Management Wal-Mart's Challenges Term Paper

Pages: 10 (3101 words)  ·  Style: APA  ·  Bibliography Sources: 4  ·  File: .docx  ·  Level: College Senior  ·  Topic: Business


Reports indicate that its culture and the misreading of the competitors led a series of bad decisions in the global business (Brunn, 2006).

Destroying Small Businesses

By becoming the leading global retailer, Wal-Mart is obsessed with numbers. After all, the company is the leader and pursues the entire world market for further success. In the international market, the larger size of Wal-Mart cannot be used to conclude that the company is successful and better. In fact, the company has faced criticisms regarding its impact on small retailers. Independent retailing shops have gone out of business due to the entry of this giant retailer. If Wal-Mart were to enter any town after a period of at least twelve years, it would be prone to extinction. This is not just a common phenomenon in the United States; it has been repeated in all areas where the company has established its presence. In some nations, Wal-Mart has been prohibited from some communities because it leads to the death of local businesses. In the end, we might think that Wal-Mart is a custodian but a cautious killer in reality (Koontz & Weihrich, 2010).

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TOPIC: Term Paper on Management Wal-Mart's Challenges in the Assignment

The biggest obstacle Wal-Mart has encountered when attempting to expand in the global market is its local position. Community groups seldom accept the company when it rejects plans of erecting new stores. This does not only protect the cultures of local communities but also preserves culture differentiation (Jha, 2011). The giant retailer had various problems with consumers, which forced the company to re-consider some adjustments. Researchers say that the retailer is trailing in lack of knowledge with respect to the taste of the local communities. A good example is the challenges experienced by the new store in Brazil. Brazilians do not encourage people to pay for an entry fee or membership for their clubs. Moreover, they discourage large stores for volumes of goods. For Wal-Mart to fix this into its culture, it was forced to adjust its strategies. Another cultural barrier arises from the collection of data. The company is used to receiving calls in the U.S. market from retailers seeking for data about trends in local retail markets. However, this trend is not applicable in foreign markets. This has forced the giant company to depend strongly on their independent physical observations (Labuski & Copeland, 2012).


Supplier relationships have been a major issue of concern for Wal-Mart in global markets. The company has become tired of applying similar standards as those applied in the U.S. with its local suppliers. However, the relationship between manufacturers and retailers is quite different from that in the United States. In the United Sates, Wal-Mart is the dominant retailers and all suppliers have to follow its conditions and rules (Kneer, 2009). The industry must set standards and prices as determined by the company. This is the reason why the company sells and buys cheaply. Nevertheless, Wal-Mart has been prohibited from conducting business with some manufacturers in foreign markets. This follows its attempt to sell goods at a price that fell below the manufacturing costs. This created some extreme reactions. Some local suppliers banned Wal-Mart for giving special discounts or even selling products to the giant retailer. In addition, some manufacturers have rejected the company's delivery system. This arises from the refusal to supply products to the company's distribution centers. They have lobbied to ignore any form of discount. This coupled with irregular deliveries and inventory control problems have orchestrated the product shortage on the shelves of Wal-Mart stores (Koontz & Weihrich, 2010).

Government Polices and Regulations

In the current business community, dealing with government regulations and rules is unavoidable. A giant retailer in the U.S. can behave like a bully but must act like a foreigner when it is in a different country. Wal-Mart's entry into China clarified this problem. China's population is over one million with over two hundred cities. Besides Wal-Mart's early success, the company has been plagued by burdens defying radical solutions (Jha, 2011). These problems include strong foreign and local competition, supply chain, and a lot of red tape from the government. We are all familiar with the fact that any communist government operates on limited and strict rules and regulations. The communist government of China has boxed retailers from selected foreign firms for limiting competition.

