Where does management stand on beer breaks
Table of Contents
The two main core businesses for Wal-Mart are retailers and the warehouse clubs. Both businesses have an increasing international demand and they are very competitive with big players on them. Wal-Mart has developed a huge efficiency in both markets and it is absolutely able to compete wherever. The needs to reduce prices and the globalization era have pushed Wal-Mart for going global. Finally, Wal-Mart has developed the skills to expand its business in a foreign market and to compete with success on them. As conclusion, Wal-Mart presents the perfect conditions for going global, and it has many things for gaining:
· The genetic factor. I think the continuous expansion is an essential part of the genetic business of Wal-Mart, it is part of its nature. The Wal-Mart management has based its strategy on a continuous growth. If we analyze the growth rate over the years, we could see that Wal-Mart has developed a positive feedback or spiral of growth. Low price sales are one of the strong characteristics for Wal-Mart. These low prices could be reached for the very aggressive purchase policy, low operating cost and purchase volume. These strategies are stressed by the continuous expansion because it allows to Wal-Mart to deal with bigger volume purchases and better distribute the fix cost of operation. In addition, this volume allows Wal-Mart to innovate and develop technology for being more efficient. All this is that I call positive feedback and it constitutes one of Wal-Mart's pillars.
· Exportable efficiency and work methodology. Wal-Mart has developed a very efficient mechanism to operate in the retailer and warehouse clubs markets. This developed strategy has worked very well in the United States, and it looks possible to be adapted abroad. Going global gain also more efficiency.
· Globalization: Wal-Mart expansion nature has been benefitted by the globalization. In addition, Wal-Mart management and high level employees have strong experience dealing with international commerce. The globalization was for War-Mart a facilitation process for its natural expansion. Going global Wal-Mart better use its developed resources which give it a competitive advantage.
As conclusion, going global for Wal-Mart is its nature, it hurts its competence, it avoids that the competence lands in Wal-Mart region, it gains efficiency and uses its competitive technology and human resource advantages.
Wal-Mart has had very important challenges going global. Wal-Mart developed very efficient strategies adapted for a specific market in the United States. Going abroad, these strategies must be adapted for each country, and the capacity of adaptation and perception of needed changes by the management represent big challenges.
The productivity in the United States is one of the higher around the world. In this market, people work with a high efficiency that it could be difficult to find in other markets. Wal-Mart could try to enforce this similar efficiency in other countries, but it could be seen as high demanding working conditions for the society, with risk of being rejected.
In the same sense, some conducts, rules in place and work environment developed by Wal-Mart in the United States could be found inappropriate in other markets (e.g.: the policies about women's right, grassroots organizations, labor unions, low wages, low rate of employee health insurance enrollment, pressure to employees to vote for specific parities during national elections) (http://en.wikipedia.org/wiki/Walmart). These social and cultural constraints represent a very important challenge for any company going global, but especially for Wal-Mart, who base part of its strategy in the high employee efficiency.
The economic instability and/or high inflation in some countries constitute an important barrier for business planning. This instability and inflation also could represent a huge opportunity, but in any case they are variables that should be very well analyzed before to develop business in those countries. In addition, other barriers/opportunities that Wal-Mart should study previous going to these countries are the corruption, employee salary level (important factor for Wal-Mart efficiency), available technology, structural problems (e.g.: some countries are suffering electricity shortages), policies (e.g.: unions, subsidies, quotas, tariffs, protectionism), business-practice laws, local laws.
As summary, Wal-Mart faces important challenges associated to the adaptation of its business operation to each country/region.
Wal-Mart's operations are organized into three divisions: Wal-Mart Stores U.S., Sam's Club, and Wal-Mart International. This last, Wal-Mart International division, organize the operations of the 2980 stores in 14 countries outside the United States (http://en.wikipedia.org/wiki/Walmart).
The most common mechanism used for Wal-Mart to expand its operations is through the foreign direct investment (e.g.: acquisition of an established retailer, in Canada acquired the 122 stores of Woolco division, in England acquired Asda), but also strategic alliances (e.g.: joint ventures in India (Bharti Enterprises) and Mexico (Valmex)). Wal-Mart international also develop operation as retailer (supercenters, neighborhood market and discount store) and Sam’s Club in most of those 14 countries (http://en.wikipedia.org/wiki/Walmart).
Wal-Mart uses a very integrated, efficient and strongly controlled chain for its business; this characteristic limit some methods to develop business abroad. Only the huge intervention of Wal-Mart executives, applying Wal-Mart methodologies and technology could guarantee a successful business. These characteristics do that other methodologies than the developed by Wal-Mart for going global have strong probabilities of failure (e.g.: independent agent, licensing).
The global trends in international business seem to be an open market; in fact, it could be perceived as four different level of trading:
· a regional level, with general regional agreements (NAFTA, EU, Mercosur, GCC, and so on);
· a global level, with trades between the previous agreements (EU-NAFTA trade);
· point to point, level special agreement with trades between countries or country with regional agreements (Canada China Business Council); and
· no trades (Canada-Burundi).
This trend looks to help to Wal-Mart because they facilitate the trade between countries, knocking down barriers and supporting the mechanism of efficiency developed by Wal-Mart.
In general, I would not introduce big changes. Basically I would analyze four strategies:
· To have more adaptation to the local customs for the employees. It is possible to allow local employee not to lose some social behavior, losing some efficiency, but winning the social acceptation. An extreme case was the when Wal-Mart closed the unionized store in Jonquière, Quebec. I lived close to this city at this moment, and the people feeling about Wal-Mart were very bad in Quebec. This issue represents more than an adaptation to the social behaviour, it is a Wal-Mart strategy, but it shows how contradicting local commitments could damage its image and social acceptance.
· The Mal-Mart image is the image of a classical company from the United States. In some countries Wal-Mart has changed its face through joint ventures. I would work more in this idea, with a more adaptation to the local conditions. The name Wal-Mart has become a very recognize name around the world, and it has helped to develop business globally; but in other countries, Wal-Mart participates in the business with different names. In fact, the more important thing is how Wal-Mart develops business, its huge efficiency, its strong capacity buying cheaper and pushing till the limits to this providers (also labor providers). This strategy could be developed under any trademark, but operating under the complete Wal-Mart group taking benefit of that.
· Wal-Mart has developed several indexes to measure the performance and efficiency of it stores and clubs. These indexes push very hard to executives and manager in some countries; finally, this huge pressure could incentive acts, conducts or behaviors at the limit of the ethic considerations in those countries.
· I would develop more social programs to relate the image of the company with local people. Wal-Mart has been developing some programs, but they are few or with very bad communication to the society.