Wal-Mart’s Global Strategies

Wal-Mart’s Global Strategies

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In the current business environment, many companies make efforts to diversify their businesses to other countries rather than the parent country. When doing business in other countries, the business leaders often make decisions and come up with strategies which are responsive to the international needs and the domestic customers (Kaushil & Cooper, 2000). Retail industry is among the most competitive sectors of the economy. Companies in this sector which are operating across the board will thus need unique marketing strategies and an effective management style. Most of the world’s biggest retailers who have been expanding past their national borders have recorded immense success (Davis, 2014). Walmart, one of the biggest retail outlet has not been left behind. It is growing exponentially and has opened business in more than 50 states. We will go deeper to find the early strategies that the company put in place in order to ensure its expansion in other countries is successful.

The company set an early strategy in its management structure. Walmart was able to understand that not every country can be tapped effectively with similar organizational structures. Keeping this in mind, the company put in place unique systems in their structure which are relevant with the market type that the company is operating. The company came up with three main systems: Sam’s Club, Walmart stores and International stores. The difference between these stores is the difference in their approach in selling the company’s products.

Under Walmart stores company structure, it is further divided into: Neighborhood markets, supercenters and discount stores. These structures offer a different shopping atmosphere which enables the company to divide its market on income lines. Sam’s clubs are the membership clubs whereby the company directs its focus on the people who are well-off in the society. The stores on the other hand are operated on subscriptions and pay returns to the members. These are common in Puerto Rico. Finally, the international stores are divided further into supercenters, Sam’s club, discount stores, restaurants and retail stores. The main reason for this kind of division is to make sure that the retail company is able to sell their products to different countries by using a format which is suitable for the country’s demand.

When in an international market, the company faces effects from cultural beliefs, living standards in the country, people’s perception among others. For them to be successful in the countries they venture in, they need to come up with suitable organizational structures which reflect the specific market needs (Kotter & Schlesinger, 2008).

The main benefit the company achieves from this type of structure, is that it gets to understand better the specific market and do an establishment of the most suitable approach that they can have for the market. When operating in an area with low-income people, the company makes sure that they are responsive to the population’s needs in form of the packaging and costs that they adopt.

The strategy to differentiate their approaches of operation in different countries was a very good move. This gives the company a competitive advantage over other companies which are in the same business. It enables them capture people from the different walks of life and hence being quite considerate in the different markets. They are also able to factor in the cultural beliefs as different countries have different cultural beliefs and interfering with this can lead to the closure of business. They have been able to factor this in thus ensuring customer loyalty which is a plus for the business.

As indicated earlier, several countries have different cultures which affect businesses. This affects every international business as they are plaquedby the different cultures. Walmart has faced this hurdle and has had to deal with it in every country where it ventures. In most countries, especially in Asia, the company has been seen as trying to encroach and grab business opportunities from the local traders (Basker, 2005). In some instances, the authorities are pressurized by the local business communities to deny the company permission to operate. In this case, the communities try to ensure protection of their interests by dragging in the companies.

Walmart’s international division has the mandate of ensuring they conduct research on the company’s prospective markets. They have done very well in this sector but have failed to establish consumer preferences which are driven by culture in some of their markets. The company has experienced conflicts with their clients which has forced it to approve on some amendments that are meant to prevent it from shutting down its stores. In some countries, Walmart faced some challenges whereby they retailed the exact same things that the small scale traders sold. The locals were familiar with their local traders and interacted freely. There stores were usually dirt, noisy and packed and operated in low prices. Walmart came in and introduced the concept hypermarkets which offered well-spaced and clean outlets. This made their consumers to feel uneasy. They were used to doing shopping where they had the privilege of absolute privacy which involved the owner dealing with clients one at a time. Walmart’s approach on the other hand needed the consumers to alter their purchasing and shopping habits as well as their anticipations when doing their purchases from the stores.