In addition, the local suppliers control and nominate some selected products. For example, tobacco and liquor should be bought from local firms, and the favorite Chinese vegetables must be purchased nearby too. Besides establishing a store in China, Wal-Mart is yet to open a new outlet in a booming city. The company only operates thirty-seven outlets. Similarly, just like any other retailers, the company has encountered the government red tape in its efforts to expand. This is enough evidence to show that Wal-Mart has been struggling to survive in China (Steers & Nardon, 2006).

Internal Challenges

Human Resource Management

As the world is increasingly transforming into a global village, highly noticeable firms such as Wal-Mart will continue to face serious challenges in addressing social issues that affects its customers. Some problems are expected to come from the community groups and unions. Although it would be impossible for anyone to force Wal-Mart to consider unions, these unions would still ruin the business itself (Labuski & Copeland, 2012). Unions have been complaining that Wal-Mart has been taking advantage of the employees. Based on their wages, employees have been unable to afford benefits and health insurance. Employees of the giant retailer work overtime with no payment. This has resulted in a series of lawsuits, which concluded that the company must pay its employees for work done during overtime hours. This was a ruling pushed by workers who were forced to work overtime with no pay for the period between 1995 and 2000. Therefore, Wal-Mart has been attempting to decrease the number of permanent workers in support of unionizing its employees. This has helped Wal-Mart in eliminating the common union basis (Kneer, 2009).

Following Wal-Mart's rapid growth, the leading challenges have been a lack of adequate human capital. The company has claimed that it cannot boast to be a global player because its foreign managers cannot even communicate through the language of the foreign country. In order to solve this circumstance, the company had to decentralize the authority of its management from a centralized headquarters to international operations. Independent country managers gained the freedom to run the operations of the business. This is evident in the merchandising and operations departments. Nevertheless, Wal-Mart has been incapable of maintaining a quality workforce like in the U.S. Local workers among them managers do not have experience in the culture of the company; they have been slow in adjusting (Labuski & Copeland, 2012).

Wal-Mart remains the world largest company and leading retailer based on market capitalization, ignoring profits and generation of revenue. While the company has enjoyed a period of tremendous success in operating across the U.S. markets, it has reinforced expansion across the international market. Nevertheless, the achievement the company has attained in U.S. markets is not a guarantee that it will be successful in the rest of international market. Considering Asian markets, another potential opportunity for Wal-Mart would be Japan. Through its acquisition and partnerships, the retailer has been carefully analyzing the market by embracing a go-slow approach. While acquiring Japan's Seiyu, Wal-Mart had to part with $50 million at an interest rate of seven percent. As a result, Wal-Mart has been slowly rolling out its practices and systems in Japan. This began by putting the company's pricing strategy and supply chain into effect (Hitt, Ireland & Hoskisson, 2008).

In 2009, the chain lost $70 million. However, the company may oversee a turnaround courtesy of its efficiencies. Brand names have been replaced with stores that are more profitable and enhanced integration with the largest suppliers of Wal-Mart such as Johnson and Johnson, Procter & Gamble, Kellogg and Nestle. Recently, the newly acquired Seiyu opened a new outlet in a fishing village featuring one floor, long row of cashier registers and a wide aisle. This is a test of Wal-Mart's design, layout, supply system, and brands in Japan (Steers & Nardon, 2006).

Wal-Mart continues to face challenges in executing its retail system link in Japan. In addition, most suppliers have not yet implemented communication technologies that conform to Wal-Mart's efficiency systems. In addition, supplier-retailer relationships have been traditionally based on personal ties dating back from a series of generations. A major cultural adjustment will be witnessed by the shift towards impersonal electronic relations. The over four hundred stores belonging to Seiyu are currently using systems developed by Wal-Mart including the system that enables suppliers to monitor and oversee product sales (Kneer, 2009). For Wal-Mart to succeed in the international market, the key would be to collaborate with local communities, who are familiar with the terrain of the area. The recent acquisition in Brazil is slowly rolling out Wal-Mart's operation system. They have… [END OF PREVIEW] . . . READ MORE

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