Topic: BusinessManagement

Last updated: March 28, 2019

The International Division at Wal-Mart International Business: Strategy & Structure October 10th, 2012 Introduction I would like to begin stating the reason why I decided to choose this case and, above all, this topic. Since the beginning of my academic career field I’ve always found more interesting the “human” side of business sciences, especially those concerning the behavior of organizations in the environment in which they operate and consequentially of the people that materially make them work.This because organizations are “living structures” created by men in order to reduce the uncertainty typical of every “open system” like the real world, as opposed to what scholars call “closed system” to indicate an environment where all the variables are controllable or at least predictable (Thompson, 1967). So the reason that led this choice was not that the case itself (even if Wal-Mart still represents one of the most successful firms in the world) but the more general organizational change behind it and the question common to probably every firm: why do organizations change and what is the best solution possible?Wal-Mart Despite being one of the biggest multinational retailer corporation in the world for revenues (446. 950 billion $ in 2012) and employees (2.

2 million as of 2012), WalMart remains a family owned business since its foundation in 1962 by Sam Walton, and even after his death members of the family keep on having key places inside the company: one bright example is Robson Walton, eldest son of Sam and Chairman of the company at the present date since 1992.The success of the firm is mainly due to an aggressive cost leadership strategy (Porter, 1980) that ensured the company with a huge competitive advantage, but that has not been completely free from critics: low specialized labor force and the exploitation of the “arbitrage” offered by countries such as China are a few examples. The company was even accused of child labor exploitation. Being true or not, Wal-Mart keeps on leading among its competitors with 8500 stores in 15 countries and plans of further expansions even in the African continent through the acquisition of a big local distributor.

Summary The International Division was born in the early 1990s with Wal-Mart’s international expansion and today counts three departments (Europe, Asia, Americas). Each one is coordinated by a CEO who reports to the CEO of the International Division, who eventually reports to the CEO of Wal-Mart. Wal-Mart’s initial purpose was to export the format that has been so successful in the United States in terms of stores, operations and merchandising, that’s why the division was structured with a strong centralized control.However by the end of the 1990s Wal-Mart’s management noticed that this organizational choice caused slow decision-making and information overload and above all that local conditions couldn’t be ignored. Britain’s ASDA supermarket chain’s acquisition triggered the change: country manages no longer needed the approval from the company’s headquarter in Arkansas especially for decisions regarding operations and merchandising.

Despite leaving most of the responsibility for procurement at a regional level, today the company is striving to find a balance between a centralized procurement to boost its huge purchasing power and a flexible product mix that could fit each local market. After the decentralization process, the International Division has gained a new central role in the company’s strategy: identifying best practices and moving them across countries.But probably the most radical innovation is the possibility provided by the division to implement the knowledge acquired in foreign countries even in domestic operations, marking a shifting from a US centered mentality to a more global one. Analysis At the beginning of its international adventure, Wal-Mart’s management had their ideas clear: exporting the format that led to the huge success within the US boarders as if it was a bundle, applying the “American way” like a “one-size-fits-all” strategy even in countries like Argentina and United Kingdom.

Clear idea, but mostly wrong. Like bringing an English movie to Italy without even putting the subtitles. The main problem was a slow decision-making process that involved the country managers, forced to ask permission for every change in the local strategy to the main headquarter.

This caused an information overload at the top of the line command, and the “funny” aspect of this was that those at the head of the pyramid probably weren’t even the right ones to take such decisions, especially in a company with a greatly diversified portfolio of products like Wal-Mart.The answer of the firm was definitely pointing at the right direction: the executives came to the conclusion that the business should have been driven by each country, shifting from a “push” to a ”pull” logic. Giving greater responsibilities to local managers definitely helped easing the burden of information that the central headquarter had to deal with, but most importantly allowed the company to find solutions tailored to each local necessity.However, this decentralization risks making Wal-Mart lose part of its purchasing power when it comes of procurement since now a considerable portion of it stays at a country and regional level.