In India for instance, social relationships play a major role in their financial deals (Padmanabhan, 2012). India has held this aspect even in globalization. Walmart has however managed to change the community’s attitude towards westernization and captured the significant customer base. There is still the existent of the small traditional shops in India’s waysides. These still control the retail markets. Researchers have suggested that these roadside stores will continue controlling 85% of the country’s domestic market (The Economist, 2008). The shops are so tiny but the locals prefer them. It is believed that this occurred because of poverty which pushes the locals. They prefer the local stores as they establish personal relationships with the store owners for them get goods on credits in instances whereby they do not have cash.

Expanding businesses to countries which have different set ups than the mother country can be challenging at times. There are several challenges that are experienced and thus one needs to have a very good strategy to go about the business expansion. In Southern India for instance, a lot of challenges are faced when expanding a business especially in terms of culture. Despite these challenges, the region has several opportunities for business. These include spectacular economic growth. The region has for the past 60 years experienced tremendous economic growth and has also become a breeding ground for innovative, fast-moving and competitive businesses. This makes it a good market to open up a business. They also have a large consumer market because of its vast population. Many international businesses prefer this region as it is fairly easy to offer services and products to over 260 million customers than in other regions where the population is lower. The region is also business friendly specifically for foreign investors. Some nations like Singapore in this region offer low taxes for new organizations thus making it favorable for startups. The country as well offers fast business registration processes hence attracts investors. This is the same case with Hong Kong. Finally, the region also has been doing well in the tourism industry. The industry has tripled in its size for the last 10 years. The spectacular tourist attraction sites and well-developed infrastructure have enable this growth therefore opening up the region for business.

Despite these opportunities, there are several challenges that are faced by foreign investors in South Asia. These include Currency fluctuations. The region doesn’t have any currency regulator thus can maintain low exchange rates for them to promote exports. This makes it challenging for foreign companies to grow and make profits. Secondly, they have varying legal systems. Despite the recent liberalization of the region’s economies, they still continue placing restrictions on the way foreign companies operate in the region. This can lead to instability of the foreign companies. The final challenge which is the most common is their unique business culture. The region possesses very unique business cultures which are quite distinct from that in the west. They focus on the individual dynamics and hierarchical structures over individual autonomy. Gender on the region is also factored in. Most Asian companies benefit in that the local talents are preferred and local business practices and local industries are protected as well. Asian governments secure these practices by putting in place policies which are favorable to the local business and culture which at the end of it all frustrates the western companies.

Despite these challenges, there are some strategies that can be put in place to make entry into this market fairly easy. On the issue of currency fluctuation, a foreign company can ensure they secure local tax and engage a government relations counsel who is capable of giving advise on how to go about regulatory environments and the local currency. On the second challenge, the varying legal systems, the foreign company should ensure they get help from a localized legal counsel who is familiar with the legal opportunities and issues which they are likely to face in the region they plan to operate. It is important to note that no two jurisdictions in south Asia are alike thus professional skepticism can be very helpful. Finally, business cultures in the Asian companies can prove to be tough for foreign companies. They thus need to adopt the local practices for them to thrive and survive in Asia. It requires localization of human resource practices and the corporate strategy as well which can reduce the impact of the local regulatory environments to make them favorable to the incumbent businesses.

To conclude, it is clear that Walmart is one of the largest retail outlets and has succeeded in the international markets thanks to its management systems which with no doubt is seen as being effective so far. The organizational structure is one of the systems which has given the company an upper hand in the global market. Internationalization of business in the global economy comes with a lot of challenges. As discussed, Walmart faces several challenges when they cross the borders. It is hence evident that companies which have the decided to invest abroad need to be prepared to deal with communities regarding culture and other local competitors in the country. There are however some strategies which have been discussed that could play a big role in ensuring that companies are able to do better in the international markets. These strategies help companies know how to handle different situations when they arise.

References

Basker, E. (2005). Job creation or destruction? Labor market effects of Wal-Mart expansion. Review of Economics and Statistics, 87(1), 174-183.

Davies, K. (2014). International expansion and retail: Top retailers go global. Radius worldwide.

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

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

Padmanabhan, M. (2012). Walmart’s struggles in India: How institutional contexts can limit foreign entry. Journal of Communication, Culture & Technology, 13(1).

The Economist 2008, Unshackling the chain stores. Web.