Wal-Mart and Cross-Cultural Perspectives - Essay Example

Wal-Mart Stores Inc. is the biggest retailer globally. It expanded globally by inaugurating its first-ever global store in Mexico City in 1991. In the US, Wal-Mart is doing business in 50 states, besides other countries including Puerto Rico, Canada, China, Mexico, Brazil, Germany, Britain, Argentina and South Korea. All these countries are culturally diverse, therefore, chances of erupting of the cross-cultural issues for Wal-Mart in these culturally diverse countries abound, as 130,000 employees of Wal-Mart had been from these countries, as per the data figures of 1999 (Govindarajan & Gupta, 2002). Intercultural communication in organizations helps in smooth sailing. For example, in Mexico, cultural trait like collectivism and large power distance are their leading cultural values. Otherwise also, the Mexican social aspirations and their workplace trends of employees and managers are distinct from those of U.S. employees and managers. The degree of difference is so much noticeable that the U.S. managers positioned in Mexico find their work not up to the mark. A United States manager of Wal-Mart, not keen to take interest in Mexican culture to comprehend the distinct differences and make changes in his or her functioning style as per the Mexican culture may go through frustration and disenchantment (Chapter 11: Intercultural Communication in Organizations, p. 374). Roping and managing people from different cultures within an organizational context provides one of the biggest challenges for MNCs. It is going to be a tough job for managers to deliver performance if they do not give due credit to the subtleties and complexities of managing corporate affairs in a multicultural and multinational business scenario (Chapter 11: Intercultural Communication in Organizations, p. 374). Wal-Mart had used different channels of entering these countries. For example, path taken by the Company for opening its stores in Mexico was based on equal partnership through joint venture with Cifra, Mexico’s biggest retailer. The purpose of this joint collaboration was to cover operational risks of the new market, thus, indirectly getting protection from the cross-cultural issues emerging from globalization of operations (Govindarajan & Gupta, 2002). Wal-Mart had been following the local adaptation strategy, without which it could not firmly stabilize its hold in foreign lands, as winning the local battle has been critical to Wal-Mart’s success. It is very important for any global company to adjust according to the distinct local market conditions. It needs to work upon changing certain aspects of its business model according to local requirements. These amendments had to be recreated. Wal-Mart did the same business model adaptation changes in China. The example of China market is an acknowledgement of this procedure (Govindarajan & Gupta, 2002). The Case Example of Germany Wal-Mart had to close its stores in Germany. Same was the case in Korea and Japan, as the chain could not penetrate the Korean and Japanese markets. In Germany, something went wrong. The common opinion over its failure to establish roots in these countries was that some of Wal-Mart’s global issues erupted from the arrogant attitude of the company management and their over-confidence regarding their managing capabilities. Their over-confidence could be justified from their performance based on seven billion customers a year. Unfortunately, the same success story could not be repeated because of different value-systems prevalent in countries like Germany, Korea, and Japan; markets of these countries just detested Wal-Mart’s insistence to enforce its value-system ((Chapter 11: Intercultural Communication in Organizations, p. 374). According to a Wal-Mart global representative, its failure in Germany was a lesson worth learning for the management. After its failure in Germany, management started respecting the country-specific cultural traits. The Germans took offensive from the smiling greeter at each door of Wal-Mart. The male shoppers found it flirtatious (Chapter 11: Intercultural Communication in Organizations, p. 375). Another issue in Germany was related to the German labor unions, as the company could not maintain good relations with German labor unions. While in Germany, Wal-Mart had to change its head-office location, which is quite common happening in the United States. Such a scenario involves shifting of place by the employees also with all the baggage. It is not the trend in Germany; employees prefer to leave a company rather than shifting their base. A leading issue was related to lack of insight of the US managers about their German customers and the market (Landler & Barbaro, 2006). Wal-Mart made a number of cultural mistakes in Brazil and Mexico. In Brazil, it ran a campaign on golf clubs although people there do not play golf. In Mexico, it focused ice