Walmart Global Expansion
Problem
Walmart managed to attain successful expansion within the U.S. in the 1990s, and the management made a decision to seek for global expansion. All of the markets that it intends to enter can be described as having or will force Walmart to deal with different cultural aspects and diverse government policies far from those in the U.S. (Alcácer, Agrawal, & Vaish, 2013). In this regard, the major problem that is notable from this approach is that Walmart tried to replicate its effective U.S. business model in Mexico, Canada, Brazil, Argentina, Central America, China, South Korea, Japan, Germany, the U.K., and Africa. The decision to use a similar strategy in these new markets cost the company many struggles, and even years before it could realize any form of profit-making. For instance, in the China market was much diverse from others both in consumer preferences, patterns, mode of competition as well as regulations. Therefore, for the company to be able to replicate and address specific aspects in this market, the company was forced to offer store managers with noteworthy autonomy, an element that made Walmart centralize several decisions. In other words, its operational decisions ended up being centralized within the American headquarter.
Central Management Decision
It is important to note that the Chinese market was different from others, and that is what caused Walmart’s strategic adaptability issues in China. That is, they required to make or adapt to the local needs of this market. What happened is that Walmart centralized the process of decision making in it’s headquartered, and these forced its adaptability into this market to go down. However, this conclusion does not apply to all the subsidiaries, considering the fact that the multinational firms’ approach to any market is made as a differentiated network. This implies that the process of decision making can be centralized with respect to the market more like its home markets, for instance, the Canadian market (Alcácer, Agrawal, & Vaish, 2013). This form of approach has the potential of developing an organizational structure that contains heterogeneous relations among its subsidiaries and the head office, an aspect that can be described by diverse degrees of centralization and decentralization. As noted earlier, the different operation decisions are assumed to have taken a centralized approach in the Chinese market. In this case, there is somehow a decentralized decision-making process because these decisions would have been made with the subsidiary. On the other hand, decentralization would have permitted the subsidiary to respond to exactitudes within the Chinese market, meaning that the strategic adaptability could not have remarkably been affected. However, considering the extent to which numerous multiple markets are in existence within China, subnational adaptation may have been crucial necessary in such a case of strategic adaptability was likely to face negative impacts.
Recommendations and Implementation Issues
The recommendations and implementation concerns can be viewed from a theoretical perspective. That is from a contingency theory which deals with multinational corporations’ environment states that the optimal way to organize the operations of a company is contingent on the nature of the corporations surrounding environment. There, it’s necessary for any corporation entering a new market to adapt to the local environment through increased emphasis on decentralization (Alcácer, Agrawal, & Vaish, 2013). This is because the subsidiaries possess a considerable amount of information concerning the local environment, and this calls for more information on the way to adapt to the individual subsidiary’s environment. In this regard, having a decentralized approach in decision making Walmart subsidiaries would have gotten an effective answer to local exactitudes in China. In other words, Walmart must have a differentiated perspective among its numerous environments where its subsidiaries operate. This means that Walmart’s structure should not be determined by the general environment meaning that a single organization-wide structure is not sufficient for it to be applied all over the entire organization; instead, the level of autonomy of the individual subsidiary must be determined by that particular subsidiary’s environment.
Reference
Alcácer, J., Agrawal, A., & Vaish, H. (2013). Walmart around the World.
Reference
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