopers in 2013. The study shows that 75% employers globally experience a challenge in hiring appropriate employees because of lack of skills and experience (PricewaterhouseCoopers, 2013). Consequently, Wal-Mart might not find the necessary human capital to enhance its success in emerging markets.
Unpredictable consumer behavior
Wal-Mart’s effort to position itself in the foreign market might be affected by the consumer’s purchasing behavior. The consumers’ purchasing decision is subject to cultural, psychological, social and personal factors. Most emerging markets suffer from predominantly low-income levels, unreliable cash flows, and sources of income (Lamb, 2010).
Most consumers purchase in small quantities. However, when consumers have substantial income, they purchase in large quantities. Therefore, the consumers’ purchasing power is limited while their behavior is unpredictable, which may affect Wal-Mart’s operational strategies and hence its ability to maximize profit.
Strategies that the firm can adopt address the organizational issues
Before expanding into the international market, Wal-Mart should undertake a comprehensive cultural analysis. Doole and Lowe (2008) are of the opinion that a firm intending to expand into the international market should focus on various levels of culture, which include
- Regional, religious and ethnic aspects
- The target market’s national culture
- Social class level
- Gender and generation levels
Moreover, Wal-Mart should analyze diverse components of culture. Some of these components include the target consumers’ level of education, social organization, technology and material culture, values and attitudes, language, religion, and aesthetics. Analyzing the target consumers’ level of education in the foreign market will enable Wal-Mart to determine how to market its products.
For example, gaining knowledge on the target customers’ literacy level will determine how the firm brands its products. Understanding the target country’s social organization will improve Wal-Mart’s ability to influence the consumers’ decision-making process. This assertion emanates from the fact that the consumers’ decision-making process is subject to social factors.
According to Esan (2012), values refer to individuals’ strong ideas, customs, and beliefs. On the other hand, attitudes refer to negative or positive evaluations, tendencies, and feelings of individuals towards certain concepts or objects (Esan, 2012).
Evaluating the consumers’ values, attitudes, religion, and aesthetics will give Wal-Mart an edge in determining the most effective operational and marketing strategies to formulate and implement. Cultural analysis will also enable the firm to understand the consumers’ decision-making process, as the firm will understand the cultural factors that influence the consumers’ behavior.
For example, the firm will understand how cultural forces such as language, art, family, religion, and history affect the consumers. The firm will also understand the variation in cultural messages across different culture (Doole & Lowe, 2008).
Outsourcing talent and effective leadership
Skills shortage is one of the major challenges that organizations in different parts of the world are facing. However, developing and emerging economies are the worst affected.
According to Gilmore and Williams (2012), a direct correlation exists between the level of employees’ skills and the organization’s productivity and competitiveness. Therefore, the probability of an organization succeeding in the international market is dependent on the quality of its labor force.
Managerial positions are the most difficult for the firm to fill in its foreign labor market. In a bid to deal with the skills and the talent gap challenge in the international market, Wal-Mart should outsource some of the skills. This move will enable the firm to eliminate the cost of operation that it might incur by investing in employee training and development.
In a bid to achieve this goal, the firm can outsource managerial skills from renowned consultancy firms such as PricewaterhouseCoopers, Deloitte, and Touche. These firms have managed to develop the skills of their employees in different capacities. Therefore, Wal-Mart will be in a position to fill the skills and talent gaps successfully (Taplin, 2008).
Considering the competitive nature of the labor market in emerging markets, Wal-Mart should ensure that it creates an optimal working environment, which will improve the rate of employee retention, and to achieve this goal, the firm should implement an effective reward and performance management system. Therefore, employees will desire to continue working in the organization.
In a bid to penetrate a foreign market, Wal-Mart should adopt a branding strategy that fits the target market. One of the ways through which the firm can achieve this goal is by adopting the concept of localization. According to Balmer et al. (2006), localization enables an organization to increase its customer base, which arises from the fact that the products developed are conscious of the cultural aspects in the target market.
By implementing effective brand management, Wal-Mart will be in a position to achieve a high level of brand identity and recognition. Therefore, the likelihood of the firm succeeding in the international market will be high.
Wal-Mart’s market expansion strategy will improve the likelihood of the firm attaining long-term continuity. However, its success in the international market will depend on how well it manages the cultural differences, skills and talent shortage, and consumer behavior. In a bid to deal with these challenges, Wal-Mart should consider undertaking a comprehensive cultural analysis before entering the target market.
Moreover, the firm should outsource the skills that are not available in the foreign market and integrate an optimal leadership strategy. Effective brand management will also enhance the firm’s likelihood of success.
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