skates. In Korea, the Wal-Mart product stock-lines were vertically so high that customers were not able to reach there without mechanical assistance. These mistakes reveal the fact that the management and sales tactics should differ from country to country; these might be remunerative in a country, but may not work in another country because of varied cultural perspectives. Reaching a higher level in realizing sales should not blur the focus on perceiving and appreciating the cultural differences (Landler & Barbaro, 2006). China Case Analysis China is the most densely populated country across the whole world. It is a leading business potential offering location for retail businesses. One can gauge China’s business potential in retail segment from the sales figures, which advanced at the rate of 11% in-between 1990 and 1995. This boost in retail sales occurred because of economic freedom and a huge hidden demand potential for consumer products. All is although not well in China from the perspective of sudden changes brought about by the Chinese government policies and regulatory compliance forcing multinational companies to comply with. These are a different set of distinct challenges of the China market. Another hurdle of the China retail market is that growth in infrastructure is not up to the optimum level. Relatively speaking, there is a wide gap in the income level of the consumers in the US and in China, particularly the middle-class spending power on consumables. Such a gap in the middle-class peoples’ income required Wal-Mart to change its business model to work efficiently amidst leading populated regions of China. Wal-Mart’s sales people realized the spending pattern of the Chinese people finally that they preferred to make purchases in small portions, and the language barriers needed customized marketing shifts for product labeling and branding (Govindarajan & Gupta, 2002). Wal-Mart reacted by organizing various experiments. First, it tried with various store designs to find out what attracted customers the most. One location, the Shenzhen Supercenter, was a hybrid store linking a supercenter and a warehouse club. It sold memberships but offered the same discounted rates to non-members to shop at daily low prices plus a 5 percent premium. The Shenzhen store also tried selling stocking merchandise focusing at majorly male market. Wal-Mart also started evaluating smaller satellite stores that seemed to work well with the purchasing habits, besides the shipping and shopping practices, in China (Govindarajan & Gupta, 2002). Other than trying different store designs, Wal-Mart checked merchandise lines to find out what would have the highest consumer attraction and suit best with the Chinese culture. The conclusion was derived finally by Wal-Mart to showcase a relatively vaster range of products, especially perishable goods that attracted the Chinese taste-buds (Govindarajan & Gupta, 2002). In the Chinese retail market, Wal-Mart also felt the need to adapt to product sourcing. It had three alternatives: 1) products sourced from global suppliers; 2) products produced in China by global suppliers like Procter & Gamble, and 3) products from regional suppliers. Wal-Mart selected the clever strategy of combining the two alternatives, 2 and 3, by procuring 85 percent of its merchandise for the Chinese retail market in China. Thus, a viable solution was found to optimize the wishes of local customers for highly sought-after US-made consumer goods and ethical consideration in the interests of the people of China and to help the Chinese economy, as insisted by the local governments to stock the Wal-Mart stores with the locally procured goods (Govindarajan & Gupta, 2002). One can derive insights from the above discussion that an organization like Wal-Mart while expanding globally can face hard times by ignoring ground realities related to distinct country-specific cultural traits, and also by committing gaffes, as Wal-Mart committed in countries like Germany, Mexico, Korea and Japan. The Chinese example is a positive indication to resolve the local economic issues by cooperating with local governments in foreign lands to strengthen its roots by adjusting management practices to suit the economic climate and adapt to consumer tastes. References Chapter 11: Intercultural communication in organizations. (n.d.). Sage Publications. Retrieved from http://www.sagepub.in/upm data/42959_11_Intercultural_Communication_in_Organizations.pdf Govindarajan, V., & Gupta, A.K. (2002). Taking Wal-Mart global: Lessons from retailing's giant. [Electronic version]. Strategy+ Business, (17). Retrieved from http://www.strategy-business.com/article/13866?pg=all Landler, M., & Barbaro, M. (2006, August 2). International business; no, not always. The New York Times, pp. A1, A3. Retrieved from http:/nytimes.com/gst/fullpage.html?res=9D02EFDB103FF931A3575BC0A9609C8B63&module=Search&mabReward=relbias%3Ar Read More