Many companies have failed to achieve their business potentials due to lack of appropriate International Human Resource (IHR) strategies. This malpractice has produced different managerial strategies in many countries. Every country has its socio-cultural and political forces. The citizens living in different countries tend to exhibit unique cultural practices (Mello, 2014). Multinational companies should therefore hire competent leaders who can manage the cultural differences experienced in every targeted region. This paper examines the business issues affecting Wal-Mart’s performance in China.
A Brief Analysis of the Case
According to the article, Wal-Mart is struggling “to replicate its Domestic Business Model (DBM) in different countries such as China” (Farhoomand, 2012, p. 2).Wal-Mart’s use of organized chain stores had become common in different countries such as Mexico and the United States. Such chain stores have made it easier for Wal-Mart to formulate the best logistics and distributions systems.
The company uses the best price controls and regulations in order to achieve its goals. The biggest question is whether the company’s business model can work effectively in a foreign country like China. The “greatest challenge is how Wal-Mart can succeed in a market environment that has remained business-friendly” (Farhoomand, 2012, p. 5). A solution to this major challenge will promote Wal-Mart’s corporate strategy.
The Major Issues Surrounding Wal-Mart China
The company’s business strategy has succeeded in some countries such as the U.S. and Mexico. The company uses several strategies in order to emerge successful. The business model has empowered and attracted more customers. The company lowers its prices daily in order to emerge profitable. The company treats every customer with respect. Wal-Mart provides quality products and goods at a very low price.
The company’s presence in China has resulted in numerous issues. Some of “the major issues affecting many retailers in China include shoplifting, little purchases, lack of enough information technologies (ITs), regulatory restrictions, and poor infrastructure” (Farhoomand, 2012, p. 8). These challenges have affected the businesses of several retailers such as Wal-Mart. According to Farhoomand (2012, p. 8), “the income disparity and local protectionism experienced in China have continued to affect the performance of different foreign companies”.
However, a new challenge is currently making it impossible for Wal-Mart to achieve its goals in China. The company’s decision to replicate its original business model in China has produced minimal fruits. The company has also recorded numerous losses in countries such as Japan. Wal-Mart’s business model failed significantly in Germany. Wal-Mart has also retreated from South Korea after several years of poor performance. The company was among the less successful in the country. This situation explains why Wal-Mart China must analyze and address the issues affecting its business performance. The “issue of wage disparity, lack of proper marketing strategies, and inability to manage local employees continues to affect the company’s goals” (Farhoomand, 2012, p. 6).
Alternative Courses of Action
The consumer market in China has been opening its doors to many retailers and marketers. Wal-Mart China can retain the most powerful aspects in order to make its business model profitable. The Every Day Low Prices (EDLP) concept can also attract more customers. Wal-Mart China “should embrace the use of effective logistics and distribution systems” (Luthans & Youssef, 2007, p. 341). The firm can establish positive partnerships with various suppliers in the country. Price regulations will also support Wal-Mart’s strategy. A positive managerial strategy and knowledge of different international business strategies will ensure Wal-Mart China achieves its potentials.
The company should replicate its Open-Door Policy (ODP) in order to support its employees in China. A positive “managerial strategy will ensure every employee in the country is passionate, happy, and motivated” (Luthans & Youssef, 2007). The knowledge of different consumer expectations can support the firm’s goals. The company should address most of the above challenges. The company can lower its prices. It should also hire professional managers who understand the issues affecting many Chinese employees. New changes in Wal-Mart’s business model will make it profitable in the Chinese market (Armstrong, 2006). Wal-Mart China can also increase the number of its convenient stores across the country. Such stores will support the company’s goals and increase its profitability.
Recommendation for Action
The above strategies and changes will ensure Wal-Mart produces a powerful business model that can produce positive fruits in China. Wal-Mart should identify the importance of global HR practices. Such practices will analyze and address the issues affecting every store in the country. A “global HR strategy will create a competitive advantage” (Mello, 2014, p. 43). This strategy “makes it easier for companies to adapt effectively to every local expectation and culture” (Mello, 2014, p. 96).
International HR managers “should deal with all aspects of discrimination, empower different employees, promote culturally sensitive working environments, address organizational challenges, and empower local citizens” (Armstrong, 2006, p. 41). These approaches will support every multinational company. New efforts will improve the level of job satisfaction. Every store should have a culturally competent manager who supports his or her employees. This case study explains why Wal-Mart should use better HR practices in order to achieve its business goals in China.
Armstrong, M. (2006). A Handbook of Human Resource Management Practice. London: Kogan Page Limited.
Farhoomand, A. (2012). Wal-Mart Stores: “Every Day Low Prices” in China. Asia Case Research Centre, 1(1), 1-27.
Luthans, F., & Youssef, C. (2007). Emerging Positive Organizational Behavior. Journal of Management, 33(1), 321-349.
Mello, J. (2014). Strategic Human Resource Management. Boston, MA: Cengage Learning.