But on the other side decentralizing makes easier for the International Division to detect the best practices all over the world in each core activity and then moving them across countries to increase both efficiency and effectiveness.Analyzing the organizational choice adopted by Wal-Mart, the first big problem that comes with the international division is the potential conflict between domestic and foreign divisions since they operate at the same level but have obviously different needs. Another problem involves the internal organization of the division: local managers are usually given not that much of voice because the headquarter assumes that the responsible of the international division is able enough to represent all the countries.The last problem regards coordination between domestic and foreign operations: this structure tends to isolate the two divisions from each other, preventing communication and knowledge transfer and the implementation of global strategies in terms of products. In the specific case of Wal-Mart, big improvements have been made in order to overcome these problems although the general feeling is still the one of a US centric company.Other solutions would bring both advantages and disadvantages: A worldwide area structure promotes local responsiveness at the expenses of skills transfer, while a worldwide product divisional structure improves knowledge transfer but at the same time limits regional control. According to theories, the ultimate structure for adopting a transnational strategy would be the global matrix structure, but problems with excessive bureaucracy and ambiguous accountability make its implementation almost a utopia.

Conclusion What eventually arises from the analysis is that it’s hard to tell witch organizational solution best suits for a firm’s success: usually the ideal structure is an hybrid between the archetypes offered by the literature and the best way to find it is often represented by the evergreen trial and error method. Wal-Mart seems to be on the right path, having proved the ability to learn from its mistakes and to find effective solutions that time by time are going to help the firm finding its ideal shape. Sources Thompson J.D. (1967). Organization in action.

McGraw-Hill, New York. Porter M. (1980).

Competitive Strategy. Free Press, New York. Phillips A. (2012). International Business: Strategy & Structure. McGraw-Hill Create, New York. http://www.

google. com/finance? q=NYSE%3AWMT&fstype=ii&ei=mRRxUOiwHIOwk AXYpgE http://www. corriere. it/esteri/09_novembre_02/sfruttamento-minori-usa-kettyareddia_193093d8-c7a2-11de-ace9-00144f02aabc. shtml http://www2. journalnow. com/news/2010/sep/29/head-of-wal-mart-tells-wfu-audienceof-plans-for-g-ar-425152/Wal-Mart,S.RobsonWalton,SamWalton,Supermarket,Asda,Sam’sClub,Hypermarket,ManagementThe International Division at Wal-Mart International Business: Strategy ; Structure October 10th, 2012 Introduction I would like to begin stating the reason why I decided to choose this case and, above all, this topic.

Since the beginning of my academic career field I’ve always found more interesting the “human” side of business sciences, especially those concerning the behavior of organizations in the environment in which they operate and consequentially of the people that materially make them work.This because organizations are “living structures” created by men in order to reduce the uncertainty typical of every “open system” like the real world, as opposed to what scholars call “closed system” to indicate an environment where all the variables are controllable or at least predictable (Thompson, 1967). So the reason that led this choice was not that the case itself (even if Wal-Mart still represents one of the most successful firms in the world) but the more general organizational change behind it and the question common to probably every firm: why do organizations change and what is the best solution possible?Wal-Mart Despite being one of the biggest multinational retailer corporation in the world for revenues (446. 950 billion $ in 2012) and employees (2. 2 million as of 2012), WalMart remains a family owned business since its foundation in 1962 by Sam Walton, and even after his death members of the family keep on having key places inside the company: one bright example is Robson Walton, eldest son of Sam and Chairman of the company at the present date since 1992.The success of the firm is mainly due to an aggressive cost leadership strategy (Porter, 1980) that ensured the company with a huge competitive advantage, but that has not been completely free from critics: low specialized labor force and the exploitation of the “arbitrage” offered by countries such as China are a few examples. The company was even accused of child labor exploitation.

Being true or not, Wal-Mart keeps on leading among its competitors with 8500 stores in 15 countries and plans of further expansions even in the African continent through the acquisition of a big local distributor.Summary The International Division was born in the early 1990s with Wal-Mart’s international expansion and today counts three departments (Europe, Asia, Americas). Each one is coordinated by a CEO who reports to the CEO of the International Division, who eventually reports to the CEO of Wal-Mart.

Wal-Mart’s initial purpose was to export the format that has been so successful in the United States in terms of stores, operations and merchandising, that’s why the division was structured with a strong centralized control.However by the end of the 1990s Wal-Mart’s management noticed that this organizational choice caused slow decision-making and information overload and above all that local conditions couldn’t be ignored. Britain’s ASDA supermarket chain’s acquisition triggered the change: country manages no longer needed the approval from the company’s headquarter in Arkansas especially for decisions regarding operations and merchandising.Despite leaving most of the responsibility for procurement at a regional level, today the company is striving to find a balance between a centralized procurement to boost its huge purchasing power and a flexible product mix that could fit each local market. After the decentralization process, the International Division has gained a new central role in the company’s strategy: identifying best practices and moving them across countries.But probably the most radical innovation is the possibility provided by the division to implement the knowledge acquired in foreign countries even in domestic operations, marking a shifting from a US centered mentality to a more global one. Analysis At the beginning of its international adventure, Wal-Mart’s management had their ideas clear: exporting the format that led to the huge success within the US boarders as if it was a bundle, applying the “American way” like a “one-size-fits-all” strategy even in countries like Argentina and United Kingdom.Clear idea, but mostly wrong.

Like bringing an English movie to Italy without even putting the subtitles. The main problem was a slow decision-making process that involved the country managers, forced to ask permission for every change in the local strategy to the main headquarter. This caused an information overload at the top of the line command, and the “funny” aspect of this was that those at the head of the pyramid probably weren’t even the right ones to take such decisions, especially in a company with a greatly diversified portfolio of products like Wal-Mart.

The answer of the firm was definitely pointing at the right direction: the executives came to the conclusion that the business should have been driven by each country, shifting from a “push” to a ”pull” logic. Giving greater responsibilities to local managers definitely helped easing the burden of information that the central headquarter had to deal with, but most importantly allowed the company to find solutions tailored to each local necessity.However, this decentralization risks making Wal-Mart lose part of its purchasing power when it comes of procurement since now a considerable portion of it stays at a country and regional level. But on the other side decentralizing makes easier for the International Division to detect the best practices all over the world in each core activity and then moving them across countries to increase both efficiency and effectiveness.Analyzing the organizational choice adopted by Wal-Mart, the first big problem that comes with the international division is the potential conflict between domestic and foreign divisions since they operate at the same level but have obviously different needs.

Another problem involves the internal organization of the division: local managers are usually given not that much of voice because the headquarter assumes that the responsible of the international division is able enough to represent all the countries.The last problem regards coordination between domestic and foreign operations: this structure tends to isolate the two divisions from each other, preventing communication and knowledge transfer and the implementation of global strategies in terms of products. In the specific case of Wal-Mart, big improvements have been made in order to overcome these problems although the general feeling is still the one of a US centric company.Other solutions would bring both advantages and disadvantages: A worldwide area structure promotes local responsiveness at the expenses of skills transfer, while a worldwide product divisional structure improves knowledge transfer but at the same time limits regional control. According to theories, the ultimate structure for adopting a transnational strategy would be the global matrix structure, but problems with excessive bureaucracy and ambiguous accountability make its implementation almost a utopia.Conclusion What eventually arises from the analysis is that it’s hard to tell witch organizational solution best suits for a firm’s success: usually the ideal structure is an hybrid between the archetypes offered by the literature and the best way to find it is often represented by the evergreen trial and error method. Wal-Mart seems to be on the right path, having proved the ability to learn from its mistakes and to find effective solutions that time by time are going to help the firm finding its ideal shape. Sources Thompson J.

D. (1967). Organization in action. McGraw-Hill, New York. Porter M. (1980). Competitive Strategy.

Free Press, New York. Phillips A. (2012). International Business: Strategy ; Structure. McGraw-Hill Create, New York. http://www.

google. com/finance? q=NYSE%3AWMT;fstype=ii;ei=mRRxUOiwHIOwk AXYpgE http://www. corriere.

it/esteri/09_novembre_02/sfruttamento-minori-usa-kettyareddia_193093d8-c7a2-11de-ace9-00144f02aabc. shtml http://www2. journalnow. com/news/2010/sep/29/head-of-wal-mart-tells-wfu-audienceof-plans-for-g-ar-425152/

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